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Just another name for Distribution? Distribution is an essential pat of the

value chain, BUT

A value chain has a much wider

perspective than distribution.

Activities that facilitate the primary activities.

Directly concerned with the creation or delivery of a product or service.

Margin or profit results from:

Managing the linkages between activities &

Delivery of products & services at a price above the cost of all activities.

Linkages are flows of information, goods & services, as well as systems & processes involved.

Interrelated, interdependent institutions & agencies.functioning as a system or network.cooperating in their efforts. to produce (for) & distribute goods to the end user.

1. Developing channels of distribution,

based on strategic considerations of efficiency & effectiveness &

2. Managing channels of distribution, for

optimal impact, whilst fully aligning them with the changing needs of customers & markets.

Buying & selling becomes easy: fewer intermediaries to sell to;

Transportation: less time to market; Financing: more regular cash-flow; Processing & storage: holding inventory, breaking down into order quantities; Advertising & sales promotion: better communication & execution of promotions;

Pricing: Better management of market price; Reduction of risk: lower cost of insurance, return-of-goods policy; Personal selling: efficient sales, information & support role; Communications: quick information flows/ feedback; Servicing & repairs network: facilitates network for durable/ technology products.

Why a different role? Services are often produced & delivered at the same time. The Airlines Example: Airlines produce/ own their service, but other partners contribute. Airlines have partnership arrangements with hotel chains, car rental companies, tour groups.

Sales forces: airline salespeople service large corporate customers in collaboration with travel agencies, & other partners; Car Rentals, Hotels, Credit card companies partner with airlines on discounts & frequent flyer programs; Strategic alliances between airlines extend a carrier's geographic coverage.

Airline Alliances result in: 1. Routing advantages, 2. Better equipment utilization, 3. Airport access, 4. Reduced capital expenditures, 5. Expanded market coverage.

Options available:

Direct distribution


Combination of the above (now with or without the Internet).

An American multinational information technology corporation headquartered in Palo Alto, California, United States that provides products, technologies, software, solutions & services to consumers, small & medium-sized businesses (SMBs) & large organizations, including the public & private sectors.

how to service thousands of SMBs, with employees fewer than 500?

HP salespeople alone were not an option clients would not be adequately serviced margins would be severely eroded. Strategy: Start by first clearly identifying channels preferred by customers i.e. assessing Customer value requirements.

Treating channels regarded as partners & NOT competition, even if they carried competitive brands; Strengthening communications (websites, brochures, advertising, & newsletters) were to focus better on the entire customer base. Covering all options in a cost effective manner.

The strategy was a big success! SO what was the learning? 1. In the technology business in particular partnering with competition is NOT a NO-NO! 2. A good distribution network creates strong competitive advantage. 3. Customer value requirements must prevail over all considerations in business.


What Buyers expect: Amount & frequency of purchase, Assistance needed, Access to technology/Internet: Move from selling A product in a box to selling superior brand experience.


What Products require: Simple or complex products (requiring close contact with customers), Support services needed.


What Financial & Control Factors apply: Traditional relationship between control & cost. Changing rules dictated by the Internet: Avoiding third-party retailers altogether.

Selecting channel type:

a) Conventional typical grocery. b) Vertical Marketing System: 1. Ownership VMS: more control, less adaptability - Sony Sweets. 2. Contractual VMS: formal arrangements such as franchising - KFC. 3. Administered VMS: no ownership, but administrative control e.g. DeBeers diamonds. 4. Relationship VMS: Collaboration between companies - IBM, Intel & Dell promoting Linux.

Deciding on distribution intensity... i. Intensive: most outlets in an area e.g. Unilever, P&G, Tapal, EBM; ii. Exclusive: very few outlets/ channels: Mercedes, Lexus, Butlers Coffee;

iii. Selective: between the two extremes: McDonalds, Toyota, EBH.

Deciding on channel structure/ configuration: 1. What do end-users want? 2. What are the product characteristics? 3. What capabilities and resources does the manufacturer possess? 4. What functions have to be performed? 5. What skills do intermediaries possess?

1. Market access: what is the coverage or customer base? 2. Value-added competencies: what is the right combination? Does it exist? 3. Financial considerations: what is the revenue & cost impact of using different channels. 4. Flexibility & control considerations: how easy or difficult it is to add/ replace channel?





Providing channel leadership: ensuring performance, providing guidance; Managing structure & systems: from informal to highly structured, policies & procedures, linkages, support services; Managing physical distribution: storage, transportation, route planning. Managing channel relationships: Collaboration, commitment & trust, power & interdependence.

Schultz said entrepreneurs and business owners should ask themselves one question: What does my brand stand for? Schultz argued that by making a deeper emotional connection with your customers, your brand will stand out from the hundreds, if not thousands, of vendors, entrepreneurs, and business owners selling similar services and products.

In my conversation with Schultz, he never mentioned the word "coffee" until I brought it up. Of course, coffee is what Starbucks sells as a product, but it's not what the chain stands for. It's too early to say whether the current Starbucks marketing effort will reverse a steep decline in profits, but the campaign -"It's not just coffee- is consistent with Schultz's philosophy to sell something bigger than the physical product the company produces.

Legendary entrepreneur Richard Branson was once asked, "What does Virgin stand for?" He could have answered "a great music store" or "a great airline," but instead he answered with one word -"fun." By focusing on fun from his earliest days as an entrepreneur, Branson's vision allowed him the flexibility to move beyond a single product.

Today the Virgin empire spans some 360 companies. Branson instinctively knew how to differentiate his brand. Branson was able to adapt, change, and take advantage of new opportunities because he sold an experience.

When I asked Hsieh what Zappos stands for, he never mentioned the physical products that Zappos sells - shoes and clothes. Instead, he answered "happiness." Without a hint of hesitation, Hsieh suggested that Zappos could be running an airline in 20 years. I can't forecast whether Zappos will turn into a Virgin type of enterprise, but by promoting an experience - in this case, the joy customers feel when they deal with the company - Hsieh is setting up the brand for success should new opportunities become available.