CHANGING CHANNEL: THE IMPACT OF

THE INTERNET ON DISTRIBUTION

STRATEGY

Presented to: Dr. Adnan Bashir

By:
Syed Hassan Ahmed Naqvi 20121-14135
Sajjad Hussain Khanani 20191-26411
Fahad bin Faisal 20171-22722
Faraz Ahmed 20191-25792
Sufyan Zafar 20181-24802
INTRODUCTION

 
 Distribution Channels
 For most marketing decision makers, dealing with the channel for a product or service
ranks as one of the key marketing quandaries.
 Marketing channel decisions are critical also because they intimately affect all other
marketing and overall strategic decisions.
 Distribution channels generally involve relatively long-term commitments, but if managed
effectively over time, they create a key external resource.
 Not only will it modify many of the assumptions on which distribution channel structure is
based, in many cases it will transform and even obliterate channels themselves.
PURPOSE OF A DISTRIBUTION
CHANNEL
 Three decades later, Stern and El-Ansary defined a distribution channel as sets of independent
organizations involved in the process of making a product or service available for use or
consumption.
 Quite simply, the purpose of a distribution channel is to make the right quantities of the right
product or service available at the right place, at the right time.
 They do this by creating time, place, and possession utility - right product, right place, right
time.
 Producers supply large quantities of a relatively small assortment of products or services,
while customers require relatively small quantities of a large assortment of products and
services.
 Through the process of exchange, intermediaries create possession utility, in addition to
creating utility of time and place.
THE INTERNET AND THE WORLD WIDE WEB: WHAT
DOES TECHNOLOGY DO

 The internet is a huge network of computers all connected together, but it was the World

Wide Web that made the technology into something that linked information together and
made it accessible to everyone.
 Due to internet in this modern era has made everyone work very easy and efficiently.
 The distribution channel may get change in the coming years.
 This internet technology has eradicated or killed three major factors which are distance,
time and location irrelevant.
THE DEATH OF DISTANCE:
The distance also plays an important part in the technological world
 An Australian writer wrote that the traders are lacking behind and are far in international
trade just because of physical distance between these countries and the world market.
 Distance will no longer determine the cost of communicating electronically.
 The distribution of digital product like pictures or videos can be done easily along with the
services which has no cost.
 For other physical product there may be less effect on distribution cost.
 THE HOMOGENIZATION OF TIME :

The time also plays an important part in electronic market.

 When there is a physical market so the seller has to stay in his shop whole day and if there
is no sale whole day so the seller cannot do any other thing.
 If he sells through the web so the buyer can easily go through the web and can also have a
long description details about the product. This helps in saving time.
 Rather than visiting the shop the people easily can do anything online.

 
THE IRRELEVANCE OF THE LOCATION:

The location also plays an important role

 When there is a physical shop so there must be a suitable location, with a building, and
most of all, a large stock of books.
 In virtual or online store like amazon there is no need of building, no need of shelf, no
need of warehouse, just a fast, efficient server and a big database.
 This technology has help many business to save rent, utility expense and many other things
too.
 FILL IN THE BLOCKS: THE EFFECT OF TECHONOLOGICAL
CHANGES ON THE FUNCTION OF DISTRIBUTION CHANNELS

 INTERNET DISTRIBUTION MATRIX

Contrasting the three effect of technology vertically with the
three basic functions of distribution channels horizontally.
FILL IN THE BLOCKS: THE EFFECT OF TECHONOLOGICAL
CHANGES ON THE FUNCTION OF DISTRIBUTION CHANNELS

 The Death of Distance and Re-Assortment / Sorting

 The Death of Distance and Routinization.
 The Death of Distance and Searching
FILL IN THE BLOCKS: THE EFFECT OF TECHONOLOGICAL
CHANGES ON THE FUNCTION OF DISTRIBUTION CHANNELS

 The Homogenization of Time and Re-Assortment / Sorting.

 The Homogenization of Time and Routinization.
 The Homogenization of Time and Searching.
THE IRRELEVENCE OF LOCATION AND
REASSORTMENT/SORTING

 At first manufactures were dependent on conventional stores.

 Dell computer is the best example for trading successfully through internet as in 1998 its
sales reached $4 million a day.
 This has also provided great strategic advantage to Dell.
 Physical location does not matter much and reassortation and sorting is done by the
customers.
THE IRREVELENCE OF LOCATION AND
ROUTANIZATION

 Typically it was more convenient for the purchasers if suppliers are located near.
 Caterpillar was the first to make an attempt of online purchasing and after the bidding they
ended up saving an average of 6%.
 Through online purchasing of goods GE was able to decline the cost of its goods between
5% and 20%.
 GE was able to make contacts from foreign suppliers.
THE IRRELEVENCE OF LOCATION AND SEARCHING

 At first, buyers were not able to go further for search of the goods because the cost of
searching would out weight the benefits of lower price. While intermediaries used to
search for both buyers and producers. For example, insurance agents.
 By interacting directly with the customers suppliers would have more knowledge about
them.
 Customers also prefer to interact directly with the company regardless of its location so it
provides them with further opportunity to interact with them.
LONG TERM EFFECTS OF THE IMPACT OF THE
TECHNOLOGY ON DISTRIBUTION CHANNEL
 There are three types of changes that are expected to take places as the result of
increasing influence of technology on Distribution channels.

1. Distribution channel transformation into distribution medium.

2. Rise in commoditization.
3. Disintermediation and Reintermediation.
 Distribution channel transformation into distribution medium.

 A medium is a place in which something strives and thrives.

 A place through which something is accomplished, transferred and conveyed.
 Interactivity is the major difference between a channel and a medium. A medium is
based on interactivity between the consumers and the producers.
 Media allows to create products, markets and to recreate the products.

DISTRIBUTION CHANNEL DISTRIBUTION MEDIUM

Rise in commoditization
 Commoditization refers to the process through which the complex process
becomes easy and convenient.
 will increase as the flow of information increase and makes markets efficient.
 Companies provide their customers with option to create the product as per their
needs.
 For instance Nike allows its customers to add specification as add on their shoes.
 Dell also allows its customers to add components as per their needs.
 As a result the prices vary for the add on features and specifications
Disintermediation and Reintermediation.
 Since customer gets direct access to the company while sitting at office or home
as a result disintermediation occurs.
 Customers do not have to wait for the salesperson, retail store for the service or
product.
 The increasing technology also facilitates further intermediation by bring the
specific of the customers on a single platform.
 For instance Policy bazar is an Indian website which allows customers to compare
the insurance policies of different companies using their platform and to buy
insurance.
 Cheap flights also provides customers with the option to compare the airfares of
different airlines and to make bookings.
THANK YOU