BA 115IU
International Marketing
Chapter 15:
International Marketing Channels
Lecturer: Dinh Thi Le Trinh
Table of contents
◼ Channel-of-Distribution Structures
◼ Distribution Patterns
◼ Alternative Middleman Choices
◼ Factors Affecting Choice of Channels
◼ Channel Management
Three major decisions of
distribution Channel
◼ Channel design
◼ Channel management
◼ Physical distribution
Channel-of-Distribution
Structures
◼ Import-Oriented Distribution Structure
◼ Japanese Distribution Structure
◼ Trends: From Traditional to Modern Channel
Structures
Channel-of-Distribution
Structures
◼ Distribution process
◼ Physical handling and distribution of goods
◼ Passage of ownership
◼ Buying and selling negotiations between producers and
middlemen
◼ Buying and selling negotiations between middlemen
and customers
◼ Each country market has a distribution structure
How a Distributor Reduces the
Number of Channel Transactions
Consumer and Business
Marketing Channels
Comparison of Conventional Distribution
Channel with Vertical Marketing System
Multichannel Distribution
System
The characteristics of an import-
oriented or traditional distribution
◼ Particularly in developing countries
◼ Strong dependence on imported goods
◼ Controlled supply by importers
◼ Limited supply and high prices
◼ Distribution systems in this structure are more localized
The characteristics of an import-
oriented or traditional distribution
◼ Dominant role of importer-wholesaler
◼ Limited development of independent agencies
The characteristics of an import-
oriented or traditional distribution
=> a significant focus on importers
and a less developed supporting
infrastructure.
Japanese Distribution
Structure
◼ High density of small players
◼ Manufacturer-dominated channels
Japanese Distribution
Structure
◼ Culture-driven business philosophy
◼ Legal framework supporting small retailers
Changes and challenges in
Japanese retail
◼ Shift toward larger stores
◼ Impact of globalization and external forces
Changes and challenges in
Japanese retail
◼ Trend towards discounting and direct purchasing
◼ Rise of E-commerce and mobile shopping
Shift from traditional to
modern distribution channels
◼ Global economic and political influences
◼ Examples of traditional channels
◼ New forms and processes
Changing retail landscapes
and market entry
◼ Retail expansion and adaptation
◼ Innovative retail approaches
◼ Impact on distribution systems
The future landscape of global
retail
◼ Global expansion of retail giants
◼ Pan-European retail strategies
The future landscape of global
retail
◼ Technological advancements and E-commerce
◼ Emerging trends in delivery and E-commerce
Diversity in retail size and
emergence of direct selling
◼ Size patterns in global retail
◼ Vast differences in retail sizes, from large department stores like
Japan’s Mitsukoshi to small stalls in Ibadan, Nigeria.
◼ Direct selling as a strategic response
◼ In markets with underdeveloped distribution systems, companies
like Amway use direct marketing in Latin America and Asia.
Alternative management
choices
Altanatives middlemen choices
◼ Agent Middlemen: Work on commission, no title
to goods. Focus on foreign sales, assume less
risk.
◼ Merchant Middlemen: Take title to goods, assume
trading risks. Provide import/export wholesaling
functions.
◼ Government-Affiliated Middlemen: Deal with
products and services for government use.
Retail structure in three
countries
Middlemen selection
◼ Based on company objectives and market
needs.
◼ Requires understanding the functions and
influence of different types of middlemen.
◼ Recognize the varied roles and titles of
middlemen in international markets.
Role and impact of home-
country middlemen
◼ Functions
◼ Facilitate foreign-market distribution from a domestic base.
◼ Ideal for companies with small international sales or limited foreign
market experience.
◼ Advantages
◼ Minimizes financial and management commitment in foreign
markets.
◼ Disadvantages
◼ Limited control over the distribution process.
◼ Risk of dependency on domestic channels for international
expansion.
Direct retail channels and
global retail expansion
◼ Manufacturers’ Retail Stores
◼ Owned or franchised retail stores directly by manufacturers.
◼ Global Retailers
◼ Major players in international markets, expanding global coverage.
◼ Role in providing entry to international markets for suppliers, like
Pacific Connections’ expansion through Walmart.
Export facilitation through
EMCs and trading companies
◼ Export Management Companies (EMCs)
◼ Aid firms with small international volume or those avoiding direct
involvement.
◼ Functions include promotion, credit arrangements, and market
research.
◼ Trading Companies
◼ Facilitate trade between nations, dealing with a variety of goods.
◼ Key in navigating complex distribution systems, especially in
Japan.
Export management
companies
Niche middlemen and group
exporting initiatives
◼ Complementary Marketers (Piggybacking)
◼ Companies distributing non-competitive but complementary
products.
◼ Manufacturer’s Export Agents (MEAs)
◼ Independent agents providing selling services for manufacturers.
◼ Operate on commission, covering specific markets or products.
◼ Webb-Pomerene Export Associations
◼ Groups formed for export activities, exempt from certain antitrust
laws.
◼ Benefits include reduced export costs and improved trade terms.
The role of foreign sales
corporations in international trade
◼ Foreign Sales Corporations (FSCs)
◼ Entities set up in foreign countries to obtain tax exemptions
on export earnings.
◼ Function as principal or agent, related to manufacturing
parent or independent.
◼ Faced legal challenges, impacting international trade
dynamics.
Foreign-country middlemen
◼ Functions
◼ Direct involvement in the foreign market, dealing with local
distribution challenges.
◼ Examples: Manufacturer’s representatives, foreign distributors.
◼ Advantages
◼ Closer to the target market, better understanding of local
dynamics.
◼ Shorter distribution channels, direct market contact.
◼ Disadvantages
◼ Increased complexity due to language, cultural differences, and
local market regulations.
Government-affiliated
middlemen
◼ Functions
◼ Procurement of products and services for government use.
◼ Example: State purchasing offices like in the Netherlands.
◼ Advantages
◼ Direct access to government contracts and large-scale orders.
◼ Potential for long-term, stable business relationships.
◼ Disadvantages
◼ Navigating bureaucratic processes and compliance with government
regulations.
◼ Example: Differences in efficiency between public sector (e.g., FEMA)
and private sector (e.g., Walmart).
Factors Affecting Choice of
Channels
◼ Cost
◼ Capital Requirements
◼ Control
◼ Coverage
◼ Character
◼ Continuity
Channel Management
◼ Locating Middlemen
◼ Selecting Middlemen
◼ Motivating Middlemen
◼ Controlling Middlemen
◼ Terminating Middlemen