Distributed database systems can yield significant cost and performance advantages over centralized systems for geographically distributed organizations. The efficiency of a distributed database depends primarily on the data allocation (data replication and placement) and the operating strategies (where and how retrieval and update query processing operations are performed). We develop a distributed database design approach that comprehensively treats data allocation and operating strategies, explicitly modeling their interdependencies for both retrieval and updateprocessing. Wedemonstratethatdatareplication,joinnodeselection,anddatareductionbysemijoinare important design and operating decisions that have significant impact on both the cost and response time of a distributed database system.