International channel of distribution

Presentation on international marketing distribution channel, their types and functions.

1. INTERNATIONAL DISTRIBUTION CHANNEL By Vijyata Assistant professor Ranchi Women’s College , Ranchi University Jharkhand

2. Definition Distribution channels are the link between producers and customers. It is the path traced in the direct and indirect transfer of title to a product as it moves from a producer to the ultimate consumer or industrial distribution channel. Distribution channels are the set of firms and individuals that take tittle or assist in transferring title to a particular good or service as it moves from the producer to the consumers.

3. Categories of intermediary Channels of distribution consist of two categories of intermediary or middlemen, namely merchants who take title to the goods agents who do not take title to the goods but assist in the transferring of the title In international marketing, two categories of channel are involved, namely, channels between the nations and channels within the foreign market.

4. FOREIGN MARKET MIDDLEMEN HOME MARKET MIDDLEMEN

5. INTERNATIONAL CHANNEL SYSTEM While talking about international distribution only EXPORT is taken into account for which the distribution channel consists of both domestic system and the foreign system. There are two ways of exporting

6. INDIRECT EXPORTING In indirect exports the manufacture utilizes the services of various type independent market middlemen. When a manufacturer exports indirectly. he transfers the responsibility for the selling job to some other organization. The indirect method is more popular with firms, which are beginners in export activities and with those whose export business is not sizeable

7. Domestic Overseas Intermediaries Manufacturer’s Export agents Purchasing Agent Country-controlled buying agents Export management companies (EMC) Export merchants Export Broker Piggybacking.

8. Manufacturer’s Export agents These agents work on commission focusing more on sale and handling of goods including documentation and shipping tasks involved in exporting process. But they have limited expertise confined to a particular location, so services of different MEA will be needed to cover different parts of the world. Purchasing Agent The purchasing agent represents the foreign buyer . Operating as per the needs of the overseas customer , the purchasing agent acts in the interest of buyer seeking the best possible terms for which he is paid commission by the buyer. They are also called Commission agent or buying agent

9. EXPORT MERCHANT Export merchant buys the manufacturer’s product and sells it abroad on his own. Besides production and customization , all other international marketing tasks are handled by the export merchants EXPORT BROKER Export broker brings buyer and seller together for a fee. He negotiates the terms for the seller , does not take possession or title to the goods. He has no financial responsibility but can assist in arrangement of credit. . He has extensive knowledge of the overseas markets and foreign customers.

10. Country-controlled buying agents These are purchasing agents controlled by foreign ’s government agency or quasi –government firm. These agents have their offices located in countries that are major suppliers Export management companies (EMC) EMC manage the entire export activities of a manufacturer under a contract. EMC’s provide extensive services to manufacturers ranging from promotion of products overseas to shipping arrangement and documentation.

11. Piggybacking When a manufacturer/supplier does not find any channel partner with sufficient interest to pioneer new products piggybacking can be used. Piggybacking is an arrangement with another company , which sells in the same customer- segment , to take on the new product as if it were the manufacturer. In this the manufacturer retains control over a number of marketing decision areas, particularly pricing, promotion and positioning, while the other partner acts as rented sales force only Here, the products retains the name of the manufacturer and both partners normally sign a multi-layer contract to provide continuity.

12. Direct exporting Direct exporting refers to sale in the foreign market by the manufacturer /producer himself. Since direct export requires the manufacturer to handle all the complex trade regulation like banking, financing, transportation etc by himself,, the exporter should have sufficient volume for foreign trade and should have experience and training of these tasks. Direct exporting gives a higher degree or complete control over the marketing and operations to the manufacturer as well as a greater margin in profit by saving on commissions. Direct exporting channels involve intermediaries based in foreign market to undertake marketing operations.

13. Foreign intermediaries Foreign Sales Representatives Importer Foreign Stocking and Non-Stocking Agents State Controlled Trading Companies.

14. Foreign Sales Representative These are foreign manufacturers who handle related product line on commission basis. They have knowledge of the local market but since they sell a number of product , push marketing may be required to increase the sale in foreign market. Importer Importers identify the local market requirement and purchase goods in their own names acting independently of the manufacturer. They use their own strategies to satisfy the needs of the market they serve.

15. State –owned Trading companies Few of the Government department and/or government owned companies buy large quantities of certain goods frequently on long-term basis for mass consumption . Overseas/Foreign Agent Overseas act as an contact point or as office-type setup in foreign market for an exporter from where he can operate all his selling and marketing activity without being physically present by paying commission to the agent. The agent does not trade on their own but secures orders in the name of the exporter and gets commission on the basis of business generated.

16. Factors affecting choice of channel FACTORS INDIRECT DIRECT The Market Dispersed Small Potential sale Consumer Market Concentrated Large potential Sales Industrial Market The Product Non- Technical Product Consumer Goods Technical Products Industrial Goods Marketing Skills of the Company Company lacks marketing skills and experience Company possess marketing skill and experience Degree of Control Company desires Little Control Company desires high degree of control Financial Condition of the company Weak Financial condition Strong Financial Condition

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