1. DISTRIBUTION
Martin
Jung
Manuel
Tal
Taro
Arindam

2. Agenda
Introduction
Product
Consumer
Partner IT

3. Imagine … But have you ever thought about distribution?
Imagine you become a Product Manager, and you have to decide upon your product strategy.
You are probably thinking, design, marketing, promotion operations, pricing
But have you ever thought about distribution?

4. Output Input Black Box The neglected “P”
For most people distribution is still a black box
Output
Input
Black Box

5. Looking for distribution on the Value Chain
Porter’s value chain does not specifically define distribution
Outbound logistics?
Marketing and Sales?
Services? ? ? ?

6. What really influence our distribution?
Product
Channel
Partners
Consumer
Information Technology

7. Evolution of channel management
What’s the value added from each
Intermediary?
Producer
Consumers
Retailers
Wholesalers
Agents or Brokers
Wholesaler
Channel
Retailer
Direct
Agent/Broker
Producer
Consumers
Retailers
Wholesalers
Agents or Brokers
Agent/Broker
Channel
Can we retain the value without intermediary?
Conventional
Marketing Channel
Vertical Marketing
System (VMS)

8. Factors to influence channel strategy decisions
Issues that Influence Channel Strategy
Levels of Distribution Intensity
Factors
Affecting Channel
Choice
Objective
Intensity
Level
Intensive
Selective
Exclusive
Achieve mass
market selling.
Convenience goods.
Work with selected
intermediaries.
Shopping and some
specialty goods.
Work with single intermediary.
Specialty goods
and industrial
equipment.
Number of Intermediaries
Many
Several
One
Product Factors
Partner Factors
Customer Factors
Other Factors

9. Agenda
Introduction
Product
Consumer
Partner IT

10. West-African natural gas producer
Traditional natural gas transport occurs via extensive pipeline networks.
Gas pipelines
West-African natural gas producer

11. Regasification terminal
Liquefying gas to LNG enables new distribution possibilities.
Gas production
Cooling gas to minus 162°C results in the condensation of the gas, known as Liquefied Natural Gas (LNG).
Liquefaction plant
Shipping
Regasification terminal
Benefits
LNG takes up about one six hundredth of the volume of gaseous natural gas.
LNG can be transported to distant customers via ships without expensive pipeline networks
Pipeline delivery

12. LNG is a growing market especially for remotely located gas producers.
Market trends
Major players: Shell, ENI, Gaz de France, Tractebel, Endesa, Iberdrola
Main countries: Algeria, Lybia, Oman, Qatar, Nigeria, UEA, Trinidad, Egypt, Australia, Norway, Venezuela
5.9%
3.8%
% Worldwide growth in gas
% Worldwide growth in LNG

13. Agenda
Introduction
Product
Consumer
Partner IT

14. Coke versus milk – multi-channel distribution.
Coca-Cola accounts for less than 2 ounces of the 64 ounces of fluid that each of the world‘s 4.4 bn people drink every day. The enemy is coffee, milk, water.
Mr. Goizueta CEO
Retailers
Super-markets, Kiosks
Consumers
Airlines
Bottler
Clubs, Bars
Restaur-ants, Hotels
Vending machines

15. how to choose the right partner
The Pepsi challenge or
how to choose the right partner
70.4%
Venezuela was the only country in which Pepsi was bigger than Coca Cola
In 1996 Cisneros Group switched from bottling Pepsi to Coke
In the last quarter of 1996 Pepsi had only 15.5% market share
100%
21.5%

16. Agenda
Introduction
Product
Consumer
Partner IT

17. Number of companies in Japan based on number of employees
In the Japanese office supply market customer needs changed over the years.
Although we are a
small company...
we want to
buy office
supplies in any
number, at any
time! 5%
95%
Number of companies in Japan based on number of employees
>30 employees
< 30 employees
< 10 employees
Let us introduce the case that customers require new distribution channel.
The revolution of distribution happened in office supply market in Japan.
In Japan, there are 6.2 million companies. But, 95% of them are offices with less than 30 employees.
In case of big firms like Sony or Toyota, sales rep of each office supply company comes to replenish almost everyday. But, small companies had to go to a store to buy their office supplies.
It’s troublesome to go out to buy office supplies. And, they do not know the store keep what they want to buy. So, administrative staffs, like her, always complains about office supply companies.
Yes, this is the customer needs, which is the chance for new business. To enjoy night life in Tokyo, what she needs is blah blah blah….
Big firms: Daily replenishment by sales reps at discount price
Small firms: Go to stationer’s shop and buy at a fixed price
Small order, frequent deliveries
Quick delivery
One Stop Shopping
New customer needs!

18. Askul revolutionized the distribution of office supplies by introducing an agent-vendor system.
Promise: Next-day delivery on all orders, from a single pencil to a truckload of office supplies
Maker
Primary
Wholesaler
Secondary
Retailer
Customer
Inventory
Old distribution
Reduction of intermediaries
Faster delivery
Less inventory cost
Growing customer base
Wholesaler and retailer revert into agents. Profit sharing and little cannibalization among stakeholders possible.
New distribution
Agent
Billing, Registration
Order
Delivery
Customer
One company named ‘Askul Corporation’ caught the needs and revolutionized distribution in office supply business.
Their promise to customers is next-day delivery on all orders, from a single pencil to a truckload of office supplies.
To realize the promise, Askul needed to invent new distribution channel. Here is the typical distribution model of old office supply. There are many wholesalers, so it’s impossible to require customer needs.
So, Askul developed the following distribution model for business with small companies. Agents introduce Askul’s new business model to customers, sell membership to them and registered them. Then, customers order directly to Askul by phone, mail or internet. Askul deliver office supplies within 24hours. Then, agents send bill to customers and customers pay for office supplies through agents.
By the new distribution system, Askul achieved reduction of intermediaries, faster delivery, less inventory cost and growing customer base. And, last but not least, the new distribution channel could avoid confliction with existing distribution channel by converting wholesalers and retailers into agents. In this new model, wholesalers and retailers of old distribution channel act as agents. They have customer base which Askul does not have. Also, the old distribution channel is also important for Askul because there is a market for conventional individual customers. The new distribution model made it possible to share profits in stakeholders, without cannibalizing.

19. Agenda
Introduction
Product
Consumer
Partner IT

20. One of the largest distribution networks exist in India.
Do you know one of the largest distribution networks in the world?
Making over transactions in one hour?
Mumbai
Nutan Mumbai Tiffin Box Suppliers Charity Trust
or…Dabbawallahs
or… Lunch deliverymen

21. … Key facts Cooking at home
Home-made lunch picked up 10 am
Boxes taken to nearest railway station & sorted
Boxes unloaded at destination and re-sorted
Delivered at p.m.
At 1.30 p.m returned to houses
Packaging
Transport/ Delivery
Key facts
Customer at workplace
Started in 1890 with 25 clients – Now over 200,000 clients
Boxes carried on heads, hand-wagons & cycles
Each porter covers km in 2 ½ hrs

22. … Each lunch-box-lid has a complex coding system:
Symbols identify the house, the originating & destination stations
Colors identify each suburb & individual sectors
Dashes, crosses & dots identify the street, the building and the floor of delivery
IT-Free and certified!
Prof. C K Prahlad: “quintessential master of supply chain management”
6 Sigma performance rating by Forbes ~ 1 error in 16 million transactions -- Treated on a par with Motorola

23. Distribution as strategic asset

24. Distribution as strategic asset
Thanks.
Any questions?

25. Product
Channel
Partners
Consumer
Information Technology