Chapter 13 Global Marketing Channels and Physical Distribution

Global Marketing Channels Channel of Distribution An organized network of agencies and institutions which, in combination, perform all the activities required to link producers with users to accomplish the marketing task Distribution The physical flow of goods through channels 2002 – Chapter 13 Andrew P. Yap - FIU – MAR 4156

Channel Objectives and Constraints Major Categories of Channel Utility Place – product available in location convenient to a customer Time – product available when desired by a customer Form – product available in form ready to be used by a customer Information – availability to answer questions about product benefits 2002 – Chapter 13 Andrew P. Yap - FIU – MAR 4156

Channel Objectives and Constraints Customer Characteristics Geographic distribution, income, shopping habits, reaction to selling methods vary by country Product Characteristics Degree of standardization, perishability, service requirements also vary by country Middleman Characteristics Often engage in cherry picking 2002 – Chapter 13 Andrew P. Yap - FIU – MAR 4156

Selection and Care of Distributors and Agents A wholesale intermediary that typically carries product lines or brands on a selective basis Agent An intermediary who negotiates transactions between parties but does not take title to the goods being purchased or sold 2002 – Chapter 13 Andrew P. Yap - FIU – MAR 4156

Distribution Channels Piggyback Marketing One manufacturer obtains distribution of products through another’s distribution channels Avon and Mattel Industrial Products Four elements of industrial marketing channel The Internet, the manufacturer’s sales force, distributor or agents, and wholesalers 2002 – Chapter 13 Andrew P. Yap - FIU – MAR 4156

Global Retailing Department Stores Specialty Retailers Supermarkets Have several departments under one roof (Macy’s) Specialty Retailers Have a great deal of merchandise depth (Gap) Supermarkets Retail establishments that offer food and nonfood items Convenience Store Merchandise mix is limited to high turnover products 2002 – Chapter 13 Andrew P. Yap - FIU – MAR 4156

Global Retailing Discount Stores Hypermarkets Emphasis is on low prices Full-line discounters (Wal-Mart) Offer a wide range of nonfood and nonperishable items Hypermarkets Combines the discounter, supermarket, and warehouse club approach under one roof Average 200,000 to 300,000 sq. ft. 2002 – Chapter 13 Andrew P. Yap - FIU – MAR 4156

Global Retailing Supercenters Category Killers Offer a wide range of aggressively priced grocery items plus general merchandise Space size is half that of hypermarkets (Wal-Mart) Category Killers Stores specialize in a particular product category and offer a vast selection at low prices Home Depot and Toys R Us 2002 – Chapter 13 Andrew P. Yap - FIU – MAR 4156

Global Retailing Market Entry Strategy Framework Culturally Close Organic Chain Acquisition Easy to Enter Difficult to Enter Franchise Joint Venture Culturally Distant 2002 – Chapter 13 Andrew P. Yap - FIU – MAR 4156

Global Retailing Market Entry Strategy Framework Organic Growth When a company uses its own resources to start a store from scratch or to acquire existing retail facilities Virgin Megastore in Paris Franchising The appropriate entry strategy when barriers to entry are low yet the market is culturally distant in terms of consumer behavior or retailing structures Benetton stores 2002 – Chapter 13 Andrew P. Yap - FIU – MAR 4156

Global Retailing Market Entry Strategy Framework Acquisition Entails purchasing multiple existing outlets in a foreign country Marks & Spencer acquiring Brooks Brothers Joint Ventures Advisable when culturally distant, difficult-to-enter markets are targeted China 2002 – Chapter 13 Andrew P. Yap - FIU – MAR 4156

Physical Distribution and Logistics Management Important Distribution Activities Order Processing Includes order entry, order handling, and order delivery Warehousing Distribution centers are designed to efficiently receive goods from suppliers and fill orders for individual stores Inventory Management Ensures that a company neither runs out of manufacturing components or finished goods nor have excess inventory 2002 – Chapter 13 Andrew P. Yap - FIU – MAR 4156

Physical Distribution and Logistics Management Important Distribution Activities Transportation Modes Rail – the most heavily used mode in the U.S. accounting for nearly 40% of all cargo moved Trucks – an excellent mode for both long-haul, transcontinental transport and local delivery of goods Air – the most expensive but also the quickest and most reliable mode of transportation Water – inland water and ocean transportation 2002 – Chapter 13 Andrew P. Yap - FIU – MAR 4156

Physical Distribution and Logistics Management Channel Strategy Involves an analysis of each shipping mode to determine which mode(s) will be effective and efficient in a situation Logistics Management The integration of activities necessary to ensure the efficient flow of raw materials, in-process inventory, and finished goods from producers to customers 2002 – Chapter 13 Andrew P. Yap - FIU – MAR 4156