Business Explain: International Distribution and Retailing

What are the factors influencing marketing via the internet?

Culture

The website and the product must be culturally neutral or adapted to fit the uniqueness of a market.

Adaptation

Ideally, a website should be translated into the languages of the target markets.

Local contact

If fully committed to foreign markets, a company should create virtual offices abroad by buying server space and create mirror sites to enable voicemail and email contact specifically for the key markets.

Payment

Customers should be able to use a credit card number, an email or purchase by phone.

Delivery

Use different kinds of shipping companies such as Federal Express, UPS etc. Or the cheaper alternative, going for surface postal delivery of small parcels.

Promotion

In order to have visitors on the website, there needs to be marketing and advertising done that leads consumer to the online shop. Thus, search engine registrations, press releases, local newsgroups and forums, mutual links and banner advertising can help attract more visitors.

What are the six influencing factors in the choice of channel?

Cost

The costs arising from a) capital or investment of developing the channel and b) the continuing cost of maintaining it. The marketing cost is the cost of sales revenue less the production cost.

Capital Requirement

Maximum investment usually required when a firm establishes its own distribution channel, and less investment the more it hands over the work to middlemen

Control

More control if the firm has its own distribution channel, less if it hands activities out to middlemen.

Coverage

Market coverage in order to → gain the optimum volume of sales obtainable in each market, to secure a reasonable market share and to attain satisfactory market penetration.

Character

The chosen distribution system must fit the character of the company and the markets in which it is doing business. These relate to bulk of the product, complexity of sale, sales service required and value of the product. Also, patterns change.

Continuity

Most middlemen have little loyalty to their vendors, handling brands in good times when the line is making money but quickly reject them when they don't. Thus, channels of distribution often pose longevity problems.

What is the key variable that affects the marketer's choice of distribution channels?

The four main variables which affect the marketer's choice of distribution channels are;

1. The availability of middlemen

2. The cost of their services

3. The functions performed (and the effectiveness with which each is performed)

4. The extent of control which the manufacturers can exert over the middlemen's activities

How is distribution-channel structure affected by increasing emphasis on the government as a customer and by the existence of state trading agencies?

Marketers must deal with governments in every country of the world. Products, services and commodities for the government's own use are always procured through government purchasing offices at federal, regional and local levels. As more and more social services are undertaken by governments, the level of government purchasing activity escalates.

In what circumstances are trading companies likely to be used?

Trading companies accumulate transport and distribute goods from many countries. Large, established trading companies are generally located in developed countries, and they sell manufactured goods to developing countries, and buy raw materials and unprocessed goods.

In what circumstances is the use of an EMC logical?

When a firm has a relatively small international volume, or is unwilling to involve their own personnel in the international function.

How and why are distribution channels affected when the stage of development of an economy improves?

As an economy advances, the distribution system begins to take the form of distribution in the U.S. The apparent reason for this change in structure is due to the decentralization of the total marketing function. As an economy becomes more sophisticated it places increasingly complicated and sophisticated demands upon the marketing function.

This results in modification of the existing system to be able to meet the increased demand placed upon it by the emerging economy. Consumer segments become much larger and diversified and each in turn places new demands on the distribution system which causes modification in order to administer to the requirements of that segment.

How does physical distribution relate to channel policy and how do they affect one another?

Selling directly to the consumer through the mail, by telephone or door-to-door is becoming the distribution-marketing approach of choice in markets with insufficient and/or underdeveloped distribution systems.

Physical distribution, or Place, must integrate with the other 'P's in the marketing mix. For example, the design of product packaging must fit onto a pallet, into a truck and onto a shelf; prices are often determined by distribution channels; and the image of the channel must fit in with the supplier's required 'positioning'.

Distribution channels are important because they affect sales, since if it's not available it can't be sold. Most customers won't wait. Distribution also affects profits and competitiveness since it can contribute up to 50 percent of the final selling price of some goods.

This affects cost competitiveness as well as profits since margins are squeezed by distribution costs. Delivery is seen as part of the product influencing customer satisfaction. Distribution and its associated customer service play a big part in relationship marketing.

Decisions about physical distribution are key strategic decisions. They are not short term. Increasingly it involves strategic alliances and partnerships which are founded on trust and mutual benefits. We are seeing the birth of strategic distribution alliances. You can see Southwestern Bell in the Hall Of Fame explain how marketing marriages provide new ways of getting products and services in front of customers.

Why is the EMC sometimes called an independent export department?

An EMC is an export management company which is an important middleman for firms with relatively small international volume or those unwilling to involve their own personnel in the international function.

It is considered an independent export department since it works under the names of the manufacturers and functions as a low-cost, independent marketing department with direct responsibility of the parent firm. The working relationship is so close that customers are often unaware that they are not dealing directly with the export department of the company.

In what ways and to what extent do the functions of domestic middlemen differ from those of their foreign competitors?

1. Domestic agent usually takes possession of the goods, while foreign agents do not

2. Domestic agent has authority to set prices, foreign agent does not

3. Domestic agent does some promotion and selling

4. Domestic agent occasionally extends credits

The functions of the domestic and foreign middlemen are quite similar in many areas, but there are certain differences. First, the domestic agent usually takes possession of the goods, whereas the foreign agent does not. In the area of setting prices, the domestic agent has the authority to do so, while his foreign counterpart does not.

Both types of domestic middlemen arrange for the shipping of goods, but the foreign middlemen do not. Two other differences exist between foreign and domestic agents. The domestic agent does some promotion and selling, and occasionally extends credit. On the other hand, foreign agents usually do not participate in these activities.

How does the globalisation of markets, especially in the EU, affect retail distribution?

There are some important trends in distribution systems that will lead to their eventual globalization. That is, there is greater commonalty than disparity among middlemen in different countries. U.S. based Southland Corporation's 7-Eleven Stores are replacing many of the traditional "Mom and Pop" stores that have dominated a significant part of Japan's retail food distribution. In Spain, 7-Eleven and Campsa, the Spanish gasoline monopoly, opened 200 7-Eleven minimarkets at Campsa service stations.

Hypermarkets, a retailing innovation developed in France, have expanded beyond French borders to other European countries and to the United States. Discount, home repair, self-service, and supermarkets are all mass merchandising concepts gradually spreading all over the world. In anticipation of Europe 1992, national and international retailing networks are developing throughout the world.

European integration, global brands, globalized media communications, consumers that expect rational and predictable product assortments, and global companies anxious for their products to be distributed in the most efficient manner are factors driving a growing number of traditional distribution channel members to greater efficiencies and competitiveness. Many are developing into transnational, if not global, operations. Global products require integrated, efficient distribution systems to achieve maximum effectiveness.

What are the distinguishing features of the European distribution system?

The European distribution system used to suffer from regulations and administrative routes that prevented transportation from running as smoothly and cheaply as it could have otherwise. Nowadays, only one piece of paper is required to transport goods throughout all of the EU.

The result of this was that most companies started working with centralised warehouses and distribution centres. In addition, just-in-time inventory has been implemented to reduce costs by becoming more efficient in production and storage.

A result of distribution becoming easier, is that concentration of production increases.