Marketing in the International Environment

1. Marketing in the International Environment Chapter 13 Distribution Management Chapter 16 Global Logistics and Materials Management

2. Economic Social Demographic Marketing Mix Product Price Promotion Place Marketer Target Market Political Cultural Feedback Technological Legal

3. Chapter 13Distribution Management Involves making decisions on the following issues • Channel Structure • Channel Design • Channel Management • Selection of Intermediaries • Channel Management • E-commerce

4. Channel Structure and Flows

5. Five Typical Flows in Distribution Channels Managing the flows is the key in distribution • Title (ownership to goods, downward) • Goods (physical flow of goods, downward) • Money (how transaction takes place, both ways) • Information (information shared by various parties, both ways) • Risk (risk shared in distribution, downward, moves with goods)

6. Determinants of Channel Structure and Relationships • Customer Characteristics- socioeconomic, demographic, and psychographic • Culture- each country is different, globalization in distribution • Competition- local vs. global • Company Objectives- single vs. multiple channels • Character- nature of the product • Capital- investment requirements • Cost- related to Capital, variable or day to day cost • Coverage- Intensive, Selective and Exclusive • Control- related to channel length, culture • Continuity- long term aspects, commitment • Communication- distance issues: social, cultural, technological, time and geographic

7. Selection of Intermediaries • Types of Intermediaries • Distributor • Purchase the product and exercise more independence than agencies • Organized along product lines and provide the international market with complete marketing services • Agents • Operate on a commission basis • Do not physically handle the goods • Controls to make sure that the customer gets the most recent and appropriate product

8. Agents vs. Distributors

9. Sources for Finding Intermediaries • Governmental Agencies • US Department of Commerce • Trade Opportunity Program (TOP) • Country Directories of International Contacts (CDIC) • The US Exporters Yellow Pages, Commercial News USA • Private Sources • Trade directories • Banks • Airlines • Chambers of Commerce

10. Screening Intermediaries • Screening Intermediaries • Performance • Financial standing • Management ability • Adequacy and quality of the sales team • Ability to provide customer service to the next channel level • Professionalism • The Distributor Agreement • Elements of a Distributor Agreement (see Exhibit 13.13)

11. Channel Management • Channel relationship is like a marriage-two independent entities with shared goals • Factors in channel management- leadership and control • Gray markets (parallel importation)- how to manage them • Termination of the channel relationship

12. Exhibit 13.14Performance Problems and Remedies When Using Overseas Distributors

13. Seiko’s Authorized and Unauthorized Channels of Distribution Ex. 13.15 K. Hattori & Co. Ltd. Tokyo, Japan Japan United States Rest of the World Unauthorized Importers Seiko Time Corp. (Importer) Authorized Importers Regional Distributors 15 Regional Distributors Unauthorized Distributors Regional Distributors 15,000 to 20,000 Retailers Authorized Seiko Dealers Numerous Retailers Unauthorized Retailers Numerous Retailers Japanese Consumers American Consumers Other Consumers

14. Exhibit 13.16International Distribution Life Cycle Co. A’s own ability And willingness to build market share in market X Effort/ Commitment Intermediary’s willingness and ability to build Co.A’s market share in marker X

15. E-Commerce • Marketers are networking and selling products and services through the Internet. Delivery can be outsourced by DHL, FedEx, and UPS • Popular websites are as follows • Priceline.com http://www.priceline.com • eBay http://www.ebay.com • Quadremhttp://www.quadrem.com • ECnethttp://www.ecnet.com • Alibabahttp://www.alibaba.com • Even Facebook is used for marketing

16. Chapter 16Global Logistics and Materials Management Involves making decisions on the following issues • Channel Structure • Channel Design • Channel Management • Selection of Intermediaries • Channel Management • E-commerce

17. International Logistics Defined • International logistics refers to the design and management of a system that controls the flow of materials. It involves… • Materials management- the timely movement of raw materials, parts, and supplies into and through the firm • Physical distribution- involves the movement of the firm’s finished product to it’s customers • Supply Chain Management- refers to the whole system of value-adding activities connecting the source to the end-user • Complexities of logistics and SCM

18. The International Supply Chain suppliers Corporation Customers Inbound MaterialsThrough FlowOutbound Materials Domestic/Export Materials Domestic/ Import Sourcing Order Processing Order Placement Order Processing Order Placement Transportation Transportation Supplier Firm Transportation Transportation Materials Management PhysicalDistribution Management Physical Distribution Management Customer Firm Interface Customer Service Interface Storage Storage Inventory Management Storage Inventory Management Inventory Management

19. International Transportation Issues • International transportation is one of the major concerns because it determines how and when goods will be received. The concerns are… • Transportation infrastructure • The availability of modes • Choice of modes depends on transit time, reliability/predictability, cost, noneconomic factors

20. Exhibit 16.3International Airfreight 1960-2027

21. Exhibit 16.5Evaluation Transportation Choices Mode of Transportation _______________________________ Characteristics of Mode Air Pipelines Highway Rail Water ___________________________________________________________ Speed (1=fastest) 1 4 2 3 5 Cost (1=highest) 1 4 2 3 5 Loss and Damage (1=least) 3 1 4 5 2 Frequency *(1=best) 3 1 2 4 5 Dependability (1=best) 5 1 2 3 4 Capacity+ (1=best) 4 5 3 2 1 Availability (1=best) 3 5 1 2 4 ___________________________________________________________ *Frequency: number of times mode is available during a given time period. +Capacity: ability of mode to handle large or heavy goods.

22. The International Shipment

23. Exhibit 16.6 Documentation for an International Shipment Documentation is sometimes considered to be a trade barrier Trading regions such as the European Union have greatly simplified their documentation requirements

24. Documentation for an International Shipment – Bill of Lading

25. International Inventory Issues • Order Cycle Time • The length of the total order cycle : order transmission, order filling, packing and preparation for shipment, and transportation • Consistency • Customer Service Levels • How is a firm able to fill all orders within a set time, quality of service • Inventory as a Strategic Tool • Avoid currency risk and high inflation

26. International Storage Issues • Customers expect quick responses to orders and rapid delivery. • Warehousing space is expensive. • The trade-offs between service and cost

27. International Storage Issues

28. International Storage Issues • Outsourcing • Shifting of traditional corporate activities to parties outside of the firm and often outside of the country • Foreign Trade Zones (FTZ) • Trade zones are considered to be outside the customs territory of the country within which they are located

29. International Packaging Issues • Climate • Transportation mode • The weight • Customer Requirements • Government Requirements • Cost (shipping, insurance, pilferage)

30. Management of International Logistics • Centralized • logistics management - Headquarters retain decision-making power and control over logistic activities • Decentralized • Each subsidiary is made a profit center • Leads to greater local management satisfaction and better adaptation to local market condition • Contract logistics (Outsourcing) • Helps firms improve service at equal or lower cost • Leads to loss of the firm’s control in the supply chain

31. The Supply Chain and the Internet

32. Logistics and Security • Terrorists • Government • Cargo Security • Impact of security measures for international shipment • Affect the firm’s ability to plan their international shipments and distributions • Increases the cost of supply chain activities