Chap12pp distribution
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This chapter discusses marketing channels and physical distribution. It defines channel objectives as creating utility for customers through place, time, form, and information utility. Distribution channels are made up of firms that add utility through physical flow of goods. Key channel members are distributors and agents. The chapter also covers consumer and industrial product channels, establishing direct and indirect channels, working with intermediaries, and global retailing strategies and challenges. It defines supply chain, logistics, and discusses physical distribution and transportation. The chapter concludes with a comparison of US and Japanese distribution channels for automobile parts.
Chap12pp distribution
- 1. Chapter 12 Global Marketing Channels and Physical Distribution Channel Objectives * Marketing channels exist to create utility for customers * Place utility - availability of a product or service in a location that is convenient to a potential customer * Time utility - availability of a product or service when desired by a customer * Form utility - availability of the product processed, prepared, in proper condition and/or ready to use * information utility - availability of answers to questions and general communication about useful product features and benefits Distribution Channels: Terminology and Structure * Distribution is the physical flow of goods through channels * Channels are made up of a coordinated group of individuals or firms that perform functions that add utility to a product or service Distribution Channels: Terminology and Structure * Distributor – wholesale intermediary that typically carries product lines or brands on a selective basis * Agent – an intermediary who negotiates transactions between two or more parties but does not take title to the goods being purchased or sold
- 3. * Piggyback Marketing * channel innovation that has grown in popularity * One manufacture distributes product by utilizing another company’s distribution channel * Requires that the combined product lines be complementary and appeal to the same customer Industrial Products
- 4. Establishing Channels * Direct involvement – the company establishes its own sales force or operates its own retail stores * Indirect involvement – the company utilizes independent agents, distributors, and/or wholesalers * Channel strategy must fit the company’s competitive position and marketing objectives with in each national market Working with Channel Intermediaries * Select distributors – don’t let them select you * Look for distributors capable of developing markets, rather than those with a few good customer contacts * Treat local distributors as long-term partners, not temporary market-entry vehicles Working with Channel Intermediaries * Support market entry by committing money, managers, and proven marketing ideas * From the start, maintain control over marketing strategy * Make sure distributors provide you with detailed market and financial performance data * Build links among national distributors at the earliest opportunity Global Retailing * Department stores * Specialty retailers
- 5. * Supermarkets * Convenience stores * Discount stores and warehouse clubs * Hypermarkets * Supercenters * Category killers * Outlet stores Global Retailing Global Retailing * Environmental Factors (push factor) * Saturation in the home country market * Recession or other economic factors * Strict regulation on store development * High operating costs * Critical Question * What advantages do we have relative to the local competition? * Local purchasing behavior? Global Retailing Strategies
- 6. * Organic * Company uses its own resources to open a store on a green field site or acquire one or more existing retail facilities * Franchise * Appropriate strategy when barriers to entry are low yet the market is culturally distant in terms of consumer behavior or retailing structures Global Retailing Strategies * Chain Acquisition * A market entry strategy that entails purchasing a company with multiple existing outlets in a foreign country * Joint Venture * This strategy is advisable when culturally distant, difficult-to-enter markets are targeted Innovation in Global Retailing * Innovation takes place only in the most highly developed systems * The ability of a system to successfully adapt innovations is directly related to its level of economic development * Even when the economic environment is conducive to change, the process of adaptation may be either hindered or helped by local demographic factors, geographic factors, social mores, government action, and competitive pressures * The process of adaptation can be greatly accelerated by the actions of aggressive individual firms Supply Chain Definitions * Supply Chain
- 7. * Includes all the firms that perform support activities by generating raw materials, converting them into components or finished products and making them available to customers * Logistics * The management process that integrates the activities of all companies to ensure tan efficient flow of goods through the supply chain Physical Distribution, Supply Chains, and Logistics Management * Order Processing * includes order entry in which the order is actually entered into a company’s information system; order handling, which involves locating, assembling, and moving products into distribution; and order delivery * Warehousing * Warehouses are used to store goods until they are sold * Distribution centers are designed to efficiently receive goods from suppliers and then fill orders for individual stores or customers Physical Distribution, Supply Chains, and Logistics Management * Inventory Management * Ensures that a company neither runs out of manufacturing components or finished goods nor incurs the expense and risk of carrying excessive stocks of these items. * Transportation * the method or mode a company should utilize when moving products through domestic and global channels; the most common modes of transportation are rail, truck, air, and water Transportation
- 8. * Channel Strategy – analyzing each shipping mode to determine which mode, or combination of modes, will be both effective and efficient in a given situation Japanese Distribution Structure High Density Middlemen Channel Control Business Philosophy Large-Scale Retail Store Law and Its Successor
- 9. Comparison of Distribution Channels Between the United States and Japan © 2005 Prentice Hall 12-24 Comparison of Distribution Channels Between the United States and Japan Au tomobile makers affiliated parts makers Independent parts makers Repair parts makers Au tomobile makers Wholesalers Special agents Dealers Sub-dealers Cooperative sales companies 2nd-level wholesalers Retailers Large users Gasoline stations Au tomobiles repair shops End users Automobile parts: Japan Irwin/McGraw-Hill 14-3 Comparison of Distribution Channels Between the United States and Japan © 2005 Prentice Hall 12-25 Comparison of Distribution Channels Between the United States and Japan SOURCE: McKinsey industry studies Manufac- turer Warehouse distributor Jobber buy- ing groups Jobber Mass merchandiser Repair specialist Automobile parts: United States 51% 10% 18% Primary channel Secondary channel Jobber InstallerInstaller CustomerCustomer 21% Irwin/McGraw-Hill 14-4
- 10. Comparison of Distribution Channels Between the United States and Japan © 2005 Prentice Hall 12-24 Comparison of Distribution Channels Between the United States and Japan Au tomobile makers affiliated parts makers Independent parts makers Repair parts makers Au tomobile makers Wholesalers Special agents Dealers Sub-dealers Cooperative sales companies 2nd-level wholesalers Retailers Large users Gasoline stations Au tomobiles repair shops End users Automobile parts: Japan Irwin/McGraw-Hill 14-3 Comparison of Distribution Channels Between the United States and Japan © 2005 Prentice Hall 12-25 Comparison of Distribution Channels Between the United States and Japan SOURCE: McKinsey industry studies Manufac- turer Warehouse distributor Jobber buy- ing groups Jobber Mass merchandiser Repair specialist Automobile parts: United States 51% 10% 18% Primary channel Secondary channel Jobber InstallerInstaller CustomerCustomer 21% Irwin/McGraw-Hill 14-4