IB Business & Management

Unit 4.6 Place (Distribution)

‘getting the product to the right customers at the right place and at the right time’

Place is about…….

Place?

• Refers to distribution • Most products are NOT sold directly from

the manufacturer to the final customer

• What other types of business might be involved in getting the product to the final customer?

Chain of Distribution

• The means of getting a product to the customer

• One or more intermediaries may be involved

• The longer the chain the more expensive the final product to the consumer. Why?

• The longer the chain the longer it will take to get the product to the consumer. Why?

Types of Intermediaries

• Retailer – A business which buys goods from manufacturers and wholesalers and sells them in small quantities to customers

• Wholesaler – A business which buys goods from manufacturers and sells them in smaller quantities to retailers

• Agent/Broker – An independent company who negotiates between buyers and sellers

• Distributor – Specialist , independent businesses that sell products of only a few manufacturers

WHOLESALERS – WHY USE THEM?

Wholesaler Advantages

• Wholesaler takes care of storageo Retailer has less cost &

more space• Retailers do not have

to purchase such large quantities

• Producer’s costs are lower as they are selling in bulk to fewer customers

• Producers do not have to deal with distribution issues / problems

Wholesaler Disadvantages

• Producer loses control of marketing

• How do you know the wholesaler will promote like you want them to?

• Retailers have higher prices as the wholesaler’s costs must be passed on

RETAILERS – WHAT ARE THEY ALL ABOUT?

Some Types of Retailers

Department Stores

Online Retailers

Market Traders

Superstores/Hypermarkets

Supermarkets

Multiples

Independent stores

Distributors

• Distributorso Independent,

specialist businesses that sell products of only a few manufacturers

• Examples include:o Carso Bookso Movieso Electrical equipment

Agents or Brokers• Negotiators who act on

behalf of buyers & sellers of a product

• Usually not employed by the producer, independent

• Experts in their field• Often charge either a

commission or a fee• Often offer products from

a variety of producers• Examples:

o Real estate, travel, insurance, financial advisors

Agents or Brokers

• Often rely on personal selling techniqueso Product is

complicatedo Buyer needs

educationo Buyer can ask

questionso Product may need

demonstration

Direct Route

• What methods could a firm use to sell directly to customers?

Can you think of examples of companies which use these methods?

Direct Marketing Distribution

• Telesales, or telemarketingo Sales people make phone

callso Or automated voice or text

messagingo Expense varieso Some people hate it

• E-commerceo Websites which accept

payment online Credit card PayPal E-check

o Not appropriate for all products

o Growing in popularity

• Direct Mailo Send promotional

material via the postal service

o Can be personalizedo But often considered

‘junk’• Vending Machines

o Drinks, snacks, cigso Can be placed almost

anywhereo New machines can

accept various payment methods

o Costs are minimal, i.e., no salespeople needed

o Vandalism, limited stock, mechanical failures

Factors in Choosing Distribution Strategy

• Costs & benefitso Direct selling may reduce costs but retailers

may have better access to customerso Transportation methods must also be

considered, e.g., rail, ship, trucking, air• Product

o Perishables must have short chainso Fast-moving goods need to be moved in large

volumes (wholesalers & retailers more app.)o Many products can now be sold directly

through the internet (books, dvds, toys, airfare, vacations, clothes)

Multi-Channel Distribution

• Many businesses will use more than one channel

• E.G., airlines will sell tickets via:o Travel agencieso Airport counterso Internet websiteo Internet travel sites

Expedia Kayak Orbitz

What Distribution Channel/Channels do these

manufacturers use?

Factors in Choosing Distribution Strategy

• Marketo Niche markets often directly controlled by

producer whereas mass markets often best to use intermediaries

• Timeo Some items require immediate delivery while

others can be ordered and delivered at a later date

• Legal Constraintso Often a nation or community’s laws affect the

distribution selectiono E.g., gambling, alcohol sales, guns &

ammunition

Channels of Distribution

• Channels of distribution are NOT the methods of transporto They are NOT trucking, railroads,

shipping etc.• Channels of distribution refer to the

intermediaries used to get product to customer such as wholesalers, agents, retailers

SUPPLY CHAIN MANAGEMENT (HL ONLY)

Supply Chain Management (SCM)

• AKA logistics• Art of managing

& controlling the sequence of events from production to delivery to a customer

SCM Functions• Stock control

o Track all stocks (raw materials, work-in-progress, finished goods) from source to consumption

• Quality controlo Ensure quality at all

stages in the processo Are you getting your

money’s worth at each stage

• Supplier networkso Select supplierso Coordinate amongst

them• Transportation

networkso Select most cost-

effective methodo Monitor their

performance

Comments on SCM

• Long chains provide opportunities for things to go wrong

• SCM helps ensure appropriate supply of stocks to meet demando Excessive stock costs moneyo Lack of stocks leads to production delays &

potential lost sales• SCM contributes to ‘lean’ production

o Identify wasteo Identify opportunities for improvement