Introduction

Global Marketing g Channels and Physical Distribution

Global Marketing (Global Edition) Chapter 12
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Chapter topics: Channel objectives Channel design & strategy Distribution channels consumer & industrial Global retailing Channel conflict Vertical marketing systems Physical distribution, supply chains, and logistics Transportation modes
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Channel Objectives
Marketing channels exist to create utility for customers
Place utility: availability of a product or service in a potential customer location that is convenient to a p Time utility: availability of a product or service when desired by a customer Form utility: availability of the product processed, prepared, in proper condition and/or ready to use Information utility: availability of answers to questions and general communication about useful product d tf features t and db benefits fit
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Organizational Objectives for Channel Management

Economic objectives
cost minimization stabilization of costs and/or profits over time total investment in channel system

Power objectives
channel control independence organizational stability organizational image

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Channel Design and Strategy

Factors which impact p the selection of a marketing channel include: Market factors Product factors Organizational factors Competitive factors
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Channel Design and Strategy

Characteristics of Short Channels Market factors Business users Geographically concentrated Extensive technical knowledge and regular servicing required Large orders Product factors Perishable Complex
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Characteristics of Long Channels Consumers Geographically diverse Little technical knowledge and regular servicing not required Small orders Durable Standardized Inexpensive
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Expensive

Channel Design and Strategy

Characteristics of Short Channels Organizational factors Characteristics of Long Channels Manufacturer has adequate Manufacturer lacks adequate resources to perform channel resources to perform channel functions functions Limited product line Channel control important Competitive factors Manufacturing feels dissatisfied with marketing intermediaries performance intermediaries in promoting products Broad product line Channel control not important Manufacturer feels satisfied with marketing intermediaries performance intermediaries in promoting products 12-7
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Distribution Channels: Terminology and Structure

Distribution is the physical flow of goods th through h channels h l Channels are made up of a coordinated group of individuals or firms that perform functions that add utility to a product or service

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Distribution Channels: Terminology and Structure

Distributor wholesale intermediary that typically carries product lines or brands on a selective basis Agent an intermediary who negotiates transactions between two or more parties but does not take title to the goods being purchased or sold
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Consumer Products

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Peer-to-Peer Selling
The Internet and other related media are dramatically altering distribution Interactive TV may become a viable direct g channel in the future marketing

Door-to-Door Door to Door Selling

Mature form in the US Growing popularity in China AIG insurance, Mary Kay, Tupperware, Avon, Amway Amway sales tripled in China, 1998-2004 1998 2004 to $2B, $2B company companys s biggest market of cars are sold door-todoor to door in Japan with 100,000 salespeople
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eBay pioneered P2P

- Helps Disney and IBM set up auction sites for B2C auctions

Interactive TV is coming when homes are wired for 2 2-way way

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Consumer Channels
Manufacturer-owned M f t d stores t
Walt Disney opening 600 new stores globally Nike, Levi Strauss, Apple

Consumer Products
Piggyback Marketing
Channel innovation that has grown in popularity One manufacturer distributes product by utilizing another companys distribution channel h l Requires that the combined product lines be complementa complementary and appeal to the same customer
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Independent franchise Independent retailers

Wal-Mart Wal Mart

Flagship retail stores for Apple, Sony well Sony, well-known known fashion houses, houses Nokia, Nike: to build brand loyalty, showcase products products, and help gather marketing intelligence
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Industrial Products

Establishing Channels
Direct involvement the company establishes it own sales its l force f or operates t it its own retail t il stores Indirect involvement the company utilizes independent agents, distributors, and/or wholesalers Channel strategy gy must fit the companys p y competitive position and marketing objectives within each national market
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Retailing in Developing Countries

Consumers purchase food, soft drinks and other items at Mom & Pop stores, kiosks and market stalls in kiosks, single use packages 70% of Mexicans shop at these stores P&G aids stores that carry at least 40 P&G products p y , promo p with displays, materials 12-17

Working with Channel Intermediaries

1. Select distributors dont let them select you p of developing p g markets, , 2. Look for distributors capable rather than those with a few good customer contacts 3. Treat local distributors as long-term partners, not t temporary market-entry k t t vehicles hi l 4. Support market entry by committing money, managers, and proven marketing ideas 5. From the start, maintain control over marketing strategy 6. Make 6 a e su sure e distributors d st buto s provide p o de you with t detailed deta ed market a et and financial performance data 7. Build links among national distributors at the earliest opportunity t it
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Mexican storefront
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Global Retailing
Department stores Specialty retailers Supermarkets Convenience stores Discount stores and warehouse clubs Hypermarkets S Supercenters t Category killers Outlet stores

Top Five Global Retailers

Dome of the famous department store Galeries Lafayette in Paris

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Global Retailing
Environmental Factors

Global Retailing Strategies

Organic growth Company uses its own resources to open a store on a greenfield site or acquire one or more existing retail facilities Franchise Appropriate strategy when barriers to entry are low, yet the market is culturally distant in terms of consumer behavior or retailing structures Chain Acquisition A market entry strategy that entails purchasing a company with multiple existing outlets in a foreign country Joint Venture This strategy gy is advisable when culturally y distant, , difficult-toenter markets are targeted
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Saturation in the home country market Recession or other economic factors Strict regulation on store development High operating costs

Critical Question

What advantages do we have relative to the local competition?

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Global Retailing Market Entry Strategy Framework

Channel Conflict
Horizontal Conflict Most often, horizontal conflict causes sparks between different types of marketing intermediaries that handle similar products g among g Sometimes results from disagreements channel members at the same level Vertical Conflict Channel members at different levels find many reasons for disputes Example: when retailers develop private brands to compete with producers brands or when producers establish their own retail outlets or websites 12-24
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Managing Channel Conflict

Adoption p of superordinate goals Co-optation Co optation Diplomacy Mediation Arbitration
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Conflict, Cooperation & Competition

Grey marketing (parallel importing): sale of authorized, authorized branded products through unauthorized channels Why do manufacturers tolerate grey marketing? 1. violations are difficult to detect or document 2 potential 2. t ti l f for one channel h l to t f free-ride id on another th member is low 3 product is mature 3. 4. parallel importer is a loyal high-performing dealer Why do manufacturers welcome grey markets? 1. increase coverage in emerging markets 2 pressure authorized 2. th i d channels h l to t compete t harder h d 3. avail the product to price-sensitive consumers 12-26
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Conventional Channels vs. VMS

Vertical Marketing Systems

Corporate VMS combines successive stages of p production and distribution under single g ownership Administered VMS coordinates successive stages t of f production d ti and d di distribution t ib ti through th h the size and power of the parties; channel captain role assumed by dominant member Contractual VMS consists of independent production and firms at different levels of p distribution who join through contracts to obtain economies or sales impact (franchise, voluntary cooperative) voluntary,

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Physical Distr Distr. Expenditures

Supply Chain Definitions

Supply Chain
Includes all the firms that perform support activities by generating raw materials, converting them into components or finished products products, and making them available to customers

Logistics L i ti
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The management process that integrates the activities of all companies to ensure an efficient flow of goods through the supply chain
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PD, Supply Chains, and Logistics Management

Order Processing
includes order entry in which the order is actually entered into a companys information system; order handling, which involves locating, assembling and moving products into distribution; assembling, and order delivery

PD, Supply Chains, and Logistics Management

Inventory Management
Ensures that a company neither runs out of manufacturing components or finished goods nor incurs the expense and risk of carrying excessive stock of these items

Warehousing
Warehouses are used to store goods until they are sold Distribution centers are designed to efficiently receive goods from suppliers and then fill orders for i di id l stores individual t or customers t
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Transportation
the method or mode a company should utilize when moving products through domestic and global channels; the most common modes of transportation are rail, water, truck, air, pipeline and internet
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Inventory Control
Important since firms need to maintain enough inventory to meet customer demand without incurring unneeded costs for carrying excess inventory Just-in-time (JIT) production Vendor-managed inventory (VMI)

Transportation

Determining optimal order quantity q y

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Channel Strategy analyzing each transportation mode to determine which one, or combination of modes, will be most effective and efficient in a given situation 12-34
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Transportation Modes
Federal government deregulation of transportation i industry i d (1980) led l d to new breed of transportation companies which are multimodal, lti d l providing idi cradle dl to t grave service i or total transportation -- piggyback -- fishyback fi h b k -- birdyback
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Transportation Modes
Make or buy alternatives: private carrier - owned & operated by individual organization contract - independent organization that agrees to transport products according to contractual arrangement p transportation p facilities common - operates on scheduled basis between predetermined points