International Distribution Management

A Comparative Study of International Brands u Compare SKUs u Compare Prices u Compare Channels u Compare Displays u Across time

DISTRIBUTION CHANNELS FOR BUSINESS GOODS

DISTRIBUTION CHANNELS FOR CONSUMER GOODS

Global Trends in Distribution Systems u Larger-Scale Retailers u International Retailers u Direct Marketing u Discounting u Information Technology

Wholesaling u Most European countries are on par, relative to the population u The United States has relatively few establishments, each of larger scale u The Japanese have many units and a large number of people in wholesaling u The size distribution of wholesalers in many countries seems to approximate the well-known “80-20” rule: 80 percent of the transactions are handled by 20 percent of the firms u Vertical Integration –Power and Competition –Efficiency

Retailing u Lifestyle –Shopping represents both a tiresome job and a leisure activity for individuals everywhere and is both a reflection of and a formative influence on the lifestyle of the people in a country u Creating New Channels u The rapid deployment of point-of-purchase information technology

The Place du Grand Sablon

Developments in the 1990s u The border-hopping of the 1980s has accelerated in the 1990s –German companies Metro, Rewe, and Tengelmann entered the Czech Republic, Hungary, and Poland u Growth in the scope of internationalization: companies entered many markets besides adjacent ones –Food retailers in Western Europe: Tengelmann (Germany); Ahold (Netherland); Delhaize Le Lion (Belgium) in the U.S., Central Europe, and the Far East –U.K. retailers: Marks & Spencer; The Body Shop; Laura Ashley; Tesco; Sainsbury –U.S. clothing chains: Talbots and T.K. Maxx have seen the U.K. as a bridgehead into the continental Europe

Classification of the Global Retailers A A C C B B D D Benetton, Ikea, Habitat, Gap, H&M, C&A Toys R Us, Virgin, Douglas, Spar, Vobis Marks & Spencer, Migros Carrefour, Makro, Promodes, Auchan, IGA, Yaohan Many Categories Few Categories Own-Label Focus Manufacturer Brands Focus

Global Distribution Home Market Channel Members Export Management Company Export Agent Direct Exporting Home Market Channel Members Export Management Company Export Agent Direct Exporting Players Foreign Market Channel Members Import Intermediaries Local Wholesalers Retailers Foreign Market Channel Members Import Intermediaries Local Wholesalers Retailers Developing an International Distribution Strategy Factors Affecting Selection of Channel Members Locating and Selecting Channel Members Managing the Distribution Channels Developing an International Distribution Strategy Factors Affecting Selection of Channel Members Locating and Selecting Channel Members Managing the Distribution Channels Process Gaining Access to the Distribution Channels Gaining Access to the Distribution Channels Global Supply Chain Management Trends in Global Distribution

Processes of Establishing A Global Distribution System u Develop a distribution strategy u Establish criteria for selecting distribution partners u Locate potential distribution partners u Solicit the interest of distributors u Screen and select distribution partners u Negotiate agreements

Channel Objectives u To create utility for customers –Place (the availability of a product or service in a location convenient to a potential customer) –Time (the availability of a product or service when desired by a customer) –Form (the product is processed, prepared, and ready to use and in proper condition) –Information ( answers to questions and general communication about useful product features and benefits are available)

Dimensions of Distribution Strategy u Distribution Density –Density refers to the amount of exposure or coverage desired for a product u Channel Length –The concept of channel length involves the number of intermediaries involved in bringing a given product to the market u Channel Alignment and Leadership –The area of alignment deals with the structure of the chosen channel members to achieve a unified strategy u Distribution Logistics –Logistics involves the physical flow of products as they move through the channel

Factors Influencing the Selection of Channel Members u Cost u Capital Requirement u Product and Product Line u Control u Coverage u Synergy

Channel Structure Alternatives for Consumer Products u Door-to-Door Sales Force u Internet Marketing u Mail-Order Marketing u Manufacturer-Owned Stores

Entry Strategy Framework A A C C B B D D OrganicChain Acquisition FranchiseJoint Venture Culturally Distant Culturally Close Easy to Enter Difficult to Enter

Entry Strategy u Organic (Greenfield and Site Acquisition) –Using its own resources to acquire existing sites from other retailers or to start from scratch u Franchise –Master franchise: only one franchisee per country or region; a sub-franchisee network –Direct franchise: several franchisees within a country, usually on a location-by-location basis u Acquisition –Involves purchasing multiple outlets in the target market u Joint Venture

Gaining Access to Distribution Channels u The “Locked-Up” Channel u Alternative Entry Approaches –Piggybacking –Original Equipment Manufacturers (OEMs)

Rationalizing Local Channels u Changing Distributors –The termination of independent distributors’ or authorized dealers’ contracts –Creating a wholly owned sales subsidiary u Dual Distribution –To differentiate the offerings in different channels

Problems for Manufacturers u The shift of bargaining power in the channel u To serve local retailers and global retailers simultaneously u “Channel Captain” u Relationship Marketing u Development of global brands

Experiential Marketing u Modern economies have evolved from the delivery of commodities to the delivery of goods, from goods to services, and are in the process of evolving to the delivery of experiences u Services become increasingly commodified, customer perceptions of competitive advantage diminish, as does satisfaction u The delivery of experiential market offerings involves engaging customers in a memorable way u All actions of the organization contribute to the ‘performance’ of the experiential market offering

Times Square Theaters

Store Ambience and Brand Experience u The retail space is becoming more important to brands as the style of consumer shopping changes –Have a clear brand identity –Provide a brand-related consumer benefit –Leverage brand assets –Create a superior shopping experience –Continuously innovate to keep the experience fresh –Leverage the store and its learning

Godiva Display

Laduree

Virtual Shopping

Flagship Stores u Have a clear rand identity u Provide a brand-related consumer benefit u Leverage rand assets u Create a superior shopping experience u Continuously innovate to keep the experience fresh u Leverage the store and its learning