2. Logistics Marketing and Distribution
In general the greater the distance between the product source and the
target market, the greater the time delay for delivery and the higher the
transportation cost. However, innovation and new transportation
technologies are cutting both time and dollar costs.
To facilitate global delivery, transportation companies such as CSX
Corporation are forming alliances and becoming an important part of
industry value systems.
Manufacturers can take advantage of intermodal services that allow
containers to be transferred between rail, boat, air and truck carriers.
Memorex Telex provides an excellent illustration of how companies can
reconfigure inbound logistics in the value chain to support an overseas
sourcing strategy.
3. Logistics Planning
Having sketched in the broad picture of international marketing, we are
ready to analyze the approaches of management to international logistic
planning.
In supplying world markets, companies try to work out systems that will be
competitively practical and permit lowest cost operation so that profit is
maximized.
This is one of the key components of the global unification strategy upon
which the overall effectiveness of a multinational firm depends.
Export of finished products from the United States. Virtually all companies
start their logistic planning with a strong preference for exporting from the
United States. Manufacture abroad always involves some risks, along with
the complications of managing operations from a distance.
4. Placement Decisions: Distribution of Products
Distribution is the course that goods take between production and the final
consumer.
The Importance of Placement
The marketing function of distribution involves the critical process of
ensuring that the products of a firm reach the proper location for sale at the
proper time and in proper quantity.
Breaks in the distribution flow can have critical ramifications, in the form of
disgruntled customers, spoiled or damaged goods, excessive costs, and lost
sales.
Distribution decisions are also of critical importance because they are often
long term in nature, involving the signing of contracts with transporters or
equipment leasers or the development of expensive capital equipments or
infrastructures.
5. Direct and Indirect Selling Channels
Direct selling
Direct selling is employed when a manufacturer develops an overseas
channel. This channel requires that the manufacturer deals directly with a
foreign party without going through an intermediary in a home country.
The greatest advantage of direct selling channel is the active market
exploitation, since the manufacturer is more directly committed to its foreign
markets.
Indirect selling
Indirect selling also known as the local or domestic channel is employed
when a manufacturer in the United States for example, markets its product
through another US firm that acts as the manufacturer’s sales intermediary
(middleman).
There are several advantages to be gained by employing an indirect
domestic channel. For example, the channel is simple and inexpensive. The
manufacturer incurs no start up cost for the channel and is relieved of the
responsibility of physically moving goods overseas.
6. Cont….
Types of Intermediaries: Direct Channel
There are several types of intermediaries associated with the direct and indirect
channels (Figure). This figure compares two channels and lists the various types
of domestic and foreign intermediaries.
International Channels of Distribution
Deptt stores
Independent
retailers
Voluntary
group retailers
Independent
wholesalers
Agents
9. Types of Intermediaries: Indirect Channel
Agents who look after the Interests of Manufacturers
Manufacturer’s Export Agent or Sales Representative
Export Management Company
Cooperative Exporter
Webb-Pomerene Association
Purchasing/Buying Agent
Country Controlled Buying Agent
Resident Buyer
Export Merchant
Export Drop Shipper
Export Distributor
Trading Companies
10. Channel Development
The suitability of a particular channel depends greatly upon the country in which
it is used. The particular type of intermediary that works well in our country may
not work well elsewhere or may lose effectiveness over time.
Litbak and Benting suggest the use of a country’s temperature gradient to
classify countries. Their classification system is based on the following
environmental characteristics.
1. Political stability
2. Market opportunity
3. Economic development and performance
4. Cultural unity
5. Legal barriers/restrictions
6. Physiographic barriers and
7. Geo-cultural distance.
11. Legal Regulations
Determinants of Distribution Channel
A country may have specific laws that rule out the use of particular channels
or middlemen. France, for example, prohibits the door to door selling
whereas it is encouraged in India.
Although private importers in Iraq may choose to deal through commission
agents Iraqi legislation prohibits state enterprises from dealing with third
party intermediaries in operating foreign supplies.
Saudi Arabia requires every foreign company working there to have a local
sponsor who receives about 5% of any contract. Not surprisingly, many
Saudis acting, as agents have become millionaires almost overnight.
The overseas distribution channel often has to be longer than desired
because of government’s regulations; a foreign company may find it
necessary to go through a local distributor/agent.
12. Factors Involved in Distribution Systems
Distribution choices depend on several factors. One of them is the nature of
the product. Is it perishable or fragile or a product that will require after sales
service? Might an authorised company dealer better distribute it?
Another consideration is the degree of control over distribution. Greater
control over the distribution process requires greater involvement by a firm
in terms of time, money and energy.
Another factor is cost. Whatever distribution mix a firm wishes to employ
may be constrained by the availability of middlemen or channels of
distribution, by political limitations imposed by the characteristics of the
country or by infrastructural deficiencies in the country, which limit types,
and methods of usable distribution modes.
The development level of a nation also affects the distribution resources and
network.
Distribution decisions can be even more complex in least developed
countries where specific ethnic groups within the country dominate
distribution channels.
14. Packaging
Packaging has assumed an important function for the preservation of the goods
as well as for the reduction of cost of the products.
It may be viewed as consisting of two distinct types:
i. Industrial (exterior) and
ii. Consumer (inferior).
Problems
There are four common packing problems some of which are in direct
conflict with one another:
i. Weight,
ii. Breakage,
iii. Moisture and temperature,
iv. Pilferage.
15. Containerization
An increasingly popular method of shipment is containerization. A container
is a large box made of durable material such as steel, aluminum, plywood,
and glass reinforced plastics.
Containers are ordinarily obtained from either carriers or private parties.
Containers can take care of most of the four main packing problems.
Because of a container’s construction, a product does not have to have
heavy packing.
The container by itself provides good protection for the product against
breakage, moisture, and temperature. Because breaking into a container is
difficult, this method of shipment discourages pilferage and theft as well.
It is important to select the right container because containers come in
varying sizes and types. Two basic types of container can be identified:
i. Dry cargo containers and
ii. Special purpose containers.
