International Business Networking Seminar
Angga Surya Pradana-3104008
INTERNATIONAL BUSINESS NETWORKING PROGRAM - “Y” CLASS
UNIVERSITY OF SURABAYA - FACULTY OF BUSINESS & ECONOMICS 2013
When selling products in foreign markets, a firms should maintain relationships with local distributors over the long term even after establishing their own local network to handle major clients. In theory, local distributors provide knowledge about the local market, knowledge of local regulations and business practices, existing major customers at low cost, and the ability to hire appropriate staff and develop relationships with potential new customers.
Based on David Arnold's observation about foreign distribution, he observes that many organization establish relationship with local distributors in the host country in order to reduce costs and minimizing the risk. This is happened because local distributors tends to have knowledge about local regulations, business practices, ability to hire appropriate staffs and has relations with potential customers that the organization needs when want to enter their products to host country market that for the organization the condition of host country market is still uncertain.
Foreign distribution channels
All products whether they be consumers goods, industrial goods, or services require a channel distribution. Channel distribution can vary from direct to multi level channels that serves particular purposes. For example, goods that distribute from the producer to consumer is considered ad direct channel or direct sales and produces to agent or distributors to consumer are considered as indirect channel or indirect sales.
There are five alternatives types of consumer channels which are producer-consumer, producer-retailer-consumer, producer-wholesaler-retailer-consumer, producer-agent/distributors-retailer-consumer, and producer-agent/distributors-wholesaler-retailer-consumer.
Producer-consumer channel. Direct selling between producer and consumer has been a feature of marketing of big companies such as Tupperware plastic containers. Direct marketing is of growing importance in Europe for example direct mail, telephone selling and direct response advertising. But for a companies that still uncertain about the condition of the host country market condition, this type of channel are not suggested.
Producer-retailer-consumer channel. This type of channel tends to think that consumers must have the convenience of viewing and/or testing the product at the retail before buy the product.
Producer-wholesaler-retailer-consumer channel. For small retailers with limited order quantities, the use of wholesalers makes economic sense. Wholesalers can buy in bulk from producers, and sell smaller quantities to numerous retailers. But large retailers in the same market have the power to buy directly from producers and thus cut out the wholesaler. In certain cases, the buying power of large retailers has meant that they can sell products to their customers cheaper than a small retailer can buy from the wholesaler. Longer channels like this tend to occur where retail oligopolies do not dominate the distribution system.
Producer-agent/distributor-retailer-consumer/Producer-agent/distributor-wholesaler-retailer-consumer channel. This type of channel is most common when companies enter international markets, due to the fact that it does not require as much investment in terms of time and money. In this type of channel, the distributor has the entire responsibility of the rest of the distribution channel such as choice of intermediaries, storage and marketing and an agent has various responsibilities depending on the agreement with the producer because the agent or distributor has more knowledge of the condition of the host country market that the organization want to sell their product...