Evaluating the Main Alternatives

Suppose a company has identified several channel alternatives and wants to select the one that will best satisfy its long-run objectives. The firm must evaluate each alternative against economic, control ;md adaptive criteria.

Using economic criteria, the company compares die likely profitability of different channel alternatives. It estimates the sales that each channel would produce and the costs of selling different volumes through each channel. The company must also consider control issues. Using intermediaries usually means giving them some control over the marketing of the product, and some intermediaries take more control than others. Other things being equal, the company prefers to keep as much control as possible. Finally, the company must apply adaptive criteria. Channels often involve long-term commitments to other firms and loss of flexibility, making it hard to adapt the channel to a changing marketing environment. The producer wants to keep the channel as flexible as possible. It must therefore assess the level of risk attached to selecting a channel system. For example, a company using a sales agency may have to offer a five-year contract. During this period, other means of selling, such as a company sales force, may become more effective, but the company cannot drop the sales agency. To be considered, a channel involving long-term commitment should be greatly superior on economic or control grounds.

Continue reading here: Designing International Distribution Channels

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