Solution to complete the car tire distribution channel system at Danang Rubber Joint Stock Company

PART I

SOME THEORETICAL ISSUES ON DISTRIBUTION SYSTEM

1.1. CONCEPT AND IMPORTANCE OF DISTRIBUTION ACTIVITIES

DISTRIBUTION IN ENTERPRISE

1.1.1. Concept

Distribution is the process of transferring ownership between sellers and buyers, while at the same time organizing, regulating, and coordinating different intermediary organizations to ensure that goods reach and exploit the maximum types of market needs (a) .

Participate in basic distribution activities

- The groups of suppliers and final consumers are the concentrated representatives.

of the seller and the buyer.

- Group of intermediaries directly involved in circulation activities

goods, with different functions and levels of market cost.

- The warehouse system and means of transport are responsible for preserving, reserving and circulating goods, closely linked with a number of systems of various types of stores, shops, displays and sales.

- Market information system and support services for purchasing and selling activities

distribution

1.1.2. The role of distribution

While every business, big or small, has the opportunity to participate in the retail industry, not everyone can participate in the distribution industry. In each country, while a product can appear in tens of thousands of retail outlets, each manufacturer usually has only a few carefully selected distributors with very strict contract terms. This is understandable because distribution businesses play a vital role as a bridge between the manufacturer and the market.

- Distribution is an important tool connecting producers and consumers, creating a match between supply and demand, compensating for shortcomings in time and

location and ownership. In that sense, distribution is the activity

create services for society

- Distribution allows to reduce transaction points and realize savings

Multi-level for manufacturers.

- Implement synchronous improvement of product designs, overcome limitations in

the products, techniques and finances of each individual manufacturer.

- Better satisfy the increasing demands of consumers.

- Distribution policy and method of distributing goods are always the most basic and essential content of commercial policy in business activities of enterprises.

1.1.3. Distribution function (b)

- Distribution is responsible for transporting goods and services from the manufacturer to the final consumer. Therefore, distribution must undertake the following functions:

- Research: collect information needed for strategic planning

and facilitate exchange.

- Promotion: Deploy and disseminate convincing information about

Current items and new products.

- Contact: establish relationships with customers.

- Balancing: regulating the supply of goods according to customer requirements, including activities such as grading, classification and packaging...

- Negotiation: Representing the buyer or seller in negotiating prices and other transaction terms to reach an agreement to sign a final contract and transfer ownership of the goods.

- Financing: collecting and dispersing capital to shoulder part or all of the costs

costs required for distribution and consumption.

- Risk sharing: jointly accept the risks associated with operating the distribution

match

The above functions may vary among channel members. If the

If production can perform these functions, costs will increase and prices will be higher.

When some functions are transferred to intermediaries, costs and prices will

lower, but have to add costs for the intermediary. The question of who does each

The function of the channel is determined by productivity and efficiency (i)

1.1.4. Relationship with other elements in the marketing mix

Product

+ Distribution channel

+ Brand

+ Model

Price

+ Discount

+ Consumption …

Place

Marketing mix

Target market

+ Choose an intermediary

+ Related factors

Promotion

+ Advertising

+ Promotion

+ Marketing

Distribution plays an important role in the company, it is the key to establishing strategic marketing and marketing mix. Creating consistency, effective synchronization between product policies - price policies - propaganda policies, promotions and product promotion. Therefore, a reasonable distribution policy will make the business process safe, strengthen the linkage process in business, make the circulation of goods fast and effective.

1.1.5. Problems encountered due to lack of channel management

Suppose in a distribution channel system that is operating without a channel manager, when a new product is launched, the primary goal of suppliers is to bring that product to consumers. All partners capable of helping to achieve this goal are invited to participate, on the condition that the costs incurred are minimized. When there is a certain growth in revenue, the distribution channels are also expanded in the direction of the participation of new channel partners, arising from personal relationships as well as special priorities of some influential people who make decisions in the channel. From there, "unspoken" and unofficial rules are born and they regulate the operation of the entire system.

When businesses have grown to a strong enough level, they will realize the shortcomings of the channel system. Even if the channel organization develops, the channel system being nurtured and operated will only meet current tasks, without creating opportunities for channel partners to exchange and cooperate.

Typically, they focus on establishing a distribution channel based on available resources to achieve future business goals, they realize that it is necessary to establish a distribution channel. Such complementary designs always lead to a dysfunctional channel structure that is not compatible with the original channel system.

Only when problems arise in the channel system will solutions be mobilized to solve these problems. For example, when a manager realizes that he has not been able to promote a new product to the market, the first thing he does is meet with sales partners and review the product introduction program. They discover that the distribution channel system is not capable of promoting product consumption to the market, and the sales force is weak. At that time, along with maintaining and increasing customer demand for other products, the manager needs to come up with ideas for building incentive programs, planning product promotion and advertising. This is a "patchwork" management activity. The manager directly "manages" the channel, but from the beginning, due to the lack of channel design, the channel manager does not deeply understand what needs to be solved and how to thoroughly solve the problem.

The foundation for creating an effective channel management strategy is the channel design technique. Good channel design will greatly assist and reduce the burden on the channel manager in the daily channel management work. Channel strategy will not be effective until the channel manager has an effective channel design.

1.2. BASIC CONTENTS RELATED TO DISTRIBUTION CHANNEL

MIX

1.2.1. Target market:

The set of customers that the business focuses all its marketing efforts on.

tap into them to find the desired responses.

Evaluate and select target market:

Evaluation: The business must consider three factors: the size and growth rate of each market segment, the structural attractiveness, and the business's objectives and resources (b) .

Selecting the target market: based on the results of market segmentation assessment, the enterprise proceeds to select the target market. There are five ways to select the target market as follows:

Focus on a market segment: the company selects a market segment and focuses on exploiting that market segment.

Selective specialization: the firm selects a number of different market segments, each of which is attractive and suitable to the firm's resources.

Market specialization: firms focus on serving many

the needs of a market.

Product specialization: a business produces a certain type of product to sell to a number of market segments.

Serving the entire market: the business aims to serve all

Group customers with the products they need.

1.2.2. Variables affecting distribution channel structure

1.2.2.1. Market characteristics

Four basic market variables that particularly influence channel structure are:

Market geography: Market geography refers to the location of the market and its distance.

distance from producer to market. Market geography is the basis for developing a channel structure that completely covers the market "The greater the distance between the producer and its market, the more likely it is that intermediaries will be used and will have lower costs than direct distribution".

Market size: The number of customers in the market determines the size of the market. If the number of customers in the market is large, the use of intermediaries is more necessary. Conversely, if the number of customers in the market is small but the size of each customer is large, the company should sell directly to avoid using intermediaries.

Market density: is the number of purchasing units (consumers or industrial customers) per unit area. In general, the more fragmented the market (the lower the market density), the more difficult distribution is. The more fragmented the market, the

The more intermediaries are needed, the more concentrated the market is, the more intermediaries should be avoided.

Market behavior:

How do consumers buy? When do they buy?

Where to buy?

Who buys?

1.2.2.2. Product characteristics (c)

Volume and weight: heavy and bulky products have high transportation costs so the channel structure for these products should be as short as possible. Except in cases where customers buy small volumes and deliver quickly, intermediaries may be necessary.

Perishability: Fresh products and products that are susceptible to obsolescence are called perishable products. When the producer and the consumer are close, the channel structure is usually short. When the distance is longer, a few intermediaries may be used.

Unit Product Value: The lower the unit product value, the longer the channels should be.

Novelty: Many products are new to both consumer and industrial markets and therefore require heavy promotion at the introduction stage. During the introduction stage, shorter channels are considered advantageous in achieving product acceptance.

1.2.2.3. Characteristics of the company (c)

Key firm factors influencing channel structure.

Company size: will determine the company's ability to find suitable channel members. Large companies have greater flexibility in choosing channel structure than small companies.

Financial capacity: the greater the financial capacity of the company, the less dependent it is on intermediaries. The resources of the company will determine which distribution functions it can perform and which functions it can leave to other members.

Goals and strategies. Company marketing goals and strategies

Different channels are used differently.

Some weaknesses of Vietnam's distribution industry.

Firstly, there is the phenomenon of overlap between distribution and retail. An enterprise with a dominant market position (according to Vietnam's competition law, an enterprise that occupies more than 30% of the market is considered to have a dominant position) simultaneously performs both distribution and retail, which is not pleasant for other retail enterprises. Competition control agencies in many countries have very specific regulations on what scale and in what proportion an enterprise is allowed to do so.

Secondly, due to the lack of qualified distributors, a company can now distribute many competing products. The case of FPT distributing mobile phones for Nokia, Motorola, and Samsung as above is one of the examples. Of course, manufacturers do not feel comfortable with this and they are constantly looking for opportunities to have their own distributors for their products.

Third, as in retail, the distribution industry must have competition. Competition will ensure effective distribution at the lowest cost, thereby benefiting both manufacturers and consumers. The example of FPT also shows that in Vietnam there are not many businesses strong enough, in terms of capital and reputation, to be able to create a competitive environment in the distribution industry.

1.2.3. Determine the form of distribution

Feature

Exclusive distribution

right

Selective distribution

Wide distribution

Target

Create prestige, corporate identity, control distribution channels and ensure a stable environment and high profits.

Operate in moderate market size, build strong image, control some distribution channels, achieve moderate sales volume

and high profit

Operating in a large market area, gaining support from distribution channels, generating high sales and profits.

Member channels