Chapter 14 International Marketing Channels Copyright 2009 Mc

Chapter 14 International Marketing Channels Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -1

Chapter Learning Objectives • The variety of distribution channels and how they affect cost and efficiency in marketing • The Japanese distribution structure and what it means to Japanese customers and to competing importers of goods • How distribution patterns affect the various aspects of international marketing • The growing importance of e-commerce as a distribution alternative • The functions, advantages, and disadvantages of various kinds of middlemen • The importance of middlemen to a product’s success and the importance of selecting and maintaining middlemen Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -2

Global Perspective A Single Stick of Doublemint Today – 18 Billion Tomorrow • A product must be made accessible to the target market at an affordable price. • 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 marketer. • Competitive advantage will reside with the marketer best able to build the most efficient channel from among the alternatives available. Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -3

Channel-of-Distribution Structures • All consumer and industrial products eventually go through a distribution process. – Physical handling and distribution of goods – Passage of ownership (title) – Buying and selling negotiations between producers and middlemen – Buying and selling negotiations between middlemen and customers • Each country market has a distribution structure through which goods pass from producer to user. Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -4

Import-Oriented Distribution Structure • Demand exceeds supply • The customer seeks the supply from a limited number of middlemen • Distribution systems are local • Few countries fit the import-oriented model today In an import-oriented or traditional distribution structure, an importer controls a fixed supply of goods and the marketing system develops around the philosophy of selling a limited supply of goods at high prices to a small number of affluent customers. Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -5

Japanese Distribution Structure 1. A structure dominated by many small middlemen dealing with many small retailers. 2. Channel control by manufacturers. 3. A business philosophy shaped by a unique culture. 4. Laws that protect the foundation of the system. Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -6

Comparison of Distribution Channels between the United States and Japan • Insert Exhibit 14. 1 Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -7

High Density of Middlemen • Not unusual for consumer goods to go through three or four intermediaries before reaching the consumer. • In Japan, small stores account for 57. 7 percent of retail food sales. • In the U. S. , small stores generate 19. 2 percent of food sales. • Japan has a large number of independent groceries and bakers, unlike America with an emphasis on supermarkets, discount food stores, and department stores. Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -8

Channel Control 1. Inventory financing – sales made on consignment. 2. Cumulative rebates – given for quantity purchases, early payments, etc. 3. Merchandise returns – unsold merchandise may be returned. 4. Promotional support – intermediaries receive support. Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -9

Business Philosophy • Emphasises loyalty, harmony, and friendship. • Supports long-term dealer-supplier relationships that are difficult to change. • The cost of Japanese consumer goods are among the highest in the world. • Japanese law gives the small retailer enormous advantage over the development of larger stores. Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -10

Large-Scale Retail Store Law and Its Successor • • Daitenho – the Large-Scale Retail Store Law: – Large stores must have approval from the prefecture government – All proposals first judged by the Ministry of International Trade and Industry (MITI) – Then, if all local retailers unanimously agreed, the plan was approved – Could be a lengthy process – Applied to both domestic and foreign companies Replaced by the Large-Scale Retail Store Location Act of June 2000: – MITI out of the process – Relaxed restrictions Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -11

Changes in the Japanese Distribution System • • • Structural Impediments Initiative Deregulation Wal-Mart “New” retailers The Internet Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -12

Trends: From Traditional to Modern Channel Structures • European retailers merging with former competitors and other countries to form Europe-wide enterprises. • Foreign retailers attracted by the high margins and prices. • The Internet may be the most important trend affecting distribution. • Covisint • Global. Net. Xchange • E-commerce • 7 -Eleven competes with Fed. Ex and UPS Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -13

Distribution Patterns • General patterns – – – – Middlemen services Line breadth Costs and margins Channel length Nonexistent channels Blocked channels Stocking Power and competition Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -14

Distribution Patterns (cont. ) • Retail patterns – Size patterns – Direct marketing – Resistance to change Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -15

Retail Structure in Selected Countries Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -16

Alternative Middleman Choices • Seller must exert influence over two sets of channels: – One in the home country – One in the foreign-market country • Agent middlemen – represent the principal rather than themselves. • Merchant middlemen – take title to the goods and buy and sell on their own account. Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -17

International Channel-of. Distribution Alternatives Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -18

Home-Country (Domestic) Middlemen • • • Manufacturer’s retail stores Global retailers Export management companies Trading companies Complementary marketers Manufacturer’s export agent Home-country brokers Buying offices Selling groups Export merchants Export jobbers Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -19

Foreign-Country Middlemen • • • Manufacturer’s representatives Distributors Foreign-country brokers Managing agents and compradors Dealers Import jobbers, wholesalers, and retailers Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -20

Government-Affiliated Middlemen • Marketers must deal with governments in every country of the world. • Products, services, and commodities for the government’s own use are always procured through government purchasing offices at federal, regional, and local levels. • Efficiency of public sector versus the private sector. Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -21

Factors Affecting Choice of Channels • • • Cost Capital requirements Control Coverage Character Continuity Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 1 -22

Locating, Selecting, and Motivating Channel Members • Locating middlemen • Selecting middlemen – Screening – The agreement • Motivating middlemen • Terminating middlemen • Controlling middlemen Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -23

The Internet • E-commerce is used to market: – Business-to-business (BSB) services – Consumer and industrial products • B 2 B enables companies to cut costs in three ways: – Reduces procurement costs – Allows better supply-chain management – Makes possible tighter inventory control Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -24

Concerns for e-Vendors • • • Culture Adaptation Local contact Payment Delivery Promotion Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -25

Summary • The international marketer has a broad range of alternatives for developing a distribution system. • Three primary alternatives for using agent middlemen: – Agent middlemen – Merchant middlemen – Government-affiliated middlemen • Channel structure may vary from nation to nation or from continent to continent. • Information and advice are available relative to the structuring of international distribution systems. • Traditional channels are being challenged by the Internet, which is becoming an important alternative channel to many market segments. Copyright 2009 Mc. Graw-Hill Australia Pty Ltd PPTs t/a International Marketing by Cateora Slides prepared by Kate Mizerski, Edith Cowan University 14 -26