1. Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Slide 14 - 0 Chapter Fourteen Global Distribution

2. Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Slide 14 - 1 SIZE & NUMBER OF WHOLESALERS IN SELECTED COUNTRIES Source: Retailing in the European Single Market, 1993. These figures are adapted from Table EUR1a: “Importance of Commerce in the EC—absolute values (1987-91)”

3. Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Slide 14 - 2 Japanese Import Distribution Alternatives - Distribution Route of Italian Spaghetti Processing and packing plant Import agent Producer Primary wholesaler Intermediary wholesaler Small wholesaler Retailer Conventional Route Restructured Route Retail price: 170yen/300g package Retail price: 128yen/300g package Depots Distribution Wholesalers Distribution centers Retailer Processing and packing plant Importing company A/C Producer Savings: 25% Source: Allied Import Company, as reproduced in Michael R. Czinkota, and Jon Woronoff, Unlocking Japan’s Markets. Chicago, IL: Probus, 1991, p. 104. Used with permission.

4. Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Slide 14 - 3 International Comparison of Wholesale Trade Practices Source: Distribution Economics Institute, Survey on International Comparison on the Distribution Industry, May 1990.

5. Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Slide 14 - 4 International Comparison of Wholesale Trade Practices Source: Distribution Economics Institute, Survey on International Comparison on the Distribution Industry, May 1990.

6. Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Slide 14 - 5 International Comparison of Wholesale Trade Practices Source: Distribution Economics Institute, Survey on International Comparison on the Distribution Industry, May 1990.

7. Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Slide 14 - 6 Size and Number of Retail Outlets in Selected Countries Source: Retailing in the European Single Market, 1993. These figures are adapted from Table EUR1a: “Importance of Commerce in the EC—absolute values (1987-91)”

8. Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Slide 14 - 7 GLOBAL RETAILING 1. STANDARDIZED PRODUCTS, GLOBAL BRANDS 2. GLOBAL SEGMENTS 3. A STORE “CONCEPT” 4. CONCEPT MOBILITY 5. SIMILAR INFRASTRUCTURE (REPLICABILITY)

9. Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Slide 14 - 8 Seiko’s Authorized and Unauthorized Channels of Distribution Distributors Retailers Importer Source: Jack Kaikati, “Parallel Importation: A growing Conflict in International Channels of Distribution,” Symposium on Export-Import Interrelationships, Georgetown University, November 14-15, 1985. Distributors Retailers Importer EuropeHong KongJapanNorth America Broken arrows denote the flow of Seiko watches through unauthorized channels of distribution. Solid arrows denote the flow of Seiko watches through authorized channels of distribution.

10. Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Slide 14 - 9 Channel Actions vs Gray Trade Supply Interference Dealer Interference Demand Interference Strategic Attack

11. Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Slide 14 - 10 VALUE ADDED BY THE CHANNEL LOW HIGH MARKET GROWTH RATE INTRODUCTORY --PC’s: HOBBYIST STORES --DESIGNER APPAREL: BOUTIQUES GROWING --PC’s: SPECIALITY RETAILERS --DESIGNER APPAREL: BETTER DEPARTMENT STORES DECLINING --PC’s: MAIL ORDER --DESIGNER APPAREL: OFF-PRICE STORES MATURE --PC’s: MASS MERCHANDISERS --DESIGNER APPAREL: MASS MERCHANDISERS

12. Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Slide 14 - 11 BUILDING A DISTRIBUTOR TEAM FOR EPSON PRODUCTS JAPAN’S EPSON CORPORATION, A LEADING MANUFACUTURER OF COMPUTER PRINTERS, WAS PREPARING TO ADD COMPUTERS TO ITS PRODUCT LINE. NOT HAPPY WITH ITS CURRENT DISTRIBUTORS AND NOT TRUSTING THEIR ABILITY TO SELL TO NEW TYPES OF RETAIL OUTLETS, EPSON’S GENERAL MANAGER, JACK WHALEN, DECIDED TO QUIETLY RECRUIT NEW DISTRIBUTORS TO REPLACE THE EXISTING ONES. WHALEN HIRED HERGENRATHER & COMPANY, A RECRUITING COMPANY, AND GAVE THE FOLLOWING INSTRUCTIONS: SEARCH FOR APPLICANTS WHO HAVE TWO-STEP DISTRIBUTION EXPERIENCE (FACTORY TO DISTRIBUTOR TO DEALER) IN EITHER BROWN GOODS (TVs AND SO ON) OR WHITE GOODS (REFRIGERATORS, AND SO ON).

13. Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Slide 14 - 12 THE APPLICANTS HAVE TO BE CEO TYPES WHO WOULD BE WILLING AND ABLE TO SET UP THEIR OWN DISTRIBUTORSHIPS. THEY WILL BE OFFERED $80,000 YEARLY SALARY PLUS BONUS, AND $375,000 TO HELP THEM SET UP IN BUSINESS; EACH WILL ADD $25,000 OF HIS OR HER OWN MONEY, AND EACH WILL GET EQUITY IN THE BUSINESS. THEY WILL HANDLE ONLY EPSON PRODUCTS BUT MAY STOCK OTHER COMPANIES’ SOFTWARE. EACH DISTRIBUTOR WILL HIRE A TRAINING MANAGER AND RUN A FULLY EQUIPPED SERVICE CENTER. THE RECRUITING FIRM HAD A HARD TIME FINDING QUALIFIED AND MOTIVATED PROSPECTS. THEIR WANT ADS IN THE WALL STREET JOURNAL(WHICH DID NOT MENTION THE COMPANY’S NAME) PULLED ALMOST 1,700 LETTERS BUT MOSTLY FROM UNQUALIFIED PEOPLE LOOKING FOR JOBS. THEN THE FIRM USED THE YELLOW PAGES TO GET THE NAMES OF EXISTING DISTRIBUTORS AND PHONED THE SECOND-IN- COMMAND MANAGERS. IT ARRANGED INTERVIEWS AND, AFTER

14. Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Slide 14 - 13 MUCH WORK, PRODUCED A LIST OF HIGHLY QUALIFIED INDIVIDUALS. WHALEN INTERVIEWED THEM AND CHOSE THE 12 MOST QUALIFIED CANDIDATES FOR HIS 12 DISTRIBUTOR AREAS. THE RECRUITING AGENCY WAS PAID $250,000 FOR ITS RECRUITING EFFORT. THE FINAL STEP CALLED FOR TERMINATING EPSON’S EXISTING DISTRIBUTORS. THESE DISTRIBUTORS HAD NO INKLING OF THIS DEVELOPMENT, SINCE THE RECRUITMENT WAS CONDUCTED IN SECRECY. JACK WHALEN GAVE THEM A 90-DAY NOTICE OF THE CHANGEOVER. THEY WERE SHOCKED, HAVING WORKED WITH EPSON AS ITS FIRST DISTRIBUTORS. BUT THEY HAD NO CONTRACTS. WHALEN KNEW THEY LACKED THE ABILITY TO HANDLE EPSON’S EXPANDED COMPUTER PRODUCT LINE AND REACH THE TARGET NUMBER OF DEALERS. HE SAW NO OTHER SOLUTION. SOURCE: ARTHUR BRAGG, “UNDERCOVER RECRUITING: EPSON AMERICA’S SLY DISTRIBUTOR SWITCH,” SALES AND MARKETING MANAGEMENT, MARCH 11, 1985, PP. 45-49.

15. Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Slide 14 - 14 GLOBAL LOGISTICS TECHNOLOGY AND FREE TRADE EFFECTS TECHNOLOGY AND FREE TRADE EFFECTS: 1.SEAMLESS: TRUCK, TRAIN, SHIP 2.CONSOLIDATION OF TRANSPORTATION AND WAREHOUSING 3.EXPRESS SERVICES 4.RESULT: LOGISTICS ARE OFTEN OUTSOURCED AND NOT USUALLY A GREAT TRADE BARRIER ANYMORE.

16. Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Slide 14 - 15 Determinants of Choice of Channel 1. Product Requirements (Perishable lettuce, sensitive apples, fine china, scratched cars, beer without freshness, moldy cakes,...) 2. Logistic Feasibility (Equipment by DHL, autos by air, faxes of newsletters, freezer railroad cars, shock-absorbent packaging, vacuum-packed,...) 3. Demand Factors (Importance of speed for repairs, timing of raw materials for inventory, customers’ need for immediate gratification, quality standards of middleman and final user,...)

17. Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Irwin/McGraw-Hill ©The McGraw-Hill Companies,, Inc., 2000 Slide 14 - 16 Determinants of Choice of Channel 4. Competitive Factors (How fast is fast? How good is good? What are the alternatives for the buyer? Strategic importance of the market?) 5. Middlemen Resources (Storage capability? Credit or consignment or cash? Motivating with fast delivery? Just-in-time system? Promised supplies? Ability to support the marketing effort?) 6. Own Resources (Financial, manpower, production capacity)