Distribution strategies and performance: a cross-national comparison of the automobile industry

Abstract

This research focused on a crossed-national comparison of distribution of passenger car manufacturers and dealers, and resultant performance in channels of distribution. The comparison was conducted between a typical emerging car economy and a typical developed car market. Thus the study compared the distribution strategies and performance in the same industry in advanced vis-à-vis, emerging economics, and also collected data from the manufactures and the dealers, i.e. From both channel dyad. In the passenger car industry manufactures deal directly with a multiple of independent dealer. This makes the management and administration of such a system a complex affair impacting on the performance of the channel. Extant research on distribution has developed into two streams one focusing on distribution strategies and the other focusing on channel performance. Distribution strategy has been defined here as the means by which a firm in marketing channels responds to the interplay of international and external forces in the channel to meet its distribution objectives. The of distribution strategies of the manufacture have been considered: channel length, channel breath (relative intensity of distribution), brand and territorial exclusivity of dealer, criteria used to select dealers, franchise terms and conditions, locus of distribution functions and extent of standardization or adaption of distribution with respect to similar regional markets. The last element is particularly relevant when there is an entry into new international markets, as in the case of MNC manufactures entering India the distribution strategy of the dealer has been conceptualized as consisting of the following dimensions : sales and aftersales facilities, dealer training dealer expenditure , and dealers participation in decision making distribution performance has been defined here as the extent to which a firm’s objectives, both economic and strategic with respect to distribution of its products are achieved through planning and execution of distribution strategy. Distribution performance of the car manufacture and dealer has been conceptualized as the performance of both manufacture and the dealer on their various functions and responsibilities in the channel of distribution. Distribution strategy has important bearing on level of distribution performance. However, there has hardly been an attempt to empirically explore the linkages between the two. Also research on distribution strategies and performance has been rare for emerging economics, and most studies on distribution have collected data from only one side of the channel dyad. This research tries to address these gaps. Therefore, the objective of this research is: 1) To understand distribution strategies and performance of passenger car manufacture and dealers and to explore linkage between strategies and performance. 2) To identify best practice in car dealership business 3) to compare distribution practice between a typical emerging economy and an advanced car market. Four manufacture in the Indian passenger car market and four manufacture in the French passenger car market were include in the study. Data was collected on various dimensions pertaining to their distribution objectives, distribution strategies and distribution performance through personal interview with senior management of the company, followed by personally administrated questionnaire. Data was collected from car dealer through mailed questionnaire survey. The strategies of manufacture were analyzed using content analyses on case studies. The dealer data was analyzed using Data envelopment analysis , and the relative efficiency of each dealer was obtained. The methodological contribution of this research was in its use of DEA, because the application of DEA in marketing has been rare. The main findings from the research on manufactures are : • Four types of distribution strategy were identifiable, viz authoritative –intensive, authoritative selective, participative-intensive and participative-selective. • Incumbent companies with highest market shares in the Indian as well as the French market have adopted authoritative-intensive strategy of distribution. • Foreign entrants in India and France have adopted authoritative-intensive strategy and authoritative-selective strategy if their distribution objective is market share and profits respectively while foreign entrants in both countries have adopted participative-selective strategy if their objective is reputation for product quality aftersales service or brand image. • Passenger car manufacture consider personal characteristics of the owner as the main criteria for selecting dealers if their distribution objective is to build reputation for aftersales product quality and brand image and consider financial stability of the main criteria if their distribution objective is market share or profits. The main findings from the research on dealer are : • There are difference in relative efficiency of dealers, when perceptual measures of performance are considered compared to actual measures of performance. • Sales and aftersales facilities of the dealer is positively correlated to both dealer sales and dealer net profit before tax. Dealer whose sales and aftersales facilities are high also have higher perceived relative efficiency and higher actual relative efficiency . • Dealer’s participation in decision making was found to have significant positive relationship with the service and parts revenue of the dealer. However dealer who have a higher participation in distribution decision making did not have relative efficiency – either perceived or actual. The research would help the automobile manufacture as well to understand the different dimensions of distribution strategies , and how these dimensions influence the performance of the dealer and , In turn the manufacture. This would enable both manufactures and dealers to develop distribution strategies which would be improved performance. The research goal had been to determine the industry’s best practice with respect to distribution strategies and the manufactures and dealer participating in the study are likely to be benefited from the exercise