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INTERNATIONAL MARKETING WONKWANG UNIVERSITY 1 Professor In Woo Jun / Bcom, MBA, Ph.D. 2015 GLOBAL DISTRIBUTION & LOGISTICS MANAGEMENT
INTERNATIONAL MARKETING
WONKWANG UNIVERSITY
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Professor In Woo Jun / Bcom, MBA, Ph.D.2015
GLOBAL DISTRIBUTION & LOGISTICS MANAGEMENT
CONTENTS
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I. GLOBAL DISTRIBUTION MANAGEMENT 1. Distribution Strategy2. The Factors Affecting Distribution Channel Selection 3. Types of Distribution Channel 4. Global Trend in Distribution
II. GLOBAL LOGISTICS MANAGEMENT1. Global Logistics 2. Important Activities of Global Logistics
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1. Distribution Strategy
GLOBAL DISTRIBUTION MANAGEMENT
A distribution strategy is one part of the marketing mix, and it needs to be consistent with other aspects of the marketing strategy : product policies, pricing strategy and communication strategy.
Distribution Strategy
Pricing Strategy
Product Policy Communication
Strategy
DistributionDensity
DistributionLogisticsChannel
AlignmentChannelLength
Source : Gillespie, K., Jeannet, J.P., and Hennessey, H.D. (2007), “Global Marketing ”, Houghton Mifflin Company, p. 402
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1.1) Distribution Density
The number of sales outlets or distribution points
- Extensive distribution : A distribution strategy that employs manysales outlets Consumer goods
- Selective distribution : A distribution strategy that employs fewsales outlets Home appliances, Clothing
- Exclusive distribution : A distribution strategy in which a product isavailable through only one outlet Special Goods with specific brands
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1.2) Channel Alignment
The coordination of various channel members to the end of providinga unified approach to the marketing of a product/service
It is one of the most difficult tasks in distribution management
The longer distribution channel, the more difficult it becomes toensure channel alignment
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1.3) Channel Length
The number of intermediaries directly involved in the physical distribution of a product from the manufacturer to the buyer
Channel length is normally influenced by three factors ;
- A product’s distribution density- The average order quantity - The availability of channel members
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2. The Factors Affecting Distribution Channel Selection
A marketer needs to identify and select appropriate distributionpartners in various national markets.
The selection of distribution channel is an extremely important because the partner often will assume a portion of the marketing responsibility, or even all of it.
Changing a distribution partner can be expensive or sometimes impossible because of local laws.
- ex) Vulcan Chemical was fined U$23million for unfairly terminating the rights of Phillip J. Barker.
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2.1) Costs
Channel costs can be divided into three ; initial costs, maintenancecosts and logistics costs.
- Initial costs : All costs related to setting up the channel, such as time, travel expenses, the costs of the agreement negotiation with channel members, etc.
- Maintenance costs : The costs of managing and auditing channeloperations
- Logistics costs : This includes transportation costs, storage costs, warehousing costs, the costs of paper works for customs, etc.
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2.2) Product
The nature of a product can affect channel selection.
If the product is perishable and has a short shelf life, the manufacturer is forced to use shorter channels to get the product to the consumer more rapidly
- ex) Delta Dairy, a Greek producer of dairy products.
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2.3) Control and Coverage
In the case of direct sales, a manufacturer can control everything.
In the case of longer channel, in many cases, the manufacturer may not know who is ultimately buying the products.
Coverage is a geographical area that a manufacturer wants a channelpartner to cover.
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3. Types of Distribution Channel
It is a merchant who takes title to the manufacturer’s goods with its own name and account (e.g. Samsung Corporation, Mitsui Corporation)
It has financial capability Income Source : The difference between its buying price from the
manufacturer and its selling price to the consumer
Manufacturer ConsumerTrading Intermediary
Sales & PurchaseContract
Payment Payment
Sales & PurchaseContract
3.1) Big-sized Trading Intermediary
GLOBAL DISTRIBUTION MANAGEMENT
Source : Developed by In Woo Jun (2015)
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Manufacturer Consumer
It is an individual or company who represents and acts on behalf of the manufacturer
Start-ups, or SMEs Income Source : Compensated on the basis of a Commission from the
manufacturer
Trading Agent
AgencyAgreement
Sales & Purchase Contract
Authorization Representation
3.2) Small-sized Trading Agent
GLOBAL DISTRIBUTION MANAGEMENT
Source : Developed by In Woo Jun (2015)
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4. Global Trend in Distribution
Distribution systems throughout the world are continually evolvingin response to economic and social changes.
A manager should consider not only the state of distribution today, but also the expected state of distribution system in the future.
Five major trends are currently prevailing throughout the world : 1) the growth of larger-scale retailers, 2) an increased number of international retailers, 3) the proliferation of direct marketing, 4) the dominant role of IT to support a distribution strategy, 5) the emergence of organized smuggling.
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4.1) Larger-scale Retailer / International Retailer
The entry of Wal-Mart in the U.K, via its acquisition of ASDA’s 260 stores, offered consumers decreased price and a growth in superstores.
IKEA, the Scandinavian retailer, has been very successful in Europe,Asia, and the U.S.A.
4.2) Direct Marketing
Direct-sales firms such as Amway, Avon, and Mary Kay providedhighly successful in many emerging markets.
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4.3) Online Retailing
The Internet has opened an entirely new channel for retailers and manufacturers to sell their products.
E-commerce, B2B, B2C, etc.
4.4) IT
Information Technology is vitally important in the moderndistribution industry as well as other industries.
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4.5) Smuggling
Smuggling is the illegal transport of products across national borders.
Smuggling has recently emerged as a serious challenge to manyinternational marketers.
- India : Gold, Silver and Consumer Durable Black-market economy equivalent to 20% of the national GDP
- Brazil : 50% of the computer sales involved smuggled computers.
- Cigarettes : 33% of all cigarettes sold in the world market involved in smuggling.
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1. Global Logistics
GLOBAL LOGISTICS MANAGEMENT
Global logistics : The transportation and storage activities necessary to transfer the physical products from manufacturing plants and warehouses in different countries to the various local countries.
Global logistics is a subset of global distribution, which also involves the management of the channels within a country.
Important activities of global logistics include i) order processing, ii) warehousing, iii) inventory management and iv) transportation.
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2.1) Order Processing
Order processing includes i) order receiving, ii) order entry, iii) order handling, and iv) order delivery to the customer
Receiving purchase order from customers
Entering order into information
system
Preparing order and ready for distribution
Delivering order to customers
Source : Developed by In Woo Jun (2015)
GLOBAL LOGISTICS MANAGEMENT
2. Important Activities of Global Logistics
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2.2) Warehousing
In global distribution, warehouses are necessary to store the products until they are sold.
Another type of warehousing facility, distribution center, is designed to receive the products efficiently from suppliers and then to deliver the products to customers.
The modern warehouses are automated and are equipped with high technology.
Many companies outsource this function.- ODW Logistics Inc. operates several warehouses on behalf of Deere
& Company, Limited Brands and other customers.
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2.3) Inventory Management
GLOBAL LOGISTICS MANAGEMENT
Inventory management is the process of efficiently overseeing the constant flow of units into and out of an existing inventory.
This process usually involves controlling the transfer in of units in order to prevent the inventory from becoming too high.
Balancing order-processing costs against inventory-carrying costs is very important.
An important new tool for inventory management is RFID (Radio Frequency Identification)
- RFID : Small tags that are attached to pallets, containers or individual inventory items
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2.4) Transportation
There are several types of transportation modes ; Rail, water, truck, air, pipeline and Internet.
Two types of water transportation : Inland water transportation (e.g. canal) and ocean transportation.
GLOBAL LOGISTICS MANAGEMENT
[ Comparison of Major Transportation Modes]
Source : Keegan, W. J., and Green, M. C. (2013), Global Marketing, Pearson, p. 396
