Chapter 11
INTERNATIONAL MARKETING
CHANNEL MANAGEMENT
MINDMAP GROUP 1
Marketing channel International distribution is
managements the process by which products
integrates two key and services flow between
areas in marketing producers, companies that act
strategy: distribution as intermediaries, and
and logistics. consumers, and includes the
transfer of ownership.
International logistics refers to the
strategic management of the flow of
products and services among marketing
INTERNATIONAL
channel members. including both
MARKETING upstream and downstream activities.
CHANNEL - Upstream activities focus on
bringing a product or supplies into a
DECISIONS
company. while downstream activities
DISTRIBUTION INTENSITY concentrate on sending a product or
SELECTION OF DISTRIBUTION
supplies to another channel member for
CHANNELS resale.
MANAGING DISTRIBUTION CHANNELS
PHYSICAL DISTRIBUTION
SELECTION OF DISTRIBUTION CHANNELS
CONSUMER CHANNELS
Direct Channel Producer Consumer
Indirect Channel Producer Retailer Consumer
Producer Wholesaler Retailer Consumer
CONSUMER CHANNELS
Direct Channel Producer End user
Indirect Channel Producer Industrial agent End user
Producer Industrial merchant. End user
DIRECT MARKETING
A primary option for many international marketers, especially
MANAGING DISTRIBUTION CHANNELS
those just entering a new host country, is to engage in direct
marketing.
A direct marketing channel relies on direct selling of a product
or service to consumers or end users without the use of
wholesalers, retailers, industrial agents, or industrial
merchants.
Consumers around the world are familiar with direct
marketing.
-In Germany, more than 80% of companies provide some form of direct
marketing.
- Telemarketing, email, and direct marketing programs are popular in Brazil.
INDIRECT MARKETING
When indirect channels are used, the goods and services move
through one or more intermediaries or organizations that
move products for producers to consumers and end users.
Agent
MANAGING DISTRIBUTION CHANNELS middlemen do not take title or ownership of the
products. Agents, or brokers, bring buyers and sellers together
in a particular country.
- These channel members generally work on a commission basis.
- Agent wholesalers may or may not take physical possession of the products.
Merchant middlemen assume title and ownership of the
products..
- An import jobber purchases products from producers in one country and sells
them to established distribution system members in another country.
- Merchant retailers purchase goods for resale and then market those
products to consumers.
INTERNATIONAL
TRADING CHANNELS
Trading companies are common in Other marketing teams may select
the Pacific Rim. These the traditional international
organizations provide intermediary marketing channel, which consists
activities that include marketing of producers, wholesalers, and
services, financial assistance, and retailers.
MANAGING DISTRIBUTION CHANNELS
information flow.
-The Japanese keiretsu trading companies - In developed countries, distribution systems
act as a family of firms with close tend to be more institutionalized and focus
relationships and, often, shared ownership. on the traditional roles of producer,
- The chaebols of South Korea are similar in wholesaler, and retailer..
many ways and play an important part in
South Korean politics and business culture.
BUSINESS-TO-BUSINESS
CHANNELS
Many countries house large International marketing
industrial agent and merchant channels may include a series of
companies. different wholesalers and
- The manufacturer's marketing team retailers..
selects those that reach the company's
Facilitating agencies assist in
target market most effectively.
- Local conditions and considerations, various aspects of negotiation,
including legal restrictions, the financing, documentation,
availability of delivery systems, and the physical distribution, and
potential to create quality partnerships,
MANAGING DISTRIBUTION CHANNELS warehousing of products
affect these decisions.
internationally.
TYPES OF
FACILITATING AGENTS
provide shipping, documentation, customs clearance and brokerage,
FREIGHT FORWARDERS
consolidation, storage, and insurance.
TRANSPORTATION specialize in moving products through various modes of transportation.
COMPANIES
CUSTOMS BROKEN represent importers/exporters in dealings with customs, including obtaining and
submitting all documents for clearing merchandise through customs, arranging
inland transport, and paying all charges related to these functions.
CHANNEL LENGTH
Marketing channel length refers to the number of intermediaries that a
product goes through before reaching the consumer.
- In a traditional
MANAGING channel,
DISTRIBUTION there are two intermediaries: the wholesaler and the retailer.
CHANNELS
- Direct marketing represents the shortest channel length, as the product moves directly from
the manufacturer to the retail customer.
SELECTION FACTORS
TYPE OF PRODUCT
PRICE
COMPETITION
BRAND IMAGE DIRED PRODUCT
POSITION
TARGET MARKET
INTERNATIONAL
CONSIDERATIONS
Available Intermediaries
Image of Distributors
Domestic vs. Foreign Issue
Legal Restrictions
Taxes on Transportation and Delivery
EXISTING CHANNELS
MANAGING DISTRIBUTION CHANNELS
Managing international distribution networks means that companies
utilize unique distribution structures in each country. A channel
structure may work well in one country but not in another.
- Understanding the distribution systems present in target countries constitutes a crucial
element in developing a successful international distribution system.
- In some situations, the company will establish an entirely new distribution system.
International marketing professionals work to ensure that the
international distribution channel meets the needs of all parties
involved.
-The system should effectively serve producers, wholesalers, retailers, and consumers.
-Channel members often use market research to more clearly understand distribution
patterns in target markets.
FUTURE CHANNELS
Discussions about infrastructure Deliveries of products and even
in international marketing often the availability of those
concentrate on the availability products are often influenced
of road, rail, and air transport by the presence or absence of
MANAGING DISTRIBUTION CHANNELS
systems; water, electricity, and highways and railroad cars
natural gas; and other physical along with other modes of
features. transportation.
GRAY MARKETS
A gray market is the practice of distributing products through
distribution channels that were not authorized by the marketer of
the product.
- In international marketing, the process is often referred to as parallel importing, or
the use of gray market tactics across international borders.
With parallel importing, international distributors begin to sell a
product in either unauthorized countries or through unauthorized
retailers.
- Wholesalers buy a product in one country at a low price and resell it in other
markets, or to unauthorized retailers, for profit.
- The producer may end up competing domestically against its own brands that were
imported into the country by overseas distributors.
MANAGING DISTRIBUTION CHANNELS
In general, gray marketing is legal, but it does violate channel
agreements.
POWER BASES IN INTERNATIONAL
MARKETING CHANNELS
LEGITIMATE
REFERENT
MANAGING DISTRIBUTION CHANNELS
EXPERT
REWARD
COERCIVE
STAGES IN THE NEGOTIATION PROCESS
PREPARATION
RELATIONSHIP BUILDING
MANAGING DISTRIBUTION
INFORMATION GATHERINGCHANNELS
INFORMATION USING
BIDDING
CLOSING THE DEAL
IMPLEMENTING THE AGREEMENT
CULTURAL INFLUENCES ON NEGOTIATIONS
Cultural variables influence international negotiations in many ways:
- (1) interests, behaviors, and desired outcomes;
- (2) relationships, communication, and perceptions;
- (3) negotiation context;
- (4) Hofstede's dimensions;
- (5) thought processes; and
- (6) the overall negotiation culture.
THE OVERALL NEGOTIATION CULTURE
INFORMATION ORIENTED RELATIONSHIP ORIENTED
Focus on Competition Focus on Increasing Trust
Low Context High Context
Less Respect for Authority Authority and Position Play Key Roles
Individualism Collectivism
Impatient Less Focused on Time
INTERNATIONAL MARKETING CHANNEL
STRUCTURE
COST
COORDINATION
MANAGING DISTRIBUTION CHANNELS
COVERAGE
COOPERATION
CONTROL
COST
Some costs are incurred when establishing the channel and choosing members.
Some costs are associated with maintaining the system, which typically center on
encouraging channel members to remain members of the system.
• International distribution expenses consist of more than just costs associated with moving
products from country to country.
- Costs associated with storing, packing, preparing, and documenting product sales are also
included in distribution costing.
The task of transporting goods between countries presents additional difficulties.
- International distribution systems are often more expensive than those found in
purely domestic settings due to the costly nature of moving products between
countries or continents.
- It has been estimated that as much as 30% of the price of a product can be directly
attributed to distribution costs for products shipped between continents.
COORDINATION
Coordinating the marketing efforts that must take place at each level of the system
constitutes an important part of managing the international marketing.
Decisions are made as to what promotional and logistical activities each member will
perform. Marketing channel coordination requires an efficient international distribution
process.
COVERAGE
Marketers examine questions pertaining to the extent to which channel members cover
certain territories.
Channel member roles differ according to the country being served, and as a result,
distribution strategies will likely vary from country to country.
When addressing coverage, international marketers consider intensive, selective, and
exclusive distribution strategies.
When intensive distribution is selected, channel members will be expected to cover a
wider and more intense territory than would be the case for an exclusive distribution
strategy.
COOPERATION
Although it is difficult to assess, channel leaders attempt to assess the cooperation of
potential channel members prior to the formation of a formalized marketing channel.
The reputation of potential members, along with evidence of previous marketing success
in targeted regions or countries, becomes critical.
The extent to which marketing channel members simply trust one another becomes the
primary determinant of cooperation between parties in a marketing channel.
CONTROL
International marketers lose some control over the physical movement of goods when
goods are shipped domestically. - Monitoring the movement of goods and ensuring their
safe delivery brings about extra expenses.
MANAGING DISTRIBUTION CHANNELS
Marketing channel members are often apt to protect their own interests rather than the
well-being of the overall marketing channel.
Opportunism reflects the tendency for channel members to pursue self-interests rather
than those of other members of the marketing channel.
Monitoring and controlling the activities of channel members allows the producer to
ensure that marketing activities are carried out as planned.
Channel leaders can consolidate international distribution systems in order to maintain
better control and cooperation among channel members.