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3-1 Chapter Fifteen Global Distribution MKT568 Global Marketing Management Dr. Fred Miller Sample Essay Question DeutscheDrives is German producer of computer storage devices and media. The firm wishes to build upon its success in European markets by expanding to Asia, Africa, North and South America. 1. Identify and describe the three general international marketing strategies. (6 points) 2. For each element of the marketing mix (product, price, promotion and distribution), identify and describe one benefit of a global strategy and one constraint to implementing such a strategy. (12 points) 3. Which of the three general marketing strategies do you recommend to DeutscheDrives? Explain why. (2 points) Benefits of Standardized Distribution Cost reduction shipping and merchandising costs channel management costs Control of marketing strategy Consistency of positioning Logistic efficiency Constraints on Standardization Wholesaling and Retailing Structures wholesaling; types, business practices, integration retailing practices; integration, lifestyles, global retailing, retailing channel captains, PoP IT Adjusting Channel Relationships changing distributors, dual distribution shortening channels, integration creating new channels Data Archaeology: Profiling Web Customers 14-2 Size and Number of Wholesalers in Selected Countries # of enterprises Employees Revenue (thousands) (thousands) (bill ECU) Belgium 48 202 85 4.2 1,771 Denmark 36 166 60 4.6 1,676 Greece 28 115 — 4.1 France 132 1,049 312 7.9 2,356 Ireland 4 40 12 11.5 3,429 193 1,084 — 5.6 Luxembourg 2 11 5 5.7 2,632 Netherlands 72 360 135 5.0 1,878 Portugal 31 200 — 6.4 United Kingdom 143 921 310 6.5 2,172 United States 470 4,578 1,260 9.8 2,684 Japan 436 4,332 2,651 9.9 6,075 Italy Exhibit 14.1 Emp/Ent Rev/Ent (mill ECU) Source: Retailing in the European Single Market, 1993. These figures are adapted from Table EUR1a: “Importance of Commerce in the EC—absolute values (1987-91)” 14-7 Exhibit 14.4 Size and Number of Retail Outlets in Selected Countries # of enterprises Employees Revenue/ Ret to Whol Ratio Emp/Ent Rev/Ent (thousands) (thousands) (bill ECU) Belgium 128 275 35/41% 2.1 274 Denmark 48 200 24/40% 4.2 499 Greece 175 338 20 1.9 114 France 462 2,090 260/83% 4.5 563 Ireland 29 131 11/92% 4.5 375 Italy 930 2,401 230 2.6 247 Luxembourg 4 18 3/60% 5.2 857 Netherlands 95 638 45/33% 6.7 474 Portugal 173 366 20 2.1 115 United Kingdom 348 3,030 280/90% 8.7 804 United States 1,504 19,085 1,350/107% 12.7 898 Japan 1,620 6,851 682/26% 4.2 421 (mill ECU) Source: Retailing in the European Single Market, 1993. These figures are adapted from Table EUR1a: “Importance of Commerce in the EC—absolute values (1987-91)” 14-3 Japanese Import Distribution Alternatives - Distribution Route of Italian Spaghetti Producer Import agent Conventional Route Processing and packing plant Primary wholesaler Small wholesaler Intermediary wholesaler Retail price: 170yen/300g package Retailer Restructured Route Producer Savings: 25% Exhibit 14.2 Importing company A/C Processing and packing plant Depots Distribution Wholesalers Distribution centers Retailer Retail price: 128yen/300g package Source: Allied Import Company, as reproduced in Michael R. Czinkota, and Jon Woronoff, Unlocking Japan’s Markets. Chicago, IL: Probus, 1991, p. 104. Used with permission. 14-4 International comparison of Wholesale Trade Practices Practice Returned Goods • Returning unsold goods is common Rebate system • Diverse complicated structure (volume, fixed date, evaluation, promotion) • Long term in pay unit (yearly, halfyear, etc.) • Rebates are not necessarily open • MSRP’s exist • Written materials and certain drugs and cosmetics are allowed to maintain resale prices Quotations Exhibit 14.3 Japan United States Britain • Doesn't exist except for imperfect or damaged goods • No rebates but discounts and allowances exist • Open rule • Pay unit depends • Doesn't exist except for imperfect or damaged goods • Quantitative and date fixed rebates exist • Open rule • Pay unit depends • Manufacturer's suggested retail prices exist • Doesn't exist in principle • Books and drugs are allowed to maintain resale prices Source: Distribution Economics Institute, Survey on International Comparison on the Distribution Industry, May 1990. Global Logistics and Channels Global Distribution issues of transportation between countries technology and competition Modes of Transportation air express; business and consumer markets ocean carriers; containerization overland; rail, truck, roll-on-roll-off inventory management; distribution centers Global Logistics and Channels Parallel Distribution definition and effects supply, dealer, demand interference and strategic attack Global Channels availability, tie-up, coordination and control 14-8 Seiko’s Authorized and Unauthorized Channels of Distribution Europe Hong Kong Japan North America Importer Importer Distributors Distributors Distributors Distributors Retailers Retailers Retailers Retailers Importer Solid arrows denote the flow of Seiko watches through authorized channels of distribution. Broken arrows denote the flow of Seiko watches through unauthorized channels of distribution. Exhibit 14.5 Source: Jack Kaikati, “Parallel Importation: A growing Conflict in International Channels of Distribution,” Symposium on Export-Import Interrelationships, Georgetown University, November 14-15, 1985. KFC in Japan Video This video has content relevant for several topics in the course. Describe the challenges KFC has confronted in TWO of the following areas. Has the firm responded to these challenges effectively? Explain. Japanese management styles and practices Corporate strategies for international markets multidomestic, global, global with localization Product and branding strategies Market entry strategies Promotion strategies Distribution and locational strategies 3-1 Chapter Fifteen Global Distribution MKT568 Global Marketing Management Dr. Fred Miller Cola Wars Video In which countries, with what strategy and with what success has Mecca Cola chosen to challenge Coca Cola? In which countries, with what strategy and with what success has Qibla Cola chosen to challenge Coca Cola? How has Coca Cola responded to these challenges? Bond’s Vodka Article The promotional technique discussed in this article is product placement. Describe this technique and explain its value, especially for an alcoholic beverage product. Why did Brown Forman spend as much as it did to insure that James Bond would drink Finlandia in his most recent movie? How does this effort mesh with the firm’s marketing strategy? In your opinion, how valuable is product placement for global marketing strategies? Explain.