PROF. RAGHAVENDRAN VENUGOPAL

Entry mode & Global Distribution

Entry mode

ExportingJoint ventureAcquisitionAssembly operationsTurnkey operationsWholly owned subsidiaryLicensingStrategic alliancesFranchisingManagement contractsFree Trade ZonesContract Manufacture

Strategic Alliance

Types of SA: Technology based alliances Production based alliances Distribution based alliances R&D alliances

OEM

Original Equipment manufacturing a company selling an unbranded product or component to another company in global market.

Problems solved through OEM: Branding Budget constraint Eliminate bottle necks & improve efficiency

Key Aspects of working with OEM: Quality Manufacturers with best practices Corrective action Want ISO vendors Competitive prices

Significance of OEM

Low prototype costsShort lead timeMin stock levelsNo need for costly post – cast machiningHighly damped structureHigh dynamicTotally machine structureHigh dimensional accuracyExcellent supplier – customer relationship

Entry modes & Marketing Control

Control

Risk

Co-operative StrategiesJVSA

Direct ExportingAgents

DistributorsManagement Contracts

FranchisingDirect marketing

Direct InvestmentAssembly

Own SubsidiaryAcquisition

Indirect ExportPiggybacking

Ex management companies

Domestic Purchasing

Optimal entry strategy

Company strategic posture

Product/Market situation

Emerging High-growth

Mature Services

Incremental IDExp IDExp Dexp Licen/Alli

Protected JV IDExp Licen/Alli Licensing

Control WOS Acqi/Alli WOS Fran/Alli/Exp

Global Distribution

3 essential functions have to be performed Transfer of title The physical movement of the products Storage

GD is complex, multimodal world of logistics, shipping, insurance, warehousing & documentation.

Global Firms have 2 options when selecting distributing system Indigenous channels of distribution Develop a global distribution system

Channel members in international distribution Types of intermediaries

Indirect channel Direct channel

International channels of distribution

• Export broker• Export agent• Cooperative

exporter

• Purchasing or Buying office

• Country controlled Buying Agent

• Resident Buyer

• Export Merchant• Export drop Shipper• Export distributor• Trading company

• Foreign Distributor

• Foreign Retailer• State controlled trading company• End user

For Manufacturer

Domestic Agent

Indirect

Channel

For/Buyer

Domestic Merchant

Direct

Wholesaling

Vertical integration

Wholesaler

Merchant WH

Agents & Brokers Manufactur

er’s WHFull

Service WH

Limited service

Merchant WH

General MerchandiseLimited line WHRack JobbersSpecialty Line WHCooperatives

Cash N Carry WHDrop ShippersMail Order WHTruck WH

Retailing

Self study, as discussed in depth in SADMAN

Global Logistics

Operational factors Warehouse management Packaging Inventory management Material handling Information systems Transportation Insurance Shipment packing

Transportation

RoadwaysRailwaysWaterwaysInland waterRope waysAirwaysPipelinesPackage serviceIntermodal transport

Parallel distribution

Few mechanism to avoid parallel distribution: Create different packaging for the different countries. Maintain the price differentials & minimize the gaps in

such a way as to make it less appealing for the parallel distributor.

Limit the quantity that distributors in lower priced markets can receive per order.

Gray trade: it is known as parallel distribution. 3 main factors are

Price discrepancies between 2 national markets Limited availability of certain models or version in one market. Less logistics problem due to increased availability of global

modes of transportation

Effects of gray trade

Erosion of Brand equityDisturbed relationships with authorized

channel membersLegal liabilitiesComplicating international marketing

strategiesMeasures against gray trade ( Reactive)

Strategic confrontation, Collaborationparticipation, Acquisitionprice cuttingsupply interferencePromotion

Measures against gray trade ( Proactive)Product DifferentiationStrategic pricingDealer developmentMkISLong term Image reinforcementEstablishing Legal ProceduresLobbying

Multiple Distribution Channel

Internet SalesCatalogue SalesSales RepresentativeMulti-Level MarketingInfomercialsCross Consignment

Effective Global Distribution System

Find out customers want, services, delivery, choice, technical help & so on.

Find out about costs & feasibility for the company, Support systems & suppliers.

Determine Management Objectives & Ideal global Distribution system.

Compare given OptionsEvaluate assumptions by bringing present

system.Develop plan to rectify the difference.Implement the plan.

International Retailing

Home reading from SADMAN

Issue in International Retailing

Legislation & RegulationTaxation & Cross Border ShoppingVariation in Retail Practices– Consumer

PerspectivesVariation in Retail Practices– Salespeople &

Management

Thank you