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1、Introduction:As marketers well know, distribution is a major component of the marketing mix, a vital and necessary part of the so-called four Ps. According to Peter Druckers view, the distribution as one of the final frontiers of management because it affect all aspects of the firms long-term and sh
2、ort-term activity and internal organization. (Alan West, 1989, P2) If the product is not accessible, it must be difficult to sell it and then all the efforts made to promote the productions will be in vain. Peter Druckers vision of the future of management sees fewer, more highly skilled, and less d
3、epartmentalized individuals organizing and directing the high technology firms in the industrialized world. Distribution involves a whole range of external and internal factors. And we will discuss the following aspects: Changing distribution environment, components of distribution, key issues of di
4、stribution, and the various distribution channel designs.The Changing Distribution Environment:Any companies exist in an era of accelerating change especially the international firms. Large numbers of related environmental changes requires improving of distribution consistently. The pressures exerte
5、d by change on company distribution policy vary with the company but all companies will share the common effects of broader environmental conditions.New technologyNew technology is having a dramatic impact on distribution. It is astonishing because of continually being refined and applied in differe
6、nt situations. Simply by improving knowledge of sales, volumes, production lead times, current inventories, manufacturers can reduce stockholding at plants, control inventories at suppliers and change order processing procedure. (Alan West, 1989, P6) Emergence of new technology leads more effectivel
7、y transportation, infrastructure and even procedure management. There have been alterations between companies as well as within them. For example, the Bar cod system. It was not used until 1970s which simples the controls of purchasing, producing, warehouse, sale.Industrial concentrationIn all major
8、 western economies, industrial concentration or the ownership by fewer and fewer companies of larger and larger market shares proceeds apace. This has two important effects on suppliers. First, their profit margins will be put increasingly under pressure as large groups buying in large quantities wi
9、ll want large discounts. For the fast moving consumer goods manufacture the market reality is that they are achieving a greater and greater volume of sales through a smaller number of accounts. This change influences the way suppliers organize and service their markets, with distribution becoming an
10、 increasingly key issue in effective market management.Speed of market changeThe huge growth in competitive, international markets has played a key role in shaping the total distribution environment. Thus the pace of product replacement has steadily increased. Indeed when one compares the markets of
11、 Europe, Japan and the US, it is possible to judge the competitiveness of the environment by the speed of product change and innovation. Companies in high technology and consumer fashion have to respond more rapidly to changes in market trends and control their levels of inventory and product range
12、accordingly. Increasing costs of personnelLabour costs rose consistently in this century. For example, Australian labour cost changed from 14.4 to 24.6 during 2001 to 2005. () Distribution remains very labour intensive for many firms and changes in distribution policy and organization often have a s
13、ignificant impact on staffing levels. Rising fuel Given the shortage of crude oil resources, fuel cost has continued to rise in real terms since the early 1970s. In the April 2010, the petrol prices have reached a new record high, having broken the previous record of 119.7p a liter set in July 2008.
14、 Overseas prices have also risen. The UK has the eleventh highest unleaded price in Europe and the second highest diesel price. (AA Fuel Prices, Apr 20th) Transportation as the essential part of distribution, fuel price became the initial issue to consider.LegislationChanging attitudes towards the e
15、nvironment and working practices affect the distribution environment in various ways like restricting the length of the working day for delivery drivers to limitations on load size and content for the different distribution systems. In addition, Legislation often influences how and how many products
16、 are distributed in particular markets. For example, Commission Regulation (EC) No exempted supply and distribution agreements concerning final and intermediate goods as well as services, provided that the combined market share of the parties concerned does not exceed 30% of the relevant market. (Su
17、mmaries of ED legislation, Feb 21st, 2007)Economic volatilityChanging exchange rates influences the decision of distribution obviously. Partly by affecting the level of company working capital, they contribute to pressure on the distribution system by demanding much closer scrutiny of stock levels a
18、nd to reappraise their distribution policies. Most of the companies had to reappraise their distribution policies because of oil price volatility accompanied by fluctuations and that will affect the transportation cost directly. Changes in infrastructureA modern infrastructure is crucial to economic
19、 success. All the governments pay more attention to the modernizing and developing road, rail, water, air networks to suit modern economic environments and obviously there have been ramifications for the users of transport infrastructures. On the other hand, government policy can also indirectly aff
20、ect the distribution environment on infrastructure. Like French railways carry a higher percentage of national freight than British Rail since the British government apply more limitation on the freight role for the nationally owned railway than in French.Social trendsHow consumer spend their leisur
21、e time is significantly more important to make a decision on the ultimate distribution methods and the location to outlets such as retailing and supermarket industry. The difference can be visible between the western and oriental. As we know, Western civilization is accustomed to centralize purchasi
22、ng while Oriental likes retailing especially Chinese who prefer food fresh. Base on the lifestyle, retailing could be a better way for Oriental countries than in Western.The components of distribution: A firms distribution objectives will ultimately be highly relatedsome will enhance each other whil
23、e others will compete.(University of Southern California, para1)From the objective, the distribution planner will be able to refine the components of the distribution plan-channels, production, warehousing, inventory, transportation and order processing systems.Key issues of distribution:Cost (FIGUR
24、E1 JohnWiley & Sons P8)Since international markets involve greater distances physical distribution costs are relative higher. But the additional costs of servicing overseas markets involve more than those of transport cost alone. There is a substantially increased packaging cost, the requirement to
25、improve either the product packing or the carton strength to withstand the increased physical demands of transport to multinational markets. Despite of those costs, the costs of administration are substantially higher for international management. And often documentation is incorrectly completed, le
26、ading to a further increase in cost as payment will be delayed until new documents are dispatched. (Alan West P74)Transport costsAdequate cost data are required to determine the type of vehicle it is most economic to use in any business. Since a vehicle is only in economic use when it is moving with
27、 a revenue-paying load, what is needed is information about how much time is spent in the garage, on maintenance, loading and unloading, how full the vehicle is loaded for each trip, how much the size of each drop in relation to its value and how many the mileage for each drop were factors influence
28、 the transport cost directly. Warehousing costsDistribution means more than delivery, but warehousing. Three major parts consist of the cost of running a warehouse. First of all, there is depreciation or rental on the building and any equipment used inside it such as racking, conveyors and fork-lift
29、 trucks. Secondly, there is the cost of the personnel required for handling, documentation and management. Thirdly, the necessary services such as fuel, electricity and water have also to be taken into account. The cost relationships of stockManufacturing cost. The lowest unit cost of manufacture wi
30、ll usually involve availability of finished product in excess of demand during certain periods. The surplus creates a stock cost.Demand. The frequency distribution of demand is the main factor. And the problem is the frequency can only be deduced from historical sales data which may not always be re
31、levant to what will happen in the future, and involves fairly sophisticated calculations when related to the amount of safety stock necessary to satisfy that demand.Lead Times. To satisfy any given demand, stock levels will be determined by the supply lead time- the time it takes for an order for fr
32、esh supplies to be fulfilled. The shorter lead time, the lower the stock level required. Therefore, it is necessary to know the scope that exists for reducing lead time and the cost of so doing. This will usually mean a faster and more expensive means of transport, but a reduction in the time taken
33、to process an order and the time taken to place it will also shorten lead time.Packing costs. Packaging is not used for merchandising purely. It is designed to protect the goods from damage and theft in the process of distribution. This can affect the cost of insurance and waste of damaged goods. In
34、 addition, it is related to he cost of transport because if this is based on the weight of the complete package then heavy packaging cost can increase transport cost considerably, particularly for air freight which is the most costly.Local environmentFirst, the legal environment in an international
35、market may effectively determine the structure of he distribution system, which may be entirely different from that operating in the home market. Second, there legal guidelines may change rapidly, dramatically altering the distribution environment. In addition to legal constraints, local business pr
36、actice often influences the way in which a foreign firm can effectively penetrate the market. ControlThe combined effect of distance and local market structures can mean that the suppliers control over distribution is more limited than at home. The shortage of information also means that the invento
37、ry control system for overseas markets is likely to be less effective than in the home market making necessary higher levels of buffer or reserve stock.CurrencyThe movement of payment within the distribution channel is complicated in overseas markets by differing currencies and exchange complexities
38、. This will be compounded when the inflation rate in either market is high and there are legal problems in transferring funds, such as foreign exchange controls.Communication Distance makes effective communication between supplier and customer more difficult. This will be particularly important when
39、 the product supplied is complex and requires a high level of technical support and spare part provision. Distribution channel design: (Donald f. Bowersox, P498)Four general approaches are used to describe channels: descriptive institutional, graphic, commodity groupings and functional. Descriptive
40、institutional approachThis channel analysis focuses on the identification, description, and classification of middlemen institutions. Such institutions are grouped with respect to the marketing services they perform. It could be divided into three parts and at the first level the distinction is made
41、 between merchant and functional middlemen. At the second level, the distinction between range and type of wholesale services is made. The third level presents descriptive criteria commonly applied to the various categories of wholesalers specified by the first two levels. (Figure 2 P499)Graphic app
42、roachThe graphs illustrate the range of alternatives in institutional selection at all levels of the marketing process. In the four channels shown (Figure3), the most typical for the consumer is the wholesale-retail-consumer channel. The channel selected by the manufacturer depends upon the characte
43、ristics of the product, the buying habits of the consumer, and the overall marketing strategy of the firm. For example, a large personal sales force is required for successful marketing of a product nationwide directly to the consumer. The companies such as Avon Products and Fuller have selected thi
44、s method of distribution. On the other hand, a manufacturer with limited capital resources and a limited product line might elect to hire a broker or an agent to sell products in consumer channels. The main advantage of a graphic approach is that ti illustrates the many links in modern marketing. By
45、 the use of graphs the multiplicity of institutions is focused in a logical sequence. However, the simplicity of flow diagrams tends to understate some complexities of designing the proper channel structure for an individual firm.Commodity GroupingsIn an effort to limit the range of considerations i
46、n channel planning, several studies have been completed with the objective of defining channel structure in detail for specific commodities. Generally empirical in nature, commodities studies combine a description of institutions with a graphic illustration of primary ownership flows. Although they
47、are very useful in specific situations, such commodity-channel treatments are too specific for general planning.Functional treatmentsThe functional approach to channel structure developed as a result of attempts to provide a logical explanation of the overall marketing process. A function, in a mark
48、eting sense, represents a major economic activity that must be performed to some degree in the marketing of all products. In the marketing of many products, a given function may be performed by a number of institutions and intermediaries between the points of original sale and final sale. (Figure 4)
49、(Alan Rushton & John Oxley & Phil Croucher) Figure5 P 50Manufacturer direct to retail storeManufacturer via manufacturers distribution operation to retail storeManufacturer via retailer depot to retail storeManufacturer to wholesaler to retail shopManufacturer to cash-and-carry wholesaler to retail shopManufacturer via third-party distribution service to retail shopManufacturer via small parcels carrier to retail shopManufacturer via broke
