当代商业概论 Fundamentals of Business

Lecture 5:Distribution and Business Plan Writing

What to cover today ：1. Distribution and market coverage2. Channels of distribution 3. Intermediaries 4. Physical distribution and transportation 5. Developing a business plan

Exercises

1. Distribution and market 1. Distribution and market coveragecoverage

Distribution 分销 is:-- the channels or pathways by which a fir

m’s products are made accessible to its customers

Market coverage 市场覆盖 is:-- the degree of product distribution among

outlets to cover the market

Market coverage can be classified as:

Intensive distribution: across most or all possible outlets to ensure easy access by consumers, products that do not take up much space and do not require expertise, e.g. cigarettes, chewing gum, soft drink

Selective distribution: through selected outlets, and some outlets are intentionally avoided, to create prestige or guarantee specialized service e.g. Victoria’s Secrets: via upscale department stores only

Exclusive distribution: through only one or few outlets, an extreme form of S distribution, e.g. luxury watches, high-quality jewelry: one particular specialty store

The higher the price, the more selective the market coverage.

Marketing research and market coverage

Marketing research can help a firm determine the optimal type of coverage by identifying where consumers desire to purchase products or services.

a DVD producer: grocery stores, retail stores, video stores, supermarket; amount of money customers are willing to pay at each type of store

Ralph Lauren: company-owned stores in trendy neighborhoods and resorts, “store within a store” in department stores such as Marcy’s

2. Channels of distribution2. Channels of distribution

Channels of distribution 分销渠道 is:

-- the specific method a firm uses to sell and deliver its products or services to its customers

Direct Channel: involves no intermediaries One-level Channel: involves retailers Two-level Channel: involves wholesalers

and retailers

2.1 Comparison of three distribution channels

“The direct model eliminates the need to support an extensive network of wholesale and retail dealers, thereby avoiding dealer markups 加价 ; avoids the higher inventory costs associated with the wholesale/retail channel and the competition for retail shelf space. … In addition, the direct model allows the Company to maintain, monitor, and update a customer database that can be used to shape the future product offerings. … this direct approach allows the Company to rapidly and efficiently deliver relevant technology to its customers.” -- Dell annual report

Question: what are the advantages of the direct channel as foregrounded here?

Case study: Direct channel of Dell

Direct channel the producer deals directly with customers e.g. Amway, insurance companies, DHC, 凡客诚

品 , Land’s End, Dell Possible promotion mix: rely more on personal

selling, PR, direct mail, and the Internet (increasing popularity)

Advantage: full control over the marketing mix (esp. price & promotion); higher profit (no markup, the full difference between the cost and the price goes to the producer); firsthand feedback

Disadvantage: more sales & delivery employees; more promotion expanses; less coverage/access

One-level channel

one marketing intermediary (the retailer) is involved between the producer and the customer

e.g. Time Warner: its film company – movie theaters, its record company – music shops

Possible promotion mix: rely more on media ads and sales promotion

Two-level channel two marketing intermediaries (the

wholesaler & the retailer) are involved between the producer and the customer

e.g. Anheuser-Busch’s Budweiser beer: the producer – 900 beer wholesalers – countless retail outlets such as grocery stores, convenience stores, supermarkets, vending machines

Possible promotion mix: rely more on media ads and sales promotion

2.2 Factors affecting the choice of distribution channels Market coverage Product characteristics: standardized products

(apples, napkins) are more likely to involve intermediaries than complex products (computers, cars, customerized furniture), because the latter require more expertise, specialized service, and greater communication between the buyer and the seller

Ease of transportation: the more transportable a product is, the more likely it is to involve intermediaries, e.g. built-in swimming pools vs. aboveground pools

Use of multiple channels

3. Intermediaries3. Intermediaries -- institutions or individuals that participate in the process of

moving products from the producer to the customer Merchants: become owners of products and then resell t

hem; can be further classified as: Wholesalers 批发商 : buy products from the producer in

large quantities and resell them to retailers Retailers 零售商 : sell products to end consumers

Agents 代理商 & brokers 经纪人 : match sellers and buyers (wholesalers, retailers, or both) of products without becoming owners; permanent (agents) vs. deal-by-deal (brokers)

3.1 Wholesalers

Full-service wholesalers

Limited-function wholesalers Rack jobbers 货架批发商 Cash and carry wholesalers 付款提货批

发商 Drop shippers 订货批发商

3.2 Retailers

Store retailing Department stores Discount stores Supermarkets Hypermarkets General stores Specialty stores

Nonstore retailing Virtual stores Vending machines Mail-order houses Direct selling Carts and kiosks MLM

3.3 Agents & brokers

Commonly used by small businesses with unknown brands that may not receive orders from wholesalers or retail outlets, or by foreign companies to explore the market and “test the water”

e.g. an entrepreneur creates a new paint product may use an agent to convince a representative (also called a buyer) of Home Depot, who will decide whether Home Depot should carry this products in its retail stores. An agent can be critical to the success of such a firm.

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3.4 Value added by intermediaries

Time utility 时间便利 Place utility 地点便利 Ownership utility 所有权便利 Form utility 商品整理便利 Information utility 信息便利 Service utility 服务便利

4. Physical distribution and 4. Physical distribution and transportationtransportation

Modes of transportation:

Rail: mainly for wholesalers Truck: mainly for retailers Pipeline: for liquid & gas Water: for bulk cargos, esp. international

trade Air: for light, costly goods

Case study: Streamline the logistic process in Toyota

The selection of proper transportation is merely the first step in developing a proper system for delivering products efficiently.

Toyota used to let its finished cars sit in its Kentucky factory, until it had a large batch to send by rail to various dealerships around the country. Now it immediately sends its finished vehicles by rail to a sorting dock, where they are sorted and then delivered to various cities nearby. Consequently the cars no longer sit at the factory, and the distribution time has been reduced by 2 day.

In reality, no formulas are available to determine the ideal transportation system. Most firms compare the estimated time and expenses of each possible method, and then select the most time-/cost-efficient one.

5. Developing a business plan5. Developing a business plan

-- a detailed description of the proposed business, including a description of the product or service, the types of customers it would target, the competition, and the facilities needed for production

-- a checklist for entrepreneurs to ensure that them have considered all the key functions of the business

-- a formal document to provide to potential investors

Structure of a typical business plan 1. Description and

ownership of proposed business

2. Assessment of the business environment (marketing research)

Economic environment Industry environment Global environment3. Management plan Organizational

structure

Production process Human resources4. Marketing plan Target market Product characteristics Pricing Distribution Promotion5. Financial plan Funds needed Feasibility 6. Summary

Appendices

Online resources for creating a business

Yahoo!’s Small Business site http://smallbusiness.yahoo.com American Express http://americanexpress.com/smallbusiness Small Business Administration http://www.sbaonline.sba.gov Quicken Small Business http://www.quicken.com/small_business

Online resources for business/marketing plan writing

Business Plan Guide http://wenku.baidu.com/view/ffd6b3daa58da0116c1749fc.html

Developing a business plan http://wenku.baidu.com/view/5ba1f48583d049649b6658b5.html

卡姿兰品牌营销策划方案 http://wenku.baidu.com/view/6a5bacc7aa00b52acfc7ca91.html

克丽缇娜品牌重庆上市推广方案 http://wenku.baidu.com/view/9a8e02768e9951e79b8927f8.html 莱坤男性化妆品营销策划书 http://wenku.baidu.com/view/8abdf900bed5b9f3f90f1ca2.html 名人掌上电脑智能王网络营销计划书 http://wenku.baidu.com/vie

w/1a5cfbc75fbfc77da269b1b7.html

Exercises

1. Translation (1) 市场覆盖 (2) 分销渠道(3) 物流 (4) 代理商(5) 货架批发商 (6) 订货批发商(7) 营业额 (8) 利润(9) 运营成本 (10) 货仓(11) 售货亭 (12) 邮购公司 (13) 直接销售 (14) 多层直销

2. Group project: writing a marketing plan 营销计划书

In the MS Word format In groups of 2-4 no less than 4 pages In English

3. Supplementary reading Avon is Calling in Every Wa

y It Can Global Integrated Logistics Developing the Business Pl

an College Health Club: Develo

ping a Business Plan