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APPRAISAL OF DISTRIBUTION STRATEGIES OF PRODUCTION COMPANIES
(A STUDY OF THE NIGERIAN BOTTLING COMPANY PLC IN ENUGU)
BY
UKWUEZE, EMMANUEL O. PG/MBA/00/31829
DEPARTMENT OF MARKETING FACULTY OF BUSINESS ADMINISTRATION,
UNIVERSITY OF NIGERIA ENUGU CAMPUS, ENUGU.
NOVEMBER, 2007
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TITLE PAGE
APPRAISAL OF DISTRIBUTION STRATEGIES OF PRODUCTION COMPANIES
(A STUDY OF THE NIGERIAN BOTTLING COMPANY PLC IN ENUGU)_
BY
UKWUEZE, EMMANUEL O. PG/MBA/00/31829
A PROJECT REPORT SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR
THE· AWARD OF A POSTGRADUATE MASTER OF BUSINESS ADMINISTRA TION (MBA) DEGREE IN
MARKETING.
DEPARTMENT OF MARKETING, FACULTY OF BUSINESS ADMINISTRATION,
UNIVERSITY OF NIGERIA, ENUGU CAMPUS, ENUGU
SUPERVISOR: ACHI, C.B.
3
NOVEMBER, 2007
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CERTIFICATION
I, Ukwueze, Emmanuel O., a postgraduate student in the
Department of Marketing with registration number
PG/MBA/00/31829 has satisfactorily completed the
requirements for the course and research work for the Award of
Master of Business Administration (MBA) Degree, in Marketing,
Department of Marketing.
To the best of my knowledge, this work is original and has
not been submitted in part, or in full in this or any other
university or Polytechnic for Award of Degree or Diploma. ……………………………. Candidate) ……………………………. Date
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APPROVAL PAGE
Ukwueze, Emmanuel O, a postgraduate student in the
Department of Marketing with registration Number
PG/MBA/00/31829, has satisfactorily completed the
requirements for the research work, for the Award of
Postgraduate Master of Business Administration (MBA)
Degree, in Marketing, Department of' Marketing, Faculty of
Business Administration.
Achison C.B Dr. G. Ugwuonah (Supervisor) (Head of Department) ……………………………. ……………………………. Date Date
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DEDICATION
This research work is dedicated to the Glory of God
Almighty for His guidance and protection.
Ukwueze, Emmanuel O. PG/MBA/00/31829
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ACKNOWLEDGEMENTS
I give thanks to God almighty for his guidance throughout
the period of this course. It is his grace and kindness that saw
me through.
I would like to recognize and acknowledge the
contributions of the following to the success of this work; first
and foremost, to my supervisor, Chief Achi, C.B., who was
more of an uncle, for his patience and encouragement. Again,
worth commending is his effort and desire to see that the
project report was completed on time, and submitted to meet
the stipulated date, this he did by painstakingly correcting all
errors (both of omission and commission) which undoubtedly
has made me realize the little I know each time I am corrected
by him.
Mention must be made of some lecturers, most
importantly, Dr. I.C. Nwaizugbo, who is currently the Head of
Department of Marketing, Prof. Ikechukwu E. Nwosu; Prof.
Okafor, F.O; Prof. Imaga, E.U.L., Dr. U.J.F. Ewurum, Dr.
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Ikeagwu, K. Egbui(late), Chief J.A. Ezeh; H.R.H. Chief Unamka,
P.C (late), Dr. Chikeleze, B.E and host of others am unable to
mention their names.
A great and sincerely gratitude and appreciation to my,
friends and well-wishers, most especially Mr. Uzoh, Stanley
ILBA, whose attention, Unpublished Project works, Texts,
Journals, Magazines and Bulletins I was able to secure and
which mattered a great lot and helped immensely to the
completion of this project work, Stanley, "You are truly a great
friend".
Finally, most respected and honoured gratitude and
appreciation goes to the Most High God to whom I remain a
living testimony of his faithfulness.
Ukwueze, Emmanuel O.
PG/MBA/00/31829
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ABSTRACT
This research project was carried out to appraise the
distribution strategies of production companies, a study of the
Nigerian Bottling Company P1c in Enugu.
A sample size of 240 respondents were randomly selected
from the Staff, Management and Customers of the Nigerian
Bottling Company P1c in Enugu. Both primary and secondary
data were collected and analysed using the chi-square test.
The researcher, based on the data collected and analysed,
found out the following:
The Management & Staff and Distributors of NBC
P1c are knowledgeable of distribution strategies of
NBC P1c;
NBC P1c Internal and External Publics (Management
& Staff and Distributors/Consumers) have positive
perception about the distribution strategies of NBC
P1c;
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The distribution policies of NBC P1c are implemented
along the line of set objectives;
The various distribution strategies used by NBC
P1c for tackling distribution problems include;
multiple distribution, selective distribution and
extensive distribution strategies;
The NBC Plc Distribution Department has gone to
a great extent in coping with short delivery of
trucks;
Physical Distribution policies of NBC Plc have
encouraged their consumers' loyalty;
There is adequacy in NBC Plc Sales Department
programmes for the satisfaction of existing and
prospective customers;
The NBC Plc chosen channels of physical
distribution have made impact on the consumer
patronage;
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LIST OF TABLES
Tables:
4.1 Sex and Age distribution Respondents ....................
85 4.2
Total number of respondents .............................................
87
4.3 Knowledge of the distribution strategies of NBC Plc
88
4.4 Perception (feeling/impression) about NBC Plc
distribution strategies
89
4.5 Distribution policies being implemented along the
line of set objectives ................................................ 90
4.6 Various distribution used by NBC Plc for tackling
distribution problems .............................................
91
4.7 Extent gone by Sales Department in copping with short
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delivery of trucks ...................................................
92
4.8 Physical distribution policies of NBC Plc have
encouraged consumer loyalty .................................
93
4.9 Adequacy in the sales Department programmes
for the satisfaction of the existing and prospective
customers .............................................................
94
4.10 If the chosen channels of physical distribution has
affected the consumer patronage of the products .... 95
TABLE OF CONTENTS
Title page i
Certification ii
Dedication
iii
Acknowledgement
iv
Abstract v
Table Contents
vi CHAPTER ONE 1.0 Introduction 1
1.1 Statement of Problem 3
13
1.2 Objectives of the Study 3
1.3 Hypothesis Formulation 4
1.4 Research Questions 5
1.5 Significance of the Study 6
1.6 Scope of the Study 7
1.7 Limitation 8
References
23
CHAPTER TWO
2.0 Review of Related Literature ............................................. 24
2.1 Introduction ................................................................... ..24
2.2 The Concept of Physical Distribution
32
2.3 Scope of Physical Distribution systems ............................ .40
2.4 Designing and managing Distributions system ................. .49
2.5 Choosing a Channel of Distribution .................................. 59
2.6 Economic Importance of middle men ................................. 68
References ...................................................................... 73
CHAPTER THREE
3.0 Research Design and Methodology .................................... 76
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3.1 Research Method .............................................................. 76
3.2 Research Design .............................................................. .76
3.3 Method and Source of Data Collection ............................... 77
3.3.1 Questionnaire ............................. ................................ · 77
3.3.2 Interview Method ........................ .................................. 78
3.3.3 Libraries ..................................... ................................. 78
3.4 Population for the study ................. .................................. 79
3.5 Determination Sample Size ............ ................................... 79
3.6 Procedure for Data Gathering ......... .................................. 80
3.7 Validity of Reliability of Data instrument 81
3.8 Method of Data Analysis ............... , ................................ 82
3.9 Test of hypotheses .......................
82
References 84
CHAPTER FOUR
4.0 Analysis and Interpretation of data
85
4.1 Questionnaire Administration - sex and age
15
distribution of respondents .......................................... 85
Reference ... 104
CHAPTER FIVE
5.0 Summary of Findings, Conclusion and
Recommendations 105
5.1 Summary of Findings
............................................................................................. 1
05
5.2 Conclusion ..................................................................... 107
5.3 Recommendations ........................................................... 108
Bibliography
Appendix I
Appendix II
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CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
Distribution channel is the path through which goods and
services traverse as they go from producer to ultimate consumer.
Also, marketing channels or marketing intermediaries represent
organized network of agencies and institutions which in
combination perform all the activities required to link producers
with users and users with producers in order to accomplish the
marketing task. By delivering products and their ownership titles
to consumers at the right time, marketing channels therefore,
perform a special kind of service to society by generating time,
place and ownership utilities.
A sound physical distribution policies are therefore,
important as a guideline for companies effective and efficient
performance in order to realize and achieve the desired short and
long run goals and objectives.
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Many business organizations have come short of achieving
their desired goals and objectives even after producing high
quality products. These shortcomings have been attributed to
improper, ineffective and inefficient strategies as it relates to
physical distribution of goods. The purpose of distribution is to
make goods to be physically available to the ultimate consumer at
reasonable prices. It is therefore, very imperative that the
products are distributed in the most efficient manner to reach the
ultimate consumer whose patronage ensures the survival of the
organization. By so doing, the organization will enjoy consistent
high sales turnover and subsequently high profit delivery.
Organizations through their managerial functions of
planning, marshal out articulated 'policies that enable them to
control their internal and external actions. Against this
background, the organization will be able to harness and monitor
her relationship or activities internally and her publics.
Physical distribution policies In the Nigerian Bottling
Company include' identification of appropriate location of plant,
equipment, depots, warehouses and mode of transportation
services. It also includes the maintenance of good communication
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system, inventory level and proper packaging of products so that
they can be transported and stored on a economic basis. They are
geared to reduce loss and increase satisfactory customers service
so that the organization will continue to win their loyalty.
1.2 STATEMENT OF PROBLEMS
An efficient physical distribution system makes it possible
for a particular geographical area to specialize in producing
products for which it has the appropriate natural resources,
ultimate or to the advantage.
However, physical distribution policies of most product-
oriented companies in Nigeria have left -much to be desired in
satisfying-the consumers wants and needs.
This project work will endeavour to appraise the physical
distribution policies of Nigerian Bottling Company organization in
Enugu, and proffer solutions for improvement.
1.3 STATEMENT OF OBJECTIVES
Efficiency and satisfactory services are key goals of physical
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distribution of the Nigerian Bottling Company. Organizations
whose physical distributions policies are far from adequate in
meeting her key goals should appraise these policies so as to
correct the lapses and flaws where they exist.
Additionally, this research work apart from appraisal of
physical distribution of Nigerian Bottling Company Plc, intends to
now the following:
1. To examine whether the physical distribution policies of the
company are being implemented along the line of set
objectives.
2. To ascertain the extent the various strategies have helped
to enhance the company's physical distribution problems.
3. To determine to what extent the sales department
especially, has gone in coping with short of delivery trucks,
vehicles etc.
4. To proffer or recommend articulated solutions to the
bottlenecks being experienced by the Nigerian Bottling
Company Plc, in the physical distribution of her
productions within Enugu.
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1.4 FORMULATION OF HYPOTHESES
1. Ho: The physical distribution policies of the Nigerian
Bottling Company have not encouraged consumer
loyalty of the company's product.
Hi: The physical distribution policies of the Nigerian
Bottling Company have encouraged consumer loyalty of
the company's product.
2. Ho: The safes department programmes to satisfy both
existing and prospective customers are not adequate.
Hi: The sales department programmes to satisfy both
existing and prospective customers are adequate.
3. Ho: The chosen channels of physical distribution have not
affected the consumer patronage of the company's
products.
Hi: The chosen channels of physical distribution have
affected the consumer patronage of the company's
products.
1.5 SIGNIFICANCE OF THE STUDY
The research work is very significant because of it
contributes to the field of knowledge, in finding ways of improving
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the physical distribution policies of Nigerian Bottling company in
Enugu.
Additionally, the research work would appraise the
significant role of physical distribution policies of the Nigerian
Bottling Company Plc, in Enugu as to know whether it has been
adequate to the company's most target audience.
The findings and recommendations of this research work, if
adopted by Nigerian Bottling Company Plc, in her physical
distribution policies will reduce some costs and enhance her
distribution activities above her competition.
Management of Soft Drinks Companies and the Nigerian
Bottling Company plc, in particular can adopt these findings as a
guide in formulating their physical distribution polices for their
companies.
Academically, further research could be carried out to
widen the intellectual horizon of people, and also, improve the
physical distribution policies of the Nigerian Bottling Company
Plc, and other Soft Drink Bottling Companies in Enugu and
beyond.
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1.6 SCOPE OF THE STUDY
The scope of this study IS only limited to the Enugu
Metropolis as being covered by Nigerian Bottling Company. For
ease of research project, Enugu metropolis was divided into four
groups: ABC and D.
1.7 LIMITATION OF THE STUDY
In any human endeavour, there are always some constraints
and this research work is not an exception.
a. It was the intention of the researcher to cover other
products but for the limited time given for the study.
b. Closely related is the problems of inadequate fund to
finance the research which limited the scope of research
to only the Nigerian Bottling Company Plc in Enugu.
c. Limited published data on the topic was equally a
constraint. In fact, much has not been written in this
field in which case, the researcher wrote using other
published material.
d. Accessibility to some key officers for interview was nearly
impossible as the secretary deliberately refused the
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researcher entry. Others claimed they were 'not
authorized to expose official secrets,
1.8 THE NIGERIAN BOTTLING COMPANY PLC. ENUGU PLANT
Nigeria Bottling Company, Enugu has presently installed
capacity of two hundred and fifty thousand hectoliter. The
increase was necessitated by the daily Increase at the
consumption rate of soft drink in Enugu metropolis 'and other
areas, which the plant serves. This increase in soft drink
production has equally affected the volume of work being
performed by the field officer, sales departments, production
department and the contractors too. The creation of Ebonyi State
has subsequently increased the allocation being provided for that
area too.
As a result of this, they have redrawn their physical
distribution network to enable them meet the prevailing
challenges. Enugu plants have staff complement of 300 in
administrative, production, purchasing, supply, distribution/
sales and operation. The Enugu plant supplies all other depots at
Nsukka, from these depots, it distributes the soft drinks to dealers
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who will eventually directly sell the soft drinks to ultimate
customers.
Enugu plant presently has about 10 trucks which distribute
the soft drinks to the- depot. However, the plant having realized
the insufficiency or inadequacies of these vehicles for effective
physical distribution, has signed agreement with truck owners for
commission. As a result of this, agreement, the vehicle owners
have deployed their then to the distribution of soft drinks volume
of their sales volume and also consignment reduction of their
maintenance and service costs of their capital equipment.
Furthermore, Nigerian Bottling Company Plc in the quest to
boost her sales volume in Enugu metropolis and widen the
physical distribution polices has encouraged those with private
trucks, lorries and vehicle to obtain their quantities directly from
the plant. This has reduced the long time being awaited before the
retailers and wholesalers are served with the products. This has
equally allowed the plant managers to serve sufficiently their
depots for benefits of small buyers.
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Distribution outlets, like Universities of Nsukka, Enugu
Campus, Enugu State University of Science and Technology,
Institute of Management and Technology Enugu , Ecumenical
Institute Emene etc are stockpiled with different brands-coca-
cola, Fanta orange, Fanta ginger ale, Fanta tonic; Fanta
Chapman, sprite, lemon etc.
Nigerian Bottling Company has among her distribution
policies provide kiosks and stall for willing and interested retailers
and traders whose energy will concentrate solely for the
distribution of their products. This, they consider will 'not give
their competitors any room to' breakthrough. Such beneficiaries
are provided with fridge, freezers, coolers etc.
In view of the dispersal nature of the distributions and
consumers in the metropolis the Nigerian Bottling Company
depots mass/multiple distribution policies. With this design they
are able to meet the needs and consumers. Selective and exclusive
distribution physical policies are equally embodiment of the
physical distribution policies of the company. By this, the
company is able to reach out or serve those customers who cannot
be served through the intensive mass distribution. However, the
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company ensures that the selective and exclusive channels do not
create monopoly among those involved.
Organization Distribution Policies and Logistics:
The task of distribution is to make goods available to buyers.
In doing so, exchange of ownership takes place in which case, title
to a product has to change hands several times and physical
movement of goods is triggered off but not necessarily to
accompany the route of ownership flow. The physical flow of
distribution in Nigerian Bottling Company is essentially the
responsibility of the sales department. In order worlds, the sales
and transport departments are merged into a single department.
The function of the sales department is to maintain links with
distribution who in turn ensures that the channel network is
efficient and effective. The sales department which co-ordinates
the activities of the transport department take charge of the
organization’s route trucks, built delivery lorries, trailers and
hired vehicles and sees to the organization's physical movement of
the soft drinks (product) from the plant warehouses to the various
target market destination in the Enugu metropolis.
27
There routine activities are not restricted to Enugu
metropolis alone, it cuts across all other' plant warehouses
throughout other areas.
Nigerian Bottling Company has in her distribution policies as:
1. Institutional distribution
2. Physical distribution
Institutional Distribution: Involve the use of the institutional
components or elements to facilitate ownership flow or transfer of
title to a product from the first owner to the last owner in order to
achieve the marketing goal in a manner profitable to the company.
However, the achievement of the goal is in part dependent upon
the nature of its marketing structure hence its significance.
The institutional structure for marketing consists of various
elements which are physically identifiable, including producers,
the ultimate consumers or users and the middlemen.
Physical Distribution: Is often referred to as logistics and tasks of
logistics is to minimize non-transportation and transportation
costs which usually arise as a result of physical movement
activities.
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The organization believes so much in reaching out to her
customers. As a result, the company ensures that the retailers
and the wholesalers perform their duties efficiently and equally
have good command of the market. Under marketing distribution
policies we have:
a. Mass/intensive/multiple distribution
b. Selective distribution
c. Exclusive distribution
Mass/Intensive/Multiple Distribution:
According to the marketing manager on the, intensive
distribution strategy, the company uses route trucks for delivery
approved to their customers mainly in the bottling areas of the
company in Enugu. This enhances the bottle turnover or bottle
return after sales. The small hotel, kiosks, fast food joints and
restaurants belong to this level of distribution.
Additionally, customers who are not big time soft. Drink dealers
belong to this group.
Selective Distribution:
The Nigerian Bottling company here, selects among
distributors who are credible, normally and financially, to
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distribute their products. The company delivers the products to
the distributors who buy in large quantities and are also located
at a strategic area where customers can easily locate them. Also, it
reduces the cost of transportation for Nigerian Bottling Company.
Nigerian Bottling Company in her physical distribution
policy, delivers her products to the distributors -with bulk delivery
and thus varies from trailers and trucks.
Additionally, distributors collect their products from the
company's plant premises and this is known as self-collection
method.
The company's effort to in reaching the distributors with the
company's delivery van is that it helps the company to decongest
her premises by avoiding excessive stock-in.
Exclusive Distribution
This is of little significance to the Nigerian Bottling Company
in respect of Enugu metropolis. The reason is that other
competitors will not be given the least opportunity to take control
of the market; such competitors include 7up Bottling Company,
30
Reno Soft Drink Company 9Lh Mile, Nigerian Mineral Waters,
makers of Limca Soft Drinks.
The Distribution Policy and Enugu Distribution
The physical distribution policies of "Nigerian Bottling
Company are uniform in structure in all their plant locations.
However, due to the peculiar characteristics surrounding some
environments, some plants are therefore allowed to modify some
specifications so as to oil easy and efficient distributive system.
Other reasons could be as 'a result of consumer behavior and
tradition of the people.
According to the sales Manager, Aba and Enugu plant offices
tend to have such similar strategy than other distributions plants
offices.
Due to these difference, distribution problems may arise.
When the routes, avenues or pathways through which goods and
services flow or move from producers to consumers are blocked,
many things come to marketers mind. It is under this premise.
That the Enugu distribution office modifies their distribution
strategies in order to suit the environment in which they are
operating.
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In order to serve and respond to the demands and needs of
the customers, the Enugu plant Office categorized the customers
into groups:
a. Exclusive: These are strategic public centers where the
company's products are assumed to be in constant and high
demand. These include places like the Airport, Hotel Presidential,
Modotel Hotel, Zodiac Hotel, Recreation Clubs and Nike Hotel
Resorts.
b. Middle Class: These are fairly large establishments but do
command a lot of market patronage like the exclusive. Their sales
volume are quite on the high side and they include big super
markets like Eastern Shop, Tompson Super Markets, and Leventis
Stores, Fast Food Joints and Restaurants equally belong to this
categories.
c. Other: There are those outlets that do not belong to the two
mentioned categories. They constitute the kiosks, small hotels,
restaurants, and stores, talk shops, hawkers and retailers.
The physical distribution policies of soft drink companies in
Nigeria requires special attention as a result of its nature. The
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issue is essentially one of determining any appropriate
distribution pattern or methods that should be employed to
minimize total cost of distribution and therefore beat down the
incident or competition since, a lot of competitors have natured to
Share in its profit. Some competitors include Reno Industries,
Nigeria Mineral Water, makers of Limca, 7 -up Bottling Company
to mention but few.
Business concerns are established to make-profile or operate
with break-even point. The profits earned are generated through
the implementation of a sound policy. These companies which
Nigerian Bottling Company belongs to operates within the ambit of
such laid policies in their day-to-day operations. If a' policy is not
well formulated and implemented, it will adversely affect the
organization which will eventually affect the consumers. '
On the basis of this, there is need for a careful handling of
the physical distribution function to ensure a successful operation
of soft drink industries.
However, for Nigerian Bottling Company, for· physical
distribution policies to be purposeful, the policies must be
constructive in their core activities such as transportation,
33
warehousing, inventory management, order processing and also,
have the ability to organize these mix activities properly.
This research work intends to examine and appraise the
physical distribution "Direct" and institutional distribution or
indirect policies of the Nigerian Bottling Company.
Additionally, we will appraise whether the policies have
served the customers satisfactorily and if the policies have also
contributed to the growth realization of the organizations goals
and objectives or not, whether such policies', ensure that the
customers get the products at the right time and in the right
quantity as ordered. Any shortcomings from these physical
distribution policies.- will certainly lead to loss of customer's
loyalty to competitors, which will consequently affect the profit
position of the company.
Effects of Company's Policies on the Company, the Consumer
and The sales Volume:
The problem of selecting the most satisfactory channel of
distribution for production is complex. A lot of 'things are
thoroughly examined and appraised before the final selection is
34
done in both the physical and institutional distribution. The
company ensures that the uncontrollable external variables are
properly appraised in order to reduce the inherent risks that are
likely to occur. Such external considerations include:
a. The nature of the- product
b. The position of the manufacturer
c. The position of the consumer
d. Analysis of market consideration
e. Type, location and buying habits of consumers
f. Existing trade channels of competitors.
Absence of effective distribution may arise and also the
increasing prices relative to the demand qualities for the
company's product calls for a re-examination of the physical
distribution policies and the efficient handling of the company's
physical distribution programme.
Unfortunately, like many other firms in the related industry,
the company's physical network tends to be bedeviled with the
following problems.
In the event of direct dealings with customers, there maybe
conflict between the company and the sales force objectives. The
35
sales force may want an increase in the commission paid by the
company while the company may want to invest more in capital
projects. This could lead to industrial disharmony, which will
affect the performance of the sales force. Against this background,
the customer will no longer be served properly.
In order to meet her target, the company will ensure that her
staff, especially, those in the sales department are properly
motivated. As a result of this, they will enthusiastically serve the
customers to the best of their ability.
Additionally, the company should provide 'sufficient vehicles
to distribute the products to the ultimate consumers. Inadequacy
of funds to procure more distributing vehicles and replace of
broken down ones will surely affect the performance of the sales
force and many customers will be unsatisfied with the services
they received which is not in the best interest of the company.
In the same token, in dealing indirectly or institutional
dealing with customers some operational cost, which would have
been incurred in the form of transportation, will be saved. The
fund which would be employed into other useful ventures in the
form of transportation, will be saved. The level of satisfaction that
36
consumers will derive by using the company's salesmen might be
more different than using distributors. When such problem exists,
consumer patronage will be reduced thereby overstocking the
warehouses of these distributors.
Another problem with indirect or institutional dealing with
consumer is that since the chain of distribution is long some
bottles might not be retained which is an additional cost to the
company.
This research project is therefore aimed at reappraise thee
policies so as to fine tune lapses where they exist. The
inadequacies of marketing systems in the soft drink industry are
most glaring in the 'area. of physical distribution and - one
frequently hears of problems affecting the development of such
infrastructure needed by the industry; such glaring problems are
in the basic support for modern marketing activities but they are
poorly provided for. The lack of such infrastructure will adversely
affect the industry. The management should look into such areas
In order to enhance the performance of the industry at large.
The management should provide adequate personnel to man
the warehouses and deports, so that customers orders and
37
request will be promptly responded to. The fridges, deep freezers,
coolers, T shit, openers and cup should be evenly and fairly
distributed to sustain patronage.
38
REFERENCES
Ifezuea, AN. (1990): Basic Marketing; Enugu: ABIC Publishers Ltd
Kotler, P. (1980): Marketing Management, 2nd Edition; New York: McGraw hill Inc.
Udeagha, O.A. (1996): Principles of Marketing)' Enugu: Optimum Publishers ltd.
39
CHAPTER TWO
2.0 REVIEW OF RELATED LITERATURE
2.1 INTRODUCTION
Organization at the point of inception outlines policies within
which the organization contains her operation. These general
policies supersede the other policies or bye-laws which other
departments like sales departments, production departments,
marketing departments and administrative departments. However,
individual units or departments, in order to discharge their
responsibilities efficiently, design additional policies for the
interest of the department in particular and the company in
general.
Nigerian Bottling Company is one of such companies which
has physical distribution policies to serve the ultimate consumers
better than her competitors. Nigerian Bottling Company is aware
that with constructive physical distribution polices.
i. The company' will be able to serve her target customers
satisfactorily.
40
ii. They will be able to reduce to the barest minimum their
overhead and running costs.
iii. Special attention will be geared towards servicing their
delivery trucks and vehicles.
iv. Wholesalers and retailers will sale the Nigerian Bottling
company's products accordingly to the lay down
policies.
v. Also, the bottles, creates and other company assets will
not be exposed to danger spoilage or theft etc.
Before now, the early fifties and sixties, physical
distribution job is often fragmented between production and
marketing and it is often confused with channels of distribution as
media such as freight transportation, warehousing, warehousing,
material handling, product packaging; inventory control, plant
and site selection, order processing, market forecasting and
customer service. In order words, physical distribution is one of
the facilitative media through which the channels of distribution
functions are performed: They are not channel of distribution
because they do not play a major role in negotiating purchase and
41
sales. These media could be said to complement the total function
of channel distribution.
In a more succinct way, Stanton (1971), defined physical
distribution as the management of the physical now of' products
and the establishment and operation of efficient flow systems. The
true management of channels of distribution must take
cognizance of this important variable. It is the ignorance of the
clear distinction between these two terms that explains the neglect
over the years of physical distribution as a tool of marketing
management.
Revolt et al (1977), saw that “effective management will be an
illusion without physical distribution” They observed that
physical distribution not only account for a considerable portion
of a firm's outlay for success in marketing, but also provide a level
of service for customers which increasingly is becoming a prime
weapon in the firms struggle for competitive advantage.
Stephenson and Wollet (1986), and credence. to this view
when they observed that the level of customer is a variable that
directly affect demand: Converse (1954), a noted marketing
professor said that business had been paying a great deal more
42
attention to buying and selling than to physical distribution.
Physical distribution is overlooked and brushed aside as of little
importance. Nigerian Bottling Company physical distribution to
policies pays great attention to physical distribution. This has
reflected in their trade and sales performance volume.
Drucker (1962), the well known management consultant and
Writer, calls the distribution activities that occur after the goods
are produced, the most sadly neglected, most promising areas of
world business. Smith (1964) also emphasized that maximum
market shares can only be achieved with maximum distribution
Nigerian Bottling Company a great believe of physical distribution
has been able to serve her customers in every nook and crannies.
In emphasizing the importance of marketing in business
growth, Drucker (1958) observed that in every underdeveloped
country, marketing is the least developed part of the economy. He
suggested that at, the very least, marketing should be developed
as rapidly as is manufacturing in order that the progress of the
latter may not be impeded: Most manufacturing outfits in
developing countries rarely have a well-defined and articulated
distribution channel. They believe in selling concept which
43
suggests that by and large all produced goods must be sold or
bough by consumers.
“The reason for the absence of marketing planning stems
from fact that the product, for distribution are channeled- via
established channels of distribution. The marketing manager
simply allocates products to accredited distributors or co-
operative societies on an approved formula. Since demand exceeds
supply in most cases, there is not marketing problems envisaged
in the foreseeable future”.
It also accentuates the importance of combinative business
development stages by Nigeria indigenous forms e specially in the
product as compared with the luxury of production before
marketing stages. If the produced soft drinks for instance are not
sold through a well-planned programme, the mere weigh of the
financial burden imposed by excess inventory accumulation may
make further growth of at least rapid growth difficult. Various
writers have taken individual specific view of the processes and
functions of marketing. Tousley et al (1962), saw marketing as
consisting of those efforts which affects transfers in the ownership
44
of goods and services and which provide for their physical
distribution.
Management of Nigerian Bottling organization should
channel their distribution polices to physical distribution
management since efficiency in this has a better promise of profit
improvement for the company than general administration. This
dream will come true, if such relates functional departments as
traffic, customer service and research and development are
established in soft drink companies. The distributive sector is still
growing in Nigeria but with little or no improvement in terms of
carrying out is marketing functions. This assertion was made
clear when El. Rufia argued that one narrowness in the scope of
our marketing system. Most companies do little about improving
their physical distribution management and in most cases their
activities in this line are confined within a geographical area.
Nigerian Bottling Company being a multinational company does
not share this assertion bearing in mind that her distributive
channels cut across the whole country at large. However, other
companies employ the services of dealers' or middlemen to
compete amongst themselves.
45
The physical movement of goods is harped as a result of lack
of material handling equipment, transport facilities, inventory
management and so. There is often inherent delays in loading and
off loading of bottles and creates due to the fact that the job is
manually operated. And moreover, there is no safety regulation
incentives covering those involved in this process.
El-Rufia, further pointed out that the inefficiency in the
physical distribution of goods and services m Nigeria is as a result
of lack of clear-cut policy on physical distribution channels. Also,
the majorities of middlemen in our society _are untrained and
consist mainly of men and women who because of their financial
position and/or their connections are' assigned distributorship of
products.' So, because of this lack of marketing training, they by
all means detest the competition. The proffer monopoly status and
strive for sole distributorship of the product in a large an area as
possible he concluded. The researcher in the course of data
gathering and interviews observed their trend in Nigeria Bottling
Company. One therefore, imaging the negative impact a foiled
physical distribution policies could have on the entire marketing
46
mix and consequently on the corporate plan or Nigerian Bottling
Company.
"To collaborate these views, Raymond and stole (1981), have
pointed out that while the distribution channels are conceived
with providing time and place utilities, it is actually the' physical
distribution policy that actually accomplishes these goals", Based
on this viewpoint, the researcher believes that an, effective
physical distribution policy can make important additions of the
bundle of utilities that buyers consider as well- as being excellent
means for an individual from toe create a comprehensive
differential for its products. This will enhance customers
satisfaction which is the core ideal of the marketing concept.
Kotler (1980), has point out that consumer attraction and
satisfaction are deeply affects by sellers physical distribution
capabilities. Supporting Kotler's views McDaniel (1982), saw
physical distribution policy as a potent tool In the demand
creation process. Kotler and McDaniel make sense if Nigeria
Bottling company does not evolve an efficiently implemented
procedures that will inspire that its' brand of soft drinks like coca-
cola, Fanta orange, Fanta ginger ale, Fanta tonic, sprite, Fanta
47
Chapman, bitter lemon, Fanta soda, Eva distilled water etc always
available in the right place, right time and right quantity, it may
generate unless where brand loyalty exists a switch to competitors
brands.
2.2 THE CONCEPT OF PHYSICAL DISTRIBUTION
Physical distribution refers to the flow of procedures from
the products from the production points to the consumption
points. According to the American Council of Physical Distribution
Management.
“Physical distribution is a term employed in manufacturing
and commerce to desirable the broad range of activities concerned
with efficient movement of finished products from the end of the
production line to the beginning of the production lime.
These activities include foresight, transportation,
warehousing, material handling, material handling, protective
packaging, inventory control, plant and warehouse site section,
order processing market forecasting and customer services.
48
Another author puts it that; "physical distribution is an
integrated set of activities that deal with managing the movement
of products within firms and through marketing channels".
But in the seller' market which is generally a common
experience In Nigeria scene, distribution has taken a back seat
among marketing activities. And it has consequently received little
attention of marketing executives. Prof. 0 Iyada, believes that a
reversal of the traditional direction of content between the buyer
and seller is patently observable. Rather than the seller identifying
where the customer buys literally at the factory gate. The product
(NBC) is the sovereign among the members of the channel.
Having sent two definitions above, it is therefore, crystally
clear that the object of physical distribution is to get the right
quantity of goods, place then at the right point and at the tight
time.
“An efficient physical distribution policy has enabled
companies to attract additional customers by offering better
services or lower prices through physical distribution policies
improvement. Also companies loose customers when they fail to
49
supply goods and service on time as provide in the physical
distribution policies”.
"The size of the distributive sector is often regarded as an
index of development, a large vigorous sector reflecting a higher
level of industrial and regional specialization in the economy,
demand pattern and high level distributive services".
Unfortunately, the situation in most countries especially in
developing nations has shown that this objective is hard to attain.
According to Dr. Ukwu, the situation is not true of Nigeria because
a large distributive sector co-exists with a low level of general
productivity and income. He is of the opinion that the multiplicity
of traders and the extended channels of distributive could be a
national response to the inefficiencies of the total economic
context of production and exchange.
Generally, there are four cogent reasons for this existence of
middlemen in the distributive channel.
1. The economy of operational specialization.
2. The economy of spatial and temporal convenience.
3. The economy of balanced inventories respectively
50
The research notes that even though some people see
middlemen in Nigeria as robbers who exploit both the consumers
and manufacturers for their selfish ends, one should equally look
beyond this to' see the essential functions performed by the
middlemen.
The truth Dauda argue IS that there is a high degree of
business in the control of channels of distribution by
manufactures, hence the high propensity to profit by the channel
members. Soft drinks production companies are equally victims of
these gains instead of carrying out the distribution policies of the
Nigerian Bottling Company. Sales officers and filed inspectors do
little of nothing to penalize erring distributors of Nigerian Bottling
Company.
Furthermore, to support Dauda's argument, D.A. Nnolim
strongly believes that the problem as many have observed, is not
the problem of middlemen but that of a lengthy distribution chain
and unclear definition and duplication of functions. There is also
the problem of too many marginal wholesalers and retails in the
chain. The net effect of the situation is a considerable loss in
welfare to the consumers.
51
This lack of control by the manufacturers like Nigerian
bottling organization at times results to the general scarcity of
goods and services. But note, the scarcity is usually an artificial
one (that is, the deliberate intention of some channel members to
refuse to sell the products they carry in they carry in the normal
course of their business, with the hope to refuse their wealth by
selling later instead of now).
This king of problem tends to force the soft drink consumers
who cannot buy directly from Nigerian Bottling Company to break
their loyalties by switching to other soft drink companies like
Reno, Limca, 7 -up etc to get their order honoured. Thus, the
inadequacies of the marketing system of developing economies are
often glaring in the area of physical distribution and one
frequently hears of distribution "bottleneck" effecting the
development of such economies.
Among the early views which focused on how to improve the
efficiency of physical distribution were the “principles” text of
1990s which mostly covered the strategic possibilities inherent in
the physical supply function.
52
Arch. W. Shaw in his contribution, made a clear statement
about the conceptual .division of marketing into two halves
demand creation and physical supply. He pointed out that "the
relationship between the activities of demand creation and
physical supply illustrated the persistence of the two principles of
interdependence on balance." The researcher strongly believes
that any neglect or failure to co-ordinate the two activities would
certainly upset the .equilibrium of forces which meant efficient
distribution
P.C. Okolie, in a paper titled “effective distribution of locally
produced items in Nigeria”. Trends to support Dauda's opinion on
distribution in Nigeria. He believes that the achievement of
effective and efficient physical distribution system is hampered by
the unfavourable economic conditions emanating from over
dependence on foreign and imported goods, local industries are
unable to procure raw materials to continue full production.
Thus, the industries are pre occupied with production
problems and have little or not time for organization and
management of physical distribution.
53
Generally, there is poor service to the consumer in the effect
to maximize profit especially in the areas of soft drink distribution.
The researcher during his preliminary visits to soft drink
companies observed that material-hand equipment is lacking and
the resultant effect is that consumers are not attended to with the
dispatch they deserved. The loading and off loading of soft drinks
are done manually. Furthermore, there are no research units;
customer service departments to see to the needs are complaints
of the customers.
The above inadequacies defeat the physical distribution
objective of getting the right quantity of goods; place them at the
right point and at the right time.
Paul Cherington, one' to the pioneer contributors to
marketing principles on this ground made some notable
contributions to physical distribution though. He identified four
maladjustment of a mass production economy.
i. Assembling and disbursing
ii. Grading and classifying
iii. Storage
iv. Transportation and moving
54
He further distinguished between commercial and physical
transfer functions as follows:
The commercial function correcting maladjustment between
the p. ace of consumption and place of production should not be
confused with the phenomena concerned with the· mechanical
tasks involved In the physical transfer of goods from place to
place.
Fred. E Clark in his book “principles of marketing” saw “the
exchange functions as one part of marketing and the physical
supply functions constituting of transportation and storage as the
others”. He was the first· person to speak on the principle of
concentration and dispersion in the movement of goods.
“H emphasized on the role of transportation rates as a factor
affecting market delineation and competitive success. He declared
thus: other things being equal, the seller who has the lowest
transportation costs on the materials. Equipment and supplies
which he used and on the shipment of his product to market can
sell at the lowest price, makes the greatest net profit 'and it his
supply is great enough may even control the market”. 'In
conclusion, Professor Olukunle Lyade says that:
55
“Physical distribution design will have to ·align with consumer
outlet patronage preferences. In other words the consumer will be
less prepared to and need to exert much effort to procure his
preferred product poor distribution may thus cause a
manufacturer loss of sales, customers, goodwill, brand loyalty and
share of the market and profitability”.
2. 3: SCOPE OF PHYSICAL DISTRIBUTION SYSTEMS
According to Kotler, there are at least fourteen tasks involved
in physical distribution, there are order processing, customer
service, sale forecasting, distribution planning, inventory
management, package, in-plant warehousing, shipping, outboard
transportation, field warehousing, production planning, receiving,
materials procurement, and in board transportation.
From Kotler’s view above, it is quite glaring that the task of
physical distribution starts from the customer even before
production begins. It is not longer a matter of planning only after
the products have been produced and attempt made to deliver or
make them available. Rather, starting with 'company's target
customer, their needs, location and delivery plans are formulated
with respect to production and inventory levels. For brevity sake,
56
however, the tasks involved in physical distribution would be
discussed under five broad headings known as elements of
physical systems, these are:-
1. Order processing
2. inventory planning and control
3. material handling
4. transportation
5. warehousing
Transportation and warehousing were formerly regarded as a
follow up to the sales already made but today 'these two physical
distribution functions have been recognized as a vital part of
marketing effort to create and to expand sales volume not as a
follow up. Each of these five elements will now be discussed
below.
Order processing
“Order Processing has been described as the physical
distribution activity that involves the handling of all paper work
associated with the procurement of raw materials or' sales of a
firm's products or services:" Some authors refer to it as those
57
activities involved in collecting, checking and transmitting sales
order information.
The speed and accuracy in which orders are processed is a
major determinant of a company's level of customer’s service. If an
order is received and left for days unattended, the final delivery of
the customer's order will be delayed.
Similarly, transmitting wrong quantity of order placed, wrong
shipping advice etc. All these are likely to lower the level of
customer service and …… customer dissatisfaction.
Philip Kotler expressed the following views about order
processing as an activity of physical distribution, he said that,
physical distribution begins with customer's order. The order
department prepares multi copy invoices and dispatches them to
various departments. Items out of stock are back ordered.
Shipped items are accompanied by 'shipping and billing document
with copies going to various departments.
The company and its customers benefit when these steps are
performed quickly and accurately. Ideally, sales representatives
send in their orders every evening, increasingly through computer
58
hookups. The order department processes these quickly and the
warehouse sends tile goods out as soon as possible.
Still on order processing, Osuala said that, the objective of
order processing in rapid, processed accurate orders. To maintain
the time liner aspect of physical distribution, service orders must
be processed quickly. Order processing systems are often
simplistic and inexpensive. Manual system in which a clerk
checks items for ordering, fills out order form, and mail it to the
supplier is commonly used in Nigeria, the supplier in turn,
manually process the order. This method is quite slow and subject
to much Inaccuracy. Many companies in developed countries use
computer to monitor their inventory system, determine the order
and transits it by telephone lines to another computer, which fills
the orders. Such systems process orders virtually
instantaneously, but are very expensive.
Inventory Planning and Control
Encyclopedia in Britancia defines inventory as "a term used
to designate items of property held in stock by a business form, it
includes items that are held for sales in the ordinary course of
59
business and items that are in the process of producing goods to
be sold.
Inventory plans involve the development of adequate
assortments of product for the target markets, therefore "a
systematic approach must be taken to determine efficient order
points to eliminate shortages or avoid too much capital tied up in
the inventory" it is not realistic from a cost pointy of view for a
firm to carry the amount of stock that would guarantee virtually
no stock outs; similarly, carrying too little stock involves the firm
in some undesirable costs.
Generally, three main costs are incurred as regards
inventory, these are:-
(1) Carrying cost (2) Re-order cost (3) Stockout cost
1. Carrying costs are cost of holding too much stock, it includes
storage cost, warehousing, risk of obsolescence, pilferage,
insurance in inventory, cost of protection and cost of capital
tied up in
60
2. Recorder costs are incurred from placing order, It includes
cost of request for order e.g. telephone, stationary etc. cost of
deceiving, handling and transportation cost.
3. Stockout cost results from out of stock situation, they are
cost of disrupted production which lead to extra cost of
accelerating services when inventory becomes available e.g.
overtime, hiring of temporary hands contribution margin on
list sales and extra cost of uneconomic production time. Of
all the three cost only out-of-stock cost can be avoided the
other two can only be minimized; if,
(a) A minimum quantity of inventory is maintained Buffer
or safety stock)
(b) An optimum size of inventory IS ordered at an
appropriate time (the economic order quantity) taking
the concept of economic order quantity into
consideration an Inverse relationship exist between
reorder and carrying cost. When- one is increasing the
other is decreasing. It is noticed that the reorder period
in this case is constant. Therefore the reorder period is'
61
fixed while the reorder quantity varies. This is referred
to as P. system.
The other option to this approach is the Q -system. In this
system, the quantity to be ordered is fixed while the order passed
can vary. The most popular method for calculating this is the
Economic order Quantity (EOQ). It uses the stock level to
determine when to place an order. The formula is:-
EOQ= J 2DS
IC
Where S is the set up of ordering cost D is the annual of
period demand in unit is I is the percentage of annul carrying cost
per unit to unit per unit to unit value C is the price plus variable
order cost per unit
Example
An item costs NS. 00 per unit. It costs 5% per unit to carry. The annual demand for the item is 1000, the order cost is N5.00
EOD = 2DS = 2 X 100 X5 IC 0.5 X 5
10,000 = 1000 = 200 units .25 .5
62
Such a company can minimize its total annual cost if it
orders its inventory 'model objectives it to minimize the cost (that
is ordering and carrying cost) the diagram below shows the
idealized structure of an inventory system.
Constant
Average inventory
10 MI M2 M
The assumptions here are:-
1. Usage rate is constant
2. Time period between the placing and receipt of order is constant
3. Each order is received as soon as it is placed
4. There is no stock out condition.
Number of unit order
Constant usage rate
Average inventory
63
The effect of these four assumptions is shown in the above
diagram, the LM is a linear representation of the first assumption,
the usage rate is constant, inventory are consumed until a level, R
is reached at which point an order for Q quantity' is placed. Since
replacement of inventory is assured to be instantaneous once it is
consumed to M (a point in time). Ii: is automatically replenished to
the point Q.
Inventory is of strategic importance to any firm because the
stock of a firm's inventory is an important indication of how
healthy the firm is, therefore it requires efficient management
system arid control as well as protection from both physical
deterioration and pilferage or theft. The physical quantity of goods
available on hand can be determined through a physical count,
(this is physical inventory system). Even if a perpetual inventory
control system is used a physical is usually made to determine
that goods are actually on hand.
To prevent diversion of the property of the firm (companies)
involves keeping a record of what should be on hand, the charging
of an individual with the responsibilities of seeing that the goods
are used only· for business purposes. The three functions of
64
record keeping, safeguarding and physical counting should be
performed by different individuals. How much should be spent on
physical control of inventory depend on the type of goods of the
industry.
An efficient inventory control system in addition to providing
for 1 he protection of the firms properly aids management by
making continually available information as to the quantity of
goods on hand.
However, the system of control adopted often depends on the
nature of the business, the type and nature of the product and the
funds available for that purposes. Products that are subject to
physical deterioration demand extra care and efficient storage and
handling facilities.
2.4 DESIGNING AND MANAGING DISTRIBUTIONS SYSTEM
A physical distribution system embraces all of physical hand
ling required between the point of production and, the point of
consumption of a given material or product. It could be recalled
that the management has become so enchanted with the methods
of management science that it has forgotten some of the
65
fundamentals-in particular the need to do some better job or
organizing and grouping physical distribution activities.
Under traditional concept, physical distribution starts with
the goods at the plant and efficient ways of placing them into the
hand s of various classes of customers. In the modern marketing
concept view, physical distribution planning should start with the
market consideration and work all the way back to raw materials
need and sources. The firm should start with its target customers,
their location and their needs for product delivery and availability.
Nigerian Bottling Company In their physical distribution policies
always delivers their products where they will enjoy the command
of the market. As a convenience good, they ensure that the
ultimate consumer does not wonder about in search of their
product. Given this condition producing and using activities
typically take place at different times different locations and at
different rates.
Paul .converse, In discussing “positive managerial
orientation” states as follows: “then seller who can make the
quickest delivery, carry stocks, and thus “use less capital with a
66
minimum danger of losing business due to being out of stock has
point out the a decided advantage and turns to be the best seller.”
The author goes further to point out the wisdom of reverse
stocks and strategically located regional stock and as important
strategy for averting or eliminating the competitive dangers of
stock-outs and as well achieve customer satisfaction by
competitively strategically locating the manufacturing plants,
assembly plants and warehousing. Nigerian bottling company has
demonstrated this in their choice of locating deports within the
Enugu metropolis. With these depots full to the bream,
wholesalers and retailers demands for company's products are
met with ease.
A large number of articles have contributed a lot to the
development of an' efficient and reliable system of distribution.
But it seems much emphasis has been: placed on customer
service. This is because the level of service a firm provides it
customers directly affects demand.
This problem does not usually aisle especially where
substitute goods are non-existent such as soft drinks. Some
renowned authors, in an article tilted "physical Distribution
67
service in industrial purchase Decision" suggested that the logistic
planner should set a customer service standard and this could be
in a number of dimensions viz:
1. The speed of providing a customer with his order
2. The extent to immediate availability of all items in the order
3. The reliability of the speed
4. The accuracy of filling the order
5. Undamaged delivery of goods.
It should be noted that in practice, firms try to meet up with
the above but normally experience ail associated increase in cost
of achieving the standard. At this juncture, one can rightly ask the
question; Is a distribution manager needed? or should we
continue to entrust all the marketing functions on the marketing
manager all alone?
In fact, the issue here is not who is who, but who can do
what. The exact point here is on the extent to which distribution
activities can be co-ordinated and the extent to which this
coordination can be achieved through a formal distribution
organization rather than formalized procedures and operating
practices in a traditional pattern. This problem is common in
68
Nigeria where most manufactures do not have policy on
distribution.
Since there "is the tendency for a producer in this our
country to sell off whatever product he has, he feels less
concerned about what is happening within the channels through.
which the goods are made available to users. For this kind of
people, no attempt is made to evaluate and control the channels.
In fact, it may seem offensive but safer to say that most
producers do know which way their products go, the moment it
leaves the factory or warehouse.
In projecting into the future of physical distribution, William
J. Stanton, foresees tremendous challenges and opportunities
awaiting business executives in the year ahead. These pressures,
he believes would be coming from conditions within their
companies and also 'from external environmental forces. Nigerian
Bottling Company is not an exception. He hinted that essentially,
there would be problem of organization with regard to physical
distribution activities.
69
He further stressed the need for effective co-ordination
process in this area. He equally advised that management should
develop and operate efficient flow system so that the right amount
of the rights products can be moved to the right place at the tight
time.
William B. Saunders in his own contribution enumerated
what distribution managers should concern them with, namely:
i. Order processing and inventory control
ii. Supervision of physical distribution functions
iii. Communication and travel,
These, he said would help business in procuring maximum
system efficiency. Basically, each product must be carried at a
level that reflects real demand plus safety stock for several
unexpected variations in demand. Nigerian Bottling Company
being very much aware of unexpected demand during celebrations
like masquerade festivals, trade fairs, chieftaincy title ceremonies,
convocation and matriculation etc always provide for such
occasion. Inventory decision-making involves a two -step decision
process consisting of when to or order re-order points, and how
much to order (order quality). The first one deals with the
70
determination of the level at which the remaining stock justifies
the placement of new order.
The determination or order point depends upon the order
lead-time, usage rate, and the service standard. The high these
are the higher the order point. If the lead-time and the customer
usage rate were variable, the order point would have to the
amount of safety stock. The final order point is set on the basis of
balancing the risk of stock out against cost of over stock. The
second factor how much to order directly affect how often an order
is to be placed. The larger the quantity the less frequently it
becomes. Here again, cost is involved in processing the order. This
consists of the setup cost and the running cost for manufacturers.
If the set up is low, the manufacture can produce the item often
and equal to the running cost.
On the other hand, if the set up cost is high he can reduce
the average cost per unit producing a larger run and carrying a
more inventory.
Therefore, inventory decision involves a comparison of the
order processing cost. The carrying cost items include storage
cost, cost' of capital tied up, taxes and insurance, depreciation
71
and obsolesce, many companies have higher inventory carrying
cost than, necessary because they try to offer their customers the
same service standard on all their goods. For such companies,
information about their customers' economic order quantity (EOQ)
is necessary to enable them services their customers effectively at
a minimum cost. For example, inventory planning involves a
determination of the optimum level of investment, which is,
selecting the appropriate inventory level and controlling inventory
cost. The rule involved in the process of inventory planning is to
select the inventory level that minimizes total long- run cost. The
long-run investments in inventory are generally of the type.
a. The cost of carrying on inventory, Insurance, taxes,
obsolesce, clerical and handling costs and risk.
b. Cost of not carrying enough inventory, cost of disruption,
overtime payment, cost quantity discount, and cost of extra
purchase.
In order to minimize the inventory, large orders have to be
placed and in order to minimize the second cost of not carrying
enough inventory, more frequent small orders have to be placed.
72
The above conflicting decisions of quantity and time can be
resolved by the use of economic order quantity formula.
The economic order quantity refers to the amount of
inventory to be ordered at any one time in order to minimize the
annual inventory cost. It is equally regarded as the quantity of
goods carried in inventory which minimize the total cost of
operation by maintaining an appreciable balance between carrying
costs and ordering costs. It also helps to minimize our stock
sysndrome. The amount of inventory is known as the optimum
order size and it is required whether inventory is in the form of
raw materials or finished goods.
The economic order quality can be determined by busing the
fonnula below:
E.O.Q. = 2DR
1
Where D = Total Demand
R = Cost of processing an order
I = Cost of Maintaining one unit of inventory per
year
Being aware of the above information, the management is
then better placed to determine the level of inventory required for
73
their various products at a minimum cost. Of course, the effective
application of the above formula ensures;
1. A continuous, constant, and known rate of demand
(quantity).
2. A constant and known lad time to order cycle
3. A constant price
4. Satisfaction of all demands
This means that each time an order is placed, there is
certainly that the order will be met. so, having known this, it then
becomes important for firms at this point in time, to be able to
distinguish between their fast moving, moderately moving and
slow moving items and handle them differently.
The researcher observed that the fast moving item in
Nigerian Bottling Company physical distribution in Enugu
metropolis are coca-cola followed by Fanta orange, Fanta
Chapman, Fanta ginger ale, Fanta tonic and lastly by Fanta
lemon. The case of sprite is to low may be because there is no
other competition except 7up Bottling Company. 7up Bottling
Company is not a good competitor because they have not been
very regular.
74
J.F. Stolle, in his 'advice as regards inventory management
was of opinion that management in choosing distribution pattern
should rather tailor their pattern to suit their pattern to suit their,
specific needs objectives. Maximum customer services implies
large: inventories premium transportation multiple warehouse, all
of which raise distribution cost. Minimum distribution cost
implies cheap transportation, low stocks and few warehouses.
A company cannot achieve physical distribution policies
efficiently by asking each physical distribution manager to
minimize his or her own costs. Profit maximum should be of
paramount importance instead of the costs incurred in the course
of executing the distribution.
2.5 CHOOSING A CHANNEL OF DISTRIBUTION
Products do not simply fall into the hands of those who want
or need them. In fact, there can be no buying and selling if there
is no system of distribution because the function of distribution is
to move goods from producers to the consumers.
For instance, the aim of marketing will highly be defeated in
a situation where a businessman has a warehouse full of goods in
75
Lagos but has no means of making them available to his
customers at Enugu. In the same taken, Nigerian Bottling
Company cannot after production fall short of distributing them to
her prospective and potential customers in Enugu metropolis.
The result is that those goods will remain stocked in the
warehouse without being sold. To avert this unintended inventory
or problem therefore, marketers must take deliberate steps in
order to provide the appropriate time and place utility by moving
products from the processor to intermediaries and finally to
ultimate consumers. In a laymen's view, a channel of distribution
is simply the way or mode through which goods and services are
made available to the market.
According to E. Jerome Mc McCarthy, “A channel of
distribution is any series of firms or individuals who participate in
the How of gods and services from producer, to final user or
consumer”.
Levi Chukwura Ezeaku sees channels of distribution as “The
different avenues open to any producer whereby he can get his
product as into the hands of those who heed them”.
76
In his "strategies approach to choosing distribution channel”
J.M. Elegbide, stated that in designing the channel, the form's
policy makers should study the needs of each segment of
customers to decide the kinds and number of retailers to use and
the distribution efforts between the manufacturer and retailer.
He further stated that the main characteristics of the
strategies methods are that it IS analytical, strategic and
sequential and specific to the firm using it.
He also added that instead of reclining on the traditional
textbook method of choosing channels, policy makes should be
more analytical. By this, he meant that there should be a
systematic examination of the channel members, the type of
product, and functions the channel members expected to perform
these functions efficiently and combination of these channel
members. The structure must be solidly based on the needs of the
market segment; the form has to serve and must systematically
take into account, the resources and capabilities of the firm and
its completive advantage versus competing' firms. It is useful to
determine before hand, whether several will perform ether by a
single institution or the function including the manufacturer. The
77
type of products influenced the choice of channel to use soft
drinks being the products of Nigerian Bottling Company and
convenience goods like all other industrial goods use short
channels. This is because the markets for these types of products
are large and are scattered in every geographical areas. The
proximity of the market makes for direct selling which favours the
use of short distribution channel.
Based on this, the length and breath of the channel is
determined to a great extent by the product and geographical
dispersion of the customers.
Two major criteria are said to determine a manufacturer's
choice of a channel, economic' and control. The economic criterion
relates to the ability of a channel member to be able to exploit the
full sales potential and· ensure adequate and efficient coverage of
an assigned territory.
The second is that the manufacturer should be able to exert
considerable degree of control on the channel. This may be in
terms of price maintenance, sales promotional activity
merchandizing or even missionary work.
78
Empirical observation has shown that these criteria do not
apply in Nigeria situation. Channel members are selected on
criteria that have little to do with performance. Rather,
“distributions is given on a reciprocal basis, or to centers of power
or just an act of goodwill”. No wonder, most of the distributors of
some soft drinks companies are illiterates who know little or
nothing about the products they carry. In most manufacturing
concerns in Nigeria, Soft Drink. Bottling Company not exceptions
distributorship IS exchanged among proxies of marketing
managers. The new rulers in government also send a list of their
spouse of proxies for distributorship appointment in the
government owned companies. It is my belief, said by Prof. Iyada
that second Tier Foreign exchange Market (SFEM) will change all
these and will restore physical distribution as a vital element in
profitable and consumer -oriented marketing.
Furthermore, Williams J. Stanton laid down four steps that
include the choice of channels to employ.
They are:
a. Market Consideration:
79
In choosing a distribution channel, it is always very difficult
to determine whether a product is intended to serve a consumer
or industrial market. If it is for consumer market of course
retailers will be included in the channel.
All other market variables that are considered here are the
number of potential customers. The geographic concentration of
market and the order size. These variables will determine whether
to sue one, two or three channel system in the disposal of the
company's products.
b. Middlemen Consideration'
Selection of distribution channel is also influenced by the
services provided by the middlemen. This simply means that each
producer should select middlemen who will provide those
marketing services that the producer Nigerian Bottling Company
either is unable to provide or cannot economically perform.
Furthermore, the middlemen whom a product desires may not be
available, Nigerian Bottling Company while appointing middlemen
ensures that the financial well-being of the distributors are not in
doubt.
80
Control criterion-territorial coverage i.e. how far into the
market a distributor will go. Nigeria Bottling 'Company also
ensures the adaptive criterion of the middlemen.
This will make .Nigerian Bottling Company known the
distributor's product line to know other related products he is
carrying, whether complementary or competitive products. The
sales strength is the market coverage, quality and quantity of his
line. His physical logistics capability whether he has warehouse,
storage facilities, delivery facilities.
Finally, the Nigerian Bottling Company ensures that the
distributor enjoys management capability-whether he has the
adequate manpower to carry out the project. Finally,
manufacturer's choice of channels is limited because some of their
marketing policies are not acceptable to certain types" of
middlemen.
c. Product Consideration:
The variables that are considered here are the unit values
perish ability, and the technical nature of the product. The
producer looks at other variable like bulk, post sales service,
custom design and product mix. The producer-often chooses to
81
sell directly to the users, if his product is of technical nature.
Perishable products use short channels. The unit value of product
affects the amount of funds available for distribution.
Consequently, the lower the unit value, the longer usually
are the channels of distribution and vice versa.
d. Company Considerations:
The variables usually considered here that affect the choice
of channels of distribution are the financial resources of the
company, the ability of management, and the desire for channel
control, Channel 1 and 2 are clearly direct channels, channel 3
through 5 would be best classified as indirect channels. Physical
distribution policies objectives cannot be realized with the
elimination of the wholesalers and retailers. Their involvement in
the coordination and management of marketing mix and functions
contribute. a great deal to the profit maximization of the
companies which Nigerian Bottling Company is one.
82
Nigerian Bottling Company is one, Nigeria Bottling Company
uses channel 2 in her physical distribution policies In Enugu
metropolis.
Channel 2 account for about 90% of the distribution
activities of the company where driver and some salesmen are
sued to supply its numerous retailers scattered all over Enugu in
then trucks and vehicles.
As opposed to the unethical practices of appointing the
distributors based on connections, here under are the acceptable
criteria for selecting the channel participation.
i. The middlemen must be accessible to the market that the
company wants to reach.
ii. The channel members must be able to carry adequate stocks
of the company products.
iii. Must provide effective promotional programmes, advertising,
personal selling, sales promotion, and publicity.
iv. Must have the ability to provide services to customers credit
delivery installation, and product repairs and replacement.
83
v Ability to pay its bills on time and equally have capable
management.
The Nigerian Bottling Company and other soft drink
managements should be able to verify or quantity costs inherent
in each alterative channel and the performance of the channel in
line with the overall corporate goals before arriving at the decision
of a channel.
The organization should equally be dynamic, for instance, a
major change in a company's distribution system requires an
organizational realignment. If a new distribution network appears
necessary, new responsibilities are created and old ones altered.
Management in the light of this must assign responsibilities to
transportation, warehousing, and inventory control. To yield a
better result, these functions must be properly coordinate with
manufacturing (or buying) and selling (or merchandizing).
The diverse of an important department like' sales and
distribution will make the production circle incomplete.
additionally, the organizational objective and goals will not be
achieved. Sales and distribution comprise field, selling, selling and
distribution channels, warehousing, transport, sales reporting,
84
sales analysis, forecasting, sales budgets and quotas, sales
communication.
2.6 ECONOMIC IMPORTANCE OF MIDDLEMEN.
Manufacturer's wholesalers and retailers take legal title to
products as they flow through the marketing channels. The
manufacturer cannot achieve adequately the organizational
objectives of satisfying the ultimate consumers through physical
distribution polices' without the cooperation of the middlemen.
Besides, 90% manufactures survival the tide of economic
strangulation and depression as a result of the middlemen or
intermediaries.
Wholesalers but bulk and resale to retailers in small lots and
to other wholesalers as well as to commercial users. Retailers on
other hand buy in lots and resale to consumers or household
users. Both the wholesalers and the retailers are engaged in the
sorting process which involves:
1 Sorting
2 Accumulation
3 Allocation
4 Assortment
85
i Sorting out:
Involves separating large heterogeneous goods into smaller,
more homogeneous group e.g., a large organ grove or a heap of
orange would certainly contain some that are not suitable for
producing canned orange juice e.g.,
a. Some would be two ripened
b. Some would be diseased
c. Some not ripe
d. Some could be good only to be sold as eating oranges.
Wholesales who break bulks by buying in large quantities and
selling in similar lost are assembles, example, dealers on oranges,
eggs, corn blades, pears, cold nuts, tomatoes, periwinkles,
cabbage, mangoes, beans and fruits.
In case of soft drinks bottling company, the middlemen sort
out the broken bottles, incomplete bottles in the creates.,
uncorked bottles by corking machines at the factories etc, the
wholesales is prone to buy from various local producers, then
assemble the lot before sorting and finally selling to retailers etc.
Assemble are very pronounced in some open markets across
86
Nigeria, women are very 'commonly seen dominating this
wholesale market.
ii. Accumulation
This consists of assembling group of homogenous goods from
many different sources insufficient quantity for mass
production or mass marketing. For example, producers of
tomatoes puries buy from special wholesalers, who specialize
in buying, accumulating and supplying specialized type of
tomatoes use for the production of tinned puries. Producers
of refined palm kernel oil-have special wholesale suppliers
characteristically crushed to mill the oil there from.
iv. Allocation
This consists of separating large amount of goods into
smaller quantities suitable for resale to retailers and other
wholesalers. For instance, kerosene dealers would purchase
tanker loads of kerosene and would distribute to various small
scale street-side jerry-can dealers who finally sell to consumers.
The Nigerian Bottling Plc drivers large tucks of soft drink creates
which they distribute to small holder wholesalers are retailers who
resale to consume.
87
iv. Assortment
This is the large stage of the assortment process. Assortment
occurs when someone usually the retailers assembles diverse
supplies in a single place to meet customers demand. No one
wants to go to separate stores for milk, bread, 'sugar, butter and
meat. All retailers are in the business of building assortments.
That match the demands of the consumers who patronize their
stores. Wholesalers and retailers of Nigeria Bottling Company
ensure that different brands like coca-cola 25cl, 30cl, 15cl,
sprites, Fanta etc are available.
Marketing intermediaries or marketing channels are very
vital for the realization of organizational objectives arid its
economic importance cannot be overemphasized
88
REFERENCES
Borsodi, R. (1984): The Distribution Age; New York: o. Appleton and coy.
Clerk, F.E. (1922): Principles of Marketing,· New York: The
Macmillan Company. Dauda, O.A. (1979): Business Times, February 6. Ejioffor, N. (1979): The Business of Hoarding in Marketing In
Nigeria, Edited by J.O. Onah; London: Cassel Ltd .. El-Rufai, N.A. (1984): New Nigerian Newspaper January 27 Ezeaku, L. C. (1980):, Commerce for the Certificate Year; Enugu:
Fourth Dimension Publishing Co., Ltd. Frank, s. (1998) In Maclaughlin and Robert, C. ·P.(2000):
Quantitative Techniques for Management Decision; Boston: Houghton Mifflin Ltd.
Kotler, P. (1980): Principles of Marketing, 5th Edition; London:
Prentice International, Inc. McCarthy, J. (1981):, Basic Marketing: A Managerial Approach,
7th Edition; Homewood: III Irwin. McCarthy, J. and William D. P. Jr. (1984): Basic Marketing, -8th
Edition; Homewood: Minols Richard D. Irwin, Inc. Nnolim, D.A (1979): "Marketing as a Tool of Economic
Development" in Marketing in Nigeria, Edited by J. O. Onah; London: Cassell Ltd.,
Nwaogwu, C. (1979): "Marketing Planning and Organization in
Nigeria Enterprises " In Marketing in Nigeria, Edited by J. 0 Onah; London: Cassell Ltd.
89
Okolie, P. C. (1999): Paper on Effective Distribution of Locally Produced Items in· Nigeria (Unpublished).
Olukunle, I. (1987): "Implications of Second-Tier Foreign
Exchange Market (SFEM) for Marketing Activities". A paper presented at the Workshop of the Nigerian Marketing Association, Lagos, on 25th September.
Paul, D. (1927): "Physical Distribution Service In Industrial
Purchase Decision", Journal of Marketing, American Marketing Association.
Saundres, B. W. (1969). "Designing and Distribution System" in
Bowertox, D.J. et al, Physical Distribution Management (Book of Readings); London: Macmillan company)
Saw, W. (1916): An Approach to Business Problems; Cambridge:
Harvard University. Stanton, W.J. (1981): Fundamentals of Marketing, 6th Edition;
New York: McGraw Hill Book Company Stolle, J.F. (1967): Harvard Business Review, vol. 45, No.4 Ukwu, 1. U. Distribution in Nigeria (Unpublished work) Unertington, R, (1912). The Elements of Marketing; New York: The
Macmillan Company.
90
CHAPTER THREE
3.0 RESEARCH DESIGN AND METHODOLOGY:
This research chapter will present the researcher’s
methodology and processes involved in carrying out the research
project. The chapter will be divided into sub-sections as
presented below:
3.1 RESEARCH METHOD
The type of method to be used in any research undertaking
is determined substantially by the nature of the research problem
and purpose of the study, the use of descriptive or normative
method of research is regarded by the researchers as logically
sound and adequate for getting solutions to the problem posed by
the study. The researcher therefore, applied the survey method of
research for the study.
3.2 RESEARCH DESIGN
The researcher applied the multiple data gathering technique
in order to adequately cover research questions and hypotheses
and to achieve precise and reliable result. The researcher thus
91
used questionnaire and interview schedule for the purpose of
primary data collection.
3.3 METHOD AND SOURCE OF DATA COLLECTION
The researcher employed the use of multiple, data gathering
technique in order to adequately cover research questions and
hypotheses and to achieve precise and reliable result.
The exploratory survey method which embraces questions
and interview will be used as primary and secondary data
gathering instrument, since according to Busha (1986),
researchers consider it to be' the most suitable techniques for
discerning "the kind of information needed by users as the source
on which most researchers commonly rely". The research thus,
used questionnaire and personal interview for. the purpose of
primary data collection.
3.2.1 Questionnaire
The researcher will make use of questionnaire to elicit
information from field research.
The questionnaire will be administered in two (2) categories
as follows:
92
1. For the Management & Staff of NBC Plc;
2. For the Distributors/Consumers of NBC Plc.
It will be randomly administered to a statistically determined
sample size of 245 from the entire population of the universe.
3.2.2 Interview Method
The method will be used to extract responses to questions
that were not included in the questionnaire, but which are vital to
the research, personal structured and unstructured interviews
will be conducted with some Consultants in Management,
Marketing, Communications and Public Relations.
3.2.3Libraries
Materials from libraries and other research units which
include books, journals, weeklies, unpublished projects, and
dailies will be used as secondary source of data collection. This
will be employed essentially to provide a theoretical framework for
the study. Both private .and public libraries will be used or
consulted.
These in addition to weakness of the primary data gathering
methods thereby, enhances research reliability.
93
3.4 POPULATION FOR THE STUDY:
The population for this study is made up 'of the Staff,
Management and Customers of the Nigerian Bottling Company Plc
(NBC) Enugu. Since the exact number of NBC Plc customers
cannot be easily determined (notwithstanding the 875 staff
strength of NBC Plc, Enugu, it is therefore, regarded as an infinite
population.
3.5 DETERMINATION OF SAMPLE SIZE:
To determine the sample size, the researcher conducted a
pilot survey, in which twenty (20) of the research questionnaire
were administered randomly on the Management & Staff and the
Distributors/Consumers of NBC Plc.
Out of the number administered, 16 were correctly' filled and
returned. It was therefore, taken as a positive responses. The
remaining 4 represented both the ones that were wrongly filled
and rejected. These were regarded as negative responses. The
percentage of response therefore, is 80 and, 20 respectively.
To calculate the optimum sample size, the researcher applied
the Freud and Williams model of sample size determination,
94
calculated at 95% confidence level of significance and 5%
standard error, which formula is:
N = (z)2 (pg)
e2
Where N Sample Size
P = Percentage of positive response
Q = Percentage of negative response
E = Percentage of error
Z = Normal variant for the desired level of
confidence.
Substituting and solving for "N"
N = (1.96)2 (80.20)
25
= 3.8416.1600
25
= 245
3.6 PROCEDURE FOR DATA GATHERING:
Research questionnaires will be given to the people
scientifically selected for this study. They will be requested to
either circle or tick the 'option that best suited their choice and
also fill the blank spaces, with whatever they felt were answers.
95
In order to avoid delay at the same time, ensure high
percentage return of questionnaires, they will be distributed by
respondents
3.7 VALIDITY AND RELIABILITY OF DATA INSTRUMENT
Validity as used here is the degree of extent to which an
instrument actually' measures what it is intended to measure.
Therefore, an instrument is tailored to achieve research objectives.
Thus, the instrument used for this research will be validated
by ensuring that the questions are structured in a manner that
will enable the research obtain information relevant to the
purpose and objectives of the study.
In order to maximize reliability of the instrument used for
the research, the investigator will ensure that questions will not
be ambiguously presented to respondents in a manner likely to
communicate different meaning that could generate inaccurate
and inconsistent responses. The researcher also maintain
objectivity by not fielding leading questions. A pilot survey using
the instrument will be carried out to ensure validity and
reliability.
96
3.8 METHOD OF DATA ANALYSIS
Data collected will be coded, grouped into frequencies,
computed and arranged into tables for easy references and
analysis.
Presentation method to be used will include: simple
percentages, tables and a pie-chart.
3.9 TEST OF HYPOTHESES
The main method to be used in analysing data collected in
this study will be simple percentage for testing the research
questions and Chi-Square for testing the hypotheses.
The formula for percentage is given as:
a x 100
b 1
Where a = numerator (number of respondents to an item).
b = denominator (total respondents in the simple
100 = Percentage
The acceptable criterion in 50%. Where the percentage response
is 50% and above, then the statement holds true or otherwise.
Where it is less than 50%, it hold as untrue or otherwise.
97
Formula for Chi-Square is as follows:
X2 = (nij – eij)2
Where X2 = Chi-square
nij = Observed frequencies
eij = expected frequencies
The degree of freedom is determined with the following formula:
df = (r-1) (c-1)
where r = The number of rows
c = the number of columns
df = (3-1) (2-1)
= 2 x 1 = 2
:. X2 (2) 0.05 = 5.991
98
REFERENCE
I
Ikeagwu, E (1998). Groundwork: of Research Methods and
Procedures; (UNEC): Institute for Development studies.
99
CHAPTER FOUR
4.0 ANALYSIS AND INTERPRETATION OF DATA
To analyse the data collected, this chapter is divided into two
sections viz, questionnaire administration and test of hypotheses.
These sections are hereby presented in a chronological sequence
In line with the research objectives, questions and hypotheses.
4.1 QUESTIONNAIRE ADMINISTRATION - SEX AND AGE
DISTRIBUTION OF RESPONDENTS
It was viewed that age differences of the respondents will be
considered in the distribution of the questionnaire. This was
based on the assumption that there is relationship between age
and interest in the level of appreciation. The Table below
summarizes the distribution or respondents by age and sex.
TABLE 4.1 SEX AND AGE DISTRIBUTION OF RESPONDENTS
AGE RANGE IN YEARS FEMALE MALE TOTAL
18-30 yrs 10 12.5 20 12 30 12.25
31-40 yrs 35 43.75 80 48.9 115 47
41-50 yrs 30 37.5 50 30 80 32.65
51 and above 5 6.25 15 9.1 20 8.10
100
TOTAL 80 100 165 100 245 100 SOURCE: RESPONSE TO RESPONDENTS QUESTIONS No
1 and 2.
In table 4.1 above, a summary of the distribution of
questionnaire by age consideration was tabulated. The table
indicates that 80 questionnaire were administered on men.
Further, the analysis of sex and age distribution revealed that 80
out of 245 subjects, representing 32% were female, while the
remaining 165 (68%) represented the male.
On the 'whole, the administration of the questionnaire were
used on three categories of respondents.
(i) The management and staff of NBC Plc.
(ii) The Distributors of NBC Plc
(iii) - The Consumers of NBC Plc products
The total number of respondents and questionnaire
administered were presented in table 4.2.
101
TABLE 4.2 TOTAL NUMBER OF RESPONDENTS
RESPONDENTS NBC PLC PUBLICS
NO OF COPIES
ADMINISTERED
NO OF USABLE RESPONSE
COPIES RETRIEVED
RATE %
MGT STAFF 85 80 34.70
DISTRIBUTORS 80 80 80 32.65
CONSUMERS 80 80 32.65
TOTAL 245 240 100
Table 4.2 above, shows the total number of respondents of
this research study. Out of a total of 240 subjects, 80 were the
NBC Plc MGT & Staff, while 80 each were the NBC Plc
Distributors and consumer respectively.
Furthermore, out of the. 245 questionnaires distributed to
the three segments of respondents, 240 were retrieved and found
usable. This means 98% of the questionnaires distributed were
usable.
102
TABLE 4.3: KNOWLEDGE OF THE DISTRIBUTION STRATEGIES OF NBC PLC Response Variables
Respondents Percentage MANAGEMENT DISTRIBUTION Total STAFF CONSUMERS
No % No % No %
Yes 120 100 120 100 240 100
No - - - - - -
TOTAL 120 100 120 100 240 100
SOURCE: Response to NBC Plc internal and external publics Question No.3.
Table 4.3 above, indicates that both Internal and external
publics of NBC Plc distribution strategies of NBC Plc.
TABLE 4.4: PERCEPTION (FEELING/IMPRESSION) ABOUT NBC PLC DISTRIBUTION STRATEGIES
Response Respondents Percentage Variables
INTERNAL EXTERNAL TOTAL - , PUBLICS PUBLICS
No % No % No %
Positive 100 84 90 75 190 79.5
Negative 10 8 90 17 30 12.5
Don't know 10 8 10 8 20 8
103
TOTAL 120 100 120 100 240 100 SOURCE: Response to NBC Plc internal and external publics
Question No.4.
Table 4.4 above, shows that the NBC P1c publics have
positive perception about the distribution strategies. This can
be buttressed by the fact that a total of 190 respondents,
representing 97.5%gave their affirmation to the above
assertion.
And this can be represented by a pie chart.
Fig. A pie chart representing the perception of the NBC Plc
internal and external publics.
104
TABLE 4.5 DISTRIBUTION POLICIES BEING IMPLEMENTED ALONG THE LINE OF SET OBJECTIVES
Response Variables Respondents Perception
INTERNAL PUBLIC
EXTERNAL PUBLIC TOTAL
No % No % No %
Yes 80 67 70 58 150 62.5
No 30 25 35 29.5 65 27 Don't know 10 8 15 12.5 25 10.5
- TOTAL 120 100 120 100 240 100 SOURCE: Response to NBC Plc internal and external publics
Question No 5.
Table 4.5 above, indicates that the distribution are
implemented along the line of set objectives. This can be proved
by the fact that a total of 150 respondents, representing 62.5%
gave their nod to the above assertion.
105
TABLE 4.6: VARIOUS DISTRIBUTION USED BY NBC FOR
TACKLING DISTRIBUTION PROBLEMS
Response Variables Respondents Percentage
INTERNAL PUBLICS
EXTERNAL PUBLICS TOTAL
No % No % No %
Multiple distribution 8 7 5 4 13 5.5 Selective distribution 8 6.5 21 18 29 12.5 Exclusive distribution 4 3.5 4 3 8' 3
All of the above 100 83 90 75 190 79
N one of the above - - - - - -
TOTAL 120 100 120 100 240 100 SOURCE: Response to NBC Plc internal and external publics
Question No 6.
Table 4.6 above, shows that the company's distribution
strategies use in tackling their distribution problems. And this can
be proved by the fact that a total number of 190 respondents,
representing 79% agreed to the above assertion.
106
TABLE 4.7: EXTENT GONE BY SALES DEPARTMENT IN
COPYING WITH SHORT DELIVERY OF TRUCKS.
Response Variables Respondents Percentage
INTERNAL PUBLICS
EXTERNAL PUBLICS TOTAL
No % No % No %
Very great extent 45 37 25 21 70 29
Great extent 55 46 75 62.5 130 54
Little extent 20 16.5 20 16.5 40 17 - ,
SOURCE: Response to NBC Plc internal and external publics
Question No 7.
Table 4.7 above indicates that NBC Plc has gone to a great extent
in copping with the short delivery trucks. This - dill be
buttressed by the fact that a total number 130 respondents,
representing 54% gave their approval to the above assertion.
107
TABLE 4.8: PHYSICAL DISTRIBUTION POLICIES OF NBC PLC
HAVE ENCOURAGED CONSUMER LOYALTY
Response. Respondents Percentage
Variables
- INTERNAL PUBLICS EXTERNAL
PUBLICS TOTAL
No % No % No %
Yes 110 92 115 96 225 93.73
No - - - - - -
Don't know 10 8 5 4 15 6.25
TOTAL 120 100 120 100 240 100
SOURCE: Response to NBC Plc internal and external publics
Question No 8.
Table 4.8 above, indicates that the physical distribution
policies of NBC Plc have encouraged consumer loyalty. And this
can be buttressed by the fact that a total number of 225
respondents, representing 93.75% gave their affirmation to the
above assertion.
108
TABLE 4.9: ADEQUACY IN THE SALES DEPARTMENT
PROGRAMMES FOR THE STATISFACTION OF THE EXISTING
AND PROSPECTIVE CUSTOMERS
Response Variables Respondents Perception
Internal publics External
publics Total
No % No % No %
Yes 70 58 90 75 160 67
No- 10 8.5 , 5 4 15 6
Don't know 40 33.5 25 21 65 27
TOTAL 120 100 120 100 240 100
SOURCE: Response to NBC Plc internal and external publics
Question No 9. .
Table 4.9 above, indicates that there is adequacy in sales
department programmes for the satisfaction of existing and
prospect customers. This can be proved by the fact that a total
number of 160 respondents, representing 67% gave their
approval to the above assertion.
109
TABLE 4.10: IF THE CHOSEN CHANNELS OF PHYSICAL
DISTRIBUTION HAS AFFECTED THE CONSUMER PATRONAGE
OF THE PRODUCTS
Response Variables
Respondents Percentage . Internal
publics External publics Total
No % No % No %
Yes 45 37.5 30 25 75 3l.25 - No 60 50 80 67 140 58.34
Don't know 15 12.5 10 . 8 25 10.41 TOTAL 120 100 120 100 240 100
- SOURCE: Response to NBC Plc internal and external publics
Question No 10.
Table 4.10 above, shows that the NBC Plc chosen channels
of physical distribution have made an impact on the consumer
patronage. And this can be buttressed by the fact that a total
number of 140 respondents, representing 58.34% gave their
affirmation to the above assertion.
110
SECTION TWO (2): TEST OF YPOTHESES
1. . Ho: The physical distribution policies of the Nigerian
Bottling Company have not encouraged Consumer
loyalty of the company's product.
Hi: The physical distribution policies of the Nigerian
Bottling Company have encouraged Consumer
loyalty of the company's product.
CHI-SQUARE TEST FOR TABLE 4.10 (CONTINGENCY TABLE)
RESPONSES
RESPONDENTS YES NO DON'T TOTAL % OF
KNOW RESPONDENTS
Internal Publics 70(80) 10(7.5) 40(32.5) 120
External Publics 90(80) 5(7.5) 25(32.5) 120
TOTAL. 160 15 65 240 Source: Table 4.10
Values in the big cells are observed frequencies. Computed X2 = (nij - eij)2
Where nij = Observed frequencies
eij = Expected frequencies .
111
oi ei oi-ei (oi-ei)2 (Oi-ei)2/ ei
70 80 -10 100 1.25
10 7.5 2.5 6.25 0.833
40 32.5. 7.5 56.25 1.730
90 80 10 100 1.25
5 32:5 2:5 6.25 1.730
25 32.5 7.5 56.25 1.730 . . 7.626
The degree of freedom is determined with the following formula:
df = (r-I) (C-I)
Where r = the number of rows
C = the number of columns
df = (3-1) (2-1)
= 2 x 1 = 2
.'. X2 (2) 0.05 = 5.991.
With the 2 degree of freedom at 5% level of significance-is
5.991 compared with the calculated value of 7.626.
Decision Rule: Reject Ho if X2 calculated is greater than X2 given
(5.991), otherwise do not reject Ho. Since X2 calculated i.e. 7.626
is greater than X2 given i.e. 5.991, we therefore, reject, Ho (Null
112
hypotheses). The conclusion therefore, is that the physical
distribution policies of the Nigerian Bottling Company have
encouraged consumer loyalty of the company's product.
HYPOTHESES TWO (2)
2. Ho: The sales department programmes to satisfy both
existing and prospective customers are not
adequate.
Hi: The sales department programmes to satisfy both
existing and prospective customers are adequate.
CHI-SQUARE TEST FOR TABLE 4.6 (CONTINGENCY TABLE)
RESPONDE RESPONSES
- NTS
YES NO DON'T TOTAL % OF KNOW RESPONDENTS ,
Internal Publics 110(102.5) , 2(3.5) 8(14) 120
External Publics 95(102.5) 5(3.5) 20( 14) 120
TOTAL 205 7 28 240 Source: Table 4.6
Values in the big cells are observed frequencies.
Computed X2 = (nij - eij)2
113
Where nij = Observed frequencies
eij = Expected frequencies .
oi Ei oi-ei (oi-e i)2 (Oi-ei)2/ ei
110 102 7.5 56.26· 0.548
2 3.5 l.5 2.25 0.642
8 14 -6 36 2.571
95 102.5 7.5 56.25 0.542
5 3.5 1.5 2.25 0.642
20 14 6 36 2.571
7.522
The degree of freedom is determined with the following formula:
df = (r- I) (C- I),
Where r = the number of rows
C = the number of columns
df = (3-1) (2-1)
= 2x1=2
:.X2 (2) 0.05 = 5.991.
With the 2 degree of freedom at 95%level of significance is
5.991 compared with the calculated value of 7.522.
114
Decision Rule: Reject "Ho is X2 calculated is greater than X2
given. Since X2 calculated is 7.522 and greater than X2 given i.e.
5.991; we therefore, reject Ho (Null hypotheses) and accept HI
(alternative hypotheses). The conclusion therefore is that the
sales department programmes to satisfy both existing and
prospective customers are adequate.
HYPOTHESES THREE (3)
3. Ho: The chosen channels of physical distribution have
not affected the consumer patronage of the
company's products.
Hi: The chosen channels of physical distribution have
affected the consumer patronage of the company's
products.
CHI-SQUARE TEST FOR TABLE 4.11 (CONTINGENCY TABLE)
RESPONDENTS
RESPONSES
PROMPT NOT NOT TOTAL % or
PROMPT RESPONSIVE RESPONDENTS
Internal publics 45(37.5) 60(70) 15(12.5) 120
External publics 30(375) 80(70) 10(12.5) 120 TOTAL 75 . 140 25 , 240
Source: Table 4.11
115
Values in the big cells are observed frequencies, while those in
brackets are expected frequencies.
Computed X2 - (nij - eij]?
Where nij = observed frequencies
Eij = expected frequencies
oi Ei oi-ei (oi-e i)2 (Oi-ei)2/ ei
45 37.5 7.5 56.25 1.5
60 70 10 100 1.428
15 12.5 2.5 6.25 0.5
30 37.5 7.5 56.25 1.5
80 70 10 100 1.428
10 12.5 2.5 6.25 0.5
6.856
The degree of freedom is determined with the following formula:
df = (r- I) (C- I), Where r = the number of rows
C = the number of columns Df = (3-1) (2-1)
= 2x1=2
:.X2 (2) 0.05 = 5.991.
116
With the 2 degree of freedom at 95%level of significance is
5.991 compared with the calculated value of 6.856.
Decision Rule: Reject Ho is X2 calculated is greater than X2
given. Otherwise do not reject. Since X2 given = 5:991, we
therefore, reject Ho (Null hypotheses) and accept HI (alternative
hypotheses). The conclusion therefore, is that the chosen
channels of physical distribution. have affected the consumer
patronage of the company's products.
117
REFERENCES
Uzoh, Stanley ILEA (2002): "A Critical and comparative Analysis of the Public Relations Strategies In promoting Effective Customer Relations". An unpublished project report submitted for the Award of a postgraduate Master of business Administration (MBA) degree in Marketing, Faculty of Management Science, Awka, Anambra - State. August.
118
CHAPTER FIVE
5.0 SUMMARY OF FINDINGS, CONCLUSION AND
RECOMMENDATIONS
A successful company is not necessarily the one that
succeeds in selling the products it manufactures just for now, but
the company whose selling activities as planned and executed by
the company's sales force is self sustaining; such a sustenance
requires a high degree of creativity beyond the skills of fast
talking salesman and other antiquated confusion tactics still
evident in selling activities in Nigeria.
It is against this background that the researcher makes an
in depth investigation into the appraisal of physical distribution
policies of the Nigerian Bottling Company in Enugu.
5.1 SUMMARY OF FINDINGS
Based on the data analysis and. interpretation, the
researcher arrived at the following findings:
The Management & Staff and Distributors of NBC Plc
are knowledgeable of distribution strategies of NBC Plc;
119
NBC Plc Internal and External Publics (Management &
Staff and Distributors/Consumers) have positive
perception about the distribution strategies of NBC Plc;
The distribution policies of NBC Plc are implemented
along the line of set objectives;
The various distribution strategies used by NBC Plc for
tackling distribution problems include; multiple
distribution, selective distribution and extensive
distribution strategies;
The NBC Plc Distribution Department has gone to a
great extent in coping with short delivery of trucks;
Physical Distribution policies of NBC Plc have
encouraged their consumers' loyalty;
There is adequacy in NBC Plc Sales Department
programmes for the satisfaction of existing and
prospective customers;
The NBC Plc chosen channels of physical distribution
have made impact on the consumer patronage;
120
5.2 CONCLUSION
The importance of distribution towards attainment of the
company’s marketing goals and objectives cannot be
overemphasized. In fact, some authorities are the backbone of
marketing and commerce and that is why marketing has been
synonymous with distribution. Thus, an effective distribution
strategy is as important as product itself. This goes to support
the view that for effective and efficient distribution to occur,
product and all other departments necessary to enhance the
satisfaction of customers’ need must work as a team.
Having seen the benefits or rather, the crucial role an
efficient physical distribution system can play, it then become
imperative that the Nigerian bottling Company Plc should
maintain and even improve on the existing physical distribution
policies. This will enable the company to be in a better position in
a more efficient manner which will then enhance its repeat
purchase/patronage motive/objective.
The Nigerian Bottling Company will continue to be a clear
leader in soft drink manufacturing by employing a planned,
coordinated and controlled physical distribution system to serve
121
her distributors and consumers in every nook and cranny in
Enugu metropolis.
The Nigerian Bottling Company will therefore, benefit more
to continue with the present distribution policies of
mass/intensive/multiple, selective and exclusive. With such well
defined and coordinated organizational physical distribution
channels the company will continue to be clear leader in soft
drink manufacturing.
5.3 RECOMEMNDATIONS
Based on the above findings, the researcher therefore,
recommends the following measures to make the prevailing
physical distribution policies of the Nigerian Bottling Company
Plc ill Enugu more effective.
1. For effective and efficient distribution system to take
place, there must be a corporate planning of all the
departments concerned. Transport, sales, production,
marketing and purchasing should all work as a team to
plan how customers' can be satisfied best without
bottlenecks. , .
122
2. More powers or authority should be given to the depots
managers to allow for effective operation instead of a highly
centralized system of management. This will enable them to
use their own initiatives whenever the need arises, instead
of sticking to the rigidly established guidelines.
3. The company should device a more effective and efficient
way of monitoring the activities of their distributors.
Establishing more depots to allow for direct dealings with
the real consumers can do this. The various managements
should also provide management services such as training,
inventory management study, as well as sending sales
people to help develop' the marketing programmes (display
arrangements, location decisions and so on) for the
distributors. This will help the distributors to maintain the
required inventory as well as operate efficiently.
Furthermore, disciplinary measures such as terminating
their distributorship rights or curtailing their quota should
be meted to erring ones.
123
4. There should be positive and clear out approach for
appointing distributors of which honesty, integrity and
code of ethics be developed for distributors. Educational
backgrounds should also form part of the qualifying
criteria for appointing distributors.
In summary, it is envisaged that the present physical
distribution policies of the Nigerian Bottling Company in Enugu
metropolis will improve if the above recommendations are
implemented.
124
BIBLIOGRAPHY
Borsodi, R. (1984): The Distribution Age; New York: O. Appleton and coy.
Clerk, F.E. (1922): Principles of Marketing; New York: The
Macmillan Company. Daucla, O.A. (1979): Business Times, February 6. Ejioffor, N. (1979): The Business of Hoarding in Marketing In
Nigeria, Edited by J.O. Onah; London: Cassel Ltd. El-Rufai, N.A. (1984): New Nigerian Newspaper January 27 Ezeaku, 1. C. (1980): Commerce for the Certificate Year,
Enugu: Fourth Dimension Publishing Co., Ltd. Frank, S. (1998) In Maclaughlin and Robert, C. P. (2000):
Quantitative Techniques for Management Decision; Boston: Houghton Mifflin ltd.
Ifezuca, AN. (1990): Basic Marketing; Enugu: ABIC Publishers
Ltd Ikeagwu E. (1998): Groundwork: of Research Methods and
Procedures; (UNEC): Institute for Development Studies.
Kotler, P. (1980): Principles of Marketing, 5th Edition; London:
Prentice International, Inc. Kotler, P. (1980): Marketing Management, 2nd Edition; New
York: McGraw hill Inc. McCarthy, J. (1981): Basic Marketing: A Managerial Approach,
7th Edition; Homewood: III Irwin.
125
McCarthy, J. and William D. P. Jr. (1984): Basic Marketing; 8th Edition; Homewood: Minols Richard D. Irwin, Inc.
Nnolrn, D. A. (1979): "Marketing as a Tool of Economic
Development" in Marketing in Nigeria, Edited by J.O.Onah; London: Cassell Ltd.,
Nwaogwu, C. (1979): "Marketing Planning and Organization in
Nigeria Enterprises" In Marketing in Nigeria, Edited by J.O Onah; London: Cassell Ltd .
Okolie, P. C. (1999): Paper on Effective Distribution of Locally
Produced Items in Nigeria (Unpublished). Olukunle, I. (1987): "Implications of Second-Tier Foreign
Exchange Market (SFEM) for Marketing Activities". A paper presented at the Workshop of the Nigerian Marketing Association, Lagos, on 25th September.
Paul, D. (1927):"Physical Distribution Service In Industrial
Purchase Decision", Journal of Marketing, American Marketing Association.
Saundres, B. W. (1969). "Designing and Distribution System" in
Bowertox, D.J. et al, Physical Distribution Management (Book of Readings); London: Macmillan company,
Saw, W. (1916): An Approach to Business Problems;
Cambridge: Harvard University Stani on, W.J. (1981): Fundamentals of Marketing, 6th Edition;
New York: McGraw Hill Book Company Stolle, J.F. (1967): Harvard Business Review, vol. 45, No.4 Udeagha, O.A. (1996): Principles of Marketing; Enugu: OptimumPublishers ltd.
Ukwu, 1. U. Distribution in Nigeria (Unpublished work)
126
Uner ington, R. (1912). The Elements of Marketing; New York:
The Macmillan Company.
127
APPENDIX 1
INTERVIEW SCHEDULE
INTERVIEWER INTERVIEWER
QUESTIONS RESPONSES
1 What is your name? …………………….
2 What is your educational qualification …………………….
3 Do you have adequate knowledge of NBC
Plc distribution strategies?
…………………….
4 What IS your perception of NBC
distribution strategies?
…………………….
5 Are the distribution policies of NBC Plc
implemented along the line of set
objectives?
…………………….
6 What are the various strategies employed
by the Warehouse Department to tackle
the distribution problems of NBC Plc
…………………….
7 To what extent has the sales
Department gone in coping with short of
delivery trucks/vehicles etc?
…………………….
8 Have physical distribution policies of
128
BNC Plc encouraged consumer loyalty to
their products?
…………………….
9. Are the sales Department programmes
meant to satisfy the existing and
prospective customers adequate?
…………………….
10. Have the chosen channels of physical
distribution affected the consumer
patronage of the company’s produce?
…………………….
129
APPENDIX II
Department of Marketing Faculty of Business Administration University of Nigeria Enugu - Campus Enugu November, 2007
Sir/Madam,
Please find the enclosed - a questionnaire for your
completion and return to the address above.
The questionnaire is in connection with the Award of
Postgraduate, Master of Business - Administration (MBA) Degree
in Marketing, by the Department of Marketing, Faculty of
Business Administration, University of Nigeria, Enugu Campus.
Any information supplied here, will be treated with the utmost
confidentiality. Please feel free to select any question of your
choice and complete the box provided by ticking ( ) accordingly.
Thanks.
130
QUESTIONNAIRE ADMINISTRATION FOR THE INTERNAL PUBLICS OF NBC' PLC (MANAGEMENT AND STAFF) AND EXTERNAL PUBLICS (DISTRIBUTORS AND CONSUMERS).
1. Sex: (a) Male (b) Female
2. Age: (a) 18 - 30 yrs (b) 31 - 40yrs
(c) 4 1 - 50 yrs (d) Above 50 yrs
3. Do you have knowledge of NBC Plc distribution strategies?
(a) Yes (b) No
4. What is the perception of NBC Plc distribution strategies?
(a) Positive (b) Negative (c) Don't know 5. Are t he distribution policies of NBC Plc implemented' along
the line of set objectives? '
(a) Yes (b) No (c) Don't know
6. What are the various strategies employed by the Warehouse
Department to tackle the distribution problems of NBC Plc?
i. ……………………………………………………………………..
ii. ……………………………………………………………………..
iii. ……………………………………………………………………..
iv. ……………………………………………………………………..
131
7. To what extent has the sales Department gone in copping
with short of delivery trucks, vehicle etc
(a) Very great extent
(b) Great extent
(c) Little extent
8. Have physical distribution policies of NBC Plc encouraged
consumer loyalty to their product?
(a) Yes (b) No (c) Don't know
9. Are the sales Department programmes meant to satisfy the
existing and prospective customers adequate?
(a) Yes (b) No (c) Don't know
10. Have the chosen channels of physical distribution affected the
consumer patronage of the company's products?
(a) Yes (b) No (c) Don't know