Place

IB Learner Profiles

  • Key Attributes of the IB Learner Profile

    • Thinker

    • Inquirer

    • Knowledgeable

    • Communicators

    • Principled

    • Open-minded

    • Caring

    • Risk-takers

    • Balanced

    • Reflective

Key Concepts

  • Four Key Concepts:

    • Sustainability

    • Ethics

    • Creativity

Learning Objectives

  • Define the terms 'place' and 'distribution channel'.

  • Explain the different distribution channels available to businesses.

  • Explain the importance for a business of selecting the most appropriate distribution channel(s).

  • Evaluate the impact of selecting the right distribution channel(s) on a business and its stakeholders.

Understanding 'Place'

  • Definition of 'Place':

    • Refers to:

    • Where a product is sold.

    • How it gets to the customer (distribution).

    • Ensuring products are available to consumers.

    • Success is more likely if distribution is:

    • At the right place (where consumers buy).

    • At the right time (when they want to buy).

    • At the right price (cost-effectively).

Distribution Channels

  1. Types of Distribution Channels:

    • Channel 1:

      • Producer → Wholesaler → Retailer → Consumer

    • Channel 2:

      • Producer → Retailer → Consumer

    • Channel 3:

      • Producer → Consumer

Methods of Distribution

  • Using a Wholesaler:

    • Example: Coca-Cola's distribution involving wholesalers selling to retailers.

    • Benefits include bulk purchasing and reduced storage needs for retailers.

  • Manufacturer to Retailer:

    • Example: Coca-Cola supplying directly to ASDA.

    • This channel is becoming more common with large retailers directly receiving large quantities from manufacturers.

  • Direct Selling (Manufacturer to Consumer):

    • Example: Factory outlet stores, internet sales.

    • This method helps retain more profits and reach consumers directly.

Impact of Distribution Choices

  • Choosing the right distribution channel depends on several factors:

    • The Nature of the Product:

    • Perishable or fragile goods favor direct distribution.

    • Heavy or unusually packaged items may require large retailers for cost efficiency.

    • Convenience goods need to be widely available through various retailers.

    • The Market:

    • Large markets may require intermediaries; smaller markets can often use direct sales.

    • The segmentation of the market may influence the type of retail outlet used.

    • Cost Considerations:

    • Longer supply chains may increase costs due to maintaining multiple intermediaries.

    • Conversely, shorter supply chains can incur higher costs if alternative direct sale methods aren't viable.

Multi-channel Distribution

  • Definition:

    • A system utilizing more than one method of distribution (e.g., online, in-store).

  • Benefits:

    • Provides customers with multiple purchasing options.

    • Aims to maximize revenue and enhance customer loyalty through providing choice and convenience.

IKEA Case Study

  • Overview of IKEA:

    • Swedish-founded multinational known for ready-to-assemble furniture and home accessories.

    • Largest furniture retailer since at least 2008.

  • Distribution Strategy:

    • Global presence with over 25 distribution centers in 50+ countries.

    • Direct supply model whereby suppliers deliver large quantities directly to IKEA stores, minimizing handling and transport costs.

  • Challenges:

    • Initially slow to adopt online sales; now testing new channels such as third-party platforms (e.g., Amazon).

    • Must balance the profit margins with the cost of selling through platforms like Amazon (30-40% cuts).

    • Examining new store formats and approaches to enhance distribution efficiency.

Market Research for IKEA

  • Benefits of Market Research:

    • Helps understand if there is consumer interest in purchasing online through platforms like Amazon.

  • Drawbacks:

    • Might incur high costs conflicting with IKEA's direct selling approach.

Evaluating Distribution Strategies

  1. Benefits of Adding Amazon as a Distribution Channel:

    • Increased convenience for customers seeking IKEA products quickly.

    • Potential improvement in sales volume despite profit margin cuts.

  2. Drawbacks of Adding Amazon:

    • Loss of profit margin due to Amazon's cut.

    • Reduced control over customer interactions and brand representation on third-party platforms.

Conclusion on Distribution Strategies for IKEA

  • Overall recommendation to add Amazon considering customer accessibility and potential revenue increase, while acknowledging market demographic considerations.

  • Assess the appropriateness based on target audience preferences for shopping (online vs in-store).