International contracts: the integrated distribution network and the development of an international brand network

Luca Davini
Avvocato in Milan and Turin

It is well known that the export of Made in Italy products is one of the main strenghts of the Italian economy. This activity – which focuses mainly on agri-food products, pharmaceutical goods, clothing, mechanical engineering and investment goods – can be undertaken according to various distribution systems previously analyzed on our blog.

The most obvious and intuitive is certainly given by direct distribution, which consists in the absence of intermediaries between the producer and the market. In this case, the producer uses its own branches to distribute and has excellent control of the market, even if this requires substantial expenses and investments.

However, it is not necessary to have a direct presence, as it is therefore possible to create integrated distribution networks with the company brand and local partners. In this sense, the intermediary (who promotes a sale between producer and customer) or the retailer (who buys and resells the producer’s goods) is integrated into the producer’s network and has the task of promoting its products in accordance with the commercial and corporate marketing choices, in exchange for a privileged position (exclusive or equivalent situation).

Through this method, which differs from the simple export plan aimed at distributing products through importers and distributors, a real international brand network will be created with points of sale and support structures. This network – through the mapping of outlet areas, price levels, the local distribution system and consumers habits – will therefore allow to understand which are the most suitable places to start a profitable business with the brand and the help of local partners.

The advantages of a distribution system like this are:

– homogeneity of image and positioning;

– market extension;

– more efficient management of distribution at lower costs;

– efficient implementation of the marketing plan.

The ways for developing a branded network are different: starting from distribution/concession to sell, up to partnership, franchising and direct management.

In order to decide how to develop this branded network, it is therefore necessary to start from an analysis of the fundamental objectives:

i. if the goal is to be present on site with physical stores, without however the need to manage end customers, surely the distribution/concession to sell will be an excellent solution;

ii. if, on the other hand, the company needs to control all processes, the hypothesis of a partnership tailored for the company and adapted to the specific case may be considered;

iii. finally, in the event that the ultimate goal is to reach end customers also with regard to personal data and management of the commercial relationship, the most suitable solution will be the use of franchising, where for example the franchisor can give directives to the franchisee on everything what concerns the point of sale and can control in a more pervasive way the work of the franchisee and the customers with whom the latter relates.

To complete this creation of the brand network, it is then necessary to consider the central importance of the presence of distinctive signs that make it possible to identify the brand and its sign, together with a know-how composed of a series of innovative elements that allow the management of the brand’s sale point in a different way than all the other competitors.

Therefore, the best way to protect the brand network with its distinctive signs and consequently the entire business, lies in the drafting of tailor-made international contracts, that is, tailor-made for the company, always taking into account the corporate marketing plan and commercial objectives.

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