1. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 15 Global Distribution and Logistics

2. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Introduction Channels of distribution connect producers and customers Links are ___________ and __________ entities that perform a number of functions Producers rely on _________ to facilitate the location of companies interested in distributing products

3. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Structure Channels can vary from direct, producer- to-consumer types to elaborate, multilevel channels Channel systems

4. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Structure Techniques employed by businesses Creating new bridges between producers and customers Creating new forms of B2B commerce Focusing on peer-to-peer (P2P)

5. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Structure Connections made by marketing institutions serve Flows are usually multidirectional— vertical and horizontal

6. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Design Length and width of the channel employed Determined by factors that can be summarized as the 11 Cs Uses the 11 Cs as a checklist to determine the proper approach

7. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11 C’s External Customer Competition Internal Company objectives Capital Coverage Continuity

8. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Design Customers Basis for channel-design decisions Focusing on customer needs by understanding:

9. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Design Culture Distribution culture:

10. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Design Competition Channels used by competitors may be the only product distribution system that is accepted by both the trade and consumers An international marketer’s task is to

11. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Design Company objectives Character Products may be distributed in a number of ways even to the same target audience

12. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Design Capital Marketer’s financial strength determines Stronger the marketer’s finances, the more able the firm is to establish channels it either owns or controls

13. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Design Cost Varies over the life cycle of the relationship as well as _______________________ Incurred in protecting the company’s distributors against adverse market conditions

14. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Design Coverage Area to be covered depends on the: Companies typically enter a market with one local distributor

15. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Design Control

16. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Design Continuity Rests heavily on the marketer

17. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Design Communication Is a two-way process that does not permit the marketer to dictate to intermediaries Assists the international marketer in:

18. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Management Types of intermediaries Distributor: Agent: Operates on a commission basis

19. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Management Government agencies The U.S. Department of Commerce has various services that can assist firms in identifying suitable representatives abroad

20. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Management Private sources Advertising Websites Email solicitations

21. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Management The distributor agreement Important terms to be included in the agreement Contract duration Method of payment Facilitating payments: Products and conditions of sale

22. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Management Gray markets (______________) Products vary from inexpensive consumer goods to expensive capital goods Conditions that allow unauthorized resellers to exist

23. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Management Arguments for gray markets:

24. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Management Arguments against gray markets:

25. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Management Gray markets Gray-market goods can: Strategies to eliminate gray markets:

26. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Management Termination of channel relationship Reasons

27. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Management Termination of channel relationship Just causes Time to think about such issues is before the overseas distribution agreement is signed Careful preparation can allow the exporter to negotiate a termination without litigation

28. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. E-Commerce M-commerce: The marketer has to be sensitive to the governmental role in e-commerce The company itself must be prepared to provide 24-hour order taking and customer service

29. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Logistics Design and management of a system that controls the inflow outflow of materials in an international corporation The systems approach helps the firm explicitly recognize the linkages among separate logistics components

30. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Logistics Interaction with outside organizations, suppliers, and customers helps integrate all partners Systems approach also ensures: JIT - EDI - ESI - ECR -

31. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Logistics Two phases in the movement of materials Materials management: Physical distribution:

32. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Logistics Concepts within logistics Systems concept: Total cost concept: Trade-off concept:

33. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Logistics Supply chain management Advances in information technology have been crucial to progress in supply chain management

34. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Logistics The Impact of International Logistics Logistics costs have risen over the years Close collaboration with suppliers and customers

35. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Logistics New dimensions of international logistics Domestic operations Logistics decisions are guided by: International operations

36. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Transportation Issues Transportation infrastructure Firms encounter infrastructural variations Mistakes in the _____________________ increase costs

37. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Transportation Issues Availability of modes - Ocean shipping Types of vessels Common vessels

38. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Transportation Issues Availability of modes - Air shipping High-value items are mostly shipped by air, particularly if they have a high density Volume of airfreight can be increased by

39. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Transportation Issues Choice of transport modes Transit time

40. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Transportation Issues Predictability Higher predictability of airfreight allows lower levels of inventory safety stock Merchandise shipped via air is likely to suffer less loss and damage

41. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Transportation Issues Cost Noneconomic factors

42. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The International Shipment Documentation Sometimes considered to be a trade barrier __________ is the most important document Shipper’s declaration for ____________ Assistance with international shipments Several intermediaries provide services in the physical movement of goods

43. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Inventory Issues Inventory carrying costs: Order cycle time – In international marketing, the order cycle is frequently longer than in domestic business

44. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Inventory Issues Customer service levels Responsiveness that inventory policies permit for any given situation Should be based on:

45. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Inventory Issues Inventory as a strategic tool Dealing with currency valuation changes Hedging against inflation

46. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Storage Issues Storage facilities Factors determining the location of storage facilities

47. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Storage Issues Storage facilities ABC analysis classifies products that are most sensitive to delivery time

48. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Storage Issues Outsourcing Reasons for outsourcing

49. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Storage Issues Foreign trade zones Considered for Found at: Benefits both the Generates employment opportunities

50. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Packaging Issues Adequate for domestic shipping may be inadequate for international transportation Weight of packaging must be considered

51. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Management of International Logistics Centralized logistics management Decentralized logistics management

52. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Management of International Logistics Contract logistics Outsourcing logistical management by employing outside logistical expertise Allows marketers to take advantage of an existing network, complete with resources and experience

53. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Logistics and Security Logistics systems are vulnerable to terrorist attacks and piracy To prevent them, governments impose security measures

54. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Logistics and Security Security measures:

55. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Logistics and Security Strategies employed for reducing security costs

56. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Recycling and Reverse Logistics Reverse distribution systems Environmental concerns are also growing in the packaging field

57. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Recycling and Reverse Logistics ISO 14000 Firms should concentrate on providing the society with a better quality of life