Posted: January 12th, 2023
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Management of Distribution Channels
Suppose you are the General Manager of a manufacturing organization (each group should select the type of manufacturing and the range of products produced) that operates in the Egyptian market. The company is operating under a strategy that aims to minimize the overall cost of operation (cost leadership).
During the last board of directors meeting, there was a hot discussion about the future and prosperity of the business.
The General Manager shared the latest sales numbers. In fact, the numbers were not good. Sales had declined for the fifth straight quarter while the market is still expanding with the demand for our product soared. On the other hand, competitors are increasingly taking market share on our expense.
The Operations Director identified they are continuously trying to minimize the operating costs while increasing functionality. Besides, several development initiatives were applied that led to better organizational cost structure. Moreover, the Operation Director identified that their outsourcing strategy is quite matured. He clearly mentioned that the company is keeping in-house only few core activities, where they can achieve and maintain a long-term competitive advantage, while they outsource all other activities in which they do not have a world class status. He also affirmed dispersing the value creation activities in locations that contribute in improving the organizational cost structure.
The Marketing Director identified that consumer needs are well defined and market surveys confirm that consumers are happy with the quality and functionality of the company’s products. However, the surveys affirmed that they are not always happy with the high selling price, compared to competitors. Besides, surveys report that consumers usually have difficulty in finding the company products in the right place and the right time. The Marketing Director admitted the tight control of the cost inside the four walls of the organization, however, he noted that the main problem that contribute to higher selling prices is related to how we get our products to the customers with accepted price. We need to rethink our segmentation strategy and how consumers want to buy our products. He added that there is a need to think about the provision of the demanded levels of service output needed by end-users (channel flows). He also raised the issue of the distribution channel configuration, role of each member and their contributions, sharing of effort and revenue, etc.
After some hot discussions between the board members, they finally decided to think about redesigning their distribution network. The Chairman announced a team should be formed with the responsibility of restructuring the distribution system and thinking about how the distribution strategy would contribute to the organization strategy and organizational success.
As a member of the restructuring group, you are requested to:
1. Identify one product and analyze consumer service needs
This depends, but not limited to, the answers of several questions: (5 points)
Do consumers prefer buying in bulks or they prefer buying in small quantities.
Do consumers want to buy from nearby locations or they want to buy from distant centralized locations, or buy over the phone or through the mail?
Do consumers want immediate delivery or are they willing to wait?
Do consumers value breadth of assortment or do they prefer specialization?
Do consumers want many add-on services (customer service, delivery, credit, repairs, installation, information provision) or will they obtain these elsewhere?
2. Using SWOT analysis, identify the strengths and weaknesses in your distribution channel. besides, identify the opportunities & treats found in the external environment (2.5 points)
3. Determine the channel objectives and identify the major alternatives. This should be clear in terms of what segments the company will target and what service out it will provide to its target segment. Then the company should identify its major channel alternatives in terms of: (2.5 points)
Types and numbers of intermediaries
The responsibilities of each channel member.
4. Using the efficiency template, evaluate the contribution of each member and how profits could be shared among channel members. (2.5 points)
5. Evaluate the make or buy channel decisions. (2.5 points)
6. Identify the needed level of intensity of the distribution. (2.5 points)
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