DISTRIBUTION Martin Jung Manuel Taro Arindam Agenda

DISTRIBUTION Martin Jung Manuel Taro Arindam

Agenda § Introduction § Product § Consumer § Partner § IT

Imagine … Imagine you become a Product Manager, and you have to decide upon your product strategy. You are probably thinking, design, marketing, promotion operations, pricing But have you ever thought about distribution?

The neglected “P” For most people distribution is still a black box

Looking for distribution on the Value Chain Porter’s value chain does not specifically define distribution • Outbound logistics? • Marketing and Sales? ? • Services?

What really influence our distribution? Information Technology Product Channel Partners Consumer

Evolution of channel management What’s the value added from each Intermediary? Direct Channel Retailer Channel Producer Wholesaler Agent/Broker Channel Agents or Brokers Wholesalers Retailers Consumers Producer Agents or Brokers Can we retain the value without intermediary ? Producer Retailers Consumers Producer Conventional Marketing Channel Vertical Marketing System (VMS)

Factors to influence channel strategy decisions Issues that Influence Channel Strategy Factors Affecting Channel Choice Levels of Distribution Intensity Objective Number of Intermediaries Intensive Achieve mass market selling. Convenience goods. Many Selective Product Factors Intensity Level Work with selected intermediaries. Shopping and some specialty goods. Several Exclusive Work with single intermediary. Specialty goods and industrial equipment. One Partner Factors Customer Factors Other Factors

Agenda § Introduction § Product § Consumer § Partner § IT

Traditional natural gas transport occurs via extensive pipeline networks. Gas pipelines West-African natural gas producer

Liquefying gas to LNG enables new distribution possibilities. Gas production Cooling gas to minus 162°C results in the condensation of the gas, known as Liquefied Natural Gas (LNG). Liquefaction plant Shipping Regasification terminal Benefits • LNG takes up about one six hundredth of the volume of gaseous natural gas. • LNG can be transported to distant customers via ships without expensive pipeline networks Pipeline delivery

LNG is a growing market especially for remotely located gas producers. Market trends 5. 9% 3. 8% % Worldwide growth in gas % Worldwide growth in LNG • Major players: Shell, ENI, Gaz de France, Tractebel, Endesa, Iberdrola • Main countries: Algeria, Lybia, Oman, Qatar, Nigeria, UEA, Trinidad, Egypt, Australia, Norway, Venezuela

Agenda § Introduction § Product § Consumer § Partner § IT

Coke versus milk – multi-channel distribution. Coca-Cola accounts for less than 2 ounces of the 64 ounces of fluid that each of the world‘s 4. 4 bn people drink every day. The enemy is coffee, milk, water. Mr. Goizueta CEO Retailers Supermarkets, Kiosks Bottler Airlines Clubs, Bars Restaurants, Hotels Vending machines Consumers

The Pepsi challenge or how to choose the right partner 70. 4% 100% 21. 5% • Venezuela was the only country in which Pepsi was bigger than Coca Cola • In 1996 Cisneros Group switched from bottling Pepsi to Coke • In the last quarter of 1996 Pepsi had only 15. 5% market share

Agenda § Introduction § Product § Consumer § Partner § IT

In the Japanese office supply market customer needs changed over the years. Although we are a small company. . . we want to buy office supplies in any number, at any time! Number of companies in Japan based on number of employees >30 employees 5% < 30 employees 95% < 10 employees • Big firms: Daily replenishment by sales reps at discount price • Small firms: Go to stationer’s shop and buy at a fixed price New customer needs! • Small order, frequent deliveries • Quick delivery • One Stop Shopping

Askul revolutionized the distribution of office supplies by introducing an agent-vendor system. Promise: Next-day delivery on all orders, from a single pencil to a truckload of office supplies Old distribution Inventory Maker Inventory Primary Secondary Retailer Wholesaler Customer • Reduction of intermediaries • Faster delivery • Less inventory cost New distribution Customer Order Delivery Billing, Registration Agent • Growing customer base Billing, Registration • Wholesaler and retailer revert into agents. Profit sharing and little cannibalization among stakeholders possible.

Agenda § Introduction § Product § Consumer § Partner § IT

One of the largest distribution networks exist in India. Do you know one of the largest distribution networks in the world? Making over 200. 000 transactions in one hour? Mumbai Nutan Mumbai Tiffin Box Suppliers Charity Trust or…Dabbawallahs or… Lunch deliverymen

… Cooking at home • Boxes taken to nearest railway station & sorted • Home-made lunch picked up 10 am Packaging • Delivered at 12. 30 p. m. Transport/ Delivery Key facts • Started in 1890 with 25 clients – Now over 200, 000 clients • Boxes carried on heads, handwagons & cycles • Each porter covers 70 - 80 km in 2 ½ hrs • Boxes unloaded at destination and resorted • At 1. 30 p. m returned to houses Customer at workplace

… Each lunch-box-lid has a complex coding system: • Symbols identify the house, the originating & destination stations • Colors identify each suburb & individual sectors • Dashes, crosses & dots identify the street, the building and the floor of delivery Prof. C K Prahlad: “quintessential master of supply chain management” IT-Free and certified! 6 Sigma performance rating by Forbes ~ 1 error in 16 million transactions - Treated on a par with Motorola

Distribution as strategic asset

Distribution as strategic asset Thanks. Any questions?

Information Technology Product Channel Partners Consumer