1. IB Business & Management Unit 4.6 Place (Distribution)

2. ‘getting the product to the right customers at the right place and at the right time’ Place is about…….

3. Place? Refers to distribution Most products are NOT sold directly from the manufacturer to the final customer What other types of business might be involved in getting the product to the final customer?

4. Chain of Distribution The means of getting a product to the customer One or more intermediaries may be involved The longer the chain the more expensive the final product to the consumer. Why? The longer the chain the longer it will take to get the product to the consumer. Why?

6. Types of Intermediaries Retailer – A business which buys goods from manufacturers and wholesalers and sells them in small quantities to customers Wholesaler – A business which buys goods from manufacturers and sells them in smaller quantities to retailers Agent/Broker – An independent company who negotiates between buyers and sellers Distributor – Specialist, i ndependent businesses that sell products of only a few manufacturers

7. WHOLESALERS – WHY USE THEM?

8. Wholesaler Advantages Wholesaler takes care of storage o Retailer has less cost & more space Retailers do not have to purchase such large quantities Producer’s costs are lower as they are selling in bulk to fewer customers Producers do not have to deal with distribution issues / problems

9. Wholesaler Disadvantages Producer loses control of marketing How do you know the wholesaler will promote like you want them to? Retailers have higher prices as the wholesaler’s costs must be passed on

10. RETAILERS – WHAT ARE THEY ALL ABOUT?

11. Some Types of Retailers Department Stores Online Retailers Market Traders Superstores/ Hypermarkets Supermarkets Multiples Independent stores

13. Distributors o Independent, specialist businesses that sell products of only a few manufacturers Examples include: o Cars o Books o Movies o Electrical equipment

14. Agents or Brokers Negotiators who act on behalf of buyers & sellers of a product Usually not employed by the producer, independent Experts in their field Often charge either a commission or a fee Often offer products from a variety of producers Examples: o Real estate, travel, insurance, financial advisors

15. Agents or Brokers Often rely on personal selling techniques o Product is complicated o Buyer needs education o Buyer can ask questions o Product may need demonstration

16. Direct Route What methods could a firm use to sell directly to customers?

17. Can you think of examples of companies which use these methods?

18. Direct Marketing Distribution Telesales, or telemarketing o Sales people make phone calls o Or automated voice or text messaging o Expense varies o Some people hate it E-commerce o Websites which accept payment online  Credit card  PayPal  E-check o Not appropriate for all products o Growing in popularity Direct Mail o Send promotional material via the postal service o Can be personalized o But often considered ‘junk’ Vending Machines o Drinks, snacks, cigs o Can be placed almost anywhere o New machines can accept various payment methods o Costs are minimal, i.e., no salespeople needed o Vandalism, limited stock, mechanical failures

19. Factors in Choosing Distribution Strategy Costs & benefits o Direct selling may reduce costs but retailers may have better access to customers o Transportation methods must also be considered, e.g., rail, ship, trucking, air Product o Perishables must have short chains o Fast-moving goods need to be moved in large volumes (wholesalers & retailers more app.) o Many products can now be sold directly through the internet (books, dvds, toys, airfare, vacations, clothes)

20. Multi-Channel Distribution Many businesses will use more than one channel E.G., airlines will sell tickets via: o Travel agencies o Airport counters o Internet website o Internet travel sites  Expedia  Kayak  Orbitz

21. What Distribution Channel/Channels do these manufacturers use?

27. Factors in Choosing Distribution Strategy Market o Niche markets often directly controlled by producer whereas mass markets often best to use intermediaries Time o Some items require immediate delivery while others can be ordered and delivered at a later date Legal Constraints o Often a nation or community’s laws affect the distribution selection o E.g., gambling, alcohol sales, guns & ammunition

28. Channels of Distribution Channels of distribution are NOT the methods of transport o They are NOT trucking, railroads, shipping etc. Channels of distribution refer to the intermediaries used to get product to customer such as wholesalers, agents, retailers

29. SUPPLY CHAIN MANAGEMENT (HL ONLY)

30. Supply Chain Management (SCM) AKA logistics Art of managing & controlling the sequence of events from production to delivery to a customer

31. SCM Functions Stock control o Track all stocks (raw materials, work-in-progress, finished goods) from source to consumption Quality control o Ensure quality at all stages in the process o Are you getting your money’s worth at each stage Supplier networks o Select suppliers o Coordinate amongst them Transportation networks o Select most cost-effective method o Monitor their performance

32. Comments on SCM Long chains provide opportunities for things to go wrong SCM helps ensure appropriate supply of stocks to meet demand o Excessive stock costs money o Lack of stocks leads to production delays & potential lost sales SCM contributes to ‘lean’ production o Identify waste o Identify opportunities for improvement