INTERNATIONAL
DISTRIBUTION
CHANNEL
BY V I J YATA
A SS I S TA N T P R O F E SS O R
R A N C H I W O M E N ’ S C O L L E G E , R A N C H I U N I V E R S I T Y
J H A R K H A N D
DEFINITION
• Distribution channels are the link between
producers and customers.
• It is the path traced in the direct and indirect
transfer of title to a product as it moves from a
producer to the ultimate consumer or industrial
distribution channel.
• Distribution channels are the set of firms and
individuals that take tittle or assist in
transferring title to a particular good or service
CATEGORIES OF INTERMEDIARY
Channels of distribution consist of two
categories of intermediary or middlemen,
namely
1. merchants who take title to the goods
2. agents who do not take title to the goods but
assist in the transferring of the title
In international marketing, two categories of
channel are involved, namely, channels between
the nations and channels within the foreign
HOME MARKET
MIDDLEMEN
FOREIGN MARKET
MIDDLEMEN
INTERNATIONAL CHANNEL SYSTEM
While talking about international distribution only
EXPORT is taken into account for which the distribution
channel consists of both domestic system and the
foreign system.
There are two ways of exporting
EXPORT
DIRECT INDIRECT
EXPORTING EXPORTING
INDIRECT EXPORTING
In indirect exports the manufacture utilizes the
services of various type independent market
middlemen. When a manufacturer exports
indirectly. he transfers the responsibility for the
selling job to some other organization.
The indirect method is more popular with firms,
which are beginners in export activities and with
those whose export business is not sizeable
DOMESTIC OVERSEAS
INTERMEDIARIES
• Manufacturer’s Export agents
• Purchasing Agent
• Country-controlled buying agents
• Export management companies (EMC)
• Export merchants
• Export Broker
• Piggybacking.
• Manufacturer’s Export • Purchasing Agent
agents
The purchasing agent
These agents work on represents the foreign buyer
commission focusing more on . Operating as per the needs
sale and handling of goods of the overseas customer ,
including documentation and the purchasing agent acts in
shipping tasks involved in
the interest of buyer seeking
exporting process. But they
the best possible terms for
have limited expertise
which he is paid commission
confined to a particular
by the buyer. They are also
location, so services of
called Commission agent or
different MEA will be needed
buying agent
to cover different parts of the
world.
• EXPORT MERCHANT • EXPORT BROKER
• Export merchant Export broker brings
buys the buyer and seller together
for a fee. He negotiates
manufacturer’s
the terms for the seller ,
product and sells it
does not take possession
abroad on his own. or title to the goods. He
Besides production has no financial
and customization , responsibility but can
all other assist in arrangement of
international credit. . He has extensive
knowledge of the
marketing tasks are
overseas markets and
handled by the
Country-controlled Export management
buying agents companies (EMC)
These are purchasing EMC manage the entire
agents controlled by export activities of a
foreign ’s government manufacturer under a
agency or quasi – contract. EMC’s provide
extensive services to
government firm. These
manufacturers ranging
agents have their offices
from promotion of
located in countries that
products overseas to
are major suppliers
shipping arrangement and
documentation.
• Piggybacking
When a manufacturer/supplier does not find any channel partner
with sufficient interest to pioneer new products piggybacking can
be used. Piggybacking is an arrangement with another company ,
which sells in the same customer- segment , to take on the new
product as if it were the manufacturer.
In this the manufacturer retains control over a number of
marketing decision areas, particularly pricing, promotion and
positioning, while the other partner acts as rented sales force only
Here, the products retains the name of the manufacturer and both
partners normally sign a multi-layer contract to provide continuity.
DIRECT EXPORTING
Direct exporting refers to sale in the foreign market by the
manufacturer /producer himself. Since direct export requires the
manufacturer to handle all the complex trade regulation like
banking, financing, transportation etc by himself,, the exporter
should have sufficient volume for foreign trade and should have
experience and training of these tasks.
Direct exporting gives a higher degree or complete control over the
marketing and operations to the manufacturer as well as a greater
margin in profit by saving on commissions.
Direct exporting channels involve intermediaries based in foreign
market to undertake marketing operations.
FOREIGN
INTERMEDIARIES
• Foreign Sales Representatives
• Importer
• Foreign Stocking and Non-Stocking
Agents
• State Controlled Trading Companies.
• Foreign Sales • Importer
Representative
Importers identify the
These are foreign
local market requirement
manufacturers who handle
related product line on and purchase goods in
commission basis. They have their own names acting
knowledge of the local market independently of the
but since they sell a number manufacturer. They use
of product , push marketing
their own strategies to
may be required to increase
the sale in foreign market.
satisfy the needs of the
market they serve.
• State –owned Trading • Overseas/Foreign Agent
companies Overseas act as an contact
point or as office-type setup in
Few of the Government
foreign market for an exporter
department and/or from where he can operate all
government owned his selling and marketing
companies buy large activity without being
quantities of certain physically present by paying
goods frequently on commission to the agent. The
agent does not trade on their
long-term basis for mass
own but secures orders in the
consumption. name of the exporter and gets
commission on the basis of
business generated.
FACTORS AFFECTING CHOICE OF
CHANNEL
FACTORS INDIRECT DIRECT
The Market Dispersed Concentrated
Small Potential sale Large potential Sales
Consumer Market Industrial Market
The Product Non- Technical Product Technical Products
Consumer Goods Industrial Goods
Marketing Skills of Company lacks marketing Company possess
the Company skills and experience marketing skill and
experience
Degree of Control Company desires Little Company desires high
Control degree of control
Financial Condition of Weak Financial condition Strong Financial Condition
the company
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