international marketing distribution-by akshay samant
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International Marketing
Distribution
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International Distribution In intl mktg manufacturer doesn’t sell products directly
Goes thro several parties before reaching consumer
Involves various channels and variety of intermediaries
Q: How do I get my product most profitably to a foreign country ? The answer lies in• Firms method of entry in foreign market• Selection & distribution channel within each of firms foreign market
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International Distribution Decision criteria for entry methodFirm must evaluate Company goals - volume of business desired andgeographical coverage
Size of the company in sales and assets
Product line &nature of product (Industrial,consumer, high or low price)
Competitor abroad
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International Distribution
Decision criteria for entry methodDifferent entry method as per country need & regulatn
In some wholly owned operations
In others marketing subsidiaries
In some others local distributors
or combine different entry methods
Eg. Dupont 40 countries wholly owned
20 countries Mkt subsidiaries
> 60 countries distributors
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Alternative foreign entry mode
Indirect Export
Trading
Exp managementcompany
Piggy back
Production in Home Market
Foreign production
Direct ExportForeignDistributor
Agent
Overseas Mkt subsidiary
Contract managmnt
Licensing
Assembly
Joint Venture
100% ownership
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International Distribution
Decision criteria for entry method
Market feed back ( What’s going on in the FM, Direct entry method (agent,distributor,subsidiary
will offer better market information)
Learning by experience ( more international experience, the more the company is involved in FM )
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International Distribution
Decision criteria for entry method
Incremental Market cost ( cost associated with IM no matter
who does it. The channel selection determines it. However
no additional outlay with indirect exporting
Profit possibilities ( profit potential & cost associated with
each entry method must be evaluated. Eg.25% on sale
volume of $ 2 mio. vs 17% on $ 1mio. The 2nd entry method
more attractive
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International Distribution Decision criteria for entry methodCompany entry mode determines the following Investment requirement (higher in case of wholly owned )
Administrative requirement ( documentation, red tape etc.)
Personnel requmnt (qualified internationalist or outsource) Exposure to foreign problems ( legal,regulatory,tax,labour)
Risks Risk analysis of market entry modes Economic,Environment ,Political, Forex
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International Distribution
Indirect Export :Foreign sales through domestic sales Organization
Trading companies :Handle imports ( Mitsubishi- Japan) Size and market
coverage of these companies make them attractive
distributors. Cover the Mkt well & service the products
Draw back – likely to carry competing lines & the new
product added might not receive the desired attention
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International Distribution
Indirect Export :
Export Management companyAct on behalf of the company with closer cooperation & coordination. Use company letterheads, negotiate on behalf of the firm. Economical mode & the cost is shared
PiggybackManufacturer uses overseas distributor to sell another company’s product along with its own,( carrier, rider relationship) Advantage – Fill the gap in its product line or economy of scale. Economical and cost is shared.
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International Distribution
Direct Export :Foreign sales handled same way as domestic.All documentation, distribution fall under the firm
Task of exp. Management staff:Choosing foreign mkt ( existing, new)Choosing representation ( own, or franchisee)Physical distribution & export documentation, logisticcoordination
Marketing task : market intelligence, pricing & promotion
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International Distribution
Foreign manufacturing & foreign entry :
Firm might find it undesirable to supply all foreign markets
from domestic production
Factors force/ encourage firm to produce in FM• Heavy distribution cost,Tariff & Quotas• Govt. policies encouraging local production• Better interaction with local needs• Saving on transportation, Tariff,& raw materials• Better customer & Govt. relations• No interruption of supplies
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International Distribution
Approaches to foreign manufacture:
Assembly : Produce components locally, ship them to FM
for assembly ( cars, electronics, Industrial goods)
Contract manufacture: Products produced in the FM by
another producer under contract with the firm . Covers only
mfg. Marketing is covered by the firm ( eg. P&G in Italy )
Drawback - manufacturing profit goes to the producing
firm, Q.C is always a problem
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International Distribution Approaches to foreign manufacture:Licensing : Firms establishes local production in FM without capital investment usually for a longer period Involves much greater responsibility for the national firmLicensor gives patent / Trademark rights,copyright and product know how
Joint Venture :Foreign operation where intln company has enough equity to share a voice in the management ( 25 - 75 )
Many nations prefer JV – Nations gets more of the profit & the technical benefit
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International Distribution
Approaches to foreign manufacture:
Strategic Alliance:
Non equity contractual relationship between competition &
competitors in different countries eg. ( Phillips link with
Siemens )
The local firm gets a new product one that is
complimentary rather than directly competing ( eg
Antidiarrhoel with ORS)
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International Distribution
Approaches to foreign manufacture:Wholly owned foreign production:100% ownership by international firm( 100% completeness of control by the international firm )
Buy out a foreign producer through acquisition routeBuy out a joint venture partner
Acquisition : Quicker way to get into a market than building Its own facilities. Package also includes qualified labourforce,management,local knowledge,contact with local Mkt and Govt.
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International Distribution
Foreign Market channel & Global Logistics:How to distribute the products in FM once the goods are Reached ?• Management of foreign distributors• Management international logistics
Management of foreign distributor – depend on the entry mode chosen.Firms have little to do when they choosetrading / export management & licensing companies
Firms having own subsidiaries / complete mfg & mkt operations in the FM have direct responsibility
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International Distribution
Marketing through Trading company Primary method of reaching foreign marketFirm’s success depends on performance of the distributor
Selection: Comp performce,past record,financial backingAgreement: Spell out duties & responsibilities & interest of each partyFinancial /price consideration: Margins ,commission,credit termsMarketing support: Participation in promotion, trade fairs,sampling etc.Communication: availability of Tel,e.mail,personal visitsIncentive and motivation: to induce him to sell
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International Distribution
Marketing through Firms own presence Firm having own staff manage distribution locallyFollow local distribution infrastructure (Wholesaler, retailer,transport system
Wholesaler & service : getting assortments, breaking bulk & distribute to retailers
Retailer & services: stocking, displaying,selling products, inventory carrying and repurchase
A proper coordination, co operation and motivation is necessary to manage business
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International Distribution
Physical distribution vs Logistics:
Physical distribution: Financial & ownership flow of goods a narrow view of the physical movement
Logistics: Much more than physical movement & Transportation. Involves number & location of production &storage facilities,production schedules inventory managmt
Documentation involves more parties, more data, more Credit checks on foreign buyers and involvement of new intermediary in exp sales- international freight forwarder
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International Distribution
Logistics within a foreign Market:
Firms having own subsidiary must seek to optimize its
physical distribution
Where represented by distributor & licensees – firm has
limited role in logistics
Firms approach abroad can vary according to the size of
the market,way market is supplied,urbanization,
topography,& storage facilities ( Congo- Physical
distribution problems)
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International Distribution
Multi market logistics:World – not one market but collection of individual national mkts, each under the control of sovereign
Govt. Has various methods of separation their markets from others, tariff barriers, quotas & licenses,local laws,monitory system,tax system,transport policies
Logistic management should adapt to overcome the barriers to achieve integrated world mkt for physical distribution ( eg. Coco cola built plant in India because of trade restrictions )
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International Distribution Management of international logistics:
Facilities available are Freight forwarders: specialist in documentation & transportation,insurance etc well managed on their own
Free Trade Zone & public warehouse: 50 nations over 500FTS,free ports,bonded warehouse( a Govt owned &supervised by custom officials
Permit goods without tax as long as they are in the FTZMay allow processing,Assembly, sorting, repacking within the zone ( provides employment opportunities )