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Chapter 15 – International Marketing Channels
15-1
Chapter 15 – International Marketing Channels
Teaching Objectives
2) Examine the Japanese distribution system as it exists today, changes that are rapidly occurring,
and speculate on the eventual changes that will come about there.
4) Discuss the factors affecting the choice of a channel.
5) Review the methods of locating, selecting, and motivating channel members.
Comments and Suggestions
1. To illustrate the extreme channel structures that can confront an international marketer, we like to
begin the discussion of this chapter with a comparison of a channel structure with a minimum number
2. Following the discussion above, we suggest presenting a brief overview of the international channel
of distribution alternatives, Exhibit 15.3 followed by a discussion of the six Cs of channel strategy.
3. Catalog sales and mail order are growing in importance as an effective way to enter some markets.
There have been a number of large U.S. catalog retailers, L.L. Bean, Lands’ End, and Eddie Bauer for
Chapter 15 – International Marketing Channels
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Lecture Outline
I Global Perspective
II. Channel of Distribution Structures
Chapter 15 – International Marketing Channels
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Discussion Questions
1.
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)
2. Discuss the distinguishing features of the Japanese distribution system.
Distribution in Japan has long been considered the most effective non-tariff barrier to the Japanese
and 4) laws that protect the foundation of the system, the small retailer.
High Density of Middlemen. There is a density of middlemen, retailers and wholesalers in the
Japanese market unparalleled in any Western industrialized country. The traditional structure serves
consumers who make small, frequent purchases, at small conveniently located stores. The high
Chapter 15 – International Marketing Channels
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Large-Scale Retail Store Law. Competition from large retail stores has been almost totally
controlled by Daitenho–the Large-Scale Retail Store Law. Designed to protect small retailers from
3. Discuss the ways Japanese manufacturers control the distribution process from manufacturer to
retailer.
Manufacturers depend on wholesalers for a multitude of services to other members of the distribution
network. Financing, physical distribution, warehousing, inventory, promotion and payment collection
4. 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.
Competition from large retail stores has been almost totally controlled by Daitenbo, the Large-Scale
Chapter 15 – International Marketing Channels
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Designed to protect small retailers against competition from large stores, the law has been imposed
against both domestic and foreign companies. It took ten years for one of Japan’s largest supermarket
chains to get clearance for a new site. Toys `R’ Us fought rules and regulations for over three years
The SII negotiations to pry open new markets for American companies is producing strong evidence
of cracks in the system. Japanese businesspeople are challenging the traditional system and Japanese
consumers are undergoing a change in attitude toward shopping and traditional retailing by
responding favorably to bargain prices.
SII and deregulation will undoubtedly have a part in changing Japanese distribution practices but
they had no other alternatives. But, more often now, the Japanese consumer has a choice of prices for
everything from appliances to beer.
The “new” retailers are relatively small and account for no more than three percent of retail sales,
compared with 14 percent for all specialty discounters in the U.S. But their impact extends beyond
their share of market because they are forcing the system to change. Traditional retailers are
Chapter 15 – International Marketing Channels
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.
Japanese retailing may be going through a change similar to that which occurred in the United States
after World War II. At that time the U.S. retailing structure was made up of many small retailers
served by a multilayered wholesaling system and full-service department stores and specialty stores
6. Discuss how the globalization of markets affects retail distribution.
There are some important trends in distribution systems that are leading to globalization. That is,
there is greater commonalty than disparity among middlemen in different countries. U.S. based
Southland Corporation’s 7-Eleven Stores are replacing many of the traditional “Mom and Pop” stores
7. To what extent, and in what ways, do the functions of domestic middlemen differ from their foreign
counterparts?
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8. Why is the EMC sometimes called an independent export department?
9. Discuss how physical distribution relates to channel policy and how they affect one another.
Two extremely different channel policies exist in various areas which affect physical distribution. For
example, in Turkey the buyer must seek out the seller with very little service offered by the latter.
10. Explain how and why distribution channels are affected as they are when the stage of development of
an economy improves.
As an economy advances, the distribution system begins to take the form of distribution in the U.S.
11. In what circumstances is the use of an EMC logical?
12. In what circumstances are trading companies likely to be used?
13. How is the distribution channel structure affected by increasing emphasis on the government as a
customer and by the existence of state trading agencies?
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14. Review the key variables that affect the marketer’s choice of distribution channels.
The four main variables which affect the marketer’s choice of distribution channels are (1) the
15. Account, as best you can, for the differences in channel patterns which might be encountered in a
highly developed country and an underdeveloped country.
The attitude toward the middlemen in underdeveloped countries is generally negative, whereas his or
16. “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.
17. Discuss the various methods of overcoming blocked channels.
Buying equity in the middlemen and thereby gaining entrance to the channel. Buying distribution
18. What strategy might be employed to distribute goods effectively in the dichotomous small-large
middleman pattern which characterizes merchant middlemen in most countries?
19. Discuss the economic implications of charging termination penalties or restricting the termination of
middlemen. Do you foresee such restrictions in the United States?
Chapter 15 – International Marketing Channels
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Termination penalties restrict the freedom of marketers to adjust to changing needs of the market and
therefore reduce market efficiency. Such restrictions may stultify company growth and restrict its
flexibility. Risk taking and experimentation are minimized because the marketer has a difficult time
terminating experimental channels that fail.
There are indicators and a few legal precedents restricting a manufacturer’s middleman termination in
the United States, but growth of such restriction has been slow and cautious.
20. Discuss why Japanese distribution channels can be the epitome of blocked channels.
Distribution in Japan has long been considered the most effective non-tariff barrier to the Japanese
market. The distribution system is different enough from U.S. or European countertrades to give an
21. What are the two most important provisions of the Export Trading Act of 1982?
22. 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 from your two retail stores. You have recently
customer indicated she wanted the item in about a week. Air Express seems logical but how much
will it cost? Consult both the FedEx homepage http://www.fedex.com and the UPS homepage
23. 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
