International Marketing:Chapter 15 Key Concepts

• Japanese Distribution System & Four Characteristics– High density of middlemen– High level of channel control– Unique business philosophy– Large-scale retail store law

• Six factors affecting channel choices– Cost– Capital– Control– Coverage– Character– Continuity

• Home-country middlemen• Foreign country middlemen• Government-affiliated middlemen• Challenges of Channel Development• Internet-the most important international distribution trend

Channels of Distribution

• Each country market has a unique distribution structure

• Distribution process includes:–Physical handling and distribution of goods–Passage of ownership–Buying and selling negotiations • between producers and middlemen• between middlemen and customers

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Channels of Distribution in Developing Countries

• Traditional, import-oriented channels– Importer-wholesaler performs most marketing functions– Limited supply of products is sold at high prices to affluent

customers– Demand exceeds supply– Mass distribution not necessary

• Implications for foreign marketers:– Local distribution systems– Distribution system not integrated nationally– Nonexistent or underdeveloped marketing infrastructure

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Primary Characteristics ofJapanese Distribution Systems

High density of middlemenHigh level of channel controlUnique business philosophyLarge-scale retail store law

Retail Patterns of DistributionGreater Diversity Than Wholesaling

• Size patterns– Great diversity in size– No adequate way to reach small retailers– Large retailers growing in developing countries

• Direct marketing– By mail, telephone, catalogs, or door-to-door– Works well in affluent markets with underdeveloped

channels– Amway & Avon expanding dramatically

• Resistance to change– Many laws exist to protect the entrenched

Alternative Middleman Choices

• Seller must exert influence over two sets of channels– home country– foreign market country

• Agent middlemen – represent the principal rather than themselves– work on commission

• Merchant middlemen– take title to the goods and buy and sell on their own

account– tend to be less controllable

Home-Country Middlemen

• Manufacturer’s retail stores (Disney, etc.)• Global retailers (Wal-Mart, IKEA, etc.)• Export management companies (EMC)• Trading companies• U.S. export trading companies• Complementary marketers• Manufacturer’s export agent• Webb-Pomerene Export Associations• Foreign Sales Corporation

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Foreign-Country Middlemen

• Variety in most countries is similar to U.S.

• Dealing directly can be advantageous

– shorter channels

–moves manufacturer closer to the market

• More important foreign-country middlemen:

–manufacturer’s representatives

– foreign distributors

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Government-Affiliated Middlemen

• Marketers must deal with foreign governments

• Government purchasing offices

– Procure products & services for the government’s own use

– Work at federal, regional, and local levels

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Factors Affecting Choice of Channels

• International marketers need a clear understanding of market characteristics and must have established operating policies before beginning the selection of channel middlemen

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Factors Affecting Channel Choices

• Cost

• Capital

• Control

• Coverage

• Character

• Continuity

Challenges of Channel Development

• Locating Middlemen

• Selecting Middlemen

• Motivating Middlemen

• Terminating Middlemen

• Controlling Middlemen

Internet:The Most Important Global Distribution Trend

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Concerns for International E-Vendors

• Culture

• Product adaptation

• Local contact

• Payment

• Delivery

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