Download International Marketing

Topic 9
International Distribution & Logistics
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 firms
 Each market contains a distribution network with
many channel choices
 In some markets the distribution structure is multilayered, complex, inefficient, even strange
 Competitive advantage will reside with the marketer
best able to build the most efficient channel

Principles of distribution
 Transactional cost minimisation
 Reinforcement of corporate image
 Reactivity to customer requirements
 Reactivity to competition (use as an SCA)
 Intermediary reduction / Integration / Out
sourcing
 Power relativities in the distribution system
 Movement to source of production or selling
What is different
internationally?
 Customer expectations / competitive
offers
 Transport costs / availability /
topography
 Market structure / Distributive
responsibility
 Distributor chains / power / location
 Logistical networks
 Wholesaler / Retailer Agent / traditions
 Distributive culture / norms
 Customer
characteristics
 Nature of product
 Demand
 Competition
 Legal Regulations
 Local practices
 Cost
- capital
- maintenance
 Control
 Market



coverage (channel width)
Intensive
Selective
exclusive
 Channel
length
 Control (Integration)
 Consider customer service needs
 Positive
motivators – win-win approach
(1) financial rewards
(2) psychological rewards
(3) communications
(4) company support
 Agree
performance targets
 Periodically monitor
1.
2.
3.
4.
5.
6.
7.
8.
Middlemen Services
Product Line Breadth
Costs and Margins
Channel Length
Nonexistent Channels
Blocked Channels
Stocking
Power and Competition
Complex Japanese Distribution System
Manufacturer
or Importer
Speciality
Distributor
Primary
Wholesaler
Secondary
Wholesaler
Tertiary
Wholesaler
Retailer
Consumer
Self-Service
Store
Department
Store

High density of middlemen

Channel control by manufacturers

Business philosophy shaped by a unique
culture

Laws that protect the small retailer
International Patterns Of Retailing




Traditional retailing
Intermediary retailing
Structured retailing
Advanced retailing





Interactive customer marketing
Mass customisation
Data mining
Category management
Effective consumer response
Traditional
Advanced
Typical in:
Developing
Countries
Mature
economies
Power
Concentration
Low
High
Outlet size
Small
Large
Retail marketing
Rarely used
Very Important
Retail technology
Rarely used
Vital
International Electronic Forms Of
Retailing
Pure
Exchanges
Internet
Markets
Single
Buyer
Markets
Auctions
Market conditions conducive to electronic
channels of distribution
• Inefficiencies in traditional distribution channels
•
•
•
•
Market fragmentation
Minimum scale barriers
Commodity-type products
Short life-cycle products
Source: Klein & Quelch
(1997)
 Distance
involved
 Currency variations
 Conformance to national regulations
 Transportation systems



Infrastructure
Availability of modes
Choice of modes
 Order




cycle times & Customer service levels
JIT delivery
EDI (electronic data interchange)
ESI (early supplier involvement)
ECR (efficient customer response)
 International
storage issues
 International packaging
 The

concept of EPZ
duty-free manufacture or processing of products for export
purposes within a customs-controlled environment
 Advantages




All goods entering the EPZ are exempted from customs duties
and import permits
Firms can use foreign currency to settle transactions
EPZs can be used for assembly of products and so help reduce
transportation costs
EPZs give greater flexibility, and help avoid unwanted
bureaucracy of customs and excise
The Nature of Global Logistics
and Channel Decisions I
 International distribution encompasses
two areas of responsibility:
– Channel management
• identifying, selecting and supporting
distribution partners
• distribution partners bridge the gap between
manufacturer and customer
– Global logistics
• ensuring adequate supply
• the right products are made available to
customers when and where they want them
The Nature of Global Logistics
and Channel Decisions II
 The value chain
Information &
Research
Target Marketing
Selection
Purchasing
Inbound
Logistics
Product Policy &
Strategy
R&D
Pricing Policy &
Strategy
Assembly &
Manufacturing
Distribution Policy
& Strategy
Outbound
Logistics
Communication
Policy & Strategy
Marketing
Installation & Testing
Service
Margin
- Messages, appeals
- Media Strategy & Plan
- Advertising Plan
- Promotion Plan
- Personal Selling
- Direct Marketing Plan
- Direct Mail
- Telemarketing
The Nature of Global Logistics
and Channel Decisions III
 The value chain provides a useful
framework for integrating various
organisational activities related to
global distribution
 Today, distribution activities are
becoming increasingly intertwined, i.e.
– sourcing material and parts for production
– taking care of product shipment
– selecting suitable distribution partners
In-Bound Logistics I
 In-bound logistics describes the process
of moving products and materials from
suppliers to the factory
 Six factors must be taken into account
–
–
–
–
–
–
factor costs and conditions
transport costs
country infrastructure
political risk
market access
currency issues
In-Bound Logistics II
 Factor costs and conditions
– land
– labour, including the cost of workers
• manufacturing and production
• professional and technical
• management
– capital cost
 The cost of these factors depends on
– availability
– relative abundance
In-Bound Logistics III
 World factor costs that affect
manufacturing
– industrialised countries
• factor costs are tending to equalise
– industrialising countries (Singapore, other
Pacific Rim countries)
• offer significant factor costs savings
• offer an increasingly developed infrastructure
and political stability
– Russia and other countries
• lower factor costs (especially wages) are offset
In-Bound Logistics IV
 Transport Costs
 Country Infrastructure
 Political Risk
 Market Access
 Foreign Exchange
Out-Bound Logistics
 Moving products from the factory to
customers
 It involves aspects of
– transportation,
– inventory control,
– order processing and
– warehousing
International Channel
Strategies
 The purpose of marketing channels is to
create utility for customers
– place
– time
– form
– information
 Two forms of channel strategy
– direct involvement
– indirect involvement
Characteristics Impacting on
Channel Design and Strategy I
 Customer characteristics
– customer number, geographic distribution,
income, shopping habits, reactions to
different selling methods
 Product characteristics
– perishability, service requirements or unit
price
Characteristics Impacting on
Channel Design and Strategy
II Middleman characteristics
– attitude towards the manufacturer
• selection and care of distributors and agents
• distributor and agent performance
• termination
 Environmental characteristics
– economic, social and political dimensions
Global Trends in Channel
Design and Strategy I
 Global Retailing
– today
– future
 Direct Marketing
– distribution system, where sales to
customers are carried out via telephone,
mail or door-to-door
– one-on-one approach is effective for
products which need demonstration or
complex explanation
Global Trends in Channel
Design and Strategy II
 E-Commerce and International
Distribution Strategies
– Design of appropriate distribution systems
 E-Tailing
– describes the increasing trend of retail
operations globalising via the Internet
– presenting and selling a product range
over the Internet gains increasing
importance
Global Trends in Channel
Design and Strategy III
 Alternative Channel Responses
Channel Decision
Electronic
Commerce
Manufacturer
Direct
Physical
Distribution
Existing
Retailer Online
Cybermediary
Traditional
Retailer