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International ChannelsInternational Channels To make goods available to end customers, a To make goods available to end customers, a
firm employs market intermediariesfirm employs market intermediaries
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International ChannelsInternational Channels Smooth flow of goods has to be ensured from Smooth flow of goods has to be ensured from
the place of manufacture to the place of the place of manufacture to the place of consumptionconsumption
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International ChannelsInternational Channels Functions performed by channelFunctions performed by channel Physical flow of goodsPhysical flow of goods Transfer of ownership to customerTransfer of ownership to customer Realisation of payment and and cash flow Realisation of payment and and cash flow
from customer to manufacturerfrom customer to manufacturer Promotion, feedbackPromotion, feedback
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Types of International Distribution ChannelsTypes of International Distribution Channels
Indirect ChannelsIndirect Channels Has to deal with domestic agent/ without any Has to deal with domestic agent/ without any
dealing with foreign based firmdealing with foreign based firm Less investment no marketing experience required Less investment no marketing experience required
Low cost opportunity,Low cost opportunity, Limited feedback, commissions have to be Limited feedback, commissions have to be
paid ,little insight into the market , no feedbackpaid ,little insight into the market , no feedback
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International ChannelsInternational Channels Direct channelDirect channel Selling of goods directly to market Selling of goods directly to market
intermediary or end user in the overseas intermediary or end user in the overseas marketmarket
Closer relationship, insight into foreign Closer relationship, insight into foreign market, control over the export process is market, control over the export process is greatergreater
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International ChannelsInternational Channels
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Indirect Channel
AgentsMerchant Intermediaries
Broker, Comm agentImporter Buying agentCountry Controlled buying agentBuying offices
Merchant exporterInternational trading coszaibatsusExport trading house
Home market
International ChannelsInternational Channels Direct Marketing approaches such as through Direct Marketing approaches such as through
telephone, door to door works better in telephone, door to door works better in affluent marketsaffluent markets
Amway and Avon are succesful in these Amway and Avon are succesful in these countriescountries
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International ChannelsInternational Channels
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Direct Channel
E channelAgents or merchant intermediaries
Broker Commission agent(works foExporter and importer) Manfrs agentSales rep of exporterDistributorRetailerWholesaler buy from distributors
International ChannelsInternational Channels Japan\Japan\ High Density of middlemen, chain of primary High Density of middlemen, chain of primary
secondary regional local wholesalerssecondary regional local wholesalers Long term relationship with the intermediariesLong term relationship with the intermediaries Law protects small retilers from large retailersLaw protects small retilers from large retailers MITI approves all large retailers MITI approves all large retailers
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International ChannelsInternational Channels Food SalesFood Sales Japan small stores 95 % of total food retail Japan small stores 95 % of total food retail
stores account for 57.7 % of food salesstores account for 57.7 % of food sales In US small stores 69% account for 19.2 In US small stores 69% account for 19.2
percent of food retail in USpercent of food retail in US
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International ChannelsInternational Channels Channels in the USA and European countries Channels in the USA and European countries
tend to be shortertend to be shorter
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International ChannelsInternational Channels Factors affecting choice of channelsFactors affecting choice of channels Identify specific target marketsIdentify specific target markets Specify marketing goalsSpecify marketing goals Specify financial and personal commitmentsSpecify financial and personal commitments Identify control length of channels terms of Identify control length of channels terms of
sale and channel ownershipsale and channel ownership
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International ChannelsInternational Channels International franchising is gaining popularityInternational franchising is gaining popularity
Mcdonalds, Pizza Hut, Benetton etcMcdonalds, Pizza Hut, Benetton etc Growth in Private LabelsGrowth in Private Labels 38% in Switzerland, 32 % on UK 15% in US38% in Switzerland, 32 % on UK 15% in US
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International ChannelsInternational Channels Costs involved in developing channelsCosts involved in developing channels Capital cost cash flow requirements)and Capital cost cash flow requirements)and
maintenance cost (margins, amrkup, selling force maintenance cost (margins, amrkup, selling force costs etc)costs etc)
Coca Cola distribution system in India and ChinaCoca Cola distribution system in India and China Less dependence on local partners and more Less dependence on local partners and more
control by Coca Cola in Chinacontrol by Coca Cola in China
Coverage , Continuity problems in ChannelsCoverage , Continuity problems in Channels
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Screening, Selecting agreement motivating, Screening, Selecting agreement motivating, terminating middlementerminating middlemen
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International ChannelsInternational Channels Managing LogisticsManaging Logistics Logistics in International Markets in comples Logistics in International Markets in comples
dure to physical distance ,compatibility of dure to physical distance ,compatibility of logistics systems, nature intermediaries etclogistics systems, nature intermediaries etc
Principal Objective is to reach the final Principal Objective is to reach the final customers with the correct quantity, st the customers with the correct quantity, st the desired location, at the right time, in usable desired location, at the right time, in usable condition, in the most cost efficient mannercondition, in the most cost efficient manner
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International ChannelsInternational Channels TransportationTransportation Warehousing storing, consolidation (LCL), Warehousing storing, consolidation (LCL),
breaking bulk etcbreaking bulk etc Inventory Mangement optimising of costs Inventory Mangement optimising of costs
coping with demand fluctuationscoping with demand fluctuations Packaging to ensure safe and smooth shipmentPackaging to ensure safe and smooth shipment Information and communication technologyInformation and communication technology
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Pallets for Air CargoPallets for Air Cargo Containers (20ft,40ftX 8ftx8ft)Containers (20ft,40ftX 8ftx8ft) Containerisation facilitated easy handling,door Containerisation facilitated easy handling,door
to door delivery, lowers warehousing costs, to door delivery, lowers warehousing costs, reduces documentation work, reduces reduces documentation work, reduces pilferage reduces damage in transitpilferage reduces damage in transit
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International ChannelsInternational Channels Ocean transportation preferred over air Ocean transportation preferred over air
transportation for bulk ,heavy cargo.transportation for bulk ,heavy cargo. Air accounts for only 1% by volume of total Air accounts for only 1% by volume of total
transportationtransportation
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International ChannelsInternational Channels Organized retailing is gaining significance Organized retailing is gaining significance Global retail sales estimated at $8 trillionGlobal retail sales estimated at $8 trillion Sales of top ten retailers reached $690 trillion Sales of top ten retailers reached $690 trillion
in 2004 (Wall mart, Carrfour, Home Depot in 2004 (Wall mart, Carrfour, Home Depot Metro etcMetro etc
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International ChannelsInternational Channels Extreme differences in sizes of retailersExtreme differences in sizes of retailers
All retailers People served per retailer All retailers People served per retailer USA 702 395USA 702 395 Japan 1202 106Japan 1202 106 China 21,188 61China 21,188 61 Argenitana 296 127Argenitana 296 127
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