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CHAPTER 13
Managing Global Distribution Channels
CHAPTER OUTLINE
LXXX. The Structure of the Global Distribution System
LXXXI. Foreign-Market Channel Members
A. Costs
B. Product and Product Line
C. Control, Coverage, and Synergy
LXXXIII. Locating and Selecting Channel Partners
LXXXIVI. Managing Global Distribution
A. Motivating Channel Participants
B. Controlling Channel Participants
LXXXVI. Gaining Access to Distribution Channels
A. The Locked-Up Channel
B. Alternative Entry Approaches
CHAPTER OBJECTIVES
At the end of this chapter, students should be able to do the following:
List and describe the key players within both home-market channels and foreign-market
channels.
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Explain the impact on national channel strategy of distribution density, channel length,
and channel alignment.
Describe how costs, product line, control, coverage, and synergy all influence the
proper choice of channel members.
List and explain the five key areas of global logistics management.
Explain the growing global importance of large-scale retailers, international retailing,
direct marketing, online retailing, information technology, and smuggling.
QUESTIONS FOR DISCUSSION
1. You have been assigned the task of selecting distributors in Malaysia to handle your
firm’s line of car batteries. What criteria will you use to select among the twelve possible
distributors?
Number of salespeople, geographic territory covered, credit and bank references, physical
2. The performance of your agents and distributors in South America has been poor over
the past three years. List possible ways in which to improve the management of these
agents and distributors.
Agents and distributors in South America may not be motivated. Increasing financial
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3. Given the trends in global retailing, what distribution strategies should a worldwide
manufacturer of women’s clothing consider?
A worldwide manufacturer of womens clothing might consider a distribution alliance with
4. Your firm has just entered the Polish market for bottled water. The major distributor is
owned by a competitive producer of bottled water. What strategies can you use to gain
access to this market?
This is an example of a locked-up channel. One possibility to pursue is piggybacking. Is a
5. Compare and contrast, from the manufacturer’s point of view, the problems that
parallel imports cause (Chapter 12) with those caused by smuggling. If governments
increasingly restrict international marketers from stopping parallel imports, can these
same marketers be held responsible for products being smuggled? Explain your
reasoning.
Parallel importing and smuggling cause similar problems for producers. Both parallel
importing and smuggling often bring products to consumers at prices lower than local retail
CASE 13.1: GIANTS IN ASIA
This case exposes the student to the obstacles and opportunities of international retailing. Focusing
on U.S.-based Wal-Mart and Frances Carrefour, the case describes what adaptations these
international retailers have made in Asian markets in response to government regulations, cultural
norms and preferences, and local competition.
DISCUSSION QUESTIONS
6. Why do you think hypermarkets are more common in some countries than in others?
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Students could suggest several reasons for this phenomenon:
Car ownership could be higher in some countries.
2. What competitive advantages do foreign retailers such as Wal-Mart and Carrefour
enjoy when they enter Asian markets?
Economies of scale often enable international retailers to offer products at much lower prices
than their local competitors.
3. What are some possible competitive advantages of local retailers? Are those advantages
transferable to other Asian countries?
Local retail companies may possess key advantages over international retail entrants. For
example, local customers may have established loyalties to local retail brands or developed
habitual patronage of particular locations; it may be challenging for international brands to
convince consumers to change these loyalties or habits. Embedded in the local cultural
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4. Why do you think governments regulate retailing practices?
Beholden to the support of the local population, governments are motivated to protect the
CASE 13.2: WHO’S TO BLAME?
Smugglingits causes and consequencesis the central theme of this case. Some producers, like
the tobacco manufacturers mentioned in the case, benefit from smuggled goods. For others, the
negatives of smuggling far outweigh any potential benefits. The case also mentions actions
governments are taking to combat and deter smuggling behavior.
DISCUSSION QUESTIONS
1. Why would BAT, or any multinational firm, cooperate with smugglers?
The Indian government restricted distribution of BAT products to duty-free shops and hotels,
2. How could smuggling hurt a multinational company?
First, a multinational firm could be accused of participating in smuggling and this could result
in fines, arrests and/or bad publicity.
(Chapter 11).
3. Why do you think some countries are introducing stiff penalties for smuggling?
Tariffs and taxes can be a key source of government revenue. Smuggled goods are lost
4. Whom do you think should be held responsible for smuggling—the manufacturer, the
smugglers themselves, the retailers, or the final consumer?
Most students will immediately state that the smugglers themselves should be held
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CASE UPDATES
The European Union and Philip Morris International announced that they were close to an
agreement to settle outstanding EU suits involving smuggling. Philip Morris agreed to pay the EU
$1 billion. In addition the company and the EU signed an agreement to jointly fight smuggling.
A follow-up question could be: Why do you think Philip Morris agreed to these terms?
Students could mention that the company might still fear lawsuits. This could possibly be true. In
However, the threat of counterfeits may have played a greater role. The large, global cigarette
companies soon faced a major problem of counterfeit cigarettes that began pouring through the
same smuggling distribution channels that governments claim cigarette companies supported for