Distribution Cateora 14 10th edition

1
Distribution Cateora 14 (10th edition)

• Diversity of networks
• impact on costs and effectiveness
• Japanese distribution systems
• long complex channels/ barrier to entry?
• Types of middlemen
• Determinants in channel choice
• Identification, choice and motivation of middlemen

2
Distribution - barrier to entry

• costs too high
• channel controlled by our competitors
• only local networks - no national channels
  available
• legislation protecting certain kinds of stores,
  middlemen and channels

3
Types and structures of networks

• length no. of middlemen in chain
• breadth no. of middlemen at each level
• simple, parallel or scrambled
• distribution networks
• interconnected interdependent organizations
• network of organizations in value chain

3
4
Diversity of channels

• conventional
• long / short / parallel
• organizational structure
• corporate / franchise/ independents...
• direct
• telemarketing
• catalogue
• Internet

5
Distribution strategies
(1) Type of channel arrangement


Conventional
Vertically coordinated



Administered
Contractual
Ownership
(2) Desired intensity of distribution




Intensive
Exclusive
Selective
(3) Selection of a channel configuration
5
6
Network structure
Manufacturers

Agents/brokers

Wholesalers/distributors


Retailers
Retailers
Consumers and other customers
6
7
Comparing Japanese/American networks Exh. 14-1,
p. 411

• how to describe the two?
• by what criteria?
• length?
• breadth?
• degree of specialization of middlemen?
• which is better system?
• based on what?

8
Automotive spare parts - US
8
9
Distribution of automotive spare parts Japan
9
10
Middlemen Functions

• commercial
• finance / mkt / title (legal)
• credit / collecting funds / accounting
• promotion / pub / merchandising / prospecting /
  market research
• negotiation /contracts / closing sale / transfer
  of title

• physical (logistics)
• cargo handling / transport
• receiving goods (port / airport)
• local transport / national / international
• warehousing
• packaging
• after sales service
• unpacking / break-bulk

11
Eliminate middlemen savings?

• you can eliminate a middleman but not his
  functions
• real question who can do work at least cost?
  (the case of IKEA)
• economies of scale in distribution
• concept of spin-off 

12
Channel controlretailer vs. manufacturer

• who has most power Wal-Mart or Proctor Gamble
  ?
• concept of channel captain
• vertical marketing systems
• shift in power structure
• effect of information technology
• logistics systems
• consumer behavior

13
Top Retailers
(source www.hoovers.com/capsules)
1998
Sales
Growth
Employees
Stores
Company
USB
98/97 ()
000
number of
Wal-Mart
118
12.5
825
3,400
Kmart
32
2.4
261
2,100
Target
20
14.1
166
800
Toys 'R' Us
11
11.1
116
1,450
Home Depot
24
23.7
125
680
P G
37
3.9
110
n/a
J J (JNJ)
23
4.7
91
n/a
Pepsi
21
-33.9
142
n/a
('97)
Coca-Cola
19
1.7
30
n/a
('97)
Royal Bank
12
1.4
51
1,400
Seagram
10
-22.7
24
n/a
14
Development of marketing

• product orientation
• sales orientation
• marketing concept
• consumer is king
• competitive advantage
• strategies aimed at horizontal competition
• relational marketing (alliances)
• power, influence and cooperation

15
Market power retailers control information
access to consumers (shelf space)
MANUFACTURER
LARGE RETAILERS
CONSUMERS
16
Dynamics of entry mode decisions
time
branch
wholy owned subsidiary
c o n t r o l
joint venture

agent licences
indirect exporting
risk
17
Distribution in Japan

• 1. structure dominated by large of small
  wholesalers dealing with large of small
  retailers
• 2. manufacturers control channels
• 3. business philosophy strongly linked to
  Japanese culture
• 4. foundation of Japanese distribution small
  retailers strongly protected by legislation (The
  Large Scale Retail Store Law)

18
Restructuring of Japanese retailing?

• permit to open new store long delays (gt 10 yrs
  in some cases)
• following SII (US/Japan) stores lt1000 m2 may be
  built without special permission
• limits on opening hours removed
• specialty stores beginning to develop to compete
  with traditional stores (incl. department stores)
  
• structural impediments initiative

19
Restructured distribution - lower prices

• Japanese retail at same level as US retailing in
  1960s?
• new Japanese entrepreneurs (manufacturers /
  retailers) seeking new ways to simplify
  distribution/ reducing costs
• prices in Japan 2-4 X more expensive than in US?
• choices in price relatively new in Japan
•  global retailers  arriving also in Japan