Chapter 15 Flashcards
What is the distribution process?
includes the physical handling and distribution of goods.
what is distribution structure?
each country has a a distribution structure through which goods pass from producer to user, includes middlemen, customary functions, services, market characteristics ect.
Import-oriented distribution structure
importer controls a fixed supply of goods, and the market develops around the philosophy of selling a limited supply of goods at high prices to a small number of customers.
In the resulting seller’s market, market penetration and mass distribution are not necessary because demand exceeds supply, and in most cases, the customer seeks the supply from a limited number of middlemen.
Japanese distribution structure
The traditional Japanese structure serves consumers who make small, frequent purchases at small, conveniently located stores
- structure dominated by many small middlemen dealing with many small retailers
- channel control by manufacturers
- business philosophy shaped by a unique culture
- laws that protect the foundation of the system—the small retailer.
Large-scale retail store law
Designed to protect small retailers from large intruders into their markets
The law required that any store larger than 5,382 square feet (500 square meters) must have approval from the government to be “built, expanded, stay open later in the evening, or change the days of the month they must remain closed.”
Retail patterns
Retailing shows even greater diversity in its structure than does wholesaling.
In Italy and Morocco, retailing is composed largely of specialty houses that carry narrow lines, whereas in Finland, most retailers carry a more general line of merchandise
Direct selling
selling directly to the consumer
through mail, by telephone, or door-to-door
often the approach of choice in markets with insufficient or underdeveloped distribution systems
Distribution patterns and resistance to change
Efforts to improve the efficiency of the destruction system, new middlemen and other attempts to change the traditional system is often seen as threatening.
But ultimately, the consumer will prevail
What is an agent middlemen?
work on commission and arrange for sales in the foreign country, but does not take title to the merchandise.
the manufacturer assumes trading risk but maintains the right to establish policy guidelines and prices
What is a merchant middleman?
Merchant middlemen actually take title to manufacturers’ goods and assume the trading risks, so they tend to be less controllable than agent middlemen
Primarily concerned with sales and profit margins, not concerned with the best interest if a manufacturer
Home-country middleman (domestic middleman)
located in the producing firm’s country, provide marketing services from a domestic base.
Most likely to be used when the marketer is uncertain or desires to minimize financial and management investment.
offer many advantages for companies with small international sales volume, those inexperienced with foreign markets
What are manufacturers retail stores?
An important channel of distribution for a large number of manufacturers is the owned, or perhaps franchised, retail store. Disney, Benetton, and many of the classic Italian luxury goods makers take this approach
Global Retailers
IKEA, Costco, Sears Roebuck, and Walmart expand their global coverage, they are becoming major domestic middlemen for international markets
Export management companies (EMC)
Important middleman for firms with relatively small international volume or those unwilling to involve their own personnel in the international function
How does EMC’s work?
Working under the names of the manufacturers, the EMC functions as a lowcost,
independent marketing department with direct responsibility to the parent firm. The working relationship is so close that customers are often unaware they are not dealing directly with the export department of the company
The export management company may take full or partial responsibility for promotion of the goods, credit arrangements, physical handling, market research, and information on financial, patent, and licensing matter
Usually work on commission
What are trading companies?
Trading companies accumulate, transport, and distribute goods from many countries-
Usually located in developed countries, selling manufactured goods to developing countries and buy raw materials and unprocessed goods (dependency theory baby!)
Ex: Gary MacKenzie for UK
What is the export trading company act?
law in US that allows producers of similar products to form export trading companies without violating antitrust provisions
ETC Act created a more favorable environment for the formation of joint export ventures
Complementary marketers (piggybacking)
the businesses involved target a similar customer base but offer different products or services that complement each other
accepts products that are noncompetitive but complementary and that add to the basic distribution strength of the company itself.
The classic example was Gillette distributing batteries
in less-developed countries, years before Gillette bought Duracell
Manufacturer’s export agents (MEA)
The MEA is an individual or agent firm that provides selling services for manufacturers. it does not serve as the producer’s export department, but short-term for one or two markets.
Similar to EMCs, but EMS services as an export department
Webb-Pomerene Export Associations (WEPAs)
Form of exporting group. After the Webb-Pomerene Act of 1918, american businesses could join forces without being subjected to antitrust law
WPEAs cannot participate in cartels or other agreements that would reduce competition in the US
Benefits of WPEAs
- reduce cost of export
- demand expansion
- trade barrier reduction
- improvement of trade and bilateral agreements
What is a foreign sales corporation (FSC)?
A sales corporation set up in a foreign country, that can obtain tax exemptions of a proportion of earnings.
WTO ruled FSCs to be violating international trade rules
Foreign country middlemen
International marketers who wish to control their distribution process may chose to work with foreign country middlemen
their channels become shorter
They have better understanding of culture and language
Government affiliated middlemen
Help deal with governments
Products, services, and commodities for the government’s own use always are procured through government purchasing offices at federal, regional, and local levels
What are the factors that affect choice of channels?
Six C’s:
Cost, capital, control, coverage, character and continuity
Explain costs (6 C’s)
the two kinds of costs of channels are the (1) investment of developing the channel and (2) the cost of maintaining it.
The cost of middlemen include transporting and storing goods, breaking bulk, providing credit, advertising, rales representation and negotiation
Explain capital requirements (6 C’s)
Capital requirement and cash flow is are associated with the particular types of middlemen
Some require more, some less.
Explain control (6 C’s)
Longer channels reduce manufacturer’s control
Coverage (6 C’s)
Full market coverage is major goal, may require changes in distribution per country through time
Character (6 C’s)
Selected channel must coincide with character of company and markets in which is it doing business
Continuity (6 C’s)
Channels often pose longevity problems.
- Distribution may be lost in area where an individual retires or moves on from business
- Most intermediaries have little loyalty to ventors
- Distributors and dealers probably most loyal, but brand loyalty still must be built downstream through the channel.
Channel management
The process of building channels for international distribution is not easy
It includes seeking out middlemen and building a network who fit the company and their requirements.
Searching for middlemen
Starts with a study of the market and determining the criteria for evaluating middlemen in that market.
The criteria vary from what type middleman it is, the market, and company’s requirement.
Motivating middlemen
They must be motivated through financial reward, but also psychological rewards
Could include visits to the company’s headquarters.
Publicity is also a good reward, the middleman being praised in the newspaper locally
All depends on the the culture distance, some require more than others
Controlling middlemen
Maintaining good communication and having a good relationship is key
Quotas, reports, and personal visits by company representatives can be effective in managing middleman
Terminating middlemen
Termination varies around the world, in the US all types of middlemen are simply laid off, but in some parts of the world it is more delicate legal implication and obligations.
Ex: in Colombia, when a middleman i fired, a 10% annual compensation is required by law
Internet and distribution
Internet is an important distribution method for multinational companies and a source of products for businesses and consumers
E-commerce in on the rise and they need to take into consideration:
- Culture
- Adaption
-Language
- Marketing
-Payment methods
- Delviery
