Deck 15: International Marketing Channels

Question 1

Discuss the ways Japanese manufacturers control the distribution process from manufacturer to retailer.

Answer 1

With recent accreditations in social, cultural, technological and marketing environments, the choice regarding maintenance of control over distribution channels is also diversifying, making it crucial for an organization to opt for a suitable strategic mix rather than choosing a solely focused strategy.
The Japanese manufacturers effectively controls the overall distribution process ranging widely from a manufacturer to a retailer, with the aim focused on the establishment and maintenance of long term relationships.
They try to keep together all the parties involved in the system, like a family, where everyone supports each other and prevent rivalries from entering the family (or channel). For this, a wholesaler sometimes acts as an agent middleman maintaining the tie-ups between parties.
The elements, which are used to maintain an effective control over channels by strengthening their relationships with other channel members, are as follows:
1. The manufacturers in Japan provide sales consignments or other related services with long-term extendable credit systems. In fact, sometimes they even readily finance their inventories.
2. Annually, the Japanese manufacturers offer rebates to their distribution channel members for numerous different reasons, such as,
a. For purchasing the products in large quantities,
b. Making payments before last dates,
c. Exhibiting high performances in the markets,
d. Effectively maintaining certain levels of inventories,
e. Participating in sales promotions campaigns,
f. Showcasing loyalty towards the suppliers,
g. Effectively maintaining promoting the price policies set by the manufacturer,
h. Cooperating with all the parties involved, and
i. Consistently contribute towards the manufacturer's overall success.
3. The return policy of Japanese manufacturers has made it easier for the parties to return the unused or unsold merchandise at any level of distribution channel.
The Japanese manufacturers effectively cater to the local needs by promoting their products and services through local and regional intermediaries. They distribute displays layouts for advertisements, assist the intermediaries with in-store demonstrations, and create awareness through their education programs.

Question 2

Discuss the economic implications of charging termination penalties or restricting the termination of middlemen. Do you foresee such restrictions in the United States

Answer 2

The process of breaking any agreement or a long term contract by any party involved in the foresaid transaction or business, maybe defined as the termination of contract. And, the fees which needs to be paid in levy of this is called, termination penalty.
The termination penalties and the provisions restricting the termination of middleman can adversely affect a market structure, like follows:
1. Most of the times, due to the emergence of any termination penalty, the freedom of a marketer is restricted as it prevents them to make required adjustments in their strategies as per the changing needs of target market.
2. By restricting the termination of a middleman, a country also curbs the flexibility of its operations. Because, a middleman is terminated either when he is not performing well that is up to the standards set by company or the market conditions requirements changes which forces the company adopt different channels of distribution.
3. When a marketer is curbed from terminating the unsuccessful or experimental channels of distribution, then it negatively impacts its risk taking and creative abilities.
In United States of America, a middleman can be terminated in a very simple manner, by just dismissing him. There, no complex legalities are required to terminate someone who is either underperforming or can't be involved in new channels of distribution strategies.
Although, there are some provisions too, which give a chance to middleman to put forward his say on the matter in view. For example, in a southern state of United States, Colombia, the company needs to compensate a middleman for terminating him. They generally pay ten per cent of a middleman's annual pay for all the years of his services rendered by the company. But, such processes are very lethargic as they require a lot of patience and cautious behaviour.

Question 3

Describe the large-scale retail store law found in Japan and show how the Structural Impediments Initiative (SII) is bringing about change in Japanese retailing.

Answer 3

A retail law is a body of laws aimed at effective regulation of sales, advertising and distribution practices of an organization, pertaining to their consumers and products.
Japan has always been a hub of small retailers, with some stores even employing only one or two employee but still contributing a lot to an organizational success. In order to prevent invasions of their regional and domestic markets by large retailers, the government of Japan came up with a unique law in 1950s to protect their interests. They call it Daitenho, which is a Large Scale Retail Store Law of Japan.
According to this law, every retailer who wishes to open a store larger than 500 square meters i.e. 5,382 square feet in a particular area is required to submit their plans and proposals to locally established small retailers of that area and the government. Ministry of International Trade Industry, Japan, also reviews all the proposals. If all these parties approve the plans, then only it is sent for further processing. Otherwise, if any one of the party declines the proposal, then it is returned to the proposer seeking clarifications and required modifications. Sometimes, it takes many years such as ten, to approve any proposal.
In addition, there are numerous licenses required by any retailer to operate in a particular area. Thus, the distribution systems in Japan function as a non-tariff barrier, which effectively prevents the entry of foreign players in regionally set domestic markets. But, foreign players interested in setting up their stores in Japan, often see these laws as a major roadblock in the success of Japan. All these laws are blocking the Japan's road to improvements, thereby maintaining a lower standard of living as compared to other well-established and developed nations.
Thus, foreign counterparts are coming up with deregulations and resolved practices, one of which is Structural Impediments Initiative (SII). It is a bilateral negotiation between two major powers of the world, United States of America and Japan. The aim of Structural Impediments Initiative is to identify and reduce the Japan's structural hindrances and obstructions, in order to encourage smooth trade between both the countries. It has paved the way for big retail giants across the globe to participate in Japanese growth model by catering the needs of its public, at a much cheaper cost and convenience.

Question 4

Discuss why Japanese distribution channels can be the epitome of blocked channels.

Question 5

"Japanese retailing may be going through a change similar to that which occurred in the United States after World War II." Discuss and give examples.

Question 6

What are the two most important provisions of the Export Trading Act of 1982

Question 7

Discuss how the globalization of markets, especially Europe 1992, will affect retail distribution.

Question 8

You are the sales manager of a small company with sales in the United States. About 30 percent of your business is mail order, and the remainder is from your two retail stores. You recently created an e-store on the Web and a few days later received an order from a potential customer from a city near Paris, France. The shipping charges listed on the Web are all for locations in the United States. You don't want to lose this $350 order. You know you can use the postal service, but the customer indicated she wanted the item in about a week. Air express seems logical, but how much will it cost Consult both the FedEx home page (www.fedex.com) and the UPS home page (www.ups.com) to get some estimates on shipping costs. Here are some details you will need: value $350; total weight of the package, 2.5 pounds; package dimensions, 4 inches high by 6 inches wide; U.S. zip code, 97035; and French zip code, 91400. (Note: It's not fair to call UPS or FedEx-use the Internet.)

Question 9

To what extent, and in what ways, do the functions of domestic middlemen differ from their foreign counterparts

Question 10

Based on the information collected in Question 22, how practical would it be to encourage foreign sales Your average order ranges from about $250 to $800. All prices are quoted plus shipping and handling. You handle a fairly exclusive line of Southwestern Indian jewelry that sells for about 15 to 20 percent higher in Europe than in the United States. The products are lightweight and high in value.

Question 11

Why is the EMC sometimes called an independent export department

Question 12

Discuss how physical distribution relates to channel policy and how they affect each other.

Question 13

Explain how and why distribution channels are affected as they are when the stage of development of an economy improves.

Question 14

In what circumstances is the use of a EMC logical

Question 15

In what circumstances are trading companies likely to be used

Question 16

How is the distribution channel structure affected by increasing emphasis on the government as a customer and by the existence of state trading agencies

Question 17

Review the key variables that affect the marketer's choice of distribution channels.

Question 18

Account, as best you can, for the differences in channel patterns which might be encountered in a highly developed country and an underdeveloped country.

Question 19

"One of the first things companies discover about international channel of distribution patterns is that in most countries it is nearly impossible to gain adequate market coverage through a simple channel of distribution plan." Discuss.

Question 20

Define:
Distribution process
Distribution structure
Large-Scale Retail Store Law
Complementary marketing
Agent middlemen
Merchant middlemen
Home country middlemen
Dealer
Export management company (EMC)
Export Trading Company Act (ETC)

Question 21

Discuss the various methods of overcoming blocked channels.

Question 22

Discuss the distinguishing features of the Japanese distribution system.

Question 23

What strategy might be employed to distribute goods effectively in the dichotomous small-large middleman pattern which characterizes merchant middlemen in most countries