A study on effectiveness of distribution channel

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CHAPTER 1
INTRODUCTION

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1. INTRODUCTION
TITLE: “A STUDY OF EFFECTIVENESS OF DISTRIBUTION
CHANNEL OF PARAGON STEELS PVT. LTD., KANJIKODE”
“A distribution channel means the chain of business or
intermediaries through which a good or service passes until reaches the end
consumer”
Success of each company lies on various aspects, among these the
distribution channel is the most important one. Distribution channel is a
chain of intermediaries; each passing the product down the chain to the
next organization, before it finally reaches the consumer or end-user. This
process is known as the ‘distribution chain’ or the channel’. Each of the
elements in these chains will have their own specific needs, which the
producer should consider, along with those of the all-important end-user or
consumer. Each company had their own distribution channel for their
product marketing, it differ from other companies. Every company wants to
know effectiveness of distribution channel of its product. If the distribution
channel is not effective, the company cannot perform very well in the
market. For better sale of its product in the market, the company must
formulate different strategies for the distribution channel. A company can
coordinate and formulate different activities in the distribution channel.
PARAGON STEELS is a private company situated at Kanjikode,
Palakkad. The head office is situated at Coimbatore. The Paragon Steels
deals with the manufacture of cold twisted detailed bars and thermo
mechanical twisted bars and which are mainly used for construction
purposes.

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1.2 OBJECTIVES
The main object of this project is to find out the effectiveness of
distribution channel in the organization.
1.3 SCOPE OF STUDY
The report contains a brief discussion of the various activities of the
company and its Distribution channel process.
1.4 METHODOLOGY
The data collected for this project are both primary and secondary. Primary
data collected from Paragon steels Pvt. Ltd and the secondary data
collected from journals and websites
1.5 TOOLS USED FOR THE STUDY
Questionnaire method was chosen as the tool for collecting data and
various charts are used for data analysis and interpretation like pie chart,
bar diagram etc.
1.6 LIMITATIONS OF STUDY
 The time frame was a major constraint
 Unavailability of information
1.7 CHAPTER SCHEMING
Chapter 1: INTRODUCTION
Chapter 2: COMPANY PROFILE
Chapter 3: REVIEW OF LITERATURE
Chapter 4: DATA ANALYSIS AND INTERPRETATION
Chapter 5: FINDINGS, SUGGESTIONS & CONCLUSION

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CHAPTER 2
COMPANY PROFILE

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2.COMPANY PROFILE
PARAGON STEELS Pvt Ltd Company situated at Kanjikode,
Palakkad. The head office is situated at Coimbatore. The Paragon Steels
deals with the manufacture of cold twisted bars and thermo mechanical
twisted bars which are mainly used for construction purposes. PARAGON
STEELS Pvt Ltd are registered under The Company’s Act 1956. The
company functions under the leadership of M.Paramashivam who is
Chairman and Director. There are around 300 staff employee working in
Paragon Steels and technical staffs are recruited only through contract
basis. These labours are mainly from Orissa and Bihar.
PARAGON STEELS is the one of the largest established private
company in south India. It was established in 2001. They stand in the side
of technology and in quality to bring the best over the years. It has evolved
to become one of the most reliable and excellent rolling mills. Paragon
promises and fulfills safety, quality, reliability and strength in the steels
bars they are producing. The company runs with fully computerized
networking system in its administration with latest technology facilities and
machinery which hands up to an average of 450 tons in loading and
uploading work. 20mm, 24mm, 28mm, 32mm of TMT. Above 85% of
scraps are imported from outside India. The company has large structure
has melting division and also handles production capacity up to 60000 per
year
PARAGON STEELS achieved the certificate of ISI-1786 and ISO
900/2000. And also Paragon Steels received the prestigious DHAT
NAYAK award, 2004 for excellent in performance and development work
in steel industry in south India

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MISSION
Quality & Purity, Safety, Strength
GOAL
 Providing good quality of steel bars
 Customer satisfaction
PROMOTERS
 Chairman & Director
 Managing Director
POLICIES
 Credit Policy
OBJECTIVES
 Providing good quality products
 Create customer satisfaction
 To create healthy working environment
 Improvement of existing technology and adaption of new ideas
 Giving a good working conditions among the employees
 Conducting various activities in society
 Maintain quality leadership
 To detect and prevent problems in the organization
 Better communication in the management system

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MANUFACTURING CAPACITY
Manufacturing capacity of ingot unit depends on the induction
furnace and its melting rate. Based on industry standards supplier
specification, the capacity calculation are as follows:
Power rating of induction furnace - 2750 KW
Capacity of crucible -19000 Kg
(19mt comprising of 6mt 7mt)
On 3 shift operation and 300 working days/year, it is assumed that
10 batches of 19 MT of molten can be tapped a day which will result in a
total annual net output of 48000 Mt as given below (65 days per annum is
deducted for maintenance of machines and national holidays).
19mt *10/days *300 days=48000MT per annum
Annual manufacturing capacity is taken as 48000 Mt with six
crucibles for three panels, melting can be done alternatively allowing time
or relining patching and sintering of crucible. With this arrangement, we
can save a lot of time and increase productivity.
SITE LOCATION AND LAND
The ingot unit and hot rolled strip unit mill is ideally set up
in an industrial area in Kanjikkode New Industrial Development Area
(NIDA) promoted by District Industries Center (DIC) Kanjikkode, Kerala.
The plants are operating in a land area of 20.24 acres. Power substation is
available nearby, making it ideally suitable for plant location.

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FEATURES OF PARAGON STEEL
1) Sole Entrepreneur with a land structure of 25 acres.
2) Well qualified and experienced staff and management with timeless
effort and services.
3) Stock yard cell with storing capacity up to 10000 Tones (one of its
mega kind in the districts).
4) Delivering the material on time by distributors with 100% accuracy.
MARKETING DEPARTMENT
This department involves four managers for smooth marketing
functions. Sales manager helps to co-ordinate and control the activities of
sales department and he reports to the MD. Deputy Manager, monitor the
dispatch of steel and evaluate the performance of dealers and submit the
report to the sales manager. They are also in charge of evaluating the
advertising strategies. Assistant Sales Manager helps to monitor depot
offices in respect to district assigned to firm and co-ordinate the activities
of depot. Assistant Sales officer is responsible for the arrangement of
dispatch of final product through rail and roads and also control and co-
ordinate the work of clerical staffs in the dispatch of steel.

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CHAPTER 3
REVIEW OF LITERATURE

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3. REVIEW OF LITERATURE
The Distribution Channel is the chain of intermediaries, each of them
passing on the product or service to another intermediary until it reaches
the consumer. It defines that,
"The route by which a product or service is moved from a producer
or supplier to customers. A distribution channel usually consists of a chain
of intermediaries, including wholesalers, retailers, and distributors, that is
designed to transport goods from the point of production to the point of
consumption in the most efficient way"
More specifically, a distribution channel is:
 The transfer of goods from manufacturer to the end user.
 Route of a company for distributing the goods.
 The process of moving goods from the manufacturer to the consumer.
 A supply chain consisting of all parties in between production to the
end user.
Types of channel members
The activities in the distribution channel can be carried out by the
marketer himself or it can be carried out by specialist organizations. The
specialist organizations and the channel members can be categorized into
two types.
 Resellers
 Specialty Service Firms.
Resellers are the companies which usually buy and take the ownership of
the products from the manufacturer with the intention of selling to end
consumers. An organization can have one or more than one reseller in the
chain. The network or chain of resellers is known as reseller network. The
resellers can be further classified into:
Retailers: A retailer sells the product directly to the end customer.

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Marketing - Distribution channels
A distribution channel can have several stages depending on how many
organizations are involved in it:
Channel 1 contains two stages between producer and consumer -
a wholesaler and a retailer. A wholesaler typically buys and stores large
quantities of several producers’ goodsand then breaks into bulk deliveries
to supply retailers with smaller quantities. For small retailers with limited
order quantities, the use of wholesalers makes economic sense.
Channel 2 contains one intermediary. In consumer markets, this is typically
a retailer. The consumer electrical goods market in the UK is typical of
this arrangement whereby producers such as Sony, Panasonic, Canon etc.
sell their goods directly to large retailers such as Comet, Tesco and
Amazon which then sell onto the final consumers.
Channel 3 is called a "direct-marketing" channel, since it has no
intermediary levels. In this case the manufacturer sells directly to
customers. An example of a direct marketing channel would be a factory
outlet store. Many holiday companies also market direct to consumers,
bypassing a traditional retail intermediary - the travel agent.

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A channel of distribution or trade channel is defined as the path or route
along which goods move from producers or manufacturers to ultimate
consumers or industrial users. In other words, it is a distribution network
through which producer puts his products in the market and passes it to the
actual users. This channel consists of: - producers, consumers or users and
the various middlemen like wholesalers, selling agents and retailers
(dealers) who intervene between the producers and consumers. Therefore,
the channel serves to bridge the gap between the point of production and
the point of consumption thereby creating time, place and possession
utilities.
A channel of distribution consists of three types of flows:-
 Downward flow of goods from producers to consumers
 Upward flow of cash payments for goods from consumers to
producers
 Flow of marketing information in both downward and upward
direction i.e. Flow of information on new products, new uses of
existing products, etc from producers to consumers. And flow of
information in the form of feedback on the wants, suggestions,
complaints, etc from consumers/users to producers.
An entrepreneur has a number of alternative channels available to him for
distributing his products. These channels vary in the number and types of
middlemen involved. Some channels are short and directly link producers
with customers. Whereas other channels are long and indirectly link the
two through one or more middleman.
These channels of distribution are broadly divided into four types:-
 Producer-Customer: - This is the simplest and shortest channel in
which no middlemen is involved and producers directly sell their
products to the consumers. It is fast and economical channel of
distribution. Under it, the producer or entrepreneur performs all the
marketing activities himself and has full control over distribution. A
producer may sell directly to consumers through door-to-door

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salesmen, direct mail or through his own retail stores. Big firms
adopt this channel to cut distribution costs and to sell industrial
products of high value. Small producers also sell directly to local
consumers.
 Producer-Retailer-Customer:- This channel of distribution
involves only one middlemen called 'retailer'. Under it, the producer
sells his product to big retailers (or retailers who buy goods in large
quantities) who in turn sell to the ultimate consumers. This channel
relieves the manufacturer from burden of selling the goods himself
and at the same time gives him control over the process of
distribution. This is often suited for distribution of consumer
durables and products of high value.
 Producer-Wholesaler-Retailer-Customer:- This is the most
common and traditional channel of distribution. Under it, two
middlemen i.e. wholesalers and retailers are involved. Here, the
producer sells his product to wholesalers, who in turn sell it to
retailers. And retailers finally sell the product to the ultimate
consumers. This channel is suitable for the producers having limited
finance, narrow product line and who needed expert services and
promotional support of wholesalers. This is mostly used for the
products with widely scattered market.
 Producer-Agent-Wholesaler-Retailer-Customer:- This is the
longest channel of distribution in which three middlemen are
involved. This is used when the producer wants to be fully relieved
of the problem of distribution and thus hands over his entire output
to the selling agents. The agents distribute the product among a few
wholesalers. Each wholesaler distributes the product among a
number of retailers who finally sell it to the ultimate consumers. This
channel is suitable for wider distribution of various industrial
products.
An entrepreneur has to choose a suitable channel of distribution for his
product such that the channel chosen is flexible, effective and consistent
with the declared marketing policies and programmes of the firm. While
selecting a distribution channel, the entrepreneur should compare the costs,
sales volume and profits expected from alternative channels of distribution
and take into account the following factors:-
 Product Consideration: - The type and the nature of products

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manufactured is one of the important elements in choosing the
distribution channel. The major product related factors are:-
 Products of low unit value and of common use are generally
sold through middlemen. Whereas, expensive consumer goods
and industrial products are sold directly by the producer
himself.
 Perishable products;products subjected to frequent changes in
fashion or style as well as heavy and bulky products follow
relatively shorter routes and are generally distributed directly
to minimize costs.
 Industrial products requiring demonstration, installation and
after sale service are often sold directly to the consumers.
While the consumer products of technical nature are generally
sold through retailers.
 An entrepreneur producing a wide range of products may find
it economical to set up his own retail outlets and sell directly
to the consumers. On the other hand, firms producing a narrow
range of products may their products distribute through
wholesalers and retailers.
 A new product needs greater promotional efforts in the initial
stages and hence few middlemen may be required.
 Market Consideration: - Another important factor influencing the
choice of distribution channel is the nature of the target market.
Some of the important features in this respect are:-
 If the market for the product is meant for industrial users, the
channel of distribution will not need any middlemen because
they buy the product in large quantities. short one and may as
they buy in a large quantity. While in the case of the goods
meant for domestic consumers, middlemen may have to be
involved.
 If the number of prospective customers is small or the market
for the product is geographically located in a limited area,
direct selling is more suitable. While in case of a large number
of potential customers, use of middlemen becomes necessary.
 If the customers place order for the product in big lots, direct
selling is preferred. But, if the product is sold in small

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quantities, middlemen are used to distribute such products.
 Other Considerations: - There are several other factors that an
entrepreneur must take into account while choosing a distribution
channel. Some of these are as follows:-
 A new business firm may need to involve one or more
middlemen in order to promote its product, while a well
established firm with a good market standing may sell its
product directly to the consumers.
 A small firm which cannot invest in setting up its own
distribution network has to depend on middlemen for selling
its product. On the other hand, a large firm can establish its
own retail outlets.
 The distribution costs of each channel are also an important
factor because it affects the price of the final product.
Generally, a less expensive channel is preferred. But
sometimes, a channel which is more convenient to the
customers is preferred even if it is more expensive.
 If the demand for the product is high, more number of
channels may be used to profitably distribute the product to
maximum number of customers. But, if the demand is low
only a few channels would be sufficient.
 The nature and the type of the middlemen required by the firm
and its availability also affect the choice of the distribution
channel. A company prefers middlemen who can maximize
the volume of sales of their product and also offers other
services like storage, promotion as well as after sale services.
When the desired type of middlemen is not available, the
manufacturer will have to establish his own distribution
network.

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All these factors or considerations affecting the choice of a
distribution channel are inter-related and interdependent. Hence, an
entrepreneur must choose the most efficient and cost effective channel of
distribution by taking into account all these factors as a whole in the light
of the prevailing economic conditions. Such a decision is very important
for a business to sustain long term profitability.

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CHAPTER 4
DATD ANALYSIS AND
INTERPRETATION

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4.DATA ANALYSIS AND
INTERPRETATION
QUALITY OF STEEL BARS
HANDLING
TABLE NO:1
OPINION NO
RESPONENTS
CUMULATIVE
%
PERCENTAGE
high 12 12 60
medium 7 19 35
low 1 20 5
Total 20 20 100
CHART NO:1 QUALITY OF STEEL BARS HANDLING
INTERPRETATION
In the above table more of the dealers are handling high quality
steels. So it shows the company has produced high quality steels.
0
10
20
30
40
50
60
70
high medium low
no responents
cumulative
percentage

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OTHER MAJOR SUPPLIERS
TABLE NO:2
Opinion No respondents Cumulative % Percentage
Kairali steels 6 6 30
Agni steel 4 10 20
Prince steels 5 15 25
Others 5 20 25
CHART NO: 2 OTHER MAJOR SUPPLIERS
INTERPRETATION
From the above chart it is clear that the dealers are selling other
steels other than the Paragon Steels bars.
30%
20%
25%
25%
no of respondents
Kairali steels
Agni steel
Prince steel
others

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TRANSPORTATION AND LOGISTICS
FACILITY
TABLE NO:3
Opinion No
respondents
Cumulative % Percentage
Always 0 0 0
Sometimes 2 2 10
Rarely 4 6 20
Never 14 20 70
CHART NO:3 TRANSPORTATION AND LOGISTIC
FACILITY
INTERPRETATION
From the above chart it is clear that 70% of the dealer say that Paragon
Steels never provide transportation.
10%
20%
70%
Sometimes
Rarely
Never

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EXPERIENCE OF THE RETAILER
TABLE NO:4
opinion No respondents
Below 2 years 5
2-5 years 10
5-10 years 20
More than 10 years 5
CHART NO:4 EXPERIENCE OF THE RETAILER
INTERPRETATION
From the above diagram we can find out that more of the retailers
are of 5-10 years experience.
0
2
4
6
8
10
12
14
16
18
20
Below 2 years 2-5 years 5-10 years More than 10
years

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PROMPTNESS OF DEALER
TABLE:5
Opinion No of respondents
Good 19
Moderate 15
Bad 6
CHART NO:5 PROMTNESS OF DEALER
INTERPRETATION
From the above table it is clear that more of retailers say that
promptness of dealer was good.
0
2
4
6
8
10
12
14
16
18
20
Good Moderate Bad

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DELAY IN DELIVERY OF GOODS
TABLE NO:6
Always 0
Sometimes 3
Rarely 7
Never 30
CHART NO:6 DELAY IN DELIVERY OF GOODS
INTERPRETATION
From the above diagram it is clear that delay of delivering goods
occur rarely.
0
5
10
15
20
25
30
Always Sometimes Rarely Never

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DEGREE OF CUSTOMER PREFERANCE OF
PARAGON STEELS
TABLE NO:7
Below 10% 1
10-20% 10
20-30% 20
Above 30% 9
CHART NO:7 DEGREE OF CUSTOMER PREFERANCE OF
PARAGON STEELS
INTERPRETATION
The customer preference of the paragon steels is more than 50%
compared to others steels.
2%
25%
50%
23%
No of respondents
Below 10%
10-20%
20-30%
Above 30%

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SALES OF PARAGON STEELS
TABLE NO:8
Below 10% 2
10-30% 9
20-30% 20
Above 30% 9
CHART NO:8 SALES OF PARAGON STEELS
INTERPERTATION
The sale of paragon steels is moderate level.
0
5
10
15
20
25
Below 10% 10-30% 20-30% Above 30%

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DOES THE PROMOTIONAL ACTIVITES
INCREASE THE SALES
TABLE NO:9
opinion No of respondents
Always 21
Sometimes 9
Rarely 7
Never 3
CHART NO:9 DOES THE PROMOTIONAL ACTIVITES
INCREASE THE SALES
INTERPERTATION
From the above chart it is clear that promotional activities increase
the sales.
52%
22%
18%
8%
No of respondents
Always
Sometimes
Rarely
Never

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DELIVERY OF PRODUCTS
TABLE NO:10
Always 0
Sometimes 3
Rarely 6
Never 11
CHART NO:10 DELIVERY OF PRODUCTS
INTERPERTATION
From the above diagram we can understand that Paragon Steel
deliver the goods at correct time.
0
2
4
6
8
10
12
Always Sometimes Rarely Never

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PROFITABLE OR NOT
TABLE NO:11
Yes 16
No 4
CHART NO: 11 PROFITABLE OR NOT
INTERPERTATION
From the above diagram we can understand company is profitable.
0
2
4
6
8
10
12
14
16
18
Yes No

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CREDIT FACILITY
TABLE NO:12
Highly satisfied 2
Satisfied 14
Dissatisfied 4
Highly dissatisfied 0
CHART NO:12 CREDIT FACILITY
INTERPERTATION
From the above table it is clear that more of the dealers satisfied with
the current credit facility offered by Paragon Steels.
0
2
4
6
8
10
12
14
Highly satisfied Satisfied Dissatisfied Highly
dissatisfied

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CHAPTER 5
FINDINGS, SUGGESTIONS &
CONCLUSION

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5.FINDINGS, SUGGESTIONS AND CONCLUSION
This study “Effectiveness of distribution channel with the
reference to Paragon Steels Pvt. Ltd.” helps to find out the
efficiency of the distribution channel followed at the organization.
The findings as follows:
 It was found that 60% of the dealers handling high quality
steel bars.
 We can find out that dealers are taking goods from different
suppliers.
 Findings can prove that dealers agreed the company never
support in the transportation and logistics.
 It was found that more of retailers having the experience.
 It was found that more of the retailers agreed that the
promptness of dealer is good.
 It was found that the retailers agreed that there will be never
delay in delivering the goods from the suppliers.
 We can find out that the customer preference of Paragon Steel
was high.
 From the findings we know that sale of Paragon Steel was
high.
 It was found that more of the retailers agreed that promotional
activities increase the sale of Paragon Steels.

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SUGGESTIONS
 The company should improve the advertisement programs.
 Provide more logistics facility.
 Make more effectiveness in the distribution channel.
 Improve transportation facility.
 Make a good cooperation with the dealers.

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CONCLUSION
The distribution channel means “The chain of businesses or
intermediaries through which a good or service passes until it
reaches the end consumer” A distribution channel can include
wholesalers, retailers, distributors and even the internet. Channels
are broken into direct and indirect forms, with a "direct" channel
allowing the consumer to buy the good from the manufacturer and an
"indirect" channel allowing the consumer to buy the good from a
wholesaler. From the project we can conclude that a distribution
channel is important factor for sales their product in a good way.
So, every company should maintain a good distribution
channel. A company distribution channels decision directly affects
every other marketing decision. The company sales force
communication decision depends on how much training, motivation
and support its channel partners need. A company develops or
acquires certain new product and may depend on how well those
products fit the capabilities of its channel members.

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BIBLIOGRAPHY
WEBSITE:
www.google.com
www.wikipedia.com
www.bussinessinfo.com
BOOKS:
Management principles, processes & practices - Anil Bhat and Arya
Kumar

A study on effectiveness of distribution channel

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