Global market management minor project ggsipu

GLOBAL MARKETING MANAGEMENT
DR. ZILLUR RAHMAN
PROFESSOR
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
1
MODULE - 52

Module 18 & 19: Global Market Entry Mode
Global Marketing Environment
Module 10 & 11: Political/ Legal Environment
Module 3, 4 & 5: Global Economic Environment
Module 6 & 7: Financial Environment
Development of Competitive Strategy
Module 8 & 9: Cultural issues and Buying Behavior
Module 12 & 13: Global Marketing Research
Module 14 & 15: Global Segmentation and Positioning Module 16 & 17: Global Marketing Strategies
Module 1 & 2: Globalization
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Global Marketing Strategy Development
Module 20 & 21: Global Product Development
Module 22 & 23: Marketing Product and Services
Module 26 & 27: Communicating with the world Consumer
Module 28 & 29: Sales Management
Module 24 & 25: Global Pricing Module 30 & 31: Global Logistic and Distribution
Module 32, 33 & 34: Export/Import Management

Managing Global Operation
Module 35 & 36: Planning, Organization and Control of Global Marketing Operations
Module 37 & 38: Marketing in Emerging Markets
Module 39 & 40: Global Marketing and the Internet
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Business-to-Business Perspective
Module 41: Introduction To Business-to-Business Marketing Module 42: How Business Organizations Buy
Module 43: Strategic Planning for Global Business Markets Module 44: Ethical Considerations for Business Marketers
Module 45: Market Research Module 46: Segmentation, Targeting, and Positioning
Module 47: Product Strategy & Development Module 48: Services for Business Markets
Module 49 & 50: Pricing Module 51 & 52: Supply Chain Management & Managing
Module 53 & 54: Business-to-Business Marketing Communications Distribution Channels
Module 55 & 56: Customer Relationships & Key-account Management Module 57: Sales Promotion, Exhibitions, & Trade Fairs
Module 58: Corporate Reputation Management Module 59 & 60: Marketing Planning, Implementation, & Control

Supply Chain Management and Managing Distribution
Channels
MODULE - 52
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Module Overview
1. Strategic issues in distribution
2. Managing distribution channels
3. Efficient customer response
5

Introduction
• Finding and managing distributors and dealers around the world can
be a time-consuming task for a B2B marketing manager.
• On the other hand, the distribution network is a key strategic
resource which provides a strong competitive advantage.
• This module describes the process of discovering and managing
channel partners in a global setting.
6

Strategic Issues in Distribution
• Strategy is about creating competitive advantage.
• The following factors are the key issues in the ways that distribution
affects strategy:
7
A good distribution network
adds value to the product by
increasing utility.
The channel is the firm’s
major link to its customers.
Choice of channel influences
the rest of the marketing
mix, thus affecting overall
strategy.
Building appropriate
channels takes time and
commitment, particularly in
a global context, so
distribution decisions are
difficult to change.
The distribution system
determines segmentation
and targeting issues in many
cases.
Conflicts may arise between
the firm’s strategic goals and
those of the distributors,
particularly in global markets
where timescales may be
very different.
Intermediaries in foreign
countries may weaken the
control of the supplier over
the way the product is
marketed.

• Distribution adds utility to the product in the following ways:
8
Table 52.1: Added utility
Source: Zimmerman, A. & Blythe,
J. (2013) Business to Business
Marketing Management A global
perspective

• The distribution system often determines the targeting rather than
the other way round. This is particularly true in developing
countries where the transport infrastructure means that some parts
of the country are inaccessible (as discussed in Module 51).
• Strategic advantage can be derived from the way distributors serve
customers.
• Although “cutting out the middle man” reduces costs because the
“middle man” profit is removed from the equation, it turns out that
the services provided by the middle man are actually useful and
necessary, and would have to be carried out by someone else.
9

• The middleman’s profit is almost always covered amply by the
savings in time made by using the service.
10
For example, a motor mechanic needs rapid delivery of spare parts: ordering each part
for each car directly from the manufacturer would mean complex ordering and some
very lengthy delays.
Carrying out a routine service on someone’s automobile might need 10 or 15 different
spare parts, from light bulbs to brake linings, all manufactured by different companies in
different parts of the country (or even different parts of the world).
So, the motor mechanic orders all the parts from a motor factor, who keeps stocks of
the commonest parts and can deliver within an hour or so.

• Distributors serve customers in some or all of the following ways:
11
•Local distributors will hold buffer stocks of products, so they should be able to supply customer needs
rapidly.
Provide fast delivery
•Like the motor parts factor mentioned above, a distributor may well be able to supply a wide range of
products which are suitable for the needs of a specific market segment.
Provide a segment-based
product assortment
•A distributor may be able to provide credit facilities for firms. Having local knowledge, the distributor
will be able to decide who is creditworthy and who is not. An overseas manufacturer may have no idea
where to start obtaining credit ratings.
Provide local credit
•Local distributors may have knowledge of other products which are useful to the customer, and which
are complementary to the firm’s products.
Provide product
information
•Distributors are often able to advise on the availability of components or are able to research
availability from among the manufacturers they act for. This can backfire from the manufacturer’s
viewpoint, since distributors may (and often do) carry several alternative components.
Assist in buying decisions
•Because the distributors know the local market, they are often able to anticipate the needs of their
customers and advise manufacturers accordingly.
Anticipate needs

• Choosing the right distributor creates access to an existing group of
committed customers.
• The distributor adds value to the product offering by giving advice,
assistance, and rapid response.
• Distributors also serve manufacturers in the ways discussed in next
slide.
12

Buy and hold stocks
•Distributors are the
customers of the
manufacturers,
since they select,
buy, and pay for the
goods.
•The manufacturer is
thus relieved of
much of the
financial and
logistical
responsibility of
holding stocks.
Combine
manufacturers’
outputs
•Since customers
almost always buy
from a number of
manufacturers,
they will be
exposed to the
firm’s products
when they order
products from a
distributor.
•This in effect
provides a “piggy
back” promotional
method.
Share credit risk
•Distributors may
offer credit to their
own customers and
carry the risk for
this: even though
the manufacturer
will offer credit to
the distributor in
order to allow them
to stock the
products, this is a
much smaller risk.
Share selling risk
•The distributors
have a stake in
making the sales,
since they have
committed to
purchasing the
products.
•Obviously, there is
an assumption that
the products are
saleable, and an
assumption that the
manufacturer will
play a part in
marketing the
products, but both
parties have a clear
stake and
commitment in the
success of the
product.
Forecast market
needs
•Distributors are
much closer to the
market than the
manufacturers are
and are therefore in
a much better
position to forecast
demand.
Provide market
information
•Likewise, the
distributors are a
good source of
information about
possible new needs
of their customers.
•This can be helpful
in new product
development.
13

• Setting up the right channels for getting the product from its source
to the customer involves a combination of direct selling and the use
of various intermediaries and facilitators.
• Intermediaries include distributors, wholesalers, and retailers who
are classified as merchants.
• The channel also may include manufacturers’ representatives or
sales agents who find customers and even negotiate for the
supplying firm. This group is classified as agents.
• The major difference between agents and merchants is that
merchants purchase and resell product while agents do not.
14

• A manufacturing firm will have far
more control over an agent than over
a merchant since the merchant owns
the product.
• In formulating the firm’s channel
design, a marketing director must take
into account a number of
environmental influences as well as
company resources and capabilities.
These are shown in Figure 52.1.
15
Figure 52.1: Influences on channel design
Source: Zimmerman, A. & Blythe, J. (2013) Business to
Business Marketing Management A global perspective

• First and foremost, the firm must look at customer segment
requirements.
• Is the segment sophisticated enough to deal with remotely-located
distribution outlets or is training and maintenance a necessity
requiring local, on-the-scene distributors? As we will see later in this
module, various kinds of customers require different levels of
service.
– For firms selling software, this may mean direct sales to large
multinational corporations wherever they are located, one-step
wholesale distribution to local small computer centers, direct sales to
large computer retailers.
16

• The way customers are segmented will have a major effect upon the
distribution alternatives chosen.
– For instance, customers who are highly price-sensitive and can place
large orders will not buy through even one step of distribution and will
demand direct sales from the manufacturer.
• Competitors may also determine channels to be chosen.
• If an entrenched competitor has already set a pattern of distribution
which customers have become accustomed to, it will be difficult for
a newcomer to change that pattern unless it can show efficiencies
and cost savings to its customers as a result of these changes.
17

• The functions handled by distributors may also be set by the
competitors. Here again, a newcomer would have difficulty changing
what customers have come to expect.
• Competition also may affect the next influence shown in Figure 52.1
– availability.
• In many small markets, there are few qualified distributors for
products requiring technical knowledge.
• Most or all of these distributors may have already established
agreements with competitors.
18

• If a new firm moves into a particular market, it may find that the
most desirable distributors are not available.
• In this case, the marketing manager is faced with the difficult choice
of offering his/her product to a distributor who is already handling a
competitive product or finding a distribution firm in a related field
and training that distributor to represent the product.
• Culture can have an important effect upon channel design as well.
• In some countries, an established way of distributing all products
has grown up and become the norm.
19

– For example, in Japan there are many levels of distribution firms, which
sell to one another before the product reaches the final consumer: this
is a daunting challenge for non-Japanese marketers.
• In some markets, there is vertical integration whereby distribution
firms are owned by manufacturers or close relationships have been
established.
• Changing these culturally-driven distribution patterns will be
difficult, especially since trust between channel members is lower
when there are cultural differences between the players.
20

• Company objectives and resources also have a significant effect
upon distribution choices.
• Clearly, distribution strategy must be in congruence with the
marketing strategy which, in turn, should be in agreement with the
overall company objectives.
• Equally important will be company resources. If the firm decides to
establish a large network of distributors in over 100 countries, it will
require a large commitment of human resources.
• Since most distributors need to be trained and motivated by
headquarters staff, frequent visits are usually necessary.
21

• Because of the travel time required to reach all parts of the globe, it
is impossible for a limited staff to supervise and motivate a
worldwide distribution network in multiple countries.
• A common problem is overreliance on electronic communication as
a substitute for personal training and motivation.
• A meeting conducted via Skype might be a very useful thing to do,
but sometimes a face-to-face meeting is necessary, if only to put the
relationship on a human level.
• Disappointment with distributor results can usually be traced to
under-resourcing selection, training, and motivation of distributors.
22

• Distribution strategy will also have an important influence on
channel design.
• A firm must decide whether it requires intensive, selective or
exclusive distribution.
• Intensive distribution means selling through as many outlets as are
available and qualified.
• Selective distribution means choosing a limited number of firms as
intermediaries.
• Exclusive distribution means choosing one intermediary in each
market.
23

• Products that have few customers, such as nuclear power plants or
aircraft engines, are obviously candidates for exclusive distribution.
• Choosing individual firms who can represent the manufacturer both
in follow-up service as well as customer training is critical.
• A firm selling stationery to be used in offices will probably choose
intensive distribution, hoping to market the product to as many
users as possible through as many channel types as is practical.
• Finally, product characteristics must be a part of the equation.
24

• If a firm has decided to market its product as a high-priced, high-
service product, this will dictate choosing exclusive or selective
distribution through well-financed, prestigious outlets, while a firm
which identifies its product as a “value alternative” using lower
prices will probably opt for the “warehouse” approach.
• The distribution strategy is directly related to the product
characteristics as well.
• Although directors of marketing hope to see neat looking
distribution charts, they often find that their actual distribution
patterns are quite messy.
25

• Most firms use multiple distribution channels to reach customers in
order to deliver the required satisfaction to any particular customer
segment.
• This can be helpful in meeting different market segments but has
the major drawback that the various distributors may resent the
existence of the others, and may feel that their own positions are
being undermined.
• Care needs to be taken to ensure that the segments really are
clearly-defined and overlap is kept to a minimum.
26

• Having said that, many firms manage to operate successfully
through multiple distribution channels for different segments: for
example, 3M have a total of five separate channels just for
audiovisual equipment.
• In each case the distribution channel addresses a specific customer
group, so that the different members of the distribution network do
not compete with each other even though they all carry the same
product lines.
• Generally, including the Internet as a distribution channel enhances
the overall performance of firms.
27

• However, this finding should be considered in terms of its cultural
context – the same finding may not apply everywhere, especially if
distributors are prone to view Internet distribution as a breach of
trust.
• Using multiple channels appears to work best if the supplying
company has a strong internal marketing orientation as internal and
external channel conflicts also appear to be closely related.
• In some cases, firms inherit distribution channels when they take
over other firms, or when there is a merger of firms in the same
industry.
28

• Rationalizing the distribution channels can be daunting, with firms
needing to assess which channels are most effective, and at the
same time having to discard trusts which have sometimes been built
up over many years.
• Firms should triangulate on the problem using multiple perspectives
– assessing distributors by historical performance, sales
management, strategic fit, and customer preference – before
making a final choice about which distributors to keep and which to
drop.
29

• In Figure 52.2, we see a manufacturer
selling directly, either through its own
salesforce or through the Internet to
certain customers.
• In addition, the manufacturer is using an
agent, and while agents do not take title
to the product, they may be the main
intermediary in a particular market.
30
Figure 52.2: Marketing channels

• This manufacturer also uses a distributor (wholesaler) who sells to
customers as well as dealers (retailers), who also sell to customers.
• Also shown is a relationship between the agent and the distributor.
A manufacturer may choose to have independent sales agents
who call on distributors helping with the sale.
• Any one manufacturer may very well have distribution patterns
that look like Figure 52.2.
• Firm management must frequently re-evaluate its choices,
changing the distribution patterns to suit the needs of new market
segments that it identifies.
31

• Many firms divide their customers into A-, B- and C-type customers,
with the A list comprising the top 10 percent by number and
accounting for up to 50 percent of the firm’s volume.
• The B-type customers are medium-sized, accounting for 25 percent
of customers by number and perhaps 25–30 percent of all sales.
• The remaining nearly two-thirds of customers in the C category
probably account for the smallest percentage of sales and their per-
order volume is small.
• Of course, these customers may eventually move up into buying in
greater volume, so they are still worth looking after.
32

• If a firm uses this approach, its
distribution alternatives will be clear.
• The A-types will be served by direct
sales from the manufacturer, the B-
types through some form of
distribution, and the C-types through
the Internet or mail order.
• In selecting a distributor, the first step
is to use the Partner Profile, shown in
Table 52.2.
33
Table 52.2: Partner profile

• This can easily be applied to any possible distribution partner to
determine whether this particular partner is the best choice.
• Unfortunately, choosing intermediaries is often approached under
unrealistic deadlines during quick trips to multiple markets.
• Experience has shown that spending one day in a country and
finding a firm through informal discussions over dinner or at a local
pub usually results in a poor choice.
• A marketing executive then finds that the intermediary signed on in
haste is very difficult to remove.
34

• Because many countries have passed
legislation steeply in favor of local
distributors, marketing manager should
be sure that all distribution partners sign
carefully drawn agreements.
• A list of the most important contract
areas which should be included in any
agent or distributor agreement is shown
in Table 52.3.
35
Table 52.3: Agent/distributor agreements
Source: Zimmerman, A. & Blythe, J. (2013)
Business to Business Marketing Management A
global perspective

• The type of relationship refers to whether a firm will be taking title
to the product or not, in other words, if the distribution partner is
an agent or a merchant.
• The second contract area describes the type of entity the
intermediary will be. It is preferable to make agreements with
corporations rather than individuals.
• The latter leaves a firm open to the interpretation that the firm has
an employer–employee relationship which is entirely different from
that of an arm’s length distributor and allows far less protection in
the event of disagreement.
36

• Indeed, in some countries (notably France) agents are regarded as
employees and have the full protection of employee legislation
regarding termination of the contract.
• In the case of taxes, the location of the establishment will
determine the tax jurisdiction. It is best to appoint an intermediary
with multiple lines so that it does not appear to be a branch of a
manufacturing firm.
• The duration of the agreement should be limited – one to two years
– and not indefinite. New agreements should be developed and
signed periodically to show that the relationship is being renewed.
37

• Regarding termination, the most solid basis for termination will be
failure to reach goals. These goals must be established on a periodic
basis by agreement of the manufacturer and the intermediary.
38
Should the agreement
be terminated, it is
important to include in
the document how the
termination will take
place.
Important items such as
disposition of inventory,
return of literature and
other materials, ownership
of customer lists and so on
should be described in this
agreement.
It is sometimes possible
to specify the country
under whose laws the
contract will be
enforceable, but this can
lead to complex (and
expensive) litigation.

• The product sale or service agreement identifies what product or
service areas the intermediary will be responsible for.
• Territory refers to the areas where the intermediary is to represent
the manufacturer. Sophisticated manufacturers will retain the right
to distribute the product independently of the distributor, but most
distributors will want exclusivity in a particular country.
• In some cases, this will be the only logical course since a market
may be too small to support multiple distributors.
• However, this course also leaves the manufacturer with no other
alternative should the intermediary prove to be inadequate.
39

• The next area to include is whether or not disputes will be
submitted to arbitration and what jurisdiction will be governing.
• It is always better to pre-establish an arbitration method in these
agreements so that disputes can be settled without going to court.
• Payment and compensation relates to the way commissions will be
calculated for agents and the way payments will be made through
distributors.
• Because of anti-corruption laws, more fully discussed in module 44,
it is necessary to establish clear accounting pathways to trace
payments.
40

• Other important items include the terms of sale such as ownership
of the goods, the facilities and personnel to be applied to the
distribution of the particular product line, and the inventory to be
carried.
• An important clause to include in an agreement is confidentiality –
intermediaries should be prevented from using sensitive
information they may discover during the relationship – and
confidentiality should survive the termination of the agreement.
• The intermediary should be required to acknowledge that the
manufacturer retains the rights to all proprietary information.
41

• The intermediary should be granted limited use of this intellectual
property, especially trademarks and copyrights.
• Records and communication should be specified so that the
intermediary will know the reporting requirements of the
manufacturer.
• Some manufacturers describe carefully the kinds of advertising and
promotion to be used and even retain a right of approval before
advertising is placed.
• Some other provisions may also be necessary in the agreement.
42

• The most important one is the so-called force majeure, which allows
a firm freedom from the provisions of the agreement because of so-
called “Acts of God.”
• One may also wish to include a section requiring dealers to comply
with all local laws.
• This listing, while a good starting point, is not complete for every
situation and a marketing director developing a distributor or agent
agreement should take legal advice to be sure all clauses required
for his/her particular business are included.
43

• Some rules of international
distribution are listed in Table 52.4.
• As has been mentioned, many firms
do not spend enough time choosing
distributors.
• Often, distributors are chosen simply
because they make contact with the
manufacturer, asking for the line.
44
Table 52.4: Guidelines for successful
international distribution
Source: Zimmerman, A. & Blythe, J. (2013)
Business to Business Marketing Management A
global perspective

• Carefully identifying the needs of the segment and the capabilities
required in a particular country will lead a manufacturer to spend
the required time to select the best possible candidate.
• Above all, this is the most important task in distribution
management.
• Distributors who have key contacts in a country but are unable to
develop a market usually are not the best long-term partners.
• Having said that, most distributors will spend only a limited amount
of time developing a market.
45

• A manufacturer must understand its commitment to market
development and cannot rely entirely upon the distributor to
“pioneer” in a new market without significant help.
• Although many multinational firms see distributors as simply market
entry vehicles, a more effective strategy will be to choose
distributors who will become partners.
• When a large firm shows that it will not partner with the local
distributor on a long-term basis, the local distributor management
often become defensive and look to short-term gains rather than
long-term market development.
46

• On the other hand, research shows that a committed partner will
become even more so in times of business uncertainty, when trust is
at a premium.
• As has been mentioned, a full effort is required to enter a new
market. Resources of all kinds, including people, are required to
make a distributor successful.
• Training in selling and the technical aspects of the product is usually
at a minimum and on-site visits to help in real situations are often
what makes the difference between success and failure.
47

• Some multinationals take minority equity stakes in distribution
companies.
• While this increases a multinational’s exposure to market
downturns and political risk, it also signals a level of commitment to
local distributors. It can be a very effective way to gain cooperation
and full effort from local intermediaries.
• While distributors can implement strategy, adapting it to the local
culture, the multinational should maintain control over the
marketing strategy.
48

• In some cases, employees from the manufacturer should be sent to
work in the distributor’s business to ensure the implementation is
following the strategy.
• The need for market and financial data is obvious. Where
cooperation has been established, distributors will be more
forthcoming with these data.
• However, should the distributor suspect that the manufacturer is
not committed to a long-term relationship, information flow is
usually the first aspect of the relationship to dry up.
49

• It is suggested to set up distributor councils to increase cooperation
among national or regional distributors, but this should be
approached with caution.
• While they can serve as a vehicle for increasing cooperation, they
can also reinforce dissatisfactions among distributors, especially in
periods of downturn or where a manufacturer experiences product
problems.
• A less formal approach may achieve the same results. In other
words, holding annual or semi-annual meetings with regional or
even worldwide distributors (should the number not be unwieldy)
can serve as a good vehicle for education and motivation.
50

• Supplier relations are important for any organization. These
relationships are dynamic, because they are built up through human
contact and human effort.
• In fact, business is about people – only people buy and sell, hire and
fire, and make decisions on behalf of their organizations.
– From the perspective of the buyer, the seller’s salesperson actually is
(in effect) the selling company.
– Likewise, from the salesperson’s perspective the buyer is the buying
company.
51

• This means that any sign of dishonesty or even unpleasantness on
the part of the individuals concerned will affect the other party’s
perception of the company as a whole.
• Here is a checklist for selecting and motivating distributors.
52
Ask potential customers to recommend possible distributors.
• This will help ensure a smooth logistical flow.
Determine which distributor best fits the company’s overall strategy.
• Goals and strategic aspirations of the distributor should be close to those of the company, so that the relationship
remains close.
• For example, a conflict might arise between an aggressive company seeking rapid growth and a distributor which
prefers high profit margins at the expense of growth.

Visit the distributor regularly.
• This helps to build the relationship by keeping the company up-to-date with developments in the market, and
allows the distributor to raise issues.
• It is probably also advisable to allow the distributor access to staff at all levels in the organization – technical people,
administrators, and financial managers – as well as marketers, since this will also strengthen the relationship.
Visit the overseas customers with the distributor.
• Provided the distributor or agent has no objection, joint visits to the overseas customers also help to support the
distributor and build the relationship.
• Customers usually welcome the opportunity to have direct contact with the company.
Provide training and support.
• If the distributor’s staff can be trained at the company’s premises this will make a major difference to the smooth
running of the relationship, since the distributor will make useful contacts for informal resolution of minor
problems, and will develop a better understanding of the corporate culture.
53

Managing Distribution Channels
• Channels can be led by any
of the channel members,
whether they are
producers, wholesalers, or
retailers, provided the
member concerned has
channel power.
• This power comes from
seven sources, as shown in
Table 52.5.
54
Table 52.5: Sources of Channel power
Source: Zimmerman, A. & Blythe, J. (2013) Business to Business
Marketing Management A global perspective

• Channel cooperation is an essential part of the effective
functioning of channels.
• Since each member relies on every other member for the free
exchange of goods down the channel, it is in the members’
interests to look after each other to some extent.
• Channel cooperation can be improved in the following ways:
55
The channel members can
agree on target markets so that
each member can best direct
effort toward meeting the
common goal.
Define the tasks each member
should carry out. This avoids
duplication of effort or giving
the final consumer conflicting
messages.

• A further development is co-marketing, which implies a
partnership between manufacturers, intermediaries, and retailers.
• This level of cooperation involves pooling of market information
and full agreement on strategic issues.
• Channel conflict arises because each member wants to maximize
its own profits or power.
• Conflicts also arise because of frustrated expectations; each
member expects the other members to act in particular ways, and
sometimes these expectations are unfulfilled.
56

• For example, a retailer may expect a wholesaler to maintain large
enough stocks to cover an unexpected rise in demand for a given
product, whereas the wholesaler may expect the manufacturers to
be able to increase production rapidly to cover such eventualities.
• Channel management can be carried out by cooperation and
negotiation (often with one member leading the discussions) or it
can be carried out by the most powerful member laying down rules
which weaker members have to follow.
• Sometimes the simplest way to control a distribution channel is to
buy out the channel members.
57

• Buying out members across a given level (e.g., a wholesaler buying
out other wholesalers) is called horizontal integration; buying out
members above or below in the distribution chain (e.g., a retailer
buying out a wholesaler) is vertical integration.
• An example of extreme vertical integration is the major oil
companies, which extract crude oil, refine it, ship it, and ultimately
sell it retail through petrol stations.
• At the extremes, this type of integration may attract the attention
of Government monopoly regulation agencies, since the
integration may cause a restriction of competition.
58

• Producers need to ensure that the distributors of their products
are of the right type. The image of a distribution agent can damage
(or enhance) the image of the products sold (and vice versa).
• Producers need not necessarily sell through the most prestigious
distributor, and in fact this might be counter-productive for many
cheap, everyday items such as office stationery or nuts and bolts.
• Likewise, a prestigious product should not be sold through down-
market distributor.
59

• This is particularly important in global markets, where the
producing company may not be familiar with the distribution
methods in the target country.
60
For instance,
manufacturers’
agents in Germany
tend to be highly
professional and
committed, and
expect the same level
of commitment from
the firms they
represent.
They will expect
regular visits from
the selling company,
marketing support,
and above all
reliability of delivery.
In most cases, a
German agent will
make a thorough
investigation of the
foreign company
before accepting the
task of selling its
products.
In other countries
(like UK)
manufacturers’
agents are rarely as
assiduous in checking
out the client
company – they are
much more likely to
take on the product
and see if it sells.
For the German
agent, the company
he or she represents
is integral to his or
her reputation. For
the UK agent, the
relationship is not
regarded as being as
direct.

Efficient Customer Response
• Efficient customer response seeks to integrate the activities of
manufacturers and distributors using computer technology; the
expected result is a more responsive stocking system for the
distributor, which in turn benefits the manufacturer.
• Some of the features of ECR are:
– Continuous replenishment
– Cross-docking
– Roll-cage sequencing
61

62
Continuous replenishment
• The supplier plans production
using data generated by the
distribution network.
Cross-docking
• It attempts to coordinate the
arrival of suppliers’ and retailers’
trucks at the distribution centers
so that goods move from one
truck to the other without going
into stock.
• Although transport efficiency
falls because a supermarket
truck collecting (say)
greengrocery might have to wait
for several suppliers’ trucks to
arrive, the overall speed of
delivery of products improves,
which can be crucial when
dealing with fresh foods.
Roll-cage sequencing
• It allows storage of products by
category at the factory or
warehouse; although this adds
to the labor time at the factory,
it greatly reduces labor time at
the customer’s warehouse, or
the retail store, since the roll
cages can be moved directly into
position.

• The main problem with ECR is that it relies on complete cooperation
between members of the distribution chain.
• In any channel of distribution where the power base is unequal, this
is less likely to happen; despite the overall savings for the channel as
a whole, self-interest on the part of channel members may lead to
less-than-perfect cooperation.
• Using distribution networks strategically will always involve
consideration of the strategies of the distributors themselves. These
may conflict with the strategy of the supplying firm. Harmonizing
these strategic differences, and generating synergies from them, is a
challenge for most firms.
63

Conclusion
• In this module, we explained the main issues in designing a suitable
distribution policy.
• Next, we explained the role of distribution in gaining competitive
advantage and described the ways of integrating the distribution
network.
• We listed the advantages of different types of distribution system.
• Then, we presented how “cutting out the middleman” reduces
efficiency and increases costs.
• Finally, we described some of the techniques used for efficient
customer response.
64

References
1. Kotabe, M. & Helsen, K. (2012) Global Marketing Management,
Wiley India(P.) Ltd., Fifth Edition.
2. Keegan, W.J. (2004) Global Marketing Management, Pearson
Education, Inc., Seventh Edition.
3. Zimmerman, A. & Blythe, J. (2013) Business to Business Marketing
Management A global perspective, Routledge, Second Edition.
65

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