Transcript Merchant middlemen

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.
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
14-2
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
14-3
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
14-4
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
14-5
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
14-6
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
14-7
Comparison of Distribution Channels
between the United States and Japan
Exhibit 14.1
14-8
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
14-9
Retail Structure in Three Countries
Exhibit 14.2
14-10
Channel Control
• Inventory financing
• Cumulative rebates
• Merchandise returns
• Promotional support
14-11
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
14-12
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
14-13
Changes in the
Japanese Distribution System
• Structural Impediments Initiative
• Deregulation
• Wal-Mart
• “New” retailers
• The Internet
14-14
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
14-15
General Distribution Patterns
• Middlemen services
• Line breadth
• Costs and margins
• Channel length
• Nonexistent channels
• Blocked channels
• Stocking
• Power and competition
14-16
Retail Distribution Patterns
• Size patterns
• Direct marketing
• Resistance to change
14-17
Retail Structure in Selected Countries
Exhibit 14.3
14-18
International
Channel-Distribution Alternatives
Exhibit 14.4
14-19
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
14-20
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
14-21
How Does an EMC Operate?
Exhibit 14.5
14-22
Home-Country Middlemen
• Home-country brokers
• Buying offices
• Selling groups
• Webb-Pomerene export associations
• Foreign sales corporation
• Export merchants
• Export jobbers
14-23
Foreign-Country Middlemen
• Manufacturer’s representatives
• Foreign Distributors
• Foreign-country brokers
• Managing agents and compradors
• Dealers
• Import jobbers, wholesalers, and retailers
14-24
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
14-25
Factors Affecting
Choice of Channels
• Cost
• Capital requirements
• Control
• Coverage
• Character
• Continuity
14-26
Locating, Selecting,
and Motivating Channel Members
• Locating middlemen
• Selecting middlemen
– Screening
– The agreement
• Motivating middlemen
• Terminating middlemen
• Controlling middlemen
14-27
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
• B2B enables companies to cut costs
– Reduces procurement costs
– Allows better supply-chain management
– Makes possible tighter inventory control
14-28
Concerns for e-Vendors
• Culture
• Adaptation
• Local contact
• Payment
• Delivery
• Promotion
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, offering
a wider range of possibilities for entering foreign markets
14-30