Factors affecting choice of channel

1. Legal Regulations
A country may have specific laws that rule out the use of particular channels or
mid-dlemen for example, prohibits the use of doors to door selling. Although
private importers in Iraq may choose to deal through commission agents, Iraqi
legislation prohibits state enterprises form dealing with third party intermediaries
(including commission agents) in obtaining foreign supplies, Saudi Arabia requires
every foreign company with work there to have a local sponsor who receives about
5 percent of any contract. Not surprisingly, many Saudis, acting as agents, have
become millionaires almost overnight.

2. Product Image
The product image desired by a manufacturer can dictate the manner in which the
product is distributed. A product with a low- rice image requires intensive
distribution. On the other hand, it is not necessary nor even desirable for a
prestigious product to have wide distribution. Cliniques products are sold in only
sixty-four department stores in Japan. Waterford Glass has always carefully
nurtured its posh Image by limiting its distribution to top-flight department and
specialty stores. At one time it did not take on any retail accounts for a period of a
year. Its effort to create an air of exclusivity has worked so well that Waterford
Glass commands a quarter of the U.S. market, easily making it the best-selling fine
crystal.

3. Product Characteristics
The type of product determines how that product should be distributed. For low-
high-turnover convenience products, the requirement is for an intensive
distribution network. The intensive distribution of ice cream is an example walls
(formerly Foremasts) success in Thailand can be attributed in part to its intensive
distribution and channel adaptation tailored its distribution activities to the lo-cal
Thai scene by sending its products (Ice cream, milk, and other dairy products) into
market in every conceivable manner. Such traditional channels as wholesalers and
such new channels as company-owned retail outlets (modern soda fountains) and
push-carts are also used. Pushcarts are supplied by the company and manned by
indepen-dent retailers (i.e., sidewalk salesmen) who keep a 20 percent margin.
However, tra-ditional channels employing wholesalers, small stores, restaurants,
hotels, and schools still account for a majority of sales.
4. Middlemens Loyalty and Conflict
One ingredient for an effective channel is satisfied channel member. As the channel
widens and as the number of channels increases, more direct competition among
channel members in inevitable. Some members will perceive large competing
member and self-service members as being unfair. Some members will blame the
manufacturer for being motivated be greed when setting up a more intensive
network. In effect for being motivated by greed when setting up a more intensive
network. In effect intensive distribution reduces channel members. Cooperation
and their loyalty as well as Increases channel conflict Michelin has been accused of
undercutting its own dealers in the U.S: market by not only expanding its dealer
network by 50 percent but also adding a direct channel to take national accounts
away from dealers. Both actions increased price competition and reduced dealers
loyalty. Apples problems in Japan owed in part to its addition of new channels
even though it already had a big distributor.

5. Local Customs Local business practices

, whether outmoded or not, can interfere with efficiency and productivity and may
force a manufacturer to employ a channel of distribution that is longer and wider
than desired. Because of Japans multitiered distribution system, which relies on
numerous layers of middlemen, companies often find it necessary to form a joint
venture with Japanese firm, such as Pillsbury with snow Brand, Xerox with Fuji,
and KFC with Mitsubishi Japan many layered distribution system is not entirely
unique in that part of the world, since the custom in many Far Eastern countries is
to have multiple intermediary markups on imported goods. Yet the rule of thumb in
Hong Kong is that there should be no more than two layers between a U.S.
exporter of finished goods and Hong Kong consumers, usually consisting of an
importer agent retailer, or distributor.
6. Power and Coercion
The least dependent person hypothesis, mentioned earlier, states that the one
party with resources and alternatives can demand more because it needs the other
party less. As such, the least dependent member of the channel has more power and
may be able to force to the channel member to accept its plan. This hypothesis
explains why it has been difficult for Japanese and Korean semiconductor
manufacturers to recruit U.S. distributors to reach customers who are too small to
buy directly from computer chip manufacturers. The major U.S. semiconductor
manu-facturers have long adopted a tacit policy of not allowing their distributors to
sell Japanese competitors products.

7. Control
If it has a choice, a manufacturer that wants to have better control over its product
distribution may want To both shorten and-narrow its distribution channel- One
study of Bntaills machine tool importers-f6imd that, in light of the EU integration
and com-petitive pressures, there has been an increase in the number of sales
subsidiaries as compared with distributors or agents. Apparently, manufacturers
want to get closer to final customers.

IMPORTANCE OF PHYSICAL DISTRIBUTION

_______________________ International physical distribution encompasses the
logistics or movements of goods across countries from the sources of supply to the
centers of demand. In other words, it is concerned with getting the right product to
the right place at the right time in a good condition at a reasonable cost.
Warehousing, transportation and inventory control are the major components of
physical distribution.
The final purpose of physical distribution activity is to provide adequate service to
their customer. This is an activity, which offers a great potential for increasing
efficiency. In international distribution there are complexities of national borders,
customs of trade, tariffs and duties, carrier performances, monetary exchange, and
the necessity of filling out numerous documents.
Management of International Physical Distribution As mentioned earlier, the three
important aspects of physical distribution are warehousing, transportation and
inventory management. The basic decisions to be made concerning warehousing
are how many warehouses of what size does the company need and in which
country they should be located.