Published on March 20, 2014
A PROJECT REPORT ON Identifying Distribution Gap And Planning For Route Efficiency. HINDUSTAN COCA-COLA BEVAREGE VARANASI As Partial Fulfillment for the award of MBA degree under U.P.Technical University, Lucknow 2005-07 Under the able guidance of: Mr. Virendra Dahia. Submitted By: Ranjeet Kumar Asthana. R.No. 0509870206 INSTITUTE OF MANAGEMENT STUDIES NOIDA
CERTIFICATE TO WHOM IT MAY CONCERN This is to certify that MR. RANJEET ASTHANA roll no.0509870206 of MBA is a bonafide regular student of INSTITUTE OF MANAGEMENT STUDIES (IMS), NOIDA for the session 2005-07. He has completed the summer training project report entitled “IDENTIFYING DISTRIBUTION GAP AND PLANING FOR ROUTE EFFICIENCY” In the organization “HINDUSTAN COCA-COLA BEVAREGE PRIVATE LIMITED, MEHNDINGANJ,RAJATALAB,VARANASI ” as a partial fulfillment for the award of MBA degree under u.p.technical university,lucknow. I find the research report is up to standard and original one. Dr. C.S.NAGPAL EXECUTIVE DIRECTORSS
CERTIFICATE TO WHOM IT MAY CONCERN This is to certify that MR.RANJEET ASTHANAI roll no.0509870206 of MBA is a bonafide regular student of INSTITUTE OF MANAGEMENT STUDIES (IMS), NOIDA for the session 2005-07. He has completed the summer training project report entitled “IDENTIFYING DISTRIBUTION GAP AND PLANING FOR ROUTE EFFICIENCY” In the organization “HINDUSTAN COCA-COLA BEVAREGE PRIVATE LIMITED, MEHNDINGANJ,RAJATALAB,VARANASI ” as a partial fulfillment for the award of MBA degree under u.p.technical university,lucknow. I find the research report is up to standard and original one. Project Supervisor VIRENDRA DAHIA
ACKNOWLEDGEMENT The project work bears the imprint of several people. I have a deep sense of gratitude and honor towards them. First of all I would like to pay my gratitude thanks to Mr.B.J.Rishi (Coordinator).I extend my thanks to my project supervisior Mr. Virendra Dahia. I would also like to give my sincere thanks to Mr. Sharat Kumar (HR Manager) for giving me an opportunity to work for their esteemed organization . I would also like to give my special thanks to Mr. Gaurav Dhar Dubey (sales manager) who helped me in completion of this training And, at last but not the least I would like to thank all those distributors and retailers who provided me necessary information of market and the current scenario and all those people who are directly and indirectly involved in the project. Ranjeet Asthana
PREFACE It gives me an immense pleasure to put my project on “Identifying Distribution Gap And Planning For Route Efficiency” with respect to coco-cola in varanasi . this is made after a through study on specified marketing environment of working atmosphere in Hindustan coca-cola Beverages Pvt. Ltd. Situated at Mehndiganj Raja Talab, varanasi. It is difficult for a common man to understand each and every aspect of the organization. I have tried to present in an a lucid manner through the language of common man so that every one may understand the complications of project have been made in a clear by suitable data wherever necessary. My study is based on the “Identifying Distribution Gap And Planning For Route Efficiency”. as a lot of effort is made by the sales and marketing department to meet out obligations apart from my project topic I have tried to chalk out almost every department of the production plant. In all my modesty, I wish to record here that a sincere attempt has been made for the presentation this report. I also trust that this study will not only prove to be academic interest but also will be able to provide an insight into the area of working in multinational companies.
DECLARATION I RANJEET KUMAR ASTHANA student ofINSTITUTE OF MANAGEMENT STUDIES , NOIDA of MBA III semester, hereby, declare that the summer training report having the title.Identifying Distribution Gap & Planning for Route Efficiency in (LUXA, DASASHAWAMEDH GHAT, BANGALI TOLA, RAMAPURA RATHYATRA) Varanasi.There are several things, which are essential and important. It is outcome of my own work and the same has not been submitted to any universityCollegeInstitution for the award of my degree. Date: RANJEET KUMARASTHANA (MBA III Semester) Place:
EXECUTIVE SUMMARY On 8th of June, I started my project under the guidance of Mr. Gaurav dubey (Sales Manager) ,Mr. Ghanshayam Singh (Sales Executive) and Mr. Sivam pan dey (marketing executive). I have covered all the area which come under Krishana Enterprise and Om enterprise. The areas I covered are as follows: Dasashawamedh Ghat, Bangali Tola, Bhelupura,Ramapura, Madanpura, Luxa ,Rathayatra,Kamachha in Varansi city. I had surveyed many retail shops as possible in the area assigned to me . There I found some positive as well as some negative image of coke. I had done two surveys , one was Each dealer survey and another one was brand and pack availability survey for knowing distribution gap and route efficiency. I had also filled 100 questionaires from the retailer related to distribution of soft drink and preference towards soft drinks. In Each Dealer Survey , I counted the types of channel from where the cold drink was selling for examples like pan shops , tea stalls , general stores , restaurant etc and also the average sale of the cold drinks at that shops. Also we covered each and every retailers at every route and we had to check that all the brands and packs of coke were available or not or which one was available. Every where I found the shortage of 200ml and 500ml bottle which was in more demand. At every route I found some problems related to shortage of brands and problem of improper visit of company officers to the retailers. I think that another
soft drink like Pepsi was much more stronger inside the city because they give good margin to the retailers that’s why the retailers prefer to sell Pepsi in comparison with Coke . And the other problem was that the retailers getting product at cheaper cost in comparison from what they were getting from distributors. After completing the survey, I got one more opportunity from the sales manager in the form of a Market Impact Team . The work of that team was that the team went to every retailer for right execution daily and to convinced to buy each and every brand of coke. In the right execution daily, we went to the retailer and make the cooling system pure and in the brand order. The brand order of coke is 1. Thumps up 2. Coca-cola 3. Sprite 4. Limca 5. Fanta 6. Mazza . We arrange it with the norms of coke in daily. In M.I.T. we take seven steps which are as following: 1. Check the out side signs 2. Make worm display 3. Grid to retailer 4. Check inside signs 5. Check and maintain the cooling agent of Coke
6. Take the order to the retailer and fulfill it 7. Tell him about your next visit and thanks him. I have completed and submitted my project report on 7th August. In this organization, I learned more about the sales and the behavior of the retailer and distributor.
DISTRIBUTION Firm, Brand, and Product Line Objectives Firm level objectives: It is not enough to simply state a firm’s goal as maximizing the present value of total profit since this does not differentiate it from other firms and says nothing about how this objective is to be achieved. Instead, a business and marketing plan should suggest how the firm can best put its unique resources to use to maximize stockholder value. A number of resources come into play—e.g., • Distinctive competencies—knowledge of how to manufacture, design, or market certain products or services effectively; • Financial—possession of cash or the ability to raise it; • Ability and willingness to take risk; • The image of the firm’s brand; • People who can develop new products, services, or other offerings and run the needed supports; • Running facilities (no amount of money is going to get a new microchip manufacturing plant started tomorrow); and • Contacts with suppliers and distributors and others who influence the success of the firm.
Market balance: It is essential that different firms in the same business not attempt to compete on exactly the same variables. If they do, competition will invariably degenerate into price—there is nothing else that would differentiate the firms. Thus, for example, in the retail food market, there are low price supermarkets such as Food 4 Less that provide few if any services, intermediate level markets like Ralph’s, and high-end markets such as Vons’ Pavillion that charge high prices and claim to carry superior merchandise and offer exceptional service Risk: In general, firms that attempt riskier ventures—and their stockholders— expect a higher rate of return. Risks can come in many forms, including immediate loss of profit due to lower sales and long term damage to the brand because of a poor product being released or because of distribution through a channel perceived to carry low quality merchandise. Brand level objectives: Ultimately, brand level profit centers are expected to contribute to the overall maximization of the firm’s profits. However, when a firm holds several different brands, different marketing and distribution plans may be required for each. Several variables come into play in maximizing value. Profits can be maximized in the short run, or an investment can be made into future earnings. Product profit can be measured in several ways. If you sell a computer that cost $950 to make for $1,000, you are making only a 5% gross profit. However, selling a product that cost $5 to make for $10 will result in a much higher percentage profit, but a much lower absolute margin.
A decision that is essential at the brand level is positioning. Options here may range from a high quality, premium product to a lower priced value product. Note here that the same answer will not be appropriate for all firms in the same market since this will result in market imbalance—there should be some firms perceiving each strategy, with others being intermediate. Distribution issues come into play heavily in deciding brand level strategy. In order to secure a more exclusive brand label, for example, it is usually necessary to sacrifice volume—it would do no good, for Mercedes-Benz to create a large number of low priced automobiles. Some firms can be very profitable going for quantity where economies of scale come into play and smaller margins on a large number of units add up—e.g., McDonald’s survives on much smaller margins than upscale restaurants, but may make larger profits because of volume. Some firms choose to engage in a niching strategy where they forsake most customers to focus on a small segment where less competition exists (e.g., clothing for very tall people). In order to maintain one’s brand image, it may be essential that retailers and other channel members provide certain services, such as warranty repairs, providing information to customers, and carrying a large assortment of accessories. Since not all retailers are willing to provide these services, insisting on them will likely reduce the intensity of distribution given to the product.
Product line objectives: Firms make money on the totality of products and services that they sell, and sometimes, profit can be maximized by settling for small margins on some, making up on others. For example, both manufacturers and retailers currently tend to sell inkjet printers at low prices, hoping to make up by selling high margin replacement cartridges. Here again, it may be important for the manufacturer that the retailer carry as much of the product line as possible. Distribution Objectives Interrelated objectives: A firm’s distribution objectives will ultimately be highly related—some will enhance each other while others will compete. For example, as we have discussed, more exclusive and higher service distribution will generally entail less intensity and lesser reach. Cost has to be traded off against speed of delivery and intensity (it is much more expensive to have a product available in convenience stores than in supermarkets, for example). Narrow vs. wide reach: The extent to which a firm should seek narrow (exclusive) vs. wide (intense) distribution depends on a number of factors. One issue is the consumer’s likelihood of switching and willingness to search. For example, most consumers will switch soft drink brands rather than walking from a vending machine to a convenience store several blocks away, so intensity of distribution is essential here. However, for sewing machines,
consumers will expect to travel at least to a department or discount store, and premium brands may have more credibility if they are carried only in full service specialty stores. Retailers involved in a more exclusive distribution arrangement are likely to be more “loyal”—i.e., they will tend to • Recommend the product to the customer and thus sell large quantities; • Carry larger inventories and selections; • Provide more services Thus, for example, Compaq in its early history instituted a policy that all computers must be purchased through a dealer. On the surface, Compaq passed up the opportunity to sell large numbers of computers directly to large firms without sharing the profits with dealers. On the other hand, dealers were more likely to recommend Compaq since they knew that consumers would be buying these from dealers. When customers came in asking for IBMs, the dealers were more likely to indicate that if they really wanted those, they could have them—“But first, let’s show you how you will get much better value with a Compaq.” Distribution opportunities: Distribution provides a number of opportunities for the marketer that may normally be associated with other elements of the marketing mix. For example, for a cost, the firm can promote its objective by such activities as in-store demonstrations/samples and special placement (for
which the retailer is often paid). Placement is also an opportunity for promotion—e.g., airlines know that they, as “prestige accounts,” can get very good deals from soft drink makers who are eager to have their products offered on the airlines. Similarly, it may be useful to give away, or sell at low prices, certain premiums (e.g., T-shirts or cups with the corporate logo.) It may even be possible to have advertisements printed on the retailer’s bags (e.g., “Got milk?”) Other opportunities involve “parallel” distribution (e.g., having products sold both through conventional channels and through the Internet or factory outlet stores). Partnerships and joint promotions may involve distribution (e.g., Burger King sells clearly branded Hershey pies). Deciding on a strategy. In view of the need for markets to be balanced, the same distribution strategy is unlikely to be successful for each firm. The question, then, is exactly which strategy should one use? It may not be obvious whether higher margins in a selective distribution setting will compensate for smaller unit sales. Here, various research tools are useful. In focus groups, it is possible to assess what consumers are looking for an which attributes are more important. Scanner data, indicating how frequently various products are purchased and items whose sales correlate with each other may suggest the best placement strategies. It may also, to the extent ethically possible, be useful to observe consumers in the field using products and making purchase decisions. Here, one can observe factors such as (1) how much time is devoted
to selecting a product in a given category, (2) how many products are compared, (3) what different kinds of products are compared or are substitutes (e.g., frozen yogurt vs. cookies in a mall), (4) what are “complementing” products that may cue the purchase of others if placed nearby. Channel members—both wholesalers and retailers—may have valuable information, but their comments should be viewed with suspicion as they have their own agendas and may distort information. Direct Marketing We consider direct marketing early in the term as a “contrast” situation against which later channels can be compared. In general, you cannot save money by “eliminating the middleman” because intermediaries specialize in performing certain tasks that they can perform more cheaply than the manufacturer. Most grocery products are most efficiently sold to the consumer through retail stores that take a modest mark-up—it would not make sense for manufacturers to ship their grocery products in small quantities directly to consumers. Intermediaries perform tasks such as • moving the goods efficiently (e.g., large quantities are moved from factories or warehouses to retail stores);
• breaking bulk (manufacturers sell to a modest number of wholesalers in large quantities—quantities are then gradually broken down as they make their way toward the consumer); • consolidating goods (retail stores carry a wide assortment of goods from different manufacturers—e.g., supermarkets span from toilet paper to catsup); and • adding services (e.g., demonstrations and repairs). Direct marketers come in a variety of forms, but their categorization is somewhat arbitrary. The main thing to consider here is each firm’s functions and intentions. Some firms sell directly to consumers with the express purpose of eliminating retailers that supposedly add cost (e.g., Dell Computer). Others are in the business not so much to save on costs, but rather to reach groups of consumes that are not easily reached through the stores. Others—e.g., online travel agents or check printers—provide heavily customized services where the user can perform much of the services. Telemarketers operate by making the promotion in integral part of the process—you are explained the benefits of the program in an advertisement or infomercial and you then order directly in response to the promotion. Finally, some firms combine these roles—e.g., Geico is a customizer, but also claims, in principle, to cut out intermediaries. There are certain circumstances when direct marketing may be more useful— e.g., when absolute margins are very large (e.g., computers) or when a large
inventory may be needed (e.g., computer CDs) or when the customer base is widely dispersed (e.g., bee keepers). Direct marketing offers exceptional opportunities for segmentation because marketers can buy lists of consumer names, addresses, and phone-numbers that indicate their specific interests. For example, if we want to target auto enthusiasts, we can buy lists of subscribers to auto magazines and people who have bought auto supplies through the mail. We can also buy lists of people who have particular auto makes registered. No one list will contain all the consumers we want, and in recent years technology has made it possible, through the “merge-purge” process, to combine lists. For example, to reach the above-mentioned auto-enthusiasts, we buy lists of subscribers to several different car magazines, lists of buyers from the Hot Wheels and Wiring catalog, and registrations of Porsche automobiles in several states. We then combine these lists (the merge part). However, there will obviously be some overlap between the different lists— some people subscribe to more than one magazine, for example. The purge process, in turn, identifies and takes out as many duplicates as possible. This is not as simple task as it may sound up front. For example, the address “123 Main Street, Apartment 45” can be written several ways—e.g., 123 Main St., #123, or 123-45 Main Str. Similarly, John J. Jones could also be written as J. J. Jones, or it could be misspelled Jon J. Jonnes. Software thus “standardizes” addresses (e.g., all street addresses would be converted into the format “123
Main St #45” and even uses phonetic analysis to identify a likely alternative spelling of the same name. Response rates for “good” lists—lists that represent a logical reason why consumer would be interested in a product—are typically quite low, hovering around 2-3%. Simply picking a consumer out of the phone-book would yield even lower responses—much less than one percent. Keep in mind that a relevant comparison here is to conventional advertising. The response rate to an ad placed in the newspaper or on television is usually well below one percent (frequently more like one-tenth of one percent). (More than one percent of people who see an ad for Coca Cola on TV will buy the product, but most of these people would have bought Coke anyway, so the marginal response is low). Electronic Commerce Online marketing can serve several purposes: • Actual sales of products—e.g., Amazon.com. • Promotion/advertising: Customers can be quite effectively target in many situations because of the context that they, themselves, have sought out. For example, when a consumer searches for a specific term in a search engine, a “banner” or link to a firm selling products in that area can be displayed. Print and television advertisements can also
feature the firm’s web address, thus inexpensively drawing in those who would like additional information. • Customer service: The site may contain information for those who no longer have their manuals handy and, for electronic products, provide updated drivers and software patches. • Market research: Data can be collected relatively inexpensively on the Net. However, the response rates are likely to be very unrepresentative and recent research shows that it is very difficult to get consumers to read instructions. This is one of the reasons why the quality of data collected online is often suspect. There are many obstacles to the growth of e-commerce: • Reach: Although the majority of U.S. households now have computers connected to the Internet, a very large minority does not, and penetration rates are considerably lower in some countries. In foreign countries, even those households that have computers may be reluctant to spend time online due to the per minute charges, which discourage the more leisurely “browsing” American style. • Concerns about privacy: A number of consumers are concerned about giving up information to marketers that can easily be collected electronically. Naturally, few consumers would like information about their medical status widely collected by firms, but many consumers are
even reluctant to have marketers know the ages of their children and past book purchase records. R • eputational issues: Although not as much as a problem before, firms operating online or through direct mail have often been viewed with suspicion since consumers may question whether they will be around if they do not deliver satisfactorily. Transshipments: Although the Internet should facilitate commerce across boarders, customers paperwork and ambiguities in duty liability make shipments across countries burdensome. • Costs. During the “boom,” Internet firms were not expected to be efficient and thus developed bad habits. Although shipping and handling charges can help cover costs of shipping and administration, these often take away the attractiveness of Internet shopping. The most successful e-commerce firms turn out to be the ones that have been successful doing other kinds of direct marketing (e.g., catalog sales) before and have developed the discipline and efficiency required there. For products that have relatively high absolute margins—e.g., computers— there is more money to cover administrative costs. • Language. Since the Internet reaches around the world, it is often difficult to match viewers with their preferred languages. Because U.S. firms and individuals tended to predominate among those first to occupy the Web, most sites are in U.S. English. British speakers of English generally do not perceive American English as American—they tend to
perceive spelling such as “color” rather than their “colour” as misspellings. French consumers do not like to have to click to get from an English language to a French language site. It is estimated that by the year 2007, the majority of web surfers will not be comfortable in English and will want sites in their own languages. • Government regulations: In the U.S., the government has tried to keep its hands off the Net as much as possible to foster its growth as a trade area, and a recently expired moratorium on new sales taxes was even instituted. However, governments in many other countries are more forceful in their regulations. In countries such as China, where sites can be used to spread “subversive” ideas, there is a great deal of government scrutiny and suspicion. • Cultural obstacles are often severe. The whole purpose of the web is to make information readily available. In countries where information is closely guarded, that is a frightening idea. There is often also a desire for personal interaction, which may be required to establish the trust needed to secure a deal. • Payment issues. U.S. consumers exposed to credit card fraud have very limited liabilities, but these protections do not exist to the same extent in Europe or Asia. In China, much of the purpose of the Internet is defeated with some 80% of transactions being completed off-line, usually with funding instruments other than credit cards.
There are a number of problems in running and developing web sites. First of all, the desired domain name may not be available—e.g., American Airlines could not get “American.com” and had to settle for “AmericanAir.com.” There is also a question having your site identified to potential users. Research has found that most search engines have a great deal of “false hits” (sites irrelevant that are identified in a search—e.g., information about computer languages when the user searches for foreign language instruction) and “misses” (sites that would have been relevant but are not identified). It is crucial for a firm to have its site indexed favorably in major search engines such as Yahoo, AOLFind, and Google. However, there is often a constant struggle between web site operators and the search engines to outguess each other, with the web promoters trying to “spam” the search engines with repeated usage of terms and “meta tags.” The fact that many computer users employ different web browsers raises questions about compatibility. A major problem is that many of the more recent, fancier web sites rely on “java script” to provide animation and various other impressive features. These animations have proven very unreliable. Sites may “crash” on the user or prove unreliable, and many consumers have found themselves unable to complete their transactions. Legal issues. There are a number of legal issues associated with the Internet: • Reach across boarders. Web sites transcend country lines and thus, a firm may be subjected to legal standards of different countries. It may
be difficult to create advertising that simultaneously complies with rules for each country. • Taxation: There is a great deal of ambiguity as to which state and local governments may collect taxes on merchandise sold on the Internet. There is also a question as to who has the responsibility for making the payment—the seller or the buyer? • Privacy issues. Many foreign governments prohibit the collection of personal information of consumers (as Amazon.com does), which greatly reduces the customization opportunities online. Web site design: The web designer must make various issues into consideration: • Speed vs. aesthetics: As we saw, some of the fancier sites have serious problems functioning practically. Consumers may be impressed by a fancy site, or may lack confidence in a firm that offers a simple one. Yet, fancier sites with extensive graphics take time to download— particularly for users dialing in with a modem as opposed to being “hard” wired—and may result in site crashes. • Keeping users on the site: A large number of “baskets” are abandoned online as consumers fail to complete the “check-out” process for the products they have selected. One problem here is that many consumers are drawn away from a site and then are unlikely to come back. A large number of links may be desirable to consumers, but they tend to draw
people away. Taking banner advertisers on your site from other sites may be profitable, but it may result in customers lost. • Information collection: An increasing number of consumers resist collection of information about them, and a number of consumers have set up their browsers to disallow “cookies,” files that contain information about their computers and shopping habits. Cyber-consumer behavior: In principle, it is fairly easy to search and compare online, and it was feared that this might wipe out all margins online. More recent research suggests that consumers in fact do not tend to search very intently and that large price differences between sites persist. We saw above the problem of keeping consumers from prematurely departing from one’s site. Legal Issues Distribution issues raise significant legal questions, many of which relate to antitrust law. The main purpose of antitrust law is to enforce fair competition among firms. There are two different kinds of competition that are relevant here. Interbrand competition refers to different brands that compete against each other—e.g., Nike competes against Reebok. On the other hand, intrabrand competition refers to competition between different channels that sell the same branded goods—e.g., Footlocker competes against other retailers that sell Nike products. Often, it may be necessary to sacrifice the one kind of
competition to bolster the other. For example, by introducing exclusive territories given to some retailers who alone are given the right to sell in one geographic area, these retailers may have extra incentive to “push” the product. The theory here, then, is that by reducing the intrabrand competition among retailers all carrying, say, Guess jeans, the retailer will be motivated to put up a strong competition against other retailers who carry Levi’s, thus enhancing interbrand competition. There are a number of ways in which competition can be threatened: • Collusion: Retailers and/or manufacturers get together and agree to limit competition—e.g., the three laundromats in a small town all get together and agree that no one will charge less than one dollar per wash. Although blatantly illegal in the United States, this kind of behavior is accepted in certain parts of the world, although European countries are now beginning to be less tolerant. • Discriminatory pricing: Some full service manufacturers may decide to give better deal to more powerful buyers—e.g., Wal-Mart may negotiate better prices than Joe’s Grocery Store can. Such differences in prices paid by competing firms are generally legal only if they are justified by actual cost savings in selling to the two different firms—obviously, the average overhead per case of Bandaid will be much lower when selling to Wal-Mart, which buys in huge quantities.
• Predatory pricing: Firms may attempt to temporarily sell products below their costs so that competitors are driven out of business, after which the predators will raise their own prices. This is generally illegal in the U.S. • Territorial restrictions (as discussed above) and customer coverage restrictions (e.g., one firm is designated as the only firm that is allowed to sell to hospitals, while another one may be designed the sole authorized seller to gyms). These may or may not be legal, depending on the courts’ interpretation of their impact on overall market competition. • Price maintenance. Manufacturers may put pressure on retailers not to sell their products below or above a certain price. While certain manufacturers are concerned that some distributors may take advantage of exclusive distribution deals and set maximum prices, the greatest concern is about minimum prices. Here, manufacturers may be concerned that if price competition is too intense, services will suffer. By trying to ensure that no one sells below a designated floor price, full service retailers are guaranteed certain levels of profitability. Generally, it is explicitly illegal for retailers and manufacturers to agree not to sell below a certain price (in legal terms, that would be a “conspiracy in restraint of trade). However, it frequently is legal for the manufacturer to tell the retailer that if he or she sells below the price, the manufacturer will stop him or her. It would be illegal, however, for
the manufacturer to promise another competitor to “cut off” the offending retailer. • Tying: Here, a customer may be required to buy two products even if he or she only wants one. Firms may want to engage in this activity if they have a monopoly-like situation for one product but face competition for another (e.g., Intel dominates the market for the newest chips but has much more competition for the motherboards and modems that the firm also produces. Thus, the firm might like to buyers of their newest CPUs to also buy motherboards also. Tying is legal under some circumstances when it is deemed to be reasonable (the customer cannot expect to be able to buy a car without tires even if he or she can find cheaper alternatives elsewhere) but can be illegal if it is abusive and serves no legitimate purpose (as in the Intel case). Antitrust law is often rather murky, and it may be hard to find a straight answer as to whether something is legal or not. In general, courts have classified various kinds of activities in categories of varying certainty of legality or illegality. Per se illegality includes practices that are definitely illegal if it can be proven that they have taken place (e.g., two retailers agreeing not to sell below certain prices). Under the modified rule of reason, certain practices are presumed to be illegal, but the courts will hear exculpatory evidence which may clear a firm (e.g., courts are likely to be suspicious if a supplier drops a discount retailer after receiving complaints from a full service retailer, but if the manufacturer can prove that it did not agree with the full
service retailer to stop the supply and that the termination benefits interbrand competition, the practice may be accepted). Under the rule of reason, the totality of circumstances are examined to assess impact on competition, and a decision is made—thus, the law is not as clear (e.g., whether tying—requiring a consumer to buy two products even if he or she wishes to buy only one—is subject to significant review). Finally, certain practices are per se legal—i.e., they are accepted as legal and no legal action can be taken (e.g., since consumers do not compete against each other, it is legal to charge different airline passengers different fares based on advance purchase and Saturday night stayovers). Service Outputs As we have discussed earlier, firms have to make tradeoffs between different considerations such as cost of distribution, intensity vs. exclusivity, and service provided. Some of the services ultimately desired by consumers include bulk- breaking (as previously discussed), spatial convenience (being able to buy milk in the supermarket rather than having to drive out to a farmer to get it), timing of availability (having someone—the retailer and other channel members—plan to have toothpaste available in the store when the consumer needs it), and providing a breadth of assortment (the same store will carry different kinds of food and other merchandise from different suppliers.
Segmentation involves identifying groups of consumers who respond relatively similarly to different treatments. In general, we want to find segments that contain people who are as similar as possible to each other while, simultaneously, being as different as possible from members of other segments. Thus, for example, members of what we might term a price sensitive food segment are likely to seek out the lowest priced retailers even if they are not located conveniently, buy larger packages, switch brands depending on what is on sale, and cut coupons. The “fussy” segment, in contrast, may shop either where the best quality is found or at the most convenient location, and may be brand loyal and not cut coupons. Note that not all members of each segment will be completely alike, and there is some tension between precision of description and cutting the segments into too small pieces. The idea, here, then, is for different channels to serve different consumers (e.g., price sensitive individuals are targeted by Food 4 Less while more upscale stores target the price insensitives). Channel Structure and Membership Issues Paths to the customer. For most products and situations, it is generally more efficient for a manufacturer to go through a distributor rather than selling directly to the customer. This is especially the case when consumers need to have variety and assortment (e.g., consumer would like to buy not just toothpaste but also other personal hygiene products, and even other grocery
products at the same place), when products are bought in small volumes or at low value (e.g., a candy bar sells for less than $1.00), or even intermediaries have skills or resources that the manufacturer does not (a sales force, warehousing, and financing). Nevertheless, there are situations when these conditions are not met—most typically in industrial settings. As an extreme case, most airlines are perfectly happy only being able to buy aircraft and accessories from Boeing and would prefer not to go through a retailer— particularly since the planes are often highly customized. More in the "gray" area, it may or may not be appropriate to sell microcomputers directly to consumers rather than going through a distributor—the costs of providing those costs may be roughly comparable to the margin that a distributor would take. Potential channel structures. Channel structures can assume a variety of forms. In the extreme case of Boeing aircraft or commercial satellites, the product is made by the manufacturer and sent directly to the customer’s preferred delivery site. The manufacturer, may, however, involve a broker or agent who handles negotiations but does not take physical possession of the property. When deals take on a smaller magnitude, however, it may be appropriate to involve retailer--but no other intermediary. For example, automobiles, small planes, and yachts are frequently sold by the manufacturer to a dealer who then sends directly to the customer. It does not make sense to deliver these bulky products to a wholesaler only to move them again. On the other hand, it would not make sense for a California customer to fly to Detroit, buy a car there, and then drive it home. As the need for variety increases, a
wholesaler may then be introduced. For example, an office supply store needs to sell more merchandise than any one manufacturer can produce. Therefore, a wholesaler will buy a very large quantity of binders, file folders, staplers, reams of paper, glue sticks, and similar products and sell this in smaller quantities—say 200 staplers at a time—to the office supply store, which, in turn, may go to another wholesaler who has acquired telephones, typewriters, and photocopiers. Note that more than one wholesaler level may be involved—a local wholesaler serving the Inland Empire may buy from each of the two wholesalers listed above and then sell all, or most, of the products needed by local office supply stores. Finally, even in longer channels, agents or brokers may be involved. This, in particular, will happen when the owner of a small, entrepreneurial company has more experience with technology than with businesses negotiations. Here, the manufacturer can be freed, in return for paying the agent, from such tasks, allowing him or her to focus on what he or she does well. Criteria in selecting channel members. Typically, the most important consideration whether to include a potential channel member is the cost at which he or she can perform the required functions at the needed level of service. For example, it will be much less expensive for a specialty foods manufacturer to have a wholesaler get its products to the retailer. On the other hand, it would not be cost effective for Procter & Gamble and Wal-Mart to involve a third party to move their merchandise—Wal-Mart has been able to develop, based on its information systems and huge demand volumes, a more
efficient distribution system. Note the important caveat that cost alone is not the only consideration—premium furniture must arrive in the store on time in perfect condition, so paying more for a more dependable distributor would be indicated. Further, channels for perishable products are often inefficiently short, but the additional cost is needed in order to ensure that the merchandise moves quickly. Note also that image is important—Wal-Mart could very efficiently carry Rolex watches, but this would destroy value from the brand. "Piggy-backing." A special opportunity to gain distribution that a manufacturer would otherwise lack involves "piggy-backing." Here, a manufacturer enlists another manufacturer that already has a channel to a desired customer base, to pick up products into an existing channel. For example, a manufacturer of rhinoserous and hippopotamus shampoo might be able to reach zoos by approaching a manufacturer of crocodile teeth cleaning supplies that already reaches this target. In the case of reciprocal piggy-backing, the shampoo manufacturer might then, in turn, bring the teeth cleaning supplies through its existing channel to exotic animal veterinarians. Parallel Distribution. Most manufacturers find it useful to go through at least one wholesaler in order to reach the retailer, and it is simply not efficient for Colgate to sell directly to pathetic little "mom and pop" neighborhood stores. However, large retail chains such as K-Mart and Ralph’s buy toothpaste and other Colgate products in such large volumes that it may be efficient to sell
directly to those chains. Thus, we have a "parallel" distribution network whereby some retailers buy through a distributor and others do not. Note that we may also be tempted to add a direct channel—e.g., many clothing manufacturers have factory outlet stores. However, note that the full service retailers will likely object to being "undercut" in this manner and may decide to drop or give less emphasis to the brand. It may be possible to minimize this contract by precautions such as (1) having outlet stores located in vacation areas not within easy access of most people, (2) presenting the merchandise as being slightly irregular, and/or (3) emphasizing discontinued brands and merchandise not sold in regular stores. Evaluating Channel Performance. The performance of channel members should be periodically monitored—a channel member may have looked attractive earlier but may not, in practice be able to live up to promises. (This can be either because of complacency or because the channel member simply did not realize the skills and resources needed to perform to standards). Thus, performance level (service outputs) and costs should be evaluated. Further, changes in technology or in the market place may make it worthwhile to shift certain functions to another channel member (e.g., a distributor has expanded its coverage into another region or may have gained or lost access to certain retail chains). Finally, the extent to which compensation is awarded in proportion to performance should be reassessed—e.g., a distributor that ends up holding inventory longer or taking on more returns may need additional compensation.
STATEMENT OF THE PROBLEM
DISTRIBUTION GAP Distribution Gap is that posed by the limits on the distribution of the product or services . If it is limited to certain geographical regions, as some draught beers are, it cannot expect to make sales in other regions. At the other end of the spectrum, the multinationals may take this to the extremes of globalization. Equally, if the product is limited to certain outlets, just as some categories of widely advertised drugs are limited by law to pharmacies, then other outlet will not be able to sell them. A more likely outcome is that percentage of distribution limited. The remedy for this is simply to maximize distribution, Unfortunately, maximizing distribution is not quite as it sounds, except for the obvious market leaders. It is true that additional sales force effort, backed by suitable sales promotional activities, should be able to increase distribution somewhat, although there will still have to be some balance between the benefits to be gained and the cost to be incurred. But the prime barrier to distribution will probably be the resistance of the distribution chains to stock anything other than the best seller. This can partially be overcome in the short term by offering better terms and higher margin, so that the distributor make more on each sale. But the distributors have since learned that their biggest profit come from concentrating on the main brands. They, above all, by the 80:20 rule COMPETITIVE GAP What is left represents the gap resulting from the competitive performance. This competitive gap is the share of business achieved among similar products, sold in the same market segment , and with similar distribution patterns – or at least, in any comparison, after such effects have been discounted. Needless to say, it is not a factor in the case of monopoly provision of services by the public sector.
The competitive gap represents the effect of factors such as price and promotion, both the absolute level and the effectiveness of its messages. It is what marketing is popularly supposed to be about. Gap Analysis Market Deficiencies. "Gap" analysis involves analyzing current market offering to assess the extent to which they meet customer demands. Demand side gaps involve a market situation where consumers are not satisfied buying what is available— usually either because the level of service provided is not adequate or because the offering is too expensive. Supply side gaps, in contrast, involve firms that provide services that are needed, but ones that can be met elsewhere at lower prices. Demand Side Gaps. Customer satisfaction abounds, and many consumers would like to replace their current suppliers. This can happen either generally—there is a widespread dissatisfaction with banks among consumers, and many would switch if they found one that they thought to provide better service—or the gap can be with one segment that is not being well served. As an example of the latter, consider parents who, if they had not had children, would have been perfectly satisfied with an ordinary Internet service provider but are now worried that their children can be exposed to inappropriate material online. Therefore, the PAX Network, which features family-oriented television programming, stepped in to offer a service that claims to block out most objectionable sites. Further, one auto parts store owned by a woman ran an advertising campaign aimed
at women, acknowledging that women were often being asked by their husbands and boyfriends to be "parts runners." The ad then went on to talk about the cleanliness of the store and non-condescending attitudes of the sales people. Note that although a gap may exist in the sense that existing firms are not offering what consumers may ideally want, there is a limit to what buyers would be willing to pay for. For example, before starting their ice-cream business, Ben and Jerry considered going into business delivering the New York Times to people’s doors on Sunday mornings along with fresh baked bagels. A problem here, however, could have been the cost of this service. Sometimes, a firm may be able to come in and fill a gap, but may need to compromise on exactly how far to go. There are usually some struggles between what would be nice to have and what customers are wiling to pay for. For example, many computer buyers would like to have someone come and set up the computer, the peripherals, and the Internet connection, but might balk at paying $150 for this service. Many consumers would like to have their dry cleaning picked up and delivered, but when push comes to shove, they would not be willing to pay for the extra service. In the early 1990s, a firm owning several supermarket chains decided start Tiangues, a chain aimed at Hispanic consumers in Southern California. Employees were screened to be fluent in both Spanish and English, and foods that would appeal especially to different Hispanic groups were emphasized. The chain was very popular when it first opened, but it soon lost market share as it was found that with time, what mattered most to customers was low prices.
Wheel of Retailing. An interesting phenomenon that has been consistently observed in the retail world is the tendency of stores to progressively add to their services. Many stores have started out as discount facilities but have gradually added services that customers have desired. For example, the main purpose of shopping at establishments like Costco and Sam’s Club is to get low prices. These stores have, however, added a tremendous number of services—e.g., eye examinations, eye glass prescription services, tire installation, insurance services, upscale coffee, and vaccinations. To the extent these services can be added in a cost effective manner, that is a good thing. Ironically, however, what frequently happens is that "room" now opens up for a "bare bones" chain to come in and fill the void that the original store was supposed to have filled! New stores can now come in and offer lower prices before additional, costly services "creep" in. Note that upscaling over time may be an appropriate strategy and that the owner of the "rising" chain may itself want to start another, lower-service division (e.g., Ralph’s may want to own another chain such as Food 4 Less). Supply Side Gaps. Supply side gaps come about when a business finds that the services that it has traditionally offered to customers in the past are now too expensive to justify the value they provide. For example, in the "old days" (i.e., until the early 1990s), travel agents provided a valuable service—they would "match" travelers and airlines, finding a reasonable fare and travel time and issuing the ticket to the customer who, then, did not have to call all the airlines for a fare and then visit the airport or an airline office. However, nowadays, it is much more convenient for consumers to carry e-tickets, and it is frequently easier to go online to compare fares and travel time at one’s convenience. Therefore, travel agents, to command their commissions, will often
need to provide something extra that the online services cannot. The problem is that, for most consumers, there just isn’t much that the travel agent can offer other than fancy coffee or donuts, which you can get more conveniently elsewhere anywhere. Maybe they can take passport photos or arrange bus transportation to a cruise ship, but is that enough to justify people coming to them? Online services are starting to offer package deals—air fare, hotel, and car rental—anyway. Finding opportunities. Again, it is important to emphasize the need for market balance. Frequently, there will be room for higher cost services for one segment, and perhaps a diametrically opposed service for the lower cost service. Gaps, costs, and performance. Generally, we find that gaps do not exist when cost and service are "in line" with customer expectations. Thus, for example, Nordstrom serves a segment that desires high service. Nordstrom incurs a great deal of costs in this, which are ultimately passed on to the consumer, but Nordstrom’s customers are willing to pay for this. Similarly, Wal-Mart provides some, but less, service and does so at a very low cost. Thus, another segment’s preferences are served. Thus, service output demand is matched with supply. On the other hand, many auto repair facilities provide less service than is expected and do not adequately make up for this by low prices. Therefore, an opportunity might exist for someone to offer better service at a not much higher cost. On the other hand, nowadays people may not be willing to pay the extra cost for going to a butcher shop and pay significantly more if what they get is only a little better than what is available in the supermarket meat section.
Closing gaps. Firms may be able to close, or reduce, their gaps by reconsidering their offerings. A gasoline station that offers an "average" level of service at prices higher than those of self-service stations might either target the low cost segment, lowering prices and cutting costs, or targeting a premium service and "beefing up" service. Similarly, a firm that faces a segmented market might "branch off" into different units that offer different levels of service to different customers. For example, Toyota started the Lexus division for consumers who demanded more service than would have been cost effective to offer to its traditional customers. On the supply side, closing gaps mostly involves improving efficiency and/or reducing costs in other ways. Alternatively, existing channels may be reassessed—e.g., airlines have deemphasized travel agents. Channel Management and Conflict Vertical integration. Generically speaking, products may come and reach consumers through a chain somewhat like this: Raw materials ---> component parts ---> product manufacturing ---> product/brand marketing ---> wholesaler ---> retailer ---> consumer Money can be made at each stage in the chain and it may be tempting for firms to try to get into all aspects. For example, Henry Ford wanted to make all the components for his own cars, so Ford tried to run its own rubber plantation with limited
success. The temptation to try to expand vertically can be especially strong when an industry faces limited growth and thus presents limited opportunities for reinvestment into traditional operations (e.g., if the auto industry is not growing as much as desired, one way to reinvest profits, rather than having to pay them back to stockholders who would then have to pay taxes on the dividends, might be to buy steel mills. The problems, however, is that the management is not used to running such businesses and that managerial time will be spread among more areas. Business structures. A business can be squarely focused in just one area —e.g., Kentucky Friend Chicken is only in the fast food business and prides itself on this. On the other hand, certain businesses are part of an assortment of businesses that all have common, or at least overlapping, membership. Sometimes, these businesses can be related in some way—for example, Pepsico used to own several restaurant fast food chains, and Microsoft, in addition to being in the software business, used to own Expedia, the online travel service. Here, expertise and brand equity might be transferred from businesses to business. In other situations, however, these "empires" may consist of unrelated businesses that were bought not so much because they "fit" into management expertise, but rather because they were for sale when the conglomerate had money to invest. With the tobacco industry currently being relatively profitable but having a questionable future, a tobacco firm might invest in a software maker. Generally, such investments are risky because of problems with management oversight. In Japan, many firms are part of a keiretsu, or a conglomerate that ties together businesses that can aid each other. For example, a keiretsu might contain an auto division that buys from a steel division. Both of these might then buy from a iron mining division, which in turns buys
from a chemical division that also sells to an agricultural division. The agricultural division then sells to the restaurant division, and an electronics division sells to all others, including the auto division. Since the steel division may not have opportunities for reinvestment, it puts its profits in a bank in the center, which in turns lends it out to the electronics division that is experiencing rapid growth. This practice insulates the businesses to some extent against the business cycle, guaranteeing an outlet for at least some product in bad times, but this structure has caused problems in Japan as it has failed to "root out" inefficient keiretsu members which have not had to "shape up" to the rigors of the market. Motivations for outsourcing. While firms, as discussed above, often have certain motivations for trying to "gobble" up as many business opportunities as possible, there are also reasons for "outsourcing" or contracting out certain functions to others. Auto makers, for example, have often found it profitable to buy a number of components from non-union manufacturers. Often small vendors, run by entrepreneurs, are better motivated to perform certain services—e.g., insurance agents can have an incentive to build up and service a client base more effectively than an internal staff could. It is also possible for outsiders to specialize—chemical firms, for example, may be better able to research and develop paints than auto manufacturers. Smaller independent firms may also operate more leanly, facing market competition better than large, centralized firms. A firm specializing in just making nuts and bolts may have greater economies of scale than Rolls Royce, which makes only a limited number of cars.
Channel Power. Some channel members need others more than others need them. For example, Wal-Mart has a lot more power, given its large volume purchases, than many of its suppliers. There are several sources of power. Reward power involves a channel member being able to positively reinforce another’s performance— e.g., Coca Cola may be able to give a price break or pay a fee for additional shelf space. A retailer that meets a certain goal—e.g., the sale of 50,000 cases per month—may receive a bonus. In contrast, coercive power involves the threat of a punishment. A large retailer, for example, may tell a small manufacturer that no further orders will be forthcoming unless a price discount is offered. Expert power includes knowledge. Wal- Mart, for example, because of its heavy investment in information technology, can persuasively argue about likely sales volumes at different price levels. "Legitimate" power involves government or other regulations—e.g., auto dealers have a great deal of power over auto makers because only they are allowed to sell to end customers in the continental U.S. under most circumstances. Finally, referent power involves the desire of the other side to be associated—most manufacturers of upscale merchandise are highly motivated to ensure their availability at Nordstrom’s. Channel conflict. We have seen throughout the term that conflict exists between channel members. For example, Coca Cola would like to increase its sales by offering a discount on its cans. However, the retailer knows that overall soda sales will not go up much when Coke is put on sale—consumers who bought other brands will just switch, for the most part. Therefore, the retailer might like to "pocket" any discount that Coke offers. Similarly, Bass might like to increase its sales by selling to Costco, but its full service retailers will object to this competition. A number of approaches to resolution
are available, but none are perfect. Sharing of information may help build trust, but this can be expensive, cumbersome, and may result in this information being available to competitors. The two sides might seek outside mediation, with a supposedly neutral party suggesting a fair solution, or the two sides may try to compromise on their own. One side may accommodate the other, but may not be motivated to continue to do so in the future, or the other may try to coerce its way through threats of punishment. Distribution gap and route efficiency in Varanasi Distributors in Varanasi : There are 14 distributor in varanasi city Distributor under whom I worked 1 Krishna Shivam Pawan We can take the example of Krishna. it covers the following route Luxa- Dushawamegh- Bangalitola- Nai-sarak- Lehartara – Sarswati phatak There are around 350 outlets on this route . in which there are 50 RED outlets. There are 15 vehicles for distribution one can store around 50 crates each time and this is sufficient for carrying on the distribution process. For the coverage of 350 outlets the agency has, Vikram-2 Auto Rickshaw -4 Mahindra geep-1 Trolley 8
The agency has around 8-10 efficient salesman to cover the above mentioned route. WHAT IS RED ? RED (Right Execution Daily) RED outlets are those who sell the product during off- Season (July-February) 80% sales are given by RED outlet which is 20% of whole outlet. WHY DO WE DO RED SCORING? 1. Company classify the outlet into four categories via., 1. Diamond outlets– they are those outlets which sell above 800 crates 2. Gold outlets – they are those outlets which sell above 500-799 crates. 3. Silver outlets - they are those outlets which sell 200-499 crates. 4. Bronze outlets – they are those outlets which sell up to 200 crates. 2. On the basis of RED scoring discount and schemes are allotted every year. To know the performance of market developers (M.D.) RED is done with the help of MIT (market impact team) in this team of 5 to 7 members are made. It looks after all the outlet of their area. Through MIT following work is being performed. 1. Outside signage 2. Worm display 3. Great the customer 4. Inside signage 5. Cooler purity 6. Range selling/ order taking 7. Thanks
EVERY DEALER SURVEY (EDS) EDS is a method of collection of data in which each and every outlets of cold- drinks was to be covered .which was decided through random selection of map of varanasi. In this particular area was allotted to each individual in which they had to find out Distribution gap and draw the map on the basis of which company will plan for efficient route. Route efficiency To provide route efficient structure we first have to analyze distributor’s capacity. Evaluating distributor’s capacity to execute Evaluating distributor. -Distributor dependent on our business - Relationship with retailer Owner market visit. -Self managed v/s manager dependent -Distributor interest and attitude. Evaluating distributor salesman. -Salesman quality. -salesman continuity. Validation -Contribution of discounted volume to total volume. -Contribution of sub-distributor / fat dealer volume to total volume. Need for efficient route Market changes-number, size, and volume of outlets change. Product mix in the market changes …....Pricing? Competition enters the market. Introduction of new distributor in that period. Purchasing new vehicle for improving productivity.
Changing analyzing traffic pattern. Objectives of efficient route design Limited geographical area of the distributor. Maximizing daily number of standards –calls and cover more area in the market. provide the necessary service frequency to increase the daily visit. Guidelines for sequencing outlets Avoid traveling the same street twice to avoid wastage of time. Avoid repeating loop. Avoid repeating loop and improving efficiency. Do not skip outlets and trying to increase the efficiency. Work towards sales depot. Plan entry and exit point and mapping their route design. Left-hand traffic rules – make left turns. Minimize driving time and using shortest route of reaching the retailer. Minimizing waiting time and trying to visit the smaller outlet first. Building an efficient route Sequencing Work from the edge of the territory towards depot Work for the farthest outlet towards depot. Work from largest vehicle size to small. Steps in creating routes 1. Firstly a database is created every dealer through survey and record is maintained about dealers. After this we have to analyze the capacity and capability of dealers. So it will help in further regulating the activity. 2. Then we can easily formulate all the outlet in the area and finding about their daily sales. If it sales good quantity of unit then that outlet can be segmented as an important outlet. 3. Then different zones are to be created and different program is made regarding each zone and work is assign to each salesman to handle zone in an effective way.
4. Calculate the total time required in all kinds of activities and matching it with the time available with the salesman and trying to complete all activities in
Canvas Prints at Affordable Prices make you smile.Visit http://www.shopcanvasprint...
30 Días en Bici en Gijón organiza un recorrido por los comercios históricos de la ...
Con el fin de conocer mejor el rol que juega internet en el proceso de compra en E...
With three established projects across the country and seven more in the pipeline,...
Retailing is not a rocket science, neither it's walk-in-the-park. In this presenta...
Wait time Wait time of transit route used at ... region’s transit system. Identifying gaps is the first ... tradeoffs in public transit planning.
industrial depot maintenance planning in support ... and eliminating any gaps in depot maintenance capability ... ective and effi cient industrial depot maintenance ...
... Southeastern Anatolia was located on the trading route between ... Rehabilitation Project, GAP Afforestation Project, Participation in urban planning and ...
Transportation planning, or transport planning, ... identifying problems, ... trip distribution, mode choice and trip/route assignment.
... Evaluating Strategic Gaps. ... Strategic Planning Element. Plan. Actual. ... Identifying The Desired Position. Evaluating Strategic Gaps.
Head of Distribution, ... Strategy Planning and Insights Manager at ... - Identifying distribution capability gaps and defining optimal route-to-market strategy ...
identifying the consumer buying behaviour in tyre ... 258 distribution channel relationship ... 340 identifying distribution gap and planning for route efficiency ...
Advanced Planning & Scheduling is a powerful and easy-to-use ... perform gap analysis and ... User-defined formulas for identifying performance measures ...