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Mary Joy Fernandez
Analysis of selected aspects of the multi-channel management and the international
distribution system
ISBN: 978-3-8366-0556-4
Druck Diplomica® Verlag GmbH, Hamburg, 2007
Zugl. FOM - Fachhochschule für Oekonomie und Management Essen, Essen,
Deutschland, Diplomarbeit, 2006
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Table of contents
I
TABLE OF CONTENTS
TABLE OF CONTENTS... I
LIST OF ABBREVIATIONS ... IV
LIST OF FIGURES ... V
LIST OF TABLES ... VI
1
INTRODUCTION...1
1.1 P
ROBLEM DEFINITION
...1
1.2 O
BJECTIVES OF THIS DIPLOMA THESIS
...2
1.3 S
COPE OF WORK
...3
2
BASICS OF THE DISTRIBUTION POLICY ...5
2.1 D
EFINITION AND CLASSIFICATION OF THE TERMS DISTRIBUTION
,
DISTRIBUTION
POLICY AND DISTRIBUTION CHANNEL
...5
2.1.1 Distribution and distribution policy...5
2.1.2 Distribution channel ...6
2.2 O
BJECTIVES OF THE DISTRIBUTION POLICY
...7
2.3 F
IELDS OF ACTIVITY OF THE DISTRIBUTION POLICY
...9
2.3.1 The physical distribution process...9
2.3.2 The sale of goods process ...11
2.4 A
CTORS WITHIN THE DISTRIBUTION CHANNEL
...13
2.4.1 Relations of action ...13
2.4.2 Distribution channel breadth ...16
2.4.3 Distribution channel length ...19
2.4.3.1 Direct distribution channel...20
2.4.3.2 Indirect distribution channel ...22
2.4.4 Single-channel versus multi-channel ...24
3
THE MULTI-CHANNEL MANAGEMENT ...27
3.1 D
EFINITION AND MEANING OF MULTI
-
CHANNEL DISTRIBUTION AND
MANAGEMENT
...27
3.2 M
AIN OBJECTIVES OF THE MULTI
-
CHANNEL MANAGEMENT
...28
3.3 S
IGNIFICANT DRIVERS OF THE MULTI
-
CHANNEL MANAGEMENT
...30
Table of contents
II
3.3.1 Changed consumer behavior ... 30
3.3.2 Competitive behavior of the competition ... 32
3.3.3 Development of information and communication technology ... 34
3.3.4 Internal development of a company ... 35
3.4 C
HANCES
,
RISKS AND DOUBLE FIT OF THE MULTI
-
CHANNEL MANAGEMENT
... 37
3.4.1 Chances... 37
3.4.2 Risks ... 38
3.4.3 Double fit... 39
3.5 T
ASKS OF THE MULTI
-
CHANNEL MANAGEMENT
... 41
3.5.1 Integration of new distribution channels ... 42
3.5.2 Design of the distribution channel mix ... 44
3.5.3 Coordination and evaluation of the distribution channels ... 46
3.6 S
ELECTED APPROACHES REGARDING THE IMPLEMENTATION OF MULTI
-
CHANNEL
MANAGEMENT
... 49
3.6.1 Multi-channel management by McKinsey & Company ... 49
3.6.2 Multi channel management by Arthur D. Little ... 50
3.6.3 Customer-driven distribution system by Louis Stern and Frederick
Sturdivant... 51
3.7 R
EPRESENTATION OF THE
O
TTO GROUP AS A MULTI
-
CHANNEL COMPANY
... 53
3.7.1 Basics of the Otto group... 53
3.7.2 The multi-channel structure of the Otto group ... 53
4
THE INTERNATIONAL MARKETING WITHIN THE SCOPE OF THE
MULTI-CHANNEL MANAGEMENT ... 57
4.1 D
EFINITION AND MEANING OF INTERNATIONAL MARKETING
... 57
4.2 R
EASONS FOR INTERNATIONALIZATION
... 58
4.3 G
ENERAL OBJECTIVES OF INTERNATIONALIZATION
... 60
4.4 C
HANCES AND RISKS OF FOREIGN BUSINESS
... 61
4.4.1 Chances... 61
4.4.2 Selected risks... 62
4.5 I
NTERNATIONAL DISTRIBUTION CHANNELS
... 63
4.5.1 Determinants of international channel decisions ... 63
4.5.1.1 External
determinants ... 64
4.5.1.2 Internal
determinants... 66
Table of contents
III
4.5.2 Distribution channel decisions in the international marketing ...69
4.5.3 Global trends in channel design and strategy ...71
4.6 T
HE CHANNEL STRUCTURE OF TWO
A
SIAN COUNTRIES IN COMPARISON
...73
4.6.1 The distribution system in the developed country Japan ...73
4.6.2 The distribution system in the emerging market country China ...76
4.6.3 Concluding comparison between Japan and China...80
5
CONCLUSION AND OUTLOOK ...82
BIBLIOGRAPHY ...VII
List of abbreviations
IV
LIST OF ABBREVIATIONS
approx. approximately
B2B
Business-to-Business
B2C
Business-to-Consumer
cf. confer
e.g.
exempli gratia (for example)
et al.
et alii (and others)
et seq.
et sequens (and the following one)
et seqq.
et sequens (and the following ones)
IAO
Frauenhofer Institut für Arbeitswissenschaft und Organisation
ibid.
ibidem (in the same place)
i.e.
id est (that is)
p. page
PDA
Personal Digital Assistant
pp.
pages
s.n.
sine nominee (without author)
TV
Television
List of figures
V
LIST OF FIGURES
Figure 2-1: Areas of activity of the distribution policy ...13
Figure 2-2: The distribution channel in the end user area...14
Figure 2-3: The distribution channel in the processing area ...15
Figure 2-4: Direct and indirect distribution...19
Figure 3-1: Chances, risks and double fit of multi-channel systems ...41
Figure 3-2: The distribution channel portfolio...43
Figure 3-3: Adequate combination of structure types and coordination approaches
within the multi-channel management ...48
Figure 4-1: Determinants of international channel decisions...64
Figure 4-2: Alternative distribution channels in the international marketing ...70
List of tables
VI
LIST OF TABLES
Table 2-1: The four P's of the marketing mix ... 6
Table 2-2: Advantages and disadvantages of the three options of the distribution
breath ... 18
1 Introduction
1
1 INTRODUCTION
1.1 Problem
definition
In the current time, there is no area in life that is not subject to change. Even within the
distribution, changes have taken place in the course of the years. One significant factor
of change in the distribution is the introduction of multiple distribution channels the
multi-channel management. The term multi-channel is not new
1
, but for all that it has
gained of importance for companies. This statement is valid for companies in the
national as well as in the international fields. It has, more or less, substituted the
meaning of a single-channel distribution, which was more practiced in the past.
Multi-channel management has become a significant issue when coming to the
distribution of goods and the market development. Thereby, factors such as the attitude
of the competition, the internal development of the company and especially the
consumer behavior have determined the enhancement of its importance
2
. Moreover, the
development of information and communication technology has led to the introduction
of new distribution channels, as e.g. the internet, next to the traditional channels which
are the mail order business or the stationary distribution channels among others
3
. The
demand for companies offering different purchasing ways respectively channels has
been increasing. The reason for this development is the fact that consumers have
recognized the variety of ways they are able to choose in order to acquire a product.
This involves that consumers set high value on the distribution channels offered by the
companies
4
. The increased consumer demand cannot be only noticed in Germany but
also in the international context.
As a consequence companies have been forced to modify their distribution strategies in
order to be able to fulfill the consumer needs and thus assuring the customer retention
further on
5
. But the multi-channel distribution is not only a necessity. On the other hand
it is linked with additional possibilities for companies. For instance, they can achieve
cost advantages such as the increase of the total revenue
6
. The management of parallel
running channels is not as easy as one might think and in addition, a multi-channel
1
cf. Sauer, A. (2005), pp. 1 et seq.
2
cf. the same et al. (2004a), p. 2.
3
cf. Wilke, A. (2005), pp. 19, 27.
4
cf. Förster, A./ Kranz, P. (2003), pp. 169 et seq.
5
cf. ibid. (same page as at
4
)
6
cf. Wilke, A. (2005), pp. 19, 42.
1 Introduction
2
management bears some risks. These two aspects lead to the necessity that the
companies have to be engaged in the involvement of distribution channels, in the
arrangement of the channel mix as well as in the coordination of the multi-channel
system
7
. It always has to be stressed that the multi-channel management is not only
important for the domestic market, but also for the international one.
The distribution in the international context is more complex and different from the
domestic one. Since the distribution system differs from country to country, it is not
possible to apply the same distribution system as in the home country
8
. Therefore, this
diploma thesis does not only illustrate the multi-channel management in general but
also the international marketing within the scope of the multi-channel management.
1.2 Objectives of this diploma thesis
Within the scope of this diploma thesis the significance of the multi-channel
management in the distribution is supposed to be analyzed for the today's businesses.
For this purpose, selected aspects of the multi-channel management are described. In
order to place multiple channels successfully in position, a well thought-out
implementation and execution of a multi-channel strategy is required.
A further goal within the framework of the multi-channel management is the review of
distribution systems in the international context as there are differences between
domestic and foreign markets. It shall be taken a look on the distribution systems
applied in two Asian countries. On the one hand the focus shall be on Japan as a
developed country and on the other hand on China as an emerging market country.
Here, the extent of factors influencing the distribution system in a respective overseas
country has to be considered. Such factors can be the culture of a country or the people
living in that foreign country among other things.
7
cf. Sauer, A. et al. (2004a), p. 1.
8
cf. ElKahal, S. (1994), pp. 115 et seq.
1 Introduction
3
1.3 Scope of work
This diploma thesis is composed of three main chapters.
At the beginning the multi-channel management will be classified in the entirety of
marketing. The multi-channel management belongs to the distribution policy which is a
part of the marketing mix. Thus, the basics of the distribution policy will be described.
At the same time, the first connections to the multi-channel management should be
shown. After having defined the terms distribution, distribution policy and distribution
channel, the objectives of the distribution policy as well as its fields of activity will be
illustrated. The focus shall be on the distribution channels. Thereby, the distribution
channels can be structured regarding the number of actors operating in a certain level
and the number of levels which actors operate at. The distribution channel is closely
linked with the multi-channel management since it also contains the decision how many
channels will be applied within the distribution system. This chapter ends with the
comparison between the single-channel and the multi-channel. This last part of the
chapter introduces the next chapter about the focal point of this thesis the multi-
channel management.
In a further step, well-chosen aspects of the multi-channel management will be
introduced in order to show the significance of multi-channel management. Before
dealing with this topic in detail, the general meaning of the term multi-channel
management has to be defined. In this connection its main objectives, chances and risks
will be pointed out. Afterwards, the factors influencing the development of the
distribution via multi-channels are described. As already mentioned significant drivers
are the changed consumer behavior, the competitive behavior of the competition, the
development of information and communication technology and the internal
development of a company. In order to ascertain a successful multi-channel
management several tasks need to be fulfilled, which will be shown in the next step.
Furthermore, some existing approaches for implementing multi-channel management
will be described. At the end of this chapter there will be a short review of the multi-
channel management of the Otto group having successfully implemented the multi-
channel in their distribution system. The review will show that the Otto group will
further pursue this strategy in the future.
1 Introduction
4
In the last chapter the international marketing within the scope of the multi-channel
management will be depicted, whereby the focal point is the determinants influencing
the channel decision in the international context. The aspects of the international
distribution channel will be shown after pointing out the general aspects of the
international marketing such as its definition, reasons for internationalization as well as
its general aims and chances and risks of the foreign business. The last chapter
concludes with a description of the distribution system in Japan and in China. These
countries have been chosen to illustrate the difference in the development of the
distributions systems between a developed country and an emerging market country
within East Asia.
2 Basics of the distribution policy
5
2 BASICS OF THE DISTRIBUTION POLICY
2.1 Definition and classification of the terms distribution, distribution policy
and distribution channel
2.1.1 Distribution and distribution policy
The term distribution basically differs from the term distribution policy. Thus, these
terms do not have the same meaning
9
.
With regard to the macroeconomic point of view, the term distribution is often being
taken as the area of activity between production and consumption
10
. The distribution is
about all sales economic activities, which affects the forwarding of goods from the
manufacturer to the consumer
11
. These goods can either be material goods, immaterial
goods or a combination of both, as e.g. a product plus service package
12
. Therewith, in a
functional meaning, the distribution contains the retail and the turnover of goods
between economic entities, whereas this functional view also includes the distribution
bodies of the manufacturer. Looking at the institutional view, the distribution is
considered as business concerns
13
.
Compared to the distribution concept in terms of macroeconomics, the distribution
policy relate to certain decisions of the manufacturer or retailer. The distribution policy
comprises the formulation of distribution objectives and the inference of distribution
strategies. Moreover, it implicates the planning, realization and control of measures to
design the distribution process. These measures shall be aligned in a way so that a
physical and communicative existence in the sales market will be available for a
company.
Even though the classification of the term distribution policy into the marketing-mix is
not consistently defined in the literature, the distribution policy can be seen as a part of
the marketing with a sub mix character. Thus, it can be further considered next to the
other three areas of the marketing mix: product policy, price policy and promotion
9
cf. Ahlert, D. (1996), p. 15.
10
cf. Rimpler, G. (1995), p. 31.
11
cf. Ahlert, D. (1996), p. 15.
12
cf. Gerth, N. (1999), p. 48.
13
cf. Rimpler, G. (1995), p. 31.
2 Basics of the distribution policy
6
policy
14
. According to McCarthy, these areas of the marketing mix are also called the
four P's as illustrated in the following table together with the several instruments
allocated to every P
15
.
Table 2-1: The four P's of the marketing mix;
Source: Following Bliemel, F./ Kotler, P. (2001), p. 150
.
2.1.2 Distribution
channel
The term distribution channel, which can also be called marketing channel or channel of
trade, is the frame system of the distribution. The characteristic of the distribution
channel is the realization of the exchange of goods, money and information between the
actors of the market
16
. The distribution channel is defined as the chosen way to take the
goods from the manufacturer to the consumer. It is sometimes also defined as a free
alliance of companies that have united for purposes of trade. Since there are different
point of views regarding the term distribution channel, there are consequently a few
confusions about its definition. The producer sees the distribution channel as the
forwarding of goods throughout several middlemen because he concentrates on different
intermediaries which are considered as being necessary to get the goods to the
14
cf. Gerth, N. (1999), pp. 48 et seq.
15
cf. Bliemel, F./ Kotler, P. (2001), p. 150.
16
cf. Böcker, F. (1972), p. 39; Pepels, W. (2000), p. 733.
2 Basics of the distribution policy
7
customers. A wholesaler or retailer, for instance, transports significant inventories of
several producers. By taking over this task or respectively obligation by the wholesaler
or retailer, they also take over the risk which is connected with the appropriate task.
Consumers associate the term distribution channel with the aspect that various
intermediaries are set up until the product of a producer reaches them. Lastly, the
distribution channel might be characterized in terms of its structural design and
effectiveness of action by the researcher considering the distribution channel as it
performs in the economic system
17
.
In many different literatures, the distribution channel is considered as the way on which
the offered goods of a manufacturer are distributed to the consumer. Indeed, there can
be various ways as e.g.:
18
· A firm has its own distribution channels.
· A company addresses directly to its basic customers.
· A firm calls in other firms to accomplish the distribution of the goods.
This includes that a distribution channel does not only contain one company acting in
the market, but many different actors who depends on each other's work. Managing a
distribution channel is a procedure which often needs time to finalize. Even after the
selling has been made, the relation to the customer is mostly not ended. Distribution
channel decisions play an important strategic role in the entire existence and
achievement of aims of a company in the market
19
.
2.2 Objectives of the distribution policy
In general, the term objectives can be defined as desired future conditions or the striving
for certain future situations. Since the distribution policy is a sub area of the business
management, the objectives of distribution have to be integrated into the entire goal
system of the enterprise
20
. The objectives of the distribution policy firmly derive from
the superior objectives of the business and the marketing strategy, and allude to diverse
17
cf. Rosenbloom, B. (1995), p. 5.
18
cf. Doole, I./ Lowe, R. (2004), p. 334; Nieschlag, R. et al. (2002), p. 884.
19
cf. Anderson, E. et al. (2001), p. 3.
20
cf. Fritz, W./ Specht, G. (2005), p. 244.
2 Basics of the distribution policy
8
areas of activities of the distribution. Next to the behavior of the own enterprise, the
company also takes into account the intermediaries, end-consumers and the competitors
in business
21
. These objectives have to be phrased as operational as possible to ensure
their relevance in action. Superior objectives can be the increase in sales or market
share. Next to these superior objectives, following specific target figures can underlie
the decisions in the distribution policy:
22
· Image of the distribution channel:
An example is to establish an exclusive distribution channel for a first-class
brand to encourage the aimed product positioning.
· Suggestibility and controllability of the distribution channel:
Among others, manufacturers could set in distribution channels they can control
and govern. This could be the case if the manufacturer has more power than the
respective middlemen, or if the middlemen allow the manufacturer a kind of
responsibility such as consulting the middlemen with regard to the presentation
of the goods.
· Avoidance of conflicts:
Conflicts can be circumvented by working with intermediaries who are willing
to team up in order to realize the intended marketing activities of the
manufacturer, for instance.
· Costs of distribution:
Winning cheaper distribution channels, such as discount houses, can be one
measure to reduce the costs of distribution. Such markets only assess a minor
margin due to high sales amount and profitable cost management.
· Distribution intensity:
This deals with the decision about the number of middlemen maintaining a
product or brand in their range of goods for a certain time. This will be seen in
relation to the total number of middlemen who have listed the respective class of
goods in their range of goods.
· Length of time of buildup and flexibility:
For instance, the time needed until the achievement of a certain target extent of
distribution can be considered when deciding for a distribution channel.
21
cf. Schögel, M. (1997), p. 19.
22
cf. Meffert, H. (2000), pp. 601 et seq.
2 Basics of the distribution policy
9
The several target figures shall relate to the superior profit target of a company. This is
significant, because the design of the distribution system is one of the most intricate
problems in marketing. That is why an orientation of the entire system adequate to the
aim is exceedingly challenging
23
.
2.3 Fields of activity of the distribution policy
2.3.1 The physical distribution process
With respect to material goods, the physical distribution, which is about logistic issues,
plays an important role within the distribution policy
24
. Logistic issues are ambient
bridging as well as bridging of time through forwarding and warehousing
25
. The
ambition of the physical distribution is to reach a preferably competitive predominant
and good cost-value ratio of the transport of goods. This is important when forming the
distribution chain particularly with regard to the end-consumer
26
. The logistic tasks can
be performed by the producer himself, the retailers, the distribution aides such as the
forwarder, or also by the consumers
27
. All enterprises joining the physical distribution
form together a distribution system
28
. This distribution system can be subdivided into
several subsystems such as a warehouse system, a transport system or an order
processing system among others.
From the point of view of a single part of the system, the logistic actions present the
marketing logistics. This includes the realization of the terms of delivery which are the
following:
29
· order processing,
· warehousing,
· picking,
· packaging,
· transport.
23
cf. Meffert, H. (2000), p. 602.
24
cf. Gerth, N. (1999), p. 51.
25
cf. Fritz, W./ Specht, G. (2005), p. 48.
26
cf. Ihde, G. (2001), p. 296.
27
cf. Rimpler, G. (1995), pp. 42 et seq.
28
cf. Gerth, N. (1999), p. 51.
29
cf. Ahlert, D. (1996), pp. 22 et seq.
2 Basics of the distribution policy
10
While the physical distribution comprises the whole transport of a product from the
manufacturer to the consumer, the marketing logistics only comprises the logistic
activities controlling a single part of the system, such as the manufacturer as an
example. This also includes the distribution aides instructed by this part of the system.
The area of activities of the marketing logistics can also be the same as the ones of the
physical distribution. The physical distribution is divided into the internal area on the
one hand and the external area on the other hand. Within the internal area the respective
part of the system has the authority, while the external area is not controlled by it.
The agreement of the terms of delivery between the manufacturer and the customer, and
the fulfillment of these terms of delivery through the measures of the marketing
logistics represent the delivery policy
30
. The delivery service, a subjective factor, is the
acquiring component impacting the delivery policy which contains following
components:
31
· Delivery time, which is the period of time between the receipt of the order and
the arrival of the goods at the customer.
· State of delivery, i.e. the right goods should be delivered in the required state
and the adequate quantity.
· Reliability of delivery, which means that a delivery date shall be retained.
· Flexibility of delivery, which is the ability to make allowance for special
requests of the customer.
The delivery service is obliged to estimate the delivery policy through the possible
transaction partners and shall show the kind and extent of the inventive sway of the
enterprise on the physical distribution system
32
. The delivery service has to be seen in
association with the costs thereby incurred. Therefore, the decision on the costs is the
primary decision to be taken
33
. Logistic costs are in the first instance the stock and the
storage costs. Other costs are the costs of handling and transport as well as the control
and system costs
34
.
30
cf. Ahlert, D. (1996), pp. 22 et seq.
31
cf. ibid. (same page as at
30
); Meffert, H. (2000), p. 654.
32
cf. ibid. (same page as at
30
).
33
cf. Scheuch, F. (1996), p. 628.
34
cf. Kuhlmann, E. (2001), pp. 226 et seq.
2 Basics of the distribution policy
11
Because of the rising pressure coming from the market, the ability to deliver has
become an important characteristic within the competition. Further reasons for the
importance of the logistics are the internationalization of the markets and the requests of
the customers. Consequently, the logistics has changed from a habitual auxiliary task to
a quintessential role within the marketing. Only through the physical distribution the
goods can be physically made available, which is decisive for the success of sale
35
.
When talking about immaterial goods, such as services, the marketing logistics is only
relevant in following cases:
36
· The service will be forwarded by a material medium, for example software,
which will be carried by a data medium.
· The service of material ware of the customer is adduced and the logistic
performance concerns the goods of the customer, but not the service itself. An
instance is the service work in the house of the tenderer.
In addition, without a special logistic system the distribution system carries out the
necessary conditions of the service distribution, which is different from the material
goods
37
.
The distinction of the physical distribution process to the sale of goods process is the
fact that it only implies the bodily turnover of goods. The flow of funds and information
bonded with it are not considered here
38
.
The design of the physical goods distribution process is of less importance for the
following remarks.
2.3.2 The sale of goods process
The sale of goods process is the other field of activity of the distribution policy next to
the physical distribution process
39
. The sale of goods process is targeted on the vending
of goods as well as the socializing of the customer contact and the appropriate customer
35
cf. Pepels. W. (1995a), p. 83.
36
cf. Rimpler, G. (1995), pp. 47 et seq.
37
cf. ibid. (same page as at
36
).
38
cf. Pepels, W. (2004); p. 835.
39
cf. Ahlert, D. (1996), p. 26.
2 Basics of the distribution policy
12
retention
40
. There are the distribution channel policy and the sales management which
can be distinguished.
The distribution channel policy is responsible for the design of the distribution channels
which has been defined in chapter 2.1.2. It further has to make strategic decisions with
the distribution channels
41
. The distribution channel policy deals with the decision how
to bring the goods from the manufacturer to the consumer. At this, it has a key impact
on the distribution system. All distribution subjects realizing sales functions or actively
arranging the sale of goods process belong to the distribution channel policy
42
. The
choice of the distribution channel needs to be aligned to the customers. Moreover, it has
to regard corporate and market aimed attributes as well as costs and revenues
43
.
Following questions should be responded:
44
· Shall the goods be sold in a direct or indirect way?
· Will there be a single or a multi-channel distribution?
· How is the intensity of the channel?
These questions will be illustrated in detail in the following chapters.
Furthermore, the distribution channel policy has to decide on the behavior pattern
towards the middlemen as well as the use of contractual market channel systems. These
decisions are assigned to the strategic marketing planning and relatively bind the
company in the long run. A change in the strategy is rarely possible because it is linked
with high efforts and costs.
In opposition to the distribution channel policy, the sales management belongs to the
operative marketing planning. One of the tasks of the sales management is the sales
conception, i.e. the conceptual and strategic design of the sales work. In addition, the
sales management has to arrange the organization of the sales department and predefine
procedures and actions supporting the sales employees to realize their aimed oriented
tasks. Next to the management of the customer relationship, the sales management
controls the attained results
45
.
40
cf. Dichtl, E. et al. (2002), p. 883.
41
cf. Czech-Winkelmann, S. (2003), p. 9.
42
cf. Pepels, W. (1998), p. 56.
43
cf. Becker, J. (2000), p. 87.
44
cf. Czech-Winkelmann, S. (2003), pp. 9 et seqq.
45
cf. ibid. (same page as at
44
).
2 Basics of the distribution policy
13
Figure 2-1: Areas of activity of the distribution policy;
Source: Following Czech-Winkelmann, S. (2003), p. 10; Hesse, J. (2004), p. 13.
The physical distribution process and the sale of goods process are carried out by
different distribution bodies. Therefore, these two parts of the distribution policy are
mentioned separately. Nevertheless, there should not be a total separation between them
because both parts have to be taken into account if the value of benefit of the entire
system should be developed to the maximum
46
. In order to be successful, a company
will have an eye on the offering of good merchandises and the socializing with
preferably lots of customers on the one hand. But on the other hand, the company has
also to fulfill the needs for delivery service of these customers
47
.
2.4 Actors within the distribution channel
2.4.1 Relations of action
There are two scopes of design of the distribution channel. These are the breadth and the
length of the distribution channel
48
. The breadth of the channel describes the number of
actors acting together in a distribution level
49
. In view of the channel length it can be
stated that this deals with the number of levels on which the actors shall act together.
Different actors can be distinguished, as e.g. the own internal (the marketing
department) and external (the field service) distribution bodies of the manufacturer.
46
cf. Fritz, W./ Specht, G. (2005), p. 49.
47
cf. Dichtl, E. et al. (2002), p. 953.
48
cf. Pepels, W. (2001), pp. 2 et seq.
49
cf. Sander, M. (2004), p. 656.
2 Basics of the distribution policy
14
Moreover, the manufacturer can place in position distribution aides such as trade
representatives. The retailers have also their own internal (the office work) or external
(marketing consultant) distribution bodies as well as foreign distribution aides. On the
purchasing side they possess their own buyers or foreign purchasing aides. Lastly, there
are the purchasing bodies of the end-customer
50
. The outcome of this is that there are
usually four actors in the distribution channel of the ultimate buyer area. These are the
manufacturers and their distribution aides, the wholesalers and their distribution aides as
well as the retailers and end-customers. The relationship between these actors is
illustrated in the following figure.
Figure 2-2: The distribution channel in the end user area;
Source: Following Pepels, W. (1995b), p. 2.
Within the area of processing there are three actors, which are the manufacturers and
their distribution aides, the interconnection retailers and their aides as well as the
industrial customers. Between these different involved parties there are diverse
connections as shown in the following figure.
51
50
cf. Pepels, W. (2001), pp. 2 et seq.
51
cf. the same (1995b), p. 5.
2 Basics of the distribution policy
15
Figure 2-3: The distribution channel in the processing area;
Source: Following Pepels, W. (1995b), p. 2.
Within the push strategy the manufactured goods will be pressed through the
distribution system. This takes place through the own marketing organization and by
means of sales promotions directed to the trade. That is to say that the manufacturer
runs advertising focused on the wholesaler. The wholesaler carries out concentrated
advertisement to the retailer and the retailers do the same to the end-consumer, in turn.
The use of the push strategy is recommendable if there is only a minor brand loyalty
regarding the product class or if the determination concerning the choice of brand will
be made in the store. Furthermore, the push strategy can be applied if the article will be
bought in impulse or if the customer is in the knowledge of the usefulness of the
goods
52
.
Another distribution channel relation is the pull strategy. Here, the manufacturer
stimulates a demand for his articles by practicing concentrative sales promotion for the
final consumer
53
. The demand of the consumers leads the wholesalers, retailers or
distributors to the obligation to build up stocks of the respective article in their range of
goods. In the end, the demand of the final customer shows that the article is towed
through the distribution channel. The pull strategy most frequently uses advertisement
and sales promotion
54
.
Furthermore it is important to mention that there can also be a combination of the push
and pull strategy where both are utilized. In this case, there will be a selling-in activities
52
cf. Bliemel, F./ Kotler, P. (2001), p. 920.
53
cf. Witt, J. (1994), p. 54.
54
cf. Bowersox, D./ Cooper, M. (1992), p. 182.
Ende der Leseprobe aus 104 Seiten
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Details
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- , 2006, Analysis of selected aspects of the multi-channel management and the international distribution system, Hamburg, Bedey Media GmbH, https://www.diplom.de/document/229013
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