Chapter 8: Managing Distribution

Question 1

What is a distribution strategy

Answer 1

The process of moving items from the producer to the manufacturer, from the manufacturer to the wholesaler, from the wholesaler to the retailer and finally to the consumer

Question 2

What is a distribution channel

Answer 2

Can be described as people/organisations that direct the flow of products from producers to consumers in a supply chain

Question 3

What is distribution intensity

Answer 3

It refers to the number and dispersion of retail outlets in a geographical area which a customer can buy a particular product.

Question 4

What are the 3 distribution intensity strategies

Answer 4

1. Exclusive distribution - placing product in one or few intermediaries (for example expensive cars - Ferrari, expensive watches - Rolex)
2. Selective distribution - placing products in a limited number of retail outlets or locations (for example apple products, nike)
3. Intensive distribution - placing products in as many retail outlets or locations as possible (for example bread and milk)

Question 5

What are the different types of intermediates used in distribution channels

Answer 5

• Franchises: a channel arrangement where one party (franchisor) grants another party (franchisee) the right to use its trademark, business systems and processes to produce and market a product/service according to specific contractual specifications
• Agents/brokers: act as an intermediary between the seller offering a product/service and potential buyer
• Wholesalers: are independently owned businesses that take ownership of goods and assume risk associated with ownership, they generally sell to other businesses such as retailers (example Makro)
• Retailers: intermediaries that sell directly to final consumers and may purchase their product straight from producers or wholesalers (example Edgars)
• Distributors/dealers: a dealer is a firm engaged in buying and selling a particular kind of goods to consumers thus dealers are usually retailers. A distributor is a firm that supplies goods to dealers, thus distributors a typically wholesalers
• Merchants: undertake the same actions as an agent but take ownership of goods and then handle and sell them on their own account (example Makro)

Question 6

Explain the different types of retailers

Answer 6

• department stores: are large scale retailers with wide variety and deep assortment, such as Edgars
• Discount retailers: offer a broad but shallow assortment of products, such as Jet
• Limited line retailers: have narrow product assortment
• Supermarkets: offer wide range of products, such as Checkers
• Convenience stores: also called corner store, open for 24/7
• Store presence: retailers are also classified according to the store presence, which can be either store or non-store retailing

Question 7

What are the benefits of using agents or brokers

Answer 7

• agents and brokers reduce the selling and distribution costs for the individual or organization
• agents and brokers usually have extensive knowledge of local markets
• agent and brokers extend the firms representation geographically
• agents and brokers possess unique skills and knowledge that are essential to successfully marketing the individual or organizations products

Question 8

What is the disadvantage of using agents or brokers

Answer 8

It is that they could represent other sellers as well

Question 9

What are the three advantages of franchising to the franchisor

Answer 9

• franchisors can have a smaller central firm rather than developing and owning a chain of stores which can require a large capital
• this small central firm reduces the franchisor’s labor, administrative and other business costs
• lowers the franchisors business risk