mmit session 6
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MMIT session 6. Distribution Channels. What are supply networks and channels of distribution? How should marketers design supply networks and channels of distribution? How can marketers select channel members? What are the challenges of managing distribution channels?. - PowerPoint PPT PresentationTRANSCRIPT
MMIT SESSION 6
Distribution Channels
1. What are supply networks and channels of distribution?
2. How should marketers design supply networks and channels of distribution?
3. How can marketers select channel members?
4. What are the challenges of managing distribution channels?
Who are the top supply chain companies worldwide?
Nokia Apple Procter & Gamble IBM Toyota Motor Wal-Mart Anheuser-Busch Tesco
Best Buy Samsung
Electronics Cisco Systems Motorola The Coca-Cola
Company Johnson & Johnson
What is a supply chain?
A supply chain is a set of three or more entities (organisations or individuals) directly
involved in the upstream or downstream flows of product, service, finances and/or
information from a source to a customer.
What are distribution channels?
Distribution channels are sets of intermediaries that are usually independent
organisations involved in the process of making a product or service available for
use or consumption.
Intermediaries in distribution channels
Wholesalers Retailers Distributors Transport companies
Brokers Manufacturers’ reps Agents Export management
Title Holders Non-Title Holders
What is supply chain management?
Supply chain management (SCM) encompasses the planning and
management of all activities in buying, making, providing and distributing. It also includes coordination and collaboration
with channel partners.
20th century demand-driven supply networks
Figure 17.8 Demand-driven supply networks
21st century demand-driven supply networks
Figure 17.8 Demand-driven supply networks (continued)
Key processes of supply chain management
Customer relationship management
Customer service management
Demand management
Order fulfillment
Manufacturing or service process flow management
Intermediary relationship management
Product development/ commercialisation
Returns
Consumer marketing channels
Figure 17.11 Consumer and industrial marketing channels
Industrial marketing channels
Figure 17.11 Consumer and industrial marketing channels (continued)
3 types of distribution strategy Intensive – stocked in all outlets Selective – few intermediaries,
specialists Exclusive – only one brand by reseller
Customer needs
Quantity of purchase
Waiting/delivery time
Convenience
Product variety
Service backup
Identifying channel alternatives
Types of intermediaries
Number of intermediaries
Terms and responsibilities
Figure 17.15 The value adds versus the costs of different channels
Terms and responsibilities of channel members
Price policy Condition of sale Distributors’ territorial rights Mutual services and responsibilities
Channel-management decisions
Training channel members
Motivating channel members
Evaluating channel members
Modifying channel members
Zara – mini-case20
Inditex = Zara, Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterqüe
Zara operates in 82 countries with a network of 1.631 stores
Based in La Coruna/Arteixo, Spain 70% of sales are in Europe, 25% in Spain New rules for marketing
Zara’s challenge to marketing wisdom21
Rule one: country-of-origin carries value (Zara is from a small town in Spain, pop. 25,000)
Rule two: avoid stock-outs (shortages contribute to the urge to buy now, new goods arrive twice a week, Zara makes 20,000 items a year (3x what gap makes), London shoppers visit Zara 17x annually compared to 4x for average store)
Rule three: advertise (Gap and H&M spend 3-4% of sales on ads, Zara 0.3%, focus on location)
Zara (continued)22
Rule four: outsource (Gap and H&M don’t own any facilities, Zara manufactures 51% of its products in Spain, Portugal, Morocco. Only basic items are outsourced to Asia (34%) and Turkey (14%). This reduces errors in prediction so that Zara’s average discount is 15% vs. 40% for other retailers)
Rule five: efficiency through large batches (Zara uses quick reaction, fixed supply chain schedule: stores order twice a week, truck and cargo flights on fixed schedule, good arrive in at stores in Europe in 24 hrs, US 48 hrs, and Asia 72 hrs)
Zara’s challenges23
Expensive in China Competitors can copy model Standardized marketing problems C&A failure – standardization and
centraliztion Sizes, Ads showing body hair, Colors, Dress
cuts
EU does better in Operations than People management
Marketing Mix for International Firms
Product PlacePromotionPricing
Marketing Mix
Key Decision-Making Factors Standardization versus customization Legal forces Economic factors Changing exchange rates Target customers Cultural influences Competition
Standardization versus Customization
3 Options: ETHNOCENTRIC (standardized–
home) GEOCENTRIC (standardized-
global) POLYCENTRIC (customized)
International Marketing Advantages
STANDARDIZED Approach
+ Reduces marketing costs+ Facilitates centralized
control of marketing+ Promotes efficiency in R&D+ Results in economies of
scale in production+ Reflects the trend toward
a single global marketplace
CUSTOMIZED Approach
+ Reflects different conditions of product use
+ Acknowledges local legal differences
+ Accounts for differences in buyer behavior patterns
+ Promotes local marketing initiatives
+ Accounts for other differences in individual markets
Figure 17.1 The International Operations Management Process
Strategic Context•Differentiation•Cost leadership•Focus
Standardized vs. CustomizedProduction
Acquisition of Resources•Supply Chain •Management•Vertical Integration•Make-or-buy decision
Location Decisions•Country-related issues•Product-related issues•Government policies•Organizational issues
Logistics and Materials Management•Flow of materials•Transportation options•Inventory levels•Packaging
Production Management1. Acquisition of Resources2. Location Decisions3. Logistics and Materials Management
1. Acquisition of ResourcesManagers must decide where and how to obtain
the resources the firm needs to produce its products
Supply chain management: set of processes and steps a firm uses to acquire the various resources it needs to create its products
Vertical integration: extent to which a firm either provides its own resources or obtains them from other sources
Figure 17.2 Basic Make-or-Buy Options
Necessary Trade-offs in Make-or-Buy Decision
Make Buy
Cost + Profit potential - Expensive initial
+ no start up costs- more exp. unit costs
Control + quality, delivery schedule, design changes, cost
- contract enforcement
Risk + control + reduces financial, operating, and political
Investment (in facilities, tech, people)
+ become assets, competitive or strategic advantage
+ lowers investment, frees up capital, reduces training costs and expertise needs
Flexibility - Difficult to change direction
+ can change suppliers, products, easily
2. Location DecisionsManagers must decide where to build
administrative facilities, sales offices, etc.
Factors to consider: Country-Related Issues Product-Related Issues Government Policies Organizational Issues
Country-Related Issues Resource availability Cost Infrastructure Country-of-origin effects
Product-Related Issues Value-to-weight ratio Technology Importance of customer feedback
Government Policies Stability of political process National trade policies Economic development incentives Existence of foreign trade zones (FTZ)
Organizational Issues Business strategy
Cost leadership Differentiation
Organizational structure Inventory management policies
Just-in-time (JIT) inventory management system
3. Logistics and Materials Management
Managers must decide on modes of transportation and methods of inventory control
Three key flows: flow of materials, parts, supplies, and other
resource from suppliers to the firm flow of materials, parts, supplies, and other
resources within and between units of the firm itself
flow of finished products, services, goods from the firm to customers
Differences in Domestic and International Materials Management
Distance involved in shipping Number of transport modes Complexity of regulatory context
Key Factors Time Predictability Cost
Advantages and Disadvantages of Different Modes of Transportation for Exports
Mode Advantages Disadvantages Sample Products
Train Safe, reliable, inexpensive
Limited to rail routes, slow
Automobiles, grains
Airplane Safe, reliable, fast
Expensive, limited access
Jewelry, medicine
Truck Versatile, inexpensive
Small size Consumer goods
Ship Inexpensive, good for larger products
Slow, indirect Automobiles, furniture
Electronic Media
Fast Unusable for many products
Information