international distribution class 8. international marketing, 2013. buzulukova e.v., sheresheva m.u
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IntroductionThe marketplace is becoming increasingly globalCustomers want smaller quantities of more customized products, and they demand to be treated individuallyThe changing global competitive and technological environments are transforming the way products are produced and moved around the worldGlobalization of retailers and wholesalers drives globalization of manufacturing companies International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
Place - Marketing ChannelsWhat 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 customerTime utility: availability when desired by a customerForm utility: availability of the product processed, prepared, in proper condition and/or ready to useInformation 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
SellerChannels 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 ManagementChannel 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
Organic growth Chain acquisition
Franchising Joint-venture
Culturally close
Culturally distant
Easy to enter
Difficult to enter
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
Factors that influence the choice of distribution channel
Country CharacteristicsAccess 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 MedicineInternational Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
B2C vs. B2B ChannelsBusiness-to-consumer channels
Designed to put products in the hands of people for their own useAlternatives: direct marketing, franchising, sales force, agents/brokers, internal sales force, wholesalers, retailers…
Business-to-business channelsDeliver products to manufacturers that use them as inputs in the production process or in day-to-day operationsAlternatives: internal sales force, distributors, wholesalers…
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
Marketing Channel Alternatives for Consumer Goods
Consumers
M
Internet, mail order, door-to-
door, house party, etc…
M
Company-owned,
franchising
M
MSF
R
M
Agents, brokers
R
M
MSF
W
R
M
MSF
R
W
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
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, 2005International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
Problems in International Marketing Channels
Global retailingCase of hypermarkets
Multi-channel strategiesCase of franchising-Internet
Market-specific channelsCase of wine distribution
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
Global RetailingGlobal 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 entryWal-Mart caseInternational 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-lineEnsure multi-channel coherencyBack-office motivationUse 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 limited32% 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 advantagesReduction in intermediation costs associated with wholesale and retail activitiesThe ability to lower costs associated with purchasing by curbing the time and effort involved in supply and logistics operationsImproved information gathering and processing that permit improved management of the supply chainThe 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 customersNew customers’ segments
International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.
Distribution IntensityIntensive 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.
Successful global marketing strategy
Factors:Deliver products of high quality to customersPrice competitively through careful cost managementOperate within short lead timesProvide excellent after-market supporting servicesSources:Understanding a nature of the marketsInfrastructure for transportation Level of technology Financial management Organization behaviour and human resources International Marketing, 2013. Buzulukova E.V., Sheresheva M.U.