International Distribution Class 8. International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.

International Distribution

Class 8.

International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.

IntroductionThe marketplace is becoming increasingly globalCustomers want smaller quantities of more customized products, and they demand to be treated individuallyThe changing global competitive and technological environments are transforming the way products are produced and moved around the worldGlobalization of retailers and wholesalers drives globalization of manufacturing companies International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.

Place - Marketing ChannelsWhat is a marketing channel (or distribution channel)?

“Marketing channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user” (Kotler)“an organized network of agencies and institutions which, in combination, perform all the activities required to link producers with users to accomplish the marketing task” (AMA)

They perform functions that add utility to a product or service:

Place utility: availability of a product or service in a location that is convenient to a potential customerTime utility: availability when desired by a customerForm utility: availability of the product processed, prepared, in proper condition and/or ready to useInformation utility: availability of answers to questions and general communication about useful product features and benefits

What about international marketing channels?these interdependent organizations allow goods and

services to cross national boundaries


International Channels

SellerChannels between countries

Channels within foreign

countries

Final buyers

1. Channels between countries: gets the products to the borders of the foreign market; decisions concerning types of intermediaries (agents, trading companies, etc…), types of transport, financing and risk management…

2. Channels within foreign countries: gets the products from entry point to final buyers and users; decisions concerning types of retailers (franchising, supermarkets, etc…), local channels

Channels of distribution vary considerably among countries. Distribution, by its nature, is a marketing activity that is performed close to the market.


Channel ManagementChannel design: types of intermediaries, number of intermediaries (exclusive, selective, intensive), contractual arrangements…

Managing retailing, wholesaling and market logistics…

Selecting, motivating and evaluating channel members (cooperation, conflict, competition)

Channel dynamics: traditional, VMS, HMS, multi-channel marketing systems…

Most difficult part of the mix to standardize


Approach to Managing Supply Chains and Distribution


Global Retailing Market Entry Strategy Framework

Organic growth Chain acquisition

Franchising Joint-venture

Culturally close

Culturally distant

Easy to enter

Difficult to enter


Factors that influence the choice of distribution channel

Country CharacteristicsAccess to low-cost labor or raw materials

Availability of specialist skills/expertise/ infrastructure

Government Incentives and Regulations

Market factors: Cultural variations

Buyer behaviour

Buyer needs for product information, installation and servicing

The willingness of channel intermediaries to market product

Intermediary cost: "mark-up" or "commission“

Producer factors:Resources

Customer-based skills

Extend of control

Product factors: FMCG vs MedicineInternational Marketing, 2013. Buzulukova E.V., Sheresheva M.U.

B2C vs. B2B ChannelsBusiness-to-consumer channels

Designed to put products in the hands of people for their own useAlternatives: direct marketing, franchising, sales force, agents/brokers, internal sales force, wholesalers, retailers…

Business-to-business channelsDeliver products to manufacturers that use them as inputs in the production process or in day-to-day operationsAlternatives: internal sales force, distributors, wholesalers…


Marketing Channel Alternatives for Consumer Goods

Consumers

M

Internet, mail order, door-to-

door, house party, etc…

M

Company-owned,

franchising

M

MSF

R

M

Agents, brokers

R

M

MSF

W

R

M

MSF

R

W


Conclusion – 7 Rules of International Distribution

Select distributors. Don’t let them select you.Look for distributors capable of developing markets, rather than those with a few good customer contacts.Treat local distributors as long-term partners, not temporary market-entry vehicles.Support market entry by committing money, managers, and proven marketing ideas.From the start, maintain control over marketing strategy.Make sure distributors provide you with detailed market and financial performance data.Build links among national distributors at the earliest opportunity.

Source: D. Arnold, HBR, 2005International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.

Problems in International Marketing Channels

Global retailingCase of hypermarkets

Multi-channel strategiesCase of franchising-Internet

Market-specific channelsCase of wine distribution


Global RetailingGlobal retailing since 1970s, but many variations…

Differences in the importance and types of retailing channels: shopping malls, department stores, discount stores, wholesale clubs, outlet centers, hypermarkets…

Factors affecting the success of hypermarkets: culture, income, market fragmentation, traditional stores, locations, demography…

Global retailing market entryWal-Mart caseInternational Marketing, 2013. Buzulukova E.V., Sheresheva M.U.

Concept of Multi-Channel Strategies – Franchising and Internet

BRICK AND MORTAR

CLICK AND MORTAR

Coexistence of traditional and virtual marketing channels

“brick and click”

Antagonostic or complementary?International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.

Some Practical Advice…

Brand structure rather than channel structure (reduce risk of network competition)Sell all products on-lineEnsure multi-channel coherencyBack-office motivationUse Internet to increase visits (locations, maps)Limit use of e-mail…… But does this apply to franchising?


Multi-Channel Strategies in Franchising

Franchising firms are « plural form networks »

Internet is another distribution channel

Internet seems to be a priority

Internet is « revolutionizing » franchising

…

But, franchisors offering on-line sales are limited32% in the US

30% in the UK

Less than 20% in France


Opportunities and Threats of Multi-Channel Strategies (Franchising-Internet)

Opportunities Threats

New marketing channel

Increased sales

Network image

Positive internal effects

Cannibalism

Restriction franchisee sales

Non-conformity websites

Exclusive territories

Limits some entry modes


E-commerce advantagesReduction in intermediation costs associated with wholesale and retail activitiesThe ability to lower costs associated with purchasing by curbing the time and effort involved in supply and logistics operationsImproved information gathering and processing that permit improved management of the supply chainThe prospect of expanding market share and/or developing new markets by lowering the cost of gathering and processing information on the wants of existing and potential customersNew customers’ segments


Distribution IntensityIntensive distribution aims to provide saturation coverage of the market by using all available outlets. For many products, total sales are directly linked to the number of outlets used (e.g. cigarettes, beer). Intensive distribution is usually required where customers have a range of acceptable brands to chose from. In other words, if one brand is not available, a customer will simply choose another.Selective distribution involves a producer using a limited number of outlets in a geographical area to sell products. An advantage of this approach is that the producer can choose the most appropriate or best performing outlets and focus effort (e.g. training) on them. Selective distribution works best when consumers are prepared to "shop around" - in other words - they have a preference for a particular brand or price and will search out the outlets that supply.Exclusive distribution is an extreme form of selective distribution in which only one wholesaler, retailer or distributor is used in a specific geographical area.


Supply chain relationships and approaches


Ekaterina Buzulukova. International marketing. Last lecture

Modes of collaboration: example

Successful global marketing strategy

Factors:Deliver products of high quality to customersPrice competitively through careful cost managementOperate within short lead timesProvide excellent after-market supporting servicesSources:Understanding a nature of the marketsInfrastructure for transportation Level of technology Financial management Organization behaviour and human resources International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.

International Distribution Class 8. International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.

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Transcript of International Distribution Class 8. International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.