Class 8.
International Distribution
International Marketing, 2013.
Buzulukova E.V., Sheresheva M.U.
Introduction
The marketplace is becoming increasingly global
Customers want smaller quantities of more
customized products, and they demand to be
treated individually
The changing global competitive and technological
environments are transforming the way products
are produced and moved around the world
Globalization of retailers and wholesalers drives
globalization of manufacturing companies
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
Place - Marketing Channels
What is a marketing channel (or distribution channel)?
“Marketing channels are sets of interdependent organizations involved in the
process of making a product or service available for use or consumption by
the consumer or business user” (Kotler)
“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” (AMA)
They perform functions that add utility to a product or
service:
Place utility: availability of a product or service in a location that is
convenient to a potential customer
Time utility: availability when desired by a customer
Form utility: availability of the product processed, prepared, in proper
condition and/or ready to use
Information utility: availability of answers to questions and general
communication about useful product features and benefits
What about international marketing channels?
these interdependent organizations allow goods and services to
cross national boundaries
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
International Channels
Seller
Channels
between
countries
Channels
within
foreign
countries
Final
buyers
1. Channels between countries: gets the products to the borders of
the foreign market; decisions concerning types of intermediaries
(agents, trading companies, etc…), types of transport, financing and
risk management…
2. Channels within foreign countries: gets the products from entry
point to final buyers and users; decisions concerning types of
retailers (franchising, supermarkets, etc…), local channels
Channels of distribution vary considerably among countries.
Distribution, by its nature, is a marketing activity that is
performed close to the market.
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
Channel Management
Channel design: types of intermediaries, number of
intermediaries (exclusive, selective, intensive), contractual
arrangements…
Managing retailing, wholesaling and market logistics…
Selecting, motivating and evaluating channel members
(cooperation, conflict, competition)
Channel dynamics: traditional, VMS, HMS, multi-channel
marketing systems…
Most difficult part of the mix to standardize
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
Approach to Managing Supply
Chains and Distribution
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
Global Retailing Market Entry
Strategy Framework
Culturally close
Organic growth
Chain acquisition
Easy to
enter
Difficult
to enter
Franchising
Joint-venture
Culturally distant
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
Factors that influence the choice of
distribution channel
Country Characteristics
Access to low-cost labor or raw materials
Availability of specialist skills/expertise/ infrastructure
Government Incentives and Regulations
Market factors:
Cultural variations
Buyer behaviour
Buyer needs for product information, installation and servicing
The willingness of channel intermediaries to market product
Intermediary cost: "mark-up" or "commission“
Producer factors:
Resources
Customer-based skills
Extend of control
Product factors:
FMCG vs Medicine
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
B2C vs. B2B Channels
Business-to-consumer channels
Designed to put products in the hands of people
for their own use
Alternatives: direct marketing, franchising, sales
force, agents/brokers, internal sales force,
wholesalers, retailers…
Business-to-business channels
Deliver products to manufacturers that use them
as inputs in the production process or in day-today operations
Alternatives: internal sales force, distributors,
wholesalers…
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
Marketing Channel Alternatives for
Consumer Goods
M
Internet, mail
order, door-todoor, house party,
etc…
M
M
M
M
M
MSF
Agents,
brokers
MSF
MSF
Companyowned,
franchising
W
W
R
R
R
Consumers
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
R
Conclusion –
7 Rules of International Distribution
Select distributors. Don’t let them select you.
Look for distributors capable of developing markets,
rather than those with a few good customer contacts.
Treat local distributors as long-term partners, not
temporary market-entry vehicles.
Support market entry by committing money,
managers, and proven marketing ideas.
From the start, maintain control over marketing
strategy.
Make sure distributors provide you with detailed
market and financial performance data.
Build links among national distributors at the earliest
opportunity.
Source: D. Arnold, HBR, 2005
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
Problems in International
Marketing Channels
Global retailing
Case of hypermarkets
Multi-channel strategies
Case of franchising-Internet
Market-specific channels
Case of wine distribution
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
Global Retailing
Global retailing since 1970s, but many
variations…
Differences in the importance and types of
retailing channels: shopping malls, department
stores, discount stores, wholesale clubs, outlet
centers, hypermarkets…
Factors affecting the success of hypermarkets:
culture, income, market fragmentation,
traditional stores, locations, demography…
Global retailing market entry
Wal-Mart case
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
Concept of Multi-Channel Strategies –
Franchising and Internet
BRICK AND
MORTAR
CLICK AND
MORTAR
Coexistence of traditional and
virtual marketing channels
“brick and click”
Antagonostic or
complementary?
International Marketing,
2013. Buzulukova E.V., Sheresheva M.U.
Some Practical Advice…
Brand structure rather than channel structure
(reduce risk of network competition)
Sell all products on-line
Ensure multi-channel coherency
Back-office motivation
Use Internet to increase visits (locations, maps)
Limit use of e-mail…
… But does this apply to franchising?
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
Multi-Channel Strategies in Franchising
Franchising firms are « plural form networks »
Internet is another distribution channel
Internet seems to be a priority
Internet is « revolutionizing » franchising
…
But, franchisors offering on-line sales are limited
32% in the US
30% in the UK
Less than 20% in France
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
Opportunities and Threats of Multi-Channel
Strategies (Franchising-Internet)
Opportunities
Threats
New marketing channel
Increased sales
Network image
Positive internal effects
Cannibalism
Restriction franchisee
sales
Non-conformity websites
Exclusive territories
Limits some entry modes
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
E-commerce advantages
Reduction in intermediation costs associated with
wholesale and retail activities
The ability to lower costs associated with purchasing
by curbing the time and effort involved in supply and
logistics operations
Improved information gathering and processing that
permit improved management of the supply chain
The prospect of expanding market share and/or
developing new markets by lowering the cost of
gathering and processing information on the wants of
existing and potential customers
New customers’ segments
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
Distribution Intensity
Intensive distribution aims to provide saturation coverage of the market
by using all available outlets. For many products, total sales are directly
linked to the number of outlets used (e.g. cigarettes, beer). Intensive
distribution is usually required where customers have a range of acceptable
brands to chose from. In other words, if one brand is not available, a
customer will simply choose another.
Selective distribution involves a producer using a limited number of
outlets in a geographical area to sell products. An advantage of this
approach is that the producer can choose the most appropriate or best
performing outlets and focus effort (e.g. training) on them. Selective
distribution works best when consumers are prepared to "shop around" - in
other words - they have a preference for a particular brand or price and will
search out the outlets that supply.
Exclusive distribution is an extreme form of selective distribution in which
only one wholesaler, retailer or distributor is used in a specific geographical
area.
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
Supply chain relationships and
approaches
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
Modes of collaboration: example
Ekaterina Buzulukova. International marketing. Last lecture
Successful global marketing
strategy
Factors:
Deliver products of high quality to customers
Price competitively through careful cost
management
Operate within short lead times
Provide excellent after-market supporting services
Sources:
Understanding a nature of the markets
Infrastructure for transportation
Level of technology
Financial management
International
Marketing, 2013.and
Buzulukova
E.V., Sheresheva
M.U.
Organization
behaviour
human
resources