International Marketing

14th Edition P h i l i p R. C a t e o r a M a r y C. G i l l y John L. Graham

International Marketing Channels
Chapter 14
McGraw-Hill/Irwin International Marketing 14/e

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

Global Perspective ±
A Single Stick of Doublemint Today ± 18 Billion Tomorrow

‡ A product must be made accessible to the target market at an affordable price ‡ Getting the product to the target market
± Can be a costly process

‡ Forging an aggressive and reliable channel of distribution
± The most critical and challenging task facing the international marketer

‡ Competitive advantage
± For the marketer best able to build the most efficient channel from among the alternatives available
14-2

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 14-3 .

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 14-4 .

Import-Oriented Distribution Structure ‡ Demand exceeds supply ‡ The customer seeks the supply from a limited number of middlemen ‡ Distribution systems are local 14-5 .

A business philosophy shaped by a unique culture 4. A structure dominated by many small middlemen dealing with many small retailers 2. Laws that protect the foundation of the system 14-6 . Channel control by manufacturers 3.Japanese Distribution Structure 1.

Comparison of Distribution Channels between the United States and Japan Exhibit 14.1 14-7 .

S.7% of all retail stores) ± Small stores account for 59. discount food stores.7% of food sales 14-8 . and department stores ± Small stores generate 35. emphasis is on supermarkets.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 (94.1% of retail food sales ‡ U.

Retail Structure in Three Countries Exhibit 14.2 14-9 .

performing services.Channel Control ‡ Inventory financing ± Sales are made on consignment with credits extending for several months.etc. early payments. ‡ Promotional support ± Intermediaries receive a host of displays. including quantity purchases. ‡ Merchandise returns ± All unsold merchandise may be returned to the manufacturer. achieving sales targets. management education programs. ‡ Cumulative rebates ± rebate are given annually for any number of reasons. advertising layouts. in-store demonstrations 14-10 . maintaining «.

harmony.Business Philosophy ‡ Emphasizes loyalty. and friendship ‡ Supports long-term dealer-supplier relationships ‡ The cost of Japanese consumer goods are among the highest in the world ‡ Japanese law gives the small retailer enormous advantage over the development of larger stores 14-11 .

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 14-12 .

Changes in the Japanese Distribution System ‡ Structural Impediments Initiative ‡ Deregulation ‡ Wal-Mart ‡ ³New´ retailers ‡ The Internet 14-13 .

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 ‡ The Internet may be most important distribution trend ‡ Covisint ‡ GlobalNetXchange ‡ E-commerce ‡ 7-Eleven competes with FedEx and UPS 14-14 .

General Distribution Patterns ‡ Middlemen services ‡ Line breadth ‡ Costs and margins ‡ Channel length ‡ Nonexistent channels ‡ Blocked channels ‡ Stocking ‡ Power and competition 14-15 .

Retail Distribution Patterns ‡ Size patterns ‡ Direct marketing ‡ Resistance to change 14-16 .

Retail Structure in Selected Countries Exhibit 14.3 14-17 .

International Channel-Distribution Alternatives Exhibit 14.4 14-18 .

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 14-19 .

export trading companies ‡ Complementary marketers ‡ Manufacturer¶s export agent 14-20 .S.Home-Country Middlemen ‡ Manufacturer¶s retail stores ‡ Global retailers ‡ Export management companies ‡ Trading companies ‡ U.

How Does an EMC Operate? Exhibit 14.5 14-21 .

Home-Country Middlemen ‡ Home-country brokers ‡ Buying offices ‡ Selling groups ‡ Webb-Pomerene export associations ‡ Foreign sales corporation ‡ Export merchants ‡ Export jobbers 14-22 .

wholesalers. and retailers 14-23 .Foreign-Country Middlemen ‡ Manufacturer¶s representatives ‡ Foreign Distributors ‡ Foreign-country brokers ‡ Managing agents and compradors ‡ Dealers ‡ Import jobbers.

and local levels ‡ Efficiency of public sector versus the private sector ± Wal-Mart did better than FEMA after Hurricane Katrina 14-24 . and commodities for the government¶s own use ± Work at federal. regional.Government-Affiliated Middlemen ‡ Marketers must deal with governments in every country of the world ‡ Government purchasing offices ± Procure products. services.

Factors Affecting Choice of Channels ‡ Cost ‡ Capital requirements ‡ Control ‡ Coverage ‡ Character ‡ Continuity 14-25 .

Selecting. and Motivating Channel Members ‡ Locating middlemen ‡ Selecting middlemen ± Screening ± The agreement ‡ Motivating middlemen ‡ Terminating middlemen ‡ Controlling middlemen 14-26 .Locating.

S.The Internet ‡ E-commerce ± Business-to-business (BSB) services ± Consumer services ± Consumer and industrial products ‡ E-commerce is more developed in U. than in rest of world ‡ B2B enables companies to cut costs ± Reduces procurement costs ± Allows better supply-chain management ± Makes possible tighter inventory control 14-27 .

Concerns for e-Vendors ‡ Culture ‡ Adaptation ‡ Local contact ‡ Payment ‡ Delivery ‡ Promotion 14-28 .

offering a wider range of possibilities for entering foreign markets 14-29 .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.

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