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McGraw-Hill/Irwin
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
Note: Doublemint has a 91% market share in China
International Channels
Important Points involved in making channel decisions
I. Channel Structure II. Distribution Patterns III. Alternative Middlemen Choices IV. Factors that affect Choice of Channel V. Locating, Selecting, Motivating and Terminating Middlemen
I. Channel Structure
Types of Channel Structures:
1. Import-oriented (traditional) distribution structure
Strong dependence on imported manufactured goods Demand exceeds supply Chewing gum example in China
I. Channel Structure
2. Japanese distribution structure Features:
Note: the Japanese distribution system is changing because of the globalization of markets (more competition, more access, lower prices, etc)
Channel control Everyone in channel is tied to manufacturers thru such things as: inventory financing; cumulative rebates, merchandising returns and promotional support Business Philosophy Large-scale retail store law and the Large-scale Retail Store Location Acts Most in Japan and in the U.S. see the Japanese distribution as a major non-tariff barrier
It has four distinguishing features: 1. a structure dominated by many small middlemen dealing with many small retailershigh density of middlemen, channel control by manufacturers, a business philosophy shaped by a unique culture, and laws that protect the foundation of the systemthe small retailer
2. 3. 4.
I. Channel Structure
7-11 Japan has a joint venture with www.7dream.com When order is placed on the web, customer then uses 7-11 convenient stores for pick-up points for their orders. E-commerce retailers (eBay, e-Toys, Amazon.com) Ford, Daimler-Chrysler and GM created a website that allows purchase of automotive parts from suppliers: www.covisint.com Sears and Carrefour of France created a retail exchange for retailers and supplier transactions: www.gnx.com
14-10
Foreign consumer
Exporter
Importer
Foreign retailers
Irwin/McGraw-Hill
Merchant Middlemen
Take title of goods being distributed (manufactures have less control) Motivated by profit, tend to be less loyal to one brand
2. Foreign-Country Middlemen
Types & characteristics
See exhibit 14.7
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
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
Sources to use:
U.S. Dept. of Commerce, foreign consulates, commercially published directories
Selecting Middlemen
Two steps
1. Screening 2. Developing the Agreement
Terminating Middlemen
Must consider things such as:
Legal protection Control over middlemen
Controlling Middlemen
Control over the system (distribution network) Control over the middlemen
Volume of sales, market coverage, services offered, pricing, advertisement, payment of bills and profitability.
The Internet
How the internet affects distribution of products and services
E-commerce, B2B (most prevalent in the U.S. oldest companies) Lowers distribution costs (middlemen often eliminated) Example:
Crossing Borders 14.4 pg. 429 No More Roses for my Miami Broker