SOME multinationals who have rushed to gain a foothold in the China market find they have lost control over their distribution systems, according to a study by Kroll Associates (Asia), a company that primarily investigates white-collar crimes.
'Some companies based in the United States and Europe that wanted to get into the China market did not do their basic homework,' Kroll Associates managing director Stephen Vickers said.
'They put all their faith in middlemen and a few of them did very well initially.
'But then, the distribution areas were divided into zones as the business grew, and the middlemen began to use friends and family to own distribution areas.
'You never let your employees own their distributorships.' Mr Vickers claimed bodies responsible for buying certain categories of goods had been persuaded to buy more than was required.
'When the stockpiles of goods bought began to grow, they were shipped out to markets where the unit prices were better,' Mr Vickers said.