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Transcript of IM9 Distribution
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Copyright Atomic Dog Publishing, 2002Copyright Atomic Dog Publishing, 2002
Managing International Distribution Operations and Logistics
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Copyright Atomic Dog Publishing, 2002Copyright Atomic Dog Publishing, 2002
Issues Related to International Distribution
• Using Established Channels Could charge high prices Could be blocked by competition Choice is a long-term decision: company may be bound
indefinitely to the channel choice
• Building Channels Necessary if there are no channels at all and if the existing
channels do not conform to company needs Expensive
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Copyright Atomic Dog Publishing, 2002Copyright Atomic Dog Publishing, 2002
Home-Country Middlemen
• Export Management Companies Highly specialized in certain industries and/or
regions
• Trading Companies The Japanese Model: sogo shoshas The U.S. Model and the Export Trading Company
Act
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Copyright Atomic Dog Publishing, 2002Copyright Atomic Dog Publishing, 2002
Home-Country Middlemen, continued
• Home-Country Brokers and Agents Middlemen who bring international buyers and sellers together
in the company's home country Do not carry title to the product Manufacturer’s export agent: represent a manufacturer Buying offices: buyers located in the firm’s home country,
representing different international firms
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Copyright Atomic Dog Publishing, 2002Copyright Atomic Dog Publishing, 2002
Home-Country Middlemen, continued
• Cooperative Export Arrangements Also known as piggybacking and mother henning
• Involve exporters agreeing to handle export functions for unrelated companies on a contractual basis Complementary export agents export complementary
products on a commission basis Complementary export merchants actually take title to the
complementary products that they export
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Copyright Atomic Dog Publishing, 2002Copyright Atomic Dog Publishing, 2002
Home-Country Middlemen, continued
• Webb-Pomerene Associations of Exporters Competing companies that join resources and efforts to
export internationally Are exempt from antitrust scrutiny Are present especially where cartels are active
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Copyright Atomic Dog Publishing, 2002Copyright Atomic Dog Publishing, 2002
Home-Country Middlemen, continued
• Foreign Sales Corporation (FSC) Sales corporation that is set up overseas Allows for a portion of U.S. firm’s foreign-source
income to be exempt from U.S. income tax To qualify for tax exemption, firm must:
- have a foreign presence
- meet certain management and economic requirements
- incur abroad a minimum level of direct costs in sales activities, in areas such as marketing, advertising, and order processing.
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Copyright Atomic Dog Publishing, 2002Copyright Atomic Dog Publishing, 2002
Home-Country Middlemen, continued
• Export merchants Intermediaries who take title to and possession of
the products they carry Responsible for shipping and marketing the
products in the target market Carry competing brands Examples:
- export jobber, who carries commodity goods, but does not take physical possession of the goods
- Norazi agent, who deals in illegal and/or gray market products
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Copyright Atomic Dog Publishing, 2002Copyright Atomic Dog Publishing, 2002
Foreign-Country Middlemen
• Merchant Middlemen Intermediaries who carry the manufacturer’s product line in a
particular country Usually carries title to and has physical possession of the
products
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Copyright Atomic Dog Publishing, 2002Copyright Atomic Dog Publishing, 2002
Foreign-Country Middlemen, continued
• Agents and Brokers Many types of agents and brokers in foreign markets, such
as manufacturer's representatives and managing agents- Could act as the manufacturer’s sales representatives and are
paid on commission
- Or they could take on the role of managing agents (also known as compradors), with an exclusive arrangement with the company, representing it in the foreign market; the latter are paid as a percentage of sales
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Copyright Atomic Dog Publishing, 2002Copyright Atomic Dog Publishing, 2002
Foreign-Country Middlemen, continued
• Alternative Distribution Structures: Network Marketing Using acquaintance networks for the purpose of both sales
and distribution Have high potential in emerging markets
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Copyright Atomic Dog Publishing, 2002Copyright Atomic Dog Publishing, 2002
International Distribution and Logistics
• Distribution Centers
• Transportation Firms
• Freight Forwarders and Customs Brokers
• Government Agencies Promote national security Promote international involvement of local firms Provide financing and insurance for high risk ventures
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Copyright Atomic Dog Publishing, 2002Copyright Atomic Dog Publishing, 2002
Government Agencies
• International Trade Administration
• Bureau of Export Administration
• U.S. Commercial Service
• Export/Import (Ex-Im) Bank
• United States Trade and Development Agency
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Copyright Atomic Dog Publishing, 2002Copyright Atomic Dog Publishing, 2002
Other Service Providers
• Non-governmental International Chamber of Commerce
• Banks
• Insurance agencies
• Marketing research firms
• Consultants
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Copyright Atomic Dog Publishing, 2002Copyright Atomic Dog Publishing, 2002
Logistics Alliances
1) Establish objectives
2) Identify providers
3) Express needs/wants
4) Evaluate and select bidder
5) Develop integration plan
6) Create win-win relationship
7) Measure and analyze performance
8) Redefine goals and objectives
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Copyright Atomic Dog Publishing, 2002Copyright Atomic Dog Publishing, 2002
Challenges to International Distribution and Logistics
• Distribution challenges in developing countries
• Parallel imports (gray markets) Distribution systems that are not authorized by the
manufacturer: products purchased in a low-price market are diverted to other markets
Hurt company image- Charge similar prices worldwide
- Create product for low-markets not as attractive to up-market
- Complicate repair/servicing process for gray market goods
- Inform consumers
- Litigate
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Copyright Atomic Dog Publishing, 2002Copyright Atomic Dog Publishing, 2002
Logistics Challenges
• Combating Parallel Imports: Charging similar prices worldwide Creating product for low-price markets not as attractive to
up-market Complicating the repair/servicing process for gray market
goods Informing consumers Litigating
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Copyright Atomic Dog Publishing, 2002Copyright Atomic Dog Publishing, 2002
Chapter Summary
• Described functions of home-country and host-country middlemen involved in international distribution
• Identified different facilitators of international distribution and logistics
• Described their involvement in distribution process
• Addressed challenges encountered by distribution in countries of different development levels