---
title: "Five Questions Distributors Must Consider for Survival and Growth"
description: "Currently, over 90% of Chinese distributors are individually operated, with few having sound management systems and professional operational processes. In today's increasingly competitive market and growing strength of terminal channels, distributors should consider establishing a management process that adapts to competitive development from aspects such as corporate culture, human resources, financial management, responsibility division, and rational planning."
author: "朱志明"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2014-10-09"
language: "en"
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# Five Questions Distributors Must Consider for Survival and Growth

> Currently, over 90% of Chinese distributors are individually operated, with few having sound management systems and professional operational processes. In today's increasingly competitive market and growing strength of terminal channels, distributors should consider establishing a management process that adapts to competitive development from aspects such as corporate culture, human resources, financial management, responsibility division, and rational planning.

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Currently, over 90% of Chinese distributors are individually operated, and few have sound management systems and professional operational processes. "Mom-and-pop shops" and "brother shops" are everywhere, with management levels varying greatly. Random management, multi-headed management, unclear division of labor, and ambiguous responsibilities are common. In today's increasingly competitive market and growing strength of terminal channels, from which aspects should our distributors start to establish a management process that adapts to competitive development?

**First: Corporate Culture, the Foundation of Development**

Every enterprise has its development goals and purposes. Only when an enterprise clearly defines its goals, purposes, and central theme can all management rules and regulations be formulated, executed, and maintained around this central theme. Any conflict with this center should be invalid. There are many criteria to judge whether an enterprise can sustain healthy development, but one is crucial: whether the enterprise can use corporate culture as a management method. Distributors must transition from rule by man to institutionalization. Through institutional standards, employees should understand how existing problems and abnormal phenomena affect the enterprise's development, constrain personal prospects, and harm other employees. This enables everyone to fully recognize the necessity of adhering to the enterprise's development purpose and the seriousness of maintaining the corporate culture image. It is even more important that the boss of the distribution company must lead by example in implementing corporate culture. If leaders do not practice what they preach, the content and ideas of corporate culture will become a dead letter.

**Second: Human Resources, the Key Priority**

Many distributors still use family-style management. During the entrepreneurial period, the business scale was small, and employee quality requirements were low. Relatives and friends became the core backbone, leading to nepotism rather than meritocracy. Over time, this resulted in ineffective employee management, severely restricting the distributor's development. Although many distributors have realized that despite the expanded scale, a team has not formed, and there is no human resources system matching the current scale and future development. Employee capability and cohesion have become problems. This is partly because distributors have not yet developed a team-building mindset, and partly because they lack the ability to build a team. For distributors, doing business is building a team. What kind of enterprise you want to be determines what kind of team you must build. Today, distributors must introduce talent for their own development and abandon the short-sighted idea that "family and relatives are most reliable." Compared to upstream manufacturers, distributors lack not capital but talent and management! In human resource management, distributors should establish a scientific talent management system, including talent reserves, pre-job training, performance appraisal, and job promotion, all with clear rules.

**Third: Financial Management, Carry It Through**

Currently, many distributors' financial management only involves simple bookkeeping of daily income and expenses. Operating expenses are spent arbitrarily without complete procedures, and cannot be reflected through sound financial accounts. In most distributors' minds, they can use their own money as they wish, and the only approvers might be their wives or mothers. These approvers often merely act as "financial directors," with no standards for employee wages, reimbursement, shopping, or hospitality, and no sound procedures or systems to regulate them. Thus, many distributors often wonder: "I earn quite a bit, but after deducting miscellaneous expenses, why is there so little left at year-end?" Therefore, distributors must establish a sound financial management system, with detailed statements for monthly sales, profit and loss, and assets and liabilities. This way, distributors can know how much they earned, how much they lost, and where to reduce operating costs and turn losses into profits.

**Fourth: Clear Division of Responsibilities and Powers, Imperative**

In distributor management models, it is common to see one person handling multiple roles and positions. Due to unclear responsibilities and powers, poor performance and mutual blame-shifting occur. The author believes that in today's increasingly fierce market competition, a high-quality marketing team must be established first. Each member's "responsibilities, powers, and benefits" must be clearly defined. Who sells, who delivers, etc., must be assigned to specific individuals. For cross-functional work and those holding multiple positions, how to assess them must be fully institutionalized. In marketing management, cooperation with upstream manufacturers should also be carefully considered. To effectively motivate employees, market policies can be delegated, giving employees flexible market operation space. Implementing regional market responsibility and power linkage helps them truly shed the mentality of hired workers and operate and manage the market from an operator's perspective, thereby increasing team ownership and enhancing cohesion and combat effectiveness. Enterprises differ in size and culture, and their management behaviors have their own characteristics. But how can enterprises go further and climb higher in such fierce market competition? They need a management system suited to their own characteristics. Distributors are mostly individual enterprises, and management is often dictated by the boss. It is highly flexible but lacks systematic management engineering. Who does what, who doesn't, who does more or less—the division of labor is unclear. Most tasks are done on a whim or assigned by the boss. This leads to some being overworked without appreciation, while others are idle and act clever, causing unfair bonus distribution and declining morale. How to reasonably allocate product, regional, and responsibility assignments so that everyone does their own job, maximizes their strengths, and does their best in their respective duties has become a problem distributors must consider. Avoid situations where achievements are attributed to one person and failures to everyone else.

**Fifth: Rational Planning, Step-by-Step to Win**

Many distributors aspire to represent more good brands or obtain larger regional agency rights, without considering whether their capital arrangements, personnel placement, and network layout can be in place and thorough, and whether they can meet the manufacturer's requirements. They run around like firefighters, neglecting one thing for another, and eventually fail to meet any brand's requirements, potentially losing agency rights. I have personally encountered such a distributor. Perhaps considering operating costs and profit margins, he tried every means to secure agency rights for four brands. In his view, this could save more warehousing, travel, and salary costs. One salesperson could handle all brands, and he could rely on multiple brands for profits. But in the end, he added several warehouses and more salespeople, yet profits did not increase. Instead, capital turnover slowed (because many distributors have a habit of delaying payment, his salespeople seemed more like debt collectors, causing much frustration). Inventory piled up unevenly, and best-selling brands could not be stocked due to lack of funds, risking loss of agency qualifications. For slow-moving products, retailers were not cooperative, only paying after selling out, causing sleepless nights. He often mortgaged real estate and cars to maintain capital turnover. Distributors must consider whether a bigger scale truly means higher profits based on their management capabilities. Many well-known Chinese enterprises have perished because they loved to extend and expand wildly, engaging in "horizontal marketing," weakening their main products and reducing their market influence. Distributors should strive to refine, strengthen, and deepen their main products, regions, and networks, and refine their internal management, ensuring they only bite off what they can chew.

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