You are on page 1of 15

Sales and Distribution

Management 2e

Tapan K. Panda
Sunil Sahadev

Oxford University Press 2012. All rights reserved.


Chapter 15
Distribution Channel
Management - An
Introduction

Oxford University Press 2012. All rights reserved.


Learning Objectives
Understand the reason why distribution channels exist

Know the types of functions that distribution channels perform

Explain the process of channel management

Appreciate the need for channel strategy in an organization

Oxford University Press 2012. All rights reserved.


Role of distribution channels
To adjust the discrepancy of assortment through the process of
sorting, accumulation, allocation, and assorting
To minimize the distribution costs through routinising and
standardizing transactions to make exchange more efficient and
effective
To facilitate the searching process of both buyers and sellers by
structuring the information essential to both the parties
To provide a place for both parties to meet each other and
reducing uncertainty

Oxford University Press 2012. All rights reserved.


How do distribution channels contribute
Intermediaries can improve the efficiency of the exchange process
Channel intermediaries adjust the discrepancy of assortment
through the performance of the sorting process
Marketing intermediaries hang together in channel arrangements
to provide for the routinisation of transactions
Channels facilitate the searching process

Oxford University Press 2012. All rights reserved.


Activities that a typical Distribution
Channel performs
Spatial discrepancy

Temporal discrepancy

Need to break the bulk

Need to provide assortment

Oxford University Press 2012. All rights reserved.


The cost and control aspects of
intermediation

Control Cost
efficiency

Direct distribution Indirect distribution

Oxford University Press 2012. All rights reserved.


Distribution Channel Strategy
Setting distribution objectives in terms of the customer
requirements
Finalizing the set of activities that are required to be performed
to achieve the channel objectives
Organizing the activities so that the responsibility of performing
the activities is shared among the entities who are meant to
perform these activities
Developing policy guidelines for the smooth functioning of the
channel on a day to day basis

Oxford University Press 2012. All rights reserved.


Distribution Channel Strategy
Distribution channel management encompasses all activities
dealing with the distribution function of the firm
The distribution strategy provides guidelines for decision making
The distribution management function can be viewed as
happening in two phases: the ex ante phase and the ex poste
phase

Oxford University Press 2012. All rights reserved.


Distribution Channel Strategy
The ex ante phase involves all the activities that are associated
with the design and establishment of the distribution channel.
These activities actually take place before the distribution
channel actually starts functioning.
The exposte phase involves managing the day to day activities of
the channel wherein the behavior of the individual channel
members are coordinated

Oxford University Press 2012. All rights reserved.


The Framework for Channel Management
Design
Designof
of the
the
channel structure
structure
Ex ante
Phase
Establishing
Establishingthe
the
Distribution ChannelStrategy
Distribution Channel Strategy channel
Channel Objective
Objective
Activity Finalization
Activity Finalization
Organizing theactivities
Organizing the activities
Developing Policy Guidelines
Developing Policy Guidelines
Motivating
channel
members
Ex poste
Phase
Resolving
conflicts among
channel
members

Oxford University Press 2012. All rights reserved.


Pharmaceutical Distribution in India
Distribution channel structure

Post-liberalization scenario

Stockists

Retail

Distribution Margins in India

Oxford University Press 2012. All rights reserved.


Pharmaceutical Distribution in India

Manufacturer

C&F/Depot/Super stockist

Stockist

Institution Wholesaler Hospital

Retail/Chemist

Patient

Oxford University Press 2012. All rights reserved.


Rural Distribution Channels
Public distribution system which operates ration shops

ITC and Hindustan Unilever trying innovative methods at


expanding network and achieving penetration of the rural
hinterland

Oxford University Press 2012. All rights reserved.


Rural Distribution Channels
Major Issues
Economic issues

Physical infrastructure

Service output issues

Diversity related issues

Oxford University Press 2012. All rights reserved.