DISTRIBUTION_CHANNELS_-_IMM

Global Marketing Channels and Physical Distribution : 

© 2005 Prentice Hall 12-1 Global Marketing Channels and Physical Distribution

Channel Objectives : 

© 2005 Prentice Hall 12-2 Channel Objectives Marketing channels exist to create utility for customers Place utility - availability of a product or service in a location that is convenient to a potential customer Time utility - availability of a product or service when desired by a customer Form utility - availability of the product processed, prepared, in proper condition and/or ready to use information utility - availability of answers to questions and general communication about useful product features and benefits

Distribution Channels: Terminology and Structure : 

© 2005 Prentice Hall 12-3 Distribution Channels: Terminology and Structure Distribution is the physical flow of goods through channels Channels are made up of a coordinated group of individuals or firms that perform functions that add utility to a product or service

Distribution Channels: Terminology and Structure : 

© 2005 Prentice Hall 12-4 Distribution Channels: Terminology and Structure Distributor – wholesale intermediary that typically carries product lines or brands on a selective basis Agent – an intermediary who negotiates transactions between two or more parties but does not take title to the goods being purchased or sold

Consumer Products : 

© 2005 Prentice Hall 12-5 Consumer Products

Consumer Products : 

© 2005 Prentice Hall 12-6 Consumer Products Piggyback Marketing channel innovation that has grown in popularity One manufacture distributes product by utilizing another company’s distribution channel Requires that the combined product lines be complementary and appeal to the same customer

Industrial Products : 

© 2005 Prentice Hall 12-7 Industrial Products

Establishing Channels : 

© 2005 Prentice Hall 12-8 Establishing Channels Direct involvement – the company establishes its own sales force or operates its own retail stores Indirect involvement – the company utilizes independent agents, distributors, and/or wholesalers Channel strategy must fit the company’s competitive position and marketing objectives with in each national market

Working with Channel Intermediaries : 

© 2005 Prentice Hall 12-9 Working with Channel Intermediaries Select distributors – don’t let them select you Look for distributors capable of developing markets, rather than those with a few good customer contacts Treat local distributors as long-term partners, not temporary market-entry vehicles

Working with Channel Intermediaries : 

© 2005 Prentice Hall 12-10 Working with Channel Intermediaries Support market entry by committing money, managers, and proven marketing ideas From the start, maintain control over marketing strategy Make sure distributors provide you with detailed market and financial performance data Build links among national distributors at the earliest opportunity

Global Retailing : 

© 2005 Prentice Hall 12-11 Global Retailing Department stores Specialty retailers Supermarkets Convenience stores Discount stores and warehouse clubs Hypermarkets Supercenters Category killers Outlet stores

Global Retailing : 

© 2005 Prentice Hall 12-12 Global Retailing Top 25 Global Retailers in 2002, sales in Millions

Global Retailing : 

© 2005 Prentice Hall 12-13 Global Retailing Environmental Factors Saturation in the home country market Recession or other economic factors Strict regulation on store development High operating costs Critical Question What advantages do we have relative to the local competition?

Classifying Global Retailers : 

© 2005 Prentice Hall 12-14 Classifying Global Retailers

Global Retailing Strategies : 

© 2005 Prentice Hall 12-15 Global Retailing Strategies Organic Company uses its own resources to open a store on a green field site or acquire one or more existing retail facilities Franchise Appropriate strategy when barriers to entry are low yet the market is culturally distant in terms of consumer behavior or retailing structures

Global Retailing Strategies : 

© 2005 Prentice Hall 12-16 Global Retailing Strategies Chain Acquisition A market entry strategy that entails purchasing a company with multiple existing outlets in a foreign country Joint Venture This strategy is advisable when culturally distant, difficult-to-enter markets are targeted

Global Retailing Strategies : 

© 2005 Prentice Hall 12-17 Global Retailing Strategies

Innovation in Global Retailing : 

© 2005 Prentice Hall 12-18 Innovation in Global Retailing Innovation takes place only in the most highly developed systems The ability of a system to successfully adapt innovations is directly related to its level of economic development Even when the economic environment is conducive to change, the process of adaptation may be either hindered or helped by local demographic factors, geographic factors, social mores, government action, and competitive pressures The process of adaptation can be greatly accelerated by the actions of aggressive individual firms

Supply Chain Definitions : 

© 2005 Prentice Hall 12-19 Supply Chain Definitions Supply Chain Includes all the firms that perform support activities by generating raw materials, converting them into components or finished products and making them available to customers Logistics The management process that integrates the activities of all companies to ensure tan efficient flow of goods through the supply chain

Physical Distribution, Supply Chains, and Logistics Management : 

© 2005 Prentice Hall 12-20 Physical Distribution, Supply Chains, and Logistics Management Order Processing includes order entry in which the order is actually entered into a company’s information system; order handling, which involves locating, assembling, and moving products into distribution; and order delivery Warehousing Warehouses are used to store goods until they are sold Distribution centers are designed to efficiently receive goods from suppliers and then fill orders for individual stores or customers

Physical Distribution, Supply Chains, and Logistics Management : 

© 2005 Prentice Hall 12-21 Physical Distribution, Supply Chains, and Logistics Management Inventory Management Ensures that a company neither runs out of manufacturing components or finished goods nor incurs the expense and risk of carrying excessive stocks of these items. Transportation the method or mode a company should utilize when moving products through domestic and global channels; the most common modes of transportation are rail, truck, air, and water

Transportation : 

© 2005 Prentice Hall 12-22 Transportation Channel Strategy – analyzing each shipping mode to determine which mode, or combination of modes, will be both effective and efficient in a given situation

Factors that affect choice of Channels : 

Factors that affect choice of Channels The “6 C’s” need to be considered: 1. Cost Investment cost of developing channel; and cost of maintaining channel 2. Capital requirements How much capital is required 3. Control How much control is desired Example: company’s own sales force exerts most control vs. using middlemen

Factors that affect choice of Channels : 

Factors that affect choice of Channels 4. Coverage Full market coverage, or targeted coverage to densely populated areas… 5. Character Channel of the distributions system must meet the “character of the company” seeking to do business 6. Continuity Will there be longevity issues How to build loyalty with middlemen is much more difficult than a company’s own sales force

Locating, Selecting, Motivating and Terminating Middlemen : 

Locating, Selecting, Motivating and Terminating Middlemen Factors affecting locating middlemen: Things to look for: Financial stability, managerial stability, productivity, reputation, etc. Sources to use: U.S. Dept. of Commerce, foreign consulates, commercially published directories Selecting Middlemen Two steps 1. Screening 2. Developing the “Agreement”

Locating, Selecting, Motivating and Terminating Middlemen (Cont.) : 

Locating, Selecting, Motivating and Terminating Middlemen (Cont.) Motivating Middlemen Common methods used to motivate middlemen: Financial rewards, psychological rewards, communications, company support and corporate rapport Terminating Middlemen Must consider things such as: Legal protection Control over middlemen Controlling Middlemen Control over the system (distribution network) Control over the middlemen Volume of sales, market coverage, services offered, pricing, advertisement, payment of bills and profitability.