The structure of distribution is assumed

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1 INTRODUCTION The structure of distribution is assumed to be a given environmental factor. Manufacturing firms tend to make choices among the various channels that are in the structure. The structure itself is, however, taken as an uncontrollable variable. Though marketing channels are generally regarded as a variable aspect of the marketing mix of the manufacturers, they often receive less managerial attention than considerations of product, price and promotion. This is because much of the channel, in the typical case, is outside the company, where it is difficult to do anything about it, especially in the short run. The result is that manufacturers frequently overlook the opportunity to make a break-through by innovations in distribution channels. It has become apparent that in the developing world, distribution problems have been more obstructive -_,; _ than many other deterrents to the process of industrialisation. An efficient distribution system is a necessary».~ ~- " >-' \ condition for industrial and economic advancement. If

Though marketing channels are generally regarded as a variable aspect of the marketing mix of the manufacturers, they often receive less managerial attention than considerations of product, price and

2 effective marketing institutions are not available, or do not develop at the right time, producers may be blocked from evolution to higher and more productive levels. If many firms in an economy are similarly blocked, the process of development will be severely hampered. Apprehensions have been expressed that manufacturers in India find it increasingly difficult to match mass production with mass distribution and that the inadequacy of the present distribution structure creates bottleneck in the economy. 9Pis2EiYs _2 _EE2_ E2 z The prime objective of the study is to analyse the existing structure of marketing channels with a view to ascertain the adequacy of the present distribution system to provide the distribution services most appropriate for the emerging mass production situation. Based on the main objective, the study is directed to find out: 1. The channel mix used by specific industries and individual manufacturing firms--the combination of the different channels used to serve different market segments--so as to see whether distribution

Apprehensions have been expressed that manufacturers in India find it increasingly difficult to match mass production with mass distribution and that the inadequacy of the present distribution

3 channels are used by manufacturing firms for strategy differentiation; 2. The length of the channel--the number of levels of intermediaries between the manufacturer and the consumer--in order to probe whether there are redundant intermediaries in the channels; 3. The institutional and functional characteristics of the different types of intermediaries used in various industries, with a view to find the emerging trends in institutional innovations and functional adaptations; 4. The intensity of distribution, so as to analyse the policies of exclusive and selective distribution, the availability and selection of channel members, the extent of vertical integration, and the level of channel cooperation and control. éaelxzisel_%9 l-_ 2é_B2 2E_P2 22 As the research tradition in marketing usually treats distribution system as a static mechanism, the dominant approaches to marketing analysis are not adequate for analysing the dynamics of distribution channels in a developing economy. A new conceptual

The institutional and functional characteristics of the different types of intermediaries used in various industries, with a view to find the emerging trends in institutional innovations and

4 model has been developed for the purpose of this study. Four structural variables of marketing channels, i.e.. number of channels, number of levels in the channels, type of intermediaries, and number of channel members at each level, have been analysed. The study attempts description and analyses the development, dynamics, and determinants of each of these variables. Specific hypotheses have been formulated and tested with reference to 16 aspects of the structure of marketing channels. The study is both descriptive and analytical. Different methods of research have been employed for collection and analysis of data. While selecting industries, due representation was given to different cvnsw m er prvducb, categories of industries,lsemi-industrial goods, and industrial products. The fifteen industries covered by the study include soaps, pharmaceuticals, packaged food and soft drinks, agricultural inputs and implements, batteries, lamps, TVs and radios, fans, tyres, paints, watermeters, transformers, electromechanical components, power cables and chemicals. To represent the various industries, thirty manufacturing firms were selected using statistical judgement for detailed analysis.

Specific hypotheses have been formulated and tested with reference to 16 aspects of the structure of marketing channels. The study is both descriptive and analytical.

5 Interviews were held with marketing executives of the selected manufacturing firms. An elaborate schedule was used to collect primary data from these companies. A second source of information was the trading community. As a third source, experienced executives of some leading firms located outside Kerala were interviewed, primarily for clarifications regarding trade practices in different industries. From the last two sources relevant data were obtained through unstructured interviews. 212 _9. _E12.. '..B X For convenience of analysis, the study is divided into seven chapters. Chapter I attempts to set the study in its right perspective by tracing the adaptive behaviour of marketing channels in the course of economic evolution. The pattern of evolution in the major structural variables of distribution is analysed by reviewing the economic histories of the United States, U.K., and Japan. Chapter II defines the research problem, develops a conceptual model for analysing channel structure, and discusses the methodology used for collection and analysis of data.

As a third source, experienced executives of some leading firms located outside Kerala were interviewed, primarily for clarifications regarding trade practices in different industries.

6 While the first two chapters give a theoretical background, the subsequent four chapters contain empirical analyses of four aspects of the structure of marketing channels. Chapter III deals with the multiple channel structure. Tracing the number of channels used in different industries, and differentiating the role of direct and indirect channels, the study proceeds to discussions on channel design, addition and deletion of channels, and the dynamics of channel change. The last part of the chapter is devoted to the discussion on the determinants of strategic adaptations in distribution channels. Chapter IV begins with a description of the number of levels and intermediaries, and analyses the additions and deletions of channel levels. As part of the dynamics of channel length, issues such as redundant intermediaries and their impact on cost of distribution, unnecessary repetition of functions, communication bottlenecks and channel speed are discussed. The search for the determinants of channel length leads to the analysis of the impact of customer buying patterns, physical and economic distance, market density, size and market power of the manufacturer, and product characteristics.

Tracing the number of channels used in different industries, and differentiating the role of direct and indirect channels, the study proceeds to discussions on channel design, addition and deletion

7 Chapter V deals with institutional dynamics in the distribution system. From a description of the extent of trade specialisation among wholesale and retail intermediaries, the study leads to the institutional evolution and functional adaptations of marketing intermediaries. Trade margins and cost of distribution are analysed in the context of trade functions. The last part analyses the factors inhibiting institutional innovations and focuses on the challenge of rationalisation and modernisation of wholesaling and retailing. Chapter VI discusses the horizontal structure of distribution by tracing the policies of intensive, selective and exclusive distribution at various levels, and analyses the vertical relationships among channel participants. The issues analysed include the availability of channel members for relatively smaller firms, the legal environment of distribution, the channel dominance by manufacturers, and the factors influencing vertical integration as well as formation of centrally coordinated channels. Chapter VII consolidates the major findings of the empirical analyses in this study.

intermediaries. Trade margins and cost of distribution are analysed in the context of trade functions.

SALES. Management PRADIP KUMAR MALLIK. Associate Professor, Department of Business Administration The University of Burdwan West Bengal

SALES. Management PRADIP KUMAR MALLIK. Associate Professor, Department of Business Administration The University of Burdwan West Bengal S SALES Management PRADIP KUMAR MALLIK Associate Professor, Department of Business Administration The University of Burdwan West Bengal OXFORD UNIVERSITY PRESS Contents Preface v 1. INTRODUCTION TO PERSONAL