INTERNATIONAL DISTRIBUTION OPERATIONS AND CHANNELS

Prepared by:
VIPIN RAI RAVI SAHU AMIT CHAUHAN VINEET KUMAR PRATOSH PANDE

Physical distribution channel is the term used to describe the method and means by which a product or a group of products are physically transferred, or distributed, from their point of production to the point at which they are made available to the final customer.

OBJECTIVES

Describe the functions of home-country and host-country middlemen involved in international distribution Identify the different facilitators of international distribution and logistics and describe their involvement in the international distribution process Address the challenges encountered by distribution in countries of different development levels

CHANNELS OF DISTRIBUTION:

THE MAIN DIFFERENCES AMONG CHANNEL STRUCTURES ARE:

The types of intermediaries (as shown above); the number of levels of intermediaries (how many companies handle the product); the intensity of distribution at each level (i.e: are all or just selective intermediaries used at the different levels?).

CHANNEL SELECTION
Normally be considered by a company in the course of its distribution planning process to ensure that the most appropriate channel structure is developed: To make the product readily available to the market consumers at which it is aimed. The most important factor here is to ensure that the product is represented in the right type of outlet or retail store. Having identified the correct marketplace for the goods, the company must make certain that the appropriate physical distribution channel is selected to achieve this objective. To enhance the prospect of sales being made. This can be achieved in a number of ways. The general aims are to get good positions and displays in the store. The product should be 'visible, accessible and attractively displayed'.

To achieve a given level of service. Once again, from both the supplier's and the customer's viewpoints, a specified level of service should be established, measured and maintained. The customer normally sees this as crucial, and relative performance in achieving service level requirements is often used to compare suppliers and may be the basis for subsequent buying decisions. To minimize logistics and total costs. Clearly, costs are very important, as they are reflected in the final price of the product. The selected channel will reflect a certain cost, and this cost must be assessed in relation to the type of product offered and the level of service required.

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 3. Government Affiliated Middlemen

HOME-COUNTRY MIDDLEMEN

Export Management Companies  Highly specialized in certain industries and/or regions Trading Companies
 

The Japanese Model: sogo shoshas The U.S. Model and the Export Trading Company Act

HOME-COUNTRY MIDDLEMEN

Home-Country Brokers and Agents



  

Middlemen who bring international buyers and sellers together in the company's home country Do not carry title to the product Manufacturers export agent: represent a manufacturer Buying offices: buyers located in the firms home country, representing different international firms

HOME-COUNTRY MIDDLEMEN

Cooperative Export Arrangements



Also known as piggybacking and mother henning

Involve exporters agreeing to handle export functions for unrelated companies on a contractual basis


Complementary export agents export complementary products on a commission basis Complementary export merchants actually take title to the complementary products that they export

HOME-COUNTRY MIDDLEMEN

Webb-Pomerene Associations of Exporters

  

Competing companies that join resources and efforts to export internationally Are exempt from antitrust scrutiny Are present especially where cartels are active

HOME-COUNTRY MIDDLEMEN

Foreign Sales Corporation (FSC)

  

Sales corporation that is set up overseas Allows for a portion of U.S. firms foreign-source income to be exempt from U.S. income tax To qualify for tax exemption, firm must:
-

have a foreign presence meet certain management and economic requirements incur abroad a minimum level of direct costs in sales activities, in areas such as marketing, advertising, and order processing.

HOME-COUNTRY MIDDLEMEN

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 Norazi agent, who deals in illegal and/or gray market products

International Channel-Distribution Alternatives

FOREIGN-COUNTRY MIDDLEMEN

Merchant Middlemen


Intermediaries who carry the manufacturers product line in a particular country Usually carries title to and has physical possession of the products

FOREIGN-COUNTRY MIDDLEMEN

Agents and Brokers  Many types of agents and brokers in foreign markets, such as manufacturer's representatives and managing agents
-

Could act as the manufacturers sales representatives and are paid on commission Or they could take on the role of managing agents (also known as compradors), with an exclusive arrangement with the company, representing it in the foreign market; the latter are paid as a percentage of sales

FOREIGN-COUNTRY MIDDLEMEN

Alternative Distribution Structures: Network Marketing



Using acquaintance networks for the purpose of both sales and distribution Have high potential in emerging markets

ISSUES RELATED TO INTERNATIONAL DISTRIBUTION

Using Established Channels

  

Could charge high prices Could be blocked by competition Choice is a long-term decision: company may be bound indefinitely to the channel choice Necessary if there are no channels at all and if the existing channels do not conform to company needs Expensive

Building Channels


INTERNATIONAL DISTRIBUTION AND LOGISTICS

Distribution Centers Transportation Firms Freight Forwarders and Customs Brokers Government Agencies
  

Promote national security Promote international involvement of local firms Provide financing and insurance for high risk ventures

GOVERNMENT AGENCIES

International Trade Administration Bureau of Export Administration U.S. Commercial Service Export/Import (Ex-Im) Bank United States Trade and Development Agency

OTHER SERVICE PROVIDERS

Non-governmental


International Chamber of Commerce

Banks Insurance agencies Marketing research firms Consultants

CHALLENGES TO INTERNATIONAL DISTRIBUTION AND LOGISTICS

Distribution challenges in developing countries Parallel imports (gray markets)  Distribution systems that are not authorized by the manufacturer: products purchased in a low-price market are diverted to other markets  Hurt company image
-

Charge similar prices worldwide Create product for low-markets not as attractive to up-market Complicate repair/servicing process for gray market goods Inform consumers Litigate

LOGISTICS CHALLENGES

Combating Parallel Imports:

 

 

Charging similar prices worldwide Creating product for low-price markets not as attractive to up-market Complicating the repair/servicing process for gray market goods Informing consumers Litigating

FACTORS THAT AFFECT CHOICE OF CHANNELS

The 6 Cs need to be considered:

1.

Cost
cost of developing channel; and cost of maintaining channel

Investment

2. 3.

Capital requirements
much capital is required

How

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

How

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
there be longevity issues How to build loyalty with middlemen is much more difficult than a companys own sales force

Will

THANK YOU.