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CHAPTER 9: INTERNATIONAL MARKETING CHANNELS - Coggle Diagram
CHAPTER 9: INTERNATIONAL MARKETING CHANNELS
Channel of distribution structures
the distribution process
physical handling and distribution of goods
distribution structure
marketer must select channel of distribution
middlemen reflect existing competition, characteristics, tradition, and economic development
import-oriented distribution structure
importer controls fixed supply of goods
importer/wholesaler performs most marketing functions
japanese distribution structure
features
high density of middlemen
channel control by manufacturers
business philosophy shaped by unique culture
laws that protect the foundation of the system - the small retailer
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
trends: from traditional to modern channel structures
countries with traditional structure changing
shift in structure leads to more innovation
Distribution patterns
traditional system will not change overnight
variety of distribution patterns
foreign channels different from domestic channels
retail patterns
size patterns
high concentration of retailers, more competition for marketer
direct selling
often used in markets with underdeveloped distribution systems
resistance to change
consumer demand for high-quality, low-cost products prevails
Alternative Middleman Choices
channel selection
range of options for marketers
should be given considerable thought
includes all activities from manufacturer to consumer
seller must exert influence over two sets of channels
home country
foreign-market country
ideally, company will control or be involved in process through various channel members to final consumer
selection of middlemen a high priority
external middlemen
agent middlemen
do not take title to the merchandise
merchant middlemen
take title to merchandise: assume all trading risks
home-country middlemen
provide marketing services from a domestic base
foreign-market distribution relegated to others
many types of domestic middlemen
manufacturers' retail stores
global retailers
export management companies (EMCs)
trading companies
accumulate, transport, and distribute goods from many countries
export trading companies (ETCs)
joint export ventures more efficient for producers and suppliers
complementary marketers
commonly called 'piggybacking'
manufacturer's export agent (MEA)
short term relationship with producer, operates on straight commission basis
webb-pomerene export associations (WPEAs)
unique benefits
reduction of export costs
demand expansion through promotion
trade barrier reduction
improvement of trade terms through bilateral bargaining
foreign sales corporation (FSC)
set up in foreign country or US possession
can act as own principal, buying and selling for its own account, or a commissioned agent
can obtain corporate tax exemption or portion of earnings from lease of export property
foreign country middlemen
variety of agent and merchant middlemen similar to that in US
moves manufacturer closer to the foreign market
manufacturers' representatives and foreign producers
government-affiliated middlemen
marketers must deal with governments in every country
seen to be less efficient than other middlemen
Factors Affecting Choice of Channels
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
Six Cs
Cost
two kinds
Capital or investment cost
Continuing cost of maintaining
Cost of middlemen
Transporting and storing goods
breaking bulk
providing credit
local advertising
sales representation
negotiations
Inefficient middlemen can be eliminated to reduce cost
Capital requirements
Financial ramifications of distribution policies
Maximum investment needed without middlemen
Control
Longer channels reduce manufacturer’s control
Coverage
Full-market coverage major goal
Character
Selected channel must coincide with character of company and markets in which it is doing business
Perishability or bulk of product
complexity of sales
sales service required
value of product
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
Channel Management
locating middlemen
Begin with study of market
Determine criteria for evaluating middlemen
Main subject areas for criteria
Productivity or volume
Financial strength
Managerial stability
Capability
selecting middlemen
Screening process should include
Exploratory letter or e-mail sent to prospective middleman in native language with product info and distributor requirements
Follow-up with best respondents for more specific info
Check of credit and references from other clients of prospect
Personal check of the most promising firms
agreement
Initial contract for selected middlemen to sign is recommended
Spells out responsibilities; annual sales minimum established
motivating middlemen
Clear correlation between sales volume and motivation
Categories of motivational techniques
Financial rewards
Psychological rewards
Communications
Company support
Corporate rapport
controlling middlemen
Control over system and middlemen important
Standards of performance should include
Sales volume objective
inventory turnover ratio
number of accounts per area
growth objective
price stability object
quality of publicity
Useful tactics for management
Specifically contracted behavior
Good social relations
terminating middlemen
Situations in which termination is necessary
Middlemen not performing up to standards
Restructure of distribution needed to reflect changing market
Competent legal advice needed when entering contracts
Middlemen often have legal protections in other countries
Should be avoided by thoroughly screening prospects
Poor choices can adversely affect future business in countries
The Internet
E-commerce
Important distribution method for multinationals
Marketing and sales of B2B and B2C products and services
Services ideally suited for international sales via the Internet
Online B2B enhances performance
Reduces procurement costs; easier to find cheapest supplier
Allows for better supply-chain management
Makes tighter inventory control possible
main factors to consider
Culture
Adaptation (especially of language)
Local contact information
Payment
Delivery
Promotion
Logistics
logistics management
Total systems approach to managing distribution process
Physical distribution system
More than just physical movement of goods
Goal to find optimum system cost still consistent with customer service objectives of firm