Marketing Management Chapter 11: Distribution and Supply Chain Management

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For a complete list of all chapters so far, you can visit the Marketing Management Tab on the blog!

Chapter 11: Summary

Distribution comprises channels and supply chain management. Channels deal with institutional linkages such as retailers and wholesalers, whereas supply chain management addresses the processes underlying these linkages, such as warehousing, transportation, and inventory management, and connects them from the supplier to the end user. The objective of both components is to provide a high level of customer service at a manageable cost.

Distribution channels take on various functions of the manufacturers because they can perform them more efficiently. Depending on the type of product and type of consumer, they can range from the zero level, where the contact between manufacturer and end user is direct, to multiple levels, from producer to wholesalers and retailers. The choice of channel is an important one because it has major strategic implications and is difficult to change. Within the channel choice, decisions also need to be made about channel compensation and control. To a large degree, effective channel management depends on close information linkages. The use of information analysis at the retail level increasingly makes other channel members dependent on these information sources. Overall, channel members need to add value to the distribution process—or be eliminated. This also applies to the purchasing process, which is an integral part of distribution, albeit an internally focused one.

Supply chain management benefits from a systems view of corporate activity and includes the development of close relationships with both suppliers and customers. Effective coordination between parties reduces cost and provides for competitive advantage through approaches such as just-in-time (JIT) delivery, electronic data interchange (EDI), and early supplier involvement (ESI). Production, transportation, facility, inventory, and communication decisions are the key areas within logistics, all of which require trade-offs and collaborative action among participants. Even though the optimizing activities of a firm provide for some benefits, competitive differentiation occurs mainly through coordination with other companies.

The firm may evaluate transportation based on transit time, reliability, and cost and achieve operational improvements, but a strategic collaborative approach with customers and suppliers can deliver even greater benefits. Such collaboration can include the use of third-party logistics providers. Logistics can also play a major role in making the firm more environmentally responsive by designing reverse distribution systems for the recycling of merchandise and by devising distribution processes that minimize risk and damage to the environment.

All channel and supply chain efforts are designed to increase customer service. The intent is to delight the customer. It is therefore important to understand the importance of customer complaints. Such complaints should be encouraged so that the firm learns early on about potential problem areas. In addition, they need to be resolved quickly so that customers are willing to return. Good customer service requires the orientation and commitment of the entire corporate culture so that the customer notices at each point of contact with the firm that customer service thinking is a part of the organization.

Marketing Management Chapter 10: Pricing Decisions

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For a complete list of all chapters so far, you can visit the Marketing Management Tab on the blog!

Chapter 10: Summary

Much of pricing theory is derived from economics, especially from supply and demand theory. This information is encapsulated in the famous demand and supply curves. The price is set by the point where the curves intersect. The degree to which demand is susceptible to price changes (price elasticity of demand) is another concept borrowed from economics but very useful to marketers.

Again in theory, but rarely in practice, these curves can be obtained from statistical analysis of historical data, survey research, and experimentation. Rather less theoretically, factors affecting the pricing policies of a specific organization include organization factors, product life cycle, product portfolio, product line pricing, segmentation and positioning, and branding. Factors derived from customers are demand, benefits, value, and distribution channels. Of these, perceived value is especially important because it defines what the customer should be prepared to pay.

Pricing new products offers a different set of challenges. In general, the two main opposing strategies are

•     Skimming—High price, to skim off the short-term profit

•     Penetration—Low price, to maximize long-term market share

Practical pricing policies for existing brands may include cost-plus pricing, target pricing, historical pricing, product line pricing, competitive pricing, market-based pricing, and selective pricing. The price can also be a major factor in determining a product’s or service’s image, ranging from quality-price to budget-price.

A wide range of discounts may be offered: trade, quantity, cash, allowances, seasonal, promotional, and individual.

Prices may also be set at levels that are judged to be “psychologically” appropriate ($9.95, for instance). Other ways of achieving a price effect may lie with other parts of the offer, such as product bundling, at one extreme, and charging separately for “options,” at the other. Alternatively, price may be negotiated, as it often is in capital goods markets.

Organizations may resort to price competition for several reasons, including volume sales, other stimuli, and minor brands. On the other hand, the dangers of initiating a price war include low-quality image, temporary advantage, and profit loss.

Curative International Marketing, Corporate and Business Diplomacy: A Triple Application for Migration

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Hello! I am sharing an abstract of a new paper published in The Synergy of Business Theory and Practice. Special thanks to Hans, Evangelos, Maria, and Dolores. Find a link to the complete paper attached below.

This contribution aims to cover a literature gap as to conceptualizing the nexus between sustainable corporate policy and globalization phenomena challenges exemplified by migration. The work is designed as a conceptualized chapter derived from a synthesis of discussed concepts and a case study of migration based on documentary analysis. Based on a review on mainstream literature on a still scattered and ambiguous body of knowledge in the research stream of corporate and/or business diplomacy, the work suggests a synthesis of the two concepts with international curative marketing for sustainable corporate policy. The contribution suggests a distinction between business and corporate diplomacy complemented by multidisciplinary concepts derived from the curative international marketing paradigm and a distinction between legitimacy and reputation-orientated corporate mindset.

https://www.researchgate.net/publication/335019120_Curative_International_Marketing_Corporate_and_Business_Diplomacy_A_Triple_Application_for_Migration

Marketing Management: 4th Edition Available Now!

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Hello! I have very pleased to announce the publication of Marketing Management: 4th Edition with the help of Springer Publishing. I would like to give a special thank-you to Masaaki Kotabe, Demetris Vrontis, and Riad Shams for their collaboration.

Over the coming weeks, I will be releasing promotional summaries of the chapters of Marketing Management right here on this page. You can look for new Marketing Management posts every Wednesday!

If you are interested in purchasing a copy of the book and would like it signed, please contact me. For purchasing, please visit https://www.springer.com/gp/book/9783030669157

How Grateful Will the U.S. Be?

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A new commentary published in CEO World and the Daily Tribune

Hello! I would like to share my most recent commentary on Hungary and Prime Minister Orban. Please find the complete text below.

The other day I was watching a Tucker Carlson talk show that focused on Hungary. Several reasons motivated my interest: One was that Hungary is hardly ever mentioned in broadcasts or social media, and if so, only with heavy negativity, as the bad guy. For example, US President Joe Biden referred to Hungary´s democratically elected Prime as a “thug.” Second, Carlson’s visit provided me an opportunity to instantly check claims made since my wife was in Hungary. It was also a good opportunity to improve my understanding of the Hungarian condition and also of my analysis resulting from my investigations: That Hungarians are not feckless monopolists living in a scrapped together dictatorship. There are, and in April next year again will be, serious elections which, so far have resulted in clear and stable majorities. As reported by their embassy communications, their “thug” made major contributions by accommodating, feeding and clothing Afghani refugees. The education sector in Hungary, particularly at the university level, is said to be under strong government directive and control. I could not find that in conversations, but rather encountered domestic university conditions of good structure and high repute. Students are ready for discussions and analysis about great varieties of topics. Hungarian Nobel prize winners are extraordinarily frequent subjects. Most recently, Katalin Kariko was a major contributor to the mRNA development, the basis of the Pfizer Covid vaccine. My excellent Washington dentist tells me about Istvan Urban of Budapest where he goes for learning and training. When Mr. Carlson interviewed the Hungarian Prime Minister Orban, the thoughts on encouraging families, education and support of students and his definitions of national boundaries did not appear very controversial. The policy steps taken have yielded good results. Orban also has developed his own approach to government response to incoming migration. Guided by his belief that 10 million Hungarians cannot accommodate a large number of migrants, he has his border guards support migrants and then have them escorted back to the other side of the border. I have witnessed large groups of migrants pick fruit trees bare within minutes, leaving their owners without income and food. When implemented, Orban’s policy was firmly rebuffed by Europeans, even though by now they have adapted his approach as well. Hungary has given much ongoing support to Europe. Even though located on the verge between Asia and Europe, its society has always seen itself as clearly a part of Europe. It has held European occupants at bay as a member of the Austrian-Hungarian empire, limited the century-long occupation by the Turks, and gloriously lost battles that protected the West. I remember when in 1956, in an eerie similarity to Afghanistan today, American encouragement led to all-Hungarian revolutions against the occupying Soviet forces that resulted in many killings and emigrations from Hungary. I remember, as do many others, how the Hungarian politician Gyula Horn opened the border from Hungary to Austria, which permitted East Germans to flee in large numbers and triggered the beginning of German reunification. For all these good measures delivered by Hungary, I have great difficulty finding any long-term gratitude as payback. Yes, politics tends to be reflected by the steps of the moment, but perhaps, as we appear to redesign relations, obligations, and renew spheres of interests, this might be the right time to forge relations that are based on long-term history, making up for past services rendered within a Europe in flux. Such obligations deserve to be addressed clearly and driven by transparency. Trying to make opposition whither by silencing it or ignoring it will not work in an era of global communication. Closer and better recognition of the past may well be the key to a realignment and a better future for all. In conclusion, the dimensions highlighted by Tucker are true. His perspective of Hungary, confirmed by my wife and my personal insights emerge with little challenge. I wish the country well.

International Business, 9th Edition

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Hello! I am pleased to announce the upcoming publication of a new edition of International Business in collaboration with Cambridge University Press. This book is expected soon in the next coming months, and I am very excited for its release. If you are interested in getting your copy of the text signed, please contact me via email.

The updated cover for the new version!

Here is a brief description from Cambridge University Press:

“Thoroughly updated, the 9th edition of this bestselling textbook incorporates global trends and data, supported by an exemplary case selection based on firms from around the world. The internationally cited author team of Czinkota, Ronkainen, and Gupta balance conceptual understanding of business theory with the day-to-day realities of business practice, preparing students to become successful participants in the global business place. This edition brings greater focus on Asia and emerging markets, as well as Brexit, the impact of COVID-19 on business and the importance of technology and the digital space to international business practice. Through its discussion and analysis, the book guides students to a greater understanding of contemporary business issues and helps them to develop new tools of analysis. Covering all key aspects of international business, the authors emphasize a few key dimensions: international context, role of government in international business, small- and medium-sized firms, and social responsibility.”

The Colonial Pipeline: Prepare for the Unexpected

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Hello everyone! I would like to share this new commentary of mine that was recently published in The Hill and MSN among others. I hope everyone has enjoyed a safe Memorial Day weekend.

Prepare for the Unexpected

Michael R. Czinkota

     Music aficionados connect the month of May with Mozart’s minuet written as a five year old” komm lieber Mai und mache…,” but for many Americans this year the link came from a curtailment of gas It was reported that almost 80 percent of fuel depots in Virginia and North Carolina were running on empty. Lines of cars seeking gas quickly brought back eerie memories of the 1970s.

    That shortfall is said to stem from private sector adversaries who had successfully shut down the flow of liquid energy. The result was a major decline in distribution capacity, particularly of Colonial Pipeline. Evildoers apparently had employed software manipulations to severely disrupt fuel flow. They informed their targets that this ransomware disruption would prevent the flow of gas until a large payoff had been made. The amount ranged between 5 to 20 million dollars. Colonial could not reverse the impact. Payment was allegedly made, and the energy flow was slowly restored.

    A lack of gas sounds bad enough, but it may be only one of simultaneously appearing evils. If the action was meant to distract, what was the issue to be covered up? What nation gets the next turn? If this was just a preparation for future malfeasance, what obligations will arise and how costly will they be? When taking off shoes as a security precaution at an airport, it is not just the action that matters but rather the rationale and background that makes such actions necessary.  Research at Georgetown has clearly indicated that the long-term indirect effects of terrorism far outweigh the short-term direct ones. When combining all these cost factors one can conclude that somewhere someone is cooking our goose and we struggle to protect limited targets and save up the ransom money.

    We need to find and combat the culprits of such threats, and often it is us. With all our elegant computerization and artificial intelligence, we have largely lost control of management capabilities both at work and at home. At the same time, we are increasingly exposed to sudden shifts in our lives. We often work without backup with rising risk. Only five years ago, who would have prepared for a large and convenient “home office”? Many of us encounter a lack of clarity in communication that weakens our capabilities The Covid-based loss of one whole school year will offer serious repercussions for years to come.

    Here is a collateral damage example. My family went to dinner leading up to an outdoor performance. We had explained our plans well in advance, including the dinner timeline so that we would be punctual. The time came and went, but no hosts were in sight. We knocked on the kitchen door where we found waiters in distress. As they told us, the computer did not perform and they did not know how to directly deal with pricing, adding, and allocating meal expenses to guests. What a pity!

    We need an annual event devoted to catching up. That time would help us to see and test the shortfalls in our understanding of processes. Flipping a switch or pushing a button should alert the system that attention is needed. Those on the controls need to know why they have just undertaken a measure and what it does. We need to remember what we may have forgotten. We must recall with a personal, replicable event the rationale, causality, and linkages of our actions. Doing so will greatly strengthen our capabilities to plan, understand, and reduce risk exposure.

BETTER OFF?

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Hello! This is a new commentary of mine that was recently published in CEOWORLD Magazine. I have included an excerpt below, and you are welcome to read the full commentary through the link at the bottom.

Less than a decade ago many economic players pronounced the triumph of global marketing. Governments encouraged market-based decision rules of economic games. Those who invoked benefits of government planning and state monopolies rapidly encountered substantial public doubt. Ten years is a long time for firms and their customers. Conditions have changed. Back then, competitive market conditions held preference. Nations that had turned away from mandated economies found rewards in very strong growth rates. There were sharp expectations for growing political freedom, greater increases in life expectancy, higher literacy rates, and a better overall standard of living. Firms encountered substantial benefits

Read More Here: https://ceoworld.biz/2021/03/28/better-off/?utm_source=email&utm_medium=CEOSocial&utm_campaign=SocialWarfare

Baby Boomer-owned small businesses can help resuscitate urban economies

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Professor Jerry Haar at Florida International University has kindly granted me permission to re-post a very interesting article (Hall, J. (2020, September 12). Baby Boomer-owned small businesses can help resuscitate urban economies. The Hill.) of his on my blog.

Please click on the link below and feel free to leave your thoughts.

https://thehill.com/opinion/finance/516132-baby-boomer-owned-small-business-can-help-resuscitate-urban-economies?rnd=1599920642