International Marketing Distribution-By Akshay Samant
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Transcript of International Marketing Distribution-By Akshay Samant
International Marketing
Distribution
International Distribution In intl mktg manufacturer doesn’t sell products directly
Goes thro several parties before 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
International Distribution Decision criteria for entry methodFirm must evaluate Company goals - volume of business desired andgeographical coverage
Size of the company in sales and assets
Product line &nature of product (Industrial,consumer, high or low price)
Competitor abroad
International Distribution
Decision criteria for entry methodDifferent entry method as per country need & regulatn
In some wholly owned operations
In others marketing subsidiaries
In some others local distributors
or combine different entry methods
Eg. Dupont 40 countries wholly owned
20 countries Mkt subsidiaries
> 60 countries distributors
Alternative foreign entry mode
Indirect Export
Trading
Exp managementcompany
Piggy back
Production in Home Market
Foreign production
Direct ExportForeignDistributor
Agent
Overseas Mkt subsidiary
Contract managmnt
Licensing
Assembly
Joint Venture
100% ownership
International Distribution
Decision criteria for entry method
Market feed back ( What’s 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 )
International Distribution
Decision criteria for entry method
Incremental Market cost ( cost associated with IM no matter
who 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 mio. vs 17% on $ 1mio. The 2nd entry method
more attractive
International Distribution Decision criteria for entry methodCompany entry mode determines the following Investment requirement (higher in case of wholly owned )
Administrative requirement ( documentation, red tape etc.)
Personnel requmnt (qualified internationalist or outsource) Exposure to foreign problems ( legal,regulatory,tax,labour)
Risks Risk analysis of market entry modes Economic,Environment ,Political, Forex
International Distribution
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 Mkt well & service the products
Draw back – likely to carry competing lines & the new
product added might not receive the desired attention
International Distribution
Indirect Export :
Export Management companyAct on behalf of the company with closer cooperation & coordination. Use company letterheads, negotiate on behalf of the firm. Economical mode & the cost is shared
PiggybackManufacturer uses overseas distributor to sell another company’s 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.
International Distribution
Direct Export :Foreign sales handled same way as domestic.All documentation, distribution fall under the firm
Task of exp. Management staff:Choosing foreign mkt ( existing, new)Choosing representation ( own, or franchisee)Physical distribution & export documentation, logisticcoordination
Marketing task : market intelligence, pricing & promotion
International Distribution
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
International Distribution
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
mfg. Marketing is covered by the firm ( eg. P&G in Italy )
Drawback - manufacturing profit goes to the producing
firm, Q.C is always a problem
International Distribution Approaches to foreign manufacture:Licensing : Firms establishes local production in FM without capital investment usually for a longer period Involves much greater responsibility for the national firmLicensor gives patent / Trademark rights,copyright and product know how
Joint Venture :Foreign operation where intln company has enough equity to share a voice in the management ( 25 - 75 )
Many nations prefer JV – Nations gets more of the profit & the technical benefit
International Distribution
Approaches to foreign manufacture:
Strategic Alliance:
Non equity contractual relationship between competition &
competitors in different countries eg. ( Phillips link with
Siemens )
The local firm gets a new product one that is
complimentary rather than directly competing ( eg
Antidiarrhoel with ORS)
International Distribution
Approaches to foreign manufacture:Wholly owned foreign production:100% ownership by international firm( 100% completeness of control by the international firm )
Buy out a foreign producer through acquisition routeBuy out a joint venture partner
Acquisition : Quicker way to get into a market than building Its own facilities. Package also includes qualified labourforce,management,local knowledge,contact with local Mkt and Govt.
International Distribution
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 choosetrading / export management & licensing companies
Firms having own subsidiaries / complete mfg & mkt operations in the FM have direct responsibility
International Distribution
Marketing through Trading company Primary method of reaching foreign marketFirm’s success depends on performance of the distributor
Selection: Comp performce,past record,financial backingAgreement: Spell out duties & responsibilities & interest of each partyFinancial /price consideration: Margins ,commission,credit termsMarketing support: Participation in promotion, trade fairs,sampling etc.Communication: availability of Tel,e.mail,personal visitsIncentive and motivation: to induce him to sell
International Distribution
Marketing through Firms own presence Firm having own staff manage distribution locallyFollow 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
International Distribution
Physical distribution vs 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 managmt
Documentation involves more parties, more data, more Credit checks on foreign buyers and involvement of new intermediary in exp sales- international freight forwarder
International Distribution
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 ( Congo- Physical
distribution problems)
International Distribution
Multi market logistics:World – not one market but collection of individual national mkts, 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 mkt for physical distribution ( eg. Coco cola built plant in India because of trade restrictions )
International Distribution 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 500FTS,free ports,bonded warehouse( a Govt owned &supervised by custom officials
Permit goods without tax as long as they are in the FTZMay allow processing,Assembly, sorting, repacking within the zone ( provides employment opportunities )