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Distribution Management Hugo van Zyl 083-629 2069 [email protected] Marketing 2B Distribution Management Quiz What are the 5 Primary and 4 Support Activities that “Porter” names in his model to describe Value creation in the Supply chain? 9+1 point Hugo van Zyl 083-629 2069 [email protected] Marketing 2B Distribution Management Quiz 9 Value creating stages - Porter • Primary activities – – – – – Inbound logistics Operations goods Outbound logistics Marketing / Sales Service • Support activities – – – – Procurement function Tech Development Human resources Infrastructure Hugo van Zyl 083-629 2069 [email protected] Marketing 2B Distribution Management SAF Channel participants – Chapter 2 SAF Distribution Overview Evolution of SAF distribution channels Informal sector Hugo van Zyl 083-629 2069 [email protected] Marketing 2B Distribution Management Trends Franchising SAF Distribution - Overview Typical SAF Distribution channels participants Manufacturing Wholesalers Informal retailers Consumers Hugo van Zyl 083-629 2069 [email protected] Retailers Marketing 2B Distribution Management The Typical distribution channel Importer Producer Wholesaler Manufacturer Retailer Consumer Supplier Importer Producer Retailer Manufacturer Consumer Supplier Global company Local Manufacturer Local Wholesaler Local Retailer Local Consumer Hugo van Zyl 083-629 2069 [email protected] Marketing 2B Distribution Management Evolution of SAF distribution channels • History lesson!! Hugo van Zyl 083-629 2069 [email protected] Marketing 2B Distribution Management SAF Retailers ( Grocery) 2004 # Stores Sales ($mn) Metcash 1’544 3’272 Spar (SAF) 813 1’829 Shoprite 743 4’067 Pick n Pay 594 4’288 Woolies (SAF) 221 1’744 Massmart 167 2’532 Hugo van Zyl 083-629 2069 [email protected] Marketing 2B Distribution Management Trends. • • • • Evolution of Distribution channels is linked to economic development. SAF – Large informal retail sector ( Spaza shops and street vendors) But 2% of Retailers are responsible for 70% of sales (P&P et al) Wholesalers have evolved into Self service wholesalers (Metcash Africa) Hugo van Zyl 083-629 2069 [email protected] Marketing 2B Distribution Management Trends - Wholesalers • Phase of evolution is dependant on the economic development of the country. • Phase 1 – Divorced its operation from those of importers. • Phase 2 – Certain activities handed over to retailers • Phase 3 – Specialization according to manufacturing lines. • Phase 4 – Attraction of End consumers Hugo van Zyl 083-629 2069 [email protected] Marketing 2B Distribution Management Importance of Wholesalers in developing countries • Wholesalers are key in Marketing activities • Control the Distribution channel. • Activities: – – – – – Collects products and Raw material Network with Markets Keep stocks Break down bulk Finance function • Cash / Carry Wholesalers are prominent in developing economies Hugo van Zyl 083-629 2069 [email protected] Marketing 2B Distribution Management Evolution of C/C Wholesalers • C/C Wholesalers market a limited range with fast turnover. • Gains a competitive advantage by buying in bulk. • Focus on small independent retailers and individual consumers Hugo van Zyl 083-629 2069 [email protected] Marketing 2B Distribution Management Development of C/C Wholesalers • 1960 – 1970 – No C/C wholesalers, Full service wholesale responsible for distribution to retailers • 1970-1985 – Makro and Metro established • 1986 – 1990 – Growth in Makro and Metro – Opening of Price club (P&P) • 1991- 2005 – Consolidation into Premier group and Massmart – Economic and tech innovation causing further changes in C/C profile Hugo van Zyl 083-629 2069 [email protected] Marketing 2B Distribution Management Metcash Organogram Hugo van Zyl 083-629 2069 [email protected] Marketing 2B Distribution Management Massmart organogram Hugo van Zyl 083-629 2069 [email protected] Marketing 2B Distribution Management SAF retailers • 3 main groups responsible for 63% of all food purchased in Retail market • Purchase directly from manufacturer • In competition with C/C wholesalers • Some C/C wholesalers targeting Consumers so lines are blurring Hugo van Zyl 083-629 2069 [email protected] Marketing 2B Distribution Management Comparison of Clicks vs. Dischem + Hugo van Zyl 083-629 2069 [email protected] Marketing 2B Distribution Management Franchising “Being in business for yourself but not by yourself” • Arrangement between the franchisor and the franchisee • Franchisor – Seller and owner of the trademark or name of the business • Franchisee – purchases the right to use the name / trademark and the processes of the business • Highest are of growth in retail business globally Hugo van Zyl 083-629 2069 [email protected] Marketing 2B Distribution Management Franchisor Advantages • • • • • Disadvantages Acquire funds No direct ownership of Brand Reduction in Distribution cost Motivation is high Co-operative advertising opportunities • Regulations limiting power • Loss of control: – – – – – Hugo van Zyl 083-629 2069 [email protected] Marketing 2B Distribution Management Over brand Over Distribution Expansion programs Financial situation Corporate intellectual property Franchisee Advantages • Risk of failure minimized: – Business model proven – Products proven • Continuous service • Economies of scale • High return on investment Disadvantages • No guarantees of success • Little say in expansion programs • Loss of some level of independence • Pricing model might may be a disadvantage to the Franchisee Hugo van Zyl 083-629 2069 [email protected] Marketing 2B Distribution Management Franchising in SAF Hugo van Zyl 083-629 2069 [email protected] Marketing 2B Distribution Management Informal sector and Distribution channels • Developing countries have an “informal business” sector • ASGISA – 2nd economy • Unemployed people that operate a small “informal” business • In general outside the normal regulations and legal framework • Critical and essential part of economy. • Needs some from of distribution network to service demands Hugo van Zyl 083-629 2069 [email protected] Marketing 2B Distribution Management
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