International Marketing Channels

14 - 3

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 may be the most critical and challenging task facing the international marketer

• Competitive advantage will reside with the marketer best able to build the most efficient channel from among the alternatives available

14 - 5

Peking Ducks – No Free Enterprise

Guangzhou’s Farmers Market

14 - 6

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.

14 - 8

Comparison of Distribution Channels between the United States and Japan

• Insert Exhibit 14.1

14 - 10

Retail Structures

Source: Euromonitor, 2003

14 - 13

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

14 - 15

Trends: From Traditional to Modern Channel Structures

Russian Home Depot (Super Home) in St. Petersburg

14 - 16

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

14 - 18

Distribution Patterns

Mexico vs. Malaysia

14 - 20

Retail Patterns

Source: Euromonitor, 2003

14 - 22

Alternative Middleman Choices

14 - 24

Home-Country Middlemen

Nike European Distribution Center, Laakdal, Belgium

Nike Sport Store, St. Petersburg, Russia

14 - 26

Home-Country Middlemen

14 - 27

Foreign-Country Middlemen

Tokyo Tsukigi Fish Market

14 - 28

Foreign-Country Middlemen

14 - 31

Factors Affecting Choice of Channels

Stockmann’s Department Store, Helsinki, Finland

Grand Bazaar (Kapali Carsi), Istanbul, Turkey

14 - 33

Locating, Selecting, and Motivating Channel Members

• Locating middlemen• Selecting middlemen

- Screening- The agreement

• Motivating middlemen• Terminating middlemen• Controlling middlemen

14 - 34

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

14 - 35

Concerns for e-Vendors

Fedex at Roissy Airport, Paris, France