Chapter global logistics and distribution. After studying this chapter you will be able to understand: The importance of derived demand in industrial markets, how demand is affected by technology levels, characteristics of an industrial product, the importance of ISO 9000 certification, the growth of business services and nuances of their marketing, the importance of trade shows in promoting industrial goods, the importance of relationship marketing for industrial products and services.
GLOBAL MARKETING MANAGEMENT Seventh Edition MASAAKI KOTABKE | KRISTIAAN HELSEN Chapter 15 PowerPoint Global Logistics and Distribution Chapter Overview Definition of Global Logistics Managing Physical Distribution Managing Sourcing Strategy Free Trade Zones International Distribution Channel International Retailing Chapter 15 Copyright © 2017 John Wiley & Sons, Inc Introduction • Global logistics and distribution have played a critical role in the growth and development of world trade and in the integration of business operations on a worldwide scale • The use of appropriate distribution channels in international markets increases the chances of success dramatically • In the United States, the total logistics cost stayed around 10 percent of the GDP from 2006 to 2008, but has moderately declined to 8.3 percent GDP in 2014 Chapter 15 Copyright © 2017 John Wiley & Sons, Inc Introduction • As firms start operating on a global basis, logistics managers need to manage shipping of raw materials, components, and supplies among various manufacturing sites at the most economical and reliable rates • The development of intermodal transportation and electronic tracking technology has resulted in a quantum jump in the efficiency of the logistic methods employed by firms worldwide Chapter 15 Copyright © 2017 John Wiley & Sons, Inc Definition of Global Logistics • Global logistics is defined as the design and management of a system that directs and controls the flows of materials into, through, and out of the firm across national boundaries to achieve its corporate objectives at a minimum total cost (Exhibit 15-1) Chapter 15 Copyright © 2017 John Wiley & Sons, Inc Exhibit 15-1 Chapter 15 Copyright © 2017 John Wiley & Sons, Inc Definition of Global Logistics Materials management refers to the inflow of raw materials, parts, and supplies in and through the firm Physical distribution refers to the movement of the firm’s finished products to its customers, consisting of transportation, warehousing, inventory, customer service/order entry, and administration Sourcing strategy refers to an operational link between materials management and physical distribution and deals with how companies managed R&D (e.g., product development and engineering), operations manufacturing), Copyright © 2017 John(e.g., Wiley & Sons, Chapter 15 Inc and marketing activities Managing Physical Distribution • The following factors contribute to the increased complexity and cost of global logistics: – – – – – Distance Exchange rate fluctuation Foreign intermediaries Regulation Security Chapter 15 Copyright © 2017 John Wiley & Sons, Inc Managing Physical Distribution • Modes of Transportation—Important Factors – Value-to Volume Ratio – Perishability – Cost of Transportation • Modes of Transportation—Methods – Ocean Shipping • Liner Service • Bulk Shipping – Airfreight – Intermodal Transportation Chapter 15 Copyright © 2017 John Wiley & Sons, Inc Managing Physical Distribution • Warehousing and Inventory Management – Hedging against Inflation and Exchange Rate Fluctuations – Benefiting from Tax Differences – Logistical Integration and Rationalization – E-Commerce and Logistics Chapter 15 Copyright © 2017 John Wiley & Sons, Inc 10 Free Trade Zones • A free trade zone (FTZ) is an area that is located within a nation (say, the United States), but is considered outside of the customs territory of the nation • U.S FTZs are licensed by the Foreign Trade Zone Board and operated under the supervision of the US Customs Service Presently, some 500 FTZs are in operation Across the U.S., about 420,000 jobs are directly related to activity in FTZs Chapter 15 Copyright © 2017 John Wiley & Sons, Inc 16 Free Trade Zones • FTZs provide many cash flow and operating benefits to zone users (Exhibit 15-5): Duty deferral and elimination Lower tariff rates Lower tariff incidence Exchange rate hedging Import quota not applicable “MADE IN U.S.A.” designation Chapter 15 Copyright © 2017 John Wiley & Sons, Inc 17 Exhibit 15-5: Benefits of Using a Foreign Trade Zone (FTZ) in the United States Chapter 15 Copyright © 2017 John Wiley & Sons, Inc 18 International Distribution Channel • Firms may reach their customers through: – Their own local salesforce – The internet – Independent intermediaries, most often at the local level Chapter 15 Copyright © 2017 John Wiley & Sons, Inc 19 Exhibit 15-6: International Distribution Channel Alternatives Chapter 15 Copyright © 2017 John Wiley & Sons, Inc 20 International Distribution Channel • Guidelines for selecting foreign intermediaries: – Search for intermediaries capable of developing markets, not just those with good contacts – Regard intermediaries as long-term partners – Actively search for and select intermediaries, not the other way around – Support your intermediaries by committing resources Continued Chapter 15 Copyright © 2017 John Wiley & Sons, Inc 21 International Distribution Channel Continued –Ensure intermediaries provide information you need, including market and sales performance data –Attempt to control marketing strategy as much as possible –Make links with national intermediaries as soon as possible after entering a foreign market Chapter 15 Copyright © 2017 John Wiley & Sons, Inc 22 International Retailing • In developed countries, retailing employs between and 12 percent of the workforce • Retailing involves very locally entrenched activities, including stocking an assortment of products that local consumers prefer, catering to local shopping patterns, and seasonal promotion as well as meeting local competition on a daily basis Adaptation is a key success factor Chapter 15 Copyright © 2017 John Wiley & Sons, Inc 23 International Retailing • In 2013, Wal-Mart was the largest retailer in the world with a total revenues of over $476 billion Only 10 percent of its sales are generated outside its core NAFTA region, compared with Carrefour’s 20 percent of sales generated outside its core Europe region • In general, European retailers tend to be more willing to customize their marketing and procurement strategies to various local market peculiarities than U.S or Japanese retailers Chapter 15 Copyright © 2017 John Wiley & Sons, Inc 24 Exhibit 15-7: International Operations of the World’s Top 10 Retailers Chapter 15 Copyright © 2017 John Wiley & Sons, Inc 25 International Retailing • E-commerce and Retailing - - As online sales accelerate, traditional retailers are increasingly recognizing e-commerce as a key element of their global expansion strategies E-commerce is not limited to the developed countries China is already the fastest growing Internet market in Asia Chapter 15 Copyright © 2017 John Wiley & Sons, Inc 26 International Retailing - Brazil is the most wired nation in Latin America Along with the growth of internet access is expected a similar growth in entrepreneurial ecommerce operators - Despite the rapid growth of the Internet, the need for local or regional distribution of products is likely to remain as important as it was before the Internet revolution Chapter 15 Copyright © 2017 John Wiley & Sons, Inc 27 International Retailing • Private-Label Brands (Store Brands) – Appeal to price-conscious customers – Attractive to MNCs facing well-entrenched incumbent brands in markets they plan to enter • “Push” versus “Pull” – The traditional supply chain powered by the manufacturing push is becoming a demand chain driven by consumer pull, especially in the developed countries Chapter 15 Copyright © 2017 John Wiley & Sons, Inc 28 International Retailing • On-Time Retail Information Management – Reduced Inventory – Market Information at the Retail Level • Strong logistics capabilities can be used as an offensive weapon to help a firm gain competitive advantage in the marketplace • Retailing Differences across the World – Industrialized countries tend to have a lower distribution outlet density than the emerging markets Chapter 15 Copyright © 2017 John Wiley & Sons, Inc 29 International Retailing – The advanced facilities available in the developed world allow a much higher square footage of retail space per resident due to the large size of the retail outlets – Large-Scale Retail Store Law (LSRSL) in Japan—this law helped to protect the small retail stores for more than 40 years until recently – Germany (store hours limited) and China (basket shopping behavior) support adaptation approach Chapter 15 Copyright © 2017 John Wiley & Sons, Inc 30 ... cost (Exhibit 1 5- 1) Chapter 15 Copyright © 2017 John Wiley & Sons, Inc Exhibit 1 5- 1 Chapter 15 Copyright © 2017 John Wiley & Sons, Inc Definition of Global Logistics Materials management refers... services Chapter 15 Copyright © 2017 John Wiley & Sons, Inc 13 Exhibit 1 5- 2 Chapter 15 Copyright © 2017 John Wiley & Sons, Inc 14 Exhibit 1 5- 3: Major Reasons for Outsourcing Chapter 15 Copyright... – E-Commerce and Logistics Chapter 15 Copyright © 2017 John Wiley & Sons, Inc 10 Managing Physical Distribution • Third-Party Logistics (3PL) Management – The largest 3PL sector is the value-added