13Managing Global Distribution Channels

Learning Objectives

• List and describe the key players within both home-market channels and foreign-market channels.

• Explain the impact on national channel strategy of distribution density, channel length, and channel alignment.

• Describe how costs, product line, control, coverage, and synergy all influence the proper choice of channel members.

• Suggest ways to locate foreign distributors.

• List ways to motivate and control foreign distributors.

• Suggest alternative entry strategies for markets where competitors already control distribution channels.

• Identify the differences between global logistics management and global supply chain management.

• List and explain the five key areas of global logistics management.

• Explain the growing global importance of large-scale retailers, international retailing, direct marketing, on-line retailing, information technology, and smuggling.

Chapter Outline

• The structure of the global distribution system• Foreign-market channel members• Analyzing national channels• Factors influencing the selection of channel

members• Locating and selecting channel partners• Managing global distribution• Gaining access to distribution channels• Global logistics• Global trends in retailing• Smuggling

Factors Shaping Distribution

• Level of economic development

• Consumer disposable income

• Infrastructure quality

• Culture

• Physical environment

• Legal/political system

Global Distribution System Structure

• Channels of distribution provide essential linkages between manufactured products and the consumer

Foreign-Market Channel Members

• Import intermediaries

• Local wholesalers (dealers, distributors)

• Local agents

• Retailers

Analyzing National Channels

• Distribution density

• Channel length

• Channel alignment and leadership

• Distribution logistics

Factors Influencing the Selection of Channel Members

• Costs

• Product and product line

• Control, coverage, and synergy

Sources Useful for Locating Possible Distribution Partners

U.S. Department of Commerce

BanksDirectoriesTrade shows

Competitors’ distribution partners

ConsultantsAssociationsForeign consulates

Process of Establishing an International Distribution System

• Develop a distribution strategy.

• Establish criteria for selecting distribution partners.

• Locate potential distribution partners.

• Solicit the interest of distributors.

• Screen and select distribution partners.

• Negotiate agreements.

• Piggybacking – Another company that sells to the same consumer segments takes on the new products

• Joint ventures – Partnership typically between local firm with market access with a foreign firm with no local access

• Acquisitions – Purchasing a local company with existing distribution system

Gaining Access to Distribution Channels

Logistics Decision Areas

• Traffic or transportation management

• Inventory control

• Materials handling and warehousing

• Fixed-facilities location management

Challenges Facing Firms with Global Logistics Systems

• Resources to support the system

• Exchange rate fluctuations

• Availability of infrastructure

• Ease of working with host governments

• Costs of the system

Global Supply Chain Management

• Encompasses more than the traditional concept of logistics – Logistics– Marketing relationships– Product development & rollout– Management of product returns

Successful International Retailers

• Three categories:1. Replicators – Export model virtually

unchanged

2. Performance Managers – Acquire existing retailers and develop as independent entities

3. Reinventors – Employ standardized back-end systems and processes while creating tailored retail format

Smuggling

• Smuggling – Illegal transport of products across national borders– Illicit products– Illegal distribution of products that are legal

to sell and use