INTERNATIONAL MARKETING

DECISIONS
Session 6
International distribution decisions
MIXED-UP SENTENCES
Key learning points (on Session 5 )

1 Explicit cultures are comfortable with direct communication style in advertising and sales

2 Digital marketing communications can easily be standardized across county markets

3 The most important for global brand is to standardize their message and ensure equivalent
interpretation

4
Price discrimination theory leads to the phenomenon of gray markets

International pricing corridors can ensure good coordination of prices across international
5 country markets

© Nathalie Prime
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3 Agenda:
International distribution decisions

Part 1 Part 3

Cross-border entry strategies Internationalizing BtC distribution

Part 2 Part 4

The diversity of local distribution Plenary case discussion:

systems and their dynamics of
change POWERIX, preparing for the negotiation of a
licensing agreement

© Nathalie Prime
International distribution decisions: How to make the offering
accessible across country markets?

International distribution

Cross-boarder distribution Into-market distribution

(how to enter: through an entry (how to enter: through a local
strategy) network)

B2B entry B2B

mode and B2C
local
marketing
implications) Focus of this lecture

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A diversity of marketing transactions, related buyers and sellers [reminder]

Focus of this session

Producer
B2B

B2B

B2B B2B
Wholesaler Producer Wholesaler

B2R B2C
B2B

R2C C2C
Retailer Consumer Consumer

© Nathalie Prime
Typical B2C distribution channels and marketing decisions [reminder]

 Co-management of logistics and merchandising

 Co-promotion
 Co-management of the brand
 IT systems for automated information exchange

Trade
Marketing/
Producer Distributor (retailer) more power than producer
Category management

Marketing Mix Retailing Mix

 Product  Assortment
 Price  Price
 Promotion  Communication
 Place  Store
localization
Consumer  Services
 Physical support

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 PART 1
-

Cross-Border entry strategies

What are the international license benefits and risks from the licensee perspective?

Key point to prepare negotiation?

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Cross-border and into-market transactions: 2 intermediations

Cross-Border transactions B2B - Getting the product / services from the domestic context
to the foreign market in good conditions

B2C or B2B - Once inside the country market, making the

Into-Market transactions
product / service available to the target customers

2 intermediations:
▪ One under control of the exporter,
▪ The other under control of the importer or the
subsidiary

Example: Australian Pork Limited

(APL) in Singapore with Airpork brand
(frozen pork)

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How to make make the offering accessible
across country markets?
International
distribution
An entry mode is an agreement which enables a
firm to implement its marketing strategy in a
target country, alone or in partnership. This
agreement may cover marketing operations
only, or may also include production and other
Cross-border Into-market
operations. It is a strategic IB decision:
distribution: distribution:
1.It impacts marketing performance, especially through an through a local
the capacity to control the implementation of the entry strategy network
marketing strategy abroad

2.It has long-term implications (exit flexibility and

costs, capacity to evolve)

B2C B2B

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HOW? A typology of entry modes depending on CONTROL e.g Mc Donalds
--> Brand + Training + Recopying
capabilities FSAs = Firm Specific Advantages
Subsidiary Subsidiary

Model (know how and FSAs)

+ from scratch bought
Franchising (greenfield) (brownfield)

Quadrant 2 Alone

Quadrant 4
Licensing (100%)

With a
Management Partner Joint-venture
Contract

Dealership
Branch FDI --> investment
Property (FDI, equity shared owned)
- Agent Foreign minority +
stake by partial
takeover
of an existing
Quadrant 1

Quadrant 3
Export Commissioner
company
Piggy-back
General Trading Foreign majority stake
Company
(e.g. in a joint-venture)
Foreign
Buying offices -
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HOW? The effect of new technologies on International market entry
(IME)

Source: Watson, George F, Weaven, Scott, Perkins, Helen, Sardana, Deepak and Palmatier, Robert W. (2018),
« International Market Entry Strategies: Relational, Digital, and Hybrid Approaches”, Journal of International
© Nathalie
Marketing, Prime
Vol. 26, No. 1, pp. 30–60.
Overview – Entry modes

Entry mode Advantage Disadvantage

Q1: Exporting
 Direct
The firm contacts directly the buyers  good sales push  irregular
abroad / is contacted directly (e.g.
trade fairs)

 Indirect  safe  easy exit strategy for partner

Local agent, Piggyback, Trading  simple  low control of into-market distribution
company…  experience building (e.g. final pricing)

Q2: Licensing/  Quick time to market  No access to end customer

 Possibility of rapid  Dependent on partner’s efforts
Franchising substantial volumes if  Potentially reduced margins
managed carefully
 Good “glocalisation”  Difficult management of licensees /
prospects franchisees network (large, remote,
culturally distant)
 Needs careful and permanent
quality control (information systems,
audit)

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Overview – Entry modes

Entry mode Advantage Disadvantage

Q4: Wholly owned
subsidiary (WOS)

 Brownfield operations  Potentially immediate  Challenge of organisational

(Acquisition) time-to-market after integration and cultural fit
= When buying existing local acquisition  Delayed full control of sales, network
companies can provide high marketing and pricing strategy
ROI / is cheap (e.g. privatisations)  Potential access to
trained sales force and
logistic network
 Access to key
accounts and
ownership of end
customer

 Greenfield operations
(ex nihilo)  Transfer of corporate  Sustained investments to ensure
= When creating a new company can culture is easier business development (sales,
provide better capacity to benefit from
OLI advantages (Dunning)
 Business development network, and pricing control to be
plans easier to built in time)
implement
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Overview – Entry modes

Entry mode Advantage Disadvantage

Q4: International
Joint Venture
= Creation of a new corporate
unit with the local partner
 Synergy & Strengths  Dispute on strategy and
shared in a operations/copy/outselling the JV/
cooperation  Cultural differences

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 PART 2
-
The diversity of local distribution systems and their
dynamics of change

Why are local distribution systems different?

What is the role of retailers in local distribution ?

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Distribution in TRIAD countries: mature and highly competitive

Modern distribution represent a key trait of developed

economies and mass-market consumer societies

Relies on modern industrial and commercial

techniques

Internationalizing in order to:

Flee their own saturated marketplace
Benefit from deregulation and economic growth in
emerging economies

e.g Casino

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But even within TRIAD countries, distribution systems are quite different
The US
Retail market size:
$ 25,203 M (2016)
Key traits:
 Vast territory
 Large distributors buying
directly from producers
that have their own
channels
 Specialized rather than
“one stop shopping
concepts”
Examples:
 Wal-Mart, Costco,
Walgreens, The Kroger
Company
Source: Euromonitor, Forbes
Europe
Retail market size:
$ 18,185 M (2016)
Key traits:
 Legal and administrative
variations across relatively
small countries
 Big corporations with
increasing bargaining
power
 Dual distribution systems
maintained in the South
(modern stores +
traditional wet markets)
Examples:
• Carrefour, Tesco, Metro,
Ikea, Aldi
Japan
Retail market size:
$ 9,901 M (2016)
Key traits:
 High density of urban
population served by
medium-sized distributors
 Historically high number of
wholesalers having long
term business
relationships with
producers and retailers
 Long-term Legal systems
protecting small retailers
Examples:
 7-Eleven, Aeon, Yamada
Denki
© Nathalie Prime
Leading retailers worldwide in 2021, by total number of stores
World: number of stores of the leading retailers 2021

45 000
40 773
40 000

35 000

30 000
Number of stores

25 526
25 000

20 000
16 250
14 845
13 757 13 712 13 334 13 294 13 124 12 951
15 000 11 407 10 502 10 431 9 772
10 000 7 519

5 000

Note(s): Worldwide; 2021; Top 15 global retailers based on Stores ranking

Further information regarding this statistic can be found on page 8.
© Nathalie Prime
Source(s): Kantar; National Retail Federation; ID 263516
Leading retailers worldwide in 2020, by retail revenue (in billion U.S.
dollars)
World: leading retailers 2020, by retail revenue

Retail revenue in billion U.S. dollars

0 100 200 300 400 500 600

Walmart Inc (United States) 559,15

Amazon.com, Inc. (United States) 213,57

Costco Wholesale Corporation (United States) 166,76

Schwarz Group (Germany) 144,25

Company (Country of origin)

The Home Depot, Inc. (United States) 132,11

The Kroger Co. (United States) 131,62

Walgreens Boots Alliance, Inc (United States) 117,71

Aldi Einkauf GmbH & Co. oHG (Germany)* 117,05

JD.com, Inc (China) 94,42

Target Corporation (United States) 92,4

CVS Health Corporation (United States) 91,2

Lowe's Companies, Inc. (United States) 89,6

Ahold Delhaize (Netherlands) 85,18

Aeon Co., Ltd. (Japan) 75,08

Tesco PLC (United Kingdom) 73,89

Note(s): Worldwide; 2020 © Nathalie Prime

Further information regarding this statistic can be found on page 8.
2 Source(s): Deloitte; ID 266595
Top 10 retailers

file:///C:/Users/prime/Downloads/gx-global-powers-of-retailing-2022.pdf © Nathalie Prime

The Internet opportunities for B2B, B2C and C2C distribution

Key characteristics of e-commerce:

 Vanishing of temporal (24/24) and geographical boundaries (anywhere with a connection +

access to world markets)
 Cost advantage over brick-and-mortars retailers (particularly when real estate pricing is high)
 Digital strategy allows for some interactivity, feedbacks with and from customers, and advanced
data analytics
 Customization: superior adaptation of the distribution channel
 Comparability of alternatives and prices: more transparency
 Still operational during sanitary crisis (Covid19)

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Top 10 languages in the internet

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https://www.internetworldstats.com/stats7.htm
World’s top e-retailers

Source: http://www2.deloitte.com/content/dam/Deloitte/global/Documents/Consumer-Business/gx-cb-global-powers-of-retailing-2016.pdf
© Nathalie Prime
M-commerce

Typical traits:
 Ubiquity and mobility (real time access, independent of user’s location,
coverage when big population)
 Convenience (always at hand, easy to use, fast processing),
 High personalization to individuals’ characteristics
 Data-driven marketing

M-commerce sales
 By 2021, mobile commerce (m-commerce) sales are expected to account for a good half of e-
commerce sales
 Asia as a leading region, esp. driven by China
 $133 billion(2013), estimated to reach $630 billion (2018)
 Banking and travel services are very popular
 Covid19 positive impact

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Modernization of distribution: A major trait of emerging economies

Opportunities of internationalization for modern retailers due to:

 Deregulation of retailing markets in fast growing economy

 “Supermarketization” targeting the new middle class
 Growing urbanization, education, middle class and ultra-rich
segments
 Contribution to economic development in general (structuring supply
chain, building infrastructures & bringing technology)
 Building long term capabilities
 E-commerce platforms growing
 Since Covid 19, E-commerce is to be understood as the latest
modern retail channel
 Omnichannel trend Africa’s growing middleclass on the
retail space
e.g. the Global Retail Development Index (A.T. Kearney) © Nathalie Prime
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© Nathalie Prime
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The future of e-commerce since Covid 19

https://www.youtube.com/watch?v=Vc2ceRsGATk

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However, traditional small stores tend to resist

Kirana in India Kiosk in Ecuador

Hong-Kong market Small market in Africa

CNN video
[extra file]
© Nathalie Prime
Digital innovations: Unmanned stores” or shopping without waiters

Shops without Ordering food

cashiers without waiter
© Nathalie Prime
https://www.youtube.com/watch?v=tajmWSwodME 3
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 The future of retailing after Covid 19

• Stores are reopening and people are

ready to shop!

• Competition of digital native brands!

• How to create experiences that keep

shoppers coming back?

https://www.youtube.com/watch?v=jEHDtlbb-f0

© Nathalie Prime
 PART 3
-
Internationalizing BtC distribution

What are the key decisions to internationalize distribution channels in a B2C context?

What challenges are to be faced?

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Mapping key decisions areas for internationalizing
B2C distribution

The distribution channel must allow for:

1 The match with the international positioning of the brand

2 The appropriate degree of control (stores’ ownership, franchise, indirect or

direct channels)

3 The expected geographical coverage (big cities or everywhere)

4
The retail infrastructures costs (warehouse, transport, logistics)
5
The differentiation from competition
6
Meeting customers’ needs: characteristics, expectations and cultural habits

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(1) Matching local channel with the international
positioning of the brand

Issue: How to ensure that the local distribution channel will match with the international
positioning of the brand?

Example: Toiletries in France

 Perfumeries and department stores Up

market

 Popular department stores (Monoprix) Middle

 Pharmacies market

 Drugstores Mass
 Convenient stores market

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EXAMPLE – Monoprix Espace beauté in France

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EXAMPLE – Natura in FRANCE

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(2) Degree of control

Distributors

Ownership International Exclusive

100% control franchising Dealers

 Best option in terms  Requires transfer of  Relationship

of control (of know-how to local marketing with key
ownership and know- partners specific to distributors
how) countries / industries
© Nathalie Prime
(3) Geographical coverage

Exclusive distribution:
1 E.g. in city centers, best suited for high priced, and exclusive
products

Selective distribution
Best suited for specialty products requiring fast learning of
2
local knowledge (e.g., franchises in the fast food or hospitality
industries)

Extensive distribution:
3 Best suited for mass market products (e.g., Carrefour or
Tesco international retailers distributing FMCG products)

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EXAMPLE – Exclusive geographical coverage: Apple stores in China

42 Apple stores in China, of which:

 5 in Beijing
 3 in Chongqing
 2 in Fujian
 3 in Guangdong
 1 in Guangxi
 1 in Henan
 5 in Jiangsu (province of)
 4 in Liaoning (province of)
 2 in Shandong
 7 in Shanghai
 2 in Sichuan
 3 in Tianjin
 1 in Yunnan
 3 in Zhejiang

All these areas are large, urban and

wealthy

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EXAMPLE – Selective geographical coverage: L’Oreal professionnal

Hairdressing salon as a distribution

channel (model B2B2C)

Professional products division in L’Oréal in

charge of distributing its products to
hairdressing salons worldwide

Hairdressing salons represent the key

partner and client purchase:
 Technical products like colours,
oxidants etc.
 Professional products for home use
which the clients are offered

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EXAMPLE – Widespread geographical coverage: COCA COLA

 Global franchise system that relies on extensive and well-organised global distribution
network guaranteeing the ubiquity of its product.

 Coca-Cola company sells syrups to more than 250 local bottling partners worldwide.

 All bottling partners work closely with customers to execute localized

strategies developed in partnership with the company as a function of the existing
distribution opportunities locally:

 Grocery stores
 Supermarkets
 Restaurants
 Street vendors
 Convenience stores
 Movie theatres
 Amusement parks
 Vending machines The Hug Machine (Singapore)
https://www.youtube.com/watch?v=A45sjUX7mp0

Happyness truck in Brazil

https://www.youtube.com/watch?v=SgGfBiswon0 © Nathalie Prime
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(4) Retail infrastructure

Channel length:
Relying more or less on intermediaries depending on local customs and competition

Financial resources:
Necessary to build up a network of channels (fixed capital, working capital, original losses)

Costs considerations:
Transportation, warehousing, inventory, customer service and order management,
administration

Examples: Reduction of logistic costs in the EU

1. Customs: Elimination of customs check points at national borders. Duties not

including anymore the transit intermediate countries
2. Pan-European product standards: harmonization of distribution and
transportation facilities
3. Transport deregulation inside EU
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(5) Differentiation from competition through distribution

 Example:
Toshiba decides to open 10 after sales centres in major Vietnamese cities call “pro-
service centres”

 Promotion of the program Free maintenance – Going with quality to deal with
fierce competitors (Samsung, LG)

 The network of sales points provide customers with good

information and implementation of a free hotline

 Outcome:
Collection of precious
information over customers
and adapt products to their
specific needs

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(6) Meeting customers’ needs: characteristics, expectations and cultural habits

 Opening hours: legal / religious

restrictions?

 Products range: banned products as per

religious or legal restrictions?

 Service-related perceptions: e.g. Waiting

time-related behavior, Preferred payment
techniques

 Need for relations and contacts vs. self-

service and convenience

Shop in Saudi Arabia

 Culture-bound habits and their dynamics
of change

EXAMPLE- Culture-bound shopping habits of low income

consumers: CNN - Kenya slum traders
Source: Al Arabiya News © Nathalie Prime
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EXAMPLE – Meeting customers’ shopping needs of rural Low Income
Consumers (LIC) --> single sachek (volume + price) --> waste
s lng ln + giá --> nhng mt trái là tiêu hao nhiu

HUL’s Shakti network distribution model now covers

half the villages in rural India

Reverse migration during the pandemic also helped

rural markets (70% of India) grow ahead of urban

Shakti was originally (2006) identified as a CSR

activity, but it is now part of the mainstream
business of Hindustan Unilever (HUL)

© Nathalie Prime
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Sustainability, the consumer global megatrend

file:///C:/Users/prime/Downloads/gx-global-powers-of-retailing-2022.pdf © Nathalie Prime

Conclusion:
The role of place in the international marketing mix

Standardization Adaptation

“Offering the same products, with the same features at “The development of distinctive tailor-made products,
identical prices, with identical promotional activities, by pricing, promotion and distribution policies that have no
using the same distribution channels in all operating standardized elements”
countries”

Efficiency goals Effectiveness goals

Product Place Promotion Price

 Decisions for internationalizing into-market distribution channel: Adaptation – Standardization

issues as of how a producer manages to make the offering accessible at the local level
 Place decisions are much more often adapted than standardized due to diversity of distribution
systems across the world and to the general difficulty to maintain global positioning standard (as
competition and consumers vary across country markets)

© Nathalie Prime
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 Plenary case discussion:

POWERIX, preparing for the negotiation of an international

licensing agreement

What are the international license benefits and risks from the licensee perspective?

Key point to prepare negotiation?

© Nathalie Prime
To CONSOLIDATE your
learning after class

 ABCD Table - Session 6

REVIEW Session 5 set of slides

GROUP BEST SUMMARY on Google Drive: Lessons learnt in Session 6 to prepare for the
exam MCQ

READ Zalando (2021), How the industry and consumers can close the sustainability attitude-
behavior gap in fashion, https://corporate.zalando.com/en/attitude-behavior-gap-report

© Nathalie Prime