---
title: "How Should Distributors Design Their Business Organizational Structure at Different Development Stages and Operating Conditions?"
description: "This article is reproduced from the public account: Sugar Tobacco Weekly Food Edition. Every distributor goes through a process of growth from small to large and from weak to strong. As brands increase, channels expand, and teams grow, the distributor's business organizational structure must be adjusted in a timely manner to effectively reduce operating costs and maximize sales and profit contribution. Generally speaking, distributors establish their business organizational structure based on how they divide the market. There are four common ways to divide the market: first, by market region; second, by agency product; third, by channel; fourth, by a combination of the three."
author: "王焕之"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2015-06-05"
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# How Should Distributors Design Their Business Organizational Structure at Different Development Stages and Operating Conditions?

> This article is reproduced from the public account: Sugar Tobacco Weekly Food Edition. Every distributor goes through a process of growth from small to large and from weak to strong. As brands increase, channels expand, and teams grow, the distributor's business organizational structure must be adjusted in a timely manner to effectively reduce operating costs and maximize sales and profit contribution. Generally speaking, distributors establish their business organizational structure based on how they divide the market. There are four common ways to divide the market: first, by market region; second, by agency product; third, by channel; fourth, by a combination of the three.

This article is reproduced from the public account: Sugar Tobacco Weekly Food Edition
Any distributor must go through a development process from small to large and from weak to strong. With the increase in brands, expansion of channels, and growth of the team, the distributor's business organizational structure must also be adjusted in a timely manner to effectively reduce operating costs and maximize sales and profit contribution.
**Generally speaking, distributors establish their business organizational structure based on how they divide the market. There are four common ways to divide the market:** First, by market region; second, by agency product; third, by channel; fourth, by a combination of the three. In other words, the distributor's business organizational structure is determined by the regions, products, and channels they operate in, so it must be adapted to local conditions. Being static is certainly not acceptable, and blindly copying others is even less advisable. So, how should distributors design their business organizational structure for different development stages and operating conditions?
**Model 1: "Regional" Business Organizational Structure**
**Organizational characteristics:** The market is divided by region, and all products and channels are managed by the regional salesperson. However, due to limitations in energy and ability, salespeople often tend to "sell old products rather than new ones, and sell fast-moving products rather than slow-moving ones."
**Applicable scope:** Distributors with a single product, single channel, and small scale.
For distributors, under what circumstances is business simplest and easiest? Of course, when the product line is most streamlined and the channel is most singular. Many distributors have this experience: at the start, due to limited scale, they can only represent one or two products and operate only one type of channel, such as circulation, supermarkets, or catering. Dividing the market by region, salespeople can basically manage, but if another channel or a few more products are added, salespeople find it very difficult. Why does this happen?
Because different channels require different operational methods, and thus different skills for salespeople. Similarly, each product has different promotion methods and market acceptance. With more products, salespeople inevitably neglect one thing while attending to another.
Of course, distributors cannot expect their salespeople to be able to promote any product and handle any channel, because "all-round" salespeople are either hard to recruit or hard to retain. Therefore, in a regional organizational structure, salespeople tend to rely on past experience and habits, only selling old products and focusing on main channels. The mindset of "selling old not new, selling fast not slow" is deeply ingrained, making it difficult to effectively solve the problem of expanding new products and new channels.
In summary, the regional organizational structure is only suitable for distributors with a single product, single channel, and small area. If they try to promote new products and expand new channels under this structure, it will be difficult to succeed. Therefore, as the scale of products and types of channels increase, distributors must adjust and expand their existing business organizational structure to meet further development needs.
**Model 2: "Product-Based" Business Organizational Structure**
After entering the growth period, distributors will inevitably increase products or expand channels. If they aim to increase business scale through multi-brand operations based on existing channel customers, they can refer to the product-based business organizational structure.
As mentioned earlier, a salesperson does not have enough energy to successfully promote multiple products. Under the product-based organizational structure, each brand or product has a dedicated sales team to maintain it, maximizing the market sales potential and effectively solving the problem of weak new product promotion. However, this also brings two drawbacks: First, multiple teams serve the same customer simultaneously, making resource sharing impossible; Second, the number of sales personnel increases sharply, and operating costs and expenses rise significantly. Therefore, after adopting this structure, many distributors see a significant increase in product sales, but overall profits decline.
In fact, the product-based business organizational structure is built on the basis of large-scale operations. If product sales are insufficient to support expenses, then it can only be at the expense of profits. Therefore, before deciding to form a new product sales team, distributors must fully assess potential cost risks, and while pursuing rapid volume growth, try to balance profits as much as possible.
To this end, a phased operation approach can be adopted. During the new product expansion period, organize special activities. One method is personnel adjustment, such as mobilizing salespeople from five regions to focus on one area for two days, and then repeat for other areas; another method is shifting focus, such as requiring all salespeople to promote old products for two days and new products for three days. The significance of special activities is to maximize the concentration of existing personnel's energy, quickly increase the distribution rate of new products, and solve the problem of standardized display. When the sales scale of new products reaches a certain level, then form a dedicated sales team and gradually transition from a regional organizational structure to a product-based organizational structure.
**Model 3: "Channel-Based" Business Organizational Structure**
**Organizational characteristics:** Business teams are divided by channel type, such as one group for supermarkets, one for circulation, one for group buying. All products and related matters are handled by one salesperson, with strong channel control but high operating costs.
**Applicable scope:** Distributors with a single product, multiple channels, and scale.
The channel-based business organizational structure is similar to the product-based one, both aiming to solve the problem of distributor scale development. The difference is that the latter starts from products, while the former starts from channels, ultimately establishing the entire business team organizational structure.
Distributors adopting a channel-based organizational structure usually represent only one or two products but are involved in multiple channels, such as supermarkets, circulation, catering, and group buying. Since a single salesperson does not have enough ability to maintain multiple channels simultaneously, dedicated business teams are formed for each channel, effectively improving service and control over channel customers. The drawbacks of this model are:
First, it still cannot effectively solve the problem of promoting new products; Second, it bears the dual pressure of channel costs and personnel costs.
The issue of new product promotion has been mentioned earlier. As for how to alleviate the cost pressure of full-channel operation, the key is still scale support. However, in the early stage of channel expansion, what if scale advantages have not yet formed? Slow down; it is not necessary to achieve all channels at once. Instead, based on the operational characteristics of the existing team, gradually penetrate other channels. For example, if the current focus is on circulation, then first open catering outlets, then enter large supermarkets, and finally do group buying, step by step. In addition, for distributors with a single product and multiple channels, the brands they hold must be strong enough and have products suitable for various channels such as circulation, supermarkets, and catering.
If the products represented by the distributor are only suitable for circulation, then do not enter supermarkets. Otherwise, the product and channel will not match, making it difficult to sell, let alone form a certain scale.
In short, establishing a channel-based business organizational structure also has prerequisites. Distributors must find corresponding target customers based on their products and choose suitable channel types.
**Model 4: "Combination" Business Organizational Structure**
**Organizational characteristics:** Business teams are divided by brand. Brand managers are responsible for the overall operation of the brand, then supermarket and circulation supervisors are responsible for channel sales and promotion, and finally, salespeople in various regions and systems execute. This organizational structure is very large, solving the problem of scale and large-scale operation of trading companies, but the corresponding management difficulty and costs are also considerable.
**Applicable scope:** Distributors with multiple products, multiple channels, and scale.
When a distributor's scale develops to a certain level, continuing to build a business organizational structure based on a single region, product, or channel makes it difficult to achieve higher business goals. For example, some distributors have made a single product very mature with good sales in every channel, so they will inevitably introduce other products to enrich their product structure. Others are very strong in the circulation channel and have successfully operated multiple brands, so they naturally do not want manufacturers to give other channels to others. At this point, it is necessary for distributors to adopt a "product + channel + region" combination organizational structure to establish a multi-product, multi-channel operation model.
In reality, distributors with operating scales of tens of millions or even hundreds of millions more often adopt this organizational structure. They are generally located in provincial capitals or prefecture-level cities and hold several strong brands that are among the top in their categories, such as Shuanghui, Haitian, and Master Kong. Each brand has considerable sales volume. Specifically, in each region, monthly sales in each county can exceed one million, and in urban areas, sales may approach ten million, enough to support an independent business team for multi-channel development and management. Another situation is when distributors have enough products but no particularly prominent brand. In that case, they cannot divide departments by brand but should establish departments such as leisure food division, beverage division, dairy division, etc., based on product series combinations, which can also maximize the market potential of products and increase sales scale.
The "product + channel + region" business organizational structure model effectively solves the problem of scale and large-scale operation of trading companies, but at the same time, it must be noted that due to the overly large organizational structure, management difficulty will inevitably increase. Whether the business team can form strong execution often depends on the abilities of professional managers and middle-level supervisors, and the role of the boss in the management system must also be adjusted accordingly. In addition, operating costs and expenses become quite tricky. Imagine if a distributor has 5 brand divisions and 5 independent business and distribution teams, serving the same channels and customers, it will inevitably cause huge resource waste. Therefore, it is recommended that distributors, based on the "product + channel + region" business organizational structure, introduce a marketing department for brand planning and market promotion, while integrating terminal management and logistics distribution teams to effectively reduce personnel costs and channel expenses and improve overall operational efficiency.
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