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    Channel Planning

    1

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    Designing Distribution

    Channels

    3

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    4

    Definition

    Channel design refers to those decisions

    involving the development of new marketing

    channels where none had existed before, or

    the modification of existing channels

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    Analyzing Consumer Service Needs

    Setting Channel Objectives & Constraints

    ExclusiveDistribution

    SelectiveDistribution

    IntensiveDistribution

    Identifying Major Alternatives

    Evaluating the Major Alternatives

    Channel Design

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    6

    Variables

    Market coverage

    Sales contact

    Inventory Order processing

    Gathering market information

    Customer support Volumes

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    Objectives

    Channel positioning: Ease or exclusivity

    Comfort

    Technical or service support Inventory levels to hold

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    Volkswagen

    Where Volkswagen might trip, say analysts, is

    distribution. India is a large country and

    hundreds of dealers are required to cover its

    length and breadth. With about 300 dealers,

    industry norms suggest, a car maker can cover

    up to 80 per cent of the market. How does

    Volkswagen measure against this benchmark?At the moment, Volkswagen has 43 dealers in

    32 cities.

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    Channel formats

    Push strategy or pull strategy

    Zero level to three level

    Producer driven: Company owned outlets

    Licensed outlets

    Franchises, CSAs

    Brokers, Vending machines

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    Channel formats

    Seller driven:

    Retailers

    Department stores/supermarkets

    Specialty stores

    Door-to-door

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    Channel formats

    Service driven

    Restaurants

    Automobiles

    Other formats

    Direct marketing

    Horizontal Marketing System

    Hybrid Marketing Systems

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    Any company must ensure that:

    Distribution channels meet the companys objectives.

    Channels are created to match with brand perception createdby advertising.

    It is aware of market trends and change distribution strategiesaccordingly.

    The product receives the display and attention by all channelpartners.

    Consumers either find it easy to buy products or are willing tobear some difficulty in acquiring the companys products.

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    VMS (3 types)

    Corporate VMS: When successive stages of

    distribution are under a single ownership.

    Contractual VMS: When independent firms at

    different levels of distribution join together throughcontracts it is known as Contractual VMS. (3 types)

    Administered VMS: A channel member controls the

    other channel members in the distribution chain by

    the sheer power of its size.

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    Contractual VMS

    Producer-Wholesaler: When Maruti appointsdealers, it would be under a certain contract.

    Producer-Retailer: A Samsung store will not

    be owned by the company. Wholesaler-Retailer: Co-operatives fall under

    this category. Retailers buy from the jointly-

    owned wholesaler and share the profits thosepurchases generate.

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    Logistics

    Suppliers, agents, marketers, channel members, and

    customers

    Inbound and outbound logistics

    Technologies: product codes, satellite tracking,electronic data interchange (EDI), and electronic

    funds transfer (EFT)

    Includes: Order receiving and processing,Warehousing and storage, Inventory management,

    Scheduling and Transportation

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    HUL Go To Market Strategy (GTM)

    HUL total 2400 distributors

    Mumbai: 21 distributors into four mega

    distributors [Rs 480 crore]

    Target: of1.5 billion (Rs 9,855 crore)

    Orders logged in evening, delivered the next

    evening to the distributor by C&F

    Consumers get fresher stock, more visibility

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    Inventory held by distributor: 0

    HUL salesmen use handheld terminals

    Replenishment orders from retailers

    Mahindra Logistics: 0 losses in transit

    Single distributor per store model

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    Choosing a channel: the Aspinwall

    Approach

    Characteristic Red Orange Yellow

    Replacement

    rate

    High Medium Low

    Gross margin Low Medium HighAdjustment Low Medium High

    Time of

    Consumption

    Low Medium High

    Searching

    time

    Low Medium High

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    Aspinwall Technique

    Red Orange Yellow

    Long Medium Short

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    Financial Approach

    C&F 0.5% - 1%

    Distributor 4%

    Wholesaler 4 10% Retailer 7.5 25%

    Logistics 5 10%

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    Channel Strategy

    The broad principles by which the firm

    expects to achieve its distribution

    objectives for its target market/s

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    Peter Drucker

    Everybody knows how fast technology is

    changing. Everyone knows about markets

    becoming global and about shifts in the

    workforce and in demographics. But fewpeople pay attention to changing distributive

    channels

    Manage by Walking Around Outside

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    Tom Peters

    Most firms make the mistake of paying toolittle attention to the somewhat attenuatedmembers of their marketing team [marketing

    channel]. The few companies that mind theirdistribution reap tangible rewards

    Ignore Distribution Channels at your ownrisk

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    Good channel management is good general

    management

    Frank Cespedes

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    Channel Power, Conflict &

    Policies

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    Selection of channel

    partners

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    Selection of channel partners

    Channel selection is a vital part of the channel

    strategy and management process.

    Objective is to develop a systematic and

    effective process for identifying the channel

    partners to fit your needs.

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    Cont..........

    How to evaluate marketing channel partners is a

    common problem when seeking to new market

    It provides a framework for identifying the

    primary strategic intent of entering into the

    partnership in the chosen market.

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    Nine quality of successful channel

    partners

    Level of alignment between the dealer and

    organization.

    The commission structure.

    The commission structure should be base on

    the volume of sales not the margin.

    Match with the organizational philosophy.

    Ability to use resources optimally.

    Assessment of financial exposure.

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    Speed on distribution.

    Flexibility

    Competitive edge & better focus.

    Cont..........

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    Channel Power

    The ability of a channel member to influence

    the actions of other channel members is

    called channel power.

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    Types of Power

    Reward

    Coercive

    Expert

    Legitimate

    Referent

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    Channel Conflict

    The situation of disagreement between the

    channel members is called channel conflict.

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    Stages of Conflict

    Latent

    Perceived

    Felt

    Manifest

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    Reasons for Channel Conflict

    Roles not properly defined

    Resource scarcity

    Difference in perception

    Pricing

    Philosophy differences

    Goal incompatibility

    Communication difficulties

    Expectation Differences

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    Managing conflict

    Understanding the nature & impact of conflict

    Tracing the source of Conflict

    Understanding the impact of conflict

    Strategy & plan of action for resolution

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    Ways to manage Channel Conflict

    Vertical marketing systems (VMS)

    Hybrid marketing systems

    Disintermediation

    Conventional Channel versus

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    Conventional Channel versus

    Vertical Marketing System

    Wholesaler

    Retailer

    Manufacturer

    Wholesaler

    Retailer

    Consumer

    Wholesaler

    Retailer

    Manufacturer

    Wholesaler

    Retailer

    Consumer ConsumerConsumer

    RetailerRetailerRetailer

    ManufacturerManufacturer

    WholesalerWholesalerWholesalerWholesaler

    Retailer

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    Hybrid Marketing System

    ManufacturerManufacturer

    WholesalerWholesalerWholesalerDistributor

    Retailers

    Dealers

    Catalogs, telephone, Internet

    Sales force

    consumer

    consumer

    business

    business

    Catalogue, telephone,internet

    Sales force

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    Disintermediation

    Catalogs, telephone, Internet

    Sales force

    Wholesaler

    Retailer

    Manufacturer

    Wholesaler

    Retailer

    Consumer

    Wholesaler

    Retailer

    Manufacturer

    Wholesaler

    Retailer

    Consumer

    Manufacturer

    Consumer

    Manufacturer

    Consumer

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    Channel policies

    Which market to service

    Customer coverage

    Pricing

    Product line to be handled

    Selection of the right channel

    Termination of a channel membership

    Ownership of the channel

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    Case: Maruti Suzuki

    Nilesh Parmar Roll No: 37

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    History

    Established in 1982

    Joint venture of Govt. of India & Japanese

    company Suzuki Motors Corporation

    Previously Govt. of India owned 80%

    equity & Suzuki had 20%.

    Now Indian Financial Institute has 18.28%,

    Suzuki has 54.24% & 25% equity is public

    offering.

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    MD & CEO of

    Maruti- Suzuki Ltd

    MR. SHINZO NAKANISHI

    There is reason to believe that

    Nakanishi, 60, will make the transition

    in a most unobtrusive manner. He has

    served Suzuki Motor Co, which owns

    54.2 per cent of Maruti, for 36 years and

    yet not many in Maruti seem to know

    that he is related to O Suzuki, the

    chairman of his eponymous company.

    He is Chairman of Maruti for 5 yrs.

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    Key Factors

    Functioning Better facilities

    Increasing usage & market expansion

    Offering gamut of services

    SWOT analysis Strong distribution network

    Customer satisfaction

    Pre-owned car business

    Exports Ecological environment

    Technological development

    Maruti & Road Safety

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    Functioning

    Production Management System (PMS) :-It is a

    strategy to achieve Manufacturing Excellence evolved

    through participative approach.

    The system is people driven and ensures involvementof all levels (Managers, Executives, and Supervisors).

    Achieved the target of selling a million cars in the

    financial year 2009 - 2010

    PMS has lead the production team towards greater

    enhanced productivity with perfection.

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    Better facilities

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    Increasing usage & market expansion

    Better value for money

    Presence across multiple segments

    Product innovation thereby increasing

    penetration levels.

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    Offering gamut of services

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    Maruti Suzuki EECO

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    Wagon R

    Wagon R known as Theblue eyed boy re-launched

    on 23rd april 2010.

    It is designed with ample

    and convertible inner space

    Launched to compete with

    Hyundai Santro, Ford Figo,

    Chevrolet Beat,

    Volkswagen Polo, Nissan

    Micra.etc

    Available in the 3 variants

    (LX,Lxi,Vxi).

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    Swift

    B-segment carMost powerful & fuel

    efficient in this segment

    Sporty in looks

    Dynamic European

    stylingLaunched to compete

    Tata Indica , Hyundai

    Getz, chevy SRV

    Car of the year 2006

    CNBC auto car award

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    SX- 4

    Sedan model SX4meets BS4 Emission

    norms

    CNG kit fitted for

    enhancing performance

    of carLaunched to compete

    against Ford fiesta ,

    Honda city , Hyundai

    verna , Fiat linea.

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    Grand VitaraLaunched in Japan in

    1988 as Vitara.

    With superior

    engineering i,e 2.4 VVT

    Engine ,4 wheel drive

    launched as Grand

    vitara

    2.5 million units sold all

    over

    SUV of the year by

    NDTV profit car award

    in 2008.

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    UPCOMING : Maruti Kizashi

    D segment of cars

    Launched to compete

    with Honda civic , Toyota

    Corrola , Skoda Octavia

    & Volkswagen Jetta,Volkswagen Vento

    Estimated price range

    above 14 Lakhs

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    Maruti Cervo

    Compact carsegment

    660 cc engine

    Estimated price

    range Rs 1.5 to 2lakhs

    To be launched in

    month of nov.2011.

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    Strong Distribution Network

    Largest distribution & service network

    Over 400 sales showroom

    Over 600 dealer network

    Over 1900 authorized service stations

    Over 1190 cities

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    Customer satisfaction :-

    Largest distribution & service network

    MUL has tied up with SBI (State Bank of India)

    to offer financial help to customers

    Maruti Suzuki offers 13 models ranging from

    peoples car Maruti 800 for less than Rs 2lakh

    to premium sedan SX4 & luxury SUV Grand

    Vitara.

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    Technological environment:-

    Launched CNG kit for Alto its highest selling

    car

    Development of small & fuel efficient car

    engines

    Use of next generation KB series engine in A-

    star

    Alternate fuel technology using LPG in MPI

    engines

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    Institute of driving training &research(IDTR):-

    Maruti & Govt.ofIndia Intiative

    Over 5.5 Lakh

    commercial drivers

    trained in Delhi.Train 5 lakh in next

    3years towards

    Safety Driving.

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    M ti S ki

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    Maruti-Suzukitoday:-

    Company holdsmore than 50% of

    domestic car market

    .

    Company is listedon NSE & BSE. On

    BSE it has highest

    market capitalization

    in auto sector.

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    Certificates & Awards:-

    1999:-Certified as per ISO 14001:1996 formaintaining EMS.(environment managementsystem)

    Certified for changing its EMS from ISO

    14001:1996 to ISO 14001:2004.Golden peacock award by world environment

    foundation in 2007.

    1

    st

    prize for excellence in energy conservationby Haryana govt.

    1st company in world in automobile industry toget an ISO 9001-2000 certification.

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    CONCLUSION

    Today, the Suzuki brand is synonymous with 'value-packed'products, which offer quality, reliability and originality.

    An integral part of the Suzuki concept to deliver 'value-packed'products lies in ensuring that the company use the most modern

    manufacturing equipment and technologies together with factoryworkers and engineers. In addition, various activities are aimed atcontinually enhancing productivity, strict quality controls andeffective communication.

    Suzuki develops products for the new generation and changeable

    lifestyles, constantly creating new technologies and applying themto products with affluent imagination. The team covers a widerange of latest advances in energy, environment, electronics,communication, information and control applications.

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