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The following will be discussed in this chapter: Channel-of-distribution structures, import-oriented distribution structure, Japanese distribution structure, high density of middlemen, channel control, business philosophy, large-scale retail store law and its successor,...
International Marketing 15th edition Philip R. Cateora, Mary C. Gilly, and John L. Graham ChannelofDistribution Structures • All consumer and industrial products eventually go through a distribution process – Physical handling and distribution of goods – Passage of ownership – Buying and selling negotiations between producers and middlemen – Buying and selling negotiations between middlemen and customers • Each country market has a distribution structure – Goods pass from producer to user Roy Philip ImportOriented Distribution Structure (1 of 2) • In an importoriented or traditional distribution structure: – Importer controls a fixed supply of goods – Marketing system develops around the philosophy of selling a limited supply of goods at high prices to a small number of affluent customers Roy Philip ImportOriented Distribution Structure (2 of 2) • Demand exceeds supply • The customer seeks the supply from a limited number of middlemen • Distribution systems are local • Few countries fit the importoriented model Roy Philip Japanese Distribution Structure (1 of 2) • • • • • • Four distinguishing features High density of middlemen Channel control Business philosophy Largescale retail store law Changes in the structure Roy Philip Japanese Distribution Structure (2 of 2) A structure dominated by many small middlemen dealing with many small retailers Channel control by manufacturers A business philosophy shaped by a unique culture Laws that protect the foundation of the system Roy Philip High Density of Middlemen • Not unusual for consumer goods to go through three or four intermediaries before reaching the consumer • Japan has a large number of independent groceries and bakers (94.7% or all retail stores) – Small stores account for 59.1% of retail food sales • U.S. emphasis is on supermarkets, discount food stores, and department stores – Small stores generate 35.7% of food sales Roy Philip Channel Control • • • • Inventory financing Cumulative rebates Merchandise returns Promotional support Roy Philip Business Philosophy • Emphasizes loyalty, harmony, and friendship • Supports longterm dealersupplier relationships • The cost of Japanese consumer goods are among the highest in the world • Japanese law gives the small retailer enormous advantage over the development of larger stores Roy Philip LargeScale Retail Store Law and Its Successor • Daitenho – the LargeScale Retail Store Law – Large stores must have approval from the prefecture government – All proposals first judged by the Ministry of International Trade and Industry (MITI) – If all local retailers unanimously agreed, the plan was approved – Could be a lengthy process – Applied to both domestic and foreign companies • Replaced by the LargeScale Retail Store Location Act of June 2000 – MITI out of the process – Relaxed restrictions Roy Philip 10 Alternative Middleman Choices • Seller must exert influence over two sets of channels – One in the home country – One in the foreignmarket country • Agent middlemen – represent the principal rather than themselves • Merchant middlemen – take title to the goods and buy and sell on their own account Roy Philip 11 International ChannelofDistribution Alternatives Exhibit 15.3 Roy Philip 12 Channel Management • Locating middlemen • Selecting middlemen – Screening – The agreement • Motivating middlemen • Terminating middlemen • Controlling middlemen Roy Philip 13 Logistics (1 of 2) • Logistics management is a total systems approach to the management of the distribution process that includes all activities involved in physically moving raw material, inprocess inventory, and finished goods inventory from the point of origin to the point of use or consumption • The physical distribution system involves more than the physical movement in goods; it includes the location of plants and warehousing, transportation mode, inventory quantities, and packing Roy Philip 14 Logistics (2 of 2) • Substantial savings can result from the systematic examination of logistics costs and the calculation of total physical distribution costs • The concept behind physical distribution is the achievement of the optimum (lowest) system cost, consistent with customer service objectives of the firm • One of the major benefits of the European Union’s unification is the elimination of transportation barriers among member countries Roy Philip 15 ... Merchant middlemen – take title to the goods and buy and sell on their own account Roy Philip 11 International? ? ChannelofDistribution Alternatives Exhibit? ?15. 3 Roy Philip 12 Channel Management • Locating middlemen • Selecting middlemen... Small stores generate 35.7% of food sales Roy Philip Channel Control • • • • Inventory financing Cumulative rebates Merchandise returns Promotional support Roy Philip Business Philosophy • Emphasizes loyalty, harmony, and friendship... Goods pass from producer to user Roy Philip ImportOriented Distribution Structure (1 of 2) • In an importoriented or traditional distribution structure: – Importer controls a fixed supply of goods – Marketing? ?system develops around the philosophy