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Chapter 14
International Marketing Channels
PowerPoint presentation prepared by:
Professor Rajiv Mehta
Associate Professor of Marketing
New Jersey Institute of Technology
Newark, N.J.
McGraw-Hill/Irwin
© 2005 The McGraw-Hill Companies, Inc. All rights reserved.
Chapter Learning Objectives
1. The variety of distribution channels and how
they affect cost and efficiency in marketing
2. The Japanese distribution structure and what
it means to Japanese customers and to
competing importers of goods
3. How distribution patterns affect the various
aspects of international marketing
Chapter Learning Objectives
4. The growing importance of e-commerce as a
distribution alternative
5. The functions, advantages, and disadvantages
of various kinds of middlemen
6. The importance of middlemen to a product’s
success and the importance of selecting and
maintaining middlemen
Introduction
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•
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•
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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 whose structures are
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
Channel-of-Distribution Structures
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The distribution process includes the physical handling and
distribution of goods, the passage of ownership (title), and the
buying and selling negotiations between producers and
middlemen and between middlemen and customers
Each country market has a distribution structure through which
goods pass from producer to use
Within this structure are a variety of middlemen whose
customary functions, activities, and services reflect existing
competition, market characteristics, tradition, and economic
development
Channel structures range from those with little developed
marketing infrastructure such as those found in many emerging
markets to the highly complex, multi-layered system found in
Japan
Japanese Distribution Structure
•
Distribution in Japan has long been considered the most
effective non-tariff barrier to the Japanese market The Japanese
distribution structure is different enough from its U.S. or
European counterparts
It has four distinguishing features:
1.
2.
3.
4.
a structure dominated by many small
middlemen dealing with many small
retailers—high density of middlemen,
channel control by manufacturers,
a business philosophy shaped by a
unique culture, and
laws that protect the foundation of the
system—the small retailer
Channel Control in Japanese Distribution Systems
Control is maintained through the following elements:
1.
2.
3.
4.
Inventory financing with credits
extending for several months.
Cumulative rebates
Merchandise returns that are allowed
to the manufacturer.
Promotional support to intermediaries
in the form of displays, advertising
layouts, and management education
programs
Distribution Patterns
•
Distribution patterns are always evolving and new patterns are
developing and marketing channels are not the same throughout
the world
Some general distribution patterns that are similar globally include:
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
Retail Patterns
•
International retailing shows even greater diversity in its
structure than does wholesaling
Some general retailing patterns include:
1.
2.
3.
4.
Retail Size Patterns
Direct Marketing
Resistance to Change
Alternative Middleman Choices
Home-Country Middlemen
•
Home-country middlemen, or domestic middlemen, provide
marketing services from a domestic base and find foreign
markets for products for local manufacturers
Frequently used types of domestic intermediaries include:
1.
2.
3.
4.
5.
6.
7.
Manufacturers’ Retail Stores
Global Retailers
Export Management Companies
Trading Companies
U.S. Export Trading Companies
Complementary Marketers
Manufacturer’s Export Agent
8.
9.
10.
11.
12.
13.
14.
Home-Country Brokers
Buying Offices
Selling Groups
Webb-Pomerene Export Associations
Foreign Sales Corporation
Export Merchants
Export Jobbers
Foreign-Country Middlemen
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Some of the more important foreign-country middlemen, who
find markets for foreign manufacturers include:
1.
2.
3.
4.
5.
6.
Manufacturer’s Representatives
Distributors
Foreign-Country Brokers
Managing Agents and Compradors
Dealers
Import Jobbers, Wholesalers, and
Retailers
Factors Affecting Choice of Channels
The following points should be addressed prior to selecting intermediaries:
1. Identify specific target markets within and across
countries.
2. Specify marketing goals in terms of volume, market
share, and profit margin requirements.
3. Specify financial and personnel commitments to the
development of international distribution.
4. Identify control, length of channels, terms of sale, and
channel ownership
Six Cs of Channel Strategy
Channel strategy itself is considered to have the following six specific strategic
goals:
1.
2.
3.
4.
5.
6.
Cost
Capital Requirements
Control
Coverage
Character
Continuity
Locating Middlemen
Firms seeking overseas representation should compile a list of middlemen from
such sources as the following:
1.
2.
3.
4.
5.
6.
7.
8.
Commercially published directories
Foreign consulates
Chamber-of-commerce groups located abroad
Other manufacturers producing similar but
noncompetitive goods
Middlemen associations
Business publications
Management consultants
U.S. Department of Commerce
Selecting Middlemen
In selecting middlemen, the following steps should be used.
1.
Screening based on the
following criteria:
(a) reputation
(b) creditworthiness
(c) markets served
(d) products carried
(e) number of stores
(f) store size
2.
The Agreement that
details terms of the
contract and the
functions to be
performed on behalf of
the foreign
manufacturer
Motivating Middlemen
There is a clear correlation between the middleman’s motivation and sales
volume
Motivational techniques may be grouped into
five categories:
(1) financial rewards
(2) psychological rewards
(3) communications
(4) company support, and
(5) corporate rapport
The Internet
•
E-commerce is used to market business-to-business services, consumer
services, and consumer and industrial products via the World Wide Web
•
The Internet is an important distribution method for multinational companies
•
When using the internet for distribution
purposes, the following factors should be
considered:
1.
2.
3.
4.
5.
6.
Culture
Adaptation (especially of language)
Local contact information
Payment form
Delivery
Promotion