1. DISTRIBUTION OF MEDICAL PRODUCTS

2. Theoretical questions 1.The essence of distribution. Planning and organization of distribution. 2.Kinds of channels-structure and their functions. Creation of channels. The organization of the control and the estimation of their efficiency. 3.Kinds of trading intermediaries and the principles of their selection. 4.The basic methods and systems of selling, their elements and functions. 5.The concept of logistic. 6.Wholesale realization and retail trade of medical products

3. Marketing is defined as an exchange process. In relation to distribution, exchange poses two problems. Firstly, goods must be moved to a central loca­ tion from the warehouses of producers that make heterogeneous goods and that are geographically widespread. Secondly, the goods that are accumulated from diversified sources should represent a desired assortment from the customers' viewpoint.

4. These two problems can be solved by the process of sorting, which combines concentration (i.e., bringing the goods from different sources to a central location) and dispersion (i.e., picking an assortment of goods from different points of concentration). There are two basic strategic questions that need to be answered here. Who should perform the concentration and dispersion tasks — the manufacturer or intermediaries? Which intermediary should the manufacturer select to take the goods close to the customer?

5. Functions during distribution divide the corresponding management into 2 kinds: Commercial, channel distribution of the goods. Its functions are to provide the purchase and sale of goods, to transfer of the belonging. Physical distribution. Its functions are storage, warehousing or transportation of goods.

6. Components of the distribution planning: To define a strategy of a distribution and organization of the channels - structure; To define methods or types of the distribution channel, their combination on groups of the goods and segments of the markets; To define a number of levels of the channel; To choose the system of management of trade channels, forms of legal and organizational relations; To define a supervising role of the firm - manufacturer or trading firm; To create a network of wholesale or retail shops, warehouses, etc.; To define routes of distribution; To analyze the possible efficiency of selling.

7. Kinds of channels-structure and their functions. Creation of channels. The organization of the control and the estimation of their efficiency The channel-structure strategy refers to the number of intermediaries, who may be employed in moving goods from manufacturers to customers. A company may distribute its goods to customers or retailers without involving any intermediary. This comprises the shortest channel and may be called a direct distribution strategy. Alternatively, goods may pass through one or more middlemen, such as wholesalers and/ or agents. This is an indirect distribution strategy.

8. Channels of distribution may be evaluated on such primary criteria as : cost of distribution, coverage of market (penetration), customer service, communication with the market, and control of distribution networks. Occasionally such secondary factors as support of channels in the successful introduction of a new product and cooperation with the company's promotional effort also become evaluative criteria. Arriving at a distribution channel, which will satisfy all these criteria, requires simultaneous optimization of every facet of distribution, something which is usually not operationally possible.

9. There are four types of the distribution channels structure: Producer — consumer. The shortest, simplest channel of distribution for consumer products is from the producer to the consumer, with no middlemen involved. Producer —► retailer —► consumer. Many large retailers buy directly from manufacturers. Producer —► wholesaler—► retailer —► consumer. This is "traditional" channel for consumer goods. Small retailers and small manufacturers by the thousands find this channel the only economically feasible choice. Producer — agent — wholesaler — retailer —► consumer. To reach small retailers, the producers often use agent middlemen, who, in turn, call on wholesalers that sell to stores.

10. For a choice of the channel of distribution it is necessary to consider: A degree of intensity of selling (intensive, exclusive, selective); Planned sales volumes; Features of goods; Opportunities of the manufacturer (resources, the staff, competitiveness, etc.); Results of the estimation of the channel distribution by a set of criteria.

11. Intermediaries execute specific functions: 1.Buying: Act as purchasing agents for customers. Anticipate customers' needs, have good knowledge of market and sources of supply. Enable customers to deal with only a few sales people rather than with representatives of many producers. 2.Selling: Provide a sales force for producers to small retailers and in­dustrial users, at a lower cost than producers would incur to reach these markets. Customers often know and trust their local wholesalers more than distant supplier.

12. –Dividing, bulk breaking: Wholesalers buy in carload and truckload lots and then resell in case lots or less, thus providing a saving and a service to customers and producers. –Transportation: It provides quick, frequent delivery to customers, thus reducing their risks and investment in inventory. Reduce producers' and cus­tomers' freight costs by buying in large quantities.

13. –Risk bearing: In addition, simply by taking title to products, wholesalers deduce a producer's risk, tosses due to spoilage or fashion obsolescence are then borne by wholesalers. –Market information: Wholesalers supply information for their customers, regarding new products, competitors' activities, special sales by producers, etc. –Management services and advice: By offering managerial services and advice, especially to retailer customers, wholesalers have significantly strength­ened their own position in the market. The existence of full-service wholesalers is dependent, upon the economic health and well-being of small retailers. Therefore, by helping the retailers, the wholesalers really help themselves.

14. So, these are granting of trading services: maintenance with the information on the market; support in promotion of the goods and stimulation of selling; selection, standardization and packaging of the goods; storage of the goods in warehouses. The intermediary wholesale enterprises in the system of market relations are divided into two groups: independent intermediaries and dependent.

15. Independent ones are the independent intermediary organizations getting goods in the property with their subsequent realization to consumers. Distributors, dealers concern to this group of intermediaries, jobber, trading brokers (the distributors, who are not having warehouse).

16. The distributor is the independent intermediary having the property right to the goods. It sells die goods on its own behalf and at own expense. Frequently distributors are constant representatives of foreign firms. Dealers is the independent intermediary, who as against others carries out after selling service (the market of the equipment, home appliances). Jobber is the fine intermediary and resells the goods.

17. Dependent intermediaries have no property right to the goods and work for commission compensation. Brokers, commission agents concern to dependent marketing intermediaries, agents (industrial and marketing). Brokers are agent middleman whose prime responsibility is to bring buyers and sellers together. They furnish considerable market information regarding prices, products, and general market conditions. Brokers do not physically handle the goods, they do not work on a continuing basis with their principals. Manufacturers' agents (frequently called manufacturers representatives agents commissioned to sell part or all of a producer's products in particular territories. The agents are independent and are in no way employees of the manufacturers. They have little or no control over the prices and terms or sale; these are established by the manufacturer.

18. The commission merchants arrange, for any necessary storage, grading, and other services prior to the sale. They find buyers at the best possible prices, make the sales. They deduct their commissions, freight charges, and other mar­keting expenses, and then remit the balance as soon as possible to the local shippers. Selling agent is an independent middleman, who essentially takes the place of manufacturer's entire marketing department. These agents typically per­form more marketing services than any other type of the agent middleman does.

19. Methods and systems of selling After selecting their distribution channels, manufacturers should next decide upon the number of middlemen (the intensity of distribution) to be employed at the wholesale and retail levels. There are three strategies to choose from here. Instead, they form a continuum or points on a scale, running from intensive distribution through selective distribution to exclusive distribution.

20. Intensive Distribution Ordinarily the strategy of intensive distribution is used by manufacturers of consumer convenience goods. Consumers demand immediate satisfaction with this class of product and will not defer purchases to find a particular brand. Retailers often control the extent, to which the strategy of intensive distribution can be implemented.

21. Selective Distribution Selective distribution covers a wide range of the distribution intensity. Selective distribution is a retail strategy that involves making a product or group of products available only in certain markets. This is the opposite of open distribution, where a product line is distributed to as many markets as possible. There are several reasons for employing this approach, including the potential for limiting competition and minimizing distribution costs so that net profits are higher. The process of selective distribution focuses on identifying specific markets where a company’s products are highly likely to be favored by consumers in the area, while avoiding distribution to areas where there is less of a chance of gaining a significant market share. Often, this situation comes about because a number of similar products are already available through certain markets, and the level of competition is higher. By choosing to distribute goods through handpicked retailers within certain geographic regions, it is possible to avoid some of this competition, while still tapping into the demand for products of that type

22. Exclusive Distribution Under an exclusive distribution strategy, the supplier agrees to sell only to a particular wholesaling middleman or retailer in a given market. This type of distribution agreement is usually seen with high end and luxury products. In an example of an exclusive distribution agreement, a car manufacturer might only agree to allow three dealers to sell its cars in a specific country. Dealers other than these three who attempted to sell new vehicles from that manufacturer would be doing so without authorization; one consequence of this might be that the manufacturer would refuse to honor warranties or provide support for cars sold at unauthorized dealers. The structure of an exclusive distribution agreement favors both the manufacturer and the distributor or retailer. From the point of view of people moving the product to consumers, having an exclusive contract means that consumers must come to them if they want the product. For example, if a cell phone provider has an exclusive deal with a manufacturer of cell phones, people who want to use cell phones made by that manufacturer must go through that cell phone provider.

23. Systems of selling are divided: Simple (manufacturer - consumer); Complex (with participation of intermediaries); Vertical marketing systems (Corporate; Contractual (intermediate); Administrative).

24. Vertical marketing systems Formally or informally coordinated distribution channel where its independent members work together to achieve greater efficiency and economies of scale, and to eliminate channel-conflict arising out of disparate individual objectives.

25. Vertical marketing systems In corporate vertical marketing systems, the production and marketing facilities are owned by the same company. In administered vertical marketing systems, the coordination of production and marketing activities is achieved essentially through the domination of one powerful channel member. The manufacturer's brand and market position are strong enough to get the voluntary cooperation of retailers in matters of advertising, pricing, and store display.

26. In contractual vertical marketing systems, independent institutions — producers, wholesalers, and retailers — are banded together by contract to achieve the necessary economic size and coordination of effort. Three types of contractual systems can be identified: wholesaler-sponsored voluntary chains, retailer-owned cooperatives, and franchise systems.

27. franchise systems The term franchise comes from a French word which means "freedom." Politically, a franchise is the freedom to participate in government, generally through the right to vote. In business, franchise systems are business models in which a company with a successful product or business system allows other businesses the right, or freedom, to operate under their trade name for a fee. The original business which sells the right is called the franchisor: the person or company which purchases the right is called the franchisee.

28. In most franchise systems, the franchisor maintains a great deal of control over the product and services offered by the franchisee in order to maintain brand consistency and the reputation of his trademark or product. For example, the franchisor generally has very strict terms governing marketing, product quality, building design and operating practices. An entrepreneur should carefully examine the restrictions of prospective franchise systems to make certain he is able to work comfortably within those constraints.

29. An investor needs to be aware that buying a franchise from a successful company does not necessarily guarantee his own success. The purchaser must make certain he has the managerial ability required to run a business, as well as the aptitude needed for the particular franchise he chooses. If he has no mechanical aptitude, for example, he may want to stay away from franchise systems that specialize in auto repair or maintenance. He should also make certain that the success of the parent company is not a result of regional issues, that the company has the resources to offer adequate support, and that his local area has not reached a saturation point for that type of business.

30. When investigating particular franchise systems, a prospective purchaser should consider a number of factors. He should know exactly what is included in the franchise fee; for example, training, operations manuals, guidance in site selection, and territorial rights. The franchisor should be able to provide projections of how much capital the investor needs, how long it should take for the new franchise to open, and when the investor can reasonable expect to recover his initial investment. It is also important to know how many other franchise offices will be sold in the same area, and if there are any on-going franchise fees.

31. Channels of distribution may be evaluated on such primary criteria as cost of distribution, coverage of market (penetration), customer service, communication with the market, and control of distribution networks. Occasionally such secondary factors as support of channels in the successful introduction of a new product and cooperation with the company's promotional effort also become evaluative criteria. To arrive at a distribution channel, which will satisfy all these criteria, requires simultaneous optimization of every facet of distribution, something, which is usually not operationally possible.

32. For estimating the efficiency of distribution channels the concept 3C and 6C is used: The concept "3C": costs - сosts of distribution control - the control over the channel of distribution coverage - scope of the market

33. The concept "6C": costs Costs of distribution control The control over the channel of distribution coverage Scope of the market capital The investments necessary for formation of the channel distribution character Character of the channel, its conformity to the goods, requirements of the manufacturer and the consumer continuity Stability of the channel, orientation to long-term cooperation.

34. Physical distribution involves the flow of products from supply sources to the firm, and from the company to its customers. Executives, who manage physical distribution, are responsible for developing and operating efficient flow systems. Their goal is to move the right amount of the right products to the right time. Physical distribution costs are a substantial part of the total operating costs in many firms. Moreover, physical distribution is probably the only remaining source of major cost reductions in many companies.

35. Physical distribution should be treated as a total system of business action. In the past (and unfortunately even now in too many firms), physical distribution activities have been fragmented operationally and organizationally. Applying the systems concept also means applying the total-cost approach— that is, reducing the cost of the entire system, rather than the costs of individual elements in the system. However management should not strive only for the lowest total cost of physical distribution. Instead, the goals should be to effect the best balance between the level of costumer service and the total cost. Sometimes a company can improve its market position by providing a higher level of customer service, even though this means an increase in physical distribution costs.

36. The actual operation of a physical distribution system requires management's attention and decision making in five areas: (1) inventory location and warehousing, (2) materials handling, (3) inventory control, (4) order processing, (5) transportation. Again, these areas should not be approached as individual activities, but as subsystems of the whole—the physical distribution system.