Вы находитесь на странице: 1из 11

Distribution plays a key role in the success of international marketing strategy.

It ensures that a
company can deliver products and services to international customers efficiently and cost
effectively. Members of the distribution channel also provide an important local marketing
resource that enables a company to increase market share or enter new markets with the backing
of local knowledge and established business relationships. Companies developing a global
branding strategy can use a distribution channel to extend their brand into new territories.
The influence of the globalization of markets extends beyond the global Brand, products and
advertising. Global brand and global product efficiencies achieved through global market
strategy can be limited if products reach the target market through inefficient distribution
systems. Although the global marketer seeks the most effective and direct distribution network,
choices are limited by the existing distribution structures within a country market.
To complete the component of the marketing mix, in addition to the product development,
pricing, and promotion, and to get the product to the target market, channels of distribution must
be developed. every country or target market area presents the international marketer with unique
middle men and distribution patterns. The challenge for the international marketer is to forge
channels from available middlemen that effectively meet the needs of the target market.
The ultimate goal is to ensure that target markets receive the product in the manner that lead to
customer satisfaction. This means that the seller must exert influence over two sets of channels,
one in the home country and one in the market country. In the home country the seller must have
an organization to deal with the channel members needed to move the products between
countries. In the foreign country the seller must also supervise the channels that supply the
product to the end user.
Goods produced in factories and or commodities produced in agriculture must reach consumers.
The systems by means of which goods reach the consumer are known as distribution channels.
These are organizations that facilitate the sale and movement of products. The totality of all
distribution channels forms a distribution network. Distribution is a very complex system but can
be conceptually divided into four major categories:
1) market makers,
2) sellers,
3) transporters, and
4) hybrids.
Distribution: Channels and Logistics
Distribution involves getting the product from the manufacturer to the ultimate consumer.
Distribution is often a much underestimated factor in marketing. Many marketers fall for the trap
that if you make a better product, consumers will buy it. The problem is that retailers may not be
willing to devote shelf-space to new products. Retailers would often rather use that shelf-space
for existing products have that proven records of selling.
Distribution channels move products and services from businesses to consumers and to other
businesses. Also known as marketing channels, channels of distribution consist of a set of
interdependent organizationssuch as wholesalers, retailers, and sales agentsinvolved in
making a product or service available for use or consumption. Distribution channels are just one
component of the overall concept of distribution networks, which are the real, tangible systems
of interconnected sources and destinations through which products pass on their way to final
consumers. As Howard J. Weiss and Mark E. Gershon noted in Production and Operations
Management, a basic distribution network consists of two parts: 1) a set of locations that store,
ship, or receive materials (such as factories, warehouses, retail outlets); and 2) a set of routes
(land, sea, air, satellite, cable, Internet) that connect these locations. Distribution networks may
be classified as either simple or complex. A simple distribution network is one that consists of
only a single source of supply, a single source of demand, or both, along with fixed
transportation routes connecting that source with other parts of the network. In a simple
distribution network, the major decisions for managers to make include when and how much to
order and ship, based on internal purchasing and inventory considerations.
In short, distribution describes all the logistics involved in delivering a company's products or
services to the right place, at the right time, for the lowest cost. In the unending efforts to realize
these goals, the channels of distribution selected by a business play a vital role in this process.
Well-chosen channels constitute a significant competitive advantage, while poorly conceived or
chosen channels can doom even a superior product or service to failure in the market.
MULTIPLE CHANNELS OF DISTRIBUTION
For many products and services, their manufacturers or providers use multiple channels of
distribution. A personal computer, for example, might be bought directly from the manufacturer,
either over the telephone, direct mail, or the Internet, or through several kinds of retailers,
including independent computer stores, franchised computer stores, and department stores. In
addition, large and small businesses may make their purchases through other outlets.
Channel structures range from two to five levels. The simplest is a two-level structure in which
goods and services move directly from the manufacturer or provider to the consumer. Two-level
structures occur in some industries where consumers are able to order products directly from the
manufacturer and the manufacturer fulfills those orders through its own physical distribution
system. In a three-level channel structure retailers serve as intermediaries between consumers
and manufacturers. Retailers order products directly from the manufacturer, then sell those
products directly to the consumer. A fourth level is added when manufacturers sell to
wholesalers rather than to retailers. In a four-level structure, retailers order goods from
wholesalers rather than manufacturers. Finally, a manufacturer's agent can serve as an
intermediary between the manufacturer and its wholesalers, creating a five-level channel
structure consisting of the manufacturer, agent, wholesale, retail, and consumer levels. A five-
level channel structure might also consist of the manufacturer, wholesale, jobber, retail, and
consumer levels, whereby jobbers service smaller retailers not covered by the large wholesalers
in the industry.
BENEFITS OF INTERMEDIARIES
If selling directly from the manufacturer to the consumer were always the most efficient
methodology for doing business, the need for channels of distribution would be obviated.
Intermediaries, however, provide several benefits to both manufacturers and consumers:
improved efficiency, a better assortment of products, routinization of transactions, and easier
searching for goods as well as customers.
The improved efficiency that results from adding intermediaries in the channels of distribution
can easily be grasped with the help of a few examples. Take five manufacturers and 20 retailers,
for instance. If each manufacturer sells directly to each retailer, there are 100 contact linesone
line from each manufacturer to each retailer. The complexity of this distribution arrangement can
be reduced by adding wholesalers as intermediaries between manufacturers and retailers. If a
single wholesaler serves as the intermediary, the number of contacts is reduced from 100 to 25:
five contact lines between the manufacturers and the wholesaler, and 20 contact lines between
the wholesaler and the retailers. Reducing the number of necessary contacts brings more
efficiency into the distribution system by eliminating duplicate efforts in ordering, processing,
shipping, etc.
In terms of efficiency there is an effect of diminishing returns as more intermediaries are added
to the channels of distribution. If, in the example above, there were three wholesalers instead of
only one, the number of essential contacts increases to 75: 15 contacts between five
manufacturers and three wholesalers, plus 60 contacts between three wholesalers and 20
retailers. Of course this example assumes that each retailer would order from each wholesaler
and that each manufacturer would supply each wholesaler. In fact geographic and other
constraints typically eliminate some lines of contact, making the channels of distribution more
efficient.
Intermediaries provide a second benefit by bridging the gap between the assortment of goods and
services generated by producers and those in demand from consumers. Manufacturers typically
produce large quantities of a few similar products, while consumers want small quantities of
many different products. In order to smooth the flow of goods and services, intermediaries
perform such functions as sorting, accumulation, allocation, and creating assortments. In sorting,
intermediaries take a supply of different items and sort them into similar groupings, as
exemplified by graded agricultural products. Accumulation means that intermediaries bring
together items from a number of different sources to create a larger supply for their customers.
Intermediaries allocate products by breaking down a homogeneous supply into smaller units for
resale. Finally, they build up an assortment of products to give their customers a wider selection.
A third benefit provided by intermediaries is that they help reduce the cost of distribution by
making transactions routine. Exchange relationships can be standardized in terms of lot size,
frequency of delivery and payment, and communications. Seller and buyer no longer have to
bargain over every transaction. As transactions become more routine, the costs associated with
those transactions are reduced.
The use of intermediaries also aids the search processes of both buyers and sellers. Producers are
searching to determine their customers' needs, while customers are searching for certain products
and services. A degree of uncertainty in both search processes can be reduced by using channels
of distribution. For example, consumers are more likely to find what they are looking for when
they shop at wholesale or retail institutions organized by separate lines of trade, such as grocery,
hardware, and clothing stores. In addition, producers can make some of their commonly used
products more widely available by placing them in many different retail outlets, so that
consumers are more likely to find them at the right time.
- Intermediaries can provide economies by reducing the amount of work that must be done by
both producers and consumers. Intermediaries transforms the assortments of products made by
producers into assortments wanted by consumers. In making products and services available to
consumers , channel members add value by bridging the major time, place and possession gaps
that separate goods and services from those who use them.

- Intermediaries help producers complete transaction by: Information: gathering and distributing
marketing research and intelligence information needed for planning and aiding exchange.
Promotion: developing and spreading persuasive communications about an offer. Contact:
finding and communicating with prospective buyer. Matching: shaping and fitting the offer to
the buyers needs including activities such as manufacturing, assembling, grading and packaging.
Negotiation: reaching an agreement on price.
-Intermediaries help producers fulfill transaction by: Physical distribution: transporting and
storing goods. Financing: acquiring and using funds to cover the costs of the channel work.
Risk taking: assuming the risk of carrying out the channel work.
PARTICIPANTS IN DISTRIBUTION
Market Makers
Market makers are organizations that provide either a real or virtual place where goods may be
bought and sold. Classical example are the farmer's market, considered as the entity that actually
rents space to farmers for their stalls, a stock market that controls who may or may not trade by
selling seats on its exchange, a shopping mall that makes its money by leasing space to stores at
the mall. Markets need not be places. Therefore catalog publishers and web-based sellers are
also "market makers." A pure form of a web-based market maker is the stock exchange. The
Lusaka Stock exchange for example, itself does not sell anything; it hosts a selling and buying
community. The distribution function fulfilled by market makers is the aggregation in a real or
virtual place of diverse and competing sellers. Thus market makers provide a convenience to the
customer who likes to compare many competing products with the least amount of trouble.
Ininternational marketing this has made things a lot easier as the seller already has the channel
and intermediaty through which the goods will be sold, the stock exchange
Sellers and Resellers
Selling organizations either purchase and own the goods they sell or they fulfill a selling function
without ownership. If they are in the first category, they will be called distributors, wholesalers,
jobbers, retailers, or dealers. If sellers are in the second category, they will be called brokers,
traders, rep organizations, and agents. The distinction between these categories is all important
from the producer's point of view. "Purchasing and owning" sellers are the most desirable
because they take possession and cannot return the merchandise. Sales agents just represent: they
take no ownership risk.
Transporters
Central to every distribution system, but usually least talked about, is the community of
organizations that physically store and move the goods. These elements may be owned by sellers
or producers; most often they are independently owned. The Post Office and commercial freight
carriers, or instance, are important players. Transporters operate warehouses and provide ground,
water, and air transport services. All these are intermediaries that need to be managed by the
international marketer
Hybrids
Some of the functions described above are mutually exclusive. A seller either owns merchandise
or does not. Other roles, however, are more easily combined and traditionally have been. A
grocery store is thus the merging of an old farmers market and a dry goods market into a single
enterprise that now "makes its own market" and also owns all the merchandise it sells. Major
grocery chains also tend to own all or part of the transportation system they use. In the modern
environment a large shopping mall is a market of markets, each store within it being itself an
assembly of many types of merchandise that, once, were sold in separate markets. A restaurant is
the best example of a small "hybrid." It creates its own market by offering a diversity of foods; it
combines the production function by cooking the food and the selling function by offering it for
sale on site. Most diverse stores such a grocery chains, drug stores, department stores, and major
discounters are hybrids in that they make a market but also own and sell the merchandise. The
ice cream vendors selling in the city from a little truck combines seller and transporter roles in a
hybrid distribution mode.

The best promotion or marketing, however, will not get the product bought if it is being sold or
distributed in the wrong place. For example, a company that makes curial products that has its
flagship store in an area like Lusaka probably will not have many of its products because the
demand is not there. The distribution channel should be matched against its buyers. Once
businesses determine where their customers are, they should make sure to have their distribution
channel flow directly there. So a small company selling curial products might open a retail shop
near to toursit resorts as opposed to the middle of a city, far from resorts. It might not be possible
for small companies to use all the distribution channels available, from a retail shop to a catalog
sales to direct sales, because they are unable to pay to run all of them. Small companies will need
to select the best distribution channels they can afford to keep open.
The international marketer needs clear understanding of market characteristics and must have
established operating policies before beginning the selection of channels meddlemen.
The following factors should be addressed prior to the selection process:
1. Specific marketing goals, expressed in terms of volume, market share and profit margin
requirements.
2. Specific financial and personal commitments to the development of international
distribution
3. Question of control, length of channels, terms of sale, and channel ownership
Factors affecting choice of Channels
Distribution channels vary depending on market size, competition, and available distribution
intermediaries. The following elements therefor should be considered when making a decision
1. Functions to be performed by middlemen
2. Cost of middle mens services
3. Avaiability of middlemen in a particular foreign country
4. The extent of control which the manufatcturer will exert over the middlemens activity
Besides the companys overall goals, in the short and long run the distribution channel strategy
is considered to have six specific strategic goals. These goals can be characterized as the six
Cs of channel strategy. These are: costs,capital,control, coverage,character, and continuity.
Each of these must be considered in building an economical and effective distribution network
1 Cost
We encounter two kinds of channel costs
1. The capital or investment cost:- cost of developing the channel and the continuing cost of
maintainance of the companys selling force or in the margins, markup , or commission
of various middlemen handling the goods
2. Marketing cost: -these must be considered, for example the entire diffenrecne between
the factory price of the goods and the price the customer ultimately pays for the
merchandise. The cost of middlemen include transporting and storing of goods, break
bulk handling, paperwork, handling credit and local advertising, sales representationand
negotiation.
Despite the old channel truism that you can eliminate middlemen but you can not eleimnate
their functions or costs, creative marketing does permit channel cost savings in many
cirmstances. Some marketers have found out that infact they can reduce costs by many
shorter channels
2 Capital requirements
The financial commitments of a distribution policy are often overlooked. Two critical elements
are capital requirements and cash flow patterns associated with using a particular type of
iddlemen.
-Maximum investment is usually required when a company establishes its own internal channels,
its own sales force.
- The use of distributors or dealers may lessen the cash investment, but manufacturers often
provide initial inventories on consignment, loan floor plan or other arrangements.
- Agent middlemen may require no investemet but are sometimes subsidized by the company
during an introductory period
- Distributirs an d dealers unike agents provide immediate cash flow when they purchase
theproducts
3 Control
Companies often involve themselves deeply in the distribution of their own goods to improve
control of their marketing destinies.
-It is generally conceded that the companys own sales force permits maximum control even
though it imposes additional costs
- As channels of distribution grow longer, the ability to control price, volume, promotion
methods and type of outlet is diminished. Some companies give up any attempt to control the
end destiny of their products and are satisfied to place the goods in the hands of the middlemen
who pass them on for international distribution. Cocacola however is one company that has
managed to continue to control its distribution channels.
4 Coverage
Another major goal to fullmarket coverage is
- Gain the optimum volume of sales obtained in each market
- Secure a reasonable market shares
- Attain satisfactory penetration
Coverage ay be assessed on geographical or ither matket segments. Adquate market coverage
may require changes in the distribution system from country to country or time to time..
Coverage is difficulty to develop both in high in highly developed areas and in sparse markets
because of heavy competition and the latter because of inadequate channels. Coverage also
includes the concept of full representation for all lines a company wishes to sale within a given
market. Sometimes middlemen take on more lucrative parts of line than the one the
manufacturer wants to emphasise.
5 Character
The channel of distribution system chosen must fit the character of the company and the market
in which it is doing business. Matching the character of the producer and middlemen may be a
more difficulty task , sometimes meshing up the two characters is so impossible that companies
have given up markets rather than compromise company standards. In other instances company
standards have been adhered to and local channel characteristics ignored with resulting
distribution disasters. Channel scommanders must be aware of the fact that channel partners
change, they can not assume that once a channel has been established to fit character of both
company and market that no more needs to be done.
6 Continuity
Channels of distribution often pose longevity problems. Most agent middlemen firms tend to be
small institutions. When one individual retires or moves out of the line of business , the company
may find it has lost its distribution in that area.Whole sales and especially retailers are not noted
for their continuity in the business either. Most middlemen have little loyalty to their vendors as
tey quickly reject products which are no longer lucrative as they used to be. The middle men may
also switch their loyalty to other companies or to other inducements. If a channel is to perform
consistently well, it must have continuity and this reason alone has prompted some companies to
develop their own company controlled distribution organization.
Using foreign country middlemen moves the manufacturer closer to the market and onvolves the
company more closely with problems of language, physical distribution,communication and
financing.
Foreign middlemen may be agents or merchants. They may be associated with parent companies
to varing degrees.

How to motivate channel partners
Once middlemen are selected , a promotional programme must be started to maintain the level
of interest in the manufacturers product.
The levels of distribution and the importance of the invidual channel partners will determine the
activities undertaken to keep the channel members alert. At all levels there is a correlation
between the channel members motivation and the sales volume.
Ther are five main categories of motivational techniques to maintain channel members interest
and support for the product.
a) Financial rewards
These must be adequate for any middleman to carry an promote a copanys products. Margins or
commissions must be set to meet the needs of the middlemen and may vary according to the
volumes or level of sales involved.
b) Psychological rewards
Being human middlemen require recognition for the job they are doing. A trip to the parent
company or regional office is a great honor. Publicity in company media or local newspaper laso
build esteem and involvement among foreign middlemen
c) Continiuos flow of communication
The company should maintain a continuing flow of communication in the form of letters, news
letters and periodicals to its middlemen. The more personal they are the better. More and better
contact naturally leads to less conflict and smooth working relationship
d) Company support
A company can support its middlemen by offering advantageous credit terms, adequate product
information, technical assistance and product service. Such support helps build the distributors
confidence in the product and their own ability to product results
e) Corporate rapport
Considerable attention must be paid to the establishment of close rapport between the company
and its middlemen. A company should also be certain that conflicts that arise are handled
skillfully and diplomatically, and not be seen as being insensitive and ipersonal
Other ways to motivate channel members are:
1. Understand the Relationship. You are using a channel because you want the channel to carry
the cost of sales, while the channel wants you to minimise their sales costs by getting you
perform services for them. Because your agendas are different, you must craft a relationship that
makes sense and works for both firms
2: Limit the numbers. Its a big mistake to recruit too many channel partners. Its not true that
the more channel partners you have, the more they will sell. When you have too many partners,
you cant support them adequately and theyll start competing with each other and may even
create a price war for your product.
3: Create joint ventures. Create a relationship that takes into account the resources that both
companies can bring to bear in order to make the relationship successful. You will need to invest
resources in training, marketing and sales support, while the channel must commit resources to
training and actively promote the solution within its target market.
4: Get team consensus. If you sell your products both through direct sales and channels, youll
need to keep the two groups from treading on each others toes. If the direct sales team sees the
channel as competition, you can end up fighting a price war with your own product as each
group tries to undercut the other.
5: Target your markets. Figure out exactly where your product is most likely to sell and what
kind of person or organization can sell it most successfully. The more you understand your
customer base, the easier it will be to ensure that the channel focuses on the customers who are
most likely to generate revenue and profit for both you and your partner.
6: Recruit a top manager. Most firms assign a low-level drone to work with the channel.
Channel managers need to be heavy hitters so that they can influence and direct channel strategy
and behaviour. Be sure you treat channel managers well, or they could end up working the
partners issues inside your firm, rather than the other way around.
7: Train, train, train. Channel sales training must go beyond the sales training that you would
normally supply to a direct sales force. Your channel partners sales reps will need top quality
selling tools, such as competitive data sheets, sales scripts, selling videos, testimonials as well as
the usual brochures and specification sheets.
8: Support, support, support. If the channel partners are using your product in new ways, such
as customizing it for a particular industry, they will need more support than your direct sales
force. Frequent and ongoing communication is vitally important to the health of a channel
relationship.
9: Provide cool incentives. While your partners sales staff may already be well compensated,
they will be far more likely to sell your product is they feel that there is something in it for them.
For example, you might give a channel sales rep credit towards a personal purchase for attending
a regional training session.
10: Spend some money. A good way to ensure channel loyalty is to help with the channels
marketing efforts, such as through joint funding of advertisements. However, do not just throw
money at them. Be sure that there is some way to measure the impact of the money, through
higher sales of your product














REFERENCES
1. J. Weiss and Mark E. Gershon noted in Production and Operations Management
J an 1993

2. Motivating Channel members: by Shwetanshu Gupta, March 2014


3. Stern, Louis W., and Adel I. El-Ansary. Marketing Channels . Prentice-Hall, 1988.

4. Griffith, Kimberly. "More Than Just a Shopping Cart." I ndustrial Distribution. 1
January 2006

5. DM Sinyangwe CBU 2010 International Marketing 460 Lecture Notes