INTERNATIONAL MARKETING DISTRIBUTION
Distribution channels represent bridges between producers and consumers in both domestic and international markets. In every country or market, be it developed or developing, products or services go through distribution channels before eventually getting to the ultimate consumer(s).
Marketing intermediaries or middlemen are therefore the marketing institutions in the channel distribution that facilitate the flow of goods and services from the manufacturers to the consumers. This can be within a country or between countries as in this case. The distribution process includes the physical handling and movement of products and or services, the passage of ownership (title) from the manufacturer to the middlemen, and to the point of consumption of the products or services.
Distribution Channel Structure:
A lot of policy and strategy channel selection issue face the international marketing manager, although these are not completely different from those that face domestic distribution. However, challenges and the resolution of the issues differs because of various channel alternatives, the difference in the socio-economic. political and environmental factors that impact on international market.
One of such issues has to do with the distribution structure within which are variety of middlemen whose customary functions / activities are influenced by the existing competition, market characteristics, culture, economic development, the political disposition of the country among other things.
In other words, despite similarities, marketing channels are not the same all over the world, because the behaviour of channel members (i.e. middlemen) is the result of the interactions between the socio-cultural environment and the marketing activities.
Simple distribution channel
The above diagram is a simple distribution channel that illustrates the flow of goods from the producer or manufacturer to the distributor or agent, who in turn supplies the products to the wholesaler, retailer and to the foreign consumer. It is important to note that the flow or movement of goods and services are not as simple or straightforward as illustrated above. For instance, the manufacturer can bye-pass the distributor, wholesaler, retailer, and deal directly with the consumer.
The second diagram illustrate alter-natives distribution channels in international marketing. In the case of the multi international channel distribution diagram above, the producer or marketer deal with the wholesaler/middlemen/agent company or the exporter within the home country. Alternatively, the producer can deal with tfie importer in the foreign market or country. Similarly, any of the middlemen (i.e. wholesaler, agent or importer) in the home country can also deal with any of the middlemen or the consumer in the foreign country.
Import-Oriented / Mass-Consumption Distribution Structure
In the developing countries like Nigeria, the channel distribution structure has a strong dependence on imported manufactured goods. This traditional channel structure of import-oriented distribution controls considerable amount of goods in the market. It has the marketing philosophy of selling a limited supply of goods at a high price to a small number of affluent customers.
This results to seller’s market, which make market penetration and mass distribution not really necessary since demand here exceeds supply in most cases customers here, seek the supplier.
The middlemen in this import-oriented structure are fewer in number.
On the other hand, the mass consumption distribution channel is associated with developed or industrialized nations like USA. In this distribution channel, one supplier docs not dominate supply, supply can be increased or decreased within a time. Generally, this is referred to as a buyer’s market, and the manufacturer endeavours to enter the market by pushing the goods lo the consumers through variety of intermediaries such as wholesaler, agent, exporter, importer, retailer or consumer.
Modern Channel Structure
It is important to note that in this twenty-first century many countries are affected by the current global economic and political changes, which also impact on the distribution structure.
The trends from ”traditional to modern channel structures” bring about pressures on marketers who then seek ways to form, new alliances, and new process that will enhance profitability than in the market segments that are served by costly traditional distribution systems.
Direct marketing, door-to-door selling, hypermarkets, discount houses, shopping malls, catalog selling. E-commence through the internet, and other distribution methods are some of the new modern channel structures being introduced with the aim of providing efficient distribution channels. Middlemen/Intermediaries:
Middlemen are independent business concerns that operate as a link between producers or manufacturers of goods and services, and the ultimate consumer.
There are two types of middlemen: merchant middlemen and agent middlemen.
Merchant Middlemen: These are the middlemen lat have title of the goods and service they market. Distributors are also other merchant middlemen.
Agent Middlemen: These are the middlemen that do not take title of the goods and services they market. Agent is a representative of a principal or the producer.
Agents are paid commission for the goods they sell, and any unsold product can be returned to the manufacturer. They usually handle products for more than one product line. The merchant or agent middlemen’ can be located in the same country with the manufacturer of the products they handle, or may be in another country (foreign country) where the consumer resides.
Wholesalers and retailers are two examples of merchant middlemen
Wholesalers: These are examples of merchant middlemen who buy products in large quantity from manufacturers, and sell in small quantity to the retailers.
Retailers: This is another example of merchant middlemen who buy in small quantity from the wholesaler on manufacturer, and sell in smaller quantities to the consumer or users of the products.
It is important to note that both the wholesaler and the retailer can be located in the same country as the manufacturer, or be in another country (foreign country; as the consumer of the product.
Retailing in Some Countries
Retailing all over the world has been in different forms or nature for several years. The form of retailing appears to be directly related to the state or level of economic development of a given nation.
For instance according to Catcora and Graham (1999), in Itali and Morocco, retailing is composed of specialty houses which carry narrow lines, while in Finland, most retailers carry a more general line of products. Retail si/c • represented at one end by Japan’s giant Mitsukoshi Ltd.which was said to enjoy the patronage of more than or:: hundred thousand customers every day. On the other extreme is represented in the market of Ibadan. Nigeria, where one or two retail stores serve some three thousand customers.
Factors Impacting on Choice of Channels: International Marketers need a general knowledge or awareness of factors that affect distribution channels in the global market. This is because it may be easy to assume that the structural distribution patterns of domestic and foreign channels are similar, therefore the domestic can be used in the foreign. This is misleading, hence international marketers needs a clear understanding of both domestic and foreign market characteristics before adopting operating policies or selecting the type of distribution, channel for their company.
Some issues to be considered before choosing a channel include:
Identify a define target markets within and across national boundaries.
State marketing goals in terms of quantity market share, the required profit margin, and the function of channel members.
Define the financial and human resource needed for the development of channel of distribution in the foreign country(ies).
The extent of channel control, length of channels, terms of sale, and channel ownership should be identified and defined.
Identify and evaluate alternative channels, as to appreciate which is the next best alternative channel.
Similarly, companies that are successful in the attainment of channel objectives in their international marketing give serious consideration to the six-channel strategy: cost, capital, control, coverage, character and continuity.
Cost: The cost to be considered here has to do with the capital or investment cost of developing the channel, or the cost of maintaining the investment. The cost of maintaining the investment include; selling force personnel cost. Product handling cost, middlemen handling cost, transportation cost, storing cost, advertising cost, and other marketing cost.
Some marketers try to reduce some of the above costs, by eliminating some middlemen in the channel. Firms must do this with caution, considering its capability, the advantage and disadvantage of using shorter channels.
Capital: Another important factor in the distribution policy of companies is the financial requirement. This has to do with cash – flow requirement associated with the company establishing its own internal channels, using distributors or agents.
Control: Some companies like to be involved in the distribution of its products, as to maintain some degree of control over the movement of its products. Although the more involve a company is in the channel system the more cost it will incur. Different channels arrangement provides peculiar challenge and level of control, which include the ability to control price, volume, and promotion, among others.
Coverage: Coverage may be assessed on the bases of geographic or market segments. Adequate market coverage may require changes in the distribution systems from one country to another country, and from time to time. The major objective of a successful channel is the full-market coverage that is, gain the optimum or maximum volume of sales obtainable in a given market, secure a reasonable market share, and attain desired market penetration.
Character: It is necessary to appreciate that companies have characters or peculiarities, therefore distribution channels to be used must be made to fit into the character of the company. On the product requirements for instance, the factors to be considered may be perishability, bulk of the product, complexity of sale, sales services required etc.
Continuity: Continuity in channel distribution is a necessary policy, companies must put into consideration when making decisions on choice of channel. This is because channel of distribution most limes pose continuity problems] Wholesalers, more particularly the retailers are not usually loyal or committed for continuity in channel distribution.
They handle brands in good times, when the line or brand is Baking good returns, but they quickly reject or change such products when the return is not profitable any more – may be when it is not the product’s season to bring in high returns.
Distributors and agents are more committed or loyal middlemen. However, it is important for manufacturers to aim at building brand loyally also from wholesalers and retailers.
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