International Channels of Distribution

1
International Channels of Distribution

• How do you get the product/service to foreign
  consumers?

2
Distribution Plan

• Determine which selling approach is best.
• a. Consult Country Commercial Guides (CCGs)
  "Marketing U.S. Products and Services in
  (country) chapter
• b. Industry Subsector Analyses (ISAs)
• Find distributors.
• Find end foreign buyers (trade leads).

3
For example, How would you distribute shoes in
Italy?Shoes Distribution Varies Across Countries
A
B
C
D
Producer
Producer
Producer
Producer
Agents
Wholesaler
Wholesaler
Retailer
Retailer
Retailer
Consumer
Consumer
Consumer
Consumer
4
For Example German Vs. French Shoe Distribution
Distribution London Euromonitor, 1988, pp.
162, 171
Germany
Organized Independents (buying groups) 35
Major Shoe chains 29
Mail 7
Department Stores 6
Hypermarkets 6
Discount Stores 6
Independent Shoe Stores 4
Other retailers 7
100
France
Independent Shoe stores 56
Direct Sales 14
Clothing stores 2
Department stores 2
Variety stores 1
Other retailers 25
100


5
Who are Your Customers/ What Brands Styles Do
They Buy?Where Do They Shop?
6
Would They Shop in Specialty Stores?Distributing
Shoes in Italy j99
Bruno Magli
Gucci Childrens Shoes E400
7
Outdoors? Shoe Stores? Specialty Stores?
Distributing Shoes in Italy j99
8
Should You Set Up Your Own Store Chain?
Distributing Shoes in Italy j99
9
Potential Italian Shoe Distributors

• ITALY BOLOGNAFIEREPiazza Constituzione, 6 -
  40128 BOLOGNATel 39 051 282111 - fax 39 051
  282333E-maildir.com_at_bolognafiere.it
• CENTRO SERVIZI E.F.D.Contact Dott.ssa Chiara
  PadovaniVia B. Franceschini, 5 - 50142
  FIRENZETel 39 055 7398932 - Fax 39 055
  7398935E-mailobiemoda_at_iol.it
• FIERA MILANOLargo Domodossola, 1 20145
  MILANOTel 39 2 49971 - Fax [phone]
  Fifth Avenue, Suite 600 New York, NY 10019
  (USA)Tel [phone] - Fax 1
  212-459-0090iacc_at_ix.netcom.com
• LINEAPELLE - ANTEPRIMA - PREVIEWVia Brisa, 3 -
  20123 MILANOTel 39 02 8807711 - Fax 39 02
  860032E-mailtrend_at_trendselection.com
• AREAPELLESegreteria Via Brisa,3 20123
  MILANOTel 39 02 801020 - Fax 39 02
  72000120E-maillineapelle_at_unic.it
• FIRENZE EXPO SpaFirenzeTel 00 39 55 49721 -
  Fax [phone]

10
What is a Channel of Distribution?

• Process including the physical handling and
  distribution of goods, the passage of ownership
  (title) and the buying and selling negotiations
  between producers and middlemen and between
  middlemen and customers.

11
What Is An International Marketing Channel?

• Middlemen in the process between Manufacturer
  Final International Consumer who may or may not
• Physically handle distribute the goods
• Assume title to goods
• Negotiate buying and selling
• Middlemen used when the can perform functions
  more efficiently than manufacturers can

12
Marketing Channels for Consumer Goods and
Services
A
B
C
D
Producer
Producer
Producer
Producer
Agents
Wholesaler
Wholesaler
Retailer
Retailer
Retailer
Consumer
Consumer
Consumer
Consumer
13
Marketing Channels for Industrial Goods and
Services
A
B
C
D
Producer
Producer
Producer
Producer
Agent
Agent
Wholesaler
Wholesaler
Industrial Buyer
Industrial Buyer
Industrial Buyer
Industrial Buyer
14
Channel Decisions When Entering New Country

• Whether to Use Established Channels or Build Own
  Channels?
• Whether to Use Home-country (located in producing
  firms country) or Host-country (located in
  foreign country) middlemen?
• Which intermediaries?
• How many intermediaries?
• Exclusive one or a select few
• Selective more than a few, less than all
• Intensive as many outlets as possible

15
Examples of Home-Country Middlemen(1) Global
Retailers

• Global Retailers

16
Examples of Home-Country Middlemen(2) Export
Management Company

• Export Management Companies
• Independent firm which acts as the exclusive
  export sales department for non-competing firms
• Typically represent smaller companies in
  specialized industries
• Ranges in size from 1 to 100 employees and
  handles 10 of exported manufactured goods

17
Example of Export Management Company

• You sell to AMEX We take it abroad absorb all
  risks
• Amex Export Functions
• We purchase products from our business partners
  for resale in international markets.
• We pay for products purchased on terms similar to
  our business partners' standard domestic terms.
• We've developed over the past twenty years a
  unique system and strong know-how to select,
  appoint, and manage international distributors to
  market these products overseas.
• We attend trade shows, implement advertising
  programs, and translate material.
• We are responsible for invoicing, collection and
  bear the responsibility for payment.
• We handle shipping details, customs forms, export
  licensing, and all relevant export documentation.
  
• We constantly research and appraise market
  conditions overseas, and provide useful feedback
  to our business partners to incorporate in their
  marketing, and product development plans.
• We travel, meet face-to-face with our customers
  and see first-hand their needs and marketing
  efforts.

18
EMC Limitations

• Relatively small with limited financial
  resources may be unable to stock product or
  offer financing to foreign customers
• Focus efforts on products that bring in most
  profits
• Most do not cover Canada
• Manufacturers may lose control over who buys,
  selling price, promotion, etc.

19
Examples of Home-Country Middlemen(3) Export
Trading Company

• Export Trading Companies
• Larger companies that specialize in providing
  intermediary services, risk reduction, financial
  assistance, etc.

20
Export Trading Companies

• Export Trading Companies A typical ETC is more
  market-orientated and transactions driven than a
  typical EMC. An ETC most often acts as an
  independent distributor creating transactions by
  linking domestic producers and foreign buyers.
• As opposed to representing a given manufacturer
  in a foreign market, the ETC determines what U.S.
  products are desired in a given market and then
  work with U.S. producers to satisfy demand. ETCs
  can perform a sourcing function searching for
  U.S. supplies to fill specific foreign requests
  for U.S. products.
• A special kind of ETC is a group organized and
  operated by producers. These ETCs can be
  organized along multiple or single-industry lines
  and can also represent producers of competing
  products.
• Most ETCs take title to the goods involved, but
  some will work on a commission basis.

21
Examples of Home-Country Middlemen(4)
Agents/Brokers

• Home country agents/brokers
• Do not take title
• Shorter term relationship
• Specialize in certain products

22
Examples of Host (Foreign) Country Middlemen

• (1)Merchant middlemen (take title possession)
• Distributors/Wholesalers
• Dealers / Retailers (Ongoing relationship to sell
  to customers)
• (2)Agents brokers (do not take title seldom
  take possession)

23
Home-country or Host-country Middlemen?

• Use Home-country or Host-country middlemen
• Select Home-country middlemen if you do not wish
  to enter or do not have capability to enter
  foreign market
• Select Host-country middlemen if you seek greater
  control over marketing mix have a presence in
  the foreign country

24
Marketing Channels Differ Around The World in

• Services they perform
• Breadth of lines they carry
• Costs and trade margins
• Length of channel - long vs. short

25
Selecting Marketing Channels

• Marketing channel decisions are among the most
  complex challenging facing the firm
• Each channel creates different level of sales
  costs
• Firm usually committed to decision for long time

26
How Do you Select Channel?

• Cost Transporting storing goods
• Capital Requirements
• Control
• Coverage
• Character Does it fit the character of the
  company and the market?
• Continuity Can you foster loyalty among members?

27
Locating Middlemen

• U.S. Department of Commerce
• Directories
• Foreign Chambers of commerce
• Middlemen associations
• Internet services, e.g. www.tradecompass.com
• Carriers e.g. shipping companies

28

• Two basic sources of "buy" leads
• The ones you or your reps develop first-hand
• Second hand leads -- the ones you hear or read
  about
• Good trade lead sources include
• U.S. Governments Trade Opportunity Program found
  on the NTDB,
• FAS Agricultural Trade Leads,
• Commercial News USA trade leads,
• Global Technology Network.
• World Trade Center (WTC) network, and many
  states have their own overseas trade offices.

29
Locating Information About Channels of
Distribution in Foreign Country

• Commercial Guide - Marketing U.S. Products and
  Services section
• Articles on distribution country product
  ABI-Inform

30
For Example, How are Cars Sold in China? Buick
Succeed in China By Laying Stress on Quality,
Robert Simison, Wall Street Journal, Oct. 26, 1999

• Most cars are sold not by conventional dealers
  but by independent distributors and traders.
  Typical is the Asia Games Village parking lot in
  Beijing, which has become a sort of flea market
  for dozens of small-time traders of new and used
  vehicles.

31
For Example, When Opening Retail Outlet, Where Do
You Locate, How Many? 1st Starbucks Herald Plan
To Give Parisians Café Alternative, Jonathan
Shenfield, The Commercial Appeal, Memphis, TN,
Jan. 17, 2004

• The first shop (Starbucks) near the Paris Opera,
  is situated to draw both tourists and localsThe
  chain began to establish itself across Europe
  nearly six years ago, starting with Britain,
  Switzerland and AustriaAnother outlet opens
  Monday in the La Defense business district, the
  second of about 10 planned for Paris.