BA 590BA 590

Module 3

Industry Competition

The Competitive Environment

Information on Competitors

Competitive Barriers

Competitive Rivals

Competitor Analysis

Kinds of Markets

KeyConcepts

in theCompetitiveEnvironment

4-6

PricePrice

LocationLocation

Product SelectionProduct Selection

Special ServicesSpecial Services

Helpful SalespeopleHelpful Salespeople

Fairness in DealingFairness in Dealing

KeyEconomicFactors Affecting

Consumers’Retail Choice

Retailing

12-3

Retailing Economic NeedsRetailing Economic Needs

• Price - Value Offered, Credit, Discounts

• Location - Convenience, Parking, Safety

• Product Selection - Width and Depth of Assortment, Quality

• Special Services - Delivery, Wrapping, Special Orders

Retailing Economic NeedsRetailing Economic Needs

• Helpful Salespeople - Courteous, Knowledgeable, Fast Checkout

• Fairness in Dealings - Honesty, Return Priviledges

Exhibit 12-1

Conven-tionalofferings

Single- andlimited-linestores

Expandedassortmentand service

Specialty shops anddepartment stores

Expandedassortmentand/or reducedmargins/service

Supermarkets, discounthouses, mass-merchandisers,supercenters

Added conveniencehigher marginsless assortment

Telephone/mail order,vending machines,door-to-door, conveniencestores, electronic shopping

Expandedassortmentreduced marginsmore information

Internet

12-4

Types of Retailers

Retail Formats that Focus on Convenience

Convenience(Food) Stores

Door-to-DoorSelling

Telephone and Direct Mail

AutomaticVending

12-5

Focusing on Convenience

ConvenienceConvenience

• Convenience Food Stores - Convenience Version of Limited line food stores

• Vending - Automated Dispensing of Goods

• Door-to-Door - Direct to Consumer’s Home

• Telephone and Direct Mail - Allows Customers to Shop at Home and Charge

12-6

MoreInformation

ShoppingDifferences

Still inInfancy

Competitionwill bringChange

WideAssortment

NewConvenience

Costs areDeceptive

Retailing on the Internet

Retail Chains

Major Typesof RetailChains

CorporateChains

VoluntaryChains

Franchise Chains

CooperativeChains

12-7

Retail ChainsRetail Chains

• Corporate Chain - Owns and Manages More Than One Store

• Cooperative Chains - Retail-Soonesred Groups that Have Buying Organizations and Run Joint Promotions

• Voluntary Chains - Wholesaler Sponsered Groups That work With Independent Retailers

• Franchise Operation - Franchisor Develops Strategy, Franchises Implement

Retailing ChangeRetailing Change

• Wheel of Retailing - New Retailers Enter as Low-Cost, Low-Status, Low-Margin, Low Price, then Evolve into Conventional Retailers

• Scrambled Merchandising - Carrying All Product Lines that Can be Sold Profitably

• Retailer Life Cycle

The New Face of Wholesaling

New Strategies Needed to SurviveNew Strategies

Needed to Survive

Progress or FailProgress or Fail

Producing ProfitsProducing Profits????????????????????????????????????????????????????????????????????????????????

12-8

Types of Wholesalers

Exhibit 12-512-9

Does wholesaler own the products?

Limited-functionmerchant

Wholesalers

Servicemerchant

wholesalers

Agent middlemen

How many functions does the wholesaler

provide?

All the functions

Some functions

Yes (merchant wholesaler) No (agent middleman)

Types of Wholesalers

Exhibit 12-512-9

Does wholesaler own the products?

Limited-functionmerchant

Wholesalers

Servicemerchant

wholesalers

Agent middlemen

How many functions does the wholesaler

provide?

All the functions

Some functions

Yes (merchant wholesaler) No (agent middleman)

Manufacturer or producer

Consumer

Procter &Gamble

DelMonteNissanCitibank

Wholesaler

Wholesaler

Retailer

Wholesaler

RetailerRetailer

10-5

Exhibit 10-2

Four Examples of Basic Channels of Distribution for Consumer Products

Strategy Decision Areas in Place

Exhibit 10-110-3

Type ofchannel

Type of physical distribution

facilities needed

How to managechannels

Middlemen/facilitators needed

Degree of marketexposure desired

IndirectDirect

Place objectives

Customerservice

level desired

Place ObjectivesPlace Objectives

• Product Classes• Convenience• Impulse• Emergency• Shopping• Specialty• Unsought

Why a Firm May Want to Use Direct Channels

Greater ControlGreater Control

Lower CostLower Cost

Value added subsequent to production process

Value added subsequent to production process

Direct contact withCustomer Needs

Direct contact withCustomer Needs

Quicker Response orChange in Marketing Mix

Quicker Response orChange in Marketing Mix

Suitable Middlemen NotAvailable

Suitable Middlemen NotAvailable

SomeReasonsfor ChoosingDirect Channels

SomeReasonsfor ChoosingDirect Channels

10-4

Manufacturer or producer

Consumer

Procter &Gamble

DelMonteNissanCitibank

Wholesaler

Wholesaler

Retailer

Wholesaler

RetailerRetailer

10-5

Exhibit 10-2

Four Examples of Basic Channels of Distribution for Consumer Products

Discrepancy and SeparationDiscrepancy and Separation

• Discrepancy of Quantity• Discrepancy of Assortment• Regrouping Activities

• Accumulating• Bulk Breaking• Sorting• Assorting

AccumulatingAccumulating

Bulk-Breaking

Bulk-Breaking

AssortingAssortingSortingSorting

Regrouping Activities

10-6

= number ofoutlets

Intensive

Selective

Exclusive

What MarketExposureFits the

MarketingObjectives

10-9

Market Exposure

Distribution StrategiesDistribution Strategies

• Intensive: All Responsible and Suitable Retailers and Wholesalers Who Will Stock a Product

• Selective: Only Those Who Will Give a Product Special Attention

• Exclusive: Only One Middleman in a Given Geographic Area

Understanding Physical Distribution

Co

sts

($)

Customer Service Level

0

0

90%

Transporting Cost

Lost Sales

Inventory Cost

Total Cost of PD

Factors that Affect PD Service LevelsFactors that Affect PD Service Levels

• Advance Product Availability Info• Time to Enter and Process Orders• Backorder Procedures• Order Status Info• Reliability in Meeting Delivery

Dates• Return handling Procedures

The Transporting Function

Modesof

Transportation

Water

Air

RailTruck

Pipeline

Transporting Function Transporting Function (p. 256)(p. 256)

• Rail• Good Blend of Cost and Number of

Locations Served

• Water• Low Cost, Can Handle almost Anything

• Truck• Gets it Anywhere Quick

• Air• Quickest of All

The Storing Function

Price Stability

Flexibility

Costs

Specialized Function

3-Minute Distribution Drill3-Minute Distribution Drill

• Evaluate The Service Level for a Consumer Product or Service, and Offer Two Improvements• Example: Starbucks Coffee

• # 1: Charge Accounts For Frequent Customers

• # 2: Reserved Seats