International Marketi ng 14 th Edition P h

International Marketi ng 14 th Edition P h i l i p R. C a t e o r a M a r y C. G i l l y John L. Graham International Marketing Channels Chapter 14 Mc. Graw-Hill/Irwin Copyright © 2009 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

What Should You Learn? p The variety of distribution channels （分销渠道） and how they affect cost and efficiency in marketing p The Japanese distribution structure and what it means to Japanese customers and to competing importers of goods p How distribution patterns affect the various aspects of international marketing p The growing importance of e-commerce as a distribution alternative（替代分销） p The functions, advantages, and disadvantages of various kinds of middlemen p The importance of middlemen to a product’s success and the importance of selecting and maintaining middlemen 2

Introduction p This chapter discusses the basic points involved in making channel decisions: Ø Ø Ø Channel structures Distribution patterns Available alternative middlemen Factors affecting choice of channels Locating, selecting, motivating, and terminating middlemen 3

Channel-of-Distribution Structures p All consumer and industrial products eventually go through a distribution process Ø Physical handling and distribution of goods Ø Passage of ownership Ø Buying and selling negotiations between producers and middlemen Ø Buying and selling negotiations between middlemen and customers p Each country market has a distribution structure Ø Goods pass from producer to user 4

Channel-of-Distribution Structures 5

Import-Oriented Distribution Structure p. In an import-oriented or traditional distribution structure: Ø Importer controls a fixed supply of goods Ø Marketing system develops around the philosophy of selling a limited supply of goods at high prices to a small number of affluent （富裕的） customers 6

Import-Oriented Distribution Structure p In the resulting seller’s market, market penetration and mass distribution are not necessary because Ø Demand exceeds supply and The customer seeks the supply from a limited number of middlemen p Distribution systems are local rather national in scope p Few countries fit the import-oriented model 7

Japanese Distribution Structure p The Japanese system has four distinguishing feathers: 1. A structure dominated by many small middlemen dealing with many small retailers 2. Channel control by manufacturers 3. A business philosophy shaped by a unique culture 4. Laws that protect the foundation of the system 8

9

10

High Density of Middlemen p Not unusual for consumer goods to go through three or four intermediaries before reaching the consumer p Japan has a large number of independent groceries and bakers (94. 7% or all retail stores) Ø Small stores account for 59. 1% of retail food sales p U. S. emphasis is on supermarkets, discount food stores, and department stores Ø Small stores generate 35. 7% of food sales 11

Retail Structure in Three Countries 在日本盛行百元店、 99元店、便利店、 护理药品店、 民用批发店 12

Channel Control is maintained through the following elements: p Inventory financing(存货融资) with credits extending for several months. p Cumulative rebates（累计折扣） including quantity purchases, early payments, achieving sales targets, performing services, maintaining specific inventory levels, participating in sales promotions p Merchandise returns that are allowed to the manufacturer. p Promotional support(促销支持) to intermediaries in the form of displays, advertising layouts, and management education programs 13

Business Philosophy p Emphasizes loyalty, harmony, and friendship p Supports long-term dealer-supplier relationships p The cost of Japanese consumer goods are among the highest in the world p Japanese law gives the small retailer enormous advantage over the development of larger stores 14

Large-Scale Retail Store Law and Its Successor p Daitenho – the Large-Scale Retail Store Law （大型零售商店法 ） Ø Large stores must have approval from the prefecture government Ø All proposals first judged by the Ministry of International Trade and Industry (MITI)(贸易通产省) Ø If all local retailers unanimously agreed, the plan was approved Ø Could be a lengthy process Ø Applied to both domestic and foreign companies p Replaced by the Large-Scale Retail Store Location Act of June 2000(大型商店位置法) Ø MITI out of the process Ø Relaxed restrictions 15

Changes in the Japanese Distribution System p The Structural Impediments Initiative, deregulation, and most recently Wal-Mart are causing changes in Japanese distribution practices. p “New” retailers Ø Kojima（小岛） Ø yaodabashi kamela（淀桥相机） Ø Tutaya(茑屋书店) p The Internet Ø Lakutian（乐天） 16

Trends: From Traditional to Modern Channel Structures p European retailers merging with former competitors and other countries to form Europewide enterprises p Foreign retailers attracted by high margins and prices p The Internet may be most important distribution trend p E-commerce p 7 -Eleven competes with Fed. Ex and UPS 17

Changes in the Japanese Distribution Systems convenience stores developed tremendously in Japan. 7 Eleven Japan p. Most items available in larger supermarkets can be found in Japanese convenience stores. In addition, the following additional services are also commonly available: ØCourier, or postal service. ØPhotocopying, or fax service. ØATMs. ØUtilities and other bills and tax payment service. ØTickets service for concerts, theme parks, airlines etc 18

19

Distribution Patterns • Distribution patterns are always evolving and new patterns are developing and marketing channels are not the same throughout the world Some general distribution patterns that are similar globally include: 1. Middlemen Services 2. Product Line Breadth 3. Costs and Margins 4. Channel Length 5. Nonexistent Channels 6. Blocked Channels 7. Stocking 8. Power and Competition 20

Retail Distribution Patterns p Size patterns p Direct marketing p Resistance to change(抵制变化) 21

Retail Structure in Selected Countries 22

Alternative Middleman Choices p Seller must exert influence over two sets of channels Ø One in the home country Ø One in the foreign-market country p Agent middlemen (代理中间商) – represent the principal rather than themselves p Merchant middlemen (独立中间商) – take title to the goods and buy and sell on their own account 23

International Channel-Distribution Alternatives Exhibit 14. 4 24

Home-Country Middlemen p Manufacturer’s retail stores p Global retailers p Export management companies p Trading companies p U. S. export trading companies p Complementary marketers p Manufacturer’s export agent 25

Home-Country Middlemen p Home-country brokers p Buying offices p Selling groups p Webb-Pomerene export associations(韦伯-波 莫雷内出口联盟） p Foreign sales corporation p Export merchants p Export jobbers (批发商) 26

How Does an EMC Operate? Exhibit 14. 5 27

Foreign-Country Middlemen p Manufacturer’s representatives p Foreign Distributors p Foreign-country brokers p Managing agents and compradors （代管和买 办） p Dealers p Import jobbers (批发商), wholesalers, and retailers 28

Government-Affiliated Middlemen p Marketers must deal with governments in every country of the world p Government purchasing offices Ø Procure products, services, and commodities for the government’s own use Ø Work at federal, regional, and local levels p Efficiency of public sector versus the private sector Ø Wal-Mart did better than Federal Emergency Management Agency (FEMA) after Hurricane Katrina(飓风卡特里娜) 29

Factors Affecting Choice of Channels The following points should be addressed prior to selecting intermediaries: 1. Identify specific target markets within and across countries. 2. Specify marketing goals in terms of volume, market share, and profit margin requirements. 3. Specify financial and personnel commitments to the development of international distribution. 4. Identify control, length of channels, terms of sale, and channel ownership 30

Factors Affecting Choice of Channels p Cost p Capital requirements p Control p Coverage p Character p Continuity Give an example to analyze what kind of channel a type of products can choose for distribution in domestic market based on the Six Cs. 31

Locating, Selecting, and Motivating Channel Members p Locating middlemen p Selecting middlemen Ø Screening Ø The agreement p Motivating middlemen p Terminating middlemen p Controlling middlemen 32

Locating Middlemen Firms seeking overseas representation should compile a list of middlemen from such sources as the following: 1. Commercially published directories 2. Foreign consulates 3. Chamber-of-commerce groups located abroad 4. Other manufacturers producing similar but noncompetitive goods 5. Middlemen associations 6. Business publications 7. Management consultants 8. U. S. Department of Commerce 33

Selecting Middlemen In selecting middlemen, the following steps should be used. 1. Screening based on the following criteria: (a) reputation (b) creditworthiness (c) markets served (d) products carried (e) number of stores 2. The Agreement that details terms of the contract and the functions to be performed on behalf of the foreign manufacturer (f) store size 34

Motivating Middlemen There is a clear correlation between the middleman’s motivation and sales volume Motivational techniques may be grouped into five categories: (1) financial rewards (2) psychological rewards (3) communications (4) company support, and (5) corporate rapport（企业关系） 35

Terminating Middlemen When middlemen do no perform up to standards or when market situation change, requiring a company to restructure its distribution. In US, it is usually a simple action regardless of the type of middlemen the are simply dismissed. However, in other countries, middlemen often has some legal protection that makes termination difficult 36

Controlling Middlemen Control over middlemen are necessary international business The first relates to control over the distribution network The second type of control is at the middleman level. Parent company should know the activities of middlemen in respect to their volume of sales, market coverage, service offered, prices, advertising, payment of bills, and even profit 37

The Internet p E-commerce Ø Business-to-business (BSB) services Ø Consumer and industrial products p E-commerce is more developed in U. S. than in rest of world p B 2 B enables companies to cut costs Ø Reduces procurement costs Ø Allows better supply-chain management Ø Makes possible tighter inventory control 38

Concerns for e-Vendors（电子销售商） p Culture E-distribution center p Adaptation p Local contact p Payment p Delivery p Promotion Discuss: How culture influence Etrading? 39

Summary p The international marketer has a broad range of alternatives for developing a distribution system p Three primary alternatives for using agent middlemen Ø Agent middlemen Ø Merchant middlemen Ø Government-affiliated middlemen p Channel structure varies Ø Nation to nation Ø Continent to continent p Information and advice are available relative to the structuring of international distribution systems p The Internet is challenging traditional channels, offering a wider range of possibilities for entering foreign markets 40

Homework Assignments p Discuss the Dual Channels of distribution of Suning and Guomei. p Discuss the channels of distribution of Wal. Mart. 41