ICG- The IIS University

Project
on
Channels of Distribution
BBM- 603
Submitted to:
Ms. Chhavi jain maam
Assistant professor
IIS University

Submitted by:
Sonali Ruhela
Srishti
Shekhawat
Khushboo
Sharma

International
Distribution

What are distribution

channel?

Distribution: How goods reach

consumers
Peter Producer
The Consumer

Peter
Wendy
Producer Wholesal
er

Lilly Consume
r
Retailer

INTERNATIONAL
INTERNATIONAL
CHANNEL
CHANNEL
SYSTEM
SYSTEM
International marketing involves exporting,
Two categories of marketing channels are
involved, viz.,
Channels between the nations

And
Channels within the foreign market

There are broadly two ways of exporting

Indirect exporting

Indirect exporting- In this the actual export is carried out by

independent middleman or cooperative organizations.

Direct exporting- It refers to direct sale by the manufacture to

the foreign buyer.

Direct exporting

Indirect Exporting
The indirect method is more popular with firms which are just
beginning their exporting activities and with those whose export
business is not considerable.
In other words, when a manufacture exports indirectly , he
transfers the responsibility for the selling job to some other
organization.
Broadly, two alternative channels are available for indirect
exporting, viz.,
Marketing middlemen
Cooperative organizations

MARKETING MIDDLEMEN
There are two important middlemen
MERCHANTS
AGENTS
Export merchants- who buys the manufactures
product and sell it abroad on his own, merchant is one
who takes title to the product he sells.
Agents/Brokers- Unlike the merchant middlemen, the
agent does not take the title to the goods; he simply
seeks overseas buyers for a commission.

COOPERATIVE ORGANISATIONS
The

co-operative

exporting

organisations,

which

represent a cross between indirect and direct, carry

on exporting activities on behalf of several producers,
and partly under the administrative control of the
manufactures.
There

are

two

distinct

types

international marketing organisations:

Piggyback marketing
Exporting combinations

of

cooperative

DIRECT EXPORT
As the name indicates, direct export
refers to the sale in the foreign
market directly by the manufacturer.
Firms

with

considerable

export

business usually resort to direct

exporting.

 A number of organizational arrangements are

available to a company for carrying on direct
exporting:
a) The export business may be conducted by a domestic
based export department or division .there are four
important types of domestic based export organization.
1) Built in export

2) Separate export

department
3)export combination

4) export sales subsidiary

b)A company may employ travelling salesman for the

overseas market these travelling salesman may be home
based or may not be home based.

 INDUATRIAL BUYERS
JOINT VENTURE
STATE BUYING ORGANZATION
CUSTOMERS
GOVERNMENT DEPARTMENT
RETALERS
DISTRIBUTOR
WHOLESALER
IMPORTER

Direct Exporting Channels

CHANNEL LEVELS
1) Zero level channel It is also called direct
marketing channel ,is essentially characterized by
the producer making a direct sale to the buyer.
2) One level channel- It is characterized by one
selling intermediary like the retailer or the agent.
3) Two level channel- It contain two intermediaries
e.g., wholesaler/distributor and retailer
4) Three level channel- It has three intermediaries
i.e., agents wholesalers and retailers .

Types of Foreign Intermediaries

IMPORTERS It refers to one who imports the product in large
quantities either as an agent for a foreign buyer or for resale.
Such imports includes ,large import houses and trading houses.
DISTRIBUTOR - A distributor who buys directly from the
exporter and holds large stocks of a product has an exclusive
right

to sell the product in particular area or to a particular

type of customer .
WHOLESALER Although

wholesalers often buy from the

importers or distributors, there are also wholesalers who buy

directly from the exporters.

 RETAILER Large retailer may buy directly from the

exporters .Department stores, supermarkets or the
other types of chain stores are among the most
important direct retail buyers.
MULTIPLE CHANNELS In some cases ,an exporter
may use multiple channels for a product. For example
an exporter may sell the wholesalers, large retailers
may depend on distributors.
GOVERNMENT DEPARTMENT In some countries
government departments buy large quantities
of
certain goods, often a long term basis . These are
generally essential goods of mass consumption or for
use in government department.

 STATE BUYING ORGANIZATION - In some countries the

imports of goods are done by the government organization
like state trading organization .This was the case until
recently in centrally planned economies .

JOINT VENTURE AND LICENSEES/FRANCHISEES

very important export marketing channel that is growing in

popularly is the collaborative

arrangement between the

exporter and foreign firm .

It is enterprise in which both ownership and management
are shared by firms from two or more countries are very
common between firms from developed and developing
countries.

Marketing environment and internal

distribution
Marketing Environment can be defined as all the Internal and External
Factors and Forces that affect a firms ability to develop and maintain
successful transactions and relationships with the target customers . It
includes all forces that affect Marketing Policies, Decisions and
Operations of a company.
The nature of the distribution system in a market is generally
influenced by the relevant business environment. A particular
distribution channel best suited for a product in one market may be
inappropriate in another market.
Within-country channels of distribution vary from country to country
for consumer goods.

Cntd
COMPONENTS OF MARKETING ENVIRONMENT :
o Internal environment : Forces and actions inside the firm that
affect the marketing operation composed of internal stake
holders and the other functional areas within the business
organization.
o External environment : it includes Micro environment and
Macro environment.

o Micro environment includes- Suppliers, Customers,

Intermediaries, Competitors, General Public.
o Macro environment includes-Demographic, Economic
Natural/Physical, Technological, Politico-legal ,Sociocultural factors.

Factors affecting Marketing

environment and internal
Political and Legal distribution
forces - It Includes laws, government

agencies and pressure groups that influence or limit various

organizations and individuals in a given nation.
Economic Environment -The nations of the world are broadly
classified as developing countries and developed countries.
The developing countries fall into two categories - low income
countries and middle income countries. Economic
environment of different countries in International Marketing
are not similar.
Social and cultural forces -The social environment includes
the religious aspects, language, customs, traditions and beliefs,
tastes and preferences, social institution , buying and
consumption habits etc. Social environment of different
nations are different.

Cntd..
Demographic forces - Demographic data helps in
preparing geographical marketing plans, household
marketing plans, age wise plans for a nation. It influences
behavior of consumers which in turn will have direct
impact on market place. A marketer must communicate
with consumers anticipate problems ,respond to
complaints and make sure that the firm operates properly.
Technological Environment - It Changes rapidly, Creates
new markets and opportunities. Safety regulations result
in higher research costs and longer time between
conceptualization and introduction of product.

Factors influencing channel

selection
Market and
customer
characteris
tics
Company
characteris
tics and
objectives

Product
characteris
tics

Competitor
s
characteris
tics

Middlemen
characteris
tic
Environme
ntal
characteris
tics

Cntd..
Product characteristics- Product characteristics like unit value,
perishability, bulk, degree of product standardization, complexity and
service requirements, determine, to some extent, the way the product
should be distributed.
Market and customer characteristics- Market and customer
characteristics such as size and location of the market, the number and
geographical dispersal of the customers, the frequency of purchase
and the typical size of the purchase, customers buying habits etc. are
important factors to be considered in the choice of the channel.
Middlemen characteristic- Middleman differ in their ability and
willingness to carry out promotional activities and to push the
product. The margin and commission for the middlemen is another
important issue. The type of products dealt with by a particular
intermediary should also be an important consideration.

Cntd..
Company characteristics and objectives- The choice of the channel
is also influenced by such factors as the companys size, financial
strength, product mix, past channel experience, overall marketing
policies and channel objectives.
Competitors characteristics- Like any other marketing decision,
the channel decision is influenced by the nature of the competitors.
Sometimes, it may be appropriate to adopt a channel policy similar to
that of the competitor, but sometimes it may be more profitable to
design quite a different channel policy.
Environmental characteristics- The channel design is also
influenced by such environmental factors as the economic situation,
social and cultural factors, the physical environment and government
policies and regulations.