1. Topic 9 International Distribution & Logistics

2.  Getting the product to the target market can be a costly process  Forging an aggressive and reliable channel of distribution may be the most critical and challenging task facing the international firms  Each market contains a distribution network with many channel choices  In some markets the distribution structure is multi- layered, complex, inefficient, even strange  Competitive advantage will reside with the marketer best able to build the most efficient channel

3. Principles of distribution  Transactional cost minimisation  Reinforcement of corporate image  Reactivity to customer requirements  Reactivity to competition (use as an SCA)  Intermediary reduction / Integration / Out sourcing  Power relativities in the distribution system  Movement to source of production or selling

4. What is different internationally?  Customer expectations / competitive offers  Transport costs / availability / topography  Market structure / Distributive responsibility  Distributor chains / power / location  Logistical networks  Wholesaler / Retailer Agent / traditions  Distributive culture / norms

5.  Customer characteristics  Nature of product  Demand  Competition  Legal Regulations  Local practices

6.  Cost - capital - maintenance  Control

7.  Market coverage (channel width)  Intensive  Selective  exclusive  Channel length  Control (Integration)  Consider customer service needs

8.  Positive motivators – win-win approach (1) financial rewards (2) psychological rewards (3) communications (4) company support  Agree performance targets  Periodically monitor

9. 1. Middlemen Services 2. Product Line Breadth 3. Costs and Margins 4. Channel Length 5. Nonexistent Channels 6. Blocked Channels 7. Stocking 8. Power and Competition

10. Complex Japanese Distribution System Consumer Retailer Tertiary Wholesaler Secondary Wholesaler Primary Wholesaler Speciality Distributor Manufacturer or Importer Department Store Self-Service Store

11.  High density of middlemen  Channel control by manufacturers  Business philosophy shaped by a unique culture  Laws that protect the small retailer

12.  Traditional retailing  Intermediary retailing  Structured retailing  Advanced retailing  Interactive customer marketing  Mass customisation  Data mining  Category management  Effective consumer response International Patterns Of Retailing

13. TraditionalAdvanced Typical in:Developing Countries Mature economies Power Concentration LowHigh Outlet sizeSmallLarge Retail marketingRarely usedVery Important Retail technologyRarely usedVital

14. International Electronic Forms Of Retailing Internet Markets Auctions Single Buyer Markets Pure Exchanges Source: Klein & Quelch (1997) Market conditions conducive to electronic channels of distribution Inefficiencies in traditional distribution channels Market fragmentation Minimum scale barriers Commodity-type products Short life-cycle products

15.  Distance involved  Currency variations  Conformance to national regulations  Transportation systems  Infrastructure  Availability of modes  Choice of modes

16.  Order cycle times & Customer service levels  JIT delivery  EDI (electronic data interchange)  ESI (early supplier involvement)  ECR (efficient customer response)  International storage issues  International packaging

17.  The concept of EPZ  duty-free manufacture or processing of products for export purposes within a customs-controlled environment  Advantages  All goods entering the EPZ are exempted from customs duties and import permits  Firms can use foreign currency to settle transactions  EPZs can be used for assembly of products and so help reduce transportation costs  EPZs give greater flexibility, and help avoid unwanted bureaucracy of customs and excise

18. The Nature of Global Logistics and Channel Decisions I  International distribution encompasses two areas of responsibility: –Channel management identifying, selecting and supporting distribution partners distribution partners bridge the gap between manufacturer and customer –Global logistics ensuring adequate supply the right products are made available to customers when and where they want them

19. The Nature of Global Logistics and Channel Decisions II  The value chain

20. The Nature of Global Logistics and Channel Decisions III  The value chain provides a useful framework for integrating various organisational activities related to global distribution  Today, distribution activities are becoming increasingly intertwined, i.e. –sourcing material and parts for production –taking care of product shipment –selecting suitable distribution partners

21. In-Bound Logistics I  In-bound logistics describes the process of moving products and materials from suppliers to the factory  Six factors must be taken into account –factor costs and conditions –transport costs –country infrastructure –political risk –market access –currency issues

22. In-Bound Logistics II  Factor costs and conditions –land –labour, including the cost of workers manufacturing and production professional and technical management –capital cost  The cost of these factors depends on –availability –relative abundance

23. In-Bound Logistics III  World factor costs that affect manufacturing –industrialised countries factor costs are tending to equalise –industrialising countries (Singapore, other Pacific Rim countries) offer significant factor costs savings offer an increasingly developed infrastructure and political stability –Russia and other countries lower factor costs (especially wages) are offset by limited infrastructure development and greater political uncertainty

24. In-Bound Logistics IV  Transport Costs  Country Infrastructure  Political Risk  Market Access  Foreign Exchange

25. Out-Bound Logistics  Moving products from the factory to customers  It involves aspects of –transportation, –inventory control, –order processing and –warehousing

26. International Channel Strategies  The purpose of marketing channels is to create utility for customers –place –time –form –information  Two forms of channel strategy –direct involvement –indirect involvement

27. Characteristics Impacting on Channel Design and Strategy I  Customer characteristics –customer number, geographic distribution, income, shopping habits, reactions to different selling methods  Product characteristics –perishability, service requirements or unit price

28. Characteristics Impacting on Channel Design and Strategy II  Middleman characteristics –attitude towards the manufacturer selection and care of distributors and agents distributor and agent performance termination  Environmental characteristics –economic, social and political dimensions

29. Global Trends in Channel Design and Strategy I  Global Retailing –today –future  Direct Marketing –distribution system, where sales to customers are carried out via telephone, mail or door-to-door –one-on-one approach is effective for products which need demonstration or complex explanation

30. Global Trends in Channel Design and Strategy II  E-Commerce and International Distribution Strategies –Design of appropriate distribution systems  E-Tailing –describes the increasing trend of retail operations globalising via the Internet –presenting and selling a product range over the Internet gains increasing importance

31. Global Trends in Channel Design and Strategy III  Alternative Channel Responses