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 International Distribution<br />Agreement  Channel Strategy  Channel Management

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Channel Strategy and Structure, Pro Forma, Business Plans, Valuations, Feasibility Studies...

Your channel strategy and structure are part of the foundation of your enterprise. It is hard to change these after you have completed the rest of your infrastructure, so you should make sure that they are treated correctly the first time.

You may refer to channels of distribution in a number of different ways. For some companies, it sorts under the overall corporate or enterprise strategy. A separate strategic planning department may prepare recommendations. Or this may fall under marketing strategy, and terms such as marketing channels or sales channels may be in common use.

The actual distribution strategy and channel structure often determine the role of channels of distribution in an enterprise. If marketing and sales are handled through pure sales outlets, and especially through non-dedicated channels, it may be appropriate to consider this a marketing and sales strategy. If dedicated channels are used, and especially if local production or use of intellectual property is part of the channel structure, your distribution strategy may be elevated and become part of corporate strategy.

The benefits of using third party channels of distribution are outlined on our Channel Services Overview Page. It is necessary to understand these benefits and how to obtain them to decide on your strategy. This page covers the latter as well as how to structure your distribution channels.

Basic Strategy

    Your basic third party distribution strategy should include:

    1. A decent unit level business concept. It does not have to be the best, but it must work for the channel operators while also generating sufficient revenues and profits for you. Your strategy and structure may involve several kinds of independent or interdependent unit level operations. Suggestions for evaluating, developing, or improving your prototype or prototypes may be found under Efficiency Audits.

    2. A win-win structure. The essential ingredients for creating that winning structure are listed under Strategic Planning Agenda.

      Incidentally, this agenda also provides you with most of the topics that you need for discussing channels of distribution in your business plan.

      Before you proceed, you may also want to refer to what is said about benchmarking under the Market, Competitor Surveys tab and keep that available when you work on your strategy and structure.

    3. Channel operator and chain managers selection. In addition to selecting or converting to the right channel types (which should be covered when you create or recreate your win-win strategy and structure, above), make sure that you select the right unit operators for the selected channels. A correlative to this is allocating sufficient resources to making sure that this is accomplished. Recruitment and selection is covered under Recruiting Channel Reps, Etc.

      Similarly, make sure that you have the right chain managers for supporting and controlling your channel operators.

    4. Training and control. Depending on the kind of channel used, more or less training and control of the channel operators is required. In franchising, for instance, training and control is paramount (see Manuals, Training Programs).

      Also, make sure that you properly train and motivate the trainer.

Advanced Strategic Thinking

In order to use the 4 basic pillars of any distribution program outlined above, you need to take a step back and elevate the analysis to what we call "future-think." The most important aspect of strategy is your prespective. When you click through to the Strategic Planning Agenda, you will notice that we start with your goals and objectives.

Prior to any structuring or restructuring, you need to establish a basis for what you want to accomplish. Structuring your channel relationships cannot properly be accomplished in a vacuum, but requires strategic thinking, starting with a vision of the entire enterprise, placing ourselves in that vision, and looking backward from that vision ("future-think").

There are three parts to this analysis:

  1. Contrary to the norm, we consider the establishment of channels of distribution a means to an end and not an end in itself. Consequently, short of buying an already-established chain immediately to distribute your products and services, you would want to build your own in as short as period of time as possible. How far and how fast you go should only be a function of your constraints, not a comparison to "average" or "typical" companies. And, remember, we start with the end result and describe what we need to accomplish during the last period before our channels are all in place, then what needs to take place for each prior period -- all the way back to the present.
  2. Speed is not the only consideration, however, as you must also consider the competitive environment each step of the way, long term profitability, etc. These and other considerations help you decide what kind of channels to use: company-owned branches, franchises, area developers, area representatives, non-affiliated distributors, a combination or two or more of these, etc.
  3. For each kind of channel selected, you then need to build a matrix showing both the development of each distribution point over time and the establishment of this kind of distribution points over time. If several kinds of independent or related distribution channels are used, all matrices must be linked and summed. The resulting model is then used to test your assumptions and adjust your strategy and structure until an optimal model is found. For more detail on financial modeling and pro forma testing, go to Pro Forma Testing.

Strategy and Structure As a Process and Part of a Process

Your strategy and structure set the stage for how you entire business is established and operated. They dictate your operations manuals, training programs, marketing and sales plans and materials, etc. If you use third party channel operators, your structure has to be translated into documents that will govern those relationships. Our consultants are expert not only at the actual strategy and structure formulation, but also at creating the other plans and materials required by that formulation. We also work closely with your legal advisors to make sure that all business dicisions are properly reflected in your documents (see Documents, Regulations).

Although difficult to change, your strategy and structure may need to change as markets and competition change, or to reflect your experiences. Consequently, we always seek to build some flexibility into your distribution programs. This is a continuous process. We also encourage you to "take stock" every 6-12 month and make necessary changes (see Periodic Reviews, Updates).

Strategy and Structure As Basis for Business Plans and Feasibility Studies

Your strategy and structure are the core of your business plan. In addition, your business plan should include sections on your business history, management, engineering, marketing, operations, finance, etc. For details, go to Business Plans and Valuations.

Your strategy and structure, augmented with pro forma testing, are also used for feasibility analysis. In fact, the strategy and structure process outlined above is also a feasibiliy analysis, the main difference being the stage or timing of the analysis.

News... A recent US Supreme Court decision reversed a long-standing precedent and declared it not necessarily illegal for chains to set minimum prices. The same had been said earlier for maximum prices. The legality of price fixing is, therefore, now fully based on the effect it may have on the markets. READ MORE

Cencir will continue to provide you with late-breaking news relevant to chain management. To receive such updates by Email, please register here.

"Due to your outstanding work, we have gained 42 new locations in 23 states within two years of expanding. I highly recommend Cencir for strategic planning and all aspects of channels of distribution development."
-Allen Hager, President, Right At Home, Omaha, NE

Satisfaction Guaranteed!
We reduce or waive professional fees for preliminary feasibility and initial needs assessment if you are not 100 percent satisfied.

Gain Credibility!
As independent experts, we add credibility to your efforts to improve your channel relationships.

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Our consultants think and operate globally and will adapt and promote your offering to multiple cultures and languages.

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When you have to act fast, we have done it before and can help you speed up the process without ruining your image.

One Stop Shopping!
Save time, money, and aggravation by using expert channels of distribution project managers dedicated to comprehensive solutions designed to multiply your business value.

Our consultants have advised hundreds of companies of all sizes in most industries worldwide on how to structure their distribution channels. This includes providing distribution strategies for such brands as Commerce Clearing House, Cancer Treatment Centers of America, 3M, Pacific Bell, SealMaster, SkyTel, Sears, Henchy Industries, Hyatt Hotels, Ace Hardware, Beard & Warner, CBS, Stewart Warner, United Airlines, Northwest Orient, Coldwell Banker, Fidelity, Freuhauf Trailer, Buffalo Wild Wings, Budget Rent-A-Car, National Car Rental, Ryder Truck Rental, Chevron, Getty Oil, BP/Amoco, Mobil, Shell, Texaco Europe (Norway, Sweden, Denmark), St-Hubert BBQ (Canada), Pollo Campero (Guatemala), Helados Bon (Dominican Republic), Max’s (the Philippines), Nestle (Switzerland, Italy), Sonae Group/Orbitur Campgrounds (Portugal), The International Investor (Kuwait, England, Switzerland), Sushi Parties (Japan), and L.O.G. (Norway).

"Cencir's franchising experts made the difference in transforming C&O [Beard Papa's master franchisee] into a successful master franchisee. The principals at Cencir are seasoned veterans in a league of their own, high and above everyone else in their franchise expertise. They walked us through the franchise disclosure documents and difficult and sensitive negotiations that had little room for error. We accomplished more than our objectives."
-Luigi Cruz, Founder & CEO, C&O, Foster City, CA

"We always want this ultimate business professional on our team." -Vic Koppang, President and CEO, Koppang Franchise Development Company (Modernistic Carpet Cleaning)

Free Seminar Outline and Consultation

of our channels of distribution seminar. The corner-stone of this seminar is channel strategy and structure and their implication for building the entire chain. A seminar enrollment form is available at Seminars. Want immediate attention? Call 708-672-3957 or drop us an Email for a no-obligation discussion of your situation. [top]