Managing international
Channels of Distribution
INTRODUCTION
Channels Of Distribution describes the varieties of
intermediaries (i.e., agents, wholesaler and retailers)
involved in moving products between countries as well as
within countries. The tasks and functions of the various
intermediaries will be examined. It should be kept in mind
that certain types of intermediaries do not exist in some
countries and that the pattern of use as well as the
importance of each type of intermediary varies widely from
country to country
.
A manufacturer is required to make several decisions that
will affect its channel strategy, including the length, width,
and number of distribution channels to b used.
DEFINITION
THE AMERICAN MARKETING ASSOCIATION
DEFINES:-CHANNEL OF DISTRIBUTION AS—
“An organized network of agencies and institutions
which in combination perform all the activities
required to link producers with users to accomplish
the marketing task.”
DISTRIBUTION:Is the physical flow of goods through channels and
CHANNELS:Is coordinated groups of individuals or firms that
perform functions adding utility to a product or
services.
OBJECTIVES OF CHANNELS
TO CREATE UTILITY FOR CUSTOMERS
CHANNEL UTILITY ARE:PLACE
TIME
FORM
INFORMATION

Ex:-COKE’S LEADERSHIP:due to PLACE UTILITY
The most effective channel arrangement is a
clear focus of the company’s marketing effort on
a target market and a determination of its needs
and preferences.
 Channel strategy in global marketing must fit the
company’s COMPETITIVE POSITION and
MARKETING OBJECTIVE in each national market
 If a company wants to enter a competitive
market,it has two basic choices:DIRECT INVOLVEMENT (sales force,
retail stores etc.)
INDIRECT INVOLVEMENT
(independent agents, distributors, wholesalers)

Distribution Channel Functions
Information
Transfer
Payments
Physical
Distribution
Risk Taking
Communication
Negotiation
Ordering
Financing
ROLES OF CHANNEL MEMBERS
1. Facilitate the search process of buyers &
sellers:-
Lower the uncertainty among end-users
In their absence, manufactures would also be
confuse about how to approach customers
2. Sorting:Channel members eliminate the differences in
the collection of goods & services offered by
company
CONTD.
3. Making transactions routine:Transactions involve ordering of goods or
services, fulfilling orders & paying for goods &
services purchased.
i.e., Manufacture-Wholesaler-Retailer-Customer
Help in making transactions routine through
standardizations & automations
4. Contractual efficiency:Channel Intermediaries have to optimize the
number of exchange relationships required to
complete a transaction.
DESIGNING MARKETING
CHANNELS
Dimensions to choose a channel design:
The channel length – Number of
intermediaries between the producer and
customers
The channel breadth – Number of outlets
available to consumers
The cost involved in selecting a particular
channel
CONTD.
A channel decision depends on the following
considerations:1.
CHANNEL STRUCTURE:-
It refers to the number of levels of channels
intermediaries (Distributor, Wholesaler,
Retailer).
It depends on the number of intermediaries
uses to distribute its product to end-users
The channel levels are zero level, one level,
two level & three level.
Zero-level channel
One-level channel
Two-level channel
Wholesalers
Retailers
Three-level channel
Wholesalers
Agents
Retailers
Consumers
Manufactures
Retailers
CONTD.
2. CHANNEL INTENSITY:It refers to the number of intermediaries present in a
distribution or marketing channel.
Intensive distribution
Producers of products stock their goods in as many
outlets as possible as possible by considering time &
place utility.
Exclusive distribution
Producers of some products limit the number of
intermediaries handling their product to deliver
maximum service quality to customers, try to develop a
superior brand image for their product.
CONTD.
Selective distribution
It is adopted when the manufacturer lacks
the resources to adequately influences the
policies of all the intermediaries who can
carry a particular product.
The manufacturer distributes products
only to specific retailers selected on the
basis of defined criteria.
CONTD.
3. TYPE OF CHANNEL INTERMEDIARIES AT EACH
LEVEL
Manufacturer’s representatives
They sell the manufacturer's product to the wholesalers,
retailers, other businesses & also to institutions such as
hospitals, libraries & school.
They may represent more than one manufacturer.
Also called account executives or sales engineers.
Manufacturer’s sales force
It comprises the salespersons who are on the company’s
rolls & received a fixed salary.
Devotes their entire time & effort to selling that product or
service of that manufacturer.
CONTD.
Industrial distributors
These are independent firms consisting of
sales & support personnel.
They differ from manufacturer's in that
they take possession of the products they
sell & have a partnership arrangement
with the manufacturer.
Examples: Norton, Pfizer & 3M.
FACTORS AFFECTING SHAPING OF
CHANNELS
CUSTOMERS
 PRODUCTS
 MIDDLEMEN AND
 ENVIRONMENT

CUSTOMER CHARACTERISTICS


Customers number, geographic distribution, income,
shopping habits and reactions to different selling
methods all vary from country to country and therefore
require different channel approaches.
The need for multiple channel intermediaries increases
as the customers increases.
EX:- 10 customers must be directly contacted by either by
manufacturer or an agent,
For mass market products bought by millions of customers,
retail distribution outlets or mail order distribution is
required.
Product characteristics
Degree of standardization.
 Perishablity
 Bulk/Quantity
 Services (requirements and facilities)
 Unit price

Types of products




Product with high unit price rely on controlled sales
force,(Ex. mainframes computers) since selling cost of
this expensive distribution method is small part of the
total SP.
Cosmetics products and other consumer products rely on
wide gross selling margins to compensate salespeople
(Ex. Amway and avon)
Perishable products need relatively direct channels to
ensure proper conditions at the time of purchase by
customers. (bread and eatables)
Bulky products/large quantity (Ex.soft drinks )of product
requires minimum shipping distances, charges and
minimum amt. of transactions between intermediaries.
Middleman characteristics
Cherry picking. Practice of taking orders
from manufacturers whose product
require less efforts to promote.
 Bypassing of cherry picking can be done
by going alternatives options like:

•Setting own distribution organizations.
•Going for cooperative arrangements/direct selling
supports and distribution support systems. ( Rely on
distributors own sales force by subsidizing the cost of
the sales representatives the distributer had assigned
to the company’s products).
Middleman characteristics
•Selection- finding most efficient and compatible distributers. (Ex. The
local chamber of commerce or local trade associations in country can
provide lists.)
•Before signing make sure the presence of one key person in the
organization who will make it a personal objective to achieve success
with your product.
•Distributer must be capable of assisting of providing necessary
information about customers .
•Distributer/agent should have core competency in related products.
•Motivation in form of commissions is appreciable.
•Clause of termination on the account of performance should be
clearly expressed. (Ex. despite of mentioned clause foreign agent
might sue you on basis of his native country norms.)
Environmental characteristics
•Economic
•Social
•Political
Consumables and eatables are highly sensitive
towards environment. Success of Supermarkets is
classical example of this factor.
Structure
• Consumer products
the hands of end user.
Designed to directly put in
•Industrial products
Designed for manufacturers
and organizational use.
Consumer product :
• Door to Door selling
•Manufacturer- owned store
•Franchise Operations
•Combination Structures
Industrial products
M
M
Manufacturer-Owned Stores
Consignment to Part
– Time Salesperson
House Party
Mail order
Door-to-Door
Agents/
Brokers
M
MSF
M
MSF
M
M
MSF
W
W
W
R
R
R
R
Customers
M = Manufacturer
W = Wholesaler
MSF = Manufacturer’s Sales Force
R = Retailer (including online e-commerce
Figure :- Marketing Channel Alternatives – Consumer Product
R
Marketing channels alternatives for industrial
product
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