Distribution decision
M1.Choose an organization: Describe Distribution Channels, Benefits/Costs of intermediaries The
chosen company is HP i.e. Hewlett Packard. HP is an American company that has its head quarters in
Palo Alto, California, US. Its major products are Electronics, software and other advanced digital
technologies. HPs distribution network is based and organized by a system of direct and channel. The
channel has various partners that make use of various types of customer groupings. These customers
include retailers who sell HP products using their own stores or through the internet. Resellers who sell
HP products or services with added value to targeted clients and finally distribution partners who
distribute and supply HP solutions to other smaller resellers do not have or who are not in a position to
have a direct relationship with HP.
The major benefits of the intermediaries are that they boost sales by using persuasive techniques and
promotional activities. The resellers provide information and advice to the clients who form positive
opinion about the product and develop brand loyalty and trust of the organizations products. The
intermediaries buy the products in bulk from the factories and help in breaking down the quantities into
small affordable units to the consumers. The cost of the intermediaries is the ultimate revenue loss as they
too must gain from the same system of selling i.e. the manufacturer must sell the product to the
intermediaries at a cost that’s lower than the relative retailing price. Besides the revenue loss, the
manufacturer also looses the communication control over the messages accompanying their products
being sold by the intermediaries.
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- Describe the organization, its target market, its positioning and its current competitive
situation. Also discuss the products that it produces (NOTE: If the company is very large
and produces many diverse product lines, narrow focus to just one division or product line
of that company).
Hewlett Packard was incorporated on 18 th the year 1947 and later started its operations as a
corporation in the year 1957. It’s a multinational corporation that deals in the manufacturing of
Personal Computers, printers. Cameras, scanners and calculators. HPs target for revenue growth
is by the use of four approaches i.e. by adjusting and winning new customers and business while
consolidating and retaining the existing customers and businesses, to identify the suppliers for
specific products and evaluating their performance, expanding its own distribution network and
entering other new markets. Hp is positioning itself for the future as represented by its share
price and what its future value represents. Hp is representing itself as the future of technology
both in the US and the world. Its reliability and taste of excellence is a mark of its quality.
HPs competitive edge is the way it coordinates its intermediaries for example the personal
computers are sold mostly through the retail channels while the IPG (Imaging and Printing
Group) products are managed and sold through the available consumer and commercial channels
but customers can also purchase its products directly from their factory outlets. HP produces a lot
of electronic devices and digital machines like PCs, IPG products and also software. - Classify and describe the multi-channel distribution system for the product line and
assess the appropriateness of its design in relation to its desired service output levels (e.g.,
lot size, waiting time, spatial convenience,…).
The actual balance of the types of channels varies in accordance with the products. Personal
computers are mostly sold through the retail channel while the printers, scanners, cameras,
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copiers are sold by the consumer and the commercial channels. These design is convenient for
the intermediaries as the technical part of the sales items are handled directly with the company
while the other products that are easy to handle and which require less technical knowledge are
handled mostly by the intermediaries. The products of HP have very long shelf life and maybe
obsolescence is the only challenge they may face. Most of HP electronics are handy and they can
be carried around easily. (Rosenbloom, 1991)
- Discuss how the organization benefits by using one or more intermediaries.
The major benefits of the intermediaries are that they boost sales by using persuasive techniques
and promotional activities. The resellers provide information and advice to the clients who form
positive opinion about the product and develop brand loyalty and trust of the organizations
products. The intermediaries buy the products in bulk from the factories and help in breaking
down the quantities into small affordable units to the consumers. The intermediaries also save a
lot of time for both the customers and the sellers as the intermediaries are well experienced in
their trade and they can operate conveniently and at a faster rate. - Describe the costs and potential risks that the firm must encompass by using these
intermediaries. Explain how
The cost of the intermediaries is the ultimate revenue loss as they too must gain from the same
system of selling i.e. the manufacturer must sell the product to the intermediaries at a cost that’s
lower than the relative retailing price. Besides the revenue loss, the manufacturer also looses the
communication control over the messages accompanying their products being sold by the
intermediaries. (Stern and Adel, 1988)
VMS are the coordinated, formal or informal distribution channels whose members are
independent but work together in an effort to achieve greater economies of scale. These are the
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intermediaries that operate in their own stores but store the manufacturer’s products for resale.
HMS (Horizontal marketing system) is a type of distribution channel that combines several other
organizations for the sole purpose of marketing.
M2. Choose an organization that creates products that are sold to other businesses and uses
at least two different sales channels (the organization may or may not use any
intermediaries).
Toyota Motor Corporation sells its vehicles to individuals as well as to companies who buy in
bulk and later resell to private companies. Toyota Corporation sales directly to individuals as
well as the use of Toyota branded outlets to market and the use of online computer sales.
- Briefly describe the organization, its target market, its competitive situation, and the products
that it produces (NOTE: If the company is very large and produces many diverse product lines,
you should narrow your focus to just one division or product line of that company).
Toyota Motor Corporation started its operations on 28 TH August the year 1937. Its current
president and representative is Akio Toyoda. The corporation has its head office in Toyota City
in Japan. It has a workforce of 325,905 employees worldwide. Its major business activity is the
manufacture of the Toyota branded Motor vehicles. www.Toyota Motor Corporation
Toyota Motor Corporation target is to expand its business operation globally. In these regard its
main objective is to train and develop manpower to improve its sales worldwide. Its competitive
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strategy involves the introduction of four sales channels i.e. the Netz and the Vista sales which
were meant initially to strike a resonating cord with new customers while not forgetting the usual
customers. The lexus brand was also created as a global premium and very competitive in the US
and most parts of Europe and Africa. It was Japan’s most luxurious vehicle in the market.
Toyota Motor Corporation manufactures different brands and models of Toyota vehicles i.e.
from Toyota saloon vehicles, pickups, station wagons to other Sports utility vehicles.
- Classify and describe the multi-channel distribution system for the product line and
assess the appropriateness.
Since the initial establishment of the Toyota Motor dealers in the year 1935 by the use of its own
local capital, Toyota has gradually developed a sales and distribution structure that is practically
based on the basic principles of independence and utmost responsibility in a system
interdependent network between the other external distributors and the main Toyota Company.
The use of on line trading system and its own independent Motor showrooms has greatly
improved its sales. The vehicles have a very long product life compared with perishable
products. The Toyota sales are very convenient as they have greater flexibility and they are also
easy to handle. - Explain how the distribution system does or could operate as an integrated logistics
system (i.e., use of
information technology to accomplish and/or coordinate such logistical processes as
ordering, warehousing, inventory, shipping) and the benefits associated with that system
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strategy, or why a ILS doesn’t make sense for the organization of its design in relation to
its desired service output levels (e.g., lot size, waiting time, spatial convenience).
This is a system wide management and coordination of the whole logistics chain or channel as
single entity in centralized location instead of different management levels of individual
functions. The effect of ILS is often is mostly measured or gauged in terms of metrics for
instance the reliability of the system, availability, testability and its overall maintability at times
referred as the System safety. Toyota’s integrated logistic Support is very advanced in terms of
efficiency and reliability. (Systems Assessments, 2008) The ILS is makes use of the modern
software to finalize the efficiency of the automated systems in inventory and all other forms of
inventory controls. The coordination of orders, shipping has been made easy with very simple
software for general business operations. The ILS is usually developed in conjunction with the
system engineers. The ILS is widely used because of its reliability, accuracy and convenience.
The motor vehicles have an advantage as their waiting period can extend even to more than year.
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References
Rosenbloom, B. (1991) Marketing Channels. Dryden, .
Stern, L.W., and Adel I E. (1988) Marketing Channels. Prentice-Hall,
Systems Assessments (2008) Integrated Logistics and COOP Support Services.
