International distribution: importers representatives foreign subsidiaries

Course summary (International distribution).

Global distribution: direct and indirect export channels. Sales / production subsidiary. Internationalization: licenses and franchises. Sales network management.
Objectives. In this unit you will learn:

- The importance planning an appropriate International distribution strategy when entering new export markets, examine the distribution options available to the exporter, outline the criteria to be used when selecting a distribution option and analyze strategies which can be implemented for consumer and/or industrial products.

- The channel options that may be used when entering new export markets. We are going to examine the direct and indirect export channels open to the exporter, analyze the functions of importers and representatives, discuss the use of company personnel and sales or production subsidiaries as well as explore franchising, licensing and other channels.

- The process of evaluating, recruiting and managing international sales representatives and the mechanism involved in selling into department stores and hypermarkets.

This will be achieved by:
- Examining the distribution options available to the exporter.
- Outlining the criteria to be used when selecting a distribution option.
- Introducing strategies which can be implemented for consumer and/or industrial products.

In finishing this Learning Unit, you will know the different possibilities that a company has for creating a network of international representatives and negotiation factors with possible agents at the time of signing contracts.

Example of the course International distribution:

In general, it would be ideal for an exporter to be able to sell direct to his final client with no need for intermediaries. In this way the exporter: reduces cost of sales, increasing the product's competitiveness; is in direct contact with the market, obtaining a continuous feedback of information; he can control the company's marketing policy directly. However, the truth is that this is not always possible (due to the costs involved or market idiosyncrasies) and in these cases the company should seek an intermediary.

We will analyze the most appropriate profile of a Foreign trade representative or agent, how to find him, how to apply control mechanisms, etc. What we must keep in mind is that the representative or agent is only useful when he starts to sell. Finding the agent isn't the end in itself, rather obtaining orders through him.

We will learn about selling into hypermarkets and department stores. You will outline the organization of a purchasing department. You will learn how to best approach department stores. You will examine the role of purchasing agents. You will analyze an interview with a purchasing manager.

To help overcome the difficulties encountered in international markets, it may often be in the interests of small and medium size companies to resource a separate organisation for the promotion and/or sale of their products abroad. It is quite common in Europe. It consists of uniting the export departments of several companies to form one common one for use by all.

The option “growing from zero” of the export department which can be seen as the most effective, is the creation of shared structures between various companies; what we will call “export consortiums”

Trading Companies are companies that sell domestically produced products abroad. They play an important role in giving an impetus to foreign trade and operate as commission agents for exporters. The Trading Company usually operates by finding a client who wishes to purchase a certain product somewhere in the world. Generally, these are clients who require a component that is almost unique and incorporated into their own product so it can be difficult for them to find a vendor. Japanese trading companies (Sogo Shoshas) or the corresponding in South Korea (Chaebols), are the ones that are furthest from the prototype of small companies described; they have a higher number of employees which allows them to specialize in specific products: cement, steel, heavy machinery and food. 

Sales Subsidiary. This formula enables having much stricter control of the marketing policy. For the company, the creation of a subsidiary means a long-term investment. Thus, the company should make a series of really in-depth research studies, in order to prevent any mistakes. Alternatively, the company could create a sales subsidiary but only when the sales potential is really high. Fully owned subsidiaries have been viewed as an international movement of capital. Now, however, capital transfers are accompanied by technological flow, managerial control, and access to input and output markets otherwise unattainable to the receiving country.

The various formulae analyzed so far correspond to what we could describe as a traditional distribution chain: from manufacturer to importer, from importer to wholesaler, from wholesaler to the representative, from the representative to the sales point and from the sales point to the end user. Once the necessary experience has been obtained, it cedes the opportunity to sell its products to those people or companies that wish to invest, creating a direct sales point similar to the one already set up.

Finally, we will analyze how e-business can influence international distribution. We believe that companies nowadays should look at digital distribution strategies. We see a business environment changing from consolidated multinational companies with established distribution channels selling "atoms" to pure Internet start-ups which only sell "bits". When we think about "bits" products we automatically think about digital distribution over the net, a global, flexible, instantaneous distribution which in many cases will not be controlled by national customs controls. What's more, implementing digital distribution strategies can create tensions in our traditional distribution network if we cannot create synergies.

Cases study (International Distribution):

Toshiba, a world leader in high technology, is a diversified manufacturer and marketer of advanced electronic and electrical products, spanning information & communications equipment and systems, Internet-based solutions and services, electronic components and materials, power systems, industrial and social infrastructure systems, and household appliances. Under the management vision of Innovation-driven, customer-focused growth, the key objective of the Toshiba Group of companies is to provide total utmost satisfaction to customers worldwide through leading-edge products and top-of-the-line services.

Mitsubishi Corporation (MC) is Japan's largest general trading company (sogo shosha) with over 200 bases of operations in approximately 80 countries worldwide. Although the activities encompass everything from trading to business investment, the essence can best be described as focusing on the needs and seeds of customers and society, conceiving business models, and reliably providing functions and services to propel these businesses forward.  Over the last 20 years, Mitsubishi Corporation has been actively engaged in various business fields in China, since the opening of Beijing office in 1979.

Focused on patients’ needs, Sanofi-aventis offers a range of essential healthcare assets, including a broad-based product portfolio and a presence worldwide. Operating in over a hundred countries, sanofi-aventis markets major pharmaceutical products derived from its research and a very wide range of medicines adapted to local needs throughout the world. Health policies and practices vary from country to country, with different funding systems and retail channels, and wide or restricted access to medicines. To adapt to these varied situations, sanofi-aventis has introduced a regionalization strategy. In many countries, sales forces have been reorganized into regional divisions and new functions have been created to interface effectively with institutions and administrations, as well as with patient associations.

Sumitomo Corporation is a leading general trading company, boasting 150 locations in 70 countries throughout the world. The entire Sumitomo Corporation Group consists of nearly 780 companies and more than 70,000 personnel. The Company's overseas industrial complex business (the overseas market penetration of Japanese companies has continued to accelerate since the late 1980s) is involved in the development and sales of industrial complexes in Vietnam, the Philippines and Indonesia, supporting the further penetration of the manufacturing industry in Asia and assisting in building industrial infrastructure throughout Asia in local communities. In total, more than 240 companies have taken up residence in three industrial locations, creating 95,000 new jobs.

Rolls-Royce plc is a global company providing power on land, sea and air. The company has established leading positions in civil aerospace, defence, marine and energy markets. Rolls-Royce plc operates in four global markets - civil aerospace, defence aerospace, marine and energy. Annual sales total nearly £6 billion, of which 50 per cent currently comes from aftermarket services. The order book stands at more than £17 billion. Headquartered in suburban Washington DC (US), Rolls-Royce North America provides management direction and corporate support for all Rolls-Royce businesses and operations in the region. Purchasing in Rolls-Royce has changed dramatically from the organisation it was just three years ago, driven by a recognition that Purchasing performance has a massive impact on our business success and on the service we provide to our customers.

Renault-Nissan Alliance. On March 27, 1999, Nissan and France's Renault SA signed an agreement concerning a comprehensive global alliance aimed at achieving profitable growth for both companies. For 10 years, employees at Renault and Nissan have worked as partners with attitudes of mutual respect and company pride while keeping separate brands and corporate identities.
Nissan continues its quest to optimize product development and deliver highly innovative technology. The Infiniti brand is highly regarded for its advanced design and powerful performance in each of its markets, including the U.S., Canada, Russia, the Middle East and Korea. With its highly refined style and responsiveness, Infiniti promises a driving experience with unparalleled appeal. This globalization program has now advanced to the stage where decision-making has been localized through the establishment of regional headquarters in North America and Europe. Nissan North America Inc. and Nissan Europe N.V. oversee the entire scope of Nissan's local operations in their respective regions, including product development, manufacturing, procurement, fund-raising and mutual complementation of parts between companies.

MANGO is a prestigious multinational company dedicated to the design, manufacture and marketing of clothing garments and accessories for women. MANGO bases its logistics on an in-house system which has developed progressively since the opening of our first store in 1984 until the present day, in which MANGO has become Spain’s second largest textile exporter. The Product Distribution team is responsible for selecting and managing the product in stores in order to define and offer stores a product offer that responds to the needs of each market in all the countries in which MANGO is present.

MANGO opened its 99th store in 1992. From this point on, the company's international expansion got underway with the opening of two stores in Portugal and in France afterwards. In 1997, the total turnover generated abroad exceeded the domestic turnover for the first time, and in 2001 it reached 68% of the total turnover. They presently have approximately 1220 MANGO/MNG stores in a total of 91 countries. Their goal is to be present in every city in the world. The MANGO fashion chain offers its franchise system throughout the European Union and in the major world capitals and cities.

7-Eleven pioneered the convenience store concept way back in 1927 at the Southland Ice Company in Dallas, Texas. 7-Eleven is the undisputed leader in convenience retailing with more than 24,000 stores operating in the U.S. and 17 other countries and total sales of more than $33 billion. More than 5,800 7-Eleven and other convenience stores are operated and franchised by 7-Eleven, Inc. in the United States and Canada.

 

International, Distribution, Exports, Importers, Representatives, foreign, Subsidiaries, direct, Indirect, export, channels, Sales, Production subsidiary, Internationalization, Licenses, Franchises, Sales, Network, Management, Master, international business