Question

Discuss how physical distribution relates to channel policy and how they affect one another. Explain how and why distribution channels are affected as they are when the stage of development of an economy improves. Account, as best you can, for the differences in channel patterns which might be encountered in a highly developed country and an underdeveloped country.

Answer 1

Physical distribution is the transfer of ownership of a product from it's point of manufacture to it's point of consumption is termed as physical distribution. In order to achieve this the product pases to a distribution channel which may comprise distributors, wholesalers, stockists, retailists, networks or internet. Each company may be a part, or more than one part at times, of this channel and may formulate it's own strategy and various policies to successfully complete it's role in the channel by optimising distribution at it's level. All these marketing channels have three major core functions of purchase of products for resale from the higher point in the channel, selling the products to the lower line in the channel and providing maximum support to the lower level to optimise sales. Channel is the means for the product to reach the consumer, and the optimum management of this ensures the product reaches the widest and maximum customer base. Channel policy decides the best route for the product to reach its destination by selecting one or more options from the available chain of commerce based on suitability for the product. Physical distribution and channel policy are entirely interdependent and one cannot exist without the other as for optimum implementation of physical distribution there should be support from a strong and perfect channel policy.

Distribution channels are chosen on the basis of various prevalent factors such as characteristics of the customers, their needs, their cultures, their incomes, their buying patterns and success factors which serve to arrive at an implementable channel plan for the specific product in the particular market. The goal of a channel is to attain maximum contact with customers in a bid to optimise the channel based on their needs. Every business has a target population and a specialised channel plan to ensure it gets optimum benefits from a channel operating within the framework of this plan. With development of an economy the channels available become wider with more options, the consumers have more buying power and overall this may require an overhauling of the channel selected as where initially supplying to wholesalers was the norm, with development in the economy, entering retail markets for the wholesalers may be more profitable or e-commerce may become an available option as an add-on.

In developed nations channel patterns are very well-developed and smooth, and similar patterns found across the nation to facilitate quick and easy flow of the economy. a set pattern is followed from manufacturer, to distributor, to wholesaler to retailer to consumer. the whole chain functions like a well-oiled engine and each channel member fulfils their role to perfection. Hence, the economy and the channel work together as a whole, with the help of an excellent infrastructure for transportation, manufacture, communication and facilitation of business with a set pattern in place. In an underdeveloped nation it is very difficult to simply follow a set pattern even across the entire nation due to vast differences in rate of development in different parts of the nation. Also, the customer, the culture, the infrastructure or rather the lack of it, impact selection of channel within a single nation itself, vastly. The mindset is conservative generally, so in a place accustomed to dealing with retailers a strategy to introduce direct marketing may fail miserably, unless market research proves it viable. Within retailing itself methodology may vary like in Italy each retailer of shoes sells a special variety only, whereas in most economies every retailer sells similar products. The lack of infrastructure may impact transportation of the product to the next participant in the supply chain resulting in doing away with too many channel intermediaries for example, a small scale producer selling directly to retailers, or else a larger one selling to wholesellers and doing away with the distributor. This may also be caused due to non-availability of large warehousing spaces for existence of large distributors, so the producer may prefer to have numerous small wholesalers to cover an area instead. Hence, we can see that the channel of supply varies greatly with development and the selection of channel pattern becomes much more easier and it's successful implementation more assured with existence of well-defined patterns of channel flow available in developed nations.