Welcome to class of International Distribution by Dr Welcome to class of International Distribution by Dr. Satyendra Singh Professor, Marketing and International Business University of Winnipeg Canada s.singh@uwinnipeg.ca http://abem.uwinnipeg.ca www.abem.ca/conference

International Distribution Distribution Structure Traditional, Modern, Retail Giants Distribution Patterns General, Retail Factors Affecting Choice of Channel Character, Coverage, Continuity, Control, Cost Locating and Managing Channel Members Locating, Selecting, Motivating, Controlling, and Terminating

Distribution Structure… Difference Between Domestic and Foreign Structure Super-efficient system in the USA vs. highly complex in Japan Traditional Distribution Structure Import-oriented structure High price, small no of affluent customers Sellers market  demand exceed supply Absence of cars and telephones Local monopoly of small stores Buy daily in developing country vs bi-weekly in Canada Intermediaries do not perform specific activities Import-wholesalers perform marketing function Advertising, marketing research, warehousing, financing, storage

International Intermediaries

In Africa

In Africa

Distribution Structure… Modern Channel Structure Discount, self-service, mass merchandizing, return policy… Change in direct marketing Door-to-door selling, hypermarkets, shopping malls, catalogue, Internet Wal-Mart, Carrefour (France), Praktikar (Germany), Ikea (Sweden) Higher margin in EU than US Internet-based system for ordering and delivering (low cost, efficient) Brick-mortar eg. Dell, Brick-click eg Amazon, DHL, UPS Convenience store as a pickup points for web-orders

Distribution Structure Retail Giants Structure Wal-Mart, McDonald’s, Home Depot take risk in foreign markets Europeans: quick to enter foreign market, emphasis on being first, retail strategy, local needs and taste Americans: exploit domestic market first, emphasis on efficiency, standardization and value to customers International retailers have advantages over local retailers World-class business processes Technology Financing Organizational capabilities Greater buying power Superior service…

Retail Structure in Selected Countries

Distribution Pattern… General Pattern Foreign channels are not the same as domestic channels Intermediary services are different Storage and wait for customers to come and see them, India, Egypt Line breadth Dealing-only narrow lines Requires government license Cost and margin Shorter channel for industrial or expensive goods Inverse relationship b/w length of channel and size of purchases Non-existent channels – selling on the roads! Blocked channels – competitors or relationships Power and competition – large whole sellers finance downstream

Distribution Pattern Retail Pattern Product lines: narrow (Italy, Morocco) vs. broad (Japan) Size pattern No of person served per retailer– higher in developed countries May be difficult to reach so many small retailers across a country Depends of economic development – single cigarette Direct marketing – mail, tel, door-to-door Usually best for developed economy, but Eastern European gaining popularity; e.g., Amway Local retailers need to compete Product selection Greater convenience Customer service Liberal store hours Retailers cannot close/open stores at their wish

Factors Affecting Choice of Channel… Objectives Volume, market share, profit, control, length of channel, terms of sales The 5 C’s of distribution Character of your Company and the market Perishable items, complexity of sales requires, SAS, value of the product Own sales force vs. distributor’s, aggressive managers (NY, fast cities) Coverage Distribution intensity, 100%! Has impact on market share/penetration/$ Several channels may be needed (full service vs. no service) 2-3 cities may be enough (Paris 30% of France population vs. NY only 5%) More distributors needed in US than France to achieve the same market share Continuity Serious issue if family-owned channel. Coca-cola lured Pepsi’s distributor in Brazil May not carry the line with less margin

Factors Affecting Choice of Channel Control Own/short channel  more control on price, volume, promotion Enthusiastic  invest time to promote your product Cost Developmental and maintenance costs Transporting and sorting, breaking bulk, provide credit, local advertising, sales representation, negotiations If possible, set up your own channel  own sales force However other costs remain same– consignments, loan, floor plans, etc.

Locating and Managing Channel Members Tradeshow, governments (DFAIT), third party recommendations, websites Selecting Trustworthy, references, finances, size of firm, experience, resources Go to foreign market and see the channel members Motivating Financial, psychological rewards (trip to head office, recognition), communications (newsletter, new product info.), corporate rapport Controlling Measurable performance indicators sales volume, market share, inventory turnover, accounts per area… Terminating Easy in US, not in international markets may claim up to 10% of sales as compensation x no of years served

Internet Culture Polite words, color, 70% user Sweden vs. 1% in China vs. 40% France Need broad-band, China allows only access to approved websites Adaptation Global or local 50,000 pages! Translation in +50 languages! Local Contact Customer enquiries, product return, payment where credit card is not possible, delivery of the purchased product Promotion Website is a store; we need to bring customers there Search engine registration, banners display, press release, local news group, … Different e-mail marketing strategy in EU– more privacy by law Vacation packages are more popular in the UK than US Germany may be interested in different destinations than Canadians