Post on 04-Jun-2018
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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
DECISION CRITERIA FOR ENTRY METHOD
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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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DECISION CRITERIA FOR ENTRY METHOD
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
APPROACHES TO FOREIGN MANUFACTURE
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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.
APPROACHES TO FOREIGN MANUFACTURE
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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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