Chapter 12 Global Marketing Channels and Physical Distribution

Key Issues
Definition: Distribution, Channels, Distributor Agent

Working with Channel Intermediaries

Global Retailing Strategies : Organic, Chain Acquisition, Franchise, Joint Venture

Channel Objectives
Marketing channels exist to create utility for customers
Place utility - availability of a product or service in a location that is convenient to a potential customer Time utility - availability of a product or service when desired by a customer Form utility - availability of the product processed, prepared, in proper condition and/or ready to use information utility - availability of answers to questions and general communication about useful product features and benefits
3

Distribution Channels: Terminology and Structure

Distribution is the _________of goods through channels Channels are made up of a coordinated _________________that perform functions that add utility to a product or service

Distribution Channels: Terminology and Structure

Distribution is the physical flow of goods through channels Channels are made up of a coordinated group of individuals or firms that perform functions that add utility to a product or service

Distribution Channels: Terminology and Structure

Distributor wholesale intermediary that typically carries ___________on a selective basis Agent an intermediary who ________transactions between two or more parties but does not take _____to the goods being purchased or sold
6

Distribution Channels: Terminology and Structure

Distributor wholesale intermediary that typically carries product lines or brands on a selective basis Agent an intermediary who negotiates transactions between two or more parties but does not take title to the goods being purchased or sold

Consumer Products

Consumer Products
Piggyback Marketing
channel innovation that has grown in popularity One manufacture distributes product by utilizing another companys distribution channel Requires that the combined product lines be complementary and appeal to the same customer
9

Industrial Products

10

Establishing Channels
Direct involvement the company establishes its _________or operates its__________ Indirect involvement the company utilizes ________________. Channel strategy must fit the companys competitive position and marketing objectives with in each national market

11

Establishing Channels
Direct involvement the company establishes its own sales force or operates its own retail stores Indirect involvement the company utilizes independent agents, distributors, and/or wholesalers Channel strategy must fit the companys competitive position and marketing objectives with in each national market
12

Working with Channel Intermediaries

Select distributors dont let them select you Look for distributors capable of__________, rather than those with a few good customer contacts Treat local distributors as_____________, not temporary market-entry vehicles
13

Working with Channel Intermediaries

Select distributors dont let them select you Look for distributors capable of developing markets, rather than those with a few good customer contacts Treat local distributors as long-term partners, not temporary market-entry vehicles
14

Working with Channel Intermediaries

Support market entry by committing money, managers, and proven marketing ideas From the start, maintain control over marketing strategy Make sure distributors provide you with detailed ________________________data Build links among __________________at the earliest opportunity
15

Working with Channel Intermediaries

Support market entry by committing money, managers, and proven marketing ideas From the start, maintain control over marketing strategy Make sure distributors provide you with detailed market and financial performance data Build links among national distributors at the earliest opportunity
16

Global Retailing
Department stores Specialty retailers Supermarkets Convenience stores Discount stores and warehouse clubs Hypermarkets Supercenters Category killers Outlet stores

17

Global Retailing

Top 25 Global Retailers in 2002, sales in Millions

18

Global Retailing
Environmental Factors
Saturation in the home country market Recession or other economic factors Strict regulation on store development High operating costs

Critical Question
What advantages do we have relative to the local competition?

19

Classifying Global Retailers

20

Global Retailing Strategies

Organic
Company uses its _________to open a store on a green field site or acquire one or more existing retail facilities

Franchise
Appropriate strategy when barriers to entry are ____yet the market is culturally _____in terms of consumer behavior or retailing structures
21

Global Retailing Strategies

Organic
Company uses its own resources to open a store on a green field site or acquire one or more existing retail facilities

Franchise
Appropriate strategy when barriers to entry are low yet the market is culturally distant in terms of consumer behavior or retailing structures
22

Global Retailing Strategies

Chain Acquisition
A market entry strategy that entails _________a company with ________in a foreign country

Joint Venture
This strategy is advisable when culturally______, _________markets are targeted

23

Global Retailing Strategies

Chain Acquisition
A market entry strategy that entails purchasing a company with multiple existing outlets in a foreign country

Joint Venture
This strategy is advisable when culturally distant, difficult-to-enter markets are targeted

24

Global Retailing Strategies

25

Innovation in Global Retailing

Innovation takes place only in the most highly developed systems The ability of a system to successfully adapt innovations is directly related to its level of economic development Even when the economic environment is conducive to change, the process of adaptation may be either hindered or helped by local demographic factors, geographic factors, social mores, government action, and competitive pressures The process of adaptation can be greatly accelerated by the actions of aggressive individual firms

26

Supply Chain Definitions

Supply Chain
Includes all the firms that perform support activities by generating raw materials, converting them into components or finished products and making them available to customers

Logistics
The management process that integrates the activities of all companies to ensure efficient flow of goods through the supply chain

27

Physical Distribution, Supply Chains, and Logistics Management

Order Processing
includes order entry in which the order is actually entered into a companys information system; order handling, which involves locating, assembling, and moving products into distribution; and order delivery

Warehousing
Warehouses are used to store goods until they are sold Distribution centers are designed to efficiently receive goods from suppliers and then fill orders for individual stores or 28 customers

Physical Distribution, Supply Chains, and Logistics Management

Inventory Management
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.

Transportation
the method or mode a company should utilize when moving products through domestic and global channels; the most common modes of transportation are rail, truck, air, and water

29

Transportation

Channel Strategy analyzing each shipping mode to determine which mode, or combination of modes, will be both effective and efficient in a given situation
30

Looking Ahead
Chapter 13 Communications Decisions I: Advertising and Public Relations

31

Self test Questions 1

Which of the following is an appropriate guideline for companies selecting independent distributors in international markets:
a) Select distributorsdon't let them select you. b) Look for distributors capable of developing markets. c) Treat local distributors as long-term partners. d) Maintain control over marketing strategy from day one. e) All of the above are appropriate guidelines.
32

Self test Questions 2

Which approach to global retail expansion involves "greenfield" investment using a company's own financial resources to build a new store from the ground up:
a) chain acquisition b) organic growth c) franchise d) joint venture
33

Self test Questions 3

When British entrepreneur Richard Branson established the first Virgin Megastore in Japan, he established a joint venture with the Marui retailing chain. Judging by the approach Branson used, he and his management team must have viewed Japan as:
a) culturally close and easy to enter b) culturally distant and easy to enter c) culturally close and difficult to enter d) cultural distant and difficult to enter
34

Self test Questions 4

When British entrepreneur Richard Branson established the first Virgin Megastore in France, he invested a great deal of money to develop a retail space on the famous Champs-Elyses. Judging by the approach Branson used, he and his management team must have viewed France as:
a) culturally close and easy to enter b) culturally distant and easy to enter c) culturally close and difficult to enter d) culturally distant and difficult to enter

35

Self test Questions 5

Which approach to retail expansion is most appropriate when targeting a country that management considers both culturally close and easy to enter:
a) organic growth b) chain acquisition c) franchise d) joint venture
36

In-class Project
Why does McDonalds use constant currency comparisons when reporting its financial results?

McDonalds knows that the foreign exchange value of each currency can change daily. By showing all currency figures using the foreign exchange rate applied to the previous year's financial statements, the company helps investors and analysts compare year-to-year results on the same basis. Otherwise, investors and analysts would have to adjust the current year's figures in order to make a fair and accurate comparison of sales and profit trends.

37

In-class Project
What type of assets might McDonalds list for depreciation in its financial statements? Restaurant buildings, kitchen equipment, and delivery trucks are three types of tangible, long-term assets McDonald's would depreciate. Students may name additional assets, as well.

38

In-class Project
What effect do the corporate income tax rates in countries where McDonalds operates have on the income statements prepared in local offices? The corporate income tax rates, along with expenses, are deducted from sales revenues to calculate net income in each country
39

In-class Project
What problems might arise if individual McDonalds restaurants were required to enter sales data directly on the companys centralized accounting website, instead of following the current procedure of sending it through country and regional channels? Having individual restaurants send sales data directly to headquarters would probably create confusion and additional problems, in part because of the high number of restaurants reporting (more than 27,000) and because of the need to convert raw sales data using a multitude of foreign exchange rates. The current system, which allows local, country, and regional controllers to collect and review restaurant sales, make any necessary adjustments and conversions, and then send it to the next level for consolidation, might be further automated to speed up the process.
40

In-class Project
To help investors and analysts better assess the companys worldwide financial health, should McDonalds be required to disclose financial results for every country and region? Support your chosen position. Two arguments for disclosing detailed financial results for each country and region: (1) investors and analysts would be better able to evaluate the company's performance within the context of each areas environment and economic climate; (2) investors and analysts would be able to contrast company results from country to country over time and during one particular period. Arguments against: (1) investors and analysts could have difficulty making sense of country-by-country results because of unique laws and regulations governing the accounting and reporting for operations in each nation or area; (2) emphasizing country-by-country results could distort the true overall picture of McDonalds performance. Students may suggest other arguments for and against, as well.

41