International marketing channels

INTERNATIONAL MARKETING

Channel of distribution - Structures

Products must be accesible to the target market at an affordable price.Through an agressive and reliable distribution channel. Channel decisions: Channel structure, channel selection, middlemen location, selection and motivation.

The distribution process includes the physical handling and distribution of goods, the passage of ownership and the buying and selling negotiations.

The distribution structure is along which goods pass from producer to user, including the middlemen with specific functions.

The availability and character of middlemen reflect the economic development and characteristics of the market.

The Distribution Process

Producer Middlemen Customers

IMPORT ORIENTED DISTRIBUTION STRUCTURE

Traditional distribution structure.

An importer controls a fixed supply of goods.

Reduced number of middlemen.

Not a mature marketing infrastructure.

Local scope.

Few countries adopt it.

JAPANESE DISTRIBUTION STRUCTURE

Structure dominated by many small middlemen dealing with many small retailers

Channel control by manufacturers through incentives such as financing, return of merchandise, promotional support and refunds

A business philosophy shaped by a unique culture that tends to build relationships.

Laws that protect the small retailer.

Pasaje Comercial Hernandez in Bogota,Destination of imported goods for

several decades in the 20th Century.

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Current Distribution TrendsDirect sales through catalogs

Web-based purchasing

Discount stores

Strategic alliances among competitors in order to join experience

Take advantage of the benefits offered by other companies

Dia is a discount chain owned byCarrefour

Multi-level catalog salesAre booming in LatAm.

Alternative middleman choices

A marketer’s options range from assuming the entire distribution activity to depending on intermediaries for the distribution of the product.

Agent middlemen • Manufacturer’s export agent• Act on behalf of the manufacturer• Manufacturer can establish politics and ask for reports

Merchant middlemen • Own the merchandise • Act on its own behalf• Less control and less risk

Home-country middlemenManufacturers’ Retail

Store

•Or franchises where goods are sold.

Global Retailers

•Global companies that are local partners.

Export ManagementCompanies

•EMC•Work as an independent marketing department at low cost.

Trading Companies

•Supply goods to developing countries.•Store, transport and distribute different products.

Complementary Marketers

•Piggybacking•When a Company wants to supplement its own products.

Manufacturer’s Exports Agent

•Act on behalf of the producer but it’s not a department. •Provides a specific service.

Foreign-country middlemenCloser to the host country market.

It helps avoiding:• Problems of language• Physical distribution• Communications

They could be agents or merchant middlemen. Strong relationship with the company or just short term agreements.

Factors affecting choice of channels

The international marketer needs a clear understanding of market characteristics.

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.

Select middlemen (Functions, cost, control and availability)

Channel strategy has six strategic goals besides guaranteeing profits

Six Cs

COST

Two kinds of cannel cost

1. Investment cost of developing the channels

2. The cost of maintaining it

Costs: Transportation Storing Providing credit Local advertising Negotiations

CAPITAL REQUIREMENTS

Maximum investment is usually required when a company establishes its own internal channels.

Use of distributors may lessen the capital investment.

CONTROL

The more involved a company is with the distribution, the more control it has.

◦ At a cost that is not practical

COVERAGE

Gain optimum volume of sales

Secure a reasonable market share

Coverage may be adressed by:Geographic segments Market segments

Do not attempt full market coverage but seek significant penetration in major population.

CHARACTER

The cannel of distribution system selected must fit the character of the company and the markets in which it is doing business.

CONTINUITY

Most agent middlemen firms tend to be small institutions.

Loyal middlemen

Build brand loyalty.

Locating middlemen Study of the market Determination of criteria

1. Productivity or volume

2. Financial strength

3. Managerial stability and capability

4. Reputation of the business

Published directories, chambers of commerce, business publications, management consultants.

SELECTING MIDDLEMEN

Screening: Exploratory letter (Product information and distribution

requirements) Response (Attributes of the middleman) References Financial information

Select a middleman that customers perceived as the best way.

Agreement Found and evaluation Negotiation position Spell out specific responsibilities (Sales mínimum for

evaluation)

MOTIVATING MIDDLEMEN

Motivation is correlated with sales volume.

Financial rewards (More than commissions).

Psycological rewards (Recognition, guided visits, publicity).

Communications and relationships.

CONTROLLING MIDDLEMEN

Marketing objectives must be spell out.

Control over the distribution network

Control over the middlemen perfomance Reports Personal visits

TERMINATING MIDDLEMEN

Middlemen do not perform up to standards

Market situations change.

Legal protection

The internet The internet is an important distribution method for multinational companies and a source of P/S for business and consumers.

E-vendor must be concerned with the following issues: 1. Culture: Culturally neutral or adapted 2. Adaptation: Designed and translated into the languages of the target markets3. Local contact: Virtual offices 4. Payment: Through internet 5. Delivery: Companies that offer delivery worldwide6. Promotion: Advertise Company’s presence and P/S.

Logistics Getting the correct quantity of the product to customers in the required time frame at a cost that

leaves enough margins for a profit.

Physical distribution system: Location of plants and warehousesTransportation modeInventory quantities Packing and packaging Insurances Legal payments

Interdependence