Global Distribution

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Global Distribution
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Exclusive and Dual Distribution
EXCLUSIVE DISTRIBUTION
DUAL DISTRIBUTION
EXPORTER
EXPORTER
INDEPENDENT LOCAL DISTRIBUTOR
OEM BUYER
INDEPENDENT LOCAL DISTRIBUTOR
RETAILERS
RETAILERS
RETAILERS
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The PLC Effect How Local Channels Evolve
INTRODUCTORY --PCs HOBBYIST
STORES --DESIGNER APPAREL BOUTIQUES
DECLINING --PCs MAIL ORDER --DESIGNER APPAREL
OFF-PRICE STORES
LOW
MARKET GROWTH RATE
GROWING --PCs SPECIALITY RETAILERS --DESIGNER
APPAREL BETTER DEPARTMENT STORES
MATURE --PCs MASS MERCHANDISERS --DESIGNER
APPAREL MASS MERCHANDISERS
HIGH
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Determinants of Channel Choice
1. Product Requirements (Perishable lettuce,
sensitive apples, fine china, scratched cars,
beer without freshness, moldy cakes,...) 2.
Logistic Feasibility (Equipment by DHL, autos by
air, faxes of newsletters, freezer railroad cars,
shock-absorbent packaging, vacuum-packed,...) 3.
Demand Factors (Importance of speed for repairs,
timing of raw materials for inventory, customers
need for immediate gratification, quality
standards of middleman and final user,...)
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Determinants of Channel Choice
4. Competitive Factors (How fast is fast? How
good is good? What are the alternatives for the
buyer? Strategic importance of the market?) 5.
Middlemen Resources (Storage capability?
Credit or consignment or cash? Motivating with
fast delivery? Just-in-time system? Promised
supplies? Ability to support the marketing
effort?) 6. Own Resources (Financial, manpower,
production capacity)
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Wholesaling

• Wholesaling Functions
• Primary functions of wholesaling
• Making contact
• Negotiating
• Buying
• Selling
• Warehousing
• Wholesaling is a major component of a countrys
  infrastructure and its structure reveals
  important clues as to the countrys stage of
  development

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Wholesaling in Selected Countries
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Rationalizing distribution Italian Pasta in Japan
Conventional Route
Small wholesaler
Producer
Processing and packing plant
Import agent
Primarywholesaler
Intermediary wholesaler
Retail price 170yen/300g package
Retailer
Restructured Route
Depots Distribution Wholesalers Distribution
centers
Processing and packing plant
Importing company A/C
Producer
Retailer
Savings 25
Retail price 128yen/300g package
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Wholesaling

• Full-service wholesalers can usually be counted
  on in most countries
• However, because of their size and tie-ins with
  existing brands and chains they might not be
  willing to distribute the firms products
• The full-service concept should be carefully
  assessed for each country entered, since a
  full-service wholesaler will retain market
  knowledge and control the marketing.
• For the experienced entrant, limited services
  wholesalers might be more beneficial, because of
  increased control and more management learning.

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Wholesalers and Power

• Power and Competition
• The size distribution of wholesalers in many
  countries approximates the well-known 80-20
  rule
• 80 percent of the transactions are handled by 20
  percent of the firms
• Efficiency
• The trend toward integration is based on the
  technological developments that have make
  large-scale economies and technical coordination
  feasible
• These vertically and horizontally integrated
  firms become gate-keepers to the local market
  entry barriers.

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Retailing

• Retailers are the middlemen who buy from
  wholesalers and manufacturers and sell directly
  to the ultimate consumer.
• The retailing structure involves stores
  (supermarkets, department stores, specialty
  stores) as well as banks, restaurants,
  mail-order, etc.
• Different economies have different retail
  structures (e.g. Gillette blades are sold through
  drugstores in the US, tobacco shops in Italy,
  department stores in Germany, on the street in
  Moscow, at movie counters in Thailand, from
  traveling vans in India)

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Retail Outlets in Selected Countries
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Retailing

• Retailing and Lifestyles
• The retailing structure has to adapt to the
  varying living conditions (the lifestyles) of
  individual households
• Creating New Channels
• As economic growth takes place and global trade
  expands, new alternatives emerge
• Global Retailing
• The logistical and operational know-how of
  leading retailers is helping to increase the
  trend of retailing being globalized at a fast
  rate
• The rapid deployment of point-of-purchase
  information technology has shifted the power in
  the channel toward large retailers

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Worlds Largest Retailers
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Global Retailing?

• Global expansion of retailing is still difficult.
  Most large retailers are still pre-dominantly
  domestic.
• The Body Shop is one success story. The factors
  that helped its global expansion include
• 1. STANDARDIZED PRODUCTS, GLOBAL BRAND
• 2. GLOBAL SEGMENTS
• 3. A STRONG STORE CONCEPT
• 4. CONCEPT MOBILITY
• 5. SIMILAR INFRASTRUCTURE (REPLICABILITY)

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Parallel Distribution Gray Trade
GRAY TRADE - parallel distribution on genuine
goods by intermediaries other than authorized
channel members

• Three main factors motivate entrepreneurs to
  engage in gray trade
• 1. Wide price discrepancies between national
  markets
• 2. Limited availability of certain models or
  versions in one market
• 3. Inexpensive logistics means that
  transportation can be accomplished with relative
  ease

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The Gray Trade Arbitrage
USA home ()
Germany (DM)
Japan (Yen)
If DM/ 1.8, and Yen/ 120, then buy at
home If DM/ gt 1.8, and Yen/ 120, then buy in
Germany If DM/ lt 1.8, and Yen/ gt 120, buy in
Japan
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Seikos Channels of Distribution
Europe
Hong Kong
Japan
North America
Importer
Importer
Importer
Importer
Importer
Importer
Distributors
Distributors
Distributors
Distributors
Distributors
Distributors
Distributors
Distributors
Retailers
Retailers
Retailers
Retailers
Retailers
Retailers
Retailers
Retailers
Broken arrows denote the flow of Seiko watches
through unauthorized channels of
distribution.Solid arrows denote the flow of
Seiko watches through authorized channels of
distribution.
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Effects of Gray Trade
EROSION OF BRAND EQUITY can happen if the gray
goods do not perform to the level
expected STRAINED RELATIONSHIPS WITH AUTHORIZED
CHANNEL MEMBERS arises when channel members face
intra-brand competition LEGAL LIABILITIES
usually involves warranties that cant be
honored COMPLICATION OF GLOBAL MARKETING
STRATEGIES forecasted sales in a market may not
be realized when there is a sudden influx of
gray goods
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Channel Actions against Gray Trade
Supply Interference Engaging in relationship
building with distributors and requesting the
careful screening of orders and careful disposal
of surplus inventory Dealer Interference Searchin
g for gray imports at the gray traders outlets
in the importing country, then asking the dealer
to help dispose of the inventory Demand
Interference Using advertising to educate
customers about the drawbacks of gray
goods Strategic Attack Creating stronger reasons
for customers to patronize authorized dealers
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Global Channel Design
Two major considerations
What type of channel/middlemen should be used to
ensure that the strategic marketing objectives
are met in that country? What are the important
functions in the channel network for that country?
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Designing Global Channels
REVISIT YOUR FSAS Key success factors and FSAs
vary across countries and across channels WHAT
CHANNELS ARE AVAILABLE? Once you identify the
critical features of your channel network, find
out if the country market possesses these
channels CHANNEL TIE-UP Channel members might be
difficult to enlist due to entry barriers,
competition, and special trade allowances COORDIN
ATION CONTROL Once a distribution network is
established, coordination control from a
centralized headquarters should be feasible