Distributional Decisions

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Distributional decisionsDistributional decisions


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Chapter 01Chapter 01

Exporting and ImportingExporting and Importing

marketing and Internationalmarketing and International

MarketingMarketing

3

Distributional Decisions


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MKT 4134 InternationalMarketing

3

ObjectivesObjectives

The objectives of this chapterare:1. To give an understanding of the

institutional and physical aspectsof channels of distribution inglobal marketing

2. To describe the differentchannels of distribution andshow their advantages and

disadvantages and,3. To illustrate the importance and

role of channels of distribution


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4

Distribution ChannelsDistribution ChannelsA c anne is an institution t roug w ic goo s an services aremarketed. Channels give place and time utilities to consumers. Inorder to provide these and other services, channels charge amargin. The longer the channel the more margins are added.In deciding on channel design the following have to beconsidered carefully:

Market needs and preferencesThe cost of channel service provisionIncentives for channel members and methods of

paymentThe size of the end market to be served

Product characteristics required, complexity ofproduct, price, perish ability, packaging

Middlemen characteristics - whether they will pushproducts or be passive

Market and channel concentration and organization

Appropriate contractual agreements


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5

The Role of Marketing Channels inThe Role of Marketing Channels inInternational Marketing StrategyInternational Marketing Strategy

Channels provide the means by which the firm

moves the goods and services it produces to

ultimate users

Facilitate the exchange process by cutting the

number of contacts necessary

Adjust for discrepancies in the markets

assortment of goods and services via sortingStandardize exchange transactions

Facilitate searches by both buyers and sellers


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Distribution channels in theDistribution channels in theage of distributionage of distribution

The advent of information technology (IT) has broughtwith another acronym found in all spheres of commercialactivity: EDI. This is electronic data interchange

It affects everything now, including the movement ofgoods, the documentation which accompanies the goods

and so, payment as well. EDI has had an important effect on buyer-seller relations

within the international as well as national context. EDI creates a databank of clients and their spending

patterns which has effectively transferred some of thetraditional market power and knowledge possessed bythe manufactures to those retailers offering the storecards.

To the consumer, electronic networks control money.


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Types of MarketingTypes of MarketingChannelsChannels

Marketing channelMar et ng c anne : system omarketing institutions that promotesthe physical flow of goods andservices, along with ownership title,from producers to consumer orbusiness user; also called a

distribution channel Marketing intermediaryMarketing intermediary:

wholesaler or retailer that operatesbetween producers and consumers orbusiness users; also called amiddleman

WholesalerWholesaler: marketingintermediary that takes title to goodsand then distributes these goodsfurther; also called a jobber ordistributor


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Marketing channels.Marketing channels.


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Marketing channels.Marketing channels. Direct SellingDirect Selling

Direct channelDirect channel: marketing channel thatmoves goods directly from a producer toultimate user

Direct sellingDirect selling: strategy designed to establish

direct sales contract between producer andfinal user

Dual DistributionDual Distribution: Network that movesproducts to a firms target market through

more than one marketing channel

Reverse ChannelsReverse Channels: Channels designed toreturn goods to their producers


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Virtual value chain vs.Virtual value chain vs.physical value chainphysical value chain

The value chain is the set ofvalue adding activities.

By studying availableinformation, new forms ofvalue added could be foundfor the customer, many ofwhich could be found on theInternet or through the use ofIT.

Federal Express (FedEx)

allow customers to tracktheir packages through thecompany Web site.
http://www.premiumblend.com/pages/services/dellivery.shtmlhttp://www.mybargainjewels.com/product.asp?pf_id=111191


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LogisticsLogistics Logistics is frequently used

as term to describe themovement of goods andservices between supplierand end-user.

Logistics management isthat part of the supply chainwhich plans, implements andcontrols the efficient,effective forward and reverse

flow and storage of goods,services and relatedinformation between the pointof origin and the point of

consumption in order to meetcustomers' re uirements. A

Inside Nexus Distribution,a United States-based logistics

provider. Image shows

goods stacked on palletswith forklift.
http://en.wikipedia.org/wiki/Image:Allentown_Project_042.jpg


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Logistics allianceLogistics allianceVan Laar oven an S arman

(1994) defined a logistics

alliance as an agreement thatmet three conditions:It must involve at least onefull year of cooperation.It must offer both

transportation andwarehousing services.It must employ a singleprovider for the services.

Van Laarhoven and Sharman

(1994) see these logisticsalliance becoming what they callbuilding blocks, the veryfoundations of the networkeconomy.

They define the network economyas a system in which companies


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Comparative objectives and channel memberComparative objectives and channel memberexpectationsexpectations

Exporters objectives

2.Volume growth3.Market share4.Profitability5.High penetration level

6.High service level7.Wide product range8.Product promotion9.Product extension

10.Market feedbackCustomer perceptions2. Degree of foreignness3. Price/value relationship4. Conformity with local5. Standards

6. availability

Intermediaries needs

2. Product price stability3. Gross returns4. Regular inventory turnover5. Good return on selling space6. Promotional allowance7. Technical assistance8. Continuity of supply9. Product extension10. Finance for consumption cred

Lesscontrol

overprodu

ct

Moreco

ntrol

Conveyance of foreign firm

image indirectly toconsumer

Con

veya

nce

offoreign

firm

imageindirectly

to

consum

er


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Comparative objectives and channel memberComparative objectives and channel memberexpectationsexpectations

Exporters objectives2. Volume growth

3. Market share4. Profitability5. High penetration level6. High service level7. Wide product range8. Product promotion9. Product extension10. Market feedback

stomer perceptions

gree of foreignness

ice/value relationshipnformity with localandardsailability

Intermediaries needs

2. Product price stability3. Gross returns4. Regular inventory turnover5. Good return on selling space6. Promotional allowance7. Technical assistance8. Continuity of supply9. Product extension10. Finance for consumption cred

Lesscontro

l

overp

rod

uct

Moreco

ntrol

Conveyance of foreign firmimage indirectly to

consumer

Conve

yanc

eof

foreig

nfirm

imag

e

indire

ctly

to

consum

er


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Factors influencing Marketing Channel Strategies

Characteristics of

Short Channels

Characteristics of Long

Channels

Market

factors

Business users Consumers

Geographically

concentrated

Geographically diverse

Extensive technical

knowledge and regular

servicing required

Little technical knowledge

and regular servicing not

required

Large orders Small ordersProduct

factors

Perishable Durable

Complex Standardized

Expensive Inexpensive


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Characteristics of Short

Channels

Characteristics of Long

Channels

Producerfactors

Manufacturer hasadequate resources to

perform channel functions

Manufacturer lacksadequate resources to

perform channel functions

Broad product line Channel control important

Limited product line Channel control not

important

Competitive

factors

Manufacturing feels

satisfied with marketingintermediaries

performance in promoting

products

Manufacturer feels

dissatisfied withmarketing intermediaries

performance in promoting

products


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Determining Distribution IntensityDetermining Distribution Intensity

Distribution intensity: number of intermediariesthrough which a manufacturer distributes its goods

Intensive distributionIntensive distribution: channel policy in whicha manufacturer of a convenience product attemptsto saturate the market

Selective distributionSelective distribution: channel policy in which afirm chooses only a limited number of retailers tohandle its product lineExclusive distributionExclusive distribution: channel policy in which a

firm grants exclusive rights to a single wholesaler orretailer to sell its products in a particular geographicarea


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Legal problems of exclusiveLegal problems of exclusive

distributiondistribution

Exclusive-dealing agreement: arrangement between

manufacturer and e-marketing intermediary that

prohibits the intermediary from handling competingproduct lines

Closed sales territories: exclusive geographic selling

region of a distributor

Tying agreement: Arrangement that requires a

marketing intermediary to carry items other than those

they want to sell


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Marketing intermediariesMarketing intermediaries

Travel Agents Tour Wholesalers

ConciergesSpecialists:

Brokers & Junket Reps

Internet Hotel Representatives

Consortia & Reservations

Systems

Global DistributionSystems

National, State,and Local Tour Agencies

Philip Kotler, John Bowen, James Makens, Marketing for Hospitalityand Tourism, 3rd edition.


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Marketing intermediariesMarketing intermediariesA business firm that operates between producers

and consumers or business users, also called amiddleman.

May be a wholesaler, retailer, or facilitating

intermediary.

Retailing: Activities involved in selling goods and

services to ultimate consumers

Wholesaler: An intermediary that takes title to the goods it

handles and redistributes them to retailers, other distributors,

and sometimes end consumers


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MKT 4134 InternationalMarketing 23

Conventional DistributionConventional DistributionChannel vs. Vertical MarketingChannel vs. Vertical Marketing

SystemsSystemsVerticalVertical

marketingmarketingchannelchannel

Manufacturer

Retailer

ConventionalConventionalmarketingmarketingchannelchannel

Consumer

Manufacturer

Consumer

Retailer

Wholesaler

Whole

saler


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Freeport/free trade zoneFreeport/free trade zone

A free trade zone (FTZ) or Exportprocessing zone (EPZ) is one or moreareas of a country where tariffs andquotas are eliminated and bureaucraticrequirements are lowered in hopes ofattracting new business and foreign

investments. Free trade zones can bedefined as labor intensive manufacturingcenters that involve the import of rawmaterials components and the export offactory products.

The Freeport advantages

3. Batter cash flow for firms located onfreeports.4. Freeports provide firms with a degree of

flexibility in adjusting to marketconditions.

A woman is working at FTZin Sri Lanka.
http://www.google.lk/imgres?imgurl=http://www.upenn.edu/pennpress/img/covers/14380.jpg&imgrefurl=http://www.upenn.edu/pennpress/book/14380.html&h=339&w=225&sz=28&tbnid=EdKFq_iPKG0J::&tbnh=119&tbnw=79&prev=/images%3Fq%3Dsri%2Blanka%2Bfree%2Btrade%2Bzone%2B(FTZ)%2B%2Bpictures&hl=en&sa=X&oi=image_result&resnum=1&ct=image&cd=1http://www.google.lk/imgres?imgurl=http://www.chillnite.com/wp-content/uploads/2007/11/03112007317.jpg&imgrefurl=http://www.chillnite.com/review-tea-lounge-at-movenpick-kuwait-free-trade-zone2&h=401&w=800&sz=46&tbnid=_y4bjYxy2TIJ::&tbnh=72&tbnw=143&prev=/images%3Fq%3Dsri%2Blanka%2Bfree%2Btrade%2Bzone%2B(FTZ)%2B%2Bpictures&hl=en&sa=X&oi=image_result&resnum=2&ct=image&cd=1


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Freeport advantagesFreeport advantages1. Freeports provide firms with freedom

from paperwork and bureaucraticlegislation.

2. Firms located on a zone can benefit from

the concentration of export facilitiestherein, including customs, insurance,packing and certification.

3. Firms located on a zone could benefit

from savings in insurance and policingcosts.4. Freeports could make a substantial

contribution to employment.


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Physical DistributionPhysical Distribution

A companys physical distributionsystem contains the followingelements:


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The Problem of Sub optimizationThe Problem of Sub optimization

Condition that results when individual

operations achieve their objectives but interfere

with progress toward broader organizational

goals

Customer Service StandardsCustomer Service Standards

Statement of goals and acceptable performancefor the quality of service that a firm expects to

deliver to its customers


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TransportationTransportation

Class Rate

Commodity Rate

Classes of CarriersClasses of Carriers

Common carriers move freight via all modes of

transportation for the general public

Contract carriers do not serve the general public

Private carriers do not offer services for hire, but

provide transportation services solely for internally

generated freight


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Railroads

Motor Carriers

Water Carriers

Pipelines

Air Freight

Freight Forwarders

and Supplemental Carriers

Intermodal Coordination

Major Modes ofMajor Modes of

TransportationTransportation


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Comparison of Transport ModesComparison of Transport Modes

Mode Speed Depend-

ability in

Meeting

Schedules

Frequency

of

Shipments

Availabil-

ity in

Different

Locations

Flexibilit

y in

Handling

Cost

Rail Average Average Low Low High Average

Water Very

slow

Average Very low Limited Very

high

Very

low

Truck Fast High High Very

extensive

Average High

Pipeline Slow High High Verylimited

Very low Low

Air Very fast High Average Average Low Very

high


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WarehousingWarehousingStorage warehouse

Distribution warehouse

Automated Warehouse TechnologyAutomated Warehouse Technology

Distribution costs can be cut and customerservice improved by automating warehousesystems

Warehouse LocationsWarehouse Locations Major logistics decision involving the number

and locations of storage facilities

Two cost categories influence the choice: Warehousing and materials-handling costs

Delivery costs from warehouse to customers


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Inventory Control SystemsInventory Control Systems

Important since firms need to maintain enough

inventory to meet customer demand withoutincurring unneeded costs for carrying excess

inventory

Just-in-time (JIT) productionVendor-managed inventory (VMI)

Order ProcessingOrder ProcessingStock out: order for a product that is

unavailable for shipment or sale


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Protective Packaging and Materials HandlingProtective Packaging and Materials Handling

Materials Handling: set of activities that move

production inputs and other goods within plants,

warehouses, and transportation terminals

Unitizing: process of combining individual

materials into large loads for easy handling

Containerization: process of combining several

unitized loads into a single, well-protected load

CC d


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MKT 4134 InternationalM k i 35

Causes and consequencesCauses and consequencesdistribution channel Conflictdistribution channel Conflict

Incompatibility

Difference in

Perception

Dependence Break of

relationship

Damage ofgoodwill

Business fail

Distributional Decisions

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