Industrial / Consumer Product Channels, Marketing Channels, Distribution Channel, Marketing Channel, Vertical / Corporate / Contractual / Administered / Horizontal / Hybrid Marketing Systems, Distribution strategies

1. International Marketing
Module VI

2.  A distribution channel is the route taken by product from the
producer to the ultimate customer.
 A distribution channel is a system of relationships existing
among businesses that participate in the process of buying &
selling the products

3.  Middlemen
 Any intermediary between producer & customer
 Agent
 Intermediary with legal authority to market goods & services and to
perform other functions on the behalf of producer is called agent
 Wholesaler
 Organizations who buy from producers & sell to retailers

4.  Retailer
 As the last link in many marketing channels, retailers sell directly
to final customers. They produce goods from wholesaler &
sometimes from the producer
 Distributor
 Distributor is the general term used for the large stockiest of any
product, & who use to serve the needs of other intermediaries.

5. Manufacturer Manufacturer Manufacturer Manufacturer
Consumer Consumer Consumer Consumer
Retailer Retailer Retailer
Wholesaler Wholesaler
Agents
0 Level
Channel
1 Level
Channel
2 Level
Channel
3 Level
Channel

6. Manufacturer Manufacturer Manufacturer Manufacturer
Industrial
Buyer
Industrial
Buyer
Industrial
Buyer
Industrial
Buyer
Industrial
Distributor
Industrial
Distributor
AgentsAgents

7.  Transfer of Title
 Financing
 Exchange of Information
 Demand Forecasting
 Sales Promotion
 Market Expansion
 Physical Distribution

8.  Channel Objective
 Convenience to Consumer
 Product Characteristics
 Company Factors
 Competition
 Product life cycle stage
 Intensity of Market Coverage
 Intensive
 Selective
 Exclusive

9.  Channel Terms & Conditions
 Price policy & trade margins
 Payment terms
 Territorial demarcation

10. 13-10
 Factors influencing Marketing Channel
Strategies
Characteristics of
Short Channels
Characteristics of Long
Channels
Market
factors
Business users Consumers
Geographically concentrated Geographically diverse
Extensive technical
knowledge and regular
servicing required
Little technical knowledge and
regular servicing not required
Large orders Small orders
Product
factors
Perishable Durable
Complex Standardized
Expensive Inexpensive

11. 13-11
Characteristics of
Short Channels
Characteristics of
Long Channels
Producer
factors
Manufacturer has adequate
resources to perform
channel functions
Manufacturer lacks adequate
resources to perform
channel functions
Broad product line Limited product line
Channel control important Channel control not
important
Competitive
factors
Manufacturing feels
satisfied with marketing
intermediaries’ performance
in promoting products
Manufacturer feels
dissatisfied with marketing
intermediaries’ performance
in promoting products

12.  Vertical Marketing Systems (VMS)
consists of producers, wholesalers, and
retailers acting as a unified system - that
seek to maximize profits for the whole
channel.
 Here, one channel members owns the
others, has contracts with them or use so
much power that they all cooperate.
 Such systems occur to control channel
behaviour and manage channel conflict.

13. Corporate
Common Ownership at Different
Levels of the Channel
Corporate
Common Ownership at Different
Levels of the Channel
Contractual
Contractual Agreement Among
Channel Members
Contractual
Contractual Agreement Among
Channel Members
Administered
Leadership is Assumed by One or
a Few Dominant Members
Administered
Leadership is Assumed by One or
a Few Dominant Members
Greater
Lesser
Degree
of
Direct
Control
Degree
of
Direct
Control

14.  In a corporate VMS, production and distribution stages are combined
under single ownership, in order to manage cooperation and conflict
management.
 . Bata markets its products through its own chain of distributors.

15.  A contractual VMS consists of independent
firms at different levels of production and
distribution who join together through
contracts to obtain more economies or
sales impact than each could achieve
alone.
 Automobile Sector

16.  A vertical marketing system that coordinates
production and distribution stages, not through
common ownership or contractual ties, but
through the size and power of one of the parties
 e.g. Procter & Gamble, Campbell Soup (or
retailers like Wal-Mart, Toys `R` Us) are very
strong that they can command special displays,
shelf space, promotions and prices form the other
parties.

17.  HMS occurs when two or more related or
unrelated companies work together to exploit
marketing opportunities.
E.g. Coca-Cola and Nestle formed a joint
venture to market ready-to-drink coffee and
tea worldwide. Coke provided worldwide
experince in marketing and distribution
beverages and Nestle contributed two
established brand names - Nescafe and
Nestea

18.  Hybrid marketing systems is also called
multi channel distribution systems where the
company uses several marketing channels
(e.g. direct mail - telemarketing, retailers,
distributors, dealers, own sales force) to
sell its products to different customer
segments.
 E.g. IBM uses its own sales force + IBM
direct which is the catalogue and
telemarketing operation of IBM +
independent IBM dealers + IBM dealers for
business segments + large retailers like
Wal-Mart.

19. Direct shipment
 Items shipped from the supplier to retail store
without going through distribution centers
Warehousing
 The classical strategy
Cross-docking
 Items are distributed continuously from suppliers
through warehouses to customers
 However, they are kept at the warehouse for only
8 to 12 hours

20.  Physical distribution is the actual handling & moving of goods
within individual firms along channel systems.
 Physical distribution involves actual movement of goods after
they are produced & before they are consumed

21.  Order processing decision
 Transportation decision
 Storage decision
 Inventory control decision

22. The more developed countries have more levels
of distribution, more specially stores and
supermarkets, more department stores and more
stores in rural areas.
The manufacturer-wholesaler-retailer functions
become separated with increasing economic
development
The number of small store declines and the size of
the average store increases with increasing
development

23. 23
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