Provide an overview of the way distribution choices facing manufacturers have evolved.
The role of channel leader is increasingly in the hands of larger retailers.
Collaborative relationships set up between subjects at different points along the chain. Distribution has evolved from being a means of transferring information collected during the sales process, to becoming one of the creators of the information. Manufacturers are trying to gain greater control over information sources, with downstream integration or ICT sharing with operators further down the chain.
Manufacturing distribution policy
Within the manufacturing industry, distribution policy is more or less free depending on the market structure served by the company and the strength of its brand:
The process of defining a distribution policy rests on three fundamental decisions:
The process of determining the whole distribution chain, therefore, can be broken up into three consecutive phases:
To evaluate the different alternative forms of distribution, companies use a set of criteria, as well as quantitative (economic-financial) and qualitative (checking demand, prestige and notoriety) indicators for effectiveness and efficiency.
Evaluation needs to take the economic potential of the alternatives into account.
An analysis of the different channels based on economic-financial criteria, forms the quantitative basis on which the business can make its choice. Other more qualitative considerations can then come into play. One of the most important of these is the extent to which changes in consumer patterns are followed, and the variety and variability of market needs.
The choice of distribution formula may also be dictated by the need for promotion (prestige and notoriety to be gained from logo-brand sharing) or for differentiation (better quality of sales service).
Multiple distribution channels tend to be used in the following circumstances:
Factors generally taken into consideration when choosing distributors are:
Combining trade marketing with consumer marketing allows for new forms of collaboration within distribution channels based on new and efficient management approaches, that aim to increase the value that can be derived from distribution. Every channel is a system made up of linked and interconnected parts whose coordinated, non-conflictual working towards the same goals, means that the whole system can gain competitive advantage over the competition based on cost leadership and differentiation.