GLOBAL MARKETING

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GLOBAL MARKETING

• Distribution Management

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Why A Distribution Strategy?

• To make the right quantities of the right product
  or service available at the right place, at the
  right time.
• To create time, place, and possession utility.
• To create
• Functional efficiency.
• Scale efficiency.
• Transactional efficiency.

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Functional Efficiency

• Routinize transactions so that the cost of
  distribution can be minimized.
• Standardizing products and services.
• Standardizing issues such as lot size, delivery
  frequency, payment, and communication,
• Automating activities.

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Scale Efficiency

• Support economies of scope by adjusting the
  discrepancy of assortments.
• Producers supply large quantities of a relatively
  small assortment of products and services.
• Customers require relatively small quantities of
  a large assortment of products and services.
• Channel members solve this discrepancy by
  aggregating stocks from several different
  suppliers.

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Transactional Efficiency

• Facilitate the searching processes of both
  producers and customers by structuring the
  information essential to both parties.
• Distribution channels make it easy for customers
  to find what theyre looking for and to be able
  to choose from a large assortment of goods.

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What Is A Distribution Channel?

• A set of interdependent organizations involved
  in the process of making a product or service
  available for consumption or use by consumers or
  industrial users.

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Alternative Distribution Systems

• Direct Channel System
• Indirect Channel System
• Mixed Channel System
• Vertical Marketing System
• Horizontal Marketing System

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Direct Channel Systems
Manufacturers
Direct Sales
E- Commerce
Direct Marketing
Tele- marketing
Reps/ Agents
Customer Markets
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Direct Channel Systems

• The manufacturer retains ownership (title) of the
  products.
• The manufacturer is responsible for delivery to
  customers.
• The manufacturer is responsible to provide
  value-added functions desired by customers.

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Direct Channel Systems

• Preferred when
• High purchase quantity
• High need for product information and
  customization
• High need for product quality
• Low need for large product assortment
• Low need for availability and after-sale service
• Complex logistics

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Indirect Channel Systems
Manufacturers
Reps/ Agents
Wholesalers
Retailers
Customer Markets
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Indirect Channel Systems

• Involve at least one intermediary who takes over
  both ownership of the product and the majority of
  the control in both sales and distribution.
• VARs and OEMs are unique indirect channel
  systems--they buy products, add value to them,
  and then resell them.

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Indirect Channel Systems

• Preferred when
• Low purchase quantity
• Low need for product information and
  customization
• Low need for product quality
• High need for large assortment
• High need for availability and after-sale service
• Simple logistics.

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Mixed Channel Systems

• A combination of direct and indirect channel
  systems to meet the needs of different target
  markets.
• Three benefits
• Increase market coverage
• Reduced delivery costs for existing customers
• More customized selling

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Vertical Marketing Systems (VMS)

• The manufacturer, wholesaler, and retailer act as
  a unified system.
• One channel member either owns the other channel
  members, franchises them, or has so much power
  that all channel members cooperate.
• Arose in an effort to control channel conflict.

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Types of VMS

• Corporate VMS
• Combines successive stages of production and
  distribution under single ownership.
• Highest level of control.

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Types of VMS

• Administered VMS
• Coordinates successive stages of production and
  distribution through the size and power of one of
  its members.
• Generally, manufacturers of a dominant brand are
  able to secure strong trade cooperation and
  support from retailers.

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Types of VMS

• Contractual VMS
• Independent firms at different levels of
  production and distribution integrating their
  programs on a contractual basis to obtain more
  economies or sales impact than they could achieve
  alone.

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Contractual VMS Three Types

• Wholesaler-sponsored voluntary chains
• Wholesalers organize groups of independent
  retailers to better compete with large chain
  organizations.
• Retailer cooperatives
• Retailers organize to carry on wholesaling and
  possibly some production.
• Franchise organizations

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Horizontal Marketing Systems

• Two or more unrelated companies put together
  resources or programs to exploit an emerging
  marketing opportunity.
• Temporary or permanent basis.
• May form a joint venture company.

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Channel Design Issues
Analyze Customers Desired Service Output Levels
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Five Service Outputs

• 1. Lot size
• The number of units the channel permits a typical
  customer to purchase on one occasion.
• 2. Waiting time
• The average time customers wait for receipt of
  the goods.
• 3. Spatial convenience
• The degree to which the marketing channel makes
  it easy for the customers to purchase the
  product.

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Service Outputs (continued)

• 4. Product variety
• The assortment breadth provided by the channel.
• 5. Service backup
• The add-on services (credit, delivery,
  installation, repairs) provided by the channel.

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Channel Design Decisions
Analyzing Customers Desired Service Output Levels
Establishing Objectives And Constraints
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Establishing Objectives Constraints

• Under competitive conditions, arrange functional
  tasks to minimize total channel costs with
  respect to desired levels of service outputs.
• Constraints
• Selling effort of intermediaries
• Competitors channels
• Marketing environment
• Legal regulations and restrictions

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Channel Design Decisions
Analyzing Customers Desired Service Output Levels
Establishing Objectives And Constraints
Identifying Major Channel Alternatives
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Identifying Major Channel Alternatives

• The types of available intermediaries.
• The number of intermediaries needed.
• The terms and responsibilities of each channel
  member.

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Types of Intermediaries

• Merchants
• Wholesalers and retailers
• Agents
• Brokers, manufacturers reps, and sales agents
• Facilitators
• Transportation companies, independent warehouses,
  banks, and advertising agencies

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Number of Intermediaries

• Usually one of three strategies
• Exclusive distribution
• Selective distribution
• Intensive distribution

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Terms Responsibilities of Channel Members

• Price policy
• Conditions of sale
• Territorial rights
• Mutual services and responsibilities

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Channel Design Decisions
Analyzing Customers Desired Service Output Levels
Establishing Objectives And Constraints
Identifying Major Channel Alternatives
Evaluating the Major Alternatives
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Evaluating the Major Alternatives

• Economic criteria
• Control criteria
• Adaptive criteria
• Brand image

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Channel Management Issues

• Channel power
• Manufacturer vs. wholesaler vs. retailer
• Channel conflict
• Goal incompatibility
• Unclear roles and rights
• Differences in perception
• Intermediary dependence

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Channel Management Issues

• Impact of Technology
• Death of Distance
• Homogenization of Time
• Irrelevance of Location

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Channel Management Issues

• Channel control
• Pull strategy
• Push strategy
• Trade incentives
• Legal ethical issues
• Exclusive dealing
• Exclusive territories
• Tying agreements
• Dealers rights