Distribution Policies Intensive Selective Exclusive Integrated

Intensive Distribution Used if the product is sold everywhere Ex: Coca-cola is found in schools, bus stations, parks, malls, arenas, cafeterias, grocery stores, drugstores, retail outlets, planes, trains, movie theatres, restaurants, etc.

Selective Distribution Try to control the distribution of their product May seek to avoid conflicts in positioning/brand image If a retailer orders a manufacturer’s product, by law the manufacturer cannot refuse to sell the product to the store without a valid reason

Exclusive Distribution The manufacturer has made a deal with one or two retailers in a particular area to sell the manufacturer’s product exclusively This allows the product to have a prestige image and allows the manufacturer to dictate some of the retail strategies. Ex: High fashion clothing, famous-name watches, luxury giftware

Integrated Distribution In this case a manufacturer, distributor, or retailer owns both distribution outlets and manufacturing facilities for a product Ex: IKEA, Lee Valley tools – own and operate their own manufacturing & retail stores

Distribution Channels

Channels of Distribution All businesses need to distribute their product either to a place where a consumer can find it OR directly to the consumer IF the consumer has the product, the marketer has been SUCCESSFUL

Direct Channel Producer Consumer

Indirect Channel #1 Producer Retailer Consumer

Indirect Channel #2 Producer Specialty Channel Consumer

PAUSE FOR THOUGHT Think of one item you recently purchased at a store. Where was it made? In detail, how do you think it got to the store? BMI3C Unit 8

Distribution and Logistics

What to Consider When... Is the channel directed at an industrial and/or institutional consumer? What is the income level of the target market? How large is the local market? BMI3C Unit 8

What to Consider When... What are the buying habits of the consumers? Will the selected channel reach a sufficient number of consumers? Is it a seasonal or high-fashion item? BMI3C Unit 8

What to Consider When... Can the channel become a competitive advantage? Is the product custom made? Will the product spoil? What is the unit value of the product? BMI3C Unit 8

What to Consider When... How large or how heavy is the product? Does the product come with a manufacturer’s warranty? Is the product price sensitive? BMI3C Unit 8

Logistics

Logistics Logistics is the process of designing and managing a supply chain. A supply chain consists of all the activities involved in getting the product from the original source to the ultimate consumer. BMI3C Unit 8

Logistics MANUFACTURER raw material equipment supplies processed goods BMI3C Unit 8 importer wholesaler retailer

Logistics A supply chain involves purchasing, manufacturing, storage, and an emphasis on transportation. BMI3C Unit 8

Logistics There are four major factors: destination (distance): local transportation costs less than cross country, crossing oceans is more expensive and complex than crossing land BMI3C Unit 8

Logistics There are four major factors: weight: heavy/bulky shipments cost more to transport than light/compact ones BMI3C Unit 8

Logistics There are four major factors: volume: large shipments can use containerization (put all products in a container), small shipments cannot BMI3C Unit 8

Logistics There are four major factors: type of goods: some require special handling: fruit, frozen foods, toxic chemicals, etc. BMI3C Unit 8

Logistics At a certain point, it has to be decided when the seller’s responsibility for the product ends, and the buyer’s responsibility begins. This is called the Free on Board (FOB) point. BMI3C Unit 8

List two advantages and disadvantages for each. Logistics There are five main ways to transport a product: trucks trains planes ships pipelines Assignment List two advantages and disadvantages for each. BMI3C Unit 8

Inventory Management

Inventory Management Inventory management controls the goods within the business. It helps business determine: what they need how much they need when they need it BMI3C Unit 8

Inventory Management Overstocks A company never wants to have more inventory than it can sell in a reasonable period of time because inventory costs money. BMI3C Unit 8

Inventory Management Overstocks investing money in inventory ties up that money; it cannot be used for anything else inventory needs storage space, which uses up valuable production or sales space BMI3C Unit 8

Inventory Management Overstocks many companies borrow money to purchase inventory, interest grows. effective inventory control means low inventory, less storage space, and less financial assistance. BMI3C Unit 8

Inventory Management Out-of-Stocks Inventory must be managed to avoid running out of an item. What are all the things that would happen to the Cambridge Toyota plant if they couldn’t get spark plugs? BMI3C Unit 8

Inventory Management Shrinkage A loss of inventory due to breakage, damage, or theft. Managed in two ways: (a) prevent it from happening (b) record it when it happens BMI3C Unit 8

Inventory Management Shrinkage Businesses must count inventory yearly; if count is off, record new value, take a loss. Lost inventory can be counted as a loss on a company’s income tax (to a limit). BMI3C Unit 8

Inventory Management Turnover the number of times a company sells its inventory in a year indicates how quickly a product sells standard turnover rates posted on StatsCan website BMI3C Unit 8

Inventory Management Turnover high turnover means more sales; watch for out-of-stock issues low turnover means overstock, strategy is needed to sell more product BMI3C Unit 8

Distributing to International Markets

Distributing to Int’l Mkts Problems for Canadian businesses internationally: logistics, distances, tariffs, currency rates, foreign laws and regulations, foreign banks, foreign transportation companies, languages, cultures, politics, crime BMI3C Unit 8

Distribution to Int’l Mkts Possible options: Build plant in foreign market and distribute the same way Build a warehouse in foreign market, hire local sales reps Create a joint venture with a foreign company so they make your product BMI3C Unit 8

Distribution to Int’l Mkts Possible options: Licence the brand to a foreign manufacturer Sell to an importer Send a Canadian sales rep to sell directly to foreign retailers BMI3C Unit 8