1. Global Marketing Management
Masaaki Kotabe & Kristiaan Helsen Third Edition John Wiley & Sons, Inc., 2004
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

2. Global Logistics and Distribution
Chapter 16
Global Logistics and Distribution
Chapter 16
Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

3. Kotabe & Helsen's Global Marketing Management, Third Edition, 2004
Chapter Overview
1. Definition of Global Logistics
2. Managing Global Logistics
3. Free Trade Zones
4. Maquiladora Operation
5. U.S. Special Import Tariff Provisions
6. Global Retailing
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

4. Kotabe & Helsen's Global Marketing Management, Third Edition, 2004
Introduction
Global logistics and distribution have played a critical role in the growth and development of world trade and in the integration of manufacturing on a worldwide scale.
The use of appropriate distribution channels in international markets increases the chances of success dramatically.
In the United States, the total logistics cost has amounted to ten to eleven percent of the country’s GDP every year in the last decade.
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

5. Kotabe & Helsen's Global Marketing Management, Third Edition, 2004
Introduction (contd.)
As firms start operating on a global basis, logistics managers need to manage shipping of raw materials, components, and supplies among various manufacturing sites at the most economical and reliable rates.
The development of intermodal transportation and electronic tracking technology has resulted in a quantum jump in the efficiency of the logistic methods employed by firms worldwide.
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

6. 1. Definition of Global Logistics
Global logistics is defined as the design and management of a system that directs and controls the flows of materials into, through and out of the firm across national boundaries to achieve its corporate objectives at a minimum total cost (see Exhibit 16-1).
Materials management refers to to the inflow of raw material, parts, and supplies through the firm.
Physical distribution refers to the movement of the firm’s finished products to its customers, consisting of transportation, warehousing,
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

7. 1. Definition of Global Logistics (contd.)
inventory, customer service/order entry, and administration.
Chapter 16
Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

8. 2. Managing Global Logistics
The following factors contribute to the increased complexity and cost of global logistics:
Distance
Exchange rate fluctuations
Foreign intermediaries
Regulation
Security
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

9. 2. Managing Global Logistics (contd.)
Modes of Transportation
Value-to-Volume Ratio
Perishability
Cost of Transportation
Ocean Shipping
Liner Service
Bulk Shipping
Air Freight
Intermodal Transportation
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

10. 2. Managing Global Logistics (contd.)
Warehousing and Inventory Management
Hedging Against Inflation and Exchange Rate Fluctuations
Benefiting from Tax Differences
Logistic Integration and Rationalization
E-Commerce and Logistics
Third-Party Logistic (3PL) Management
The largest 3PL sector is the value-added warehousing and distribution industry.
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

11. Kotabe & Helsen's Global Marketing Management, Third Edition, 2004
3. Free Trade Zones
Logistical Revolution with the Internet
The trend toward third-party logistics is a result of the Internet and the intranet as well as concentrating on core competencies.
A free trade zone (FTZ) is an area that is located within a nation (say, the United States), but is considered outside of the customs territory of the nation.
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

12. 3. Free Trade Zones (contd.)
FTZs provide many cash flow and operating benefits to zone users and include (see Exhibit 16-2):
1. Duty deferral and elimination
2. Lower tariff rates
3. Lower tariff incidence
4. Exchange rate hedging
5. Import quota not applicable
6. “Made in U.S.A.” designation
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

13. 4. Maquiladora Operation
The maquiladora industry, also known as the in-bond or twin-plant program, is essentially a special Mexican version of a free trade zone and was started in 1965.
Mexico allows duty-free imports of machinery and equipment for manufacturing as well as components for further processing and assembly, as long as 80 percent of the plant’s output is exported.
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

14. 4. Maquiladora Operation (contd.)
Mexico permits 100 percent foreign ownership of the maquiladora plants in the designated maquiladora zone.
Most of the maquiladora plants are located along the U.S.-Mexico border, such as Tijuana across from San Diego, Ciudad Juarez across from El Paso, and Nuevo Laredo across from Laredo. Other cities include Monterrey, Mexico City, and Guadalajara.
Mexico has been an attractive location for labor-intensive assembly because of cheaper labor.
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

15. 5. U.S. Special Import Tariff Provisions
Under NAFTA regulations, local content requirements have encouraged companies to move their operations to Mexico.
Special U.S. tariff provisions have encouraged U.S.-based companies to export U.S.-made components and other in-process materials to foreign countries for further processing and/or assembly and subsequently to reimport finished products back into the United States. U.S. imports
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

16. 5. U.S. Special Import Tariff Provisions (contd.)
under these tariff provisions are officially called U.S. imports under items and of the U.S. Harmonized Tariff Schedule (the 9802 tariff provisions, for short).
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

17. Kotabe & Helsen's Global Marketing Management, Third Edition, 2004
6. Global Retailing
In developed countries, retailing employs between 7 percent and twelve percent of the workforce.
In 2002, Wal-Mart was the largest retailer in the world with a total revenues of $220 billion. Only 10 percent of its sales are generated outside its core NAFTA region.
“Push” versus “Pull”:
The traditional supply chain powered by the manufacturing push is becoming a demand chain driven by consumer pull, especially in the developed countries.
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

18. 6. Global Retailing (contd.)
On-Time Retail Information Management
Reduced Inventory
Market Information at the Retail Level
Strong logistics capabilities can be used as an offensive weapon to help a firm gain competitive advantage in the marketplace.
Retailing Differences Across the World:
Industrialized countries tend to have a lower distribution outlet density than the emerging markets.
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

19. 6. Global Retailing (contd.)
The advanced facilities available in the developed world allow a much higher square footage of retail space per resident,due to the large size of the retail outlets.
Large-Scale Retail Store Law (LSRSL) in Japan
This law helped to protect the small retail stores
E-Commerce and Retailing
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

20. 6. Global Retailing (contd.)
Countries such as Japan and Germany are warming up to the same e-commerce revolution as the United States has experienced.
E-commerce is not limited to the developed countries.
China is already the fastest growing Internet market in Asia.
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

21. 6. Global Retailing (contd.)
Brazil is the most wired nation in Latin America.
Despite the rapid growth of the Internet, the need for local or regional distribution of products is likely to remain as important as it was before the Internet revolution.
Despite the rapid growth of the Web, the need for local or regional distribution of products is likely to remain as important as it was before the Internet revolution.
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Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

22. Copyright © John Wiley & Sons, Inc., 2004
Chapter 16
Kotabe & Helsen's Global Marketing Management, Third Edition, 2004