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Chapter 13

Chapter 13. Distribution Management. International Distribution. The firm sells to its customers: directly through its own sales force. indirectly through independent intermediaries. indirectly through an outside distribution system with regional or global coverage. Channel Structure.

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Chapter 13

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  1. Chapter 13 Distribution Management

  2. International Distribution • The firm sells to its customers: • directly through its own sales force. • indirectly through independent intermediaries. • indirectly through an outside distribution system with regional or global coverage.

  3. Channel Structure • How to structure the distribution channels is the most important long-term marketing mix decision a firm may make. • Channel structures are designed to manage multidirectional (horizontal and vertical) connections in: • physical movement of goods and services • transactional title flows • information communications flows

  4. Channel Configurations Manufacturer Manufacturer Originator Agent Agent Agent Agent Wholesaler Wholesaler IndustrialDistributor Agent Retailer Agent Retailer IndustrialDistributor Retailer Retailer Agent Consumer Industrial User Consumer / Industrial User Consumer Products Industrial Products Services

  5. INTERNAL Company objectives Character Capital Cost Coverage Control Continuity Communication EXTERNAL Customer characteristics Culture Competition Determinants of Channel Structure and Relationships

  6. Channel Design Considerations • Customer characteristics • What do they need, why, when, and how? • Distribution culture • The structural linkages and functional characteristics of existing channels. • Competition • What channels does the competition use? • Company objectives • Determined by company objectives for market share and profitability.

  7. Channel Design Considerations • Character • The nature of the product impacts the design of the channel. The channel must match the positioning of the product in the market. • Capital • ... Describes the financial requirements for setting up a channel system. • Cost • … is the expenditure incurred in maintaining a channel once it is established.

  8. Channel Design Considerations • Coverage • The number of areas in which a product is represented and the quality of that representation. • Types of coverage • Intensive • Selective • Exclusive

  9. Channel Design Considerations • Control • The use of intermediaries, product type, and the marketer’s use of power will determine the amount of market control. • Continuity • Responsibility of the marketer and is expressed through market commitment. • Communication • Provides the exchange of information that is essential to the functioning of the channel. • Social, cultural, technological, time and geographical distances cause problems.

  10. Intermediaries • Types of intermediary relationship • Distributorship • Agency • Type of exporting function • Indirect exporting • Direct exporting • Integrated distribution

  11. Intermediaries • Sources for Finding Intermediaries • Distributor inquires • Governmental agencies • Commerce Department’s Trade Opportunities Program • U.S. Exporters Yellow Pages • Private sources • Trade directories • Screening Intermediaries • Performance • Professionalism

  12. Agents Foreign (Direct) Brokers Manufacturer’s Reps Factors Managing agents Purchasing Agents Domestic (Indirect) Brokers Export Agents EMCs Webb-Pomerene Commission agents Distributors Foreign (Direct) Distributors/dealers Import jobbers Wholesalers/retailers Domestic (Indirect) Domestic wholesalers EMCs ETCs Complementary marketers Selection of Intermediaries SOURCES: Peter B. Fitzpatrick and Alan S. Zimmerman, Essentials of Export Marketing (New York American Management Association, 1985), 20; and Bruce Seifert and John Ford, “Export Distribution Channels,” Columbia Journal of World Business 24 (Summer 1989): 16; http://www.usatrade.gov.

  13. The Distributor Agreement • Typical terms include • Contract duration • Typically short periods initially • Geographic and customer boundaries • Well-defined territories and channels • Compensation • Methods for determining payment amounts and how and in what currency payment is to be made. • Products and conditions of sale • Products to be sold; terms and conditions of sales • Means of communication between parties

  14. Channel Management • Coordinating two independent entities with shared goals. • The relationship needs to be managed for the long term. • Factors complicating channel management • Ownership • Geographic, cultural, and economic distance • Different rules of law

  15. Arguments for: The right to “free trade.” Consumers benefit from lower prices. Discount distributors have found a profitable market niche. Arguments against: Gray marketers take unfair advantage of trademark owner’s marketing and promotion. Parallel imports deceive consumers by not meeting product standards or expectations of after-sale service. Gray Markets (Parallel Importation)

  16. The Solution to the Gray Market Problem? • A contractual relationship that ties businesses together.

  17. E-Commerce • Any worldwide web strategy must be tied closely to the company’s overall growth strategy in international markets. • Companies must come to terms with issues related to security, privacy, and access to global networks, at the same time, promoting global commerce over the Internet.

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