Case Example: L.L.Bean - Global?
1994: international sales grew by more than 62 percents and now
account for more than 13 percent of total sales
Problems of infrastructure have created significant barriers:
telephone and postal service limitations, lack of international services
such as 1-800 numbers, etc.
As a result, 70 percent of L.L. Bean’s international sales come from
Japan
Case Example of distribution problems: Glaxo
Wellcome in Nigeria
Nigeria pharmaceuticals industry separates OTC and prescription medications
into two separate industries
Glaxo’s analysis on logistics: outbound logistic management systems
tend to be mutually incompatible in a combined business structure.
Prescription medicines are usually very expensive an d compact. Value
per volume is usually high, unlike OTC products that are bulky and have
low value per volume.
Inefficiencies in the old system
Combined business: Delivery of products to customers was largely
a function of the availability of adequate OTC orders to fill a delivery
truck.
The compact nature of prescription medicines often prevented filling
a whole truck for each unit of customer order
Delivery of prescription medicines to customers, therefore, tended
to wait until enough OTC orders became available
Restructuring: Glaxo Wellcome Nigeria Ltd. Now uses courier services
to deliver products to its customers. Improved levels of customer service
and contributed to market share.
International Distribution Systems
Distribution systems differ in many markets
There are patterns that are typical of certain countries - these are
useful for identifying problems and prospects
Consider typical channel: Corporation - M-W-R-C
Combine typical channel with market entry options (exporting vs. production)
Are there customs, laws, traditional relationships to consider?
If we enter an alliance or joint venture, at what point of the channel
do we begin to participate?
Where is each function typically located in our target countries?
Cutting Out the Middleman
Factors Affecting Channel Choices
Cost - financial, time, effort, learning,
Capital - investment by home office - will your business venture be
supported in the long-term?
Control - will you need to maintain charge, or can you afford to give
control to another firm to sell your product correctly? Will you be expected
to give up control?
Coverage - will your product be distributed throughout the country
as you had planned? Will your product be handled in the right way?
Character - does the distribution system match the image you want for
your product?
Continuity - will you be able to maintain this structure for the long-term?
Japanese Distribution Structure
Complexity: High Density Middlemen - a complex network, often
traditional long-term relationships, keiretsu-type structure
Channel Control - is there a certain member of the channel who is most
influential?
Coverage: how widespread is the channel?
Customs: Business Philosophy - you “belong” to the company, you
are there for life - how long will the relationship be in existence?
Are there governmental regulations: Large-Scale Retail Store
Law - restrictions placed based on size of store, restricted retail variables
such as store hours, numerous changes in recent years
Channel Development
Locating Middlemen - yellow pages, local ports, US government recommendations
Selecting Middlemen - what are their skills?
Screening - do they have experience that we need? Can they provide
market exposure?
Agreements - defining responsibilities
Motivating Middlemen - incentives?
Terminating Middlemen - what are the laws governing your relationship?
International Channel-of-Distribution Alternatives
Home Country Middlemen
Export Management Company - works like a marketing dept
Trading Companies (Foreign) - trade in specific commodities
U.S. Export Trading Companies - trade in specific commodities
Complementary Marketers
Manufacturer's Export Agents
Home Country Brokers
Buying Offices
Selling Groups
Webb-Pomerene Export Associations - good for establishing standards
Foreign Sales Corporations
Norazi Agents
Export Merchants
Export Jobbers
Comparison of Distribution Channels Between the United States and Japan
Comparison of Distribution Channels Between the United States and Japan
General Motors Networks - American Style Keiretsu
Retail Patterns
Retailing Comparison U.S. and Japan the role of small
stores is much larger!
Undercutting the Competition
Japanese consumers have turned to catalogs Look at the price comparisons
Japanese Consumer Philosophy
Harmony and Friendship
Consumer
Brand Loyalty
Service and Quality Over Price
Small, Frequent Purchases
So how would traditional US marketing approaches work in Japan?
E.g. comparative advertising?
Kentucky Fried Chicken
Mitsubishi needed an industry to purchase its poultry - contacted KFC
- initial refusal
KFC later found that US market had less expansion potential - began
to consider Mitsubishi’s offer
Began research into adaptation of KFC stores for Japanese market
KFC in Japan - Location
Site selection: 50,000 people passed through the train stations per
day
number of people 15 min away by bus
number of people 15 min walking distance
no parking needed or available
overhead high - crowded conditions - little retail space
KFC in Japan - store layout
Scaled down store, equipment, seating areas to fit reduced space availability
US prototype did not fit
Similar foods, yet additions of Japanese preferences
Wax models of food for selection
Statues of the Colonel
KFC in Japan - cultural differences
Imperatives: store blessing, wax models of food, courtesy calls to
neighbors, gifts of sample foods
Adiaphora: exec speaking Japanese
Exclusives: Shinto priest must conduct blessing, ceremony could
not have been conducted by US representatives
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