Caterpillar has dominated the global construction and mining equipment market with over 35% market share. They attribute their success to high quality products, manufacturing flexibility, innovation, and responsiveness to customer needs. However, their most important competitive advantage is their distribution system of independent dealers that build strong customer relationships. Caterpillar partners closely with dealers to provide value to customers through dealer profitability, support, communication, monitoring performance, and personal relationships. This mutually beneficial distribution system is a major source of Caterpillar's competitive advantage and is built on trust and shared goals between the company and its dealers.

1. MARKETING CHANNELS &
SUPPLY CHAIN MANAGEMENT
CHAPTER 11

3. CATERPILLAR ®
• They have dominated the world’s market for
heavy construction and mining equipment.
• Their yellow tractors, crawlers, loaders and
trucks are the most common sight in many
construction area.
• They have captured 35% of the world’s market
share, selling more than 300 products to 200
countries.

4. CATERPILLAR ®
Many factors contribute to their success:
• High quality products
• Flexible and efficient manufacturing
• Innovative products
• An organization that is responsive to the
customer’s needs.
• There prices may be high but they provide
high quality, trouble free operation for long
term value

5. CATERPILLAR ®
• Yet those are not the reasons of Caterpillar’s
dominance. It is through their dealers who
provide and build strong customer
relationships in their communities.
• Caterpillar and its dealers work in close
harmony to find better ways to bring value to
customers. The entire system is linked by a
single worldwide computer network.

6. CATERPILLAR ®
Caterpillar has provided strong partnership with its dealers:
• Dealer Profitability: Share the gain as well as the pain.
• Extraordinary Dealer Support: Fast distribution and
problem solving.
• Communications: Frequently, fully and honestly
• Dealer Performance: Making sure that the dealers are
doing well through monitoring of sales, position, service
quality, financial capabilities, etc.
• Personal Relationships: Forming close and personal ties
with its dealers.

7. CATERPILLAR ®
Caterpillar’s superb distribution system serves as a
major source of competitive advantage. The system is
built through mutual trust and shared dreams.
Caterpillar and their dealers shared pride as they
achieve together.
It is more than financial arrangement but feeling great
through doing what is good for the world because they
are part of an organization that makes, sells, and tends
to the machine that help make the world work.

8. DISTRIBUTION CHANNEL
It is a set of interdependent organizations
involved in the process of making a product or
service available for use of consumption by the
consumer or business user.

9. WHY ARE MARKETING
INTERMEDIARIES USED?
• Greater efficiency in making goods available to
the target market
• Offer the target market communication,
experience, specialization and scale of operations
more than it can achieve with its own company.
• Reduce the amount of work.
• Transform products made by producers into the
assortments wanted by consumers.
• Can buy large quantities and then break them
into assortments for consumers.
• They play a good role in the demand and supply.

10. HOW A DISTRIBUTOR REDUCE THE
NUMBER OF CHANNEL TRANSACTIONS

11. DISTRIBUTION CHANNEL
FUNCTIONS
 Information: gathering and distributing market
research and intelligence
 Promotion: developing and spreading persuasive
communication about an offer.
 Contact: finding and communicating with buyers.
 Matching: shaping and fitting the offer to the buyer’s
needs, including activities such as manufacturing,
grading, assembling and packaging.

12. DISTRIBUTION CHANNEL
FUNCTIONS
 Negotiation: reaching agreed price and other terms
of the offer.
 Physical Distribution: transporting and storing
goods
 Financing: use funds to cover the cost of channel
work
 Risk Taking: taking the risk of carrying out the
channel work.

13. NUMBER OF CHANNEL LEVELS
• Channel Level – a layer of intermediaries that
performs some work in bringing the product
and its ownership closer to the final buyer.
• Direct Marketing Channel – a marketing
channel that has no intermediary levels.
• Indirect Marketing Channel – channel
containing one or more intermediary levels.

14. CONSUMER & BUSINESS
MARKETING CHANNELS

15. CONSUMER & BUSINESS
MARKETING CHANNELS
All institutions in the channel are connected by several
types of flows:
 Physical flow of products
 Flow of ownership
 Payment flow
 Information flow
 Promotion flow

16. CHANNEL BEHAVIOR AND
ORGANIZATION
 Distribution channels are more than simple collection
of firms tied together for their common good.
 CHANNEL DISTRIBUTION
 A distribution channel are firms banded together for
their common good.
 Each member is dependent on other.

17. CHANNEL CONFLICT
• Channel Conflict – disagreement among
marketing channel members on goals and
roles – who should do what and for what
rewards.
• Horizontal Conflict – conflict among forms at
the same level of the channel
• Vertical Conflict – conflict between different
levels of the same channel – the most
common of all.

18. CONVENTIONAL DISTRIBUTION
CHANNEL
 Conventional Distribution Channel – a channel
consisting of one or more independent producers,
wholesaler, and retailers, each a separate business
seeking to maximize its own profits even at the
expense of profits for the system as a whole.

19. VERTICAL MARKETING SYSTEMS
 Vertical Marketing System (VMS) – a distribution
channel structure in which producers, wholesalers,
and retailers act as unified system.
1. Corporate
2. Contractual
3. Administered

20. CMC vs. VMS

21. VERTICAL MARKETING SYSTEMS
1. Corporate VMS – a VMS that combines
successive stages of production and
distribution under single ownership –
channel ownership is established through
common ownership.

22. VERTICAL MARKETING SYSTEMS
2. Contractual VMS – a VMS in which
independent firms at different levels of
production and distribution join together
through contracts to obtain more economies
or sales impact than they could achieve
alone.
• Wholesaler-sponsored Voluntary Chains
• Retailer Cooperatives

23. VERTICAL MARKETING SYSTEMS
• Franchise Organization – a contractual VMS
in which a channel member, called a
franchiser, links several stages in the
production-distribution process.

24. VERTICAL MARKETING SYSTEMS
3. Administered VMS – a VMS that coordinates
successive stages of production and distribution, not
through common ownership or contractual ties, but
through the size and power of one of the parties.

25. HORIZONTAL MARKETING
SYSTEMS
 A channel arrangement where two or more companies
at one level join together to follow a new marketing
opportunity.
 McDonalds and Heinz

26. HYBRID MARKETING SYSTEMS
 Multi-channel distribution system in which a single
firm sets up two or more marketing channels to reach
one or more customer segments.

27. HYBRID MARKETING SYSTEMS
PRODUCERS
DISTRIBUTORS DEALERS
RETAILERS
CONSUMERS 1
CONSUMERS 2
CONSUMERS 3
CONSUMERS 4

28. CHANGING CHANNEL
ORGANIZATION
 Disintermediation – the displacement of traditional
resellers from a marketing channel by radical new
types of intermediaries.

29. CHANNEL DESIGN DECISIONS
 Analyzing Consumer Service Needs

30. CHANNEL DESIGN DECISIONS
 Setting Channel Objectives and Constraints

31. CHANNEL DESIGN DECISIONS
• Identifying Major Alternatives
1. Types of Intermediaries
 Company’s Sales Force
 Manufacturer’s Agency
 Industrial Distributors

32. CHANNEL DESIGN DECISIONS
• Identifying Major Alternatives
2. Types of Intermediaries
 Intensive Distribution – stocking the product in as many
outlets as possible.
 Exclusive Distribution – giving a limited number of dealers
the exclusive right to distribute the company’s products in
their territories.
 Selective Distribution – the use of more than one but fewer
than all, of the intermediaries who are willing to carry the
company’s products.

33. MARKETING LOGISTICS AND SUPPLY
CHAIN MANAGEMENT
• Marketing Logistics – the task of involving in
planning, implementing and controlling the
physical flow of materials, final goods, and
related information from points of origin to
points of consumption to meet customer
requirement and a profit.
• Supply Chain Management – managing value
added flows of materials, final goods and related
information between suppliers, the company,
resellers and final buyers.

34. SUPPLY CHAIN MANAGEMENT
• Outbound Distribution – moving products
from the factory to resellers and finally to
customers.
• Inbound Distribution – moving products and
materials from suppliers to factory.
• Reverse Distribution – moving broken,
unwanted or excess products returned from
consumers to resellers.

35. SUPPLY CHAIN MANAGEMENT
SUPPLIERS COMPANY RESELLERS CONSUMERS
INBOUND
LOGISTICS
OUTBOUND
LOGISTICS

36. MAJOR LOGISTICS FUNCTIONS
• Order Processing – through salespeople, mail,
email, telephone, internet, intranet and
extranet platforms.
• Warehousing
 How many warehouses needed
 What types of warehouse
 Storage warehouse or distribution centers
 Automated warehouse

37. • Warehousing
 Distribution Centers – a large, highly automated warehouse
designed to received goods from various plants and suppliers,
take orders, fill them efficiently, and deliver goods to
customers as quickly as possible.
• Inventory Management
 Just in Time Logistics System
MAJOR LOGISTICS FUNCTIONS

38. TRANSPORTATION SYSTEMS
TRUCKS

39. TRANSPORTATION SYSTEMS
RAILROADS

40. TRANSPORTATION SYSTEMS
WATER
CARRIERS

41. TRANSPORTATION SYSTEMS
AIR CARRIERS

42. TRANSPORTATION SYSTEMS
PIPELINES

43. TRANSPORTATION SYSTEMS
• Intermodal Transportation – combining two
or more modes of transportation.
PIGGY BACK

44. TRANSPORTATION SYSTEMS
FISHY BACK

45. TRANSPORTATION SYSTEMS
TRAINSHIP

46. TRANSPORTATION SYSTEMS
AIR TRUCK

47. TRANSPORTATION SYSTEMS
AIRCRAFT
CARRIERS

48. THIRD PARTY LOGISTICS
• An independent logistics provider that
performs any of all the functions required to
gets its clients’ product to market.

50. SEMI-FINAL EXAMINATION
• 1 ASSIGNMENT
• 1 ACTIVITY
• NO QUIZZES
• SEPT. 24, 2015
• 25 MATCHING TYPE
• 30 DISCUSSION
• 15 IDENTIFICATION/ENUMERATION
• TAKE NOTE THERE ARE NO MORE SPECIAL
EXAM AFTER FINALS.