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Global Perspective A Single Stick of Doublemint Today – 18 Billion Tomorrow. A product must be made accessible to the target market at an affordable price Getting the product to the target market can be a costly process

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Global perspective a single stick of doublemint today 18 billion tomorrow l.jpg
Global Perspective A Single Stick of Doublemint Today – 18 Billion Tomorrow

  • A product must be made accessible to the target market at an affordable price

  • Getting the product to the target market can be a costly process

  • Forging an aggressive and reliable channel of distribution may be the most critical and challenging task facing the international marketer

  • Competitive advantage will reside with the marketer best able to build the most efficient channel from among the alternatives available

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Channel-of-Distribution Structures Billion Tomorrow

  • All consumer and industrial products eventually go through a distribution process.

    • Physical handling and distribution of goods

    • Passage of ownership

    • Buying and selling negotiations between producers and middlemen

    • Buying and selling negotiations between middlemen and customers

  • Each country market has a distribution structure through which goods pass from producer to user.

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Import-Oriented Distribution Structure Billion Tomorrow

  • Demand exceeds supply

  • The customer seeks the supply from a limited number of middlemen

  • Distribution systems are local

  • Few countries fit the import-oriented model today

In an import-oriented or traditional distribution structure, an importer controls a fixed supply of goods and the marketing system develops around the philosophy of selling a limited supply of goods at high prices to a small number of affluent customers.

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Japanese Distribution Structure Billion Tomorrow

  • A structure dominated by many small middlemen dealing with many small retailers

  • Channel control by manufacturers

  • A business philosophy shaped by a unique culture

  • Laws that protect the foundation of the system

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Comparison of Distribution Channels between the United States and Japan

  • Insert Exhibit 14.1

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High Density of Middlemen States and Japan

  • Not unusual for consumer goods to go through three or four intermediaries before reaching the consumer

  • In Japan, small stores account for 57.7 percent of retail food sales

  • In the U.S., small stores generate 19.2 percent of food sales

  • Japan has a large number of independent groceries and bakers, unlike America with an emphasis on supermarkets, discount food stores, and department stores

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Business Philosophy States and Japan

  • Emphasizes loyalty, harmony, and friendship

  • Supports long-term dealer-supplier relationships

  • The cost of Japanese consumer goods are among the highest in the world

  • Japanese law gives the small retailer enormous advantage over the development of larger stores

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Large-Scale Retail Store Law and Its Successor States and Japan

  • Daitenho – the Large-Scale Retail Store Law

    • Large stores must have approval from the prefecture government

    • All proposals first judged by the Ministry of International Trade and Industry (MITI)

    • Then, if all local retailers unanimously agreed, the plan was approved

    • Could be a lengthy process

    • Applied to both domestic and foreign companies

  • Replaced by the Large-Scale Retail Store Location Act of June 2000

    • MITI out of the process

    • Relaxed restrictions

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Changes in the Japanese Distribution System States and Japan

  • Structural Impediments Initiative

  • Deregulation

  • Wal-Mart

  • “New” retailers

  • The Internet

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Alternative Middleman Choices States and Japan

  • Seller must exert influence over two sets of channels:

    • One in the home country

    • One in the foreign-market country

  • Agent middlemen – represent the principal rather than themselves

  • Merchant middlemen – take title to the goods and buy and sell on their own account

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Foreign-Country Middlemen States and Japan

  • Manufacturer’s representatives

  • Distributors

  • Foreign-country brokers

  • Managing agents and compradors

  • Dealers

  • Import jobbers, wholesalers, and retailers

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Government-Affiliated Middlemen States and Japan

  • Marketers must deal with governments in every country of the world

  • Products, services, and commodities for the government’s own use are always procured through government purchasing offices at federal, regional, and local levels

  • Efficiency of public sector versus the private sector

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Factors Affecting Choice of Channels States and Japan

  • Cost

  • Capital requirements

  • Control

  • Coverage

  • Character

  • Continuity

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Locating, Selecting, and Motivating Channel Members States and Japan

  • Locating middlemen

  • Selecting middlemen

    • Screening

    • The agreement

  • Motivating middlemen

  • Terminating middlemen

  • Controlling middlemen

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Summary States and Japan

  • The international marketer has a broad range of alternatives for developing a distribution system.

  • Three primary alternatives for using agent middlemen:

    • Agent middlemen

    • Merchant middlemen

    • Government-affiliated middlemen

  • Channel structure may vary from nation to nation or from continent to continent.

  • Information and advice are available relative to the structuring of international distribution systems.

  • Traditional channels are being challenged by the Internet, which is offering an ever-wider range of possibilities for entering foreign markets.