ICG- The IIS UniversityProject

onChannels of Distribution

BBM- 603

Submitted by:Sonali Ruhela

Srishti ShekhawatKhushboo Sharma

Submitted to:Ms. Chhavi jain ma’amAssistant professorIIS University

International

Distribution

What are distribution channel?

Distribution: How goods reach consumers

Peter ProducerThe Consumer

Peter Producer

WendyWholesaler

Lilly Retailer

Consumer

INTERNATIONAL CHANNELSYSTEM

International marketing involves exporting,

Two categories of marketing channels are

involved, viz.,

Channels between the nations

And

Channels within the foreign market

There are broadly two ways of exporting

Indirect exporting

• Indirect exporting- In this the actual export is carried out by independent middleman or cooperative organizations.

• Direct exporting- It refers to direct sale by the manufacture to the foreign buyer.

Direct exporting

Indirect Exporting

The indirect method is more popular with firms which are just

beginning their exporting activities and with those whose export

business is not considerable.

In other words, when a manufacture exports indirectly , he

transfers the responsibility for the selling job to some other

organization.

Broadly, two alternative channels are available for indirect

exporting, viz.,

•Marketing middlemen

•Cooperative organizations

MARKETING MIDDLEMEN

There are two important middlemen

MERCHANTS

AGENTS

Export merchants- who buys the manufacture’s product and sell it

abroad on his own, merchant is one who takes title to the product

he sells.

Agents/Brokers- Unlike the merchant middlemen, the agent does

not take the title to the goods; he simply seeks overseas buyers for a

commission.

COOPERATIVE ORGANISATIONS

The co-operative exporting organisations, which represent a

cross between indirect and direct, carry on exporting

activities on behalf of several producers, and partly under the

administrative control of the manufactures.

There are two distinct types of cooperative international

marketing organisations:

Piggyback marketing

Exporting combinations

DIRECT EXPORT

As the name indicates, direct export

refers to the sale in the foreign

market directly by the manufacturer.

Firms with considerable export

business usually resort to direct

exporting.

• A number of organizational arrangements are available

to a company for carrying on direct exporting:

a) The export business may be conducted by a domestic based

export department or division .there are four important types

of domestic based export organization.

1) Built in export 2) Separate export department

3)export combination 4) export sales subsidiary

b)A company may employ travelling salesman for the overseas

market these travelling salesman may be home based or may

not be home based.

Direct Exporting Channels

•IMPORTER

•WHOLESALER

•DISTRIBUTOR

•RETALERS

•GOVERNMENT DEPARTMENT

•CUSTOMERS

•STATE BUYING ORGANZATION

•JOINT VENTURE

•INDUATRIAL BUYERS

CHANNEL LEVELS

1) Zero level channel – It is also called direct marketing channel ,is

essentially characterized by the producer making a direct sale

to the buyer.

2) One level channel- It is characterized by one selling

intermediary like the retailer or the agent.

3) Two level channel- It contain two intermediaries e.g.,

wholesaler/distributor and retailer

4) Three level channel- It has three intermediaries i.e., agents

wholesalers and retailers .

Types of Foreign Intermediaries

IMPORTERS – It refers to one who imports the product in large

quantities either as an agent for a foreign buyer or for resale. Such

imports includes ,large import houses and trading houses.

DISTRIBUTOR - A distributor who buys directly from the exporter

and holds large stocks of a product has an exclusive right to sell the

product in particular area or to a particular type of customer .

WHOLESALER – Although wholesalers often buy from the importers

or distributors, there are also wholesalers who buy directly from the

exporters.

RETAILER – Large retailer may buy directly from the exporters .Department stores, supermarkets or the other types of chain stores are among the most important direct retail buyers.

MULTIPLE CHANNELS – In some cases ,an exporter may use multiple channels for a product. For example an exporter may sell the wholesalers, large retailers may depend on distributors.

GOVERNMENT DEPARTMENT – In some countries government departments buy large quantities of certain goods, often a long term basis . These are generally essential goods of mass consumption or for use in government department.

STATE BUYING ORGANIZATION - In some countries the imports of

goods are done by the government organization like state trading

organization .This was the case until recently in centrally planned

economies .

JOINT VENTURE AND LICENSEES/FRANCHISEES – A very important

export marketing channel that is growing in popularly is the

collaborative arrangement between the exporter and foreign firm .

It is enterprise in which both ownership and management are shared

by firms from two or more countries are very common between firms

from developed and developing countries.

Marketing environment and internal distribution

• Marketing Environment can be defined as all the Internal and External Factors and Forces that affect a firm’s ability to develop and maintain successful transactions and relationships with the target customers . It includes all forces that affect Marketing Policies, Decisions and Operations of a company.

• The nature of the distribution system in a market is generally influenced by the relevant business environment. A particular distribution channel best suited for a product in one market may be inappropriate in another market.

• Within-country channels of distribution vary from country to country for consumer goods.

Cntd…COMPONENTS OF MARKETING ENVIRONMENT :o Internal environment : Forces and actions inside the firm that

affect the marketing operation composed of internal stake holders and the other functional areas within the business organization.

o External environment : it includes Micro environment and

Macro environment.o Micro environment includes- Suppliers, Customers,

Intermediaries, Competitors, General Public. o Macro environment includes-Demographic, Economic

Natural/Physical, Technological, Politico-legal ,Socio-cultural factors.

Factors affecting Marketing environment and internal distribution

• Political and Legal forces - It Includes laws, government agencies and pressure groups that influence or limit various organizations and individuals in a given nation.

• Economic Environment -The nations of the world are broadly classified as developing countries and developed countries. The developing countries fall into two categories - low income countries and middle income countries. Economic environment of different countries in International Marketing are not similar.

•  Social and cultural forces -The social environment includes the religious aspects, language, customs, traditions and beliefs, tastes and preferences, social institution , buying and consumption habits etc. Social environment of different nations are different.

Cntd..•  Demographic forces - Demographic data helps in

preparing geographical marketing plans, household marketing plans, age wise plans for a nation. It influences behavior of consumers which in turn will have direct impact on market place. A marketer must communicate with consumers anticipate problems ,respond to complaints and make sure that the firm operates properly.

• Technological Environment - It Changes rapidly, Creates new markets and opportunities. Safety regulations result in higher research costs and longer time between conceptualization and introduction of product.

Factors influencing channel selection

Market and customer

characteristics

Product characteristics

Middlemen characteristic

Company characteristics and objectives Competitors’

characteristics

Environmental characteristics

Cntd.. Product characteristics- Product characteristics like unit value,

perishability, bulk, degree of product standardization, complexity and service requirements, determine, to some extent, the way the product should be distributed.

Market and customer characteristics- Market and customer characteristics such as size and location of the market, the number and geographical dispersal of the customers, the frequency of purchase and the typical size of the purchase, customers’ buying habits etc. are important factors to be considered in the choice of the channel.

Middlemen characteristic- Middleman differ in their ability and willingness to carry out promotional activities and to push the product. The margin and commission for the middlemen is another important issue. The type of products dealt with by a particular intermediary should also be an important consideration.

Cntd.. Company characteristics and objectives- The choice of the channel

is also influenced by such factors as the company’s size, financial strength, product mix, past channel experience, overall marketing policies and channel objectives.

Competitors’ characteristics- Like any other marketing decision, the channel decision is influenced by the nature of the competitors. Sometimes, it may be appropriate to adopt a channel policy similar to that of the competitor, but sometimes it may be more profitable to design quite a different channel policy.

Environmental characteristics- The channel design is also influenced by such environmental factors as the economic situation, social and cultural factors, the physical environment and government policies and regulations.