1. 9 MARKETING STRATEGY O.C. FERRELL • MICHAEL D. HARTLINE
Distribution and Supply Chain Management

2. Distribution and Supply Chain Concepts
Marketing Channels
“An organized system of marketing institutions through which products, resources, information, funds, and/or product ownership flow from the point of production to the final user.”
Physical Distribution
“Coordinating the flow of information and products among members of the channel to ensure that products are available in the right places, in the right quantities, at the right times, and in a cost-efficient manner.”

3. Graphical Depiction of a Supply Chain
Exhibit 9.1

4. Marketing Channel Functions
Channel Function Specializations
Sorting
Breaking Bulk
Maintaining Inventories
Maintaining Convenient Locations
Providing Services
Channel Effectiveness and Efficiency
Distribution Decision Criteria
(1) Is the channel effective?
(2) Is the channel efficient?

5. Discussion Question
Some manufacturers and retailers advertise that customers should buy from them because they “eliminate the middleman.” Evaluate this comment in light of the functions that must be performed in a marketing channel. Does a channel with fewer members always deliver products to customers at lower prices? Defend your position.

6. Strategic Issues in Distribution and Supply Chain Management
Marketing Channel Structure
Exclusive Distribution
Selective Distribution
Intensive Distribution
Channel Integration (three key factors)
Connectivity
Community
Collaboration
Creating and Enhancing Value in the Supply Chain

7. Discussion Question
Describe the characteristics of a product that represent something you would go to great lengths to acquire, thus supporting a manufacturer’s use of an exclusive distribution strategy. How much more knowledgeable are the salespeople at an exclusive distribution location versus those at an intensive distribution location? Why is this so?

8. Marketing Strategy in Action
Clinique cosmetics uses a selective distribution strategy as their primary marketing channel structure.
What is the motivation for using this strategy for this type of product line? What are the apparent benefits that Clinique receives from this strategy?

9. Maximizing Profit Margin Performance
Exhibit 9.2

10. Conflict and Collaboration in the Supply Chain (1 of 2)
The Basis of Conflict in the Supply Chain
Five basic sources of power:
Legitimate Power
Reward Power
Coercive Power
Information Power
Referent Power

11. Factors in Successful Supply Chain Collaboration
Exhibit 9.3

12. Conflict and Collaboration in the Supply Chain (2 of 2)
Collaborative Supply Chains
Category management must be:
Customer driven
Strategically driven
Multifunctional
Financially based
Systems dependent
Focused on immediate consumer response

13. Major Components of Category Management
Exhibit 9.4

14. Trends in Marketing Channels (1 of 2)
Advancing Technology
Growth of Internet and e-commerce
Radio frequency identification (RFID)
Shifting Power in the Channel
Discount mass merchandise retailers
Wal-Mart, Kmart, and Target
Category focused retailers (category killers)
Toys “R” Us, Lowe’s, Office Depot, AutoZone, and Best Buy
Outsourcing Channel Functions
Outsourcing is growing rapidly

15. Category Killers - AutoZone

16. The Trend in Outsourcing
Exhibit 9.5

17. Trends in Marketing Channels (2 of 2)
The Growth of Direct Distribution and Nonstore Retailing
Examples of Nonstore Channels
Catalog and Direct Marketing
Direct Selling
E-Commerce
Home Shopping Networks
Vending
Direct Response Advertising
The Growth of Dual Distribution

18. Discussion Question
What are the major differences you have experienced in buying a product through a physical retail store, a manufacturer’s physical store, a catalog, and an online merchant? What have some retailers in your area done to justify their ongoing presence in the channel?

19. Legal and Ethical Issues in the Supply Chain
Dual Distribution
Exclusive Channel Arrangements
Tying Arrangements
Counterfeit Products

20. FDA Against Counterfeit Drugs