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Free Custom «Channel Strategies and the Value Chain» Essay Sample

Free Custom «Channel Strategies and the Value Chain» Essay Sample

The channel of distribution is a system that helps companies transfer products from original manufacturer to end customer. Companies use a variety of distribution channels to increase access to their products in all potential markets. According to Mulky (2013), effective distribution channels provide a company with a strategic advantage. Design and management of distribution channels are vital to a company’s ability to compete effectively. Distribution channels play a crucial role in managing a value chain, which helps a company identify its competitive advantages. Distribution channels eliminate the gap between a manufacturer and final customers creating value for consumers.

Effect of Growth, Going Global and Supply Chain on Distribution Channels

The channels of distribution have changed significantly during the last decade due to opportunities brought by globalization. Distribution strategies are affected when a company operates globally because it has to consider how to move supplies and final products.  According to Naghi & Para (2013), globalization affects all companies including those that are not interested in expanding their business to global markets due to competition from companies that extend their operations beyond national markets. It presents opportunities and challenges for companies to remain competitive in the market. It affects businesses and the way in which companies interact with consumers. Large multinational corporations continue to expand their global reach to remain competitive in their markets. Due to globalization, the distribution channels for both iPhone and Samsung Galaxy have moved over to imports that represent better value for money for final consumers. The products are distributed to different countries across the globe. Due to a continuous process of globalization, Apple and Samsung have implemented advanced distribution strategies to ensure that their products (iPhone and Samsung) are available in all markets and customers can access them. As multinational corporations, Samsung and Apple Inc have realized the significance of globalization by entering new markets all over the world to increase their sales volume and profits. Both companies are good at seizing opportunities in the global market by working on their distribution channels.

Apple has several distribution strategies for iPhone including retail stores in different countries where the company operates via online stores. Apple Inc has a website that allows customers purchase iPhones directly from the company online. The product is available in Apple stores across the globe located in different cities making it more accessible to customers. Apple stores contract with local telecommunication service providers and third parties. Another distribution strategy used by Apple is electronic companies such as Amazon.com, a well-known distributor of various products (Hult, Closs, & Frayer, 2013) Globalization has also shaped the distribution strategies for Samsung Galaxy. The product is found in retail stores, grocery stores and the company’s outlets located in different cities across the globe.

The relationship between a supply chain and a distribution channel is the most important strategic decision for companies. Highly efficient supply chains for Samsung Galaxy and iPhone create value for the products and sustainable competitive advantage. Samsung has a global supply chain which ensures a smooth flow of Samsung Galaxy to the distribution stores. Each major activity such as design, sourcing of raw materials, production and marketing is performed in different countries where a comparative advantage is the highest for that particular activity of the supply chain. According to Hult, Closs & Frayer (2013) making supply chains global prevents disruption of product flow which helps a company to stay competitive in the market. A combination of strategic and comparative advantages in the process of implementing a strategically oriented global supply chain helps a firm to identify the most appropriate markets or countries to transfer its value-added activities.

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 Apple has a diverse and well-managed supply chain for iPhone’s raw materials. It relies on its external partners, thus, there is a possibility of difficulties and delays. Apple pools together raw materials for iPhones to be assembled in China. The supply chain affects the distribution strategies of the company. The company must ensure that iPhones emanating from China are available for purchase in stores worldwide. China is a starting point of iPhone’s distribution network; the product is transported from the factories to the Apple stores where it is modified to match the needs of consumers specific to each market. 

Effects of Market Shift/Decline on Channel Strategies

Distribution channels develop and operate in a complex environment that keeps changing. Changes in the market have a significant effect on distribution channels. Mulky (2013) asserts that companies must design distribution channels that respond rapidly and dynamically to changes in customer demand and supply fluctuations to enhance profitability. Market shifts or declines influence distribution channel strategies. Demand variation influences consistency and stability of distribution channels. Increase in demand requires a company to increase its distribution networks to ensure that customers in different places access the product. Market supply also influences distribution channels. An increase in supply requires a company to expand its distribution networks to increase its sales. A decrease in supply limits expansion of distribution. 

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Socio-cultural and economic factors influence market demand whereas legal and competitive factors influence supply in distribution channels. Socio-cultural factors influence product demand due to social factors such as family, roles and reference-group influences as well as customer demographic characteristics. An increase or decrease in demand influences distribution decisions. Firms must determine demand and supply for a product before deciding on the distribution intensity on each channel level. Distribution density can be grouped into three categories: selective, intensive and exclusive. When supply and demand are high, a firm uses intensive distribution channels which involve the distribution of a product through all available channels to reach all the potential markets (Mulky, 2013).  Intensive distribution ensures that products are available at the right time. When demand and supply are low, firms use selective and exclusive distribution.

Obtaining Leverage within Channel and Value Chain

A company can enhance customers’ experience to obtain leverage within channel and value chain. This can be achieved by blending in-store and online shopping strengths to provide consumers with an immersive shopping experience (Krueger, 2015). Consolidation of several channels into a single distribution channel can help firms maximize market efficiency. Multiple distribution channels can maximize efficiencies in the market by extending the coverage area. The use of multiple channels can help a company meet the needs of end customers because they can purchase products via the channel that suits them most depending on their preferences and characteristics of the products. Multiple channels help a company capture opportunities to increase value. Moreover, the use of multiple channels can help a company to reduce risks by responding to changes in the market and increasing competition. The use of multiple distribution channels prevents new competitors from a decline in market shares when they enter the market through inexpensive channels. Krueger (2015) asserts that the integration of indirect and direct channels such as online platforms safeguards a firm against problems that may arise in regard to the existing channels. Direct distribution allows a firm to provide its products at lower costs compared to indirect channels that involve wholesale and retailers.

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With the increased availability of the internet as a new distribution channel, the intermediation function is constantly changing. In an increasingly competitive business environment, companies require an effective distribution strategy to reach target customers and markets (Hult, Closs, & Frayer, 2013). Companies can rely on the intermediaries instead of providing products directly to customers to increase the efficiency of their distribution channel. Most of the customers prefer purchasing goods in physical stores, and thus a company can create value for consumers through an enhanced in-store shopping experience.

Most companies seek to maximize market efficiency and profitability by expanding market share and customer base. A firm can extract greater profit by increasing supply chain efficiency and integrating innovative ideas into a value chain. Value chain consists of all the activities involved in the process, from a product being designed to being delivered to a customer. Each activity of the processes of product development and delivery adds value. Firms can maximize efficiency in the market by leveraging their value chains to increase their global expansion. By leveraging global supply chains, a company can maximize its market efficiency. Hult, Closs & Frayer (2013) assert that global supply chains are critical for companies that are becoming global as they help them reach a larger number of customers in different markets across the globe. Customers are global, and they demand value which must be sought in emerging markets, developed markets and less developed markets. Global supply chains provide a value-added benefit. All activities in a global supply chain must add value to the chain by reducing the cost of operation. Involving other companies in a supply chain requires monitoring of a value added to a product to avoid issues that may arise in the process of determining the total value. Moreover, determination of the value added-benefit in global supply chains may create additional costs because it requires investment, integration and coordination of the companies involved.

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Strategic Elements and Organizational Environments

Making marketing decisions is one of the most important roles of a company’s management. Organizational profitability and sustained growth highly depend on this role. Marketing decisions cannot be made without considering strategic elements and organizational environment (Ab Talib & Abdul Hamid, 2014). High performance of iPhone and Samsung Galaxy is linked to various strategies created to protect the companies from threats and opportunity exploitation. The products are distributed to segments that are selected based on their suitability and attractiveness. Marketing decisions for iPhone and Samsung Galaxy factor in competitors. Companies investigate the strategies used by their competitors and the way they affect their marketing plans. Samsung and Apple expand into countries with few competitors to ensure their survival and growth.

An organizational environment that affects marketing decisions can be classified into two groups: external and internal environment. Many macro environment factors influence marketing decisions for Samsung Galaxy and iPhone. Political environment is one of the external factors that influence marketing decisions of Samsung Galaxy and iPhone. Government regulations, competition regulations, taxes and political instability affects a company’s decision in regard to whether to enter a country (Ab Talib & Abdul Hamid, 2014). For instance, when introducing iPhone or Samsung Galaxy into a new country, the companies must know tax and government regulations in regard to imported products.  Political stability and free trade policies increase the opportunities for expansion of iPhone and Samsung Galaxy distribution channels to increase their availability in various markets. Samsung Galaxy is not marketed in some countries such as Japan due to political differences. Changes in legal and political environment can influence marketing decisions.

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Moreover, economic environment affects marketing decisions. Economic factors such as living standards, inflation, exchange rate and income level influence the ability of people to buy iPhones and Samsung Galaxy as they are targeted to reach high and medium class individuals. Samsung and Apple rely on foreign supply for their product components, and thus currency fluctuations and exchange rates influence marketing decisions. Rapid economic growth creates an opportunity for expansion of distribution channels to introduce the products into new markets (Ab Talib & Abdul Hamid, 2014). Besides, marketing decisions of Samsung and Apple depend on technological environment. Advancement in technology has changed the way Samsung Galaxy and iPhones are marketed. Both products are marketed on online platforms to increase sales and profitability.

Conclusion

Distribution channels play a crucial role in a value chain of a company. They help a company move final products to places where they can be accessed by customers easily and at the right time. In the era of globalization, distribution channels and globalized supply chains help companies penetrate new markets to increase sale volumes and profitability. Integration of offline and online distribution channels create value and help companies reach customers across the globe. Selection of a distribution channel depends on strategic elements and internal and external environments, which influence the attractiveness and demand for a product.

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