International Distribution

The International Distribution System

Time and Place Utility

  • Both channels and physical distribution focus on time and place utility.

  • Ensuring products are available in the right location at the right moment adds value for the customer.

Intermediaries

  • Marketing channels are often referred to as 'marketing intermediaries'.

  • These intermediaries are essential for achieving sales and are usually independent businesses.

Direct and Indirect Channels

  • Channels can be categorized as direct or indirect.

  • Business-to-business channels tend to be more direct compared to consumer markets.

  • Consumer markets often utilize a network of wholesalers and retailers for distribution.

Channel Change

  • Channels evolve over time, a concept known as the Wheel of Retailing.

  • This concept is similar to the product life cycle but applies to distribution channels.

  • As new channels emerge, they can replace older channels, providing strategic advantages through innovation.

New Channel Developments

  • Notable new shopping trends include:

    • Non-shop shopping

    • One-stop shopping

    • Internet shopping

    • TV shopping via satellite channels

    • Catalogue shopping

    • Direct distribution

One-Stop Shopping

  • The rise of large multiples and their takeovers leads to concentration of market share.

  • This trend results in more vehicles, larger freezers for inventory, and an overall reduction in shopping time for consumers.

Digital Marketing

  • Digital marketing may not suit all small businesses, irrelevant except for information dissemination.

  • It can take the form of:

    • Informational

    • Transactional

    • Both (informational and transactional)

  • Small firms, like fish farms in Scotland or cheese shops in Cheddar, can tap into international markets.

E-commerce Orientation Matrix

  • Matrix representing various focuses and orientations:

    • Low to high information focus orientation

    • Integrated e-commerce orientation

    • Low involvement orientation

    • Transaction focus orientation

  • This matrix illustrates the role of e-commerce in supporting both informational and purchase transactions.

Strategic Advantage of Channel Structure

  • A well-structured channel can provide a strategic advantage.

    • Developing countries usually have less developed channel structures.

    • Developed countries typically have complex and multilayered structures, e.g., Japan's retail market predominantly consists of small shops and numerous wholesalers.

Alternative Middlemen

  • A range of intermediary options are available including:

    • Home country middlemen (e.g., Export Management Companies)

    • Foreign country middlemen (e.g., manufacturers' reps, brokers)

  • Each type serves specific roles in the supply chain.

Locating and Managing Middlemen

  1. Locating: Identify suitable middlemen for specific products.

  2. Selecting: Apply criteria such as financial health, reputation, and capabilities.

  3. Motivating: Provide financial and psychological incentives, as well as support.

  4. Terminating: Handle termination carefully, ensuring legal considerations are addressed.

Control Challenges

  • Challenges in controlling intermediaries can arise.

  • Companies can use exclusive agreements for better control, although creating a proprietary distribution system can be costly.

  • Uncontrolled intermediaries may lead to negative impacts on long-term business stability.

Complexity in Channel Systems

  • Some countries have complex channel systems while others are more direct and simpler.

Distribution Channels - Japan Example

  • Car parts distribution in Japan involves:

    • Affiliated parts manufacturers

    • Independent parts manufacturers

    • A network including wholesalers and dealers.

Distribution Channels - USA Example

  • Car parts distribution in the USA involves various intermediaries:

    • Wholesaler buying groups

    • Warehouse distributors

    • Mass merchandisers

    • Repair specialists.

International Channel Alternatives

  • Options for international distribution include:

    • Open distribution via domestic wholesale middlemen

    • Export management companies or company sales forces.

    • Relationships between foreign agents/merchants and retailers.

Factors Influencing Channel Choice

  • Key factors influencing the choice of distribution channels include:

    • Capital requirements

    • Cost considerations

    • Control issues

    • Coverage

    • Continuity

    • Product characteristics.

Future Considerations

  • Speculation about the channel situation in 20 years:

    • Continuous innovations and changing shopping patterns.

    • Potential prevalence of computer-based shopping.

    • Exploration of the social and personal aspects of shopping.