Introduction
In order to enter the UK market, Ayale’s Herbal Water should take into account upstream and downstream markets and their impact on distribution channel. Physical distribution and channels of distribution are the two basic components of the distribution mix (Herbal Water Home Page 2008). Both deal with physical flows and title flows. The selection of these channels, or routes for reaching consumers, is usually based on sales, communications, and contactual considerations (Crawford 77). The elements of a physical-distribution system include market segments, manufacturing, distribution to wholesaling and retailing points, and transportation and storage links. In order to reach its target market, Herbal Water will use multiple distribution channels.
Upstream Value Chains
Herbal Water upstream value chain consists of two main steps: exploration and production. The UK market receives bottled water from primary manufacturers, and distributes through “supermarkets and hypermarkets with a 44.8% share of the market’s volume” (Bottled Water in the United Kingdom 2007). Herbal Water itself is a supplier to food industries, hotels and spas, and cruise lines. The same distribution structure will be used in the UK where Herbal Water can sell its products to natural foods industries, which, in their turn, will sell the water to natural food retail chains delivered the product to the end consumers (Bottled Water in the United Kingdom 2007). In Herbal Water, these activities are designed as a coordinated system and linked with the other elements of the marketing mix (Crawford 72). For Ayale’s Herbal Water, upstream distribution requires the logical design of distribution networks that adapt the transportation and warehousing systems to changing market conditions and variations in other elements of the marketing mix (Hollensen 82).
Herbal Water → Danone or Pressure Coolers → Final consumer
Potential distributors for Ayale’s Herbal Water are Danone and Pressure Coolers Limited. In the UK, too often, physical-distribution activities are performed as a number of independent functions rather than as a system. In the UK, Danone is one of the potential food companies for cooperation and distribution of Herbal Water products. To plan, direct, and coordinate physical distribution activities, it is desirable for Ayale’s Herbal Water to group them all within a single segment. Manufacturing, however, generally lacks such coordination. Strategic alliance with Pressure Coolers Limited proposes great opportunities for Ayale’s Herbal Water because it is a market leader in bottled water and Pressure Coolers. “Pressure Coolers has been operating for longer than most of its competitors and has dealt with a very wide range of customers across all sectors of industry and commerce as well as almost every part of the public sector” (Pressure Coolers Home Page 2008).
The bottled water will be delivered by Herbal Water to the distributor in the UK, Danone and Pressure Coolers, and these companies, in their turn, will distribute Ayale’s Herbal Water through the channels to the end consumers. “Danone is one of the leading producers of fresh dairy products worldwide. Its fresh dairy products division has subsidiaries in 30 countries. Danone’s principal products include yogurts and infant food” (Bottled Water in the United Kingdom 2007). In the UK, business logistics activities for Herbal water will be concerned with the movement and storage of products and supplies to implement marketing strategies and tactics and satisfy customer needs. They focus on coordinating supply and demand and creating place, time, and possession utilities. There is a difference between physical supply and physical distribution, for goods can be moved in two ways (Paley 72). The standard of customer services offered is determined by the consideration of both customers and competitors.
Downstream Value Chains
Downstream value chains in the UK are influenced by customers’ needs and preferences, tastes and life style. It is concerned with the physical flow of goods to markets. In order to enter the market, Ayale’s Herbal Water should use two online distributors: Cotswold Spring Pure English Water and Eden Bottled Water Coolers. These companies will distribute Ayale’s Herbal Water through their sites to the end consumers (Doyle and Stern 44). These companies are potential distributors for Ayale’s Herbal Water with large distribution channels and a stable market position.
Herbal Water → Online Distributor (Cotswold Spring Pure English Water and Eden Bottled Water Coolers) → Final consumer
Also, in the UK, Herbal Water can sell directly to big retailers. The main retailers in the UK are Tesco and Asda.
Herbal Water → Distributor (Tesco and Asda) → Final consumer
This structure of distribution is the most appropriate for the UK market because it allows the company to save costs on advertising and minimize risks (typical for direct distribution channels) (Bottled Water in the United Kingdom 2007). The main channels of direct distribution will be supermarkets, convenience stores, on-trade channels. Improvements in the performance of the physical-distribution functions have led to increased marketing effectiveness and reduced costs for some industries (Hollensen 12). According to statistical results, supermarkets and hypermarkets form the most significant distribution channel in the UK bottled water market, with a 44.8% share of the market’s volume, convenience stores 19.20%, on-trade 13.60%, other 22.40%” (Bottled Water in the United Kingdom 2007). The services offered by major competitors establish a general standard. Nevertheless, Herbl Water management will also think of the particular impact of service variations on customer response and profitability as a guide inconsidering alternative distribution strategies (Hollensen 54). If customers will accept longer delivery times without shifting their business to competitors, then more efficient use might be made of centralized processing facilities, and less efficient ones could be closed. The downstream distribution will cross the legal and organizational boundaries and focuses on an entire process, even though legal control may be in several hands; that is, it is frequently concerned with the linkage of several independent firms like Cotswold Spring Pure English Water and Eden Bottled Water Coolers (Paley 41; Doyle and Stern 28).
For Ayale’s Herbal Water, effectively organizing physical-distribution activities in the UK is a difficult task, because it involves such technical matters as transportation rates, materials handling, scheduling movements, and laying out warehouses. Thus, it has general relationships with manufacturing, marketing, and purchasing functions. To develop better flows of goods to customers and consumers, marketing managers achieve a balance of physical-distribution components. In order to meet diverse customers’ needs, Herbal Water should maintain adequate customer service taking into account: (1) the percentage of customers who get their orders in a given number of days; (2) the limitation of back orders to a specified level; (3) delivery to any customer in a specified territory in x days (Hollensen 24). Customer service will also include such components as product availability, delivery reliability and frequency, order-cycle time, and stock-out percentages.
Works Cited
Bottled Water in the United Kingdom. Industry Profile. November 2007.
Cotswold Spring Pure English Water Home Page 2008. Web.
Crawford C. Merle. New Products Management. Irwin-McGraw Hill. 7th edition, 2003.
Doyle, P., Stern, Ph. Marketing Management and Strategy. Financial Times/ Prentice Hall; 4 edition, 2006.
Eden Bottled Water Coolers Home Page 2008. Web.
Herbal Water Home Page. 2008. Web.
Hollensen, S. Global Marketing: A Decision-Oriented Approach. Financial Times/ Prentice Hall; 4 edition, 2007.
Paley, N. The Manager’s Guide to Competitive Marketing Strategies. Thorogood, 2006.
Pressure Coolers Home Page. 2008. Web.