International Distribution Systems

1
Chapter 14
International Distribution Systems
2
In International Distribution

• The firm sells to its customers
• directly through its own sales force
• indirectly through independent intermediaries
• indirectly through an outside distribution system
  with regional or global coverage

3
International Distribution Systems

• I. Problems in International Distribution
• 1) More stringent legal restrictions
• 2) Goods must be transferred further
• 3) May be difficult to get product to the
  consumer (infrastructure issues)
• II. Channel Design
• - Length, width, and the 11 Cs

4
Intermediaries

• Sources for Finding Intermediaries
• Distributor inquires
• Governmental agencies
• Commerce Departments Trade Opportunities Program
• U.S. Exporters Yellow Pages
• Private sources
• Trade directories
• Screening Intermediaries
• Performance
• Professionalism

5
Selection of Intermediaries

• Agents
• Foreign (Direct)
• Brokers
• Manufacturers Reps
• Factors
• Managing agents
• Purchasing Agents
• Domestic (Indirect)
• Brokers
• Export Agents
• EMCs
• Webb-Pomerene
• Commission agents

• Distributors
• Foreign (Direct)
• Distributors/dealers
• Import jobbers
• Wholesalers/retailers
• Domestic (Indirect)
• Domestic wholesalers
• EMCs
• ETCs
• Complementary marketers

6
International Distribution Systems

• III. Moving the Product Overseas
• 1) Ocean shipping
• 2) Air freight
• IV. Types of Middlemen
• 1) Freight forwarders
• 2) Trading Companies
• 3) Export Management Cos.

7
Real Physical Distribution Costs Between Air and
Ocean Freight - Singapore to the United States
In this example, 44,000 peripheral boards worth
7.7 million are shipped from a Singapore plant
to the U.S. West Coast. Cost of capital to
finance inventories is 10 percent annually
2,109 per day to finance 7.7 million. Transpor
t costs 31,790 127,160 (in transit 21
days) (in transit 3 days) In-transit inventory
financing costs 44,289 6,328 Total
transportation costs 76,079
133,487 Warehousing inventory costs (60 days
_at_2,109/day) Singapore and U.S.
126,540 Warehouse rent 6,500 Real physical
distribution costs 209,119 133,487
15-15
Ocean Air
SOURCE Adapted from "Air and Adaptec'c
Competitive Strategy,
International Business, September 1993, p.44.
Irwin/McGraw-Hill
8
International Distribution Systems

• IV. Types of Middlemen (Cont.)
• 4) Piggybacking
• 5) Domestic export middlemen
• V. Choosing a Middleman

9
Japanese Consumer Philosophy
? Harmony and Friendship ? Consumer ? Brand
Loyalty ? Service and Quality Over Price ?
Small, Frequent Purchases
14-6
Irwin/McGraw-Hill
10
Retail Patterns
Retail Outlets Population Employees Country (000)
per Outlet per Outlet
Argentina 199.5 164 4 Australia 160.2 111 5 Canada
157.2 183 9 India 3540.0 253 NA Japan 1591.2 79 4
Malaysia 170.6 109 8 Mexico 899.3 96 2 Philippine
s 120.1 547 28 South Africa 60.4 675 7 South
Korea 730.0 60 2 U.S.A
1516.3 170
13
SOURCES International Marketing Data and
Statistics, 21st ed. (London Euromonitor
Publications, 1997), and "Indicators of Market
Size for 115 Countries," Crossborder Monitor,
August 27, 1997.