IM9 Distribution

Copyright Atomic Dog Publishing, 2002Copyright Atomic Dog Publishing, 2002

Managing International Distribution Operations and Logistics


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

• 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 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



• 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



• 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



• 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.



• 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

• 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

• 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, 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

• 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

• 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

• Non-governmental International Chamber of Commerce

• Banks

• Insurance agencies

• Marketing research firms

• Consultants


Logistics Alliances

1) Establish objectives

2) Identify providers

3) Express needs/wants

4) Evaluate and select bidder

5) Develop integration plan

6) Create win-win relationship

7) Measure and analyze performance

8) Redefine goals and objectives


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

• 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

• 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

IM9 Distribution

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