International Marketing Channels

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Chapter 11
International Marketing Channels
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Chapter Learning Objectives
1. The variety of distribution channels and how
they affect cost and efficiency in marketing
2. The Japanese distribution structure and what
it means to Japanese customers and to competing
importers of goods
3. How distribution patterns affect the various
aspects of international marketing
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Chapter Learning Objectives
4. The growing importance of e-commerce as a
distribution alternative
5. The functions, advantages, and disadvantages
of various kinds of middlemen
6. The importance of middlemen to a products
success and the importance of selecting and
maintaining middlemen
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Introduction

• 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 firms
• Each market contains a distribution network with
  many channel choices whose structures are
• In some markets the distribution structure is
  multi-layered, complex, inefficient, even strange
• Competitive advantage will reside with the
  marketer best able to build the most efficient
  channel

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Channel-of-Distribution Structures

• The distribution process includes the physical
  handling and distribution of goods, the passage
  of ownership (title), and the buying and selling
  negotiations between producers and middlemen and
  between middlemen and customers
• Each country market has a distribution structure
  through which goods pass from producer to use
• Within this structure are a variety of middlemen
  whose customary functions, activities, and
  services reflect existing competition, market
  characteristics, tradition, and economic
  development
• Channel structures range from those with little
  developed marketing infrastructure such as those
  found in many emerging markets to the highly
  complex, multi-layered system found in Japan

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Japanese Distribution Structure

• Distribution in Japan has long been considered
  the most effective non-tariff barrier to the
  Japanese market The Japanese distribution
  structure is different enough from its U.S. or
  European counterparts

It has four distinguishing features

1. a structure dominated by many small middlemen
   dealing with many small retailershigh density of
   middlemen,
2. channel control by manufacturers,
3. a business philosophy shaped by a unique culture,
   and
4. laws that protect the foundation of the
   systemthe small retailer

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Channel Control in Japanese Distribution Systems
Control is maintained through the following
elements

1. Inventory financing with credits extending for
   several months.
2. Cumulative rebates
3. Merchandise returns that are allowed to the
   manufacturer.
4. Promotional support to intermediaries in the form
   of displays, advertising layouts, and management
   education programs

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Distribution Patterns

• Distribution patterns are always evolving and new
  patterns are developing and marketing channels
  are not the same throughout the world

Some general distribution patterns that are
similar globally include

1. Middlemen Services
2. Product Line Breadth
3. Costs and Margins
4. Channel Length
5. Nonexistent Channels
6. Blocked Channels
7. Stocking
8. Power and Competition

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Retail Patterns

• International retailing shows even greater
  diversity in its structure than does wholesaling

Some general retailing patterns include

1. Retail Size Patterns
2. Direct Marketing
3. Resistance to Change
4. Alternative Middleman Choices

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Home-Country Middlemen

• Home-country middlemen, or domestic middlemen,
  provide marketing services from a domestic base
  and find foreign markets for products for local
  manufacturers

Frequently used types of domestic intermediaries
include

1. Manufacturers Retail Stores
2. Global Retailers
3. Export Management Companies
4. Trading Companies
5. U.S. Export Trading Companies
6. Complementary Marketers
7. Manufacturers Export Agent

8. Home-Country Brokers 9. Buying Offices
10. Selling Groups 11. Webb-Pomerene Export
Associations 12. Foreign Sales Corporation
13. Export Merchants 14. Export Jobbers
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Foreign-Country Middlemen

• Some of the more important foreign-country
  middlemen, who find markets for foreign
  manufacturers include

1. Manufacturers Representatives
2. Distributors
3. Foreign-Country Brokers
4. Managing Agents and Compradors
5. Dealers
6. Import Jobbers, Wholesalers, and Retailers

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Factors Affecting Choice of Channels
The following points should be addressed prior to
selecting intermediaries

1. Identify specific target markets within and
   across countries.
2. Specify marketing goals in terms of volume,
   market share, and profit margin requirements.
3. Specify financial and personnel commitments to
   the development of international distribution.
4. Identify control, length of channels, terms of
   sale, and channel ownership

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Six Cs of Channel Strategy
Channel strategy itself is considered to have the
following six specific strategic goals

1. Cost
2. Capital Requirements
3. Control
4. Coverage
5. Character
6. Continuity

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Locating Middlemen
Firms seeking overseas representation should
compile a list of middlemen from such sources as
the following

1. Commercially published directories
2. Foreign consulates
3. Chamber-of-commerce groups located abroad
4. Other manufacturers producing similar but
   noncompetitive goods
5. Middlemen associations
6. Business publications
7. Management consultants
8. U.S. Department of Commerce

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Selecting Middlemen
In selecting middlemen, the following steps
should be used.

• Screening based on the following criteria
• (a) reputation
• (b) creditworthiness
• (c) markets served
• (d) products carried
• (e) number of stores
• (f) store size

2. The Agreement that details terms of the
contract and the functions to be performed on
behalf of the foreign manufacturer
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Motivating Middlemen
There is a clear correlation between the
middlemans motivation and sales volume

• Motivational techniques may be grouped into
• five categories
• (1) financial rewards
• (2) psychological rewards
• (3) communications
• (4) company support, and
• (5) corporate rapport

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The Internet

• E-commerce is used to market business-to-business
  services, consumer services, and consumer and
  industrial products via the World Wide Web

• The Internet is an important distribution method
  for multinational companies

• When using the internet for distribution
  purposes, the following factors should be
  considered
• Culture
• Adaptation (especially of language)
• Local contact information
• Payment form
• Delivery
• Promotion

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