This document discusses strategies for managing distribution channels and supply chain management. It covers topics such as the strategic role of distribution, types of distribution channels, factors that influence channel structure choices, managing channel relationships, and initiatives to improve supply chain efficiency through approaches like Efficient Consumer Response programs. Samsung is provided as an example of a company that implemented a strategy of focusing on higher-end retail channels and product lines to build its brand image and competitiveness.

1. 10-1
Chapter Ten
Value Chain
Strategy
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

2. 10-2
Value Chain
Strategy
 Strategic role of distribution
 Channel of distribution
strategy
 Managing the channel
 International channels
 Supply chain management
issues

3. 10-3
Strategic Role of
Distribution
Distribution functions
- buying and selling activities
- product assembly
- transportation
- financing
- processing and storage
- advertising and sales promotion
- pricing
- reduction of risk
- personal selling
- communications
- servicing and repairs
Channels for Services
Direct distribution by
manufacturers

4. 10-4
Marketing
Channels
Manufacturers/producers
Consumers and organizational end users
Agents/brokers
Wholesalers/
distributors
Retailers Retailers

5. 10-5
Illustrative Example: Samsung
• Goal of moving from cheap imitative
electronics products to a cool brand
• Feature-packed products
• Products removed from shelves of Wal-Mart
and Target and positioned with higher-end
chains like Best Buy and Circuit City
• Samsung competes through hardware
innovation, product customization and speed
• Samsung sells only higher-end goods and
resists pressures towards marketing low-price
products
• Strategy is implemented in part through
supply chain and distribution choices

6. 10-6
Distribution by Manufacturers
 Manufacturers have three
distribution alternatives:
– Direct distribution is necessary
– Use of intermediaries is
necessary
– Both direct and intermediary
contact are feasible

7. 10-7
Distribution
by the
manufacturer
Opportunity
for
competitive
advantage
Supporting
services are
required
Rapidly changing
market environment
Extensive
purchasing
process
Early stages of
product life cycle
Complex product
application
Profit margins
adequate to support
distribution
organization
Complete line
of products
Purchases
are
large and
infrequent
Small number of
geographically
concentrated
buyers
Factors Favoring Distribution by
Manufacturer

8. 10-8
Illustrative Example: Retail
Initiatives by Manufacturers
• Apple Computer
– To educate consumers about computers and music
players
• Sony Electronics, palmOne
– Reinforce brands with affluent consumers and
better understand market trends
• Driving forces are market access and market
learning

9. 10-9
Channel of Distribution
Strategy
Types of distribution
channel
Distribution intensity
Selecting the
channel strategy
Strategies at
different
channel levels

10. 10-10
Steps in Channel Strategy
Selection
(1) Type of channel arrangement
(3) Selection of a channel configuration
Administ
ered
Intensive Exclusiv
e
Selective
(2) Desired intensity of
distribution
ContractualOwnership
Conventional Vertically coordinated

11. 10-11
Distribution Intensity
Illustrations
Trading Area
A B C
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Exclusive
distribution
Selective
distribution
Intensive
distribution
Illustrations
Cadillac automobiles
Ethan Allen furniture
Revlon cosmetics
Caterpillar equipment
Estée Lauder cosmetics
Timex watches

12. 10-12
Managing the Channel
Channel leadership
Management structure and systems
Physical distribution management
Channel relationships
Conflict resolution
Channel performance
Legal and ethical considerations

13. 10-13
Strategic Value Chain
Management
 Supply chain management
– Efficient Consumer Response
program
– Lean supply chains
– Agile supply chains
 Impact of supply chain strategy on
marketing
 E-business models
 Retailer and distributor power
 Strategic flexibility and change

14. 10-14
Efficient Consumer Response
 Traditional channel problems
– Forward buying and diverting
– Excessive inventories
– Damages and unsaleable goods
– Complex deals and deductions
– Too many promotions and coupons
– Too many new products
 Efficient Consumer Response
– Category management
– “Value” pricing replaces promotions
– Continuous replenishment and cross-docking
– Electronic data interchange
– New performance measures
– New organizational processes and structures
– Internet-based network for supplier-buyer
trading