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CHAPTER DISTRIBUTION DECISIONS VTHN ngocvth@uel.edu.vn CONTENTS 01 HANDLING THE EXPORT ORDER 03 DISTRIBUTION CHANNELS: OBJECTIVES, TERMINOLOGY, AND STRUCTURE 02 PHYSICAL DISTRIBUTION 04 GLOBAL RETAILING INTRODUCTION ● Access a key decision ● Can we use the same distribution channels as home markets? ● Distribution density; channel length; channel alignment; distribution logistics ● Distribution channels tend to be longer, but …… ● Wholesale and retail related to economic development ● Direct channels provide better control, flexibility and feedback ● Disintermediation THE EXPORT PROCEDURE 1.1 ORDER RECEIVED DIRECTLY FROM PROSPECTIVE IMPORTER • Order contains the essential facts concerning the desired merchandise & shippment • Exporter send confirmation of receipt • Exporter prepare Proforma Invoice (type & amount of merchandise, unit costs & extensions, expected weights & measures, terms of sales and payment, etc.) 1.2 ORDER RECEIVED FROM BRANCH OR REPRESENTATIVE OVERSEAS • Use a combination order form and sales contract • Exporter accept the order, then complete & sign the form (both the seller & buyer) • Indent order is between final purchaser & overseasbased branch office/ distributor of export 1.3 EXPORT LICENSES • Individual countries have their own export laws, • Control the export of products for reasons (national security, foreign policy, short supply, preservation of cultural property, assisting of industries using domestic products, renvenue purpose) 1.4 FINANCING/ PAYMENT & OTHER TERMS OF SALE • Getting the merchandise from the exporter’s plant to the port • Getting the merchandise through outbound Customs • Getting the merchandise abroad ship (or other mode of transport) • Paying for the freight • Paying for insurance PHYSICAL DISTRIBUTION • The passage of goods across national boundaries, with attendant legal requirements • Shipment by ocean-going vessels or international airlines, with attendants security needs and specific documentary requirements • The time and distance required to complete the transaction, with attendant needs for ensuring payment PHYSICAL DISTRIBUTION A positive effect on a company’s sale volume through the service provided The speed with which a product can be provided to a customer • The reliability with which the average speed of service is achieved • The degree of immediate availability of the product • The arrival of the product in good condition • Six channel structure alternatives for industrial/ business products 3.1 ESTABLISHING CHANNELS AND 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 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 4.1 TYPES OF RETAIL OPERATIONS Department stores Specialty retailers Supermarkets several departments under one roof, each representing a distinct merchandise line and staffed with a limited number of salespeople narrowly focused and offer a relatively narrow merchandise mix aimed at a particular target market departmentalize , single-story retail establishments that offer a variety of food and nonfood Convenience stores same products as supermarkets, but the merchandise mix is limited to high-turnover convenience and impulse products Discount retailers the emphasis on low prices 4.1 TYPES OF RETAIL OPERATIONS Hard discounters limited assortment of goods— typically 1,000 to 3,000 different items— at rock-bottom prices Hypermarkets hybrid retailing format combining the discounter, supermarket, and warehouse club approaches under a single roof (200,000 to 300,000 square ft) Superstores Shopping malls the label many in group of stores in the retailing one place, leisure industry use when destination talking about stores such as Toys ‘R’ Us, Home Depot, and IKEA Outlet stores dispose of excess inventory, out-ofdate merchandise, or factory seconds 4.2 GLOBAL TRENDS ● ● ● ● ● ● ● ● ● Increased internationalisation of retailing and logistics Further spread of discounting Digital retailing on global scale Growth of mobile shopping Online sales accelerating in developing markets 3rd party marketplace Customers seeking experiences & products reflecting personal brand on social media (Deloitte, 2017) Amazon disrupting the marketplace E-Marketplace e.g Alibaba “Customers want authentic, sharable experiences to further their personal brand” “Retailization of the world - the maker movement, the sharing economy” “E-commerce continues to be a major growth engine for the retail industry” —Deloitte (2017) 4.3 ISSUES IN THE CYBERMARKETPLACE • • • • • • Digital divide Growing online shopping, but varied across world Diverse credit card culture Disintermediation process Cannabalising existing distribution channels? Black Friday/Cyber Monday • Manufacturers competing • • • • • • with resellers Channel conflict Importance of logistics support Currency issues Fraud issues Communication issues Drone delivery? 4.4 GREY MARKETS/ PARALLEL IMPORTING “A grey market generally consists of those unauthorised distributors and dealers that circumvent channel arrangements by buying a company’s products in low-price markets and selling them in high-price markets at lower prices than those offered by authorised channel members” (Hollensen, 2004) “Parallel importation is an unauthorized import into a country of non-counterfeit goods imported without the express permission of the intellectual property owner (The Balance, 2017) EXAMPLE “If you’re selling Nike trainers on your Amazon page and you haven’t gotten permission from Nike — the owner of the Nike trademark — and you ship a pair of shoes to someone in another country, you’re selling a parallel import.” (RepricerExpress, 2017) “Parallel importers buy patented drugs in low-price country and import them into high-price country to offer at lower prices than local price set by patentee” UNCTAD 4.4.1 AMAZON’S VIEWPOINT • different options in place ü obey the trademark owner’s decision to either be able to import their product or not ü your own thing if the trademark owner’s rights have been exhausted • Requirement to research each brand and manufacturer to check rules are about selling & importing a specific item • Advice to seek legal counsel ● High value market 4.4.2 ASPECTS ● Most trades high-priced branded goods - jewellery, cameras, tablets, pharmaceuticals, watches ● Diverse products and brands involved e.g Rolex, Nescafe, Nike, Burberry, Apple ● Not copies or counterfeits ● Genuine trade-marked items, imported legally ● Legally a ‘grey’ issue as legislation varies across countries 4.4.3 PROBLEM? ● Without consent of brand owner ● Impact on brand equity and value ● Established distributors lose motivation as margins eroded ● Grey marketer interested in quick sale and short-term profits ● Manufacturer could lose markets over time – impact performance ● Could destroy customer goodwill SUMMARY • More direct the channel, the higher the level of control • The distribution environment varies greatly across countries • Good channel relationships are important • Need to consider future development of the distribution structure • Parallel importing becoming a major issue for global brands ? What special distribution challenges exist in Japan? What is the best way for a non Japanese company to deal with these challenges? THANK YOU