STUDENTS' CORNER - 165
The Manufacturer
and a Distributor come together for business and they enter into an agreement
that the manufacturer will sell his products only through the Distributor with
whom he has signed an agreement. Exclusive Distribution thus restricts the
manufacturer to one distributor only. At
the same time, the Distributor also is restricted to the products of the
Manufacturer; he cannot sell the products of any other manufacturer. Of course, as we saw earlier, Exclusive
Distribution is a strategy and it is not a condition for any manufacturer;
neither for any distributor.
Exclusive
Distribution has certain advantages.
First of all,
it gives focus to the product directly and in a way to the distributor also.
Moreover, the greater advantage is the company need not worry over its
competitor getting better of the brand by winning over the distributor. In the Exclusive Distribution, the
distributor becomes dependent on the brand, the company, this dependence of the
distributor gives good cause to the company to exercise some real control over
the distributor, of course, so long the agreement is in force.
Usually, the
Exclusive Distributors will be financially sound; therefore, they can stock a large inventory. This
financial strength that enables them to go in for a big inventory has manifold
advantages; the customer feels confident that he can go to Exclusive
Distributor and make a purchase of his
choice without fail. In other words, the availability of the product-range is a
major merit of commercial interest. For the manufacturer, he is able to market
his products quite profitably; for the distributor, it gets him a social
recognition.
Another great
benefit of the facility of Exclusive Distribution relates to a company’s
efforts to enter a foreign market. The company cannot be expected to have all
the necessary facts about the foreign market; but the Exclusive Distributor has.
With his effective local presence, he can guide the company in a right
direction since he knows firsthand the market scenario there. The Foreign
Footprint of the company is rightly initiated with the able support of the
Exclusive Distributor in the foreign land.
In our next
session, we shall move on to Transportation in Logistics.
