Lecture International marketing (14/e) - Chapter 14

International Marketi
ng
14th Edition
P h i l i p R. C a t e o r a
M a r y C. G i l l y
John L. Graham

International
Marketing
Channels
Chapter 14
McGraw­Hill/Irwin
International Marketing 14/e

Copyright © 2009 by The McGraw­Hill Companies, Inc. All rights reserved.


Discussed questions
1. What are the major decisions facing Marketing
Managers when dealing with distribution channel?
2. What are the major functions of channel
distribution?
3. Review the key variables that affect the marketer’s
choice of distribution channels.
4. Account, as best you can, for the differences in
channel patterns which might be encountered in a
highly developed country and an underdeveloped
country.
14-2

Discussed questions
1. What is EMC? Why is the EMC sometimes called an
independent export department? Compare advantages and
disadvantages of EMC and company own marketing
department?
2. Explain how and why distribution channels are affected as
they are when the stage of development of an economy
improves.
3. Discuss the role of internet as channel distribution in
international marketing context? Provide examples to
illustrate your point

14-3


Three major decisions of
Distribution Channel
• Channel Design
• Channel Management
• Physical Distribution

14-4


What Should You Learn?
• The variety of distribution channels and how they affect
cost and efficiency in marketing
• The Japanese distribution structure and what it means to
Japanese customers and to competing importers of goods
• How distribution patterns affect the various aspects of

international marketing
• The growing importance of e-commerce as a distribution
alternative
• The functions, advantages, and disadvantages of various
kinds of middlemen
• The importance of middlemen to a product’s success and
the importance of selecting and maintaining middlemen
14-5


Global Perspective –

A Single Stick of Doublemint Today – 18 Billion Tomorrow

• A product must be made accessible to the target
market at an affordable price
• Getting the product to the target market
– Can be a costly process

• Forging an aggressive and reliable channel of
distribution
– The most critical and challenging task facing the international
marketer

• Competitive advantage
– For the marketer best able to build the most efficient channel
from among the alternatives available
14-6

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

14-7


How a Distributor Increases Efficiency

Intermediaries reduce the number of
contacts & the work
15- 8
Copyright ©2009 Pearson Education South Asia Pte Ltd


Channel Member Functions

15-9


Three types of channels:

• A manufacturer selling a physical
product and services might require
three channels:
1. A sales channel
2. A delivery channel
3. A service channel

15- 10


Consumer Marketing Channels

15- 11


International
Channel-Distribution Alternatives

14-12


Import-Oriented
Distribution Structure
• In an import-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

14-13


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

14-14


Japanese Distribution Structure
1. A structure dominated by many small
middlemen dealing with many small retailers
2. Channel control by manufacturers
3. A business philosophy shaped by a unique
culture
4. Laws that protect the foundation of the system

14-15


Comparison of Distribution Channels
between the United States and Japan

14-16

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

14-17


Retail Structure in Three Countries

14-18


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

14-19

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

14-20


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
14-21


Changes in the

Japanese Distribution System
• Structural Impediments Initiative
• Deregulation
• Wal-Mart
• “New” retailers
• The Internet

14-22


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 high margins and prices
• The Internet may be most important distribution
trend
• Covisint: General Motors, Ford Motor, DaimlerChryler
• GlobalNetXchange: Sears, Roebuck, Carefour
• E-commerce: Amazon.com
• 7-Eleven competes with FedEx and UPS
14-23


General Distribution Patterns
• Middlemen services
• Line breadth
• Costs and margins
• Channel length
• Nonexistent channels

• Blocked channels
• Stocking
• Power and competition
14-24


Retail Distribution Patterns
• Size patterns
• Direct marketing
• Resistance to change

14-25