1) What is Loctite’s distribution strategy? What are the different distribution channels which are used by Loctite?
Loctite’s distribution strategy is to reach a worldwide sale capability in the chemical adhesives industry. Loctite wants to offer a full range of sealant and adhesive products which meet the different needs of its customers. The company provides a great support to distributors, training the distributor’s salespeople, demonstrating new products in seminars, and explaining cases where the product has been used. The different distribution channels are through independent distributors, representative offices, exports agents, joint ventures, acquisitions of others distributors and subsidiaries.
2) How does Loctite’s channel strategy differ between the domestic North American market and international markets?
In North America, Loctite sells approximately through 1,600 outlets across all over the country. Distributors ranged from small outlets to Loctite’s biggest customers. Loctite focused in selective distribution that is the reason for not being represented in most of the 50,000 potential outlets. The selective distribution allows a superior level of service for its customers, adding more value to the product.
Loctite always looked for two or three distributors representing the same market, so its customers had the choice of a different supplier. Distributor had a attractive return, which is between 30% to 35% of margin. The industrial distributors were structured into 12 regions.
The international market strategy was in some cases made by shipments under licensing agreements, e.g. in Japan. All products sales were made by overseas sales before the constructions of manufacturing plants. Some acquisitions and joint ventures helped to achieve a faster international expansion. Loctite acquired equity interests in its distributors around Europe. Loctite’s strategy was to penetrate in a country market with a relationship with a distributor, and increasing stake in this market, and eventually getting the business ownership.
3) What factors are driving Loctite’s acquisition of its international distribution channels?
Loctite’s acquisitions of its international distribution are driven in the most of the cases by the slow sales growth. Once a distributor establishes its business and its market share, it gets satisfied with the margin of the sales, and many times do not reinvest its profits in the business. It generates neither a higher growth nor a raise in the market share. Some distributors do not allow Loctite to have an active participation in their sales, and cash flow statements, so reinforcing Loctite to acquire the company.
4) What should Loctite do about distribution in Hong Kong?
Loctite should reinforce its policy in its distributor in Hong Kong. Loctite should try to work together with this local distributor, trying to explain Loctite’s policies and improve the communication. The business, the goals, and the results expected for that distributor has to be clarified.
Loctite’s P.R.C joint venture should meet with the distributor so they could specify a price range where both of the companies could make a better profit. Both companies have to analyze the market penetration so it is not penalized because of high prices, and neither the quality because of price war between those two seller companies. And Loctite should start to sell in China market.