International Business and International Marketing

Chapter 13 : Marketing Channel and Place Decisions

Chapter Summary

Marketing channels are created to facilitate the exchange process, alleviate discrepancies, standardize transactions and provide customer service. In a normal situation, a distribution system consists of two levels of players between the manufacturer and the consumer. These players are wholesale distributors and retailers. Distribution channels in different countries are dissimilar in terms of the retail system, channel length and channel accessibility.

Characteristics of customers, product, intermediaries and the environment influence the mode of channels. The characteristics of customers include number of customers, geographical distribution, income, and shopping habits. Product attributes include degree of standardization, perishable nature of the product, bulk, service requirements and unit price. The mode of channel is also affected by a variety of economic, social and political factors. Generally, local markets in less developed countries are regulated or dominated by networks of local intermediaries.

Internationally operating companies have to partner with these distributors to gain access to their unique expertise and knowledge. Channel innovation depends on many factors like level of economic development of the country in which the firm is operating, local demographic/geographic factors, social norms, government actions and competitive pressures. A properly designed distribution channel will help a company achieve a sustainable competitive advantage. Channel structure varies depending on the customer.

Transactions between parties that do not involve the ultimate consumer are considered wholesale transactions. There are two types of wholesale intermediaries: merchant intermediaries and functional intermediaries. Merchant intermediaries buy products and resell them. Functional intermediaries negotiate and just expedite exchange among producers and resellers. They charge fees and/or commission. An international firm must take adequate care when entering into agreements with distributors. This can make or mar its chances of success. A firm can choose direct or indirect channel based on requirements. It can similarly go for selective or intensive distribution depending on the need.

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