International Marketing Distribution-By Akshay Samant

International Marketing

Distribution

International Distribution In intl mktg manufacturer doesn’t sell products directly

Goes thro several parties before reaching consumer

Involves various channels and variety of intermediaries

Q: How do I get my product most profitably to a foreign country ? The answer lies in• Firms method of entry in foreign market• Selection & distribution channel within each of firms foreign market

International Distribution Decision criteria for entry methodFirm must evaluate Company goals - volume of business desired andgeographical coverage

Size of the company in sales and assets

Product line &nature of product (Industrial,consumer, high or low price)

Competitor abroad

International Distribution

Decision criteria for entry methodDifferent entry method as per country need & regulatn

In some wholly owned operations

In others marketing subsidiaries

In some others local distributors

or combine different entry methods

Eg. Dupont 40 countries wholly owned

20 countries Mkt subsidiaries

> 60 countries distributors

Alternative foreign entry mode

Indirect Export

Trading

Exp managementcompany

Piggy back

Production in Home Market

Foreign production

Direct ExportForeignDistributor

Agent

Overseas Mkt subsidiary

Contract managmnt

Licensing

Assembly

Joint Venture

100% ownership


Decision criteria for entry method

Market feed back ( What’s going on in the FM, Direct entry method (agent,distributor,subsidiary

will offer better market information)

Learning by experience ( more international experience, the more the company is involved in FM )


Decision criteria for entry method

Incremental Market cost ( cost associated with IM no matter

who does it. The channel selection determines it. However

no additional outlay with indirect exporting

Profit possibilities ( profit potential & cost associated with

each entry method must be evaluated. Eg.25% on sale

volume of $ 2 mio. vs 17% on $ 1mio. The 2nd entry method

more attractive

International Distribution Decision criteria for entry methodCompany entry mode determines the following Investment requirement (higher in case of wholly owned )

Administrative requirement ( documentation, red tape etc.)

Personnel requmnt (qualified internationalist or outsource) Exposure to foreign problems ( legal,regulatory,tax,labour)

Risks Risk analysis of market entry modes Economic,Environment ,Political, Forex


Indirect Export :Foreign sales through domestic sales Organization

Trading companies :Handle imports ( Mitsubishi- Japan) Size and market

coverage of these companies make them attractive

distributors. Cover the Mkt well & service the products

Draw back – likely to carry competing lines & the new

product added might not receive the desired attention


Indirect Export :

Export Management companyAct on behalf of the company with closer cooperation & coordination. Use company letterheads, negotiate on behalf of the firm. Economical mode & the cost is shared

PiggybackManufacturer uses overseas distributor to sell another company’s product along with its own,( carrier, rider relationship) Advantage – Fill the gap in its product line or economy of scale. Economical and cost is shared.


Direct Export :Foreign sales handled same way as domestic.All documentation, distribution fall under the firm

Task of exp. Management staff:Choosing foreign mkt ( existing, new)Choosing representation ( own, or franchisee)Physical distribution & export documentation, logisticcoordination

Marketing task : market intelligence, pricing & promotion


Foreign manufacturing & foreign entry :

Firm might find it undesirable to supply all foreign markets

from domestic production

Factors force/ encourage firm to produce in FM• Heavy distribution cost,Tariff & Quotas• Govt. policies encouraging local production• Better interaction with local needs• Saving on transportation, Tariff,& raw materials• Better customer & Govt. relations• No interruption of supplies


Approaches to foreign manufacture:

Assembly : Produce components locally, ship them to FM

for assembly ( cars, electronics, Industrial goods)

Contract manufacture: Products produced in the FM by

another producer under contract with the firm . Covers only

mfg. Marketing is covered by the firm ( eg. P&G in Italy )

Drawback - manufacturing profit goes to the producing

firm, Q.C is always a problem

International Distribution Approaches to foreign manufacture:Licensing : Firms establishes local production in FM without capital investment usually for a longer period Involves much greater responsibility for the national firmLicensor gives patent / Trademark rights,copyright and product know how

Joint Venture :Foreign operation where intln company has enough equity to share a voice in the management ( 25 - 75 )

Many nations prefer JV – Nations gets more of the profit & the technical benefit


Approaches to foreign manufacture:

Strategic Alliance:

Non equity contractual relationship between competition &

competitors in different countries eg. ( Phillips link with

Siemens )

The local firm gets a new product one that is

complimentary rather than directly competing ( eg

Antidiarrhoel with ORS)


Approaches to foreign manufacture:Wholly owned foreign production:100% ownership by international firm( 100% completeness of control by the international firm )

Buy out a foreign producer through acquisition routeBuy out a joint venture partner

Acquisition : Quicker way to get into a market than building Its own facilities. Package also includes qualified labourforce,management,local knowledge,contact with local Mkt and Govt.


Foreign Market channel & Global Logistics:How to distribute the products in FM once the goods are Reached ?• Management of foreign distributors• Management international logistics

Management of foreign distributor – depend on the entry mode chosen.Firms have little to do when they choosetrading / export management & licensing companies

Firms having own subsidiaries / complete mfg & mkt operations in the FM have direct responsibility


Marketing through Trading company Primary method of reaching foreign marketFirm’s success depends on performance of the distributor

Selection: Comp performce,past record,financial backingAgreement: Spell out duties & responsibilities & interest of each partyFinancial /price consideration: Margins ,commission,credit termsMarketing support: Participation in promotion, trade fairs,sampling etc.Communication: availability of Tel,e.mail,personal visitsIncentive and motivation: to induce him to sell


Marketing through Firms own presence Firm having own staff manage distribution locallyFollow local distribution infrastructure (Wholesaler, retailer,transport system

Wholesaler & service : getting assortments, breaking bulk & distribute to retailers

Retailer & services: stocking, displaying,selling products, inventory carrying and repurchase

A proper coordination, co operation and motivation is necessary to manage business


Physical distribution vs Logistics:

Physical distribution: Financial & ownership flow of goods a narrow view of the physical movement

Logistics: Much more than physical movement & Transportation. Involves number & location of production &storage facilities,production schedules inventory managmt

Documentation involves more parties, more data, more Credit checks on foreign buyers and involvement of new intermediary in exp sales- international freight forwarder


Logistics within a foreign Market:

Firms having own subsidiary must seek to optimize its

physical distribution

Where represented by distributor & licensees – firm has

limited role in logistics

Firms approach abroad can vary according to the size of

the market,way market is supplied,urbanization,

topography,& storage facilities ( Congo- Physical

distribution problems)


Multi market logistics:World – not one market but collection of individual national mkts, each under the control of sovereign

Govt. Has various methods of separation their markets from others, tariff barriers, quotas & licenses,local laws,monitory system,tax system,transport policies

Logistic management should adapt to overcome the barriers to achieve integrated world mkt for physical distribution ( eg. Coco cola built plant in India because of trade restrictions )

International Distribution Management of international logistics:

Facilities available are Freight forwarders: specialist in documentation & transportation,insurance etc well managed on their own

Free Trade Zone & public warehouse: 50 nations over 500FTS,free ports,bonded warehouse( a Govt owned &supervised by custom officials

Permit goods without tax as long as they are in the FTZMay allow processing,Assembly, sorting, repacking within the zone ( provides employment opportunities )

International Marketing Distribution-By Akshay Samant

Business

Transcript of International Marketing Distribution-By Akshay Samant