Global Marketing Channels and

Physical Distribution
Global Marketing Module
Learning Objectives
1 Identify and compare the basic structure options for
consumer channels and industrial channels.
2 List the guidelines companies should follow when
establishing channels and working with intermediaries in
global markets.
3 Describe the different categories of retail operations
that are found in various parts of the world.
4 Compare and contrast the six major international
transportation modes and explain how they vary in terms
of reliability, accessibility, and other performance
metrics.
Distribution Channels: Terminology and
Structure (1 of 2)
Physical distribution is the physical flow of
goods through channels.
A channel of distribution is “an organized
network of agencies and institutions that, in
combination, perform all the activities required to
link producers with users to accomplish the
marketing task.”
Channel Objectives & Utility
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 (2 of 2)
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 Channels
Figure 12-1 Marketing Channel Alternatives: Consumer Products
Peer-to-Peer Marketing
The Internet and other related media are
dramatically altering distribution
Interactive TV may become a viable direct
marketing channel in the future
eBay pioneered P2P
Helped Disney and IBM set up auction sites
for B2C auctions
Interactive TV is coming when homes are wired
for 2-way
 Door-to-Door Selling
Mature form in the U.S.
Tupperware has a sales
force of 200,000 in
Indonesia, its biggest
market
Growing popularity in
China-Avon, Mary Kay
½ of cars are sold door-to-
door in Japan with 100,000 The U.S. accounts for only
salespeople 10% of Tupperware sales.
Tricia Stitzel is CEO of the
company.
Consumer Channels
Manufacturer-owned stores
Nike, Levi Strauss, Apple, Sony, fashion design houses
have flagship stores
Independent franchise
Independent retailers
Walmart
Flagship retail stores for Apple, Sony, well-known
fashion houses, Nike to build brand loyalty, showcase
products, and help gather marketing intelligence
Retailing in Developing Countries
Consumers purchase food, soft drinks, and other items
at “Mom & Pop” stores, kiosks, and market stalls in
single-use packages
70% of Mexicans shop at these stores
P&G aids stores that carry at least 40 P&G products
with displays, promo materials through a golden store
program
Nestlé has a floating supermarket that sails the
Amazon River to reach remote areas
 Industrial Products Channels
Figure 12-2 Marketing Channel Alternatives: Industrial Products
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
within each national market
Working with Channel Intermediaries (1 of
2)
1. Select distributors - don’t let them select you
2. Look for distributors capable of developing
markets, rather than those with a few good
customer contacts
3. Treat local distributors as long-term partners, not
temporary market-entry vehicles
Working with Channel Intermediaries (2 of
2)
4. Support market entry by committing money,
managers, and proven marketing ideas
5. From the start, maintain control over marketing
strategy
6. Make sure distributors provide you with detailed
market and financial performance data
7. Build links among national distributors at the earliest
opportunity
Intermediaries
Be realistic about the intermediary’s motives
May maximize its profit rather than the
manufacturer’s
May engage in cherry picking-only taking
products with known demand
Manufacturer may need to establish its own
distribution channel although it will have high costs
Or the manufacturer can supplement the cost of the
sales force of the distributor
 Global Retailing (1 of 2)
Department stores
Specialty retailers
Supermarkets
Convenience stores
Discount stores and
warehouse clubs
Hypermarkets
Supercenters The LP12 Mall of Berlin
Category killers opened in 2014 with 270
stores as well as apartments.
Outlet stores
Global Retailing (2 of 2)
European retailers spread to colonies in the 19th,
early 20th centuries
Global retailers serve developing nations with
more products & better prices
Organized retail refers to modern, branded chain
stores
Only 5% of India’s total market
Sector will have double-digit growth
 Table 12-1 Top Five Global Retailers, 2017

Ran Company Country Formats Sales ($

k millions)
1 Walmart United Discount store, $485,873
Stores States wholesale club
82,996 (2016
2 Carrefour France Hypermarket data)
3 Tesco P L C United Supermarket/hypermar 69,501
Kingdom ket
4 Metro A G Germany Diversified 43,828

5 Aldi Germany Discount store NA

 Types of Retailers (1 of 5)
 Department stores have a product mix under one roof
 Expansion outside of the home market is usually limited to a few countries
 Two views:
 “It’s quite difficult to transfer a department store brand abroad. You have to
find a city with the right demographic for your offer. If you adapt your offer
to the locality, you dilute your brand name.”

Maureen Hinton, London Retail

Analyst
 “Conceptually, department stores are global brands already because we live
in a world with an enormous amount of travel between cities and continents.”
Marvin Traub, former C EO,
Bloomingdales
 Types of Retailers (2 of 5)
Specialty Retailers Supermarkets
Less variety than Between 50,000 &
department stores 60,000 sq . f t.
uare ee

Offer merchandise depth Grocers haven’t spread

& high levels of service outside the US b/c
The Body Shop, market size is vast
Victoria’s Secret, UK Tesco is global
Starbucks
Types of Retailers (3 of 5)
Convenience Stores
High-turnover convenience & impulse goods
Prices 15-20% higher than grocery stores
7-11 is the world’s largest
64,000 locations
Trend towards locating in malls, airports, office
buildings, and college & universities
Discount Retailers
Full-line Discounters
Wide variety of merchandise; Ex. Walmart
Warehouse Clubs
Memberships fees; Ex. Sam’s, Costco
Dollar Stores
Sell at a single low price; Ex. in U.S. Family Dollar,
Dollar Tree; Internationally, My Dollarstore has rapid
growth
Hard Discounters
Limited assortment, rock bottom prices
Types of Retailers (4 of 5)
Hypermarkets are hybrid retailers combining the
discounter, supermarket & warehouse club; 20,000-
30,000 sq . f t.
uare ee

Supercenters have lower priced groceries plus general

merchandise; half the size of a hypermarket; Walmart
operates 3,275 stores plus 100s in Mexico, Argentina,
and Brazil
Superstores aka Category Killers & Big-Box sell
vast assortments of a product category
Toys ‘R’ Us, Home Depot, IKEA
 Types of Retailers (5 of 5)
Shopping Malls Outlet Stores
Groups of stores in one Shops that offer excess
place inventory, out-of-date
Enclosed or outdoor merchandise or factory
Leisure destinations offer seconds
entertainment & Popular in the US,
convenience expanding into Europe
Trend towards outdoor & Asia
“lifestyle centers” with
food courts &
entertainment
Global Retailing Trends
Environmental Factors that cause retailers to look
outside the home country
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?
Figure 12-3 Global Retailing Categories
Figure 12-4 Global Retailing Market Entry
Strategy Framework
Global Retailing Strategies (1 of 2)
Organic Growth
Company uses its own resources to open a
store on a greenfield 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 (2 of 2)
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
 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 an efficient flow of goods through the
supply chain
Physical Distribution, Supply Chains, and
Logistics Management (1 of 2)
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 (2 of 2)
Inventory Management
Ensures that a company neither runs out of
manufacturing components or finished goods nor incurs
the expense and risk of carrying excessive stock of these
items
Social media can play an important role by connecting
social media followers with the brand
Transportation
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
Figure 12-5 Supply Chain, Value Chain,
and Logistics
 Transportation
Table 12-4 Comparison of Major International Transportation Modes
Mode Reliability Cost Speed Accessibility Capabilit Ease of
y Tracing
Rail Average Average Average High High Low
Water Low Low Slow Low High Low
Truck High Varies Fast High High High
Air High High Fast Low Moderate High
Pipeline High Low Slow Low Low Moderate
Internet High Low Moderate Moderate; Low High
to fast increasing

 Channel Strategy - analyzing each shipping mode to determine

which mode, or combination of modes, will be both effective
and efficient in a given situation