Question

What are the factors affect the choice of distribution channels in international marketing? Discuss, in detail, the logistics in international marketing? In brief, why do you think that channel of distribution is the most critical and challenging task facing the international marketer? Justify your answers through related examples.

Answer 1

Question 1

Various constituents of the marketing mix like promotion etc., are closely related to the channels of distribution. A wrong choice of distribution channel ultimately increases the price of the product. Deciding a proper channel of distribution is not an easy task. It involves a careful study and consideration of many factors stated below.

(1) The Nature of the Product:

These factors include the physical characteristics of a product and its impact on the selection of a particular channel of distribution.

Various factors under this category are:

(a) Perishability:

Products that are perishable in nature are distributed by employing a shorter channel of distribution so that goods could be delivered to the consumers without delay. Delay in the distribution of these products will deteriorate their quality.

(b) Size and weight of the product:

Bulky and heavy products like coal and food grains etc. are directly distributed to the users involve heavy transportation costs. In order to minimize these costs a short and direct distribution channel is suitable.

(c) The unit value of a product:

Products with lesser unit value and high turnover are distributed by employing longer channels of distribution. Household products like utensils, cloth, cosmetics etc. take longer time in reaching the consumers. On the other hand, products like jewellery having high product value are directly sold to consumers by the jewellers.

(c) Standardisation:

Products of standard size and quality usually take longer time by adopting longer channels of distribution. For example, machine tools and automobile products which are of standard size reach the consumer through wholesalers and retailers. Un-standardized articles take lesser time and pass through shorter channels of distribution.

(e) Technical Nature of Products:

Industrial products which are highly technical in nature are usually distributed directly to the industrial users and take lesser time and adopt shorter channel of distribution. In this case, after-sales service and technical advice are provided by the manufacturer to the consumers.

On the other hand, consumer products of technical nature are usually sold through wholesalers and retailers. In this manner, a longer channel of distribution is employed for their sales. After-sales services are provided by wholesalers and retailers. Examples of such products are televisions, scooters, refrigerators, etc.

(f) Product Lines:

A manufacturer producing different products in the same lines sells directly or through retailers and lesser time is consumed in their distribution. For example, in case automobile rubber products this practice is followed. On the other hand, a manufacturer dealing only in one item appoints sole selling agents, wholesalers, and retailers for selling the product.

(g) A number of prospective buyers:

If the number of buyers is likely to be more, the distribution channel will belong. On the other hand, if the number of consumers is expected to be less, the manufacturer can effectively sell directly to the consumers by appointing salesmen.

(h) The geographic concentration of the market:

Where the customers are concentrated at one particular place or market, the distribution channel will be short and the manufacturer can directly supply the goods in that area by opening their own shops or sales depot. In the case where buyers are widely scattered, it is very difficult for the manufacturer to establish a direct link with the consumers, services of wholesalers and retailers will be used.

(i) Government Regulations and Policies:

Government policies and regulations also influence the choice of distribution channels. The Government may impose certain restrictions on the wholesale trade of a particular product arid take over the distribution of certain products. All these restrictions have a direct impact on selecting the channel of distribution.

Question 2

logistics is the management process of 'planning, implementing, and controlling the physical and information flows concerned with materials and final goods from the point of origin to the point of usage.' International logistics involves the management of these resources in a company's supply chain across at least one international border.

Conceptual Framework

It may sound complicated, but logistics is basically the management of stuff, and information regarding the stuff, from one place to another until it reaches the consumer. The logistical management of physical items may include the integration of information (such as inventory databases and shipping schedules), material handling, production, packaging, inventory, transportation, distribution, storage, and security for the resources.

Example of International Logistics

Let's look at a simple example. Just pretend for a moment that you work as a logistics manager for a large American jewelry company based out of New York. Your company has an extensive international supply chain. We'll walk through a simplified logistical process for a diamond ring.

Your diamond supplier is in South Africa. You get your gold from a supplier in China. The jewelry itself is assembled in Switzerland. Your job is to manage the supply chain from the acquisition of a resource through its transformation into a finished product and until it is sold to a customer. Your responsibilities may include the following:

• Oversight of the purchase of diamonds in South Africa and gold necessary from China to fulfill the company's production demands
• Arranging for the temporary warehousing of the purchased diamonds and gold at local storage facilities
• Arranging for the international shipping of the gold stored in China to a subsidiary in a small Eastern European country, where the gold will be refined and prepared for the jewelers in Geneva
• Arranging for the international shipping of the diamonds stored in South Africa to the company's facilities in Geneva for cutting and polishing
• Arranging for the international shipping of the refined gold to the company's Geneva facility to create rings and settings
• Once the rings are finished, arranging for their warehousing at the company's central warehouse until they are needed to fill orders, keeping meticulous computerized inventory records, and ensuring the facility is adequately secured
• Arranging for the shipment of an order of diamond rings to the company's flagship Manhattan retail store
• Continued monitoring of the inventory at the retail store until the product is sold to a customer

Question 3

n a world where geographic boundaries are blurring, conquering overseas markets doesn’t have to be such a tough proposition. It does raise some new operational issues for your business though, including whether this is something you should tackle yourself or engage the services of a local agent or distributor, which is why we’ve broken down some of the big issues to make international distribution sound less overwhelming, and more achievable.

• Inaccurate Stock Management
• Dependency on the reports
• Unknown Market
• No proper track on the movement of goods
• Fluctuation of prices
• Vulnerability to changing prices