1. International Distribution Systems
465 Fall2000 /Sec 001
Nov27/Class 12A

2. Japanese Distribution Structure
 High Density Middlemen
 Channel Control
 Business Philosophy
 Large-Scale Retail Store Law
 Changes Effected by SII

3. Retailing Comparison U.S. and Japan
Food
% Small Stores % Sales
Japan 95 57
U.S
Japan 94 50
U.S
Non-Food

4. Cutting Out the Middleman
Number of companies involved in each level of the food industry, % of total, 1993
Total number
141,597
97,882
181,374
100%
Manufacturers
90%
80%
Wholesalers
70%
60%
50%
40%
Retailers
30%
20%
10% 0%
Japan
Britain
United States

5. Comparison of Distribution Channels Between the United States and Japan
Manufac-turer
Warehouse distributor
Jobber buy-ing groups
Jobber
Mass merchandiser
Repair specialist
Automobile parts: United States
51%
10%
18%
Primary channel
Secondary channel
Installer
Customer
21%
SOURCE: McKinsey industry studies

6. Comparison of Distribution Channels Between the United States and Japan
Automobile parts: Japan
Automobile makers affiliated parts makers
Independent parts makers
Repair parts makers
Automobile makers
Wholesalers
Special agents
Dealers
Cooperative sales companies
2nd-level wholesalers
Sub-dealers
Retailers
Gasoline stations
Large users
Automobiles repair shops
End users
SOURCE: McKinsey industry studies

7. Undercutting the Competition
New York London Paris Tokyo Mexico City
Aspirin $ $ $ 7.08 $ $
Cup of coffee
Movie
Compact disk
Levi 501 jeans
Ray-Ban sunglasses
Sony Walkman
Nike Air Jordans
Gucci men's loafers
Nikon camera ,054.42
SOURCE: "Tourists and Bargains Galore," Fortune, June 13, 1994, p. 12.

8. Japanese Consumer Philosophy
 Harmony and Friendship
 Consumer
 Brand Loyalty
 Service and Quality Over Price
 Small, Frequent Purchases

9. Channel Control & Business Philosophy
Channel control mechanisms:
How is the status quo maintained?
Business Philosophy:
Harmony /friendship/loyalty

10. Large-scale Retail Store Law
Protect Small Retailers
*500 Sq Meters (5,382 Sq. Ft.)
*Approval from MITI and Prefectural government to: Build Expand Changing Operating Hours Change Days Closed
*Local Retailers must unanimously approve plan
*In addition, a full service store - 39 Licenses to be secured!
*Months to years for approval Japanese Supermarket - 10 years Toys "R" US - 3 years
Structural Impediments Initiative(SII) & changing patterns

11. International Channel-of-Distribution Alternatives
Home Country
Foreign Country
The foreign marketer or producer sells to or through
Foreign consumer
Domestic producer or marketer sells to or through
Open distribution via domestic wholesale middlemen
Foreign agent or merchant wholesalers
Foreign retailers
Exporter
Importer
Export management company or company sales force

12. Home Country Middlemen
 Global Retailers
 Export Management Company
 Trading Companies (Foreign)
 U.S. Export Trading Companies
 Complementary Marketers
 Manufacturer's Export Agents
 Home Country Brokers
 Buying Offices
 Webb-Pomerence Export Associations
 Foreign Sales Corporations
 Export Merchants
 Export Jobbers

13. Foreign Country Middlemen
 Manufacturer's Representatives
 Distributors
 Brokers
 Managing Agents and Compradors
 Dealers
 Import Jobbers
 Wholesalers
 Retailers

14. Factors Affecting Channel Choices
 Cost
 Capital
 Control
 Coverage
 Character
 Continuity

15. Channel Development  Screening  Agreements  Locating Middlemen
 Selecting Middlemen
 Screening
 Agreements
 Motivating Middlemen
 Terminating Middlemen

16. Locating Middlemen… Useful Data Sources
Distributor Inquiries
U.S. Dept. of Commerce
Trade Opportunities Program
Commercial Service International Contacts
Agent/Distributor Service
International Company Profile
Trade Sources
Magazines, journals
Directories
Associations
Banks, advertising agencies, carriers

17. Field sales organizations
Customers
Direct-mail solicitation/contact of previous applicants
Trade fairs
Independent consultants

18. Selecting Middlemen…
Which of the prospective middlemen can perform well?….
Study the market &determine the criteria for evaluating middlemen servicing that market….The screening
How to structure an effective distributor agreement? Recommend initial contracts be signed for one year..The Agreement

19. Criteria for Choosing Distributors (For each distributor…
Criteria for Choosing Distributors (For each distributor…...sum of weight x rating)
5-6
Previous experience (products handled, area covered, size)
Services offered (inventory, repairs, after-sales service)
Marketing support (advertising and promotional support)
Financial strength *Managerial capability&stability
Relations with government
Cooperativeness *Reputation of the business
Whether or not handling competing products
Exhibit 5.4
Source: Adapted from Root, 1987, p63-65 6 6 6

20. Motivating Middlemen Financial rewards Psychological rewards
Communications
Company support
Corporate rapport

21. Controlling Middlemen
Control over the channel system
loss of control thru “secondary wholesaling
loss of control thru “gray markets”
Control at the middleman-level
Perfomance standards,monitoring,reviews,action
w.r.t sales vol targets, mkt coverage,
prices, services offered,payments,profits
thru reports,visits …termination if nec.

22. Master Foreign Distributorship Agreement Checklist
5-7
Exhibit 5.5
Source: Adapted from Hall, 1993, pp Courtesy of Unz & Co. 7 7 7

23. Master Foreign Distributorship Agreement Checklist
5-8
Exhibit 5.5 cont.
Source: Adapted from Hall, 1993, pp Courtesy of Unz & Co. 8 8 8