Chapter 14 14 0 International Distribution Systems IrwinMc

Chapter 14 14 -0 International Distribution Systems Irwin/Mc. Graw-Hill ©The Mc. Graw-Hill Companies, Inc. , 1999

Japanese Distribution Structure 14 -1 High Density Middlemen Channel Control Business Philosophy Large-Scale Retail Store Law Changes Effected by SII Irwin/Mc. Graw-Hill ©The Mc. Graw-Hill Companies, Inc. , 1999

Comparison of Distribution Channels Between the United States and Japan 14 -2 Automobile parts: Japan Automobile makers affiliated parts makers Automobile makers Dealers Independent parts makers Repair parts makers Wholesalers Special agents Cooperative sales companies Sub-dealers 2 nd-level wholesalers Retailers Gasoline stations Large users Automobiles repair shops End users Irwin/Mc. Graw-Hill SOURCE: Mc. Kinsey industry studies ©The Mc. Graw-Hill Companies, Inc. , 1999

Comparison of Distribution Channels Between the United States and Japan 14 -3 Automobile parts: United States Manufacturer 51% Warehouse distributor Jobber buying groups Jobber Installer Customer 10% 18% Mass merchandiser 21% Repair specialist Primary channel Secondary channel SOURCE: Mc. Kinsey industry studies Irwin/Mc. Graw-Hill ©The Mc. Graw-Hill Companies, Inc. , 1999

Retailing Comparison U. S. and Japan 14 -4 Food % Small Stores % Sales Japan 95 57 U. S. 70 19 Non-Food Japan 94 50 U. S. 81 33 Irwin/Mc. Graw-Hill ©The Mc. Graw-Hill Companies, Inc. , 1999

Large-scale Retail Store Law 14 -5 Protect Small Retailer 500 Sq Meters (5, 382 Sq. Ft. ) Approval from MITI and Prefectural government to: Build Expand Changing Operating Hours Change Days Closed Local Retailers must unanimously approve plan Months to years for approval Japanese Supermarket - 10 years Toys "R" US - 3 years Licenses required to operate Full Service Store - 39 Licenses need approval Irwin/Mc. Graw-Hill ©The Mc. Graw-Hill Companies, Inc. , 1999

Undercutting the Competition 14 -6 Product Audio cassette Average Tokyo Retail Price Shop America Catalog Price $11 - $14 $6 - $8 Auto-Reverse Walkman 70 50 Braun Juicer 32 20 Canon Autoboy Camera 260 180 Channel No. 5 (1/2 oz) 153 85 15 - 20 8 - 11 86 46 4, 857 3, 078 Compact disk Lady Remington shaver Rolex watch SOURCE: Shop America LTD. as quoted in "Can This Catalog Company Crack the Japanese Marketing Mass? " Business Week, March 19, 1990, p. 60. Irwin/Mc. Graw-Hill ©The Mc. Graw-Hill Companies, Inc. , 1999

Japanese Consumer Philosophy 14 -7 Harmony and Friendship Consumer Brand Loyalty Service and Quality Over Price Small, Frequent Purchases Irwin/Mc. Graw-Hill ©The Mc. Graw-Hill Companies, Inc. , 1999

Cutting Out the Middleman 14 -8 Number of companies involved in each level of the food industry, % of total, 1993 Total number 141, 597 97, 882 181, 374 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Manufacturers Wholesalers Retailers Japan Irwin/Mc. Graw-Hill Britain United States ©The Mc. Graw-Hill Companies, Inc. , 1999

General Distribution Patterns 14 -9 Middlemen Services Line Breadth Costs and Margins Channel Length Nonexistent Channels Blocked Channels Stocking Power and Competition Irwin/Mc. Graw-Hill ©The Mc. Graw-Hill Companies, Inc. , 1999

Retail Patterns 14 -10 Country Argentina Australia Canada India Japan Malaysia Mexico Philippines South Africa South Korea U. S. A Retail Outlets (000) Population per Outlet 199. 5 160. 2 157. 2 3540. 0 1591. 2 170. 6 899. 3 120. 1 60. 4 730. 0 1516. 3 164 111 183 253 79 109 96 547 675 60 170 Employees per Outlet 4 5 9 NA 4 8 2 28 7 2 13 SOURCES: International Marketing Data and Statistics, 21 st ed. (London: Euromonitor Publications, 1997), and "Indicators of Market Size for 115 Countries, " Crossborder Monitor, August 27, 1997. Irwin/Mc. Graw-Hill ©The Mc. Graw-Hill Companies, Inc. , 1999

International Channel-of-Distribution Alternatives 14 -11 Home Country Foreign Country The foreign marketer or producer sells to or through Foreign consumer Domestic producer or marketer sells to or through Open distribution via domestic wholesale middlemen Exporter Importer Foreign agent or merchant wholesalers Foreign retailers Export management company or company sales force Irwin/Mc. Graw-Hill ©The Mc. Graw-Hill Companies, Inc. , 1999

Home Country Middlemen 14 -12 Global Retailers Export Management Company Trading Companies (Foreign) U. S. Export Trading Companies Complementary Marketers Manufacturer's Export Agents Home Country Brokers Buying Offices Selling Groups Webb-Pomerence Export Associations Foreign Sales Corporations Norazi Agents Export Merchants Export Jobbers Irwin/Mc. Graw-Hill ©The Mc. Graw-Hill Companies, Inc. , 1999

Major Japanese Trading Companies (Sogo Shosha) 14 -13 Company C. Itoh Mitsui Sumitomo Marubeni Mitsubishi Nissho Iwai Tomen Nichimen Kanematsu-Gosho Total Share (percent) Sales of Nine Sogo Shosha (Yen billions) Exports Imports from into Offshore Total In Japan Trade 20, 533 20, 300 21, 404 18, 248 16, 614 15, 047 6, 324 5, 893 5, 502 129, 866 100. 0 9, 867 7, 000 8, 175 6, 965 7, 267 4, 404 3, 185 1, 850 1, 430 50, 142 38. 6 2, 937 3, 553 4, 591 3, 014 2, 495 2, 003 712 670 863 20, 836 16. 1 3, 386 4, 524 5, 298 3, 463 3, 152 4, 346 1, 162 984 2, 420 28, 736 22. 1 4, 343 5, 222 3, 340 4, 806 3, 701 4, 295 1, 265 2, 389 789 30, 151 23. 2 SOURCE: Japan Foreign Trade Council, Inc. , 1991. Irwin/Mc. Graw-Hill ©The Mc. Graw-Hill Companies, Inc. , 1999

Channel Control by Manufacturer or Trading Company 14 -14 Inventory Financing Cumulative Rebates Quantity Purchased Early Payments Achieving Sales Targets Performing Services Maintaining Inventory Levels Sales Promotions Loyalty Maintain Prices Cooperation Merchandise Returns of Unsold Merchandise Retailers Receive Displays Advertising In-store Displays Financial Assistance Irwin/Mc. Graw-Hill ©The Mc. Graw-Hill Companies, Inc. , 1999

General Motors Networks American Style Keiretsu 14 -15 General Motors Networks - American Style Keiretsu We read a lot about the Japanese keiretsus and their interlocking networks of suppliers, financing, and producers. Do we have anything similar in the United States? Consider the breakdown of the $10, 000 you pay for a General Motors' Le. Mans. $3, 000 to South Korea for labor and assembly. $1, 850 to Japan for engines, transaxles, and electronics. $700 to Germany for styling and design engineering. $400 to Taiwan, Singapore, and Japan for small components. $250 to Britain for advertising and marketing services. $50 to Ireland Barbados for data processing. $4, 000 goes to strategists in Detroit, lawyers, bankers, lobbyists, insurance and health care workers all over the country and to General Motors shareholders all over the world. The suppliers listed here are not all independent companies operating at arm's length but are corporate subsidiaries, joint ventures, or suppliers that have agreed to a longterm arrangement to provide products or services. Together they make up a global network of interdependent companies that repeatedly deal with each other across borders. ©SOURCE: Robert Reich, "The Myth of 'Made in the U. S. A. ', " The Wall Street Journal, July 5, 1991, p. A 6. Reprinted by permission of The Wall Street Journal, © 1991 Dow Jones & Company, Inc. All Rights Reserved Worldwide. Irwin/Mc. Graw-Hill ©The Mc. Graw-Hill Companies, Inc. , 1999

Foreign Country Middlemen 14 -16 Manufacturer's Representatives Distributors Brokers Managing Agents and Compradors Dealers Import Jobbers Wholesalers Retailers Irwin/Mc. Graw-Hill ©The Mc. Graw-Hill Companies, Inc. , 1999

Factors Affecting Channel Choices 14 -17 Irwin/Mc. Graw-Hill Cost Capital Control Coverage Character Continuity ©The Mc. Graw-Hill Companies, Inc. , 1999

Channel Development 14 -18 Irwin/Mc. Graw-Hill Locating Middlemen Selecting Middlemen Screening Agreements Motivating Middlemen Terminating Middlemen ©The Mc. Graw-Hill Companies, Inc. , 1999