Efficient and Effective International Distribution Channels

1. Chapter 14 International Marketing Channels McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

2. Forging an aggressive and reliable channel of distribution may be the most critical and challenging task facing international firms. Competitive advantage will reside with the marketer best able to build the most efficient and effective channel. Introduction

3. The distribution process includes the physical handling and distribution of goods, the passage of ownership (title), and the buying and selling negotiations between producers and middlemen and between middlemen and customers. Channel-of-Distribution

4. a structure dominated by many small middlemen dealing with many small retailers—high density of middlemen; channel control by manufacturers; a business philosophy (loyalty, harmony and friendship) shaped by a unique culture, and; laws that protect the foundation of the system—the small retailer. Japanese Distribution Structure • Distribution in Japan has long been considered the most effective non-tariff barrier to the Japanese market. It has four distinguishing features:

5. Distribution Channels: U.S. vs Japan

7. Inventory financing with credits extending for several months. Cumulative rebates. Merchandise returns that are allowed to the manufacturer. Promotional support to intermediaries in the form of displays, advertising layouts, and management education programs. Channel Control in Japanese Distribution Systems Control is maintained through the following elements:

8. Middlemen Services Product Line Breadth Costs and Margins Channel Length Nonexistent Channels Blocked Channels Stocking Power and Competition Distribution Patterns • Distribution patterns are always evolving and new patterns are developing and marketing channels are not the same throughout the world Some general distribution patterns that are similar globally include:

9. Retail Structure in Selected Countries

10. Distribution Alternatives

11. Manufacturers’ Retail Stores Global Retailers Export Management Companies Trading Companies U.S. Export Trading Companies Complementary Marketers Manufacturer’s Export Agent Home-Country Middlemen • Home-country, or domestic, middlemen provide marketing services from a domestic base and find foreign markets for products for local manufacturers. Frequently used types of domestic intermediaries include: 8. Home-Country Brokers 9. Buying Offices 10. Selling Groups 11. Webb-Pomerene Export Associations 12. Foreign Sales Corporation 13. Export Merchants 14. Export Jobbers

12. Manufacturer’s Representatives Distributors Foreign-Country Brokers Managing Agents and Compradors Dealers Import Jobbers, Wholesalers, and Retailers Foreign-Country Middlemen • Some of the more important foreign-country middlemen, who find markets for foreign manufacturers include:

13. Identify specific target markets within and across countries. Specify marketing goals in terms of volume, market share, and profit margin requirements. Specify financial and personnel commitments to the development of international distribution. Identify control, length of channels, terms of sale, and channel ownership. Factors Affecting Choice of Channels The following points should be addressed prior to selecting intermediaries:

14. Commercially published directories Foreign consulates Chamber-of-commerce groups located abroad Other manufacturers producing similar but noncompetitive goods Middlemen associations Business publications Management consultants U.S. Department of Commerce Locating Middlemen Firms seeking overseas representation should compile a list of middlemen from such sources as the following: