Distribution Systems in

Specialized Areas
T
Specialized Areas

 Distribution System for Agricultural Products

 International Marketing Distribution Systems
 Emergency of Electronic Channels
International Marketing Distribution Systems

• Although entering into international markets is merely

seen as an application of the marketing mix in an
international context, the process is not that simple
• There are differences in customer needs, wants and
expectations, trade practices, government policies,
rules and regulations, infrastructure etc.
Why do Companies want to enter International
Markets?
 Saturation of domestic markets; today, most companies face
tremendous competition because of imports in their respective
countries
 Foreign markets offer immense opportunities and a huge
scope for growth when a company has reached saturation in
the domestic market, and hence international markets serve as
attractive markets for many companies for supplementing the
profits earned from domestic markets
Why do Companies want to enter
International Markets? Cont…
 Capturing new markets internationally, also helps companies in
gaining cost advantages
 In case of excess capacity which cannot be absorbed locally,
companies seek markets abroad
 Entering new markets internationally, is also used by many
companies as a strategy to minimize the risk of excessive
competition in domestic markets
Why do Companies want to enter
International Markets? Cont…
 It helps companies diversify and expand business in new
territories
 It also helps companies in building a brand image in
international markets as well
 The rapid advancements in technology has made it easy for
companies to enter into international markets and reach
customers across the globe
Why should Companies Need to Study
International Markets before Entering them?

 This is because of the differences in customer expectations

across countries; customers of no two countries are alike, and
their perception towards products as well as motivations for
purchase will vary
 Differences exist with respect to governmental policies, rules
and regulations, and a thorough understanding of the same is
required before a company enters an international market
 Trade practices across countries vary which substantially affect
how players operate in the market
Why should Companies Need to Study
International Markets before Entering them?

 The difference in the quality of physical infrastructure, also

affects business which might not be of same level in two
countries
 Selecting an International Market
 Companies should take utmost care while making decisions
with respect to entering a market as a lot of time and money
resources can go waste if wrong decisions are made
 Entering into an international market would mean a huge
investment
There are many factors which must be taken into consideration while selecting an international market
like:

 Market size  Availability of raw materials

 Language of the host country  Human resources
 Cultural perspectives  Currency rates
 Laws and regulations  Market steicturtical risks.
 Pricing  Political risks
Market Size
 When selecting an international market, considering market size is
crucial for several reasons:
 A larger market typically offers more potential customers, which can
lead to scalability and increased revenue.
 A larger market may also indicate more diverse consumer needs,
allowing for a broader product range.
 Additionally, a larger market may attract more competitors, so
understanding the size helps in evaluating the level of competition,
potential market share, and overall growth prospects.
 Furthermore, a larger market often provides economies of scale and
potential cost efficiencies.
Pricing:
• Considering pricing is crucial when selecting an international
market because it directly impacts the competitiveness and
profitability of products or services. Understanding local pricing
dynamics, including consumer purchasing power, price
sensitivity, and acceptable pricing strategies, is essential for
setting competitive prices that align with market expectati ons.
Market structural risk
• Market structural risk refers to factors such as the level of
competition, barriers to entry, industry regulations, and market
saturation. Understanding these factors helps in assessing the
potential challenges and opportunities within a market. High
levels of competition or significant barriers to entry may pose
challenges for new entrants, while unmet consumer needs or
favorable regulatory environments could represent
opportunities.
Language of the host country
• Considering the language of the host country is important when
expanding internationally for several reasons.
• Language significantly impacts communication with customers,
suppliers, and partners.
• Understanding the host country's language can facilitate
effective marketing and advertising strategies, as well as help in
providing customer support.
Language of the host country Cont…
• It also influences the design and content of products,
packaging, and labeling to appeal to local consumers.
• Additionally, language considerations extend to legal and
regulatory requirements, as contracts, documentation, and
compliance may need to be in the local language.
• Finally, language impacts the ease of doing business and
integrating into the local culture, demonstrating respect and
building trust with the host country's population.
Availability of raw materials
 Before entering an international market, a company must also
ensure that the required raw materials can be procured in the
right quantity and at right prices in the foreign country,
especially if the company is setting up a manufacturing unit in
the foreign country
• The cost of raw materials should not exceed the designated
costs for the company
Cultural perspective:

 It is important to understand the cultural components of a foreign

country
 Culture lays the foundation of product features and attributes, and
lies at the cors 8t marketing communication with consumers in
international markets
 Culture influences needs, wants and preferences; it influences
product usage, and price sensitivity, as well as communication
styles and methods
 A poor understanding of culture can lead to resentment, and
prove to be highly costly for a company, leading to heavy losses
for the company
Human resources
 Before entering a foreign market and establishing a base there,
a company must ensure that the skilled human resources are
available
 Manpower are assets, and are a pre-requirement for the
smooth functioning of any organization
Laws and Regulations:

 Laws vary from one country to country, and it is important to know and
understand the do's and dont's of the foreign land
 It is important to know policies and procedures, as well as rules and
regulations regarding investments, manufacturing, marketing,
employment, taxation, profit repatriation, safety pollution etc.
 Before entering an international market, it is important that the company
fulfills the legal requirements with respect to entry and operations in the
foreign land nd
• All necessary licenses must be obtained and required registrations must
be complied with before production and marketing activities are initiated by
the company
•
Political risks
 Political instability in a foreign market can prove to be very costly
for an organization
 A frequent change of government severely affects the change and
implementation of business policies
 A risk assessment must be conducted to determine the suitability
of operations in a foreign country; the economic and political
situation of a foreign country must be evaluated before a
company decides to enter an international market
• *Often, foreign governments may oppose the entry of big business
ventures on their land on account of resentment from domestic
business houses
Currency exchange rates
 Exchange rates substantially affect the cost of production and
marketing, and so currency rates must be taken into
consideration before entering foreign markets
 Currency rates also affect the pricing dynamics
 Frequent fluctuations in currency rates can prove to be very
costly for an organization
Modes of Entry into International Markets
• Companies have various options to choose from while entering
international markets
• They may export through a local agent, or through a foreign
agent, or export to a foreign importer/distributor, or set up a
local office, or opt for licensing and franchising, or set up joint
ventures, or set up wholly owned manufacturing units
• The choice and the structure of the distribution channel and the
channel partners depends on the sales potential, sales volume,
nature of the product, nature of competition, legal and
regulatory frameworks etc.
Indirect exporting:

• In this case, the company acts as third party supplier

 The company operates by selecting an importer in the foreign
country who further sells the products of the company
 It is a price sensitive strategy, but the benefit is that the
importer knows how to sell to customers in his own local
market
 In addition, this method limits down the growth prospective of
the supplier
Direct exporting:

 In case of direct exporting, the company directly supplies the

products to its customers in the foreign country.
 It is also a price sensitive strategy as customers would always
buy from those who sell at the minimum prices
Licensing and Franchising
 Licensing involves a fee payment by the licensee in
exchange for use of a patent, trademark or a company
name; Franchising involves the same, except that in
addition, the franchisor provides help to the franchisee
 Licensing and franchising allows companies to
minimize their initial investment in the foreign country
 The model also helps companies to develop a better
understanding of the country and its people before
making huge investments
 Joint ventures:A joint venture is like forming a partnership with
a local player
 The local partner's knowledge of the market, helps in better
adapting to needs of the foreign marked and also helps adopt a
sound and suitable marketing and communication strategy
while dealing with customers
Direct investment
 This is one of the costliest ways of entering a foreign market
 It calls for setting up the whole business in a foreign country
just like the way it is in the domestic country
 In this method, company exercises full control over its
international operations
International Logistics
• While logistic management decisions are crucial for an
organization, they assume greater importance in the context of
international distribution management.
• This is because of physical distance, complexities due to
currency variations and exchange rate, transportation
infrastructure and transportation modes, packaging, as well as
cross border trade regulations
THANK YOU