CHAPTER I

INTRODUCTION AND DESIGN OF THE STUDY

1.1 OVERVIEW

Concepts of the Supply Chain and Supply Chain Management(SCM)

are attracting management focus in many industries. Driven by the concept
and development of SCM there is an ongoing realization that companies
need to establish relationships with their suppliers and customers in order to
assure their own competitiveness in an industry. Lot of firms realize that
partnering with customers and suppliers are important means of
establishing competitive advantage.

There is a trend towards closer and more long-term relationships

between the different actors in a supply chain, the driving forces being
increased business complexity, shorter product life cycles, global
competition and pressure on profit (Holmlund and Kock, 1996). However,
not everybody agrees that integration and close collaboration is the best
solution in each and every case. Bask and Juga, (2001) argue that it is
necessary to reassess this dominant view of integrated supply chains, and
they advocate a change from holistic towards semi-integrated supply
chains.

Mouritsen et al., (2003) question the general foundation of SCM

“the more integration and transparency in the supply chain the better” by
stressing different dilemmas of SCM research. Furthermore, Mouritsen et
al.,(2003) stress the need for more research to explore how the management
of supply chains is performed under different circumstances, as well as
when the integration of activities and processes across the supply chain is
beneficial for the participants, and when more arm’s length relations would
be more appropriate. Parallel to the focus on integration in supply chains
there is also research done on the structure of supply chains. Stock et al.,
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(2000) studied the role of fit between supply chain structure, integration and
organizational performance in the extended manufacturing enterprise.

Wren (2007), studied how the structure of distribution channels

influences decisions on competitive strategy. Structure is seen as a
contingency variable on micro level, expressed as number and type of
intermediaries as well as on macro level regarding transactional forms or
bureaucratic forms of interaction. There are striking similarities between the
two concepts of supply chain structure and distribution channel structure.
The structure and integration of distribution channels could take almost any
form, but the form it actually takes depends on several issues. The most
important factor is the consumers' demand for service output. In order to
work with the design of the distribution channel several steps are needed,
such as; examining products/services that are sold, end-user segmentation,
investigating external and internal constraints and opportunities, and
confronting the constraints/objectives (Couglan et al.,2006). The main
product from the sawmilling industry, softwood lumber, is in many cases
referred to as a commodity product (Roos, 2002).

Competition amongst suppliers of commodity products is primarily

based on the suppliers’ total offer (i.e. product and service). Each individual
company exists in a specific setting, affected by several contingency
variables, making every company to some extent unique. The contingency
approach proposes that organizational adoption and survival can be
achieved in several ways and that one specific way is not equally effective
under all circumstances (Zeithaml et al.,1988). Research presented aims at
answering the following questions; what are the structures of distribution
channels in the Aluminium industry, and how do Aluminium integrate
throughout the distribution chain? Which are the specific contingency
variables in play, and how do these variables affect distribution channel’s
structure and integration? This study is conducted as an explorative pre-
study of five case companies constituting a point of departure for

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forthcoming research on structures, integration forms, effectiveness and
efficiency regarding Aluminium industry distribution channels.

1.2 INTRODUCTION

The role of distribution is to provide a company the accomplishment

of the task of delivering the product at a right time, right place, and right
quantity at a minimum cost (Bucklin, 1966). Although the distribution
problem was one of the first issues analysed by the marketing researchers in
the beginning of the 20th century (Bartels, 1965), the distribution problem
has an enormous importance in the marketing literature and managerial
contexts today. Empirical research in this area must be set up to develop
more profitable ways the companies to reach the market. According to
Stern and Reve (1980), channel theory is divided into two orientations: an
economic approach and other behavioural. First analyses the efficiency of
the channel, studying issues like channel design and structure. The latter is
sociological oriented, focusing on power, cooperation, satisfaction and
conflict in channels. The structure of channels requires a set of strategic
decisions (Rosenbloom 1999; Lilien et al., 1992): the first decision
determines the appropriate intermediary type, e.g. wholesaler, retailer,
franchise, broker, direct sales force; second is distribution intensity (how
many intermediaries to include and number of levels of a channel
structure). The second strategic decision in a channel, distribution intensity
is a key element of the channel strategy (Coughlan et al.,2001; Lilien et
al.,1992; Jain, 2000), and often dictate all the channel structure influencing
the type of intermediary, the coverage of the market, and the kind of
distribution (direct or indirect). A variety of approaches has been taken to
distribution channel, but distribution structure and intensity has received
little attention in academic research (Rangan, et al., 1992; Frazier and
Lassar, 1996; Rodriguez et al., 2005; Gattorna 1978). Marketing
researchers are more concerned to management issues like power, conflict,
satisfaction and performance (Gaski 1996). Few empirical studies were

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conducted to study distribution intensity and structure. Most of ideas
concerning channel design issues are underlying and theoretical that
predicts the choice of channel based in some factors. Although these
constructs have been well accepted by marketing scholars, empirical
research has to be done to confirm these assumptions and to find new
factors determining the channel choice. Hence, this study aims to review
the distribution structure literature and builds a framework analysis to be
tested by empirical studies.

The primary theoretical statement links distribution structure with

class of products (Frazier and Lassar, 1996; Rangan et al., 1992). The class
of products are related with the classification of consumer goods
(convenience, shopping and specialty) first proposed by Copeland (1923).
His intention was to create a guide for the development of marketing
strategies by manufacturers. His purpose was to show how consumer
buying habits affected the type of channel of distribution and promotional
strategy (Bucklin, 1962). According to these characteristics convenience
goods are associated with intensive distribution, shopping goods require
selective distribution and specialty goods are related with exclusive
distribution. Convenience goods are consumer goods and services that the
consumer buys frequently, immediately and with a minimum of comparison
effort. Shopping products are less frequently purchased and consumers
spend considerable time and effort gathering information and comparing
alternative brands. Specialty products are consumer goods with
characteristics or brand identification for which a significant group of
buyers is willing to make a special purchase effort (Kotler, 1997).

1.3 DISTRIBUTION CHANNEL

Distribution channels can be understood by analysing their

constituents, structure, functions and contributions. Channels consist of
networks of different types of independent businesses which need to be
aligned to assist manufacturers in fulfilling and creating consumer demand

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for products and services. Channels consist of three categories of entities:
agents, merchants and facilitators. Agents promote products and generate
sales but do not themselves buy and stock products. Agents can be
independent or they may be employees of the company. Merchants such as
retailers, wholesalers and distributors buy stock and sell goods to others in
the chain or to ultimate consumers. Merchants are usually independent, but
some companies may have their own wholesale trading units or retail
outlets. Facilitators such as logistics service providers, independent
warehouses, carrying and forwarding agents and transporters facilitate
movement, storage, and delivery of products, but are not involved in
promoting or trading. Distribution channels are configured by putting
together agents, merchants, and facilitators in specific ways depending on
the market, product and competitive context.

Channel structures vary across countries and industries, but all

channels can be described using simple concepts such as directness, levels,
density, variety and novelty. Directness refers to the process of direct sales
between manufacturers and consumers without any intervening channel
member. Indirect distribution occurs when a manufacturer uses channel
members to sell to consumers. Researchers have identified a number of
conditions which influence whether direct distribution or indirect
distribution is appropriate (Rangan, Menezes, and Maier, 1992). The
concept of levels indicates the number of different buying and selling
entities that exist between a manufacturer and a consumer. In the
automotive industry, manufacturers sell to franchised exclusive dealers who
in turn sell to final consumers. This is termed as a one-level channel. In the
Fast Moving Consumer Goods (FMCG) industry it is common for
companies to sell to stockists who sell to retailers who in turn sell to
consumers.

This is an example of a second level channel. Density refers to the

number of outlets within certain geographic area. The fewer the number of

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outlets, the more exclusive is the distribution, and the more the number of
outlets, the more intensive the distribution. The distribution of luxury cars
with just one or two outlets in a district or city can be termed as exclusive
while the distribution of matchboxes with thousands of outlets may be
termed as intensive. Variety refers to the number of different types of
outlets. Biscuit distribution may exhibit high variety since biscuits are
available in paan stores, groceries, general stores, supermarkets, canteens,
vending machines, and even online; while distribution of silk sarees may
exhibit low variety in terms of channels used. Novelty refers to the
utilisation of new types of channels. Online channels and vending machines
are comparatively new in India and would therefore be considered to have a
higher level of novelty compared to direct marketing or network marketing
channels. Distribution channels are evaluated using three major criteria:
effectiveness, efficiency and adaptability. There is little research in the
Indian context on the factors that affect channel effectiveness and
efficiency. A good understanding of the factors will aid in modifying
channel structure in response to changes in the channel or environment.

A major challenge in channel management is keeping channel

members motivated to support the principal, especially when markets are
tough. Channel member profitability is a major driver but not the only
factor affecting channel member satisfaction and motivation. Skilled
channel managers make concerted efforts to measure and monitor channel
profitability and channel members' return on investment (ROI). In addition
to ensuring healthy ROI, firms utilise a variety of financial and non-
financial incentives to motivate channel members. Channel incentives can
range from credible channel policies, market development support,
supplemental contact, high powered incentives, and end-user contact
(Gilliland, 2004).

The nature and characteristics of channels also depends on the level

of economic development. Research has suggested that channels in

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developed countries are likely to have larger wholesalers, larger retailers,
and fewer levels in the channel when compared to channels in less
developed countries (Olson and Granzin, 1992). Channels in developed
markets are also characterised by organised retail and wholesale chains,
considerable use of technology and data by channel members, informed
customers, high internet penetration, sophisticated logistics, and strong
implementation of laws and regulations. Distribution channels in emerging
markets are characterised by unorganised retailing and wholesaling;
smaller, independent retailers and wholesalers; more levels in the
distribution chain; less use of technology and data by channel members;
scantier penetration of Internet; evolving logistics infrastructure; and poor
implementation of laws and regulations. Emerging markets also have large
bottom-of-pyramid (BOP) and rural markets which pose unique challenges
for distribution. Channels change over time even if changes appear to be
very slow. Channel change may be influenced by market drivers such as
volatility in consumer needs, consumer sophistication and channel
sophistication; environment drivers such as volatility in competitors'
strategies and environment conflict; and firm drivers like company size and
scope economies (Coelho and Easingwood, 2008).

1.3. Dealer

The term dealer is used to describe a specific type of intermediary

that is not a retailer, value-added seller or wholesaler. The term dealer can
refer to either a company or an individual, and can describe an intermediary
that buys directly from the manufacturer or from another intermediary.
Unlike a wholesaler, a dealer represents the end of a distribution channel
and sells a product directly to the consumer. A dealer is distinct from a
value-added seller because a dealer does not alter a product. Whereas a
retailer -- such as a department store -- may sell a variety of different types
of products, a dealer specializes in one or more types of products
exclusively.

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1.4 DISTRIBUTION CHANNEL STRUCTURE IN INDIA

The distribution channel structure in India is largely traditional and

quite unique. The major channel components are the retail network,
wholesale network, and the logistics infrastructure. The retail network in
India consists of over nine million outlets. These include traditional outlets
like paan shops; grocers or kirana stores; general stores; specialised shops
for footwear, clothing, jewellery, watches, mobile phones and consumer
durables; newer formats like supermarkets, hypermarkets and online stores;
and service outlets like fast food outlets, beauty parlours, fitness centres,
coaching centres and so on. Traditional outlets are spread across urban and
rural India but the newer formats are mostly located in urban areas. The
average retail outlet in India is very small in terms of area, number of
employees, and number of stock keeping units (SKUs). Traditional retail in
India offers consumers a number of advantages like convenience, home
delivery, credit and personalised service. On the other hand, modern retail
offers periodic promotional offers, lower prices, wider assortment, a better
ambience, and higher quality brands. The continued existence of traditional
retail in India has been based on factors such as lower rentals, lower labour
costs, credit from suppliers, low or no liability on taxes, and a legal
framework which prevented foreign direct investment (FDI) in retailing
until quite recently. Traditional stores have managed to hold their own
against organised Indian retailers so far by making some changes in their
operating practices. It will be interesting to see how traditional Indian stores
will fare in future after the entry of price aggressive international retailers.
Research in Latin America suggests that small traditional stores have lower
sales per floor area and lower gross margins compared to modern retailers
but they survive because of higher inventory turnover (Andrea, Lopez-
Aleman and Stengel, 2006). Research in Chile suggests that local retailers
can successfully compete with foreign retailers by implementing best
practices and focussing on the requirements of local customers (Bianchi and
Mena, 2004).

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 Notwithstanding the many advantages offered by traditional retailers
in India, modernisation has picked up in many sectors such as apparel retail,
watch retail and footwear retail. Modernisation seems to have resulted from
both supply side and demand side factors. Supply side factors supporting
modernisation are the large investments in retail made by brand owners in
watches, textiles and footwear; development of malls and shopping centres;
and the entry of large Indian business groups into grocery and electronics
retailing. Demand side factors include increased disposable income among
consumers, greater brand consciousness, greater appreciation of ambience
and air conditioning and perception of shopping as a rewarding leisure
activity. One important sector where the pace of modernisation has been
very slow in India is the food retail sector. The bulk of food purchasing in
India still happens from traditional kirana stores and traditional commodity
markets. Preliminary research in India suggests that format choice in food
products is influenced by consumer demographic and psychographic
factors, and by distance travelled to the store (Prasad and Aryasri, 2011).
The popularity of traditional retail in India could be explained by the
presence of a large rural and BOP consumer segment which does not have
access to modern food retail outlets. Cultural barriers may also prevent
consumers from lower socio-economic strata from patronising modern
retail stores. Research in Israel has found that cultural factors and distance
from modern stores influence consumers' purchase of perishable food items
from traditional stores (Goldman and Hino, 2005). Other factors which
affect consumers' channel choices are retail brand image, store loyalty, store
status hierarchy, variety seeking behaviour and leisure and entertainment
habits of consumers.

The public distribution system in India requires immediate attention

from the Central and State governments. India was one of the earliest
among emerging countries to think of making essential food grains and
edible oil available to its citizens at affordable prices. A comprehensive

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system of procurement, storage, and distribution via Central and State
agencies and a large network of fair price shops was set up across the
country. This system has however been plagued by inefficiencies and
leakages. Several modifications have been made to the original scheme to
ensure better targeting of people below the poverty line.

Regulations regarding FDI in Indian retail have now been eased;

foreign companies can now freely participate in single brand retail. Foreign
direct investment in multi-brand retail is also possible in large cities subject
to clearance by the State government, provided the foreign company meets
conditions regarding the size of the investment; investment in the back-end,
and proportion of sourcing in India. It is too early to say if these new
regulations will attract substantial FDI in Indian retail. The Indian market is
not an easy one to understand, and according to press reports, several large
Indian business groups who made significant investments in retailing are
yet to attain profitability. There are some fundamental differences between
retailing in developed countries and retailing in India. Consumers in
developed countries tend to spend more per purchase occasion as they
purchase a wider assortment, larger quantities, and higher value products.
Retailing in the developed countries is characterised by large format
supermarket, hypermarket, and category speciality stores in suburban
locations with ample parking. Large format stores are unlikely to be
successful in India because of constraints of transport, lack of storage space
at home, and lower income levels. Format choice is likely to be an
important decision in the Indian market and research findings in this area
will be useful for retailers who want to enter the Indian market. Format
preferences of consumers are difficult to forecast a-priori but conjoint
analysis has been used successfully for examining format choices.

The e-retailing format has made significant strides in developed

markets especially in categories such as books, durables, phones, and
apparel. Many brick and mortar retailers have started e-retail operations in

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response to the growth of stand-alone e-retailers. Internet penetration in
India was traditionally considered too low to support e-retailing but the
rapid growth in the smart phone category allows mobile phone owners to
access the Internet easily. This may have implications for growth in
e-retailing in India.

Wholesalers have always been an important part of the distribution

channel in India. Wholesalers purchase products from manufacturers and
sell to retailers. They perform services like storage, bulk breaking, credit
provision, and information provision for manufacturers. Most wholesalers
in India are small in relation to their counterparts in developed countries
and they operate in a limited geographical territory. Wholesalers may
specialise in a narrow product range across a few brands and deal with a
small number of retailers. FMCG companies in India have developed a
category of exclusive wholesalers called stockists or redistributors. These
stockists are expected to operate in a defined geographic territory and
service a defined set of retailers by providing regular product delivery to
retailers using dedicated transport units which ply on fixed routes. Stockists
are expected to employ sufficient number of salespersons and promotional
personnel to ensure proper stocking and display of the manufacturer's
products. The number of stockists used by a single FMCG manufacturer for
all-India distribution may run up to a few thousand and these stockists may
cover over a million retailers using systematic physical distribution. In
recent years, there have been reports that even while pursuing value and
volume growth, companies are reducing the number of stockists they
employ. The implication is that stockists now have a larger territory to
operate in and will actually or potentially be handling a larger turnover as
compared to previous years. Controlled distribution through stockists is
usually supplemented by using non-exclusive traditional wholesalers who
cater to retailers who are not covered by stockists. Traditional wholesalers
can help in expanding brand presence by several million more outlets.

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Practitioner wisdom suggests that traditional wholesalers operate on very
low margins, yet provide useful services. Traditional wholesalers are an
important element of distribution in India but there is hardly any published
research about their business models and operating strategy.

A new breed of organised, pan-India, professionally managed

wholesale companies have made their appearance in the electronics trade,
specifically in IT hardware, technology products and mobile phones. Large
organised international companies have also entered the cash and carry
wholesale format with a pan-India footprint. If this trend continues, we can
envisage the appearance of professional wholesaling in other sectors of the
Indian economy in the not too distant future. The growth of large, organised
wholesalers has profound implications for manufacturers in India.
Manufacturers have had to deal with relatively small stockists and
wholesalers with the power balance firmly lying with manufacturers. The
power balance can change drastically when manufacturers have to deal with
large, powerful wholesalers. The growth of organised wholesaling offers
research opportunities for future distribution research in India.

Logistics is an important part of distribution channel management in

India. The design of the warehouse network in India has hitherto been
influenced more by the taxation structure and less by actual distance,
transport and demand considerations. Due to the presence of the inter-state
Central Sales Tax, companies have tried to avoid inter-state sales by setting
up warehouses in almost every state. This has necessitated the location of
warehouses in almost every state. For cost reasons, these state level
warehouses are usually outsourced to specialist entities called carrying and
forwarding agents (CFAs). The location of CFAs within a state is
determined by demand factors and transportation considerations. The tax
structure distorts rational network design and can give rise to cost
inefficiencies (Avittathur, Shah and Gupta, 2005). Future changes in the tax

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regime may permit companies more freedom to redesign their distribution
for locating distribution centres to minimise costs and maximise service.

Many leading companies have implemented technology initiatives in

their distribution channels. These include provision of computer systems
and billing software to CFAs and stockists and connecting CFAs' and
stockists' computers with their manufacturing databases, providing
handheld devices to stockist salespersons for accurate billing, using Global
Positioning System (GPS) enabled transport vehicles. Companies are also
experimenting with analytics and big data to understand retail demand.
Firms must also address the softer aspects of channel capabilities through
upgrading the channel human resources and management capabilities of
stockists and wholesalers via in-house or outsourced training initiatives.
Informal surveys among channel members suggest that the human
resources area is a bottleneck for most channel members.

Data on the size and measurable characteristics of the distribution

channel in India is very difficult to obtain. Consequently retail audit
measurements are extremely important for companies in estimating their
volume and value of market share, distribution coverage, and retail
presence. Sophisticated retail audit services with pan-India urban and rural
sampling covering various types of retail outlets and products are now
available in India for most FMCG categories. This needs to be extended to
cover many more product and service categories. In addition to sample
based audits, census of retail and wholesale outlets is required to understand
the Indian distribution system. The Central Statistical Organisation of the
Government of India has in the past carried out a trade census which
yielded useful information on the scope and characteristics of trade in India.
The census was supposed to be carried out on a periodic basis but no fresh
data has been available since 1996–97. The trade census requires updating
at the earliest. Other interesting areas for study in the context of Indian
retail and distribution channels are franchising and franchisee operations;

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transaction cost analyses; horizontal integration; retail employee
satisfaction and validity of the service profit chain framework; store
location models; factors affecting private label activity and retail access of
Bottom of the Pyramid (BoP) consumers.

1.5 IMPORTANCE OF DISTRIBUTION CHANNEL

Today’s distribution systems incorporate a number of new features,

combined with features which have long been part of distribution systems.
Taken together these features represent variety since there are many
alternative ways of structuring the system. In this section the focus is on
describing the most relevant features of these systems. The label “modern
business systems” is intentionally wide, since some of the features pertain
to customers, some to the organisation of production and distribution and
others to the nature of the firms involved. The purpose is, therefore, to start
with a wide description and then narrow it down to the most important
elements for the dissertation. We divide this into the degree of
customisation to the end user, features relevant to the system as a whole
and, finally, the issue of actors and specialists. The degree of
individualisation to end user requirements, is frequently high in modern
business systems, reflecting a trend to increasing customisation (Hulthén
and Gadde, 2007).

This customisation can be both in terms of the product choice or the

provision of a high degree of product variety, through distribution channels
providing goods through alternate routes. The background for the high
degree of customisation consists of a number of factors. First, the customers
are more demanding and expect to have a wide choice for many products
such as cars, personal computers or mobile phones. Second, firms may see
the ability to offer such variety as a source of competitiveness and,
therefore, increase the variety of their offerings to tap new consumer
segments. Finally, many industries now have the technological ability to
offer such variety. Approaches such as mass customisation work by

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creating basic product modules which are combined when customer orders
are known.

This gives the customer increased choice, since each module may
have a range of options, and it reduces inventories since there is no need to
store all versions of finished products. A typical example in this regard is
Hewlett-Packard which created power supply modules for its printers, and
could quickly combine these with generic printers when the demand in
different regions was known (Feitzinger and Lee, 1997). Typical of these
approaches is the tendency to focus on postponing activities until actual
customer demand is known (Hulthén and Gadde, 2007). A second major
feature of modern business systems is the proliferation of channels used to
reach customers. An instructive example is the Indian industry, which
although relatively young, has seen several types of distribution systems.

The Indian competence in the customer population varies widely,

meaning that a manufacturer should serve a range, from people who
assemble components from a variety of manufacturers themselves, to those
requiring complete installation of the system at home, as well as extensive
follow-up (Morris and Morris, 2002). This makes the Indian sector a prime
example of serving different customer segments in different ways, often
described as hybrid distribution (Hulthén, 2002). When buying a PC, the
customer has a number of options available. One possibility is to go to a
local retail store and buy a stocked PC for immediate pickup. In this case
the PC will normally already be configured, and the purchase will also
normally include a service agreement. Another option is the Dell version
where the customer chooses from a limited range of options online for
quick delivery. Local PC shops may also offer their own PC versions.
Finally, users can purchase the parts and assemble the PC themselves. This
last option will typically not include support and may not give the user the
cheapest price for all the components, but it does allow for a very specific
and tailor-made PC. The final feature of modern business systems raised

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here is the considerable use of and reliance on specialists to carry out a
range of tasks. For example, the market for third-party logistics services
(3PL) has expanded considerablyin the last few years (Carbone and Stone,
2005, Hertz and Alfredsson, 2003), including services such as transport,
handling, warehousing and increasingly packaging and light manufacturing
operations (van Hoek, 2001). The tendency in third party logistics is that
firms are taking on more and more specialised services in order to move
away from the heavily commoditised market for basic transport (Persson
and Virum, 2001, Carbone and Stone, 2005). The reasons for this extensive
use of specialists are complex. The central reason is that specialised actors
can achieve greater efficiency in operations, which fits with core
competence arguments (Ashenbaum et al., 2005, Prahalad and Hamel,
1990). Moreover, the increase in the number of channels and complexity of
business systems means that it is increasingly difficult for manufacturers to
carry out all relevant activities themselves. It seems that there are self-
reinforcing elements in these systems. Increased complexity and
outsourcing lead to opportunities for specialists to carry out some tasks
more efficiently, but this again creates increased complexity. In general, we
can say that contemporary business systems are characterised by providing
a wide choice of products through many channels to the consumer, but at
the expense of complexity in terms of the channel structure and the number
of actors involved. The wide choice requires options for customising
products for the end user, through modularisation and postponement of
activities. This general background allows us to focus more precisely on the
object of study in this dissertation.

1.6 RESEARCH GAP

The distribution channel structure remains an important yet little

researched issue, especially in the Indian context. As the pathway along
which products, information, and finance flow between manufacturers and
end-consumers, designing and maintaining an efficient channel would be

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important elements in a company’s competitiveness. This round table
article provides an overview of distribution channels, identifies the key
issues that impact distribution channels in India, and attempts to develop an
agenda for future channel related research.

In India, where the distribution channel structure is largely

traditional and the penetration of organised retail is very low, the traditional
retailer offers several advantages such as convenience, credit, home
delivery, and personalised service; modernisation of retail, however, is
picking up in many sectors. In the second part, the article reports on a panel
discussion featuring academic and industry experts, on the challenges in
designing, constructing, and managing distribution channels in India.
Chief Marketing Officer, Acer Computers, describes the evolution of
Acer’s information technology (IT) distribution model, particularly the
challenges the company faced as they moved from a semi-direct business
model to an indirect business model, and the challenges of Indian
distribution.

Consolidation in the Indian marketplace, redefinition of distributor

roles, and convergence of products, are emerging trends to see in
distribution structure. Changes in technology, business models, and supply
chain dynamics are the challenges ahead. The Senior Vice-President,
Madura Coats, presents the distribution system and market experiences of a
textiles and thread business, a consumer business with an intense
countrywide distribution network. The principal challenge in this field as
that of cost effective reach. Observes that rural affluence is an emerging
trend, and that critical challenges such as channel profitability, high cost to
serve, sales force attrition and effectiveness, and lack of market intelligence
among others, need to be addressed. The Senior Dean e-Academics,
Institute of Management Technology, Ghaziabad, focusses on the demand
side of the distribution channel i.e. the consumer, while touching upon

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different types of industries, fast moving consumer goods (FMCG),
durables, B2B, and services marketing.

Making several suggestions that could help these various industries

differentiate themselves, he emphasises that customer satisfaction is most
important at the strategic level, and that technology could only play a
secondary role. The Director, Nielsen, details the process of retail audit or
retail measurement that tracks the consumer off-take for FMCG through
retail trade, and surveys the Indian retail landscape. Suggests that trends
like personal consumption mindset, nutrition and wellness, digitisation,
partaking in global brand culture, lifestyle upgrade, and emphasis on time
saving could shape demand in the near future, and that connectivity would
emerge as a key factor affecting trends in the long term.

Indian retail scenario in recent years provides a SWOT analysis of

the Indian retail sector and suggests that growth is the Indian retail sector is
inevitable and given its low penetration levels, organised retail is not likely
to impact unorganised retail in India. It also looks at FDI in multi-brand
retail and the expected response from manufacturers.

1.7 STATEMENT OF THE PROBLEM

The first premise for this study is the complexity and variety of
many contemporary distribution systems, or stated another way the inherent
variety of current distribution systems. The variety in distribution systems
is not rigorously defined at this stage, but it should capture central elements
such as the degree and types of hybrid distribution, customisation and
modularisation and the use of specialists (or intermediaries in this case.)
The focus is on describing the distribution system in such a way that we can
adequately capture different types of variety. To this end we will use the
term “distribution system structure” to separate it from other elements of
the distribution system. This is a selection made because it reflects some of
the main features of these systems and matches the focus of the study.

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 As seen in the discussion of the focus of the study, coordination of
the distribution system becomes important because these systems are
increasingly characterised by many specialised actors. For the problem
statement to adequately describe what we are studying, coordination of the
activities of the intermediaries and the distribution system overall is
necessary. We should be able to answer questions on how the distribution
system is coordinated as a whole and how this fits with the structure of the
distribution system and relates to the roles of intermediaries. We want to
both describe different roles for intermediaries and connect these to
preconditions in the system. However, we are not making a direct causal
connection here, since there are many possible interactions between the
three elements. An important aspect is to describe possible roles for
intermediaries in a contemporary setting with a considerable amount of
variety. On the basis of this, we can then later go back to existing literature
and contribute in terms of new or changed roles. Taking these points into
consideration, we can then formulate our main problem statement.

Problem statement: What is the impact of distribution system

variety on intermediaries and the roles they may play in such a system?
How are the activities of the system coordinated, and how does this
coordination affect intermediaries and their roles in particular?

This problem statement shows the three main conceptual areas to be

explored in the theoretical framework. The first two are connected as they
are both aspects of the distribution system itself, while the third can be
viewed as the core of the dissertation.

1.8 RESEARCH OBJECTIVES

 To study about the pattern of roles and importance of channel

members demographic profile among various Aluminium Industries
in Tamil Nadu,

19
  To find out the perception of the producer and channel members
towards the participation in various marketing factors,
 To identify the problem creating factors for the complication and
conflict among the members,
 To know about the factors considered for the selection of Dealer,
Whole Sealer, Retailer, Direct Sales Force and Sales Promotion of
Aluminium Industries in Tamil Nadu,
 To find whether the role of members are aware in sharing the
responsibility regarding the participation in distribution channel
participation,
 To provide suitable recommendations to the channel members for
the effective partnership in of distribution channel of Aluminium
Industries in Tamil Nadu.

1.9 SIGNIFICANCE OF THE STUDY

The distribution management is of major decision for the marketer

because it involves channel members and consumers in making the product
to reach from producer to the consumer. Designing the channel style,
channel intermediaries, channel members role and functions helps the
marketer to focus on the product/services movement to the consumers
through the channel intermediaries. Most of the companies’ performance
and profitability is decided by the distribution and channel decisions. The
reasons for the channel members difference of opinion and their
expectations further helps in implementing the significant practices of
partnership marketing in different industries. This will be definitely helpful
to the channel members to know their problems involved in the channel
members and to evolve the partnership strategies to make them becoming
the good channel partners. The Management theory support the following
Research model.

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1.9 RESEARCH MODEL
Chart 1.1

21
1.10 JUSTIFICATION FOR SELECTED RESEARCH MODEL

Constructs References

Brownlie, D. and Saren, M. (1997) 'Beyond the

one-dimensional marketing manager: The discourse
Dealer
of theory, practice and relevance', International
Journal of Research in Marketing 14 , 147-161.

Weijers, S., Glockner, H. H., and Pieters, R. (2012).

Whole Sealer logistic Service Providers and Sustainable Physical
Distribution. Log Forum, 8(2), 157-165.

Mandal, K., Bandyopadhyay, G., and Roy, K.

(2011). Quest for Different Strategic Dimensions of
Retailer
Channel Management: An Empirical Study. Journal
of Business Studies Quarterly, 3(2), 25-44.
Fraizer, James Gill, and Sudhir Kale (1989),
“Dealer Dependence Levels and Reciprocal Actions
Direct Sales Force in a Channel of Distribution in a Developing
Country.” Journal of Marketing, 53 (January),
pp.50-69.
Dong, M. C., Tse, d. K., and Hung, K. (2010).
Effective Distributor Governance in Emerging
Sales Promotion Markets The Salience of Distributor Role,
Relationship Stages and Market Uncertainty.
Journal of International Marketing, 18(3), 1-17.

Chimhundu, R., and Hamlin Robert.(2007).Future

Distribution
of the brand management Structure in FMCG.
Channels
Brand Management, 14(3), 232-239.

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1.11 RESEARCH HYPOTHESIS
(H1): There is an effect on age over distribution channels in
aluminium industry in Tamil Nadu
(H1): There is an effect on marital status over distribution channels
in aluminium industry in Tamil Nadu
(H1): There is an effect on religion over distribution channels in
aluminium industry in Tamil Nadu
(H1): There is an effect on education level over distribution channels
in aluminium industry in Tamil Nadu
(H1): There is an effect on types of family over distribution channels
in aluminium industry in Tamil Nadu
(H1): There is an effect on size of family over distribution channels
in aluminium industry in Tamil Nadu
(H1): There is an effect on number of dependents over distribution
channels in aluminium industry in Tamil Nadu
(H1): There is an effect on sales promotion over distribution channel
in aluminium industry
(H1): There is an effect on dealer over distribution channel in
aluminium industry
(H1): There is an effect on whole sealer over distribution channel in
aluminium industry
(H1): There is an effect on retailer over distribution channel in
aluminium industry
(H1): There is an effect on direct sales force over distribution
channel in aluminium industry

1.12 RESEARCH METHODOLOGY

The nature of the research is exploratory method, and the sample

size is 522 Aluminum Industries in Tamil Nadu, India and data collection
method used in the research is “Questionnaire Method”. Data will be
analyzed by using SPSS 23, Amos 20.0 and Smart PLS 3.0.

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 1.13 SAMPLING AND SAMPLE PLAN
Justification for Selected Samples
Table 1.2

Total Population Samples Drawn Percentage

1153 522 45.27

The total populations have derived from based on the MSME

(Micro, Small and Medium Enterprises), Guindy, Chennai, Tamilnadu.
From the above Table, it is observed that the total number of Small Scale
Aluminium Industries in Tamilnadu were 1153. At the time of data
collection researcher we have used simple random sampling to collect the
data from the Small Scale Aluminium Industries in Tamilnadu. Finally we
have received response from 522 Small Scale Aluminium Industries in
Tamilnadu.

Chart 1.2: Justification for Selected Samples

1.14

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LIMITATIONS

A number of suggestions with respect of the limitations identified in

this study are cited here with the hope that future researchers would address
these issues more concretely. They are as follows:

 The first limitation of the study is in generalizing the result obtained.

Even though the survey was conducted in parts of TamilNadu, the
same would not be a representative sample of the entire country.

 The proposed model which has been implemented in TamilNadu has

been only tried for one Aluminium Industry and may not be generic
in nature.

 Another limitation of study is that the different types of retailers in

terms of purpose of sales have not been taken into account. All
retailers are treated alike and the data was analysed. There is scope
for furthering the research on the basis of type of retailers.

 The retailer perception about the brand has not been considered
while measuring various parameters.

 The study involves distributor’s services levels, but does not involve
the cost to distribute over a specific geography, hence the costing
with regards to distribution across the area may be different in one
terrain from the cost of distribution in another terrain.

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1.15CHAPTARIZATION

Chapter 1 - Introduction and Design of the Study

In this chapter an exhaustive discussions pertaining to introduction

of the study and overview of the study.

Chapter 2 - Review of Literature

This chapter deals with description of study area has been presented
also this chapter deals with past reviews related to the study.

Chapter 3 - Industry Profile

This chapter deals with the industry profile and major players in the
Indian Aluminium Industries.

Chapter 4 - Data Analysis and Interpretations

Here the survey data has been tabulated and analysed processed with
the help of computer software packages and other statistical tools and other
relevant techniques.

Chapter 5 - Findings, Suggestions, Conclusions, Future Implications

and Limitations

The final chapter infers the various findings in the form of

conclusions and suggestions being made in the light of findings.

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