MODULE-4 INTERNATIONAL DISTRIBUTION STRATEGY

INTERNATIONAL CHANNELS

In international marketing, the distribution channels or channels of distribution refer to the

routes through which products or services move from the producer to the end consumer in
different countries. These channels play a critical role in reaching target markets efficiently
and effectively. Here are some common types of international channels:

1. Direct Exporting:
 In direct exporting, the producer sells goods directly to customers in foreign markets
without using intermediaries.
 This approach gives the producer greater control over marketing, pricing, and
customer relationships.
 It requires a good understanding of foreign markets, logistics, and compliance with
trade regulations.
 Examples include online sales through a company's website, export sales teams, or
international trade shows.
2. Indirect Exporting:
 Indirect exporting involves using intermediaries, such as export agents, trading
companies, or export merchants, to sell products in foreign markets.
 These intermediaries handle tasks such as marketing, distribution, and logistics on
behalf of the producer.
 It can be beneficial for producers who lack the resources or knowledge to enter
foreign markets on their own.
 Export management companies (EMCs) and export trading companies (ETCs) are
examples of intermediaries used in indirect exporting.
3. Foreign Distributors/Agents:
 Companies often establish relationships with foreign distributors or agents to sell and
distribute products in foreign markets.
 Distributors purchase the products from the producer and sell them to retailers or end
consumers in the foreign market.
 Agents work on behalf of the producer to promote and sell products, earning a
commission on sales.
 This channel is beneficial for accessing local market knowledge, networks, and
established customer bases.
4. Franchising:
 Franchising is a method of international expansion where a company (franchisor)
grants the rights to another party (franchisee) to use its business model, brand, and
processes in a foreign market.
 The franchisee operates the business according to the franchisor's standards and pays
fees or royalties for the rights.

1
  This channel allows for rapid international expansion while leveraging the local
knowledge and resources of the franchisee.
5. Joint Ventures and Strategic Alliances:
 Companies may form joint ventures or strategic alliances with local partners in
foreign markets.
 This involves two or more companies pooling resources, expertise, and market
knowledge to enter a foreign market together.
 Joint ventures involve creating a new entity, while strategic alliances are partnerships
without forming a new legal entity.
 These channels enable companies to share risks, costs, and market entry barriers while
accessing local expertise and networks.
6. Licensing and Technology Transfer:
 Licensing involves granting the rights to use intellectual property (such as patents,
trademarks, or technology) to another party in exchange for royalties or fees.
 Technology transfer involves sharing technology, know-how, or manufacturing
processes with a foreign partner.
 This channel allows companies to generate revenue from their intellectual property
and expand into foreign markets without significant capital investment.
7. E-commerce and Online Marketplaces:
 With the rise of e-commerce, companies can reach international customers directly
through online channels.
 Selling through e-commerce platforms, marketplaces (such as Amazon, Alibaba,
eBay), or their own websites allows for a global reach.
 This channel provides convenience for customers and lower barriers to entry for
companies expanding into foreign markets.
8. Global Supply Chains:
 Global supply chains involve the coordination of production, sourcing, and
distribution activities across multiple countries.
 Companies work with suppliers, manufacturers, logistics providers, and retailers in
different countries to deliver products to end consumers.
 This channel requires efficient logistics, communication, and coordination to ensure
timely delivery and quality control.

CHANNEL ALTERNATIVES

In international marketing, "channel alternatives" typically refer to the various ways a

company can distribute its products or services to reach customers in different countries. Here
are some common channel alternatives in international marketing:

1. Direct Exporting: This involves selling products directly to customers in another country. It
could be done through online sales, mail order, or sales representatives.

2
2. Agents and Distributors: Companies can work with local agents or distributors who are
familiar with the local market, language, and culture. These intermediaries help with
marketing, sales, and distribution.
3. Joint Ventures and Strategic Alliances: Forming partnerships with local companies can be
beneficial, especially when entering a new market. This allows for sharing of risks, resources,
and knowledge.
4. Franchising: Companies can expand internationally by offering franchises to local
entrepreneurs. This allows for rapid expansion while maintaining a degree of control over
product quality and brand image.
5. Licensing: Licensing involves granting the rights to use intellectual property (such as
trademarks, patents, or technology) to a foreign company in exchange for royalties. This is
common in industries such as technology, entertainment, and fashion.
6. Online Marketplaces: Leveraging global online marketplaces like Amazon, Alibaba, eBay,
or local equivalents can provide a platform to reach international customers without the need
for physical presence.
7. Strategic Retail Partnerships: Partnering with international retail chains or local stores to
carry and sell your products can provide broad market access.
8. Export Management Companies (EMCs): These are firms that specialize in helping
companies export their products. They handle tasks such as market research, logistics,
documentation, and even financing.
9. Foreign Direct Investment (FDI): This involves establishing a physical presence in another
country through subsidiaries, branches, or manufacturing facilities. FDI allows for greater
control over operations but requires significant investment and carries more risk.
10. E-commerce Platforms: Setting up dedicated e-commerce platforms for specific
international markets can provide a direct channel to customers while adapting to local
preferences and regulations.

IMPORTANCE OF CHANNEL DECISION

The channel decision is a critical aspect of a company's marketing strategy, especially in the
context of international marketing. Here are some reasons why the channel decision is
important:

1. Market Access: Channels determine how and where products or services are available to
customers. Choosing the right channels allows a company to reach its target market
effectively, whether it's a local market or an international one. This can significantly impact
sales and market penetration.
2. Customer Convenience: Channels impact how easily customers can access and purchase
products. Convenience is a key factor in consumer behaviour, and a well-designed channel
strategy can make it convenient for customers to buy, leading to increased sales and customer
satisfaction.
3. Market Coverage: Channels help determine the extent of market coverage. Some channels,
like direct sales or online platforms, might reach a broad audience, while others, like

3
 specialized retailers or distributors, might target niche markets. The choice of channels
affects how well a company can penetrate different market segments.
4. Brand Image and Positioning: The channel through which a product is sold can influence
its perceived quality, image, and value. Luxury brands, for example, often choose exclusive
channels to maintain an aura of exclusivity. The channel decision should align with the
brand's positioning strategy.
5. Cost and Efficiency: Channels impact the cost structure of a business. Some channels
require significant investment in infrastructure, distribution networks, or marketing efforts,
while others might be more cost-effective. Choosing the right channels helps optimize costs
and improve profitability.
6. Competitive Advantage: A well-planned channel strategy can become a source of
competitive advantage. If a company can deliver products faster, more conveniently, or
through more channels than its competitors, it can gain an edge in the market.
7. Market Research and Feedback: Channels provide valuable insights into customer
behavior, preferences, and feedback. Through channels, companies can gather data on sales
patterns, customer inquiries, returns, and other metrics to refine their marketing strategies.
8. Legal and Regulatory Considerations: Different channels might have specific legal and
regulatory requirements, especially in international markets. Understanding these
requirements and choosing compliant channels is crucial to avoid legal issues and penalties.
9. Risk Management: Diversifying channels helps mitigate risks. Relying on a single channel,
especially in international markets with diverse market conditions, economic factors, and
political situations, can expose a company to higher risks. A mix of channels spreads risk and
ensures business continuity.
10. Long-Term Growth and Sustainability: A well-thought-out channel strategy is essential for
long-term growth and sustainability. As markets evolve, customer preferences change, and
new technologies emerge, companies need to adapt their channel mix to remain competitive
and relevant.

FACTORS INFLUENCING THE CHANNEL DECISION

When making channel decisions in international marketing, companies must consider a range
of factors to ensure they choose the most effective and efficient distribution channels. Here
are some key factors that influence the channel decision in international marketing:

1. Market Characteristics:
 Size and Growth: The size and growth rate of the market can influence the choice of
channels. Larger markets might require more diverse channels to reach different
customer segments.
 Demographics: Understanding the demographic profile of the target market helps in
selecting channels that cater to the preferences and behaviors of the population.
 Urban vs. Rural Distribution: Differences in urban and rural areas may require
different channel strategies, as infrastructure, access, and purchasing behavior can
vary.

4
2. Product Characteristics:
 Type of Product: Whether the product is a consumer good, industrial product,
perishable item, or luxury item will impact channel decisions.
 Complexity: Highly technical or complex products might require more personalized
selling approaches, such as direct sales or specialized distributors.
 Perish ability: Perishable goods may need quick and efficient distribution channels to
minimize spoilage.
 Customization: Products that require customization or after-sales service may benefit
from channels that offer direct customer interaction.
3. Competitive Environment:
 Number and Strength of Competitors: The level of competition in the market can
influence the need for unique channel strategies to differentiate products.
 Competitive Advantage: Companies should consider how their channel choices can
enhance their competitive position, whether through wider reach, better customer
service, or lower costs.
4. Regulatory and Legal Considerations:
 Trade Regulations: Different countries have varying regulations related to
import/export, labelling, packaging, and distribution that can impact channel choices.
 Licensing and Certification: Some products require specific licenses or certifications
for distribution, affecting channel decisions.
 Taxation and Tariffs: Tax implications and tariffs on imported goods can influence
the cost-effectiveness of different channels.
5. Cultural and Social Factors:
 Cultural Preferences: Cultural norms and preferences can influence how products are
purchased and distributed. For example, some cultures prefer in-person negotiations,
while others prefer online shopping.
 Language and Communication: Language barriers may necessitate channels that
support local languages and effective communication with customers.
 Social Customs: Understanding social customs and traditions can help in designing
marketing and distribution channels that resonate with the local population.
6. Infrastructure and Logistics:
 Transportation Networks: Availability and efficiency of transportation options impact
the feasibility of certain channels, especially in remote or underdeveloped regions.
 Warehousing and Storage: Distribution channels need to consider the availability of
warehousing facilities, especially for products that require storage.
 Technology Infrastructure: Access to internet and digital technologies influences the
viability of online channels.
7. Costs and Financial Considerations:
 Initial Investment: Costs associated with setting up distribution channels, such as
infrastructure, partnerships, and technology, must be considered.
 Operating Costs: Ongoing expenses related to distribution, inventory management,
marketing, and sales support affect channel decisions.
 Return on Investment (ROI): Companies need to evaluate the potential ROI of
different channel options to ensure profitability.

5
8. Channel Partner Capabilities:
 Experience and Expertise: The capabilities and experience of potential channel
partners, such as distributors or agents, impact channel choices.
 Market Knowledge: Local partners with deep market knowledge can provide valuable
insights and assistance in navigating the market.
9. Brand Image and Positioning:
 Desired Image: The desired brand image and positioning in the market influence the
choice of channels. Premium brands might choose exclusive channels, while mass-
market brands may opt for wider distribution.
10. Risk Management:
 Political and Economic Stability: Consideration of political stability and economic
conditions in the target market is essential to mitigate risks associated with channel
decisions.
 Supply Chain Risks: Channel choices should also consider potential disruptions in the
supply chain, such as natural disasters or geopolitical events.
11. Adaptability and Flexibility:
 Ability to Scale: Channels should allow for scalability to accommodate future growth
in the market.
 Flexibility: The chosen channels should be adaptable to changes in market conditions,
consumer preferences, and company strategies.
12. Customer Preferences and Behaviour:
 Buying Habits: Understanding how customers prefer to purchase products—online,
in-store, —helps in selecting the appropriate channels.
 Service Expectations: Channels should align with customer expectations for services
such as delivery, returns, and customer support.

CHANNEL SELECTION DECISION

Selecting the right channels for international marketing involves considering a variety of
factors to ensure effective distribution, market penetration, and customer reach. Here are
some key factors that influence channel selection decisions in international marketing:

1. Market Characteristics:
 Market Size and Growth: The size and growth potential of the target market
influence the choice of channels. Larger markets might require multiple channels for
full coverage.
 Market Segmentation: Different customer segments may have unique preferences
and buying behaviors, which can impact channel choice.
 Competitive Landscape: Understanding how competitors distribute their products
can help in determining the best approach. It may involve offering more convenient
channels or creating differentiation.
2. Product Characteristics:

6
  Complexity of the Product: Complex products might require direct sales channels
with knowledgeable staff, while simpler products could use more indirect channels.
 Perishability and Shelf Life: For products with short shelf life, efficient and quick
distribution channels are essential.
 Customization Needs: Products that require customization or after-sales services
may benefit from direct channels where customer interactions are more personal.
3. Company Resources and Capabilities:
 Financial Resources: Companies with limited resources may opt for indirect
channels initially, while larger firms might invest in direct distribution.
 Expertise and Infrastructure: Having the right skills and infrastructure to manage
different channels is crucial. For example, online sales require e-commerce platforms
and digital marketing capabilities.
 Logistical Capabilities: Access to transportation, warehousing, and distribution
networks influences the choice of channels.
4. Regulatory Environment:
 Import/Export Regulations: Different countries have varying import/export
regulations that affect channel choices. Some products may require specific
certifications or licenses.
 Trade Barriers: Tariffs, quotas, and trade agreements impact the cost and feasibility
of certain channels.
5. Cultural and Social Factors:
 Consumer Preferences: Cultural norms, preferences, and buying habits influence
channel preferences. Some cultures prefer in-person interactions, while others are
more inclined towards online shopping.
 Language and Communication: Channels need to align with the language and
communication preferences of the target market.
6. Risk Considerations:
 Political Stability: Political instability in certain regions might influence the choice
of channels.
 Currency Fluctuations: Channels that involve cross-border transactions are impacted
by currency fluctuations.
 Supply Chain Risks: Dependence on a single channel or supplier can increase
vulnerability to disruptions.
7. Channel Characteristics:
 Channel Length: The number of intermediaries between the producer and the end
consumer affects control, cost, and efficiency.
 Channel Control: Direct channels offer more control over branding, pricing, and
customer interactions, while indirect channels provide broader market reach.
 Channel Conflict: Potential conflicts between channels (e.g., online vs. offline,
distributor vs. retailer) need to be considered and managed.
8. Technology and Infrastructure:
 E-commerce Readiness: The level of e-commerce adoption in the target market
influences the viability of online channels.

7
  Infrastructure Development: Availability of reliable internet, transportation, and
logistics infrastructure impacts the feasibility of certain channels.
9. Customer Expectations and Convenience:
 Convenience and Accessibility: Channels should align with how customers prefer to
shop and access products.
 After-sales Support: Channels that offer good after-sales service and support can
enhance customer satisfaction and loyalty.
10. Legal and Ethical Considerations:
 Intellectual Property Protection: Channels should protect the company's intellectual
property rights.
 Ethical Standards: Channels should adhere to ethical standards regarding product
safety, labelling, and marketing practices.

INTERNATIONAL RETAILING
International retailing refers to the practice of retail businesses expanding their operations
beyond their home country's borders to sell products or services in foreign markets. This
expansion can take various forms, such as opening physical stores, establishing online sales
channels, partnering with local distributors, or franchising.

Here are some key aspects of international retailing:

1. Market Entry Strategies:

 Company-Owned Stores: Establishing company-owned stores in foreign countries
allows retailers to have direct control over operations, branding, and customer
experience.
 Franchising: Franchising is a popular option for international expansion, where local
entrepreneurs (franchisees) operate under the retail brand's name and business model.
 Joint Ventures: Forming partnerships with local companies can help retailers
navigate the complexities of foreign markets while leveraging local expertise.
 Online Retailing: Setting up e-commerce platforms allows retailers to reach global
customers without the need for physical stores.
 Licensing: Retailers can license their brand to foreign companies to manufacture and
sell products under their name.
2. Adaptation to Local Markets:
 Cultural Differences: Understanding and adapting to local cultures, traditions, and
consumer preferences is crucial for success. This includes product assortment,
marketing strategies, and store ambiance.
 Regulatory Compliance: International retailers must adhere to local laws and
regulations governing retail operations, including taxation, labor laws, and product
safety standards.
 Localization: Customizing products, pricing, and promotions to suit local tastes and
purchasing power is essential for acceptance in foreign markets.
3. Supply Chain and Logistics:

8
  Global Sourcing: Retailers often source products from different countries to offer
diverse and cost-effective merchandise.
 Logistics Management: Efficient transportation, warehousing, and distribution
networks are vital for timely delivery and inventory management across borders.
 Reverse Logistics: Managing returns and exchanges, especially in e-commerce,
requires effective reverse logistics processes.
4. Omni-channel Retailing:
 Integration of Channels: Offering a seamless shopping experience across physical
stores, online platforms, mobile apps, and social media channels enhances customer
convenience.
 Click-and-Collect: Allowing customers to order online and pick up products from
nearby stores bridges the gap between online and offline shopping.
5. Retail Format and Store Design:
 Store Formats: Retailers may adapt store formats based on local preferences,
urbanization levels, and shopping behaviors (e.g., hypermarkets, department stores,
convenience stores).
 Store Layout and Merchandising: The layout, design, and product display in stores
should resonate with local aesthetics and shopping habits.
6. Brand Positioning and Marketing:
 Brand Image: Maintaining a consistent brand image while catering to diverse
markets requires a balance between global identity and local relevance.
 Marketing Communication: Language, cultural references, and advertising channels
should be tailored to resonate with the target audience.
 Customer Loyalty Programs: Implementing loyalty programs helps in building
long-term relationships with customers in foreign markets.
7. Competitive Landscape:
 Local Competition: Understanding local competitors' strengths, weaknesses, and
pricing strategies is crucial for market positioning.
 Global Competition: International retailers also compete with other global brands for
market share, requiring a keen understanding of industry trends and innovations.
8. Technology and Innovation:
 Retail Tech: Implementing technologies such as AI, IoT, and data analytics improves
operational efficiency, personalizes customer experiences, and optimizes inventory
management.
 Contactless Payments: Offering secure and convenient payment options aligns with
evolving consumer preferences, especially post-pandemic.
9. Sustainability and Corporate Social Responsibility (CSR):
 Ethical Sourcing: Retailers increasingly focus on sourcing products ethically and
sustainably, aligning with consumer demand for eco-friendly products.
 CSR Initiatives: Engaging in community development projects and promoting social
causes enhances brand reputation and customer loyalty.

ROLE OF LOGISTICS

9
 Logistics plays a crucial role in the success of international marketing efforts. When a
company decides to expand its market reach beyond its domestic borders, effective logistics
management becomes essential for several reasons:

1. Supply Chain Efficiency:

 Logistics ensures the efficient movement of products from the manufacturing facility to
international markets. This includes coordinating transportation, warehousing, and
distribution networks to optimize the supply chain.

2. Timely Delivery:

 International marketing success often hinges on the ability to deliver products to customers in
a timely manner.
 Logistics helps in planning and executing shipping schedules, choosing the best
transportation modes, and managing customs clearance processes to ensure on-time delivery.

3. Market Accessibility:

 Logistics enables companies to reach new markets and capitalize on global opportunities.
 By establishing efficient transportation routes and distribution channels, businesses can
expand their presence in international markets.

4. Cost Management:

 Effective logistics practices help in controlling costs associated with international marketing.
 This includes optimizing shipping routes, choosing cost-effective transportation modes, and
minimizing inventory carrying costs.

5. Inventory Management:

 International marketing often involves longer lead times and higher inventory levels.
 Logistics helps in managing inventory across multiple locations, ensuring the right products
are available at the right time to meet market demand.

6. Compliance and Regulations:

 Logistics professionals navigate complex international trade regulations, customs

requirements, and export/import restrictions.
 They ensure that shipments comply with local laws and regulations to avoid delays or
penalties.

7. Risk Mitigation:

10
 Operating in international markets introduces various risks such as geopolitical instability,
currency fluctuations, and transportation disruptions.
 Logistics plays a role in risk management by diversifying suppliers, optimizing supply chain
resilience, and planning for contingencies.

8. Customer Satisfaction:

 In international marketing, customer satisfaction is paramount for building brand loyalty and
reputation.
 Logistics ensures that products are delivered safely, securely, and in good condition, leading
to positive customer experiences.

9. Market Adaptation:

 Different markets have unique preferences, packaging requirements, and transportation

infrastructures.
 Logistics professionals work to adapt products, packaging, and logistics processes to meet the
specific needs of international markets.

10. Competitive Advantage:

 A well-managed logistics strategy can provide a competitive edge in international markets.

 Companies that can offer faster delivery, lower costs, and superior service through efficient
logistics gain an advantage over competitors.

11. Reverse Logistics:

 International marketing also involves managing returns and product recalls.

 Logistics plays a role in handling reverse logistics processes, including returns, repairs, and
recycling of products.

11