International Marketing 200094

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INTERNATIONAL MARKETING

200094

IM
200094
OVERVIEW
– Discussion Question 1:
Channel Design
– Discussion Question 2:
International Logistics
CHAPTER 8
Global distribution and
logistics
Learning objectives
1. Discuss the factors that influence the design
and structure of distribution channels and
understand the evolving role of e-commerce.
2. Evaluate the criteria for selecting and screening
intermediaries.
3. Explain the role of logistics and transportation in
international marketing.
4. Understand the impact on inventory levels
storage and packaging of international shipping.
Distribution channels
• Essential linkages that connect producers
and customers
• A team working towards a common goal
• Being close to customers and solving their
problems are vital to success
KEEPING THE GLOBAL
SUPPLY CHAIN MOVING

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Channel structure
• Configurations vary from direct (producer-to-
consumer) to elaborate multilevel channels
• Manage multidirectional connections:
– physical movement of goods and services
– transactional title flows
– information communications flows
Channel configuration
Channel design
• Length is the number of levels or types on
intermediaries
• Width is the number of institutions of each
type in the channel
• Channel design is determined by the 11 Cs:
– external determinants are givens
– internal determinants are controllable
Determinants of channel structure
and relationships (the 11 Cs)
Channel-design considerations
• Customer characteristics:
– demographics
– psychographics
– what do customers need?
– why, when and how?
Channel-design considerations
• Culture (distribution culture):
– existing channel structures
– relationships between channel members
– need to adjust to existing structures to
gain distribution
• Globalisation of distribution function:
– into emerging markets
– globalisation of intermediaries
INSIDE AMAZON’S SMART
WAREHOUSE

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DHL’S KISS DELIVERY ADS

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Channel-design considerations
• Competition:
– the only distribution system is already
accepted by both trade and consumers
• Company objectives:
– management goals
– control
– sales objectives
Channel-design considerations
• Character is the nature of the product:
– channel design must match the overall
positioning of the product
• Capital is the financial requirements:
– influences the degree of control
• Maintenance costs
Channel-design considerations
• Three different approaches for coverage:
– intensive uses the largest number of
intermediaries
– selective uses a few intermediaries
– exclusive uses only one intermediary
• Some control is lost when intermediaries are
used as it depends on the type of the
relationship and length of the channel
Channel-design considerations
• Continuity:
– market commitment
– responsibility of the marketer
• Communication is a two-way process:
– conveys the marketer’s goals to the
distributors
– solves conflict situations
– aids in the overall marketing of the product
Discussion Question 1: Channel Design

1. Discuss the pros and cons for the


different channel designs.
2. What factors impact on the choice of
channel design?
3. What channel design would work for
your product category and choice of
country?
E-commerce
• Marketing and advertising tool
• Order-taking capabilities
• Building own international distribution
networks
• Interactive relationships
• Response and delivery challenges
• Governmental role
Selection of intermediaries
• Distributor relationship:
– buys the product
– completes marketing service
• Agent relationship:
– does not physically handle the goods
– operates on commission basis
Sources for finding intermediaries

• Passive approach or an active approach


• Governmental agencies; for example,
Austrade
• Private sources:
– trade directories
– websites
The distributor agreement

• Contract duration
• Geographic boundaries
• Payment
• Expenses
• Communication
Termination of the
channel relationship
• Reasons to terminate:
– changes in distribution approach
– lack of performance
– life cycle of the channel relationships
• Just causes for termination include fraud,
deceit, damages or failure to comply with
contractual obligations
Parallel importation (grey markets)
• Authentic and legitimately manufactured
trademark items produced and purchased
abroad, but imported or diverted to the country
by bypassing designated channels
• Price segmentation and exchange rate
fluctuations allow unauthorised importers to exist
• Eliminated through one-price policies, multiple
product versions or promoting authorised
dealers
International logistics
• The design and management of a system
that controls the flow of materials into,
through and out of international corporations
• Just-in-time (JIT) delivery
• Electronic data interchange (EDI)
• Early supplier involvement (ESI)
• Efficient customer response (ECR) systems
International logistics: phases in the
movement of materials
• Materials management:
– through the firm
• Physical distribution:
– from the firm to customers
International logistics: the concepts
• The systems concept:
– materials-flow activities
– within and outside the firm
– interaction context
• Total-cost concept:
– minimises costs by implementing the
systems concept
– maximises after-tax profits in the
international arena
International logistics: the concepts
• Trade-off concept:
– linkages within logistics systems that result
from the interaction of their components;
for example, locating a warehouse near a
customer decreases delivery times but
increases storage costs
The impact of international logistics
• Costs up to 30 per cent of an order
• Growing demand
• Fuel costs
• Increased security requirements
• New dimensions:
– geographical distances
– currency variations
– varying entry regulations
– additional intermediaries
THE FUTURE OF DELIVERY
IN OUR NEW ON-DEMAND
ECONOMY

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International transportation issues
• Established transportation network in
industrialised nations:
– major infrastructural variations internationally
• Important to learn about existing and planned
infrastructures abroad
• Availability and quality of transportation mode
• Frequency of transportation services
International transportation issues:
availability of modes
• Water transportation:
– key mode for international freight
movements
– port capacity and delays can cause major
interruption
• Types of vessels:
– liner service, bulk service and tramp service
(specialised shipping)
International transportation issues:
availability of modes
• Air shipping:
– 40 per cent of the world’s manufactured
exports by value travel by air
– high value/high density items
– advancements in cargo capacity and
facilities
World airfreight traffic
International transportation issues:
choice of modes
• Transit time:
– depends on transit mode
• Predictability:
– air is the most predictable
International transportation issues:
choice of modes
• Cost:
– air is the most expensive
– what is the best mix of modes?
• Non-economic factors:
– governments may pressure a firm to use a
certain transit mode
Discussion Question 2: International Logistics

1. Discuss the pros and cons for the


different international logistics options.
2. What are the impacting factors?
3. What international logistics strategy
would work for your product category
and choice of country?
The international shipment:
documentation
• Bill of lading:
– acknowledges receipt of goods
– contract between buyer and seller
– evidence of title to the goods
• Shipper’s export declaration:
– authorisation for export
– governmental data collection
The international shipment:
documentation
• Shipper’s declaration for dangerous goods
• Consular invoice:
– data collection
• Certificate of origin:
– ensures correct tariffs
The international shipment:
documentation
• Import licences
• Foreign exchange licences:
– allows the importer to pay for the shipment
International inventory issues
• Order cycle time:
– total time that passes between order
placement and receipt of the goods
– longer length of total order cycle
– difficult to maintain consistency
• Need to reduce order cycle time and increase
its consistency without an increase in total
costs
International inventory issues
• Customer service levels:
– responsiveness of inventory policies
• Inventory as a strategic tool:
– currency valuation changes
– hedge against inflation
International storage issues

• ‘A’ products stocked in all distribution


centres
• ‘B’ products stored only in selected
locations
• ‘C’ products with low demand stocked only
at headquarters
International storage issues

• Foreign trade zones:


– no duties
– storage, packaging, inspections, labelling,
assembly etc
– ‘Made in (country)’ status
– local governments achieve increased
employment
International packaging issues

• Instrumental in getting merchandise to ultimate


destination in safe, maintainable and
presentable condition
• Responsibility of shipper of goods
• Closely linked to overall strategic plans
International packaging issues

• Differences in environmental conditions


• Weight of packaging
• Customer instructions
• Availability of intermodal containers
• Quality of inland transportation
INFLUENTIAL TRENDS IN
PACKAGING

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