Supply Chain Strategies: Push, Pull, Distribution & Channel Analysis
Value Chain in Supply Chain Management
Value chain: Series of value contributions made by the different agents of the supply chain. Includes everything from raw material or design of the product/service to the form of payment/delivery made to the buyer/final consumer.
Push vs. Pull Marketing Strategies
PUSH: Involves taking the product directly to the customer via sales force and trade promotions, to incentivize intermediaries to sell and your potential customers to buy your brand at the Point of Sale. “Taking the product to the customer”
– Trident The company works hard to have their products beside the supermarket cashier. All their products can be seen in bars and supermarkets in the most accessible places nearby the cashiers, where all the customers must go through before leaving the establishment. This is done to provoke the consumer’s desire to buy it, although the consumer does not really need it.
PULL: Involves motivating customers to seek out your brand in a pro-active process at the point of sale. It is appropriate with “Getting the customer to come to you”.
– Harley Davidson Over many years, they have created a very strong brand image, which despite their promotion, is their main marketing tool. Being a Harley owner is associated with being a “Maverick, a free soul”. People dream of owning a Harley and plan to buy them; the channels become barely important at all.
Combining Push & Pull Strategies
PUSH & PULL:
– Nike Pull Marketing: Ability to sign-up to receive emails about the company and its latest products. Includes several mobile apps that can be downloaded for iPhones and Androids. Including hashtags or listing its website at the end of commercials. Push Marketing: Selling its products in different retail stores.
Distribution Strategies
DOMESTIC GROWTH (GWT): Internal growth by opening & expanding = new stores, controlling company’s movements, new locations are of interest. Is ideal for initiating expansion in a controlled manner. Helps control the geographical location of points of sale.
– RAY-BAN Opening their first physical shop in Madrid.
– HAWKERS This business opened 40 new stores around Spain in 2019.
EXTERNAL GROWTH (GWT): This growth is based on the purchase of other companies that are competitive and have a strong local presence.
– COCA-COLA Has a joint venture with San Miguel & shared ownership of Coca-Cola’s bottling plant in the Philippines.
– BMW Has created a joint venture with Brilliance Auto Group in sharing facilities in China.
Horizontal Diversification
HORIZONTAL DIVERSIFICATION: Characterized by grouping distributors of the same channel & these groupings do not imply integration of different functions or shortening of channels. The fundamental objective = improve the capacity of commercial attraction, cover different formats that they cannot do alone.
– MANGO This clothing brand created 3 other channels of distribution:
1) Mango Man,
2) Mango Kids
3) Mango Violet
Allows the company to acquire many different scopes of customers and have a larger market.
Vertical Integration/Expansion
VERTICAL INTEGRATION/ EXPANSION: It occurs when organizations seek greater market power, greater bargaining power with suppliers, and greater added value of operations and distribution.
NEFLIX Owning its content and using its distribution system to deliver that content to its subscribers. Owning rights and distributing directly to viewers allows Netflix to keep all revenues, rather than sharing with distributors.
Channel Analysis Stages
STAGE 1 – Analysis of the company and its customers in the channel
Mission, product portfolio, target
STAGE 2 – Establishment of company objectives in the channel
Positioning, customer satisfaction, image, sales, market share
STAGE 3 – Study of restrictions in the channel
– By product: price, seasonality (reduces the possibilities of distribution), rotation, product configuration, fashion/style, portfolio scope, after-sales service, prestige, and novelty.
– By intermediaries: homogeneous capabilities to complete the functions? Can someone substitute their functions?
– By competitiveness: Intra-type Competition (Caprabo-Mercadona) Intertype (El Corte Ingles – Mango)
Vertical (retailers as wholesalers or vice versa) Between forms of distribution (online/presential)
– By environment: political, economic, social, legal, technological, and cultural aspects.
– By market: number of consumers, frequency of consumption, shopping habits.
STAGE 4 – Identification of channel alternatives Functions, classes & number of intermediaries
STAGE 5 – Evaluation of channel alternatives and final channel selection Sales capacity and coverage or Economic criteria, Control criteria, Adaptive criteria, Image, Customer service level.
STAGE 6 – Channel tracking. Motivation, control, feedback, etc.Continuous assessment, Evaluation of the relationship of Partner vs client