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International ChannelsTo make goods available to end customers, a

firm employs market intermediaries

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International ChannelsSmooth flow of goods has to be ensured from

the place of manufacture to the place of consumption

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International ChannelsFunctions performed by channelPhysical flow of goodsTransfer of ownership to customerRealisation of payment and and cash flow

from customer to manufacturerPromotion, feedback

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Types of International Distribution Channels Indirect ChannelsHas to deal with domestic agent/ without any

dealing with foreign based firmLess investment no marketing experience

required Low cost opportunity, Limited feedback, commissions have to be

paid ,little insight into the market , no feedback

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International Channels

International ChannelsDirect channel Sellin g of goods directly to market

intermediary or end user in the overseas market

Closer relationship, insight into foreign market, control over the export process is greater

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International Channels

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Indirect Channel

AgentsMerchant Intermediaries

Broker, Comm agentImporter Buying agentCountry Controlled buying agentBuying offices

Merchant exporterInterntionl trading coszaibatsusExport trading house

Home market

International ChannelsDirect Marketing approaches such as

through telephone, door to door works better in affluent markets

Amway and Avon are succesful in these countries

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International Channels

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Direct Channel

E channelAgents or merchant intermediaries

Broker Commission agent(works foExporter and importer) Manfrs agentSales rep of exporterDistributorRetailerWholesaler buy from distributors

International ChannelsJapan\High Density of middlemen,chain of primary

secondary regional local wholesalersLong term relationship with the

intermediariesLaw protects small retilers from large

retailersMITI approves all large retailers

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International ChannelsFood SalesJapan small stores 95 % of total food retail

stores account for 57.7 % of food salesIn US small stores 69% account for 19.2

percent of food retail in US

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International ChannelsChannels in the USA and European countries

tend to be shorter

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International ChannelsFactors affecting choice of channelsIdentify specific target marketsSpecify marketing goalsSpecify financial and personal commitmentsIdentify control length of channels terms of

sale and channel ownership

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International ChannelsInternational franchising is gaining

popularity

Mcdonalds, Pizza Hut, Benetton etcGrowth in Private Labels 38% in Switzerland, 32 % on UK 15% in US

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International ChannelsCosts involved in developing channelsCapital cost cash flow requirements)and

maintenance cost (margins, amrkup, selling force costs etc)

Coca Cola distribution system in India and ChinaLess dependence on local partners and more

control by Coca Cola in China Coverage , Continuity problems in Channels

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Screening, Selecting agreement motivating, terminating middlemen

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International Channels Managing LogisticsLogistics in International Markets in comples

dure to physical distance ,compatibility of logistics systems, nature intermediaries etc

Principal Objective is to reach the final customers with the correct quantity, st the desired location, at the right time, in usable condition, in the most cost efficient manner

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International ChannelsTransportationWarehousing storing, consolidation (LCL),

breaking bulk etcInventory Mangement optimising of costs

coping with demand fluctuationsPackaging to ensure safe and smooth

shipment Information and communication technology

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Pallets for Air CargoContainers (20ft,40ftX 8ftx8ft)Containerisation facilitated easy

handling,door to door delivery, lowers warehousing costs, reduces documentation work, reduces pilferage reduces damage in transit

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International ChannelsOcean transportation preferred over air

transportation for bulk ,heavy cargo.Air accounts for only 1% by volume of total

tansportation

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International ChannelsOrganised retailing is gaining significance Global retail sales estimated at $8 trillionSales of top ten retailers reached $690

trillion in 2004 (Wall mart, Carrfour, Home Depot Metro etc

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International ChannelsExtreme differences in sizes of retailers All retailers People served per retailer USA 702 395Japan 1202 106China 21,188 61Argenitana 296 127

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International ChannelsDirect channels

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Direct channels

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