Marketing Channels

UAZA INDUSTRIES
29/09/2010

FINAL PROJECT

Submitted By:
Abdullah Bin Masood
Raheel Qureshi

10034 10137 10103 10118

Naila Sadiqque M. Farooq

Submitted To:
SIR SALMAN MANGOOL
MBA summer 3rd

CONTENTS
CONTENTS...................................................................................................................3 PRODUCT PORTFOLIO...............................................................................................4 CHANNEL FLOWS......................................................................................................... 6 SERVICE OUTPUTS.................................................................................................... 7 PROBLEMS FACED BY COMPANY FOR SUSTAINING INTENSIVE DISTRIBUTION..........8 GAP ANALYSIS.............................................................................................................. 9 SOURCES OF GAPS................................................................................................... 9 Environmental Bounds...........................................................................................9 DEMAND SIZE GAP ANALYSIS..................................................................................10 SUPPLY SIDE GAP ANALYSIS....................................................................................11 CHANNEL POWER.......................................................................................................12 COMPETITORS......................................................................................................12 STRATEGIES TO USE POWER...................................................................................14 CHANNEL CONFLICT...................................................................................................15 STRATEGIC ALLIANCE.................................................................................................17 HOW TO SUSTAIN STRATEGIC ALLIANCE................................................................17 VERTICAL INTEGRATION.............................................................................................20 Why company choose forward vertical integration:................................................20 PROPOSED CHANNEL FOR THE COMPANY..................................................................21 SUGGESTIONS............................................................................................................22 CONCLUSION.............................................................................................................23 References.................................................................................................................24

INTRODUCTION
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UAZA industries, a pioneer in the many uses of tropical and non tropical juices and purees, are considered a specialist in the field. Our staff, comprised of technically trained personnel has over 15 years of combined experience in product development, custom formulation and processing of juice blends, drinks, sauces and specialty food products. We have built a network of reliable suppliers who provide dependable food grade ingredients. The heart and soul of UAZA industries is THE GROWING DEMAND upon FOOD TRACEABILITY search made by Dr. David Barling, Senior Lecturer, Centre for Food Policy, School of Community and Healthy Sciences, City of London University. UAZA industries works with clients to create the perfect packaging solution whether by the drum or by the bottle, we can handle it! The label can be as complicated or as simple as the client requires. UAZA industries have a wide variety of stocks labels or we can unleash the creative genius of our graphics guys to create a custom label. UAZA industries are a member company of BRITISH FRUIT JUICE ASSOCIATION, UK. The associations consultants always are very keen to develop quality foods, juices, and drinks, recipes following the European, FDA and Asian regulations.

PRODUCT PORTFOLIO
Juices Carbonated drinks Others

Mango Leichi Apple Orange Guava Strawberry Mix fruit

Cola Lemon Orange Dew Apple

Pickles Desi ghee Cream Laban Nimko

Products are available under the name of FRESH JOY. Products are available in different sizes e.g. juices in 250ml, 500ml, 1Ltr, 1.5Ltr and in 5Ltr pet bottle, carbonated drinks are in 300ml, 1ltr and 1.5 Liters. Pickles are available in 40gm sachet pack, 500 gm, 1kg, 5kg, 12 kg bucket n 20 kg bucket. And other things are also available in different range.

CHANNEL FLOWS

MANUFACTURERDISTRIBUTORWHOLE SELLERRETAILEREND USER

MANUFACTURERWHOLESELLERRETAILEREND USER

SERVICE OUTPUTS
Channel system perform duties that reduce end users search, waiting time ,storage and other cost .These benefits are called service output of the channel. These are;

Bulk breaking Special convenience Product variety Customer service Information provision Waiting time

Company is using intensive distribution because The more outlets, the more it will sell True for convenience goods Low involvement Low Risk Buyers tend to take what is offered Addition of few more outlets after threshold coverage increase market share due to coverage in small size high turnover stores.

All else being constant, higher degree of distribution intensity will always boost sales.

PROBLEMS FACED BY COMPANY FOR SUSTAINING INTENSIVE DISTRIBUTION

Defection of downstream channel members Bait and switch tactics

To avoid these problems company is using following tactics

Contracts or strategic alliance Offering low prices and high profits to distributors Offering different schemes Incentives and other benefits e.g. van sharing

GAP ANALYSIS
SOURCES OF GAPS
Environmental Bounds Local Legal Constraints
As such there is not environmental bound found for the company as company is dealing in FMCG. They have their own transport system. Brand name is registered and company is collaborated with British Fruit Juice Association. Sophistication of the local physical and retailing infrastructure

Because company is dealing in FMCG so all the dealing are made on cash or advance payment basis.

Managerial Bounds
Size of organization Company have 41 employees, it is a medium size organization. So there is no such issue that manager cannot handle the organization. Desire to control the customer Channel managers are highly qualified and have more than 10 years of marketing experience so he have much knowledge that how to control the customer. Lack of trust among channel members Due to much information and experience in particular field, the manager has knowledge that channel members are the partners of the organization so there is a great environment of trust among the channel members.

A survey was conducted of 35 people, 25 consumer and 10 retailers, from different cities i.e. Gujranwala, Gujrat, Daska, Sialkot. And from that we find the following gaps.

DEMAND SIZE GAP ANALYSIS

Segment name Bulk break ing Spatial ce Delive Assortme Custom er service variety Informatio Major n provision channel for this segment Distributor Yes Yes Yes Yes Yes Yes MD

convenien ry time nt and

Whole seller

Yes

Yes

Yes

Yes

Yes

Yes

DW

Retailer

Yes

Yes

Yes

Yes

Yes

No

WR

End User

Yes

Yes

Yes

Yes

Yes

No

RE

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SUPPLY SIDE GAP ANALYSIS

Channel targeting which segment House hold users MD NO Channel member and flow they prefer Environmenta l or managerial bound Information Provision. MDWR C SoS<SoD Supply side gaps affecting which flow Planned technique used for closing gap Go for pull strategy Do actions create other gaps? Waiting time might increase , spatial convenie nce might disturbe Teenagers MDWR C No SoS=SoD NO d NO

Universities DR & Colleges

Recovery period, Potential competition

Information Provision. MDWR C SoS<SoD

Give incentives and Pull Strategy

NO

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CHANNEL POWER
Power can be measured by Utility x scarcity of alternative sources

COMPETITORS
Pepsi Coke Shezan Fresher Imported brands As company is dealing in FMCG and have low competitors so company have much power as compared to their channel members. On the other hand, there is a great demand of such products and only a few companies are offering these, this is also a healthy point to have power in hand.

MEASURING UTILITY OF THE COMPANY

Company is offering low price and high profit margins to its channel members.

INVENTORYING BASES OF POWER

Channel members required low stock as compared to its competitors

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EASE OF REPLACEMENT:
Switching cost: Switching cost from fresh joy to any other company is higher Manufacturer passes the following qualities for having such power:

Quality Level Price Terms of trade Producer Reputation Reliable Delivery

Company is providing good quality product because it is collaborated with British Fruit Juice Association. They are providing the product at minimal price with good terms of trade. Beside this, the producer has good reputation and as they have their own Logistics system so they are also reliable in delivery.

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STRATEGIES TO USE POWER

Six Influence Strategies practiced by the company:

Promise (Reward)
Company provides reward when a channel member completes its target.

Threat

(Coercive)

In case of delaying the payment or slowing down the sales, company uses coercive power and if required change the channel member.

Legalistic (Legitimacy)
Company has fallen into contract before making any channel member.

Request

(Referent, Reward, Coercion)

Use this strategy when company found any complaints regarding their product availability.

Information Exchange

(Expertise, Reward)

Company provides its sale officers to all the distributors.

Recommendation

(Expertise, Reward)

This strategy is used when any channel member found difficulty in selling the product or when there is any personal problem.

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CHANNEL CONFLICT
In an effort to increase product sales, marketers are often attracted by the idea that sales can grow if the marketer expands distribution by adding additional resellers. Such decisions must be handled carefully; however, so that existing dealers do not feel threatened by the new distributors who they may feel have influence on their customers and draw off potential business. For marketers, channel strategy designed to expand product distribution may in fact do the opposite if existing members feel there is a conflict in the decisions made by the marketer. If existing members sense a conflict and feel the marketer is not sensitive to their needs they may choose to stop handling the marketers products. Conflict handling techniques used by the company:

Delivery
Resellers want the product delivered on-time and in good condition in order to meet customer demand and avoid inventory out-of-stocks and because of good logistic system company has not faced any problem yet.

Profit Margin
Resellers are in business to make money so a key factor in their decision to handle a product is how much money they will make on each product sold. They expect that the difference (i.e., margin) between their cost for acquiring the product from a supplier and the price they charge to sell the product to their customers will be sufficient to meet their profit objectives so keeping in view the objective of both, the firm and the reseller, company is providing the higher margins of profits of almost 10% average.

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Other Incentives
Besides profit margin, resellers may want other incentives to attract them especially if they are required to give extra effort selling the product. These incentives may be in the form of additional free products or even bonuses (e.g., bonus, free trips) for achieving sales goals. These benefits are offered in shape of schemes by the company.

Packaging
Resellers want to handle products as easily as possible and want their suppliers to ship and sell products in packages that fit within their system. For example, products may need to be a certain size or design in order to fit on a stores shelf, or the shipping package must fit within the resellers warehouse or receiving dock space. Company is providing good packaging and attractive look.

Training
Some products require the reseller to have strong knowledge of the product including demonstrating the product to customers. Marketers must consider offering training to resellers to insure the reseller has the knowledge to present the product accurately. Company has their own sales officers which help resellers to sell the product.

Promotional Help
Resellers often seek additional help from the product supplier to promote the product to customers. Such help may come in the form of funding for advertisements, point-of-purchase product materials, or in-store demonstrations and company is offering such offers as these are beneficial for the company too.

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STRATEGIC ALLIANCE
Why upstream member wants strategic distribution Alliance? This is the question asked and they satisfy us by telling the following factors; There are some factors which manufacturer wants to enjoy

achieve advantages of scale, scope and speed increase market penetration enhance competitiveness in domestic and in global markets enhance product development develop new business opportunities through new products and services expand market development increase exports diversify create new businesses Reduce costs.

HOW TO SUSTAIN STRATEGIC ALLIANCE

These are the following ways for maintaining long term relationship Expectations of Continuity Two way Communication Trust Fair treatment
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Balanced Power Combined Stakes Perception of commitment Have a clear goal for the alliance It is important to have a clear and realistic idea of what you expect of the alliance before you get into it. If you are expecting your partner to deliver thousands of new customers to you and you only receive several hundred, you will be disappointed.

Try it on a limited basis

Strategic alliances are typically set up on a temporary basis, but some of those alliances can last for several years. Before you enter into a long term relationship with a new partner, it might be a good idea to set up a more limited project first so you both have a better idea of how well you will work together.

Protect the brand of your partner

You need to remember that your strategic alliance partners brand is as important to him as your brand is to you. You may feel that he has an inflated sense of the importance of his brand, but you should realize that he might have the same opinion of you.

Have an Exit Strategy

Strategic alliances are typically temporary arrangements. In order for both partners to know just how temporary the arrangement is there should be specific criteria for ending the alliance. That could be a specific time, or a certain dollar amount, or any other criteria you agree on, but it should be well defined.

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VERTICAL INTEGRATION
A channel member assumes responsibility for additional channel flows rather than let them performed by other channel members. Company has fall into forward vertical integration.

Why company choose forward vertical integration:

Vertical integration potentially offers the following advantages:

Improve supply chain coordination. Provide more opportunities to differentiate by means of increased control over inputs. Capture profit margins.

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PROPOSED CHANNEL FOR THE COMPANY

As company should not go for vertical integration so the distribution channel for the company should be;

MANUFACTURERDISTRIBUTORWHOLE SELLERRETAILEREND USER

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SUGGESTIONS
Company should not go for vertical integration because: The quantity required from a supplier is much less than the minimum efficient scale for producing the product. The core competencies between the activities are very different. The vertically adjacent activities are in very different types of industries. For example, manufacturing is very different from retailing. The addition of the new activity places the firm in competition with another player with which it needs to cooperate. The firm then may be viewed as a competitor rather than a partner. Expenses can be increased.

Company should not go for pull strategy because: This can increase the expenses of the company Company might not be in position to spend more on advertisement After adopting pull strategy, if the demand increases, company might not be able to fulfill the demand and hence create a bad image in the eyes of customers.

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CONCLUSION
From the above we conclude that company is doing with its operations. Company is forming strategic alliances, which is the major part of the operations. Without alliances, it is difficult for a company to capture or enter into a new market. Company uses its channel power as FMCGs are demanded more. The other major thing is that there is a GAP between service output demanded and service output supplied as company is not spending more in pull strategy. Except that all the SODs and SOSs are fulfilled according to the requirements. The other problem the company faced is that they started their operations as a distributor in some cities, where the strategies are totally changed and this might affect the production and cause other problem e.g. shortage of funds.

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References
http://ezinearticles.com/?How-to-Build-Strategic-Alliances&id=3991698 http://www.1000ventures.com/business_guide/strategic_alliances_main.html http://www.quickmba.com/strategy/vertical-integration/ http://www.scribd.com/doc/7184882/Fmcg http://pakistanmba.jimdo.com/free-final-project-thesis-2/ http://www.ask.com/wiki/Vertical_integration http://www.investopedia.com/terms/v/verticalintegration.asp

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