UBI-GM-Presentation14.050112-place pps

The Japanese distribution structure and what it means to Japanese customers and to competing importers of goods 2.. The Japanese distribution structure and what it means to Japanese cust

International Marketing Channels

Chapter 14

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc All rights reserved.

PowerPoint presentation prepared by:

Alfred Lowey-Ball Associate Professor of Marketing UBI-United Business Institutes Brussels, Belgium

Chapter Learning Objectives

1 The variety of distribution channels and how they

affect cost and efficiency in marketing

1 The variety of distribution channels and how they

affect cost and efficiency in marketing

2 The Japanese distribution structure and what it

means to Japanese customers and to competing importers of goods

2 The Japanese distribution structure and what it

means to Japanese customers and to competing importers of goods

3 How distribution patterns affect the various aspects

5 The functions, advantages, and disadvantages of

various kinds of middlemen

5 The functions, advantages, and disadvantages of

various kinds of middlemen

6 The importance of middlemen to a product’s

success and the importance of selecting and

maintaining middlemen

6 The importance of middlemen to a product’s

success and the importance of selecting and

maintaining middlemen

• Getting the product to the target market can be costly

• Forging an appropriate channel of distribution is one of

the most critical tasks facing the international firms

• Each market contains a distribution network with many

channel choices whose structures are unique and in the

ST fixed

• In some markets the distribution structure is

multi-layered, complex, and inefficient

• Competitive advantage will go to the marketer with the

most cost effective channel

Channel-of-Distribution Structures

distribution of goods, the passage of ownership (title), and the buying and selling negotiations among producers, middlemen and customers

• Each country market has a unique distribution channel

structure

• Within these structures are a variety of middlemen whose

customary functions, activities, and services reflect existing competition, market characteristics, traditions and economic development

• Channel structures range from those with little developed

infrastructure such as those found in many emerging markets

to the highly complex, multi-layered system found in Japan

Import-oriented distribution structure

1 Seller’s market, little consumer choice

2 Distribution systems local rather than

national in scope

3 Marketing infrastructure—warehousing,

ad agencies, mkt research—is non-existent because importer does it all

• The importer controls a fixed amount of goods from abroad and

the distribution system developed around the philosophy of a seller’s market dedicated to a few affluent customers

• The importer controls a fixed amount of goods from abroad and

the distribution system developed around the philosophy of a seller’s market dedicated to a few affluent customers

Japanese Distribution Structure

1 a structure dominated by many small

middlemen dealing with many small retailers—high density of middlemen

2 channel control by manufacturers,

3 a business philosophy shaped by a unique

culture, and

4 laws that protect the foundation of the

system—the small retailer

• The Japanese distribution system is quite different from that in

the US or EU, with following four distinguishing features:

• The Japanese distribution system is quite different from that in

the US or EU, with following four distinguishing features:

Japanese vs US distribution

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc All rights reserved.

• MITSUKOSHI, a giant upscale department store,

founded in 1611, high quality, broad choice of

products, provides a total life style experience to

shoppers

• Provides a total life experience: « i-shoku-ju » to

shoppers

• Pricey, together with the small neighborhood retailer

and supporting distribution networks controls retailing in Japan

• Sales declining, new discount stores are entering the

market, dealing directly with the manufacturers

Will Mitsukoshi survive in its present form??

MITSUKOSHI in Japan

Comparison of Retail Structures

Trends: Traditional to modern channel structures

1 Pressure from within and without to create

more efficent distribution and retail systems

2 In EU Mergers & alliances to create a

response to US super retailers

3 Introduction of US-style efficiencies in mass

buying, close inventory control, broad product offerings, fast service everywhere

4 Influence of the internet:

1 Home retailing (“El Corte Ingles”)

2 Joint buying (GM, Ford, DaimlerChrysler)

3 The challenge of goods delivery  use of

convenience stores in Japan

Distribution Patterns

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

• Distribution patterns remain quite different throughout the

world and they are continually evolving…

• Distribution patterns remain quite different throughout the

world and they are continually evolving…

Retail Patterns

1 Retail Size Patterns

2 Direct Marketing

3 Resistance to Change

4 Alternative Middleman Choices

• International retailing shows even greater diversity in its

structure than does wholesaling

• International retailing shows even greater diversity in its

structure than does wholesaling

Some general retailing patterns include:

Retail Structures in some countries

International Distribution alternatives

Home-Country Middlemen

1 Manufacturers’ Retail Stores:

Disney, Benneton, Zara

2 Global Retailers: Ikea,

Carrefour, Wal-Mart

3 Export Management Companies

4 Trading Companies: esp J

ITOSHU, Mitsubishi, Marubeni

5 U.S Export Trading Companies

6 Complementary Marketers

7 Manufacturer’s Export Agent

• Home-country middlemen provide marketing services from a

domestic base and find foreign markets for products for local

manufacturers

• Home-country middlemen provide marketing services from a

domestic base and find foreign markets for products for local

11 Webb-Pomerene Export Associations

12 Foreign Sales Corporation

13 Export Merchants

14 Export Jobbers

Export Management Companies

Characteristics of Domestic Middlemen

• Foreign middlemen bring the manufacturer closer to end-use

markets Some of the more important foreign-country

middlemen, who find markets for foreign manufacturers

include:

• Foreign middlemen bring the manufacturer closer to end-use

markets Some of the more important foreign-country

middlemen, who find markets for foreign manufacturers

include:

Characteristics Foreign country middlemen

Factors Affecting Choice of Channels

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 ownershipDiscussion points with potential intermediaries:

Six Cs of Channel Strategy

Locating Middlemen

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

Firms seeking overseas representation should compile a list of middlemen from such sources as the following:

Firms seeking overseas representation should compile a list of middlemen from such sources as the following:

2 The Agreement details

the terms of the contract and the functions to be performed on behalf of the foreign

manufacturer

• Exclusivity

• Annual sales

minimum

Motivating Middlemen

Motivational techniques may be grouped intofive categories:

(1) financial rewards(2) psychological rewards(3) communications

(4) company support, and (5) corporate rapport

There is a clear correlation between the middleman’s motivation and sales volume

There is a clear correlation between the middleman’s motivation and sales

volume