当代商业概论 Fundamentals of Business

1. 当代商业概论 Fundamentals of Business Lecture 5: Distribution and Business Plan Writing

2. What to cover today： • Distribution and market coverage • Channels of distribution • Intermediaries • Physical distribution and transportation • Developing a business plan Exercises

3. 1. Distribution and market coverage Distribution 分销is: -- the channels or pathways by which a firm’s products are made accessible to its customers Market coverage 市场覆盖is: -- the degree of product distribution among outlets to cover the market

4. Market coverage can be classified as: Intensive distribution: across most or all possible outlets to ensure easy access by consumers, products that do not take up much space and do not require expertise, e.g. cigarettes, chewing gum, soft drink Selective distribution: through selected outlets, and some outlets are intentionally avoided, to create prestige or guarantee specialized service e.g. Victoria’s Secrets: via upscale department stores only Exclusive distribution: through only one or few outlets, an extreme form of S distribution, e.g. luxury watches, high-quality jewelry: one particular specialty store • The higher the price, the more selective the market coverage.

5. Marketing research and market coverage • Marketing research can help a firm determine the optimal type of coverage by identifying where consumers desire to purchase products or services. • a DVD producer: grocery stores, retail stores, video stores, supermarket; amount of money customers are willing to pay at each type of store • Ralph Lauren: company-owned stores in trendy neighborhoods and resorts, “store within a store” in department stores such as Marcy’s

6. 2. Channels of distribution Channels of distribution 分销渠道is: -- the specific method a firm uses to sell and deliver its products or services to its customers • Direct Channel: involves no intermediaries • One-level Channel: involves retailers • Two-level Channel: involves wholesalers and retailers

7. 2.1 Comparison of three distribution channels

8. Case study: Direct channel of Dell “The direct model eliminates the need to support an extensive network of wholesale and retail dealers, thereby avoiding dealer markups 加价; avoids the higher inventory costs associated with the wholesale/retail channel and the competition for retail shelf space. … In addition, the direct model allows the Company to maintain, monitor, and update a customer database that can be used to shape the future product offerings. … this direct approach allows the Company to rapidly and efficiently deliver relevant technology to its customers.” -- Dell annual report Question: what are the advantages of the direct channel as foregrounded here?

9. Direct channel • the producer deals directly with customers • e.g. Amway, insurance companies, DHC, 凡客诚品, Land’s End, Dell • Possible promotion mix: rely more on personal selling, PR, direct mail, and the Internet (increasing popularity) • Advantage: full control over the marketing mix (esp. price & promotion); higher profit (no markup, the full difference between the cost and the price goes to the producer); firsthand feedback • Disadvantage: more sales & delivery employees; more promotion expanses; less coverage/access

10. One-level channel • one marketing intermediary (the retailer) is involved between the producer and the customer • e.g. Time Warner: its film company – movie theaters, its record company – music shops • Possible promotion mix: rely more on media ads and sales promotion

11. Two-level channel • two marketing intermediaries (the wholesaler & the retailer) are involved between the producer and the customer • e.g. Anheuser-Busch’s Budweiser beer: the producer – 900 beer wholesalers – countless retail outlets such as grocery stores, convenience stores, supermarkets, vending machines • Possible promotion mix: rely more on media ads and sales promotion

12. 2.2 Factors affecting the choice of distribution channels • Market coverage • Product characteristics: standardized products (apples, napkins) are more likely to involve intermediaries than complex products (computers, cars, customerized furniture), because the latter require more expertise, specialized service, and greater communication between the buyer and the seller • Ease of transportation: the more transportable a product is, the more likely it is to involve intermediaries, e.g. built-in swimming pools vs. aboveground pools • Use of multiple channels

13. 3. Intermediaries -- institutions or individuals that participate in the process of moving products from the producer to the customer • Merchants: become owners of products and then resell them; can be further classified as: • Wholesalers 批发商: buy products from the producer in large quantities and resell them to retailers • Retailers 零售商: sell products to end consumers • Agents 代理商 & brokers 经纪人: match sellers and buyers (wholesalers, retailers, or both) of products without becoming owners; permanent (agents) vs. deal-by-deal (brokers)

14. 3.1 Wholesalers • Full-service wholesalers • Limited-function wholesalers • Rack jobbers 货架批发商 • Cash and carry wholesalers 付款提货批发商 • Drop shippers 订货批发商

15. 3.2 Retailers • Store retailing • Department stores • Discount stores • Supermarkets • Hypermarkets • General stores • Specialty stores • Nonstore retailing • Virtual stores • Vending machines • Mail-order houses • Direct selling • Carts and kiosks • MLM

16. 3.3 Agents & brokers • Commonly used by small businesses with unknown brands that may not receive orders from wholesalers or retail outlets, or by foreign companies to explore the market and “test the water” • e.g. an entrepreneur creates a new paint product may use an agent to convince a representative (also called a buyer) of Home Depot, who will decide whether Home Depot should carry this products in its retail stores. An agent can be critical to the success of such a firm.

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18. 3.4 Value added by intermediaries • Time utility 时间便利 • Place utility 地点便利 • Ownership utility 所有权便利 • Form utility 商品整理便利 • Information utility 信息便利 • Service utility 服务便利

19. 4. Physical distribution and transportation Modes of transportation: • Rail: mainly for wholesalers • Truck: mainly for retailers • Pipeline: for liquid & gas • Water: for bulk cargos, esp. international trade • Air: for light, costly goods

20. Case study: Streamline the logistic process in Toyota The selection of proper transportation is merely the first step in developing a proper system for delivering products efficiently. Toyota used to let its finished cars sit in its Kentucky factory, until it had a large batch to send by rail to various dealerships around the country. Now it immediately sends its finished vehicles by rail to a sorting dock, where they are sorted and then delivered to various cities nearby. Consequently the cars no longer sit at the factory, and the distribution time has been reduced by 2 day. In reality, no formulas are available to determine the ideal transportation system. Most firms compare the estimated time and expenses of each possible method, and then select the most time-/cost-efficient one.

21. 5. Developing a business plan -- a detailed description of the proposed business, including a description of the product or service, the types of customers it would target, the competition, and the facilities needed for production -- a checklist for entrepreneurs to ensure that them have considered all the key functions of the business -- a formal document to provide to potential investors

22. Structure of a typical business plan • Production process • Human resources • Marketing plan • Target market • Product characteristics • Pricing • Distribution • Promotion • Financial plan • Funds needed • Feasibility • Summary Appendices • Description and ownership of proposed business • Assessment of the business environment (marketing research) • Economic environment • Industry environment • Global environment • Management plan • Organizational structure

23. Online resources for creating a business • Yahoo!’s Small Business site http://smallbusiness.yahoo.com • American Express http://americanexpress.com/smallbusiness • Small Business Administration http://www.sbaonline.sba.gov • Quicken Small Business http://www.quicken.com/small_business

24. Online resources for business/marketing plan writing • Business Plan Guidehttp://wenku.baidu.com/view/ffd6b3daa58da0116c1749fc.html • Developing a business planhttp://wenku.baidu.com/view/5ba1f48583d049649b6658b5.html • 卡姿兰品牌营销策划方案http://wenku.baidu.com/view/6a5bacc7aa00b52acfc7ca91.html • 克丽缇娜品牌重庆上市推广方案 • http://wenku.baidu.com/view/9a8e02768e9951e79b8927f8.html • 莱坤男性化妆品营销策划书 • http://wenku.baidu.com/view/8abdf900bed5b9f3f90f1ca2.html • 名人掌上电脑智能王网络营销计划书http://wenku.baidu.com/view/1a5cfbc75fbfc77da269b1b7.html

25. Exercises 1. Translation (1) 市场覆盖 (2) 分销渠道 (3) 物流 (4) 代理商 (5) 货架批发商 (6) 订货批发商 (7) 营业额 (8) 利润 (9) 运营成本 (10) 货仓 (11) 售货亭 (12) 邮购公司 (13) 直接销售 (14) 多层直销

26. 2. Group project: writing a marketing plan 营销计划书 • In the MS Word format • In groups of 2-4 • no less than 4 pages • In English

27. 3. Supplementary reading • Avon is Calling in Every Way It Can • Global Integrated Logistics • Developing the Business Plan • College Health Club: Developing a Business Plan