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Sales and distribution management full notes
 

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    Sales and distribution management full notes Sales and distribution management full notes Document Transcript

    • Sales and Distribution Management Full Notes — Presentation Transcript 1. DISTRIBUTION MGT (D.M.) D.M. HAS 2 PARTS : DISTRIBUTION CHANNEL (DC) & PHYSICAL DISTRIBUTION/ MARKETING LOGISTICS (ML) DISTRIBUTON CHANNEL (MARKETING CHANNEL/TRADE CHANNEL IS A SET OF INTERDEPENDENT ORGANISATIONS INVOLVED IN THE PROCESS OF MAKING A PRODUCT/SERVICE AVAILABLE FOR USE/ CONSUMPTION.KKH/DM/BU-1 www.a2zmba.com 2. ML CONSISTS OF DELIVERING COMPLETED PRODUCTS TO CHANNEL INTERMEDIARIES & END USERS / CONSUMERS. FUNCTIONS & FLOWS IN MARKETING CHANNELS (A) MARKETING CHANNEL MEMBERS (E.G. MANUFACTURERS, WHOLESALERS, RETAILERS, BANKS/FIN.INSTITUTIONS, TRANSPORT CARRIERS, ETC) DO ONE OR MORE OF THE FOLLOWING FUNCTONS / TASKS / WORK.KKH/DM/BU-2 www.a2zmba.com 3. (i) PROMOTION: TO COMMUNICATE ABOUT PRODUCTS, TO GENERATE DEMAND/ATTRACT CUSTOMERS. IT INCLUDES ADS,S.P., PERSONAL SELLING, D.M., PUBLICITY. (ii) NEGOTIATION: AGREEMENT BETWEEN A BUYER & A SELLER, SO AS TO TRANSFER OWNERSHIP/POSSESSION. (iii) PHYSICAL DISTRIBUION: PHYSICAL FLOW/MOVEMENT OF GOODS FROM MANUFACTURER TO FINAL CUSTOMER. IT INCLUDES MANY ACTIVITIES : TRANSPORTATION, INVENTORY MGT., WAREHOUSING, ORDER PROCESSING / CUSTOMER SERVICE, ETC.
    • KKH/DM/BU-3 www.a2zmba.com 4. (iv) INFORMATION : COLLECTING & SPREADING MARKET INFO.I.E. CUSTOMERS, COMPETITORS, ENVIRONMENT. (v) FINANCING / CREDIT / PAYMENT: EXTENDING CREDIT TO CUSTOMERS, WHO PAY THEIR BILLS THRU’ BANK / FIN.INSITUTIONS OR DIRECTLY TO SUPPLIERS (vi) AFTER – SALES SERVICE: DEPENDING UPON SERVICE/PRODUCT,CUSTOMERS NEED PREVENTIVE MAINTENANCE/REPAIRS DURING/OUTSIDE WARRANTY PERIOD. (EG: 2 – WHEELERS, GEN. SETS)KKH/DM/BU-4 www.a2zmba.com 5. DEPENDING ON WHO CAN DO ABOVE FUNCTIONS EFFICIENTLY, THE MANUFACTURER SHIFTS/SHARES SOME FUNCTIONS WITH INTERMEDIARIES (EG STORAGE/INVEN.CARRING, FINANACING, PROMOTION) (B) FLOWS IN MARKETING CHANNEL. A FLOW IS THE MOVEMENT OF FUNCTIONS/TASKS PERFORMED BY CHANNEL MEMBERS, AS SHOWN.KKH/DM/BU-5 www.a2zmba.com 6. KKH/DM/BU-6 www.a2zmba.com 7. KKH/DM/BU-7 www.a2zmba.com 8. FLOWS / MOVEMENTS IN CHANNEL ARE GROUPED AS (A) FORWARD FLOWS ARE PROMOTION, PHY.DISTRI’N, & OWNERSHIP/TITLE. (B) BACKWARD FLOWS ARE ORDERING & PAYMENT. (C) BOTH DIRECTION FLOWS / MOVEMENTS ARE INFORMATION, NEGOTIATION & FINANCING.KKH/DM/BU-8 www.a2zmba.com
    • 9. ANALYSING MARKETING CHANNEL STRUCTURES MARKETING CHANNEL STRUCTURES VARY BY (1) CHANNEL LEVELS/CHANNEL LENGTH – WHICH IS BASED ON NUMBER OF INTERMEDIARIES & (2) DEGREE OF SPECIALISATION IN FUNCTIONS / FLOWS, AS SHOWN HEREAFTER.KKH/DM/BU-9 www.a2zmba.com 10. BASED ON CHANNEL LENGTH/LEVELS DIFFERENT TYPES OF CHANNEL STRUCTURES KKH/DM/BU- 10 www.a2zmba.com 11. MULTI CHANNEL MATRIX STRUCTURES (BASED ON SPECILISATION OF FUNCTIONS) NOTE : INDIRECT CHANNELS ARE TYPICALLY USED FOR CONSUMER MARKETING (EXCEPT B2C) & DIRECT / MATRIX CHANNEL STRUCTURES ARE USED MORE IN INDUSTRIAL MKG.KKH/DM/BU-11 www.a2zmba.com 12. CRITERIA FOR HARMONIOUS RELATIONSHIPHARMONIOUS RELATIONSHIP EXISTS IF GOALS ARE CONVERGENT (SIMILAR), & THE PROCESS OFDELIVERING SERVICE TO CONSUMERS IS EFFICIENT & EFFECTIVE. KKH/DM/BU-12 www.a2zmba.com 13. TYPES OF RELATIONSHIPS IN MARKETING CHANNEL KKH/DM/BU-13 www.a2zmba.com 14. WHAT IS RETAILING ? IT IS SELLING GOODS / SERVICES TO FINAL CONSUMERS FOR PERSONAL / FAMILY USE, NOT FOR BUSINESS USE . GOODS / SEVICES MAY BE SOLD IN STORES / SHOPS, STREET, OR CONSUMER’S HOME, BY PERSON, MAIL, PHONE, INTERNET OR VENDING M/C.KKH/DM/BU-14 www.a2zmba.com 15. 2. IMPORTANCE / ROLE OF RETAILER * RETAILER IS THE FINAL BUSINESS IN A CHANNEL, THAT LINKS A MANUFACTURER TO CONSUMERS.
    • * RETAILERS PERFORM IMPORTAN ACTIVITIES THAT INCREASE PRODUCT / SERVICE VALUE BY 20-50% OF FINAL COST OF MERCHANDISE. RETAILERS ACTIVITIES: (i) PROVIDING ASSORTMENT, (ii) BREAKING BULK, (iii) HOLDING INVENTORY, (iv) PROVIDING SERVICES.KKH/DM/BU-15 www.a2zmba.com 16. 3. RETAIL ENVIRONMENT IT IS CHANGING IN INDIA. EG: SHIFT IN CONSUMPTION HABIT OF OVER 1 BILLION PEOPLE (DUE TO TV, LIBERALISED ECONOMY & DEMANDING CONSUMERS) USD 2.5 BILLION INVESTMENTS (70,000 # EMPLOYMENT) (IN 10 YRS) >1000 LARGE / SMALL WORLD CLASS RETAIL STORES IN INDIA BY 2005. MULTI-CULTURAL, SOCIO-ECONOMIC DIFFERENCES (HENCE, PRODUCT-MIX MAY VARY) COOKING OIL & VANASPATHI CONSUMPTION IS 1/3 OF RURAL EXPENDITURE ON FMCG PRODUCTS. URBAN POPULATION IS 30% OF TOTAL POPULATION. 50% OF POPULATION < 20 YEARS AGE. 20% RETAILERS OFFER CREDIT TO CUSTOMERS. 50% TEA CONSUMED IN RURAL INDIA.KKH/DM/BU-16 www.a2zmba.com 17. MAJOR FACTORS AFFECTING RETAILING IN INDIA HIGH REAL-ESTATE COSTS. ABSURD RENT CONTROL LAWS (EG - MAHDA 1976 ACT).
    • HIGH INTEREST COSTS. UNPLANNED CITIES. CORRUPTION. HIGH ELECTRICITY COSTS. WEAK CONSUMER LAWS.KKH/DM/BU-17 www.a2zmba.com 18. RETAIL (ORGN.) STRUCTURES ORGANISATION STRUCTURES DIFFER BASED ON TYPE / SIZE OF THE RETAILER. (i) ORG. STRUCTURE OF A SMALL RETAILERKKH/DM/BU-18 www.a2zmba.com 19. (ii) ORIGINAL STRUCTURE OF A DEPARTMENT STORE CHAIN KKH/DM/BU-19 www.a2zmba.com 20. 5) RETAIL BASED CHANNEL FORMATS OR TYPES OF RETAILERS (i) CONVENIENCE STORE : CONVENIENTLY LOCATED , SMALL GROCERY STORE HIGH MARGIN, LIMITED DEPTH, BROAD VARIETY, LOW WAITING TIME. (ii) SPECIALITY STORE : LIMITED NUMBER OF PRODUCT LINE WITH GREAT DEPTH OF SELECTION . PRICES SAME AS DEPARTMENT STORES LOW WAITING TIME. (iii) DEPARTMENT STORE : ORGANISED INTO SEPARATE DEPARTMENTS. FOR DIFFERENT PRODUCTS MERCHANTISE. EG: CLOTHING, FOOD ITEMS, APPLIANCES. WIDE VARIETY OF PRODUCTS WITH MODERATE DEPTH. SPATIAL (SPACE) CONVENIENCE, LOW WAITING TIME.KKH/DM/BU-20 www.a2zmba.com 21. (iv) DISCOUNT STORE : WIDE VARIETY, LESS DEPTH MERCHANTISE, LOW COST LOCATIONS, LESS SERVICE, LOWER (DISCOUNTED) PRICES. TARGET CONSUMERS ARE LOW/MIDDLE INCOME GROUPS.
    • OTHER TYPES OF RETAILERS ARE SUPER STORES (20,000-50,000 SQ.FT), SHOPPING MALLS, SUPER MARKETS (20,000 SQ.FT) SELF-SERVICE FOOD STORES 6. SHOPPING BEHAVIOUR (i) SHOPPING NEEDS : MANY PRODUCTS SATISFY (a) FUNCTIONAL / RATIONAL NEEDS, AND/OR (b) PSYCHOLOGICAL / EMOTIONAL NEEDS.KKH/DM/BU-21 www.a2zmba.com 22. (ii) TYPES OF BUYING DECISION MAKING : (a) EXTENDED PROBLEM SOLVING (HIGH RISK & UNCERTAINITY) (b) LIMITED PROBLEM SOLVING – IMPULSE PURCHASE (MODERATE RISK & UNCERTAINITY) (c) HABITUAL DECISION MAKING (LOW RISK & UNCERTAINITY)- BRAND LOYALITY, STORE LOYALITY ARE EXAMPLES.KKH/DM/BU-22 www.a2zmba.com 23. STEPS / STAGES IN STORE SELECTION & BUYING PROCESSKKH/DM/BU-23 www.a2zmba.com 24. RETAIL PLANNING & STRATEGIES CONSIST OF FOLLOWING STEPS (i) DEFINE BUSINESS MISSION. (ii) CONDUCT SITUATIONAL AUDIT (SWOT). (iii) DECIDE OBJECTIVES & GOALS. (iv) EVOLVE RETAIL STRATEGY. (v) DEVELOP FINANCIAL STRATEGY.
    • (vi) PREPARE ACTION PLAN (PERT-CPM) (vii) IMPLEMENTATION & CONTROL.KKH/DM/BU-24 www.a2zmba.com 25. RETAIL STRATEGY CONSISTS OF (a) TARGET MARKET SEGMENTS. (b) RETAIL FORMAT/RETAIL MARKETING MIX. IT INCLUDES : (i) GOODS/SERVICES OFFERED, (ii) PRICING, (iii) PROMOTION, (iv) STORE LOCATION, DESIGN & VISUAL MERCHANTISE, (v) CUSTOMER SERVICEKKH/DM/BU-25 www.a2zmba.com 26. (c) SUSTAINABLE COMPETITIVE ADVANTAGE . CAN BE BUILT BY FOLLOWING AREAS: (i) CUSTOMER LOYALTY, (ii) LOCATION, (iii) VENDOR RELATIONS, (iv) MANAGEMENT INFORMATION & DISTRIBUTION SYSTEMS, (v) LOW-COST OPERATIONS.KKH/DM/BU-26 www.a2zmba.com 27. MERCHANDISE PLAN RETAILER PLANS (a) WHAT TYPE OF MERCHANDISE (GOODS) TO BUY .
    • THIS DEPENDS ON RETAIL STRATEGY 3. FACTORS ARE RELEVANT : (i) VARIETY(BREADTH), (ii) ASSORTMENT(DEPTH) (iii) SERVICE LEVELKKH/DM/BU-27 www.a2zmba.com 28. (c) HOW MUCH TO BUY . DEPENDS ON : (i) SALES FORECAST - “TOP DOWN”, “BOTTOM-UP” APPROACH & FORECASTING METHODS. INVENTORY NET SALES TURNOVER AVERAGE INVENTORY AT RETAIL THIS CAN BE CALCULATED ON MONTHLY / QUARTERLY / YEARLY BASIS. RAPID INVENTORY TURNOVER SHOWS FINANCIAL SUCCESS.(ii) KKH/DM/BU-28 www.a2zmba.com 29. PROCUREMENT & DESTRIBUTION AFTER MERCHANTISE PLAN IS MADE, PROCUREMENT FOCUSES ON BUYING MERCHANDISE. IT INCLUDES: (i) SELECTING VENDORS/SUPPLIERS, (ii) MEETING,NEGOTIATING, (iii) DEVELOPING RELATIONSHIP. RETAIL DISTRIBUTION / LOGISTICS IT IS PHYSICAL FLOW OF MERCHANDISE FROM THE SOURCE OF SUPPLY TO CUSTOMER.KKH/DM/BU-29 www.a2zmba.com
    • 30. SOME RETAILERS HAVE DISTRIBUTION CENTER TO STORE BUFFER STOCKS, AS COST OF SPACE IS LESS. IF RETAILER HAS FEW STORES, DIRECT DISTRIBUTION TO STORES IS BETTER. DISTRIBUTION CENTER ACTIVITIES : TRANSPORTATION, RECEIVING, CHECKING, STORING, MARKING, FILLING ORDERS.KKH/DM/BU-30 www.a2zmba.com 31. RETAIL (STORE) MANAGEMENT INCLUDES THE FOLLOWING: (i) MANAGING STORE EMPLOYEES : RECRUITING, SELECTING, TRAINING, MOTIVATING, MEASURING & EVALUATING PERFORMANCE, (ii) MANAGING MERCHANDISE, (iii) CUSTOMER SERVICE, (iv) INVENTORY CONTROL, (v) STORE PERFORMANCE EVALUATION.KKH/DM/BU-31 www.a2zmba.com 32. PERFORMANCE EVALUATION SYSTEM IS DESIGNED BY H.R. DEPARTMENT, BUT EVALUATION IS DONE BY IMMEDIATE SUPERVISOR. SUBJECTIVE & OBJECTIVE CRITERIA SHOULD BE USED. BOTH YEARLY/HALF YEARLY REVIEW + FREQUENT APPRAISALS ARE DONE.KKH/DM/BU-32 www.a2zmba.com 33. WHOLESAILING (B2B) IT INCLUDES SELLING PRODUCTS TO BUSINESSES LIKE RETAILERS, INDUSTRIAL & INSTITUTIONAL USERS, CONTRACTORS & MERCHANTS, BUT NOT TO HOUSEHOLD CONSUMERS.
    • WHOLESALER/DISTRIBUTOR SMALL DIFFERENCE IS IGNORED. TERMINOLOGIES/TERMS VARY IN INDUSTRY.KKH/DM/BU-33 www.a2zmba.com 34. IMPORTANCE OF WHOLESAILING LARGEST SALES IN WHOLESALE TRADE. SALES GROWTH > ECONOMIC GROWTH. STEADY GROSS MARGINS. PERFORM IMPORTANT TASKS/ FUNCTIONS.KKH/DM/BU-34 www.a2zmba.com 35. FUNCTIONS/TASKS PERFORMED BY WHOLESALERS/ DISTRIBUTORS. SELLING & PROMOTING. BUYING & ASSORTMENT BUILDING. BULK BREAKING. WAREHOUSING/STORAGE-INVENTORY HOLDING. TRANSPORTATION FINANCING RISK BEARING. MARKET INFORMATION.KKH/DM/BU-35 www.a2zmba.com 36. STRUCTURE OF WHOLESAILINGKKH/DM/BU-36 www.a2zmba.com
    • 37. DIFFERENT FORMATS / TYPES OF WHOLESALERS (A) MERCHANT WHOLESALERS , INDEPENDENT BUSINESSES, BY MERCHANDISE, THEY ARE CALLED JOBBERS,DISTRIBUTORS OR MILL SUPPLY HOUSES. TWO CATEGORIES : (i) FULL-SERVICE WHOLESALERS : THEY CARRY STOCK, HAVE A SALES FORCE, OFFER CREDIT, ARRANGE DELIVERIES.KKH/DM/BU-37 www.a2zmba.com 38. TWO TYPES OF FULL – SERVICE WHOLESALERS (a) WHOLESALE MERCHANTS SELL TO RETAILERS &GIVE FULL RANGE OF SERVICES. (b) INDUSTRIAL DISTRIBUTORS : SELL TO MANUFACTURERS, GIVE SERVICES LIKE STORAGE, CREDIT, DELIVARY.KKH/DM/BU-38 www.a2zmba.com 39. KKH/DM/BU-39 www.a2zmba.com 40. (ii) LIMITED SERVICE WHOLESALERS OFFER FEW SERVICES TO SUPPLIERS & CUSTOMERS. FOLLOWING TYPES: (a) CASH & CARRY WHOLESALERS HAVE LIMITED FMCG PRODUCTS, SELL TO SMALL RETAILERS FOR CASH. (b) TRUCK WHOLESALERS SELL & DELIVER LIMITED SEMI-PERISHABLE MERCHANDISE TO RETAIL STORES, HOSPITALS, RESTAURANTS (c) DROP SHIPPERS OPERATE IN BULK INDUSTRIES LIKE HEAVY EQUIPMENT TO SHIP FROM MANUFACTURER TO CUSTOMER.KKH/DM/BU-40 www.a2zmba.com 41. (b) RACK JOBBERS SELL TO GROCERY & DRUG RETAILERS , DELIVER, DISPLAY, BILL FOR GOODS SOLD TO CONSUMERS, KEEP STOCK RECORDS. (e) MAIL-ORDER WHOLESALERS . (f) PRODUCERS CO-OPERATIVES : COLLECT & SELL FARM PRODUCTS.
    • (B) BROKERS : BRING BUYERS & SELLERS TOGETHER, NEGOTIATION HELP, COMMISSION PAID BY PARTY WHO HIRED THEM. EX: REAL ESTATE.KKH/DM/BU-41 www.a2zmba.com 42. (C) AGENTS : REPRESENT EITHER BUYERS/SELLERS. (i) MANUFACTURER’S REPRESENTATIVES / AGENTS, (ii) SELLING AGENTS (iii) PURCHASING AGENTS (iv) COMMISSION MERCHANTS. (D) MANUFACTURERS’ & RETAILERS’ BRANCH OFFICES (E) MISCELLANEOUS WHOLESALERS (i) AGRICULTURAL ASSEMBLERS, (ii) PETROLEUM BULK PLANTS / TERMINALS, (iii) AUCTION COMPANIES.KKH/DM/BU-42 www.a2zmba.com 43. SELECTION & USING WHOLESALERS WHOLESALERS ARE USED WHEN THEY ARE MORE EFFECTIVE & EFFICIENT IN PERFORMING IMPORTANT FUNCTIONS/TASKS. WHOLESALER INDUSTRY IS VULNERABLE. SELECTION OF WHOLESALERS DEPEND UPON : (i) GIVING VALUE-ADDED SERVICES AS PER NEEDS OF MANUFACTURERS & RETAILERS. (ii) REDUCING COSTS WITH MODERN MATERIAL HANDLING & I.T. (iii) FULFILLING COMMITMENTS (AS PER AGREEMENTS) LIKE SALES VOLUME, TIMELY PAYMENTS & MARKET INFORMATION.KKH/DM/BU-43 www.a2zmba.com 44.
    • WHOLESALE STATEGIES (a) INCREASE PRODUCTIVITY BY BETTER MANAGEMENT OF INVENTORIES & RECEIVABLES. (b) IMPROVE DECISIONS ON (i) TARGET MARKET & RELATIONSHIP BUILDING. (ii) SELECT PROFITABLE PRODUCTS & SERVICES. (iii) NEW PRICING STRATEGIES. (iv) DEVELOP OVERALL PROMOTION STRTEGY. (v) DEVELOP AUTOMATED WAREHOUSES & SUPERIOR MIS & ORDER PROCESSING.KKH/DM/BU-44 www.a2zmba.com 45. CHANNEL PLANNING DESIGNING CHANNEL SYSTEM STEPS ARE : A. UNDERSTAND SERVICE OUTPUTS NEEDED BY TARGET CUSTOMERS. B. DECIDE CHANNEL OBJECTIVES & CONSTRAINTS. C. IDENTIFY MAJOR CHANNEL ALTERNATIVES. D . EVALUATE CHANNEL ALTERNATIVES & CHOSE A CHANNEL SYSTEM.KKH/DM/BU-45 www.a2zmba.com 46. (A) UNDERSTAND SERVICE OUTPUTS NEEDED BY TARGET CUSTOMERS SOME OF THE SERVICE OUTPUTS ARE : (i) LOT SIZE, (ii) WAITING TIME, (iii) SPATIAL (SPACE) CONVENIENCE. (iv) PRODUCT VARIETY/ASSORTMENT. (v) SERVICE BACK-UP.
    • IF A CHANNEL GIVES MORE SERVICE OUTPUTS, COST & PRICES GO UP. OPPOSITE IS TRUE. EX : DISCOUNT STORES.KKH/DM/BU-46 www.a2zmba.com 47. (B) DECIDE CHANNEL OBJECTIVES & CONSTRAINTS. (i) CHANNEL OBJECTIVES VARY WITH DIFFERENT MARKET SEGMENTS. CHANNEL OBJECTIVES ARE “ TARGETED SERVICE OUTPUT LEVELS ”. (ii) CHANNEL OBJECTIVES VARY WITH PRODUCT CHARACTERISTICS. (iii) STRENGTHS & WEAKNESSES (CONSTRAINTS) OF DIFFERENT INTERMEDIARIES MUST BE CONSIDERED. (iv) CONSTRAINTS OF ENVIRONMENT MUST BE CONSIDERED.KKH/DM/BU-47 www.a2zmba.com 48. (C) IDENTIFY MAJOR CHANNEL ALTERNATIVES. CONSIDER 3 ELEMENTS OF CHANNEL ALTERNATIVES: (i) TYPES OF INTERMEDIARIES. (ii) NO. OF INTERMEDIARIES : EXCLUSIVE, SELECTIVE, INTENSIVE DISTRIBUTION. (iii) TERMS & RESPONSIBILITIES : PRICE POLICY, CONDITIONS OF SALE, TERRITORIES RIGHTS, SERVICES & RESPONSIBILITIES.KKH/DM/BU-48 www.a2zmba.com 49. (D) EVALUATE MAJOR CHANNEL ALTERNATIVES & SELECT A CHANNEL SYSTEM. CRITERIA USED FOR EVALUATION : (i) ECONOMIC CRITERIA . ESTIMATE COST OF SELLING DIFFERENT SALES VOLUME THRU’ EACH CHANNEL. (ii) CONTROL
    • (iii) ADAPTIVE CRITERIA. DEGREE OF CONTROL VARIES WITH DIFFERENT CHANNELS. THE MANUFACTURER NEEDS CHANNELS WHICH ADAPT TO CHANGING NEEDS OF MARKETS.KKH/DM/BU-49 www.a2zmba.com 50. ORGANISATIONAL PATTERNS IN MARKETING CHANNELS. TO DELIVER SERVICE OUTPUTS DESIRED BY END-USERS, DIFFERENT CHANNEL SYSTEMS ARE DEVELOPED THESE ARE: (1) CONVENTIONAL (FREE FORM) MARKETING CHANNEL CONSISTS OF INDEPENDENT FIRMS REPRESENTING MANUFACTURER, WHOLESALERS, RETAILERS. EACH SEEKS TO MAXIMISE OWN PROFITS. NO MEMBER HAS CONTROL OVER OTHER CHANNEL MEMBERS. CHANNEL MEMBERS BARGAINED OVER EACH TRANSACTION. THEY WERE UNSTABLE & COULD NOT ACHIEVE ECONOMIES AND SUPERIOR SERVICE.KKH/DM/BU-50 www.a2zmba.com 51. (2)VERTICAL INTEGRATION / VERTICAL MARKETING SYSTEM (VMS) TO IMPROVE EFFECTIVENESS & EFFICIENCY OF FREE FORM/CONVENTIONAL MKT. CHANNEL, VERTICAL MARKETING SYSTEM (VMS) HAS EMERGED. IT IS A UNIFIED SYSTEM IN WHICH ONE MEMBER, THE CHANNEL LEADER, OWNS OTHERS OR HAS SO MUCH POWER THAT OTHERS COOPERATE, BEHAVE BETTER, & HAVE LESS CONFLICT. THERE ARE TWO TYPES OF VERTICAL INTEGRATION : (A )“HARD” VERTICAL INTEGRATION (CORPORATE VMS). (B)“SOFT” VERTICAL INTEGRATION, WHICH INCLUDESKKH/DM/BU-51 www.a2zmba.com 52. (B1) ADMINISTERED VMS, & (B2) CONTRACTUAL VMS. (A) “HARD” VERTICAL INTEGRATION INCLUDES OWNERSHIP OF THE CHANNEL BY ONE FIRM THRU’ GROWTH/ACQUISITION. THIS STRATEGY IS FOLLOWED BY COMPANIES ( EX BATA & CG-TRANF& HTSG) WHEN PRODUCTION AND DISTRIBUTION ARE COMBINED UNDER SINGLE OWNERSHIP.KKH/DM/BU-52 www.a2zmba.com 53. KKH/DM/BU-53 www.a2zmba.com
    • 54. DEGREES OF VERTICAL INTEGRATION & OUTSOURCING. IN MARKETING CHANNELS, DECISIONS ON “MAKE-OR-BUY” ARE SAME AS VERTICAL (FORWARD) INTEGRATION OR OUTSOURCE.KKH/DM/BU-54 www.a2zmba.com 55. OUTSOURCING IS BUYING GOODS / SERVICES FROM OUTSIDE VENDORS. REASONS : (I) LESS COST (II) LESS CAPITAL INVESTMENT, (III) BETTER QUALITY. IN DISTRIBUTION MGT., OUTSOURCING ACTIVITIES INCLUDE INVOICING, SHIPPING, FINANCING, SELLING, WAREHOUSING, ETC. CAUTION : IF A VENDOR GETS KEY INFORMATION, IT CAN BECOME A COMPETITOR.KKH/DM/BU-55 www.a2zmba.com 56. ELECTRONIC CHANNELS IT MEANS REACHING & SELLING GOODS/SERVICES TO END-USERS ELECTRONICALLY-BY USING THE INTERNET. IT IS SIMILAR TO E-COMMERCE. ON – LINE SHOPPING IS THIRD MOST POPULAR ACTIVITY ON THE INTERNET, AFTER E- MAIL & RESEARCHING/ GETTING INFORMATION. MARKET POTENTIAL OF E-CHANNELS IS HIGH, ALTHOUGH PRESENTLY SMALL.KKH/DM/BU-56 www.a2zmba.com 57. SOME OF THE PROBLEMS OF E-CHANNEL ARE : (i) HOW VAT (VALUE ADDED TAXES) WILL BE COLLECTED FOR ON LINE SALES? (ii) ON-LINE-PAYMENTS PROBLEMS.
    • (iii) DIAL-UP SYSTEM IS SLOW FOR ACCESSING WEB-SITES. OTHER SYSTEMS LIKE ISDN, DSL, CABLE MODEM ARE COSTLY.KKH/DM/BU-57 www.a2zmba.com 58. MAJOR REASONS FOR ON-LINE SHOPPING. CAN SHOP ANY TIME. LESS TIME THAN SHOPPING AT STORES. ENJOY ON-LINE SHOPPING & EASY TO SHOP. LOWER PRICES, DON’T LIKE CROWD AT RETAIL STORES, PRODUCTS / BRANDS NOT AVAILABLE WHERE THE BUYER LIVE.KKH/DM/BU-58 www.a2zmba.com 59. MAJOR REASONS FOR NOT MAKING ON-LINE PURCHASE PRODUCT RETURNS DIFFICULT. DESIRED PRODUCT NOT AVAILABLE. NOT SURE ABOUT TIMELY DELIVERY. DON’T WANT TO PAY SHIPPING COSTS. ENJOY SHOPPING AT RETAIL STORES. TOTAL COST OF BUYING MORE.KKH/DM/BU-59 www.a2zmba.com 60. CONFLICTS DUE TO ON-LINE SALES MANUFACTURER SELLING DIRECTLY THRU’ OWN WEB SITES, OR OTHER ON-LINE RESELLER CAN FACE GOAL & DOMAIN RELATED CONFLICTS. MANAGING CONFLICTS (i) SELLING AT LIST PRICE. (WITHOUT DISCOUNTS) (EX. NIKE) (ii) SELLING DIFFERENT PRODUCTS (EX. P&G). (iii) GIVE CREDIT TO OFF-LINE RETAILERS.
    • (iv) PROMOTE, DON’T SALE.KKH/DM/BU-60 www.a2zmba.com 61. CHANNEL MANAGEMENT 1. CHANNEL CONFLICTS. 2. CHANNEL POLICIES. INTRA CHANNEL CONFLICT MEANS CONFLICTS WITHIN A CHANNEL . MULTIPLE CHANNELS HAVE CONFLICTS BETWEEN 2 OR MORE CHANNELS .KKH/DM/BU-61 www.a2zmba.com 62. SOURCES/CAUSES OF CONFLICTS. GOAL DIFFERENCES DIFFERING PERCEPTIONS. DOMAIN DIFFERENCES. GRAY/BLACK MARKETS. MANAGING CHANNEL CONFLICTS SOME CONFLICTS CAN BE CONSTRUCTIVE. ASSESS CONFLICT BY INTENSITY, FREQUENCY & IMPORTANCE OF THE ISSUE.KKH/DM/BU-62 www.a2zmba.com 63. METHODS FOR MANAGING CONFLICTS EXCHANGE OF PERSONS. COOPTATION ACHIEVING COMMON GOALS. DIPLOMACY.
    • MEDIATION. ARBITRATION.KKH/DM/BU-63 www.a2zmba.com 64. 2.0. CHANNEL POLICIES POLICIES ARE MADE TO MANAGE THE CHANNEL & EFFORTS OF MEMBERS. POLICIES DISCUSSED ARE: MARKET & CUSTOMER COVERAGE, PRICING & PRODUCT LINE. 2.1. MARKET COVERAGE POLICIES INTENSIVE DISTRIBUTION MAY INCREASE INTRABRAND COMPETITION. SELECTIVE & EXCLUSIVE DISTRIBUTION TO MINIMISE INTRABRAND & IMPROVE INTERBRAND COMPETITION & SERVICE OUTPUTS. LEGALITY VARIES IN COUNTRIES.KKH/DM/BU-64 www.a2zmba.com 65. 2.2. CUSTOMER COVERAGE POLICIES WHOM INTERMEDIARIES RESELL PREVENT GRAY MARKETS PREVENT INTRABRAND COMPETITION 2.3. PRICING POLICIES MANUFACTURER HAS PRICE LIST & DISCOUNT POLICIES. FOR INTERMEDIARIES COST OF SERVICE OUTPUTS, PROFITS, AND MARKET (COMPETITORS) NORMS ARE CONSIDERED. MAXIMUM RETAIL PRICE MAINTAINENCE (RPM) IS ADOPTED.
    • KKH/DM/BU-65 www.a2zmba.com 66. PRICE DISCRIMINATION LEGALLY ALLOWS DIFFERENT PRICES TO DIFFERENT BUYERS, AS FOLLOWS: (i) VOLUME DISCOUNT; (ii) CUSTOMER SEGMENT PRICING; (iii) IMAGE PRICING; (iv) LOCATION PRICING; (v) TIME PRICING; PREDATORY PRICING IS ILLEGAL,KKH/DM/BU-66 www.a2zmba.com 67. 2.4. PRODUCT LINE POLICIES (A) EXCLUSIVE DEALING & TERRITORY ARRANGEMENT ARE LEGAL IF SELLER’S MARKET SHARE IS NOT DOMINANT & COMPETITION IS NOT LESSENED SUBSTANTIALLY. (B) TYING AND FORCING FULL PRODUCT LINE ARE HELD BY COURTS AS ILLEGAL, IF THE ARRANGEMENT LESSONS COMPETITION SUBSTANTIALLY.KKH/DM/BU-67 www.a2zmba.com 68. A PRODUCT MIX CONSISTS OF PRODUCT LINES. EACH PRODUCT LINE MANAGER TO DECIDE WHICH PRODUCT ITEMS TO BUILD, MAINTAIN, HARVEST, OR DIVEST, BASED ON SALES, PROFITS, MARKET PROFILE ANALYSIS.KKH/DM/BU-68 www.a2zmba.com 69. CHANNELS INFORMATION SYSTEMS 1. ELEMENTS OF CHANNEL INF-SYSTEM : (i) HARDWARE & NETWORKS.
    • (ii) DATABASES. (A) DATABASE GENERATION. (B) DATABASE USE. 2. IMPACT ON SERVICE. (i) SPATIAL (SPACE RELATED) CONVENIENCE. (ii) WAITING (DELIVARY) TIME REDUCTION. (iii) STOCKING NEEDED PRODUCTS & AVOIDING STOCK-OUTS.KKH/DM/BU-69 www.a2zmba.com 70. CUSTOMERS BY USING CHANNEL INFO.SYSTEM. (BY USING DATABASES), FAST MOVING ITEMS ARE ORDERED & SLOW MOVING PRODUCTS ARE DELETED. 3. IMPACT OF INF.SYS. ON CHANNEL FLOW PERFORMANCE INF.TECHNOLOGY HAS IMPROVED PERFORMANCE OF MAJOR CHANNEL FLOWS, AS SHOWN BELOW. IT HAS INCREASED CONSUMER SATISFACTION & REDUCED COSTS.KKH/DM/BU-70 www.a2zmba.com 71. KKH/DM/BU-71 www.a2zmba.com 72. ASSESSING MARKETING CHANNEL PERFORMANCE 1. MEASURING & EVALUATING CHANNEL MEMBERS’ CONTRIBUTION TO CHANNEL PERFORMANCE. THIS IS SAME AS “MARKETING COSTS & PROFITABILITY”,DISCUSSED EARLIER. THE STEPS ARE : (i) IDENTIFY CHANNEL ACTIVITIES. (ii) CONVERT NATURAL EXPENSES TO CHANNEL ACTIVITIES/FUNCTIONS. (iii) ALLOCATE FUNCTIONAL COSTS TO VARIOUS CHANNELS. (iv) PREPARE P & L FOR EACH CHANNEL.KKH/DM/BU-72 www.a2zmba.com
    • 73. 2. RESULT OF CHANNEL PERFORMANCE . CHANNEL PERFORMANCE IS ASSESSED BY AUDITING SERVICE QUALITY. THIS IS DONE BY A QUESTIONNAIRE TO MEASURE TARGET CUSTOMERS’ PERCEPTIONS, FOCUSING ON FOLLOWING 5 FACTORS: (i) TANGIBLES. (ii) RELIABILITY. (iii) REPONSIVENESS. (iv) ASSURANCE. (v) EMPATHY.KKH/DM/BU-73 www.a2zmba.com 74. MARKETING LOGISTICS IT IS DELIVERING THE FINAL PRODUCT TO CUSTOMERS & INTERMEDIARIES, AT DESIRED TIME & LOWEST COST. IT IS ALSO CALLED “PHYSICAL DISTRIBUTION”KKH/DM/BU-74 www.a2zmba.com 75. IN DEMAND CHAIN MGT: A FIRM FIRST THINKS OF TARGET MARKET & ITS DEMAND, & THEN DESIGNS SUPPLY CHAIN BY WORKING BACKWARD. REPLACE ‘CHAIN’ WORD BY ‘NETWORK’ IS FURTHER IMPROVEMENT.KKH/DM/BU-75 www.a2zmba.com 76. MISSION OF LOGISTICS MGT IS TO PLAN & COORDINATE AND INTEGRATE THOSE ACTIVITIES THAT ARE NECESSARY TO SATISFY CUSTOMER NEEDS OF EXCELLENT SERVICE AT LOWEST COST, WITHIN THE ORGANISATION.KKH/DM/BU-76 www.a2zmba.com 77. THE SUPPLY CHAIN IS A NETWORK. KKH/DM/BU-77 www.a2zmba.com 78.
    • SUPPLY CHAIN MGT (SCM) IT IS A NETWORK OF CONNECTED & INTERDEPENDENT FIRMS COOPERATIVELY WORKING TO CONTROL, MANAGE & IMPROVE FLOW OF MATERIALS & INFORMATION FROM SUPPLIERS TO END USERS. ACTIVITIES OF SCM ARE DESIGN OF PRODUCT, PLANNING & FORECASTING, PURCHASE, PRODUCTION, ORDER PROCESSING, INVENTORY CONTROL, WAREHOUSING, MATERIAL HANDLING, CUSTOMER SERVICE. LOGISTICS SCOPE STARTS FROM MGT.OF RAW MATERIAL THRU’ OPERATIONS TO DELIVARY OF FINAL PRODUCT TO CUSTOMERS.KKH/DM/BU-78 www.a2zmba.com 79. LOGISTICS & COMPETITIVE STRATEGY. GOALS/COMPETITIVE ADVANTAGE A FIRM WANTS TO ACHIEVE DELIVERING SUPERIOR CUSTOMER SERVICE AT LOWER COST/SUPERIOR CUSTOMER VALUE. COMPETITIVE STRATEGIES ARE: PERFORM VALUE CHAIN ACTIVITIES (PORTER’S) MORE EFFICIENTLY & DIFFERENTLY THAN COMPETITORS.. USE LOGISTICS CONCEPT (& SCM) TO INTEGRATE DISTRIBUTION, OPERATIONS, PROCUREMENT WITHIN THE FIRM & NETWORK (RELATIONSHIPS) BUILDING WITH SUPPLIERS & CUSTOMERS.KKH/DM/BU-79 www.a2zmba.com 80. CUSTOMER SERVICE DIMENSION IT HAS MANY ELEMENTS WHICH ARE GROUPED IN 3 CATEGORIES: (i) PRE-TRANSACTION / PRE-SALES SERVICE. (ii) TRANSACTION / DURING-SALES SERVICE. (iii) POST-TRANSACTION / POST-SALES SERVICE. SERVICE MUST BE CUSTOMISED, TO SATISFY DIFFERENT NEEDS OF CUSTOMERS.
    • “ PERFECT ORDER” ACHIEVEMENT CAN BE USED TO MEASURE SERVICE PERFORMANCE & TO SET SERVICE STANDARDS.KKH/DM/BU-80 www.a2zmba.com 81. DEVELOPING LOGISTICS ORGANISATION & MANAGEMENT. 1. HOW TRADITIONAL ORGANISATION PROCESSES A CUSTOMER ORDER. IT IS SEQUENTIAL & TAKES A LONG TIME.KKH/DM/BU-81 www.a2zmba.com 82. 2. CONVENTIONAL (VERTICAL) ORG. STRUCTURE IS ON FUNCTIONAL BASIS.THIS ORG. IS INPUT FOCUSED & BUDGET DRIVEN. IT CANNOT INTEGRATE LOGISTICS MGT.TO ACHIEVECOMPETITIVE ADVANTAGE. KKH/DM/BU-82 www.a2zmba.com 83. 3. HENCE, HORIZONTAL ORG.SHOULD BE DEVEOPED WITH FOLLOWING CHARACTERISTICS : (A) ORGANISE AROUND PROCESSES & NOT TASKS. (B) HAVE A FLAT ORGANISATION. (C) BUILT ON MULTI FUNCTIONAL TEAMS.KKH/DM/BU-83 www.a2zmba.com 84. (A) MARKET-BASED PERFORMANCE MEASUREMENT. FIG. HORIZONTAL ORG. FOCUSKKH/DM/BU-84 www.a2zmba.com 85. SOME OF CORE PROCESSES ARE : (i) CUNSUMER DEVELOPMENT. (ii) BRAND MANAGEMENT (iii) CRM,
    • (iv) CUSTOMER SERVICEKKH/DM/BU-85 www.a2zmba.com 86. THESE PROCESSES ARE BEST MANAGED BY CROSS-FUNCTIONAL TEAMS. LEADERS ARE “INTEGRATORS”, WHO FOCUS THE TEAM ON MARKET BASED GOALS. REWARD SYSTEM SHOULD CHANGE. PRODUCTION SHOULD PRODUCE WHAT IS NEEDED BY MARKET. FOR MARKET DRIVEN LOGISTICS, CHANGE FROM VERTICAL TO HORIZONTAL IS IMPORTANT.KKH/DM/BU-86 www.a2zmba.com 87. TRANSPORTATION DECISIONS 1. CAN AFFECT CUSTOMER SATISFACTION. 2. THEREFORE SELECTION OF RIGHT TRANSPORTATION MODE IS IMPORTANT. 3. ALTERNATIVES : RAIL, AIR, TRUCK, WATERWAYS, PIPELINES, RAIL-TRUCK,TRUCK- WATER,RAIL-WATER, AIR TRUCK.KKH/DM/BU-87 www.a2zmba.com 88. 4. CRITERIA FOR SELECTION DEPENDABILITY, AVAILABILITY, SPEED, LOSS / DAMAGE, & COST. 5. MARKETERS CHOOSE FROM : PRIVATE CARRIERS. CONTRACT CARRIERS. COMMON CARRIERS.KKH/DM/BU-88 www.a2zmba.com
    • 89. WAREHOUSING DECISIONS EACH FIRM STORES FINISHED PRODUCTS UNTIL THEY ARE SOLD. PRODUCTION & COMSUMPTION CYCLES DO NOT ALWAYS MATCH. THEREFORE, FIRMS MUST DECIDE : (i) HOW MANY WARE HOUSES ARE NEEDED . (ii)THEIR LOCATION.KKH/DM/BU-89 www.a2zmba.com 90. 4. DECISION DEPENDS ON : (A) MARKET COVERAGE, (B) CUSTOMER SERVICE LEVEL, (C) DISTRIBUTION COSTS. 5. TYPES OF WAREHOUSES AVAILABLE (i) PRIVATE (COMPANY OWNED) (ii) PUBLIC (LEASED/RENTED) (iii) STORAGE (MEDIUM-LONG TERM) (iv) DISTRIBUTION CENTRES. (v) AUTOMATED.KKH/DM/BU-90 www.a2zmba.com 91. INVENTORY MANAGEMENT INVESTMENT IN INVENTORY IS HIGHEST, OUT OF TOTAL INVESTMENT IN ASSETS. INVENTORIES ARE HELD AT: PRODUCTION, DISTRIBUTION, RETAIL LEVELS.
    • INVENTORY COST RISES AT FASTER RATE AS CUSTOMER SERVICE LEVEL COMES CLOSER TO 100%. A FIRM’S OBJECTIVE : SUPERIOR CUSTOMER SERVICE AT LOWER COST.KKH/DM/BU-91 www.a2zmba.com 92. 5. INVENTORY DECISIONS ARE : (A) WHEN TO ORDER? (B) HOW MUCH TO ORDER?KKH/DM/BU-92 www.a2zmba.com 93. MARKETING LOGISTICS COST AND PERFORMANCE MARKETING LOGISTICS/PHYSICAL DISTRIBUTION (PD) COST, P, IS AS FOLLOWS: P = F+W+I+LS F = FREIGHT/TRANSPORTATION COST. W = WAREHOUSE COST. I = INVENTORY COST. LS = COST OF LOST SALES, DUE TO DELAY IN DELIVARY.KKH/DM/BU-93 www.a2zmba.com 94. 2. TWO APPROACHES FOR PERFORMANCE MEASUREMENT . (A) MINIMISE TOTAL COST OF P.D. (P). (B) RETURN ON INVESTMENTS (ROI).KKH/DM/BU-94 www.a2zmba.com 95. MATERIAL HANDLING (M.H.)
    • OBJECTIVES : TO INCREASE USABLE CAPACITY OF THE WAREHOUSE AND TO IMPROVE OPERATING EFFICIENCY. GUIDELINES/PRINCIPLES OF MATERIAL HANDLING. OPTIMISE MATERIALS FLOW. SIMPLIFY BY REDUCING, ELIMINATING, COMBINING MOVEMENTS. USE GRAVITY PRINCIPLE.KKH/DM/BU-95 www.a2zmba.com 96. MAKE OPTIMUM USE OF BUILDING SPACE. SELECT RIGHT M.H.EQUIPMENT. STANDARDISE M.H. METHODS & SIZES/TYPES OF EQUIPMENT. ADOPT SAFETY PRINCIPLE.KKH/DM/BU-96 www.a2zmba.com 97. BENCHMARKING MEANING : STUDYING “WORLD-CLASS PERFORMERS” & ADOPTING “BEST PRACTICES”, OR STUDYING “BEST PRACTICE COMPANIES” TO IMPROVE PERFORMANCE. INITIALLY BENCH MARKING WAS FOCUSED ON COMPETITORS, BUT NOW IT IS FOCUSED ON TOP PERFORMING FIRMS, REGARDLESS OF THEIR INDUSTRY.KKH/DM/BU-97 www.a2zmba.com 98. 3. STEPS INVOLVED IN BENCHMARKING (i) DECIDE WHICH FUNCTIONS TO BENCHMARK. (ii) IDENTIFY KEY PERFORMANCE VARIABLES. (iii) IDENTIFY BEST IN CLASS COMPANIES. (iv) MEASURE PERFORMANCE OF THESE FIRMS. (v) MEASURE THE COMPANY’S PERFORMANCE.
    • (vi) SPECIFY ACTION PLAN TO CLOSE THE GAP.(vii) IMPLEMENT ACTION PLAN.(viii) MONITOR RESULTS.FOR SR.NO. (iii), ASK CUSTOMERS, SUPPLIERS, DISTRIBUTORS, MGT. CONSULTINGFIRMS.