2. 312MKT International Marketing
Lecture Fourteen

3. Learning objectives
To consider distribution channel management in international marketing
To explore international retailing

4. Distribution Channels
1/19/2015
Distribution Channels
M01SMM - Week 4

5. Distribution Channels
“Are the means by which goods are distributed from the manufacturer to the end user”
(Doole and Lowe, 2012)

6. Distribution – why is it critical?
It is a significant decision because other marketing mix decisions are dependant on the distribution channel decision.
It is a long term decision as once established it is difficult to alter for different reasons (e.g. legal agreement, long term successful relationships)
For this reason that the chosen channels have to be appropriate for today and flexible enough to adopt to long-term market developments
(Doole and Lowe, 2012)

7. Distribution – why is it critical?
The long-term nature of distribution decisions forces a careful analysis of future developments
The comparative inexperience of managers in the channel selection process in international markets.
In foreign market channels managers may underestimate the barriers to entry erected by local competitors or even government regulations.
(Doole and Lowe, 2012)

8. Distribution – why is it critical?
It is the bases for building a competitive advantage (e.g. speed, effective distribution).
Key areas to consider to develop a distribution strategy that delivers an effective distribution is:
Selection of foreign country intermediaries
How to build a relationship with intermediaries
How to deal with the varying types of retailing infrastructure across international markets
How to maximize new and innovative forms of distribution
How to manage the logistics of physically distributing products across foreign markets
(Doole and Lowe, 2012)

9. Indirect vs direct channels
Direct (integrated) Channels
Supplier have more control
High level of customer service (before or after sale)
Higher level of responsibility – risks (e.g. cost)
Indirect (independent) Channels
Using outside sales agents and distributors in foreign country
Less Investments
Overcoming fright rate/negotiation disadvantages
Lower the cost of exporting and allowing higher profit margins
(Doole and Lowe, 2012)

10. Indirect vs direct channels
Indirect Channels
Companies can rely of distribution services companies for services such as:
The purchase of goods
The assembly of an attractive assortment of goods
Holding stock or inventory
Promoting the sale of goods to the end consumer
The physical movement of goods
(Doole and Lowe, 2012)

11. Distribution Channels for Business goods – (B2B)
Supplier of Business goods
Indirect channels (home country channel members
Domestic Purchasing
Piggyback Operations
Export houses
Trading Companies
Direct channels (home country channel members
Company-owned
Sales force
Agents
Buyer intranet
Distributors
Business Buyer
(Doole and Lowe, 2012)

12. Channel Selection Considerations
11 elements to consider (Czinkota and Ronkainen, 2009)
Customer characteristics
Culture
Competition
Company objectives
Character of the market
Cost
Capital required
Coverage needed
Control issues
Continuity provided
Communication Effectiveness
(Doole and Lowe, 2012)

13. External factors (Hollensen)
Customer characteristics
Nature of product
Nature of demand/location
Competition
Legal regulations/local business practices
(Hollensen, 2007)

14. International Channel-of-Distribution Alternatives
1/19/2015
M01SMM - Week 4

15. On Distribution.. “Distribution Is Key in Value Proposition"
Dr Douglas Stayman
Johnson Graduate School of Management
Cornell University
“Distribution Is Key in Value Proposition"
Weblink:

16. Large Distribution Centers
How Amazon's Largest Distribution Centre Works?
Weblink:

17. Parts Distribution Center
TOYOTA
Parts Distribution Center
Weblink:

18. Converse Automated Distribution Center
Weblink:

19. The Internet
1/19/2015
E-commerce: Buying and selling through the Internet or comparable systems
Involves direct marketing from manufacturer, retailer, service provider or other intermediary to final user
For small and middle-sized firms
Overall costs are reduced by bulk buying through an online intermediary
Placing and processing orders online is cheaper and faster than the traditional way
M01SMM - Week 4

20. The Internet For service-oriented firms Makes them globally accessible
1/19/2015
The Internet
For service-oriented firms
Makes them globally accessible
Outsourcing of traditional in-house services has become more popular
E-commerce facilitates cost savings by:
Reducing procurement and transaction processing costs
Enabling better supply-chain management
Enabling tighter inventory control
M01SMM - Week 4

21. The Internet
1/19/2015
M01SMM - Week 4

22. Trends in International Retailing
Countries differ with regards to their histories, geography and politics. Due to these differences retailing structures also differ.
Retailing varies across the different levels of economic development and is influenced by cultural differences
For example the French approach relies on small scale production by the retail proprietor. The US approach encourages mass production, branding and sophisticated distribution systems to handle inventory and freshness issues.
(Doole and Lowe, 2012)

23. Retailers Differences Between Developed and Developing Countries
Retailing Issues
Traditional Retailing in Developing countries
Advanced retailing structures in mature economies
Concentration of retail power
Low
Often High
Site selection and retail location
Limited to the immediate locality
Very important often sophisticated techniques to pinpoint the most valuable assets
Size of outlet
Limited
Large and Tending to get larger
Retailer initiation of product assortment
Limited to the buy/no buy decision
Wide range of stock possible. Use of won label and store-specific sales promotions
Retail concepts images and corporate identity
Rarely used
Very important
(Doole and Lowe, 2012)

24. Retailers Differences Between Developed and Developing Countries
Retailing Issues
Traditional Retailing in Developing countries
Advanced retailing structures in mature economies
Retailer-initiated sales promotions
Rarely used. Reliance on manufacturer and wholesaler-developed sales promotion and point of sale material
Very important
Use of retail technology
Limited
Vital e.g. EDI, EPOS
Service
Mainly counter service
Mass customization, sophisticated CRM systems
(Doole and Lowe, 2012)

25. The Globalization of Retailing
The expansion of international activity of retailers around the world has given rise to 4 different types of international retailers:
The hyper market
The power retailers
The nich retailer
The designer flagship stores
(Doole and Lowe, 2012)

26. ‘Push’ Factors (reactive)
The globalization of retailing is attributed to a number of push factors such as:
Saturation of the home market or over-competition
Economic recession or limited growth in spending
A declining or aging population
Strict planning policies on store development

27. ‘Push’ Factors (reactive)
The globalization of retailing is attributed to a number of ‘push’ factors such as:
High operating cost, labour
Shareholder pressure to maintain profit growth

28. ‘Pull’ Factors (proactive)
The globalization of retailing is attributed to a number of ‘pull’ factors such as:
The underdevelopment of some markets
Poor competition
Strong economic growth and rising standards of living
High population growth or high concentration of young adults
A relaxed regulatory framework
Favourable operating costs, labour, rents, taxation

29. ‘Pull’ Factors (proactive)
The globalization of retailing is attributed to a number of ‘pull’ factors such as:
The geographical spread of trading risks
The opportunity to innovate under new market conditions

30. Marketing implications for development of international distribution strategies
The internationalization of retailing is attributed to a number of implications for the development of the distribution strategies of international firms, such as:
Power shift in supply chain towards retailers
Intense concentration competition with significant buyer power across country market
Rapidly advancing technology facilitating global sourcing and global international transactions
Unrelenting performance measures being demanded of suppliers by international retailers

31. Largest Food Retailers
Wal-Mart
Carrefour
Tesco

32. Retailing Success Story
Lush Cosmetics: 100th Shop Opening
Weblinks

33. International Retailers
Consumer and Retail Trends 2018
Weblink

34. Onkvisit & Shaw: Chapter 16
Readings:
Doole & Lowe: Chapter 10
Onkvisit & Shaw: Chapter 16
Hollensen: Chapter 16
Additional Readings:
Verhage, B. (2014). Marketing: A Global Perspective. Cengage Learning (Read Chapter 13)