International Marketing Distribution-By Akshay Samant


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International Marketing Distribution-By Akshay Samant

  1. 1. International Marketing <ul><li>Distribution </li></ul>
  2. 2. International Distribution <ul><li>In intl mktg manufacturer doesn’t sell products directly </li></ul><ul><li>Goes thro several parties before reaching consumer </li></ul><ul><li>Involves various channels and variety of intermediaries </li></ul><ul><li>Q: How do I get my product most profitably to a foreign </li></ul><ul><li>country ? The answer lies in </li></ul><ul><li>Firms method of entry in foreign market </li></ul><ul><li>Selection & distribution channel within each of firms </li></ul><ul><li>foreign market </li></ul>
  3. 3. International Distribution <ul><li>Decision criteria for entry method </li></ul><ul><li>Firm must evaluate </li></ul><ul><li>Company goals - volume of business desired and </li></ul><ul><li>geographical coverage </li></ul><ul><li>Size of the company in sales and assets </li></ul><ul><li>Product line &nature of product (Industrial,consumer, </li></ul><ul><li>high or low price) </li></ul><ul><li>Competitor abroad </li></ul>
  4. 4. International Distribution <ul><li>Decision criteria for entry method </li></ul><ul><li>Different entry method as per country need & regulatn </li></ul><ul><li>In some wholly owned operations </li></ul><ul><li>In others marketing subsidiaries </li></ul><ul><li>In some others local distributors </li></ul><ul><li>or combine different entry methods </li></ul><ul><li>Eg. Dupont 40 countries wholly owned </li></ul><ul><li>20 countries Mkt subsidiaries </li></ul><ul><li>> 60 countries distributors </li></ul>
  5. 5. Alternative foreign entry mode <ul><li>Indirect Export </li></ul>Trading Exp management company Piggy back Production in Home Market Foreign production Direct Export Foreign Distributor Agent Overseas Mkt subsidiary Contract managmnt Licensing Assembly Joint Venture 100% ownership
  6. 6. International Distribution <ul><li>Decision criteria for entry method </li></ul><ul><li>Market feed back ( What’s going on in the FM, </li></ul><ul><li>Direct entry method (agent,distributor,subsidiary </li></ul><ul><li>will offer better market information) </li></ul><ul><li>Learning by experience ( more international </li></ul><ul><li>experience, the more the company is involved in </li></ul><ul><li>FM ) </li></ul>
  7. 7. International Distribution <ul><li>Decision criteria for entry method </li></ul><ul><li>Incremental Market cost ( cost associated with IM no matter </li></ul><ul><li>who does it. The channel selection determines it. However </li></ul><ul><li>no additional outlay with indirect exporting </li></ul><ul><li>Profit possibilities ( profit potential & cost associated with </li></ul><ul><li>each entry method must be evaluated. Eg.25% on sale </li></ul><ul><li>volume of $ 2 mio. vs 17% on $ 1mio. The 2 nd entry method </li></ul><ul><li>more attractive </li></ul>
  8. 8. International Distribution <ul><li>Decision criteria for entry method </li></ul><ul><li>Company entry mode determines the following </li></ul><ul><li>Investment requirement (higher in case of wholly owned ) </li></ul><ul><li>Administrative requirement ( documentation, red tape etc.) </li></ul><ul><li>Personnel requmnt (qualified internationalist or outsource) </li></ul><ul><li>Exposure to foreign problems ( legal,regulatory,tax,labour) </li></ul><ul><li>Risks Risk analysis of market entry modes </li></ul><ul><li>Economic,Environment ,Political, Forex </li></ul>
  9. 9. International Distribution <ul><li>Indirect Export : </li></ul><ul><li>Foreign sales through domestic sales Organization </li></ul><ul><li>Trading companies : </li></ul><ul><li>Handle imports ( Mitsubishi- Japan) Size and market </li></ul><ul><li>coverage of these companies make them attractive </li></ul><ul><li>distributors. Cover the Mkt well & service the products </li></ul><ul><li>Draw back – likely to carry competing lines & the new </li></ul><ul><li>product added might not receive the desired attention </li></ul>
  10. 10. International Distribution <ul><li>Indirect Export : </li></ul><ul><li>Export Management company </li></ul><ul><li>Act on behalf of the company with closer cooperation & </li></ul><ul><li>coordination. Use company letterheads, negotiate on </li></ul><ul><li>behalf of the firm. Economical mode & the cost is shared </li></ul><ul><li>Piggyback </li></ul><ul><li>Manufacturer uses overseas distributor to sell another </li></ul><ul><li>company’s product along with its own,( carrier, rider </li></ul><ul><li>relationship) Advantage – Fill the gap in its product line or </li></ul><ul><li>economy of scale. Economical and cost is shared. </li></ul>
  11. 11. International Distribution <ul><li>Direct Export : </li></ul><ul><li>Foreign sales handled same way as domestic. </li></ul><ul><li>All documentation, distribution fall under the firm </li></ul><ul><li>Task of exp. Management staff: </li></ul><ul><li>Choosing foreign mkt ( existing, new) </li></ul><ul><li>Choosing representation ( own, or franchisee) </li></ul><ul><li>Physical distribution & export documentation, logistic </li></ul><ul><li>coordination </li></ul><ul><li>Marketing task : market intelligence, pricing & promotion </li></ul>
  12. 12. International Distribution <ul><li>Foreign manufacturing & foreign entry : </li></ul><ul><li>Firm might find it undesirable to supply all foreign markets </li></ul><ul><li>from domestic production </li></ul><ul><li>Factors force/ encourage firm to produce in FM </li></ul><ul><li>Heavy distribution cost,Tariff & Quotas </li></ul><ul><li>Govt. policies encouraging local production </li></ul><ul><li>Better interaction with local needs </li></ul><ul><li>Saving on transportation, Tariff,& raw materials </li></ul><ul><li>Better customer & Govt. relations </li></ul><ul><li>No interruption of supplies </li></ul>
  13. 13. International Distribution <ul><li>Approaches to foreign manufacture: </li></ul><ul><li>Assembly : Produce components locally, ship them to FM </li></ul><ul><li>for assembly ( cars, electronics, Industrial goods) </li></ul><ul><li>Contract manufacture: Products produced in the FM by </li></ul><ul><li>another producer under contract with the firm . Covers only </li></ul><ul><li>mfg. Marketing is covered by the firm ( eg. P&G in Italy ) </li></ul><ul><li>Drawback - manufacturing profit goes to the producing </li></ul><ul><li>firm, Q.C is always a problem </li></ul>
  14. 14. International Distribution <ul><li>Approaches to foreign manufacture: </li></ul><ul><li>Licensing : Firms establishes local production in FM </li></ul><ul><li>without capital investment usually for a longer period </li></ul><ul><li>Involves much greater responsibility for the national firm </li></ul><ul><li>Licensor gives patent / Trademark rights,copyright and </li></ul><ul><li>product know how </li></ul><ul><li>Joint Venture : </li></ul><ul><li>Foreign operation where intln company has enough equity </li></ul><ul><li>to share a voice in the management ( 25 - 75 ) </li></ul><ul><li>Many nations prefer JV – Nations gets more of the profit & </li></ul><ul><li>the technical benefit </li></ul>
  15. 15. International Distribution <ul><li>Approaches to foreign manufacture: </li></ul><ul><li>Strategic Alliance: </li></ul><ul><li>Non equity contractual relationship between competition & </li></ul><ul><li>competitors in different countries eg. ( Phillips link with </li></ul><ul><li>Siemens ) </li></ul><ul><li>The local firm gets a new product one that is </li></ul><ul><li>complimentary rather than directly competing ( eg </li></ul><ul><li>Antidiarrhoel with ORS) </li></ul>
  16. 16. International Distribution <ul><li>Approaches to foreign manufacture: </li></ul><ul><li>Wholly owned foreign production : </li></ul><ul><li>100% ownership by international firm( 100% completeness </li></ul><ul><li>of control by the international firm ) </li></ul><ul><li>Buy out a foreign producer through acquisition route </li></ul><ul><li>Buy out a joint venture partner </li></ul><ul><li>Acquisition : Quicker way to get into a market than building </li></ul><ul><li>Its own facilities. Package also includes qualified labour </li></ul><ul><li>force,management,local knowledge,contact with local Mkt </li></ul><ul><li>and Govt. </li></ul>
  17. 17. International Distribution <ul><li>Foreign Market channel & Global Logistics : </li></ul><ul><li>How to distribute the products in FM once the goods are </li></ul><ul><li>Reached ? </li></ul><ul><li>Management of foreign distributors </li></ul><ul><li>Management international logistics </li></ul><ul><li>Management of foreign distributor – depend on the entry </li></ul><ul><li>mode chosen.Firms have little to do when they choose </li></ul><ul><li>trading / export management & licensing companies </li></ul><ul><li>Firms having own subsidiaries / complete mfg & mkt </li></ul><ul><li>operations in the FM have direct responsibility </li></ul>
  18. 18. International Distribution <ul><li>Marketing through Trading company </li></ul><ul><li>Primary method of reaching foreign market </li></ul><ul><li>Firm’s success depends on performance of the distributor </li></ul><ul><li>Selection: Comp performce,past record,financial backing </li></ul><ul><li>Agreement: Spell out duties & responsibilities & interest of </li></ul><ul><li>each party </li></ul><ul><li>Financial /price consideration : Margins ,commission,credit </li></ul><ul><li>terms </li></ul><ul><li>Marketing support: Participation in promotion, trade </li></ul><ul><li>fairs,sampling etc. </li></ul><ul><li>Communication: availability of Tel,e.mail,personal visits </li></ul><ul><li>Incentive and motivation: to induce him to sell </li></ul>
  19. 19. International Distribution <ul><li>Marketing through Firms own presence </li></ul><ul><li>Firm having own staff manage distribution locally </li></ul><ul><li>Follow local distribution infrastructure (Wholesaler, retailer, </li></ul><ul><li>transport system </li></ul><ul><li>Wholesaler & service : getting assortments, breaking bulk </li></ul><ul><li>& distribute to retailers </li></ul><ul><li>Retailer & services: stocking, displaying,selling products, </li></ul><ul><li>inventory carrying and repurchase </li></ul><ul><li>A proper coordination, co operation and motivation is </li></ul><ul><li>necessary to manage business </li></ul>
  20. 20. International Distribution <ul><li>Physical distribution vs Logistics: </li></ul><ul><li>Physical distribution: Financial & ownership flow of goods </li></ul><ul><li>a narrow view of the physical movement </li></ul><ul><li>Logistics: Much more than physical movement & </li></ul><ul><li>Transportation. Involves number & location of production & </li></ul><ul><li>storage facilities,production schedules inventory managmt </li></ul><ul><li>Documentation involves more parties, more data, more </li></ul><ul><li>Credit checks on foreign buyers and involvement of new </li></ul><ul><li>intermediary in exp sales- international freight forwarder </li></ul>
  21. 21. International Distribution <ul><li>Logistics within a foreign Market: </li></ul><ul><li>Firms having own subsidiary must seek to optimize its </li></ul><ul><li>physical distribution </li></ul><ul><li>Where represented by distributor & licensees – firm has </li></ul><ul><li>limited role in logistics </li></ul><ul><li>Firms approach abroad can vary according to the size of </li></ul><ul><li>the market,way market is supplied,urbanization, </li></ul><ul><li>topography,& storage facilities ( Congo- Physical </li></ul><ul><li>distribution problems) </li></ul>
  22. 22. International Distribution <ul><li>Multi market logistics: </li></ul><ul><li>World – not one market but collection of individual national </li></ul><ul><li>mkts, each under the control of sovereign </li></ul><ul><li>Govt. Has various methods of separation their markets </li></ul><ul><li>from others, tariff barriers, quotas & licenses,local </li></ul><ul><li>laws,monitory system,tax system,transport policies </li></ul><ul><li>Logistic management should adapt to overcome the </li></ul><ul><li>barriers to achieve integrated world mkt for physical </li></ul><ul><li>distribution ( eg. Coco cola built plant in India because of </li></ul><ul><li>trade restrictions ) </li></ul>
  23. 23. International Distribution <ul><li>Management of international logistics: </li></ul><ul><li>Facilities available are </li></ul><ul><li>Freight forwarders: specialist in documentation & </li></ul><ul><li>transportation,insurance etc well managed on their own </li></ul><ul><li>Free Trade Zone & public warehouse: 50 nations over 500 </li></ul><ul><li>FTS,free ports,bonded warehouse( a Govt owned & </li></ul><ul><li>supervised by custom officials </li></ul><ul><li>Permit goods without tax as long as they are in the FTZ </li></ul><ul><li>May allow processing,Assembly, sorting, repacking within </li></ul><ul><li>the zone ( provides employment opportunities ) </li></ul>