International Marketing - Chapter 15: International Marketing Channels

Chapter 15International Marketing ChannelsInternational Marketing15th edition Philip R. Cateora, Mary C. Gilly, and John L. GrahamChannel-of-Distribution StructuresAll consumer and industrial products eventually go through a distribution processPhysical handling and distribution of goodsPassage of ownershipBuying and selling negotiations between producers and middlemenBuying and selling negotiations between middlemen and customersEach country market has a distribution structureGoods pass from producer to user2Roy Philip Import-Oriented Distribution Structure (1 of 2)In an import-oriented or traditional distribution structure:Importer controls a fixed supply of goodsMarketing system develops around the philosophy of selling a limited supply of goods at high prices to a small number of affluent customers3Roy Philip Import-Oriented Distribution Structure (2 of 2)Demand exceeds supplyThe customer seeks the supply from a limited number of middlemenDistribution systems are localFew countries fit the import-oriented model 4Roy Philip Japanese Distribution Structure (1 of 2)Four distinguishing featuresHigh density of middlemenChannel controlBusiness philosophyLarge-scale retail store lawChanges in the structure5Roy Philip Japanese Distribution Structure (2 of 2)A structure dominated by many small middlemen dealing with many small retailersChannel control by manufacturersA business philosophy shaped by a unique cultureLaws that protect the foundation of the system6Roy Philip High Density of MiddlemenNot unusual for consumer goods to go through three or four intermediaries before reaching the consumerJapan has a large number of independent groceries and bakers (94.7% or all retail stores)Small stores account for 59.1% of retail food salesU.S. emphasis is on supermarkets, discount food stores, and department storesSmall stores generate 35.7% of food sales7Roy Philip Channel ControlInventory financingCumulative rebatesMerchandise returnsPromotional support8Roy Philip Business PhilosophyEmphasizes loyalty, harmony, and friendshipSupports long-term dealer-supplier relationshipsThe cost of Japanese consumer goods are among the highest in the worldJapanese law gives the small retailer enormous advantage over the development of larger stores9Roy Philip Large-Scale Retail Store Law and Its SuccessorDaitenho – the Large-Scale Retail Store LawLarge stores must have approval from the prefecture governmentAll proposals first judged by the Ministry of International Trade and Industry (MITI)If all local retailers unanimously agreed, the plan was approvedCould be a lengthy processApplied to both domestic and foreign companiesReplaced by the Large-Scale Retail Store Location Act of June 2000MITI out of the processRelaxed restrictions10Roy Philip Alternative Middleman ChoicesSeller must exert influence over two sets of channelsOne in the home countryOne in the foreign-market countryAgent middlemen – represent the principal rather than themselvesMerchant middlemen – take title to the goods and buy and sell on their own account11Roy Philip International Channel-of-Distribution AlternativesRoy Philip 12Exhibit 15.3Channel ManagementLocating middlemenSelecting middlemenScreeningThe agreementMotivating middlemenTerminating middlemenControlling middlemen13Roy Philip Logistics (1 of 2)Logistics management is a total systems approach to the management of the distribution process that includes all activities involved in physically moving raw material, in-process inventory, and finished goods inventory from the point of origin to the point of use or consumptionThe physical distribution system involves more than the physical movement in goods; it includes the location of plants and warehousing, transportation mode, inventory quantities, and packing14Roy Philip Logistics (2 of 2)Substantial savings can result from the systematic examination of logistics costs and the calculation of total physical distribution costsThe concept behind physical distribution is the achievement of the optimum (lowest) system cost, consistent with customer service objectives of the firmOne of the major benefits of the European Union’s unification is the elimination of transportation barriers among member countries15Roy Philip