Analysis of selected aspects of the multi-channel management and the international distribution system

Diplomarbeit von Mary Joy Fernandez

Introduction:

In the current time, there is no area in life that is not subject to change. Even within the distribution, changes have taken place in the course of the years. One significant factor of change in the distribution is the introduction of multiple distribution channels – the multi-channel management. The term multi-channel is not new, but for all that it has gained of importance for companies. This statement is valid for companies in the national as well as in the international fields. It has, more or less, substituted the meaning of a single-channel distribution, which was more practiced in the past.

Multi-channel management has become a significant issue when coming to the distribution of goods and the market development. Thereby, factors such as the attitude of the competition, the internal development of the company and especially the consumer behavior have determined the enhancement of its importance. Moreover, the development of information and communication technology has led to the introduction of new distribution channels, as e.g. the internet, next to the traditional channels which are the mail order business or the stationary distribution channels among others.

The demand for companies offering different purchasing ways respectively channels has been increasing. The reason for this development is the fact that consumers have recognized the variety of ways they are able to choose in order to acquire a product. This involves that consumers set high value on the distribution channels offered by the companies. The increased consumer demand cannot be only noticed in Germany but also in the international context.

As a consequence companies have been forced to modify their distribution strategies in order to be able to fulfill the consumer needs and thus assuring the customer retention further on. But the multi-channel distribution is not only a necessity. On the other hand it is linked with additional possibilities for companies. For instance, they can achieve cost advantages such as the increase of the total revenue.

The management of parallel running channels is not as easy as one might think and in addition, a multi-channel management bears some risks. These two aspects lead to the necessity that the companies have to be engaged in the involvement of distribution channels, in the arrangement of the channel mix as well as in the coordination of the multi-channel system. It always has to be stressed that the multi-channel management is not only important for the domestic market, but also for the international one.

The distribution in the international context is more complex and different from the domestic one. Since the distribution system differs from country to country, it is not possible to apply the same distribution system as in the home country. Therefore, this diploma thesis does not only illustrate the multi-channel management in general but also the international marketing within the scope of the multi-channel management.

Within the scope of this diploma thesis the significance of the multi-channel management in the distribution is supposed to be analyzed for the today’s businesses. For this purpose, selected aspects of the multi-channel management are described. In order to place multiple channels successfully in position, a well thought-out implementation and execution of a multi-channel strategy is required.

A further goal within the framework of the multi-channel management is the review of distribution systems in the international context as there are differences between domestic and foreign markets. It shall be taken a look on the distribution systems applied in two Asian countries. On the one hand the focus shall be on Japan as a developed country and on the other hand on China as an emerging market country. Here, the extent of factors influencing the distribution system in a respective overseas country has to be considered. Such factors can be the culture of a country or the people living in that foreign country among other things.

Scope of work:

This diploma thesis is composed of three main chapters. At the beginning the multi-channel management will be classified in the entirety of marketing. The multi-channel management belongs to the distribution policy which is a part of the marketing mix. Thus, the basics of the distribution policy will be described.

At the same time, the first connections to the multi-channel management should be shown. After having defined the terms distribution, distribution policy and distribution channel, the objectives of the distribution policy as well as its fields of activity will be illustrated. The focus shall be on the distribution channels. Thereby, the distribution channels can be structured regarding the number of actors operating in a certain level and the number of levels which actors operate at. The distribution channel is closely linked with the multi-channel management since it also contains the decision how many channels will be applied within the distribution system. This chapter ends with the comparison between the single-channel and the multi-channel. This last part of the chapter introduces the next chapter about the focal point of this thesis – the multi-channel management.

In a further step, well-chosen aspects of the multi-channel management will be introduced in order to show the significance of multi-channel management. Before dealing with this topic in detail, the general meaning of the term multi-channel management has to be defined. In this connection its main objectives, chances and risks will be pointed out. Afterwards, the factors influencing the development of the distribution via multi-channels are described.

As already mentioned significant drivers are the changed consumer behavior, the competitive behavior of the competition, the development of information and communication technology and the internal development of a company. In order to ascertain a successful multi-channel management several tasks need to be fulfilled, which will be shown in the next step. Furthermore, some existing approaches for implementing multi-channel management will be described. At the end of this chapter there will be a short review of the multi-channel management of the Otto group having successfully implemented the multi-channel in their distribution system. The review will show that the Otto group will further pursue this strategy in the future.

In the last chapter the international marketing within the scope of the multi-channel management will be depicted, whereby the focal point is the determinants influencing the channel decision in the international context. The aspects of the international distribution channel will be shown after pointing out the general aspects of the international marketing such as its definition, reasons for internationalization as well as its general aims and chances and risks of the foreign business. The last chapter concludes with a description of the distribution system in Japan and in China. These countries have been chosen to illustrate the difference in the development of the distributions systems between a developed country and an emerging market country within East Asia.

Table of Contents:

	TABLE OF CONTENTS	I
	LIST OF ABBREVIATIONS	IV
	LIST OF FIGURES	V
	LIST OF TABLES	VI
1.	INTRODUCTION	1
1.1	PROBLEM DEFINITION	1
1.2	OBJECTIVES OF THIS DIPLOMA THESIS	2
1.3	SCOPE OF WORK	3
2.	BASICS OF THE DISTRIBUTION POLICY	5
2.1	DEFINITION AND CLASSIFICATION OF THE TERMS DISTRIBUTION, DISTRIBUTION POLICY AND DISTRIBUTION CHANNEL	5
2.1.1	Distribution and distribution policy	5
2.1.2	Distribution channel	6
2.2	OBJECTIVES OF THE DISTRIBUTION POLICY	7
2.3	FIELDS OF ACTIVITY OF THE DISTRIBUTION POLICY	9
2.3.1	The physical distribution process	9
2.3.2	The sale of goods process	11
2.4	ACTORS WITHIN THE DISTRIBUTION CHANNEL	13
2.4.1	Relations of action	13
2.4.2	Distribution channel breadth	16
2.4.3	Distribution channel length	19
2.4.3.1	Direct distribution channel	20
2.4.3.2	Indirect distribution channel	22
2.4.4	Single-channel versus multi-channel	24
3.	THE MULTI-CHANNEL MANAGEMENT	27
3.1	DEFINITION AND MEANING OF MULTI-CHANNEL DISTRIBUTION AND MANAGEMENT	27
3.2	MAIN OBJECTIVES OF THE MULTI-CHANNEL MANAGEMENT	28
3.3	SIGNIFICANT DRIVERS OF THE MULTI-CHANNEL MANAGEMENT	30
3.3.1	Changed consumer behavior	30
3.3.2	Competitive behavior of the competition	32
3.3.3	Development of information and communication technology	34
3.3.4	Internal development of a company	35
3.4	CHANCES, RISKS AND DOUBLE FIT OF THE MULTI-CHANNEL MANAGEMENT	37
3.4.1	Chances	37
3.4.2	Risks	38
3.4.3	Double fit	39
3.5	TASKS OF THE MULTI-CHANNEL MANAGEMENT	41
3.5.1	Integration of new distribution channels	42
3.5.2	Design of the distribution channel mix	44
3.5.3	Coordination and evaluation of the distribution channels	46
3.6	SELECTED APPROACHES REGARDING THE IMPLEMENTATION OF MULTI-CHANNEL MANAGEMENT	49
3.6.1	Multi-channel management by McKinsey & Company	49
3.6.2	Multi channel management by Arthur D. Little	50
3.6.3	Customer-driven distribution system by Louis Stern and Frederick Sturdivant	51
3.7	REPRESENTATION OF THE OTTO GROUP AS A MULTI-CHANNEL COMPANY	53
3.7.1	Basics of the Otto group	53
3.7.2	The multi-channel structure of the Otto group	53
4.	THE INTERNATIONAL MARKETING WITHIN THE SCOPE OF THE MULTI-CHANNEL MANAGEMENT	57
4.1	DEFINITION AND MEANING OF INTERNATIONAL MARKETING	57
4.2	REASONS FOR INTERNATIONALIZATION	58
4.3	GENERAL OBJECTIVES OF INTERNATIONALIZATION	60
4.4	CHANCES AND RISKS OF FOREIGN BUSINESS	61
4.4.1	Chances	61
4.4.2	Selected risks	62
4.5	INTERNATIONAL DISTRIBUTION CHANNELS	63
4.5.1	Determinants of international channel decisions	63
4.5.1.1	External determinants	64
4.5.1.2	Internal determinants	66
4.5.2	Distribution channel decisions in the international marketing	69
4.5.3	Global trends in channel design and strategy	71
4.6	THE CHANNEL STRUCTURE OF TWO ASIAN COUNTRIES IN COMPARISON	73
4.6.1	The distribution system in the developed country Japan	73
4.6.2	The distribution system in the emerging market country China	76
4.6.3	Concluding comparison between Japan and China	80
5.	CONCLUSION AND OUTLOOK	82
	BIBLIOGRAPHY	84