BHANDARI SHASHANK SHUKLA SHI VAM ATRI ABHI NAY ABHI LASH Case Brief Made medium and heavy commercial vehicles 75% market share in the segment Made medium and heavy commercial vehicles 10 tonne rated payload 25% market share in the segment Made light commercial vehicles Sold 12000 vehicles per annum Made light commercial vehicles Sold 8000 vehicles per annum Combined sales of 60000 vehicles per annum Technologically outdated products 10 tonne rated payload Extensive network of dealers for service and spare parts Vehicles rated for a payload of 1.5 tonnes Not rugged Used for intra city or short distance use The 4 Entrants DCM Toyota Asked dealers to invest heavily in infrastructure like showroom and workshop Tied up with well established dealers Allwyn Nissan Tied-up with established players with good facilities and market understanding Most of them were dealers of Ashok Leyland Swaraj Mazda Found difficult to attract dealers with deep pockets due to lukewarm response Compromised and tied up with dealers with limited investment potential Decision parameters for Channel Design Market Variables Market Size Market Geography Market Behavior
Product Variables Degree of Standardization Product Prestige Unit Value Technicality
Intermediary Variables Availability Services Cost
Company Variables Size Financial Capacity Managerial Expertise
Channel Structure The company can choose between Selective Extensive Restricted number of channels in a geographical area to sell products Exclusive rights to only a limited number of dealers to distribute their products in geographical area Good working relationship with selected channel members and expectation of better than average selling effort The dealer gains stronger distributor selling support and more control over price, promotion, credit and services Selective distribution gives good market coverage with more control and less cost to the producer This strategy helps in improving the products image and allows for higher markups Why extensive channel structure Non-availability of good dealers Sluggish sales of other competitors products using conventional distribution channel Better after sales service 20% of a typical purchase decision is linked to a perceived level of service in a market No conflict of interest for the dealer Overcome Problems of Attracting Suitable Channel Members 1. Promotion 1. Provide strong advertising and promotional support to channel members 2. Provide a wide array of promotional allowances than competitors 2. Protect channel members sales 1. Through highly extensive distribution 2. Offer exclusive dealing arrangements 3. Provide Management Assistance 1. Training Programs 2. Sales Force 3. Financial Analysis and Planning 4. Friendly Relationship 5. Product 1. Better specifications than competitor products Evaluation Parameters for Channel Members 1. Credit and financial condition: whether it is capable of investing in infrastructure 2. Sales Strength: Sales capacity of prospective intermediaries 3. Product Lines: Whether it carried competitors products, quality of products, complementary products 4. Reputation: a poor reputation of channel member can have implications for the brand 5. Market Coverage: The geographical territory that the manufacturer would like to reach 6. Sales performance: Past sales history 7. Management Ability: difficult to judge because of the intangibles involved