Demystifying Asia Pacific Sales Channel Management
by Michael BaileySixty per cent of the world's population is located in Asia, markets are growing, GDP is on the rise and companies can no longer ignore the region. In order to effectively penetrate the individual Asian markets, it is important to be proactive in the selection of each partner. Secondly, firms need to understand the dynamics of the markets that they plan to penetrate. Thirdly, it is important to safeguard brands and protect reputation. Finally, basic principals of good channel management, while the same everywhere, still need to be adapted to local markets.
Believe it or not, many Asian distributors simply arrive at a prospective principal's doorstep to be registered on a first-come-first-serve basis, often times even dictating their own terms of representation. In such cases, the principal forgoes an essential analysis that would otherwise determine (1) which distributor is the best match, (2) if all or part of the product range should be assigned to the representative, or (3) if an exclusive or non-exclusive agreement is the most appropriate. Still other firms simply do not have a full understanding of the markets they plan to enter. For example, some companies have inadvertently closed their Shanghai market to new distribution channels simply because of an existing partner in Beijing.
Imagine blocking the New York market because of claims made by a partner in Texas. Though difficult to believe, this is a common error that many reputable firms have made in China. Many companies believe that corruption is a way of life in Asia that must be accommodated. True, corrupt practices in distributor and representative sales networks are common in Asia, but these issues can be managed in a proactive manner that does not negatively affect a firm's business or reputation. Policy statements combined with frank and open, face-to-face communication and regular partner reviews are the minimum efforts that should be taken to protect brand, reputation and to stay on the right side of the law. While there are many differences between Western and Asian markets, some basic channel management concepts are the same, regardless of the market.
The seven key decision areas for effective channel management are: (1) formulating channel strategy, (2) designing marketing channels, (3) selecting channel members, (4) motivating channel members, (5) coordinating channel strategy with channel members, (6) assessing channel member performance, and (7) managing channel conflict. These principals remain unchanged in Asia, but the subtleties of application are dependent on cultural norms and expectations and on differing industry practices.
Understanding the similarities and differences between Western and Asian sales channel management is the first step to establishing a solid network in Asia. By making careful partner selections, understanding the target markets, being aware of ethical issues and recognizing the need to learn local cultures to make the best application of basic marketing principals, companies can enjoy greater regional and overall growth.
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1. Rosenbloom B. Marketing channels: a management view. Hinsdale, Il: Dryden Press, 1999.