Lnternational Marketing lnternational Marketing Chapter 10 Global Place Decision

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  lnternational Marketing
  
  Chapter 10
  Global Place Decision
  
  

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  Distribution channel
  
  Global place decisions
  
  Physical distribution and logistics
  
  
  
  

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  CASE
  

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  A .Distribution channel
  
  A channel is an institution through which goods and services are marketed. Channels give place and time utilities to consumers.
  
  Once you have committed to exporting and have selected the market(s) to enter, it is time to determine who will sell your product, how they will sell it and how it will be distributed.
  
  
  

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  Distribution channel is the systems that link manufacturers to customers. It may be an on-site store, a virtual store, a retailer, a wholesaler, an agent, a telemarketer or direct mail.
  
  Wholesalers and retailers are the distribution channel to get their products to a specific group of people. Wholesalers market items to business owners that will in turn sell the products to consumers. Retailers sell products directly to consumers.
  

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  Distribution is critical to the overseas operations
  because:
  1. It has a direct effect on sales. If you don’t have a good distribution network, your products may stack up in a warehouse and won’t reach your target customers.
  2. It affects your profits as well. As distribution costs can make up to 50% of the final selling price of some products, an efficient distribution network can increase your profit margins.
  

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  B. Global place decision
  

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  1. Direct Channel
  
  In this method, the company interacts with its customers directly without any intermediaries. Mail orders, the Internet and phone calls are some of the ways your potential customers can learn about your products and make purchases.
  

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  Direct marketing
  It is a channel-agnostic form of advertising that allows businesses organizations to communicate straight to the customer, with advertising techniques that can include Cell Phone Text messaging, email, interactive consumer websites, online display ads, fliers, catalog distribution, promotional letters, targeted television commercials, response-generating newspaper/magazine advertisements, and outdoor advertising
  

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  eg. The growth of the Internet has increased competition tremendously and opened up the doors to international business. Companies have developed a web presence to keep themselves ahead or in line with their competitors internationally. 
  
  There are a number of reasons why a company’s web presence is becoming an increasingly important tool to reach global markets.
  

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  Internet Population - Internet access is increasing in regions throughout the world. 533 million people have access to the Internet.
  
  E-commerce Growth - According to International Data Corporation (IDC), the U.S. accounts for approximately 40% of all money spent online
  
  

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  Demand for Products and Services - Regions throughout the world are realizing the enormous information resource the Web is and are interested in content, and products and services that their own regions do not provide.
  
  Online Payment - local currencies can be used
  
  
  

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  Marketing and Advertising - it can gain international audiences.
  
  Increased Sales and Reduced Costs - A web site provides an avenue through which to gain access to a large audience without spending a lot of money.
  
  

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  CASE 1
  How to buy a product from
  US through internet?
  
  
  

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  Any challenge?
  Language
  Order Fulfillment
  Post Sales Support
  Time
  Tariff
  

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  CASE 2
  

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  Manufacturer-owned store
  Also called Regular Chain. manufacturers sell their products in their own retail stores, and many of these stores appear to be in direct competition with independent retailers.
  

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  CASE 1
  

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  CASE 2
  

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  2. Select agent / distributors
  Agency selection is a critical area of your
  Export effort. You need an agent who knows
  the export market , has influence with the key
  Buying personnel in the appropriate sectors
  and knows and is committed to your business.
  
  

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  Commission agent:
  
  The commission agent represents you in the overseas market. He or she sells your product . When the customer pays for the goods, you pay the agent commission on the sale. This varies from 2% to 15% depending on the type of goods being handled. Commission should be included in the price quoted to the customer.
  
  

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  Agents do not accept any legal ownership of the product.
  
  This channel is usually expensive, as an agent is expensive to train and the physical distance makes his progress difficult to track.
  

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  Importer/distributor:
  The importer/distributor actually buys the goods from
  you, stores them in a warehouse and sells them on to a
  third party. The mark-up is usually around 33%.
  
  Since they take title to the goods, they are free to
  determine the prices of the goods themselves and
  develop their own marketing strategies.
  

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  Retailers:
  Retailers sell to the end customers and are, therefore, able to develop a better bond with them. The retailer takes on the responsibility of promoting the products and often decides the price of the product.
  
  

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  CASE
  

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  How to choose?
  You should draw up a preliminary list with the assistance of exporters, embassy or export promotion agency offices abroad, or through friends or local Chambers of Commerce and banks. You may also decide to advertise in foreign local press and/or trade journals.
  
  

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  Then write to the organizations and industrialists on this list, giving your firm's background and export objectives. Check if they are interested in handling your products and services, whether they act for competitors in the market, and their terms of commission.
  
  

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  Their replies should form the basis of a shortlist to
  be used for interviews when you next visit the market. Trade and bank references should also be sought.
  

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  Agents will only take your product line if they think
  it will make money for them. They must be convinced that it is a good selling proposition, that your company is efficient and committed and that you can supply sufficient quantities to make handling your account worthwhile.
  
  Support your agent to make the selling job as easy as possible., keep in close contact and remember that a neglected agent will neglect your product.
  

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  Do not rush to sign up with the first distributor or agent who seems interested or has the right contacts and resources. Make sure to build a very clearly defined trial period into the agreement and if possible, incorporate the minimum level of sales you expect from them over a specified period.
  

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  6C
  Cost
  Capital
  Control
  Coverage
  Character
  Continuity
  

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  CASE
  

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  C. Physical distribution and logistics
  Order processing
  Warehousing
  Inventory Management
  Transportation
  

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  1. Order processing
  This is the method chosen by the firm to receive orders from the customer. It could be by mail, telephone, through salespeople, or via computer or the Internet. Once received, orders must be processed quickly and accurately then shipped to the customer.
  
  

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  It includes order entry, in which the order is actually entered into a company ̓s information system; order handing, which involves locating , assembling , and moving products into distribution ; and order delivery , the process by which products are made available.
  
  

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  CASE 1
  

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  CASE 2
  

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  2.Warehousing
  
  Warehouses are used to store goods until they are sold. It is designed to efficiently receive goods from suppliers and then fill orders for individual stores.
  

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  Every company must store its goods while they wait to be sold. This storage function is necessary because production and consumption cycles rarely match. Companies can use either storage warehouses or distribution centers to process their goods.
  
  

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  CASE
  

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  CASE 2
  

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  Amazon.com (Amazon) was one of the first online shopping sites launched in 1995. Since its inception, it has been consistently ranked as one of the best retail sites on the Internet and is regarded as the universal model for successful Internet retailing. Amazon was ranked among the top 10 Internet sites in almost all the major market surveys. 
  

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  When Bezos started his venture, he aimed at hassle-free operations. He wanted to offer his customers a wide selection of books, but did not want to spend time and money on opening stores and warehouses and in dealing with the inventory.
  
  He however realized that the only way to satisfy customers and at the same timer make sure that Amazon enjoyed the benefits of time and cost efficiency was to maintain its own warehouse.
  

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  3. Inventory Management
  It ensures that a company neither runs out of manufacturing components or finished goods nor incurs the expense and risk of carrying excessive stocks of these items.
  
  Inventory decisions involve knowing both when to order and how much to order. During the past decade, many companies have greatly reduced their inventories and related costs through just-in-time logistics systems.
  

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  CASE
  

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  4. Transportation
  transportation is the movement of people and goods from one location to another
  
  Rail
  Truck
  Air
  Water
  
  
  

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  The choice of transportation carriers affects the pricing of products, delivery performance, and condition of the goods when they arrive--all of which affect customer satisfaction. The major forms that are available are rail, truck, water, pipeline, and air.
  
  

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  Truck: 39 % of total cargo ton-miles (the most). the largest portion of transportation within cities as opposed to between cities. highly flexible in their routing and time schedules, and they can usually offer faster service than railroads. They are efficient for short hauls of high-value merchandise.
  b). Rail: Second in cargo ton-miles with 38%. They are one of the most cost-effective for shipping large amounts of bulk products over long distances.
  
  
  

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  c). Water : about 10% of ton-miles .The cost is low for shipping bulky products, however, water is a slow form of transportation and can be affected by the weather.
  
  d). Air: Transport less than 1 % of the nation’s goods. Air freight rates are the highest forms of transportation but air freight excels in speed.
  
  

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  CASE 1
  Jerry Jones, president of Flowers-R-Us, wants to order some unique orchids from Hawaii for the upcoming prom season in his local community in Newyork. He has one month before the big dances begin. He plans to use brochures to sell the flowers to his young customers in local high schools. What would be Mr. Jones’s best transportation alternative?
  

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  CASE 2
  Byrd Lumber Company has received a large order of lumber to build three new 200-unit apartment complexes. It is essential that the lumber arrive on time which means three weeks left. Byrd Lumber is located in Texas, and must order its goods from mills in Oregon. What would be Byrd’s best transportation alternative?
  

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  CASE 3
  Phillips of Houston, needs to order a new technical precision surveying instrument from a supplier in Toronto, Canada. The instrument is highly sensitive and must be packed with great care. The instrument is about the size of a microwave oven and weights about 80 pounds. Its total value is $30,000. The company needs the instrument as soon as possible. What would be Phillips’ best transportation alternative?
  

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  For case 1
  The best alternative for Mr. Jones is to have the orchids shipped via air-freight. among the most frequently air-freighted products are cut flowers because of their perishability (a truck would delivery them from the airport or they could be picked up by the firm itself).
  
  

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  For case 2
  Byrd Lumber would most likely choose rail to bring in the lumber. Water would be out because of the time frame and location of the mills and final destination. one of the chief products shipped by rail is forestry products. Rail would be chosen over trucks because of the amount of lumber needed to build three 200-unit apartment complexes.
  

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  For case 3
  Phillips would choose air for its method of transportation. Even though trucking would be a possibility, air-freight is known for transporting high-value, low-bulk products (for example, technical instruments). Trucking could be used, however, the likelihood of damage would probably not be worth the risk.
  
  

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  Summary
  Distribution channel
  
  Place decisions
  
  Physical distribution and logistics
  

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  Reference
  http://www.cbinews.com/topic/2011/03/apple/ (APPLE在华分销）
  战略物流管理 James R.StockDouglas M.Lambert 中国财政经济出版社
  http://www.globalmarketing.cn/index.asp
  （国际营销传播网）
  http://www.icmrindia.org/casestudies/Management.asp?area=International%20Marketing (案例网）
  
  

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