ma finaledit

8/6/2019 Ma Finaledit

1/29

ACKNOWLEDGEMENT

This project is incomplete without the support of amity school of

business who gave me this opportunity to take up this project. I

would like to thank Mr. Rajesh Kumar Yadav, my faculty guide for

his direction and help without whom my project would have been

incomplete. I will also like to thank my parents whose and my

friends for their support.

1


2/29

ABSTRACT

This project gives and overview of one of the 4ps (price, product,

promotion and place of distribution) which is the place of distribution.

A producer goes through various channels in order to reach to a

consumer. These channels have been studied in detail.

In this project I also highlight the various channels of distribution adopted

by

a) Industrial goods

b) Consumer- durable goods

TABLE OF CONTENTS

1INTRODUCTION

2. WHAT ARE CHANNELS OF DISTRIBUTION.

2


3/29

3. TYPES OF CHANNEL MEMEBERS

4. CHOOSING THE RIGHT DISTRIBUTION

CHANNEL.

5. DISRTIBUTION CHANNEL STRATERGY

6. IMPORTANCE OF DISTRIBUTION CHANNELS

7. TYPES OF DISTRIBUTION.

8. STRATERGY OF TWO PRODUCTS.

a. DELL COMPUTERS

b. CEAT TYRES

1. INTRODUCTION

Product decisions are the most important of all marketing decisions since

these lead directly to the reasons (i.e., offer benefits that satisfy needs) why

customers decide to make a purchase. But having a strong product does

little good if customers are not able to easily and conveniently obtain it.

With this in mind we turn to the second major marketing decision area

DISTRIBUTION .

1


4/29

Distribution decisions focus on establishing a system that, at its basic

level, allows customers to gain access and purchase a marketers product.

However, marketers may find that getting to the point at which a customer

can acquire a product is complicated, time consuming, and expensive. The

bottom line is a marketers distribution system must be both effective (i.e.,

delivers a good or service to the right place, in the right amount, in the

right condition) and efficient (i.e., delivers at the right time and for the

right cost). Yet, as we will see, achieving these goals takes considerable

effort.

Distribution decisions are

relevant for nearly all types of products. While it is easy to see howdistribution decisions impact physical goods, such as laundry detergent or

truck parts, distribution is equally important for digital goods (e.g.,

television programming, downloadable music) and services (e.g., income

tax services).

2. WHAT ARE CHANNELS OF DISTRIBUTION?

1


5/29

Physical distribution (or place) is one of the four elements of the marketing

mix. An organization or set of organizations (go-betweens) involved in the

process of making a product or service available for use or consumption

by a consumer or business user.

Distribution decision is primarily concerned with the supply chains

front-end or channels of distribution that are designed to move the

product (goods or services) from the hands of the company to the hands of

the customer. Activities involved in the channel are wide and varied

though the basic activities revolve around these general tasks:

Ordering

Handling and shipping

Storage

Display

Promotion

Selling

Information feedback

1. TYPE OF CHANNEL MEMBERS

1. Telemarketing

Selling your product/service through telemarketing is becoming

increasingly popular. Similar to direct mail, telemarketing allows sales

to be made on a local, national and global scale, although the costs will

increase with the time and distance of phone calls. Extra skills may also

2
http://en.wikipedia.org/wiki/Marketing_mixhttp://en.wikipedia.org/wiki/Marketing_mixhttp://www.bizhelp24.com/marketing/telephone-marketing---telemarketing-tips-2.htmlhttp://www.bizhelp24.com/marketing/telephone-marketing---telemarketing-tips-2.htmlhttp://en.wikipedia.org/wiki/Marketing_mixhttp://en.wikipedia.org/wiki/Marketing_mix


6/29

be required creating the need for more staff. Alternatively, a

professional service can be consulted to carry out the task: with an

increased cost and/or commission.

2. Internet (E-commerce)

With the popularity of the Internet ever increasing, it has now become one

of the most common ways of doing business. Although e-commerce was

often associated more with the larger companies, small businesses have

now benefited from joining the bandwagon.

The Internet acts a shop window for your business where your

particular web site will allow consumers to view or purchase your

product(s)/service(s) on-line.

The Internet can also be used as a marketing tool, purely promoting

your products, which will aim to result in more sales from other

distribution channels.

The Internet can help target consumers worldwide although it may

be more feasible for consumers to purchase from within the nation

(due to costs of postage or feasibility of using the service). The

obvious cost of using the Internet for sales is the original set-up and

consistent maintenance, as well as the administration.

2. Agents/Brokers

An agent or broker will help sell your product/service, but will not

take ownership of what they are selling at any time. They usually

work on commission taking a percentage of the total sales made by

them. An agency or brokerage will sell your product or service, for

2


7/29

example insurance, tickets for entertainment, accommodation, etc.

This can be directly to the consumer or to retailers and wholesalers.

Agents/brokers can sell your product on a scale than extends from

your business premises and are very useful for expanding your

business into foreign markets.

Perhaps the most common example of an agent would be a travel

agency. They never own the holidays or credit the full amount of the

sale to their business. Instead, they act as a link between the holiday

resort and the consumer, taking a commission on the sales.

3. Wholesalers

A wholesaler can be used to distribute your products reaching a

potentially large number of consumers. The main function of a

wholesaler is to provide a link between the producer and the retailer.

The advantage of selling to a wholesaler is that they often buy in

bulk, splitting the purchase into smaller manageable quantities for

further selling to retailers.

Once selling to a wholesaler, there are three ways that your product

will reach the consumer. Firstly, the consumer will purchase directly

from the wholesaler: this is the less common route out of the three.

Alternatively, your products will be sold on by the wholesaler to

retailers.

The other advantages of selling to a wholesaler are that they may

have strong links with quality retailers: research will help discover

this fact. In addition, because they buy in bulk, it reduces the burden

of on-site storage at your premises reducing overhead costs. Further,

wholesalers will also take away the burden of transportation, as they

2


8/29

often have their own network of transport delivering goods directly

to retailers, which would normally be your responsibility.

The disadvantage of using a wholesaler to distribute your products is

that they cannot market your products extensively. Further, because

they buy in bulk, it is often you will sell at a price much lower than

the final retail price. Therefore, the wholesaler will take some of the

profit because they will sell on your products in smaller quantities at

a higher price.

2. Retailers

Like for wholesalers, it may be that you only use retailers if you

manufacture your own products: again, evidencing the larger

smaller business. Retailers can promote your product by making

consumers aware of its availability and by passing on technical

information that could encourage the sale. Because there are

thousands of retailers located all around the country, they are anexcellent intermediary for distributing your product to a wide

geographical range of consumers.

Today, many retailers prefer to buy their products directly from

producers instead of going through wholesalers: this is typical of

supermarkets. By selling directly to retailers, the added expense of

transportation is the only issue.

Small businesses account for a high proportion of retailers and so

they can often find themselves at the end or in the middle of a

distribution channel, where their own channel of selling to a

consumer would be direct.

2


9/29

4 CHOOSING THE RIGHT DISTRIBUTION

CHANNEL

There are several factors affecting how you may decide on the most

appropriate distribution channel(s). A few of these are highlighted below:

1. Profit and Sales

Which channels will maximise sales and profit? Using intermediaries

such as agents, retailers and wholesalers can distribute your product

on a wider scale but can often lead to reduced profit levels. Finding

the right balance is the key.

2. Product/Service

Perishable products such as certain foods (e.g. fruit) usually require

direct sales because of their short shelf lives. The same principle

1


10/29

applies to fragile products to reduce the amount of transportation

and handling.

Arguably, services need to be sold direct or through intermediaries

that provide a strong link between the consumer and the business

such as direct mail, e-commerce or telemarketing. This way the

consumer can specifically give their situation or requirements

directly to the business so a tailored service can be provided.

Products of low value that are manufactured in high quantities may

be influenced to take a distribution channel involving a wholesaler.

This way, it reduces the issue of storage, as wholesalers will buy inbulk

1. The Consumer

How convenient is it for them to purchase your product or service

Who is your target audience?

1. Competition

How does direct competition sell their product? Is it effective enough to

follow?

2. Personal Knowledge/Confidence

Do you know the different intermediaries well enough to be confident that

it is the best option? For example, which retailers have a good reputation

and where are they located?

2


11/29

5 DI ST RI BU TI ON - CH AN NE L

S T R A T E G Y

1. MARKET FACTORS

An important market factor is "buyer behaviour"; how do buyer's

want to purchase the product? Do they prefer to buy from retailers,

locally, via mail order or perhaps over the Internet? Another

important factor is buyer needs for product information,

installation and servicing. Which channels are best served to

provide the customer with the information they need before buying?

Does the product need specific technical assistance either to install

or service a product? Intermediaries are often best placed toprovide servicing rather than the original producer - for example in

the case of motor cars.

The willingness of channel intermediaries to market product is also

a factor. Retailers in particular invest heavily in properties, shop

fitting etc. They may decide not to support a particular product if it

requires too much investment (e.g. training, display equipment,

warehousing).

Another important factor is intermediary cost. Intermediaries

typically charge a"mark-up" or "commission" for participating in

the channel. This might be deemed unacceptably high for the

ultimate producer business.

2


12/29

1. PRODUCER FACTORS

A key question is whether the producer have the resources to

perform the functions of the channel? For example a producer may

not have the resources to recruit, train and equip a sales team. If so,

the only option may be to use agents and/or other distributors.

Producers may also feel that they do not possess the customer-based

skills to distribute their products. Many channel intermediaries

focus heavily on the customer interface as a way of creating

competitive advantage and cementing the relationship with their

supplying producers.

Another factor is the extent to which producers want to maintain

control over how, to whom and at what price a product is sold. If a

manufacturer sells via a retailer, they effective lose control over the

final consumer price, since the retailer sets the price and any

relevant discounts or promotional offers. Similarly, there is noguarantee for a producer that their product/(s) are actually been

stocked by the retailer. Direct distribution gives a producer much

more control over these issues.

1. PRODUCT FACTORS

Large complex products are often supplied direct to customers (e.g.

complex medical equipment sold to hospitals). By contrast perishable

products (such as frozen food, meat, bread) require relatively short

distribution channels - ideally suited to using intermediaries such as

retailers.

2


13/29

DISTRIBUTION INTENSITY

There are three broad options - intensive, selective and exclusive

distribution:

Intensive distribution aims to provide saturation coverage of

the market by using all available outlets. For many products, total

sales are directly linked to the number of outlets used (e.g.

cigarettes, beer). Intensive distribution is usually required where

customers have a range of acceptable brands to chose from. In other

words, if one brand is not available, a customer will simply choose

another.

Selective distribution involves a producer using a limited

number of outlets in a geographical area to sell products. An

advantage of this approach is that the producer can choose the most

appropriate or best-performing outlets and focus effort (e.g.training) on them. Selective distribution works best when consumers

are prepared to "shop around" - in other words - they have a

preference for a particular brand or price and will search out the

outlets that supply.

Exclusive distribution is an extreme form of selective

distribution in which only one wholesaler, retailer or distributor is

used in a specific geographical area.

2


14/29

6.IMPORTANCE OF DISTRIBUTION

CHANNELS

As noted, distribution channels often require the assistance of others in

order for the marketer to reach its target market. But why exactly does a

company need others to help with the distribution of their product?

Wouldnt a company that handles its own distribution functions be in a

better position to exercise control over product sales and potentially earn

higher profits? Also, doesnt the Internet make it much easier to distribute

products thus lessening the need for others to be involved in selling a

companys products.

While on the surface it may seem to make sense for a company to

operate its own distribution channel (i.e., handling all aspects of

distribution) there are many factors preventing companies from doing so.

While companies can do without the assistance of certain channel

members, for many marketers some level of channel partnership is

needed. For example, marketers who are successful without utilizing

resellers to sell their product (e.g., Dell Computers sells mostly through

1


15/29

the Internet and not in retail stores) may still need assistance with certain

parts of the distribution process (e.g., Dell uses parcel post shippers such

as FedEx and UPS). In Dells case creating their own transportation

system makes little sense given how large such a system would need to be

in order to service Dells customer base. Thus, by using shipping

companies Dell is taking advantage of the benefits these services offer to

Dell and to Dells customers.

7.TYPES OF DISTRIBUTION

1. Direct Distribution System

With a direct distribution system the marketer reaches the intended

final user of their product by distributing the product directly to the

customer. That is, there are no other parties involved in the distribution

2


16/29

process that take ownership of the product. The direct system can be

further divided by the method of communication that takes place when a

sale occurs. These methods are:

Direct Marketing Systems With this system the

customer places the order either through information gained

from non-personal contact with the marketer, such as by

visiting the marketers website or ordering from the

marketers catalogue, or through personal communication

with a customer representative who is not a salesperson, such

as through toll-free telephone ordering.

Direct Retail Systems This type of system exists when a

product marketer also operates their own retail outlets. As

previously discussed, Starbucks would fall into this category.

Personal Selling Systems The key to this direct

distribution system is that a person whose main responsibility

involves creating and managing sales (e.g., salesperson) is

involved in the distribution process, generally by persuading the

buyer to place an order. While the order itself may not be

handled by the salesperson (e.g., buyer physically places the

order online or by phone) the salesperson plays a role in

generating the sales.

Assisted Marketing Systems Under the assisted

marketing system, the marketer

Relies on others to help communicate the marketers products but

handles distribution directly to the customer. The classic example of

assisted marketing systems is eBay which helps bring buyers and

1


17/29

sellers together for a fee.

1. Indirect Distribution System

With an indirect distribution system the marketer reaches the intended

final user with the help of others. These resellers generally take

ownership of the product, though in some cases they may sell products

on a consignment basis (i.e., only pay the supplying company if the

product is sold). Under this system intermediaries may be expected to

assume many responsibilities to help sell the product.

Indirect methods include:

Single-Party Selling System - Under this

system the marketer engages another party who then sells

and distributes directly to the final customer. This is most

likely to occur when the product is sold through large store-

based retail chains or through online retailers, in which case

it is often referred to as a trade selling system.

Multiple-Party Selling System This indirect

distribution system has the product passing through two or

more distributors before reaching the final customer. The

most likely scenario is when a wholesaler purchases from the

manufacturer and sells the product to retailers.

2


18/29

STRATERGIES OF TWO PRODUCTS

CONSUMER GOODS DURABLE GOODS

DELL COMPUTERS

Introduction

Michael Dell started Dell Computers in 1984 with only $1,000.

Currently, Dell has grown to be a $30+ billion company, with average

Daily earnings of $40 million. How did he do it? He started his

company

With a new concept: eliminate the middlemen, and sell directly to the

Consumer. By eliminating wholesalers and retailers, Dell has been

able to

Maintain complete control over inventory levels, as well as

2


19/29

distribution costs.

Direct Distribution

As mentioned above, Dell figured out a new way to sell computers to

the

Consumer, which is through direct distribution. By using a direct

Distribution approach, Dell was able to gain a competitive advantage

for

Several reasons:

First of all, direct distribution allows Dell to eliminatewholesalers. This is advantageous because Dell does not have to

deal with wholesalers and have to be responsible for keeping

track of inventory for numerous wholesalers.

Second, Dell has eliminated retailers. This is effective because

without retailers, Dell does not have to receive customer orders

through thousands of different retailers- they can take orders

directly from the customer, and eliminate the hassle of selling

their product through retailers.

2


20/29

Customer Service

By dealing directly with the customers, Dell has earned a reputation for

Having excellent customer service. Instead of dealing with a retailer

that

Carries Dell products, customers have the benefit of being able to reach

Dell 24 hours a day, 7 days a week for technical support and customer

Complaints. This makes the consumer feel more at ease knowing that

they

are dealing directly with the source instead of having a retail store relay

their problems to Dell. Dell also has an extensive customer database

that

allows them to quickly and efficiently deal with all customer problems.

Dell reportedly deals with up to 10,000 customers per day, either by

phone or through e- mail.

Supply Chain Management

In addition to their customer service, Dell has implemented an

outstanding supply chain system that has made their business even

better.

They use supply chain software by i2, which gives them the ability to

get

materials from suppliers over the web in real time, and get thosesupplies

to the factories every two hours to meet customer needs. The key to the

success of this method is that Dell has suppliers within close proximity

to

all of their factories. Basically, Dell never runs out of an item, and if

2


21/29

they

need something, they can get it so quickly that they can take an order

for a

custom computer and have it in the mail and on the way to the

customer

in a couple days or less.

By maximizing their supply chain capabilities and developing excellent

customer service, Dell computers has established themselves as one of

the

front-runners in the computer business. Their ability to provide

customers

with custom-built computers in a matter of days at an affordable

price is

unheard of in their market, and their business has thrived as a result.

2


22/29

INDUSTRIAL GOODS

Ceat Tyres

1


23/29

INTRODUCTION

CEAT Ltd., one of the oldest among RPG companies, is one of Indias

leading tyre manufacturers. Itmanufactures tyres for the Heavy Duty

Trucks & Buses, Light Commercial Vehicles, Earth Movers,Forklifts,

Tractors, Trailers, Cars, Two & Three Wheelers and Off the road

segments. It also exportstyres to over 90 countries. CEAT has two

large tyre plants based in Mumbai (Bhandup) and Nasik(Satpur), a

tyre plant in Cochin, in Kerala, through RADO Tyres, and two plants

in CKITL and ACPLin Sri Lanka, through CEAT Kelani. Tyre

Production aggregates over 7.6 million tyres per annum.Ceat

produces Tyres for 3 different markets 1. OEM 2. Replacement tyres

and 3. Exports. For the purpose of this project we are limiting

ourselves to studying the distribution of the Replacement tyres

market only. The reason is that tyres are sold to OEMs follow theB2B sales process hencethey do not require an elaborate distribution

network. Also tyres that are exported use the distribution network of

some other company. Hence the most challenging Sales and

Distribution network is developed for the Replacement Market. The

analytical Framework detailing how the variables affect Sales and

Distribution of tyres hasbeen developed for Truck Tyres. The reason

being that, buying behavior is different across theTruck, Bus,

Passenger Vehicle, 2&3 wheeler segments. Also Truck tyres is the

largest customer

segment for any tyre company accounting for more than 50% of the

tyre sales.

2


24/29

CHANNEL DESIGN

CEAT has one of the largest distribution network for tyres in India.

It has divided theIndian sub continent into 33 regions and has set up a Regional Office

for each region.

Clearing and forwarding agents (C&FAs) are attached to them.

Often the largers regions have 2 or3 or more C&FAs to cover the

region properly. The total number of C&FAs across the country

is112.The basic operating structure of the Ceat Ltd comprises of the

following entities:

_ Factory

_ DDC

_ RDC

_ C&FA

_ Dealers

CEAT has three level distribution structure. The factory supplies

goods to the RDCs (RegionalDistribution Centers) and from these

RDCs the goods are transferred to CFAs (Carrying andForwarding

Agents) which act as godowns for distribution to the dealers.

There is only one DDC (Divisional Distribution Centre) this is at

Nashik and is used for Storage andAssembly of tyres, Tubes and

Flaps from the Nashik plant.RDCs are the mother godowns for

storage of goods. The tyres, tubes and flaps are transported tothese

from factories. The set is formed at RDCs and strapped. The tube is

inflated beforetransportation to RDCs. The Dispatch challans are

issued to the transporters. In some cases, the RDCs are required to

supply the goods directly to the dealers and invoice them in the

requiredformat.Ceat has recently shifted from the DDC structure

1


25/29

wherein it had 7 DDCs to the RDC structure,however this structure

is proving inefficient from the operating cost point of view. The

inventory

cost has shot up and availability has suffered. The amount of safety

stock in the system has alsogone up. Hence Ceat is about to shift back

to the DDC structure over a one year period.

CFAs are the smaller go downs which pull the goods from the RDCs.

They transfer the goods to the dealers and an invoice needs to be

generated. The CFAs pull the goods from RDCs according to

demand. These CFAs then distribute the goods to the dealers. The

Dealers are of three types

1. Tyre retailers: These are usually multi-brand tyre dealers.

They stock many brands of tyres

for a particular segment of customers. These can further be divided

into Truck Dealers andNon-Truck dealers.

2. Trader Dealers: These dealers are used typically to ensure

upcountry coverage where thecompany distribution network is

absent. These dealers have their shops in upcountry

locations or sell to other dealers in upcountry locations and thus

enhance the distribution

reach of the company. They purchase tyres in bulk and often avail of

the Turn over discounts.

3. Ceat Shoppe: Ceat shoppe is a retail outlet where only ceat tyres

are sold. This is used

mainly for passenger car and 2 wheeler tyre sales. The customers get

2


26/29

a range of tyres and

advise about selecting the right tyre while purchasing from here.

They also get a very goodafter sales service.

TRANSPORTATION AND LOGISTICS

Modes of Transportation

The Tyres are transported mostly by road from the Factory to the

RDC, RDC to CFA and from CFAto the dealer. Usually trucks are

used for the transport of these tyres. For smaller tyres often

LCVs(Tempos) are used.Tyres are transported by Train to

Guwahati RDC which is the only RDC which is linked by train.

Modes of Transportation

after Dealer Usually customers come to the dealers shop to purchase

tyres and the individual tyres are eitherfitted on to the vehicle at the

shop or they are transported on non-mechanised push

carts/commercial 3-wheelers etc.

Use of Information Technology

Ceat has recently shifted to SAP, hence all the transportation

documents are generated on SAP. The same has been detailed in the

documents used section. SAP BW (Business warehouse)module also

generates the analytical report which give the dealerwise and

regionwise salesreports. This helps in availability of live information

to all the regional and product managers fortaking decisions at any

time.

2


27/29

CONCLUSION

Channels of distribution move products and services from businesses

to consumers and to other businesses. For many products and

services, their manufacturers or providers use multiple channels of

1


28/29

distribution. Personal computers, for example, might be bought

directly from the manufacturerover the telephone, via direct

mail, or through the company's web site on the Internet or through

several kinds of retailers, including independent computer stores,

franchised computer stores, and department stores. There are also a

number of support functions that help channel members perform

their distribution tasks. Transportation, storage, insurance,

financing, and advertising are tasks that can be performed by

facilitating agencies that may or may not be considered part of the

marketing channel.

REFERENCES

Cis519.bus.umich.edu/cgi-bin/cis551-01.board.pl?read=1061

www.zeromillion.com

www.dell.com

2
http://www.referenceforbusiness.com/encyclopedia/A-Ar/Advertising.htmlhttp://www.referenceforbusiness.com/encyclopedia/A-Ar/Advertising.html


29/29

www.astrategies.com

www.beemanagement.com

1
http://www.astrategies.com/http://www.beemanagement.com/http://www.astrategies.com/http://www.beemanagement.com/

ma finaledit

Documents