Chapter2-.-Distribution Management

Submitted by: Mary Jane A.
Resente CBET-19-502E
Submitted to: Dr. Ester T. Edralin September 29, 2020
Chapter 2: The Channel Participants

Summary:
This chapter talks about the types of channel participants including the distribution tasks they perform.
First it discuss who are the Channel participants which are the manufacturer and producers,
intermediaries and final users. The manufacturers and producers as the participants help to maximize
and making the product available to the customers to satisfied their needs and wants, while in
intermediaries as a channel help in distribution of the product in a high fixed costs, efficient and help to
achieve the desired economies of scale. As for the final users they are viewed as the target market. In
addition this chapter discuss the different type of wholesalers, according to the Census of Wholesale
Trade there are 3 major types of wholesalers (1) Merchant wholesalers this are type of wholesaler
perform of buying product, hold the inventory, gain the title and handling products in a quite large
quantities and then reselling the products in smaller quantities to others like retailers or even other
wholesalers too. (2) Agents, brokers, and commission merchants this are the type of wholesalers who do
not take the title to the goods compare to merchant wholesalers but they act as the representative of
the customer or clients, in that way they only earn by gaining commission on sales or purchases. (3)
Manufacturer’s sales branches and offices which are separated from manufacturing plants and owned
by manufacturers, the task they perform is to offer the product came from the manufacturer at a
wholesale price. Also, this chapter tells about retailers which retailer view as Consist of business firms
engaged primarily in selling merchandise for personal or household consumption and rendering services
incidental to the sale of goods however in kinds of retailers can be classified as a merchandising
business, Service Business, or hybrid business. While the structure trends of retailers are based on the
number of retail establishment that indicated the size of the retail establishments has increased the
average sales volume. To sum up, retailers increased growing power in marketing channel because they
can increased the size and buying power by using advance technology and modern marketing strategy.
Discussion Question #1
Wrigley is the world’s leading manufacturer of chewing gum, producing literally millions
of packages of gum every day. It is a large, financially strong company whose manufacturing
technology for producing gum is state-of-the-art. It sells its products to millions of gum-
chewing consumers all over the United States and many other countries around the world. Still,
Wrigley has never attempted to sell its chewing gum directly to consumers, but instead uses a
wide variety of intermediaries at the wholesale and retail levels.
Why do you suppose Wrigley has chosen to use intermediaries rather than sell direct to
consumers? Explain the underlying economics of the company’s policy.
 I think Wrigley has right decision on choosing intermediaries than selling directly to the
customer because if Wrigley has a lack of the requisite expertise on distributing the
product to the final consumer and economies of scale then Wrigley will fall out of
business. The Production and logistics decision of a multinational businesses should
consider always how will be efficient and low cost to gain more profit from the business
because if Wrigley will setting up the distribution task in each target country in the
world then the company can cover up the costs. And also a need to maintain a huge
inventory to meet the demand by putting up at least have a several warehouse in a
certain country and need to provide transportation of the product that will add other
cost. Choosing intermediaries give advantages in distributing the product to final
consumer, for example Wrigley bulk inventory is divided up into smaller portions and
distributed among intermediaries for distribution. The intermediaries will serve as
logistic support, ensure smooth and effective physical distribution of goods, and provide
customer care services both before and after sales. By using intermediaries Wrigley can
minimize the costs and maximize profit.
Best Buy is by far the largest consumer electronics retailer in the world with sales of
over $45 billion and almost 4,000 stores worldwide. Best Buy enjoys tremendous power in the
marketing channels within which it operates. All manufacturers and other suppliers providing
products to Best Buy have to pay close attention to what this 1,000 pound gorilla of a retailer
wants. But even when suppliers go out of their way to meet the demands of Best Buy, they are
finding that the giant retailer could block them from getting their products to consumers
because Best Buy may favor certain suppliers with which it can make especially attractive deals.
In addition, Best Buy is increasing its emphasis on offering its own private brand products such
as the thinnest laptop on the market and an all-electrical motorcycle. Some of Best Buy’s own
products may even compete directly with famous supplier brands, such as Apple and Sony.
Why do you think Best Buy is flexing its muscles in the channel? Do you think this type of
behavior is inevitable on the part of giant dominant retailers?
 Best buy is flexing its muscles in the channel because they need to make a good
relationship towards to customer and Fill up the demand of the customers by satisfying the
needs and wants, and improving the distribution task help those to be a head towards the
number of competitors that wants to compete to them.
 Yes, it inevitable on the part of giant retailers. It happen when retailers become larger,
the power of others channel member also larger so that Best buy should maintain the
supplier power in order not to take away the supplies by other retailers. Best buy also
taking risk making attracting deals for customer by making their own product brand that
can able to compete with famous supplier brands, such as Apple and Sony. Lastly, best
buy have 4000 stores world-wide and sales over $45 billion no doubt that they still being
favor by the suppliers than other retailers.
Jacobson Companies, headquartered in Des Moines, Iowa, describes itself on its Web
site as a “can do” third party logistics company. The company is indicative of the new breed of
logistics services firms that can do it all. If a company, whether a manufacturer, wholesaler,
retailer or other type of firm, needs logistical help, they can find “one-stop shipping” for
logistical services if they deal with 3PL firms. Along with the availability of an almost unlimited
range of services, is the capability of many 3PLs to custom tailor the logistical services they
provide to fit the particular needs of their clients.
Why do you think 3PLs have become such an important type of facilitating agency in
market channels? Do you expect this trend to continue?
 Logistics is very essential to a business because it manage the flow of things from raw
material to creating a product and to the point of consumption to satisfy the needs of
customer or organization. Having a 3PLs help the company reducing the cost of product
distribution and this is also more convenient to the firm because it provide all the need
in distributing the product.
 Yes, I assume this trend to continue because 3PLs provide convenient and efficient than
other type of logistics it will help the company to balance the risk because the fact that
3PLs can perform important type of facilitating that will tailored a specific customer
needs. It will be a great advantage in every firm if they consider 3PLs, 3PLs will
guarantee the channel movement more efficient and smooth that the costumer know
where they should go to buy the products or how they can find the product that they
need.

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Submitted by: Mary Jane A.

Chapter 2: The Channel Participants

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