MKT 5301_VII: | Management

AdvancedMarketingMKT5301UnitVIIEssay.docx 2 Advanced Marketing MKT 5301 Unit VII Essay This essay measures your mastery of ULO 6.1. Choose a well-known global organization (e.g., Amazon, McDonald’s, Zara, Unilever) that operates in multiple international markets. Research how the chosen organization distributes its products across different markets. Consider both physical (retail, wholesale) and digital (e-commerce, direct-to-consumer) channels. Describe the marketing distribution channels and explain whether you would change the distribution channels or not. Include any challenges the company is facing with distribution strategies and provide potential solutions. Include a description of key logistical aspects such as warehousing, inventory management, transportation, and supply chain coordination. Begin with an introduction. Your essay least one page in length, not counting the reference page. You must use at least one source to support your essay. Follow APA Style when creating citations and references for this assignment. UnitVIIStudyGuide.pdf MKT 5301, Advanced Marketing 1 Course Learning Outcomes for Unit VII Upon completion of this unit, students should be able to: 6. Summarize distribution management as a marketing method. 6.1 Summarize distribution strategies used by an organization. Required Unit Resources Chapter 15: Designing and Managing Distribution Channels—Read the following sections: • The Role of Distribution Channels • Channel-Management Decisions Chapter 16: Managing Retailing Unit Lesson Distribution Channel What do you think of when you hear distribution channel? Many students do not realize that the management of the distribution channel is actually a part of the management of the marketing strategy of an organization. The distribution channel represents the movement of the product or service from the manufacturer or the creator of the product or service through various intermediaries to the final consumer. This could involve a manufacturing plant, distributors, wholesalers, and retailers. The holistic process where the product or service progresses through each of these intermediaries is termed the distribution channel. Through this process, the intermediary or supplier is making some level of contribution that could include re- grouping the products through break bulking, accumulating, or assorting. Break bulking refers to the practice of dividing larger quantities into small quantities, whereas accumulating collects products from many small producers by grouping them together for customer convenience. Assorting and sorting adjust assortment discrepancies by separating products into groups. This could be based upon criteria such as style, quality, product type, or a variety of other characteristics. At the end of the day, the ultimate goal is to ensure that the right product is at the right location exactly when the target market desires the product/service. Convenience for the consumer is the ultimate goal! Direct Distribution Channel Conversely, some consumers might prefer a direct channel that moves the product directly from the manufacturer to the consumer. Online buying would be considered a direct channel of distribution for many companies. A distinct advantage to the direct channel system is that it allows the marketer to maintain greater control on all aspects of the distribution and marketing process. This could lead to overall lower costs and, theoretically, lower prices for the consumer. The direct contact with customers also provides a distinct advantage of being able to develop a stronger relationship with the customer, leading to improved customer relationship management (CRM) practices within the company. Finally, there simply might not be any suitable intermediaries available. In many cases, companies will use a variety of distribution channels (both direct and indirect) to respond to consumer needs. CRM is an extremely important factor in maintaining the highest levels of brand equity amongst customers. Understanding the customers’ value proposition provides marketing managers with the ability to ensure that the products and services offered by their company align with that value proposition. UNIT VII STUDY GUIDE Managing Distribution Channels MKT 5301, Advanced Marketing 2 UNIT x STUDY GUIDE Title Indirect Distribution Channel If the decision is made to use indirect distribution methods, retailers are a familiar intermediary used. Store retailers, non-store retailers, and corporate retailers or franchisers represent categories of retailers. The store retailers are represented by specialty stores, department stores, supermarkets, convenience stores, drug stores, discount stores, off-price retailers, superstores, and catalog showrooms. A list of common retailers is detailed in Chapter 16 of the textbook. While all four Ps (product, price, promotion, and place) are addressed in the marketing strategy for retailers, we focus on the place or the distribution strategies in this unit. Determining whether to maintain, decrease, or increase the number of physical stores is a dilemma of astronomical proportions. Why have we been witnessing a large number of retailers close their doors over the last few years? Circuit City (tech store), Sears Roebuck, K-Mart, and JC Penney, to name a few, have been closing locations due to reported slow sales. These middle-ground retailers seem to be failing fast. Middle-ground retailers are those that do not have a luxury focus or a discount pricing strategy. Several of these stores have a long history of serving customers and are now unable to maintain a customer base. Is this a result of the drastic increase in the amount of online buying? Are consumers looking at the convenience of online buying as the preferred shopping experience? What will happen to retailers as we know it today? What about shopping malls and shopping centers? These are questions to be debated as marketing managers determine the worth in opening and/or maintaining retail store locations. Non-store retailing suggests that consumers will use alternative methods such as direct marketing or catalog buying, multilevel or home selling, automatic vending machines, or alternative-service buying. Direct marketing uses shopping networks, such as QVC, and online shopping venues, such as Amazon. Multilevel uses an approach in which consumers are actually selling and incentivized to sell the company’s products to the consumer in the convenience of their home. Examples of this type might be Avon, Pampered Chef, or Tupperware. Vending machines use small machines that are dispersed everywhere to dispense and sell products. Finally, alternative service buying provides a situation where an organization provides discounts on products in exchange for the customer becoming a member of the organization. The last category is that of corporate retail organizations or franchises. This includes corporate chain stores, voluntary chains, retailer cooperatives, consumer cooperatives, merchandising conglomerates, and franchises. Franchising has become one of the fastest growing retail venues in the United States. This model suggests that a franchisor or owner of the company will provide the franchisee with the opportunity to open a location at MKT 5301, Advanced Marketing 3 UNIT x STUDY GUIDE Title a predetermined location. The franchisor provides the franchisee with the business model, processes and procedures manual, supplier contacts and discount pricing opportunities, assistance with setting up the business (including hiring of the management team and employees), and brand equity and marketing benefits. Examples of this type of retailer would include Subway, Anytime Fitness, Jimmy John’s, or Buffalo Wild Wings, to name a few. While this venture sounds incredibly profitable, it also requires a hefty investment upfront as well as monthly royalty fees to be paid to the franchisor’s company. Within the scope of selecting a distribution channel system, marketing managers also need to consider whether they will use an intensive, selective, or exclusive market exposure distribution system. The goal is to achieve an ideal market exposure that makes the product available to efficiently reach the target market but not overly exceed them. If an organization exceeds, there will be too much exposure, which will increase marketing costs and lead to increased inefficiencies. Intensive distribution suggests that the organization will sell the product through as many retailers as possible. This type of distribution is appropriate for convenience products or other products in which customers do not want to exert extra effort and time to find the product. Selective distribution suggests the organization will only sell the product through those retailers that will provide the product with special attention. An example of this might be a specialty product, such as cosmetics or specialty athletic wear, only being sold in certain stores. Using selective distribution provides the consumer with the ability to shop at one store to view a specific product category, making it easier for consumers to compare products. This also provides the ability to sell certain products in certain areas of the country or the world. For instance, it might not be effective to sell snowboards in Florida because there is no measurable snow in that part of the country. Finally, exclusive distribution suggests that the organization sells products only in certain geographically dispersed areas of the country. This distribution method only works if the target market is willing to travel to purchase the product. An example of this might be antique custom automobiles. Another important area of consideration is whether an organization is interested in global markets and, if so, how they will enter these markets. While there are many methods to enter international markets, five methods will be examined in this unit. • Exporting is the most common with products and services produced in the United States and sold to international consumers. This is typically accomplished by using an intermediary that specializes in international distribution and marketing. • Licensing is a second method of product distribution, which enables a foreign company to license a certain segment of the product/service for a fee paid to the original company. This is an interesting method, as the majority of the risk is taken on by the foreign company. • Management contracting enables a company to sell their knowledge. Many times, this involves a managerial-level person spending a period of time in an international country actually working in the foreign company and assisting them with product or service distribution and marketing best practices. • Joint venture distribution methods involve a partnership between a domestic company and the foreign company. This provides a significant advantage with one segment of the team being in the home country with a knowledge of suppliers, business practices, customs, and the other home country’s expectations. • Finally, direct investment is an option where a company fully invests in a location within the foreign country. This involves greater risks but also maintains full control of business operations. Summary Distribution strategies play a key role in the success of an organization. Understanding the options associated with distribution will enable marketers to select the strategy that best meets the needs of the associated target market. Course Learning Outcomes for Unit VII Required Unit Resources Unit Lesson Distribution Channel Direct Distribution Channel Indirect Distribution Channel Summary