International Marketing: Distribution Decisions (PDF)

International Marketing @University of Tübingen Marketing decisions: International distribution Prof. Dr. Kristina Klein Distribution politics decisions Choice of organization format for foreign business (see chapter 2) Standardization: requires that the same distr...

International Marketing @University of Tübingen Marketing decisions: International distribution Prof. Dr. Kristina Klein Distribution politics decisions Choice of organization format for foreign business (see chapter 2) Standardization: requires that the same distribution channels exist in the various countries Country-specific differences Advantage of standardization: transfer of experience from similar distribution channels Disadvantage of identical distribution partners in different countries: Increase of power of distribution partner (dependency increases) Appropriate consideration about standardization versus differentiation of distribution management Backhaus, K./Büschken, J./Voeth, M. (2003), Internationales Marketing, p. 279 f. 2 © Univ.-Prof. Dr. Kristina Klein, markstones Institute of Marketing, Branding & Technology, www.markstones.de Agenda Distribution Channels and 6.1 Channel Decisions 6.2 International Retailing 6.3 Adaption in Retailing Formats Channel utility Marketing channels exist to create utility for customers Place utility: availability of a product or service in a location that is convenient to a potential customer Time utility: availability of a product or service when desired by a customer Form utility: availability of the product processed, prepared, in proper condition and /or ready to use Information utility: availability of answers to questions and general communication about useful product features and benefits https://www.amazon.com/; https://www.theverge.com/2018/10/23/18010022/amazon-go-cashier-less-store-san-francisco-location-opens; https://en.wikipedia.org/wiki/Crossgates_Commons; https://es.fashionnetwork.com/news/Ittierre-lanza-su-e-commerce-y-abre-una-boutique- efimera-en-Milan,297845.html 4 © Univ.-Prof. Dr. Kristina Klein, markstones Institute of Marketing, Branding & Technology, www.markstones.de Channel decisions Nature Nature of Legal External Customer of demand Competition regulations/local Characteristics product (location) business practices Internal Major decisions Subdecisions Types of intermediary (alternative distribution channels) Decisions concerning structure of the Coverage (intensive, selective or exclusive) channel Length (number of levels) Control resources (degree of integration) Screening and selecting intermediaries Contracting (distributor agreement) Managing and controlling distribution Motivating channels Controlling Termination Physical movement of goods through the channel system Order handling Managing logistics Transportation Inventory Storage/ warehouse Hollensen, S. (2011), Global Marketing, p. 551 5 © Univ.-Prof. Dr. Kristina Klein, markstones Institute of Marketing, Branding & Technology, www.markstones.de Determinants of channel decisions: external determinants (1/2) Customer characteristics Size, geographic distribution, shopping habits, outlet preferences and usage patterns of customer groups must be taken into account  shopping habits, outlet preferences and usage patterns are strongly influenced by sociocultural factors Longer channels if greater number of customers, more geographically dispersed customers, smaller quantities Nature of products Low-priced, high turnover convenience products  intensive distribution network Prestigious products  not necessary to have wide distribution (narrower distribution channel) Industrial goods (e.g., bulk chemicals, metals, cement)  transportation and warehousing costs critical Product’s durability, ease of adulteration, amount and type of customer service required, special handling requirements (e.g., cold storage) are also significant factors Hollensen, S. (2011), Global Marketing, pp. 552-554 6 © Univ.-Prof. Dr. Kristina Klein, markstones Institute of Marketing, Branding & Technology, www.markstones.de Determinants of channel decisions: external determinants (2/2) 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 Specific laws that rule out the use of particular channels e.g. alcohol in the USA only in liquor stores, tobacco in Scandinavian countries only in certain stores, etc. Hollensen, S. (2011), Global Marketing, pp. 552-554 7 © Univ.-Prof. Dr. Kristina Klein, markstones Institute of Marketing, Branding & Technology, www.markstones.de Channel decisions Nature Nature of Legal External Customer of demand Competition regulations/local Characteristics product (location) business practices Internal Major decisions Subdecisions Types of intermediary (alternative distribution channels) Decisions concerning structure of the Coverage (intensive, selective or exclusive) channel Length (number of levels) Control resources (degree of integration) Screening and selecting intermediaries Contracting (distributor agreement) Managing and controlling distribution Motivating channels Controlling Termination Physical movement of goods through the channel system Order handling Managing logistics Transportation Inventory Storage/ warehouse Hollensen, S. (2011), Global Marketing, p. 551 8 © Univ.-Prof. Dr. Kristina Klein, markstones Institute of Marketing, Branding & Technology, www.markstones.de Establishing channels Direct involvement: the company establishes its own sales force or operates its own retail stores (organic growth) Indirect involvement: the company utilizes independent agents, distributors, and/or wholesalers (franchise) Channel strategy must fit the company’s competitive position and marketing objectives within each national market https://www.yelp.de/biz_photos/media-markt-albstadt-2?select=wb4vU-PIEeGM0QOTMt6_Dg; https://darnoffice.com/apple-stores-around-the- world/ 9 © Univ.-Prof. Dr. Kristina Klein, markstones Institute of Marketing, Branding & Technology, www.markstones.de Distribution channels – one or more intermediaries? Merchants Wholesaler, retailers Agents Brokers, manufacturer’s representatives, sales agents Facilitators Transportation companies, independent warehouses, banks, advertising agencies 10 © Univ.-Prof. Dr. Kristina Klein, markstones Institute of Marketing, Branding & Technology, www.markstones.de Cross-national design of a distribution system of a manufacturer – potential options (here: manufacturer of electronic components) Supplier Export firm Export firm Home country Target Country A Country B Country C Country D countries Own sales Importer Importer branch Wholesaler Consumer Consumer Consumer Consumer Homburg, C./ Krohmer, H. (2009), Marketingmanagement, p.1074 11 © Univ.-Prof. Dr. Kristina Klein, markstones Institute of Marketing, Branding & Technology, www.markstones.de Factors influencing channel width also relevant for the exam, no definitions but how to apply Channel width Intensive Selective Exclusive Distribution Distribution Distribution Product type Convenience products Specialty products Product life cycle stage Mature products New products Product price Low-price products High-price products Brand loyalty Brand-preferred products Brand-insisted products Purchase frequency Frequently purchased products Infrequently purchased products Factor Product uniqueness Common products Distinctive products Selling requirement Self-service products Personal-selling products Technical complexity Non-technical products Technical products Service requirements Limited-service products Extensive-service products Hollensen (2011), Global Marketing, p. 555 12 © Univ.-Prof. Dr. Kristina Klein, markstones Institute of Marketing, Branding & Technology, www.markstones.de Channel decisions Nature Nature of Legal External Customer of demand Competition regulations/local Characteristics product (location) business practices Internal Major decisions Subdecisions Types of intermediary (alternative distribution channels) Decisions concerning structure of the Coverage (intensive, selective or exclusive) channel Length (number of levels) Control resources (degree of integration) Screening and selecting intermediaries Contracting (distributor agreement) Managing and controlling distribution Motivating channels Controlling Termination Physical movement of goods through the channel system Order handling Managing logistics Transportation Inventory Storage/ warehouse Hollensen, S. (2011), Global Marketing, p. 551 13 © Univ.-Prof. Dr. Kristina Klein, markstones Institute of Marketing, Branding & Technology, www.markstones.de Logistics: transportation Depending on a local market’s stage of economic development and infrastructural conditions, a foreign company may need to adjust its mode of transportation drastically. Kotabe, M./Helsen, K. (2011), Global Marketing Management, p. 516 14 © Univ.-Prof. Dr. Kristina Klein, markstones Institute of Marketing, Branding & Technology, www.markstones.de Transportation Channel Strategy - analyzing each shipping mode to determine which mode, or combination of modes, will be both effective and efficient in a given situation Ease of Mode Reliability Cost Speed Accessibility Capability Tracing Rail Average Average Average High High Low Water Low Low Slow Low High Low Truck High Varies Fast High High High Air High High Fast Low Moderate High Pipeline High Low Slow Low Low Moderate Internet High Low Moderate Moderate; Low High to fast increasing 15 © Univ.-Prof. Dr. Kristina Klein, markstones Institute of Marketing, Branding & Technology, www.markstones.de The seven rules of international distribution --> unsure whether they fit your company, if they work for your competitors, etc. 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. 6. Make sure distributors provide you with detailed market and financial performance data 7. Build links among national distributors at the earliest opportunity. Arnold, D. (2000), p. 131 ff. 16 © Univ.-Prof. Dr. Kristina Klein, markstones Institute of Marketing, Branding & Technology, www.markstones.de Why is treating intermediaries as long-term partners so important? Edeka boycotted 163 products (equal to 20% of revenue the chain generates with Nestle products) in Germany Similarly, Coop boycotted a further 59 products in Switzerland Kaufland boycotted Unilever products during the Christmas shopping period. https://www.bloomberg.com/news/articles/2018-05-02/grocers-boycott-of-nestle-products-ends-after-two-month-dispute; https://www.reuters.com/article/us-nestle-retailers-edeka/supermarkets-edeka-and-coop-expand-nestle-boycott-media-idUSKCN1HD17E; https://finance.yahoo.com/news/german-retailer-kaufland-drops-unilever-products-over-price-125656060--finance.html 17 © Univ.-Prof. Dr. Kristina Klein, markstones Institute of Marketing, Branding & Technology, www.markstones.de Agenda Distribution Channels and 6.1 Channel Decisions 6.2 International Retailing 6.3 Adaption in Retailing Formats TOP 10 of Global Retailers, 2020 https://www2.deloitte.com/content/dam/Deloitte/at/Documents/consumer-business/at-global-powers-retailing-2022.pdf 19 © Univ.-Prof. Dr. Kristina Klein, markstones Institute of Marketing, Branding & Technology, www.markstones.de The most valuable retail brands Brand value in millions of U.S. dollars 0 50.000 100.000 150.000 200.000 250.000 300.000 Amazon The Home Depot Tmall Walmart Costco Taobao JD Lowe's Target Ikea Aldi Ebay Shopee Mercado Libre Pinduoduo Coupang Lidl Dollar General Whole Foods Woolworths https://www.statista.com/statistics/267870/brand-value-of-the-leading-most-valuable-retailers-worldwide/ 20 © Univ.-Prof. Dr. Kristina Klein, markstones Institute of Marketing, Branding & Technology, www.markstones.de Criteria to distinguish retail formats Definition and distinction criteria Typical criteria to distinguish retail formats Width of assortment Location (city, sub-urban, rural) Depth of assortment Store size Quality level Service level Pricing (discount vs. premium) Type of customer contact (personal vs. impersonal) Examples Department Stores Discounter Broad and deep assortment Narrow and shallow assortment Solid to high-quality assortment Modest to solid quality assortment Flexible pricing vs. Aggressive pricing Central location Suburban location Large store lower width and Medium-sized firm depth, but lower prices Service and self-service Self-service width: how many different products you have depth: hoe many variations of these products you have (size packaging, etc) 21 © Univ.-Prof. Dr. Kristina Klein, markstones Institute of Marketing, Branding & Technology, www.markstones.de Global retail formats Department stores Specialty retailers Supermarkets Convenience stores Discount stores and Retailer type Definition Example warehouse clubs Department store Product mix under one roof Saks, Bloomingdales Hypermarkets Specialty retailer Less variety than department stores; High The Body Shop, Victoria’s Secret. Supercenters merchandise depth & levels of service Starbucks Category killers Supermarket 50-60 tsd square feet UK Tesco Outlet stores Convenience High-turnover convenience & impulse goods; 7-11 stores prices 15-20% higher than grocery stores Full-line discounter Wide range of merchandise Walmart Hard discounters Limited range of merchandise, low prices Aldi, Lidl 22 © Univ.-Prof. Dr. Kristina Klein, markstones Institute of Marketing, Branding & Technology, www.markstones.de Agenda Distribution Channels and 6.1 Channel Decisions 6.2 International Retailing Adaption in Retailing 6.3 Formats Adapting to local preferences In Japan, huge self-service stores are of less importance than in Europe or North-America. This is due to the fact, that in areas of high population density, such as Tokyo, most of the households do not possess a car (costs of parking). Moreover, most families live in very close proximity and close quarters so that stockpiling (via cellars or freezer) is not possible. Consequently, a “weekly (large) shopping” (as in Europe or North America) is very rare. Japanese tend to go shopping several times a week. As such, huge self-service stores are cumbersome due to long shopping paths to purchase the desired goods. Backhaus, K./Büschken, J./Voeth, M. (2003), Internationales Marketing, p. 280 24 © Univ.-Prof. Dr. Kristina Klein, markstones Institute of Marketing, Branding & Technology, www.markstones.de Retailing in developing countries Consumers purchase food, soft drinks and other items at “Mom & Pop” stores, kiosks, and market stalls in single use packages 70% of Mexicans shop at these stores P&G aids stores that carry at least 40 P&G products with displays, promo materials https://burgenland.orf.at/v2/radio/stories/2509748/; https://www.pinterest.de/MarcesMiniature/abarrotes-stores/ 25 © Univ.-Prof. Dr. Kristina Klein, markstones Institute of Marketing, Branding & Technology, www.markstones.de Global retailing: Expansion Culturally close Organic growth Chain acquisition Easy to enter Difficult to enter Franchise Joint venture, licensing Culturally distant http://feelyourtempo.com/best-game-stores-abu-dhabi/; https://www.reuters.com/article/us-walmart-seiyu/walmart-aims-to-list-minority-stake- in-japan-unit-seiyu-idUSKCN1TR0KM; https://www.istockphoto.com/ch/foto/m%C3%B6bel-von-ikea-retail-store-gm458735317-19123839 26 © Univ.-Prof. Dr. Kristina Klein, markstones Institute of Marketing, Branding & Technology, www.markstones.de Universität Bremen Prof. Dr. Kristina Klein Max-von-Laue-Straße 1 Gebäude WiWi 2 F3210 [email protected] 0421 218-66970