Bataan Peninsula State University

GRADUATE SCHOOL

Marketing Management
MBA 105

WRITTEN REPORT

Distribution Strategy

Submitted by:

Nikka Roberts Bruzo

Master in Business Administration

Submitted to:

Leslie R. Jorge, DBA

March 13, 2021

Distribution Strategy

Distribution strategies are strategic plans developed and implemented to

deliver goods or services from the point of origin to end-user consumers.
Distribution strategy is mainly decided by keeping the top management in loop
because it affects overall operations. This strategy can be summarized with 3
main points.

 How to get the product from the manufacturing point to the end
customer?

 How to control costs and save time while executing the distribution
strategy?

 How to build a competitive advantage through distribution?

Distribution Channel

- is a chain of businesses or intermediaries through which a good or

service passes until it reaches the final buyer or the end consumer.

- flow of business that occurs between a manufacturer and a consumer. It

is a path that a transaction follows

Marketing Intermediaries

Marketing Intermediaries are individuals or business establishments that

support businesses in promoting, selling, and delivering business to consumers.

Here are some examples of common marketing intermediaries in business:

 Distributors: They have exclusive rights to use the company name and

distribute products from manufacturer within such territory. Manufacturers
set profit margins to the distributors so it allows the distributor as well as
other intermediaries down the chain to make profit.

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  Agents: These are representatives/middle person between seller and
buyer. Agents are self-employed intermediary who has continuing authority
to negotiate the sales of goods on behalf of another entity—the
supplier/manufacturer. They are paid through commission sales.

 Wholesalers: Wholesalers are the people who buy your goods in bulk and
then sell them to retailers.

 Retailer: This is a person or business that sells goods to the public in

relatively small quantities for use or consumption rather than for resale

 Resellers: These are individuals or businesses that buys product, not for

consumption, but to sell to other intermediaries. Goods are purchased and
resold for a profit. Resellers can be retailers, wholesalers or distributors.

THE NEED FOR MARKETING INTERMEDIARIES

Importance of Marketing Intermediaries

 Increase Reach- Using wholesalers, distributors, retailers and sales agents

help you get into markets you can't get into by yourself.

 Reduce Distribution Cost for Manufacturers- Reduce distribution costs for

manufacturers: If manufacturers organize their own distribution network, they
incur large costs due to lack of specialization, due to the small scale. By using
marketing intermediaries, manufacturers focus resources on the main stages of
the value chain of products.

 Lower the burden of workload- The intermediaries lower the burden of

workload by the manufacturers and customers in searching for their desired
items.

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 Rapid Reinvestment- When buying and selling off, the distribution
intermediaries will indirectly share the risks of goods with manufacturers. At that
time, manufacturing enterprises do not have to worry too much about output
products and have the capital to turn around production and re-invest in the next
cycle.

 Helping supply and demand meet - Sometimes, the seller does not know
where the buyer is and vice versa. At that time, the intermediary distributor was
the bridge to help supply and demand meet.

Functions of intermediaries

1. Purchase

Middlemen buy very large quantities of goods directly from the producer.
By buying in bulk, these intermediaries can be guaranteed significantly lower
prices.

2. Warehouse and Transportation

Once the middlemen buy a large number of goods, they need to get them
to a place where the consumer can buy them and sell them. This is a
complicated and costly process. Therefore, intermediary companies often own a
large warehouse system and transport vehicles, thereby helping manufacturers
save a lot of costs.

3. Sorting and packaging

The middlemen usually buy a very large quantity of a commodity and then
break it down into smaller lots. The process of bulk breaking into smaller batches

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will involve sorting and assembling of goods. Products will be classified according
to their properties suitable for sale to customers.

4. Share the risk

The marketing agents own the goods they buy. That means the
wholesaler finances the purchases and bears the cost of inventory until they are
sold. Because this is a huge expense, it motivates wholesalers to be precise and
efficient in their buying, stocking, and shipping processes. In addition, the
wholesaler also bears the risk of the products until they are delivered. If the
goods are damaged in transit and not sold, the wholesaler will have to return the
goods and costs.

5. Marketing

Usually, marketing intermediaries will participate in promoting the

products they distribute. Marketing intermediaries can advertise their products in
the ways they desire.

6. Distribution

Marketing intermediaries have very good ability or expertise to manage

the entire distribution process. Since usually, the marketing intermediaries will
operate on a large scale to reduce the cost of products to focus on creating
efficiency for their retail channel partners, it is difficult to replicate on the scale.

MARKET: DEFINITION AND CLASSIFICATIONS

Market

Market is composed of people with the needs to satisfy, the money to

spend, the willingness to spend, and the ability to satisfy the needs of a seller.

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 It is the whole of any region in which buyers and sellers are brought into
contact with one another and by means of which the prices of the goods tend to
be equalized easily and quickly.

Classification of Markets

Now we have seen what a market is. Let us learn more about the
classification of markets. Broadly there are two classifications of markets – the
product market and the factor market. The factor market refers to the market for
the buying and selling of factors of production like land, capital, labor, etc. The
other classifications of markets are as follows,

On the Basis of Geographic Location

• Local Markets: In such a market the buyers and sellers are limited to the
local region or area. They usually sell perishable goods of daily use since
the transport of such goods can be expensive.

• Regional Markets: These markets cover a wider are than local markets like
a district, or a cluster of few smaller states

• National Market: This is when the demand for the goods is limited to one
specific country. Or the government may not allow the trade of such
goods outside national boundaries.

• International Market: When the demand for the product is international

and the goods are also traded internationally in bulk quantities, we call it
an international market.

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On the Basis of Time

• Very Short Period Market: This is when the supply of the goods is fixed,
and so it cannot be changed instantaneously. Say for example the market
for flowers, vegetables, fruits etc. The price of goods will depend on
demand.

• Short Period Market: The market is slightly longer than the previous one.
Here the supply can be slightly adjusted.

• Long Period Market: Here the supply can be changed easily by scaling
production. So it can change according to the demand of the market. So
the market will determine its equilibrium price in time.

On the Basis of Nature of Transaction

• Spot Market: This is where spot transactions occur, that is the money is
paid immediately. There is no system of credit

• Future Market: This is where the transactions are credit transactions.

There is a promise to pay the consideration sometime in the future.

On the Basis of Regulation

• Regulated Market: In such a market there is some oversight by

appropriate government authorities. This is to ensure there are no unfair
trade practices in the market. Such markets may refer to a product or
even a group of products. For example, the stock market is a highly
regulated market.

• Unregulated Market: This is an absolutely free market. There is no

oversight or regulation, the market forces decide everything

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On the Basis of Competition

• Perfect Competition: Many buyers and sellers

• Imperfect Competition: Monopoly, Duopoly, Oligopoly, Monopolistic

CHANNELS OF DISTRIBUTION

The channels of distribution, which are sometimes referred to as trade

channels, may be broadly classified into two categories:

1. Sale through direct channels; and

2. Sale through indirect channels.

A. Direct Channel:

1. Producer → Consumer…. (Zero Level/No Intermediary)

The producer can sell directly to his customers without the help of
middlemen, such as wholesalers of retailers:

(i) By opening retails shop;

(ii) Through travelling salesmen;

(iii) Through mail order business.

These channels take the shortest route to the consumer. Certain goods,
like the industrial machinery, are directly sold to the consumers. Costly goods
like computers and luxury automobiles are also directly sold. Some
manufacturers open their own retail shops in many localities and sell goods
directly to consumers. The best example is that of the Bata Shoe Company
Shops. The manufacturers also try to sell through their own mail order
departments.

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 All these indicate that producers are now taking steps to approach the
consumers directly. Though this is possible for some types of goods, the fact
remains that the services of intermediaries, such as wholesalers and retailers,
are often essential in the distribution of goods to consumers.

B. Indirect Channel:

1. Producer→ Retailer → Consumer…… (One Level/Intermediary)

2. Producer → Wholesaler → Consumer (One Level/Intermediary)

3. Producer → Wholesaler → Retailer → Consumer (Two Level/Intermediaries)

4. Producer→ Agent → Wholesalers → Retailer → Consumer (Three

Level/Intermediaries)

The first channel, from the producer-retailer to the consumers, is

preferable where the purchasers of goods are big retailers like department
stores, chain stores, super markets or consumer co-operative stores. In these
cases, the wholesalers may be by passed because the bulk of the goods are
purchased by these large retail distributors to be sold to the consumers.

Goods like electrical appliances, fans, radios, ready-made garments and a

host of other articles fall in this category. This channel is also suitable when the
goods are of a perishable nature, and quick distribution is essential. However,
the manufacturer will have to undertake such functions as transportation,
warehousing and financing.

The second channel, from the producer-wholesaler to the consumer , can

be successfully used in distributing industrial goods. Under industrial goods are
included goods which are used for further production and not for resale. This is a
shorter channel, and the producer eliminates the retailer in this channel link. In

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this case, the buyers are business houses, government agencies, consumer co-
operative stores, etc.

The third channel, from the producer-wholesaler-retailer to the consumer

is used for the marketing of a variety of consumer goods of daily use, particularly
where the demand is elastic and a large number of similar products are
available. This channel is preferable when the market for the goods is highly
competitive.

This channel is also suitable when the producer operates under the following
conditions:

(a) The producer has a limited line of products.

(b) The finance available to the producer is limited.

(c) The wholesalers handle specialized goods.

(d) Products are not subject to change due to changes in fashion.

(e) Wholesalers and retailers can provide good promotional support.

The last channel, from the producer-sole agent-wholesaler- retailer to the

consumer, is used by some producers. The entire production of goods is
delivered to the sole agent for further distribution. The sole agent, in turn, may
distribute to wholesalers who, in their turn, distribute to retailers. The
manufacturer may appoint a single sole selling agent or he may appoint sole
agents area-wise.

He wants to pass on the risk of marketing the goods to the selling agents.
He avoids the risk involved in selling and, wants to concentrate on production.
He cuts down on his marketing expenditure and the expenditure incurred on
maintaining a sales organization and a sales force.

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 But, in doing so, he takes a big risk of relying only on the sole selling
agents; he places himself at the mercy of his selling agent. If the relations
between the producer and the selling agent become strained, or if the selling
agent fails to distribute the goods, the producer will be put to a great loss. In the
marketing of agricultural goods, however, it is a common practice to sell through
selling agents

Hybrid Distribution Channel or Multi-Channel Distribution System:

Of late, many companies used a single channel to sell to a single market

or market segment. Recently, with the proliferation of customer segments and
channel possibilities, several companies have adopted multi-channel distribution
systems; it is often called hybrid marketing channels. Multi-channel marketing
like these occurs when a single firm sets up two or more marketing channels to
reach one or more customer segments. The use of hybrid channel systems has
increased greatly in recent years.

The producer sells directly to consumer segment 1 using direct mail

catalogues and telemarketing, and reaches consumer segment 2 through
retailers. It sells indirectly to business segment 1 through distributors and
dealers, and to business segment 2 through its own salesforce.

Hybrid channels have advantages to offer to companies facing large and

complex markets. With each new channel, the company expands its sales and
market coverage and gains opportunities to tailor its products and services to the
specific needs of diverse customer segments.

But such hybrid channel systems are harder to control, and they generate
conflict as more channels compete for customers and sales. For instance, when
IBM began selling directly to customers at low prices through catalogues and

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telemarketing, many of its retail dealers cried “unfair competition” and
threatened to drop the IBM line or to give it less emphasis.

POWERPOINT PRESENTATION SLIDES

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CASE STUDY

Distribution Strategy of Bianca’s Ice Candy

I. INTRODUCTION

Rosiell and Rodolfo De Leon had no idea that their single P20 bill would
lead to a thriving business empire. Here's how the De Leons came up with the
idea for Bianca's Ice Candy in 2011.

HOW IT STARTED

Rodolfo De Leon's well-paying career ended and the De Leons hit the

lowest point of their lives. They were able to save some money, but it was
insufficient to cover their bills and send their daughters, Bianca and Nica, to
school. The family's finances were so scarce that they had to prepare their meals
on a charcoal grill rather than a gas stove.

With just P20 in her pocket and the fact that they were the only ones in
their Rizal neighborhood with a refrigerator, she purchased ice bags and sold ice
for P3 per piece, earning P300 in the process . She then went out and bought
the ingredients for ice candy, which they sold to their neighbors for P5 each.

Their ice candy gained popularity and became the neighbor's favorite.
They then sought the help of local fish vendors, sari-sari stores (neighborhood

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variety stores), carinderias (small canteens), bakeries, and even cigarette
vendors to market their ice candies by paying them P1 for each ice candy sold.

BIG BREAK

Rosiell and Rodolfo have their daughter to thank for the success of their
venture. Nica, their daughter, is a student at one of Rizal's public schools. She
insisted that her parents take their ice candies to school because they did not
have any snacks she preferred. After meeting with the principal, they were able
to secure their first client.

Their client list expanded from there. They've gone from one to thirteen
schools in two years. Again for the next two years, they have now earned 40
additional schools. They are now serving 136 schools in Antipolo, Pasig City,
Quezon City, and the province of Rizal as of July 2016.

Rosiell told Entrpreneur.com.ph that she and her husband were both
public school graduates when they were asked why they were so popular in
public schools. Their product fits well for the tray method used in public schools,
in addition to producing tasty and inexpensive ice candies.

A tray of snacks is sent to each class under this method. It's a time-saving
and avoids accidents during recess rushes. Rosiell and Rodolfo were able to
develop a steady following from public schools thanks to their knowledge. The
schools are therefore entitled to a share of the profits generated from their sales.

They now have two factories in Antipolo that make 60,000 ice candies a
day in 24 different flavors. Rodolfo's ice candies are now delivered by three
frozen vans, instead of  Rodolfo delivering using his tricycle. They plan to open a

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new factory in Antipolo in August, with the aim of increasing capacity to 500,000
units and employing at least 50 workers through their three factories.

They're also one of the ambassadors for PLDT Inc.'s business solutions
provider, PLDT Smart SME Nation.

TIMETABLE TO SUCCESS

II. CHALLENGES

 LOGISTICS- They only used their tricycle to deliver their goods to the
resellers during the first few years of their business. As we all know, tricycles
have only limited space and capacity and it can only cover short distances

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 DISTRIBUTION- They directly transacted and distributed their products to
their resellers, which is very time-consuming, considering the number of their
resellers. Instead of maximizing their time in making the ice candy it was also
spent on transacting to hundreds of resellers.
 PRICE- The price of their product is a little bit higher that the competitors,
especially those who are making homemade ice candy. The capital for
distributorship ranges from Php 200,000 to 400,000. And delivery charge to
distant provinces is expensive too.

 OTHER EXTERNAL FACTORS- The pandemic made everything difficult.

Schools and other establishments, their main market, were closed during the
lockdown and the travel restriction added to the challenges that they were
facing

III. SOLUTION
1. They invested on delivery trucks. Deliveries became easier and
faster and it can now reach distant provinces.
2. Channels for distributorship were opened. The transaction within
the system was minimized and was limited to distributors thus
maximizing their time in making their products.
3. New Promos; selling directly to resellers. They cater directly to
resellers again during the pandemic offering new promos and
affordable packages.

IV. LESSONS LEARNED

1. Be an effective strategist. Bianca’s Ice Candy showed flexibility
and resilience towards the changing circumstances. They utilized
different distribution strategies based on the current situation.

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 2. Don’t be afraid to take calculated risk. If not for their courage,
they will be where they are at today. Investing on delivery trucks
and a factory is a big move that needs a lot of courage to do.
Because of this, they were able to supply their products ont just in
their locality but also different provinces.
3. Be innovative. Most of use wanted to try something new.
Bianca’s Ice Candy thought of ways and gathered information on
how to make their products better. They made new ice candy
flavors that will surely suit the taste of the consumers which in
turn, resellers became attracted to resell these products because of
the new flavors.
4. Be persistent. Despite the receding number of distributors,
especially in distant provinces, the business is still on course. They
didn’t let the pandemic stop them. Instead, they reached out
directly to the resellers by offering affordable packages.
5. Look at the brighter side. There may be a few setbacks along
the road, but as the saying goes, “Every cloud has a silver lining”.
Bianca’s Ice Candy embraced the challenges and focused on the
opportunities that arise during the pandemic. BIC provides new
business opportunities to people even at the comfort of their
homes.

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Reference

Medina, R. H. (2015). Functions of Marketing Channels. Principles of Marketing

Revised Edition. (April 2015), PP 142-143.

Freya (2021) Marketing Intermediaries Definition, Types, Examples, and More –

AVADA Commerce. Retrieved on March 5, 2021 from
https://avada.io/resources/marketing-intermediaries.html

Walker, S. (2020) Difference Between Wholesaler and Distributor – Difference

Wiki. Retrieved on March 5, 2021 from
https://www.difference.wiki/wholesaler-vs-distributor/

Nitisha. Market: Concept and Classification of Market. Retrieved on March 5,

2021 from https://www.economicsdiscussion.net/market/market-concept-
and-classification-of-market/3723

Muley, R. Market: Meaning and Its Classification. Retrieved on March 5, 2021

from https://www.economicsdiscussion.net/market/market-meaning-and-
its-classification/16975

Pahwa, A. (2020) Distribution Channels – Definition, Types, & Functions |

Feedough. Retrieved on March 5, 2021 from
https://www.feedough.com/distribution-channels-definition-types-
functions/

Sakshi A. Types of Distribution Channels: With Example and Methods. Retrieved

on March 5, 2021 from https://www.economicsdiscussion.net/distribution-
channel/types-of-distribution-channels/31760

Primer (2016). How to earn millions with only ₱20: The Ice Candy Factory
Success Story . Retrieved on March 5, 2021 from
https://primer.com.ph/business/2016/07/28/how-to-earn-millions-with-
only-p20-the-ice-candy-factory-success-story/

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