International Marketing Part 6 PDF

International Marketing - Part 6 Distribution politics decision ⟶ When a company expands internationally, it must decide how to structure its distribution channels. There are two main approaches: 1. Standardization – Using the same distribution channels in every country. Advantage: The co...

International Marketing - Part 6 Distribution politics decision ⟶ When a company expands internationally, it must decide how to structure its distribution channels. There are two main approaches: 1. Standardization – Using the same distribution channels in every country. Advantage: The company can apply successful strategies from one market to another, learning from past experiences. Disadvantage: Relying on the same distribution partners across different countries can make the company overly dependent on them, giving those partners more power. 2. Differentiation – Adapting distribution channels to fit each country's unique market conditions. Advantage: More flexibility to meet local needs, regulations, and customer preferences. Disadvantage: Higher costs and complexity in managing different strategies for each country. Channel utility ⟶ Marketing channels create utility by making products more valuable and accessible to customers. There are four main types of utility: 1. Place Utility – Ensuring that the product is available where customers need it. Example: A soft drink being sold at a vending machine in a busy mall. 2. Time Utility – Making the product available when customers want it. Example: A 24/7 online store that allows customers to order anytime. 3. Form Utility – Providing the product in a way that is ready to use or meets customer preferences. Example: Pre-cut vegetables in a grocery store for easy cooking. 4. Information Utility – Offering helpful details about the product’s features, benefits, or usage. Example: A website with FAQs and customer reviews for an electronic gadget. Channel decisions External Factors Internal Factors Customer Characteristics Size, geographic distribution, shopping habits, outlet preferences and usage patterns of Decisions concerning structure of the channel: customer groups must be taken into account Types of intermediary (alternative distribution shopping habits, outlet preferences and usage channels) patterns are strongly influenced by Coverage (intensive, selective, or exclusive) sociocultural factors Length (number of levels) Longer channels if greater number of customers, Control resources (degree of integration) more geographically dispersed customers, Managing and controlling distribution channels: smaller quantities Screening and selecting intermediaries Nature of Product Contracting (distributor agreement) Low-priced, high turnover convenience Motivating products → intensive distribution network Controlling Prestigious products → not necessary to have Termination wide distribution (narrower distribution Managing logistics: channel) Physical movement of goods through the Industrial goods (e.g., bulk chemicals, metals, channel system cement) → transportation and warehousing costs Order handling critical Transportation Product’s durability, ease of adulteration, Inventory amount and type of customer service required, Storage/warehouse special handling requirements (e.g., cold storage) also significant  Nature of Demand (Location) Perceptions of target customers (experience with the product, product’s end use, life cycle position) about particular products can necessitate modification of distribution channels Expectations about finding particular products in particular outlets (e.g., specialty stores) Geography of a country and transportation infrastructure Competition Channels used by competing products and close substitutes → agreements with major wholesalers may create barriers or even exclude others from key channels Alternative: Use a distribution approach totally different from that of the competition (competitive advantage) Legal Regulations/Local Business Practices Specific laws that rule out the use of particular channels Establishing Channels ⟶ When expanding into new markets, a company must decide how to establish its distribution channels. There are two main approaches: 1. Direct Involvement – The company manages its own sales force or operates its own retail stores. Example: Apple opening its own Apple Stores worldwide. Advantage: Greater control over branding, pricing, and customer experience. Disadvantage: High investment costs and operational complexity. 2. Indirect Involvement – The company partners with independent agents, distributors, or wholesalers. Example: McDonald’s using a franchise model to expand globally. Advantage: Lower upfront costs and faster market entry. Disadvantage: Less control over customer service and brand consistency. A company’s channel strategy should align with its competitive position (brand strength, financial resources) and marketing objectives (target audience, pricing strategy) in each market. Some companies use a mix of both approaches, depending on the country and industry conditions. Distribution channels ⟶ When a company sells products, it can choose to distribute them directly to customers or use intermediaries. These intermediaries help move products through the supply chain and add value in different ways. There are three main types of intermediaries in distribution channels: 1. Merchants – They buy and resell products, taking ownership of the goods. Wholesalers: Purchase in bulk from manufacturers and sell to retailers. (Example: A beverage wholesaler supplying grocery stores.) Retailers: Sell products directly to consumers. (Example: Supermarkets, clothing stores, or online retailers like Amazon.) 2. Agents – They do not take ownership of the goods but help negotiate sales. Brokers: Connect buyers and sellers for a commission. (Example: A real estate broker.) Manufacturer’s Representatives/Sales Agents: Sell products on behalf of manufacturers, often in specific regions. 3. Facilitators – They assist in the distribution process but do not buy or sell the goods. Transportation Companies: Deliver products from manufacturers to wholesalers, retailers, or customers. Independent Warehouses: Store goods before they are sold. Banks: Provide financial support like credit or payment processing. Advertising Agencies: Help promote products to reach customers. Cross-national design of a distribution system of a manufacturer – potential options ⟶ (here: manufacturer of electronic components) Factors influencing channel width Transportation 1. Rail Transport Best for: Large, heavy goods over long distances (e.g., coal, steel, automobiles). Pros: High accessibility, good for bulk shipments. Cons: Moderate speed, limited flexibility for short distances. 2. Water Transport Best for: Large, low-cost, and non-urgent shipments (e.g., oil, grain, machinery). Pros: Lowest cost for bulk shipping, high capacity. Cons: Very slow, limited to areas with ports, less reliable due to weather conditions. 3. Truck Transport Best for: Consumer goods, retail distribution, and perishable items. Pros: High speed, flexible routes, direct delivery to businesses or homes. Cons: Costs vary with fuel prices, limited efficiency for long distances. 4. Air Transport Best for: Urgent, high-value, or perishable products (e.g., electronics, pharmaceuticals, luxury goods). Pros: Fastest option, high reliability, good for international shipping. Cons: Most expensive mode, limited cargo capacity. 5. Pipeline Transport Best for: Liquids and gases (e.g., oil, natural gas, water). Pros: High reliability, low cost after setup. Cons: Extremely slow, limited to specific industries, high initial investment. 6. Internet (Digital Goods Delivery) Best for: Software, streaming services, online education. Pros: Low cost, fast or instant delivery, high reliability. Cons: Limited to digital products, dependent on internet access. The seven rules of international distribution 1. Select distributors. Don‘t let them select you. 2. Look for distributors capable of developing markets, rather than those with a few obvious customer contacts 3. Treat the local distributors as long-term partners, not temporary market-entry vehicles 4. Support market entry by committing money, managers, and proven marketing ideas. 5. From the start, maintain control over marketing strategy. Make sure distributors provide you with detailed market and financial performance data 6. Build links among national distributors at the earliest opportunity.