Distribution decisions in international context External factors n Structure of distribution/channel n Conflict & Control issues n Managing logistics n
Role of channel intermediaries 1. coordinate and assemble international buyer demand product availability reduce bargaining asymmetry between buyers and sellers in different countries and cultures 2. protect buyers and sellers from opportunistic behavior to serve as agents of trust in cross-cultural context 3. reduce market transaction costs 4. match buyer and sellers in different countries – establish contacts and customer relations in selected markets 5. provide physical distribution/logistical support necessary for the company’s product category
Considerations in developing an international distribution strategy Customer characteristics n Product characteristics n Distribution channels n Environmental characteristics n Corporate objectives n Financial n Control n Profit potential n Investment requirements n
Distribution channel selection criteria n n n Distribution density refers to the coverage a product will have within a market, I. e. can you reach all your customers? Channel length refers to the number of intermediaries directly involved in the physical or ownership path from producer to customer. Number of intermediaries are influenced by: (1) a product’s distribution density, (2) the average order quantities and (3) channel membership availability. Channel alignment aims to ensure that all the distribution intermediaries co-ordinate their actions to ensure efficient delivery of products. Distribution logistics - refers to the physical movement of goods through the distribution channels.
Guidelines for anticipating and correcting problems with international distributors n n n n Select distributors – do not let them select you Look for distributors capable of developing markets Treat the local distributors as long-term partners Support market entry by committing money, managers, and proven marketing ideas Maintain control over marketing strategy Make sure distributors provide you with detailed market and financial performance data Build links among national distributors at the earliest opportunity
Multiple Channels serve international markets Home Country Firm International Market Regional distribution Retailer centre Wholesaler Sales Subsidiary Trading Company Buying Organisation Export Agent Distributor/ Importer End-user/ Customer
Selecting an international intermediary to be considered: n geographical area and market segments covered ¨ the need to avoid domain conflict among agents or distributors n range of products and companies already presented ¨ complementary n n n or competitive customers served and trade contacts used product knowledge and application experience servicing and after-sales service capability level and form of commission of margins required legal rights and responsibilities
Conflict of interests? Manufacturer Intermediary Value added in the downstream channel Supplier replaceability Transaction costs reduction Mutual support and trust
Intensive, selective and exclusive distribution M = Manufacturer W= Wholesaler R = Retailer Source: Lewison, 1996, p. 271.
Channel cooperation, conflicts and trust channel conflict arises when one channel member perceives another to be impeding the achievements of its goals There are three main sources of conflict: incompatible goals between large manufacturer exporters and small retailers domain conflict where manufacturers compete with wholesalers for market territory incongruent perceptions of the distribution task and how it should be performed
Support measures the company can take: F to provide sales and promotional materials written in the local language F to visit the agent or distributor regularly and to visit customers together F invite agents-distributors to company premises regularly F to ensure that the price structure provides a genuine financial incentive F to provide updates on products, markets, and company developments
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