INTERNATIONAL MARKETING DISTRIBUTION

INTERNATIONAL DISTRIBUTION

Manufacturer doesnt sell products directly it goes through several parties before reaching consumer Involves various channels and variety of intermediaries

Q: How do I get my product most profitably to a foreign country ? The answer lies in Firms method of entry in foreign market Selection & distribution channel within each of firms foreign market

DECISION CRITERIA FOR ENTRY METHOD

Firm must evaluate Company goals volume of business desired and geographical coverage Size of the company in sales and assets Product line & nature of product (Industrial, consumer, high or low price) Competitor abroad

DECISION CRITERIA FOR ENTRY METHOD

Different entry method as per country need & regulation In some wholly owned operations In others marketing subsidiaries In some others local distributors or combine different entry methods Eg. DuPont

ALTERNATIVE FOREIGN ENTRY MODE

Indirect Export Trading Export management company Piggy back Production in Home Market Foreign production

Contract managemen Licensing Assembly Joint Venture 100% ownership Foreign Distributor Agent Overseas market subsidiary

Direct Export

DECISION CRITERIA FOR ENTRY METHOD

Market feed back ( Whats going on in the FM?) Direct entry method ( agent, distributor, subsidiary will offer better market information) Learning by experience ( more international experience, the more the company is involved in FM )

Incremental Market cost ( cost associated with IM no matter who does it. The channel selection determines it. However no additional outlay with indirect exporting Profit possibilities ( profit potential & cost associated with each entry method must be evaluated. Eg.25% on sale volume of $ 2 million. v/s 17% on $ 1 million. The 2nd entry method more attractive

COMPANY ENTRY MODE DETERMINES THE FOLLOWING

Investment requirement (higher in case of wholly owned ) Administrative requirement ( documentation, red tape etc.) Personnel requirement (qualified internationalist or outsource) Exposure to foreign problems ( legal, regulatory, tax, labor) Risks Risk analysis of market entry modes Economic, Environment, Political Force

INDIRECT EXPORT
Foreign sales through domestic sales Organization

Trading companies :

Handle imports ( Mitsubishi- Japan) Size and market Coverage of these companies make them attractive distributors. Cover the Market well & service the products Draw back likely to carry competing lines & the new product added might not receive the desired attention

Export Management company Act on behalf of the company with closer cooperation & coordination. Use company letterheads, negotiate on behalf of the firm. Economical mode & the cost is shared Piggyback Manufacturer uses overseas distributor to sell another companys product along with its own,( carrier, rider relationship) Advantage Fill the gap in its product line or economy of scale. Economical and cost is shared.

DIRECT EXPORT
Foreign sales handled same way as domestic. All documentation, distribution fall under the firm Task of exp. Management staff: Choosing foreign market ( existing, new), Choosing representation ( own, or franchisee), Physical distribution & export documentation, logistic coordination Marketing task : market intelligence, pricing & promotion

FOREIGN MANUFACTURING & FOREIGN ENTRY

Firm might find it undesirable to supply all foreign markets from domestic production

Factors force/ encourage firm to produce in FM

Heavy distribution cost, Tariff & Quotas Govt. policies encouraging local production Better interaction with local needs Saving on transportation, Tariff,& raw materials Better customer & Govt. relations No interruption of supplies

APPROACHES TO FOREIGN MANUFACTURE

Assembly : Produce components locally, ship them to FM for assembly ( cars, electronics, Industrial goods) Contract manufacture: Products produced in the FM by another producer under contract with the firm . Covers only manufacturing. Marketing is covered by the firm ( e.g.. P&G in Italy ) Drawback - manufacturing profit goes to the producing firm. Q.C is always a problem

APPROACHES TO FOREIGN MANUFACTURE

Licensing : Firms establishes local production in FM without capital investment usually for a longer period Involves much greater responsibility for the national firm Licensor gives patent / Trademark rights, copyright and product know how Joint Venture : Foreign operation where international company has enough equity to share a voice in the management Many nations prefer JV Nations gets more of the profit & the technical benefit

APPROACHES TO FOREIGN MANUFACTURE:

Strategic Alliance: Non equity contractual relationship between competition & competitors in different countries e.g.. ( Phillips link with Siemens ) The local firm gets a new product one that is complimentary rather than directly competing ( e.g. Antidiarrheal with ORS)

Wholly owned foreign production: 100% ownership by international firm( 100% completeness of control by the international firm ) Buy out a foreign producer through acquisition route Buy out a joint venture partner Acquisition : Quicker way to get into a market than building its own facilities. Package also includes qualified labor force, management, local knowledge, contact with local Market and Govt.

APPROACHES TO FOREIGN MANUFACTURE

FOREIGN MARKET CHANNEL & GLOBAL LOGISTICS:

How to distribute the products in FM once the goods are Reached ? Management of foreign distributors Management international logistics Management of foreign distributor depend on the entry mode chosen. Firms have little to do when they choose trading / export management & licensing companies Firms having own subsidiaries / complete Manufacturing & Market operations in the FM have direct responsibility

MARKETING THROUGH TRADING COMPANY

Primary method of reaching foreign market Firms success depends on performance of the distributor Selection: Companys performance, past record, financial backing Agreement: Spell out duties & responsibilities & interest of each party Financial /price consideration: Margins ,commission, credit terms Marketing support: Participation in promotion, trade fairs, sampling etc. Communication: availability of E-mail, personal visits, Tele calling, Incentive and motivation: to induce him to sell

MARKETING THROUGH FIRMS OWN PRESENCE

Firm having own staff manage distribution locally Follow local distribution infrastructure (Wholesaler, retailer, transport system Wholesaler & service : getting assortments, breaking bulk & distribute to retailers Retailer & services: stocking, displaying, selling products, inventory carrying and repurchase A proper coordination, co operation and motivation is necessary to manage business

PHYSICAL DISTRIBUTION V/S LOGISTICS:

Physical distribution: Financial & ownership flow of goods a narrow view of the physical movement Logistics: Much more than physical movement & Transportation. Involves number & location of production & storage facilities, production schedules inventory management Documentation involves more parties, more data, more Credit checks on foreign buyers and involvement of new intermediary in sales- international freight forwarder

LOGISTICS WITHIN A FOREIGN MARKET:

Firms having own subsidiary must seek to optimize its physical distribution Where represented by distributor & licensees firm has limited role in logistics Firms approach abroad can vary according to the size of the market, way market is supplied, urbanization, topography,& storage facilities

MULTI MARKET LOGISTICS:

World not one market but collection of individual national market, each under the control of sovereign Govt. Has various methods of separation their markets from others, tariff barriers, quotas & licenses, local laws, monitory system, tax system, transport policies

Logistic management should adapt to overcome the barriers to achieve integrated world market for physical distribution ( e.g.. Coco cola built plant in India because of trade restrictions )

MANAGEMENT OF INTERNATIONAL LOGISTICS:

Facilities available are Freight forwarders: specialist in documentation & transportation, insurance etc. well managed on their own Free Trade Zone & public warehouse: 50 nations over 500 FTS, free ports, bonded warehouse( a Govt. owned & supervised by custom officials Permit goods without tax as long as they are in the FTZ May allow processing, Assembly, sorting, repacking within the zone ( provides employment opportunities )