Presentation on theme: "International Channels of Distribution"— Presentation transcript:
1 International Channels of Distribution How do you get the product/service to foreign consumers?
2 Distribution Plan Determine which selling approach is best. a. Consult Country Commercial Guides (CCGs) "Marketing U.S. Products and Services in (country) chapterb. Industry Subsector Analyses (ISAs)Find distributors.Find end foreign buyers (trade leads).
3 A B C D Producer Producer Producer Producer Agents Wholesaler For example, How would you distribute shoes in Italy? Shoes Distribution Varies Across CountriesABCDProducerProducerProducerProducerAgentsWholesalerWholesalerRetailerRetailerRetailerConsumerConsumerConsumerConsumer2
4 For Example German Vs. French Shoe Distribution Distribution – London: Euromonitor, 1988, pp. 162, 171GermanyOrganized Independents (buying groups)35%Major Shoe chains29%Mail7%Department Stores6%HypermarketsDiscount StoresIndependent Shoe Stores4%Other retailers100%FranceIndependent Shoe stores56%Direct Sales14%Clothing stores2%Department storesVariety stores1%Other retailers25%100%
5 Who are Your Customers/ What Brands Styles Do They Buy Who are Your Customers/ What Brands Styles Do They Buy? Where Do They Shop?
6 Would They Shop in Specialty Stores? Distributing Shoes in Italy j99 Bruno MagliGucci Children’s Shoes E400
8 Should You Set Up Your Own Store Chain? Distributing Shoes in Italy j99
9 Potential Italian Shoe Distributors ITALY BOLOGNAFIERE Piazza Constituzione, BOLOGNA Tel: fax:CENTRO SERVIZI E.F.D. Contact: Dott.ssa Chiara Padovani Via B. Franceschini, FIRENZE Tel: Fax:FIERA MILANO Largo Domodossola, MILANO Tel: Fax: Fifth Avenue, Suite 600 New York, NY (USA) Tel: Fax:LINEAPELLE - ANTEPRIMA - PREVIEW Via Brisa, MILANO Tel: Fax:AREAPELLE Segreteria: Via Brisa, MILANO Tel: Fax:FIRENZE EXPO Spa Firenze Tel: Fax:
10 What is a Channel of Distribution? “Process including the physical handling and distribution of goods, the passage of ownership (title) and the buying and selling negotiations between producers and middlemen and between middlemen and customers.”
11 What Is An International Marketing Channel? Middlemen in the process between Manufacturer & Final International Consumer who may or may notPhysically handle & distribute the goodsAssume title to goodsNegotiate buying and sellingMiddlemen used when the can perform functions more efficiently than manufacturers can
12 Marketing Channels for Consumer Goods and Services BCDProducerProducerProducerProducerAgentsWholesalerWholesalerRetailerRetailerRetailerConsumerConsumerConsumerConsumer2
13 Marketing Channels for Industrial Goods and Services BCDProducerProducerProducerProducerAgentAgentWholesalerWholesalerIndustrial BuyerIndustrial BuyerIndustrial BuyerIndustrial Buyer3
14 Channel Decisions When Entering New Country Whether to Use Established Channels or Build Own Channels?Whether to Use Home-country (located in producing firm’s country) or Host-country (located in foreign country) middlemen?Which intermediaries?How many intermediaries?Exclusive – one or a select fewSelective – more than a few, less than allIntensive – as many outlets as possible
15 Examples of Home-Country Middlemen (1) Global Retailers
16 Examples of Home-Country Middlemen (2) Export Management Company Export Management Companies –Independent firm which acts as the exclusive export sales department for non-competing firms;Typically represent smaller companies in specialized industriesRanges in size from 1 to 100 employees and handles 10% of exported manufactured goods
17 Example of Export Management Company You sell to AMEX; We take it abroad & absorb all risksAmex Export Functions:We purchase products from our business partners for resale in international markets.We pay for products purchased on terms similar to our business partners' standard domestic terms.We've developed over the past twenty years a unique system and strong know-how to select, appoint, and manage international distributors to market these products overseas.We attend trade shows, implement advertising programs, and translate material.We are responsible for invoicing, collection and bear the responsibility for payment.We handle shipping details, customs forms, export licensing, and all relevant export documentation.We constantly research and appraise market conditions overseas, and provide useful feedback to our business partners to incorporate in their marketing, and product development plans.We travel, meet face-to-face with our customers and see first-hand their needs and marketing efforts.
18 EMC LimitationsRelatively small with limited financial resources; may be unable to stock product or offer financing to foreign customersFocus efforts on products that bring in most profitsMost do not cover CanadaManufacturers may lose control over who buys, selling price, promotion, etc.
19 Examples of Home-Country Middlemen (3) Export Trading Company Export Trading Companies –Larger companies that specialize in providing intermediary services, risk reduction, financial assistance, etc.
20 Export Trading Companies Export Trading Companies A typical ETC is more market-orientated and transactions driven than a typical EMC. An ETC most often acts as an independent distributor creating transactions by linking domestic producers and foreign buyers.As opposed to representing a given manufacturer in a foreign market, the ETC determines what U.S. products are desired in a given market and then work with U.S. producers to satisfy demand. ETCs can perform a sourcing function searching for U.S. supplies to fill specific foreign requests for U.S. products.A special kind of ETC is a group organized and operated by producers. These ETCs can be organized along multiple or single-industry lines and can also represent producers of competing products.Most ETCs take title to the goods involved, but some will work on a commission basis.
21 Examples of Home-Country Middlemen (4) Agents/Brokers Home country agents/brokersDo not take title;Shorter term relationship;Specialize in certain products
22 Examples of Host (Foreign) Country Middlemen (1)Merchant middlemen (take title & possession)Distributors/WholesalersDealers / Retailers (Ongoing relationship to sell to customers)(2)Agents & brokers (do not take title & seldom take possession)
23 Home-country or Host-country Middlemen? Use Home-country or Host-country middlemenSelect Home-country middlemen if you do not wish to enter or do not have capability to enter foreign marketSelect Host-country middlemen if you seek greater control over marketing mix; have a presence in the foreign country
24 Marketing Channels Differ Around The World in Services they performBreadth of lines they carryCosts and trade marginsLength of channel - long vs. short
25 Selecting Marketing Channels Marketing channel decisions are among the most complex & challenging facing the firmEach channel creates different level of sales & costsFirm usually committed to decision for long time
26 How Do you Select Channel? Cost – Transporting & storing goodsCapital RequirementsControlCoverageCharacter – Does it fit the character of the company and the market?Continuity – Can you foster loyalty among members?
27 Locating Middlemen U.S. Department of Commerce; Directories; Foreign Chambers of commerce;Middlemen associations;Internet services, e.g.Carriers e.g. shipping companies
28 Two basic sources of "buy" leads: The ones you or your reps develop first-handSecond hand leads -- the ones you hear or read aboutGood trade lead sources includeU.S. Government’s Trade Opportunity Program found on the NTDB,FAS Agricultural Trade Leads,Commercial News USA trade leads,Global Technology Network.World Trade Center (WTC) network, and many states have their own overseas trade offices.
29 Locating Information About Channels of Distribution in Foreign Country Commercial Guide - “Marketing U.S. Products and Services” sectionArticles on “distribution” “country” “product” – ABI-Inform
30 For Example, How are Cars Sold in China For Example, How are Cars Sold in China? “Buick Succeed in China By Laying Stress on Quality,” Robert Simison, Wall Street Journal, Oct. 26, 1999“Most cars are sold not by conventional dealers but by independent distributors and traders. Typical is the Asia Games Village parking lot in Beijing, which has become a sort of flea market for dozens of small-time traders of new and used vehicles.”
31 For Example, When Opening Retail Outlet, Where Do You Locate, How Many For Example, When Opening Retail Outlet, Where Do You Locate, How Many? “1st Starbucks Herald Plan To Give Parisians Café Alternative,” Jonathan Shenfield, The Commercial Appeal, Memphis, TN, Jan. 17, 2004“The first shop (Starbucks) near the Paris Opera, is situated to draw both tourists and locals…The chain began to establish itself across Europe nearly six years ago, starting with Britain, Switzerland and Austria…Another outlet opens Monday in the La Defense business district, the second of about 10 planned for Paris.”