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Part 4: Additional Perspectives on Marketing Channels. International Channel Perspectives. The international perspective The complex international environment Key environmental variables Behavioral processes Designing international channels Alternative channel structures
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Part 4: Additional Perspectives on Marketing Channels International Channel Perspectives
The international perspective • The complex international environment • Key environmental variables • Behavioral processes • Designing international channels • Alternative channel structures • Motivating channel members • Leading foreign marketing channels
The International Perspective 1 What drives the need to focus on international markets? Slow growth in domestic markets Fierce foreign competition
The Complex International Environment 2 Behavioral processes in international channels From an International Perspective Environment of international channel management Designing international channels Motivating international channel members
Key Environmental Factors 3 Economic Factors Competitive Environment Sociocultural Environment Technological Environment Legal/Political Environment
Economic Factors Inflation Deflation Economic conditions that appear in the domestic environment can also occur in foreign environments, but the changes can be more dramatic. Fluctuating currency rates Recession
Competitive Environment Many less-developed countries do not have free & open competition 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 cultures Different languages Different currencies
Sociocultural Environment Varying cultural values Varying attitudes 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 perceptions Varying behavior norms
Technological Environment Some less-developed countries have relatively primitive communications & transportation technology In some developed countries, technology often matches or surpasses that of the United States. Varying levels of technological advancement around the world require U.S. channel strategy either to force foreign suppliers to meet technological demands or to raise the bar of their own levels of technology.
Legal/Political Environment Government regulations Tariffs 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 Import restrictions Quotas Policies
Behavioral Processes 4 In order to avoid negative conflict, use power effectively, & establish good communications, the channel manager must understand the behavioral aspects of channel systems. Example: Japan & Bose speakers
Designing International Channels 5 Phase 1: Recognize that a channel design decision must be made. Phase 2: The design will need to reflect whether the firm’s distribution objectives specify reaching overseas markets. Phase 3: The firm must examine carefully the kinds of tasks that need to be performed to successfully meet the firm’s distribution objectives. Phase 4: Develop a set of channel structure alternatives for the specific international environment.
A Production in Home Market Direct Exporting Foreign Distributor Agents Overseas Marketing Subsidiary 6 B Global Market Entry Strategies - Alternative Methods Foreign Production Sources Indirect Exports Casual Exporting Trading Company Export Management Company Piggyback
Casual Exporting The firm is just beginning to sell its products overseas. Unsolicited orders from foreign countries may also account for significant parts of this type of exporting.
Trading Companies They are large and have access to many world markets. They can provide a U.S. firm with rapid entry into foreign countries. But: Because the trading companies are so large, U.S. firms have little influence over how their products are sold.
Export Management Companies Domestically based wholesalers or manufacturers’ representatives who specialize in overseas sales They offer an attractive alternative to the firm that seeks a higher level of involvement in international marketing than that provided by casual exporting or trading companies.
Cooperative or Piggyback Arrangements The carrier is the firm already involved in exporting. The rider is the firm that uses the international expertise and capabilities of the carrier to enter foreign markets. This method can offer the rider an opportunity to gain entry into foreign markets with little capital outlay, while the carrier can obtain a desirable product to sell.
Foreign Distributors The manufacturer’s ability to exercise control over how its products are marketed by distributors is a crucial issue in domestic and in international marketing. But: Modern technology has made it much easier and more efficient for U.S. manufacturers to communicate with foreign distributors.
Foreign Agents They are independent, but they do not take title to, and usually do not take physical possession of, the products they represent. They can arrange for the performance of most of the international marketing tasks.
Overseas Marketing Subsidiary When the manufacturer establishes its own foreign sales branch overseas and it can perform most or all of the international marketing tasks Requires substantial commitment and investment in international marketing But: Because the subsidiary is owned by the manufacturer, the degree of control possible is greater.
Motivating Channel Members 7 Three facets of motivation management: Finding out the needs & problems of channel members Offering support to the channel members that is consistent with their needs & problems Providing leadership through the effective use of power
Leading Foreign Marketing Channels 8 1. Roles & routines of foreign distributors were not rigidly set by overseas manufacturer, but were adapted by distributor to changing circumstances in market Marketing strategy decisions were made jointly by manufacturer & distributors High degree of personal contact between manufacturer & foreign distributors maintained through personal visits, phone calls, & letters Effective leadership occurs under the following circumstances
Discussion Question #2 Dell Inc. in an attempt to gain penetration in the Chinese market decided to augment its direct sales channel model with indirect retail store channels. Two desk tops and two laptops both low-priced and specially designed for emerging markets will be sold through 2700 Gome and Suning consumer electronics stores not only in Beijing and Shanghai and other large cities but in smaller cities as well. Dell believes that the Chinese market is growing so fast that its traditional direct sales channel structure would not be able to keep up with the rapidly growing demand for personal computers in China. By relying on Chinese retailers, Dell hopes to provide many more touch points for Chinese consumers to gain access to Dell computers. Do you agree with Dell’s strategy? Why or why not? What pitfalls might this strategy encounter?
Discussion Question #4 Coca-Cola Co. has not done so well in establishing strong marketing channels in India. Its flagship product, Coke, has only about 15 percent of the market compared to Pepsi’s almost 25 percent. Coca-Cola is usually accustomed to dominating any foreign market it enters, but India has been a major exception. The potential is certainly there with over one billion consumers, a large middle class, and a hot climate. But several problems confronted Coca-Cola. First, it imported too much of the raw materials, which had high import duties and hence made Coke too expensive relative to the competition. Second, outdated bottling plants reduced efficiency and quality consistency. Finally, the company had not invested in the distribution network, including advertising and promotional support, to secure strong cooperation from both large and small distributors throughout the vast country. Why do you suppose a company of Coca-Cola’s stature and extraordinary marketing capabilities could stumble so badly in establishing a strong distribution channel for Coke in a developing country such as India? Discuss.
Discussion Question #7 “We need to expand our market base,” argued the vice president of marketing for a major American beer brewery during a strategic planning conference presentation. “Our sales growth in the United States has been decreasing over the past five years. Maybe we need to look to international markets to sustain our sales growth.” “I don’t know,” replied the president of the company. “We are really good at marketing in the United States—we know most of the ins and outs of the operation here. If we were to go overseas, we would need to learn a whole new bag of marketing tricks.” What does the president mean by his statement about having to learn a whole new bag of tricks? Explain.
