Intenational Distribution Channels | Retail | Distribution (Business)

Chapter 14

International Marketing Channels

McGraw-Hill/Irwin

© 2005 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter Learning Objectives
1. The variety of distribution channels and how they affect cost and efficiency in marketing 2. The Japanese distribution structure and what it means to Japanese customers and to competing importers of goods 3. How distribution patterns affect the various aspects of international marketing

The functions. and disadvantages of various kinds of middlemen 6. The importance of middlemen to a product’s success and the importance of selecting and maintaining middlemen . The growing importance of e-commerce as a distribution alternative 5. advantages.Chapter Learning Objectives 4.

Global Perspective Global Perspective: “500 Million Sticks of Doublemint Today – Billions Tomorrow” Most challenging aspect of selling the gum for Doublemint is how to get the gum through China’s distribution channels: • “Mastering the distribution system is the single most important challenge of China’s economic revolution” • Finding reliable distributors is a challenge – Many are state owned and have little incentive to push one brand over another • Doublemint gum found a way to distribute their products effectively thru China – Note: Doublemint has a 91% market share in China .

Alternative Middlemen Choices IV.International Channels Important Points involved in making channel decisions I. Selecting. Distribution Patterns III. Locating. Channel Structure II. Factors that affect Choice of Channel V. Motivating and Terminating Middlemen .

Channel Structure Types of Channel Structures: 1. Import-oriented (traditional) distribution structure • Strong dependence on imported manufactured goods – Demand exceeds supply – Chewing gum example in China .I.

Japanese distribution structure Features: • High density of middlemen Note: the Japanese distribution system is changing because of the globalization of markets (more competition. see the Japanese distribution as a “major non-tariff barrier” . lower prices.S.I. more access. etc) • Channel control – Everyone in channel is tied to manufacturers thru such things as: inventory financing. merchandising returns and promotional support • Business Philosophy • “Large-scale retail store law” and the “Large-scale Retail Store Location Acts” – Most in Japan and in the U. cumulative rebates. Channel Structure 2.

and laws that protect the foundation of the system—the small retailer 2.S. .Japanese Distribution Structure • Distribution in Japan has long been considered the most effective non-tariff barrier to the Japanese market The Japanese distribution structure is different enough from its U. or European counterparts It has four distinguishing features: 1. a structure dominated by many small middlemen dealing with many small retailers—high density of middlemen. channel control by manufacturers. 4. 3. a business philosophy shaped by a unique culture.

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Daimler-Chrysler and GM created a website that allows purchase of automotive parts from suppliers: www.covisint.com . 410 Impact of the internet: • 7-11 Japan has a joint venture with www.7dream. e-Toys.com) • Ford. customer then uses 7-11 convenient stores for pick-up points for their orders.I.com – When order is placed on the web. Channel Structure Trends: Crossing Borders 14.2 pg.com • Sears and Carrefour of France created a retail exchange for retailers and supplier transactions: www. Amazon. • E-commerce retailers (eBay.gnx.

Distribution Patterns Understanding these general patterns is important: • Middlemen services • Line Breadth • Costs and margins • Channel length • Non-existent channels • Blocked channels • Stocking • Power and Competition Retail Patterns • Size patterns • Direct Marketing • Resistance to Change .II.

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3 pg. 415 • Direct Marketing –Amway • Resistance to Change .II. Distribution Patterns Retail Patterns • Size patterns –Exhibit 14.

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International Channel-of-Distribution Alternatives Home Country Foreign Country The foreign marketer or producer sells to or through 14-10 Domestic producer or marketer sells to or through Foreign consumer Open distribution via domestic wholesale middlemen Exporter Importer Foreign agent or merchant wholesalers Foreign retailers Export management company or company sales force Irwin/McGraw-Hill .

6 2. Alternative Middlemen Choices Classification of Middlemen Agent Middlemen • Do not take title to the goods distributed • Less risk (manufacturer assumes risk) Merchant Middlemen • Take title of goods being distributed (manufactures have less control) • Motivated by profit. Foreign-Country Middlemen • Types & characteristics – See exhibit 14.III.7 3. tend to be less loyal to one brand 3 Alternative Types of Middlemen: 1. Government Affiliated Middlemen . Home-Country Middlemen • Types & characteristics – see exhibit 14.

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using middlemen . Control • How much control is desired – Example: company’s own sales force exerts most control vs. Factors that affect choice of Channels The “6 C’s” need to be considered: 1. Capital requirements • How much capital is required 3. and cost of maintaining channel 2. Cost • Investment cost of developing channel.IV.

Continuity • Will there be longevity issues – How to build loyalty with middlemen is much more difficult than a company’s own sales force . Factors that affect choice of Channels (Cont.IV.) The “6 C’s” need to be considered (cont): 4. or targeted coverage to densely populated areas… 5. Character • Channel of the distributions system must meet the “character of the company” seeking to do business 6. Coverage • Full market coverage.

etc. reputation. Sources to use: • U. of Commerce. commercially published directories Selecting Middlemen Two steps • 1. managerial stability. Selecting.S. Screening • 2. Developing the “Agreement” . productivity. Motivating and Terminating Middlemen Factors affecting locating middlemen: Things to look for: • Financial stability.V. foreign consulates. Dept. Locating.

Selecting. communications. services offered. psychological rewards. payment of bills and profitability. advertisement. Locating.) Motivating Middlemen Common methods used to motivate middlemen: • Financial rewards. pricing. market coverage. Motivating and Terminating Middlemen (Cont.V. . company support and corporate rapport Terminating Middlemen Must consider things such as: • Legal protection • Control over middlemen Controlling Middlemen • Control over the system (distribution network) • Control over the middlemen – Volume of sales.

B2B (most prevalent in the U.The Internet How the internet affects distribution of products and services E-commerce.S.4 pg. 429 “No More Roses for my Miami Broker . oldest companies) Lowers distribution costs (middlemen often eliminated) Example: • Crossing Borders 14.

It cuts the cost of processing the transactions. 2. 3.Cost Cutting Using B2B Internet 1. It reduces procurement costs. . It makes possible tighter inventory control. making it easier to find the cheapest supplies.

Delivery 6.E-Vendor’s Issues of Concern 1. Local contact (Buying server space and create mirror sites creating virtual offices in foreign countries. Culture 2. local news groups and forums)) . Promotion (Promoting on the web means creating a “retail store” on-line with the same promotional activities (press releases.) 4. search engine registration. Payment (Credit cards) 5. Adaptation (Translation) 3.

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