The Importance of Channel Management - Essay Example

Channel Management and Section # of Channel Management In everyday life, we are encountered on many occasions to work on a task or a problem, with somebody else or alone. It is said that nobody can work alone forever. In this world where resources are scarce and are divided among the population, you need to work with other people in cohesion to get the required result. For example, in a simple task of preparing food, you need to work with the grocer in order to buy the product, the water that is supplied to you is by a certain company and same goes for the electricity and utensils that are being used. Hardly is there a task present that requires us to work on our own. In the contemporary world, people recognize the importance of working in a team. A team is a group of people that are brought together by a common task or responsibility. As there are different qualities present in different kinds of people, they are usually utilized to the maximum extent while working in a team. This is the reason there is much emphasis paid on working as a team; to incorporate the maximum effort from different resources. In this project, we have been asked to prepare a class debate on the effectiveness of channel management and the practices that are being used in it. In order to conduct and effective debate, we made sure we divided the work according to the qualities a person in a team had. It was made sure that equal amount of work was given to everybody so that there is no cognitive dissonance or dissatisfaction on the part of the team members over working. The whole team was asked to work on the research for the relevant material and the proof reading of the researched work was my responsibility. This was done to ensure that the quality of material that was being used does not deviate from the standards and was at par with the upmost standards. To make sure that the information was valid and comprehensive, much emphasis was paid on gathering information from scholarly reports and magazines that have repute in the eyes of others on the basis of their quality. Articles were searched from known writers to ensure credibility and authenticity. The collective work of the team included preparing strong debatable points that were needed to be presented in front of the audience and the tutor. It was the collective of all the group members to prepare the presentation material and it was made sure that all the members were informed of every piece of information that was gathered so that everybody was equally prepared to give in suggestions about the debate and the benefits. Another important task that was divided among the group members was the gathering of information that was required to prepare the whole report. Evaluation of information was done by making sure that the information that was being gathered was from reputable sources and scholarly; so that there is no doubt about the authenticity of the information. Evaluation of information is generally done on the quality and source. To make it free from partiality one has to make sure that the source that is being used should be a third party presenting an opinion so that there is no element of biasness and the information is pure. Similar procedures were used to evaluate various literature sources that in the end helped us to make our report bona fide. Preparation of debate is an entirely different process. It involves brainstorming sessions and cross questioning so that all the queries of the prospective audience are answered in such a way that they don't get a chance to object and get persuaded without any doubts in their minds. Therefore, all the above were practiced to ensure that there were no loopholes left in our debate that was to be presented in front of the class. Introduction Channel management basically means the management of various entities that are working in cohesion at different steps in businesses in the supply chain. In other words, it can be called as the supply chain management; the ultimate beginning where the raw materials are extracted from various places and brought together to the point they are delivered to the hands of the consumers and the customers. For a common FMCG product, the supply chain management would consist of the production to the packaging to the warehouse to the distributors to the retailers and finally to the customers. To understand the impact of channel management and its theories in the real world, we took a real life example where I got a chance to see how things work while applying the theory to practicality. We in the team analyzed many important and significant real life examples about how things usually work in the supply chain and between businesses. By businesses, I mean the different entities that are working in a single chain flow. In order to understand that, one needs to understand the term B2B. This term that is usually used to describe the electronic and other kinds of interaction and transactions that take place between two businesses, such as the retailers and the distributors. This term is usually used as an adjective; and the topic of our interest is related to this only. Channel management is very important in every aspect of business. It is the effective management of the scarce resources that a company possesses in order to gain maximum advantage from them. Therefore, the theories that are applied in real life are closely linked. B2B marketing is what occurs between two business; the terms and conditions, the negotiations and the deals that take place. Usually in this case, there are no consumers and only industrial customers are present to negotiate and buy the product. As the companies themselves are not using the products, their terms and deals differ in many ways then the normal methods. Marketing Channel A marketing channel is nothing but a set of practices that is being used by companies for the transferring of the ownership of goods across that various entities that are present in the marketing supply chain. There are various roles of the marketing channel. One of the basic roles that a marketing channel plays is that linkage that is provides between the buyers and the sellers. In the case of business to business marketing, as there are few numbers of buyers and sellers present in the market, the marketing channel that is being used should be personalized according to the needs and requirements of particular seller. The marketing mix that is formulated is different for different customers as they have different needs to be fulfilled which cannot be generalized for a larger audience. Another role that a marketing channel plays is that it conducts the sales, advertising and promotional techniques to attract their prospective customers. In business to business marketing, this role is significantly minimized because there are fewer players with diverse needs that are catered too accordingly by the sellers. The pricing strategy that is used is also very different in business to business marketing. The prospective seller usually gives tenders which are needed to be met accordingly. Therefore, there is hardly any requirement for this role of the marketing channel. The last role of the marketing channel is that it effects the development of product strategy. This role is also minimized in business to business marketing. The strategy of production might vary significantly in this case because usually the producers have to make profits from a given amount of sales. Channel Function The channel serves as a link between the customers and the suppliers. This is the basic function that a channel provides because there is constant information flow between the two linked entities. There is constant information flow backwards and forwards between the two intermediaries of the two businesses. Forward information flow includes physical movement, ownerships issues and promotion. Backward information flow includes ordering and payment to the back end. There are other types of information exchanges that take both ways; such as negotiation over terms, the financing that needs to be done regarding various decisions, and information exchange. In this information age, there needs to be undisturbed information flow to make sure that you can get the maximum out of it. The information also needs to be timely in order to take better decisions. Therefore, this function of the channel is extremely important and should be taken care of. Service Output Theory Service output theory is a very important theory that is around 40 years old however it is widely accepted by all. It is also known as the 'Louis P Bucklin's theory of end user preference'. This framework is considered old however it is being applied by much organization and certainly useful in analyzing the practical examples that we are using. It helps to define the retail-customer interface in an efficient and structured manner. According to Bucklin there are 4 broad service outputs for a marketing channel; bulk breaking, spatial convenience, waiting or delivery time and product variety. Bulk breaking is all about breaking the unit in which the selling is made into smaller units so that consumers don't have to unnecessarily carry the excessive inventory. It refers to the opportunity that customers get to buy in smaller lots which allows them to conveniently transform purchases into consumption. This aspect is specially designed for the convenience of a consumer so that they are able to use the products more efficiently. Spatial convenience means that there is physical proximity between the consumers and the place of display of the product so as to reduce the transportation costs that the consumer has to go through. Another important thing that is minimized through this aspect of marketing channel is the search constraints and costs are also reduced. Examples of this kind of convenience are displayed by neighborhood and super markets and vending machines that reduce the transportation costs for the consumers. The waiting or postponement time is inversely related to the convenience and happiness of the customer in question. The more the waiting time, the more inconvenience is faced by the customer who usually have planned their consumption patterns a long period of time before. In business to business transactions, timely delivery is extremely important because the companies have planned the usage and consumption of the resources that have to be transferred. A delay in one part of supply chain can hinder in the profit making at a bigger extent because it might result in greater delays in other parts of the chain. Finally, the last aspect is the product variety. The greater the consumer or the customer is provided with variety, the more the consumer is attracted to make a transaction. In other words, the higher the product variety, the higher the service output. All these concepts combined put this idea forward, that an organization who makes sure that they are fulfilling these aspects of service output , are valuing the customers more than others, because they are providing to the needs and requirements of their customers. However, one thing is to be kept in mind that different supply chain management and techniques are used for different kinds of products. Therefore, managers are to make important decisions according to the needs of the product. The first thing that a manager needs to do is to identify the kind of product that they are catering too. If it is a primary product, which has a consistent demand, the supply chain requirements are strict and different than that of an innovative product that has fluctuating demand. Another aspect that has to be considered here is the demand for functional products. Since the demand for functional products is assumed to be predictable and stable, therefore, the companies producing these functional goods in a cost effective manner because they focus on a target production with the minimum costs. It results in a physically efficient process. The other type of production which does not achieve cost effectiveness is for the products which do not have a predictable demand pattern. The market response decides their output production needs and sometimes they have to cut production down and sometimes increase it according to the needs of the market. As market intervention increases risks for these innovative products, they should be given priority. In this type of supply chain, timely availability of information about the market and the needs of the people of the market is very important, so that the company can become as positively responsive to the market fluctuations as possible. Postponement and Speculation Postponement in business to business marketing and transactions can result in huge losses and constrained relations between the two entities. For example, Ica's time based competition efficiency has led to increase their value proposition in many ways. Their timely delivery has shortened the supply chain lifecycles, the drive for condensed inventories and forecasting to unstable markets. In this ever-evolving world, the above three issues have to be addressed properly in order to meet the demand patterns of the people you are catering too. Debate and Conclusion Many companies have used the service output theory and its implications as the basis of their businesses and have worked efficiently to provide maximum benefits to their respective organizations. This theory is extremely fruitful when applied to the transactions between business because there are fewer players in the market that the company has to cater too and therefore the offers that are made are more personalized than ever. These offers are made according to the different customers that one has to cater too. Another thing that was concluded while studying the examples of Ica and Lindex, the two companies under consideration are that time is a very important factor that helps in reducing the inventory carrying costs and also the fulfillment of the changing needs of the consumers. Lindex is company that produces the different kinds of clothing material for women from lingerie to ladies wear to children's wear. Due to high volatility of the market, they have an efficient time efficient supply chain system that helps them to understand the consumers needs that are prevalent at the present time and change their production processes accordingly so that they are able to provide the consumers with the requirements. Another thing that should be focused on in a supply chain management is the nature of the products that is being demanded; efficient programs should be devised to produce functional goods while market responsive goods need a different and more flexible supply chain management. The strategic position that Lindex is enjoying is because of their female focus. The examples discussed here are between retailers and the consumers; however they can be very well applied to the transactions that take place between two businesses. As the market is more volatile than ever, the production houses need to provide the consumers their demands with the help of the retailers are the intermediaries. All in all, in business to business transactions, one needs to be sure to use the right mix of the strategies according to the product that they are selling in order for the supply chain to be efficient and in line with the demand of consumers. References 1. Lindex Annual Report 2001/2002 2. Chaffey, D. (2002) e-Business and E-Commerce Management, Harlow: Prentice Hall/FT 3. Coughlan, A.T., Anderson, E, Stern, L and El-Ansary, A.I. (2004) Marketing Channels, 7e, New Jersey, Prentice Hall 4. Fill, C. and Fill K.E. (2005) Business to Business Marketing, Harlow, 3e, London, Ehompson 5. Martin and Peter Lundvall, School of Economics and Commerce, Goteborg University. Retail supply chain management. 6. McDonald M and Rogers B (1998), Key account management: learning from supplier and customer perspectives, Butterworth Heinemann, Oxford 7. Mohr, J. (2001) Marketing of High Technology Products and Innovations, New Jersey, Prentice Hall 8. 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