Globalization &

Outsourcing

Lecture 7 & 8
Course Instructor: Arslan Haider
Email: arslan.haider@lbs.uol.edu.pk
 Market Channels in Global Supply Chains
• Market channels connect global supply chains with customers
Global Market Channels Strategy
•Global market channels strategy definition:

• Ensuring products' availability in adequate quantities.

• Accessibility at appropriate locations.
• Timeliness as per customer demand.

•The role of market channels:

• Closing the customer gap in the "last mile" of global supply chains.
• The significance of the last mile:
• High importance.
• Uniqueness.
• High variance in customer preferences and requirements:
• What customers want.
• How they want it.
• When they want it.
•Impact of Bad Customer Experiences:

• Drives customers to seek alternative solutions.

• Affects logistics, purchasing, and supply chain operations.

•Positive Effects of Successful Market Channels:

• Enhanced convenience.
• Customization tailored to customer preferences.
• Higher product/service quality.
• Enriching customer experiences.

•Significance of Market Channels:

• Critical for product (or service) market presence.

• Influences customers' access to products.

•The Role of Effective Global Market Channels:

• Vital for the success of ideas, products, and services.

• Ensures that the best offerings reach customers.
• Utility in market channels drives customer value and satisfaction.
•Market Channels and Four Utilities: Market channels provide four key utilities to consider in the last mile of
the global supply chain:

• Time Utility: Ensuring products and services are available when customers want them.
• Place Utility: Making products accessible in preferred locations (e.g., retail stores or online).
• Possession Utility: Customers having access to the product for immediate use or future needs.
• Form Utility: Global market channel members adapt, prepare, or refine products to meet customer
preferences.

•Global Market Channels in Supply Chain Management:

•Encompasses sales, service, and customer relationship development.

•Emphasizes building long-term customer relationships.
•Vital component of global supply chain management.
•Components of Global Market Channels:

• Comprise producer, agent, broker, wholesaler, retailer, and consumer.

• These entities play integral roles in global supply chains and distribution.

•Global Market Channels Activities:

• Encompass various activities and processes:

• Worldwide Management of Customer Value: Creating global processes that enhance customer value.
• International Market Entry Modes: Strategies for entering international markets.
• International Wholesaling, Retailing, and Franchising: Approaches for international distribution.
• Exporting : Managing cross-border trade.
• Going Global Online: Utilizing e-commerce for global reach.
• Finding and Evaluating Channel Partners: Identifying and assessing collaborative partners in the
supply chain.
Customer Value–Creating Global Processes
•Global Supply Chain Management Focus:
• Primary focus on managing global market channels (MCM).
• MCM is essential for interacting with and delivering value to global customers.
•Core Customer Value-Creating Processes:
• In addition to MCM, two other core processes work collaboratively:
• Product Development Management (PDM): Encompasses activities related to developing and
innovating products.
• Customer Relationship Management (CRM): Involves building and nurturing customer
relationships.
•Core Processes in the Last Mile:
• MCM, PDM, and CRM are pivotal core processes in the last mile of the global supply chain.
•Customer Value Creation in Global Firms:
•Central to a global firm's connection to both global and domestic customers.
•Involves three interconnected processes.

•Product Development Management (PDM):

•Focuses on:
•Developing new customer innovations.
•Creating new solutions.
•Strengthening existing customer solutions.
•Aims to align customer satisfaction with their expectations.
•Market Channels Management (MCM):
•Emphasizes:
•Improving input acquisition and transformation into outputs.
•Integration of downstream supply chain partners.
•Drives total cost analysis towards value creation.
•Customer Relationship Management (CRM):
•Focuses on:
•Creating and leveraging connections and relationships with external marketplace actors.
•Ensuring value creation and customer satisfaction are perceived.
Subprocesses in Customer Value Creation:
•Subprocesses within PDM, MCM, and CRM are critical strategic resources for global companies and should
be thoughtfully evaluated.

•Product Development Management (PDM) Subprocesses:

• Include:
• Identifying new customer preferences.
• Designing innovative product solutions.
• Managing internal functional and departmental relationships.
• Establishing and nurturing connections with external organizations.
• Coordinating product design activities to streamline business processes.
•Market Channels Management (MCM) Subprocesses:
• Encompass activities such as:
• Selecting and qualifying market channel partners.
• Managing outbound logistics.
• Internal logistics design.
• Work flow design in product assembly.
• Batch manufacturing.
• Technology acquisition and maintenance.
• Order fulfillment, pricing, billing, rebates, and terms.
• Multi-channel management.
• Customer service coordination, including installation and maintenance.
Customer Relationship Management (CRM) Subprocesses:
•Involve:
• Identifying potential customers.
• Assessing the needs and desires of existing and potential customers.
• Understanding product usage and applications.
• Developing and executing advertising and service programs.
• Leveraging information technology for customer interaction.
• Managing customer site visit teams.
• Building customer trust and loyalty.
• Cross-selling and upselling product and service offerings.

•Global CRM Standardization:

• Can lead to significant customer satisfaction, but with certain limitations.
• There comes a point where customization is necessary based on country-specific differences.
• This inflection point is depicted in Figure 7.5.
•Approach to Global CRM:
• Start with a focus on commonalities among customers.
• Customize CRM practices to address unique differences only when needed.
 International Market Entry Modes

•Involvement and Commitment in International Market Entry:

• Involvement and commitment are distinct but interrelated aspects in international market
entry.

•Key Question:

• Consider the extent of your firm's planned involvement in the international market.
• Determine the level of commitment to the global marketplace as per the chosen involvement
level.

•Levels of International Involvement:

• Companies can participate in global supply chain activities at different levels, including:

• Exporting
• Multinational Market Channels
• Regional Market Channels
• Global Market Channels
•Initial Level: Domestic Market Channels:
• Represents the lowest level of international involvement, essentially none.
• Focuses solely on the domestic market in the country of origin.

•Next Level: Exporting :

• Involves company sales overseas.
• Lacks a formal international market channel strategy beyond exports.

•Evolution to Multinational Market Channels:

• Represents the next stage in a company's international expansion.
• Involves developing an international strategy and customizing approaches for different country
markets.

•Next Level: Regional Market Channels:

• Involves developing strategies for various global regions.
• Targets each region with a global approach.

•Highest Level of Global Strategy:

• Global Strategy: The peak of involvement for global companies with worldwide supply chains.
• Developed for the entire world or multiregional areas.
•Levels of International Commitment:
• Companies enter international markets and participate in global supply chain activities at various
commitment levels. The four primary commitment levels are:

• Exporting
• Licensing and Franchising
• International Joint Ventures
• Foreign Direct Investment

•Initial Level of Commitment: Domestic Market Channels:

• As with involvement, the initial commitment level focuses exclusively on the domestic market in the
country of origin.

•Next Level of Commitment: Exporting :

• Similarly, at this level, there is no formal international market channel strategy beyond overseas sales.

•Third Level of Commitment: Licensing and Franchising:

• Marks a transition into commitment beyond exporting, involving licensing and franchising
arrangements.
•Licensing and Franchising:
• Licensees sell a firm's products.
• Franchisors market a firm's brand and products under contract.

•International Joint Ventures (IJVs):

• Involves a partnership between a domestic and a foreign firm.

•Foreign Direct Investment (FDI):

• Represents the highest level of international presence.
• Involves direct ownership, where a firm owns foreign subsidiaries or facilities.

•Each of these modes of entry (exporting, licensing and franchising, international joint ventures, and foreign
direct ownership) has specific conditions that favor their use and comes with distinct strengths and
weaknesses.

•For a detailed breakdown of the favorable conditions, strengths, and weaknesses for each entry mode, refer to
Table 7.1.
 Exporting
•Exporting Emphasis:
• In the context of international involvement and commitment within global market channels,
we observed that the first level for both was exporting.
• This makes exporting a focal point deserving of further exploration.

•Lowest Level of Involvement and Commitment:

• Exporting represent the lowest levels of involvement and commitment a firm can opt for
when going international.
• It entails selling to foreign markets (exporting).

•Adapting to Complexity:
• As the global supply chain grows increasingly intricate over time, companies must adapt and
integrate this complexity into their supply chain strategies.
• This adaptation may involve utilizing suppliers from developing nations, sourcing products
from new origins, or expanding product exports to new markets.
•Challenges for Companies from National or Regional Trading Groups:
• Companies accustomed to operating within national or regional trading groups may find it challenging
to expand their global supply chain.

•Global Supply Chain Involvement:

• To remain competitive in the future, it's likely that your firm will need to engage with global supply
chains, typically involving exporting activities.

•Similar Logic for Exporting :

• The rationale for exporting, as depicted in Figures 7.6
• Preparedness for exporting plays a significant role.
 Export Service Providers:

Many companies engaging in international trade seek assistance from export service providers.

Several main types of service providers include:

•Freight Forwarders:
• Primary role: Coordinate international transportation for companies involved in international
shipping.
• Often consolidate smaller shipments into a single larger shipment to reduce shipping costs.
• Provide additional services beneficial to exporting firms, including handling documentation,
facilitating payment, and aiding in carrier selection.

•Export Management Companies (EMCs):

• Serve companies new to exporting, offering a comprehensive range of export services.
• Act as an outsourced internal exporting department, managing various aspects of exporting.
• Responsibilities may include handling export documentation, acting as the firm's agent and
distributor, and even managing direct sales or sales order processing.
•Export Trading Companies:
• Act on behalf of companies that contract with them to export their products.
• Identify foreign companies for marketing and selling the products.
• Provide comprehensive exporting services, including export documentation, logistics, and
transportation.

•Export Packaging Companies (Export Packers):

• Assist companies, especially those new to exporting, with packaging services.
• Offer expertise in meeting specific packaging requirements, which vary from country to country.
• Provide advice on packaging design and materials, aiming to optimize packaging to maximize the
number of items for shipping.

•Customs Brokers:
• Help companies navigate customs regulations and avoid related challenges.
• Customs requirements in various countries can be complex and challenging for new or infrequent
exporters.
• Experienced customs brokers provide vital knowledge and assistance in ensuring compliance with
import laws and documentation regulations, especially when exporting to multiple countries.
•Confirming Houses (Buying Agents):
•Represent foreign companies seeking to purchase your products.
•Focus on acquiring products at the lowest prices and earn a commission from their foreign clients.
•Government embassies can be a valuable source for identifying potential exporting connections.

•Export Agents, Merchants, and Remarketers:

•Purchase products directly from manufacturers.
•Customize packaging and labeling according to their preferences.
•Market and sell these products internationally through their own networks under their own brand names, assuming all
related risks.
•While this approach requires minimal marketing effort from you, it entails a loss of control over the product's
marketing, promotion, and positioning.

•Piggyback Marketing:
•Involves one firm distributing another firm's products.
•For example, if a company has a contract to supply a range of products to an overseas client but lacks some of the
required items, another company can "piggyback" its products to fulfill the contract's needs.
•Successful piggybacking typically requires complementary products and the same target market of customers.
•Export Processing Zones (EPZs):
• Over 600 EPZs are currently established in more than 100 countries.
• EPZs encompass various types, such as foreign trade zones (FTZs), special economic zones, bonded
warehouses, free ports, and customs zones.
• Companies frequently use EPZs to receive bulk product shipments that are later repackaged into
smaller lots for distribution to customers in the surrounding areas.
• The World Economic Processing Zones Association (WEZA), established in 1978 by the United
Nations, is a private nonprofit organization dedicated to enhancing the efficiency of EPZs. (Website:
wepza.org)

•Export-Import Banks:
• Financial resources, risk management, and payment concerns are crucial aspects of exporting and
importing. To address these issues, there are specialized banks that support international trade.

•Examples of Export-Import Banks:

• Pakistan (Website: eximbank.gov.pk)

• United States (Website: exim.gov)
• China (Website: eximbank.gov.cn)
• India (Website: eximbankindia.com)
 International Wholesaling, Retailing, and Franchising
•Effective Market Channel Options for Global Engagement:
• Wholesaling, retailing, and franchising are three viable options.
• These options allow global firms to establish connections with customers, either indirectly or directly.

•Real-World Examples of Market Channel Options:

• To illustrate these options, real-world examples can shed light on the benefits they offer to firms.

•Wholesaling:
• Involves transactions where products are acquired for resale, manufacturing, or general business operations.
• Wholesalers play a pivotal role in supply chains by facilitating cross-border product flow.
• The National Association of Wholesaler-Distributors, with around 40,000 members, advocates for the
significance of wholesalers (website: www.naw.org).
• Notable examples of wholesalers include Tech Data, Worldwide Brands, and International Wholesale Tile.

•(www.techdata.com) (www.worldwidebrands.com) (www.internationalwholesaletile.com).

•Retailing:
• Encompasses transactions where the purchaser intends to consume the product for personal, family, or
household use.
• A retailer is an organization that acquires products for the purpose of reselling them to end consumers.

•National Retail Federation:

• A staunch advocate for retailers, with a presence in approximately 45 countries. (Website: www.nrf.com)

•Illustrations of Retailers:
• H&M (Sweden):
• Focuses on offering fashion and quality at competitive prices.
• Strong presence in over 40 markets.
• Committed to continuous improvement. (Website: www.hm.com)
• Ahold (Netherlands):
• An international retailing group based in the Netherlands.
• Features prominent local consumer brands in Europe and the United States. (Website: www.ahold.com)
• Tesco (United Kingdom):
• Established in 1919 by Jack Cohen.
• Evolved to operate in 14 countries worldwide. (Website: www.tesco.com)
•Franchising:
• An arrangement where a supplier (franchisor) grants a dealer (franchisee) the rights to sell its
products in exchange for consideration.

•International Franchise Association:

• A strong advocate for franchising, boasting over 1,100 franchisor members and more than 12,000
franchisee members worldwide. (Website: www.franchise.org)

•Illustrations of International Franchisors:

• Subway (U.S.):
• The largest fast-food chain globally. (Website: www.subway.com)

• Tim Hortons (Canada):

• An iconic brand in Canada with a growing presence in select regional U.S. markets. (Website:
www.timhortons.com)

• Europcar (France):
• Provides car rental services for corporate and leisure customers.
• Offers vehicles for short and medium-term rentals in various regions. (Website:
www.europcar.com)
 Going Global Online
•Engaging Customers for Sales Success:
• Achieving desired sales outcomes in the marketplace requires dedication, a thoughtful approach, and a
strategic perspective on customer engagement.

•Three Types of Websites for Sales Implications:

• Websites can play a significant role in driving sales, whether online or at physical stores. Three
primary types of websites with implications for sales include:

• Transactional Sites:
• Function as electronic storefronts for retailers or enable manufacturers to sell directly to
customers.
• Allow customers to search for products, place orders, make payments, and receive after-sales
support.

• Information Delivery Sites:

• Promote a firm's brands and existence.
• Provide general information about the company, essentially serving as an online brochure.
• Aim to stimulate sales by encouraging customer interaction and contact with the company.
•E-Marketplaces:
• E-marketplaces act as intermediaries or "market makers" that connect buyers and sellers to
facilitate transactions. Examples include eBay, Amazon, and Taobao.

•Five Steps to Going Global Online for SMEs (Building on A Basic Guide to Exporting):

• Selecting a Domain Name:

• Choose a short, simple, descriptive, and memorable URL for the global marketplace.
• Consider using locally branded domain names to increase brand awareness, website
recall, and influence sales and customer loyalty.

• Registering with Search Engines:

• Register your website with major search engines, enabling international customers to
discover information about your products.
• Prioritize registration with search engines commonly used by the international market
you are targeting.

• Selecting a Web Host:

• Ensure that the hosting provider's servers are located within a stable infrastructure.
• Verify that the hosting service is on the backbone of a web network designed for optimal
access reliability in all your potential markets.
•Fourth Step: Localizing and Internationalizing the Web Interface:
• Adapt your web interface to cater to the preferences and expectations of your target audience.
• Consider creating specific site pages for the targeted audience rather than overhauling your main
website.
• .• Factors to address include language, cultural nuances, payment methods favored by the local
market, pricing in the local currency, and the use of metric measurements.

•Fifth Step: Leveraging Locally Oriented Web Networks:

• Explore locally oriented web networks, such as trade publications, that focus on your target markets.
• Ensure that your materials, including products, packaging, and online brochures, prominently
feature your website URL.
• Implement an opt-in mechanism on your website, enabling customers to choose to engage with your
site, your company, and your products.
 GlobalEDGE and Market Potential Index (MPI )

GlobalEDGE has been the top-ranked website in the world for international business resources on Google since
2004. Businesspeople, public policy makers, academics, and college students have been using globalEDGE in some
form since 1994 (globalEDGE.msu.edu).