Chapter

2. 14 Chapter Global Distribution

3. Rationalizing Local Channels • Changing Distributors • Distribution channel configuration for entry into a foreign market • Is rarely optimal once the product is established on the market • The traditional reason for termination of a distributor is • The exporting firm senses that the distributor is not doing a good enough job in the market • Dual Distribution • Channel changes do not necessarily involve termination of contracts • In some cases multiple channels emerge or are created

4. Wholesaling • Wholesaling Functions • Primary functions of wholesaling • Making contact • Negotiating • Buying • Selling • Warehousing • Wholesaling is a major component of a country’s infrastructure • And its structure reveals important clues as to the country’s stage of development

5. Wholesaling • Types of Wholesalers • Full-service wholesalers can usually be counted on in most countries • However, because of their size and tie-ins with existing brands and chains • They might not be willing to distribute the firm’s products • The full-service concept should be carefully assessed for each country entered

6. Wholesaling • Vertical Integration • Power and Competition • The size distribution of wholesalers in many countries seems to approximate the well-known “80-20” rule • 80 percent of the transactions are handled by 20 percent of the firms • Efficiency • The trend toward integration is based on • The technological developments that have make large-scale economies and technical coordination feasible

7. Retailing • Retailing and Lifestyles • The retailing structure has to adapt to the varying living conditions (the lifestyles) of individual households • Creating New Channels • As economic growth takes place and global trade expands, new alternatives emerge • Global Retailing • The logistical and operational know-how of leading retailers is helping to increase the trend of retailing being globalized at a fast rate • The rapid deployment of point-of-purchase information technology has shifted the power in the channel toward large retailers

8. Global Logistics • Global Logistics • Can be defined as the transportation and storage activities necessary to transfer the physical product • From manufacturing plants and warehouses in different countries to the various local market countries • Global logistics is a subset of global distribution which involves the management of the channels within a country • Supply chain management is coordinating and rationalizing the global logistics function of the firm involved in many markets

9. Global Logistics • Competition and Technology • Many firms are reluctant to try to reengineer their global logistics • A decentralized solution seems preferable • The local managers understand their customer requirements better than headquarter personnel • This counters two external forces pushing the company: competition and technology

10. Global Logistics • Air Express • Technical innovations in computerized inventory systems and numerically controlled machines for good handling made possible the growth of air express systems • Ocean Carriers • For shipments of bulky and low-value-per-unit products • Ocean vessels are still the most economical carrier alternative overseas • There have been a number of global carrier alliances in the shipping industry due to the savings involved in sharing resources and the advantage in providing integrated one-stop services to the shipper

11. Global Logistics • Overland Transportation • The increasing volume of international trade has put the inland distribution system under pressure • One North American solution has been the roll-on-roll-off system in which a loaded container is simply rolled onto a railcar and shipped by rail for part of the way, avoiding congested freeways • Warehousing • The competitive need on the part of global companies to be “close to the customer” and provide fast and efficient service • This places increased demand on warehousing and inventory management

12. Parallel Distribution • Gray Trade • Gray trade is parallel distribution on genuine goods by intermediaries other than authorized channel members • Three main factors motivate entrepreneurs to engage in gray trade • Wide price discrepancies • Between national markets • Limited availability • Of certain models or versions in one market • Inexpensive logistics • Transportation and importation can be accomplished with relative ease

13. Parallel Distribution • Effects of Gray Trade • Erosion of brand equity • The can happen if the gray goods do not perform to the level expected • Strained relationships with authorized channel members • This arises when channel members face intrabrand competition • Legal liabilities • This usually involves warranties that can’t be honored • Complication of global marketing strategies • Forecasted sales in a market may not be realized when there is a sudden influx of gray goods

14. Parallel Distribution • Channel Actions against Gray Trade • Supply Interference • Engaging in relationship building with distributors and requesting the careful screening of orders and careful disposal of surplus inventory • Dealer Interference • Searching for gray imports at the gray traders’ outlets in the importing country, then asking the dealer to help dispose of the inventory • Demand Interference • Using advertising to educate customers about the drawbacks of gray goods • Strategic Attack • Creating stronger reasons for customers to patronize authorized dealers

15. Parallel Distribution • Multiple Distribution Channels • Reason for the popularity of multiple distribution channels • The increased speed and service in global logistics • The breakdown of single-channel distribution regimes • The prevalence of gray trade • The initiators of defending against gray trade are often middlemen who decide that attack is the best defense • There is an increase in direct buying with consumers in different countries ordering directly from overseas stores and catalog houses

16. Parallel Distribution • Global Channel Design • The FSAs Revisited • To identify the channel requirements, the first step is to decide if the firm-specific advantages are uniquely lodged in the distribution channels to be used • Availability of Channels • Once the critical features of the channel network have been identified, the channel capabilities of the of the country market analyzed needs to be determined • Channel Tie-Up • Channel members may be unwilling to sign on with the new product unless special trade allowances larger than those offered by the competition are made • Coordination and Control • With a good distribution network established, coordination and control from a centralized headquarters location may be feasible