Global Marketing

Chapter 12

Global Marketing Channels and

Physical Distribution

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Learning Objectives
12.1 Identify and compare the basic structure options for
consumer channels and industrial channels.
12.2 List the guidelines companies should follow when
establishing channels and working with intermediaries in
global markets.
12.3 Describe the different categories of retail operations that
are found in various parts of the world.
12.4 Compare and contrast the six major international
transportation modes and explain how they vary in
terms of reliability, accessibility, and other performance
metrics.

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Distribution Channels: Terminology
and Structure (1 of 2)
• Physical distribution is the physical flow of goods
through channels.
• A channel of distribution is “an organized network of
agencies and institutions that, in combination, perform all
the activities required to link producers with users to
accomplish the marketing task.”

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Channel Objectives & Utility
• 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

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Distribution Channels: Terminology
and Structure (2 of 2)
• 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

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Consumer Products Channels
Figure 12.1 Marketing Channel Alternatives: Consumer
Products

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Peer-to-Peer Marketing

• The Internet and other related media are dramatically

altering distribution
• Interactive T V may become a viable direct marketing
channel in the future

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Door-to-Door Selling
• Mature form in the U.S.
• Tupperware has a sales force of
200,000 in Indonesia, its biggest
market
• Growing popularity in China-
Avon, Mary Kay
• ½ of cars are sold door-to-door
in Japan with 100,000 salespeople
The U.S. accounts for only
10% of Tupperware sales.
Tricia Stitzel is C E O of the
company.

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Consumer Channels
• Manufacturer-owned stores
– Nike, Levi Strauss, Apple, Sony, fashion design houses
have flagship stores
• Independent franchise
• Independent retailers
– Walmart
• Flagship retail stores for Apple, Sony, well-known
fashion houses, Nike to build brand loyalty, showcase
products, and help gather marketing intelligence

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Retailing in Developing Countries
• Consumers purchase food, soft drinks, and other items at
“Mom & Pop” stores, kiosks, and market stalls in single-
use packages
• 70% of Mexicans shop at these stores
• P&G aids stores that carry at least 40 P&G products with
displays, promo materials through a golden store
program
• Nestlé has a floating supermarket that sails the Amazon
River to reach remote areas

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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 company’s competitive
position and marketing objectives within each national
market

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Working with Channel Intermediaries (1 of 2)
1. Select distributors - don’t let them select you
2. Look for distributors capable of developing markets,
rather than those with a few good customer contacts
3. Treat local distributors as long-term partners, not
temporary market-entry vehicles

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Working with Channel Intermediaries (2 of 2)
4. Support market entry by committing money, managers,
and proven marketing ideas
5. From the start, maintain control over marketing strategy
6. Make sure distributors provide you with detailed market
and financial performance data
7. Build links among national distributors at the earliest
opportunity

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Intermediaries
• Be realistic about the intermediary’s motives
• May maximize its profit rather than the manufacturer’s
• May engage in cherry picking-only taking products with
known demand
• Manufacturer may need to establish its own distribution
channel although it will have high costs
• Or the manufacturer can supplement the cost of the sales
force of the distributor

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

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Global Retailing

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Types of Retailers (1 of 5)
• Department stores have a product mix under one roof
• Expansion outside of the home market is usually limited to
a few countries
• Two views:
• “It’s quite difficult to transfer a department store brand
abroad. You have to find a city with the right demographic
for your offer. If you adapt your offer to the locality, you
dilute your brand name.”
Maureen Hinton, London Retail Analyst
• “Conceptually, department stores are global brands
already because we live in a world with an enormous
amount of travel between cities and continents.”
Marvin Traub, former CE O, Bloomingdales
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Types of Retailers (2 of 5)

Specialty Retailers Supermarkets

• Less variety than • Between 50,000 & 60,000 sq . f t. uare ee

department stores • Grocers haven’t spread outside the

• Offer merchandise depth & US b/c market size is vast
high levels of service • UK Tesco is global
The Body Shop, Victoria’s
Secret, Starbucks

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Types of Retailers (3 of 5)
Convenience Stores
• High-turnover convenience & impulse goods
• Prices 15-20% higher than grocery stores
• 7-11 is the world’s largest
– 64,000 locations
• Trend towards locating in malls, airports, office buildings,
and college & universities

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Discount Retailers
• Full-line Discounters
– Wide variety of merchandise; Ex. Walmart
• Warehouse Clubs
– Memberships fees; Ex. Sam’s, Costco
• Dollar Stores
– Sell at a single low price; Ex. in U.S. Family Dollar,
Dollar Tree; Internationally, My Dollarstore has rapid
growth
• Hard Discounters
– Limited assortment, rock bottom prices

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Types of Retailers (4 of 5)
• Hypermarkets are hybrid retailers combining the
discounter, supermarket & warehouse club; 20,000-30,000
sq. feet.
• Supercenters have lower priced groceries plus general
merchandise; half the size of a hypermarket; Walmart
operates 3,275 stores plus 100s in Mexico, Argentina, and
Brazil
• Superstores aka Category Killers & Big-Box sell vast
assortments of a product category
– Toys ‘R’ Us, Home Depot, I KE A

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Types of Retailers (5 of 5)

Shopping Malls Outlet Stores

• Groups of stores in one • Shops that offer excess inventory,
place out-of-date merchandise or factory
• Enclosed or outdoor seconds
• Leisure destinations offer • Popular in the US, expanding into
entertainment & Europe & Asia
convenience
• Trend towards outdoor
“lifestyle centers” with food
courts & entertainment

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Global Retailing Trends
• Environmental Factors that cause retailers to look outside
the home country
– 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?

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Figure 12.3
Global Retailing Categories

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Figure 12.4
Global Retailing Market Entry Strategy Framework

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Global Retailing Strategies (1 of 2)
• Organic Growth
– Company uses its own resources to open a store on a
greenfield 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

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Global Retailing Strategies (2 of 2)
• 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

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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 an efficient flow of goods through
the supply chain

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Physical Distribution, Supply Chains,
and Logistics Management (1 of 2)
• Order Processing
– includes order entry in which the order is actually
entered into a company’s 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 customers.

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Physical Distribution, Supply Chains,
and Logistics Management (2 of 2)
• Inventory Management
– Ensures that a company neither runs out of
manufacturing components or finished goods nor
incurs the expense and risk of carrying excessive
stock of these items
– Social media can play an important role by connecting
social media followers with the brand
• Transportation
– 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
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Figure 12.5
Supply Chain, Value Chain, and Logistics

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