international marketing distribution. marketing mix (4 ps) product promotion pricing place...

INTERNATIONAL MARKETING

Distribution

Marketing Mix (4 Ps) Product Promotion Pricing Place (Distribution) – the most important for

international business entry

Group 7 - Distribution

Marketing Mix (4 Ps) Place (Distribution) – the most important for

international business entry:

Incoterms determine where title to goods changes.

One of the main differences in establishing a domestic or an international distribution system consists of the complexity of the variables involved in the choice of “international activities”, when each foreign market has a different distribution system.


In International Distribution The firm sells to its customers:

directly through its own sales force indirectly through independent intermediaries indirectly through an outside distribution system

with regional or global coverage


Channel Structure

How to structure the distribution channels is the most important long-term marketing mix decision a firm may make.

Channel structures are designed to manage multidirectional (horizontal and vertical) connections in physical movement of goods and services transactional title flows information communications flows


Typical Channel Configurations

ManufacturerManufacturer ManufacturerManufacturer OriginatorOriginator

ConsumerConsumer Industrial UserIndustrial UserConsumer / Consumer /

Industrial UserIndustrial User

AgentAgentAgentAgent

AgentAgent

AgentAgent

AgentAgentAgentAgent

AgentAgent

WholesalerWholesaler

WholesalerWholesaler

RetailerRetailer

RetailerRetailer

RetailerRetailer

RetailerRetailerIndustrialIndustrial

DistributorDistributor

IndustrialIndustrialDistributorDistributor

Consumer Consumer ProductsProducts

Industrial Industrial ProductsProducts

ServicesServices


International Channel-of-Distribution Alternatives

Home Country

Domestic producer or marketer sells to or through

Open distribution via domestic wholesale middlemen

Export management company or company sales force

Exporter ImporterForeign agent or merchant wholesalers

Foreign retailers

Foreign consumer

The foreign marketer or producer sells to or through

Foreign Country


Risk Levels and Levels of Involvement


Channel length

Refers to number of intermediaries between the producer and the consumer

Determined by degree to which the retail system is fragmented Long distribution channel Short distribution channel


Long distribution channel Fragmented retail system promotes growth of

wholesalers and retailers Firms go through intermediaries such as

wholesalers to cut selling costs

Short distribution channel Concentrated retail system Firms deal directly with retailers

Channel length


Channel exclusivity

Degree to which it is difficult for outsiders to access distribution channels

Varies between countries Japan - exclusive systems because personal

relations, often decades old play important role in stocking products

Difficult for new firm to get shelf space as compared to an old firm


The American structure is characterized by a large variety of retailers, by a diminishing number of wholesalers, a lot of discount stores and large retailers that control the network.

The Japanese structure is characterized by many small wholesalers dealing with a large number of retailers, and manufacturers control networks. Small retailers benefit from strong protection through The Large Scale Retail Store Law.

Different distribution structures at international level


Channel Design Considerations

Customer characteristics What do they need, why, when, and how?

Distribution culture The structural linkages and functional characteristics of

existing channels

Competition What channels does the competition use?

Company objectives Determined by company objectives for market share and

profitability.


Channel Design Considerations Character

The nature of the product impacts the design of the channel. The channel must match the positioning of the product in the market.

“Capital” ... describes the financial requirements for setting

up a channel system. “Cost”

… is the expenditure incurred in maintaining a channel once it is established.


Channel Design Considerations Coverage

the number of areas in which a product is represented and the quality of that representation.

Types of coverage Intensive Selective Exclusive


Control

The use of intermediaries will result in some loss of market control.

Control correlates with the type of product or service being marketed.

The marketer’s ability to exercise power determines the extent of control.

Careful communication with foreign intermediaries is needed to make them aware of the marketer’s control intentions.


Continuity

Channel decisions are the most long-term of the marketing mix decisions.

Care must be taken in choosing the right type of channel.

Establishing continuity is the marketer’s responsibility

Continuity is expressed through visible market commitment.


Communication

...provides the exchange of information that is essential to the functioning of the channel.

Types of “distances” that cause communication problems: Social distance Cultural distance Technological distance Time distance Geographical distance


Channel Objectives

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


Intermediaries

Types of intermediary relationship Distributor Agency

Type of exporting function Indirect exporting Direct exporting Integrated distribution


Intermediaries Sources for Finding Intermediaries

Distributor inquires Governmental agencies

Commerce Department’s Trade Opportunities Program U.S. Exporters Yellow Pages

Private sources Trade directories

Screening Intermediaries Performance Professionalism


Selection of Intermediaries

Agents Foreign (Direct)

Brokers Manufacturer’s Reps Factors Managing agents Purchasing Agents

Domestic (Indirect) Brokers Export Agents EMCs Commission agents

Distributors Foreign (Direct)

Distributors/dealers Import jobbers Wholesalers/retailers

Domestic (Indirect) Domestic wholesalers EMCs ETCs Complementary

marketers


Channel Management Coordinating two independent entities with

shared goals The relationship needs to be managed for the

long term Factors complicating channel management

Ownership Geographic, cultural, and economic distance Different rules of law


Channel Adjustment and Termination

Typical reasons for channel adjustment Growth and changes in the international marketer’s

distribution approach may eliminate a channel.

Conflict of interest and a lack interest or performance by the intermediary may require a channel modification.

Termination conditions are the most important considerations in the distribution agreement and must be spelled out clearly.


E-Commerce

Any worldwide web strategy must be tied closely to the company’s overall growth strategy in international markets.

Advantages• Being able to conduct business 24 x 7 x

365.• Expansion in market size.• Better customer service.• Reduction in costs.• Marketing efforts gets boosted.


Challenges to International Distribution

Distribution challenges in developing countries Parallel imports (gray markets)

Distribution systems that are not authorized by the manufacturer: products purchased in a low-price market are diverted to other markets

Hurt company image- Charge similar prices worldwide- Create product for low-markets not as attractive to up-

market- Complicate repair/servicing process for gray market

goods- Inform consumers- Litigate


COMPANY OVERVIEW

• In 1984, Michael Dell founded the company

• In 1985, company produced the first computer on its own

• In 1993, Dell joined the ranks of the top five PC makers worldwide

• In 1996, Dell began selling computer via web

• It develops, manufactures, sells, and support personal computers and computer related products

• Dell is the World's largest PC maker having Build To Order model

• A Fortune 200 company in just 14 years


DELL Brand-Names for Its product ranges

OptiPlex: Office desktop computer systems Dimension: Consumer Desktop computer systems Latitude: Commercially-focused laptops Inspiron: Consumer laptops Precision: Workstation systems and high-performance laptops PowerEdge: Larger corporate servers PowerVault: Direct-attach and some network-attached storage (NAS) Dell EMC: Storage area networks XPS: Enthusiast/high-performance systems Axim: PDAs utilizing Microsoft's Windows Mobile Dell On Call: Extended support services Dell monitors LCD/plasma TVs and projectors: HDTV and monitor use


Dell’s Global Presence

The AmericasThe Americas EMEAEMEA Asia PacificAsia Pacific ChinaChina

Sales Offices in 43 countries Sales presence in 170 countries 7 Manufacturing Sites

XiamenChina

PenangMalaysia

LimerickIreland

AustinTexas

NashvilleTennessee

Eldorado do Sul Brazil


DELL’s WAY

Traditional PC’s Industry Value Chain (Utilized by Compaq, IBM, HP and Most Other)

Build-to-Order/Direct Sales Value Chain (Employed by: Dell)

Manufacturing ofPC’s Component

BySuppliers

Assembly of PC byPC Makers

Manufacturing ofPC’s Component

BySuppliers

PurchaseBy

PC Users

Service andsupport activities

Provided to PCUsers

Sales and Marketing

Activities of Reseller to selfInventories ofPC’s on hand

Service andSupport activities

Provided to PCUsers

PurchaseBy

PC users

Customized Assembly of PC’s

By PC Makers


Most efficient method of distribution Minimized inventoryRapid response to customer changesCustomers receive exactly what they want: not standard solutionNew technology delivered immediatelyStrong relationship with customers and suppliers.

Benefits of Dell Direct Model


In 1996, DELL launched its web site at www.dell.com and transaction buyers used this site on the Internet increasingly to contact DELL. Shortly thereafter, buyers could actually design a computer on-line, check pricing, place an order, and track an order’s progress.

Almost immediately DELL began selling 1 million dollars per week through the Web. Incredibly, by December of 1998, transactions on www.dell.com total about 10 million dollars per day.

www.DELL.com


Dell’s website


Source: IDC PC Tracker, 1995 - 2005 (Full Year)* In 1995 Pre-Merger, Compaq ranked #1, HP #7

WW Vendor Ranking 1995 Q1'05 RankQ1'05 y/y Growth

Dell 7 1 13.6%HP (Merged) 1 2 10.6%

IBM 3 3 2.2%Fujitsu Siemens n/a 4 14.0%

Acer 6 5 39.1%Toshiba 8 6 22.6%

NEC 2 7 23.9%Apple 4 8 42.5%

Legend / Lenovo 46 9 19.9%Gateway 9 10 -20.0%

Dell Takes No.1Position in 2004

Dell No. 1


DELL - India Story

Dell Started its full fledged operations in India using the Dell direct Model in 2007. But Indian customers had to wait up to a month for delivery while the computers were manufactured in Dell's factory in Penang, Malaysia.

Dell sold just 79,244 laptops and desktops in India. In that same year, HP sold 1 million to Indian consumers.


Dell New Distribution Model

On the distribution front, Dell divided the Indian market between 35 master sales affiliates. It sidestepped the established national, regional, and retail distribution model to instead follow a model typically used for insurance agents.

The first step was to set up a factory in India. "Manufacturing locally cut delivery time by almost 50% and improved profitability," says M.R. Sundaresan, general manager of operations for Dell India. It also reduced waiting time to less than eight days.


Dell New Distribution Model

Simultaneously, Dell opened 38 exclusive stores across India.

Also joined hands with retailers such as the Tata group's Croma and Future Group's eZone for a shop-in-a-shop counter for its products. “With the launch of Dell exclusive stores, we offer our customers

the touch & feel for Dell branded products within a unique shopping experience,” Mr. Mahesh Bhalla, Director –

Consumer Sales, Dell India.

Dell backed this hybrid retail model by extending onsite service (technicians coming to individuals' homes) in 650 cities to retail and small business customers as well. Group 7 - Distribution

Results

The new distribution model worked for Dell, giving it access to even rural areas, where customers would not be able to easily order online, and where setting up retail outlets was not viable.

Now India is emerging as the fastest-growing market for Dell.

In the third quarter of 2010, India reported year-on-year growth of 55% -- the highest for any Dell market.


Thank You


international marketing distribution. marketing mix (4 ps) product promotion pricing place...

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large retailers

large number of retailers