TALLINN UNIVERSITY OF TECHNOLOGY

School of Business and Governance

Department of Business Administration

Daria Glushinskaia, Md Aminul Islam, Roxana Sheykhan, Opeyemi Basiru Amodu

PLACE ON BUSINESS MARKETS (LOGISTICS, CHANNEL)

Report

Tallinn 2017

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 Table of Contents

INTRODUCTION ........................................................................................................... 3

1. MARKETING CHANNELS .................................................................................... 4

1.1. Channel Levels ........................................................................................................... 4
1.2. Channel-Design Decisions. Analyzing Customer Needs and Wants............................. 5
1.3. Channel-Management Decisions (Organizing and Managing Channels of
Distribution) ........................................................................................................................... 7
1.4. Channel Communication ............................................................................................ 8
1.5. Evaluating Channel Members .................................................................................... 9
1.6. Goal Setting, Planning, and Performance Appraisal ................................................... 9
1.7. Conflict Management ............................................................................................... 10
1.8. Managing Channel Conflicts and Coordination ........................................................ 10
2. PHYSICAL DISTRIBUTION AND LOGISTCIS ................................................. 12
2.1. Objectives of Physical Distribution ........................................................................... 12
2.2. Key Functions of Physical Distribution ..................................................................... 12
3. SUPPLY CHAIN MANAGEMENT ...................................................................... 15
3.1. Definition .................................................................................................................. 15
3.2. The Difference Between Supply Chain Management in B2B and B2C ...................... 16
CONCLUSION ............................................................................................................. 18

REFERENCES ............................................................................................................. 19

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INTRODUCTION
The marketing of places is one of the major growth markets in marketing
communication Today, between 5 and 10 % of all advertising space in newspapers is devoted
to the marketing of places, regions and nations. It might appear strange that place
characteristics gain more importance rather than loosing importance, as the world generally
seems to become smaller and internationalization and globalization are some of the most
fashionable buzzwords in public discourse. But the ongoing globalization process also results
in an increased competition between all social domains, including a growing competition
between places. Some authors claim that the use of place marketing was originally mainly
inward directed in order to construct national identities, whereas todays place marketing is
much more outward oriented in order to create positive images and reputations (Olins 2000,
255) and in order to influence public opinion abroad (Mahle 1995, 33).

The mere fact that place ratings about the attractiveness of places for residents, tourists,
and investors are more and more common makes it difficult for politicians and public
authorities not to join the bandwagon. Such place ratings are - despite of their questionable
reliability - increasingly exploited in place promotions. As the media likes to play up their
results, place ratings can also create public awareness and that is why place marketing is such
an important topic to be discussed nowadays.

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 1. MARKETING CHANNELS
Most producers do not sell their goods directly to the final users. There is set of
intermediaries between them, performing different types of functions. These intermediaries
constitute a marketing channel (which is also called a trade channel or distribution channel).
Formally, marketing channels are sets of interdependent organizations participating in the
process of making a product or service available for use or consumption. They are the set of
pathways a product or service follows after production, culminating in purchase and

consumption by the final end user.2 Marketing channel system is the particular set of marketing
channels a firm employs, and decisions about it are among the most critical ones management
faces.

1.1. Channel Levels

The producer and the final customer are part of every channel.
There are some channels to be considered:
A zero-level channel, also called a direct marketing channel, consists of a manufacturer
selling directly to the final customer. The major examples are door-to-door sales, home parties,
mail order, telemarketing, TV selling, Internet selling, and manufacturer-owned stores.
Traditionally, Avon sales representatives sell cosmetics door-to-door and Apple sells
computers and other consumer electronics through its own stores. Many of these firms now
sell directly to customers in more ways than one, via online, catalogs, etc.
A one-level channel contains one selling intermediary, such as a retailer.
A two-level channel contains two intermediaries. In consumer markets, these are
typically a wholesaler and a retailer.
A three-level channel contains three intermediaries. In the meatpacking industry,
wholesalers sell to jobbers, essentially small-scale wholesalers, who sell to small retailers. In
Japan, food distribution may include as many as six levels. It is necessary to notice that
obtaining information about end users and exercising control becomes more difficult for the
producer as the number of channel levels increases.

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This table shows channels commonly used in business to business marketing. An industrial-
goods manufacturer can use its sales force to sell directly to industrial customers; or it can sell
to industrial distributors who sell to industrial customers; or it can sell through manufacturers
representatives or its own sales branches directly to industrial customers, or indirectly to
industrial customers through industrial distributors. But zero-, one-, and two-level marketing
channels are quite common.

1.2. Channel-Design Decisions. Analyzing Customer Needs and Wants

Consumers may choose the channels they prefer based on price, product assortment, and
convenience, as well as their own shop- ping goals (economic, social, or experiential). As with
products, segmentation exists, and marketers must be aware that different consumers have
different needs during the purchase process.
One study of 40 grocery and clothing retailers in France, Germany, and the United Kingdom
found that they served three types of shoppers: (1) service/quality customers who cared most
about the variety and performance of products and service, (2) price/value customers who were
most concerned about spending wisely, and (3) affinity customers who primarily sought stores
that suited people like themselves or groups they aspired to join. As a conclusion, customer
profiles differed across the three markets: In France, shoppers stressed service and quality, in
the United Kingdom, affinity, and in Germany, price and value.
Even the same consumer, though, may choose different channels for different functions in a

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purchase, browsing a catalog before visiting a store or test driving a car at a dealer before
ordering online. Some consumers are willing to trade up to retailers offering higher-end
goods such as TAG Heuer watches or Callaway golf clubs and trade down to discount
retailers for private-label paper towels, detergent, or vitamins.

Channels produce five service outputs:

Lot size - The number of units the channel permits a typical customer to
purchase on one occasion. In buying cars for its fleet, Hertz prefers a channel
from which it can buy a large lot size; a household wants a channel that permits
a lot size of one.
Waiting and delivery time - The average time customers wait for receipt of
goods. Customers increasingly prefer faster delivery channels.
Spatial convenience - The degree to which the marketing channel makes it easy
for customers to purchase the product. Toyota offers greater spatial convenience
than Lexus because there are
Product variety - The assortment provided by the marketing channel. Normally,
customer prefer a greater assortment because more choices increase the chance
of finding what they need, although too many choices can sometimes create a
negative effect.
Service backup - Add-on services (credit, delivery, installation, repairs)
provided by the channel. The greater the service backup, the greater the work
provided by the channel.
Providing greater service outputs also means increasing channel costs and raising prices.
Channels of all types play an important role in the success of a company and affect all other
marketing decisions. Marketers should judge them in the context of the entire process by which
their products are made, distributed, sold, and serviced.

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 1.3. Channel-Management Decisions (Organizing and Managing
Channels of Distribution)
The steps of effective channel management decisions.

6. Modifying 7. Channel
1. Selecting
Channel Design and Modification
Channel Members
Arrangements Decisions

2. Training and 5. Channel Monitor

8. Global Channel
Motivating Channel and Conflict
Considerations
Members Management

3. Channel 4. Evaluating
Communication Channel Members

1. Selecting Channel Members:

Selection of the channel members is the first step of channel management. For customers,
channels are the company. The first touch point for the customers is channel members. It is
very important for the company to select the right channel members for the value distribution.
Consumers select the products and services from the channel members and a producer or
company selects the channel members based on the channel design decisions.
Depending on the company or channel design, channel members selection varies. Usually
selection steps starts from the predefined selection process of the company.
2. Training and Motivating Channel Members:
Producer or company maintains the channel based on their strategies, cost effectiveness and
value network. It is very important for the company to make proper alignment with the channel
members with company needs, expectations, process, legal requirements, increase sales
generation, enhance customer experience, retaining customers and increasing customer loyalty.
This alignment usually occurs due to the proper training of the channel members. Training
ensures that channel members have the right information about the company, products or

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services, needs and expectations, processes, skills to do the job maintaining the quality and
efficiencies.
Effective channel members training process involves following steps.
- Need Assessment
- Readiness for training
- Creating a learning environment
- Selecting appropriate training method
- Ensuring transfer of knowledge
- Evaluation of training program

Motivating Channel Members

Marketing channel or distribution channel are the sets of independent organizations which
involves in the process of making the product or service available for the customers at the right
time. It is important for the organization to keep motivating the channel members. Lack of
motivation can lead to reduce sales and market share, decreasing customer base and threat of
terminating the relationship with the company. Based on the company and channel status,
motivation could be in many ways including monetary and non-monetary benefits,
compensation, growth, involving in marketing strategy chain, training, priority, feedbacks for
improvements, regular contact through visits, dinners, competitions, newsletters, thank you
letters, awards, etc.

1.4. Channel Communication

Communication can be described as the glue that particularly holds together a channel
distribution. The role of communication within marketing channels is an important issue from
both a managerial and a theoretical perspective. Communication in the marketing channels can
serve as the process by which persuasive information is transmitted (Frazier and Summers,
1984). The importance of channel communication is greater for proper coordination. For
instance, a discount offer has been commercialized in the TV Channels, but the channel
members are not properly communicated. Customers will be returned without having the
discount from the channel members or partners as they are not aligned. It will leads to the

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customer dissatisfaction, decreasing sales and customer loyalty, and channel members
demotivation toward the company.

1.5. Evaluating Channel Members

Evaluating the channel members based on the performances is as much as importance as
the evaluation of other marketing functions and activities. Periodic and regular evaluation
keeps both parties in a win-win situation. It also helps the organization to access the current
situation, auditing as the whole, keeping track for the sales performance, inventory
management and maintained by the channel members, proper supply chain management,
selling capabilities, attitudes of the channel members, corrective measures. It increase the
degree of manufacturer control over channel members.

1.6. Goal Setting, Planning, and Performance Appraisal

To evaluate the channel members, its important to have proper goal setting and performance
appraisal with proper planning. Goal setting and performance appraisal should be regularly
basis and periodic duration. Both helps to keep the organizational and channel members
relationship straight for greater benefits and success. Usually organizations establish sales
quota based on the associated intermediaries. These appraisals are one sided and contains sales
performance comparisons based on the standards, satisfaction index and feedbacks.

Channel Monitor and Conflict Management

Channel members monitoring:
What is going to be monitored and supervised across channel relationships and settings is
an important question. Behaviors as well as performance outcomes will need attention in many
cases, especially where intermediaries are intended to add considerable value to the core
product (cf. Celly and Frazier, 1996). Regular channel monitoring helps to keep a close eye on
the channel members, keeping performance track records and its outcomes, more attention and
empower channel members to achieve more.

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 1.7. Conflict Management
Channel partners are independent business entities and they have separate interests and
goals. How well the channels are designed, managed or communicated, there always will be
conflicts between the channel members and organization. Channel control is one of the key
aspects in the channel-firm relationships. Its very important for the firm to have the proper
control over the channel on conflicts and coordination. Followings are the types of conflicts
can find in the channel setting.
Horizontal channel conflict
Vertical channel conflict
Multichannel conflict
Causes of Channel Conflict

1.8. Managing Channel Conflicts and Coordination

Usually channels and firms both works for the same goal. Its a business to business
relationship. In order to resolve all the conflicts, coordination between them is much required.
Proper coordination helps to manage all the conflicts in minimal stage.
Strategic Justification
Dual Compensation
Superordinate Goals
Employee Exchange
Joint Memberships
Co-option
Diplomacy, Mediation, and Arbitration
Legal Recourse

Modifying Channel Design and Arrangements

No channel strategy will remain successful over the entire period of that product
lifecycle. As products life cycle changes, consumer buying pattern changes, market develops,
new competition occurs, firms also need to change the channel strategies. Every manufacturer
should have the flexibility of modifying the channel design and bring adjustments. For every
firm its a very expensive decision and sometime it could increase conflicts between the firm
and channel members. While developing the channels and strategy, firm should also

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incorporate flexible channel design and adjustment process into their strategies. This strategy
could bring the competitiveness for the firm as well.

Channel Modification Decisions

Based on the channel design and strategic decisions, firm must take channel
modification decisions. Sometime it become certain for the organizations to bring changes in
the channel lines due to the consumer buying preference change, market expands, new
competitions, emerging innovative distribution channels. Adding, dropping single or multiple
channel members requires to introduce the changes. Incremental analysis, detailed customer
databases and sophisticated analysis tools comes handy while taking channel modification
decisions.

Global Channel Considerations

International markets are always full of competition, verities, distinct challenges,
variation of customers and buying patterns. It also comes with opportunities at the same time.
It is not so easy for a firm to go global parameters without the proper channel strategy and
information. In past lots of international successful organizations fails to crack the reasons of
their failure in international markets. Before keeping the feet in the international markets,
marketers must know about the local market, customers, their preferences, competitions,
channels of distributions. Many global brands establishes their separate manufacturing unit to
produce goods or services based on the local preferences.

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 2. PHYSICAL DISTRIBUTION AND LOGISTCIS
The term physical distribution is about the process of flowing goods from material suppliers
to manufacturers and on to the end customer and involves network of transportation links,
warehousing and storage and finally delivery in a cost-effective manner within a desired
amount of time. Physical distribution consists of the group of activities associated with the
supply of finished product from the production line to the customers.

2.1. Objectives of Physical Distribution

The principal objectives of physical distribution are to deliver the right goods to the right
customer at the right time and place.
1: To give better customer service: It is the primary objectives of physical distribution.
Customers can purchase products as per their needs at desired time and from convenient place,
even at reasonable price. Additionally, middlemen involved in physical distribution and sell
the products from various companies, can offer customers to choose the most suitable products.
2: To facilitate continuous production: A proper distribution is directly connected to
raise in continuous production because of sophisticated storing facility, facilities related to
transportation and communication in global market, advance ordering and executing.

3. Cost / service trade-offs: A suitable distribution system results into lowering overall
costs in number of ways.
4. To increase competitiveness: A company can increase its competitive levels by using
a suitable distribution network. Effective distribution can lead to provide better services,
availability, timing and price which would be positive factors to stay competitive in the market.
5. Marketing Logistics: Modern managers now use the concept of marketing logistics
which starts by asking how customers want to receive the product, and then work backwards
to the design of the materials, final goods, inventory, transportation, warehousing and customer
service in order to meet those wants.

2.2. Key Functions of Physical Distribution

Identification of segments by service requirements: A marketing logistics manager
first needs to determine the dimensions of service that customers most value, for
instance reliability, speed, or availability and at the same time paying attention that

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 what are customers requirements. Some market segments may be willing to pay high
prices to gain premium services, whilst others may be willing to pay low prices and in
return accept the minimum service levels. To meet customers requirements managers
should consider cost or service trade-offs and the logistics standards set by the
competition. Once target service levels have been identified, the company must design
a physical distribution system which can deliver them at minimum cost.

Communication and order processing: Take the customer orders and execute the
specifics the customer has purchased. This process starts with a receipt of an order from
customer obtained by sales person. And seller will inform the buyer that the order will
filled and shipped by a certain date. After making certain about accuracy of order and
verifying the customers credit or ability to pay, company determines the goods
shipment from specific inventory point, and instructions will be sent accordingly to that
warehouse in order to fill the order. Significant advances in IT now offer organizations
the chance to reduce delays and costs in order processing.

Warehouse: warehouses are critical parts of overall supply chain management and it
is a key determinant of the availability of a product. Company may be willing to have
more stocking locations in order to deliver goods to customers more quickly, but
warehousing and inventory costs are high and here in terms of the trade-off concept
they may review the decision. In order to reduce these costs, the company might
centralize its inventory in one place and use fast transportation to fill orders. Some
inventory is kept at or near company site such as fruits and vegetables which are
perishable, at the same time products which are heavy and difficult to transfer may be
stored in the warehouses near market sites.

Inventory management: inventory control is one of the crucial factors in production

process. Due to stockholding have costs such as storage space, obsolescence and
interest payments. Ideally company should carry enough stock to meet customers order
immediately. If the desired goods are not available, then may cause the sale loss, or
ever worse customer loss. If too much unmoved and stored stock is held, company may
find itself with the large amount of goods which is forced to price reduction. Thus, the
objective of inventory management is to find a balance between customer service and

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 the cost of carrying additional stock. For finding desired balance in stockholding, the
most basic used method is reorder point. As inventory reduces, management must
know at what stock level (reorder point) to place a new order. For instance, order point
of 30 means reordering when the stock falls to 30 units.
Transportation and logistics: The appropriate choice of transportation mode is a key
part of physical distribution management. Several criteria should be considered while
selecting the suitable way of transportation; costs, transit time, reliability, capabilities
(for goods which require special handling, such as shipment in a proper temperature),
security and traceability. Transportation methods are described as below:
Road: The key advantage of road shipment is flexibility due to national road networks
providing direct access to production facilities, warehouses, and customers.
Rail: railways tend to carry large, bulky freights over long distances. Such as coal, chemicals,
and building aggregates. The major problem of railways is its lack of flexibility that goods
cannot be delivered to customers directly. Because of this problem, the railway share of the
European transportation market has declined steadily.
Air: Air freight has been the fastest and the most expensive way of transportation so far. Its
great speed over long distances means that it is often used to carry perishable goods and
emergency deliveries. In international trade, air freight has a specific importance among other
transportation ways, which is meeting the requirement especially for JIT systems.
Water: This can be divided into sea and inland waterways, both of which are slow but at a low
cost. They may carry variety of goods, such as oil, bulky commodities such as coal or steel. Its
low cost mean that European rivers which are linked to canal networks are still commonly
used.
Pipeline: Pipelines are form of transportation for liquids and gas. They normally belong to the
shipper and carry the shippers products. Although construction of pipelines may be extremely
costly, at the same time this transportation mode would be economical to operate and maintain
and it will be considered as a major investment.

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 3. SUPPLY CHAIN MANAGEMENT
In the start of the 1990s the emphasis on the buyer-distributor has increased. As companies
looking at a more holistic approach to the bottom line, there is an emphasis on supply chain
management, vertical alliances, lean supply, industrial networks and outsourcing. (Hill 2000)
Each of the mentioned element of focus on improved competitiveness and profitability of
corporations by offering different strategies, tools and techniques which enable companies or
business to partner with the right business or companies, creating a suitable relationship and
integrate well enough to the internal and external change
Since economic downtown has been accepted as a reality, companies are adjusting the change
thereby looking for ways to improve operating efficiencies and cut down capital requirements.
Most business sectors are saddled with intensified conditions in their perspective markets and
within their corporate boundaries. This has however, makes companies to increase and strength
connections with others delivery performance. Previously, the customers focused mainly on
low total systems cost, high quality and good. Today, they also expect short product life cycles
and time-to-market, innovativeness and customization. (Coyle et al, 1992; Kotha, 1995;
Sanchez, 1997)

3.1. Definition
Supply chain management can be described as the management of the flow of goods. It
involves the movement and storage of raw materials, work-in-process inventory, and finished
goods from where goods are manufactured to the actual place where such goods are needed for
consumption or continuous use. Supply chain management in B2B is considered more complex
than the supply chain management in tradition business (B2C). Though they both involve
movements of goods and services from manufacturing points to another point where the goods
and services are consumed, supply chain management in B2B, however, involves
manufacturers, wholesalers and distributors to carry out their activities with usually larger
organization or bigger entities.
Supply chain management also encompasses planning process, designing, execution and
monitoring of the overall process of supply chain with the mindset to create value, gain
competitive edge, leveraging worldwide logistics, matching supply with demand and
evaluating global performance of businesses.
In the words of Stephen David, the CIO and B2B officer for Procter & Gamble, building
a successful supply chain depends upon "the ability of manufacturers to develop a successful
consumer driven system" (Reese, 2014). Going by the ideology of Stephen David, there is a

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noticeable decline in today's primary market for manufacturers. As a s result of this decline,
"B2B supply chain management should not be focusing on consumer goods, but rather new
categories" (Reese, 2004). Supply chain management in B2B should be more concerned about
the "fragmented market", comprised of many types of consumers. There are certain demands
exhibit by B2B consumers and what works best in a business environment might not work in
another business environment, just the way it is with different consumers. What works best in
this context is a "consumer driven and supplies products on demand" (Reese, 2004).

3.2. The Difference Between Supply Chain Management in B2B and

B2C
B2B is many different from the traditional B2C. The reliance of B2B on other platforms of
supply such as product catalogues is one of such. In the U.S, the biggest market for B2B supply
chain activities offers some strategic resources, namely: direct materials & strategic services,
capital equipment which are then followed by some commodities market including utilities,
direct materials and transportation. (Kerns, Bruce 2000).
In B2C, real time operation us very crucial in supply chain management as it enables
manufacturers to carry out real time transactions in a perfect manner, which are characterized
by mega vending retailers.
B2C capabilities include the ability of consumers in the home to log in, use auctions,
direct sell, barter, order products and pay for them directly (kerns, 2000). The key way in which
B2B differs from B2C are as follows: (a) B2B must handle larger transaction amounts, (b) B2C
is a seller driven supply chain demand, whereas B2B is buyer driven, (c) B2C scales "linearly",
and (d) B2B scales exponentially, as the number of buyers and sellers that participate increase
(Kerns, 2000).
The rate at which transactions are carried out, platform of internet exchange and the
awareness of both suppliers and customer exhibit focus about products and services also
establish some disparities in B2B and B2C supply chain systems. The organizations involved
in B2B are more generally concerned about supply chain management on delivery schedules,
inventory levels, specification or quality of product and product/supplier development issues.
Moreover, B2B supply chain literature within the market emphasizes price (Ribbers, 2003).
B2B's often outsource functions to reduce the cost of transactions, and typically maintain long
term relationships with a few suppliers to promote efficiency and knowledge sharing (Ribbers,
2003). B2B's concentrate on profitable, upscale and larger clients as well.

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Examples of B2C's include Amazon.com which sells books, records, electronic equipment and
apparel directly to consumers. A B2B example is Bcop.com, which is an office supply
organization that provides Boise office supplies to businesses (Malmberg, 2003). B2B e-
commerce enterprises are currently larger, and expected to grow more rapidly than B2C
enterprises (Malmberg, 2003).

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CONCLUSION

In the market mix, places plays a very important and crucial role. Whether its a b2b
market or b2c market, the most complex decisions faces by the management is distribution and
channel. Distribution and channels are responsible to reach the products to the customers or
users. These setups are not only complex but also very costly. In some extent 30 to 50 percent
of the product price accounted for distribution and channel costs.
The most efficient and effective in channel and distribution management refers how effectively
that business conducts its operations. No matter the size of the business is, the concern for
logistics, distribution can help any effort to utilize the supply chain more efficiently by cutting
costs when appropriate and also by avoiding waste of time and materials.
As the world economy evolves in online, offline or physical selling and distribution, companies
are going to highlight distribution and channel management to their top priorities. There are
lots of scopes to improve the distribution and channel management systems. Most of the
organizations prefers the tailor made and best suited strategies for their businesses. The most
simple, efficient, cost effective, well organized and tailored made for the business are going to
win the war of the current and future competitive business world.

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REFERENCES

Adrian palmer, Principles of Marketing (2000)

Barton A. Weitz and Sandy D. Jap (1995). Relationship Marketing and Distribution Channels

Cowen J. Narrowing the Supply Chain by Turning the Distributor into the Manufacturer

Frazier and Summers (1984). Journal of marketing, Published on October 1990

Gary L. Frazier. Organizing and Managing Channels of Distribution

Mahle, W. A. (1995): Deutschland in der internationalen Kommunikation.

Malmberg, David. 2003. "E-Commerce and the Supply Chain." CGR Management Consultants

Philip Kotler and Kevin Lane Keller. Marketing Management. 14th Edition

Olins, W. (2000): Why Companies and Countries are taking on Each Others Roles

Reese, Andrew K. 2004. "What's Still Missing in B2B?" Supply and Demand Chain Executive

Ribbers, Piet. 2003. "E-Markets and Supply Chain Management

Sharma, Sunil. 2004. "B2B, B2C or Value Chain Management "Supply Chain Mgmt In B2B
And B2C Environment."

http://nradigitalkits.com/b2b/supply-chain-management/

https://blog.elasticgrid.com/5-considerations-when-implementing-a-global-channel-strategy/

https://www.ukessays.com/essays/marketing/selecting-distribution-channels-and-channel-
members-marketing-essay.php

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