Section 9 - Distribution and Retailing Flashcards
Distribution Process
The distribution process includes:
Physically moving and distributing products
The movement of real and virtual documents.
The transfer of ownership (title).
The buying and selling negotiations between i) producers and intermediaries, and ii) intermediaries and customers.
Intermediaries are anybody between who made it and the final customer.
Channel Objectives
From a marketing perspective, a successful channel needs to meet these minimum requirements:
Placement: the product or service must be available at the convenient and expected location for a targeted segment.
Timing: the product or service must be available at the time when it is needed and wanted.
Meets Expectations: has to be what the client is expecting.
Information: all data required to assemble and operate the product are available (enclosed or website) and understandable (language).
Distribution channels: North America and Japan
Distribution channels in North America and Japan are totally different. The channels in North America are lean with few intermediaries and tight. Japan has a crazy vertical structure that is complicated and with many intermediaries all intertwined. They can’t eliminate them because it in a collective culture it will really hurt their reputation.
Disintermediation
Defined as the elimination of channel members. Happens because of Internet access and also when large businesses decide to take over logistics duties of an intermediary (for economic reasons). Don’t do this in Japan!! Will hurt rep!!
Marketing Methods
Peer-to-Peer Marketing: the Internet has dramatically altered distribution by limiting shipping options to a few major players.
Door-to-Door Selling: this is a mature/outdated model in North America. Low trust level for this. But still popular in countries that demonstrate a collective philosophy where trust and relationships must exist before business transactions will occur. I do this!!
Consumer Channels
Manufacturer-Owned Stores: Disney or Apple; they control or own the entire channel.
Independent Franchise: a model that assures fast expansion with minimal cost. The channel’s intermediaries are usually independent business under contract.
Independent Retailers: Walmart; large retailers will use intermediaries that are either owned by them or are independent businesses under exclusive contract. Small retailers will use intermediaries that are non-exclusive independent businesses.
Establishing Channels
Direct or indirect involvement. Design channel strategy must fit with the company’s expectations in terms of i) quality, ii) inventory control, (iii) risk vs reward, iv) its willingness to ‘give up control’.
Agent Intermediaries
Agent intermediaries do not take title to the products; they represent the third party.
Agents work on commission and the suppliers assumes all risks but also maintains the right to establish policy guidelines and prices.
Merchant Intermediaries
Merchant Intermediaries take title and buy and sell on their own account. They own the product and assume all risks. This is when you buy a chocolate bar from Walmart. They own it and you are buying it from them. Their motives are for themselves, not the supplier.
Foreign Country Intermediaries
Producer’s Retail Stores: these are global manufacturers and retailers (Disney) or a franchisee (McDonald’s).
Manufacturer’s Representatives: these are export agents who are located in the foreign country. They take responsibility for receiving and distributing the producer’s goods for a specific region (which could be as small as a city or as large as several countries within a trade zone).
Managing Agents and Compradors: similar to a manufacturer’s representative but they are independent agencies under exclusive contracts.
Distributors: a merchant (or agent) intermediary that often has exclusive sales rights to a territory (city, region, country) as part of an agreement with manufacturers.
Foreign-Country Brokers: typical of brokers, they deal with commodities and large-volume food products.
Dealers: intermediaries selling industrial goods directly to B2B customers or high-value durable consumer goods directly to B2C customers.
Import Jobbers: they purchase goods directly from the manufacturer and sell to wholesalers, retailers, and industrial customers.
5 Cs of Distribution
Character, Coverage, Continuity, Control, Cost.
Supply Chain Definitions
Supply Chain: includes all the firms that perform activities related to i) generating raw materials, ii) converting them into components or finished products, and iii) making them available to customers.
Logistics: the management process that integrates the activities of all companies to ensure an efficient flow through the supply chain.
Integrated Logistics Management
A total systems approach that includes all activities involved in:
-Physical; moving raw material, in-process inventory, and finished-goods inventory.
-Virtual; moving documentation and currency.
Monitors movement from manufacturing to the end user.
International Physical Distribution: Export Shipping and Warehousing and Intermodal Services
Export Shipping and Warehousing: the increased use of containers eliminates several loadings/unloadings and changes of carriers; this modification reduces costs substantially.
Intermodal services is a transportation system that unites a logistics chain into one process; it arranges for products to be handled only twice: i) loaded at the factory, and ii) unloaded at the retailer.
At least one of these environmental factors must exist before shifting away from domestic market
(and critical question):
Saturation in the home country market.
Recession or other local economic factors.
Strict regulation on store development.
High operating costs.
Critical question: If my business makes this shift, what advantages do we have relative to the local competition? In terms of the 4Ps, selection, in-store atmosphere, customer service, logistics, information technology, etc.
