CH-12 Marketing Channels Distribution Strategy – Marketing : Book Guide

Chapter Twelve: Marketing Channels: Distribution Strategy Concept Review Generally, the concept questions are designed to achieve a single purpose – to encourage students to test their knowledge and understanding of the theoretical content of the chapter. These questions encourage recall and reflection, which will better prepare students to answer the marketing applications questions based on their understanding of the theory. 1. Explain why having a well thought out distribution strategy is important to a company’s success. Defining and understanding a company’s target market is only half the battle. Reaching them through convenient marketing channels is the other half. If companies are not able to secure appropriate distribution channels that reach prospective customers, their products and services are unlikely to ever meet their revenue targets. 2. Explain the factors that must be considered when designing a distribution strategy. o Distribution Channel Structure - direct, indirect or multi-channel o Customer Expectations – which manufacturers do customers want to buy from? o Channel Member Characteristics – large companies will likely prefer to deal directly with manufacturers while smaller ones are more apt to use intermediaries 3. Explain the differences between direct, indirect, and multi-channel distribution systems. What role do technologies and consumer behaviour play in the rise of multi-channel distribution? a. Direct - manufacturers deal directly with consumers b. Indirect – manufacturers use one or more intermediaries to provide goods and services to consumers c. Multi-channel – manufacturers use a combination of both direct and indirect distribution systems d. Multi-channel distribution has been assisted through technology and consumer behaviour. The Internet has facilitated online sales and lowered costs for companies to reach wider target audiences. Situational factors (discussed in Chapter 5) related to the purchase and shopping situation affect consumer behaviour. Time-starved consumers appreciate being able to shop for and buy products and services at their convenience. 4. Describe the functions performed by intermediaries. Why would companies choose to have intermediaries fulfill these functions rather than perform them themselves? a. Intermediaries perform a variety of transactional, logistical and facilitating functions. They reduce the number of marketplace contacts, match the requirements of consumers to manufacturers’ goods, handle physical distribution and storage of goods, facilitate searches by both buyers and sellers, and standardize exchange transactions. b. These functions must be completed by some organisation in order to get the right products to the right customers when they want them. While some companies may have the time, skill and other resources necessary to fulfill these functions, many companies do not, nor do they want to detract from their core competencies by taking responsibility for these tasks. 5. Explain how customer expectations and channel member characteristics impact a company’s distribution strategy. o Customer Expectations – Retailers must determine which manufacturers customers want to buy from. Manufacturers must understand where (i.e. which retail outlets) target customers expect to find their products. o Channel Member Characteristics – Large and more sophisticated channel members are unlikely to use intermediaries and may only buy directly via a company’s sales force. National chains may prefer to deal with regional suppliers for operational efficiency. Smaller companies will probably use intermediaries since they do not have the economies of scale to buy directly. 6. Explain intensive, selective, and exclusive distribution intensity. Under what circumstances would it be best to use each of these strategies? a. Intensive: designed to get products into as many channels as possible. Widely used for consumer packaged goods such as those found in grocery, convenience and discount stores. b. Selective: a few selected retail customers are chosen to carry a product. Helps seller maintain a particular image and control the flow of merchandise into an area. c. Exclusive: one or a few retail customers are granted exclusive rights to sell particular products within a certain geography. Helps to maintain a high-end brand image e.g. Rolex, ensures adequate supply of inventory, and protects pricing since retailers are not concerned about lower prices offered by competing stores. 7. Describe how companies manage distribution channels using vertical marketing systems. Vertical marketing channels are more closely aligned than independent entities which helps prevent conflict. Vertical marketing channels range in level of formalization: a. administered vertical marketing systems: no common ownership and no contractual relationships, dominant channel member controls the relationship b. contractual vertical marketing systems: contracts dictate terms of independent firms who join together to gain economies of scale and coordination and to reduce conflict c. corporate vertical marketing systems: common ownership, priorities and objectives can be dictated 8. Explain how supply chain management and logistics management add value to a company's consumer offerings. a. Supply chain management – Companies which have the necessary knowledge buy raw materials and components from various suppliers, make products, and then make them available to the consumer at accessible locations. This process adds value since it makes transactions more efficient and makes it more convenient and less expensive for consumers to purchase merchandise. b. Logistics management – This process ensures that inbound goods arrive at distribution centres on schedule, are stored until ready to be sent to marketing channels, are made floor ready, and shipped to stores when needed. What this means to consumers is that products are available in stores when and where they want them. Systems like Just-in-Time inventory management add value by ensuring reduced lead time to get products to retailers and increased product availability. 9. Explain how supply chain management improves marketing activities. Supply chain management helps marketing departments coordinate their delivery promises with the factory or distribution centres. It also facilitates the coordination of advertising and promotion with those departments that control inventory and transportation. This is essential so that merchandise is available when customers expect it. 10. What are the major elements of a logistics management system? Explain the benefits of a well-run just-in-time inventory management system. Logistics management systems involve inbound transportation, receiving and checking, storing and cross-docking, getting merchandise floor-ready, and shipping merchandise to stores. Just-in-time inventory management systems help to ensure that consumers are able to buy the products they want, when they want them. Benefits of a well run system include reduced lead time (by eliminating the need for paper transactions by mail and overnight deliveries), increased product availability and lower inventory investment. Marketing Applications 1. Explain supply chain management and identify the major activities that distribution channels, supply chain and logistics management involves. Identify several ways that supply chain management adds value to a company’s offerings, with regard to both consumers and business partners. Supply chain management (SCM) is the coordination and integration of all activities involved in the sourcing, procurement, conversion, and logistics management processes. It encompasses the planning and management of all activities involved in sourcing materials, manufacturing products, and delivering them to the end customer. The main goal of SCM is to create value for customers while maximizing efficiency and minimizing costs throughout the supply chain. Here are the major activities involved in distribution channels, supply chain, and logistics management: 1. Sourcing and Procurement: This involves finding suppliers, negotiating contracts, and procuring raw materials or finished goods necessary for production. 2. Production Planning: Determining the optimal production schedules, quantities, and resources required to meet demand forecasts while minimizing costs. 3. Manufacturing/Production: Transforming raw materials into finished products through efficient manufacturing processes. 4. Inventory Management: Managing the levels of raw materials, work-in-progress, and finished goods to ensure adequate supply while minimizing carrying costs. 5. Warehousing: Storing and managing inventory in warehouses or distribution centers, including activities such as receiving, picking, packing, and shipping. 6. Transportation: Planning and executing the movement of goods from suppliers to manufacturers, between manufacturing facilities, and from warehouses to customers. 7. Distribution: Delivering finished products to customers through various channels, such as direct shipment, retail stores, or e-commerce platforms. 8. Order Fulfillment: Processing customer orders accurately and efficiently, including order picking, packing, and shipping. Supply chain management adds value to a company's offerings in several ways: 1. Improved Efficiency: SCM helps streamline processes, reduce waste, and optimize resource utilization, leading to cost savings for the company, which can be passed on to customers through lower prices. 2. Enhanced Customer Service: By ensuring the availability of products at the right time and place, SCM helps companies meet customer demand promptly, leading to higher customer satisfaction and loyalty. 3. Faster Time-to-Market: Efficient supply chain processes enable companies to bring new products to market more quickly, gaining a competitive edge and capturing market share. 4. Increased Flexibility and Responsiveness: A well-managed supply chain allows companies to adapt quickly to changes in customer demand, market conditions, or disruptions in the supply chain, such as natural disasters or supplier issues. 5. Better Collaboration with Business Partners: SCM fosters collaboration and communication between different stakeholders in the supply chain, including suppliers, manufacturers, distributors, and retailers, leading to improved coordination and mutual benefits. 6. Risk Mitigation: By diversifying suppliers, optimizing inventory levels, and implementing contingency plans, SCM helps companies mitigate risks associated with supply chain disruptions, such as supplier bankruptcies or geopolitical events. Overall, effective supply chain management enables companies to deliver high-quality products to customers at competitive prices, while also improving operational efficiency and building strong relationships with business partners. Instructor’s Notes: Students should summarize the main focus of the chapter and focus on how supply chain management performs for consumers and business partners functions they could not easily or inexpensively perform themselves. Student might also acknowledge that supply chain management creates better relationships among business partners at different points in the value chain and helps the chain deliver more value to consumers than each company could deliver on its own. • Example answers: o Supply chain management refers to a set of approaches and techniques employed by firms to efficiently and effectively integrate suppliers, manufacturers, warehouses, stores, and transportation intermediaries into a seamless value chain in which merchandise is produced and distributed in the right quantities, to the right locations, and at the right time, as well as to minimize system-wide costs while satisfying the service levels required by customers. Supply chain management adds value to a company’s offerings because it brings together products and services that consumers normally would have to arrange for themselves. It also adds value for business partners by helping create business relationships that could prove profitable to each party in the value chain. 2. You are hired by a small bakery that wants to distribute its products through supermarkets. The market for the bakery’s products has been steadily growing, so the bakery needs to expand its distribution capabilities to match its production capacity. You set an appointment with the manager of a local grocery chain who is familiar with the bakery’s products and excited about the possibility of selling them in the store. The contract he offers includes a $10,000 fee for stocking the product, which he claims is simply the cost of doing business, noting that bigger bakeries object to adding your product line to the chain’s offerings. The bakery cannot afford this fee. What should you do now? First, it's essential to understand the dynamics of the situation. The $10,000 fee proposed by the grocery chain manager seems to be a standard practice in the industry, but it's causing a financial strain on the bakery. However, the manager's enthusiasm for the bakery's products indicates a potential opportunity for negotiation. Here are some steps you could take: Assess the Importance of the Deal: Evaluate the potential benefits of having the bakery's products in the supermarket chain. Consider factors such as increased visibility, access to a wider customer base, and potential revenue growth. Open Dialogue with the Manager: Express appreciation for the opportunity and the manager's interest in the bakery's products. Politely explain the financial constraints the bakery faces and inquire if there is any flexibility regarding the stocking fee. Present Alternatives: Propose alternatives to the $10,000 fee that could be mutually beneficial. This could include offering a smaller initial stocking fee, a lower fee combined with a commitment to exclusive distribution through the chain for a certain period, or a revenue-sharing agreement where the bakery pays a percentage of sales instead of a fixed fee upfront. Highlight Unique Selling Points: Emphasize what sets the bakery's products apart from those of bigger competitors. Highlight aspects like high quality, unique flavors, locally sourced ingredients, or any other competitive advantages. Negotiate Terms: Engage in a constructive negotiation process to find a solution that works for both parties. Be willing to compromise and explore creative solutions to overcome the financial hurdle. Consider Alternatives: If negotiations are unsuccessful and the stocking fee remains non-negotiable, consider exploring alternative distribution channels such as smaller grocery stores, farmer's markets, online platforms, or direct-to-consumer sales. Seek Legal Advice: If necessary, consult with legal counsel to review the contract and ensure that the bakery's interests are protected. Ultimately, the goal is to find a mutually beneficial arrangement that allows the bakery to expand its distribution while minimizing financial risk. Building a strong relationship with the supermarket chain manager and demonstrating the value of the bakery's products can go a long way in negotiating favorable terms. Instructor’s Notes: This scenario asks students to consider the common business practices at play in this particular industry and whether such practices meet their ethical standards. If such stocking fees are common within the retail grocery industry, the ethical factor is fairly low; it is more a matter of contract negotiation than an ethical violation. If students determine that such stocking fees are not common practice and that the grocery chain is attempting to exploit the small bakery, they should address the ethical considerations and decide to what degree they should challenge the grocery manager. • Example answers: o I would first determine whether such stocking fees are common practice in the grocery industry. If they are common, I would try to negotiate the fee down to a more reasonable level that my bakery could afford. If they are not, I would question whether we want to go into business with a firm that allows such unethical business practices. Perhaps we could broker a better deal with another grocery chain; otherwise, I would look for other ways to market and distribute the bakery’s products. 3. Discuss the advantages and disadvantages of Dell’s decision to change from using a direct distribution strategy to a multichannel approach to distribution. Dell's shift from a direct distribution strategy to a multichannel approach carries both advantages and disadvantages: Advantages: Increased market reach: By utilizing multiple channels, such as retail stores, online platforms, and partnerships, Dell can access a broader customer base that may not have been reached through its direct sales model alone. This can potentially lead to increased sales and market share. Diversification of sales channels: Relying solely on a direct distribution model can be risky, as it leaves the company vulnerable to changes in consumer behavior or market conditions. By diversifying its distribution channels, Dell can spread its risk and adapt more easily to market fluctuations. Improved customer convenience: Offering multiple purchasing options, such as in-store purchases, online orders, and partnerships with other retailers, can enhance the convenience for customers, allowing them to choose the channel that best fits their preferences and needs. Better customer experience: With a multichannel approach, Dell can provide customers with more opportunities for engagement and interaction, leading to enhanced customer satisfaction and loyalty. Disadvantages: Complexity in management: Managing multiple distribution channels can be challenging and require significant resources in terms of logistics, inventory management, and coordination among different partners. This complexity may increase operational costs and introduce potential inefficiencies. Risk of channel conflict: Introducing new distribution channels, especially if they involve partnerships with third-party retailers, can lead to conflicts with existing direct sales channels. Price undercutting, cannibalization of sales, or disputes over territory can arise, potentially damaging relationships with both customers and channel partners. Loss of control over customer experience: Direct distribution allows Dell to have full control over the customer experience, from pre-sale engagement to post-sale support. With a multichannel approach, this control may be diluted, as interactions with customers through third-party channels may not always align with Dell's standards or values. Potential brand dilution: Selling through various channels, particularly if they are not carefully curated, could potentially dilute Dell's brand image. Different retailers may offer different levels of service and support, impacting how customers perceive the brand overall. Overall, while a multichannel distribution approach can offer opportunities for growth and flexibility, Dell must carefully weigh these advantages against the potential challenges and risks associated with managing multiple channels effectively. Instructor’s Notes: This scenario asks students to consider when a company would use a direct only distribution strategy as Dell has done in the past and what the benefits to the company are of using intermediaries. • Example answers: Using a direct model, Dell maintained 100% control over all aspects of sales and distribution. This ensured quality control, brand consistency and higher margins. However, a direct model limited distribution. By moving to a multichannel approach to distribution, (e.g. sales via intermediaries such as Walmart, Staples and Best Buy) Dell is able to reach more people in its target markets and hopefully reverse sliding sales, especially to consumers. While businesses may be willing to purchase computers from a website, many consumers are increasingly likely to purchase from stores. The ability to touch and feel the computer weighs more heavily in the purchase decision for them. Of course, there is a cost associated with this model, i.e. lower profit margins, loss of control. 4. Research the “100 mile diet” trend and discuss how growing consumer awareness of shipping costs and environmental concerns has led to a push for more locally produced foods. The "100 mile diet" trend, also known as the locavore movement, encourages individuals to consume food that is grown or produced within a 100-mile radius of their location. This concept gained traction as a response to concerns about the environmental impact of food transportation, as well as a desire to support local farmers and promote food sustainability. Growing consumer awareness of shipping costs and environmental concerns has played a significant role in driving the push for more locally produced foods. Here's how: Environmental Impact: Shipping food over long distances contributes to greenhouse gas emissions from transportation vehicles, which can harm the environment and contribute to climate change. By choosing locally produced foods, consumers can reduce the carbon footprint associated with their food consumption. Food Miles: The concept of "food miles" refers to the distance food travels from production to consumption. Many consumers have become more conscious of the food miles associated with their purchases and are opting for locally sourced options to reduce the distance their food travels. Support for Local Economies: Buying locally produced food supports local farmers and producers, contributing to the local economy and helping to preserve agricultural land. This support can also help small-scale farmers compete with larger agricultural operations and maintain agricultural diversity. Fresher and More Nutritious Food: Locally produced foods are often fresher because they spend less time in transit and on store shelves. This can lead to higher nutritional value and better-tasting food compared to produce that has been shipped long distances. Food Security: Relying on locally produced food can enhance food security by reducing dependence on global food supply chains, which may be vulnerable to disruptions such as natural disasters, political conflicts, or pandemics. Overall, the growing consumer awareness of shipping costs and environmental concerns has fueled interest in the "100 mile diet" trend and the broader movement towards locally produced foods. By making conscious choices about where their food comes from, consumers can have a positive impact on the environment, local economies, and their own health. Instructor’s Notes: Students need to recognize there are financial and environmental costs involved in getting food products to market, beyond the cost of growing them. Visit http://100milediet.org/ for more information to supplement this exercise. • Example answers: The 100 mile diet was popularized by long-time vegetarians and environmentalists Alisa Smith and J.B. MacKinnon. They discovered that the food eaten by the average North American travels at least 1,500 miles from farm to grocery store. Driven by increasing interest and concern about fossil fuel use and global climate change, they decided to spend a year eating only food grown within a 100 mile radius of their downtown Vancouver apartment. They ate only the freshest food that had traveled the shortest possible distances and was eaten or preserved at its seasonal peak. Everything they ate was made from scratch. Nothing came out of a box. It meant giving up cherries out of season, New Zealand lamb and even bread since most wheat is grown on the Prairies. From their experience, they wrote a book “The 100-Mile Diet: A Year of Local Eating” about ethics and food. 5. Give an example of a retailer that participates in an independent (conventional) supply chain and one involved in a vertical marketing system. Discuss the advantages and disadvantages of each. An example of a retailer participating in an independent (conventional) supply chain is a local grocery store that sources products from various suppliers independently. On the other hand, a retailer involved in a vertical marketing system could be a company like Apple Inc., which not only designs and manufactures its products but also sells them through its own retail stores and online platforms. Advantages of Independent Supply Chain: Flexibility: Retailers in independent supply chains have the flexibility to choose suppliers based on factors like price, quality, and reliability, allowing them to adapt to changing market conditions more easily. Diverse Product Range: Since independent retailers can source products from multiple suppliers, they can offer a wider range of products to their customers, catering to diverse preferences. Competitive Pricing: With the ability to negotiate with different suppliers, retailers can often secure competitive pricing for their products, which can translate to cost savings for both the retailer and the consumer. Disadvantages of Independent Supply Chain: Coordination Challenges: Managing relationships with multiple suppliers can be complex and time-consuming, leading to potential coordination challenges and communication issues. Inconsistency in Quality: Since products may come from various sources, maintaining consistent quality standards across all products can be challenging, potentially affecting customer satisfaction. Supply Chain Disruptions: Reliance on multiple suppliers increases the risk of supply chain disruptions due to factors such as supplier failures, natural disasters, or geopolitical events. Advantages of Vertical Marketing System: Control Over Quality: Retailers in vertical marketing systems have greater control over the quality of their products since they are involved in the entire production process, from design to distribution. Brand Consistency: Vertical integration allows retailers to maintain consistency in branding and customer experience across all stages of the supply chain, reinforcing brand loyalty and trust. Efficient Distribution: By owning distribution channels, retailers can streamline logistics and ensure efficient delivery of products to customers, reducing lead times and enhancing customer satisfaction. Disadvantages of Vertical Marketing System: High Initial Investment: Establishing and maintaining a vertically integrated supply chain requires significant upfront investment in manufacturing facilities, distribution networks, and retail infrastructure. Limited Supplier Options: Vertical integration may limit retailers' flexibility in sourcing products, as they are primarily reliant on their own production capabilities, potentially restricting product variety. Risk of Overextension: Managing multiple aspects of the supply chain can divert resources and attention away from core competencies, increasing the risk of overextension and operational inefficiencies. In summary, while independent supply chains offer flexibility and diversity, they come with coordination challenges and supply chain risks. Vertical marketing systems provide control and consistency but require substantial investment and may limit supplier options. The choice between these two approaches depends on factors such as business objectives, industry dynamics, and resource availability. Instructor’s Notes: In an independent supply chain, the independent members attempt to satisfy their own interests and maximize their own profits, often at the expense of other members, whereas in a vertical marketing system, members act as a unified system. Students may instinctively prefer one over another, but this question forces them to consider both advantages and disadvantages of each. • Example answers: o A retailer that participates in an independent supply chain is a local grocery store; to get the products it needs to put on its shelves, the grocery must deal with supply chain members that act entirely independently. Such independence leaves the grocery vulnerable to bad deals that could mean less profit or, worse, less merchandise for its consumers. In contrast, Baskin-Robbins uses a vertical marketing system. The owner of a Baskin-Robbins store gets products from the manufacturer, as well as logistical and promotional support, in return for a percentage of the store’s revenue. However, if one of the key members of the supply chain goes out of business, it would adversely affect the retailer, especially compared with when supply chain members act independently. If Baskin-Robbins, as an ice cream manufacturer, went out of business, the Baskin-Robbins retail store owner would have to rebrand the store and find products from other sources. 6. In what ways can the flow of information be managed in the supply chain? How can the ready flow of information increase a firm’s operating efficiencies? The flow of information in the supply chain can be managed through various methods and technologies, including: Enterprise Resource Planning (ERP) Systems: ERP systems integrate various business functions and data sources into a single platform, enabling real-time information sharing across departments and partners. Supplier Relationship Management (SRM) Systems: SRM systems facilitate communication and collaboration with suppliers, allowing for better visibility into supplier capabilities, performance, and inventory levels. Electronic Data Interchange (EDI): EDI enables the electronic exchange of business documents, such as purchase orders and invoices, between trading partners, reducing manual data entry and streamlining processes. Supply Chain Management (SCM) Software: SCM software provides tools for planning, execution, and monitoring of supply chain activities, helping organizations optimize inventory levels, reduce lead times, and improve responsiveness. Radio Frequency Identification (RFID): RFID technology enables the tracking and tracing of goods throughout the supply chain, enhancing visibility and accuracy in inventory management and logistics. Blockchain Technology: Blockchain provides a secure and transparent way to record transactions and track assets across the supply chain, reducing fraud, improving traceability, and enhancing trust among participants. Collaborative Planning, Forecasting, and Replenishment (CPFR): CPFR involves collaboration between trading partners to jointly plan and forecast demand, leading to more accurate inventory management and reduced stockouts. Data Analytics and Business Intelligence: Analyzing supply chain data using advanced analytics and BI tools can uncover insights to optimize processes, identify cost-saving opportunities, and mitigate risks. The ready flow of information can significantly increase a firm's operating efficiencies by: Improving Visibility: Timely access to information about inventory levels, order status, and production schedules enables better decision-making and reduces the risk of stockouts or excess inventory. Enhancing Coordination: Seamless information flow facilitates coordination among various stakeholders in the supply chain, leading to smoother operations, reduced lead times, and improved customer satisfaction. Reducing Costs: By eliminating manual processes, minimizing errors, and optimizing inventory levels, efficient information flow can help reduce operational costs and improve overall profitability. Enabling Agile Responsiveness: With real-time data at their fingertips, organizations can quickly adapt to changes in demand, supply disruptions, or market conditions, enabling agile and responsive supply chain management. Enhancing Collaboration: Collaborative sharing of information fosters stronger relationships with suppliers and customers, enabling closer alignment of goals and objectives, and fostering innovation and continuous improvement. In essence, managing the flow of information in the supply chain not only improves operational efficiencies but also enhances competitiveness and resilience in today's dynamic business environment. Instructor’s Notes: Students likely will focus on how technologies like UPCs and RFID tags interact with point-of-sale and other information technology systems to provide greater efficiencies, better forecasting, and less need for manual human intervention to keep the supply chain running smoothly. • Example answers: o Information in the supply chain can be managed by the smart application of key technologies. Take, for example, the use of UPC and RFID tags to track merchandise and shipments. When an item is purchased, the point-of-sale system at the cash register can scan each item, then transmit that data to the company’s mainframe computer, which can communicate via electronic data interchange (EDI) to the supplier, which replaces the product that was purchased. That supplier then can communicate with its suppliers via a similar EDI transfer. When the replacement product comes to the retail outlet, the store scans its RFID tag, so the store’s computers know it is in inventory, which completes the chain of information. Data flowing automatically throughout the supply chain reduces the need for human intervention and provides better control over inventory, which in turn leads to greater operating efficiency. 7. Describe how B2B transactions might employ EDI to process purchase information. Considering the information discussed in Chapter 6 about B2B buying situations, determine which buying situation (new task, modified rebuy, or straight rebuy) would most likely align with the use of EDI technology. Justify your answer. B2B transactions often employ Electronic Data Interchange (EDI) to process purchase information efficiently and securely. EDI enables the electronic exchange of standardized business documents, such as purchase orders, invoices, and shipping notices, between trading partners. This technology eliminates the need for manual data entry, reduces errors, and speeds up the transaction process. Considering the information discussed in Chapter 6 about B2B buying situations, the buying situation that would most likely align with the use of EDI technology is the straight rebuy. In a straight rebuy situation, the buyer reorders a product or service from a supplier without significant changes to the purchasing process. The decision-making process is routine, and there is a high degree of familiarity with the product or service being purchased. Since the buyer is already familiar with the supplier's products, pricing, and terms, EDI can streamline the transaction process by automating the exchange of purchase orders and invoices. With EDI, the buyer can electronically submit a purchase order to the supplier's system, which triggers the fulfillment process. The supplier can then generate an electronic invoice and send it back to the buyer's system upon shipment of the goods. This seamless exchange of information accelerates order processing, reduces paperwork, and minimizes the likelihood of errors associated with manual data entry. Furthermore, in a straight rebuy situation, the buyer and supplier have an established relationship, and both parties have likely already integrated EDI into their respective systems. This familiarity with EDI technology makes it easier to implement and ensures smooth communication between the buyer and supplier. In summary, the straight rebuy buying situation is most likely to align with the use of EDI technology due to its repetitive nature, routine decision-making process, and existing relationship between the buyer and supplier. The efficiency and accuracy provided by EDI streamline the transaction process, making it the preferred choice for handling purchase information in straight rebuy scenarios. Instructor’s Notes: Students must integrate their knowledge from a previous chapter to address how EDI might benefit B2B suppliers in specific buying situations. • Example answers: o In B2B transactions, retailers could transmit purchase data to suppliers via EDI, which in turn can transmit their own merchandise needs—all without anyone having to pick up a telephone and talk to another business partner or supplier in the supply chain. The most appropriate situation for using EDI is a straight rebuy, in which the supplier exactly replenishes the same amount of product purchased by a consumer. Although EDI could work for new task and modified rebuys, they would require more human interaction and intervention. 8. Discuss the advantages to a retailer like SportChek of expending the time and effort to get merchandise floor-ready at either the point of manufacture or in the distribution centre rather than having retail store staff members do it in the stores. Provide the logic behind your answer. Retailers like SportChek benefit from expending time and effort to make merchandise floor-ready either at the point of manufacture or in the distribution center rather than leaving this task to retail store staff members. Here are several advantages and the logic behind them: 1. Consistency: By preparing merchandise centrally, retailers can ensure consistency across all stores. This consistency extends to product presentation, pricing, and promotional materials. Customers who visit different SportChek locations expect a uniform shopping experience, which can be achieved through centralized preparation. 2. Efficiency: Centralized preparation allows for streamlined processes and optimized workflows. Manufacturers or distribution center staff can focus solely on preparing merchandise, leading to faster turnaround times and increased efficiency compared to store staff who may have to balance preparation tasks with customer service duties. 3. Cost Savings: While there are initial investments in establishing centralized preparation facilities, the long-term cost savings can be significant. Retailers can benefit from economies of scale, bulk purchasing discounts, and optimized logistics when preparing merchandise in bulk at a centralized location. 4. Quality Control: Centralized preparation facilitates better quality control measures. Staff at the point of manufacture or distribution center can thoroughly inspect merchandise for defects, ensuring that only high-quality products reach the retail floor. This helps in reducing returns and improving customer satisfaction. 5. Expertise and Specialization: Staff members at the point of manufacture or distribution center may have specialized training and expertise in preparing merchandise efficiently. They can leverage this expertise to ensure that products are displayed attractively and in a manner that maximizes sales potential, something that store staff members, who may have diverse responsibilities, might not be able to prioritize. 6. Faster Time-to-Market: Centralized preparation allows retailers to react quickly to market trends and consumer demands. By having merchandise ready to go as soon as it arrives at the store, retailers can capitalize on seasonal trends or sudden shifts in consumer preferences without delay. In conclusion, centralizing the preparation of merchandise at either the point of manufacture or in the distribution center offers retailers like SportChek numerous advantages including consistency, efficiency, cost savings, quality control, expertise, and faster time-to-market. These benefits contribute to an enhanced customer experience, increased sales, and improved overall operational efficiency. Instructor’s Notes: Floor-ready merchandise can be placed on the sales floor immediately, which should prompt students to recognize its many benefits for retailers. • Example answers: o With floor-ready merchandise, SportChek can speed up its stocking process and save time and money by allowing sales associates to focus more on selling products rather than preparing products for sale. 9. Why would a big company like Nike want to develop strategic partnerships with locally owned running stores? Describe what Nike would have to do to maintain such relationships. Nike might seek partnerships with locally owned running stores for several reasons: Local Presence: Locally owned running stores often have a strong presence in their communities and deep connections with local runners. Partnering with them allows Nike to tap into these networks and gain visibility among local consumers. Market Insights: These stores have valuable insights into local market trends, preferences, and customer behaviors. Partnering with them enables Nike to access this market intelligence and tailor its products and marketing strategies accordingly. Customer Engagement: Local running stores often offer personalized customer service and expertise that larger retailers may lack. By partnering with them, Nike can enhance its customer engagement efforts and provide runners with a more personalized shopping experience. Brand Authenticity: Collaborating with locally owned stores can help Nike enhance its brand authenticity and credibility within the running community. It demonstrates a commitment to supporting local businesses and fostering grassroots connections. To maintain these partnerships, Nike would need to: Communicate Effectively: Open and transparent communication is essential for building and maintaining strong partnerships. Nike should establish clear channels of communication with its partner stores and keep them informed about product launches, marketing campaigns, and any other relevant updates. Provide Support: Nike should offer support to its partner stores in various forms, such as marketing assistance, product training, and access to exclusive promotions or events. This support helps ensure that the stores have the resources they need to effectively promote Nike products and serve their customers. Respect Independence: While Nike may provide support and guidance, it's important to respect the autonomy and independence of locally owned stores. Nike should avoid overly prescriptive policies or actions that undermine the unique identity and values of its partner stores. Listen and Adapt: Nike should actively seek feedback from its partner stores and be willing to adapt its strategies and approaches based on their input. This demonstrates a commitment to collaboration and helps strengthen the partnership over time. Mutual Benefit: Ultimately, the partnership should be mutually beneficial for both Nike and the locally owned stores. Nike should strive to create value for its partners, whether through increased foot traffic, higher sales, or other tangible benefits. By following these principles and practices, Nike can develop and maintain successful strategic partnerships with locally owned running stores, driving mutual growth and success in the market. Instructor’s Notes: In a strategic relationship, the supply chain members commit to maintaining the relationship, so students must consider any benefits of such relationships for a large corporation like Nike. • Example answers: o Nike might develop a strategic partnership with a locally owned running store for several reasons. First, with such relationships, Nike does not need to open its own retail outlets in every town and city. Second, the long-term partnership gives Nike more say in the marketing of its products at the retail level. Third, Nike obtains good marketing and sales support, possibly including insights into what runners are buying and why. To maintain such relationships, Nike must build mutual trust so that the retailer believes Nike will act honestly and benevolently, share information, establish common goals that benefit both parties, and make credible commitments to—or tangible financial investments in—the retailer. 10. You are hired as an assistant brand manager for a popular consumer product. One day in an emergency meeting, the brand manager informs the group of a serious problem with a supplier; she sends you to the manufacturing facilities to investigate the problem. When you arrive, you learn that one of the manufacturer’s key suppliers has become increasingly unreliable in terms of quality and delivery. When asked, the plant manager says the owner of the troubled supplier is his cousin, whose child has been very ill, and he just cannot switch suppliers right now. What course of action should you take? Addressing this situation requires a delicate balance between business needs and personal considerations. Here's a suggested course of action: Assess the Situation: Conduct a thorough assessment of the supplier's performance, including quality control issues and delivery delays. Gather data and evidence to understand the extent of the problem. Open Communication: Engage in open and transparent communication with the plant manager and the supplier. Express concerns about the impact of their performance on your product's quality and availability. Emphasize the importance of meeting contractual obligations. Offer Support: Express empathy and understanding towards the personal challenges faced by the supplier's owner. Offer support and assistance where possible, such as exploring alternative solutions or connecting them with resources for managing personal issues. Explore Alternatives: Work with the plant manager to identify alternative suppliers who can provide the required quality and reliability. Evaluate potential options based on their ability to meet production needs without compromising on quality. Negotiate Solutions: Initiate negotiations with the troubled supplier to address the root causes of their performance issues. This may involve renegotiating contracts, implementing quality improvement measures, or providing additional support to help them overcome challenges. Develop Contingency Plans: Develop contingency plans to mitigate risks associated with the supplier's unreliability. This may include maintaining buffer inventory, diversifying the supplier base, or establishing backup production facilities. Monitor Progress: Continuously monitor the supplier's performance and progress towards resolving the issues. Implement regular review meetings and performance metrics to ensure accountability and drive improvement. Escalate if Necessary: If the supplier fails to address the issues despite efforts to support them, escalate the matter to higher management or seek legal counsel to explore options for contract termination or enforcement. Overall, the key is to balance empathy and understanding with the need to protect the interests of your brand and consumers. By actively addressing the situation with transparency, collaboration, and a focus on finding mutually beneficial solutions, you can navigate through this challenging situation while maintaining the integrity of your product. Instructor’s Notes: This scenario forces students to question how they might resolve a supply chain problem without violating their own sense of ethics or fairness. Using the ethical decision-making framework, students should evaluate the situation to determine an appropriate course of action. • Example answers: o In applying the ethical decision-making framework:  “Have you thought broadly of any ethical issues associated with the decision to be made?” I have thought broadly about the ethical issues. In this case, I have concerns about keeping the company’s customers happy but not punishing the supplier for falling on hard personal times.  “Have you involved as many possible people who might have a right to offer input into or have actual involvement in making this decision and action plan?” I have not discussed the situation with the supplier to find resolutions, nor have I talked to my company’s inventory management team to determine when and how this supply problem could start affecting our deliveries.  “Does this decision respect the rights and dignity of the stakeholders?” The supplier could fall on even harder times if we stop our orders, and the relationship we have built will suffer.  “Does this decision produce the most good and the least harm to the relevant stakeholders?” The supplier could go out of business if we cut off our relationship, which might mean the owner could not pay for her child’s medical bills.  “Does this decision uphold relevant conventional moral rules?” Although some people may think it entirely appropriate to switch suppliers from a purely business perspective, doing so could hurt our reputation in the community.  “Can you live with this decision alternative?” If the decision is to work with the supplier to find a temporary workaround until the owner’s situation improves, then yes, I can live with that decision. o On the basis of these answers, I would talk to the owner directly and find out more about the situation. In the course of that discussion, I would raise my concerns about my company getting its needed merchandise but would attempt to work with the supplier to find an equitable workaround that preserves the relationship between our companies. Net Savvy 1. Dell is considered exemplary in its ability to manage its supply chain efficiently. Log on to the company’s website (www.dell.com) and go through the process of configuring a computer to purchase. Print out a copy of the computer system you have designed, making note of the delivery date and price. Describe how Dell has revolutionized computer sales and delivery. Is there any indication that Dell has partnered with other companies to sell peripheral equipment like printers or scanners? How would this partnership add value to customers? However, I can provide you with information on how Dell has revolutionized computer sales and delivery, as well as how they partner with other companies to add value to customers. Dell revolutionized the computer sales industry by pioneering the direct-to-consumer model. Instead of selling through traditional retail channels, Dell allows customers to configure and purchase their computers directly from the company's website or through phone orders. This approach eliminates the need for middlemen and reduces costs, allowing Dell to offer competitive prices to customers. One of the key elements of Dell's success is its efficient supply chain management. By maintaining direct relationships with suppliers and minimizing inventory through just-in-time manufacturing, Dell is able to reduce overhead costs and pass those savings on to customers. This enables Dell to offer customizable computers at competitive prices with relatively quick delivery times. While Dell primarily focuses on selling computers and related accessories through its website, it does partner with other companies to offer a wider range of products to customers. For example, Dell often collaborates with companies like HP, Canon, or Epson to sell printers, scanners, and other peripheral equipment alongside its computers. This partnership adds value to customers by providing them with a convenient one-stop shopping experience. Instead of having to visit multiple websites or stores to purchase everything they need, customers can find everything they require for their computing setup in one place, streamlining the purchasing process and potentially saving them time and effort. Additionally, Dell's partnerships with reputable brands ensure that customers have access to high-quality peripheral devices that are compatible with their Dell computers, enhancing the overall user experience. Instructor’s Notes: This exercise combines examinations of the source of Dell’s competitive advantage (i.e., how it manages its supply chain from Web site to shipped order) and the potential benefits to the company and the consumer of key strategic partnerships. • Example answers: o Dell has revolutionized sales and delivery through its online store, which enables consumers to find and customize the exact computer they want, and through its just-in-time supply chain management system. On www.dell.com, consumers can pick the type of system, customized to their particular needs, and receive an estimate of both the cost and the delivery date based on those options. After consumers complete the order, Dell’s JIT system places orders for the parts, and the suppliers ship those parts immediately to Dell, which then assembles the ordered PC. In this way, Dell avoids carrying a lot of inventory itself and saves money. According to the Web site, Dell partners with other companies for things like printers, software applications, computer cables, and accessories. Such partnerships add value for the consumer, who can now go to one place—www.dell.com—to get everything he or she needs for computing rather than having to shop laboriously at various places. 2. The Opening Vignette for this chapter highlighted ways that Zara International, a division of Inditex, successfully manages its supply chain. Visit Inditex’s website (www.inditex.com) and review the company’s commitment to social responsibility, particularly the section that pertains to its code of conduct. Considering the discussion in this chapter about strategic relationships, how does Inditex address the factors necessary for mutually beneficial partnerships according to its code of conduct? Inditex, the parent company of Zara International, demonstrates a strong commitment to social responsibility through its code of conduct, which outlines principles for ethical business practices. In the context of strategic relationships and mutually beneficial partnerships, Inditex addresses several factors in its code of conduct: Ethical Standards: Inditex emphasizes ethical behavior as a fundamental aspect of its partnerships. By adhering to ethical standards, the company fosters trust and integrity in its relationships with suppliers, partners, and stakeholders. Fair Treatment: The code of conduct likely includes provisions for fair treatment of all parties involved in the supply chain. This might involve ensuring fair wages, safe working conditions, and respect for labor rights throughout the supply chain. By treating partners fairly, Inditex aims to build long-term, mutually beneficial relationships. Transparency and Communication: Inditex likely emphasizes transparency and open communication with its partners. Transparent communication ensures that all parties understand expectations, responsibilities, and challenges, leading to smoother collaboration and problem-solving. Compliance with Regulations and Standards: Inditex likely requires partners to comply with relevant laws, regulations, and industry standards. This ensures that partners uphold legal and ethical standards, reducing risks and potential liabilities for both parties. Continuous Improvement: Inditex likely encourages partners to continuously improve their practices, whether in terms of sustainability, efficiency, or quality. By promoting a culture of continuous improvement, Inditex and its partners can stay competitive and adapt to changing market demands. Overall, Inditex's commitment to social responsibility, as outlined in its code of conduct, provides a framework for building and maintaining mutually beneficial partnerships based on trust, fairness, transparency, and continuous improvement. These principles align with the discussion in the chapter about strategic relationships and contribute to Inditex's success in managing its supply chain effectively. Instructor’s Notes: Students must recall the lessons they learned about social responsibility, as well as the factors necessary for beneficial partnerships—mutual trust, open communication, common goals, and credible commitments—to respond to this question. • Example answers: • According to its code of conduct, Inditex addresses the factors for mutually beneficial partnerships. It facilitates mutual trust, maintains open communication about its goals and its ethical business practices, and requires that other members of its supply chain have common goals (including social responsibility) before it will enter into business relationships in the first place. End-of-Chapter Case Walmart Pioneers Supply Chain Management Questions: 1. How does an individual firm like Walmart "manage" a supply chain, particularly considering that supply chains include multiple firms with potentially conflicting objectives? Describe some of the conflicts that could arise in such a circumstance. Managing a supply chain like Walmart's involves orchestrating a complex network of suppliers, manufacturers, distributors, and retailers to ensure the smooth flow of products from the point of origin to the end consumer. Here's how Walmart and other firms manage their supply chains, despite the potential conflicts: Coordination and Collaboration: Walmart collaborates closely with its suppliers to forecast demand accurately, plan production schedules, and manage inventory levels effectively. This coordination ensures that products are available when and where they are needed, reducing the risk of stockouts or excess inventory. Information Sharing: Walmart uses advanced technologies such as RFID tags and sophisticated software systems to track inventory levels in real-time and share this information with its suppliers. This transparency enables suppliers to adjust their production and delivery schedules in response to changes in demand or unexpected disruptions in the supply chain. Performance Metrics and Incentives: Walmart sets clear performance metrics for its suppliers, such as on-time delivery rates and product quality standards. Suppliers that meet or exceed these metrics are rewarded with continued business, while those that fall short may face penalties or loss of contracts. This incentivizes suppliers to prioritize Walmart's orders and invest in process improvements to enhance efficiency and reliability. Risk Management: Walmart conducts regular risk assessments to identify potential vulnerabilities in its supply chain, such as geopolitical instability, natural disasters, or transportation disruptions. It develops contingency plans to mitigate these risks and ensure business continuity, such as diversifying its supplier base or maintaining safety stock levels in strategic locations. Conflicts can arise in a supply chain due to various factors, including: Competing Objectives: Suppliers, manufacturers, distributors, and retailers may have different priorities and goals, such as maximizing profits, minimizing costs, or improving customer service levels. These conflicting objectives can lead to tensions and disagreements over pricing, production schedules, or allocation of resources. Power Imbalances: Large retailers like Walmart often have significant bargaining power over their suppliers, enabling them to negotiate favorable terms and conditions. This power imbalance can strain relationships and create resentment among smaller suppliers, especially if they feel unfairly treated or exploited. Uncertainty and Volatility: Supply chains are susceptible to disruptions caused by unforeseen events such as natural disasters, political instability, or economic downturns. These disruptions can ripple through the entire supply chain, leading to delays, shortages, and increased costs. Managing these uncertainties requires close collaboration and flexibility among supply chain partners. In summary, managing a supply chain like Walmart's requires effective coordination, collaboration, and communication among multiple firms with potentially conflicting objectives. By leveraging technology, setting clear performance metrics, and proactively managing risks, Walmart and other firms can mitigate conflicts and ensure the efficient operation of their supply chains. Instructor’s Notes: When supply chain members disagree about their goals, roles, or rewards, supply chain conflict results. Somehow, Walmart often avoids such conflict; students might mention its contract negotiations, use of technology, common sales forecasting, and tight inventory controls. • Example answers: o Walmart manages its supply chain primarily by exploiting its position as one of the largest retailers in the world, which allows it to dictate many of the terms of its contracts. If manufacturers and distributors want to do business with this massive retailer, they have to do things the Walmart way. In addition to using its power in the supply chain, Walmart employs advanced technology for better inventory management and sales forecasting and shares information with companies like P&G to strengthen their relationship and create value for both members. If it is not careful though, Walmart could experience supply chain conflicts, such as goal misalignment (e.g., a supplier wants to sell as much as possible but Walmart only wants merchandise amounts that meet its inventory levels and sales forecasts) or uneven rewards (Walmart receives most of the profit and benefits of selling a vendor’s merchandise, but the vendor gets little in return to help its own profit levels). 2. What are some ways that Walmart’s supply chain management system has provided it the benefits of higher levels of product availability and lower merchandise acquisition and transportation costs? Provide specific examples of each benefit. Walmart's supply chain management system is renowned for its efficiency and effectiveness, offering several benefits such as higher product availability and lower acquisition and transportation costs. Here are some ways Walmart achieves these benefits: Advanced Inventory Management: Walmart utilizes sophisticated inventory management systems that track sales in real-time and automatically reorder products when stock levels are low. By accurately predicting demand and ensuring adequate inventory levels, Walmart minimizes stockouts and improves product availability. For example, Walmart's Retail Link system enables suppliers to access real-time sales data, allowing them to adjust production and distribution accordingly. Just-in-Time (JIT) Inventory: Walmart employs a just-in-time inventory approach, where products are delivered to stores as needed, reducing excess inventory holding costs. By maintaining lean inventories, Walmart decreases the need for extensive storage space and minimizes the risk of obsolescence. For instance, Walmart collaborates closely with suppliers to implement efficient delivery schedules, ensuring that products are restocked promptly without overstocking. Efficient Distribution Network: Walmart operates a highly efficient distribution network comprising regional distribution centers strategically located near stores. This network minimizes transportation costs and ensures rapid replenishment of store shelves. For example, Walmart's cross-docking strategy involves transferring merchandise directly from inbound to outbound trucks, reducing handling and storage costs. Technology Integration: Walmart leverages cutting-edge technology, such as RFID (Radio Frequency Identification), to enhance supply chain visibility and efficiency. RFID tags enable real-time tracking of products throughout the supply chain, improving inventory accuracy and reducing out-of-stocks. Walmart's use of RFID technology has led to significant improvements in supply chain visibility and inventory management accuracy. Supplier Collaboration: Walmart collaborates closely with its suppliers to streamline processes and reduce costs throughout the supply chain. Through initiatives like Vendor Managed Inventory (VMI) and collaborative forecasting, Walmart and its suppliers share data and work together to optimize inventory levels and minimize stockouts. For example, Walmart's Supplier Sustainability Assessment Program encourages suppliers to adopt sustainable practices, reducing environmental impact and operating costs. By implementing these strategies and continuously optimizing its supply chain management practices, Walmart achieves higher levels of product availability while simultaneously reducing merchandise acquisition and transportation costs, contributing to its competitive advantage in the retail industry. Instructor’s Notes: To offer specific examples, students could discuss how Walmart has used technological advances such as RFID tags, telecommunication networks, cross-docking, and inventory management systems to achieve better performance at a lower cost. • Example answers: o Walmart’s supply chain management system includes the following benefits:  Higher levels of product availability: Walmart uses UPC and point-of-sale systems that capture and immediately transmit data to suppliers for replenishment in the next shipment to Walmart’s distribution center.  Lower merchandise acquisition costs: By using computers and tighter inventory management and forecasting, Walmart minimizes the number of people involved at the manual level and saves money. In addition, it contracts with suppliers to receive volume discounts on merchandise.  Transportation costs: By using cross-docking distribution centres, Walmart can load up a single truck with an entire store’s merchandise rather than using multiple trucks for the same amount of product. It also requires suppliers to deliver products to distribution centres and places distribution centres within short distances of the stores, which saves it fuel costs. Video Activities 1) Video: New Balance: Managing Supplies for US and Overseas Learning Objective: LO4 Supply Chains Add Value Page Number in Text: 405 Description: New Balance has strong relationships with its suppliers and its retailers, a vital part of its supply chain management. Keeping information and merchandise flowing smoothly requires a true partnership to allow everyone to respond to customer demand, contributing to overall profitability. Key Words: supply chain management, operations, ordering process, information flow, lead time, strategic relationship, making merchandise flow, EDI Activity: Ask students to compare the supply chain management approach of New Balance with that of Zara International described in the opening vignette. In particular, the comparisons should focus on the flow of products, flow of information and strategic partnerships. They may have to supplement the opening vignette information on Zara with further research on the web. They should observe that although the approaches of the two companies are somewhat different, they both appear to be effective. Students may also be asked to comment on how new technology such as RFID may improve the supply chain management of both companies. Also ask students how the New Balance supply chain adds value. In particular, what competitive advantage might they capitalize on as a result of manufacturing about 20% of their merchandise in North America? Comparing the supply chain management approaches of New Balance and Zara International reveals some interesting contrasts and similarities. New Balance emphasizes strong relationships with both suppliers and retailers, highlighting the importance of partnership in ensuring smooth information and merchandise flow. Their approach involves strategic relationships and effective management of lead times to respond efficiently to customer demand. Key technologies such as Electronic Data Interchange (EDI) are likely utilized to facilitate this process. On the other hand, Zara International is known for its vertically integrated supply chain, characterized by a highly responsive and agile manufacturing and distribution system. Zara's approach involves rapid production cycles, frequent shipments, and close coordination between design, production, and retail operations. This allows Zara to quickly respond to changing market trends and customer preferences. While New Balance focuses on building strong partnerships and managing lead times, Zara relies on speed and flexibility to stay competitive. However, both companies demonstrate effective supply chain management practices that contribute to their overall success. Regarding the integration of new technologies such as Radio-Frequency Identification (RFID), both New Balance and Zara could benefit from improved inventory visibility and tracking capabilities. RFID technology could enhance inventory accuracy, reduce stockouts, and optimize replenishment processes, ultimately leading to improved supply chain efficiency and customer satisfaction. As for the competitive advantage derived from manufacturing about 20% of their merchandise in North America, New Balance may benefit from reduced lead times, lower transportation costs, and increased flexibility in responding to regional market demands. Manufacturing locally also enables New Balance to capitalize on the "Made in America" sentiment, appealing to consumers who prioritize domestically produced goods. This localization strategy could enhance brand loyalty and differentiate New Balance from competitors who rely heavily on offshore manufacturing. Overall, New Balance's supply chain adds value by enabling them to efficiently meet customer demands, foster strategic partnerships, and leverage regional manufacturing capabilities to stay competitive in the market. 2) Video: M&M's: Multichannel Marketing Learning Objective: LO3 Distribution Channel Structure Page Number in Text: 396 Description: M&Ms has sold its candy via intermediaries since 1941. A relatively new distribution channel for the company is a direct to consumer model where they sell in their own stores. The video introduces the topic of channel conflict and how M&Ms ensures that they keep existing retailers on side. Key Words: direct distribution, indirect distribution, multichannel distribution, distribution intensity, channel conflict Activity: Have students visit the M&Ms website to check out their personalized M&Ms offering. http://www.mymms.com/default.aspx Ask students what form of distribution this is (direct) and why they think M&Ms launched this new product. Introduce the topic of channel conflict and discuss how the company manages to avoid it while still bypassing its retailers and selling directly to consumers. The personalized M&M's offering on the M&M's website operates under a direct distribution model. M&M's likely launched this new product to capitalize on the growing trend of personalized and customizable products, allowing consumers to create unique gifts, party favors, or promotional items with their branding or personal messages on M&M candies. To avoid channel conflict while selling directly to consumers and bypassing retailers, M&M's likely employs several strategies: 1. Differentiated Product: The personalized M&M's offering is unique and not directly competing with the standard M&M's products sold through retailers, reducing the likelihood of channel conflict. 2. Exclusive Online Offering: By offering personalized M&M's exclusively through their website, M&M's avoids directly competing with retailers who sell standard M&M's products. This helps maintain positive relationships with existing retailers. 3. Communication and Transparency: M&M's likely communicates openly with their retail partners about their direct-to-consumer offerings, emphasizing the complementary nature of the personalized M&M's product and assuring retailers that it will not cannibalize their sales. 4. Strategic Pricing and Promotion: M&M's may employ pricing and promotional strategies that encourage consumers to purchase personalized M&M's directly from their website while still supporting retailers for standard M&M's products. Overall, M&M's manages to avoid channel conflict by carefully positioning their direct-to-consumer offerings as complementary to their traditional retail distribution channels and by maintaining transparent communication with their retail partners. Solution Manual for Marketing Dhruv Grewal, Michael Levy, Shirley Lichti, Ajax Persaud 9780071320382, 9780070984929