Chapter Fourteen

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Chapter Fourteen
Global Distribution
2
SIZE NUMBER OF WHOLESALERS IN SELECTED COUNTRIES
Source Retailing in the European Single Market,
1993. These figures are adapted from Table
EUR1aImportance of Commerce in the ECabsolute
values (1987-91)
3
Japanese Import Distribution Alternatives -
Distribution Route of Italian Spaghetti
Conventional Route
Small wholesaler
Producer
Processing and packing plant
Import agent
Primarywholesaler
Intermediary wholesaler
Retail price 170yen/300g package
Retailer
Restructured Route
Depots Distribution Wholesalers Distribution
centers
Processing and packing plant
Importing company A/C
Producer
Retailer
Savings 25
Retail price 128yen/300g package
Source Allied Import Company, as reproduced in
Michael R. Czinkota, and Jon Woronoff, Unlocking
Japans Markets. Chicago, IL Probus, 1991, p.
104. Used with permission.
4
International Comparison of Wholesale Trade
Practices
Source Distribution Economics Institute, Survey
on International Comparison on the Distribution
Industry, May 1990.
5
International Comparison of Wholesale Trade
Practices
Source Distribution Economics Institute, Survey
on International Comparison on the Distribution
Industry, May 1990.
6
International Comparison of Wholesale Trade
Practices
Source Distribution Economics Institute, Survey
on International Comparison on the Distribution
Industry, May 1990.
7
Size and Number of Retail Outlets in Selected
Countries
Source Retailing in the European Single Market,
1993. These figures are adapted from Table EUR1a
Importance of Commerce in the ECabsolute
values (1987-91)
8
GLOBAL RETAILING

• 1. STANDARDIZED PRODUCTS, GLOBAL BRANDS
• 2. GLOBAL SEGMENTS
• 3. A STORE CONCEPT
• 4. CONCEPT MOBILITY
• 5. SIMILAR INFRASTRUCTURE (REPLICABILITY)

9
Seikos Authorized and Unauthorized Channels of
Distribution
Europe
Hong Kong
Japan
North America
Importer
Importer
Importer
Importer
Importer
Importer
Distributors
Distributors
Distributors
Distributors
Distributors
Distributors
Distributors
Distributors
Retailers
Retailers
Retailers
Retailers
Retailers
Retailers
Retailers
Retailers
Broken arrows denote the flow of Seiko watches
through unauthorized channels of
distribution.Solid arrows denote the flow of
Seiko watches through authorized channels of
distribution.
Source Jack Kaikati, Parallel Importation A
growing Conflict in International Channels of
Distribution, Symposium on Export-Import
Interrelationships, Georgetown University,
November 14-15, 1985.
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Channel Actions vs Gray Trade
Supply Interference Dealer Interference
Demand Interference Strategic Attack
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VALUE ADDED BY THE CHANNEL
INTRODUCTORY --PCs HOBBYIST
STORES --DESIGNER APPAREL BOUTIQUES
DECLINING --PCs MAIL ORDER --DESIGNER APPAREL
OFF-PRICE STORES
LOW
MARKET GROWTH RATE
GROWING --PCs SPECIALITY RETAILERS --DESIGNER
APPAREL BETTER DEPARTMENT STORES
MATURE --PCs MASS MERCHANDISERS --DESIGNER
APPAREL MASS MERCHANDISERS
HIGH
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BUILDING A DISTRIBUTOR TEAM FOR EPSON PRODUCTS

• JAPANS EPSON CORPORATION, A LEADING
  MANUFACUTURER OF COMPUTER PRINTERS, WAS
  PREPARING TO ADD COMPUTERS TO ITS PRODUCT LINE.
  NOT HAPPY WITH ITS CURRENT DISTRIBUTORS AND NOT
  TRUSTING THEIR ABILITY TO SELL TO NEW TYPES OF
  RETAIL OUTLETS, EPSONS GENERAL MANAGER, JACK
  WHALEN, DECIDED TO QUIETLY RECRUIT NEW
  DISTRIBUTORS TO REPLACE THE EXISTING ONES.
  WHALEN HIRED HERGENRATHER COMPANY, A RECRUITING
  COMPANY, AND GAVE THE FOLLOWING INSTRUCTIONS
• SEARCH FOR APPLICANTS WHO HAVE TWO-STEP
  DISTRIBUTION EXPERIENCE (FACTORY TO
  DISTRIBUTOR TO DEALER) IN EITHER BROWN GOODS
  (TVs AND SO ON) OR WHITE GOODS (REFRIGERATORS,
  AND SO ON).

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THE APPLICANTS HAVE TO BE CEO TYPES WHO WOULD
BE WILLING AND ABLE TO SET UP THEIR OWN
DISTRIBUTORSHIPS. THEY WILL BE OFFERED
80,000 YEARLY SALARY PLUS BONUS, AND 375,000
TO HELP THEM SET UP IN BUSINESS EACH WILL ADD
25,000 OF HIS OR HER OWN MONEY, AND EACH WILL
GET EQUITY IN THE BUSINESS. THEY WILL HANDLE
ONLY EPSON PRODUCTS BUT MAY STOCK OTHER
COMPANIES SOFTWARE. EACH DISTRIBUTOR WILL
HIRE A TRAINING MANAGER AND RUN A FULLY
EQUIPPED SERVICE CENTER. THE RECRUITING FIRM HAD
A HARD TIME FINDING QUALIFIED AND MOTIVATED
PROSPECTS. THEIR WANT ADS IN THE WALL STREET
JOURNAL(WHICH DID NOT MENTION THE COMPANYS NAME)
PULLED ALMOST 1,700 LETTERS BUT MOSTLY FROM
UNQUALIFIED PEOPLE LOOKING FOR JOBS. THEN THE
FIRM USED THE YELLOW PAGES TO GET THE NAMES OF
EXISTING DISTRIBUTORS AND PHONED THE
SECOND-IN-COMMAND MANAGERS. IT ARRANGED
INTERVIEWS AND, AFTER
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MUCH WORK, PRODUCED A LIST OF HIGHLY QUALIFIED
INDIVIDUALS. WHALEN INTERVIEWED THEM AND CHOSE
THE 12 MOST QUALIFIED CANDIDATES FOR HIS 12
DISTRIBUTOR AREAS. THE RECRUITING AGENCY WAS
PAID 250,000 FOR ITS RECRUITING EFFORT. THE
FINAL STEP CALLED FOR TERMINATING EPSONS
EXISTING DISTRIBUTORS. THESE DISTRIBUTORS HAD NO
INKLING OF THIS DEVELOPMENT, SINCE THE
RECRUITMENT WAS CONDUCTED IN SECRECY. JACK
WHALEN GAVE THEM A 90-DAY NOTICE OF THE
CHANGEOVER. THEY WERE SHOCKED, HAVING WORKED
WITH EPSON AS ITS FIRST DISTRIBUTORS. BUT THEY
HAD NO CONTRACTS. WHALEN KNEW THEY LACKED THE
ABILITY TO HANDLE EPSONS EXPANDED COMPUTER
PRODUCT LINE AND REACH THE TARGET NUMBER OF
DEALERS. HE SAW NO OTHER SOLUTION. SOURCE
ARTHUR BRAGG, UNDERCOVER RECRUITING EPSON
AMERICAS SLY DISTRIBUTOR SWITCH, SALES AND
MARKETING MANAGEMENT, MARCH 11, 1985, PP. 45-49.
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GLOBAL LOGISTICS
TECHNOLOGY AND FREE TRADE EFFECTS 1. SEAMLESS
TRUCK, TRAIN, SHIP 2. CONSOLIDATION OF
TRANSPORTATION AND WAREHOUSING 3. EXPRESS
SERVICES 4. RESULT LOGISTICS ARE OFTEN
OUTSOURCED AND NOT USUALLY A GREAT TRADE
BARRIER ANYMORE.
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Determinants of Choice of Channel
1. Product Requirements (Perishable lettuce,
sensitive apples, fine china, scratched cars,
beer without freshness, moldy cakes,...) 2.
Logistic Feasibility (Equipment by DHL, autos by
air, faxes of newsletters, freezer railroad cars,
shock-absorbent packaging, vacuum-packed,...) 3.
Demand Factors (Importance of speed for repairs,
timing of raw materials for inventory, customers
need for immediate gratification, quality
standards of middleman and final user,...)
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Determinants of Choice of Channel
4. Competitive Factors (How fast is fast? How
good is good? What are the alternatives for the
buyer? Strategic importance of the market?) 5.
Middlemen Resources (Storage capability?
Credit or consignment or cash? Motivating with
fast delivery? Just-in-time system? Promised
supplies? Ability to support the marketing
effort?) 6. Own Resources (Financial, manpower,
production capacity)