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Distribution Channels and Global Markets

Distribution Channels and Global Markets. 7. PowerPoint Presentation by Thomas M c Kaig, Ryerson University. Looking Ahead. After studying this chapter, you should be able to: 1. Explain the role of distribution in marketing.

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Distribution Channels and Global Markets

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  1. Distribution Channels and Global Markets 7 PowerPoint Presentation by Thomas McKaig, Ryerson University

  2. Looking Ahead After studying this chapter, you should be able to: 1. Explain the role of distribution in marketing. 2. Describe the major considerations in structuring a distribution system. 3. Discuss global marketing challenges. 4. Describe the initial steps of a global marketing effort. 5. Identify sources of trade and financing assistance.

  3. The Role of Distribution Activitiesin Marketing • Distribution • Physically moving products and establishing intermediary relationships to support such movement. • Physical Distribution (Logistics) • The activities of distribution involved in the physical relocation of products. • Channel of Distribution • The system of relationships established to guide the movement of a product. …continued

  4. The Role of Distribution Activitiesin Marketing • Functions of Intermediaries • Perform the marketing function better. • Provide efficient distribution of the product. • Merchant middlemen • Intermediaries that take title to the goods they distribute. • Agents/brokers • Do not take title to the goods they distribute. …continued

  5. The Role of Distribution Activitiesin Marketing • Types of Distribution Channels • Direct channel • A distribution system without intermediaries • Indirect channel • A distribution system with one or more intermediaries. • Dual distribution • A distribution system with more than one channel.

  6. Indirect Channels Direct Channel Wholesaler Retailer Agent/Broker Channel Channel Channel Producer Producer Producer Producer Agents or Brokers Wholesalers Wholesalers Retailers or Retailers or Retailers or Industrial Industrial Industrial Distributor Distributor Distributor Consumers or Consumers or Consumers or Consumers or Industrial User Industrial User Industrial User Industrial User Alternative Channels of Distribution Figure 7-1

  7. Structuring a Distribution Channel • Important Factors in Building a Distribution Channel • Costs associated with establishing a direct channel distribution • Coverage is increased through the use of indirect channels of distribution. • Control is enhanced using a direct distribution channel.

  8. Determining the Scope ofPhysical Distribution • Transportation—which mode to use? • Common carriers • Transportation intermediaries available for hire to the general public. • Contract carriers • Transportation intermediaries that contract with individual shippers. • Private carriers • Lines of transport owned by shippers.

  9. Determining the Scope ofPhysical Distribution • Storage • Lack of storage space is a common problem. • Materials Handling • Protecting the firm’s output during warehousing . • Specifying Responsibility for Delivery Terms • Paying freight costs. • Selecting the carriers. • Bearing the risk of damage . • Selecting the modes of transport.

  10. Small Businesses as Global Enterprises • Globalization • The expansion of international business, promoted by converging market preferences, falling trade barriers, and the integration of national economies. • Size does not limit a firm’s international activity, and small companies often become global competitors to take advantage of their unique resources.

  11. Before Going Global • Decide if firm is up to the task of globalization. • Study the different cultural, political and business practices in foreign markets. • Be prepared to modify products to meet design specifications that may vary from county to country.

  12. Questions to Consider Before Going Global • What are management’s objectives? • reasons, commitment, expected payoff • How prepared is management to go global? • in-house expertise, responsibility for and time allocated to international operations, organizational structure • Is there sufficient production capacity? • present capacity, effect of international operations on local production • Is there enough financial capacity

  13. Least Risky Moderately Risky Most Risky Trade Agreements GATT EUROPEAN UNION FTA NAFTA ANDEAN PACT COUNTRIES MERCOSUR

  14. Preparations for Global Marketing • Researching a Foreign Market • Secondary sources of information • Department of Foreign Affairs (DFAIT) • Canadian Commerical Corporation (CCC) • Canadian International Development Agency (CIDA) • Statistics Canada

  15. Export Services of the Department of Foreign Affairs and International Trade • InfoExport • Export Counselling • World Information Network for Exporters (WINS) • International Trade Data Bank • Overseas Trade Fairs • Trade Missions • Internet Resources

  16. Assistance for Global Enterprises • Connections With International Customers • Trade Leads • Trade Missions • Trade Intermediaries • Export management companies • Export trading companies • Export agents, merchants, or remarketers • Piggyback marketers

  17. Strategy Options for Global Firms • Foreign Licensing • Allowing a company in another country to purchase the right to manufacture and sell a company’s products in international markets • Licensee • The company buying the licensing rights • Licensor • The company selling the licensing rights • Royalties • Fees paid by the licensee to the licensor for each unit produced under a licensing contract

  18. Challenges to Global Business • Political Risk • The potential for political forces in a country to negatively affect the performance of businesses operating within • Economic Risk • The probability that a government will mismanage its economy and thereby change the business environment in ways that hinder the performance of firms operating there. • Exchange rates—the value of one country’s currency relative to that of another country.

  19. Sources of Trade and Financing Assistance • Financing • Private banks • Letters of credit—an agreement issued by a bank to honour a draft or other demand for payment when specified conditions are met. • Bill of landing—a document indicating that a product has been shipped and the title to that product has been transferred

  20. Sources of Trading Information • Factoring Houses • Forum for International Trade Training (FITT) • Export Development Corporation (EDC) • Canadian Commercial Corporation

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