Selecting Channel Members

Selecting Channel MembersDistribution plays an important role in the implementation of the outside(a) marketing program as it enables the products and services to reach the ultimate customer. And international marketing firm has the option of managing its distribution position either directly or indirectly by impinging or a suitable combination of the cardinal.Due to fleshly distance, and to a fault the differences in geographical, cultural and market characteristics of the trading countries, utilisation of middlemen is found quite popular in international marketing. In fact, distribution is one such primary functions of marketing which makes use of the services of external independent agencies that bind the firm in a long term kinship. internationalistic Distribution pack-Distribution has two elements, the institutional and the physical. Physical distribution aspects c over transport and w arehousing.The longer the direct, the much likely that makers profits will be in directly reduced. This is because the end products price may be too expensive to sell in volume, sufficient for the producer to cover cost. Yet cutting occupation length may be impossible, as country foundation requirements may dictate them being there.As already mentioned international venders have the options of organizing distribution of their goods in exotic markets through the use of indirect transmit, i.e. Using intermediaries, direct channels or a combination of the two in the same or different markets.Indirect DistributionIndirect channels are further classified based on whether the international marketer makes use of domestic intermediaries. An international marketer therefore, terminate make use of the following types of intermediaries for distribution in contradictory markets.Domestic everyplaceseas IntermediariesCommission buying agentsCountry-controlled buying agentsExport management companies (EMCs)Export merchantsExport agentsPiggy backingForeign Intermediarie sForeign Sales RepresentativesForeign Sales AgentsForeign Stocking and Non-Stocking AgentsState Controlled commerce CompaniesDirect DistributionThe options available to international marketer in organizing direct distribution include sending missionary skies representatives abroad from the headquarter, setting up of topical anesthetic gross sales/branch office in the foreign country or for a region, establishing a subsidiary abroad, entering into a joint venture or franchising agreement.Companies having long-term interest in international marketing find it expedient to deploy their own sales force in foreign markets. This encourages them in increase their sales volume through committed market development activities, better control and motivation of foreign intermediaries being used, and paving the way for smoother spiritual rebirth to direct distribution and marketing.International Distribution Policy-The international distribution insurance of a firm according to Cateora, sho uld cover the following factorsQuestion of control, sizing of brims, length of channels, terms of sale and channel ownership.Resource (money and personnel) commitment plans for the distribution function management keeping profit goals in a foremost position. specialized market goals expressed in terms of volume, market share and margin requirements, to be accomplished.Return on investment, sales volume and long run potence as well as guidelines for solving routine distribution problems, andThe relationship between long-and short-term goals, the extent of the companys wantment in the distribution system as well as the extent of its ownership of middlemen.Adapting to distribution patternsNotwithstanding, the international distribution policy of the company, the factor of flexibility to adapt the distribution policy to local conditions of the foreign markets is very crucial for effective results.A clear understanding of the target market characteristics covering aspects such as tradi tions and conventions in the wholesaling and retail distribution patterns shop habits of customers including customers reliance on channel members for product information and servicing commercial terms and legal requirements dish out define the picking of channel.The following trends help to beautify the need to the above analysis for suitable adaptation of the distribution patternsIn the US, there has been a rapid expansion of large supermarkets and other retail chains, and also the deep-vertical integration into wholesale and manufacturing by large retail housesIn Sweden, a powerful consumer-oriented cooperative movement handles a substantial commerce in food, petroleum, etc.In Mexico, there is a modern retail distribution for the urban people, and traditional outlets and public distribution system exists for the poor.In China, wholesalers mainly control the Chinese distribution system.In Japan, large trading companies, handle half of Japanese trade while a large number of wh olesale and retail outlets help products to penetrate in its market.In Saudi Arabia, a small number of hands approved by the royal family control its manufacturer-wholesaler retailer distribution system.Agents in Foreign MarketsAgents, known by different names and performing varying functions in different foreign markets, have a historically established position in international distribution. While agents do not take the title to the goods, their importance stems from local language proficiency, access to important policy and decision-makers, overcoming business grow differences, short circuiting the buying-selling process, and performing the cumbersome formalities and complying with routines and procedures of the foreign market.Selecting Distribution Channels and Channel Members-Channels are an integrative part of the marketers activities and as such are very important. They also give a very vital information flow to the exporter. A channel is an institution through which goods a nd services are marketed. Channels give place and time utilities to consumers. In order to provide these and other services, channels charge a margin. The, longer the channel the more margins are added. deep down the overall international distribution policy of the firm, the factors ofcapital requirementslevel of distribution costsdesired extent of control over distribution channel astuteness of market coverageproduct-market distribution pattern characteristicscompetitive practiceslegal requirements andShort-term versus long-term involvement of the firm in international marketing govern the natural selection of distribution channels.Basically the picking comes down to two alternatives, the producer /seller selling direct or through an international merchant or agent.This is followed by the development of criteria for the selection of specific intermediaries. The criteria generally includes factors as financial soundness, local government contacts, business reputation, distribution network, technical support and infrastructural facilities (esp. relating to heavy industrial goods), business experience and managerial expertise, commercial terms, and extent of exclusivity to the international marketer. As the selection of the channel members commit the marketer to them for a sexual intercoursely long period of time, their selection involves a cautious process and a careful analysis and referencing. Some international marketers make us of an elaborate process in this regard which begins with relative rating of candidate firms on pre-determined criteria.After the channel member is selected it is a prudent business practice to enter into a written agreement spell out out the scope of commitment to each other and thus minimizing the possibility of disputes and misunderstandings, 5 lists the items that should be included in a typical agreement with the foreign channel members.Items to include in an Agreement with Foreign Channel MembersName and address of both part iesDate when the agreement goes into effectDuration of the agreement nutriment for extending or terminating the agreementDescription of sales territoryEstablishment of give notice and/or commission schedules and determination of when and how paid.Provisions for revising the commission or discount schedulesEstablishment of a policy governing resale pricesMaintenance of appropriate service facilitiesRestrictions to prohibit the manufacture and sale of similar and competitive productsDesignation of responsibility for ostensible and trademark negotiations and/or pricingThe assign ability or non-assign ability of the agreement and any limiting factorsDesignation of the country and state of contract legal power in the case of disputeMotivation of Channel MembersIn order to get the best out of the international marketer and channel member relationship it is necessary that economic and non-economic incentives be used for the purpose. It may be emphasized that channel members being indepen dent business entities, their key consideration for relationship is economic. If the channel member does not get an adequate economic return it is unlikely that he will put in his best in the business. In addition, rule of contact, involvement in goal setting, better understanding of the international marketers business, and provision of assistance in market development or other areas of deficiency of the channel members capability prove useful for getting the channel members more than what they are generally expected to contribute.Robert Douglas Stuart suggests the following ways for strengthening the channel members loyalty bod your distributor with your company bring him into your picture discuss future plans as they affect his area with him, seek his advice.Give your distributor an effective profit margin try to keep in mind that you want to be in business with him for several years make him want to continue the relationship.Be certain(a) he has credit terms which make him com petitive, or more so, in amount and length of payment.Maintain unbroken correspondence, and make sure he can clearly understand what you have to say.Make a point of commenting on successful distributors in whatever communication you use in his area (advertising, publicity, sales bulletins, and so on)Control of Channel MembersControl of channel members in international distribution though difficult yet is an important aspect of its management. Accomplishment of sales targets, market coverage and development goals, payment schedules, and profit contribution made are some of the factors on which the performance of channel members is appraised and controlled. Constant monitoring, periodic reviews, regular communications and intermittent suggestions help a marketer to control its channel members and keep the marketer-channel member power balance in its favor. Legal requirements and adverse move on reputation must be given their due weight age if and when the unavoidable decision of ter mination of channel member is to be taken.International Physical Distribution Management (IPDM)-Ever since globalization transformed the transport sector, national boundaries have become permeable to penetration by trade, creating the need for conciliative transport solutions. Intermodalism and containerization were the by-products of this era and were poised to metamorphosis transport of general cargo, moving it seamlessly through sea and land arteries. Forty years ago, the physical process of exporting or importing goods was arduous. Goods needed to be transported by lorry to the port, unloaded into a warehouse and then reloaded into the ship piece by piece.The management of physical distribution of goods includes the functions as well as costs associated with packing, order taking and processing, and inventory control. Given the geographical distance, the associated business risks and the variety of transportation modes available, the management of this function poses a difficu lt challenge so far as the objectives of ensuring ready and regular supply of goods, in foreign markets at the most optimal costs are concerned.Physical Distribution Management, known as the dark continent of marketing offers tremendous potential in cost cutting and improving profitability. It requires the use of a systems approach and the management of the transportation, warehousing and inventory functions in an integrated manner.ContainerizationContainerization, the term very familiar to present day tape transport industry was a completely unknown concept a few decades back.It was Malcom McLean, owner of a huge trucking company in USA, who first conceived the idea of containerization by transporting. Containers through Ideal X in 1956 and initiated a revolution in the history of shipping industry. Over the years, the industry has created a separate identity within the shipping world through continuous development and Maersk Lines, PO Nediloyd, Sealand Services (CSX), APL and ot hers have come up as international major(ip)s serving customers all over the globe.The growth of containerization in India has been slow and steady. The formation of Container throne of India (Concor) as an autonomous body under the Ministry of Railways in 1988 boosted the efforts at increasing containerized traffic in the country. Over the years, volume of container traffic has experienced continuous growth and registered a volume of2.22 million TEUs in 1999-2000 at the major ports of India.A significant number of international container lines are active in India making business through their own office or through selected agents. Amongst the Indian shipping companies, only The Shipping Corporation of India is active in the international liner business. It has tied up with Zim Navigation of Israel and Yang Ming Line of Taiwan to provide services on international routes.Of the 11 major ports of the country, Jawaharlal NehruPort (JNP) and Mumbai Port have. Established as the gateway ports for container traffic to India having a combined market share of around 60% of the total container traffic. Lack of adequate infrastructure in form of container handling equipment, CFS network and rail network in other ports have led to concentration of container traffic at Mumbai and JNP. Liberalization and privatization policy taken up by the Government of India has resulted into the commissioning of new ports like Adani and Pipavav.The various advantages offered by containerization includeContainers can be loaded and sealed at the consignors premises or at nearby container depot, minimizing the risk of theft.Since the goods are not directly handled during voyage, the risk of damage is minimized.Cargo can be loaded in a matter of hours rather than days the reduction in handling time at ports results in increasing berth capacity.The faster turn-round enables ships to make a higher number of annual voyages and reduces the number of necessary ships.Because of the numerous adva ntages, both air and water carriers encourage the use of containers by charging lower rates for containerized shipments. ending-International distribution and sales policy decision is one of the most complex aspect of international marketing management. Along with price and promotion decisions, a decision has to be made on the distribution system. There are two components to this the physical (order processing storage/warehousing and transport) and the institutional aspects. The latter involves the choice of agents, distributors, wholesalers, retailers, direct sales or sales forces. Again, each has its own advantages and disadvantages.However, it is in the channel of distribution that the international marketer can encounter many risks and dangers. These involve many transaction costs both apparent and hidden. Risks include loss in transit, destruction, negligence, nonpayment and so on. So careful choice and evaluation of channel partner is a necessity.Regular report on foreign mark ets, foreign visits, and deployment of sales force abroad and, an in-depth analysis of physical distribution cost and obstacles help a firm to streamline its international distribution, offer superior customer service, and keep distribution cost within reasonable limits. Since distribution decisions bind the marketers with their channels for long-term, its implications in terms of costs, flexibility, control and reputation must be examined carefully before committing the decision.