International Distribution Systems Quiz

International Marketing Decisions: International Distribution

• Distribution Policies
  • Choosing the organizational format for foreign business is a key decision.
  • Standardization of distribution channels is ideal but may face country-specific differences.
  • Standardization allows transferring experience from similar channels in different countries.
  • Identical distribution partners across countries can increase their power and create dependencies.
  • Balancing standardization and differentiation is crucial in distribution management.

Channel Utility

• Marketing channels create utility for customers.
• Place utility is the availability of products/services in convenient locations.
• Time utility is the availability at desired times.
• Form utility involves processing and preparing products for ready use.
• Information utility provides information about products/services.

Channel Decisions

• External Determinants

  • Customer characteristics like size, distribution, and shopping habits need consideration in determining channel decisions.
  • Influenced by socio-cultural factors
  • More geographically dispersed customers or smaller quantities of customers may result in channels that are longer.
  • Product characteristics affect channels.
    • Low-priced, high-turnover products often use intensive distribution networks.
    • High-value or prestigious products may use selective distribution (fewer outlets).
    • Industrial goods require efficient transportation and warehousing.
  • Nature of demand/location considerations.
    • Customers' experience and perceptions of the product may affect distribution channels.
    • Expectations about product availability at specific outlets (e.g., specialty stores).
    • Geographic environment and infrastructure impact channel design.
  • Competitive considerations.
    • Competing products and channels may create barriers and require unique approaches for competitive advantages.
    • Agreements with wholesalers influence the choice of channels.
  • Legal regulations impacting channel choices.
    • Specific local regulations (e.g., alcohol laws) constrain channel options.

• Internal Determinants

  • Decisions Concerning Structure of the Channel.
    • Types of intermediaries (alternative distribution channels).
    • Coverage (intensive, selective, or exclusive).
    • Channel length(number of intermediary levels).
    • Control resources (degree of integration)
    • Screening and selecting intermediaries..
    • Contracting (distributor agreements).
    • Motivation, control, and termination of contractual relationships.
  • Managing and Controlling Distribution Channels.
    • Physical movement of goods through the system.
    • Order handling, transportation, and inventory management are important aspects of channel logistics.
    • Storage, warehousing.

• Managing Logistics

Establishing Channels

• Direct Involvement
  • Company establishes its stores or sales force for control.
• Indirect Involvement
  • Utilizes independent agents, wholesalers, or franchise distributors for broader reach and reduced control.
• Channel Strategy
  • Aligning the chosen channel strategy with the company's competitive position and objectives in each market is a critical aspect.

Distribution Channels

• Several types of intermediaries may be involved depending on the product/market needing.
  • Merchants (wholesalers, retailers)
  • Agents and brokers
  • Facilitators (transportation, warehousing, banks)

Cross-national Distribution Design

• Potential options for a manufacturer of electronic components in different target countries are presented in a diagram.
  • Export firms, importers, and own sales branches are outlined as potential elements in cross national channels

Factors Influencing Channel Width

• Channel width refers to the number and types of intermediaries involved in the distribution process.
• Various factors influence channel width choice, including the type of product, its stage in the product life-cycle, its price, brand loyalty, and purchase frequency.

Adapting to Local Preferences

• Local market characteristics (e.g., infrastructure, population density, preferences for stockpiling) influence channel selection

Retailing in Developing Countries

• Consumers increasingly purchase goods in stores or kiosks or informal marketplaces such as "mom and pop" shops.

Global Retailing: Expansion

• Expansion through organic growth, chain acquisitions, franchise agreements, or joint ventures to overcome cultural or distribution barriers or difficulties in new markets.

The Seven Rules for International Distribution

• Selecting distributors – Don't be the chosen one.
• Identifying suitable distributors based on their potential to develop new markets.
• Treating local distributors as long-term partners rather than only for a short-term entry.
• Supporting market entry through capital, managerial expertise, and proven marketing ideas.
• Establishing clear marketing strategy control.
• Requiring detailed market and financial performance data from distributors for accountability.
• Establishing connections among distributors in different countries early in the process to leverage market knowledge.

Why Treating Intermediaries as Long-Term Partners is Important

• Retailer boycotts of products can have severe repercussions on sale revenues and profits.
• Examples include Edeka and Coop’s boycotts of Nestle products in Germany and Switzerland respectively.
• Kaufland’s boycott of Unilever products occurred during the Christmas shopping period.