INTERNATIONAL DISTRIBUTION CHANNEL

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 Distribution channel: system of

marketing institutions that promotes the physical flow of goods and services, along with ownership title, from producers to consumer or business user; also called a Marketing channel.
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The Role of Distribution Activities in Marketing

Distribution Physically moving products and establishing intermediary relationships to support such movement.
Physical Distribution (Logistics) The activities of distribution involved in the physical relocation of products. Channel of Distribution The system of intermediaries (business relationships) established to guide the movement of a product.

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Functions of Intermediaries
Perform the marketing function better.
Provide efficient distribution of the product. Breaking bulk sell to customers in smaller

quantities. Assorting bringing together similar lines of goods.

Shifting risks. Merchant middlemen - take title to the goods

distributed. Agents/brokers - distribute goods only.

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Types of Distribution Channels

Direct channel A distribution system without intermediaries Indirect channel

A distribution system with one or more

intermediaries.
Dual distribution A distribution system with more than one channel.

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Alternative Channels of Distributio n

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Dell Dell Computer: A Direct Seller of Computers

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Global Perspective
Global Perspective: 500 Million Sticks of Doublemint Today Billions Tomorrow
Most challenging aspect of selling the gum for

Doublemint is how to get the gum through Chinas distribution channels: Mastering the distribution system is the single most important challenge of Chinas economic revolution Finding reliable distributors is a challenge Many are state owned and have little incentive to push one brand over another Doublemint gum found a way to distribute their products effectively thru China 7/18/2013 Note: Doublemint has a 91% market share in

Selection of channel
The selection of distribution is affected by many of factors, which play significant role while choosing the channel for distribution. It may include the buying pattern of consumer, type of the product is perishable, or auto mobile, weight and bulk and it also depends on the company's resources.

The main affecting factors are following:

Organization objectives Mode of Transport Type of product Nature and extent of market Existing channel for comparable product Buying habit of customers 10 Channel Availability

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Alternative Middlemen Choices

Classification of Middlemen Agent Middlemen
Do not take title to the goods distributed
Less risk (manufacturer assumes risk)

Merchant Middlemen
Take title of goods being distributed (manufactures have less control) Motivated by profit, tend to be less loyal to one brand

Alternative Types of Middlemen: 1. Home-Country Middlemen

2. Foreign-Country Middlemen

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International Channel-of-Distribution Alternatives

Home Country Foreign Country
The foreign marketer or producer sells to or through Domestic producer or marketer sells to or through Foreign consumer

Open distribution via domestic wholesale middlemen

Exporter

Importer

Foreign agent or merchant wholesalers

Foreign retailers

Export management company or company sales force

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Alternative Middlemen Choices Home Country

Theyre located in Firms own country. Provide marketing services from a domestic base. Employed by marketers with less international sales volume and inexperienced with foreign markets.
Global Retailers
Export Management Companies Manufacturers Export Agent Home-Country Brokers Export Merchants Piggy Back
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HOME COUNTRY MIDDLEMEN

GLOBAL RETAILERS
WAL-MART, ROEBUCK are booming domestic middlemen for international middlemen. Companies adhering to the laid requirements gain access to Overseas markets of Argentina, Brazil, canada, etc.

EXPORT MANAGEMENT COMPANIES

They work under name of manufacturers and function as a low cost, independent marketing department. For firms with relatively small international volume or which are unwilling to involve personnel in international function. A washington DC company marketing 10 US Orthopedics manufacturer products worldwide.

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MANUFACTURERS EXPORT AGENT An agent firm provides selling service for manufacturers. Operates on a straight commission basis and covers only one or two markets. Provides services similar to EMCs and does business in their own name. HOME COUNTRY BROKERS They perform low cost agent services. Perform function of bringing bringing buyers and sellers together. They specialise in one or more particular commodity and for the same maintain contact with major producers and 7/18/2013 15 purchasers.

EXPORT MERCHANTS Intermediaries who take title to and possession of the products they carry Responsible for shipping and marketing the products in the target market Carry competing brands Examples: export jobber, who carries commodity goods, but does not take physical possession of the goods.
PIGGYBACK MARKETING channel innovation that has grown in popularity One manufacturer distributes product by utilizing another companys distribution channel Requires that the combined product lines be complementary and appeal to the same customer
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Alternative Middlemen Choices Foreign Country

Distributors Foreign Country Brokers Managing Agents Dealers Wholesalers and

Retailers

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 Distributor

Is a merchant middlemen with close cooperation to the manufacturer Functions are- control over prices, inventories, servicing.
Agent

Conducts business within a foreign nation under contract arrangement with parent country. Compensation is on the basis of cost plus a specified % of profits of the managed company.
Brokers

Foreign brokers are part of small brokerage firms operating in a country. Function in good continuing relationships with customers and speedy market coverage at low costs
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 Dealers
Independent merchant middlemen with the supplier company having equity in it. Ex- Massey fergusson and caterpillar tractor company

Wholesalers and Retailers

Engage in direct importing for their own outlets and for redistribution to smaller middlemen. Large retailers perform wholesaling to local shops and dealers.

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Factors that affect choice of Channels

The 6 Cs need to be considered:
1. Cost Investment cost of developing channel; and cost of maintaining channel

2. Capital requirements How much capital is required

3. Control How much control is desired Example: companys own sales force exerts most control vs. using middlemen

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Factors that affect choice of Channels (Cont.)

The 6 Cs need to be considered (cont):
4. Coverage Full market coverage, or targeted coverage to densely populated areas
5. Character Channel of the distributions system must meet the character of the company seeking to do business 6. Continuity Will there be longevity issues How to build loyalty with middlemen is much more difficult than a companys own sales force

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Locating, Selecting, Motivating and Terminating Middlemen

Factors affecting locating middlemen: Things to look for:
Financial stability, managerial stability, productivity, reputation, etc.

Sources to use: U.S. Dept. of Commerce, foreign consulates, commercially published directories

Selecting Middlemen Two steps

1. Screening 2. Developing the Agreement
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Locating, Selecting, Motivating and Terminating Middlemen (Cont.)

Motivating Middlemen Common methods used to motivate middlemen:
Financial rewards, psychological rewards, communications, company

support and corporate rapport

Terminating Middlemen Must consider things such as:

Legal protection Control over middlemen

Controlling Middlemen
Control over the system (distribution network) Control over the middlemen

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Volume of sales, market coverage, services offered, pricing, advertisement, payment of bills and profitability. 7/18/2013

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