Developing & Implementing Distribution Strategies

What is Distribution?

Distribution (or "Place") is the fourth traditional element of the

marketing mix. Distribution is about getting the products to the

customer. Place (or distribution) decisions are those associated

with channels of distribution that serve as the means for getting

the product to the target customers. The distribution system

performs transactional, logistical, and facilitating functions.

Some examples of distribution decisions include:

Distribution channels

Market coverage (inclusive, selective, or exclusive

distribution)

Specific channel members

Inventory management

Warehousing

Distribution centers

Order processing

Transportation

Supply Chain

A supply chain is a network of retailers, distributors,

transporters, storage facilities, and suppliers that

participate in the production, delivery, and sale of a

product to the consumer. The supply chain is typically

made up of multiple companies who coordinate activities

to set themselves apart from the competition. A supply

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Developing & Implementing Distribution Strategies

chain strategy defines how the supply chain should

operate in order to compete in the market. The strategy

evaluates the benefits and costs relating to the operation.

While a business strategy focuses on the overall direction

a company wishes to pursue, supply chain strategy

focuses on the actual operations of the organization and

the supply chain that will be used to meet a specific goal.

Value Delivery Network

A "Value delivery network," is made up of the company,

suppliers, distributors, and ultimately the customers who

partner with each other to improve the performance of the

entire system. The network of all direct industry participants

involved in the production, marketing, delivery, installation and

service of your organization’s goods into specific demographic

and geographic markets. A value delivery network allows many

companies to create customer value that cannot be created by

use of the company's own value chain.

The Nature & Significance of marketing

channels

Members of the marketing channel are specialists in what they

do and can often perform tasks better and at lower cost than

companies who do not have distribution experience. Marketers

attempting to handle too many aspects of distribution may end

up exhausting company resources as they learn how to

distribute. Not only are channel members able to reduce

distribution costs by being experienced at what they do, they

often perform their job more rapidly resulting in faster product

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Developing & Implementing Distribution Strategies

delivery.

Marketers have to understand what customers want in their

shopping experience .Resellers within the channel of

distribution serve two very important needs: they give

customers the products they want by purchasing from many

suppliers and they make it convenient to purchase by making

products available in single location. Intermediaries, however,

provide several benefits to both manufacturers and consumers:

improved efficiency, a better assortment of products and easier

searching for goods as well as customers.

Types of distribution intermediary

There is a variety of intermediaries that may get involved before

a product gets from the original producer to the final user.

These are described briefly below:

Retailers : Retailers operate outlets that trade directly with

household customers. Retailers can be classified in several

ways:

Wholesalers : Wholesalers stock a range of products from

several producers. The role of the wholesaler is to sell onto

retailers. Wholesalers usually specialize in particular products.

Distributors and dealers : Distributors or dealers have a

similar role to wholesalers – that of taking products from

producers and selling them on. However, they often sell onto

the end customer rather than a retailer. They also usually have

a much narrower product range. Distributors and dealers are

often involved in providing after-sales service.

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Developing & Implementing Distribution Strategies

Franchises : Franchises are independent businesses that

operate a branded product (usually a service) in exchange for a

license fee and a share of sales.

Agents : Agents sell the products and services of producers in

return for a commission (a percentage of the sales revenues)

Number of channel levels

Distribution channels move products and services from

businesses to consumers and to other businesses. Also known as

marketing channels, channels of distribution consist of a set of

interdependent organizations—such as wholesalers, retailers,

and sales agents—involved in making a product or service

available for use or consumption. In the figure below, Channel 1

is called a direct-marketing channel, since it has no

intermediary levels. Channel 2 contains one intermediary. In

consumer markets, this is typically a retailer. Channel 3

contains two intermediary levels - a wholesaler and a retailer.

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Developing & Implementing Distribution Strategies

Marketing Logistics

Marketing logistics is the set of activities concerned with

efficient movement of finished goods from the end of the

production operation to the consumer. Marketing logistics takes

place within numerous wholesaling and retailing distribution

channels, and includes such important decision areas as

customer service, inventory control, materials handling,

protective packaging, order procession, transportation,

warehouse site selection, and warehousing. Physical distribution

is part of a larger process called "distribution," which includes

wholesale and retail marketing, as well the physical movement

of products.

Major Logistics Functions

Warehousing

Storage warehouses are basically commercial buildings used in

storing goods or merchandise owned by different companies. It

helps lessen the expense of companies in having to transport all

the goods to different places. Storage warehouses serve as

depots for merchandise or other parts for manufacturing

companies.

Inventory Control

Inventory control can be a major component of a small business

physical distribution system. Inventory management also effects

customer satisfaction. Inventory management is primarily about

specifying the size and placement of stocked goods. Inventory

management is required at different locations within a facility or

within multiple locations of a supply network to protect the

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Developing & Implementing Distribution Strategies

regular and planned course of production against the random

disturbance of running out of materials or goods.

Transportation

The choice of transportation carriers affects the pricing of

products, delivery performance and condition of the goods when

they arrive. In shipping goods to its warehouses, dealers and

customers the company can choose among five main

transportation modes: truck, rail, water, pipeline and air along

with the internet.

Third Party Logistics

Anyone can store inventory and send it out on a truck. When

looking to outsource all or part of a company’s logistics function

it is important to look for a third party logistics provider with

proven expertise. To put it simply, third party logistics or "3PL"

is the integration of a company’s warehousing, transportation,

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Developing & Implementing Distribution Strategies

and related logistics services through an outsourced or "third

party" partnership.

Distribution Strategies

For product-focused companies, establishing the most

appropriate distribution strategies is a major key to success,

defined as maximizing sales and profits. Depending on the type

of product being distributed there are three common

distribution strategies available:

Intensive distribution

It is a distribution strategy based on making the product

available to consumers at every possible location so that

consumers can buy with a minimum of effort. Used commonly to

distribute low priced or impulse purchase products e.g.

chocolates, soft drinks. 

Exclusive distribution

IT involves limiting distribution to a single outlet. The product is

usually highly priced, and requires the intermediary to place

much detail in its sell. An example of would be the sale of

vehicles through exclusive dealers.

Selective Distribution :

A small number of retail outlets are chosen to distribute the

product. Selective distribution is common with products such as

computers, televisions household appliances, where consumers

are willing to shop around and where manufacturers want a

large geographical spread.

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Developing & Implementing Distribution Strategies

Developing and implementing distribution

strategies

While some businesses can handle all factors and aspects of its

own distribution, others require some level of distribution

partnership. Choosing the right distribution channel to move

products or services to the end user is a long-term strategic

decision and varies according to the product, service and

market. When choosing a distribution strategy, a marketer must

determine what value a channel member adds to the firm’s

products and/or service. A well-chosen channel is necessary

because it constitutes a significant competitive advantage and is

designed to save on cost, improve and increase efficiency,

provide routinization of transactions, provide a larger customer

base, and allows businesses to focus on other aspects of the

organization. It is important that the channel also provide

businesses with strategic promotion, brand strategy, and

provide convenience for customers while bridging the gap

between the assortment of goods and services generated by

producers and those in demand from consumers. Poorly chosen

channels can have long-term consequences and can ultimately

lead to a superior product or services failure in the market.

Having access to good distribution is fundamental to good

marketing. Within the distribution channel is the ability to use

intermediaries to strategically market a product or service.

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Developing & Implementing Distribution Strategies

Orient appeared on the horizons of trading business of Pakistan

in 1957. The GROUP started with the establishment of ORIENT

COLOR LABS, a humble business in photo optics and photo

finishing and in just 40 years of operations it has developed into

one of the largest trading company in Pakistan dealing in

popular brand names in consumers' electronics, audio and video

goods, photographic equipment, cell phones and lighting

products. The Group imports all renowned brands from

America, Japan, Europe, Germany and Italy and has business

deals with such international names in the consumer products'

market as Mitsubishi, Yashica, Osram, Sanyo and a number of

Italian and German companies. Today the business concerns of

OG (Orient Group) encompass three major industries:

Photographic Industry

Electronics and Home Appliance Industry

Lighting Industry

Distribution Intermediaries

Distribution intermediaries are helping the company to promote,

sell, and make-available a good or service through contractual

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Developing & Implementing Distribution Strategies

arrangements or purchase and resale of the item. Orient is

using direct marketing channel as well as indirect marketing

channels like wholesalers and retailers who in turn sell the

product to customers.

Marketing Logistics

Warehousing

Storage warehousing is of great importance to the fast

developing businesses of today. Orient is having three types of

warehouses: raw material stores, finished goods warehouses

and after sale service warehouse.

Raw material stores

It can take a wide variety of component parts to successfully

manufacture the final product, which is why accurate labeling,

weighing and management of raw materials are so vital to the

processing operation. Orient is managing all this through raw

material stores.

Finished goods warehouses

Completely manufactured products ready for sale and delivery

to the marketplace are kept in finished goods warehouse. There

are total five warehouses of Orient

Refrigerator

Air Conditioners

Lighting

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Developing & Implementing Distribution Strategies

Microwave ovens

Washing machines

After Sale Service Warehouse

Orient supports clients and customers throughout Pakistan with

reliable after sales services provided by a warehouse, logistics

and repair network. If a customer has any complaint regarding

any appliance of Orient, the damaged part is repaired or

replaced immediately.

Transportation

As transportation affects the delivery performance so it is of

great importance in marketing logistics. Orient has its own fleet

of 20 vehicles. It also uses vehicles of contractors. Stock is

delivered to different branches through trucks all over Pakistan.

Logistics Information Management

Company is managing its logistics through SAP (System

Application Product). It is software which delivers products and

services that help accelerate business innovation for our

customers. We believe that doing so will unleash growth and

create significant new value – for our customers, SAP, and

ultimately, entire industries and the economy at large. Through

SAP, the company stays connected with its 14 branches all over

Pakistan. When stock is required by any branch, a stock transfer

request is passed to finished goods warehouse manager.

General Manager of sales & distribution approves it. Then MD

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Developing & Implementing Distribution Strategies

authorizes it. Then outward gate pass is formed and stock is

delivered to the destination.

The services within this column relate to the ultimate delivery of

the goods to the customer. Besides physical distribution

including store distribution Orient also offers customer service

activities. On behalf of the customer it is possible to outsource

all customer service activities like handling of complaints and

return goods to Orient.

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Developing & Implementing Distribution Strategies

Most of the information is collected from secondary sources.

Information required in writing this report is already available on

internet and I have extracted it from different websites. I have

extracted information about Chinese economy from different

reports. I have also collected data from sources such as articles,

journals, magazines, books and periodicals to obtain historical and

other types of information. Some information is also collected from

the primary source. I have taken lot of information about the

company from its website and one of its employees.

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Developing & Implementing Distribution Strategies

A marketing channel is critical to large and small businesses

because they use these distribution channels to meet their

marketing and business objectives by providing and delivering

products and/or services that generate profit and increase their

customer base. Well networked and properly knitted

distribution channel plays an important role in enhancement of

sales growth. It is the key for resellers to get the real picture

and review of the product. Besides, giving them the first step

aid in understanding product and answering their queries, the

distribution partners bridge the gap between vendors and

resellers. They facilitate them with the ability to roll back to the

vendors to rectify any problem and also to concentrate on the

market with right policies in place. In the end, from my point of

reasoning, I would like to say that Orient is developing and

managing distribution strategies in a very professional manner.

OOOOOOOOOOOOOOOOOO

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Developing & Implementing Distribution Strategies

Company should try to keep optimum level of raw material to

avoid breakdowns in production function. Company should

emphasize to develop channel management strategies that are

more competitive and cost effective. It should design a

distribution strategy to fit current and future competitive

market scenarios. Company should treat resellers and third

party distributions channels just as if they were its own

employees. Understand how to motivate them, how to get to

know them, create relationships with them, spend time with

them in the field, make sure that they have the resources and

support in order to be effective at their job and Orient can win

the distribution channel and get them selling for the company.

OOOOOOOOOOOOOOOOOO

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Developing & Implementing Distribution Strategies

1) http://www.learnmarketing.net/place.html

2) http://www.consumerpsychologist.com/distribution.html

3) http://www.business.com/directory/

transportation_and_logistics/logistics

/warehousing_and_distribution/

4) http://en.wikipedia.org/wiki/Logistics

5) http://www.rozee.pk/company-details.php?compid=4507

6)

http://www.oppapers.com/essays/Value-Delivery-Network/59040

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