Professional Documents
Culture Documents
Direct Exporting
Will increase sales and improve control and market information and develop in-house expertise in international marketing Advantages are direct contacts with Buyers, Control over prices, can take care of aftersales-service, chain of distribution is shortened, if product is good will build name, goodwill and reputation, and monitor competition and market trends Success in exports helps domestic sales image and export incentives can be availed
Market Access
Assembly Plants will help avoid Anti-Dumping duties for low priced exports Licensing Arrangements allow manufacture of goods locally with sellers brand name in exchange for royalty No investment on exporting company and risk of nationalization are low Quality control is difficult and importing company could become competitor in third markets Appointment of exclusive agents
Exclusive Agents
Most widely used method as simple and less expensive Is sole representative of manufacturer in the agreed territory May handle non-competing lines but should not take up competitors range Gets commission and operates under guidance and control of the Exporter
Joint Ventures
Via media between having a plant abroad and licensing arrangement Exporting company has some investment and a voice in the management Can utilise the local skills and distribution system of the partner Higher return than royalties and better control on Production & Marketing Greater investment and risks but nationalization is almost unlikely
Distributors
Sole importer of exporters products Buys holds large stocks and could own wholesale and retail outlets Provides repair and service facilities at cost
Marketing Channels
Make goods available from producer to customer Depends on nature of product and marketing strategy of the company Channel of consumer product is longer than industrial products generally For industrial goods the producer may sell directly
Export Channels
What is the marketing channel available in the market ? Most appropriate channel to link domestic operations to overseas channel ? Who are the consumers? Retail Outlets to reach them ? Market coverage needed based on product / market character ? Internal constraints ? Expectations from channel members ? Support system needed tosatisfy channel members ?
Channel Strategy
Gravity Approach Seller is in touch with intermediary only and hopes merchandise will move to final customers Push Policy Channel is used as promotional instrument , so planning is needed and exporter has to be channel leader Pull Strategy Reach final customers by intensive promo campaigns and pre-sell product to consumers thus create pressure on channels to carry the product
Distribution Policy
Selection of level of distributionat which to sell No. of Distribution organisations to which to sell Type of distribution organizations to sell Level of Distribution Wholesaler, Retailer, Supermarkets, chain stores, or speciality stores Direct Vs Indirect Distribution factors in favor of direct selling are Control ,Customer Satisfaction , Profit , etc Factors against Direct Selling are Standing in the market , Economies of scale
HYPERMARKETS
In USA the retailing channels are diverse Wholesale clubs like Price Costco and Sams Club and shopping malls offer rock-bottom prices Biggs in Cincinnati was one and half the size of a football field with 75 aisles and 40 checkout lanes and 60000 items Carrefour, Euromarche, Kmart and Wal-Mart have all set up hypermarkets but soon these big stores have had problems Americans found these stores too big and also did not want to mix food and nonfood purchases from one location ( cost of running such stores meant 8% gross margin) and minimum buying needed to be US $ 43
CHANNEL OBJECTIVES
Cokes leadership in world markets is based on its ability to put Coke within an arms reach of desire place utility. Dells meteoric rise in world computer industry was based on its innovative direct marketing and BTO (build to order) channel strategy Self-service discount pricing in US has been studied and applied by retailers in Europe and Asia Price could become more important than deliver
CUSTOMER CHARACTERISTICS
Influence channel design and vary from country to country and need for multiple channel intermediaries increases with increase in number of customers For mass-market products bought by millions of customers retail distributor or mail-order distribution is required In case of large number of low-volume retailers it is cheaper to reach market customers via wholesalers Direct selling can be a good way to serve large-volume retailers but individual countries may respond differently to such generalization e.g. Toys R Us faced considerable opposition from Japanese toy manufacturers to sell directly to the American company at its first store in Japan
PRODUCT CHARACTERISTICS
Channel design is influenced by standardization, perishability, bulk, service, and unit price Products with high price are often sold through company sales force because of complexity and need for explaining features Perishable products need direct channels to ensure satisfactory condition at time of purchase Bulky products need channels that minimize the shipping distances and the number of times the product changes hands before reaching the customer e.g. soft drinks and beer are bulky products that need widespread availability for effective marketing
MIDDLEMAN CHARACTERISTICS
Middlemen are in business to maximize their own profit and not for that of manufacturer They are notorious for cherry-picking practice of taking orders for products and brands which are in demand, to avoid real selling effort To counter this danger a new export-sourced product could be distributed by company relying on distributors own sales force. This allows direct-selling support and distribution support, and the distributor is happy to have free sales representative with potential for a profitable line addition
MARKET ACCESS
Local content laws BOP problems can cause market access problems May need to produce within market to avoid tariff and non-tariff barriers e.g. Japanese car industry
SHIPPING
Greater distance between product source and target market greater is the delivery time, and higher cost of transportation Inter modal services facilitate global delivery and allow containers to be transferred from rail, boat, air and truck carriers Transportation costs in US are 5% of total cost of imports and exports In Europe a single market means fewer border controls and so faster delivery and much lower costs
COUNTRY INFRASTRUCTURE
Power, transportation, roads, communication, service, component suppliers, labor pool, civil order, and effective governance Reliable access to foreign exchange to ensure buying of materials and products can be shipped to customers Countries like Lebanon, Uganda, El Salvador, Russia, and even China have constraints to handle the increasing volume of shipments
FOREIGN EXCHANGE
At any time the attractive location for production can become unattractive due to exchange rate fluctuations In 1998 financial crisis in Russia saw rouble drop from 6 to the USD to 25 roubles !! Prudent company will incorporate exchange volatility into its planning assumptions and be prepared for alternate country options for supplying markets Hence if $, Yen or Euro become seriously overvalued production could be moved to other locations to achieve competitive advantage if such options are available