DISTRIBUTION
DISTRIBUTION
A company may accurately assess market potential, design products or ser-
and promote to likely consumers; however, it will have
likelihood of reaching its sales potential if the goods or services are not
conveniently available to customers. This includes getting goods to where people want to buy them. For example, does a man prefer to buy hair dressing in a grocery store, barber shop, drugstore, or some other type of outlet?
Distribution is the course—physical path or legal title—that goods take between production and consumption. In international marketing, a producer must decide on the method of distribution among countries as well as the method of distribution within the foreign country of sale. We have alreadj discussed many considerations for distribution, including the channels of distribution to move goods among countries, how the title to goods gets transferred, and the forms of operations for foreign-market penetration. This section does not repeat these aspects of distribution; rather, it discusses distributional differences and conditions within foreign countries that an international marketer should understand.
Difficult Standardization
Different Systems Within the marketing mix, distribution is one of the mosi difficult functions to standardize internationally for several reasons. First, al countries have their own distribution systems. These are usually difficult tc change because they have evolved over time and reflect countries' cultural economic, and legal environments. Such factors as the attitudes toward own-
ing one's own store, the cost of paying retail workers, labor legislation affecting chains and individually owned stores differently, legislation restricting the size of stores, the trust that owners have in their employees, the efficacy of the postal system, and the financial ability to carry large inventories are but a few of the factors that influence how goods will be distributed in a given country. Table 18.2, for example, shows factors that help to explain why supermarkets are different between Hong Kong and the United States—that is, in Hong Kong they carry a higher proportion of fresh goods, are smaller, sell smaller quantities per customer, and are located more closely to each other.
A few other examples should illustrate how different the distribution norms are. Finland, for example, has few stores per capita because of the predominance of general-line retailers, whereas Italian distribution is characterized by a very fragmented retail and wholesale structure. In the Netherlands buyers' cooperatives deal directly with manufacturers. In Japan there are cash-and-carry wholesalers for retailers who do not need financing or delivery. Mail-order sales are very important in Germany; however, Portugal has offered little as a market for mail-order development.
How do these differences affect companies' marketing activities? One soft-drink company, for example, has targeted most of its European sales through grocery stores; however, the method of getting its soft drinks to those stores has varied widely. For the United Kingdom there is one national distributor who has been able to gain sufficient coverage and shelf space so that the soft-drink firm can concentrate on other aspects of its marketing mix. For France a single distributor has been able to get good coverage in the larger
supermarkets, but not in the smaller ones; consequently, the soft-drink fin has been exploring how to get secondary distribution without upsetting th relationship with the primary distributor. Within the Norwegian market thei are regional distributors, thus the soft-drink firm is challenged in getting thei to cooperate sufficiently to enable national promotion campaigns to be effe< tive. Within Belgium the company could find no acceptable distributor, so has had to take on the functions itself.56
Domestic Rather Than International Distributors Whereas most large a< vertising and public-relations firms have become international, few who! salers and retailers have expanded their services abroad. For advertising ar public-relations firms, this has been an advantage in developing various d grees of global programs. For wholesalers and retailers, there has, of cours been some international movement (in fact, a substantial amount since tl late 1980s such as Carrefours from France), but mostly companies that a marketing abroad must rely on the services of locally controlled distributoi It is extremely difficult, especially if initial sales expectations are not ve high, to get these distributors to alter their accustomed practices to adhere some practice that the producer wishes to standardize globally.
Choosing Distributors and Channels
Internal Handling At a low level of sales it is usually more economical handle distribution through a contract with another company, but a firm rr lose a certain amount of control this way. If a company does use exten distributors, management should reassess periodically whether sales he grown to the point that they can be handled effectively internally.
In addition to a high volume of sales, some other circumstances are cc ducive to the internal handling of distribution. One of these involves the i ture of the product. When the product has any of the characteristics of hi price, high technology, and need for complex after-sales servicing (such aircraft), the producer will probably have to get involved in dealing direc with the buyer. In such a situation, the producer nevertheless may use soi type of distributor within the foreign country who will serve to identify sa leads. A second situation is when the firm is dealing with global customt such as an auto-parts manufacturer who sells original equipment to the sa: automobile manufacturers in more than one country; such sales may go rectly from the producer to the global customer. A third situation is when 1 company views its main competitive advantage to be in its distribution me ods, such as some food franchisers. Eventually they may franchise abroad 1 maintain their own distribution outlet as well to serve as a "flagship." Amv\ is an example of a firm that has successfully transferred its house-to-hoi distribution methods from the U.S. to the Japanese market under its o' control.57
Distributor Qualifications When using external channels of distribution, a company usually can choose from a number of alternatives. Four common criteria for selection include (1) financial strength; (2) good connections, (3) other business commitments; and (4) personnel, facilities, and equipment. The first is important because of the potential long-term viability of the relationship as well as for assurance that money can be put into such things as the maintenance of sufficient inventory. The second is particularly important if sales must be directed to certain types of buyers, such as government procurement agencies. The third concerns whether the potential distributor has time for a firm's product and whether competitive or complementary products now are handled. Fourth, the current status of personnel, facilities, and equipment indicates not only ability to deal with the product, but also how quickly start-up is feasible.
Spare Parts and Repair Consumers are reluctant to buy products requiring future spare parts and service unless they feel assured that these will be readily available in good quality and at a reasonable price. The more complex and expensive the product, the more important after-sales servicing is. In the 1950s, for example, some European automobile producers entered the U.S. market without ample consideration of this factor. After the European firms made some initial sales, customer "horror stories" followed, such as waiting weeks or months for parts and finding no trained mechanics. Sales dried up as a result. Volkswagen entered later and successfully invested heavily in parts depots and training as well as promotion. Where after-sales servicing is important, it may be necessary for firms to invest in service centers for groups of distributors who serve as intermediaries between producers and consumers. At the same time, sales of parts and service sometimes may be as high as sales of the original product.
Gaining Distribution Firms must do more than evaluate potential distributors. They also must choose which firms and products will get their emphasis. Both wholesalers and retailers have limited storage facilities, display space, money to pay for inventories, and transportation and personnel to move and sell merchandise; therefore, they try to carry only those products with the greatest potential profits. If a firm is new to a country and wishes to introduce products that some competitors are already selling, it may be difficult to convince distributors to handle the new brands. Even established firms sometimes may find it hard to gain distribution for their new products, although they have the dual advantage of being known and being able to use existing profitable lines as "bait" for the new merchandise.
If a firm wishes to use existing distribution channels, it may need to develop incentives for those distributors to handle the product. Firms must analyze competitive conditions carefully in order to offer effective incentives. They may need to identify problems of distributors in order to gain loyalty by offering assistance. For example, Coca-Cola has held seminars for mom-and-
Most projections are that disparities between the "haves" and "have-nots" will grow rather than diminish in the foreseeable future, both within and among countries. This is likely to mean a simultaneous growth in affluent and poor market segments. The global affluent sector will have the means of purchasing more goods and services and will not be likely to forego purchases because of antimaterialistic sentiments. Because of the growing education of this sector, more people will be knowledgeable about slight differences in the end utility of products. It will be less possible to segment along national lines to reach these consumers.
The rise in affluence and leisure of the "haves" will probably result in changes in the composition of expenditure. As these people take at least a part of productivity increases in the form of leisure, they will spend a proportionately larger amount of their incomes on entertainment, sports clothes and equipment, organization memberships, and travel. A further change will likely be a greater share of expenditures on services in relation to products.
At the other extreme will be growing numbers of poor people who will have little disposable income to spend on nonnecessities. MNEs will face increasing pressures to develop standardized products to fit the needs of these people and to produce goods by labor-intensive methods so as to employ more people. This will create operational problems because of conflicting competitive pressures to differentiate products and to cut costs through capital-intensive methods.
What products and services are likely to be major growth markets? It is generally agreed that the generation and storage of information will continue! to be one of the major growth areas during the next few decades. In addition,! it is probable that companies making breakthroughs in process technologies; to improve productivity, such as through lasers, optics, and robotics, and| those making breakthroughs in energy conservation, such as solar photo-1 voltaics, fuel cells, and coal conversion, will be among the market-growth1 leaders.
A company may accurately assess market potential, design products or ser-
and promote to likely consumers; however, it will have
likelihood of reaching its sales potential if the goods or services are not
conveniently available to customers. This includes getting goods to where people want to buy them. For example, does a man prefer to buy hair dressing in a grocery store, barber shop, drugstore, or some other type of outlet?
Distribution is the course—physical path or legal title—that goods take between production and consumption. In international marketing, a producer must decide on the method of distribution among countries as well as the method of distribution within the foreign country of sale. We have alreadj discussed many considerations for distribution, including the channels of distribution to move goods among countries, how the title to goods gets transferred, and the forms of operations for foreign-market penetration. This section does not repeat these aspects of distribution; rather, it discusses distributional differences and conditions within foreign countries that an international marketer should understand.
Difficult Standardization
Different Systems Within the marketing mix, distribution is one of the mosi difficult functions to standardize internationally for several reasons. First, al countries have their own distribution systems. These are usually difficult tc change because they have evolved over time and reflect countries' cultural economic, and legal environments. Such factors as the attitudes toward own-
ing one's own store, the cost of paying retail workers, labor legislation affecting chains and individually owned stores differently, legislation restricting the size of stores, the trust that owners have in their employees, the efficacy of the postal system, and the financial ability to carry large inventories are but a few of the factors that influence how goods will be distributed in a given country. Table 18.2, for example, shows factors that help to explain why supermarkets are different between Hong Kong and the United States—that is, in Hong Kong they carry a higher proportion of fresh goods, are smaller, sell smaller quantities per customer, and are located more closely to each other.
A few other examples should illustrate how different the distribution norms are. Finland, for example, has few stores per capita because of the predominance of general-line retailers, whereas Italian distribution is characterized by a very fragmented retail and wholesale structure. In the Netherlands buyers' cooperatives deal directly with manufacturers. In Japan there are cash-and-carry wholesalers for retailers who do not need financing or delivery. Mail-order sales are very important in Germany; however, Portugal has offered little as a market for mail-order development.
How do these differences affect companies' marketing activities? One soft-drink company, for example, has targeted most of its European sales through grocery stores; however, the method of getting its soft drinks to those stores has varied widely. For the United Kingdom there is one national distributor who has been able to gain sufficient coverage and shelf space so that the soft-drink firm can concentrate on other aspects of its marketing mix. For France a single distributor has been able to get good coverage in the larger
supermarkets, but not in the smaller ones; consequently, the soft-drink fin has been exploring how to get secondary distribution without upsetting th relationship with the primary distributor. Within the Norwegian market thei are regional distributors, thus the soft-drink firm is challenged in getting thei to cooperate sufficiently to enable national promotion campaigns to be effe< tive. Within Belgium the company could find no acceptable distributor, so has had to take on the functions itself.56
Domestic Rather Than International Distributors Whereas most large a< vertising and public-relations firms have become international, few who! salers and retailers have expanded their services abroad. For advertising ar public-relations firms, this has been an advantage in developing various d grees of global programs. For wholesalers and retailers, there has, of cours been some international movement (in fact, a substantial amount since tl late 1980s such as Carrefours from France), but mostly companies that a marketing abroad must rely on the services of locally controlled distributoi It is extremely difficult, especially if initial sales expectations are not ve high, to get these distributors to alter their accustomed practices to adhere some practice that the producer wishes to standardize globally.
Choosing Distributors and Channels
Internal Handling At a low level of sales it is usually more economical handle distribution through a contract with another company, but a firm rr lose a certain amount of control this way. If a company does use exten distributors, management should reassess periodically whether sales he grown to the point that they can be handled effectively internally.
In addition to a high volume of sales, some other circumstances are cc ducive to the internal handling of distribution. One of these involves the i ture of the product. When the product has any of the characteristics of hi price, high technology, and need for complex after-sales servicing (such aircraft), the producer will probably have to get involved in dealing direc with the buyer. In such a situation, the producer nevertheless may use soi type of distributor within the foreign country who will serve to identify sa leads. A second situation is when the firm is dealing with global customt such as an auto-parts manufacturer who sells original equipment to the sa: automobile manufacturers in more than one country; such sales may go rectly from the producer to the global customer. A third situation is when 1 company views its main competitive advantage to be in its distribution me ods, such as some food franchisers. Eventually they may franchise abroad 1 maintain their own distribution outlet as well to serve as a "flagship." Amv\ is an example of a firm that has successfully transferred its house-to-hoi distribution methods from the U.S. to the Japanese market under its o' control.57
Distributor Qualifications When using external channels of distribution, a company usually can choose from a number of alternatives. Four common criteria for selection include (1) financial strength; (2) good connections, (3) other business commitments; and (4) personnel, facilities, and equipment. The first is important because of the potential long-term viability of the relationship as well as for assurance that money can be put into such things as the maintenance of sufficient inventory. The second is particularly important if sales must be directed to certain types of buyers, such as government procurement agencies. The third concerns whether the potential distributor has time for a firm's product and whether competitive or complementary products now are handled. Fourth, the current status of personnel, facilities, and equipment indicates not only ability to deal with the product, but also how quickly start-up is feasible.
Spare Parts and Repair Consumers are reluctant to buy products requiring future spare parts and service unless they feel assured that these will be readily available in good quality and at a reasonable price. The more complex and expensive the product, the more important after-sales servicing is. In the 1950s, for example, some European automobile producers entered the U.S. market without ample consideration of this factor. After the European firms made some initial sales, customer "horror stories" followed, such as waiting weeks or months for parts and finding no trained mechanics. Sales dried up as a result. Volkswagen entered later and successfully invested heavily in parts depots and training as well as promotion. Where after-sales servicing is important, it may be necessary for firms to invest in service centers for groups of distributors who serve as intermediaries between producers and consumers. At the same time, sales of parts and service sometimes may be as high as sales of the original product.
Gaining Distribution Firms must do more than evaluate potential distributors. They also must choose which firms and products will get their emphasis. Both wholesalers and retailers have limited storage facilities, display space, money to pay for inventories, and transportation and personnel to move and sell merchandise; therefore, they try to carry only those products with the greatest potential profits. If a firm is new to a country and wishes to introduce products that some competitors are already selling, it may be difficult to convince distributors to handle the new brands. Even established firms sometimes may find it hard to gain distribution for their new products, although they have the dual advantage of being known and being able to use existing profitable lines as "bait" for the new merchandise.
If a firm wishes to use existing distribution channels, it may need to develop incentives for those distributors to handle the product. Firms must analyze competitive conditions carefully in order to offer effective incentives. They may need to identify problems of distributors in order to gain loyalty by offering assistance. For example, Coca-Cola has held seminars for mom-and-
Most projections are that disparities between the "haves" and "have-nots" will grow rather than diminish in the foreseeable future, both within and among countries. This is likely to mean a simultaneous growth in affluent and poor market segments. The global affluent sector will have the means of purchasing more goods and services and will not be likely to forego purchases because of antimaterialistic sentiments. Because of the growing education of this sector, more people will be knowledgeable about slight differences in the end utility of products. It will be less possible to segment along national lines to reach these consumers.
The rise in affluence and leisure of the "haves" will probably result in changes in the composition of expenditure. As these people take at least a part of productivity increases in the form of leisure, they will spend a proportionately larger amount of their incomes on entertainment, sports clothes and equipment, organization memberships, and travel. A further change will likely be a greater share of expenditures on services in relation to products.
At the other extreme will be growing numbers of poor people who will have little disposable income to spend on nonnecessities. MNEs will face increasing pressures to develop standardized products to fit the needs of these people and to produce goods by labor-intensive methods so as to employ more people. This will create operational problems because of conflicting competitive pressures to differentiate products and to cut costs through capital-intensive methods.
What products and services are likely to be major growth markets? It is generally agreed that the generation and storage of information will continue! to be one of the major growth areas during the next few decades. In addition,! it is probable that companies making breakthroughs in process technologies; to improve productivity, such as through lasers, optics, and robotics, and| those making breakthroughs in energy conservation, such as solar photo-1 voltaics, fuel cells, and coal conversion, will be among the market-growth1 leaders.
Comments
Post a Comment