INTERNATIO

NAL
MARKETING
CHANNEL
MANAGEMEN
T
LEARNING
OBJECTIVE What are the essential elements
#1 of an international marketing
channel?
 two key areas in marketing strategy:

- distribution &

- logistics.

INTERNAT International distribution : a process by which products

IONAL and services flow between producers, companies that act
as intermediaries, and consumers, and includes the
MARKET: transfer of ownership.

CHANNEL
S International logistics - flow of products and services
among channel members, including both upstream and
downstream activities.
 Upstream activities : bringing a product or supplies
into a company,
 Downstream activities : sending a product to another
channel member for resale.
LEARNI
NG What key marketing channel decisions must
OBJECT be made in order to efficiently and
effectively reach customers in other
IVE #2 countries?
INTERNATIONAL
MARKETING
CHANNEL DECISIONS
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.

Variation country-by-country 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 (for
premium products)

DISTRIBUTION
INTENSITY
 Mass market of consumers.
Intensive Distribution : distributed Marketing efforts focus on making the product widely
through as many wholesalers and available.
retailers possible in a particular market. Usually, low-price products , relatively high volume,
e.g., convenience products.

Selective Distribution : strategy of close relationships develop among channel members.

using only a limited number of channel Shopping products are often marketed worldwide
using selective distribution methods.
intermediaries

DISTRIBUTION
INTENSITY (CONT.)
 Exclusive Distribution : offering products
through only one wholesaler or retailer in a
particular market area.
 Prestigious products are often offered through an

DISTRIB exclusive distribution strategy.

UTION Strategic distribution intensity choices rely

INTENSI primarily on the factors of

TY - Price,

(CONT.) - Quality &

- Competition.
- Infrastructure of the host country
- Legal restrictions on imports.
SELECTION OF
DISTRIBUTION
CHANNELS
 Direct selling of a product or service to
consumers or end users without the use of
wholesalers, retailers, industrial agents, or
DIRECT industrial merchants.

CHANN Consumers around the world are familiar

EL with 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.
 Goods and services move through one or
more intermediaries or organizations that
move products from producers to consumers

INDIRE Agent middlemen :

 Do not take title or ownership of the products.

CT  These channel members generally work on a

commission basis.

CHANN  Most of the times, don’t take physical possession of

the products.

EL Merchant middlemen :
 Assume title and ownership of the products.
 Purchases products from producers in one country
and sells them in another country.
 Merchant retailers purchase goods for resale and then
market those products to consumers.
 •Trading companies :

• provide intermediary activities, e.g., marketing

services, financial assistance, and information flow.
INTERNAT • Japanese keiretsu & Chaebols of South Korea are
large Pacific rim trading cos
IONAL
TRADING • Traditional international marketing
CHANNEL channel :
S • which consists of producers, wholesalers, and
retailers.
 In developed countries, distribution systems tend to
be more institutionalized
 TYPES OF
FACILITATING AGENTS
 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
CHANN length,

EL International marketing channels differ

LENGT significantly in both length and complexity.

H
• Intensive distribution tend to have longer
international marketing channels.
• Exclusively distributed products often have shorter
channels.

Existing & Future Channels – flexibility in RTM

MANAGIN Managing the supply channel involves a
series of strategic decisions and activities.
G  Each should concentrate on the ultimate goal of

INTERNAT reaching the target market effectively and

efficiently.
IONAL  establishing international channel strategies,

DISTRIBU
 selecting intermediary arrangements,
 making channel arrangements and choosing channel
TION partners, and
 managing channel power.
CHANNEL
S Pull & Push Strategies
 Gray market : practice of distributing products through
distribution channels that were not authorized by the
marketer of the product.

With parallel importing, international distributors sell a

GRAY product in either unauthorized countries or through
unauthorized retailers.

MARKE  Wholesalers buy a product in one country at a low

price and resell it in other markets, or to unauthorized
retailers, for profit.
TS  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.
 Contractual Channel
• consists of a binding contract that identifies all of the
tasks to be performed by each channel member from
production, delivery, sorting, pricing to promotional
MAKING support.

CHANNEL  specify legal elements of the relationship, incl country

with jurisdiction over disputes.
ARRANGE
MENTS Administered channel

AND • arrangement includes one dominant member in the

distribution channel.
CHOOSIN  Channel captains coordinate the marketing tasks
provided by the channel members.
G
CHANNEL Partnership channel

PARTNERS • 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.
 Horizontal channel conflict
• when conflict occurs between members of a channel

MANAG at the same level,

Ex One retailer may be upset about unfair pricing

ING between the outlets.

CHANN Vertical channel conflict

EL • disputes between channel members at different
levels in the system

POWER Ex between a wholesaler and a producer, or between

a producer and a retailer.
 Power struggles and imbalance may lead
to instability in the market channel.

TRUST
AND Effective marketing channels are based on
mutual trust and commitment rather than
COMMITM on the display of any type of channel
ENT IN power.
INTERNAT
 Marketing channel trust refers to the willingness to
rely on other marketing channel members.
IONAL  Marketing channel commitment reflects the desire
of channel members to continue channel
MARKET relationships.

CHANNEL
S International marketing involves negotiation, which
means the successful management of international
marketing channels requires close attention to
negotiation – Cross Cultural Negotiation
STAGES IN
THE
NEGOTIATI
ON
PROCESS
 Cultural variables influence international
negotiations in many ways:
 interests, behaviors, and desired outcomes;

CULTURA 

relationships, communication, and perceptions;
negotiation context;
L  Hofstede’s dimensions;

INFLUEN 

thought processes; and
the overall negotiation culture.
CES ON
NEGOTIA
TIONS Relationships, Communication, and Perceptions –
Logic vs Emotion
 Warehousing : the process of
storing products until they are
sold.

Inventory Control : maintaining

OPERAT an optimal inventory of products
IONS that will meet consumer demand
without burdening the system
Materials Handling : all
activities associated with
moving products within the
manufacturing and warehousing
systems.
 Documentation plays an important role in order
processing.

SECURE Bill of Exchange - used to facilitate order

processing and payments.

PAYME  A bill of exchange is an agreement between

parties in which a drawer directs a second party,

NT AND a drawee, to issue a payment to yet another party,

a payee.

EXTEN
 A bill of exchange creates a secure transaction for
both parties.

D Letter of credit - a document issued by a bank to

signal the creditworthiness of a buyer to a seller.

CREDIT  The letter of credit ensures the seller of the

buyer’s creditworthiness by stating that the bank
backs the buyer’s credit.

ECGC : Export Credit Guarantee Corp.

 The global transportation of products will
be an important part of international
marketing channels.

TRANSPOR Products must be delivered reliably and

TATION 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.
 Best option / Season
INTERNATIONAL BUSINESS
- CHANNEL STRUCTURE
 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.

COST  Costs associated with storing, packing, preparing, and

documenting product sales are also included in distribution
costing.

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.
 Coordinating the marketing efforts that
must take place at each level of the system
constitutes an important part of managing
the international marketing.
COORDIN
ATION Decisions are made as to what promotional
and logistical activities each member will
perform. Marketing channel coordination
requires an efficient international
distribution process.
 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.
COVER
AGE 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.
 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.

COOPERA The reputation of potential members, along

with evidence of previous marketing
TION 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.
 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

CONTR
own interests rather than the well-being of the overall
marketing channel.
 Opportunism reflects the tendency for channel

OL members to pursue self-interests rather than those of

other members of the marketing channel.
 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.