Companies that are expanding, or trying to become more efficient, can gain a lot from looking at their distribution strategy as a combination of three main ways to expand, and at how these work together.
• Geography: Expanding into new countries or regions.
• Business areas: Expanding into new business areas.
• Product: Expanding through new products or product variants.
Each method has its pros and cons, and they can be combined in different ways depending on the company’s business model and potential market.
Consider the figure below. It shows a company’s total expansion potential across the three methods, and it is very useful when you evaluate new expansion partners such as distributors. The matrix can of course be extended with more business areas, geographies and products.
A geography represents a country or a specific region, and a business area can be, for example, a certain type of customer or an industry with specific product or business requirements.
Ideally, the whole matrix would be filled with a reasonable number of well-performing distributors. Enough to keep the risk low, and few enough to keep the administration manageable. Companies with their own distribution capacity will probably want to cover some parts of the matrix themselves, such as the home market.
Distributors often overlap. One distributor might be able to sell a specific product in several countries, while another could sell all products, or serve all business areas, in one specific country.
Sometimes an overlap is desirable, but it can also mean giving up the chance to work with a particularly valuable distributor, since such distributors often want exclusivity. The shaded area in the figure below shows a potential conflict between two types of distributors, one with a broad product range and one with broad geographic coverage.
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