Managing Global Distribution Channels

• Distribution Channel Analysis

• Selecting Channel Members
• Gaining Access to Distribution Channels
• Global Logistics
• Global Trends in Distribution

Distribution Density

• The number of sales outlets required for the efficient marketing of firm’s products

Channel Length

• Influenced by:
  • A product’s distribution density
  • The average order quantity
  • The availability of channel members

Comparison of Distribution Channels between the United States and Japan

• Insert Exhibit 14.1

Japanese Distribution Structure

• A structure dominated by many small middlemen dealing with many small retailers
• Channel control by manufacturers
• A business philosophy shaped by a unique culture: emphasis on loyalty, harmony, and friendship
• Laws that protect the foundation of the system

High Density of Middlemen

• In Japan, small stores account for 57.7 percent of retail food sales
• In the U.S., small stores generate 19.2 percent of food sales

Large-Scale Retail Store Law

• 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)
  • Then, 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

Channel Alignment

• Ensure that various channel members coordinate their actions so that a unified approach to the marketing can be achieved.
  • Channel captain
  • Move from wholesaler dominant to retail dominant

Factors Influencing the Selection of Channel Members

• Cost
  • Initial cost
  • Maintenance cost
  • Logistics costs
•  Merchandise line
  • Shelf life
  • Technical nature of the product
• Control: wholly-owned vs. third-party
• Synergy/Compatibility:
  • Expertise
  • Knowledge about the retailer’s management style

Global Logistics

• Planning, implementing, and controlling the physical flow of materials and finished products from points of origin to points of use.

Global Logistics

• Marks & Spencer
  • Increase retail operating efficiency and eliminate stockroom with increased delivery frequency
  • Use third-party contractor to replace in-house logistics system, saving big on distribution cost

Logistics Decision Area

• Transportation Management:
  • Choice of Mode of transportation:
    • Lead time
    • Cost

Logistics Decision Area

• Inventory control
• Order Processing
• Material handling and processing

Factors that affect Inventory Level

• Demand forecast
• Service level intended
• Replenishment frequency
• Lead time
• Shipping cost
• Quantity discount

Retailers’ Sourcing Dilemma

Global Trends in Distribution

• The growth of larger scale retailers
• The popularity of international retailers
• Proliferation of direct marketing

International Grey Market

• Definition:     
  • involves the selling of trademarked products through channels of distribution that are not authorized by the trademark holder.  It can occur within or across markets.

International Grey Market

• Causes
  • exchange rate fluctuate
  • free-ride
  • price variations across countries
• Advantages and Disadvantages
  • increase sales in short run
  • lose control of the distribution channel