international marketing · international marketing channels •marketing channel managements...
TRANSCRIPT
International
Marketing
© Daniel W. Baack, Barbara
Czarnecka & Donald Baack
Part Five
International place or
distribution
Chapter 13
International marketing
channel management
Learning objectives
1. What are the essential elements of an international
marketing channel?
2. What key marketing channel decisions must be made in
order to efficiently and effectively reach customers in other
countries?
3. How can the marketing team successfully manage
international channels of distribution?
4. What international marketing channel functions do various
intermediaries perform?
5. What are the 5 Cs of selecting channel members?
4
5
Learning objective #1
• What are the essential elements of an international
marketing channel?
6
International marketing channels
• Marketing channel managements integrates two key areas
in marketing strategy: distribution and logistics.
• International distribution is the process by which products
and services flow between producers, companies that act
as intermediaries, and consumers, and includes the transfer
of ownership.
• International logistics refers to the strategic management of
the flow of products and services among marketing channel
members, including both upstream and downstream
activities.
7
International marketing channels
– Upstream activities focus on bringing a product or
supplies into a company, while downstream activities
concentrate on sending a product or supplies to another
channel member for resale.
8
Learning objective #2
• What key marketing channel decisions must be made in
order to efficiently and effectively reach customers in other
countries?
9
International marketing channel decisions
10
Distribution intensity
• The extent to which products are distributed throughout a
country and the number of intermediaries utilized to carry a
good constitutes the product’s distribution intensity.
• Strategic decisions pertaining to level of distribution intensity
are made on a country-by-country basis, because demand
for products can vary greatly across countries.
– Marketing infrastructures differ greatly.
– In developing countries, some products can only be made
available in limited locations.
11
Distribution intensity
• Intensive distribution is an international marketing strategy
in which products are distributed through as many
wholesalers and retailers possible in a particular market.
– Marketers prefer this approach when the company offers
items that appeal to a mass market of consumers.
– Marketing efforts focus on making the product widely
available.
– Usually, the items are low-price products that retailers sell
with relatively high volume such as convenience products.
12
Distribution intensity
• A strategy of using only a limited number of channel
intermediaries in the international marketing program is a
selective distribution system.
– Producers normally exert fairly strong control over
channels that utilize selective distribution because close
relationships develop among channel members.
– Shopping products are often marketed worldwide using
selective distribution methods.
13
Distribution intensity
• Exclusive distribution focuses on offering products through
only one wholesaler or retailer in a particular market area.
– Prestigious products are often offered through an
exclusive distribution strategy.
• Strategic distribution intensity choices rely primarily on the
factors of price, quality, and competition.
– In international markets, the same basic approaches are
viable, depending on the infrastructure of the host country
and any mitigating factors, such as legal restrictions on
imports.
14
Selection of distribution channels
15
Direct marketing
• A primary option for many international marketers,
especially those just entering a new host country, is to
engage in direct marketing.
• A direct marketing channel relies on direct selling of a
product or service to consumers or end users without the
use of wholesalers, retailers, industrial agents, or industrial
merchants.
• Consumers around the world are familiar with direct
marketing.
16
Direct marketing
– In Germany, more than 80% of companies provide some
form of direct marketing.
– Telemarketing, email, and direct marketing programs are
popular in Brazil.
17
Indirect marketing
• When indirect channels are used, the goods and services
move through one or more intermediaries or organizations
that move products for producers to consumers and end
users.
• Agent middlemen do not take title or ownership of the
products. Agents, or brokers, bring buyers and sellers
together in a particular country.
– These channel members generally work on a commission
basis.
– Agent wholesalers may or may not take physical
possession of the products.
18
Indirect marketing
• Merchant middlemen assume title and ownership of the
products.
– An import jobber purchases products from producers in
one country and sells them to established distribution
system members in another country.
– Merchant retailers purchase goods for resale and then
market those products to consumers.
19
International trading channels
• Trading companies are common in the Pacific Rim. These
organizations provide intermediary activities that include
marketing services, financial assistance, and information
flow.
– The Japanese keiretsu trading companies act as a family
of firms with close relationships and, often, shared
ownership.
– The chaebols of South Korea are similar in many ways
and play an important part in South Korean politics and
business culture.
20
International trading channels
• Other marketing teams may select the traditional
international marketing channel, which consists of
producers, wholesalers, and retailers.
– In developed countries, distribution systems tend to be
more institutionalized and focus on the traditional roles of
producer, wholesaler, and retailer.
21
Business-to-business channels
• Many countries house large industrial agent and merchant companies.
– The manufacturer’s marketing team selects those that reach the company’s target market most effectively.
– Local conditions and considerations, including legal restrictions, the availability of delivery systems, and the potential to create quality partnerships, affect these decisions.
• International marketing channels may include a series of different wholesalers and retailers.
• Facilitating agencies assist in various aspects of negotiation, financing, documentation, physical distribution, and warehousing of products internationally.
22
Types of facilitating agents
23
Channel length
• Marketing channel length refers to the number of intermediaries that a product goes through before reaching the consumer.
– In a traditional channel, there are two intermediaries: the wholesaler and the retailer.
– Direct marketing represents the shortest channel length, as the product moves directly from the manufacturer to the retail customer.
• International marketing channels differ significantly in both length and complexity.
– The intricate Japanese distribution system utilizes a number of wholesalers.
24
Channel length
• Products that are intensively distributed tend to have longer
international marketing channels.
• Exclusively distributed products often have shorter
channels.
25
Selection factors
26
Existing channels
• Managing international distribution networks means that
companies utilize unique distribution structures in each
country. A channel structure may work well in one country
but not in another.
– Understanding the distribution systems present in target
countries constitutes a crucial element in developing a
successful international distribution system.
– In some situations, the company will establish an entirely
new distribution system.
27
Existing channels
• International marketing professionals work to ensure that
the international distribution channel meets the needs of all
parties involved.
– The system should effectively serve producers,
wholesalers, retailers, and consumers.
– Channel members often use market research to more
clearly understand distribution patterns in target markets.
28
Future channels
• Discussions about infrastructure in international marketing often concentrate on the availability of road, rail, and air transport systems; water, electricity, and natural gas; and other physical features.
• Deliveries of products and even the availability of those products are often influenced by the presence or absence of highways and railroad cars along with other modes of transportation.
29
Learning objective #3
• How can the marketing team successfully manage
international channels of distribution?
30
Managing international distribution channels
• Managing the supply channel involves a series of strategic
decisions and activities.
– Each should concentrate on the ultimate goal, which is
reaching the target market effectively and efficiently.
• The key elements involved are
– establishing international channel strategies,
– selecting intermediary arrangements,
– making channel arrangements and choosing channel
partners, and
– managing channel power.
31
Establishing international channel strategies
• A pull strategy means that the producer concentrates on
stimulating consumer demand through extensive advertising
and consumer promotions.
– The goal, building demand, leads others in the marketing
channel to carry additional stock, because customers are
asking for the product.
• A push strategy focuses on providing intermediaries with
incentives that will lead them to cooperate in marketing the
product.
32
Establishing international channel strategies
– Discounts, sales contests, training programs, and other
methods entice the wholesaler or retailer to order in
greater quantities, thereby pushing the product through
the channel to the consumer.
33
Establishing international channel strategies
• In international markets, both push and pull strategies may
be used.
– Push strategies can assist in overcoming intermediary
resistance to foreign products.
– Pull strategies increase consumer demand by making an
item seem desirable, easy to use, exotic, or in limited
supply.
34
Selecting intermediary arrangements
• The second strategic choice is whether to use traditional
intermediaries or to create an in-house distribution channel.
• Vertical integration means that one member of the market
channel merges with or acquires another intermediary.
– Backward vertical integration occurs when a retail chain
develops or acquires its own wholesale distribution
system.
– Forward vertical integration strategies involve
manufacturers establishing wholesale distribution
systems or company-owned retail outlets.
35
Selecting intermediary arrangements
• Acquiring or merging with another company at the same level of the distribution channel, the strategy is horizontal integration.
– These efforts include manufacturers joining with other manufacturers, wholesalers acquiring other wholesalers, or retailers merging with or acquiring other retailers.
• A vertical marketing system distribution arrangement involves the producer, wholesaler, and retailer performing marketing activities as a unified system.
– These systems are planned to the extent to which functions are integrated throughout the system and often include partial ownership between cooperating companies.
36
Selecting intermediary arrangements
• Some marketers have opted for what are known as
international strategic alliances that, like vertical marketing
systems, create enduring cooperative arrangements
between firms that utilize resources.
37
Gray markets
• A gray market is the practice of distributing products through distribution channels that were not authorized by the marketer of the product.
– In international marketing, the process is often referred to as parallel importing, or the use of gray market tactics across international borders.
• With parallel importing, international distributors begin to sell a product in either unauthorized countries or through unauthorized retailers.
– Wholesalers buy a product in one country at a low price and resell it in other markets, or to unauthorized retailers, for profit.
38
Gray markets
– The producer may end up competing domestically against
its own brands that were imported into the country by
overseas distributors.
• In general, gray marketing is legal, but it does violate
channel agreements.
39
Making channel arrangements and choosing channel partners
• A channel arrangement guides the administration of the
marketing functions that will be performed in the distribution
system.
– Channel partners are organizations with relationships that
help move products from producers to consumers.
– Three forms of channel partner systems are contractual,
administered, and partnership.
• A contractual channel arrangement consists of a binding
contract that identifies all of the tasks to be performed by
each channel member with regard to production, delivery,
sorting, pricing, and promotional support.
40
Making channel arrangements and choosing channel partners
– International contractual arrangements also specify legal
elements of the relationship, including the country with
jurisdiction over disputes.
• An administered channel arrangement includes one
dominant member in the distribution channel.
– Channel captains coordinate the marketing tasks
provided by the channel members.
– Powerful manufacturer brands often become channel
captains.
41
Making channel arrangements and choosing channel partners
• A partnership channel arrangement allows members of the
channel to work cooperatively for the benefit of all firms
involved.
– Sharing of information will be one key element of an
effective partnership channel arrangements.
– Developing these arrangements in international markets
can be difficult due to the complications of the global
environment, including differences in technology and
infrastructure, legal restrictions, and cultural nuances.
42
Managing channel power
• Two major types of channel conflict occur in international distribution channels: horizontal conflict and vertical conflict.
• Horizontal channel conflict emerges when conflict occurs between members of a marketing channel at the same level, for example between retailers carrying the same product.
– One retailer may be upset about unfair pricing between the outlets.
• Vertical channel conflict occurs when there are disputes between channel members at different levels in the system, such as between a wholesaler and a producer, or between a producer and a retailer.
43
Power bases in international marketing channels
44
Trust and commitment in international marketing channels
• Power struggles and imbalance may lead to instability in the
marketing channel.
• Effective marketing channels are based on mutual trust and
commitment rather than on the display of any type of
channel power.
– Marketing channel trust refers to the willingness to rely on
other marketing channel members.
– Marketing channel commitment reflects the desire of
channel members to continue channel relationships.
45
Cross-cultural negotiation and international marketing channels
• International marketing involves negotiation, which means
the successful management of international marketing
channels requires close attention to negotiation.
• International marketing cannot take place without at least
two parties negotiating, each from a different country.
– Cultural differences greatly impact the negotiation
process. International marketers work to control or at
least limit the potentially negative effects of these
differences.
46
Stages in the negotiation process
47
Cultural influences on negotiations
• Cultural variables influence international negotiations in
many ways:
– interests, behaviors, and desired outcomes;
– relationships, communication, and perceptions;
– negotiation context;
– Hofstede’s dimensions;
– thought processes; and
– the overall negotiation culture.
48
Cultural influences on negotiations
• All individuals have interests and priorities, as will the
organizations involved in the negotiation process.
– Specific behaviors and patterns of interaction, such as
choice of direct/confrontational or indirect/cooperative
interactions follow, and the negotiating parties choose
tactics based on the cultural context.
49
Cultural influences on negotiations
• Relationships, Communication, and Perceptions
– In the area of relationships, negotiators need to know
whether long-term connections are desirable.
– Will communication be high or low context?
– Is the culture polychromic or monochromic?
– Space perceptions involve the role of personal space in
interpersonal interactions.
50
Cultural influences on negotiation
• The overall negotiation context or climate is important, and
research suggests that both the environmental context and
the immediate context significantly influence the negotiation
process.
– The environmental context includes variables such as
legal/political developments, international economics,
ideological differences, and culture.
– The immediate context includes variables such as the
bargaining power of the participants, relationships, and
the processes for conflict resolution.
51
Cultural influences on negotiation
• Hofstede’s cultural dimensions prove useful for the
international negotiator.
– Regarding power distance, negotiators should carefully
consider the social class of their potential customers and
show proper respect when it is expected.
– High uncertainty avoidance culture results in demands for
roles and procedures for dealing with uncertain events.
– Buyers or partners in collectivist cultures value
negotiating teams.
52
Cultural influences on negotiation
• People from various cultures perceive the world and think in
different ways.
– Thought processes are shaped heavily by culture,
tradition, and the educational system in play in the
specific country, and are critical to negotiations.
• Western cultures tend to rely more heavily on logic when
arriving at conclusions than do Eastern cultures.
– Eastern cultures tend to view negotiations holistically,
whereas Westerners tend to focus on specific parts of a
problem.
53
The overall negotiation culture
54
Learning objective #4
• What international marketing channel functions do various
intermediaries perform?
55
International marketing channel functions
56
Warehousing, inventory control, and materials handling
• Warehousing is the process of storing products until they
are sold.
• Marketing channel members also focus on inventory control.
– Maintaining an optimal inventory of products that will meet
consumer demand without burdening the system with
excessive stock constitutes a challenge for logistics
managers.
• Materials handling includes all activities associated with
moving products within the manufacturing and warehousing
systems.
57
Address discrepancies of assortment
• One fundamental concern in all domestic and international
marketing channels is the discrepancy of assortment
problem.
• The problem results from the simple idea that producers
generally desire to produce a large number of a limited
variety of products, while consumers usually desire limited
quantities of a wide variety of products.
• To remedy this discrepancy, channel members engage in
what is known as the sorting function.
58
The sorting function
59
Secure payment and extend credit
• Documentation plays an important role in order processing.
• A bill of exchange can be used to facilitate order processing
and payments.
– A bill of exchange represents an agreement between
parties in which one party, a drawer, directs a second
party, a drawee, to issue a payment to yet another party,
a payee.
– A bill of exchange creates a secure transaction for both
parties.
60
Secure payment and extend credit
• A letter of credit, is a document issued by a bank to signal
the creditworthiness of a buyer to a seller.
– The letter of credit ensures the seller of the buyer’s
creditworthiness by stating that the bank backs the
buyer’s credit.
61
Transportation
• The global transportation of products will be an important
part of international marketing channels.
• Products must be delivered reliably and effectively.
– Deliveries are reliable when they are on time.
– Deliveries are effective when the shipments arrive in good
quality, undamaged by the mode of transportation.
62
Learning objective #5
• What are the 5 Cs of selecting channel members?
63
International marketing channel structure
64
Cost
• Some costs are incurred when establishing the channel and
choosing members.
• Some costs are associated with maintaining the system,
which typically center on encouraging channel members to
remain members of the system.
• International distribution expenses consist of more than just
costs associated with moving products from country to
country.
– Costs associated with storing, packing, preparing, and
documenting product sales are also included in
distribution costing.
65
Cost
• The task of transporting goods between countries presents
additional difficulties.
– International distribution systems are often more
expensive than those found in purely domestic settings
due to the costly nature of moving products between
countries or continents.
– It has been estimated that as much as 30% of the price of
a product can be directly attributed to distribution costs for
products shipped between continents.
66
Coordination
• Coordinating the marketing efforts that must take place at
each level of the system constitutes an important part of
managing the international marketing.
• Decisions are made as to what promotional and logistical
activities each member will perform. Marketing channel
coordination requires an efficient international distribution
process.
67
Coverage
• Marketers examine questions pertaining to the extent to which channel members cover certain territories.
– Channel member roles differ according to the country being served, and as a result, distribution strategies will likely vary from country to country.
• When addressing coverage, international marketers consider intensive, selective, and exclusive distribution strategies.
– When intensive distribution is selected, channel members will be expected to cover a wider and more intense territory than would be the case for an exclusive distribution strategy.
68
Cooperation
• Although it is difficult to assess, channel leaders attempt to
assess the cooperation of potential channel members prior
to the formation of a formalized marketing channel.
• The reputation of potential members, along with evidence of
previous marketing success in targeted regions or countries,
becomes critical.
• The extent to which marketing channel members simply
trust one another becomes the primary determinant of
cooperation between parties in a marketing channel.
69
Control
• International marketers lose some control over the physical
movement of goods when goods are shipped domestically.
– Monitoring the movement of goods and ensuring their
safe delivery brings about extra expenses.
• Marketing channel members are often apt to protect their
own interests rather than the well-being of the overall
marketing channel.
– Opportunism reflects the tendency for channel members
to pursue self-interests rather than those of other
members of the marketing channel.
70
Control
– Monitoring and controlling the activities of channel
members allows the producer to ensure that marketing
activities are carried out as planned.
• Channel leaders can consolidate international distribution
systems in order to maintain better control and cooperation
among channel members.
71