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Managing International Distribution Operations and Logistics. Dana-Nicoleta Lascu Chapter 11. Chapter Objectives. Describe the functions of home-country and host-country middlemen involved in international distribution

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chapter objectives
Chapter Objectives
  • Describe the functions of home-country and host-country middlemen involved in international distribution
  • Identify the different facilitators of international distribution and logistics and describe their involvement in the international distribution process
  • Address the challenges encountered by distribution in countries of different development levels
issues related to international distribution
Issues Related to International Distribution
  • Using Established Channels
    • Could charge high prices
    • Could be blocked by competition
    • Choice is a long-term decision: company may be bound indefinitely to the channel choice
  • Building Channels
    • Necessary if there are no channels at all and if the existing channels do not conform to company needs
    • Expensive
home country middlemen
Home-Country Middlemen
  • Export Management Companies
    • Highly specialized in certain industries and/or regions
  • Trading Companies
    • The Japanese Model: sogo shoshas
    • The U.S. Model and the Export Trading Company Act
home country middlemen continued
Home-Country Middlemen, continued
  • Home-Country Brokers and Agents
    • Middlemen who bring international buyers and sellers together in the company's home country
    • Do not carry title to the product
    • Manufacturer’s export agent: represent a manufacturer
    • Buying offices: buyers located in the firm’s home country, representing different international firms
home country middlemen continued6
Home-Country Middlemen, continued
  • Cooperative Export Arrangements
    • Also known as piggybacking and mother henning
  • Involve exporters agreeing to handle export functions for unrelated companies on a contractual basis
    • Complementary export agents export complementary products on a commission basis
    • Complementary export merchants actually take title to the complementary products that they export
home country middlemen continued7
Home-Country Middlemen, continued
  • Webb-Pomerene Associations of Exporters
    • Competing companies that join resources and efforts to export internationally
    • Are exempt from antitrust scrutiny
    • Are present especially where cartels are active
home country middlemen continued8
Home-Country Middlemen, continued
  • Foreign Sales Corporation (FSC)
    • Sales corporation that is set up overseas
    • Allows for a portion of U.S. firm’s foreign-source income to be exempt from U.S. income tax
    • To qualify for tax exemption, firm must:
      • have a foreign presence
      • meet certain management and economic requirements
      • incur abroad a minimum level of direct costs in sales activities, in areas such as marketing, advertising, and order processing.
home country middlemen continued9
Home-Country Middlemen, continued
  • Export merchants
    • Intermediaries who take title to and possession of the products they carry
    • Responsible for shipping and marketing the products in the target market
    • Carry competing brands
    • Examples:
      • export jobber, who carries commodity goods, but does not take physical possession of the goods
      • Norazi agent, who deals in illegal and/or gray market products
foreign country middlemen
Foreign-Country Middlemen
  • Merchant Middlemen
    • Intermediaries who carry the manufacturer’s product line in a particular country
    • Usually carries title to and has physical possession of the products
foreign country middlemen continued
Foreign-Country Middlemen, continued
  • Agents and Brokers
    • Many types of agents and brokers in foreign markets, such as manufacturer's representatives and managing agents
      • Could act as the manufacturer’s sales representatives and are paid on commission
      • Or they could take on the role of managing agents (also known as compradors), with an exclusive arrangement with the company, representing it in the foreign market; the latter are paid as a percentage of sales
foreign country middlemen continued12
Foreign-Country Middlemen, continued
  • Alternative Distribution Structures: Network Marketing
    • Using acquaintance networks for the purpose of both sales and distribution
    • Have high potential in emerging markets
international distribution and logistics
International Distribution and Logistics
  • Distribution Centers
  • Transportation Firms
  • Freight Forwarders and Customs Brokers
  • Government Agencies
    • Promote national security
    • Promote international involvement of local firms
    • Provide financing and insurance for high risk ventures
government agencies
Government Agencies
  • International Trade Administration
  • Bureau of Export Administration
  • U.S. Commercial Service
  • Export/Import (Ex-Im) Bank
  • United States Trade and Development Agency
other service providers
Other Service Providers
  • Non-governmental
    • International Chamber of Commerce
  • Banks
  • Insurance agencies
  • Marketing research firms
  • Consultants
logistics alliances
Logistics Alliances
  • Establish objectives
  • Identify providers
  • Express needs/wants
  • Evaluate and select bidder
  • Develop integration plan
  • Create win-win relationship
  • Measure and analyze performance
  • Redefine goals and objectives
challenges to international distribution and logistics
Challenges to International Distribution and Logistics
  • Distribution challenges in developing countries
  • Parallel imports (gray markets)
    • Distribution systems that are not authorized by the manufacturer: products purchased in a low-price market are diverted to other markets
    • Hurt company image
      • Charge similar prices worldwide
      • Create product for low-markets not as attractive to up-market
      • Complicate repair/servicing process for gray market goods
      • Inform consumers
      • Litigate
logistics challenges
Logistics Challenges
  • Combating Parallel Imports:
    • Charging similar prices worldwide
    • Creating product for low-price markets not as attractive to up-market
    • Complicating the repair/servicing process for gray market goods
    • Informing consumers
    • Litigating
chapter summary
Chapter Summary
  • Described functions of home-country and host-country middlemen involved in international distribution
  • Identified different facilitators of international distribution and logistics
  • Described their involvement in distribution process
  • Addressed challenges encountered by distribution in countries of different development levels