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Product Distribution The Global Business Game. Prof. Nathan Globus Shows You How n Prof. Globus would like to explain to you how the distribution system.

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Presentation on theme: "Product Distribution The Global Business Game. Prof. Nathan Globus Shows You How n Prof. Globus would like to explain to you how the distribution system."— Presentation transcript:

1 Product Distribution The Global Business Game

2 Prof. Nathan Globus Shows You How n Prof. Globus would like to explain to you how the distribution system works for a typical firm in The Global Business Game. n His explanation will use the costs associated with the games starting Q4YR00 quarter.

3 Building A Distribution System n Every company starts the game with a Factory in the Economic Zone associated with its Home Country. The Zones other country unit can be commercialized. If this is done a Distribution System must be established in that country. n Every Factory has one Distribution Center. Companies can lease commercial space for additional Free- Standing Distribution Centers. These added centers provide better service to the Wholesalers they supply.

4 More Distribution System Participants n Every Distribution Center has a Sales Office. Commercial space for additional Free-Standing Sales Offices can be leased. Sales Representatives work out of these offices. They take orders, calls on Wholesalers in their territories and provide sales support to independent retailers stocking the companys television sets. n The industrys retailers are supplied by Wholesalers.

5 Wholesalers n There are two types of Wholesalers in your industry. Company-Owned Wholesalers are those owned and operated by your company. They are totally dedicated to selling your TVs. n The industrys other Wholesalers are Independent Wholesalers. These are independent merchants who sell your companys products as well as those of your direct competitors.

6 Retailers n Your company can manufacture Privately-Branded TV sets sold by the Home Electronics King chain. These sales are won on a bids basis as Factory-direct sales. Most of the industrys sales are made by Wholesalers to the countrys numerous small retail establishments.

7 The Basic Distribution System n The industrys complete distribution system.

8 A Typical Distribution System n A Home Country selling its own branded TVs through Independent and Company-Owned Wholesalers and private labeled sets directly to Home Electronics King. n Foreign Country Units with either a Distribution Center or a factory to receive television set shipments.

9 Shipping Methods n Surface transportation-- Deliveries are completed during the quarter within a country and the following quarter across national borders. n XAir-- Deliveries arrive during the same quarter. This is the most expensive way to ship.

10 Shipping Costs n The shipping costs associated with Surface and ExAir vary between the industrys three major economic spheres. n The shipping rate cross tables shown assumes the United States is the Home Country. Surface Shipping Air Express Shipping

11 Sales Promotion Effort n Sales Representatives work out of Sales Offices. n They are motivated by Base Salaries and product Commission Rates. n The sales effort is further supported by the companys product Advertising Budgets, Sales Rep training programs, reasonable product quality and product prices and reliable product deliveries.

12 Sales Force Costs n Some Sales Representatives inevitably quit over time. n They must receive fair compensation to remain loyal. Others quit just to change the scenery. n Training Programs make them more effective. n Various costs are associated with developing and retaining a sales force in the United States.

13 Channel Start-Up and Shut-Down Expenses n The industrys competitive demands may require the firm to modify its number of channel participants. n The table below summarizes various costs associated with setting- up or shutting down channel participants in the NAFTA Economic Zone in local currency values.

14 Channel Maintenance Expenses n Various expenditures are needed to maintain the level of service in any of the countrys Distribution Channel. n This table summarizes the Channel maintenance expenses within NAFTA.

15 Warehouse Handling Costs n All units sold by your company are physically handled somewhere in the Distribution Chain. n There are no Shipping and Handling charges on units sold to Home Electronics King. n The table below summarizes all Shipping and Handling charges associated with an American factory in local currency values.

16 Tariffs n Tariffs serve to protect domestic manufacturers from foreign competition by making them more expensive. n The table below combines each countrys tariff rates.

17 Shipping Decisions n The factorys Shipping Department tries to ship orders as directed. n When forced to ship short the Department ships goods in the proportions directed as to method and destination. n All goods would be shipped under the decision and output conditions shown here for Q2YR02.

18 ExAir and Short Shipments n Goods shipped ExAir do not appear as Goods In Transit because they are received in the same quarter. n Companies ship short if the firm does not have enough products to meet all current quarter sales. n The Shipping Department fills all Contract orders first. n Finished Goods transfers to Country Units are shipped next. n Product shortages appear as Back Orders and Lost Sales.

19 Channel Accounting Operations n Prof. Globus will now show you how various Channel activities are reported in the Companys Income Statement and Balance Sheet as well as their Cash Flow effects. n Here are his channel-related decisions for the quarter being demonstrated.

20 Channel and Sales Rep Decisions Eliminated one Sales Office Added one Distribution Center Added Sales Reps and Trainees Cut Base Salaries and increased Commission Rates

21 Logistics Decisions 25 sets are being sent to Mexico and Germany 27 TVs are being shipped to Mexico and Germany

22 Income Statement Effects n The shipping charges for the TVs being sent to Germany and Mexico appear as accounting transactions in the receiving countrys accounts.

23 Balance Sheet Effects

24 Cash Flow Effects

25 The End

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