International Marketing Channels 15th edition Chapter 15 International Marketing Channels Philip R. Cateora, Mary C. Gilly, and John L. Graham

Channel-of-Distribution Structures All consumer and industrial products eventually go through a distribution process Physical handling and distribution of goods Passage of ownership Buying and selling negotiations between producers and middlemen Buying and selling negotiations between middlemen and customers Each country market has a distribution structure Goods pass from producer to user Roy Philip

Import-Oriented Distribution Structure (1 of 2) In an import-oriented or traditional distribution structure: Importer controls a fixed supply of goods Marketing system develops around the philosophy of selling a limited supply of goods at high prices to a small number of affluent customers Roy Philip

Import-Oriented Distribution Structure (2 of 2) Demand exceeds supply The customer seeks the supply from a limited number of middlemen Distribution systems are local Few countries fit the import-oriented model Roy Philip

Japanese Distribution Structure (1 of 2) Four distinguishing features High density of middlemen Channel control Business philosophy Large-scale retail store law Changes in the structure Roy Philip

Japanese Distribution Structure (2 of 2) A structure dominated by many small middlemen dealing with many small retailers Channel control by manufacturers A business philosophy shaped by a unique culture Laws that protect the foundation of the system Roy Philip

High Density of Middlemen Not unusual for consumer goods to go through three or four intermediaries before reaching the consumer Japan has a large number of independent groceries and bakers (94.7% or all retail stores) Small stores account for 59.1% of retail food sales U.S. emphasis is on supermarkets, discount food stores, and department stores Small stores generate 35.7% of food sales Roy Philip

Channel Control Inventory financing Cumulative rebates Merchandise returns Promotional support Roy Philip

Business Philosophy Emphasizes loyalty, harmony, and friendship Supports long-term dealer-supplier relationships The cost of Japanese consumer goods are among the highest in the world Japanese law gives the small retailer enormous advantage over the development of larger stores Roy Philip

Large-Scale Retail Store Law and Its Successor Daitenho – the Large-Scale Retail Store Law Large stores must have approval from the prefecture government All proposals first judged by the Ministry of International Trade and Industry (MITI) If all local retailers unanimously agreed, the plan was approved Could be a lengthy process Applied to both domestic and foreign companies Replaced by the Large-Scale Retail Store Location Act of June 2000 MITI out of the process Relaxed restrictions Roy Philip

Alternative Middleman Choices Seller must exert influence over two sets of channels One in the home country One in the foreign-market country Agent middlemen – represent the principal rather than themselves Merchant middlemen – take title to the goods and buy and sell on their own account Roy Philip

International Channel-of-Distribution Alternatives Exhibit 15.3 Roy Philip

Channel Management Locating middlemen Selecting middlemen Screening The agreement Motivating middlemen Terminating middlemen Controlling middlemen Roy Philip

Logistics (1 of 2) Logistics management is a total systems approach to the management of the distribution process that includes all activities involved in physically moving raw material, in-process inventory, and finished goods inventory from the point of origin to the point of use or consumption The physical distribution system involves more than the physical movement in goods; it includes the location of plants and warehousing, transportation mode, inventory quantities, and packing Roy Philip

Logistics (2 of 2) Substantial savings can result from the systematic examination of logistics costs and the calculation of total physical distribution costs The concept behind physical distribution is the achievement of the optimum (lowest) system cost, consistent with customer service objectives of the firm One of the major benefits of the European Union’s unification is the elimination of transportation barriers among member countries Roy Philip