International Distribution Direct foreign investment –Perform all distribution functions on your own through ownership of distributors/retailers Foreign.
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International Distribution Direct foreign investment –Perform all distribution functions on your own through ownership of distributors/retailers Foreign Intermediaries U.S. Company Domestic Intermediaries Foreign consumer Internet Direct marketing Foreign Retailer X owns/operates its own distribution & retail entities or Foreign distributor Capital intensive!
International Distribution Three general exporting alternatives 1.Sell directly through your own sales force. 2.Sell indirectly through independent intermediaries. 3.Sell indirectly through an outside distribution system with regional or global coverage (e.g., Export Management Company).
Manufacturer’s Rep Foreign Intermediaries U.S. Company Domestic Intermediaries Foreign consumer Internet E-commerce Export Management Company (EMC) Foreign Retailer Importer Agent/ Broker Distributor Foreign Sales Corporation (FSC) International Distribution Alternatives: Exporting X Sales office
Intermediaries: two general types Types of intermediary relationships –Distributors; buy & resell; longer term –Agency; works on sales commissions a)agents – short term; e.g., one time b)representatives – longer term; independent sales people that represent your company’s products.
What do intermediaries do? (the short list) purchase inventory from the manufacturer or export intermediary; assumes risk for selling the product to smaller distributors, retailers and/or end users in the foreign market. Provide a sales force that is large enough to cover the country or region in which it is located. local advertising & promotion warehousing for the product. See also Table 11.2, p. 337, text JPG consulting, Going Global, Evaluating Foreign Distributors; http://www.going- global.com/
What to consider when selecting foreign intermediaries (pp.336-345) INTERNAL Company objectives – cost vs. control Character; nature of product Capital resources available to company Continuity of relationships with intermediaries Coverage EXTERNAL Customer characteristics - what needs should be satisfied? When, where, how? Culture – to what extent do we need to adapt? Competition – what intermediaries do competitors use?
Channel Design Considerations Coverage –The number of areas & retail outlets in which a product is represented and the quality of that representation. Types of coverage –Intensive –Selective –Exclusive
Locating & selecting intermediaries Locating Intermediaries - lists provided by gov’ts, chambers of commerce, business publications, etc. (Jan 16 lecture) Selecting Intermediaries - screen carefully, be precise about what functions you want performed Intermediary Evaluation Checklist: company characteristics: health of the business experience & reputation performance: sales force, territory, promotions, product movement compatibility:
Motivating intermediaries; provide incentives Inventory Financing Cumulative Rebates for larger quantities, early payments, achieving sales targets, maintaining inventory levels, performing sales promotions, etc. Returns of Unsold Merchandise Promotion & Merchandising Assistance Displays Advertising In-store Displays Financial Assistance
Terminating intermediaries Terminating Intermediaries - be aware that some countries have provisions to protect intermediaries from termination Example: Honduras distributors/agents protected by wrongful termination law (Law of Agents, Distributors and Representatives of Foreign Enterprises) Requires “just cause” for termination (fraud, negligence, failed sales targets) terminating a distributor may require compensation
The Distributor Agreement Typical terms include Contract duration Typically short periods initially Geographic and customer boundaries Well-defined territories and channels Compensation Amounts, how and in what currency Products and conditions of sale Products to be sold; terms and conditions of sales Means of communication between parties
Logistics: transportation of goods Shipping Guinness beer to Bertoua, Cameroon (Africa)
From port to patrons 4 days from Douala to Bertoua
14 Check Export Requirements Department of Commerce, Bureau of Industry & Security (formerly Bureau of Export Controls http://www.bxa.gov ) What types of products have restrictions: –primarily weapons, technology, defense related U.S. boycotts: –Iran, Iraq, Cuba, Libya Bureau of Industry & Security
15 Export Documents l Export Declaration l Consular Invoice or Certification of Origin l Bill of Lading l Commercial Invoice l Insurance Policy or certificate l Licenses l Others u Health Certificates u Packing Lists u Etc.
16 Logistics Specialists Intermodal Marketing Companies (IMCs) IMC arranges entire distribution system from factory to customer’s port of entry a broker: takes a percentage of the cost Foreign-Freight Forwarder arranges documentation advises on scheduling, routing & rates checks consular, licensing, & labeling requirements checks export restrictions offers insurance provides warehouse storage will pack/containerize