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INTERNATIONAL
DISTRIBUTION CHANNEL
BY:DEBANGSHU S. ROY
DIVYA SHARADLAVEENA SACHDEVAPREETI KUKREJATANUJ KALRAVAIBHAV VISHNOI
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Distribution channel: system ofmarketing institutions that promotes
the physical flow of goods andservices, along with ownership title,from producers to consumer or
business user; also called aMarketing channel.
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Distribution Physically moving products and establishing
intermediary relationships to support such movement.
Physical Distribution (Logistics) The activities of distribution involved in the physical
relocation of products.
Channel of Distribution The system of intermediaries (business relationships)
established to guide the movement of a product.
The Role of Distribution Activitiesin Marketing
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Functions of Intermediaries
• Perform the marketing function better.
• Provide efficient distribution of the product.
• Breaking bulk – sell to customers in smallerquantities.
• Assorting – bringing together similar lines ofgoods.
• Shifting risks.
• Merchant middlemen - take title to the goodsdistributed.
•Agents/brokers - distribute goods only. 5/1/20125
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Types of Distribution Channels
Direct channel
A distribution system without intermediaries
Indirect channel
A distribution system with one or moreintermediaries.
Dual distribution
A distribution system with more than one channel.
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AlternativeChannels
ofDistributio
n
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Dell
Dell Computer:A Direct Sellerof Computers
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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 China’sdistribution channels:
“Mastering the distribution system is the singlemost important challenge of China’s economicrevolution”
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
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Selection of channel
The selection of distribution is affected by many of factors,
which play significant role while choosing the channel fordistribution. It may include the buying pattern of consumer,type of the product is perishable, or auto mobile, weight andbulk and it also depends on the company's resources.
The main affecting factors are following:
Organization objectives
Mode of TransportType of productNature and extent of marketExisting channel for comparable productBuying habit of customersChannel Availability 5/1/201210
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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
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International Channel-of-DistributionAlternatives
Home Country
Domestic produceror marketer sells toor through
Open distribution viadomestic wholesalemiddlemen
Export managementcompany or companysales force
Exporter ImporterForeign agentor merchantwholesalers
Foreignretailers
Foreignconsumer
The foreign marketer orproducer sells to or through
Foreign Country
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Alternative Middlemen Choices—
Home Country
• Global Retailers
• Export Management Companies
• Manufacturers Export Agent
• Home-Country Brokers
• Export Merchants
• Piggy Back
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• They’re located in Firm’s own country. • Provide marketing services from a domestic base.• Employed by marketers with less international salesvolume and inexperienced with foreign markets.
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HOME COUNTRY MIDDLEMEN
GLOBAL RETAILERSWAL-MART, ROEBUCK are booming domestic middlemen forinternational middlemen.Companies adhering to the laid requirements gain access to Overseasmarkets of Argentina, Brazil, canada, etc.
EXPORT MANAGEMENT COMPANIESThey work under name of manufacturers and function as a low cost,independent marketing department.For firms with relatively small international volume or which are unwillingto involve personnel in international function.
A washington DC company marketing 10 US Orthopedics manufacturerproducts worldwide.
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MANUFACTURER’S EXPORT AGENT
•An agent firm provides selling service for manufacturers.•Operates on a straight commission basis and covers only oneor two markets.•Provides services similar to EMCs and does business in their
own name.
HOME COUNTRY BROKERS
•They perform low cost agent services.•Perform function of bringing bringing buyers and sellerstogether.•They specialise in one or more particular commodity and forthe same maintain contact with major producers and
purchasers. 5/1/201215
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EXPORT MERCHANTS•Intermediaries who take title to and possession of theproducts they carry
•Responsible for shipping and marketing the products in thetarget market•Carry competing brandsExamples:
export jobber, who carries commodity goods, but does
not take physical possession of the goods.
PIGGYBACK MARKETING
• channel innovation that has grown in popularity• One manufacturer distributes product by utilizing anothercompany’s distribution channel
• Requires that the combined product lines becomplementary and appeal to the same customer
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Alternative Middlemen Choices—
Foreign Country
• Distributors
• Foreign Country Brokers
• Managing Agents
• Dealers
• Wholesalers and
Retailers
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• Distributor
Is a merchant middlemen with close cooperation to themanufacturer
Functions are- control over prices, inventories, servicing.
• Agent
Conducts business within a foreign nation under
contract arrangement with parent country.Compensation is on the basis of cost plus a specified %of profits of the managed company.
• Brokers
Foreign brokers are part of small brokerage firms
operating in a country.
Function in good continuing relationships with customersand speedy market coverage at low costs
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• Dealers
Independent merchant middlemen with the supplier companyhaving equity in it. Ex- Massey fergusson and caterpillartractor company
• Wholesalers and RetailersEngage in direct importing for their own outlets and for
redistribution to smaller middlemen.Large retailers perform wholesaling to local shops and
dealers.
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Factors that affect choice of Channels
The “6 C’s” need to be considered:
1. Cost
Investment cost of developing channel; and cost of maintaining
channel 2. Capital requirements
How much capital is required
3. Control
How much control is desired Example: company’s own sales force exerts most control vs.
using middlemen
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Factors that affect choice of Channels(Cont.)
The “6 C’s” 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
Will there be longevity issues How to build loyalty with middlemen is much more difficult than
a company’s own sales force
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Locating, Selecting, Motivating andTerminating Middlemen
Factors affecting locating middlemen: Things to look for:
Financial stability, managerial stability, productivity, reputation, etc.
Sources to use: U.S. Dept. of Commerce, foreign consulates, commercially published
directories
Selecting Middlemen
Two steps 1. Screening
2. Developing the “Agreement”
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Locating, Selecting, Motivatingand Terminating Middlemen (Cont.)
Motivating Middlemen Common methods used to motivate middlemen:
Financial rewards, psychological rewards, communications, company
support and corporate rapport 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.5/1/201223