Title:
INTERNATIONAL TRADE, DISTRIBUTION AND LOGISTIC
Keywords Global markets, global economy, distribution channel, logistic lntegratelogistic Author:
UMA
Languages: English
Objectives/goals:
You will learn the different ways to entry in a global market. You will learn how to design a global strategy for commercializing your craft goods You will learn how to design a distribution channel You will learn how to reach your customer in international markets
Description:
The new enviromentenvironment is changing at an accelerate rate as a result of major forces such as technological advances, globalization, and deregulation. These forces have created new behaviours and challenges.
Today, any company can address international issues and a good distribution strategy helps create value for the company and gain a competitive advantage.
The globalization of markets and businesses is an irreversible process that is accelerated year after year and one of its main consequences is the increase in global competitive intensity. The purely national trade is now a global trade, with transactions that take place 24 hours a day, 365 days a year, which means that "the market is the whole world." In this environment, the company has to constantly adapt to these changes, developing and implementing internationalization strategies for its products and brands that allow it to create the competitive advantages and synergies.
When a company has decided to adopt an active internationalisation policy, it finds that its products can be marketed in a large number of countries with very different characteristics. On the other hand, it does not have sufficient resources, nor does it have sufficient training in internationalisation, especially if it is a microenterprise - to deal with several markets simultaneously. It is therefore advisable to systematize international expansion by turning first to the most favourable markets for its supply.
The internationalization strategy is not without risks, because it implies an outward exit into a new environment with great uncertainty. From a general point of view, the main stimuli for internationalization are: - Exploiting trade opportunities in other countries as well as own resources and capacities in different countries - Taking advantage of location advantages for productive activities and in terms of seeking resources Reducing costs including transaction - Find a minimum size efficient to compete in a globalized world - Follow the customer, acting as international suppliers - Being able to continue to compete in an industry that has become globalised
Nowadays some megatrends have been identified, which are “large, social, economic, political and technological changes” they influence us for some time:
1. The booming global economy
2. A renaissance in the arts 3. The emergence of free-market socialism 4. Global lifestyles and cultural nationalism 5. The privatization of the welfare state 6. The rise of the Pacific Rim 7. The decade of women in leadership 8. The age of biology 9. The religious revival of the new millennium 10. The triumph of the individual
In short, an internationalization process involves facing a series of possible challenges, opportunities but at the same time obstacles and difficulties for any company. They need to make craftsmen aware of the existence of these barriers, and of the need to prepare for them and, as a first step, to have the means to do so.
Before starting any selection process, the company must decide on the optimum number of markets it will go to. This is a strategic decision that presents two extreme alternatives. concentration or diversification - between which there are different intermediate options.
- Concentration, in this strategy, the firm focuses its resources on a limited number of markets, so that it can obtain a continuous and increasing sales volume in each of them. Its has numerous advantages for microentreprises:Â greater knowledge of the chosen markets, possibility to offer a differentiated and adapted product, reduction of logistics and administration costs.
- Diversification, on the contrary, this growth strategy is based on selling on a larger number of markets, even if it is to the detriment of achieving a significant share in some of them. The rationale for this alternative is based, on the following reasons:Â comparative information on world markets, reduced dependence on a small number of markets, exploitation of short-term competitive advantages, take advantage of economic opportunities in prices.
The main barriers for small businesses: - Limitations of financial resources. The limitations of financial resources can affect various aspects of the companys activity. More directly related to its international activity, the Art&Craft firm needs to have resources to finance its commercial and marketing activities (visit markets, participate in trade fairs and missions, prepare promotional material, etc.).
- Lack of prepared managerial staff. The lack of prepared human resources sometimes manifests as many microenterprises do not have staff who speak languages. Today you cannot operate in international markets without having a website in English. It is also necessary to have a minimum knowledge of foreign trade techniques. Internationalization needs to have managers prepared for it, with minimal knowledge of how international markets work.
- Difficulty in identifying potential clients or partners and business opportunities in other countries. A lot of information can be obtained through the Internet, but it is necessary to have the ability to study and debug it properly. The lack of preparation of human resources arises again.
- Difficulty in obtaining information about foreign markets. On market studies, specific regulations, the Internet has been a great advance in this area. In any case, it remains an area whose importance is often sparsely considered.
The size of the company is a key condition for internationalization, perhaps the most important. There is a clear interrelationship between the size of the company and exporting activity, so artisans can use forms of entry adapted to the company profile. When companies that do not reach that minimum size alone can compensate for it with other mechanisms: cooperation or association with other companies, use of foreign trade consultants.
There are numerous mechanisms that allow them to access support services for their international work that they could not have individually. The way chosen by the company to make its exit to foreign markets is a very relevant issue in the internationalization of the company.
The international dimension of the company is manifested in three modalities: 1) exports: direct and indirect 2) contractual cooperation agreements (licenses, concessions or agents and franchises 3) shareholder cooperation agreements through direct investment abroad, which can be carried out in two ways, through its own subsidiaries, whether commercial and / or productive, and through joint-venture.
The different forms of entry are characterized by certain interrelated variables: degree of control, commitment of resources, cost of exit, potential to gain knowledge, etc. Small companies have some outputs to compensate for their small size. For example, through business cooperation formulas. That is, by associating, in one way or another, with other companies: through export consortia, establishment of business clusters, agreements to share services. Through these associations, SMEs can share expenses to have services that they individually could not have.
The creation of export consortia is an interesting posibilitypossibility for the Art&Crafts microenterprise. According to the Chambers of Commerce, a consortium "consists of the constitution of a unit of action in the form of a company with a legal status differentiated from its partners, in which they hold ownership of the companys shares." The consortiums admit different modalities and characteristics but at its base is the association of a group of companies that decide to “share” a unit that manages their export activities. An added advantage of consortia is that they often receive support from public administrations.
Another possible form of association is business clusters. It is a group of companies and institutions that are geographically close, that work in a certain field and are united by common and complementary elements.
Most producers do not sell their goods directly to the final users. Between them stands a set of intermediaries that perform a variety of functions. These intermediaries constitute a distribution channel.
Art&Craft microenterprise could delegate some of the selling job to intermediaries. Although this delegation means a loss of some control over how and to whom the products are sold, producers gain several advantages by using channel intermediaries:
- Many producers lack the financial resources to carry out direct marketing. - Direct marketing simply is not feasible for some products. - Producers who do establish their own channels can often earn a greater return by increasing their investment in their main business.
Intermediaries normally achieve superior efficiency in making goods widely available and accessible to target markets. Through their contacts, experience, specialization, and scale of operation, these specialists usually offer the firm more than it can achieve on its own.
Once it has been chosen the markets, it is time to decide about the channels of distribution. They can be divided into the direct channel and the indirect channels. Indirect channels can further be divided into one-level, two-level, and three-level channels based on the number of intermediaries between manufacturers and customers. Direct Channel Zero-level Channel (Manufacturer to Customer) Direct selling doesn’t involve the inclusion of an intermediary and the manufacturer gets in direct contact with the customer at the point of sale. Direct channels could be used by manufacturers whose target audience is geographically concentrated.
Indirect Channels (Selling Through Intermediaries). When a manufacturer involves a middleman/intermediary to sell its product to the end customer, it is said to be using an indirect channel. Indirect channels can be classified into three types:
- One-level Channel (Manufacturer to Retailer to Customer): Retailers buy the product from the manufacturer and then sell it to the customers.
- Two-Level Channel (Manufacturer to Wholesaler to Retailer to Customer): Wholesalers buy the bulk from the manufacturers, breaks it down into small packages and sells them to retailers who eventually sell it to the end customers..
- Three-Level Channel (Manufacturer to Agent to Wholesaler to Retailer to Customer): Three level channel of distribution involves an agent besides the wholesaler and retailer who assists in selling goods.
The means to deliver the product the Art&Craft firms have to decide between four options:
Extensive distribution, this kind of distribution tries to cover the maximum number of possible sales points, without making any sort of selection or previous filtration.
Intensive distribution In the case of intensive distribution, the distribution of the product is sought at points of sale related to the same commercial branch, handicraft companies only.
Selective distribution, you can make selection based on geographical, demographic or practical criteria (for example, with easy access and close to your production point). Recommended for products that seek that point of differentiation from the competition.
Exclusive distribution Very exclusive and limited points of sale are chosen, in order to enhance the prestige of your brand. Exclusive distribution is a great option to have greater control of your products and have greater profit margin.
We are going to give you the main functions and activities in which distribution can help our business.
- Better customer service, the sales department can manage products and services based on customer needs. In addition, response times will be reduced and will be of higher quality. A good organization allows to lighten any process.Â
- Design and plan more adequate and optimal transport routes, as well as the way and means to be used to distribute the products to customers.
- Inventory management. The storage of materials will be based on the companys sales systems, the products most demanded by customers, or the most perishable. There are many elements that must be taken into account: type of product, size, space and place of storage, etc. In short, keep an exhaustive control of the stock.
- Order processing. The good management and planning of the stock, allows to process the orders of very fast way, satisfying the demand of the clients of effective form.
- Data management, knowing better our own product and storage system. We can obtain a large amount of information, regarding orders, detection of errors and incidents, etc.
The key aspect of logistics is that it helps us place the right products, in the right place, at the right time and in the desired conditions, in order to contribute, as much as possible, with the profitability of a company.
The logistics function is key to satisfying the consumer, which it implies: timely delivery, large inventories, wide assortment, return policies.
A competitive advantage can be achieved if good logistics is carried out, better services are provided at lower prices. There are cost savings for both companies and customers, since about 15% of the product price corresponds to transportation. Improvements in information technologies have created opportunities that help logistics through computer programs for the supply chain management process, bar codes, satellite tracking of transport, electronic order transfer and payments, among others.
The implementation of integral logistics implies the provision of better customer service and the reduction of distribution costs. For this, teamwork is required both within the company and among all organizations in the distribution channel.
Teamwork within the company strengthen relationships between departments. Its objective is to transform traditional supply chains into integrated value chains. Creation of logistics partners in order to provide greater value to the customer, strong relationships are developed with suppliers, transport companies, warehouses and service providers.
External logistics providers help customers strengthen slow and overflowed supply chains and deliver customers quickly and reliably.
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Title:
INTERNATIONAL TRADE, DISTRIBUTION AND LOGISTIC
Keywords
Global markets, global economy, distribution channel, logistic lntegratelogistic
Author:
UMA
Languages:
English
You will learn how to design a global strategy for commercializing your craft goods
You will learn how to design a distribution channel
You will learn how to reach your customer in international markets
Description:
- Exploiting trade opportunities in other countries as well as own resources and capacities in different countries
- Taking advantage of location advantages for productive activities and in terms of seeking resources Reducing costs including transaction
- Find a minimum size efficient to compete in a globalized world
- Follow the customer, acting as international suppliersÂ
- Being able to continue to compete in an industry that has become globalised
3. The emergence of free-market socialism
4. Global lifestyles and cultural nationalism
5. The privatization of the welfare state
6. The rise of the Pacific Rim
7. The decade of women in leadership
8. The age of biology
9. The religious revival of the new millennium
10. The triumph of the individual
Global Markets
Growth strategies
Barriers
- Limitations of financial resources. The limitations of financial resources can affect various aspects of the companys activity. More directly related to its international activity, the Art&Craft firm needs to have resources to finance its commercial and marketing activities (visit markets, participate in trade fairs and missions, prepare promotional material, etc.).
Entry in global markets
Mechanism to reach a global market
When companies that do not reach that minimum size alone can compensate for it with other mechanisms: cooperation or association with other companies, use of foreign trade consultants.
The consortiums admit different modalities and characteristics but at its base is the association of a group of companies that decide to “share” a unit that manages their export activities. An added advantage of consortia is that they often receive support from public administrations.
Distribution Channel Objectives
Advantages
- Direct marketing simply is not feasible for some products.
- Producers who do establish their own channels can often earn a greater return by increasing their investment in their main business.
Types of the channels
Direct Channel Zero-level Channel (Manufacturer to Customer) Direct selling doesn’t involve the inclusion of an intermediary and the manufacturer gets in direct contact with the customer at the point of sale. Direct channels could be used by manufacturers whose target audience is geographically concentrated.
Distribution Channel Design
Sales points
Benefits
Integral logistics management
Keys and Advantages
integral logistic
Creation of logistics partners in order to provide greater value to the customer, strong relationships are developed with suppliers, transport companies, warehouses and service providers.
https://www.oecd.org/industry/smes/31919223.pdf
https://www.icex.es/icex/es/navegacion-principal/implantacion-e-inversion-exterior/index.html
https://es.wikipedia.org/wiki/Exportaci%C3%B3n
https://www.youtube.com/watch?v=o7o0__2ULrg
https://www.researchgate.net/publication/225084026_Marketing_Management
Related material:
2.3_artcademy_course_international_trade_advanced_uma_en.doc
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2.3_artcademy_course_international_trade_advanced_uma_en.pptx