International Marketing
15th edition
Philip R. Cateora, Mary C. Gilly, and John L. Graham
Channel-of-Distribution
Structures
15
• All consumer and industrial products eventually
go through a distribution process
– Physical handling and distribution of goods
– Passage of ownership
– Buying and selling negotiations between
producers and middlemen
– Buying and selling negotiations between
middlemen and customers
• Each country market has a distribution structure
– Goods pass from producer to user
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Import-Oriented
15
Distribution Structure (1 of 2)
• In an import-oriented or traditional distribution
structure:
– Importer controls a fixed supply of goods
– Marketing system develops around the
philosophy of selling a limited supply of goods at
high prices to a small number of affluent
customers
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Import-Oriented
15
Distribution Structure (2 of 2)
• Demand exceeds supply
• The customer seeks the supply from a limited
number of middlemen
• Distribution systems are local
• Few countries fit the import-oriented model
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Japanese Distribution
Structure (1 of 2)
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15
Four distinguishing features
High density of middlemen
Channel control
Business philosophy
Large-scale retail store law
Changes in the structure
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Japanese Distribution
Structure (2 of 2)
15
1. A structure dominated by many small
middlemen dealing with many small retailers
2. Channel control by manufacturers
3. A business philosophy shaped by a unique
culture
4. Laws that protect the foundation of the system
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High Density of Middlemen
15
• Not unusual for consumer goods to go through
three or four intermediaries before reaching the
consumer
• Japan has a large number of independent
groceries and bakers (94.7% or all retail stores)
– Small stores account for 59.1% of retail food sales
• U.S. emphasis is on supermarkets, discount food
stores, and department stores
– Small stores generate 35.7% of food sales
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Channel Control
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15
Inventory financing
Cumulative rebates
Merchandise returns
Promotional support
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Business Philosophy
15
• Emphasizes loyalty, harmony, and friendship
• Supports long-term dealer-supplier relationships
• The cost of Japanese consumer goods are among
the highest in the world
• Japanese law gives the small retailer enormous
advantage over the development of larger stores
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Large-Scale Retail Store Law
and Its Successor
15
• Daitenho – the Large-Scale Retail Store Law
– Large stores must have approval from the prefecture
government
– All proposals first judged by the Ministry of International
Trade and Industry (MITI)
– If all local retailers unanimously agreed, the plan was
approved
– Could be a lengthy process
– Applied to both domestic and foreign companies
• Replaced by the Large-Scale Retail Store Location Act of
June 2000
– MITI out of the process
– Relaxed restrictions
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Alternative Middleman
Choices
15
• Seller must exert influence over two sets of
channels
– One in the home country
– One in the foreign-market country
• Agent middlemen – represent the principal
rather than themselves
• Merchant middlemen – take title to the goods
and buy and sell on their own account
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International
Channel-of-Distribution Alternatives
15
Exhibit 15.3
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Channel Management
15
• Locating middlemen
• Selecting middlemen
– Screening
– The agreement
• Motivating middlemen
• Terminating middlemen
• Controlling middlemen
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Logistics (1 of 2)
15
• 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 consumption
• The physical distribution system involves more
than the physical movement in goods; it includes
the location of plants and warehousing,
transportation mode, inventory quantities, and
packing
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Logistics (2 of 2)
15
• Substantial savings can result from the systematic
examination of logistics costs and the calculation
of total physical distribution costs
• The concept behind physical distribution is the
achievement of the optimum (lowest) system cost,
consistent with customer service objectives of the
firm
• One of the major benefits of the European Union’s
unification is the elimination of transportation
barriers among member countries
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