Professional Documents
Culture Documents
We will do this course in a different way There are only 11 classes left This time we will divide the course in 11 topics For each topic a group will have to show 2-3 management movies on that topic. After the movies the group will explain the topic by enacting a drama playing roles decided by the group. This is not an essential requirement The topics will be given today Each class the internal marking will be done by the class. Each student will rank the class on pre defined printed sheet. Average of the class will be that groups marks. There will be no name in the marking sheet. The marks will be exactly equal for each member of the group. This will be a group exercise and not an individual exercise
Manish.nagill@gmail.com rinkubhoriya@gmail.com
Pharmaceutical Drugs
MOVIE: Channels
Evolution of Channels
Demand Side Factors
Facilitation of Search (end user & seller) Adjustment of Assortment Discrepancy Manufacturer : large quantity of a limited variety of goods End User: Limited quantity of a wide variety of goods
Disadvantages
End Users
Individual Consumers Business organizations
Channel Captain
Intermediaries
Wholesale
Distributors, Manufacturers reps, agents and brokers
Retail
Department stores, specialty stores, franchises etc.,
Specialized
Insurance, finance, credit card, logistics, ad firms etc.
Two additional
Customer service Information Provision
Spatial Convenience
Reduces transportation, time taken, and search costs ATMs Cars for service to be picked up from home Does high traffic, bad roads affect this service output
Product variety
Greater the product variety higher the service output & higher the costs Breadth & Depth parameters, varying requirements Assortment Right Assortment & Quick delivery could be a potent combination
Information Provision
Educates end users about product attributes, usage capabilities, prepurchase and post-purchase services Product demos Increases costs Online option
Competition
At same service output level, price needs to better At same prices, better service output is required
Costs Represented
Storage & delivery costs Inventory Carrying Costs Selling, advertising, sales promotion, publicity, PR Time & Legal Costs Credit, terms & conditions of sale Price guarantees, warranties, insurance, repair, after sale service, spoilage etc. Order processing costs Collections, bad debt cases NIKE CASE STUDY
gurgaon
Reverse influence
Gap Analysis
Environmental bounds
Electric Supply Malls to close on Tuesday
Managerial bounds
Indifference of personnel to new techniques Expertise & Knowledge levels
Types of Gaps
Demand side
When a service output supplied is greater than amount demanded When a service output supplied is less than amount demanded
Gap Analysis
Types of Gaps
Supply side
Cost of providing a service output is high when it can be lower (particularly in reverse logistics) , a cable manufacturer example Bucklins principle of postponement & speculation
(manufacturer v/s consumer, books case, retail sale of CDs v/s downloads)
Gap Analysis
Supply Side Gaps
Changing the roles of current channel members Investing in new distribution technologies to reduce cost Improve the functioning of the channel
Channel Power
How to define Dependence
B depends more heavily on A if,
B gets some Utility (value, benefits etc.) from A B has fewer alternative sources for that utility
Channel Power
Approximate Methods to measure power
%age of sales and profits retailer derives from your product How well you perform your role vis--vis competitors
(utility may be missing but excellent service being rare is unique)
Channel Power
French & Raven Approach
Five Sources of Power
FIRST Reward Power (two conditions)
Has the ability to reward Will Reward and share the benefits Requirements Manufacturer must offer a quality service that is valued by end user At a price that end user is willing to pay Saleable in enough quantities for financial rewards to be valued Backed by a minimum required producer reputation And should be delivered reliably CASE STUDY
Channel Power
Second: Coercive Power
If B Fails to perform as per As requirement, A can punish B
Slowing down of shipment Remove exclusivity either territory or category Reduce margins etc. Wal Mart forces bulk breaking on its suppliers e.g. Socks Wal Mart forces suppliers to accept EDI
Leads generally over long run to Target will get less satisfied by money returns Target will become less satisfied by non-financial side Target will see relationship as conflict driven
Channel Power
Should influencer care about targets reactions?
Short Term: Target is less cooperative Medium Term: Target is less trusting Long Term: Target feels less committed Should coercion power not be used at all
EDI??
Channel Power
THIRD: Expert Power
Once expertise is transferred, this power weakens considerably
Dole out expertise in small quantities periodically Invest in continually new learning Transmit only customized information
Channel Power
Legitimate Power has two sources
Law or legal legitimate power
Patents, trademarks, franchise agreements etc.
Channel Power
Referent Power
When A can act as a standard of reference for B and hence B may seek association with A A shares its prestige by allowing B to carry its goods
Channel Power
Converting Latent power to exercised power
Promise Strategy Threat Strategy Legalistic Strategy Request Strategy Information exchange strategy Recommendation strategy
Channel Conflict
Conflict v/s Competition Measuring Conflict
Count the issues of relevance, car dealer Assign importance to each issue, (Im) Frequency of discussion & disagreement, (Fr) Intensity of dispute, (In)
Conflict = Im x Fr x In for each issue Index of Conflict = Sum of Conflicts on each issue
Channel Conflict
Conflict is desirable, Functional Conflict
Increases performance levels
Channel Conflict
Major Sources of Conflict
Competing Goals,
CEOs V/s Owners Principals V/s Channel Partners
Margin Per unit Inventory Marketing costs sharing
Channel Conflict
Major Sources of Conflict
Differing Perceptions of Reality
The attributes of product/service Applications it serves and segments Competition Manufacturer is away from customers and reseller is away from manufacturing
Channel Conflict
Major Sources of Conflict
Clash over Domains
Market Research Quantum of Pre & Post sales support Inventory
Channel Conflict
Major Sources of Conflict
Clash over Market Domains
Intra-channel Competition
Intensive Distribution Reseller representing Competitors
Unwanted Channels
Gray marketing
Channel Conflict
Dangers of Conflict
Conflict begets More Conflict Coercive power gets utilized
Channel Conflict
Styles of Conflict Resolution
Avoidance Accommodation Competition
Vertical Integration
Forward Integration/ Downstream/Backward/Upstream
Vertical Integration
Degrees of Vertical Integration Buy -----relational governance-----Make
Who does it People Money Risk Responsibility
Vertical Integration
Forward Integration
For control,
Does it work usually?
ROI
Revenues minus direct costs of integration should be positive Resources need to be there There should be no other more lucrative options for that resources
Vertical Integration
Why Outsource?
Motivation
Sales agents v/s. employees
Attraction of rewards Fear of losses
Replaceable agents
Specialization
Core competency
(Prahlad)
Vertical Integration
Why Outsource?
Survival of the Economic Fittest
No possibility of adjusting losses in distribution in any other function
Economies of Scale
Distribution as well as retailing
Vertical Integration
Why Outsource?
Heavier Coverage (assortment)
Also a reason that backward integration is not usual
Vertical Integration
Company specific capabilities in Distribution
Idiosyncratic Knowledge Realtionships Brand Equity Customized physical facilities (car shipments trucks) Dedicated capacity Site specificity
Switching Costs
What is the situation in India? (in the class) Write similar case for India in Todays Scenario for Online bill payment. (For 30 Marks), To be submitted in the next class