International Marketing Distribution

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INTERNATIONAL MARKETING DISTRIBUTION


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INTERNATIONAL DISTRIBUTION

Manufacturer doesnt sell products directly it goes through several partiesbefore reaching consumer Involves various channels and variety of

intermediaries

Q: How do I get my product most profitably to a foreign country ?

The answer lies in

Firms method of entry in foreign market

Selection & distribution channel within each of firms foreign market


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DECISION CRITERIA FOR ENTRY METHOD

Firm must evaluate Company goals volume of business desired and geographical coverage

Size of the company in sales and assets

Product line & nature of product (Industrial, consumer, high or low price)

Competitor abroad


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Different entry method as per country need & regulationIn some wholly owned operations

In others marketing subsidiaries

In some others local distributors

or combine different entry methods

Eg. DuPont



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ALTERNATIVE FOREIGN ENTRY MODE

Indirect Export

Trading

Export

management

companyPiggy back

Production inHome Market

Foreign production

irect ExportForeignDistributor

Agent

Overseas market subsidiary

Contract managemen

Licensing

Assembly

Joint Venture

100% ownership


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Market feed back(Whats going on in the FM?)

Direct entry method ( agent, distributor, subsidiary will offer better market

information)

Learning by experience( more international experience, the more the

company is involved in FM )


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Incremental Market cost ( cost associated with IM no matterwho does it. The channel selection determines it. However

no additional outlay with indirect exporting

Profit possibilities ( profit potential & cost associated with

each entry method must be evaluated.

Eg.25% on sale volume of $ 2 million. v/s 17% on $ 1 million.The 2nd entry method more attractive


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COMPANY ENTRY MODE DETERMINES THE FOLLOWING

Investment requirement(higher in case of wholly owned )

Administrative requirement ( documentation, red tape etc.)

Personnel requirement (qualified internationalist or outsource)

Exposure to foreign problems ( legal, regulatory, tax, labor)

Risks Risk analysis of market entry modesEconomic, Environment, Political Force


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INDIRECT EXPORT

Foreign sales through domestic sales Organization

Trading companies :

Handle imports ( Mitsubishi- Japan) Size and market Coverage of these companies make

them attractive distributors. Cover the Market well & service the products

Draw back likely to carry competing lines & the new product added might not

receive the desired attention


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Export Management company

Act on behalf of the company with closer cooperation & coordination. Use company

letterheads, negotiate on behalf of the firm.

Economical mode & the cost is shared

Piggyback

Manufacturer uses overseas distributor to sell another companys product along with its own,(

carrier, rider relationship)

Advantage Fill the gap in its product line or economy of scale. Economical and cost is

shared.


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DIRECT EXPORT

Foreign sales handled same way as domestic.

All documentation, distribution fall under the firm

Task of exp. Management staff:

Choosing foreign market ( existing, new), Choosing representation ( own, or franchisee), Physical

distribution & export documentation, logistic coordination

Marketing task :market intelligence, pricing & promotion


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FOREIGN MANUFACTURING & FOREIGN ENTRY

Firm might find it undesirable to supply all foreign markets

from domestic production

Factors force/ encourage firm to produce in FM

Heavy distribution cost, Tariff & Quotas

Govt. policies encouraging local production

Better interaction with local needs

Saving on transportation, Tariff,& raw materials

Better customer & Govt. relations

No interruption of supplies


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APPROACHES TO FOREIGN MANUFACTURE

Assembly : Produce components locally, ship them to FM for assembly ( cars, electronics,

Industrial goods)

Contract manufacture: Products produced in the FM by another producer under contract

with the firm . Covers only manufacturing. Marketing is covered by the firm ( e.g..

P&G in Italy )

Drawback - manufacturing profit goes to the producing firm.

Q.C is always a problem


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Licensing : Firms establishes local production in FM without capital investment usually fora longer period Involves much greater responsibility for the national firm Licensor gives

patent / Trademark rights, copyright and product know how

Joint Venture :

Foreign operation where international company has enough equity to share a voice in the

management

Many nations prefer JV Nations gets more of the profit & the technical benefit



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APPROACHES TO FOREIGN MANUFACTURE:

Strategic Alliance:

Non equity contractual relationship between competition & competitors in different

countries e.g.. ( Phillips link with Siemens )

The local firm gets a new product one that is complimentary rather than directly

competing ( e.g. Antidiarrheal with ORS)


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Wholly owned foreign production:

100% ownership by international firm( 100% completeness of control by the international firm)

Buy out a foreign producer through acquisition route

Buy out a joint venture partner

Acquisition : Quicker way to get into a market than building its own facilities. Package also

includes qualified labor force, management, local knowledge, contact with local Market and

Govt.



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FOREIGN MARKET CHANNEL & GLOBAL LOGISTICS:

How to distribute the products in FM once the goods are

Reached ?

Management of foreign distributors

Management international logistics

Management of foreign distributor depend on the entry mode chosen. Firms have little to

do when they choose trading / export management & licensing companies

Firms having own subsidiaries / complete Manufacturing & Market operations in the FM

have direct responsibility


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MARKETING THROUGH TRADING COMPANYPrimary method of reaching foreign market Firms success depends on performance of the

distributor

Selection: Companys performance, past record, financial backing

Agreement: Spell out duties & responsibilities & interest of each party

Financial /price consideration: Margins ,commission, credit terms

Marketing support: Participation in promotion, trade fairs, sampling etc.

Communication: availability of E-mail, personal visits, Tele calling, Incentive and motivation: to

induce him to sell


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MARKETING THROUGH FIRMS OWN PRESENCE

Firm having own staff manage distribution locally Follow local distribution infrastructure

(Wholesaler, retailer, transport system

Wholesaler & service : getting assortments, breaking bulk & distribute to retailers

Retailer & services: stocking, displaying, selling products, inventory carrying and repurchase

A proper coordination, co operation and motivation is necessary to manage business


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PHYSICAL DISTRIBUTION V/S LOGISTICS:

Physical distribution: Financial & ownership flow of goods a narrow view of the physical

movement

Logistics: Much more than physical movement & Transportation. Involves number & location of

production & storage facilities, production schedules inventory management

Documentation involves more parties, more data, more Credit checks on foreign buyers and

involvement of new intermediary in sales- international freight forwarder


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LOGISTICS WITHIN A FOREIGN MARKET:

Firms having own subsidiary must seek to optimize its physical distribution

Where represented by distributor & licensees firm has limited role in logistics

Firms approach abroad can vary according to the size of the market, way market is supplied,urbanization, topography,& storage facilities


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MULTI MARKET LOGISTICS:

World not one market but collection of individual national market, each under the control of

sovereign

Govt. Has various methods of separation their markets from others, tariff barriers, quotas &

licenses, local laws, monitory system, tax system, transport policies

Logistic management should adapt to overcome the barriers to achieve integrated world market

for physical distribution ( e.g.. Coco cola built plant in India because of trade restrictions )


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MANAGEMENT OF INTERNATIONAL LOGISTICS:

Facilities available are

Freight forwarders: specialist in documentation & transportation, insurance etc. well managed on

their own

Free Trade Zone & public warehouse: 50 nations over 500 FTS, free ports, bonded warehouse( aGovt. owned & supervised by custom officials Permit goods without tax as long as they are

in the FTZ May allow processing, Assembly, sorting, repacking within the zone ( provides

employment opportunities )


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International Marketing Distribution

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