Chapter 6 Flashcards
What are the 2 categories global markets are divided to?
procurement
distribution or sales market
What are procurement markets
companies supply themselves with raw, auxiliary and operating materials.
What is global sourcing strategy
Systematic search for products and services on on a global level; the best is possible offer is chosen regardless of border
What are the drivers of global procurement
-cost reduction: by exploiting potentials
-non-availability of procurement object in
domestic market
-simplification
-trade policy and regulatory framework
-digitization: access to innovative technologies, materials, internet
Costs in global procurement
customs and import fee
costs of agents, brokers, service providers
costs of market research
costs for quality inspections
translation fee
transport, logistics and storage costs
what are two forms of import?
-direct import: purchasing good from
manufacturer with no intermediate stages
-indirect import: purchasing from general
importer or wholesaler
What is a general importer
domestic trading company with exclusive contract with foreign manufacturer
risks in global procurement
-quality risks: required quality standards
aren’t met, delays, increased reject rates
-supply risks: incorrect/deficient deliveries
lead to bottlenecks in supply
-logistical risks: media breaks, prolonged
transport times
How to cushion global procurement risks?
capital commintment
What is capital commitment?
capital tied up in goods and can only be liquidated if goods are sold
What are the 2 distribution policies
-direct distribution: sells products directly to end user without external agents or intermediaries
-indirect distribution: with involvement of external agents/middlemen who resells goods from manufacturer to final customer
What are hybrid forms of indirect distribution
wholesesalers
assortment wholesalers
retailers
What is acquisition distribution?
acquisition of entity that is responsible for sales to end user
what is physical distribution
transporting goods from manufacturer to end user
What factors play role in distribution?
-product-related factors: services associated
with product, transportability, storability
-intermediary-related factors: qualification
of middle men, dependency of middle men
-company-related factors: distribution policy and role
-customer-related factors: customer preference of distribution (direct/indirect, physical proximity)
-competitive factors: distribution strategy/market position of competition
-market related factors: market position of distribution channels
-environmental factors: regulatory constraints, new technologies
