Right-Sizing Channel Partners for Your Newest Products

In the electronic component market today, precious little money is available to invest on inventory that has little chance of moving off the shelf. With operating margins in component distribution under increasing pressure, the battle over bin space and inventory spend is not getting any easier.

While some may argue we are on the upside of recovery after a long and deep recession, distributors are looking forward and seeing many red flags when it comes to doing business in the new year. First, if short- or long-term debt are part of your operating scenario, it seems likely that your cost of capital will be going up soon as interest rates begin to climb from levels they’ve been for the past couple of years. Sure, large distributors can carry lots of inventory, but manufacturers had better be sure it’s going to move if they want distributors to take it. And with distributor margins continuing to get condensed, the decision on which parts go on the shelf becomes a fairly easy one. With new products, not only are manufacturers asking distributors to cover the cost of inventory investment, they have no guarantees that the parts will actually find a home among design engineers looking to develop their own next great product. And what’s that Mr. Customer, you want to EXTEND your payment terms? If I’m going to spend a penny on it, it better have legs.

Consider this situation from the perspective of the supplier. In a rotten economy over a two-year period, component manufacturers have stayed busy, feverishly developing new parts which they hope will sustain them until a solid recovery is under way. As these products begin to come out of development and into the market, the component supplier needs a distribution channel willing to accept new- and possibly unproven- products, as well as to help carry the burden of inventory investment, demand creation, order fulfillment and marketing. After all, he’s the manufacturer. His distributor partner should take all of his parts and put them on the shelf gladly, right?!

Don’t hold your breath Manufacturer. First, consider industry in US history. Look at any mature manufactured product in the US and you quickly find a pattern. You can start at the beginning and look at the paper and textile industries. Follow those with any other industry you choose. Furniture, maybe? How about cars? Calculators, TV, electronics, computer, software, etc. Not convinced. Maybe drill down a bit more then: capacitors, printed circuit boards, fabricated sheet metal, molded plastics. It is starting to happen in earnest with even the stalwart old power connectors which were never on the radar of the consumer products focused Asian manufacturers. The path toward the maturity of the market as well as the broad decline of the domestic market associated with these industries is the same- and they all lead to Asia. Notice, though, our choice of terms: “decline”. Go back to our start. You see, while it has been reported, for example, that the paper business is dead in the US, this industry is actually on a comeback. Why, you may ask? Specialization and focus on specific- and high margin- business. Sure, they took a beating by Asian countries able to manufacture the same product at a much lower cost. But ingenuity, investment and a significant amount of re-tooling has allowed them to refocus their businesses on segments that offer better margins. Segments that, up until a few years ago, didn’t even exist within the paper industry “target customer” profile.

Any product is susceptible to aggressive competition from overseas manufacturers. None is more susceptible, however, than a product which shares a few key similarities: high volume; made using plentiful, well-trained, low-cost labor; being built on well-developed equipment with repetitive processes; can be easily shipped. Despite the hopes of the US in the early part of the 21st century, this is now true for high technology products, medium volume products, as well as medical products. Where it isn’t yet true is on higher margin specialty, niche or new products looking to be designed into, used, or sold to customers here in the US.

Now consider the typical supply chain against this same backdrop and it is remarkably consistent. Large distributors continue to focus on transaction volume as they work to increase their inventory turns on “A” moving parts. Limited resources require sales efforts to focus on the higher volume customers. As EMS business grows exponentially, large Asian distributors are becoming larger and gaining increasing shares of the market. As these Asian distributors grow larger, they continue to pressure margins and gain marketshare, as domestic distributors see the onset of broad declines.

Distributor: Let me get this straight, you have a new part that has never seen the light of day, and you want me to invest in inventory on the chance that it could be a winner?

Supplier: Yes. How many will you take?

As the Manufacturer, you already know how difficult it can be to get the attention and mindshare you need from the large distributors on your latest products. After all, you do have your broad line suppliers. Perhaps they are a national or even an ultra-national or multi-national. Suffice it to say, they are big, they are dependable and they take and move product. But when it comes to new products, you know you have a hole.

What to do? Right-size.

That’s right. You remember right-sizing when it first hit the lexicon during the recession in the late eighties. Back then, companies were adjusting their workforce to match the requirements of the situation and economic times. Well, that’s what we are talking about here as well: match your needs with those distributors who are out there focusing on specific products and specific markets. You wouldn’t hire a municipal salt truck to sprinkle salt on your asparagus. So don’t ask the Big Disty’s to present your product to their customer list. With 500+ suppliers all trying to get the same amount of attention from the large distributors, you are going to get lost in the sludge.

Today’s smaller, regional, specialized and niche distributors are focused in on the social media shift which has suddenly made the playing field surprisingly level. These distributors have the resources available to them now to immediate get your message out to users across multiple social media sites and forums used by engineers, buyers, tech writers and other users. What’s more, you are a big fish to these smaller distributors. A little attention paid to these distributors can go a long way to getting a toehold in the customers where these companies do very well. There are hundreds of these smaller distributors who are willing to share the burden of new products. With parts on the shelf, salespeople on the street and a willingness to move new product for a higher-than-market margin, right-sizing can be exactly what your new products need to get their very own set of legs.

Developing New Overseas Channels For Your Export Business? – A Project Based Approach!

Has your business revenue and growth rate reached a plateau in the USA and/or Europe? Is organic growth simply not going to take your company to the size that your investors need it to be? Many companies face this challenge but do not have the financial wherewithal to grow by merger and acquisition. The challenge is to move into new and relatively untapped markets, these are very often found outside the boundaries of the home market and the need to look overseas is glaringly obvious. Yet it is not so simple as it may first sound! You might know which of your products you want to export but do you know which country to start with, is it Japan or Korea or China or India or even smaller countries such as Singapore or Taiwan or Australia and it simply is not practical to cover them all. This is without even asking questions such as what mods will need to be done to the product and packaging, what export terms do we use, how will we get paid, what taxes are imposed, what transfer pricing will be required, what warranties will be obligatory, will we need local staff etc. etc. etc.

Then there is the question “who can we get to handle this?” Joe always takes his vacation in someplace like Bangkok or Beijing so he is probably a good candidate! The bottom line is would you take Joe, a Detroit automotive sales manager and ask him to go and close business in Korea or take Pete, a London IT sales manager and send him to set up distributors in China? Of course you wouldn’t but the reality is that this is exactly what companies are doing – they are expecting their good people to manage setting up overseas business in the same manner as if it were their home based business. Believe me it is a world apart and I don’t just mean geographically – it’s culturally and business practice wise so varied from country to country and that doesn’t even touch on the language issues.

So many companies have failed miserably when trying to set up their international business channels. A company would never think twice about creating a new production line without a project manager and a well structured project plan, even firms fitting new kitchens these days offer a project manager so why would you approach such a critical process of growing your global business on an ad-hoc basis? Would you appoint an IT project manager to manage the build of a water treatment plant or a project manager of a washing machine plant to build aerospace engines – No!  So why do so many companies believe they can succeed in international markets by using an American or European centric resource? This is an international sales and marketing task where the markets are very different than that of the American or European so doesn’t it make sense to use an appropriate resource? Think of this venture like a project and think of your International manager like you would a project manager – they have a difficult task to accomplish and need to approach it professionally, you need a lead person who has the skills and experience of not just managing overseas agents but a hunter that has worked the territories before, knows the trail and can sniff out the right targets. He needs to understand how overseas channel partners think, what drives them and turns them on and to be able to empathize with them.

I remember when I worked for a data communications company, we were doing quite well throughout the APAC region via our existing agents and distribution channels but we needed an order of magnitude increase to grow the company to the next level. I approached the International VP and told him that I needed to remove myself from the international channel management role and focus on a new growth strategy. I planned, managed and focused my effort and channeled all my energies into striking up an OEM deal with one of Japan’s largest companies. Because of the strategic and planned approach and with good tactical positioning I was able to secure the deal which yielded an enormous increase to our Far East revenues and ultimately had a huge impact on the share price of the company as a whole. Of course it left me with another problem and that was I had to source manufacturing for this scale of volume in Asia and to negotiate with the Taiwanese to get this up to speed asap, but it was a nice problem to have. The message here is that I managed the task like a project, I had the connections in Japan, knew how to deal with the Japanese from my past channel role and did not try to shoehorn it in with my day to day job of managing the existing partners.

Yet it is not only the key individual that makes it a success. Like all successful projects they start with capturing the requirements and creating a requirements specification, defining a solution, building a solution, trials and tests and rollout. It  has a timeline, budget and cash flow. The foregoing tasks can be translated into Discovery – in brief the establishing of the products or services that can be effectively and profitably introduced to the overseas market, a readiness to export survey, reviewing agreements and having a market plan, what costs will be required, will technical support be needed out in territory and how much and for how long etc. Research – What channel structure is best suited to your portfolio, which locations are lucrative and compatible, market size and acceptability, how do your competitors operate, attending trade fairs and exhibitions to glean local knowledge and so on. Engage – striking up discussions, working contacts, meeting players, evaluating strengths and weaknesses, what investment they will make, selecting the right channel, have them test trial your products, come up with a local rollout marketing plan etc. Administer – monitor the whole process with cross checks to the original requirement and refinements. Manage – ensure the process is running to time and budget, communicate with other internal stakeholders, make sure the introduction of your product to the local market is going as planned. Only then will you Succeed. Think of this as your international DREAMS model approach and conduct it like you would any other project.

You might have read all this and be thinking yeah it all makes sense but our organization simply doesn’t have the manpower to spare to focus in this depth and detail, we will just have to use our existing resource that manages the region. Well that’s your decision but you might want to look at external resources that specialize in this sort of business, have done it successfully many times before and can work alongside your existing team without you losing control. There are pros out there that will act as an extension of yours, even carry your business cards and act on your behalf and when the job is done they will hand off to your existing management team. You are now thinking OK but that will cost me lots of extra money over and above my current budget, well there may be a small extra charge but there are those that will take the bulk of their reward out of the initial sales that are delivered from the new channels and this makes it a win / win business proposition. If you do look externally make sure you look at those that can provide you with an end to end service and approach it in a methodical and structured manner. Look at Expand Internationally as a starter.

Dish Network International Channels – Dish Network in Your Language

If you live in the United States and are looking for television programming in your native language, Dish Network International may be the perfect solution. Over 28 different languages and various programming packages make Dish Network the number one choice for international viewing.

Here’s just some of the Dish Network International Programming Packages:

The Ukrainian Package: This package offers Inter+ which delivers movies, sports, music, and children’s programming in both Ukrainian and Russian languages.

For native Russian speaking individuals, the Russian Mega Pack is a perfect solution. It provides an array of Russian-language programming including the most recent news coverage, documentaries, children’s programming, movies, and talk shows.

Dish Latino – Follow the link below for more information

Italian Language: PANORAMA ITALIANO. Included in this package: RAITALIA, Euro News, Video Italia, RAITALIA Radio, RAI News, and much more. Some examples of what you can receive through these channels are: Travel shows, sports such as live soccer, music, mini-series, entertainment programs, cuisines, fashion shows, religious programs and concerts, and more. You also get free installation and DVR Upgrade.

Greek Language: Dish offers up Greek Elite Pack. This package contains ERT World, ERA Sport, ERA-5, and NET 105.8. You’ll be receiving a wide variety of sports, movies, entertainment shows, children’s programming and more. You also get Free installation and a DVR upgrade.

Chinese: The Chinese Super Pack offers multiple channels through ETTV and are all broadcast in the Chinese language.

French: 3A TELESUD. This French language channel is intended for viewers of African and West Indies descent. You’ll receive 24 hours of documentaries, news, magazines, live concerts, music videos, and more.

Japanese: TV JAPAN offers up news, documentaries, movies, sports, children’s programming and many more NHK programs.

Arabic – The Arabic Elite Super Pack and Arabic Elite Pack delivers movies, sports, dramas, 24 hour live news coverage, Egyptian Soccer League, documentaries.

German: DEUSTCHE WELLE (DW-TV). This is a German and English language channel direct from Germany. This channel provides news, sports, business, arts, politics, and many entertaining shows.

Armenian – The 24 hour Armenia TV Channel delivers movies, historical and cultural programming, news, talk shows, children’s programming, Armenian Football League and other sports programming, and much more.

Filipino – ABC, NBN, Philippine Multimedia Systems Inc. (PMSI), CCI Asia Group, Viva Entertainment – The Mabuhay Channel delivers a variety of programs such as movies, documentaries, sports, travel shows, news, music, and much more.

These packages are only a small example of the Dish Network International Programming offered by Dish Network.