Chapter 15

International Marketing Channels: Retailing Focus

Key Concepts

  • Meaning of Place in Marketing:

    • Place is one of the 4 Ps in marketing—focusing on distribution channels and accessibility of products to consumers.

  • Channels of Distribution:

    • Definition: The path a product takes from manufacturer to end-user, including all activities for transferring ownership.
Types of Middlemen

  • Agent Middlemen (Agents):

    • Do not take ownership or title of merchandise.
    • Operate on a commission basis, arranging sales in foreign countries.
    • Manufacturers bear trading risks and set policy guidelines.
    • Example: Export Management Company (EMC).

  • Merchant Middlemen (Distributors):

    • Take title to the manufacturer’s goods and assume trading risks.
    • Often criticized for lack of brand loyalty and seeking the most profitable goods.
    • Examples of global retailers: Walmart, Carrefour, IKEA.
Export Management Company (EMC)
  • EMC Operations:
    • Ideal for firms with low international volume.
    • Allows companies to enter foreign markets without directly involving their own personnel.
Key Issues in Distribution Channel Management

  • Cost Factors:

    • Includes store operating costs, transportation, payments to middlemen, and local advertising expenses.
    • Directly impacts product pricing strategies.

  • Control Factors:

    • Management of relationships with channel members such as suppliers and middlemen.
    • Determination of pricing, promotion strategies, and controlling retail environments (ownership vs. franchises).
Piggyback Marketing
  • Definition: A market strategy where a company uses another company’s established distribution channels to sell its products in foreign markets.
    • Benefits for Company 1: Fuller utilization of distribution capacity and increased revenue.
    • Benefits for Company 2: Significantly lower distribution costs by avoiding the need for their own channel setup.
Internet as a Distribution Channel
  • E-commerce: Internet can effectively serve as a distribution channel for products and services including banking, education, and consulting.
Case Studies: Failures in International Markets

  • Walmart in South Korea (1998-2006):

    • Failed due to:
    • Market entry strategies (independent acquisition vs. partnerships).
    • Poor localization of store formats (focus on warehouse style vs. customer experience).
    • Logistics inadequate for consumer preferences (bulky shopping vs. frequent small purchases).

  • Tesco in the U.S. (2007-2013):

    • Failed due to misalignment of marketing strategies and consumer behaviors in the American market.
Recap of Important Points
  • Distinguish between agent and merchant middlemen.
  • Recognize cost and control as critical elements in supply chain management.
  • Understand the implications of piggyback marketing.
  • Evaluate why major retailers like Walmart and Tesco failed in foreign markets based on market entry, localization, and consumer engagement strategies.