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Export Channels of Distribution - Coggle Diagram
Export Channels of Distribution
Overview channels of distribution
Export channels are the path through which goods or services get to a foreign customer
Direct Channels
Sells directly to foreign distributors, retailers, or trading companies
Through agents located in a foreign country
Expensive and time consuming.
Indirect Channels
Independent local middleman
Good way to test-market products, develop goodwill
Increase overall sales and cash flow with little or no investment
Disadvantage is that the firm will lose control over marketing and pricing and will have a lower profit margin..
Channels of distribution
Direct
two forms of direct channel
Direct Marketing from the Home Country
direct sales to foreign retailers or overseas end consumers
Sell directly on the website
Disadvantages
import regulations before order processing
Customers must pay taxes and customs in the importing country
send staff from exporting country to abroad
Advantages
the manufacturer or retailer desires to increase its
revenues and profits while providing its products or services at a lower cost.
Suitable for books, magazines, home appliances, cosmetics, travel, or financial services.
Marketing through Overseas Agents and Distributors
Overseas Agents
independent sales representatives of various noncompeting suppliers
get a commission if they sell the product and have the right to return the product if it doesn't sell
assume no financial risk or responsibility
the producer or exporter bears the risk
disadvantages
legal and financial problems when canceling the contract
Some countries' laws discriminate against foreign companies
The business bears the risks of pricing, shipping and sales
agents have limited training and knowledge about the product
adversely impact product sales
used when
sell products to small markets that do
not attract distributor interest
market to distinct individual customers
sell heavy equipment, machinery, or other big-ticket items
that cannot be easily stocked
solicit public or private bids
Overseas Distributors
import products for resale and are compensated by
the markup they charge their customers
bears the risk of inventory and no returns
decide the price and be the seller in the buying activity
Responsible for advertising and promotion
disadvantage
loss of control over
marketing and pricing
limited access
to or feedback from customers
limited opportunity to acquire international business
know-how and to learn about developments in foreign markets
Distributor protection laws in some countries make it time-consuming and expensive to terminate a contract with a distributor.
Indirect
Exporters that sell on behalf of manufacturer
Manufacturing exports agents (MEAs)
Represent non-competitive/related products
handle marketing, promotion, shipping (sometimes financing)
risk of loss remains with manufacturer
Export management companies (EMCs
Provide extensive services to manufacturers
noncompetitive products
Small and usually specialize by product, foreign market
can be distributors or agents, exclusive agents
Export trading companies
buy and sell goods as merchants
larger and better financed than EMCs
Exporters that buy and sell for their own account
Export merchants
purchase products directly from manufacturers
take title to the goods and sell under their own names.
Cooperative exporters
the products of other companies with their own.
Export Cartels
Organizations of firms
marketing their products overseas
Exporters that buy for their overseas customers
Export commission agents (ECA)
represent foreign buyers
large industrial users
match the buyer’s preferences and requirements
get commission by their foreign clients.
The resident buyer
Handles purchasing function for the overseas buyer
ensures timely delivery of merchandise
facilitates principal’s visits to suppliers and vendors.
Selecting the right channel
A firm
use direct channel
lucrative markets
internal strength and experience
use indirect channel
unfamiliar, small and risk markets
use both channels
difference product lines
difference customer profiles
direct channel
resources and customer
indirect channel
certain advantages-non exist
indirect channal options
direct
facilitate
indirect partner
Determinants of Channel Selection
Customer and product characteristics
Geographically homogeneous customers
Same buying habits and limited quantity
The number of consumers is large and concentrated in large population centers
Marketing environment
Direct channels are preferable in cases of countries that are more similar in culture to the exporter’s home country
Example: US exports to Canada by direct channel
Control and coverage
Direct distribution channels help manufacturers better control the system and maintain contact with the end customer
gain a larger market share
Availability and Capability of Intermediary
Certain distribution patterns vary from country to country.
International Marketing Objectives of the Firm
Profitability
Market share
Level of financial commitment
Respect to sales
=> Direct exporting is likely to provide opportunities for high profit margins
Manufacturer’s Resources and Experience
Limited experience
Limited resources
=> Indirect exporting
Major Clauses
in Representation Agreement
Renewal or termination of contract
Duration
Permissions
Applicable Law and dispute settlement
Arbitration
Applicable law
Definition of price
Price list
Agreement
Discount structure