INTERNATIONAL

CHANNELS OF
DISTRIBUTION
Learning 1. Describe the main channels of distribution used in
Outcomes exporting a product.
2. Identify the criteria for selecting a distribution
At the end of channel in international markets.
the chapter 3. Analyze the factors that need to be considered when
you should be
able to… designing marketing channels.
4. Analyze the role of the distribution system with
respect to international marketing.
5. Explain the steps involved in distribution planning,
and the factors determining the level of distribution
channel in the foreign market.
International Channels of Distribution

Functions of Channel Distribution

Number of Channel Levels
Choice of Channels of Distribution
Areas to Investigate When Making
Decisions on Distribution Channels
International Channels of Distribution

Foreign Country Middleman

Distribution Planning
Determining International Distribution Policy
 Channels of distribution are an integral part of the
marketer’s activities, and as such are very important.

Distribution channels are viewed as conducting four

basic flows: physical flow of goods, flow of ownership
and control, flow of information, and flow of money.
Distribution has two major elements, the physical and the institutional.

Physical Distribution
-consists of activities involved in moving finished
goods from manufacturers to customers.

Institutional Distribution
- involves the choice of agents, distributors, wholesalers,
retailers, direct sales, or sales forces
 Functions of
Channel of Distribution
Channels of distribution perform the following basic functions:

i. Physical distribution
ii. Provide information between sellers and buyers
iii. Promotion
iv. Breaking bulk, creating assortments, and matching
v. Provide technical advice.
Channels of distribution perform the following basic functions:
vi. Contact buyers
vii. Negotiation
viii. Order processing, documentation and billing.
ix. Merchandizing and sales support.
x. Financing, credit, and collection
xi. Risk taking
Number of Channel Levels
Distribution channels can either be direct or indirect.
• The former has no intermediary levels and the
manufacturer sells directly to the consumer, while
the latter contains one or more intermediaries
between the manufacturer and the final consumer.
 Accordingly, three alternatives are available for international
marketers:

I. Using a direct channel.

II. Using an indirect channel.

III. Using a dual distribution system with more than one channel.
 Some objectives of the distribution channel could be:
ü to increase the availability of the good or service to
potential customers
ü to satisfy customer requirements by providing high levels
of service
ü to ensure promotional effort
ü to obtain timely and detailed market information
ü to increase cost-effectiveness
ü to maintain flexibility.
 Choice of
Channels of Distribution
 The choice of international channels of distribution is not
only critical but is also an important part of international
marketing strategies. This is because the alternative
international channels of distribution are many and involve
both domestic and foreign market options.

Channels tend to be longer as the number of customers to be

served increases and the price per unit decreases.
In deciding on the international distribution channel design, the following
aspects have to be considered carefully:

Ø Market needs and preferences.

Ø The cost of channel service provision including the
capital or investment cost of developing the channel and
the continuing cost of maintaining it.
Ø Incentives for channel members and methods of
payment.
Ø The size and coverage of the end market to be served.
Ø Product characteristics required, complexity of product,
product range, nature of product, perishability, packaging.
Ø Middlemen characteristics – whether they will push
products or be passive, their skills.
Ø Market and channel concentration and organization.
Ø Legal Requirements.
Ø Company characteristics: company size, company
objectives.
Ø Risks involved.
ØRisks involved.
ØCompetitors’ policies.
ØChannel availability.
ØSales volume.
ØDegree of control.
 Areas to Investigate
When Making Decisions on
Distribution Channel
ü What are the different channels of the product in question?

ü How many intermediaries should be used at each stage in a

distribution channel?

ü What are the specific tasks and responsibilities to be taken

over by each of the intermediaries involved?
ü What are the terms and conditions under which
different intermediaries do business, in these areas:
establishing prices, credit and payment terms,
discount rebates, sales and merchandise services,
guarantees and warranties, and repair and
maintenance?
Distribution Alternatives
A marketer’s options range from assuming the entire distribution
activity to depending on intermediaries for distribution of the
product.

In contrast to domestic marketing, internal marketers must take

into account a number of domestic and foreign market
intermediaries.
Home-country or Domestic middlemen
-are located in the producing firm’s country, providing
marketing channel services from a domestic base.
Export Jobbers

Export Merchants Trading Companies

Foreign-country middlemen
-are based in the foreign country, including
manufacturers’ representatives, foreign distributors, foreign-
country brokers, dealers, import jobbers, wholesalers and
retailers, trading networks, and voluntary chains.
Distribution Planning
 Distribution planning is one of the strategic
marketing functions that enables the company to
integrate its distribution actions into the
marketing plan.
 The steps in distribution planning include:

• Determination of marketing objectives.

• Evaluation of changing conditions from country to country.
• Determination of strategy in each country.
• Determination of the role of the distribution channel
amongst the general marketing mix elements.
 The steps in distribution planning include:

• Determination of distribution policy for each country in

terms of level of distribution to be used (direct or indirect),
types of outlets (full price, service outlets), and number of
outlets (intensive, selective, exclusive).

• Determination of performance standards for all

organization in the distribution chain.
 The steps in distribution planning include:

• Establishment of means of measuring performance.

• Comparison of actual and expected performance

standards.
Determining International
Distribution Policy
Determining the international distribution policy is
a strategic marketing activity which is done on the
basis of the overall marketing objectives.
It entails selecting the level of distribution in which to sell, which means
evaluating these elements:

§ Economics of distribution.
§ Size of the potential market and the likely sales revenue
and profit volume that can be obtained.
§ Intensity of promotional efforts that will be contributed by
the independent actors, as compared to the firm’s own
facilities.
§ Political and social factors.