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Module 5


Channel Of Distribution
In every country and in every market, all consumers and industrial products eventually go through a distribution process. The distribution process includes physical handling and distribution of goods, the passage of ownership. Each country market has a distribution structure through which goods pass from producer to user

Import- oriented Distribution structure

In an import- oriented or traditional distribution structure, an importer controls a fixed supply of goods & the marketing system develops around the philosophy of selling a limited supply of goods at high prices to a small number of affluent customers. This configuration affects the development of intermediaries and their function. Because their importer- wholesaler traditionally performs most marketing functions, independent agencies that provide advertising , marketing research, warehousing and storage, transportation, financing and other functions.

Japanese distribution structure

Distribution in Japan has long been considered the most affective no tariff barrier to the Japanese market. Even though the market is becoming more open as many traditional modes of operation are eroding in the phase of completion from foreign marketers

The Japanese system has four distinguising features :

The structure dominated by many small middle man dealing with many small retailers. Channel controlled by manufacturers  Inventory financing  Cumulative rebates  Merchandise returns  Promotional support

business philosophy ( emphasizes loyalty, harmony and friendship) shaped by a uniculture. Laws that protect the foundation of the system the small retailer.


Distribution patterns
I. General patterns
1. Middlemen services The service attitudes of people in trade vary sharply at both retail and wholesale levels from country to country. In Egypt . E.g. the primary purpose of the simple trading system is to handle the physical distribution of available goods. In other countries both wholesalers and retailers try to offer extra services to make their goods attractive to customers.

2. Line breadth : Every nation has a distinct pattern relative to the breadth of line carried by wholesalers and retailers. The distribution system of some countries is characterized by middlemen who carry or can get everything; in other ways every middlemen is a specialist dealing only in extremely narrow lines .

3. Costs and margins : cost levels and middlemen margins vary widely from country to country, depending on the level of competition , service offered, and geographical and turnover factors related to market size, purchasing power, tradition and other determinants. 4. Channel length: Some correlation may be found between the stage of economic development and the length of marketing channels . In general there is a inverse relationship between channel length and size of purchase.

5. Non existent channels : In many instances, appropriate channels do not exist; in other ways part of a channel system are available but other parts are not. 6. Blocked channels : International marketers may be blocked from using the channel of their choice. Blockage can result from competitors already established lines in the various channels or from trade associations or cartels having closed certain channels. Association of middlemen sometimes restrict the number of distribution alternatives available to a producer.

.Stocking: The high cost of credit ,the danger of loss through inflation ,lack of capital, and other concerns cause foreign middlemen in many countries to limit inventories.

8. Power of competition Distribution power tends to concentrate in countries where a few large wholesalers distribute to a mass of small middlemen Large wholesalers generally finance middlemen downstream The strong allegiance they command from there customers enables them to effectively block existing channels and force an outsiders to rely on less effective and more costly distribution.

Retail patterns
Size patterns The retail structure and the problem it engenders cause real difficulties for the international marketing firm selling consumer goods. Large dominant retailers can sold direct , but there is no adequate way to directly reach small retailers go in the aggregate handle a grate volume of sales.  Direct marketing: Selling directly to the consumer through the main , by telephone , or door-to-door is often the approach of choice in markets with insufficient or underdeveloped distribution system

Alternative middlemen choice

A marketers options range from assuming the entire distribution activity (by establishing its own subsidiaries and marketing directly to the end users) to depending on intermediaries for distribution of the product. The channel process includes all activities , beginning with the manufacturer and ending with the final consumer. This means the seller must exert influence over two sets of channel

1. Home country middlemen's 2. Foreign country middlemen's In home country seller must have an organization (generally international marketing division of a company) to deal with channel members needed to move goods between countries. In the foreign market ,the seller must supervise the channels that supply the product to the end user.

Home Country Middlemen

Provide marketing services from a domestic base. By selecting domestic middlemen as intermediaries in the distribution process companies regulate foreign market distribution to others. Domestic middlemen are most likely to be used when the marketer is uncertain or desires to minimize financial and management investment.

Different types of domestic middlemen's

Manufacturers Retail Stores Global Retailers Export Management Companies (EMC) Trading Companies Complimentary Markets Manufacturers Export Agent (MEA) Home Country Brokers Buying Officers Webb-pomerene Export Association Foreign Sales Corporation Export Merchants Export Jobbers

Foreign Country Middlemens

International marketers seeking greater control over the distribution process may elect to deal directly with middlemen in the foreign market. Using foreign country middlemen moves the manufacturer closer to the markets.

Some of the foreign country middlemen

Manufactures Representatives Distributors Foreign country Brokers Managing Agents Dealers Import Jobbers, wholesalers and retailers

Factors Affecting Channel Choice

The following points should be addressed prior to the selection process  Identify specific target markets within &across countries  Specific marketing goals in terms of volume market share &profit margin requirements  Specify financial & personal commitments to the development of international distribution.  Identify control, length of channels terms of sales and channel ownership Once these points are established, selecting among alternative middlemen choice to forge the best channel can begin.

Key elements in Distribution Decisions: Cost Capital requirement Control Character Coverage Continuity

Surface v/s Air Transport

The choice regarding modes of transport in relation to export marketing revolves around the appropriates of transporting goods by ship or by air or by surface.

The important elements of the cost behave in the following fashion: Cost element Cost element for for Air Surface transport transport Freight Depot Cost Fixed inventory Packaging Insurance High Low Low Low Low Low High High High High

It is found that transport by Airway turn out be a cheaper compare to Surface Transport

The different criteria for making decisions regarding the mode of transport is  Nature of product  Time to delivery  Volume of requirement

Advantages of Air Transport

Low inventory carrying cost Decreased capital cost of goods in transit Less packaging lowers cost & reduces chargeable weight Related surface transport costs are reduced Breakage is Negligible The loss due to rough handling Insurance premium is reduced Costs related to administration, ordinary etc are minimized

The need for warehousing in a corporate unit may arise for the following reasons: Season ability Variation in demand Speculation Product conditioning

Necessary of warehousing for Export Marketing

Break-Bulk Re-Assembly

International Retailing

Chapter Objectives
Provide an overview and description of the general merchandise retailing category and offer examples and illustrations Provide an overview and description of the food retailing category and offer examples and illustrations Provide an overview and description of the non-store retailing category and offer examples and illustrations Address issues related to legislation, taxation, and retailing practices around the world

International Expansion of Retailers

Wal-Mart Metro AG Sears Roebuck Rewe Gruppe Edeka Gruppe Aldi Gruppe Dayton Hudson Tenzelmann Gruppe

International Retailing Defined

All the activities involved in selling products and services to final international consumers for their personal consumption.

Retail Formats: Variations in Different Markets Specialty Stores

Retailers offering a narrow product line and wide assortment

- Virgin Records (music products) - Mango (youth fashion)

Specialized Markets

Markets that house stores specializing in a particular product category

- Jade market (Hong Kong) - Spice market (Istanbul)

Department Stores

Offer a broad variety of goods and wide assortments U.S. and Canada: recent substantial losses Europe: expansion of national chains throughout the European Union Asia: on the decline

General Merchandise Discount Stores


Sell high volumes of merchandise Offer limited service Charge lower prices Types: - All-purpose: offer wide variety of merchandise and limited depth - Category specialists (category killers): carry a narrow variety of merchandise and offer a wide assortment

Off-Price Retailers

Sell brand name and designer merchandise at below regular retail prices Overruns, irregular products, previous seasons products Examples:
- Factory outlet stores - Close-out retailers (broad, inconsistent assortments) - Single-price retailers (all products for the same price)

Catalog Showrooms

Offer high-turnover, brand name goods at discount prices Internationally, however, goods sold through this venue tend not to be brand name, but, rather, goods that have not sold the last season through the catalog

International Food Retailers

Conventional Supermarkets

Self-service retailers with annual sales higher than $2 million and less than 20,000 square feet of store space


Combination stores (food and drug) Hypermarkets combine supermarket, discount, and warehouse retailing

Warehouse Clubs (Wholesale Clubs)


Require members to pay an annual fee Operate in low-overhead, warehouse-type facilities Offer limited lines of brand-name and dealer-brand merchandise at a substantial discount

Convenience Store

Small residential retailers or retail chains consisting of small neighborhood stores Open long hours Carry limited lines of higher-turnover necessities One-stop shopping

Non-store Retailing
Internet Retailing

Also known as interactive home shopping or electronic retailing Includes both new dot-com companies and traditional retailers attempting additional market penetration Increase company diversification

Vending Machines

Increasingly popular Extent of use varies from country to country

Television Home Shopping

A venue for selling merchandise to consumers in their homes using cable channels Examples: infomercials and direct response advertising Popular in North America and Europe, and becoming increasingly popular in Asian markets

Catalog Retailing and Direct Mail Retailing


Venues for selling merchandise to consumers using catalogs and other types of direct mail It allows for the international expansion of retailers Must be adapted to local market needs and practices Obstacles in developing countries:
deficient telephone service unreliable mail service low income unavailability of credit cards

Direct Selling

A retailing venue whereby a salesperson, typically an independent distributor, contacts a consumer, demonstrates product use and benefits, takes orders and delivers the merchandise Direct selling firms are most active in the growth markets (in emerging markets, in particular)

Network Marketing
Variation on direct selling Involves signing up sales representatives to go into business for themselves with minimal start-up capital and sell more "distributorships" and merchandise Network marketing is growing rapidly, especially in emerging markets

Issues in International Retailing

Legislation and Regulation Taxation and Cross Border Shopping Variations in Retailing Practice and Customs