International Marketing Notes

INDIAN INSTI. OF PLANNING & MANAGEMENT AHMEDABAD. SATURDAY, 25 th OCTOBAR,2 0 0 8 IM-8 * International Channels of Distribution INTERNATIONAL MARKETING

Dr. PRADIP DESAI B.E. ,M.B.A. (I.I.F.T.), LL.B., Ph.D.(Management-U.S.A.),CMC CERTIFIED MANAGEMENT CONSULTANT ( C.M.C.) CHAIRMAN & C.E.O.

MOUN MARKETING CONSULTANTS { EXPORTS -MARKETING-IMPORTS -PROJECT-MGMT. CONSULTANTS}

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Theory of CHANNELS OF DISTRIBUTION • Channels of distribution available in a country depends upon its stage of Economic development. In developed countries : • Developed markets have more dist.channels • The Influence of Foreign Import agent is reduced • Mfr.-Wholesaler(WS)-Retailer becomes separated • Financing functions of WS declines & markup increases • No.of small stores decline & size of super market store increases Moun Marketing Consultants

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Flow chart of selected Distri.channels • Food mfr.:Primary Wholesaler(PWS)> Semi WS (SWS)>Distributor>Dealers>Grocery stores/Mass Merchandiser /Retailers/ Pop & Mom stores(PMS) • Pharma.Mfr.:PWS>SWS>Distributor>Pharmacy/ drug store/consumer/direct mail order-onLine(btoc) • Cosmetic Mfr.:Mfr.sales co/co.outlet-PWS> SWS>Drug store/Retail chain/Mass Mercha./b to c *FMCG:Mfr.saleco.>WS>Distributor>dealers>retail Moun Marketing Consultants

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A. Indirect channels of Distribution 1. Export Management cos.(EMC) 2. Mfrs. Export Agents (MEA)-usually local 3. Web-Pomerene Associations (WPA) in USA 4. Commission Agent(CA)-usually appointed abroad 5. Foreign Freight Forwarder (FFF) 6. Country-controlled Buying Agents(CCBA) 7. Trading Houses/Export Houses( TH/EH)Japan was FIRST e.g.-Mitsubishi-Marubeni corp Moun Marketing Consultants

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1.Export Management co.(EMC) • It is an independent export organisation that serves different allied but non-competing cos.It operates under the clients name using client’s stationery & catalogues & promotional materials. • EMC is very good for SME sector who can not afford high overhead costs of Exporting • EMC knows specific products’ competition level, foreign culture,politics,logistics,taxation & Legal issues & are having experienced & skilled export managers well versed in Export Documentation. Moun Marketing Consultants

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2.Mfrs.Export Agents(MEA) • MEA provide services similar to EMC but the difference is they cover limited export markets & they operate in their own name. • MEA get commisssion from mfrs.for the services rendered for exports. • EMC usually represent a large PRICIPAL Mfrs.for many export markets but MEA represents several cos.& usually for short duration or even on specific order basis • Large export oriented Mfrs.prefer EMC overMEA Moun Marketing Consultants

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3 .Webb-Pomerene Association(WPA) • USA : WPA is the Association of Competing Mfg. cos. WPA in USA under the Webb-Pomerene Act,1918 allowing cos. To form cartel for export for common price,combine Shipment,carry out JT.market research or allocate bulk orders to members. • They are exempt from Anti-trust law which does’nt allow formation of cartels & price fixation for any markets & encourages free competition among all mfrs. & exporters. • In India, co-operative societies are encouraged to form Export co-operatives & CLUSTERS are formed for specific products e.g.CERAMICS-Morbi,Dyes-A’BAD Moun Marketing Consultants

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4. Commission Agents(CA) •

Commission Agents are appointed in each export markets by the Mfrs. • They provide following services : c) Market info. & market research d) Competitor’s prices & market share e) Books orders & sends payments f) Generally looks after interests of their Principals abroad fro a small % commisssion depanding upon the product. Moun Marketing Consultants

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5. Foreign Freight Forwarder (FFF) • FFF specialize in handling Shipping arrangements for export cargo • They get their commission/fees from the Shipping co. thro’ whom cargo is booked. • They are called Freight Brokers(FB)in India • May times they do re-packing at ports I which case they are paid by Exporter Moun Marketing Consultants

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6. Country-controlled Buying Agent • CCBA are the official Buying Agents of the foreign govt. for specified goods • Many developing countries maintain a `SUPPLY Mission’at TheirEmbassy abroad for procuring specific goods. * Many developing commonwealth countries appoint U.K.firms as their Buying Agents & developing countries’ buyers have their Confirming House who open L/c. for them & receives export documents & in turn bill to actual users in country of destination port. Moun Marketing Consultants 10

7. Trading Houses/Export Houses(TH/EH) • USA:AMERICAN TRADING CO.(ATC) ATC is formed under Export Trading co.Act,1982.* JAPAN: 1 st to develop large THs • To increase exports by providing more efficient export trade services to mfrs./ suppliers by providing trade finance & removing disadvantage of Anti-trust act • In India-EXPORT HOUSE & STAR TRADING HOUSE scheme provides special Incentives by way of Duty-free Imports on total value of export. Moun Marketing Consultants

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B.Direct Channels of Distribution • SalesRepresentative(SR):Mfrs.Rep.workonCommission & assume no risk/ responsibility for payments & simply pass sales leads or orders to their Principals. • PurchasingAgents(PA):They are also called Buyers for exports or export confirming houses.They are active for their Principals • Export Broker(EP):Brings the foreign buyer/seller to meet & gets small % commission from seller/exporter. • Foreign Merchant Intermediaries:Export Distributor /Foreign Retailer/Export Jobber for unbrandedProduct • Trading co.:East-India co. came to India & ruled later. • Company owned Distribution channels/retail outlets Moun Marketing Consultants 12 abroad.

Adv./dis adv. Direct/Indirect channels of Distribution • Direct channel/ agent is better since more mgmt control is exercised. • Indirect channel agent may not give correct mkt. Info./deal with competitor’s products also from same /group co. * Direct is expensive whereas Indirect is cheaper method. Moun Marketing Consultants

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