DNAM 4A

Logistics and Distribution

“DISTRIBUTION STRATEGIES”

Teacher’s name:
Claudia Rivera García

Team members:
Gonzalez Salmeron Carlos Alejandro ID: 3249
Macias Garcia Gabriela ID: 3148
Estrada Amador Claudia Daniela ID: 3069
Ramirez Pérez Claudia Itzel ID: 3259
Quiroz López Vanessa ID: 3169
Rivera Moreno Mónica ID: 3218

Delivery date:
March 20th, 2022
• Index

Introduction 3

Indirect/direct distribution 4

Company dimensions 6

Time postponement, form postponement or outsourcing 8

Market coverage 9

Marketing coverage distribution 9

Communication strategies 10

Marketing system 10

Individual Conclusions 10
 ● Introduction

In this work what we will do is to investigate which is the distribution that suits us best for the
company selected “Tenis Rivera’s” located in Aguascalientes, Mexico. The marketing
coverage, the best intermediaries and another dimension of the company. Since the
company's products are not purchased in the country of Mexico but are distributed and sold
in this nation.

Distribution strategies refer to the way in which the distribution of a certain product is carried
out, within these distributions we find two which are direct and indirect:
The direct one, in which the manufacturer sells directly to the final consumer, without any
type of intermediary and generally through a short channel. This is the one used by car
manufacturers or, in many cases, clothing manufacturers, since the distributor is the same
one that sells the product in a certain area. With the direct strategy, you have full control of
the distribution and logistics of the product, although it can be a complex and difficult
technique to put into practice.
The indirect, which is made up of one or several intermediaries and uses either a long or a
short channel. It is a simpler and cheaper strategy to implement than the direct one but, on
the other hand, with it the traceability of the product is lost throughout the distribution
process.

Indirect/direct distribution
● Is it more convenient for them to use direct or indirect distribution? Include a
comparative cost table to support your response.

The company named “Tenis Rivera’s” is located in the municipality of Pabellon de Arteaga,
in the state of Aguascalientes, which is dedicated to the sale of American shoes imported
from the United States. This company buys the sneakers from an outlet and ships them to
Mexico for sale and distribution. The shoes that the business buys are not purchased directly
from the Nike factory, they are purchased from a franchise or outlet for greater ease of
purchase and savings of time and money since outlets are usually easier to find, to make
purchases of big quantities with low taxes and offer discounts. Once they are purchased and
exported to Mexico, they arrive at a parcel service, and from there they are transported to
the warehouse. The headquarters is located in the warehouse and its regular check-up is
carried out once they arrive. Half of the merchandise stays in the main store and the other
half is sent to the Rincon de Romos municipality branch.
From the stores to the client, an indirect distribution is used, this is considered to be the best
option for the company due to its low cost and ease of handling. The "PaMex" parcel service
is used as an intermediary that assists in the logistics of the company, and the two branches
as the main point of sale, also offering national home delivery. The two branches are located
in a very optimal location previously selected with the help of a market research conducted
to locate the best spot for the stores based on customer preferences, habits, rate of
purchase, competition and demand.
In order to select whether direct or indirect distribution was going to be used the company
had to make a cost analysis of six important factors described and explained in the following
table:

Direct Distribution Indirect Distribution

Freight Cost In the beginning the cost of
transportation can be
expensive but it can decrease
overtime, since the company
creates different strategies for
better logistical use. And they
don't have to use other
logistic intermediaries.
The cost can be at the same
rates initially and currently, but
with good communication with
the parcel company(“PaMex”)
it was offered a discount to
send the shoes to Mexico. And
also the cost of transportation
from the store to the customers
is not big since they go to the
stores.

Storage Cost Since the company produces
their goods and has to send
them directly to the
consumers, the warehouse
should be bigger than others.
The area and cost of it
depends on the company but
is more expensive than
having a few products.
The storage cost is cheaper
since the products are less
than a warehouse full of freshly
produced goods, also they are
distributed into two locations
reducing the area,
maintenance and personnel in
charge of handling the shoes.

Handling Cost They have to hire more
managerial employees since
the warehouse of the
company is huge or big, and
the people here need to be
well trained and prepared to
handle big amounts of shoes
The warehouse is not that big
since the company is a retailer
and they buy less products,
they only hire the necessary
personnel and it's cheaper
since compared to a big
warehouse there are only a
 and place them in their right few to manage a small storage
spot, causing it to be more and previously selected
expensive. products.

Managerial Personnel There has to be a lot of Here the managerial personnel

Cost different areas to the correct
management of the direct
distribution strategy and the
big warehouse full of products
so they hire a lot more people
and their wages are more.
is less expensive since most of
the time they are the owners
and the same employees of
other areas, and this is a lot
better for a small company
than having a lot of employees
in just a small area.

Direct Selling Expenses These are more since they
offer different payment
methods and have to pay a
certain quantity to the
companies that are offering
them this service
(visa,PayPal,etc). Also Nike
dont pay cosisions to their
employees but the charging
services are more expensive
than this.
The direct selling expenses are
the commission to the
employees which is the 5% of
the total sale of one product
which varies depending on the
price, also the charging
services are cheaper since the
company only offers to pay by
cash.

Advertisement The advertisement strategies Marketing can be as expensive

Expenses are different and sometimes
are expensive because the
company is big and has to
sell directly to customers
without other intermediaries
or marketing companies but
their own marketing
department.
as the company wants but
regularly is cheaper then direct
distribution companies
because the brand is already
positioned and people know
about it, and even because the
company is smaller the
advertisement is made inside
the company, and is cheaper.

● If you selected indirect distribution, which intermediaries would you

recommend to use? (Wholesaler, Retailer, Franchisor, or Distributor)

The company initially considered that using a franchise would be the best thing for the
business and a quick way to be supplied by the same Nike company, however they realized
that if they bought the franchise the shoes would not be American, they would be produced
in Mexico, and labeled here, the materials would be cheaper and the quality-price ratio
would not look entirely correct. So the company decided that they would buy the products
themselves in the United States, ensuring their original products, 100% American. So this
company decided to enter a category called "retailers" since they buy from a wholesaler
such as a franchise or outlet in Texas and the products are sent to Mexico, where they are
exposed and sold in small quantities to the end user at a higher price, theoretically at the
manufacturer's suggested retail price.
The company does not select the use of a wholesaler or distributor because they are not
easy to manage for a company that sells this type of products. A distributor would be
different since the market in Mexico does not lend itself to buying large quantities of
American merchandise in its market or for stores, franchises are already stocked by the Nike
factory in Mexico and they cannot buy large quantities of American merchandise not even a
single pair of other companies or distributors.
On the other hand, wholesalers buy large amounts of merchandise from distributors and
then sell it to retailers. In this case, the company decided that the merchandise would be
brought to the wholesalers located in the U.S. and would be sold to consumers by pairs,
since wholesalers do not sell to the public in general, they only buy the merchandise of the
company and sell it to other small distributors such as retailers who buy in small or large
quantities for sale to the public, always obtaining profits.

Company dimensions
● According to 3.2.1., create a graphic that shows if the current location and
dimension of the company is correct or could be better. In case you decide it
could be better, develop a proposal but in case you decide it is correct, justify
your decision.

Factors of location

Access to labor The company is located in a very developed area and the
access to labor is good for the employees working there,
they don't come from a far location and the transportation
they use is not much.

Access to the supply of To be able to supply some necessary material from a

components and auxiliary related company, you have to travel an hour to get it, but
industries this does not change the fact that the location is bad
since it would have to be in Aguascalientes where things
would still be obtained in a distant place.

Access to water, raw Water, electricity and all services are at hand in this area,
materials, energy sources, it is an area where it is not difficult to obtain these
etc. resources and this is good since it facilitates the proper
functioning of the stores.

Infrastructures of the area The infrastructure is adequate for the areas that are
needed in the store, the warehouse, the store as such, a
bathroom, payment area, etc.

Proximity of the main In this case the proximity isn’t very feasible when it comes
markets of the company to purchasing new merchandise, because the purchasing
 department has to travel from Aguascalientes to the
United States, more specifically to the state of Texas and
this is not near to the main markets of Tenis Rivera’s.

Tax advantages The location and the area are very cheap, the grounds
and lands are not expensive when it comes to paying
taxes, they are just like the other municipality that is
nearby. They are located in a very good area but are not
that expensive.

Availability of space and The space and price of the land ratio is understandable
price of the land since the land and geographic area are located in
downtown of the municipality, they are an investment
more than an expense.

Proximity of services that
the company may need
Since the two stores are located in the center of the
place, they have a very good access to other services the
company may need, they are located near the hospital, a
parcel office, a convenience store and a lot of different
establishments.

Dimension of the company

Number of employees There are currently six employees working for the
headquarters and the branch.

Access to technology
Access to technology is very good and fast in the main
store and in the branch, they are located in municipal
capitals and the internet signal is fast with many
gigabytes, in turn there is computer equipment for
inventories and anything digital.

Access to funding sources It is very easy to manage and have access to, since there
is only one area per store that is in charge of the
financing of the company and the largest store is the one
that is in charge of the two finances of the company.

According to the previous information the company decided to stay in the location where
they are and don't change anything from the analysis of the factors of location, nevertheless;
there could be a proposal for the dimensions of the company because the access to
technology is good but not all employees know how to use it, so the company can make a
capacitation program in order to prepare the employees to offer a better service and a faster
one with the computers and the technology provided.

The following image shows the location of the store in the Pabellón de Arteaga municipality:
 Time postponement, form postponement or outsourcing
● Which strategy or strategies consider best fit the company: time
postponement, form postponement or outsourcing and why?

For this kind of business, the best strategy that fits the company necessities is Form
Postponement. Both the store located in the Pabellón de Arteaga and the branch located in
the Rincón de Romos municipalities already has a variety of models for the people to see,
but the store also brings different models that aren’t in the store according to the customers
personalized orders or even a bigger quantity of the ones that are already there. The
process of going to the United States to buy the product from an outlet and then bring them
to Aguascalientes can be costly if in the end the product won’t be purchased by the person
who ordered it. Therefore, it is essential to the business to have these types of personalized
orders confirmed so no money is spent that later won't be recovered.

Market coverage
● For Market coverage, which strategies do you suggest to use: Undifferentiated
Marketing, Differentiated Marketing, Concentrated Marketing or a mix of any or
all of them?
In this case, the market coverage that would be of great help in this business is the
undifferentiated market strategy, since what it is looking for is to spread everywhere as a
massive market, in this way campaigns can be carried out as it is in Pages of Facebook,
Instagram or in another advertising medium, making it possible to acquire new customers
and make the company have a better positioning in the market, so customers can recognize
easily the business and why their products are different from others.
Another market that can be used is the differentiated market which seeks to offer various
types of products in this case, a variety of sneakers to meet the needs of customers
depending on what the customer requires.This is very common for the company since they
have different segments and used to buy different models and variety of colors and sizes so
their customers can be satisfied, for instance shoes for daily use are sold to teenagers,
basketball shoes for this sport players, zoom pegasus models for runners and trackers, and
even Air Jordan 1’s for shoe collectors.

Marketing coverage distribution

● For Marketing Coverage Distribution, which strategies are applicable for the
company: Intensive, Selective or Exclusive?

The strategy that can be applicable for this company is Exclusive Distribution, since the
business only has one branch and they are dedicated to the sale and distribution of casual
and sport tennis shoes, they are 100% original American tennis shoes from recognized
brands. Some of the brands sold in the business are very expensive, which makes them a
luxury and they become exclusive products, Some of these brands are Calvin Klein, Nike,
Lacoste, etc. Currently the headquarters is located in the municipality of Pabellón de Arteaga
in Aguascalientes, a large number of citizens from nearby municipalities come to this branch
to buy shoes. There is another establishment in the municipality of Rincón de Romos, also in
Aguascalientes, although this one is only open on Saturdays and Sundays.

Communication strategies
● About Communication Strategies, which one do you recommend for the
company: Push, Pull, Profile or a mix of any or all of them? Justify your
response in any case.

In this case is more suitable a pull strategy, because it seems to be the one that the
company already manages. In a pull strategy the aim of the company is to promote their
products from producers to distributors and to retailers, so that the retailers may promote the
product to purchasers.
However, the company could also include Profile strategy to its communications strategies,
with this strategy, the company might build awareness, perception, attitudes and reputation
using. With this strategy the company can satisfy the needs of stakeholders.

Marketing system
● Which Marketing system is better for the company: horizontal or vertical?
Justify your response.

Horizontal market is the best market for this company since this company is aimed at
multiple sectors, it not only seeks a specific type of segment but it is aimed at all types of
public that seek to satisfy their needs, it is more than anything a company for everything
public

Individual Conclusions

Carlos AlejandroGonzalez Salmeron:

To conclude personally, in this work I learned that distribution strategies are of the utmost
importance so that the product, in this case the Rivera tennis shoes, reaches a greater
number of consumers, and therefore sales grow, so that depends on the type of business or
the type of market that each business or company has, since they have a different
distribution in terms of their products and are referred to certain people or to a certain market
segment, and thus this benefits both both for customers and for the company, the customer's
purchase process is made easier and the company reduces costs.
We find two types of distribution which are indirect and direct, each one refers to different
segments, for example, we rely on direct distribution when the manufacturer goes directly to
the consumer and indirect distribution is when the product is touched by different people or
different processes and in the end it reaches the consumer, based on this we determine the
distribution that each company has.
In this rivera tennis work we realize that the distribution in this business is indirect distribution
because the tennis shoes that are used and these go through a process of elaboration and
finishing, this process is reached at the store where the sale, since this business is tennis,
for which the best market that is managed is the horizontal one because it is not based for a
single person but for several segments.
And to finish, observe and analyze that the sale of tennis is processed and high-selling, in
addition to the fact that it does not have high restrictions and is directed to the entire public.

Gabriela Macias Garcia:

Something really important for any business is: how they are going to distribute their
products, and we have two options, in a direct or indirect way. In a direct distribution the
manufacturer is in charge of delivering the final product to the consumer, doing it in a
completely straight way without any scale, on the other hand within indirect distribution
several distributors are used to be able to send the product to the final consumer.
There are some other aspects to take into account, for example the location of the business,
if the company has a really good location it could have many benefits like reach the right
market, or even being in a specific and strategic place, so that both employers and buyers
can reach this in an easier way.
Also the market coverage distribution strategies are another factor that each company needs
to take into consideration because it allows many companies to distribute their products in
different ways. In an intensive way is when there is a business offering through as many
sales channels as possible, then we have the selective distribution which is between
intensive and exclusive distribution, finally exclusive refers to having only one distributor
within a specific geographic area.

Claudia Daniela Estrada Amador:

Every company seeks a more suitable system of distribution, so that the cost and
management of products are better. In the previous document,we have seen some of these
strategies that might be better for the company we have chosen.
First of all, it’s noticeable that the location of the company it’s pretty important, because the
company has to reach the best location to distribute their products in a way that it’s cheaper,
convenient and realistic (in an access to labor way). Some of the strategies of distribution
may include the communication it has, the type of marketing system, the marketing coverage
based on the company’s needs and actual situation.
In the case of this business, the company uses an indirect distribution because it counts with
several intermediaries that are in charge of providing the products to the final seller. In the
case of the company dimension, we decided that it is okay, it’s just needed to improve
employees' capacitance so that they can manage the computers used to manage the
products. Meanwhile market coverage, communication strategies, and marketing systems
are somehow linked, because it’s the way they approach the consumer. We selected
exclusive coverage because the company sells exclusive products from several brands, pull
communication due to the retailer is the one that promotes the product to the stakeholder
and, an horizontal system because the company aim is to provide its products to a large
segment of the market that seek to satisfy their needs.
Claudia Itzel Ramirez Pérez:
Distribution strategies is the way a company chooses to distribute its product, there are two
types of distribution strategies, direct and indirect.

The direct strategy consists of the manufacturer selling its product directly to the final
consumer, there is no type of intermediary between the seller and the final consumer, having
greater control of the logistics of its products, optimizing distribution and avoiding errors. This
strategy is carried out through e-commerce, catalogs, telephone sales.

This type of strategy is, for example, used in the clothing market. In stores like Zara or H&M,
they are the same ones that create their clothes and sell them, having direct contact with the
final consumer, another example would be Apple, where they have their physical and online
stores for the sale of their electronic devices such as their phones or its laptop and desktop
computers, in addition to its complementary products such as headphones, apple pencil,
mouse, etc.

The indirect strategy consists of the existence of intermediaries between the manufacturer
and the final consumer, this type of strategy is more complicated since control of the
distribution and logistics of the product is lost. This strategy is carried out through locations
strategically based on the habits of final consumers.
This type of strategy is, for example, used by the company "La costeña" that has many
intermediaries, for example, supermarkets such as Walmart, HEB, Aurrera, even Oxxo; like
Palmolive, which works with the same intermediaries.

Vanessa Quiroz López:

Usually, when people start a business they don’t imagine the amount of factors they have to
take into account, even more when their business is growing and customers begin to
demand more of that product or service. The whole distribution issue is essential in the
logistics of a business if you want to achieve a high quality product and a satisfactory
experience for your customers.
We already know there exist two types of distribution: Direct and Indirect. Direct distribution
implies a direct sale between the consumer and the manufacturer and gives the producer
more control over the process, but even though this strategy may seem easier, it is the other
way around; it needs a lot of responsibility and meticulous planning as well as a big amount
of money for inversion costs.
Then, we have Indirect distribution. This strategy allows the manufacturer to focus on the
product, leaving tasks (like publicity, accountancy, etc.) to auxiliary agencies, and also the
startup cost will be lower.

Mónica Rivera Moreno:

For a company it is essential to be able to decide what type of distribution to use in your
company, indirect distribution or direct distribution. This election is very important since
based on this it will be what they will have to do, invest and manage so that their products
can reach many people. Direct distribution is a little more exhaustive, it requires a lot of
dedication and a larger investment initially, but at the same time it is good for many
companies that what they are looking for is the quality of their products that can be assured
for their clients, that they themselves are the They are in charge of producing them and
sending them to final consumers and even selling them wholesale. All this has a good profit
and several businesses depend on these.
Nevertheless, indirect distribution is a very good choice when the company seeks to sell and
buy a product but not be its creator and/or distributor, this is only for those companies
smaller than those that manufacture it, they can use intermediaries in logistics to that the
products have a better and more adequate handling when it comes to the products arriving
in good condition. Many companies are dedicated to the sale of products wholesale or retail
and there are even many franchises that also do it and these companies sometimes have to
put in a little more advertising and publicity since they are smaller and distribute to
consumers but through a chain other than direct distribution.
In this case the indirect distribution is what suits best for the company and its needs.