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Master of Business Administration

MBA Semester 3
STUDY OF DISTRIBUTION CHANNEL STRATEGY OF PEPSICO FOR THE POSITIONING OF THE PRODU T

ACADEMIC SESSION (2011-2013)

SUBMITTED BY:-

Name- Sumit Goel Roll no. -> 581114656


MBA PROJECT S NOPS!S

INTRODU TION
A channel of distribution or trade channel is defined as the path or route along which goods move from producers or manufacturers to ultimate consumers or industrial users. In other words, it is a distribution network through which producer puts his products in the market and passes it to the actual users. This channel consists of: - producers, consumers or users and the various middlemen like wholesalers, selling agents and retailers (dealers) who intervene between the producers and consumers. Therefore, the channel serves to bridge the gap between the point of production and the point of consumption thereb creating time, place and possession utilities. A !"anne# of distri$ution !onsists of t"ree t%&es of f#o's() !ownward flow of goods from producers to consumers "pward flow of cash pa ments for goods from consumers to producers. #low of marketing information in both downward and upward direction i.e. #low of information on new products, new uses of e$isting products, etc from producers to consumers. And flow of information in the form of feedback on the wants, suggestions, complaints, etc from consumers%users to producers. An entrepreneur has a number of alternative channels available to him for distributing his products. These channels var in the number and t pes of middlemen involved. &ome channels are short and directl link producers with customers. 'hereas other channels are long and indirectl link the two through one or more middlemen. T"ese !"anne#s of distri$ution are $road#% di*ided into four t%&es()

Produ!er) ustomer:- This is the simplest and shortest channel in which no middlemen is involved and producers directl sell their products to the consumers. It is fast and economical channel of distribution. "nder it, the producer or entrepreneur performs all the marketing activities himself and has full control over distribution. A producer ma sell directl to consumers through door-to-door salesmen, direct mail or through his own retail stores. (ig firms adopt this channel to cut distribution costs and to sell industrial products of high value. &mall producers and producers of perishable commodities also sell directl to local consumers. Produ!er)Retai#er) ustomer:- This channel of distribution involves onl one middlemen called )retailer). "nder it, the producer sells his product to big retailers (or retailers who bu goods in large *uantities) who in turn sell to the ultimate consumers. This channel relieves the manufacturer from burden of selling the goods himself and at the same time gives him control over the process of distribution. This is often suited for distribution of consumer durables and products of high value. Produ!er)+"o#esa#er)Retai#er) ustomer:- This is the most common and traditional channel of distribution. "nder it, two middlemen i.e. wholesalers and retailers are involved. +ere, the producer sells his product to wholesalers, who in turn sell it to retailers. And retailers finall sell the product to the ultimate consumers. This channel is suitable for the producers having limited finance, narrow product line and who needed e$pert services and promotional support of wholesalers. This is mostl used for the products with widel scattered market. Produ!er)A,ent)+"o#esa#er)Retai#er) ustomer:- This is the longest channel of distribution in which three middlemen are involved. This is used when the producer wants to be full relieved of the problem of distribution and thus hands over his entire output to the selling agents. The agents distribute the product among a few wholesalers. ,ach wholesaler distributes the product among a number of retailers

who finall sell it to the ultimate consumers. This channel is suitable for wider distribution of various industrial products. An entrepreneur has to choose a suitable channel of distribution for his product such that the channel chosen is fle$ible, effective and consistent with the declared marketing policies and programmers of the firm. 'hile selecting a distribution channel, the entrepreneur should compare the costs, sales volume and profits e$pected from alternative channels of distribution and take into account the following factors:

Produ!t onsideration:- The t pe and the nature of products manufactured is one of the important elements in choosing the distribution channel. The ma-or product related factors are:

.roducts of low unit value and of common use are generall sold through middlemen. 'hereas, e$pensive consumer goods and industrial products are sold directl b the producer himself. .erishable products/ products sub-ected to fre*uent changes in fashion or st le as well as heav and bulk products follow relativel shorter routes and are generall distributed directl to minimi0e costs. Industrial products re*uiring demonstration, installation and after sale service are often sold directl to the consumers. 'hile the consumer products of technical nature are generall sold through retailers. An entrepreneur producing a wide range of products ma find it economical to set up his own retail outlets and sell directl to the consumers. 1n the other hand, firms producing a narrow range of products ma their products distribute through wholesalers and retailers. A new product needs greater promotional efforts in the initial stages and hence few middlemen ma be re*uired.

Mar-et onsideration:- Another important factor influencing the choice of distribution channel is the nature of the target market. &ome of the important features in this respect are:

If the market for the product is meant for industrial users, the channel of distribution will not need an middlemen because the bu the product in large *uantities. short one and ma as the bu in a large *uantit . 'hile in the case of the goods meant for domestic consumers, middlemen ma have to be involved. If the number of prospective customers is small or the market for the product is geographicall located in a limited area, direct selling is more suitable. 'hile in case of a large number of potential customers, use of middlemen becomes necessar . If the customers place order for the product in big lots, direct selling is preferred. (ut,if the product is sold in small *uantities, middlemen are used to distribute such products.

Ot"er onsiderations:- There are several other factors that an entrepreneur must take into account while choosing a distribution channel. &ome of these are as follows:

A new business firm ma need to involve one or more middlemen in order to promote its product, while a well established firm with a good market standing ma sell its product directl to the consumers. A small firm which cannot invest in setting up its own distribution network has to depend on middlemen for selling its product. 1n the other hand, a large firm can establish its own retail outlets.

The distribution costs of each channel are also an important factor because it affects the price of the final product. 2enerall , a less e$pensive channel is preferred. (ut sometimes, a channel which is more convenient to the customers is preferred even if it is more e$pensive. If the demand for the product is high, more number of channels ma be used to profitabl distribute the product to ma$imum number of customers. (ut, if the demand is low onl a few channels would be sufficient. The nature and the t pe of the middlemen re*uired b the firm and its availabilit also affect the choice of the distribution channel. A compan prefers a middleman who can ma$imi0e the volume of sales of their product and also offers other services like storage, promotion as well as after sale services. 'hen the desired t pes of middlemen are not available, the manufacturer will have to establish how own distribution network.

All these factors or considerations affecting the choice of a distribution channel are inter-related and interdependent. +ence, an entrepreneur must choose the most efficient and cost effective channel of distribution b taking into account all these factors as a whole in the light of the prevailing economic conditions. &uch a decision is ver important for a business to sustain long term profitabilit .

Pe&si o
.epsi3o is one of the oldest, largest and most successful beverage and snack food companies in the world. .epsi3o was founded b 3aleb (radham in 4567 in "&A. Toda .epsi3o and its affiliates operate in more than 486 countries in the world and generate revenues in e$cess of 9 86 (illion. In its pursuit of never ending growth and e$pansion, .epsi3o entered India in 45:5 in a -oint venture with .un-ab 2overnment. +owever, .epsi3o India ver soon started its beverage operations in collaboration with the ; < =aipuria group. &oon after entering the beverage segment .epsi3o ,stablished its dominance in the market owing to its e$pertise in sales, marketing, operations and local collaboration. .epsi3o maintained its market dominance for man more ears to come. +owever, this advantage slipped and .epsi3o had to concede the market leadership to 3oca 3ola India. &everal actors were responsible for this development. (ut, the most important are/ !istribution channel is having an important role in positioning of the product because we know that distribution channel is tool b which we can make reach our product to the final consumers !iscontinuation of slums in the distribution network b .epsi3o. This move b .epsi3o adversel affected its position of a market leader because while .epsi3o discontinued the use of &lums in its distribution network, 3oke continued it and within one ear, it was able to snatch considerable market share from .epsi3o.

Ac*uisition of well-established and favored brands like Thumps "p and >imca b 3oca 3ola India. These two brands still constitute a bulk of sales for 3oca 3ola India. To e$plore the reasons behind these developments this stud will anal 0e the marketing initiatives and policies of .epsi3o India in detail with particular focus on its partner relationship management. The above-mentioned ob-ectives can be achieved b carr ing a proper and planned research involving different t pes and methods. The data collected for laid the foundations for the stud and gave a platform for the anal sis and findings which lead to the fulfillment of the ob-ectives. The data collected for research is primar and secondar . .rimar data is collected b observation, interviews and *uestionnaires. The data collection and anal sis paves wa for the recommendation ad conclusion of the stud that reveals some important findings regarding the strateg and corporate structure and strateg of .epsi3o India.

OB.E TI/E OF PRO.E T

To know distribution channel &trateg of .epsi3o. To know the importance of !istribution channel strateg in .ositioning of the product. Su$ O$0e!ti*e( To know the .epsi3o planning towards the distribution channel strateg . +ow strong relationship .epsi3o has with the distributors and retailers. .erception of consumer towards the .epsi3o product. .erception of retailers towards the distribution channel of the .epsi3o.

HISTOR1 OF THE OMPAN1


It was first introduced in Nort" aro#ina in 2343 $% a#e$ Bra"am who made a pharmac which sold the drink which was known back then as 5Brad6s Drin-57 and was later named Pe&si o#a possibl due the digestive en0 me pepsin and kola nuts used in the recipe. (raham sought to create a fountain drink that was delicious and would aid in digestion and boost energ . In 456?, (raham moved the bottling of .epsi-3ola from his drugstore into a rented warehouse. That ear, (radham sold @,5A: gallons of s rup. The ne$t ear, .epsi was sold in si$-ounce bottles, and sales increased to 45,:8: gallons. In 24897 Pe&si re!ei*ed its first #o,o redesi,n since the original design of 456B. In 4575, the logo was changed again. In 4575, automobile race pioneer (arne 1ldfield endorsed .epsi-3ola in newspaper ads as CA bull drink...refreshing, invigorating, a fine bracer before a raceC. In 24327 t"e Pe&si) o#a om&an% 'ent $an-ru&t during the 2reat !epression- in large part due to financial losses incurred b speculating on wildl fluctuating sugar prices as a result of 'orld 'ar I. Assets were sold and ;o 3. Degargel bought the .epsi trademark. ,ight ears later, the compan went bankrupt again. .epsi)s assets were then purchased b 3harles 2uth/ the .resident of >oft Inc. >oft was a cand manufacturer with retail stores that contained soda fountains. +e sought to replace 3oca-3ola at his stores) fountains after 3oke refused to give him a discount on s rup. 2uth then had >oft)s chemists reformulate the .epsi-3ola s rup formula. !uring the 2reat !epression, .epsi gained popularit following the introduction in 45?A of a 47-ounce bottle. Initiall priced at 46 cents, sales were slow, but when the price was slashed to five cents, sales increased substantiall . 'ith a radio advertising campaign featuring the -ingle C.epsi cola hits the spot Twelve full ounces, that)s a lot % Twice as much for a nickel, too .epsi-3ola is the drink for ou,C

arranged in such a wa that the -ingle never ends. .epsi encouraged price-watching consumers to switch, obli*uel referring to the 3oca-3ola standard of si$ ounces per bottle for the price of five cents (a nickel), instead of the 47 ounces .epsi sold at the same price. 3oming at a time of economic crisis, the campaign succeeded in boosting .epsi)s status. In 45?A alone B66,666,666 bottles of .epsi were consumed. #rom 45?A to 45?:, .epsi-3ola)s profits doubled.

24:;s ad*ertisement s&e!ifi!a##% tar,etin, Afri!an Ameri!ans< .epsi)s success under 2uth came while the >oft 3and business was faltering. &ince he had initiall used >oft)s finances and facilities to establish the new .epsi success, the near-bankrupt >oft 3ompan sued 2uth for possession of the .epsi-3ola compan . A long legal battle, Guth v. Loft, then ensued, with the case reaching the !elaware &upreme 3ourt and ultimatel ending in a loss for 2uth.

PEPSI O IN INDIA
.epsi3o gained entr to India in 45:: b creating a -oint venture with the .un-ab government-owned Pun0a$ A,ro Industria# or&oration =PAI ) and Eoltas India >imited. This -oint venture marketed and sold >e"ar Pe&si until 4554, when the use of foreign brands was allowed/ .epsi3o bought out its partners and ended the -oint venture in 4558. 1thers claim that firstl .epsi was banned from import in India, in 45@6, for having refused to release the list of its ingredients and in 455?, the ban was lifted, with .epsi arriving on the market shortl afterwards. These controversies are a reminder of CIndia)s sometimes acrimonious relationship with huge multinational companies.C Indeed, some argue that .epsi3o and T"e o!a) o#a om&an% have Cbeen ma-or targets in part because the are well-known foreign companies that draw plent of attention.C

Summary about the company

T%&e Founded Head?uarters Area ser*ed @e% &eo&#e Industr% Produ!ts

( .ublic (FG&,: .,.) ( 3hicago, Illinois, ".&. (45AB) ( .urchase, Few Gork, ".&. ( 'orldwide ( Indra <rishnamurth Foo i (3hairwoman), (.resident) H (3,1) ( #ood Fon-alcoholic beverage ( .epsi, !iet .epsi, Dountain !ew, &ierra Dist, >ipton Teas, @up, Tropicana, Dirinda, Faked =uice, 2atorade, .ropel#itness'ater, Iuaker #ood, ;uffels, A*uafina, >a )s, !oritos, 3heetos, #ritos, ;uffles, Tostitos, &lice, Fimboo0

Re*enue O&eratin, in!ome Net in!ome Tota# assets Tota# e?uit% Em&#o%ees Di*isions

( J "&! AA.B68 (illion =2011A ( J "&! 5.AA? (illion =2011A ( J "&! A.88? (illion =2011A ( J "&! @:.::7 (illion =2011A ( J "&! 76.@68 (illion =2011A ( 75@,666 =2011A ( .epsi3o Americas (.epsi3o Americas #ood, .epsi3o Americas (everages), .epsi3o International

+e$site

( .epsi3o.com

SA>ES AND DISTRIBUTION NET+OR@ OF PEPSI O INDIA<


COMPANY

COBO

FOBO

WAREHOUSE

C&F

DISTRIBUTOR

SALESMEN

SALESMEN

WHOLESALER

SLUMS

RETAILER

RETAILER

CUSTOMER

CUSTOMER

RESEAR H METHODO>OG1

;esearch T pe &ample Techni*ue &i0e !escription Instrument

: ,$plorator ;esearch

: 3onvenient &ampling : 866 ;espondent (I meet 866 respondents out of which B6 were the distributors, 7B6 retailers and rest of where the normal consumers.) : !istributors, retailers and consumers were the different part of the 2ha0iabad, Foida and !elhi. : Iuestionnaire H observations of the respondent

BIB>IOGRAPH1

.,.&I31 IFT,;FATI1FA> 1##I3IA> ',(&IT,: http:%%www.pepsico.com% .,.&I31 IF!IA ',(&IT,: http:%%pepsicoindia.co.in% .,.&I31 IFT,;FATI1FA> IFT,;FA> ;,.1;T. www.google.com. www.pepsicoindia.com. www.wikipedia.com. http:%%finance. ahoo.com%*%bsKsL.,.M(alanceM&heetHannual http:%%www.wikinvest.com%stock%.epsiN(ottlingN2roupN(.(2) http:%%business.gov.in%manageNbusiness%channelsNdistribution.php Daga0ines - (usiness 'orld Danagement H ,conomic times.