International Channel Perspectives: The Need for Focus on International Markets

1. Chapter 18 International Channel Perspectives

2. The International Perspective Objective 1: 18 What drives the need to focus on international markets? Slow growth in domestic markets Fierce foreign competition

3. The Complex Environment Objective 2: 18 Behavioral processes in international channels From an International Perspective Environment of international channel management Designing international channels Motivating international channel members

4. Key Environmental Factors Economic Factors Competitive Environment Sociocultural Environment Technological Environment Legal/Political Environment Objective 3: 18

5. Economic Factors 18 Inflation Deflation Economic conditions that appear in the domestic environment can also occur in foreign environments, but the changes can be more dramatic. Fluctuating currency rates Recession

6. Competitive Environment 18 Many less-developed countries do not have free & open competition Different cultures Because competitive structure in foreign countries can be quite different from that in the United States, channel structure needs to be able to adapt to a wide variety of circumstances. Different currencies Different languages

7. Sociocultural Environment 18 Varying cultural values Varying attitudes Because sociocultural elements can influence all elements of the marketing mix, the channel variable is sensitive because of the often necessary person-to-person or organization-to-organization involvement. Varying perceptions Varying behavior norms

8. Technological Environment 18 Some less-developed countries have relatively primitive communications & transportation technology In some developed countries, technology often matches or surpasses that of the United States. Varying levels of technological advancement around the world require U.S. channel strategy either to force foreign suppliers to meet technological demands or to raise the bar of their own levels of technology.

9. Legal/Political Environment 18 Government regulations Tariffs Firms seeking to establish channels in foreign markets need to investigate the legal environment of each country because of the wide array of complex & burdensome issues. Import restrictions Political pressures Quotas Policies

10. Behavioral Processes Objective 4: 18 In order to avoid negative conflict, use power effectively, & establish good communications, the channel manager must understand the behavioral aspects of channel systems. • Japan & Bose speakers

11. Designing International Channels Objective 5: 18 Phase 1 Recognize that a channel design decision must be made. Phase 2 The design will need to reflect whether the firm’s distribution objectives specify reaching overseas markets. Phase 3 The firm must examine carefully the kinds of tasks that need to be performed to successfully meet the firm’s distribution objectives. Phase 4 Develop a set of channel structure alternatives for the specific international environment.

12. Objective 6: 18 Alternative Channel Structures Indirect Exporting • A firm sells products in foreign markets but does not have any special division within its organization or make any significant effort at international marketing.

13. Objective 6: 18 Alternative Channel Structures Indirect Exporting

14. Casual Exporting 18 The firm is just beginning to sell its products overseas. Unsolicited orders from foreign countries may also account for significant parts of this type of exporting.

15. Trading Companies 18 They are large and have access to many world markets. They can provide a U.S. firm with rapid entry into foreign countries. But: Because the trading companies are so large, U.S. firms have little influence over how their products are sold.

16. Export Management Companies 18 Domestically based wholesalers or manufacturers’ representatives who specialize in overseas sales They offer an attractive alternative to the firm that seeks a higher level of involvement in international marketing than that provided by casual exporting or trading companies.

17. Cooperative or Piggyback Arrangements 18 The carrier is the firm already involved in exporting. The rider is the firm that uses the international expertise and capabilities of the carrier to enter foreign markets. This method can offer the rider an opportunity to gain entry into foreign markets with little capital outlay, while the carrier can obtain a desirable product to sell.

18. Objective 6: 18 Alternative Channel Structures Direct Exporting • The manufacturer itself gets directly involved in exporting rather than delegating all of the tasks to others .

19. Alternative Channel Structures 18 Direct Exporting

20. Foreign Distributors 18 The manufacturer’s ability to exercise control over how its products are marketed by distributors is a crucial issue in domestic and in international marketing such as they might not want to do things in the manufacturer’s way. But: Modern technology has made it much easier and more efficient for U.S. manufacturers to communicate with foreign distributors.

21. Foreign Agents 18 They are independent, but they do not take title to, and usually do not take physical possession of, the products they represent. They can arrange for the performance of most of the international marketing tasks.

22. Overseas Marketing Subsidiary 18 When the manufacturer establishes its own foreign sales branch overseas and it can perform most or all of the international marketing tasks Requires substantial commitment and investment in international marketing But: Because the subsidiary is owned by the manufacturer, the degree of control possible is greater.

23. Motivating Channel Members Objective 7: 18 Three facets of motivation management: Finding out the needs & problems of channel members Offering support to the channel members that is consistent with their needs & problems Providing leadership through the effective use of power

24. Leading Foreign Marketing Channels Objective 8: 18 1. Roles & routines of foreign distributors were not rigidly set by overseas manufacturer, but were adapted by distributor to changing circumstances in market Marketing strategy decisions were made jointly by manufacturer & distributors High degree of personal contact between manufacturer & foreign distributors maintained through personal visits, phone calls, & letters Effective leadership occurs under the following circumstances