Place mix

Meaning of place mix or distribution mix
• Place mix includes various activities the company undertakes to make the product accessible and
available to target customers. The basic objective of place mix is to move products form the point of
origin (factory) to the point of consumption (customer hand)
• Place mix or distribution mix is the set of activities and decision ensuring right products to right
customers in right time and price at right place in a right manner.
• To ensure right products to right customers in right time and price at right place in a right manner,
business organization perform two set of activities- managing channel members and managing
logistics activities. Therefore, distribution channels and physical distribution are two elements or
decision criteria of place mix.
• place mix consists of decisions regarding channel members and physical distribution. It is essential to
perform these activities to ensure right products to right customers in right time and price at right
place in a right manner so that various types of utilities would be created in the field of customer.
• It plays a very important role in ownership transfer of products. It is crucial function of marketing.
Distribution creates time utility, place utility, ownership utility of products. Management of product
storing creates time utility, whereas exchange creates ownership utility. Management of goods transport
system creates place utility. Distribution satisfied customers by providing right product at right place
at right time. 2

Objectives of Distribution
1. Movement of goods:- The major objective of distribution is to effectively move the product from the
place of production to the place of consumption through the marketing channel system. Products move
from manufacture to wholesaler to retailer and finally moved to consumer from retailer.
2. Safety of product:- Distribution facilities safety of the product. Distribution makes the channel
members responsible to the proper storage and handling of the product, so that the product reaches to
the buyer in proper condition.
3. Cost reduction:- Distribution involves several channel members. They assist in delivering goods and
services to the end consumer. So, manufacture do not need to reach to the door step of every consumer.
Distribution helps in minimizing the cost of manufacture's transportation and travelling.
4. Availability of goods:- Effective distribution channels facilities easy availability of goods. Distribution
channel also helps consumers to assort the required products. Any product demanded by consumers
becomes available at any place and any time. Different products in different countries and continents are
assorted at the same place by channel members. It ensures right goods at reasonable price at right place.
5. Customer satisfaction:- Distribution is often termed as other halves of marketing. It fulfill the
customer's satisfaction by delivering right product at the right place at right time. Thus, distribution
channel sets objectives to render crucial services of regular supply of goods.
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Objectives of Distribution cont…
6. Transfer of product ownership: Actual exchange process takes place only when products reach to the
end users. A channel members has to push the product to the end consumer. So, the distribution function
also fulfills the process of ownership transfer.
7. Promotion of goods and services: Effectives distribution channel also helps in promoting goods and
services. Channel members reach to the target market taking goods from production center. After
reaching target market, the distributor gets chances to demonstrate the goods to customers. They also
promote the producer or services of the producer.
8. Regular Supply of goods:- An effective distribution system makes goods available at a right place,
regularly at a reasonable price. There is no room of shortage and black market. Thus, customers do not
feel the lack of goods in the market place.
9. Employment and occupation:- Distribution is one of the important task of marketing. This provides
jobs and employment to many persons. It plays important role in providing employment opportunities to
the people. Many persons get employment by involving in wholesale, business, retail business, agents,
intermediaries etc.
10.Financing:- Several intermediaries are involved in distribution function. They manage financial resources
themselves for distribution. Besides this, they also manage financial resources for extra warehouse and
stocks. So, the producer need not make financial arrangement for distribution and creating distribution4

Methods of distribution
• There are several methods for distribution. They can be categorized into
two groups: direct and indirect. When choosing the most cost-effective
distribution method, be sure to consider costs associated with direct
distribution as well as indirect distribution.
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1. Direct Methods
• With a direct distribution method, the producer reaches the intended final users of their product by distributing the
product directly to the consumers. That means there are no intermediaries involved in the distribution process that
takes ownership of the product. So in direct method, producer himself or his sales person directly distribute goods to
the final users without using middlemen.
i. Direct mail: Direct mail is unsolicited request sent to prospective customers through the post. It is one of the most
popular methods of direct distribution. It encompasses a wide variety of marketing material mailers, such as envelop
mailer, newspaper, sales letters, catalogues, brochure, postcards, and so on. This is the most common methods of
direct distributionmarketing. Under this method, direct mails are sent to the consumers' address.
ii. Telemarketing: Telemarketing is another methods of direct distributionmarketing in which seller asks and
motivates prospective customers to buy products over the phone. It is using the telephone to sell directly to
customers. When seller is conducting a telephone solicitation he should first introduce himself then offer an incentive
in solving a problem that he know exists. Telemarketing is popularly known as telesales or inside sales. In the words
of Kotler and Armstrong, telephone marketing - using the telephone to sell directly to customers and business
customer- has become the major direct marketing communication tool.
iii.E-mail: Another direct methods of distribution is e-mail. It is an effective way to stay connected with customers
through e-mail. Anyone can easily and quickly reach target markets through e-mail. E-mail marketing enriches
business communication. It targets specific key markets. It is cost-effective and environmentally friendly. Through
effectively use of email marketing, you can retain current customers while also targeting new markets. Email
marketing has become an essential tool for business ever since the introduction of the internet to the world. Anyone
can see hundreds of e-mail in your inbox and spam folder. They motivate us to buy something, what they offer.6

1. Direct Methods cont..
iv. On-line sales: An on-line sale (also known as I-marketing, web-marketing, e-marketing or e-commerce) is the method of
distributionmarketing of products through internet. It is global computer network that require internet. A company can sell
its products and receives its bill promptly through internet. It provides wide selection facility of products to the buyers. It
also provides reliable, complete, and up-to-date information. Internet marketing is a growing business mainly because more
and more people use the internet every day. Popular search engines such as Google and yahoo have been able to capitalize on
this new wave of advertising. It ties together creative and technical aspects of internet, including design, development,
advertising, promotion and sales.
v. Direct response: Another methods of direct distributionmarketing is direct response. In this method, the customer
responds to the marketing message directly. For example, prospects view a television presentation or radio message or
magazines ad of a product offering and they can make a purchase products, or receive discounts on products are techniques
that have been very successfully in increasing sales.
vi. Personal selling: Personal selling is another important method of direct distribution. Marketing personal sales calls on
prospects is another technique of direct marketing. It is the oldest and the most popular methods of selling goods and
services. It involves face-to-face communication between the seller and the potential buyer. It involves direct and personal
contact between the seller and hisher representation with the prospective buyer for persuading the latter to buy the seller's
product or service. It is beneficial to both the seller and the buyer. It increases the sales and profit for the seller and helps to
satisfy the wants of consumers. The seller or hisher representation can reach to the potential buyers.
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2. Indirect methods
• In indirect method, producer reaches to the final users with the help of intermediaries. They use marketing intermediaries for the
distribution of their product in the market. Agent, wholesaler, and retailer are the major methods of indirect distribution. They play
an important role in distribution management.
i. Agents: Company can distribute its products through agents. An agents is a company's direct representative in a market and is paid
commission. Heshe is a distributor who represents buyers or sellers on a relatively permanent basis performs only a few function,
and does not take title to goods. Agent sell goods and services in commission. There are several types of agents such as manufactures;
agents, selling agents, purchasing agents, and commission houses. Most businesses hire agents to advertise or promote their products
and services, usually with a focus on increasing sales.
ii. Wholesalers: Company can distribute its products through wholesaler. A wholesaler is a persona who performs wholesale trade.
Heshe works as a bridge between producers and retailers. Wholesalers have their own warehouse, means of transport, and modern
communication devices. Wholesaling refer to the trade in which merchant buys large quantity of goods from the producer and sells
them to the retailers or industrial users but not to ultimate consumers. Warehousing, quick delivery, financing, order collection, risk
bearing, sale promotion, providing advice, market information, and efficiency in distribution are the major roles of wholesalers.
iii.Retail outlets: Company can distribute its products through retail outlets. A retail outlet is a store that sells smaller quantities of
products to the ultimate consumers. A retail outlet may refer to one of two things. The first is a store that simply sells the store from a
wholesaler, or it may be manufactured by the company that owns the store. The second type of retail outlet is a store that is opened by
the manufacture, often near the factory, for the purposes of selling over-produced or irregular merchandise at discount prices.
Generally retail outlets are run by retailers. They perform business activities living close to the consumers. They work as a bridge to
link wholesalers and ultimate consumers. They provide different types of services to producers, wholesalers, and consumer. 8

Meaning of marketing/distribution Channel:-
Different intermediaries who are involved to distribute the goods and products from
producer to the consumer are called marketing or distribution channel.
Marketing channel is a set of practices to transfer the ownership of goods, from the
point of production to the place of consumption. In other words, products move from
producer to ultimate consumer or business users through marketing channels.
A marketing or distribution channel include agents, wholesalers, retailers, distributers,
and even the internet. It can be direct or indirect.
Thus a channel of distribution is the path or route along which goods move from
producer or manufacturers to ultimate consumers or industrial users. Marketing firms
use direct channels considering the nature, size, and price of the product.
Manufacturers supply their product to the consumers themselves under direct
channels whereas products are distributed through marketing intermediaries under
indirect channels. Agents, wholesalers and retailers act as marketing intermediaries
for the distribution of consumer goods.
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Channel structure for consumer Goods
1. Producer -consumer (Zero level channel)
• The channel in which no intermediaries exist between producer and
consumer is called producer-consumer channel. It is the shortest channel
level in the distribution channel. Since there is no intermediary at this
level, this channel is also called zero level channel or direct channel.
Service is generally marketed through this channel.
Producermanufacture can distribute their products or goods to
consumer through multiple Shop and stores. Products or goods are
distributed through sales representation mail order, Tele-marketing and
online marketing. Consumers can use credit card to pay for the producers.
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Channel structure for consumer Goods cont…
2. Producer-retailer-consumer (One level channel)
• In this one level channel, retailers or dealer exists between producer
and consumer. Since there is only one middleman therefore this level of
channel as one level distribution channel. Manufacture supply the goods
directly to the retailer avoiding other middleman like agent and
wholesaler. Using this one level channel, producers can reduce marketing
cost. Producers can save money that would be otherwise provided to the
middleman in the form of discount their products or goods through large
scale retail outlets such as super markets, Departmental store, discount
houses, etc.
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Producer
Consumer

3. Producer-wholesaler-retailer-consumer (Two level channel)
• The marketing intermediaries like wholesaler and retailer are involved
in this channel. Two level channels are longer than one level channel due
to the presence of wholesaler and retailer. This is therefore called the two
level channels. Most of the consumer goods reach the market through this
channel. Producer maintains contact only with wholesaler. This channel is
extensive in nature so that producer can have large volume of sales. The
products like clothes items, furniture, hardware materials, glossary
commodities, etc. are distributed by using this level of distribution
channel.
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4. Producer-agent-wholesaler-retailer-consumer (Three level
channel)
• This is the longest distribution channel for the consumer goods.
Producers generally do not like to use this channel due to its high
marketing cost and selling costs. This channel is also called three level
channel due to the presence of three different intermediaries. This
channel is substantially used in international marketing where the
marketers face distance, language and culture differences while dealing
with local wholesaler in the international market. In these circumstances,
manufactures use local agent to deal with local wholesaler and perform
sales transaction.
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Producer Agent Wholesaler Retailer Consumer

Channel structure for Industrial Goods
• The goods that are used by the industrial users for further processing or for providing services to
their clients are called industrial products or goods. Different types of distribution channels are
used for the distribution of industrial products or goods considering the nature, design, size and
price of the product. Products, agents, industrial distribution and industrial users constitute the
distribution channel for industrial products or goods. Industrial products or goods have four
alternative channel designs from zero level to level two channel.
1. Producer-industrial users (Zero level channel)
This channel has no middleman. This channel is called direct channel or zero level channel. Under
this channel, industrial users buy heavy machines and raw materials directly from producers.
Producer themselves find out the industrial users, makes contract with them and supply the
products or goods as per contract. Producer can reduce selling costs considerably applying these
channels. Zero level channels are used to buy capital items like installation, raw material and
highly priced fixed assets. The distribution costs are kept lowest as possible by the industry. The
experienced salesperson can use the direct channel for purchasing the items for their
organization.
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Producer Industrial user

Channel structure for Industrial Goods cont…
2. Producer-Industrial distributor-industrial users (One level channel)
 In This level of channel the industry uses only one intermediary, i.e. industrial
distributor for purchasing the goods or materials. Manufacture can use the
experienced sales representative in a channel level that have the specialization
in the product line. Producers of operating supplies and small accessory
equipment frequently use industrial distributors to reach their market.
Industrial distributors provide regular maintenance and servicing to assets,
capital and accessory equipment. Manufacturers of building and construction
materials like cement, rods, furniture, etc. heavy use of industrial distributors.
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Producer
Industrial
Distributor
Industrial User

3. Producer-Industrial agents-Industrial users (One level channel)
 In one level channel, the organization uses one intermediary, i.e.
industrial agent. Producer uses this channel less frequently. Producers
without their own sales departments find this channel desirable. Also a
company that wants to introduce a new product or enter a new market
may prefer to use agents to its own sales force. Producers use agent to
execute negotiation in the international markets. They use agents to
identify and contact the buyers for heavy items.
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Producer Industrial Agent Industrial User

4. Producer-Industrial agents-Industrial distributor-Industrial users
(Two level channel)
This is the longest channel for the industrial products or goods. This channel consists
industrial agents and industrial distributor between the industrial user and the
individual users. The industrial agent may represent the manufacturer. These
industrial agents negotiate for the sales as well as help transfer of the title. Producers
use this channel occasionally to sell the lower priced products or goods in
international markets. This channel is also used for the extensive distribution of goods
through a large number of retail outlets. Parts of automobiles, tyres, lubricants etc. are
distributed through this channel.
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Producer
Industrial
Agent
Industrial
Distributor
Industrial User

Role of marketing intermediaries in distribution system
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Agents
An agent is a company's direct representatives in a market and is paid commission.
Different agents and brokers also perform the role of functional middlemen in
distribution channel. They perform limited functions in marketing for commission. They
make contract for purchase and sale of goods, but do not take ownership. They make
arrangements for sale and purchase remaining between producers and retailers and
other wholesalers. There are several types of agents such as manufacturer's agents,
selling agents, purchasing agents and commission house. Most business hire agents
to advertise or promote their products and services, usually with a focus on increasing
sales. They play different roles in distribution system. The role of agent are as follows.
i. Manufacturing agents deal many kinds of consumer and industrial goods, ranging
from sporting goods to heating, and air conditioning vents and ductwork
ii. Selling agents work or serve as a sales department of organization. They play a key
role in distributing textile products and coal, and to a lesser extent, apparel, food,
lumber and metal product.
iii. Purchasing agents maintain long-term relationships with buyers. They purchase for
buyers and often receive, incept, warehouse, and send products to the buyers at right
time.
iv. Commission agents keep physical control over products to be sold and sign a contract
for the goods on behalf of the producer. Commission agents do all the functions of
wholesalers expect taking the title of the goods.
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Wholesaler
• Wholesaler sell goods to retailers by purchasing huge amount from producers. In other word,
the person who performs the wholesaler trade is a wholesaler. Wholesaler works as a bridge
between producers and retailers. Such intermediaries do not produce goods nor sell to ultimate
consumers. Wholesaler take ownership by purchasing goods from producers. The work of
wholesaler, sometimes, may be done by producers or retailers. Wholesalers invest much capital
and makes arrangement for necessary warehousestoring; for storage, means of transport and
modern communication system. So, wholesaler or businessmen purchase goods in mass
quantities transport them and bear etc. Wholesaler may also provide credit facility to their
customers.
• According to Philip. Kotler:- "Wholesaling includes all activities involved in selling goods or
services to those buying for purpose of resale or business use.
• In conclusion, a person who performs wholesales trade is a wholesaler. He works as bridge
between producer and retailers. Wholesaler have their own warehouse, means of transport and
modern communication devices. Wholesaling refers to the trade in which merchant buys large
quantity of goods from the producer and sells them to the retailers or industrial users but not
to ultimate consumers.
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Wholesaler and their roles:-
Role of wholesaler in Distribution channel
i. Bulk buying: It will be impossible to sell the manufacture product to the consumer in small quantity by manufacture
themselves. Wholesalers buy products in huge quantity from producers. Then the products are transferred to
retailers, government offices and organizations in small knowledgeable about market, they can reach to the scattered
market smoothly.
ii. Warehousing: Wholesalers are the warehouse Centre for manufacture. They buy bulk from manufacture and also
make effective arrangement for storing the products. Until the goods are not sold to retailers, they should be
properly stored in warehouse. Such storage arrangement keeps the goods safe. Besides, it also stabilizes market
price keeping balance in demand and supply.
iii.Financing: Wholesalers are financially strong. Whenever the manufacture are in financial crisis, they can get
financial assistance from wholesalers. They help producers by purchasing goods in huge quantity and paying bills
immediately.
iv. Order collection: Manufacture cannot reach to all retailers and end consumers. Wholesalers can somehow reach to
retailer and end consumers and can find out their needs and wants. Wholesalers help in collecting the order of
customers and assist manufacture in production actively. Demands or orders should be collected for delivering the
goods of different qualities and features.
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Wholesaler and their roles cont..
v. Risk bearing: Wholesalers take ownership of the purchased product. Wholesalers are liable for any kind of losses like price fall,
changing fashion, outdated technology. Similarly, there also remains a possibility of damage, fire caught, robbery, stealing etc. of
the stored goods. The wholesalers have to bear such risks. So, the wholesalers should also try to minimize such risks.
vi. Promotion: Wholesalers remain in contact with government bodies, organizations and many other retailers. So, they believe the
wholesalers. They purchase different goods from them believing in the wholesalers. Besides this, the wholesalers are also
involved in advertisement with the producers and retailers. They give suggestion to retailers about exhibition and decoration. If
needed, they also knows wants, interests, needs and desires of the consumers.
vii. Expert advisor: Wholesalers become experienced, qualified and effectives in wholesale job. Such sellers sell products through
direct contact with government organization, institution and retailers. So, they provide information about the consumer's wants
and interests to the producer. Thus, the wholesalers give valuable information as expert advisor.
viii. Market information: As wholesalers are the important parts of producers, they keep various information and records. Besides,
the wholesalers remains in close contact with retailers and markets. So, they provide information about the need of
productionproduct customers, competitors' activities, price of products, new products, new products, and environment change,
etc. They also provide retailers the important information and notices received from producers.
ix. Efficiency in distribution: Wholesalers become experienced in distribution. So, such sellers, can performs wholesale and
distribution more effectively than the producers. They quickly deliver goods to the customers of targets markets. This also cuts
down the distribution cost. The wholesalers bring effectiveness in distribution; make available the right goods, at right place, at
right time at lower cost. 23

Retailers
• A retailer is a businessperson who purchases goods from wholesalers and sells them
to ultimate consumers. The word retailer has been derived from the French word
Retail which means to sell in small quantities, rather than in gross. A retailer is a
person who purchases a variety of goods in small quantities from different wholesalers
and sells them to the ultimate consumers. Retailer is the last link in the chain of
distribution from the producer to the consumers. The act or job of retailer is retailing.
It is also known as retail trade. Normally, retailing is the ultimate stage of the
distribution processes.
• According to Condiff and Still:- A retailers is a merchant or occasionally an agent
whose main business is selling directly to the ultimate consumers.
• According to Philip Kotler:- Retailing includes all the activities involved in selling goods
or services directly to the ultimate consumers for their personal, non- business use.
• In conclusion, a retailer is a person or an institution who buy goods from wholesalers
and sells them to ultimate consumers at right place at right time for their personal use.
They also provide information about quality, utility and operation methods of the
goods or services to the consumers.
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Retailers and their role
i. Brings efficiency in distribution: Retailers brings efficiency in distribution function of marketing. They
performs distribution more effectively and efficiently than producers and wholesalers. They reduce
distribution cost and reached door to door of consumers. They solve the problems related to goods and
services.
ii. Provides market information: Retailers establish cordial relationship with consumers and remain very close
to them. So, retailers can provide information to procedures and wholesalers about the needs and wants,
priority, and requirements of the consumers. They also provide information about the preference of
consumers, activities of competitors, substitute, goods, price of substitute goods, and competitor's promotional
strategy and so on to the producers.
iii.Contacts with ultimate consumers: As the retailer sell goods to consumers, they remain in close contact with
them. They establish cordial relationships with consumers. The customers trust retailers more than the
producers and wholesalers. So, the producers and wholesalers do not need to keep direct contact with
consumers.
iv.Provides selection facility: Retailers deal several kinds of goods from their stall or showroom. They purchase
goods from wholesaler and keep them in their stall or showroom. The consumer visit their stall or showroom
to buy goods. The institutional retailer such as supermarkets, departmental stores, shopping centers, and
shopping mall provide wide selection facility to the consumers.
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Retailers and their role cont..
v. Provides before and after sale services: Retailers provide after sales services to their
consumers. For example free home delivery, money back guarantee, free servicing, free
repairing, free instruction for safe use, and so on. Services after sale is very essential to the
ultimate consumers. Thus, retailers play an important role in the distribution system.
vi. Sales of new products: Manufacture produce different types of new products and launch in
market segment. Retailer provide information to the customer about quality, feature, and
utility of these new products. On the basis of the information the customers buy new
products and services from retailers. In the absent of retailers, it becomes very difficult to get
entrance to market segment for the new products. In this way, the retailers play a vital role in
selling new product in market.
vii. Provides consumer satisfaction: Retailers provide consumer satisfaction by dealing goods
as per their needs and wants, and purchasing power. They also supply quality goods at
reasonable price. In the lack of retailers, it becomes very difficult to get such facilities for the
consumers. In this way, the retailer keep the customers always happy and satisfied.
viii. Provide home delivery: Retailers provide hone delivery services to the customers as per
their necessity. They may take nominal charges for home delivery services. This facility may
be very important in distribution system. 26

Selection of channel of distribution
or
Factors affected of channel selection
• The selection of channel of distribution is affected by the several factors
such as objectives, market, customers, product, channel, competitors and
organizational considerations.
27

1. Objective consideration
Organizational objectives are the key factors of selection of channels in the
market, objectives are related with control, coverage and cost:
i. Control: Controlling of channel structure is very difficult function in
channel of distribution. Greater degree of channel control helps to
implement his policy to the manager. Short channel of structure helps high
control power, channel control regulates the behavior of channel
participate.
ii. Coverage: Market coverage ratio depends on the organizational
objectives. If the marketer wants. Wide distribution in their product, they
should wide market coverage channel of distribution. Similarly, if they
wants coverage to selected segments they can develop exclusive
distribution system.
iii. Cost: Channel cost represented cost of distribution and discounts and
commission to channel member. Short channel needs lower channel cost
and highly physical distribution costs, similarly, long channel needs higher
channel cost and lower physical distribution costs.
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2. Marketcustomer considerations
i. Types of marketing: The role differs in different kinds of products. If
the products are industrial markets, wholesaler or manufacture play a
vital role in the market and if the consumer's market retailers play an
important in the markets.
ii. Number of consumers: The total number of consumers determines
channel structure decision. Low number of customers need short
channel of distribution and highly number of customers demand long
channel of distribution.
iii. Geographical concentration: Dispersion of customers affects channel
structure. Wide spread of customers need long channel structure.
iv. Order size: Small order size requires long channel and large order size
needed shorts channel of distribution.
v. Competition:- Selection of distribution channel by competitors directly
affect the selection of distribution channel.
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3. Product consideration:
i. Nature of product: The nature of products determines channel of
distribution. Perishable products are needed shorts or directs channel.
Durable products requires long channel of distribution.
ii. Unit value: High unit value demanded products requires short channel
and low unit value and basic needs products need long channel of
distribution.
iii. Technical products: Most of the technical products requires pre-sale,
during the sale and post sales services. Technical products are
distribution from direct channel or through dealer.
iv. Order size and weight: The order size determines on the weight of the
product. The bulky products are demanded low volume of product
because of the different supply barriers.
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4. Channelmiddleman consideration
i. Channel availability: In this competitive market, middlemen are not
interested to supply all kinds of products in the market. In the channel
selection process, marketers must analyze to interest and profit margin
of middleman to supply of the products in the market.
ii. Range of services provided: The range of services provided
determined by the products nature. The channel members are not able
to provide the desired range of services. For example the producer and
wholesaler are not willing to provide technical advice and post-sale
services.
iii. Channel attitude: Manufacture wants to supply high customer services
through low products price but wholesaler and retailer wants high
profit margin to their sales.
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5. Organizational consideration
i. Management capacity: Managerial experience and capacity cannot
works in the marketing management. The HR of sale department
requires different quantities such as attracting, presentation, selling and
after sales services activities, etc.
ii. Financial resources: Financially strong organization can manage and
control channel structure by themselves. They can supply through direct
with their own store or sale houses. But financially weak organizations
cannot control the channel members by them.
iii. Company's goodwill:Goodwill is reputation in the eye of customers. It
takes long time to earn goodwill. A reputed company sells its products
directly without any middlemen. But new company or the company is
unknown in market should sell its products through popular
middlemen.
iv. Company's policy: Policy of the company also affect the selection of
using middlemen of direct channel for distribution of company's goods.
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6. Environmental consideration:
i. Legal environment: Every company should obey legal provisions. In
other word, any activity of the company should not be against the law.
So, every company should pay attention to government law, rules and
regulations while selecting distribution channel.
ii. Social environment: While selecting distribution channel, social
environment also should be equally considered. Distribution function
should be social environment friendly. In other word, any activity of
distribution should not be against the social norms and values.
iii. Economic environment: Economic environment also influences in the
company's channel selection. If the economic condition is strong, the
company can use long distribution channel. But, if the company's
economic position is opposite of it, the company can select shortest and
cheapest channels for distribution.
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Concept of Channel Conflict
 conflict is a process that begins when one party perceives that another
party has negatively affected or is about to negatively affect something that
the first party care about.
 Conflict is any situation in which two or more parties feel themselves
opposition.
 If Channel member's idea, beliefs interest, preferences, etc. are different in
one another then conflict arise.
 channel conflict is a situation in which channel members have to compete
against one another. It exists when one channel member perceives another
channel member to be acting in a way that prevents the first member from
achieving its distribution objectives.
 The main causes of channel conflict are financial and nonfinancial reasons,
goal incompatibility, role ambiguity, perceptual difference, overdependence,
ideological difference, poor communication.
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Types of channel conflict
• Based on the level of channel member and their nature the channel conflict
can be classified into three types. They are:
i. Vertical channel conflict
ii. Horizontal channel conflict
iii. Multi-channel conflict
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Vertical channel conflict:
 The conflict that arises within the different level of the channel members is
called the vertical channel conflict.
 The conflict may be amongst the intermediaries or channel members who
are involved in the similar types of transaction. Like the conflict between
wholesaler and retailer, wholesaler and producer or producer and retailer,
etc.
 Such conflicts may arise due to the unclear goals, unclear role, poor
communication or differences in the perception amongst the channel
members.
 For example if the retailer purchases the goods or commodities directly
from the agents or producer then the wholesaler may be dissatisfied which
will result in the conflict between the wholesaler and retailer.
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Horizontal channel conflict:
 If the conflict is between the same level of the middleman distributing or
purchasing similar types of product or commodities, then it is called the
horizontal channel conflict.
 Such conflict arises when the middleman focuses only for their profit or
interest.
 For example the conflict between the WAI WAI dealer outside valley and
the dealer of WAI WAI Kathmandu. The WAI WAI dealer of Kathmandu was
accused of selling noodles even outside the valley.
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Multi-channel conflict
 Multi channel conflict arises when the producer establishes the two or
more channel members that sell to the same market.
 Multi-channel conflict become high when one of the parties get lower price
or work as compared to the other party. The satisfaction may arise due to
the lower margin that they receive distribution in the market.
 For example, the bottlers do the soft drink business by adopting the multi-
channel level. Similarly, the surya Nepal also distributes its product by
using the multiple channel system.
39

Causes of channel conflict
i. Goal in compatibility
ii. Unclear role
iii. Poor communication)
iv. Perceptual difference
v. Ideological difference
vi. Terms and condition
vii. By-passing channel
40

Channel Resolution MethodsManaging channel conflict
i. Setting the common goals or objectives: One of the common reason for conflict in channel member is setting
uncommon goals or objectives. The goals or objectives set by one party may be unaccepted by the other parties. In
such condition, the ideas of setting common of both or joint goals can be adopted. The existing goals can be modified
by the agreement of both the parties. Such common or joint goals can be modified by the agreement of both the
parties. Such common or joint goals can minimize the channel conflict.
ii. Problem solving or Negotiation: It is the traditional technique to resolve the conflict which is easy to practice. In
this process, which two or more parties reach agreement even though they have different perceptions? During
negotiation, concerned parties sit together and negotiate or participate in bilateral discussion and try reach an
agreement to settle dispute or conflict.
iii. Bargaining/ mediation):-Mediation technique is consideration effective when the channel conflict is of constant or
sensitive. It is a process in which a neutral third party helps to disputeconflict to reach an agreement. Mediator
should be creative and trusted by both parties in dispute or conflicts. As comparing to conciliationfacilitation the
mediator is more active but the conflict are free to accept or reject proposal.
iv. Improved communication: The conflict arise due to the miscommunication and misunderstanding between the
two or more channel members. If the communication gap is decreased then there will be the clear understanding
between the channel members. Such problems are seen when there is one-way communication. Instead, if the two-
way communication is widely used then the conflict can be prevented up to a large extent.
41

Channel Resolution MethodsManaging channel conflict
v. Legal action: This is the legalistic view of managing conflicts or disputes. It is a
mandatory settlement of industrial disputes or conflicts by ordinary courts, tribunals
or a labor court. Legal action is also called "litigation". The verdict of or final decision
of court binds both parties. Legal action is also called adjudication.
vi. Diplomacy:- Diplomacy is the profession, activity, or skill of managing channel
conflicts. Management can resolve the channel conflicts by its diplomatic behavior.
Channel member feel satisfied. They feel happy. Diplomatic leader can apply
diplomatic method in the resolution of channel conflicts.
vii. Market Partitioning:-Market share should be divided properly to solve the conflict
crated by market area. It can be divided by using number of customer, types etc.
viii. Persuasion:- Persuasion is another method of resolving channel conflicts. Under this
method, channel leader persuades all channel members to work for the interest of
group members. The channel leader uses his/ her power to persuade or convince the
members and solves the conflicts. Generally, it is appropriate in horizontal conflict.
42

Concept of physical distribution
• Physical distribution is the group of activities associated with the supply of finished
product from the point of origin to the point of consumption.
• Physical distribution management is the process of strategically managing the
movement and storage of materials, parts, and finished inventory from suppliers,
between enterprise facilities, and to customers.
• Physical distribution or Logistics management tries to have the "right product", in the
"right quantity", at the "right place", at the "right time", with the "right cost".
• Physical distribution is a process of planning, implementing, and controlling the
efficient, effective flow and storage of goods, services, and related information from
point of origin to point of consumption for the purpose of conforming to customer
requirements.
• Transportation, warehousing, inventory control, material handling, order processing are
the major function of physical distribution.
44

Components of physical distribution (major logistics
functions)
1. Order processing:
 Physical distribution function starts from customer demand. Order processing is
designed to take the customer orders and execute the specifies the customer has
purchased.
 The order processing is a set of processing is a set of processing for receiving, handling
and filing the order as customer demand. This function is performed form collection of
demand through marketing research or reliable information, middleman, etc.
 The organization is concerned with this function because it directly related to how the
customer is serviced and attaining the customer service goals. If the order processing
system is efficient, then the business can avoid other costs in other functions, such as
transportation or inventory control.
45

Components of physical distribution (major logistics
functions)
1. Order processing:
Order processing is related with:
i. Receiving orders: Order received through different communication media such as
mail, telephone, fax, internet, online-services and sales person. Producers or sales
persons collects the products order and they take further steps.
ii. Handling order: When received the order from customers they conforms the
products are available or not and order is checked from the account section and
warehousing. If they have the products, they make it shipment but if not they inform
the production department as per the order.
iii. Filing orders: Filing order from the sales persons or distributions as per the order of
market by the help of shipment and warehouse. Order fulfillment process should be
fast and effective through different distribution channel.
46

Components of physical distribution (major logistics functions)
2. Material handling:
 Material handling is related with the properly handling of physical goods. It is an
activity of selection proper equipment or manage the right mode of transport to handle
the product.
 handling process needs efficient and appropriate equipment to reduce handling costs
and minimize losses from breakage, spoilage and theft.
 Material handling techniques determine on nature of the product, packaging size and
materials.
 The material handling activities include equipment selection & replacement policies,
order-picking producers, stock storage & retrieval.
 Different varieties of equipment are used to handle wide range of product. The mostly
used equipment include truck, cranes, conveyor and electronic equipment. This proper
equipment helps to minimize losses forms of breakage and spoilage. 47

3. Inventory management:
 Inventory management is a decision of right size of stock of goods in right
time and balancing the cost of cost of order processing and carrying
products from suppliers and controlling other inventory costs to achieve a
desired level of customer satisfaction. Inventory control is a major role
player in the distribution system of a business.
 Inventory management involves two major functions, these are:
i. Control of inventory costs
ii. Control of inventory levels
48

4. Warehousingstorage function:
• Warehousing is placed where goods are stored for a certain period until the delivery of market for the timely supply
to the customer. Warehousing is an important function which helps to protect the product from the production place
until the consumption place and also helps demand assessment. Similarly it performs other importance function such
as assembling, bulk-breaking, storage, packaging and shopping.Warehousing performs not only storage function it
emphasize on the different activities which are taking the orders, filling the order through the helps of packaging and
shopping and quickly delivers the product to the customers.
• Types of warehouse
• Private warehouse
• Public warehouse
• Bounded warehouse
• Private warehouse: Private warehouses are owned, managed and controlled by a single person or the organization. It
is a single investment and it takes single benefits or risk. These warehouses are used for their own purpose and it has
high operating cost, big business houses are only operate private warehouse.
• Public warehouse: This is commercial warehouse which is managed by several members or public such as individual,
organization or public bodies such as VDC, municipalities, transport authorities, railway authorities or government
according to the relevant rules and laws of the country. All parties or members can use this warehouse by payment of
certain costs and it delivers all warehousing function.
• Bounded warehouse: These warehouse are stored imposed goods, before the payment of duties. Bounded warehouse49

4. Warehousingstorage function:
Types of warehouse
 Private warehouse: Private warehouses are owned, managed and controlled by a
single person or the organization. It is a single investment and it takes single benefits or
risk. These warehouses are used for their own purpose and it has high operating cost,
big business houses are only operate private warehouse.
 Public warehouse: This is commercial warehouse which is managed by several
members or public such as individual, organization or public bodies such as VDC,
municipalities, transport authorities, railway authorities or government according to
the relevant rules and laws of the country. All parties or members can use this
warehouse by payment of certain costs and it delivers all warehousing function.
 Bounded warehouse: These warehouse are stored imposed goods, before the
payment of duties. Bounded warehouse are situated at the border, airport and port.
Custom authorities usually own these warehouses and their operation and supervision
organized under the government. 50

5. Transportation:
Transportation an important element of physical distribution system which links
geographically scattered markets and facilities.
Through transportation, products are moved from manufacture to customers.
The mode of transport and distance determines 50% of physical distribution
costs.
For shipping of goods, the producer, wholesaler, retailer can choose different
transportation alternatives such as rail, truck, air, water way and pipeline and
ropeway.
For shipping of the product suppliers should consider certain criteria such as,
speed, frequency, dependability, capability, availability, accessibility, consistency,
and cost. 51

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