Channel Strategy of HP Laptop:

Laptop is a shopping product in Bangladesh. It is also a complex and high costly product.

That is why; developing a channel strategy is relatively difficult for a laptop. HP needs to

consider some decisions to develop channel strategy. HP needs to consider (1) type of

distribution channel, (2) Intensity of distribution, and Channel configuration. These

decisions should be considered to achieve the objectives of channel of distribution strategy.

Exhibit 1 shows the channel selection strategy:

The appropriate channel strategy for HP laptop is evaluated on the basis of above steps.

These are described on the next page.

1. Type of distribution channel

Conventional Vertical Marketing System Horizontal Marketing

system

Ownership Contractual Administered Relationship

2. Intensity of distribution

Intensive Selective Exclusive

3. Channel Configuration

Exhibit 1 Channel Selection Strategy

1. Type of distribution:

HP will sell laptop to two types of customer: (i) Individual customers and (ii)

Organizational buyers. Individual buyers include students and high profession persons

such as CEOs, teachers, engineers, doctors etc. Organizational buyers include multinational

and domestic companies, educational institutions, and Government. Therefore, HP has to

develop two different types of channels for each of the segment.

Channel for Individual Buyers:

Mainly, HP may select four major cities (Dhaka, Chittagong, Rajshahi, and Khulna) of

Bangladesh to sell its laptop. The following distribution channel will be applicable for

individual buyers of these four cities.

At first, HP sends the laptops to sales agents in each city through its supply chain. Then,

the sales agents will distribute laptops to its selected retailers in the city. Buyers will be

able to purchase from those shops. Again, HP supply chain may also select a retailer

Exhibit 2 Channel structure for Individual Buyers

Producer (HP Laptop)

Supply chains

Sales Agents

Retailers

Retailers

Retailers

Direct Channel

Individual Consumers

bypassing the sales agent and then sell to the customers. HP also can appoint sales

personnel to sale directly to the high profile customers such as CEOs, doctors, engineer,

teachers, businessmen etc.

Channel for Organizational Buyers:

Mainly, HP selected two major cities (Dhaka, and Chittagong) of Bangladesh to sell to

the organizational buyers. The following distribution channel will be applicable for

organizational buyers of these four cities.

At first, HP sends the laptops to sales agents in each city through its supply chain. Then,

the sales agents will distribute laptops to the distributors in the city. The Distributors

will deliver the laptops to the buyers. HP supply chain may also select a distributor

bypassing the sales agent and then sell to the customers. Again, HP can appoint sales

Sales Agents

Exhibit 3 Channel structure for organizational Buyers

Direct Channel

Producer (HP Laptop)

Supply chains

Distributors Distributors

Organizational Buyers

personnel to sale directly to the organizations or they can take order via internet and

deliver to customer through the distributor.

2. Intensity of distribution:

HP laptop is considered as a shopping product. Moreover, it is very high cost product and

people need information to compare one brand with other. HP has not got a good market

share. They have to fight with Accer, Lenovo, Dell, ASUS, and Prolink for market share.

Therefore, HP will go for selective distribution by considering nature of the product,

resources of the company, competitors’ strategy, and finally capabilities of the buyers.

HP is targeting four major cities in Bangladesh—Dhaka, Chittagong, Rajshahi, and Khulna.

It is required to select important locations in each city. It is also necessary to divide the

cities into different parts to place the retail shops.

At first, Dhaka city can be divided in four zones. There will be a retailer in each zone. Thus,

there will be four retailers of who will carry the HP Laptop in the Dhaka city. The retailers

will be located at Motijheel, Banani, Dhanmondi, and Mirpur. Each retailer will cover its

surrounding areas such as retailer at Dhanmondi will cover Mohammadpur, Adabor,

Farmgate, Azimpur, and University area.

Then, Chittagong city can be divided in four zones. There will be a retailer in each zone.

Thus, there will be four retailers of who will carry the HP Laptop in the Chittagong city. The

retailers will be located at GEC circle, Station road, Sholoshore, and CDA Avenue. Each

retailer will cover its surrounding areas.

Next, Rajshahi city can be divided in two zones. There will be a retailer in each zone. Thus,

there will be four retailers of who will carry the HP Laptop in the Rajshahi city. The

retailers will be located at Shaheb bazar and New market. Each retailer will cover its

surrounding areas.

Finally, Khulna city can be divided in two zones. There will be a retailer in each zone. Thus,

there will be four retailers of who will carry the HP Laptop in the Khulna city. The retailers

will be located at Station road and Fullpur. Each retailer will cover its surrounding areas.

After acquiring initial familiarity and market share, HP should go forward with mass or

intensive distribution strategy. HP will focus on over all market rather than selective one or

two segments.

3. Channel configuration:

The third step in selecting the distribution strategy is deciding:

A. how many levels of organizations to include in the vertical channel,

B. the specific kinds of intermediaries to be selected at each level

Several factors may influence the choice of one the channel configurations. These are

End user considerations: It is important to know where the targeted end users might

expect to purchase the laptop. Customers may want to buy laptop from HP directly or from

agents or retailers.

Product characteristics: HP laptop is complex in nature and requires after sales service.

That is why; short and direct distribution channel is preferable for HP.

HP’s capabilities and Resources: As HP has extensive capabilities and resources, and

having so many participants in distribution channel creates conflicts, it should use direct

distribution channel.

Required functions: Since laptops need after sales services, it is better for HP having

direct contact with the customers. In some cases, a full-service wholesaler may be essential.

Questions- 1: What should the company’s strategic focus be in each stage of

PLC?

Ans: strategic focus in each stage of PLC is shown here.

Introduction Growth Maturity Decline

Creating awareness about

the laptops and their

configurations and

characteristics to the

customers by extensive

ads and sales promotion

activities

Try to maximize

market share by

building

awareness and

interest in the

mass market.

Try to

maximize

profit by

reducing cost

while

defending

market share

Try to reduce

expenditure in

promotional activities

and milk the brand. In

this stage, HP also can

merge with other

companies and add extra

features in the laptops.

Questions-2: Which channel should be used in each stage?

Ans: Channel should be used in each stage

Introduction Growth Maturity Decline

Selective

distribution

channel is

preferable here.

It is suggested to build

intensive distribution

with the increase in

market share.

Build more intensive

distribution is

suggested for

maturity stage.

Go selective, phase

out less profitable

outlets to reduce

cost.

In introductory stage, market share of HP laptop is very small. So, selective distribution

strategy is productive here. In growth stage, with the rise of market share intensive

distribution strategy is suggested. In maturity stage, the market share reaches in extreme

level. Here, more intensive distribution is more useful. In decline stage, market share of HP

laptop will drop but cost will increase severely. So in this stage, HP should phase out the

less profitable outlet and come back to selective distribution strategy again.

Questions-3: In which stages of PLC will margins be the highest?

Ans: PLC curve shows which stage(s) will provide highest margins.

Figure: Product life cycle curve

From the above PLC curve, we can easily know that in the maturity stage, the profit margin

is highest with the highest amount of sales.

Questions-4: Which stages should be the most intermediaries and which

stage(s) should use the fewest?

Ans: Most intermediaries: In maturity stage there should be the most intermediaries.

Here long and intensive channels are used.

Figure: Distribution channel having the most intermediaries.

Producer Agents Wholesalers Retailers Consumer

Fewest intermediaries: In the decline period, fewer intermediaries should be used

to reduce cost. Here, in most cases, direct marketing can be used. Again one or two

selective channel can be used.

Figure: Distribution channel having the fewest intermediaries.

Conclusion:

Since HP laptop is complex goods and after sales service are needed, a close contact

between customers and the producer are needed. As a result, it will be easier for HP laptop

to provide application assistance, service, and other supporting activities to the customers.

Since most of the customers’ income level is very low, they are price conscious. It is the

responsibility of HP to reduce the cost of laptop. Here it can follow an alternative strategy

which is followed by most mobile phone companies in Bangladesh. HP can follow intensive

distribution to distribute products. But it should have several central customer care centers

in strategic areas. This strategy will help reduce the expertise cost related providing after

sales service.

Producer

(HP laptop)

Sales force

Customers

Producer

(HP laptop

Sales agent

Customers