Chapter 12 Global Placement and Distribution Channels

1. International market strategy
2. Distribution strategy
3. Product complexity
4. Size and development of the firm’s marketing organization
Internal Factors Influencing Distribution Decisions
1. Characteristics of distribution system in that country
2. Local regulations
3. Stage of PLC
4. Consumer shopping habits and market size
5. Competitive climate
External Factors Influencing Distribution Decisions
Internal Market Strategy
Entry mode and degree of control.
1. Selective
2. Intensive
3. Exclusive
Distribution Strategy
Distribution in all possible outlets.
Ex. Coke products
Fewer, selective intermediaries.
Ex. clothing; reputable outlets
Limited number of intermediaries
Ex. Technology
Shopping habits
Represent behaviors that are deeply rooted in the country’s culture and are difficult to change.
Channel Structure
Strongly influenced by the country’s economic development which creates the need for more efficient channels.
1. Direct vs. indirect
2. Conventional vs. vertical marketing systems (VMS)
3. Different types of intermediaries.
Distribution Considerations Include:
Direct Channels
Manufacturer sells directly to customer.
Indirect Channels
One or more intermediaries (agent, wholesaler, retailer, etc.) are involved.
Length of Distribution Channel
Determined by number and types of intermediaries.
Depth of a distribution Channel
Defined by number of intermediaries of the same typology.
1. Reduce number of exchanges
2. Overcome cultural barriers
3. Simplify the selling process
Intermediaries perform different functions to:
Conventional Channel
Intermediaries independent; act as if they run a separate business.
Vertical Marketing Systems
Intermediaries are linked in a unique integrated system which favors cooperation and synergies.
Vertical Marketing is Beneficial When:
1. Complex products both in the sale and after sale phases
2. No reliable distribution partner
3. Channel partners operate with very high mark ups, making final price uncompetitive
4. Retailing format available in the foreign country is not suitable for its goods
1. Corporate VMS
2. Contractual VMS
3. Administrative VMS
Types of Vertical Marketing Systems
Corporate VMS
A vertical marketing system that combines successive stages of production and distribution under single ownership.
Ex. Directly owned stores
Contractual VMS
A vertical marketing system in which independent firms at different levels of production and distribution join together through contracts to obtain more economics or sales impact than they could achieve alone.
Ex. Wholesaler-sponsored voluntary chains, retailer cooperatives, or franchise.
Administrative VMS
A vertical marketing system that coordinates successive stages of production and distribution, not through common ownership or contractual ties, but through the size and power of one of the parties.
1. Agents
2. Wholesalers
3. Retailers
Three Types of Intermediaries
Operate in the name of the company but do not take title to goods.
Take title to goods and sell to customers for resale or business use.
Are final link between provider consumer.
International Retailing
The prerequisite to manage the development of an international network is the creation of a brand value recognized by foreign consumers.
Partner Selection
A long process and each phase must be carefully evaluated.
1. Company Strengths
2. Financial resources
3. Marketing skills
4. Sale skills
5. Commitment
Attributions for Evaluation:
1. Control cost (efficiency)
2. Common value (quality)
3. Trust
4. Long-term relationships
1. Performance management
2. Coverage management
3. Capability management
4. Motivational management
Successful channel management practices should be based on four dimensions:
Performance Management
Identifies activities that are finalized to improve operating performances through the definition of roles, responsibilities and measurable goals.
Coverage Management
Focuses on channel structure efficiency and its coordination with the target market.
Capability Management
Includes all those activities that support the operations of the channel members and increase partners’ motivation that strengthen the relationship.
Physical Distribution
Manage the movement of finished products form the company to its customers.
1. Proactive
2. Reactive
-Change of corporate ownership
-Need to rearrange the channel
-Need to add more distributors
-Take out uncooperative and opportunistic channel members.
-Selling counterfeit products
Global Placement and Distribution Channel
1. Channel of distribution intermediaries exist to perform value-adding services.
2. Distribution channel is the most long-term decision in the marketing mix.
3. A long or short distribution channel system is based on the market and product characteristics.
4. Most business use multi channel distribution systems.
5. Global distribution channel efficiency is related to a country’s level of economic development.
6. The overall goal of a distribution channel is to deliver the right product, at the right time, at the right place, at the right quantity, at the right condition, and at the total least cost.