International Marketing: Chapter 15 Key Concepts Japanese Distribution System & Four Characteristics High density of middlemen High level of channel control Unique business philosophy Large-scale retail store law Six factors affecting channel choices Cost Capital Control Coverage Character Continuity Home-country middlemen Foreign country middlemen Government-affiliated middlemen Challenges of Channel Development Internet-the most important international distribution trend

Channels of Distribution Each country market has a unique distribution structure Distribution process includes: Physical handling and distribution of goods Passage of ownership Buying and selling negotiations between producers and middlemen between middlemen and customers 15-2

Channels of Distribution in Developing Countries Traditional, import-oriented channels Importer-wholesaler performs most marketing functions Limited supply of products is sold at high prices to affluent customers Demand exceeds supply Mass distribution not necessary Implications for foreign marketers: Local distribution systems Distribution system not integrated nationally Nonexistent or underdeveloped marketing infrastructure 15-3

Primary Characteristics of Japanese Distribution Systems High density of middlemen High level of channel control Unique business philosophy Large-scale retail store law

Retail Patterns of Distribution Greater Diversity Than Wholesaling Size patterns Great diversity in size No adequate way to reach small retailers Large retailers growing in developing countries Direct marketing By mail, telephone, catalogs, or door-to-door Works well in affluent markets with underdeveloped channels Amway & Avon expanding dramatically Resistance to change Many laws exist to protect the entrenched

Alternative Middleman Choices Seller must exert influence over two sets of channels home country foreign market country Agent middlemen represent the principal rather than themselves work on commission Merchant middlemen take title to the goods and buy and sell on their own account tend to be less controllable

Home-Country Middlemen Manufacturer’s retail stores (Disney, etc.) Global retailers (Wal-Mart, IKEA, etc.) Export management companies (EMC) Trading companies U.S. export trading companies Complementary marketers Manufacturer’s export agent Webb-Pomerene Export Associations Foreign Sales Corporation 15-7

Foreign-Country Middlemen Variety in most countries is similar to U.S. Dealing directly can be advantageous shorter channels moves manufacturer closer to the market More important foreign-country middlemen: manufacturer’s representatives foreign distributors 15-8

Government-Affiliated Middlemen Marketers must deal with foreign governments Government purchasing offices Procure products & services for the government’s own use Work at federal, regional, and local levels 15-9

Factors Affecting Choice of Channels International marketers need a clear understanding of market characteristics and must have established operating policies before beginning the selection of channel middlemen 15-10

Factors Affecting Channel Choices Cost Capital Control Coverage Character Continuity

Challenges of Channel Development Locating Middlemen Selecting Middlemen Motivating Middlemen Terminating Middlemen Controlling Middlemen

Internet: The Most Important Global Distribution Trend 15-13

Concerns for International E-Vendors Culture Product adaptation Local contact Payment Delivery 15-14