Chapter 18Chapter 18

International Channel Perspectives

The International The International

PerspectivePerspective

1188

Objective 1:

What drives the need to focuson international markets?

Slow growth in domestic markets

Fierce foreign competition

1818The Complex EnvironmentThe Complex EnvironmentObjective 2:

From an InternationalPerspective

Environmentof

internationalchannel

management

Environmentof

internationalchannel

management

Motivating international channel members

Motivating international channel members

Behavioral processes ininternational channelsBehavioral processes ininternational channels

Designinginternational

channels

Designinginternational

channels

1818Key Environmental FactorsKey Environmental Factors

Objective 3:

Economic Factors

Competitive Environment

Sociocultural Environment

Technological Environment

Legal/Political Environment

1818Economic FactorsEconomic Factors

Economic conditions that

appear in the domestic environment can also

occur in foreign environments,but the changes can be more dramatic.

Inflation

Recession

Deflation

Fluctuating currency rates

1818Competitive EnvironmentCompetitive Environment

Because competitive structure in foreign countries

can be quite different from that in the United States, channel structure needs to be

able to adapt to a wide variety of circumstances.

Different languages

Differentcultures

Different currencies

Many less-developedcountries do not

have free &open competition

1818

Because sociocultural elements can influence all elements of the marketing

mix, the channel variable is sensitive because of the often necessary person-to-person or

organization-to-organization involvement.

Varying behaviornorms

Varying attitudes

Varyingperceptions

Varying culturalvalues

Sociocultural EnvironmentSociocultural Environment

1818

Varying levels of technological

advancement around the world require U.S. channel strategyeither to force foreign suppliers to

meet technological demands or to raise the barof their own levels of technology.

In some developed countries, technology often

matches or surpassesthat of the

United States.

Some less-developedcountries have

relatively primitivecommunications

& transportation

technology

Technological EnvironmentTechnological Environment

1818

Firms seeking to establish channels in foreign markets

need to investigate the legal environment of each country

because of the wide array of complex & burdensome issues.

Political pressures

Tariffs

Importrestrictions

Governmentregulations

Legal/Political EnvironmentLegal/Political Environment

Policies Quotas

1818Behavioral ProcessesBehavioral Processes

Objective 4:

In order to avoid negative conflict, usepower effectively, & establish good

communications, the channel manager mustunderstand the behavioral aspects of

channel systems.

• Japan & Bose speakers

1818Designing Designing International ChannelsInternational Channels

Objective 5:

Phase 1 Recognize that a channel designdecision must be made.

Phase 2 The design will need to reflect whetherthe firm’s distribution objectives specify reaching overseas markets.

Phase 3 The firm must examine carefully thekinds of tasks that need to be performedto successfully meet the firm’sdistribution objectives.

Phase 4 Develop a set of channel structure alternatives for the specific international environment.

1818Alternative Channel StructuresAlternative Channel StructuresObjective 6:

Indirect Exporting

Casualexporting

Tradingcompany

Exportmanagement

company

Cooperative(piggyback)

Indirectexport

Productionin home market

1818Casual ExportingCasual Exporting

The firm is just beginning to sell its productsoverseas.

The firm is just beginning to sell its productsoverseas.

Unsolicited orders from foreign countries mayalso account for significant parts of this

type of exporting.

Unsolicited orders from foreign countries mayalso account for significant parts of this

type of exporting.

1818Trading CompaniesTrading Companies

They are large and haveaccess to many world markets.

They are large and haveaccess to many world markets.

They can provide a U.S.firm with rapid entry into foreign countries.

They can provide a U.S.firm with rapid entry into foreign countries.

Because the trading companies are so large,U.S. firms have little influence over how their

products are sold.

Because the trading companies are so large,U.S. firms have little influence over how their

products are sold.

But:

1818

Domestically based wholesalers or manufacturers’ representatives who

specialize in overseas sales

Domestically based wholesalers or manufacturers’ representatives who

specialize in overseas sales

They offer an attractive alternative to the firm that seeksa higher level of involvement in international

marketing than that provided by casual exportingor trading companies.

They offer an attractive alternative to the firm that seeksa higher level of involvement in international

marketing than that provided by casual exportingor trading companies.

Export Management CompaniesExport Management Companies

1818

The carrier is the firm already involvedin exporting.

The carrier is the firm already involvedin exporting.

The rider is the firm thatuses the international expertise and capabilities of the carrier to

enter foreign markets.

The rider is the firm thatuses the international expertise and capabilities of the carrier to

enter foreign markets.

This method can offer the rider an opportunityto gain entry into foreign markets with littlecapital outlay, while the carrier can obtain

a desirable product to sell.

This method can offer the rider an opportunityto gain entry into foreign markets with littlecapital outlay, while the carrier can obtain

a desirable product to sell.

Cooperative or Piggyback Cooperative or Piggyback ArrangementsArrangements

Alternative Channel StructuresAlternative Channel Structures1188

Foreigndistributors

Agents Overseasmarketingsubsidiary

Directexport

Productionin home market

Direct Exporting

1818

The manufacturer’s ability to exercise controlover how its products are marketed by

distributors is a crucial issue in domesticand in international marketing.

The manufacturer’s ability to exercise controlover how its products are marketed by

distributors is a crucial issue in domesticand in international marketing.

Modern technology has made it much easierand more efficient for U.S. manufacturersto communicate with foreign distributors.

Modern technology has made it much easierand more efficient for U.S. manufacturersto communicate with foreign distributors.

Foreign DistributorsForeign Distributors

But:

1818

They are independent, but they do not take title to, andusually do not take physical possession of,

the products they represent.

They are independent, but they do not take title to, andusually do not take physical possession of,

the products they represent.

Foreign AgentsForeign Agents

They can arrange for the performance of most of the international marketing tasks.

They can arrange for the performance of most of the international marketing tasks.

1818

When the manufacturer establishes its own foreignsales branch overseas and it can perform most

or all of the international marketing tasks

When the manufacturer establishes its own foreignsales branch overseas and it can perform most

or all of the international marketing tasks

Requires substantial commitment and investmentin international marketing

Requires substantial commitment and investmentin international marketing

Overseas Marketing SubsidiaryOverseas Marketing Subsidiary

But:Because the subsidiary is owned by

the manufacturer, the degree of control possible is greater.

Because the subsidiary is owned by the manufacturer, the degree of control possible is greater.

1818Motivating Channel MembersMotivating Channel Members

Objective 7:

Three facets of motivation management:

1. Finding out the needs & problems of channel members

2. Offering support to the channel members that isconsistent with their needs & problems

3. Providing leadership through the effective useof power

1818Objective 8: Leading Foreign Leading Foreign Marketing ChannelsMarketing Channels

Effective leadership

occurs underthe following

circumstances

1. Roles & routines of foreigndistributors were not rigidly set byoverseas manufacturer, but wereadapted by distributor to changingcircumstances in market

2. Marketing strategy decisions weremade jointly by manufacturer &distributors

3. High degree of personal contactbetween manufacturer & foreigndistributors maintained throughpersonal visits, phone calls, & letters