MARKETING STRATEGY
O.C. FERRELL • MICHAEL D. HARTLINE
9
Distribution and Supply
Chain Management
Distribution and
Supply Chain Concepts
• Marketing Channels
– “An organized system of marketing institutions
through which products, resources, information,
funds, and/or product ownership flow from the
point of production to the final user.”
• Physical Distribution
– “Coordinating the flow of information and
products among members of the channel to
ensure that products are available in the right
places, in the right quantities, at the right times,
and in a cost-efficient manner.”
9-2
Graphical Depiction of a Supply Chain
Exhibit 9.1
9-3
Marketing Channel Functions
• Channel Function Specializations
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Sorting
Breaking Bulk
Maintaining Inventories
Maintaining Convenient Locations
Providing Services
• Channel Effectiveness and Efficiency
– Distribution Decision Criteria
• (1) Is the channel effective?
• (2) Is the channel efficient?
9-4
Discussion Question
• Some manufacturers and retailers advertise
that customers should buy from them
because they “eliminate the middleman.”
Evaluate this comment in light of the
functions that must be performed in a
marketing channel. Does a channel with
fewer members always deliver products to
customers at lower prices? Defend your
position.
9-5
Strategic Issues in Distribution
and Supply Chain Management
• Marketing Channel Structure
– Exclusive Distribution
– Selective Distribution
– Intensive Distribution
• Channel Integration (three key factors)
– Connectivity
– Community
– Collaboration
• Creating and Enhancing Value in the Supply Chain
9-6
Discussion Question
• Describe the characteristics of a product that
represent something you would go to great
lengths to acquire, thus supporting a
manufacturer’s use of an exclusive
distribution strategy. How much more
knowledgeable are the salespeople at an
exclusive distribution location versus those
at an intensive distribution location? Why is
this so?
9-7
Marketing Strategy in Action
• Clinique cosmetics uses a
selective distribution
strategy as their primary
marketing channel
structure.
• What is the motivation
for using this strategy for
this type of product line?
What are the apparent
benefits that Clinique
receives from this
strategy?
9-8
Maximizing Profit Margin Performance
Exhibit 9.2
9-9
Conflict and Collaboration
in the Supply Chain (1 of 2)
• The Basis of Conflict in the Supply Chain
– Five basic sources of power:
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Legitimate Power
Reward Power
Coercive Power
Information Power
Referent Power
9-10
Factors in Successful
Supply Chain Collaboration
Exhibit 9.3
9-11
Conflict and Collaboration
in the Supply Chain (2 of 2)
• Collaborative Supply Chains
– Category management must be:
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•
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Customer driven
Strategically driven
Multifunctional
Financially based
Systems dependent
Focused on immediate consumer response
9-12
Major Components of
Category Management
Exhibit 9.4
9-13
Trends in Marketing Channels (1 of 2)
• Advancing Technology
– Growth of Internet and e-commerce
– Radio frequency identification (RFID)
• Shifting Power in the Channel
– Discount mass merchandise retailers
• Wal-Mart, Kmart, and Target
– Category focused retailers (category killers)
• Toys “R” Us, Lowe’s, Office Depot, AutoZone, and
Best Buy
• Outsourcing Channel Functions
– Outsourcing is growing rapidly
9-14
Category Killers - AutoZone
9-15
The Trend in Outsourcing
Exhibit 9.5
9-16
Trends in Marketing Channels (2 of 2)
• The Growth of Direct Distribution and
Nonstore Retailing
– Examples of Nonstore Channels
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Catalog and Direct Marketing
Direct Selling
E-Commerce
Home Shopping Networks
Vending
Direct Response Advertising
• The Growth of Dual Distribution
9-17
Discussion Question
• What are the major differences you have
experienced in buying a product through a
physical retail store, a manufacturer’s
physical store, a catalog, and an online
merchant? What have some retailers in
your area done to justify their ongoing
presence in the channel?
9-18
Legal and Ethical Issues
in the Supply Chain
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Dual Distribution
Exclusive Channel Arrangements
Tying Arrangements
Counterfeit Products
9-19
FDA Against Counterfeit Drugs
9-20