Transcript Slide 1

Chapter
14
International
Marketing Channels
McGraw-Hill/Irwin
International Marketing, 13/e
© 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.
Chapter Learning Objectives
• 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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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 may be
the most critical and challenging task facing the international
marketer
• Competitive advantage will reside with the marketer best able to
build the most efficient channel from among the alternatives
available
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Channel-of-Distribution Structures
• All consumer and industrial products eventually go through a
distribution process.
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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 through which
goods pass from producer to user.
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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 today
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.
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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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Comparison of Distribution Channels between
the United States and Japan
• Insert Exhibit 14.1
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High Density of Middlemen
• Not unusual for consumer goods to go through three or four
intermediaries before reaching the consumer
• In Japan, small stores account for 57.7 percent of retail food sales
• In the U.S., small stores generate 19.2 percent of food sales
• Japan has a large number of independent groceries and bakers,
unlike America with an emphasis on supermarkets, discount food
stores, and department stores
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Channel Control
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Inventory financing
Cumulative rebates
Merchandise returns
Promotional support
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Business Philosophy
• Emphasizes loyalty, harmony, 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
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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)
- Then, 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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Changes in the Japanese Distribution System
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Structural Impediments Initiative
Deregulation
Wal-Mart
“New” retailers
The Internet
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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 the high margins and prices
• The Internet may be the most important trend affecting distribution
• Covisint
• GlobalNetXchange
• E-commerce
• 7-Eleven competes with FedEx and UPS
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Distribution Patterns
• General patterns
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Middlemen services
Line breadth
Costs and margins
Channel length
Nonexistent channels
Blocked channels
Stocking
Power and competition
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Distribution Patterns (continued)
• Retail 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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Home-Country Middlemen
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Manufacturer’s retail stores
Global retailers
Export management companies
Trading companies
U.S. export trading companies
Complementary marketers
Manufacturer’s export agent
Home-country brokers
Buying offices
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Home-Country Middlemen (continued)
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Selling groups
Webb-Pomerene export associations
Foreign sales corporation
Export merchants
Export jobbers
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Foreign-Country Middlemen
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Manufacturer’s representatives
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
• Products, services, and commodities for the government’s own use
are always procured through government purchasing offices at
federal, regional, and local levels
• Efficiency of public sector versus the private sector
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Factors Affecting Choice of Channels
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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 is used to market:
- Business-to-business (BSB) services
- Consumer services
- Consumer and industrial products
• E-commerce is more developed in the U.S. than in the rest of the
world
• B2B enables companies to cut costs in three ways:
- Reduces procurement costs
- Allows better supply-chain management
- Makes possible tighter inventory control
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Concerns for e-Vendors
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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 may vary from nation to nation or from
continent to continent.
• Information and advice are available relative to the structuring of
international distribution systems.
• Traditional channels are being challenged by the Internet, which is
offering an ever-wider range of possibilities for entering foreign
markets.
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