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Lecture No-1
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Value Network
a system of partnerships and alliances that a firm creates to source, augment and deliver its offerings
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Distribution
Marketing
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Definitions
A set of people and firms involved in the transfer of title to a product as it moves from producer to ultimate consumer or business user. Stanton. set of inter dependant organizations involved in the process of making a product or service available for consumption or use.
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are now re inventing our distribution system in order to strengthen our competitive advantage Uniliver Pakistan K & N Foods Sitara Chemical Douber Industries India
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1. 2. 3.
Organizations use a variety of channel partners depending on the nature of the business and the customer service they desire to achieve. These partners can be grouped into three channel systems. Vertical marketing systems Horizontal marketing systems Multi channel marketing systems
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Channel systems
Vertical
Marketing Systems : comprises the manufacturer, wholesaler, retailer acting as a unified system. The principal channel member has substantial control over the other members. Corporate VMS :combines stages of production and distribution under single ownership. ( Dawn Bread)
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Corporate VMS
Milak
Food Limited Fresh Milk. Bata shoes are retailed thru Bata stores.
Administered
VMS: Manufacturers of dominant brands are able to demand and influence high levels of co operation from channels. (Kodak, P&G, Gillette.
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or more unrelated companies put together resources to exploit an emerging market opportunity.( UDL and Many medicine Companies, IBL and P&G.)
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and newspapers
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Contractual VMS
Independent
firms at different levels of manufacturing and distribution integrate on a contractual basis.(Value adding Partnerships.) Whole seller sponsored Retailer cooperatives Franchise organizations
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Distribution system
Is a key external resource Ranks in importance with
internal resources such as manufacturing, engineering, research, sales persons. Etc. Represents an important corporate commitment to the numerous independent distributors. Represents commitment to Policies and Practices.
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Channel structures
Mfgr. Mfgr. Mfgr
stores and supermarkets Project (Haneef Rajpoot) Pakistan Unilever Network-consultant Out-of-home opportunity-vending m/c Health and beauty services therapy
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Functions..
Take
on risks connected with channel work Storage and movement of physical goods Provide payment of buyers bills. Oversee actual transfer of ownership
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channel activities arise due to discrepancies between typical manufacturing activity and consumption activity. Discrepancies vary at different situations. The general discrepancies that exist are:
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Distribution activities
Spatial
discrepancy: Exists because of the physical distance between point of manufacture and point of consumption. limited manufacturing locations and widespread consumption locations.
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Distribution activities
discrepancies: The point of time in manufacturing is distinct from the point of time in consumption. (Pharmaceutical, Textile) To bridge or reduce the temporal discrepancy products have to be stocked at appropriate places and in 2222 6/17/12 adequate quantities
Temporal
Distribution activities
Breaking
Provide
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Distribution activities
Bridging
the information discrepancy. Tourism and travel; Savings and Investment; New technology products
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Lecture_3
Flow
Physical flow Title flow Payment flow Information flow Promotion flow
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key functions:
Forward flow functions: Develop / disseminate communication Store and move the physical products Oversee transfer of ownership Backward flow functions: Place orders with manufacturers Facilitate payment of bills
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Channel levels
Zero level: manufacturer & consumer One level : mfgr.retailer,consumer Two level:
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expertise of the market in Planning,Forecasting,Buying,Storing, Financing,suggesting strategies of pricing,packaging, and communication Helps the Retailer by breaking bulk,enabling wider range,providing credit,
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work with several non competitive companies or brands. Distributors, wholesalers stockists who are contracted by the company or brand.
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Classification of Agents
Brokers Commission Agents Sole Selling Agents Manufacturers Agents
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Retail formats
Food retailers : Convenience stores
Supermarkets Superstores Food & General merchandise retailers: Warehouse Cubs Hypermarkets General Merchandise Retailers: Department stores Category specialists
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RETAILING IN PAKISTAN
8% of Pakistans population is engaged in retailing.( in USA it is 25%). Share of retail trade to GDP: Pakistan -13%; USA-9%;China-8% 80%+ retail outlets are less than 500 sq.ft.
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Lecture_4
Service sector channels
Health services Educational services Entertainment services Telecom services Financial services
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Radio, TV, Cable, Satellite, Internet, Intranet, Wireless.. These channels require support of Content companies, Consumer device companies, Components companies,and conduit companies
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Information channels
Content companies:Disney Consumer devices companies Nokia Component companies:ICI Conduit companies: U-fone
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demands by segment;-(two different soft drink buyers) Identify environmental characteristics and constraints (poor infrastructure) Positioning define the optimal (numbers) channel to serve the segment, also called configuring the channel.
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to target and what segments to ignore. In a pharma product company focus may be on A class towns, govt. hospitals etc.
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Product mix, and nature of product Marketing mix elements Extent of market coverage Service levels planned Cost constraints / affordability Control of channel functions
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Lot size Waiting time Spatial convenience Product variety Service back up
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Product mix, and nature of product Marketing mix elements Extent of market coverage Service levels planned Cost constraints / affordability Control of channel functions
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Lot size Waiting time Spatial convenience Product variety Service back up
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Lot size Waiting time Spatial convenience Product variety Service back up
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the basis of cost target and service output levels. Consider product characteristics and channel strengths & weakness.
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Types of Intermediaries
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Lecture _ 5
Channel Design
The decision includes : Number of channels to employ. Number of levels to be included. Type of intermediaries to employ
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Channels need to be adopted depending on the target segment and positioning. Goals of the channel members may differ. The alternatives are many.
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1. 2. 3. 4. 5. 6.
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Criteria for choosing channel partners: Financial strength Sales strength Product lines Reputation Market coverage Sales performance
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7.Management strength 8.Plant ,equipment and facilities. 9.Ordering and payment procedures. 10.Willingness to share data. 11. Willingness to accept a quota.
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Accepts damaged goods Has simple ordering processes Carries large product breadth Provides small lot delivery Requires no minimum order size Extends credit Offers promotional support Employs trained sales representives 5252
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The design should ensure that the product reaches the right segment and also reflects the products positioning.
Dabour, Godridje
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ARVIND MILLS
CENTRAL WAREHOUSE
FRANCHISE
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ARVIND MILLS
CENTRAL WAREHOUSE
Conceptual Framework
The framework takes a bottom up approach starting from the consumer. Buyer needs Retailers requirements Distribution needs Legal requirements
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Framework
Target group Buyers needs Product features Retailers needs Legal issues Reach and Functions to be performed 6/17/12 Distribution needs
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Requirement for new dealer is need based. Intention to appoint is communicated by word of mouth thru the sales force. Interested dealers are asked to submit proposal how they can serve the organisation.
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Selection criteria:
Financial strength Manpower quantity and competency. Contacts Feedback from the local market Appointment is made after receipt of security deposit.
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An FMCG case.
Channel design:
Company
C&F agent STOCKIS T
WHOLESALE R
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Selection criteria
For Stockist: Investment capacity Location Storage space Span of control Market knowledge Infrastructure Orientation /Trustworthiness
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Selection criteria
1. . . . . . . . For the Wholesaler: Reliability Loyalty Ability to service Retailers Willingness to work with Stockist Other product lines Market reach Consistency of functioning
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COMPANY
SHOWROO M
DEAL ER
DEAL ER
CONSUM ER
RETAIL ER
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Retailers
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DISTRIBUTORS
Wholesalers
Retailers
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Sales Organization
Regional Managers
Branch Managers
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Selection process
Need out of attrition or market expansion GM approval Release of advertisement Evaluation criteria: Previous experience Financial strength Administrative skills Availability of sales force
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Category one: Short listing criteria Brands kept,Product kept,(past experience) Category two: Essential criteria Investment capacity, span of control, Attitude, Reliability,Financial strength
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Framework.
Category three: situational criteria Storage space, location, infrastructure, capability, sales force.
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Lecture _ 6
Sales performance Servicing Financial discipline Inventory maintenance Selling capabilities Support to the organisation
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Appraisal criteria
type of product Type of market Technical
Hi competition Lo competition Lo awareness Selling capability Servicing Support to Co. non durable consumer durable Sales& servicing Inventory Support to Co. Sales Financi al invento ry
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Evaluation
It is essential to study the antecedents influencing the performance or non performance. In the Pakistani context both business and social benefits are important to the channel member. Factors which influence the business and social benefits are:
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Antecedents of performance
Financial status Partnership issues Family concerns Reputation Company variables Social status
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Lecture -7
Retail industry
Evolution and status In-store Retail ; Shops and stores Non-store Retail: Direct marketing, catalogs, Television, Telephone,Vending machines etc. Retail sector is 2nd largest employer after agriculture. 12 million retail outlets contributing to Rs.11200 billion sales Food retail constitutes 62.7%of total
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Retail functions
Providing assortment Sorting Breaking bulk Rendering services Risk bearing Holding inventory Channel of communication Transport and advertising
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Retail strategy
Decisions on location, assortment, pricing and ambience are decided after the target market is identified retail strategy combines controllable and un controllable variables. Location, management, merchandise management, pricing communication with the customer are controllable variables
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Strategy
Uncontrollable variables are consumers, competition, technology, economic conditions, seasonal variations, legal restrictions.
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Retail mix
Merchandise-price and quality Location Ambience Communication Service
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Retail growth
Fastest growing retail segments: Food and grocery:91% Clothing :55% Pharmacy :27% Furniture and fixtures :27% Durables :18% Watches and jewelery :18%
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Types of warehouses
Private warehouses : owned and managed by manufacturers or traders to store exclusively their own stock of goods. Public warehouses :available to anyone on payment of rent. Statutory licence and regulations apply to own and manage public warehouses. Government warehouses :owned, managed controlled by central or state govt. 8989 6/17/12 CWC ,FCI.
Types of warehouses
Bonded warehouses: owned and managed by govt. or private agencies. Generally owned by dock authorities and located near ports. Goods are usually bonded with customs and excise departments. Co-operative warehouses: owned managed and controlled by co-operative societies.
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Types of warehouses
Cross-docking warehouses.( flow through distribution) Products from an arriving truck are not stored in a warehouse. It is immediately moved across the receiving dock to other trucks for immediate delivery to stores.
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Functions of warehouses
Storage Protection Risk bearing Financing Processing Grading and branding Transportation
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Matl.handling Logistics as a System of inter -related components Order processng Inventory ctrl Management Tries to mini-mize the cost Of using the Components Taken as a whole
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packaging
Material handling
Placement and movement of products in a storage area. Fork lifts, cranes, conveyor systems, cross docking
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