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Chapter 9: Int. Marketing Channels - Coggle Diagram
Chapter 9: Int. Marketing Channels
The 'Distribution Process'
Physical handling and distribution of goods
Passage of owner ship title
Buying and selling negotiations between producer and middleman, middleman and consumers, etc.
Distribution Structure
Import-Oriented Distribution Structure
Importers control fixed supply of goods
Limited supply of goods sold at a high price to a small group of customers
Demand > supply
Market penetration & distribution is unnecessary
Importer/Wholesaler performs most marketing functions
Not in a chain of intermediaries like in mass-marketing system
Leads to underdeveloped, nonexistent marketing infrastructure
Japanese Distribution Structure
Distinguish Features:
High density of middleman
Channel control by manufacturer
Business philosophy shaped by an unique culture
Laws protect the foundation of the system- the small retailers
Daitenho - the large-scale retail store law
Large stores must seek permission to operate or expand
Protects small retailers from competition
Lack of competition leads to highest cost of goods in world
Distribution Pattern
'Traditional' system will not change overnight
Retail Pattern
Size Pattern
Retailer to consumer ratio varies dramatically by market
High concentration of retailers = more competition for marketers
Direct Selling
Often used in market with underdeveloped distribution systems
Resistance to change
Innovation seen as threat to domestic business
Consumer demand for high-quality, low cost product
Alternative Middleman Choices
External Middleman
Agent Middleman
Do not take title to merchandise
Manufacturer assumes all trading risks but can establish policy guidelines and prices
Merchant Middleman
Take title to merchandise; assume all trading risks
Primary concern is profit
Don't always have manufacturers' best interest in mind
Home Country Middleman
Provide marketing services from a domestic base
Foreign market distribution relegated to others:
Trade-off is limited control over entire distribution process
Good for companies with small international sales volume, little international experience, or who wants to sell abroad with minimal financial & management commitment
Many types of domestic middleman
Manufacturers' retail store
Global Retailers
Export Management Companies
Trading Companies
Export Trading Companies
Complementary Marketers
Manufacturers Export Agent
Webb Pomerene Export Association (WPEAs)
Foreign Sales Corporation
Foreign Country Middleman
Variety of agent and merchant middlemen in most countries similar to that in U.S.
Moves manufacturer closer to the foreign market
Manufacturers’ representatives and foreign producers
Government Affiliated Middleman
Marketers must deal with governments in every country
Seen to be less efficient than other middleman
Factors affecting choice of channels
Points to address prior to selection process:
Identify specific target markets within and across countries
Specify marketing goals in terms of volume, market share, and profit margin requirements
Specify financial and personnel commitments to the development of international distribution
Identify control, length of channels, terms of sale, and channel ownership
6 Cs of Channel Strategy
Cost
2 kind of channel cost:
Capital/investment cost of developing channel
Continuing cost of maintaining the channel
Cost of middleman includes many things:
Transporting and storing goods, breaking bulk, providing credit, local advertising, sales representation, negotiations
Inefficient middlemen can be eliminated to reduce cost
Capital
Financial ramifications of distribution policies:
Maximum investment needed without middlemen
Middlemen may lessen capital investment, but initial inventories on consignment, loans, floor plans, or other arrangements usually need to be provided
Control
Longer channels reduce manufacturer’s control; Price, volume, promotion, and types of outlets
Coverage
Full market coverage major goal
May require changes in distribution per country through time
Character
Selected channel must coincide with character of company and markets in which it is doing business
Continuity
Channels often pose longevity problems:
Distribution may be lost in area where an individual retires or moves on from business
Most middlemen have little loyalty to vendors
Distributors and dealers probably most loyal, but brand loyalty still must be built downstream through the channel