Chapter 15 International Marketing Channels

1. International Marketing 15th edition Chapter 15 International Marketing Channels Philip R. Cateora, Mary C. Gilly, and John L. Graham

2. Channel-of-Distribution Structures • All consumer and industrial products eventually go through a distribution process • Physical handling and distribution of goods • Passage of ownership • Buying and selling negotiations between producers and middlemen • Buying and selling negotiations between middlemen and customers • Each country market has a distribution structure • Goods pass from producer to user Roy Philip

3. Import-Oriented Distribution Structure (1 of 2) • In animport-oriented or traditional distribution structure: • Importer controls a fixed supply of goods • Marketing system develops around the philosophy of selling a limited supply of goods at high prices to a small number of affluent customers Roy Philip

4. Import-Oriented Distribution Structure (2 of 2) • Demand exceeds supply • The customer seeks the supply from a limited number of middlemen • Distribution systems are local • Few countries fit the import-oriented model Roy Philip

5. Japanese Distribution Structure (1 of 2) • Four distinguishing features • High density of middlemen • Channel control • Business philosophy • Large-scale retail store law • Changes in the structure Roy Philip

6. Japanese Distribution Structure (2 of 2) • A structure dominated by many small middlemen dealing with many small retailers • Channel control by manufacturers • A business philosophy shaped by a unique culture • Laws that protect the foundation of the system Roy Philip

7. High Density of Middlemen • Not unusual for consumer goods to go through three or four intermediaries before reaching the consumer • Japan has a large number of independent groceries and bakers (94.7% or all retail stores) • Small stores account for 59.1% of retail food sales • U.S. emphasis is on supermarkets, discount food stores, and department stores • Small stores generate 35.7% of food sales Roy Philip

8. Channel Control • Inventory financing • Cumulative rebates • Merchandise returns • Promotional support Roy Philip

9. Business Philosophy • Emphasizes loyalty, harmony, and friendship • Supports long-term dealer-supplier relationships • The cost of Japanese consumer goods are among the highest in the world • Japanese law gives the small retailer enormous advantage over the development of larger stores Roy Philip

10. Large-Scale Retail Store Law and Its Successor • Daitenho – the Large-Scale Retail Store Law • Large stores must have approval from the prefecture government • All proposals first judged by the Ministry of International Trade and Industry (MITI) • If all local retailers unanimously agreed, the plan was approved • Could be a lengthy process • Applied to both domestic and foreign companies • Replaced by the Large-Scale Retail Store Location Act of June 2000 • MITI out of the process • Relaxed restrictions Roy Philip

11. Alternative Middleman Choices • Seller must exert influence over two sets of channels • One in the home country • One in the foreign-market country • Agent middlemen – represent the principal rather than themselves • Merchant middlemen – take title to the goods and buy and sell on their own account Roy Philip

12. International Channel-of-Distribution Alternatives Exhibit 15.3 Roy Philip

13. Channel Management • Locating middlemen • Selecting middlemen • Screening • The agreement • Motivating middlemen • Terminating middlemen • Controlling middlemen Roy Philip

14. Logistics (1 of 2) • Logistics management is a total systems approach to the management of the distribution process that includes all activities involved in physically moving raw material, in-process inventory, and finished goods inventory from the point of origin to the point of use or consumption • The physical distribution system involves more than the physical movement in goods; it includes the location of plants and warehousing, transportation mode, inventory quantities, and packing Roy Philip

15. Logistics (2 of 2) • Substantial savings can result from the systematic examination of logistics costs and the calculation of total physical distribution costs • The concept behind physical distribution is the achievement of the optimum (lowest) system cost, consistent with customer service objectives of the firm • One of the major benefits of the European Union’s unification is the elimination of transportation barriers among member countries Roy Philip