1. Chapter 14 International Distribution Systems

2. In International Distribution The firm sells to its customers: –directly through its own sales force –indirectly through independent intermediaries –indirectly through an outside distribution system with regional or global coverage

3. International Distribution Systems I.Problems in International Distribution 1)More stringent legal restrictions 2)Goods must be transferred further 3)May be difficult to get product to the consumer (infrastructure issues) II.Channel Design - Length, width, and the “11 C’s”

4. Intermediaries Sources for Finding Intermediaries –Distributor inquires –Governmental agencies Commerce Department’s Trade Opportunities Program U.S. Exporters Yellow Pages –Private sources Trade directories Screening Intermediaries –Performance –Professionalism

5. Selection of Intermediaries Agents Foreign (Direct) –Brokers –Manufacturer’s Reps –Factors –Managing agents –Purchasing Agents Domestic (Indirect) –Brokers –Export Agents –EMCs –Webb-Pomerene –Commission agents Distributors Foreign (Direct) –Distributors/dealers –Import jobbers –Wholesalers/retailers Domestic (Indirect) –Domestic wholesalers –EMCs –ETCs –Complementary marketers

6. International Distribution Systems III.Moving the Product Overseas 1)Ocean shipping 2)Air freight IV.Types of Middlemen 1)Freight forwarders 2)Trading Companies 3)Export Management Cos.

7. Real Physical Distribution Costs Between Air and Ocean Freight - Singapore to the United States In this example, 44,000 peripheral boards worth $7.7 million are shipped from a Singapore plant to the U.S. West Coast. Cost of capital to finance inventories is 10 percent annually; $2,109 per day to finance $7.7 million. Transport costs$31,790 $ 127,160 (in transit 21 days)(in transit 3 days) In-transit inventory financing costs$ 44,289$ 6,328 Total transportation costs$ 76,079$ 133,487 Warehousing inventory costs(60 days @$2,109/day) Singapore and U.S.$ 126,540 Warehouse rent $ 6,500 Real physical distribution costs $ 209,119$ 133,487 OceanAir SOURCE: Adapted from: "Air and Adaptec'c Competitive Strategy,” International Business, September 1993, p.44. Irwin/McGraw-Hill 15-15

8. International Distribution Systems IV.Types of Middlemen (Cont.) 4)Piggybacking 5)Domestic export middlemen V.Choosing a Middleman

9. Japanese Consumer Philosophy Harmony and Friendship Consumer  Brand Loyalty  Service and Quality Over Price  Small, Frequent Purchases Irwin/McGraw-Hill 14-6

10. Retail Patterns Argentina199.51644 Australia160.21115 Canada157.21839 India3540.0253NA Japan1591.2794 Malaysia170.61098 Mexico899.3962 Philippines120.154728 South Africa60.46757 South Korea730.0602 U.S.A 1516.3 170 13 Retail OutletsPopulationEmployees Country(000)per Outletper Outlet SOURCES: International Marketing Data and Statistics, 21st ed. (London: Euromonitor Publications, 1997), and "Indicators of Market Size for 115 Countries," Crossborder Monitor, August 27, 1997.