Module - V

International Marketing Channels:

Global perspective, Channels of distribution structures, Distribution
patterns, Alternative Middleman choices, Factors affecting choice
of channels, Costs, Locating, Selecting and motivating channel
members, The Internet.
Integrated Marketing Communications and international
Advertising:
Sales promotion in international markets, International Public
Relations, Advertising strategy and goals, Global advertising and
the communication process. Media planning and Analysis,
Campaign execution and advertising agencies, International
control and advertising: Broader issues.
 Channel-of-Distribution Structures
The Distribution Process
• Physical handling and distribution of goods
• Passage of ownership or title
• Buying and selling negotiations; between producer and
middlemen, middlemen and customers
Distribution Structure
• Marketer must select channel of distribution
• Activities of middlemen reflect existing competition,
characteristics, tradition, and economic development
 Channel-of-Distribution Structures
Import-Oriented Distribution Structure
• Importer controls fixed supply of goods
• Limited supply sold at high price to small group of customers
• Demand for products exceeds supply
• Market penetration and mass distribution not necessary

• Importer/wholesaler performs most marketing functions

• Not a chain of intermediaries like in mass-marketing system
• Leads to underdeveloped, nonexistent marketing infrastructure
 Marketing and Distribution in China

© John Graham
They’re in China, but they aren’t Peking ducks. The birds are for sale in
Guangzhou’s Qingping Free Market, the first farmers’ market to be opened in
China after the Cultural Revolution in 1979. This market was the place where
free enterprise found its rebirth. Every kind of food is for sale here—from
ducks to dogs, from scorpions to dried lizards on sticks.
 Channel-of-Distribution Structures
Japanese Distribution Structure
• Distinguishing features
1. High density of middlemen
2. Channel control by manufacturers
3. Business philosophy shaped by unique culture
4. Laws that protect the foundation of the system—the small
retailer
 Channel-of-Distribution Structures
Japanese Distribution Structure continued
• Daitenho—the Large-Scale Retail Store Law
• Large stores must seek permission to operate or expand
• Protects small retailers from competition
• Lack of competition leads to highest cost of goods in world

• Japanese system changing

• U.S. government’s Structural Impediments Initiative, deregulation,
Walmart causing some changes
• Ultimately, local merchants must demand quality products and
competitive and fair prices
 Channel-of-Distribution Structures
Trends: From Traditional to Modern Channel Structures
• Countries with traditional structures changing
• Global economic and political changes altering structures
• New forms, alliances, and processes to increase efficiency
• The Internet a large component in model channel structures

• Shift in structure leads to more innovation

• Importers, retailers more involved in new product development
• Invention of new middleman systems
• Company experimentation to maintain competitive edge
 Modernization of System in Russia
© John Graham

© John Graham
Now that Russians can own their homes, they’re spending fast in home
improvement stores like this one in St. Petersburg. In English it would be
called “Super Home.”
 Distribution Patterns
“Traditional” system will not change overnight
• Nearly all international firms forced by structure of market
to use some middlemen in distribution arrangement
Variety of distribution patterns
• Foreign channels different from domestic channels
• Differences in retail patterns
 Distribution Patterns
Retail Patterns
• Size patterns
• Retailer to consumer ratio varies dramatically by market
• High concentration of retailers, more competition for marketer

• Direct selling
• Often used in markets with underdeveloped distribution systems

• Resistance to change
• Innovation seen as threat to domestic business
• Consumer demand for high-quality, low-cost products prevails
International Competition: Resistance and Acceptance

© John Graham
© John Graham

PEMEX (Petróleos Mexicanos), the Mexican national oil company, will not let
foreign firms distribute there. However, in Malaysia, a Mobil station sits right
across the boulevard from a government-owned PETRONAS (Petroliam
Nasional) station.
 Alternative Middleman Choices
Channel Selection
• Range of options for marketers
• Assume entire redistribution activity
• Depend on intermediaries for distribution

• Should be given considerable thought

• Difficult to change once initiated
• Impacts future growth of the market share
 Alternative Middleman Choices
Channel Process
• Includes all activities from manufacturer to consumer
• Seller must exert influence over two sets of channels
1. Channels in the home country
2. Channel in the foreign-market country

• Ideally, company will control or be involved in process

through various channel members to final consumer
• Selection of middlemen a high priority
Exhibit 15.3 International Channel-of-Distribution
Alternatives

Jump to long description.

 Alternative Middleman Choices
External Middlemen
• Agent middlemen
• Do not take title to the merchandise
• Manufacturer assumes all trading risk but can establish policy
guidelines and prices

• Merchant middlemen
• Take title to merchandise: assume all trading risks
• Primary concern is profit; don’t always have manufacturer’s best
interests in mind
 Alternative Middleman Choices
Home-Country Middlemen
• Provide marketing services from a domestic base
• Foreign-market distribution relegated to others
• Good for companies with small international sales volume, little
international experience, or who want to sell abroad with minimal
financial and management commitment
• Trade-off is limited control over entire distribution process

• Many types of domestic middlemen

 Alternative Middleman Choices
Home-Country Middlemen continued
• Manufacturers’ retail stores
• Global retailers
• Export management companies (EMCs)
• Low cost, independent marketing department
• Direct responsibility to firm; close working relationship
 Global Retailing

© John Graham
Target, while a strong competitor for Walmart in the United States, has had
trouble keeping up abroad. Its biggest international adventure into Canada,
circa 2015, has not performed well. If you are driving around Australia, you
might see the brand and logo on more than 300 stores down under, such as
the one in Mareeba, Victoria. The American company had granted rights to
the trademark, but it is otherwise unrelated to the Australian stores.
 Alternative Middleman Choices
Home-Country Middlemen continued
• Trading companies
• Accumulate, transport, and distribute goods from many countries
• Important intermediaries through history; broad distribution
channels make them best means for intensive coverage of market

• Export trading companies (ETCs)

• ETC Act allows producers of similar products to form ETCs
• Joint export ventures more efficient for producers and suppliers
 Alternative Middleman Choices
Home-Country Middlemen continued
• Complementary marketers
• Take on noncompetitive but complementary products, distributes
them for another firm hoping to broaden product line
• Commonly called ‘piggybacking’
• Boosts profit for both carrier and piggybacker

• Manufacturer’s export agent (MEA)

• Agent middleman or firm providing selling services
• Short-term relationship with producer, operates on straight
commission basis
 Alternative Middleman Choices
Home-Country Middlemen continued
• Webb-Pomerene export associations (WPEAs)
• Major form of group exporting
• Unique benefits
1. Reduction of export costs
2. Demand expansion through promotion
3. Trade barrier reduction
4. Improvement of trade terms through bilateral bargaining
 Alternative Middleman Choices
Home-Country Middlemen continued
• Foreign sales corporation (FSC)
• Set up in foreign country or U.S. possession
• Manufacturers and export groups can form FSCs
• Can act as own principal, buying and selling for its own account, or
a commissioned agent
• Can obtain corporate tax exemption or portion of earnings from
sale or lease of export property
 Alternative Middleman Choices
Foreign-Country Middlemen
• Variety of agent and merchant middlemen in most
countries similar to that in U.S.
• Moves manufacturer closer to the foreign market
• Involvement with problems of language, distribution,
communications, and financing
• Shorter distribution channels

• Manufacturers’ representatives and foreign producers

 Alternative Middleman Choices
Government-Affiliated Middlemen
• Marketers must deal with governments in every country
• Products, services, commodities for government’s own use always
procured through government purchasing offices at federal,
regional, and local levels

• Seen to be less efficient than other middlemen

• Walmart planned for and delivered better aid than FEMA during
the 2005 Hurricane Katrina disaster
 Factors Affecting Choice of Channels
Points to address prior to selection process
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
 Factors Affecting Choice of Channels
Six Cs of Channel Strategy
1. Cost
2. Capital requirements
3. Control
4. Coverage
5. Character
6. Continuity
 Factors Affecting Choice of Channels
Cost
• Two kinds of channel cost
1. Capital or investment cost of developing the channel
2. Continuing cost of maintaining the channel

• Cost of middlemen includes many things

• Transporting and storing goods, breaking bulk, providing credit,
local advertising, sales representation, negotiations

• Inefficient middlemen can be eliminated to reduce cost

Cost of Tuna
Recall that the Japanese are the
world-champion fish consumers at
more than 32 kg per person per year.
World prices for fish are set at the
Tsukiji fish market in Tokyo. A big
fresh bluefin tuna caught in the
Atlantic, iced and shipped by air to
Tokyo, can bring as much as $1.76
million at auction (the previous
record price was only $396,000) and
then be shipped by air to Boston for
hungry sushi consumers. Perhaps the
market is “too efficient,” as the
world now faces a shortage of such
tuna, and at least for some,
© John Graham

Americans are paying too much for

fish these days.
 Factors Affecting Choice of Channels
Capital Requirements
• Financial ramifications of distribution policies
• Maximum investment needed without middlemen
• Middlemen may lessen capital investment, but initial inventories
on consignment, loans, floor plans, or other arrangements usually
need to be provided

Control
• Longer channels reduce manufacturer’s control
• Price, volume, promotion, and types of outlets
 Factors Affecting Choice of Channels
Coverage
• Full-market coverage major goal
• May require changes in distribution per country through time

Character
• Selected channel must coincide with character of company
and markets in which it is doing business
• Perishability or bulk of product, complexity of sales, sales service
required, value of product
 Factors Affecting Choice of Channels
Continuity
• Channels often pose longevity problems
• Distribution may be lost in area where an individual retires or
moves on from business
• Most middlemen have little loyalty to vendors
• Distributors and dealers probably most loyal, but brand loyalty still
must be built downstream through the channel
 Channel Management
Locating Middlemen
• Begin with study of market
• Determine criteria for evaluating middlemen
• Main subject areas for criteria
1. Productivity or volume
2. Financial strength
3. Managerial stability
4. Capability
 Channel Management
Selecting Middlemen
• Screening process should include:
• Exploratory letter or e-mail sent to prospective middleman in
native language with product info and distributor requirements
• Follow-up with best respondents for more specific info
• Check of credit and references from other clients of prospect
• Personal check of the most promising firms

• Agreement
• Initial contract for selected middlemen to sign is recommended
• Spells out responsibilities; annual sales minimum established
 Channel Management
Motivating Middlemen
• Clear correlation between sales volume and motivation
• Categories of motivational techniques
1. Financial rewards
2. Psychological rewards
3. Communications
4. Company support
5. Corporate rapport
 Channel Management
Controlling Middlemen
• Control over system and middlemen important
• Especially with long international distribution channels

• Standards of performance should include:

• Sales volume objective, inventory turnover ratio, number of
accounts per area, growth objective, price stability object, quality
of publicity

• Useful tactics for management

• Specifically contracted behavior
• Good social relations
 Channel Management
Terminating Middlemen
• Situations in which termination is necessary:
• Middlemen not performing up to standards
• Restructure of distribution needed to reflect changing market

• Competent legal advice needed when entering contracts

• Middlemen often have legal protections in other countries

• Should be avoided by thoroughly screening prospects

• Poor choices can adversely affect future business in countries
 The Internet
E-commerce
• Important distribution method for multinationals
• Marketing and sales of B2B and B2C products and services
• Services ideally suited for international sales via the Internet

• Online B2B enhances performance

• Reduces procurement costs; easier to find cheapest supplier
• Allows for better supply-chain management
• Makes tighter inventory control possible
 The Internet
Main factors to consider
• Culture
• Adaptation (especially of language)
• Local contact information
• Payment
• Delivery
• Promotion
 Logistics
Logistics Management
• Total systems approach to managing distribution process
• Moving good from point of origin to point of use or consumption

• Physical distribution system

• More than just physical movement of goods
• Location of plants and warehousing (storage), transportation mode,
inventory quantities, packaging
• All aspects interdependent in terms of cost and efficiency
• Goal to find optimum system cost still consistent with customer
service objectives of firm
 Trade Infrastructure

© John Graham
Trade infrastructure is crucial for international competitiveness and
cooperation. There is a lot going on in this picture of the Port of Oakland,
California. You can see the three apparently full, foreign-owned container
ships sitting low in the water—the many empty containers onboard will be
heading east to Asian ports and then will return full. The Matson ship moving
down the Oakland Estuary is heading to Hawaii with containers and private
automobiles onboard. Matson, as a U.S. domestic line founded in 1882, has
only one competitor on the Hawaii/mainland route, so it survives with
relatively light cargoes—again notice it is high in the water.
International Channel-of-Distribution Alternatives
The most direct channel of distribution is the domestic producer or marketer
selling directly to the foreign consumer.
The domestic producer or marketer can also sell directly to or through the
following domestic and foreign intermediaries:
Domestic: wholesale middlemen, export management company or
company salesforce, exporter
Foreign: importer, agent or merchant wholesaler, retailer.
Each intermediary can pass the product to the next in the distribution chain,
while some can bypass intermediaries and sell directly to the consumer.

Return to original slide.

 Integrated Marketing Communications (IMC)
Key Considerations
• Advertising, sales promotions, trade shows, personal
selling, direct selling, public relations
• Availability of channels varies in different markets
• Can determine market entry decisions
• Informs product and service development

• Goal is to achieve synergies

Sales Promotions in International Markets 1 of 2
Directed toward consumer or retailer
• Stimulate consumer purchases
• Improve retailer or middlemen effectiveness, cooperation
Local adaptation crucial
• Media limitations in some countries
• May require higher budget allocation toward sales promotions

• Major constraints can be imposed by local laws

• Promotions may require permit or be outlawed altogether
Sales Promotions in International Markets 2 of 2
Specific Objectives
• Consumer product trial or immediate purchase
• Consumer introduction to the store or brand
• Gaining retail point-of-purchase displays
• Encouraging stores to stock product
• Supporting and augmenting advertising and personal sales
 International Pubic Relations
The Role of Public Relations (PR)
• Create good relationships with press and media
• Encourage press to cover positive stories about company
• Manage unfavorable rumors, stories, and events
• Obtain corporate sponsorships

• Effective PR benefits communication with public

• Customers, the general public, and government regulators
PR: Corporate Sponsorships

Kelly Slater, 10-time world surfing

champion, ended his long-term
relationship with corporate sponsor
Quiksilver in 2014. As a promised
bonus for winning his 10th
championship, he took a 3 percent
stake in the company rather than the
rumored $10 million in cash. In 2015
Kelly’s ride with Quiksilver wiped
out, so to speak. The firm declared
bankruptcy and its stock plummeted
by 80 percent. We don’t know if Kelly
© Cameron Spencer/Getty Images

bailed out in time.

 International Advertising 1 of 3
Global mass media advertising
• Growth especially in use of digital media
• A tool for social change
• Influences consumers’ decision-making about finances
Advertising expenditures generally cyclical
• More stable in relationship-oriented countries that value
long-term performance
 International Advertising
Culture and Advertising
• Purpose of an ad
• Interpret or translate qualities of products and services in terms of
consumers needs, wants, desires, and aspirations

• Consumer response to ads impacted by:

• Culture, style, feelings, value systems, attitudes, beliefs,
perceptions

• International ad must coincide with cultural norms

• Emotional appeals, symbols, persuasive approaches
 International Advertising
Steps for International Advertising
1. Perform marketing research
2. Specify the goals of communication
3. Develop the most effective message(s) for the market
segments selected
4. Select effective media
5. Compose and secure budget based on what is required to
meet goals
6. Execute the campaign
7. Evaluate the campaign relative to the goals specified
 Vehicles as Advertising Mediums
© John Graham

© John Graham
These vehicular ads make an effective advertising medium even
in a dense London fog. Because most London cabs are black, the
Snickers ad catches the eye immediately.
 Advertising Strategy and Goals
Strategies for Advertising
• Increasing need for more sophisticated strategies
• Intense competition for world markets and sophistication of
foreign consumers

• Standardization versus customization

• Standardized products can often be marketed globally, but require
a different advertising appeal in different markets

• Market segmentation strategies

• Many ignore national boundaries
• Some propose creating segments defined by “consumer cultures”
 Advertising Strategy and Goals
Product Attribute and Benefit Segmentation
• Market offering a bundle of satisfactions buyer receives
• Primary function of product or service
• Other benefits imputed by values and customs of culture

• Cultures may seek same primary function

• Cultures often perceive other features differently
• Psychological attributes, satisfactions
 Advertising Strategy and Goals
Regional Segmentation
• Standardization becoming more possible in Europe
• Emergence of pan-European communications media
• Legal restrictions slowly being eliminated

• Companies with pan-European promotions strive for

harmony in brand names and advertising
• Avoids confusion
 The Message: Creative Challenges
Global Advertising and the Communications Process
• Message may fail for variety of reasons
• Does not get through due to media inadequacy
• Misunderstood by audience because of different cultural
interpretations
• Understood, but ineffective because marketer did not correctly
access needs, wants, or thinking process of target market
 The Message: Creative Challenges
Components of Communication Process
1. Information source
2. Encoding
3. Message channel
4. Decoding
5. Receiver
6. Feedback
7. Noise
The International Communications Process

Jump to long description.

 The Message: Creative Challenges
Promotional Misfires
• Cultural context impacts understanding of message
• Without careful consideration, misunderstanding probable
• May be a lack of knowledge about the target market

• “Psychological overlap” between sender and receiver

• Important for effective communication
 The Message: Creative Challenges
Promotional Misfires continued
• Encoding errors
• Symbols used may send unintended message
• Marketer should be aware of own SRC
• Media channel used can cause issues
• Lack of literacy and access to chosen media

• Decoding errors
• Generally caused by a poorly encoded message
• Incorrect knowledge of use patterns, message meaningless to
receiver, poor media selection, inaccurate decoding so that message
is garbled
© John Graham
The Power of Color in Ads

© John Graham
Notice the Coke advantage at work—the red contrasts with the
outdoor environment, while the Cristal aqua blends more with
the blue sky and trees.
 The Message: Creative Challenges
Promotional Misfires continued
• Feedback
• Proper feedback system (ad testing) allows company to correct
errors before substantial damage occurs

• Noise
• Compromises all external influences: competitive advertising, sales
personnel, confusion on receiving end
• Frequently beyond the control of sender and receiver
 The Message: Creative Challenges
Legal Constraints
• Comparative advertising
• Advertisement of specific products
• Pharmaceutical, toy, tobacco, and liquor industries

• Television advertisements
• EU deciding if same restrictions should apply to Internet ads

• Special advertising taxes

• Restricts creative freedom in media selection
 The Message: Creative Challenges
Linguistic Limitations
• Different languages of different countries
• Different languages or dialects within same country
• Includes subtler problems of linguistic nuance, argument style,
vernacular, and even accent

• Translation efforts often insufficient

• Use of abstraction, terse writing, and word economy in
advertisement does not translate easily

• Literacy levels vary by country

• Calls for greater creativity and use of verbal media
 Messages Around the World

©Denis Doyle/AP Images

© John
Graham

© Courtesy of GE
The “true ting” in Jamaica is a grapefruit-flavored soft drink. The slogan is, of
course, a take-off on “the real thing” advertising of Coca-Cola some decades
ago. “Ting” is obviously a Creole version of “thing” for Jamaicans. Perhaps the
best billboards ever are the giant bulls posted on hillsides around rural Spain.
They were originally meant to advertise Osborne Brandy, but they have
evolved into a national symbol. Not even Coca-Cola can make that strong a
claim. Finally, GE joined with the Chinese government in promoting a green
Beijing Olympics. Ironically, many folks around the world see outdoor
advertising itself as a kind of pollution!
 The Message: Creative Challenges
Cultural Diversity
• Language and culture interrelated
• Cultural factors largely determine perception of language in ad
• If perceptual framework differs, so does perception of message

• Perception based on tradition and heritage

• Often renders advertising campaigns ineffective or worse
• Effectiveness of sex appeals, music, and celebrities can vary

• Subcultures within countries also require attention

 The Message: Creative Challenges
Media Limitations
• Challenges marketer’s creativity
• Diminishes role of advertising in promotional program
• Forces emphasis on other elements of promotional mix

Production and Cost Limitations

• Budget and access to materials impact choice of media
• Necessity for low-cost reproduction in small markets
 Media Planning and Analysis
The Communications Revolution
• Influence of electronic communication media
• PCs, the Internet, mobile phones
• Influences everyday life for everyone on the planet
 Media Planning and Analysis
Tactical Considerations
• Availability
• Access to certain types of media vary by country; some banned

• Cost
• Prices of media susceptible to negotiation in most countries

• Coverage
• Some sectors of population difficult to reach; information about
coverage sometimes not available
• Multimedia approach increases coverage

• Lack of market data

• Seems to characterize most international markets
 Media Planning and Analysis
Tactical Considerations continued
• Newspapers
• Competition: lacking in some countries, too much in others
• Long time lag before ad can be run in many countries

• Magazines
• Use of foreign national consumer magazines by international
advertisers notably low
• Few have large enough circulation or provide dependable
circulation figures
 Media Planning and Analysis
Tactical Considerations continued
• Radio and television
• Major communications media in almost all nations
• Availability varies between countries; impacted by ad laws
• Ad skipping and streaming devices reduce coverage

• Satellite TV
• Expansion of coverage emphasizes global standardized messages
• Most technology involves government regulation and seldom
works long
 Media Planning and Analysis
Tactical Considerations continued
• Direct mail
• Viable medium in increasing number of countries
• Especially important when other media are not available
• Subject to odd and novel quirks per country

• The Internet
• Global growth in company spending on online advertising
• Reaches large portion of B2B market; limited reach in B2C market
• Set to become increasingly regulated by countries
 Media Planning and Analysis 6 of 6
Tactical Considerations continued
• Social media
• Increases speed of word-of-mouth advertising
• Consumer-generated content impacts brands
• Consumers from different countries interact online

• Mobile phone applications

• Increasing number of apps available to consumers
• M-commerce: buying products or services by mobile phone
Top Social Media Users: Average Time Spent on Social Networking
Sites, Fourth Quarter 2015 (hours per user)

Jump to long description.

Source: Statista, 2017,

Campaign Execution and Advertising Agencies
Advertising Agencies
• Manage development and execution of ad campaigns
• Local domestic agencies
• Expanding with demand from MNCs
• May provide best cultural interpretation and best feel for market

• Multinational agency with local branches

• Sophistication of a major agency with local representation
• Better able to provide a coordinated worldwide ad campaign
 Alternate Forms of Media
©Yuri Kochetkov European Press Agency/Newscom

©Tatsuyuki Tayama/Fujifotos/The Image Works

Two novel media are shown here: (1) Not only do the Russians sell space for
space tourists on their rockets; they also sell advertising space! (2) The Japanese
beverage company Suntory promotes its products with “Monitor Man” during a
football match at National Stadium. “Monitor Man” puts on an LCD display,
showing ads for Pepsi and other products, and walks around the stadium. The job
requires some muscle, as the equipment weighs about 15 pounds. All this effort
is perhaps purposely reminiscent of the Simpson’s “Duff Man.”
 International Control of Advertising:
Broader Issues
Consumer Criticisms
• Europeans skeptic of advertising; view it as nonreliable
• Non-European countries view ads as entertaining and
good sources of information
• Concerns about certain products and industries, use of sex
appeal and decency in ads, advertisements to children
Regulation
• Self-regulation versus government regulation
Thank you