International Marketing15th edition

Philip R. Cateora, Mary C. Gilly, and John L. Graham

Channel-of-Distribution 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

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Import-Oriented Distribution Structure (1 of

2)• In an import-oriented 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

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Import-Oriented 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 import-oriented

model

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Japanese Distribution Structure (1 of 2)

• Four distinguishing features• High density of middlemen• Channel control• Business philosophy• Large-scale retail store law• Changes in the structure

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Japanese Distribution Structure (2 of 2)

1. A structure dominated by many small middlemen dealing with many small retailers

2. Channel control by manufacturers3. A business philosophy shaped by a

unique culture4. Laws that protect the foundation of the

system

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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

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Channel Control

• Inventory financing• Cumulative rebates• Merchandise returns• Promotional support

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Business Philosophy

• Emphasizes loyalty, harmony, and friendship

• Supports long-term dealer-supplier 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

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Large-Scale Retail Store Law

and Its Successor• Daitenho – the Large-Scale 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 Large-Scale Retail Store Location Act of June 2000– MITI out of the process– Relaxed restrictions

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Alternative Middleman Choices

• Seller must exert influence over two sets of channels– One in the home country– One in the foreign-market country

• Agent middlemen – represent the principal rather than themselves

• Merchant middlemen – take title to the goods and buy and sell on their own account

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International Channel-of-Distribution

Alternatives

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Exhibit 15.3

Channel Management

• Locating middlemen• Selecting middlemen– Screening– The agreement

• Motivating middlemen• Terminating middlemen• Controlling middlemen

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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, in-process 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

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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

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