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International Marketing

15th edition

Philip R. Cateora, Mary C. Gilly, and John L. Graham

Channel-of-Distribution
Structures
All consumer and industrial products eventually
go through a distribution process
Physical handling and distribution of goods
Passage of ownership
Buying and selling negotiations between
producers and middlemen
Buying and selling negotiations between
middlemen and customers

Each country market has a distribution structure


Goods pass from producer to user
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Import-Oriented
Distribution Structure (1 of 2)
In an import-oriented or traditional distribution
structure:
Importer controls a fixed supply of goods
Marketing system develops around the
philosophy of selling a limited supply of goods at
high prices to a small number of affluent
customers

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Import-Oriented
Distribution Structure (2 of 2)
Demand exceeds supply
The customer seeks the supply from a limited
number of middlemen
Distribution systems are local
Few countries fit the import-oriented model

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Japanese Distribution
Structure (1 of 2)

Four distinguishing features


High density of middlemen
Channel control
Business philosophy
Large-scale retail store law
Changes in the structure

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Japanese Distribution
Structure (2 of 2)
1. A structure dominated by many small
middlemen dealing with many small retailers
2. Channel control by manufacturers
3. A business philosophy shaped by a unique
culture
4. Laws that protect the foundation of the system

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High Density of Middlemen


Not unusual for consumer goods to go through
three or four intermediaries before reaching the
consumer
Japan has a large number of independent
groceries and bakers (94.7% or all retail stores)
Small stores account for 59.1% of retail food sales

U.S. emphasis is on supermarkets, discount food


stores, and department stores
Small stores generate 35.7% of food sales
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Channel Control

Inventory financing
Cumulative rebates
Merchandise returns
Promotional support

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Business Philosophy
Emphasizes loyalty, harmony, and friendship
Supports long-term dealer-supplier relationships
The cost of Japanese consumer goods are among
the highest in the world
Japanese law gives the small retailer enormous
advantage over the development of larger stores

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Large-Scale Retail Store Law


and Its Successor
Daitenho the Large-Scale Retail Store Law
Large stores must have approval from the prefecture
government
All proposals first judged by the Ministry of International
Trade and Industry (MITI)
If all local retailers unanimously agreed, the plan was
approved
Could be a lengthy process
Applied to both domestic and foreign companies

Replaced by the Large-Scale Retail Store Location Act of


June 2000
MITI out of the process
Relaxed restrictions
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Alternative Middleman
Choices
Seller must exert influence over two sets of
channels
One in the home country
One in the foreign-market country

Agent middlemen represent the principal


rather than themselves
Merchant middlemen take title to the goods
and buy and sell on their own account

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International
Channel-of-Distribution Alternatives
Exhibit 15.3

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Channel Management
Locating middlemen
Selecting middlemen
Screening
The agreement

Motivating middlemen
Terminating middlemen
Controlling middlemen

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Logistics (1 of 2)
Logistics management is a total systems approach
to the management of the distribution process that
includes all activities involved in physically
moving raw material, in-process inventory, and
finished goods inventory from the point of origin
to the point of use or consumption
The physical distribution system involves more
than the physical movement in goods; it includes
the location of plants and warehousing,
transportation mode, inventory quantities, and
packing
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Logistics (2 of 2)
Substantial savings can result from the systematic
examination of logistics costs and the calculation
of total physical distribution costs
The concept behind physical distribution is the
achievement of the optimum (lowest) system cost,
consistent with customer service objectives of the
firm
One of the major benefits of the European Unions
unification is the elimination of transportation
barriers among member countries
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