CHAPTER 12 GLOBAL MARKETING CHANNELS AND PHYSICAL DISTRIBUTION

Table of Contents GLOBAL MARKETING CHANNELS AND PHYSICAL DISTRIBUTION Objectives , Terminology and Structure . 2 Consumer Products and Services.............................................................................................................. 2 Industrial Products .................................................................................................................................... 3 Establishing Channels and Working with Channel Intermediaries ............................................................... 4 Global Retailing ............................................................................................................................................. 4 Types of Retail Operation ......................................................................................................................... 4 Trends in Global Retailing ......................................................................................................................... 5 Global Retailing Market Expansion Strategies .......................................................................................... 5 Physical Distributions, Supply Chains and Logistics Management ............................................................... 5 Order Processing ....................................................................................................................................... 6 Warehousing ............................................................................................................................................. 6 Inventory Management ............................................................................................................................ 6 Transportation .......................................................................................................................................... 6 Channel Strategy ....................................................................................................................................... 6

GLOBAL MARKETING CHANNELS AND PHYSICAL DISTRIBUTION Objectives , Terminology and Structure Marketing channels exists to create utility for customers and the major categories of channel utility are: Place Utility availability of product or service in a location Time Utility - availability of product or service when desired by a customer Form Utility - availability of product processed, prepared in proper condition Information Utility - availability of answer to question and general communication

Distribution channels is the physical flow of goods through channels. Channels are made up of a coordinated group of individuals or firms that perform functions that add utility to a product or service. Distributor wholesale intermediary that typically carries product lines or brands on a selective basis. Agent - an intermediary who negotiates transactions between two or more parties but does not take title to the goods being purchased or sold.

Consumer Products and Services

Figure above summarizes six channels structure alternatives for consumer products.

1. Peer to peer Marketing whereby individual consumer market products to other individual. Enable via Internet and related forms of new media Interactive TV when all homes are wired using two ways technology. Example : eBay.

2. Door to Door Marketing via direct sales force. Mature in US and growing popularity everywhere. Example : AVON, AMWAY. In Japan, half the cars are sold through this Marketing strategies.

3. Manufacturer-Owned Store or Independent Franchise Store One of the first successful US based international companies. Example: Singer, Levi Strauss, Nike, Sony.

4. Various combinations of a manufacturer sales force and wholesalers independent retail outlets. 5. Public market place - Provide a convenient way for producers to sell their goods directly.

Industrial Products

Three basics elements are involved: Sales Force Distributors or Agents Wholesalers

Establishing Channels and Working with Channel Intermediaries Global company expanding across national boundaries must utilize existing distribution channel. The options are:i. Direct Involvement company establishes its own sales force or operates its own retail stores. ii. Indirect Involvement Entails utilizing independents agents, distributors or retailers. Companies entering emerging markets for first time must exercise care in choosing a channel intermediary to limit their risk and financial exposure. As such, seven specific guidelines were offers to prevent problems arising. 1. Select distributors. Dont let them select you. 2. Look for distributors capable of developing market rather than those with a few good customer contacts. 3. Treat local distributors as long term partners, not temporary market entry vehicles. 4. Support market entry by committing money, managers and proven marketing ideas. 5. Maintain control over marketing strategy from the start. 6. Make sure distributors provide you with detailed market and financial performance data. 7. Builds link among national distributors at the earliest opportunity.

Global Retailing Is any retailing activity that crosses national boundaries. Example firm or companies are Tesco, Carrefour. Types of Retail Operation 1. Department Stores have several department stores under one roof. Example : Metrojaya Department Store. 2. Specialty Retailers offer less variety than department stores. More focused and relatively narrow merchandise. Example: Laura Ashley, Gap. 3. Supermarkets departmentalized, single-story retail establishment that offer variety of food. Example: Tesco. 4. Convenience Stores offers some of the same products as supermarkets but the merchandise mix is limited to high turn-over convenience and impulse products. Example: 7-eleven. 5. Discounts Retailers can be divided into several categories such as full-line discounters (offer a wide range of merchandise), warehouse club and dollar stores (which sell a select assortment of products at a single low price. 6. Hard Discounters that sell a tightly focused selection of goods. Example: Germanys Aldi. 7. Hypermarkets hybrid retailing format combining the discounter, supermarket and warehouse club under a single roof.

8. Supercenters offer a wide range of aggressively priced grocery items plus general merchandise. Example : Walmart 9. Superstores also known as category killers. Example: ToysRUs, IKEA. 10. Shopping Malls consist of grouping of store under one roof. 11. Outlet Stores a variation on the traditional shopping mall Trends in Global Retailing Variety of environmental factor have combined to push retailers out of their home markets in search of global opportunities. Saturation of home-country market. Recession or other economics factors Strict regulation on store development. High operating cost.

Global Retailing Market Expansion Strategies Four entry strategies indicated are:1. Organic Growth occurs when a company uses its own resources to open on a green-field or to acquire one or more existing retail facilities from another company. Example: Virgin Megastore. 2. Franchising is the appropriate entry strategy when barriers to entry are low yet the market is culturally distant in terms of consumer behavior or retailing structures. Example : IKEA, Benetton. 3. Joint Ventures and Licensing use to limit their risk when targeting unfamiliar, difficult-to-enter markets. Example : IKEA 4. Acquisition a market entry strategy that entails purchasing a company with multiple retail locations in a foreign country. Example : Marks and Spencer

Physical Distributions, Supply Chains and Logistics Management Supply Chain Includes all the firms that perform support activities by generating raw materials, converting them into components or finished products, and making them available to customers.

Logistics The management process that integrates the activities of all companies to ensure an efficient flow of goods through the supply chain.

Order Processing - includes order entry in which the order is actually entered into a companys information system; order handling, which involves locating, assembling, and moving products into distribution; and order delivery. Warehousing - Warehouses are used to store goods until they are sold - Distribution centers are designed to efficiently receive goods from suppliers and then fill orders for individual stores or customers.

Inventory Management - Ensures that a company neither runs out of manufacturing components or finished goods nor incurs the expense and risk of carrying excessive stock of these items. Transportation - The method or mode a company should utilize when moving products through domestic and global channels; the most common modes of transportation are rail, truck, air, and water. Channel Strategy - Analyzing each shipping mode to determine which mode, or combination of modes, will be both effective and efficient in a given situation. - Transportation technology aspect that has been revolutionized global trade is Containerization.