Competitive Advantage through Distribution

Competitive Advantage through Distribution

General Motors as a part of its restructuring is planning to cut down on its distributors. The point that arises here is how this move will affect them. Such a move will only result in reduction in sales of General Motors. Dealers are almost like the main customers of GM. Reducing their number will automatically adversely affect the sales. This step will also cause a lot of inconvenience to the customers too. GM needs sales to pull it out of its situation. It needs distributors now more than ever. GM does not have to incur any cost of its distributors as they are all independent entrepreneurs. Hence they are not a financial burden on GM. This step is not going to benefit GM instead they stand to lose more. The revenues may decrease and their market share will erode. Instead GM should try to decrease its manufacturing costs. They should try coming up with a solution where GM can work in collaboration with their distributors.

If, still GM opts to reduce the number of distributors and has to select from various independent distributors, they ought to keep certain selection criteria in mind. General Motors should select such distributors who are experts in the technical aspects so that, if any problem arises, the distributor is able to provide backup service to the customers. The distributors should also have complete knowledge about the market so that they can build a strong customer base and increase the market share of GM. One important factor that they need to consider is that the distributors should not be keeping a high profit margin. Because a high profit margin means that the price of the product may even increase by more than 50% of the mark up price. This will force the product out of market competition which can prove disastrous for GM.  Hence the distributors can be a deciding factor of GM’s future.