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.