International Distribution

1. Welcome to class of International DistributionbyDr. Satyendra SinghProfessor, Marketing and International BusinessUniversity of WinnipegCanadas.singh@uwinnipeg.cahttp://abem.uwinnipeg.cawww.abem.ca/conference

2. International Distribution • Distribution Structure • Traditional, Modern, Retail Giants • Distribution Patterns • General, Retail • Factors Affecting Choice of Channel • Character, Coverage, Continuity, Control, Cost • Locating and Managing Channel Members • Locating, Selecting, Motivating, Controlling, and Terminating

3. Distribution Structure… • Difference Between Domestic and Foreign Structure • Super-efficient system in the USA vs. highly complex in Japan • Traditional Distribution Structure • Import-oriented structure • High price, small no of affluent customers • Sellers market  demand exceed supply • Absence of cars and telephones • Local monopoly of small stores • Buy daily in developing country vs bi-weekly in Canada • Intermediaries do not perform specific activities • Import-wholesalers perform marketing function • Advertising, marketing research, warehousing, financing, storage

6. International Intermediaries

7. In Africa

8. In Africa

9. Distribution Structure… • Modern Channel Structure • Discount, self-service, mass merchandizing, return policy… • Change in direct marketing • Door-to-door selling, hypermarkets, shopping malls, catalogue, Internet • Wal-Mart, Carrefour (France), Praktikar (Germany), Ikea (Sweden) • Higher margin in EU than US • Internet-based system for ordering and delivering (low cost, efficient) • Brick-mortar eg. Dell, Brick-click eg Amazon, DHL, UPS • Convenience store as a pickup points for web-orders

10. Distribution Structure • Retail Giants Structure • Wal-Mart, McDonald’s, Home Depot take risk in foreign markets • Europeans: quick to enter foreign market, emphasis on being first, retail strategy, local needs and taste • Americans: exploit domestic market first, emphasis on efficiency, standardization and value to customers • International retailers have advantages over local retailers • World-class business processes • Technology • Financing • Organizational capabilities • Greater buying power • Superior service…

11. Retail Structure in Selected Countries

12. Distribution Pattern… • General Pattern • Foreign channels are not the same as domestic channels • Intermediary services are different • Storage and wait for customers to come and see them, India, Egypt • Line breadth • Dealing-only narrow lines • Requires government license • Cost and margin • Shorter channel for industrial or expensive goods • Inverse relationship b/w length of channel and size of purchases • Non-existent channels – selling on the roads! • Blocked channels – competitors or relationships • Power and competition – large whole sellers finance downstream

13. Distribution Pattern • Retail Pattern • Product lines: narrow (Italy, Morocco) vs. broad (Japan) • Size pattern • No of person served per retailer– higher in developed countries • May be difficult to reach so many small retailers across a country • Depends of economic development – single cigarette • Direct marketing – mail, tel, door-to-door • Usually best for developed economy, but Eastern European gaining popularity; e.g., Amway • Local retailers need to compete • Product selection • Greater convenience • Customer service • Liberal store hours • Retailers cannot close/open stores at their wish

14. Factors Affecting Choice of Channel… • Objectives • Volume, market share, profit, control, length of channel, terms of sales • The 5 C’s of distribution • Character of your Company and the market • Perishable items, complexity of sales requires, SAS, value of the product • Own sales force vs. distributor’s, aggressive managers (NY, fast cities) • Coverage • Distribution intensity, 100%! Has impact on market share/penetration/$ • Several channels may be needed (full service vs. no service) • 2-3 cities may be enough (Paris 30% of France population vs. NY only 5%) • More distributors needed in US than France to achieve the same market share • Continuity • Serious issue if family-owned channel. Coca-cola lured Pepsi’s distributor in Brazil • May not carry the line with less margin

15. Factors Affecting Choice of Channel • Control • Own/short channel  more control on price, volume, promotion • Enthusiastic  invest time to promote your product • Cost • Developmental and maintenance costs • Transporting and sorting, breaking bulk, provide credit, local advertising, sales representation, negotiations • If possible, set up your own channel  own sales force • However other costs remain same– consignments, loan, floor plans, etc.

16. Locating and Managing Channel Members • Locating • Tradeshow, governments (DFAIT), third party recommendations, websites • Selecting • Trustworthy, references, finances, size of firm, experience, resources • Go to foreign market and see the channel members • Motivating • Financial, psychological rewards (trip to head office, recognition), communications (newsletter, new product info.), corporate rapport • Controlling • Measurable performance indicators sales volume, market share, inventory turnover, accounts per area… • Terminating • Easy in US, not in international markets may claim up to 10% of sales as compensation x no of years served

17. Internet • Culture • Polite words, color, • 70% user Sweden vs. 1% in China vs. 40% France • Need broad-band, China allows only access to approved websites • Adaptation • Global or local • 50,000 pages! Translation in +50 languages! • Local Contact • Customer enquiries, product return, payment where credit card is not possible, delivery of the purchased product • Promotion • Website is a store; we need to bring customers there • Search engine registration, banners display, press release, local news group, … • Different e-mail marketing strategy in EU– more privacy by law • Vacation packages are more popular in the UK than US • Germany may be interested in different destinations than Canadians