Subject Code: BMDSTRIL

Subject Title: DISTRIBUTION MANAGEMENT

Subject Description: The course covers the principles and functions of distribution management, the roles
marketing channels and physical distribution in the marketing system, the cost implications of the management
decisions involving distribution. Topics include the discussion of channel member roles and relationships,
legal issues related to distribution, and techniques for optimizing the effectiveness of distribution channels.
The course aims to crystallize student’s understanding of distribution cost analysis through their involvement
in exercises and actual projects in the area of distribution management.
No. of Units: 3
Class Schedule: T/F, 9-11am / 11am-1pm

DISCLAIMER: The information content provided in this course material is designed to provide helpful
information on the subjects discussed. Some information are compiled from different materials and
summarized from different books. Some information are based from contributors' perspective and
understanding. References are provided for informational purposes only and do not constitute endorsement of
websites or other sources. Readers should be aware that the websites/electronic references listed in this course
material may change. Hence, the contributors do not claim any information presented in the materials and do
not reflect their own work.

Course Learning Outcomes:

At the end of this course, the student will be able to:
1. To apply core concepts and techniques important to analyzing business logistics problems.
2. To design a comprehensive Trip Planning procedure to ensure optimum customer service satisfaction
through on time distribution.
3. Develop policies for managing the channels on product, pricing, promotions, optimal stock policies,
including safety stocks computation to come up with a smooth distribution operation.
4. Develop a system for monitoring and evaluating the performance of each channel member.

About the Instructor:

Eduard S. Cruz
College Instructor- Department of Business Administration

Contact Information:
Mobile number: 09209595011
Email: edtianity@gmail.com/ edcruz@nu-baliwag.edu.ph
Social Media: Facebook/Messenger: Eduard Santos Cruz

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Topic: Week 2

INTRODUCTION TO LOGISTICS AND DISTRIBUTION

• Customer service and logistics
• Integrated logistics and the supply chain

MODULE 2: INTRODUCTION TO LOGISTICS AND DISTRIBUTION

I. Pre-test / Activity:
One-Sentence Summary
On your class notebook, write a one-sentence summary (bullet points) of your key takeaways
during the discussion of distribution management in today’s modern setting.
II. Learning Outcomes
1. To distinguish integrated logistics and the supply chain.
2. To evaluate how logistics improves customer service.

III. Content:

Introduction to Distribution Channels:

Maintaining an organization’s competitive edge means understanding and implementing an effective

marketing logistics strategy regarding product, price, place, and promotion. These four functions of
marketing logistics help the organization to reach the target customers and deliver the products or
services sold by the organization to these customers.

Meaning of Channels of Distribution:

Channels of distribution are mainly concerned with distribution of goods and services. It is the
distribution network through which a producer puts his products in the hands of the actual user. It is
the set of marketing intermediaries or institutions who participate in the distribution of goods and
services from the point of production to the point of consumption. In the field of marketing, channels
of distribution indicate routes or pathways through which goods and services flow or move from
producers to consumers.

We can define formally the distribution channel “as the set of interdependent marketing institutions
participating in the marketing activities involved in the movement or the flow of goods or services
from the primary producer to the ultimate consumer.”

Marketing institutions considered as channel components are- (a) All kinds of merchant middlemen,
such as wholesalers and retailers, (b) All kinds of agent middlemen, such as commission agents,
factors, brokers, warehouse-keepers and so on. The route or channel includes the manufacturer and
the ultimate consumer as well as all intermediaries.

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Characteristics of Distribution Channel:

The main characteristics or elements of channel of distribution may be summarized as under:

(1) Route or Pathway – Channel of distribution is a route or pathway through which goods and
services flow from the manufacturers to consumers.
(2) Flow – The flow of goods and services is smooth and sequential and usually unidirectional.
(3) Composition – It is composed of intermediaries, such as, wholesalers, retailers, agents,
distributors, etc., also called middlemen who participate in the flow voluntarily.
(4) Functions – The intermediaries perform such functions which facilitate transfer of ownership,
title and possession of goods and services from manufacturers to consumers.
(5) Remuneration – The intermediaries are paid in the form of commission for the services rendered
by them. The same is compensated by the manufacturer in the form of commission allowed by the
manufacturer or added in the price of the goods sold.
(6) Time Utility – As they bring goods to the consumers when needed.
(7) Convenience Value – As they bring goods to the consumers in convenient shape, unit, size, style,
and package.
(8) Possession Value – As they make it possible for the consumers to obtain goods with ownership
title.
(9) Marketing Tools – As they serve as vehicles for viewing the marketing organization in its
external aspects and for bridging the physical and non-physical gaps which exist in moving goods
from the producers to the consumers.
(10) Supply-Demand Linkage – As they bridge the gap between the producers and consumers by
resolving spatial (geographical distance) and temporal (relating to time) discrepancies in supply and
demand.

Role of Distribution Channels:

In an ever-widening market, particularly in consumer goods market, distribution channels have a
distinctive role in the successful implementation of marketing plans and strategies.
These channels perform the following marketing functions:
1. The searching out of buyers and sellers (contacting).
2. Matching goods to the requirements of the market (merchandising).
3. Offering products in the form of assortments or packages of items usable and acceptable by the
consumers/users.
4. Persuading and influencing the prospective buyers to favor a certain product and its maker
(personal selling/sales promotion).
5. Implementing pricing strategies in such a manner that would be acceptable to the buyers and ensure
effective distribution.
6. Looking after all physical distribution functions.
7. Participating actively in the creation and establishment of market for a new product.
8. Offering pre-and after-sale services to customers.
9. Transferring of new technology to the users along with the supply of products and playing the role
of change agents, e.g., in the agricultural green revolution in our country.
10. Providing feedback information, marketing intelligence and sales forecasting services for their
regions to their suppliers.
11. Offering credit to retailers and consumers.
12. Risk-bearing with reference to stock holding/transport.

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Types of Intermediaries:

There are two types of intermediaries in the channel. The primary intermediaries in the channels of
distribution are the manufacturer, the middlemen i.e., the wholesalers, manufacturers’ agents and
retailers. The secondary intermediaries include the facilitating agencies like the financial institution,
public warehouses, public carriers, and the advertising agencies.

The two types of intermediaries are:

1. Primary intermediaries –
(a) Wholesalers
(b) Retailers

2. Facilitating intermediaries –
(a) Financial Institutions
(b) Public warehouses
(c) Public carriers or transport carriers
(d) Advertising agencies

Types of Distribution Channels:

1. Zero Level Channel (Manufacturer – Customer):

This is the simplest and shortest channel in which no middlemen are involved, and producers directly
sell their products to the consumers. It is fast and economical channel of distribution. Under it, the
producer or entrepreneur performs all the marketing activities himself and has full control over
distribution. A producer may sell directly to consumers through door-to-door salesmen, direct mail
or through his own retail stores.

2. One Level Channel (Manufacturer – Retailer – Customer):

This channel of distribution involves only one middleman called ‘retailer’. Under it, the producer
sells his product to big retailers (or retailers who buy goods in large quantities) who in turn sell to the
ultimate consumers. This channel relieves the manufacturer from burden of selling the goods himself
and at the same time gives him control over the process of distribution.

3. Two Level Channel (Manufacturer – Wholesaler – Retailer – Customer):

This is the most common and traditional channel of distribution. Under it, two middlemen i.e.,
wholesalers and retailers are involved. Here, the producer sells his product to wholesalers, who in
turn sell it to retailers. And retailers finally sell the product to the ultimate consumers.

4. Three Level Channel (Manufacturer – Agent – Wholesaler – Retailer – Customer):

This is the longest channel of distribution in which three middlemen are involved. This is used when
the producer wants to be fully relieved of the problem of distribution and thus hands over his entire
output to the selling agents. The agents distribute the product among a few wholesalers. Each
wholesaler distributes the product among a number of retailers who finally sell it to the ultimate
consumers. This channel is suitable for wider distribution of various industrial products.

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The Distribution Channel Structure:
The distribution channel determines how the products reach the end consumer from the manufacturer.
The channel structure can have various levels. The structure of distribution channel depends upon the
nature of the product, industry practices and priorities of the company. Some companies have
Franchisees as channel partners, which are generally exclusive outlets of the company. Different
companies choose different combinations of these channel partners as per their requirement.

The geographic focus strategy of a company can guides it to develop its channel network spread
across continents or countries divided on the basis of smaller geographic regions, states, districts etc.
The distribution channel structure may be altered depending upon the market dynamics.

In today’s changing times, it becomes necessary for a manufacturer to have more than one channel
structures working parallel to each other. E.g., a company may be selling through its traditional
distributor – dealer network on the one part and on the other end, it may also be selling directly to the
organized retail customers, who buy in bulk for requirements at their hundreds of retail outlets spread
across a geography.

Answering the following will help in setting up a robust channel partner structure:

• How many layers will our distribution channel have?

• Who will bill whom within the channel partner network?
• Who will buy from the company first and how the product will be routed till it reaches the final
customer?
• What will be the territory/area covered by each of the channel participant?
• What will be the discount structure to all?
• Which costs will be fully or partly reimbursed by the company? (E.g., rent, manpower, storage,
inventory, marketing activities etc.)
• What support will each of the channel partners get from the company?
• What will be the responsibilities of a channel partner? What a channel partner should do or should
not do?
• What are the criteria for selecting a channel partner? (E.g., Turnover? Infrastructure? Manpower
strength? Geographic area covered? Experience? Exclusivity? Technical knowledge? Market
reputation?)
• Will they be our exclusive channel partners or not? If not, what are the guidelines for selling
competition products?
• How will the conflicts among the channel partners be resolved?

Factors Affecting Channel Choice:

A distribution system is a key external resource, equally important with key internal resources. The
problem of selecting the most suitable channel of distribution for a product is complex. The most
fundamental factor for channel choice and channel management is economic criteria, viz., cost and
profit criteria.

Profit organizations are primarily interested in cost minimization in distribution and assurance of
reasonable profit margin. However, channel decisions are not made entirely on the basis of rational
economic analysis. We have to consider a number of factors such as the nature of the product, market

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trends, competition outlook, pricing policies, typical consumer needs, as well as needs of the
manufacturer himself.

The following are other critical factors:

1. Product:
(a) If a commodity is perishable or fragile, a producer prefers few and controlled levels of distribution.
For perishable goods speedy movement needs shorter channel or route of distribution.
(b) For durable and standardized goods longer and diversified channel may be necessary.
(c) For custom-made product direct distribution to consumer or industrial user may be desirable.
(d) Systems approach needs package deal and shorter channel serves the purpose.
(e) For technical product requiring specialized selling and serving talents, we have the shortest
channel.
(f) Products of high unit value are sold directly by travelling salesforce and not through middleman.

2. Market:
(a) For consumer market, retailer is essential, whereas in business market we can eliminate retailer.
(b) If the market size is large, we have many channels, whereas in a small market direct selling may
be profitable.
(c) For highly concentrated markets, direct selling is enough but for widely scattered and diffused
markets, we must have many channels.
(d) Size and average frequency of customer’s orders also influence the channel decision. In the sale
of food products, we need both wholesaler and retailer.
(e) If ultimate buyers are numerous, the order is small, order frequency is great and buyers insist on
the right to choose from a wide variety of brands/goods, we must have three or even more levels of
distribution. When service after sale is required, e.g., TV Sets, Refrigerators, etc. selective distribution
is profitable.

3. Middlemen:
(a) Middlemen who can provide marketing services will be given first preference. Of course, they
must be available.
(b) The selected middlemen must offer maximum co-operation, particularly in promotional services.
They must accept marketing policies and programs of the manufacturers and actively help them in
their implementation.
(c) The channel generating the largest sales volume at lower unit cost will be given top priority. This
will minimize distribution cost.

4. Company:
(a) A company with substantial financial resources need not rely too much on the middlemen and can
afford to reduce the levels of distribution. A weaker company has to depend on middlemen to secure
financial and warehousing reliefs.
(b) New companies rely heavily on middlemen due to lack of experience and ability of management.
(c) A company desiring to exercise greater control over channel will prefer a shorter channel as it will
facilitate better co-ordination, communication, and control.
(d) Heavy advertising and sale promotion can motivate middlemen to handle displays and join
enthusiastically in the promotion campaign and co-operative publicity. In such cases even a longer

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chain of distribution can be profitable. Thus, quantity and quality of marketing services provided by
the company can influence the channel choice directly.

5. Marketing Environment:
Marketing environment can also influence the channel decision. During recession or depression,
shorter and cheaper channel is always preferable. In times of prosperity, we have a wider choice of
channel alternatives. Technological inventions also have impact on distribution. The distribution of
perishable goods even in distant markets becomes a reality due to cold storage facilities in transport
and warehousing. Hence, this led to expanded role of intermediaries in the distribution of perishable
goods.

6. Competitors:
Marketers closely watch the channels used by rivals. Many a time, similar channels may be desirable
to bring about distribution of your products also. However, sometimes marketers deliberately avoid
customary channels (dominated by rivals) and adopt different channel strategy. For instance, you may
by-pass retail store channel (usually used by rivals) and adopt door-to-door sales (Where there is no
competition).

Physical Distribution Process:

The distribution process begins when a supplier receives an order from a customer. The customer is
not too concerned with the design of the supplier’s distributive system, nor in any supply problems.
In practical terms, the customer is only concerned with the efficiency of the supplier’s distribution.
That is, the likelihood of receiving goods at the time requested. Lead-time is the period of time that
elapses between the placing of an order and receipt of the goods. This can vary according to the type
of product and the type of market and industry being considered.

Physical Distribution process consists of the following elements:

1. Order Processing:
Order processing is the first of the four stages in the logistical process. The efficiency of order
processing has a direct effect on lead times. Orders are received from the sales team through the sales
department. Many companies establish regular supply routes that remain relatively stable over a
period of time providing that the supplier performs satisfactorily. Very often contracts are drawn up
and repeat orders are made at regular intervals during the contract period. Taken to its logical
conclusion this effectively does away with ordering and leads to what is called ‘partnership sourcing’.
This is an agreement between the buyer and seller to supply a particular product or commodity as a
when required without the necessity of negotiating a new contract every time an order is placed.

2. Inventory:
Inventory or stock management is a critical area of physical distribution management because stock
levels have a direct effect on levels of service and customer satisfaction. The optimum stock level is
a function of the type of market in which the company operates. Few companies can say that they
never run out of stock, but if stock-outs happen regularly then market share will be lost to more
efficient competitors.

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3. Warehousing:
Currently, many companies function adequately with their own on-site warehouses from where goods
are dispatched direct to customers. When a firm markets goods that are ordered regularly, but in small
quantities, it becomes more logical to locate warehouses strategically around the country.
Transportation can be carried out in bulk from the place of manufacture to respective warehouses
where stocks wait ready for further distribution to the customers.

4. Transportation:
Transportation usually represents the greatest distribution cost. It is usually easy to calculate because
it can be related directly to weight or numbers of units. Costs must be carefully controlled through
the mode of transport selected amongst alternatives, and these must be constantly reviewed. When
the volume of goods being transported reaches a certain level some companies purchase their own
vehicles, rather than use the services of haulage contractors.

Market Coverage of Distribution Channels:

Once, the company decides the general channels to be used, it has to decide on the number of
middlemen in each channel, i.e., intensity of distribution. There are three alternatives.

1. Extensive Distribution (Mass):

We have maximum number of retail outlets for mass distribution of consumer goods as consumers
demand immediate satisfaction and that too at the most convenient retail shops. Extensive or
broadcast distribution is essential when the price is low, buying is frequent and brand switching is a
common phenomenon. Extensive distribution secures rising sales volume, wider consumer
recognition and considerable impulse purchasing. But it creates problem of motivation and control,
and it may generate unprofitable sales due to higher marketing costs.

2. Selective or Limited Distribution:

When special services are needed, e.g., TV sets or a prestige image is to be created, e.g., certain
cosmetics to be sold only through chemists, we have selective distribution. The number of outlets at
each level of distribution is limited in a given geographic area. When we have limited number of
middlemen, they can spend more on sales promotion and offer maximum cooperation in the
company’s promotion campaign. If the product has long useful life and consumer brand preference
can be established, selective distribution will be more profitable.

3. Exclusive Distribution:
If the amount of product service expected by final buyers is considerable, exclusive distribution is
preferable. Here, we have one wholesaler or one retailer for a given market to handle the right of
distribution in that market. Similarly, if your brand has not only brand preference but also brand
insistence and consumers refuse to accept substitutes, selective or even exclusive distribution is
feasible. Exclusive distribution creates a sole agency or sole distribution-ship in a given market area.
Such types of distribution are very useful in the sale of consumer specialty goods, e.g., expensive
men’s suits.

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The most common routes used for bringing the products in the market from producer to consumer are
as follows:
1. Manufacturer-Consumer (Direct Sale):
There are three alternatives in direct sale to consumers- (a) Sale through advertising and direct
methods (mail-order selling), (b) Sale through travelling salesforce (house-to-house canvassing), (c)
Sale through retail shops of manufacturer. This is a shortest channel a product can follow to the
market. Business goods may be sold directly to business buyers. Usually, we have numerous and
scattered consumers who buy in very small quantities. Hence, this channel is not popular for a wider
market.

2. Manufacturer-Retailer-Ultimate Consumer:
This channel option is preferable when buyers are large retailers, e.g., a department store, discount
house, chain stores, supermarket, big mail-order house or co-operative stores. The wholesaler can be
by-passed in this trade route. It is also suitable when products are perishable and speed in distribution
is essential. Automobiles, appliances, men’s and women’s clothing, shoes are sold directly to
retailers. However, the manufacturer must perform functions of a wholesaler such as storage,
insurance, financing of inventories, and transport.

3. Manufacturer-Wholesaler-Retailer-Consumer:
This is a normal, regular, and popular channel option used in groceries, drugs, goods, etc. It is suitable
for a producer under the given conditions- (a) He has a narrow product line, (b) He has limited finance,
(c) Wholesalers are specialized and can provide strong promotional support, (d) Products are durable
and not subject to physical deterioration or fashion changes.

4. Manufacturer-Agent-Wholesaler-Retailer-Consumer:
In this channel, the producer uses the service of an agent middleman such as a sole selling agent, for
the initial dispersion of goods. The agent in turn may distribute to wholesalers, who in turn sell to
retailers. Agent middlemen generally operate at the wholesale level. They are common in agricultural
marketing. In marketing manufactured goods, agent middlemen are used by manufacturers to make
themselves free from marketing tasks. An agent middleman sells on commission basis directly to
wholesaler or large retailer.

5. Manufacturer-Wholesalers-Consumer/User:
Wholesaler may by-pass retailer when there are large and institutional buyers, e.g., business buyers,
Government, consumer cooperatives, hospitals, educational institutions, business houses.

6. Manufacturer-Distributor-Wholesaler-Retailer-User:
A lengthy marketing channel used by FMCC Companies to penetrate rural and semi-urban markets.

Middlemen in Distribution:
In all commodity markets, whether primary or central, we have a host of middlemen acting as
essential functionaries.

1. Brokers:
Broker is an agent who does not have direct physical possession of goods in which he deals but he
represents either the buyer or the seller in negotiating purchases or sales for his principals. Brokers

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may be organized as individuals, partnership or even companies. They act as agents for their clients
— producers, dealers, manufacturers, etc.

2. Commission Agents:
Individuals, firms, or even companies are organized to buy or sell commodities, acting as buying or
selling agents of producers, or manufacturers. They may buy or sell on their own account and at their
own risk of loss. In that case, they are called commission merchants or factors.

Manufacturer’s agents are very helpful, in the three circumstances- (1) for a small manufacturer with
a few products and having no salesforce, (2) for entering into a new market to be fully developed,
and (3) for sale of a new line of product, which the present salesforce is unable to manage, or the new
market is not within their territory.

3. Sole Selling Agency:

An established firm of good reputation operating in each area may be appointed as a sole agent or
distributor exclusively for that locality. When the agent is assured of benefits, he will work hard and
with enthusiasm. There should be a regular legal agency agreement covering the mutual rights and
obligations of both parties and all questions likely to arise during the agency. The minimum period
of an agency should be normally three to five years, with a three months’ notice period on either side
for agency termination.

4. Consignment Sale:
The stock is held on consignment by the agent and the property remains with the seller until it is sold.
The agency agreement will mention the maximum amount of stock to be held by the agent at a time.
Within the prescribed limit, the agent is free to select his stock.

Under a consignment sale, the goods are consigned to the selling agent called the consignee on a sale
or return basis. When the goods are sold, the agent prepares ‘Account Sale’ and forwards it to the
seller. The selling expenses and commission are deducted from the total sale proceeds and the net
amount due is remitted by cheque along with the Account Sale.

Key Issues in Determining Channel Requirement:

While a manufacturer faces an agenda of issues related to finance, marketing and industrial relations,
attention is focused on selected topics that directly impact the marketing channel arrangement. The
key issues related to this are:

1. Product Proliferation and Dynamics:

A major concern throughout industry is the rapid expansion that firms are experiencing in the number
of stock-keeping units that they maintain in their product list. Fully understanding basic customer
needs through marketing research is viewed as a key to successful new product launch.
In practice, a few firms have a highly successful new product track record. A large number of new
products fail to remove obsolete inventory. The product life cycle is useful for planning the marketing
and distribution strategy.

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2. Total Quality Initiatives:
Total quality initiatives represent the primary focus of the revitalization drive. The concept of total
quality is “do it right the first time.” The general concept of total quality is to focus managerial
attention on key concepts of manufacturing: People, Process, Design, and customer service through
distribution channel.

3. Manufacturing Strategies:
There are two popular manufacturing strategies- (1) Flexible, and (2) Focused.
The goal of flexible manufacturing is to increase responsiveness of production to consumer demands.
Having the capability to manufacture what is needed reduces the amount of inventory. For this
strategy to succeed, a manufacturer must have an efficient marketing channel so that the demand of
the product can be fulfilled effectively in time.

The goal of focused manufacture is the lowest possible per unit cost and fair quality. The basic idea
is to adopt leading-edge manufacturing technology and utilize it to the maximum capacity. Focused
manufacturing requires building significant inventories in anticipation of future sale. The operational
trick is to plan manufacturing schedules to keep anticipatory inventories balanced to market demand.

Each of these strategies requires a different type of channel management support. The modern concept
of manufacturing seeks to involve employees at all levels of the organization to effect process
improvement and to take initiatives related to customer service.

Channel Conflict-Types and Causes:

Types of Conflict:
Even when a company has an effective distribution set up in the market, some conflict between
channel members and between the company and channel members may take place. This is normally
due to conflicting business interests.
There are three types of channel conflict:

(1) Vertical Channel Conflict:

Vertical channel conflict relates to conflict between different levels within the same channel.
Example- Conflict between distributor and the retailer.

(2) Horizontal Channel Conflict:

Horizontal channel conflict means conflict between members at the same level of the distribution
channel. Example- Price-cutting between retailers in the same market.

(3) Multi-Channel Conflict:

Here the company selects two or more channels to sell its products in the same market. Example-
Company makes direct supplies to wholesales as well as key retailers in the same market. The
wholesaler is hurt since this arrangement affects his sales in the market.

Causes of Channel Conflict:

(1) Conflicting Objectives:

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The objectives of the company and the channel members differ. Example- The Company wants the
distributor to offer sales incentives for bulk purchases. The distributor wishes to work with high
margins and is concerned with his profitability.

(2) Demand for Extra Discount:

The channel members may ask for additional discount for pushing the products and the company may
not be in favor such proposal, leading to conflict.

(3) Unethical Practices:

Channel members i.e., distributors and dealers may resort to unethical practices like charging more
than MRP (particularly during shortages), not passing on free goods to consumers, selling spurious
products, etc. leading to conflict between company and channel members.

(4) Some companies may supply directly to key industrial customers bypassing the area
distributor. The distributor looses the business and the commission, and this leads to conflict
between the company and the distributor.

(5) The distributor may sell competitors’ products, and this will affect company’s business.

(6) Reduction in the Area of Operation:

In order to improve dealer coverage and sales, company may reduce the area of operation of the
current distributor and add one or more distributors in the same area. The distributor is upset with the
decision of the company as his area of operation has been reduced and his sales may be affected.

Managing Channel Conflict:

Channel members play a major role in growth and development of business. They perform specialized
marketing functions such as buying, selling, warehousing, grading, financing, risk taking and provide
valuable marketing intelligence to the company. Chosen channels cannot be terminated overnight.
Channel decisions require special attention as they are key external resource equally important like
internal resource (employees).

(a) Communication:
Regular communication between the company, distributors and dealers will certainly go a long way
in minimizing channel conflicts. Circulars, e-mails, newsletters, personal one-to-one discussions can
be used to communicate with channel members. Taking feedback from key distributors/dealers and
involving them in discussions will help the company in improving relations with distribution channel
members.

(b) Aligning Goals of the Company with These of Channel Members:

The sales and field activities plan of the company should be discussed and communicated to the
distributors/ dealers so that both the company and channel members can work together for
achievement of common objectives.

(c) Dealer Councils:

Dealer councils can resolve conflicts between company/distributors/dealers. It provides an
opportunity for dealers to represent the problem in the market.

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(d) Arbitration and Mediation:
Arbitration and mediation facilitate settlement of channel conflicts. If these methods prove
ineffective, the member may go to the court. However, it is a time-consuming and very often an
expensive option.

IV. Activity
Question:
How does the Kit Kat get from the factory into your hands? (Please refer to ppt for the
whole interactive activity)

V. Evaluation / Assessment
Wrigley is the world's leading manufacturer of chewing gum, producing literally millions of packages
of gum every day. It is a large financially strong company whose manufacturing technology for
producing gum is a state of the art. It sells its products to millions of chewing gum consumers all over
the United States and many other countries around the world. Wrigley has never attempted to sell its
chewing gum directly to consumer but instead uses a wide variety of intermediaries at the wholesale
and retail levels.

Why do you suppose Wrigley has chosen to use intermediaries rather than sell direct to consumers?

Rubric for grading:

CRITERIA PERFORMANCE INDICATORS POINTS
Content Provided pieces of evidence, supporting
16
details, and factual scenarios
Grammar Used correct grammar, punctuation, spelling,
2
and capitalization
Organization of ideas Expressed the points in clear and logical
arrangement of ideas in the paragraph 2
TOTAL 20

VI. Other Reading Materials

VII. References

Shika, K. Distribution Channels : Meaning, Types, Factors, Structure, Role and

Management, Retrieved September 8, 2021 from https://www.business manage
mentideas.com/marketing/channels-of-distribution/distribution-channels-meaning-types-
factors-structure-role-and-management-marketing/18367

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