sales ch 13
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Introduction to
Distribution Channel
ManagementPresented by: Group 10
Abhishek Jain 06
Vishal Gupta 28
Vivek Ganatra 39
Vishwak Bisen 36Vatsala Varun 59
Shrema Garg 23
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Objectives of the presentation
To explain why distribution is required.
The activities that it performs.
Is intermediation really needed? How it adds value.
What is distribution channel strategy?
What is Distribution Channelmanagement?
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Introduction
Effective Distribution A driver of
Manufacturing Sector
The existence of intermediaries is inevitablebetween producer and consumers
Improve the efficiency of the exchange process
Helps adjusts discrepancies of assortment
Help in routinization of transactions
Facilitates the searching process
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Activities performed by Distribution Channel
The source of all activities lies in the
rationale for having distribution.
In fact, the entire gamut of activities areperformed due to the existence of:
Spatial discrepancies
Temporal discrepancies
Need for breaking the bulk
Need for assortment
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Contd..
The activities are performed to reduce
these discrepancies.
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Contd..
Spatial discrepancy
Activities:
To connect dispersed user base with
manufacturer in a cost effective manner.
Distance
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Contd..
Temporal discrepancy
Activities:
Stocking at appropriate places in adequate
quantities to minimise waiting time.
Time
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Contd..
Need for breaking the bulk
Activities:
Division of bulk into phases
Routinisation of order and paymentprocessing
Bulk production -
Small individual
consumption
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Contd..
Need for assortment
Activities:
Distributors keep goods of various
manufacturers who produce only one orfew goods.
Single product
produced Multiple
products consumed
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Contd..
The intensity of these discrepancies
decides the complexity of the distribution
function.
Case in point:
A tea stall vs A toothpaste factory
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Intermediation: Is it really needed?
With adoption of Internet, now companies can
themselves perform distribution activities. For eg:
Dell Computers
Advantage: Manufacturer has full control overdistribution function as outsourced channel might
not be that committed
In cases other than technically complex or short life
cycle products, direct distribution cost is very high. If more & more activities are outsourced then firm
does not have control over the distribution function
So, most companies use the combination of direct
distribution & distribution through intermediaries.
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Contd..
A proper analysis of their strengths & weaknesses is
to be done by companies to know where to
outsource the distribution activity and where to
handle it by itself. For eg:
To expand sales rapidly- Outsourced is a good
option.
To expand gradually- Study the market dynamicsproperly & shoulder large part of distribution
activities itself.
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Distribution Channel Strategy
Distribution strategy involves the choices made by company to
achieve objectives set forth in the overall strategy of the
company.
The major domains across which distribution strategy is framed
includes:
Setting distribution objectives in terms of the consumer requirements
Finalizing the activities that are required to achieve the channel objective.
Organizing all the activities so that all are shared among the different entities ofthe channel to make distribution fast.
Developing policy guidelines for the smooth functioning of channel.
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Setting Distribution Objective
Distribution objectives are set in terms of
the service output demands of the target
customers.
Can achieve greater differentiation through
setting high levels of channel objectives
that would delight the customers.
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Finalizing Channel Activity
Identification of activities which are first
step in channel activity like zero waiting
time.
While finalizing the set of activities
infrastructural and market related
constraints have to be considered.
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Organizing the channel activities
Some critical activities such as payment
collection, dispatching from the factory,
etc. are always tightly controlled by the
company.
The more the company is willing to
outsource, the less the overheads, and
hence the lower the risk when the demand
fluctuates.
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DISTRIBUTION CHANNEL MANAGEMENT
Distribution channel management encopasses
all activities dealing with the distribution function
of a firm
It invovles implementing the distribution strategyof the firm
There are two phases
The ex ante phase The ex poste phase
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Distributionchannelstrategy
Channel objective
Activity finalization
Organizing theactivities
Developing policyguidelines
Ex ante phase
Designingchannel structure
Establishing thechannel
Ex poste phase
Motivatingchannel members
Resolvingconflicts among
channel members
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PHRAMACEUTICALS DISTRIBUTION
CHANNEL STRUCTURE
Distribution of pharmaceutical in India is mostly
decentralized and hence quite complex
Products in India move through a chain of
intermediaries unlike in west
Market is essentially volume driven rather than
value driven
Strict government regulations hinder the changein the distribution structure
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MANUFACTURERMANUFACTURER
C&F/DEPOT/SUPERSTOCKIST
C&F/DEPOT/SUPERSTOCKIST
STOCKISTSTOCKIST
WHOLESALERWHOLESALER
RETAI
LER/CH
EMISTR
ETAI
LER/CH
EMIST
PATIENTPATIENT
INSTITUTION HOSPITAL
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THANK YOU!!
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