Chapter 15
Global Distribution and Logistics
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Introduction
• Channels of distribution connect
producers and customers
• Links are ___________ and __________
entities that perform a number of functions
• Producers rely on _________ to facilitate
the location of companies interested in
distributing products
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Channel Structure
• Channels can vary from direct, producerto-consumer types to elaborate,
multilevel channels
• Channel systems
•
•
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Channel Structure
• Techniques employed by businesses
• Creating new bridges between producers and
customers
•
• Creating new forms of B2B commerce
•
• Focusing on peer-to-peer (P2P)
•
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Channel Structure
• Connections made by marketing
institutions serve
•
•
•
• Flows are usually multidirectional—
vertical and horizontal
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Channel Design
• Length and width of the channel
employed
• Determined by factors that can be
summarized as the 11 Cs
• Uses the 11 Cs as a checklist to
determine the proper approach
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11 C’s
External
• Customer
•
• Competition
Internal
•
•
•
•
•
•
•
Company objectives
Capital
Coverage
Continuity
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Channel Design
• Customers
• Basis for channel-design decisions
•
•
• Focusing on customer needs by
understanding:
•
•
•
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Channel Design
• Culture
• Distribution culture:
•
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Channel Design
• Competition
• Channels used by competitors may be the
only product distribution system that is
accepted by both the trade and consumers
• An international marketer’s task is to
•
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Channel Design
• Company objectives
•
• Character
•
• Products may be distributed in a number of
ways even to the same target audience
•
•
•
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Channel Design
• Capital
•
• Marketer’s financial strength determines
•
•
• Stronger the marketer’s finances, the more
able the firm is to establish channels it either
owns or controls
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Channel Design
• Cost
•
• Varies over the life cycle of the relationship as
well as _______________________
• Incurred in protecting the company’s
distributors against adverse market conditions
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Channel Design
• Coverage
•
• Area to be covered depends on the:
•
•
• Companies typically enter a market with one
local distributor
•
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Channel Design
• Control
•
•
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Channel Design
• Continuity
• Rests heavily on the marketer
•
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Channel Design
• Communication
•
• Is a two-way process that does not permit the
marketer to dictate to intermediaries
• Assists the international marketer in:
•
•
•
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Channel Management
• Types of intermediaries
• Distributor:
• Agent: Operates on a commission basis
•
•
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Channel Management
• Government agencies
• The U.S. Department of Commerce has
various services that can assist firms in
identifying suitable representatives abroad
•
•
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Channel Management
• Private sources
• Advertising
•
• Websites
•
• Email solicitations
•
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Channel Management
• The distributor agreement
• Important terms to be included in the
agreement
• Contract duration
•
• Method of payment
• Facilitating payments:
• Products and conditions of sale
•
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Channel Management
• Gray markets (______________)
•
• Products vary from inexpensive consumer
goods to expensive capital goods
• Conditions that allow unauthorized resellers
to exist
•
•
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Channel Management
• Arguments for gray markets:
•
•
•
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Channel Management
• Arguments against gray markets:
•
•
•
•
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Channel Management
• Gray markets
• Gray-market goods can:
•
•
•
•
• Strategies to eliminate gray markets:
•
•
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Channel Management
• Termination of channel relationship
• Reasons
•
•
•
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Channel Management
• Termination of channel relationship
• Just causes
•
•
•
•
• Time to think about such issues is before the
overseas distribution agreement is signed
• Careful preparation can allow the exporter to
negotiate a termination without litigation
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E-Commerce
• M-commerce:
• The marketer has to be sensitive to the
governmental role in e-commerce
• The company itself must be prepared to
provide 24-hour order taking and
customer service
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International Logistics
• Design and management of a system that
controls the inflow outflow of materials in
an international corporation
• The systems approach helps the firm
explicitly recognize the linkages among
separate logistics components
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International Logistics
• Interaction with outside organizations,
suppliers, and customers helps integrate
all partners
• Systems approach also ensures:
•
•
•
•
JIT EDI ESI ECR -
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International Logistics
• Two phases in the movement of materials
• Materials management:
• Physical distribution:
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International Logistics
• Concepts within logistics
• Systems concept:
• Total cost concept:
• Trade-off concept:
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International Logistics
• Supply chain management
•
• Advances in information technology have
been crucial to progress in supply chain
management
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International Logistics
• The Impact of International Logistics
• Logistics costs have risen over the years
•
•
•
• Close collaboration with suppliers and
customers
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International Logistics
• New dimensions of international logistics
• Domestic operations
• Logistics decisions are guided by:
•
•
•
•
• International operations
•
•
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International Transportation
Issues
• Transportation infrastructure
• Firms encounter infrastructural variations
• Mistakes in the _____________________
increase costs
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International Transportation
Issues
• Availability of modes - Ocean shipping
• Types of vessels
•
•
•
• Common vessels
•
•
•
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International Transportation
Issues
• Availability of modes - Air shipping
• High-value items are mostly shipped by air,
particularly if they have a high density
• Volume of airfreight can be increased by
•
•
•
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International Transportation
Issues
• Choice of transport modes
• Transit time
•
•
•
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International Transportation
Issues
• Predictability
•
• Higher predictability of airfreight allows lower levels
of inventory safety stock
•
• Merchandise shipped via air is likely to suffer less
loss and damage
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International Transportation
Issues
• Cost
•
• Noneconomic factors
•
•
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The International Shipment
• Documentation
•
•
•
•
•
•
Sometimes considered to be a trade barrier
__________ is the most important document
Shipper’s declaration for ____________
Assistance with international shipments
• Several intermediaries provide services in the
physical movement of goods
•
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International Inventory Issues
• Inventory carrying costs:
• Order cycle time –
• In international marketing, the order cycle is
frequently longer than in domestic business
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International Inventory Issues
• Customer service levels
• Responsiveness that inventory policies permit
for any given situation
•
• Should be based on:
•
•
•
•
•
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International Inventory Issues
• Inventory as a strategic tool
• Dealing with currency valuation changes
• Hedging against inflation
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International Storage Issues
• Storage facilities
• Factors determining the location of storage
facilities
•
•
•
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International Storage Issues
• Storage facilities
•
• ABC analysis classifies products that are most
sensitive to delivery time
•
•
•
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International Storage Issues
• Outsourcing
•
• Reasons for outsourcing
•
•
•
•
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International Storage Issues
• Foreign trade zones
• Considered for
• Found at:
•
•
• Benefits both the
• Generates employment opportunities
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International Packaging Issues
• Adequate for domestic shipping may be
inadequate for international
transportation
•
• Weight of packaging must be considered
•
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Management of International
Logistics
• Centralized logistics management
•
• Decentralized logistics management
•
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Management of International
Logistics
• Contract logistics
• Outsourcing logistical management by
employing outside logistical expertise
•
• Allows marketers to take advantage of an
existing network, complete with resources
and experience
•
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Logistics and Security
• Logistics systems are vulnerable to
terrorist attacks and piracy
• To prevent them, governments impose
security measures
•
•
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Logistics and Security
• Security measures:
•
•
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Logistics and Security
• Strategies employed for reducing security
costs
•
•
•
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Recycling and Reverse Logistics
• Reverse distribution systems
•
•
• Environmental concerns are also growing
in the packaging field
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Recycling and Reverse Logistics
• ISO 14000
•
• Firms should concentrate on providing
the society with a better quality of life
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