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14- 0 © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Chapter 14 International Distribution Systems
14- 1 © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Japanese Distribution Structure High Density Middlemen Channel Control Business Philosophy Large-Scale Retail Store Law Changes Effected by SII
14- 2 © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Comparison of Distribution Channels Between the United States and Japan Automobile makers affiliated parts makers Independent parts makers Repair parts makers Automobile makersWholesalersSpecial agents Dealers Sub-dealers Cooperative sales companies 2nd-level wholesalers Retailers Large users Gasoline stations Automobiles repair shops End users Automobile parts: Japan SOURCE: McKinsey industry studies
14- 3 © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Comparison of Distribution Channels Between the United States and Japan SOURCE: McKinsey industry studies Manufac- turer Warehouse distributor Jobber buy- ing groups Jobber Mass merchandiser Repair specialist Automobile parts: United States 51% 10% 18% Primary channel Secondary channel InstallerCustomer 21%
14- 4 © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Retailing Comparison U.S. and Japan % Small Stores% Sales Japan9557 U.S.7019 Japan9450 U.S.8133 Food Non-Food
14- 5 © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Large-scale Retail Store Law Protect Small Retailer 500 Sq Meters (5,382 Sq. Ft.) Approval from MITI and Prefectural government to: Build Expand Changing Operating Hours Change Days Closed Local Retailers must unanimously approve plan Months to years for approval Japanese Supermarket - 10 years Toys "R" US - 3 years Licenses required to operate Full Service Store - 39 Licenses need approval
14- 6 © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Undercutting the Competition Audio cassette$11 - $14$6 - $8 Auto-Reverse Walkman7050 Braun Juicer3220 Canon Autoboy Camera Channel No. 5 ( 1 / 2 oz)15385 Compact disk Lady Remington shaver8646 Rolex watch4,8573,078 Average TokyoShop America ProductRetail PriceCatalog Price SOURCE: Shop America LTD. as quoted in "Can This Catalog Company Crack the Japanese Marketing Mass?" Business Week, March 19, 1990, p. 60.
14- 7 © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Japanese Consumer Philosophy Harmony and Friendship Consumer Brand Loyalty Service and Quality Over Price Small, Frequent Purchases
14- 8 © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Cutting Out the Middleman 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 141,59797,882181,374 JapanBritainUnited States Manufacturers Wholesalers Retailers Number of companies involved in each level of the food industry, % of total, 1993 Total number
14- 9 © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Middlemen Services Line Breadth Costs and Margins Channel Length Nonexistent Channels Blocked Channels Stocking Power and Competition General Distribution Patterns
© The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Retail Patterns Argentina Australia Canada India NA Japan Malaysia Mexico Philippines South Africa South Korea U.S.A Retail OutletsPopulationEmployees Country(000)per Outletper Outlet SOURCES: International Marketing Data and Statistics, 21st ed. (London: Euromonitor Publications, 1997), and "Indicators of Market Size for 115 Countries," Crossborder Monitor, August 27, 1997.
© The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill International Channel-of-Distribution Alternatives Home Country Domestic producer or marketer sells to or through Open distribution via domestic wholesale middlemen Export management company or company sales force ExporterImporter Foreign agent or merchant wholesalers Foreign retailers Foreign consumer The foreign marketer or producer sells to or through Foreign Country
© The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Home Country Middlemen Global Retailers Export Management Company Trading Companies (Foreign) U.S. Export Trading Companies Complementary Marketers Manufacturer's Export Agents Home Country Brokers Buying Offices Selling Groups Webb-Pomerence Export Associations Foreign Sales Corporations Norazi Agents Export Merchants Export Jobbers
© The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Major Japanese Trading Companies (Sogo Shosha) C. Itoh20,5339,8672,9373,3864,343 Mitsui20,3007,0003,5534,5245,222 Sumitomo21,4048,1754,5915,2983,340 Marubeni18,2486,9653,0143,4634,806 Mitsubishi16,6147,2672,4953,1523,701 Nissho Iwai15,0474,4042,0034,3464,295 Tomen6,3243, ,1621,265 Nichimen5,8931, ,389 Kanematsu-Gosho5,5021, , Total129,86650,14220,83628,73630,151 Share (percent) Sales of Nine Sogo Shosha (Yen billions) ExportsImports fromintoOffshore CompanyTotalIn JapanJapanJapanTrade SOURCE: Japan Foreign Trade Council, Inc., 1991.
© The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Channel Control by Manufacturer or Trading Company Inventory Financing Cumulative Rebates Quantity Purchased Early Payments Achieving Sales Targets Performing Services Maintaining Inventory Levels Sales Promotions Loyalty Maintain Prices Cooperation Merchandise Returns of Unsold Merchandise Retailers Receive Displays Advertising In-store Displays Financial Assistance
© The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill General Motors Networks - American Style Keiretsu We read a lot about the Japanese keiretsus and their interlocking networks of suppliers, financing, and producers. Do we have anything similar in the United States? Consider the breakdown of the $10,000 you pay for a General Motors' LeMans. $3,000 to South Korea for labor and assembly. $1,850 to Japan for engines, transaxles, and electronics. $700 to Germany for styling and design engineering. $400 to Taiwan, Singapore, and Japan for small components. $250 to Britain for advertising and marketing services. $50 to Ireland and Barbados for data processing. $4,000 goes to strategists in Detroit, lawyers, bankers, lobbyists, insurance and health care workers all over the country and to General Motors shareholders all over the world. The suppliers listed here are not all independent companies operating at arm's length but are corporate subsidiaries, joint ventures, or suppliers that have agreed to a longterm arrangement to provide products or services. Together they make up a global network of interdependent companies that repeatedly deal with each other across borders. General Motors Networks - American Style Keiretsu ©SOURCE: Robert Reich, "The Myth of 'Made in the U.S.A.'," The Wall Street Journal, July 5, 1991, p. A6. Reprinted by permission of The Wall Street Journal, © 1991 Dow Jones & Company, Inc. All Rights Reserved Worldwide.
© The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Foreign Country Middlemen Manufacturer's Representatives Distributors Brokers Managing Agents and Compradors Dealers Import Jobbers Wholesalers Retailers
© The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Factors Affecting Channel Choices Cost Capital Control Coverage Character Continuity
© The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Channel Development Locating Middlemen Selecting Middlemen Screening Agreements Motivating Middlemen Terminating Middlemen
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