SM Distribution

8/9/2019 SM Distribution

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Distributing

ServicesThroughPhysicalAndElectronicChannels


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Overview

Distribution in a Services Context

Options for Service Delivery

Place and Time Decisions

Delivering Services in Cyberspace

The Role of Intermediaries

The Challenge of Distribution in Large Domestic Markets

Distributing Services Internationally


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Distribution in a Services

Context


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Distribution in a ServicesContext

In a services context, we often dont move physicalproducts

Experiences, performances, and solutions are not

being physically shipped and stored

More and more informational transactions areconducted through electronic and not physical

channels


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Applying the Flow Model ofDistribution to Services

The three interrelated elements of distribution are:

Information and promotion flow

To get customer interested in buying the service

Negotiation flow

To sell the right to use a service

Product flow

To develop a network of local sites


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Distinguishing between Distribution ofSupplementary and Core Services

Most core services require physical locations

Many supplementary services are informational;can be distributed widely and cost-effectively via

other means Telephone

Internet


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Information and Physical Processes

of Augmented Service Products


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Using Websites for ServiceDelivery

Order-TakingMake/confirm reservationsSubmit applicationsOrder goods, check status

SafekeepingTrack package movementsCheck repair status

CORE: Use Web to deliver information-based core services

Core

ConsultationConduct e-mail dialogUse expert systems

Hospitality

Record preferences

BillingReceive bill

Make auction bidCheck account status

ExceptionsMake special requests

Resolve problems

PaymentPay by bank card

Direct debit

InformationRead brochure/FAQ; get schedules/

directions; check prices


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Options for Service Delivery


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Distribution Options for ServingCustomers

Customers visit service site

Convenience of service factory locations and

operational schedules important when customer has tobe physically present

Largely people processing services and possessionprocessing services are included here

For example, barber shop, theatre, hotel, museum,retail stores, etc.


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Service providers go to customers

Unavoidable when object of service is immovable

Largely possession processing services andinformation processing services come in this category

More expensive and time-consuming for service

provider

Examples are


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Service transaction is conducted remotely

Achieved with help of logistics and telecommunications

Technological advancements are playing a major role inmaking this type of service delivery


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Six Options For ServiceDelivery


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Channel Preferences VaryAmong Customers

For complex and high-perceived risk services,people tend to rely on personal channels

Individuals with greater confidence and knowledge

about a service/channel tend to use impersonaland self-service channels

Customers with social motives tend to use

personal channels

Convenience is a key driver of channel choice


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Place and Time Decisions


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Place Decisions of ServiceDelivery

Cost, productivity, and access to labor are keydeterminants to locating a service facility

Location constraints

Operational requirement (e.g., airports)

Geographic factor (e.g.,ski resorts)

Need for economies of scale (e.g., hospitals)


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Place Decisions of ServiceDelivery

Ministores Creating many small service factories to maximize

geographic coverage

Separating front and back stages of operation

Purchasing space from another provider incomplementary field

Locating in Multipurpose Facilities

Proximity to where customers live or work

-Service Stations


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Time of Service Delivery

Traditionally, schedules wererestricted

Service availability limited to

daytime, 40-50 hours a week

Today

For flexible, responsive

service operations: 24/7service, 24 hours a day, 7 daysa week, all around the world


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Delivering Services in

Cyberspace


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Service Delivery InnovationsFacilitated by Technology

Technological Innovations Development of smart mobile telephones and PDAs,and presence of Wi-Fi

Voice-recognition technology

Websites

Smart cards- Store detailed information about customer- Act as electronic purse containing digital money

Electronic channels can be offered together withphysical channels, or replace physical channels


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E-Commerce: Move toCyberspace

What are the factors that encourage customers touse virtual stores?

Convenience

Ease of search

Broader selection

Potential for better prices

24-hour service with prompt delivery


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E-Commerce: Move toCyberspace

Recent developments: websites, customerrelationship management (CRM) systems, andmobile telephony

Integrating mobile devices into the service deliveryinfrastructure can be used as means to:

Access services

Alert customers to opportunities/problems

Update information in real time


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Role of Intermediaries


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Splitting Responsibilities forService Delivery

Challenges for original supplier

Act as guardian of overall process

Ensure that each element offered by intermediaries fits overall service concept


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Franchise as Intermediary

What is Franchising?

International Franchise Association definesFranchise as a continuing relationship in whichthe franchisor provides a licensed privilege to do

business, plus assistance in organising, training,

merchandising and management, in return for a

consideration from the franchisee


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Types of Franchising

Product or Trade Name Franchising

In this relationship the franchisee requires the tradename, trademark, and/or product from the franchisor(supplier or manufacturer). The franchisee identifies

with the supplier through the product line.


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This method of franchising consists primarily ofdistribution by a single supplier of manufacturedproducts to dealers who then in turn resell this tothe end consumer.

This franchising approach has been usedextensively in the auto and truck industry, the softdrink bottling industry, and the tire and gasolineservice station industries.


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Business Format Franchising

The business format provides the franchisee withgreat depth of knowledge and information concerninga great breadth of business activities including:

marketing, promotion, site selection, price,management, operations, training, financing,accounting systems, and legal support orinformation.


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This method or business opportunity allows anindividual without prior experience an opportunity

to be completely trained and informed about howto operate a new and different business.


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This also requires the franchisor to take thefranchisee through a fairly extensive training

program and to provide continuous training for thefranchisee even after the franchising unit has beenstarted.

Wh F hii I l


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What Franchising Involves

In Business Format Franchising, the Franchisorprovides:

An entire business concept, outlined and explained inan operating manual

Trademarks, logos, patents, and standard design forthe layout of premises, color and pattern of uniform,

etc. Accounting and financial systems

Guidelines to set up the business

Wh F hii I l


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In Business Format Franchising, the Franchisorprovides:

Support in recruitment and selection of the employees

Support in initial and ongoing training

An exclusive territory

Marketing, Public relation and Advertising support

WhtF hii I l


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The Franchisee are supposed to:

Pay an initial franchise fee

Pay a royalty as a fixed percentage of sales

Make a regular contribution to common advertisingfund

Make a significant investment in the business

Make a personal commitment to the business

Advantagesforthe


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Advantages for theFranchisee

A proven business concept

Low risk compared to return

Easier finance

Previous experience not necessary

Exclusive territory

Independent business

Disadvantagesforthe


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Disadvantages for theFranchisee

Limited Freedom (in terms of trying ideas)

Royalty payment on sales, not profit

Lack of flexibility

Exposure to bad publicity

Franchisor may fail to fulfill the promises

Contract termination

Advantagesforthe


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Advantages for theFranchisor

Rapid geographical expansion possible

Better management performance

Local knowledge thru the franchisees

Greater control (as it own store)

Less manpower required

Disadvantagesforthe


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Disadvantages for theFranchisor

Non-compliance to procedure (byfranchisee)

Challenges in maintaining relationship

Risk of erosion of brand reputation (due topoor performance of franchisee)

FranchisingandLicensing


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Franchising and Licensing

Factors Franchisee Licensee

Common Name Identified by franchisors

Trade name / brand

May not be the identified

Support Receives set up, training,

marketing, support

May receive a little or no support at

all

Standards Requires minimal standard of

operation

Fees Franchise fees and royalty as a

% of sales

Usually one-time payment


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Challenge of Distribution in

Large Domestic Markets

TheChallengeofDistributionin


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The Challenge of Distribution inLarge Domestic Markets

Distributing services (i.e.,physical logistics) faceschallenges due to:

Distances involved

Multiple time zones

Multiculturalism

Differences in laws and tax rates


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Distributing Services

Internationally

FactorsFavoringAdoptionof


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Factors Favoring Adoption ofTransnational StrategiesTransnational strategy involves integration of strategyformulation and its implementation across all countries inwhich company elects to do business

Market Drivers

Common customer needs across countries Corporate customers seek to standardize and simplifysuppliers used in different countries ad agencies,logistics suppliers, Big 4 accounting firms

Government Drivers Favorable trade policies, compatible technicalstandards, common marketing regulations

FactorsFavoringAdoptionof


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Factors Favoring Adoption ofTransnational Strategies

Competition Drivers Competitors from overseas; interdependence of countries

Firms may be obliged to follow competitors into new markets toprotect own positions elsewhere

Technology Drivers Advances in information technology miniaturization and mobility

of equipment, digitization of voice

Cost Drivers

Economies of scale

Lower operating costs

HowServiceProcessesAffect


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How Service Processes AffectInternational Market Entry

People processing services require direct contactwith customers

Export service concept

-Acting alone or in partnership with local suppliers

e.g., chain restaurants, hotels, car rental firms

Import customers

-Inviting customers from overseas to firms home country

e.g., hospitals catering to medical tourism

Transport customers to new locations

-Passenger transportation (air, sea, rail, road)

How Service Processes Affect


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International Market Entry

Possession processing involves services tocustomers physical possessions

- Repair and maintenance, freight transport

Information-based services include mental processing

services and information processing services Export the service to a local service factory

- Hollywood film shown around the world

Import customers

Export the information via telecommunications andtransform it locally- Data can be downloaded via CDs or DVDs

Impact of Globalization Drivers on


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Various Service Categories

Impact of Globalization Drivers on


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Various Service Categories

Barriers to International Trade in


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ServicesPassage of free-trade legislation is important

facilitator of transnational operations

Notable developments: NAFTA, Latin American economicblocs, EU

Despite efforts of WTO and GATT, barriers still exist: Restrictions on international airline operating rights

Heavy taxation

Legal restrictions

Lack of broadly agreedupon accounting standards

Cultural issues

Summary


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Summary

Distribution relates to both core and supplementary servicesand embraces three interrelated elements

Information and promotion flow, negotiation flow, product flow

Channel options include:

Customers visit the service site

Service providers go to their customers

Service transaction is conducted remotely

Place and time decisions include where services should bedelivered in bricks-and-mortar context, when it should bedelivered


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Documents

SM Distribution