Selecting an appropriate level of distribution intensity is an important strategic decision for brand manufacturers. However, the literature primarily focuses on the consequences of distribution intensity, with relatively little attention paid to its determinants. In the absence of sufficient academic research, distribution channel managers often rely on rules of thumb and industry norms when determining the number of distributors to market their products. This study aims to examine the impact of two market-level distributor factors on distribution intensity.
Hypotheses are developed in light of insights from micro-economic theories of the firm and tested with observational data from the Chinese automotive industry with a Copula method.
The empirical results show that greater similarity among distributors in sales capability increases distribution intensity, whereas greater similarity in service expertise decreases distribution intensity, consistent with our hypotheses. It also provides empirical evidence that other market-level factors such as population, GDP per capita, brand competition and brand experience are positively related to distribution intensity. In addition, global brands tend to use fewer distributors than local brands, reflecting a preference for greater control and brand consistency.
In contrast to related research that primarily looks at individual firms’ characteristics, the present research examines how market-level distributor factors impact distribution intensity. Our perspective leads to a few new insights that enrich the literature. Specifically, when distributors’ sales capabilities are similar to each other, manufacturers adopt a more intensive distribution strategy. On the other hand, when distributors are highly substitutable to each other in terms of positioning (service expertise) in a market, a more selective distribution strategy is preferable.
This study contributes to the limited literature on the determinants of distribution intensity. Unlike prior research that focuses primarily on manufacturer-level factors, the authors emphasize market-level distributor (dis)similarities, recognizing that distribution intensity is inherently a market-level decision. They demonstrate the significant effects of two distributor similarity factors with data from the automotive industry, which is a major engine of economic growth in the world. The perspectives and empirical findings in this study are new to the literature and inform distribution intensity decisions under different distributor contingencies in a focal geographic market.
