. Chapter 14

1. International Marketing Channels .Chapter 14 Modular: AfjalHossain Assistant Professor, Department of Marketing PSTU McGraw-Hill/Irwin International Marketing, 13/e

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 through which goods pass from producer to user.

3. Import-Oriented Distribution Structure • 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 today In an import-oriented or traditional distribution structure, an importer controls a fixed supply of goods and the marketing system develops around the philosophy of selling a limited supply of goods at high prices to a small number of affluent customers.

4. Japanese Distribution Structure • 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

5. Comparison of Distribution Channels between the United States and Japan • Insert Exhibit 14.1

6. High Density of Middlemen • Not unusual for consumer goods to go through three or four intermediaries before reaching the consumer • In Japan, small stores account for 57.7 percent of retail food sales • In the U.S., small stores generate 19.2 percent of food sales • Japan has a large number of independent groceries and bakers, unlike America with an emphasis on supermarkets, discount food stores, and department stores

7. Channel Control • Inventory financing • Cumulative rebates • Merchandise returns • Promotional support

8. 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

9. 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) • Then, 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

10. Changes in the Japanese Distribution System • Structural Impediments Initiative • Deregulation • Wal-Mart • “New” retailers • The Internet

11. Trends: From Traditional to Modern Channel Structures • European retailers merging with former competitors and other countries to form Europe-wide enterprises • Foreign retailers attracted by the high margins and prices • The Internet may be the most important trend affecting distribution • Covisint • GlobalNetXchange • E-commerce • 7-Eleven competes with FedEx and UPS

12. Distribution Patterns • General patterns • Middlemen services • Line breadth • Costs and margins • Channel length • Nonexistent channels • Blocked channels • Stocking • Power and competition

13. Distribution Patterns (continued) • Retail patterns • Size patterns • Direct marketing • Resistance to change

14. 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

15. Home-Country Middlemen • Manufacturer’s retail stores • Global retailers • Export management companies • Trading companies • U.S. export trading companies • Complementary marketers • Manufacturer’s export agent • Home-country brokers • Buying offices

16. Home-Country Middlemen (continued) • Selling groups • Webb-Pomerene export associations • Foreign sales corporation • Export merchants • Export jobbers

17. Foreign-Country Middlemen • Manufacturer’s representatives • Distributors • Foreign-country brokers • Managing agents and compradors • Dealers • Import jobbers, wholesalers, and retailers

18. Government-Affiliated Middlemen • Marketers must deal with governments in every country of the world • Products, services, and commodities for the government’s own use are always procured through government purchasing offices at federal, regional, and local levels • Efficiency of public sector versus the private sector

19. Factors Affecting Choice of Channels • Cost • Capital requirements • Control • Coverage • Character • Continuity

20. Locating, Selecting, and Motivating Channel Members • Locating middlemen • Selecting middlemen • Screening • The agreement • Motivating middlemen • Terminating middlemen • Controlling middlemen

21. The Internet • E-commerce is used to market: • Business-to-business (BSB) services • Consumer services • Consumer and industrial products • E-commerce is more developed in the U.S. than in the rest of the world • B2B enables companies to cut costs in three ways: • Reduces procurement costs • Allows better supply-chain management • Makes possible tighter inventory control

22. Concerns for e-Vendors • Culture • Adaptation • Local contact • Payment • Delivery • Promotion