International Marketing Semina Durex

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Focus channels: Durex website, supermarkets, hypermarkets, pharmacies, e-

commerce (recently)
A vertical marketing distribution system
Number of channel levels:
Manufacturer (in specific nations)
-> Wholesaler(sale branch)
-> Retailers (supermarkets, hypermarkets, stores,..)
-> Consumers
Introduction

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Distribution process
Includes the physical handling and distribution of goods, the passage of

ownership (title), and most important from the standpoint of marketing
strategy_the buying and selling negotiations between producers and middlemen
and between middlemen and customers.
Each country's market has a distribution structure through which goods pass from
producer to user. Within this structure are a variety of middlemen whose
customary functions, activities, and services reflect existing competition, market
characteristics, tradition, and economic development.
Channel-of-
Distribution
Structures

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Import-oriented
In an import-oriented or traditional distribution structure, an importer controls a

fixed supply of goods, and the marketing system develops around the philosophy
of selling a limited supply of goods at high prices to a small number of affluent
customers. In the resulting seller’s market, market penetration and mass
distribution are not necessary because demand exceeds supply, and in most
cases, the customer seeks the supply from a limited number of middlemen.
Channel-of-
Distribution
Structures

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Japanese Distribution Structure
Distribution in Japan has long been considered a most effective nontariff barrier
to the Japanese market. The Japanese distribution structure is different enough
from its U.S. or European counterparts that it should be carefully studied by
anyone contemplating entry. The Japanese system has four distinguishing
features
A structure dominated by many small middlemen dealing with many small
retailers
Channel control by manufacturers
A business philosophy shaped by a unique culture,
Laws that protect the foundation of the system—the small retailer.
Channel-of-
Distribution
Structures

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Trends: From Traditional to
Modern Channel Structures

Multinational marketers are seeking ways to profitably tap market segments that currently are served
by costly, traditional distribution systems.
Direct marketing, door-to-door selling, hypermarkets, discount houses, shopping malls, catalog selling,
the Internet, and other distribution methods are being introduced in an attempt to provide eff cient
distribution channels. Importers and retailers also are becoming more involved in newiproduct
development.
=> The effect of all these intrusions into the traditional distribution systems is a change that will make
discounting, self-service, supermarkets, mass merchandising, and e-commerce concepts common all
over the world, elevating the competitive climate to a level not known before.
Channel-of- Ex: Durex has built its own website for each nation’s market where people can directly buy products
from the firm. In addition, with the development of e-commerce platforms, customers can also
Distribution purchase these products on the channels with a competitive price.
Structures

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Distribution Patterns The “traditional” system will not change

overnight. Nearly all international firms are
forced by the structure of the market to use
at least some middlemen in the distribution
arrangement.
To better understand the distribution system

used in a foreign country, marketers must
never assume it is the same as what they
practice domestically.

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Distribution Patterns Retail Patterns
Retailing shows even greater diversity in its structure than does

wholesale.
Size Patterns:
Retail size has a direct impact on how to distribute.

Specifically, affecting the number of accessed customers in
distribution channels (dominant retailers vs small retailers).
Example: In Italy and underdeveloped countries, retailers are a

critical factor in inadequate distribution. Because, large
dominant retailers can be sold directly, but there is no
adequate way to reach small retailers who, in the aggregate,
handle a great volume of sales.

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Direct Marketing:
One way that marketers are able to overcome the

challenges posed by structures in place in underdeveloped
nations is through direct marketing.
Direct marketing occurs when consumers are targeted
through email, telephone, or door-to-door selling.
For example: Direct sales through catalogues have proved

largely successful. For example, a U.S. mail-order company,
Shop America, teamed up with 7-Eleven Japan to distribute
catalogues in its 4,000 stores.

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Resistance to Change:
Many cultures are accustomed to when and how their

products and services are made available, and may not
respond positively to adjustments.
Example: Wal-Mart’s expansion into Japan. Instead of adapting

business operations to the Japanese culture, the company
essentially assumed the Japanese would readily adapt to Wal-
Mart’s. Because there is a much larger need for local store
customization in Japan than in the US.

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Alternative Middleman Choices
Whether marketing domestically or

internationally, your options range from
taking control of the distribution process in
its entirety or depending on one or more
intermediaries for the distribution of your
products and services.
The channel process includes activities that Home-Count

start with manufacturing and end with the
final sale to the customer.
Middlemen
The seller must exert influence over two sets
of channels:
One in the home country Classification of Middlemen
One in the foreign-market country
Agent middlemen: Do not take title to the goods distribute

Merchant middlemen: Take the title of goods being
distributed

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Characteristics Exampl
Are located in the f rm’s home
i country Companies with small international
and provide marketing and distribution sales volumes, those inexperienced in
Home-Country services from a domestic base foreign markets.
Foreign-Co
The parties relegate foreign-market
Middlemen distribution to others; such as Middlemen
manufacturer or global retailers, export
management companies (EMC), or
trading companies.

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For marketers desiring greater control Durex uses foreign country middlemen -
over the distribution process, foreign- DKSH Vietnam Co., Ltd. when entering
Foreign- country middlemen are hired the Vietnam market.
Government
Oftentimes they are utilized temporarily,
Country but can also be manufacturer reps or Affiliated
Middlemen separate foreign distribution Middlemen
companies.

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Marketers must deal with governments In the Netherlands, the state’s
in every country purchasing office deals with more than
Government-affiliated middlemen are 10,000 suppliers in 20 countries.
Government- Home-Count
often responsible for delivering
Affiliated products, services and commodities for Middlemen
Middlemen the government's own uses.

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Alternative
Factors Affecting Choice ofMiddleman
Channels Choices
Cost
Capital
The capital or investment cost of constructing the channel and the ongoing cost of sustaining it are the two
types of channel costs.
Requirements
The merchandise must be considered when calculating marketing costs.
Control Transporting and warehousing items, giving loans, local advertising, sales representation, and negotiating are
all costs incurred by middlemen.
Coverage Durex was available in more than 152 countries all over the world makes the difference for branding
campaigns in different countries.
Durex has 17 manufacturing factories in the globe and uses a mass distribution approach to distribute their
Character products such as supermarkets, e-commerce, convenience stores, wholesalers, retailers and so on.
Continuity

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Alternative
Channels Choices
Cost
Capital
The capital demand and cash-flow patterns associated with hiring a specific type of intermediary are critical
considerations.
Requirements
Builds its own internal channels, or sales force, it usually requires the most investment.
Control Using distributors or dealers might reduce capital expenditures.
Durex chose intermediaries such as wholesalers, retailers for each international market to distribute their
Coverage products.
The capital expenditures for channel development will be decreased.
Character It is going to deduct the suffering for capital requirements of the whole distribution system all over the world.
Continuity

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Alternative
Channels Choices
Cost
Capital
Requirements The greater a company's involvement in distribution, the more control it has.
Each channel arrangement allows a varied level of control; as channels become longer, the capacity to
Control regulate price, volume, promotion, and outlet type decreases.
When Durex enters the foreign market and distributes their products by the intermediaries in the host country,
it will reduce cost in the supply chain.
Coverage Durex is going to hard for risk management of their product such as price, the number of products, quality or
discount campaign.
Character
Continuity

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Alternative
Channels Choices
Cost
Capital
Requirements
Control
Coverage
Character
Continuity

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Alternative
Channels Choices
Cost The difficulty of building an efficient coverage: “Country to country”:

Manufacturers' agents: Thailand and
Capital
Existing intermediaries (specialist intermediaries outside of China.
Requirements big urban centers)

Sales force in Vietnam: Durex Vietnam.
Highly developed locations -> intense competition

A merchant wholesaler–DKSH: a Swiss
company
Control Sparse markets -> insufficient channels
“Time to time”:
Coverage The high cost of distribution
Internet: E-commerce in the Vietnam
Durex codom coverage in stores is estimated at 90-95%: market (Tiki, Shoppee, Lazada, etc)
Character supermarkets and hypermarkets, such as Vinmart Shifting the status from B-to-B to B-to-C
(Vietnamese biggest market chains) Cutting time and costs for intermediaries
Durex case in Vietnam of “country to country”
Continuity and efficiency of “time to time”:

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Alternative
Channels Choices
Cost
Capital
The channel-of-distribution system chosen must match the company's personality and the markets in which it
Requirements operates.
Some product requirements, which are frequently the first to be evaluated, include the perishability or mass of
Control the product, the complexity of the sale, the needed sales service.
Channel patterns vary -> flexible to adaption.
Coverage In Vietnam, Durex still retains and maintains traditional markets such as supermarkets and drugstores, because
this segment still brings brand awareness and is suitable for the message of raising sexual awareness in
Vietnam, and at the same time, there has been a rapid shift in the new trend of e-commerce wave when
Character realizing this potential market when it can serve directly and occupies an important position in the purchasing
behavior of consumers.
Continuity

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Alternative
Channels Choices
Cost
Capital
Requirements
Control
Coverage
Character QingDao London Durex Co.Ltd - the world biggest plant of Durex - established as a JV in 1998 in China.
However, SSL group was aquired by RB group in 2010. Until now, SSL group still maintain this mass
Continuity manufacturer as the brand's long-term vendor.

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Channel Management
Locating Middlemen
The search for potential middlemen should begin with a market analysis and the development of criteria for evaluating middlemen who serve
that market.
a. Checklist b. The major problems c. Middlemen list sources of information
The checklist of criteria Locating information to Firms seeking overseas representation should compile a list
Productivity or volume aid in the selection and of middlemen from such sources as the following:
Financial strength choice of specific The U.S. Department of Commerc
Managerial stability and middlemen Commercially published directories
capabilit Discovering middlemen Foreign consulate
The nature and reputation of the available to handle one’s Chamber-of-commerce groups located abroa
business
merchandise.
Other manufacturers producing similar but
noncompetitive good
Middlemen association
Business publication
management consultant
Carriers—particularly airline
Internet-based services

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Channel Management
Selecting Middlemen
When a manufacturer is not well known abroad, the reputation of the middleman becomes the reputation of the manufacturer.
Example 1: Example 2:
THACO clinches deal to be Peugeot’s exclusive partner

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Channel Management
Selecting Middlemen
a. Screening b. The Agreement
An exploratory letter or e-mail in the native language sent to each prospective Detailing the arrangements with that middleman
middleman.
begins.
A follow-up with the best respondents for specific information concerning Convince the middleman to handle the goods and
Lines handled accept a distribution agreement that is workable for
Territory covered the company. Spelling out specific responsibilities of
Size of company
Number of salespeople the manufacturer and the middleman, including an
Other background informatio annual sales minimum.
Check of credit and references
Failure to meet sales minimums may give the

A personal check of the most promising companies: Experienced exporters exporter the right of termination. Initial contracts be
suggest that visit each possible middleman once before selecting the one to
represent you.
signed for one year only. If the first year’s
performance is satisfactory, they should be reviewed
Look for one with a key person who will take the new product: Exporters stress that for renewal for a longer period.
if you cannot sign one of the two or three customer-recommended distributors,
you might be better off having no distributor in that country

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Channel Management
Motivating Middlemen
The middleman's motivation is clearly correlated with sales volume.
Motivational techniques that can be employed to maintain middleman interest and support for the product may be grouped into 5 categories:
a. Financial rewards
Financial rewards must be adequate Example:
for any middleman to carry and "Each year, we present the Red Star award to honor a
promote a company’s products. distributor partner who delivers the highest levels of
Margins or commissions must be set support into our mutual business," said Ray Faust, vice
to meet the needs of the middleman president, sales, Heineken USA. "From broad investments
and may vary according to the in the portfolio to incremental work both on premise and
volume of sales and the level of off, our partners' efforts are essential in driving success.
services offered. Last year, Andrews showed that they are not afraid to
invest in our portfolio, and the results for both parties have
been tremendous."

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Channel Management
b. Psychological rewards
Middlemen and their Example:
salespeople respond to IPP Group is the exclusive distributor for 96 world

psychological rewards and famous brands with about 70% market share in the
recognition of their efforts. Vietnam market. IPP is the focal point for trading a
wide range of high-end brands such as Armani
Exchange, Burberry, Bvlgari, Cartier, Rolex, Versace.
In addition, the group also distributes mid-range and
high-end brands such as Tommy Hilfiger, GAP, Levi's,
Diesel, Mango, Nike. As a result, their company has
many chances to take part in a lot of famous fashion
weeks. Their general manager and representatives
visit some famous fashion weeks.

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Channel Management
c. Communications d. Company support e. Corporate rapport
Publicity in company media and The more intense the contact between the Considerable attention must be paid to the
local newspapers also builds manufacturer and the distributor, the better the establishment of close rapport between the
esteem and involvement among performance by the distributor. More and better company and its middlemen.
foreign middlemen. contact naturally leads to less conflict and a A company should be certain that the
smoother working relationship, and relationships conflicts that arise are handled skillfully and
are key, particularly in relationship-oriented diplomatically.
cultures in emerging markets.

Business is a personal and vital thing to the
people involved.

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Channel Management
Terminating Middlemen
Must consider things such as

Legal protectio
Control over middlemen
For example
In the USA, when the middlemen don’t perform to adapt to the company's requirement, this termination is
usually a simple action regardless of the type of middlemen; they are simply dismissed with no legal
protection
However, in Colombia, if the company wants to terminate an agent, the company is required to pay 10
percent of the agent’s average annual compensation, multiplied by the number of years the agent
served, as a final settlement.

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Channel Management
Terminating Middlemen
In Vietnam, Durex has a distribution system that covers up to 95% including

large supermarkets such as CoopMart, Big C, Lotte mart, pharmacies and
retail stores such as Circle K, Mini Shop, Family Mart, Party. Besides, Durex
also develops an online distribution channel through official website
durex.com.vn and Lazada channel.
It is displayed everywhere. Product characteristics are simple and do not

require a high distribution method, so Durex company has no hesitation
and concern to choose a new middleman. Moreover, according to the
provisions of Article 424 of the Civil Code 2015: in case the retailer fails to
perform the obligations and fulfills well as agreed within a reasonable time,
the company has the right to terminate the middlemen.

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Channel Management
Controlling Middlemen
Marketing objectives must be spelled out both internally and to middlemen as explicitly as possible. Standards of performance should include the
sales volume objective, inventory turnover ratio, number of accounts per area, growth objective, price stability objective, and quality of publicity.
Control over the system (distribution network)

DKSH Vietnam Co.,Ltd is the distributor for Durex in Vietnam. Besides, Good
Manufacturing Practices (GMP) and Good Distribution Practices (GDP) are
other good distributors. With the strict distribution system, no fake products
can enter their channels.
Control over the middlemen

Regarding Durex's price policy: DKSH imports condoms from the Durex
factory in Thailand with higher selling prices. For Durex, the company does
not list the prices of certain products on the main Durex fanpage.
Therefore, the value of products at retailers is pushed up differently. Durex
has no clear price control .

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The Internet
The Internet serves as a distribution channel for
international corporations as well as a source of
merchandise for businesses and consumers.
E-commerce is used to market

B2B services, consumer
services, and consumer and
industrial products via the
World Wide Web.
The direct marketing from a manufacturer, retailer,

service provider, or some other intermediary to a
final user.

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The Internet
The Durex website is available in a variety of languages
and has country-specific content for 5 countries.

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Durex's website includes local language information on over 50 goods ranging from
condoms to lubes and sextoys, as well as the creation of innovative and limited
collections

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The Internet
Customers can directly find out information about the products.
Durex is very subtle when it comes to carefully describing the difference between various
types of condoms in delicate language, not causing objection to customers in the
Vietnamese market.
Customers in countries such as the United Kingdom and the United States can purchase
Durex's goods directly on Durex's official website and pay using Amazon Pay or Paypal.

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The Internet
Durex chose to promote and sell its products
through other e-commerce platforms such as
Shopee, Lazada, and Tiki instead of starting their
business directly on its website when entering the
Vietnamese market.

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Logistics
A company becomes global, at some point in the growth and expansion of an international
firm, the movement of product could prove costly and highly inefficient for seller and buyer.
This can impact on the quantity of the product to customers in the required time frame at a
cost that leaves enough margin for a profit.
It is time to consider the concept of logistics management, a total systems approach to the
management of the distribution process that includes all activities involved in physically
moving raw material, in-process inventory, and finished goods inventory from the point of
origin to the point of use or consumption.
A physical distribution system involves more than the physical movement of goods. It
includes the location of plants and warehousing (storage), transportation mode, inventory
quantities, and packing.

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Logistics
Thailand was selected as Durex's condom
production area and distribution in Asia. DKSH
imports condoms from the factory in Thailand
to DKSH's warehouse by ocean freight.
DKSH has many additional specialized services

including: product registration, regulatory
support, customs handling, importation,
logistics, repackaging, invoicing, cash
collection, supply chain management and e-
fulfillment.
Nam Phu Thinh Express was selected as one of

the important strategic partners of DKSH
Vietnam.
Helping to address safety concerns in the

transportation and distribution of Durex
products to retail establishments and
supermarkets.

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International Marketing Semina Durex

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30% of bundles with code: 30NEWYEAR

Sign up via email

Tell us what you would be interested in:

30% of bundles with code: 30NEWYEAR

Focus channels: Durex website, supermarkets, hypermarkets, pharmacies, e-

A vertical marketing distribution system

Number of channel levels:

Manufacturer (in specific nations)

-> Wholesaler(sale branch)

-> Retailers (supermarkets, hypermarkets, stores,..)

30% of bundles with code: 30NEWYEAR

Includes the physical handling and distribution of goods, the passage of

30% of bundles with code: 30NEWYEAR

In an import-oriented or traditional distribution structure, an importer controls a

30% of bundles with code: 30NEWYEAR

Japanese Distribution Structure

30% of bundles with code: 30NEWYEAR

Trends: From Traditional to

Modern Channel Structures

30% of bundles with code: 30NEWYEAR

Distribution Patterns The “traditional” system will not change

To better understand the distribution system

30% of bundles with code: 30NEWYEAR

Distribution Patterns Retail Patterns

Retailing shows even greater diversity in its structure than does

Retail size has a direct impact on how to distribute.

Example: In Italy and underdeveloped countries, retailers are a

30% of bundles with code: 30NEWYEAR

Distribution Patterns Retail Patterns

One way that marketers are able to overcome the

For example: Direct sales through catalogues have proved

30% of bundles with code: 30NEWYEAR

Distribution Patterns Retail Patterns

Many cultures are accustomed to when and how their

Example: Wal-Mart’s expansion into Japan. Instead of adapting

30% of bundles with code: 30NEWYEAR

Alternative Middleman Choices

Whether marketing domestically or

The channel process includes activities that Home-Count

Agent middlemen: Do not take title to the goods distribute

30% of bundles with code: 30NEWYEAR

Alternative Middleman Choices

30% of bundles with code: 30NEWYEAR

Alternative Middleman Choices

30% of bundles with code: 30NEWYEAR

Alternative Middleman Choices

30% of bundles with code: 30NEWYEAR

30% of bundles with code: 30NEWYEAR

Control Using distributors or dealers might reduce capital expenditures.

The capital expenditures for channel development will be decreased.

30% of bundles with code: 30NEWYEAR

30% of bundles with code: 30NEWYEAR

30% of bundles with code: 30NEWYEAR

Cost The difficulty of building an efficient coverage: “Country to country”:

Requirements big urban centers)

Highly developed locations -> intense competition

30% of bundles with code: 30NEWYEAR

Channel patterns vary -> flexible to adaption.

30% of bundles with code: 30NEWYEAR

Continuity manufacturer as the brand's long-term vendor.

30% of bundles with code: 30NEWYEAR

30% of bundles with code: 30NEWYEAR

THACO clinches deal to be Peugeot’s exclusive partner

30% of bundles with code: 30NEWYEAR