CHAPTER 7

DISTRIBUTION
DECISIONS

VTHN
ngocvth@uel.edu.vn
CONTENTS
DISTRIBUTION
01 HANDLING THE 03 CHANNELS: OBJECTIVES,
EXPORT ORDER TERMINOLOGY, AND
STRUCTURE

GLOBAL
02 PHYSICAL 04 RETAILING
DISTRIBUTION
 INTRODUCTION
● Access a key decision
● Can we use the same distribution channels as home markets?
● Distribution density; channel length; channel alignment; distribution
logistics
● Distribution channels tend to be longer, but ……
● Wholesale and retail related to economic development
● Direct channels provide better control, flexibility and feedback
● Disintermediation
 1.1 ORDER RECEIVED DIRECTLY FROM
PROSPECTIVE IMPORTER

• Order contains the essential facts concerning the desired

merchandise & shippment
• Exporter send confirmation of receipt
• Exporter prepare Proforma Invoice (type & amount of merchandise, unit
costs & extensions, expected weights & measures, terms of sales and payment, etc.)
 1.2 ORDER RECEIVED FROM BRANCH OR
REPRESENTATIVE OVERSEAS

• Use a combination order form and sales contract

• Exporter accept the order, then complete & sign the form (both the
seller & buyer)
• Indent order is between final purchaser & overseas-based branch
office/ distributor of export
 1.3 EXPORT LICENSES

• Individual countries have their own export laws,

• Control the export of products for reasons (national security, foreign
policy, short supply, preservation of cultural property, assisting of industries using
domestic products, renvenue purpose)
1.4 FINANCING/ PAYMENT & OTHER TERMS OF
SALE

• Getting the merchandise from the exporter’s plant to the port

• Getting the merchandise through outbound Customs
• Getting the merchandise abroad ship (or other mode of transport)
• Paying for the freight
• Paying for insurance
 2. PHYSICAL DISTRIBUTION

• The passage of goods across national boundaries, with attendant legal

requirements

• Shipment by ocean-going vessels or international airlines, with

attendants security needs and specific documentary requirements

• The time and distance required to complete the transaction, with

attendant needs for ensuring payment
 2. PHYSICAL DISTRIBUTION

A positive effect on a company’s sale volume through the service

provided

• The speed with which a product can be provided to a customer

• The reliability with which the average speed of service is achieved
• The degree of immediate availability of the product
• The arrival of the product in good condition
2.1 NATURE OF THE SHIPMENT

• The minimum size of the unit pack

• The quantities
• The type of method of packaging
• The identification marking
 2.2 TRANSPORTATION

• The external movement of the product

• Select the mode(s) of transportation
• Provide adequate insurance coverage
(marine or air insurance)
 2.3 WAREHOUSING

• Assembling, breaking bulk shipments into smaller

size
• Prepare products for reshipments

• Determine
ü The number and type of warehousing facilities

ü Spatial arrangement
2.4 MATERIALS HANDLING

Provision must be made for the

internal movement of products
within plants and warehouse 2.5 CARRY INVENTORY

Cost elements in managing

inventory (storage, interest on
capital tied up, taxes, lost
sales, materials handling,
etc.)
2.6 ORDER PROCESSING & DOCUMENTATION

• Complexity number of documents & correspondents

• Culture language, currency, law
• Change changes in requirements
• Cost costs of preparation
• Error consequential costs of error and costs or correction
3 DISTRIBUTION CHANNELS: OBJECTIVES,
TERMINOLOGY, AND STRUCTURE

Marketing channels exist to In B2C marketing consumer

create utility for customers channels are designed to put
products in the hands of people
• Place utility for their own use
• Time utility
In B2B marketing industrial
• Form utility channels to deliver products
• Information utility (inputs) to manufacturers/ other
organizations
 3 DISTRIBUTION CHANNELS: OBJECTIVES,
TERMINOLOGY, AND STRUCTURE

Distributor is a wholesale intermediary that

typically carries product lines/brands on a
selective basis

Agent is an intermediary who negotiates

exchange transactions between two or more
parties but does not take title to the goods being
purchased or sold
 Six channel
structure
alternatives for
consumer
products
 Six channel
structure
alternatives for
industrial/
business
products
3.1 ESTABLISHING CHANNELS AND WORKING
WITH CHANNEL INTERMEDIARIES

● Select distributors – don’t let them select you!

● Look for distributors capable of developing markets, rather than those with a few
good customer contacts.
● Treat local distributors as long-term partners, not temporary market-entry vehicles.
● Support market entry by committing money, managers, and proven marketing ideas.
● From the start, maintain control over marketing strategy.
● Make sure distributors provide you with detailed market and financial performance
data.
● Build links among national distributors at the earliest opportunity.
 4.1 TYPES OF RETAIL OPERATIONS

Department Specialty Convenience Discount

Supermarkets
stores retailers stores retailers

several narrowly focused departmentalize, same products as the emphasis on

departments under and offer a single-story supermarkets, low prices
one roof, each relatively narrow retail but the
representing a merchandise mix establishments merchandise mix
distinct aimed at a that offer a is limited to
merchandise line particular target variety of food high-turnover
and staffed with a market and nonfood convenience and
limited number of impulse products
salespeople
 4.1 TYPES OF RETAIL OPERATIONS

Hard
Hypermarkets Superstores Shopping malls Outlet stores
discounters

limited assortment hybrid retailing the label many in group of stores in dispose of excess
of goods— format combining the retailing one place, leisure inventory, out-of-
typically 1,000 to the discounter, industry use when destination date merchandise,
3,000 different supermarket, and talking about or factory seconds
items— at rock- warehouse club stores such as
bottom prices approaches under Toys ‘R’ Us,
a single roof Home Depot, and
(200,000 to IKEA
300,000 square ft)
 4.2 GLOBAL TRENDS

● Increased internationalisation of retailing and logistics

● Further spread of discounting
● Digital retailing on global scale
● Growth of mobile shopping
● Online sales accelerating in developing markets
● 3rd party marketplace
● Customers seeking experiences & products reflecting
personal brand on social media (Deloitte, 2017)
● Amazon disrupting the marketplace
● E-Marketplace e.g. Alibaba
“Customers want authentic, sharable experiences to further their personal
brand”

“Retailization of the world - the maker movement, the sharing economy”

“E-commerce continues to be a major growth engine for the retail industry”

—Deloitte (2017)
 4.3 ISSUES IN THE CYBERMARKETPLACE

• Digital divide • Manufacturers competing

• Growing online shopping, but varied with resellers
across world • Channel conflict
• Diverse credit card culture • Importance of logistics
support
• Disintermediation process
• Currency issues
• Cannabalising existing distribution • Fraud issues
channels? • Communication issues
• Black Friday/Cyber Monday • Drone delivery?
4.4 GREY MARKETS/ PARALLEL IMPORTING

“A grey market generally consists of those

unauthorised distributors and dealers that
circumvent channel arrangements by
buying a company’s products in low-price
markets and selling them in high-price
markets at lower prices than those offered
by authorised channel members”
(Hollensen, 2004)
“Parallel importation is an
unauthorized import into a
country of non-counterfeit goods
imported without the express
permission of the intellectual
property owner.
(The Balance, 2017)
 EXAMPLE

“If you’re selling Nike trainers on your Amazon page and

you haven’t gotten permission from Nike — the owner of the
Nike trademark — and you ship a pair of shoes to someone
in another country, you’re selling a parallel import.”
(RepricerExpress, 2017)

“Parallel importers buy patented drugs in low-price country

and import them into high-price country to offer at lower
prices than local price set by patentee”
UNCTAD
 4.4.1 AMAZON’S VIEWPOINT

• 2 different options in place

ü obey the trademark owner’s decision to either be able to import their product or
not
ü do your own thing if the trademark owner’s rights have been exhausted

• Requirement to research each brand and manufacturer to check rules are

about selling & importing a specific item
• Advice to seek legal counsel
 ● High value market
4.4.2 ASPECTS ● Most trades high-priced branded goods -

jewellery, cameras, tablets, pharmaceuticals,

watches
● Diverse products and brands involved e.g.

Rolex, Nescafe, Nike, Burberry, Apple

● Not copies or counterfeits
● Genuine trade-marked items, imported legally

● Legally a ‘grey’ issue as legislation varies

 ● Without consent of brand owner
4.4.3 PROBLEM? ● Impact on brand equity and value

● Established distributors lose motivation as

margins eroded
● Grey marketer interested in quick sale and

short-term profits
● Manufacturer could lose markets over time –
impact performance
● Could destroy customer goodwill
 SUMMARY

• More direct the channel, the higher the level of control

• The distribution environment varies greatly across countries
• Good channel relationships are important
• Need to consider future development of the distribution structure
• Parallel importing becoming a major issue for global brands
 ?
What special distribution challenges exist in Japan? What is the best
way for a non Japanese company to deal with these challenges?
THANK YOU