Page 179 - DMGT547_INTERNATIONAL_MARKETING

International Marketing

Notes

Task Take example of any Indian ‘International’ Company and find out the international
distribution system of that company.

Self Assessment

State whether the following statements are true or false:
3. The choice of distribution channel and mode of transport should depend on the type of
product to be distributed.
4. Individual merchants deal directly with the customers.

Caselet Amway’s Direct Distribution

large number of consumers have started becoming members of Amway because
the products are directly available from the manufacturer. In the distribution
Asystem, the cost of the product is divided into manufacturing cost and distributing
cost. Manufacturing cost of a product is 60 per cent and the distribution cost is 40 per cent.
In case distribution cost is reduced in the international market, the cost of the product will
come down market the product highly competitive in the international market.

Amway is one of the international companies which have reduced its distribution cost by
more than 30 per cent. That is why its products become cheap and this 30 per cent saving
is distributed among the members of Amway.
If a consumer buys any product directly from the manufacturer, it can easily save 40 per
cent. However, everyone cannot do this because the manufacturing units are invariably at
far of distances, hence, the cost of transportation and other handling charges have to be
borne by the consumer. That is why direct marketing is not very popular in the international
market.
Source: PK Vasudeva, International Marketing, 3rd Edition, Excel Books.

10.3 Direct and Indirect Channels

When the Companies have to market abroad they use two principal distribution channels:
(i) direct selling and (ii) indirect selling.
Direct selling is employed when a manufacturer develops an overseas channel. This channel
requires that the manufacturer deals directly with a foreign party without going through an
intermediary in a home country. The greatest advantage of direct selling channel is the active
market exploitation, since the manufacturer is more directly committed to its foreign markets.

Direct selling has a number of problems also. It is difficult channel to manage if the manufacturer
is unfamiliar with foreign market. Moreover, the channel is time consuming and expensive.
Without a large volume of business the manufacturer may find it too costly to maintain the
channel.
Indirect selling also known as the local or domestic channel is employed when a manufacturer
in the United States for example, markets its product through another US firm that acts as the

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