Server Distribution Channel & Strategy By Dilip Alavane -2009E02Dhiraj Surana -2009E12Kirshnakant Pandey -2009E25

AgendaServer Manufacturing ProcessDistribution StrategyChannels of Distribution.

◦Indirect Distribution.◦Direct Distribution.

Measuring Channel Performance

Server Manufacturing Process

Components from Vendors

Modules Manufacturing

Systemconfiguration

Consolidation

Order Shipped to Customer

Distribution StrategySelective Distribution

◦ It’s distribution of a product through only a limited number of channels and markets.

◦ Reduces total distribution cost so that net profits are higher and often induces company’s rule for advertising, pricing and displaying.

◦ Cooperative advertising can also be utilized for mutual benefit.

◦ Focused effort

RESELLERDISTRIBUTO

R

VAR

OEM’s

ISV’s

MANUFACTURER

Named Accounts

Installed Base

New Accounts

Customers

Channel FunctionReseller1. Pursue Volume based

Business Model.2. Extends manufacturer’s

reach in the market 3. Provides directly to

end-user with service4. Stock inventory5. Rapid and convenient

delivery.6. Aggressively solicit new

accounts.Ex: Data Care Corp.,

BitScan, Eletech

DISTRIBUTOR

VAR

OEM’s

ISV’s

MANUFACTURER

RESELLER

RESELLER

VAR

OEM’s

ISV’s

MANUFACTURER

Distributor1. Supply to corporate

resellers and other distributors.

2. Carry large quantities of different products, to increase their leverage when dealing with their customers.

3. Provide specific software, peripherals, etc, as well as service.

e.g. Ingram Micro, Tech Data, Computer 2000, and Santech .

DISTRIBUTOR

Other Distributor and / or Customer

RESELLERDISTRIBUTO

R

OEM’s

ISV’s

MANUFACTURER

Other Distributor and / or Customer

VAR’s (Value Added Resellers)1. Focus entirely on

designing ,developing , and delivering complete business problem solutions to end users.

2. Solution may include hardware ,software and services.

3. Completely customizing the solution to the needs of the customer.

4. Also known as System Integrators from hardware’s perspective , specialized in selling and integrating the product for complex solutions

5. Companies that combine computer components to build a complete system.

Eg SI : Cisco, Symantec NetBackup Series

Ex: Infowrold,Informatica, Innovative Interfaces, Unisys.

VAR

RESELLERDISTRIBUTO

R

VAR

ISV’s

MANUFACTURER

Other Distributor and / or Customer

OEM’s1. Refers to companies that

make products of there own using manufactrer’s component in it , for others to repackage and sell

2. Imbedding manufacturer’s products into large systems.

3. Manufacturer’s component represents a small portion of the total product

Ex: Blade Server Chasis , MTS Systems, Mango DSP

OEM’s

RESELLERDISTRIBUTO

R

VAR

OEM’s

MANUFACTURER

Other Distributor and / or Customer

ISV’s

1. Source of Application Solutions and does not directly sell hardware paltforms.

2. They influence end users purchasing behaviour by recommending such platforms.

Ex: Wipro, Oracle, Microsoft , Novell, Redhat etc.

ISV’s

Direct DistributionDirect Marketing Systems

•Customers places the order directly by visiting the manufacturer’s website like for example Dell.•Place the order after having personal communication with a customer representative who is not a salesperson, such as through toll-free telephone ordering.

Direct Retail Systems – •This type of system exists when a product marketer also operates their own retail outlets.

Ex: Dell, HP etc having there retail outlets

Strengths of Direct model

Most efficient method of distribution

Extremely low inventories. Rapid response to

customer changes. Strong relationship with

customers and suppliers. bringing new products to

market quickly, enabling it to increase

High market share and achieve high returns on investment.

direct sales and build-to-order

Limited audience (not everyone has it or will use it for shopping)

Lack of one-to-one interaction, impersonal

Cannot touch, feel, products, concerns about colors, not tangible

Fear of fraud, ID theft, security

Weakness of Direct model

Strengths of indirect model

Very wide distribution, size, exposure, volume,

Product availability Delivery Performance. Ease of Doing Business. Expertise Focused customer base,

Broad network Can offer bundled pricing Carry our inventory, cost

sharing Offers aggressive

marketing, upsell opportunity.

Can offer personal consumer assistance, service

Don’t know end-user No control of product

presentation Limited product focus Unmanageable; have

own agenda Very independent,

difficult to control No direct customer

contact by you If they leave, you lose

the customer They also represent

others—focus is limited Less loyalty

Weakness of Indirect model

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Measuring channel performance

Channel Performance measures

Effectiveness EquityEfficiency

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Channel performance

Effectiveness : Providing the required service “most cost effectively”.•Delivery : A short term, goal oriented measure of on time delivery

•Stimulation of demand: What are the efforts made by the channel member to increase customer base or increase the usage of the product.

Equity : Extent to which “channel serves problem riddenmarkets and market segments”.

Eg: disadvantaged or geographically isolated consumers.

Efficiency: Output / InputProductivity : The efficiency with which the output is generated

from the resources and inputs. Operational efficiency.

Measuring financial performanceTo determine the profitability and

financial performance of channels following parameters can be used • Revenue,• Cost ,• Profits arriving from different segments of

Distribution Channel

Distribution channel segmentation

Indirect channelDirect channelChannel segmentation

Server Series A

Server Series C

Server Series B

Profitability

(a)

(a) Segmentation analysis by channel & product category

Server Series A

Server Series C

Server Series B

Indirect channelDirect channelChannel segmentation

Corporate Profitability(b)

East EastWest West

A B CA B C A B C A B C

Territory segmentation

Product segmentation

(b)Segmentation analysis by channel, territory and product category

Revenue Cost Analysis• Revenue and cost associated with

each segment must be analyzed–Direct selling cost–Indirect selling cost–Advertising–Sales promotion–Transportation–Storage and shipment–Order processing

Contribution margin approach

CMA requires all cost be identified as fixed or variable according to behavior of the cost

Income statement in the CMA method of analysis can be prepared that identify probability for each segment by determination of fixed, variable, direct and indirect cost

Income Statement Of Channel Segment

Directchannel

Indirect channel

Total company

Revenue/Sales generated thru channelsLess: Cost of goods soldGross ProfitLess: Variable direct costGross segment contributionLess: fixed direct costNet segment contributionLess: indirect fixed costNet profitNet segment contribution

100,00042,00058,000

6,00052,00015,00037,000

37%

150,00075,00075,00015,00060,00021,00039,000

26%

250,000117,000133,000

21,000112,000

36,00076,00041,00025,00030.4%