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A core competency is the activity a company is most proficient at, and a manufacturer's core competency is making product. Setting up an end-user sales system is not part of a manufacturer's core competency. Using distribution allows a manufacturer to limit its exposure to sales and focus its resources on efficient manufacturing techniques.
The process of finding and selling to retail customers can get expensive. The costs of advertising and maintaining retail locations can become prohibitive for a manufacturer. When a manufacturer uses distribution, it becomes the responsibility of the distributors to find retail outlets for products. The manufacturer can broaden its retail exposure through distribution without having to spend more money or involve more company resources in sales.
When a manufacturer decides to sell to a new geographical market, a distributor can offer an established retail network instantly. This is effective when opening up new international markets. A manufacturer can turn the responsibility of dealing with international trade laws, shipping through customs and handling the laws and cultures of foreign countries over to the distributors.
A manufacturer can turn over the responsibility of administering customer service duties to its distributors and reduce the manufacturer's need to invest in a customer service department. The manufacturer would only deal with the distributors, while the distributors would deal directly with retail outlets and their customers. It reduces the administrative responsibilities of the manufacturer and lowers operating costs.
The core business practice of a manufacturer is to make and package products. A distributor becomes the sales arm of your company for which you do not have to pay. By using distribution, you are able to reach a mass audience of retail outlets without having to invest any of your own company money into developing and maintaining that business network.
One of the key functions of a distributor is to grow and administer a network of viable retail outlets. Many distributors also offer specialized retailers that can reach a specific target audience. When you use a distributor, you are able to get your product out to a mass market to expand your customer exposure, or you can reach a specialty target audience without having to do any of the necessary market research.
Distributors deal with retail clients on a regular basis, and those retail clients sell to your end users. If you want to do market research on a current product or get input on new ideas on which you are working, a distributor can collect that information for you directly from your end users. This allows you to utilize a distributor's large network of retail clients to keep updated on customer preferences.
Distributors present a ready-made audience of retail clients in any market for a manufacturer that is looking to expand its product reach. For example, if your company has decided to try and compete in a European market, you can find an international distributor that will find a network of European retail outlets and give you the information you will need on what kind of product features a European audience would prefer.