• Getting your product from here to there - networks, relationships, wholesalers, and consumers
• The Wrigley story in your text gives a realistic view of the difficulties in global distribution and the unfamiliar methods which are often used
• The Wrigley Company Ltd., based in Plymouth, is one of 34 totally owned subsidiaries of Wm Wrigley Jr Company, and is responsible for marketing chewing gum and soft bubble gum in Great Britain, Ireland, East Africa, Spain, Portugal and Italy. Products are also manufactured for export to mainland Europe and the Middle East.

• The most common market segmentation is between sugar-sweetened and sugarfree variations of chewing gum. Sugarfree is growing dynamically, and accounts for over 3/4 of all gum sold in the UK. The gum market can also be segmented by format, i.e. stick, pellet, tab, chunk, or flavour, e.g. mint, fruit etc., or pack types, i.e. single packs & multipacks.

2    Some strategic clues are given on exporting forms
Check for incentives related to market entry choice
Check for restrictions related to market entry choice
Goods imported for resale through a Saudi citizen
Documentation must be on letterhead of company
Certain percentages of joint ownership
Tariff reductions for desired business forms
 

3    Many of these subtleties are not spelled out!
  They are found through export consultation

• Common mistakes of new to export firms
• Get local counseling on interpretation
• These are just a starting point
• What types of middlemen are typically used and expected?  E.g. complex networks in Japan
• We also need to know how people in various countries typically purchase products like ours. Where will they expect to find them?
• Examining Japanese distribution is a good illustration of various aspects of distribution methods, laws, and expectations. Retailers are modeling vertical integration systems after the Gap.

4    Terminology can be a valuable cue!
   CIF - cost, insurance, and freight options
   FOB - when is ownership actually taken?
   Choices of currency:  domestic, local, multinational, third party
   Payment terms, spelled out on forms

• And what is the impact of the Internet? Products are available worldwide.  Can consumers avoid complications of a country’s trade laws?

• http://www.jetro.go.jp/top/
• http://www.jetro.go.jp/it/e/pub/changing1995/index.html

6    Distribution
   Getting the Product to the Destination Market
   Distribution of the Product within the Destination Market
   Tasks:
               - transfers of ownership: advantages?
               - physical movement through time and space
    Issues:
               - safety of products and of employees
               - spoilage and damage concerns
               - where are your customers and how do they shop?
 

7    Channel Strategy
   Cost: home vs. foreign? added costs, such as establishment of standards (WPEA)
   Have you considered all hidden costs ?
   Can strategic choice of entry, content, labor, insurance, shipping  reduce
               your costs?
   Capital: investment:  will home market back your plans, or restrict funding,
               depending on home market situation?
   Control:  certainty  through home control vs. trust and use of local expertise
   Coverage: widespread? controlled? network
   Continuity:  how long a commitment? Do you have a plan to build the market?
   Is your investment experimental?
 

8    Understanding the Distribution System
   What types of middlemen are available? Are they able to provide the handling
               and exposure you need?
   What is customary in the destination market
   What skills do you have/need?
   How is your reputation made?
   Potential for cooperation?
   What type of complexity?
   Longevity, friendship in distribution
 

9    Wholesalers - what are they like?
   Size
  Power?
   Services? Costs?  What is the tradeoff?
   What kind of value-added is provided by the wholesaler?
   Will they serve the retailers which you choose?
   Will you have to develop supplementary forms of distribution?
 

10   Retailers - what are they like?
   Forms may be vastly different - Hungary, Costa Rica, South Africa
   Forms may be similar, and deceptively different - Japan, Russia
   Large-scale retailing laws - veto over establishment of new large-scale
               retailers
   Direct sales have grown - circumvents inefficiencies - Mary Kay in Russia
   Marketing on the Internet - Minitel in France has been available for years!
 
 

• How will distribution change given the growth of global commerce?
• Any ecommerce business is a global business
• Product and service adaptations must be considered
• Sizes, styles, appropriate merchandising

Fundamental Issues

• Do not begin with web design issues - instead think through the channel of distribution - this is your basic system
• Legal system:  what are e-commerce laws in your target markets? Do certain countries place restrictions?
• Infrastructural system:  Are telephone or dialup lines available throughout your target countries?
• Political restrictions on web commerce? Religious bans on prohibited products

• What is the availability of computers to persons in your target markets? Who owns computers? Internet availability in kiosks, stores? Costs to use? Is browsing behavior the same or vastly different?
• What are fundamental consumer purchase limitations: possession and trust of acceptable methods of payment, such as credit cards.
• Pricing Options: cash on delivery (Germany, India)

• Delivery options: costs, addresses, distance to consumer

Web Design Issues:

• Language, products, guarantees, warranties, images, use, terms, etc. etc. etc!
• How many languages, how many specific countries should be featured? Should country groups be featured instead?
• Local contacts and repairs
• Payment and currencies/ credit cards
• Delivery- how does it add to the shoppers’ costs?

12   Critical Differences in the Bricks and Mortar Retail Mix

• Can you adapt - can your product be sold successfully?
• Differences in store hours - eg the 24 hour shopping schedules controversial in EU
• Limitations in retail inventory and supply - shelf life and reorder points
• Limitations in retail display - limited floor space
• Power of Local Retail groups
• Large Scale Retail Store Law - Japan
• Delivery - sales from trucks, vans, and bicycles
• Let's consider the example of McDonald's

Kentucky Fried Chicken in China

• Kentucky Fried Chicken is the most famous international brand in China, according to a survey conducted by the A.C. Nielsen Co. As many as 45 percent of those surveyed said they had tasted Kentucky fried chicken at least once.
• The survey was conducted in 30 major cities in China, including Beijing, Shanghai, Guangzhou and Tianjin. The researchers received altogether some 16,000 valid questionnaires.
• There are now 380 Kentucky Fried Chicken restaurants in nearly 90 cities in China, including 42 in Beijing, employing 23,000 Chinese.
• Kentucky's Qianmen Fried Chicken Restaurant in Beijing was the first one set up in China, as well as the largest one in the world.

Development and Contributions

• In China, our fastest growing and most profitable country outside the U.S., we opened our 500th KFC and 60th Pizza Hut restaurant in 2001. Our China business volumes and margins continue to be off the charts, and KFC has been rated the number one brand in the entire country! In 2001, between KFC and Pizza Hut, we built almost 100 new units in the UK and over 80 new units in Korea, where we have the best Pizza Hut business in the world.
• We also had big wins with new product launches last year, such as the Tempura Twister in Japan, and Satay Twister in Australia. New promotions, such as the “Hot & On Time or It ’s Free ” guarantees in Australia and Korea, and the introduction of the Colonel’s famous KFC bucket in China have added to our revenue growth.

13   History:  KFC in Japan
http://www.kfc.co.jp/
http://www.yum.com/
http://www.yum.com/international/default.htm

   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
 

14   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
 

15   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
 

16   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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