How to Optimize Your B2B Channel Partnerships in China

“The information flow is so opaque that my distribution channels in China are like a black box,” the Head of Business Development for Asia Pacific at a global industrial firm said to me recently.

This is one of the many worrying comments on channel management I received during my conversations with quite a few senior executives from B2B multinationals in China last month.

Of course, not every multinational corporations is in as deeply problematic a position in the world’s largest emerging market. But regional market differences, inadequate infrastructure, and legal complexities in the country do make it additionally demanding for foreign companies to go direct, especially in terms of market expansion into lower-tier cities, thus weakening their bargaining power against local distributors.

Based on our earlier work, The Neglected Art of Channel Management, FSG has developed several tools and cases under an efficient and effective framework of “Evaluate – Motivate – Support” to help multinationals better streamline channel partner networks and align key distributor capabilities in the Chinese market.


1. EVALUATE: Build a centralized platform to assess and track channel performance regularly

To tackle the lack of information sharing in the distribution process, it is most effective to assign a Commercial Operations Team to manage direct and indirect sales in China, so that potential channel conflicts could be avoided. A centralized online distribution management system can also be established to help the team proactively track inventories, monitor seasonal sales trends, gauge the impact of internal incentives, gather end-user data, and set sales targets.

In order to prioritize distributor capability misalignment for future improvement, multinationals are encouraged to conduct a comprehensive evaluation of their current channel partnerships on a regularly basis using FSG’s 360⁰ distribution diagnostic tool. A few multinationals have also effectively streamlined their distributor networks by adopting a national partnership program for each tier of distributors based on the qualitative insight and quantitative metrics developed from systematic channel review.

2. MOTIVATE: Offer targeted incentives to prompt efforts in sales and client relationship-building

Sales can be boosted through appropriate monetary tradeoffs. Given that enhanced profitability is the ultimate goal, it is essential for multinationals to take a holistic view of distributor competitiveness in China and to provide monetary incentives by yielding margins in value chain sections where a certain distributor exhibits the most competitive advantages, such as marketing, government tenders, and after-sale services.

More non-monetary incentives and personal interactions with distributors are also essential in spurring efforts and cultivating more sustainable distribution partnerships, including global training programs, CEO distributor site visits, more joint sales calls, face-to-face workshops, and recruitment support.

3. SUPPORT: Foster long-term trust and stability in channel partnerships

By offering more accessible training programs online to facilitate technical sales of distributors and integrating compliance message into commercial training and market intelligence to ensure focus on legal awareness, an increasing number of foreign businesses have enjoyed much more stable distribution partnerships in China.

Another powerful support strategy that some B2B multinationals have considered is to form partnerships with syndicate banks to help underwrite distributor credit, so that financing burdens can be effectively lessened for many smaller distribution players.

I look forward to FSG’s upcoming Shanghai workshop next week, where the topic of distribution management in China will be discussed in-depth by around 25 multinational senior executives. For the full report on B2B Distribution Management in China, FSG clients can access the client portal. Not a client? Contact us at to learn more.

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