In almost every business-to-business industry, companies are facing increasingly powerful intermediaries in their distribution channel. Industry consolidation is replacing a multitude of small “mom and pop” distributors with a handful of national, professionally managed, publicly traded corporations. Seeking to eliminate channel costs, these distributors make new demands on manufacturers and multiply service requirements. As distributors prune their supply base, market access for manufacturers is no longer guaranteed.
Traditional channel-management approaches rightly call for a manufacturer to identify strategies to maintain market position as value migrates down the channel. Consolidation complicates this effort, however, by creating uncertainty about the investments required to gain position if the channel structure changes. Which distributors will emerge as the winners? Which channel system will customers prefer? How should manufacturers manage relationships and investments during the transition period? How can these companies ensure that they will continue to be major players in the competitive landscape?
In this article, we provide a strategic primer on wholesale distributor consolidation for manufacturers. Our goal is to help man agers understand the dynamics of consolidation and the strategic options available to them. A company may be facing various stages of consolidation. Perhaps managers already realize that consolidation will soon overtake their channel. Or a manufacturer might find itself in a channel environment that is gradually moving from fragmentation... To read the complete article, login or sign-up using the form below.
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