TRƯỜNG ĐẠI HỌC NGOẠI NGỮ- TIN HỌC THÀNH PHỐ HỒ CHÍ MINH

Ho Chi Minh City University of Foreign Languages – Information Technology

CHAPTER 15

INTERNATIONAL MARKETING
CHANNELS
P h i l i p R. C a t e o r a - M a r y C. G i l l y - J o h n L . G r a h a m

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Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
 What Should You Learn?
• The variety of distribution channels and how they affect cost and
efficiency in marketing
• The Japanese distribution structure and what it means to Japanese
customers and to competing importers of goods
• How distribution patterns affect the various aspects of international
marketing
• The growing importance of e-commerce as a distribution alternative
• The functions, advantages, and disadvantages of various kinds of
middlemen
• The importance of middlemen to a product’s success and the
importance of selecting and maintaining middlemen

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 Discussed questions
1. What are the major decisions facing Marketing
Managers when dealing with distribution channel?
2. What are the major functions of channel
distribution?
3. Review the key variables that affect the marketer’s
choice of distribution channels.
4. Account, as best you can, for the differences in
channel patterns which might be encountered in a
highly developed country and an underdeveloped
country.

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 Discussed questions
1. What is EMC? Why is the EMC sometimes called an
independent export department? Compare
advantages and disadvantages of EMC and company
own marketing department?
2. Explain how and why distribution channels are
affected as they are when the stage of development
of an economy improves.
3. Discuss the role of internet as channel distribution in
international marketing context? Provide examples to
illustrate your point

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 Three major decisions of
Distribution Channel
• Channel Design
• Channel Management
• Physical Distribution

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Channel-of-Distribution Structures

• All consumer and industrial products eventually

go through a distribution process
– Physical handling and distribution of goods
– Passage of ownership
– Buying and selling negotiations between producers and
middlemen
– Buying and selling negotiations between middlemen and
customers
• Each country market has a distribution structure
– Goods pass from producer to user

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How a Distributor Increases Efficiency

Intermediaries reduce the number of

contacts & the work
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Copyright © 2009 Pearson Education South Asia Pte Ltd
Consumer Marketing Channels

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 Import-Oriented
Distribution Structure
• In an import-oriented or traditional distribution
structure:
– Importer controls a fixed supply of goods
– Marketing system develops around the philosophy of selling a
limited supply of goods at high prices to a small number of
affluent customers

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 Import-Oriented
Distribution Structure
• Demand exceeds supply
• The customer seeks the supply from a limited
number of middlemen
• Distribution systems are local
• Few countries fit the import-oriented model

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 Japanese Distribution Structure

1. A structure dominated by many small

middlemen dealing with many small retailers
2. Channel control by manufacturers
3. A business philosophy shaped by a unique
culture
4. Laws that protect the foundation of the system

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 High Density of Middlemen

• Not unusual for consumer goods to go through

three or four intermediaries before reaching the
consumer
• Japan has a large number of independent
groceries and bakers (94.7% or all retail stores)
– Small stores account for 59.1% of retail food sales
• U.S. emphasis is on supermarkets, discount
food stores, and department stores
– Small stores generate 35.7% of food sales

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 Retail Structure in Three Countries

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 Large-Scale Retail Store Law
and Its Successor
• Daitenho – the Large-Scale Retail Store Law
– Large stores must have approval from the prefecture
government
– All proposals first judged by the Ministry of International Trade
and Industry (MITI)
– If all local retailers unanimously agreed, the plan was approved
– Could be a lengthy process
– Applied to both domestic and foreign companies
• Replaced by the Large-Scale Retail Store
Location Act of June 2000
– MITI out of the process
– Relaxed restrictions
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 Trends: From Traditional
to Modern Channel Structures
• European retailers merging with former competitors and other countries to form Europe-
wide enterprises
• Foreign retailers attracted by high margins and prices
• Hypermarkets in Brazil, such as a reduced number of SKUs.
• Tesco is moving into retail banking in its stores
• Direct marketing, door-to-door selling, hypermarkets, discount houses, shopping malls,
catalog selling, the Internet
• Importers and retailers also are becoming more involved in new product development;
• The Internet may be most important distribution trend
• Covisint: General Motors, Ford Motor, DaimlerChryler (created a single online site called
Covisint)
• GlobalNetXchange: Sears, Roebuck, Carefour
• E-commerce: Amazon.com
• 7-Eleven competes with FedEx and UPS

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 Changes in the
Japanese Distribution System
• Structural Impediments Initiative
• Deregulation
• Wal-Mart
• “New” retailers
• The Internet

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 General Distribution Patterns
• Middlemen services
• Line breadth
• Costs and margins
• Channel length
• Nonexistent channels
• Blocked channels
• Stocking
• Power and competition

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 Retail Distribution Patterns

• Size patterns
• Direct marketing
• Resistance to change

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 Alternative Middleman Choices

• Seller must exert influence over two sets of

channels
– One in the home country
– One in the foreign-market country
• Agent middlemen – represent the principal
rather than themselves
• Merchant middlemen – take title to the goods
and buy and sell on their own account

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 International
Channel-Distribution Alternatives

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 Home-Country Middlemen
• Manufacturer’s retail stores
• Global retailers
• Export management companies
• Trading companies
• U.S. export trading companies
• Complementary marketers
• Manufacturer’s export agent

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 Home-Country Middlemen
• Home-country brokers
• Buying offices
• Selling groups
• Webb-Pomerene export associations
• Foreign sales corporation
• Export merchants
• Export jobbers

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 Foreign-Country Middlemen

• Manufacturer’s representatives
• Foreign Distributors
• Foreign-country brokers
• Managing agents and compradors
• Dealers
• Import jobbers, wholesalers, and retailers

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Government-Affiliated Middlemen

• Marketers must deal with governments in every

country of the world
• Government purchasing offices
– Procure products, services, and commodities for the
government’s own use
– Work at federal, regional, and local levels
• Efficiency of public sector versus the private
sector
– Wal-Mart did better than FEMA after Hurricane Katrina

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 Factors Affecting
Choice of Channels
• Cost
• Capital requirements
• Control
• Coverage
• Character
• Continuity

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 Locating, Selecting,
and Motivating Channel Members
• Locating middlemen
• Selecting middlemen
– Screening
– The agreement
• Motivating middlemen
• Terminating middlemen
• Controlling middlemen

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 The Internet

• E-commerce
– Business-to-business (BSB) services
– Consumer services
– Consumer and industrial products
• E-commerce is more developed in U.S.
than in rest of world

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 Concerns for e-Vendors

• Culture
• Adaptation
• Local contact
• Payment
• Delivery
• Promotion

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 Summary
• The international marketer has a broad range of alternatives for
developing a distribution system
• Three primary alternatives for using agent middlemen
– Agent middlemen
– Merchant middlemen
– Government-affiliated middlemen

• Channel structure varies

– Nation to nation
– Continent to continent

• Information and advice are available relative to the structuring of

international distribution systems
• The Internet is challenging traditional channels, offering a wider
range of possibilities for entering foreign markets

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