WHAT IS EXCLUSIVE DISTRIBUTION?

This is the Vietnamese meaning of the term “Exclusive Distribution” which is very common in the business field. This term refers to an agreement between the distributor and the manufacturer. Specifically, the manufacturer authorizes to sell its products to a distribution unit. And the authorized unit will become the exclusive distributor of the product that the manufacturer provides.

ADVANTAGES AND DISADVANTAGES OF EXCLUSIVE  DISTRIBUTION

BENEFITS OF CONCENTRATION

With an exclusive distribution strategy, a manufacturer can maintain focus and simplify its business strategy. This ensures that distributors will only sell their products and not those of their competitors.

CONTROL CHARACTERISTICS

The ability to control the distribution of products by distributors will enable manufacturers to focus on implementing marketing strategies and communication activities to build images for products and brands.

AVAILABILITY

Manufacturers are always ready and have enough resources to develop a certain number of products according to the orders of distributors. As a result, the business relationship between the two parties will always be maintained and developed sustainably.

GUARANTEE SMALL FINANCIAL BENEFITS

Once the goods have been delivered and the payment process has been completed with the distributor, all financial risks such as unsold goods and inventory belong to the distributor.

LOCALIZATIONALITY

What is another advantage of an exclusive distribution strategy? It is the ability to enter a new market more easily through an exclusive arrangement with a local distributor. Because this distributor will understand the factors and needs of that market, thereby quickly building an image for the brand and promoting increased sales effectively.

DISADVANTAGES

FAITH

Choosing a reliable distributor is something that every manufacturer needs to put on top if they want their products to reach customers quickly. Otherwise, the manufacturer will have to bear a lot of risks both financially and in terms of the brand image if the distributor does not do well. In other words, the development or regress of the manufacturer depends a lot on the distributor.

DEPENDENCE

An emerging and small-scale manufacturer is prone to making this mistake. Specifically, when signing cooperation agreements with distributors, because they want to quickly sell their products, manufacturers are easily dependent on the policies that distributors offer. In the long run, it will bring unfortunate risks.

EFFECTS OF DISPUTES

What is another disadvantage of an exclusive distribution strategy? It is the damage to economic aspects and brand image that the manufacturer may have to accept if a dispute arises with the exclusive distributor. The biggest consequence is that production may lose the entire target market. Specifically, the conflict leading to breaking the agreement with the local distributor will make it difficult for the manufacturer to find cooperation with other distributors in that market.

Cre: TMS