1. Welcome to class of International Distribution by Dr
Welcome to class of International Distribution by Dr. Satyendra Singh Regent University Accra, Ghana

2. Outline Distribution Structure Factors Affecting Choice of Channel
Locating and Managing Channel Members
Labeling Requirements
Intl distribution for luxury products 2

5. 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
Import-wholesalers perform marketing function
Advertising, marketing research, warehousing, financing, storage 5

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7. 7

8. International Intermediaries8

9. Causes and Effects of Price Escalation
Source: CIF Cost, Insurance, Freight, The exhibit assumes that all domestic transportation costs are absorbed
by the exporter. Just for illustration purposes.

10. Pricing also depends on
Operating cost, custom duty, foreign exchange
Operating cost (retailing + staff) = 30%
Distributors need 60% margin (co-efficient )
HK, SP, Guam and Panama  no custom duty
Duty-free shops  20% cheaper 10

11. Modern Distribution Structure
Wal-Mart, McDonald’s, Home Depot
Discount, self-service, mass merchandizing, return policy…
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, Superior service… 11

12. Online Distribution Structure
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
Level of service is high  quick  right now
Website is a store; we need to bring customers there
Search engine registration, banners display, press release, local news group, … 12

13. Informal Distribution (Street, undocumented…)

14. Retail Structure in Selected Countries

15. In Developing countries distribution costs are high15
Source: Simanis (2012), HBR, June

16. 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 16

17. 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. 17

18. 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 18

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21. GM Food Labeling No need to label  same wrt to nutrition
Europe and Japan  Mandatory
1% contamination of unmodified products with GM foods
Consumers have the right the know the information
Let consumers decide  but no choice
Reduced sales, so processors do not sell GM foods
EU has disguised policy of protectionism
Canada and US  Voluntary
Mandatory for Non-GM foods
Let consumers decide  more choices 21

22. Traditional International Entry Mode Strategy22

23. Multi-Mode international Entry Strategy for GM Crops23

24. Perfume Distribution Perfume store countries
Selling through small perfume shops
France, Italy, Germany
Department store countries
US, UK, Australia, Canada, Japan 24

25. Luxury Outlets… Free standing, flagship COS
Shopping centre retail store
Rent + % of sales for common promotional activities
Outlet in retail park
with own entrance with parking, yet in mall
Must be destination brand  extra effort justification 25

26. Luxury Outlets … Shop-in-shop department store  can be COS
No cash register, but brand’s staff and merchandise
Give % of sales to the store (but no rent)
Brand has its own identity and culture
LV  Matsuya in Tokyo
Chanel  Daimaru in Osaka (2 floors & own elevator)
Counter in a department store
Store does everything for you  Merchandising, pricing, promotion, space allocation, organises activities...
 Takes % of sales
 Brand has no self identity and no control 26

27. Luxury Outlets … Corner in a department store
 between shop-in-shop and counter in store
Brand pays its staff; but store takes title to the merchandise
So the Brand gets limited identity, but stores put many brands together to create a full spectrum of store image
 Gents suit, perfumes…
Franchisee store  can be COS
3%-5% of sales, No investment
Franchisee must follow instructions and buy goods
Minimum sales are needed as guarantee
Chanel, LV, Hermes  against franchising/licensing 27

28. Luxury Outlets Factory outlets
Shop attached to your factory  like shop-in-shop
Duty-free shops  airports
Customers have $ in pocket and time in hand
# of flights passing through the airport
Destination, nationalities, type of travellers
Japanese smoke a lot – mild cigarettes
Americans like Whisky, Cognac (Hanessy and Martin) 28