Role of wholesaling in foreign markets: gathering product

assortments; risk bearing; bulk breaking; distribution to retailers.

Finland has one of the most concentrated large scale wholesaling
operations worldwide. Four large wholesaling groups account for most
wholesale trade. On the other extreme is Japan, with a multiplicity of
small wholesalers and even levels of wholesalers, one selling to another
, before goods reach the retailers.

Retailing in foreign markets: retailing more closely reflects the
economic and cultural life of the country. Provide some common
services such as carrying inventory, promotion of products, product
display, credit facilities to customers and other value added services.
American formats have spread across the world such as supermarkets,
convenience stores, factory outlet stores and malls.

In light of international marketing, firm should see how wholesalers fir
into marketing operations in different countries firms should think
about their market coverage, functions and services.: whether their
elimination is possible or not.
Types of distribution channels for
international marketing

1. Direct Channel: no middlemen ; only for firms that
have large resources; firm sets its own distribution
systems (sales centres or brand offices) in foreign
countries

Suitable for firms that have large financial resources;
intensive knowledge of foreign markets; sufficient
managerial personnel to supervise marketing or sales
centres in foreign markets

Salesmen may be appointed; direct marketing:
telemarketing; mail orders; internet can be used here.
 Advantages and disadvantages

Advantages:
1. Shortest distribution channel
2. When product is highly technical in nature and requires
demonstration
3. Also when firm is selling very high priced products in foreign
markets
4. Number of customer is limited/geographically concentrated
5. Firms can increase profits as profit margins do not need to be shared
with middlemen
6. Effective after sales service can be delivered
7. Full control
8. Uick delivery of goods and services to customers
9. Firm can keep in direct contact with foreign customers
E.g; Bank branches : Citibank; HSBC, Dell (internet) etc.

Disadvantages:
1. Increases distribution costs: firm has to set up its
own sales organisation and network
2. Firm has to bear all promotional expenditure
3. Requires huge financial resources
4. Increases responsibility of management
5. Not appropriate for producers and manufacturers: it
is difficult to perform manufacturing and selling
tasks simultaneously.
II. Indirect Channe of Distribution :
a. Merchant Middlemen:
i. Mrechant middlemen take both title and possession of goods.
Thus, risk bearing of unsold units remains with them.
ii. Includes wholesalers and retailers
a. Agents:
i. Middlemen who do not take title of the goods in their name
ii. Do not generally take possession of goods
iii. Only help firm to carry out transactions for which they get a
commisiion
iv. Agent-principal relationship: agent acts in the name of the
principal (the firm)
Advantages and disadvantages

Advantages:
1. Most appropriate for a new entrant in the international
marketing
2. Firms with limited resources
3. Middlemen can provide better services to customers (
knowledge; credit terms)
4. Greater acceptance by customers : foreign customers rely on
business organisations of their own coun try than deal with
foreign firms directly selling to them
5. When customers are geographically scattered
6. Can take full advantage of established , reputed middlemen
7. Firms obtain required information from middlemen such as
opinion , reactions and suggestion from customers:
middlemen more knowledgeable about local markets

Disadvantages:
1. Increases selling prices of products due to middlemen
margins
2. Middlemn may not be loyal to the marketing company
other brands
3. Reduces firms profits as thry have to part with profit
margins to be given to middlemen
4. Firm gets second hand information from middlemen
5. Foreign company remains ignorant about foreign markets
due to less involvement
6. Not suitable for high priced, technical products where
number of customers is limited
III. Mixed Channel of distribution:
Firm uses direct channels in some countries and
indirect channels in other countries. Even in a single
country, at some laces the firm may deirectly sell its
products to customers and for other places, use
indirect channel. E.g; Apple stores are present only in
ome countries like the US, Australia, UK, etc. In India,
apple products would be availoable thrugh
middlemen.
Present trend is towards a mixed channel.
III. Cooperative distribtuion : based on the principle of
co-operation. Normally used by small exporting firms.
Exporting firms dealing with same product catrgoty
come together and form an apeax body. Al firms who
want to co-operate become members of this body All
the rpoducts manufactured by member firms are
exported in foreign markets under common brand
name. Tie-ups are established in foreign markets with
co-operative societies to market the product. Profits
carried by the cooperative body in a specific period is
distributed among members on the basis of the value
of their goods.
Advantages and disadvantages

Advantages :
1. Appropriate for small exporting firms
2. Eliminates unnecessary ciompetition
3. Common branding and collective marketing
provides greater profits to members
4. Services of talented persons may be used in
governing board.
5. Individually the size of the marketing company may
be small, but together, the size increases

Disadvantages:
1. Longivity of the system is always under question
2. Efficient marketing companies usually, sooner or
later start their foreign operations separately.
3. Firms may have to bear uncessary losses due to
incompetent governing board
4. Quality issues can be challenging if coordinated
control is not maintained
IV. Vertical marketing systems:
Under this, the firm at one level of the distribution
channel owns the firms at the next level or own the
entire channel . Some international marketing
companies like Singer, Good Year, etc. gfollow this
strategy.
Factors affecting choice of channels
Marketing considerations:
1. Number of present and potential customers : greater the
number and in the case of FMCGs, indirect channels would be
appropriate.
2. Geographic Concentration of customers
3. Order sixe: larger-direct.
Product considerations:
1. Unit price of product: higher direct
2. Perishability: perishable product would usually utilise direct
channels
3. Newness of product: innovating product; direct channels
4. Technicality of product: high/complex-direct
5. Type of product: consumer goods-indirect channels

Company considerations;
1. Desire to control
2. Marketing policies and strategies: if the policy is only
super quality, high priced and unique products:
direct channels
3. Financial resources
4. Managerial resources
5. Services to customers

Middlemen consideration:
1. Market reputation and goodwill
2. Financial resources
3. Location
4. Product line specialisation and expertise
5. Access to direct market
6. Avaliable facilities
7. Avalibility of desired middlemen
8. Attitudes towards policies of marketing company
9. Prospective sales
10. Cost factor
Promotion ; Advertising, Trade
Fairs and Exhibitions

Elements in the marketing mic, decisions related to
advertising are most affected by cultural differences.

Advertising objectives stem from marketing objectives

Advertising decision involve message strategy and media
decisions.

Constraints to advertising in international marketing :
1. Language
2. Role of advertising in society
3. Cultural factors
4. Mdia availability
5. Agency availability
6. competition
Advertisng decisions facing
international marketer

Selecting the agecny

Choosing the advertising m essage

Slecting the media

Determining the internation advetising budget

Evaluating international advertising effectiveness

Organising for international advertising
Standardisation versus Adaptation
in International marketing

When companies expand into international markets,
they need to consider standardisation or adaptation of
their marketing programme in various markets.
Adaptation means change in the marketing
programme-the product, price and promotion in the
international markets. Standarsization means using
the same marketing mix in all countries.
Adaptation./standardisation of
products

Product adaptation refers to the degree physical
attributes and packaging differ in different countries

Products often need to be changed in international
markets: small or large modifications; changes typically
affect packaging, measuring units, labelling, product
constituents and features, usage instructions and to a lesser
extent-logos and branding.

Various issues may make adaptation of products
necessary-legal, technological developments, cultural and
competitive factors

Standardization: customers are willing to sacrifice specific
preferences in return of lower prices.

In terms of standardisation or adaptation of products: some
argue that focus should be on customer not products.
Standardisation assumes that humanity as a whole has
common attributes-world is become more homogenized - and
thus standardisation should be followed. Adaptation takes into
consideration differences in local needs and tastes.

Standardisation of products leads to consistent product image
and leads to increase in sales-Also lead to reduction in costs.

Brands and packaging are the most common things a company
standardises.

Companies that have the same competitors worldwide also use
standardisation.

Adaptation leads to improved business performance

Markets do differ and adaptation allows customisation to satisfy needs of
customers better

Industrial products adaptation (in terms of standards in various
countries) to a lesser degree than consumer goods which are more
culturally oriented :food products are adapted to a larger extent as food
is highly cultural in nature.

McDonalds in Japan serves smaller burgers as Japanese view burgers as a
snack, not a meal; India: spicy Indian flavoured burgers; Pizza Hut-veg,
pizzas; McDonalds in Germany serve alcohol; Pepsi ; Kurkure.

The amount of change depends on both culture and economics :
Unilever marketed smaller packages for India for a few pennies instead
of the regular sizes which cost $5.

Government rules may also lead to adaptation ; cars with child control
systems; air bags, seat belts (even more passengers sitting at the back :
in most developed nations.

There is no one right solution-but a combination of the 2 strategies that
is recommended.

Basic parameters to be considered in adapting or
standardising of Products:
1. Homogeneity of world demands and an increase in
number of global markets
2. People are willing to sacrifice preferences in features
and functions for lower price
3. Local needs are prominent, esp. in the case of
consumer goods such as food products
Adaptation/standardisation of Pricing:

One world wide pricing; dual pricing-different prices in different

countries; market differentiated pricing
Standard world wide price : pricing the product same across the
world on the basis of similar average unit costs of variable, fixed
and export related costs.
Dual pricing: consider domestic and foreign pricing issues and
this is thus translated into cost plus pricing. Fixed costs , R&D
costs and domestic overheads in the domestic country are
ignored but direct costs for producing and selling the products
becomes the baseline above which price is set.
Market differentiated pricing; prices vary according to changing
environmental conditions-such as changes in competition,
exchange rates.
Standardization and adaptation of
promotion in international markets

In B2B markets, common promotional tools used are PR and trade
shows.

1950s; adaptation; 1960s: standardisation; 1970s: back to adaptation
and 1980s: standardisation

Increase in increased nationalistic forces; a series of advertising
blunders led to adaptation

3 approaches to international advertising: standardsiation; adaptation
and a combination of both

Standardisation-reduction of costs and consistent brand image; similar
positioning; advertising budgeting; centralised advertising control

Standardisation is based on the assumption of homogeneous segments
and unless this is true, the possibility of communication break-down
increases; thus making te product less appealing to customers and
adversely affecting sales

Adaptation-advantages of local adaptation; considers local needs;
consists of decentralised advertising .

Adaptation leads to better positioning in individual markets and price
differentials

Adaptation tries to improve business performance through gaining
maximum effectiveness in terms of customer responses and sales.

Visual and verbal part of the advertising are adapted; local language,
local models and local sceneries makes the advertisements more
effective. E.g. : Coca Cola advertisements use adaptation across various
countries; Pepsi : adaptation : use of local heroes; Samsonite uses
standardisation (targeted at Global customers who have similar
needs).

When national markets are more similar within than between nations,
adaptive advertising leads to more accurate positioning and price
differentiations.
Overall Factors that affect
standardization/adaptation
1. Product variables- degree of universality of the
product
2. Homogeneous versus different markets
3. Competitive variables-competitive structure
4. Organizational experience and control
5. Infrastructural variables
6. Government variables
7. Cultural and Societal variables