Global Distribution Strategies

Objectives• To learn the variety of distribution channels and

how they affect cost and efficiency in marketing.• To understand the Japanese distribution

structure and what it means to Japanese customers and to competing importers of goods.

• To be aware of how distribution patterns affect the various aspects of international marketing.

• To understand the functions, advantages, and disadvantages of various kinds of middlemen.

• To learn the importance of selecting and maintining middlemen.

• To know the growing importance of e-commerce as a distribution alternative.

• To understand the interdependence of physical distribution activitites.

The Distribution Process

• Physical handling and distribution of goods.• Passage of ownership (INCOTERMS)

Producer Middlemen Customers

Distribution Structure

• Variety of Middlemen– Customary functions, activities and services.

• Reflection of:– Competition– Mkt characteristics– Tradition– Economic development

Import-Oriented Distribution Structure

• Developing countries importing manufactured goods.

• Limited supply at high prices.

• Small number of customers.

• No mass distribution.

Pasaje Comercial Hernandez in Bogota,Destination of imported goods for

several decades in the 20th Century.

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amas

Japanese Distribution Structure

Structure dominated by many small middlemendealing with many small retailers

Channel control by manufacturers

A business philosophy shaped by a unique culture

Laws that protect the small retailer

Current Distribution Trends

• Web-based purchasing.• Former competitors create Str. Alliances.• Discount stores• Diversification of activities

In Spain, El Corte Inglés is the biggestDepartment store, in Colombia, InformáticaEl Corte Inglés takes care of the numericPortability process; also there is a travelAgency named Viajes El Corte Inglés.

Dia is a discount chain owned byCarrefour

Distribution Patterns

• The middlemen will not disappear.• Patterns vary between markets.• The “traditional” pattern will take longer to

disappear.

Branded Shops are examples ofDistribution Patterns

Size Patterns

A small retailer in Jalisco, Mexico

Hippo Hypermarket, Belarus

Direct Marketing

• Mail, telephone or door-to-door.

Multi-level catalog salesAre booming in LatAm.

Shop America bypassed the japanese retailing system by sending catalogs to customers who may order by mail.

Resistance to Change

Prodiscos, the biggest colombian records retailer was slow in reaction facing the threat of Online piracy and digital streaming and downloading. It tried to rebrand itself as Entertainment Store during its last years but lost to the impeding change in distribution trends.

Alternative Middleman ChoicesCateora, P., &

Gilly, M

. (2011). International marketing (15th ed.).N

ew York, N

Y: M

cGraw

-Hill/Irw

in.

Types of Middlemen

• Agent Middlemen– Manufacturer’s Export Agent– Acts on behalf of the manufacturer.

• Merchant Middlemen– Combined Export Manager– Acts on its own behalf

Domestic Middle-MenManufacturers’

Retail Store• Disney

Global Retailers

• Sears Roebuck

Export ManagementCompanies

• All things export related

Trading Companies

• Long tradition of supplying goods to developing countries.

Complementary Marketers

• Piggybacking

Manufacturer’s Exports Agent

• Act on behalf of the producer

Foreign-Country Middlemen

• Closer to the host country market.• It helps avoiding:– Problems of language– Physical distribution– Communications– And Financing

Government-Affiliated Middlemen

http://www.cbi.eu/

Before Selecting Channels

• It’s necessary to address these points:1. Identify specific target markets within and

across countries.2. Specify marketing goals in terms of volume,

market share, and profit margin requirements.3. Specify financial and personnel commitments to

the development of international distribution.4. Identify control, length of channels, terms of

sale, and channel ownership.

Selecting Middlemen

Cost

Availability

Control

The Six C of the Channel StrategyCostCapitalControlCoverageCharacterContinuity

Cost

Of Developing the channel

Of Maintaining the channel

Capital

• Internal channels• Deals of distribution– Loans– Consignment– More control = more

investment

Control

• The longest the channel, the least the control the manufacturer has.With several middlemen the power to decide over• Price• Volume• Promotion• And outlets

Diminishes.

Coverage

• Geographic segments• Market segments• No full market coverage, just major population

centers.

Character

• Perishability of the product• Complexity of sale• Value of the product• Post-sale service

Continuity

• Middlemen loyalty is almos non-existent.• Shift allegiance based on perks from

competitors.

The Internet

• E-commerce is a form of direct selling.

•It reduces procurement costs.

•It allows better supply chain management

•It makes possible tighter inventory control.

Logistics

• Location of plants• Warehousing• Transportation mode• Inventory quantities• Packing.