Enhancing distribution channel management of truong giang cosmetic pharmaceutical and trade co , ltd

RECOMMENDATIONS TO ON THE DEVELOPMENT OF ENHANCE MANAGEMENT OF DISTRIBUTION CHANNEL MANAGEMENT OF TRUONG GIANG COSMETIC AND PHARMACEUTICAL CO., LTD ...37 3.2.1.. From the above analysi

TABLE OF CONTENTS

(làm lại Table of Contents)

INTRODUCTION 1

CHAPTER 1: THEORETICAL BACKGROUND OF MANAGING DISTRIBUTION CHANNELS OF PHARMACEUTICAL ENTERPRISES .7

1.1 DISTRIBUTION CHANNEL OF PHARMACEUTICAL ENTERPRISES 7

1.1.1 DEFINITION OF DISTRIBUTION CHANNEL 7

1.1.2 ROLES OF DISTRIBUTION CHANNEL .10

1.1.3 FUNCTIONS OF DISTRIBUTION CHANNEL .11

1.1.4 FLOWS IN DISTRIBUTION CHANNEL .12

1.1.5 STRUCTURE OF DISTRIBUTION CHANNEL 13

1.1.6 MEMBERS OF DISTRIBUTION CHANNEL 15

1.2 MANAGEMENT OF DISTRIBUTION CHANNEL OF PHARMACEUTICAL ENTERPRISES .16

1.2.1DEFINITION OF MANAGEMENT OF DISTRIBUTION CHANNEL MANAGEMENT .16

1.2.2 OBJECTIVES AND CRITERIA TO EVALUATE MANAGMENT OF DISTRIBUTION CHANNEL MANAGMENT 18

1.2.3 ORGANIZATION CHART OF DISTRIBUTION CHANNEL MANAGEMENT .21

1.2.4 CONTENTS OF DISTRIBUTION CHANNEL .22

1.2.4.2 ESTABLISHING THE MANAGEMENT POLICY OF DISTRIBUTION CHANNEL 25

1.2.5 FACTORS IMPACTING ON MANAGMENT OF DISTRIBUTION CHANNEL MANAGMENT 29

CHAPTER 2: CURRENT MANAGEMENT OF DISTRIBUTION CHANNEL MANAGEMENT OF TRUONG GIANG COSMETIC PHARMACEUTICAL CO., LTD .1

2.1 INTRODUCTION OF TRUONG GIANG COSMETIC PHARMACEUTICAL CO., LTD 1

2.1.1 HISTORY OF ESTABLISHMENT AND DEVELOPMENT OF TRUONG

GIANG COSTMETIC PHARMACEUTICAL CO., LTD .2

2.1.2 BUSINESS LINES OF TRUONG GIANG COSMETIC PHARMACEUTICAL

2.3.2 EVALUATION DUE TO ??? MANAGING CONTENT OF DISTRIBUTION

CHANNEL ( WHAT'S THIS SENTENCE MEAN?) 31

CHAPTER 3: RECOMMENDATIONS TO ENHANCE ON THE DEVELOPMENT

OF MANAGEMENT OF DISTRIBUTION CHANNEL MANAGEMENT OF

3.1 ORIENTATION OF ENHANCING MANAGEMENT OF DISTRIBUTION

CHANNEL OF TRUONG GIANG COSMETIC PHARMACENTICAL AND

TRADE CO., LTD BY 2020 .36

3.1.2 ORIENTATION TO ENHANCE OF ENHANCING MANAGEMENT OF

DISTRIBUTION CHANNEL MANAGEMENT OF TRUONG GIANG COMPANY

BY 2020 36

3.2 RECOMMENDATIONS TO ON THE DEVELOPMENT OF ENHANCE

MANAGEMENT OF DISTRIBUTION CHANNEL MANAGEMENT OF TRUONG

GIANG COSMETIC AND PHARMACEUTICAL CO., LTD 37

3.2.1 SOLUTION OF TO ENHANCING ORGANIZATION CHART OF

DISTRIBUTION CHANNEL 37

LIST OF REFERENCES .58

INTRODUCTION 1

CHAPTER 1: THEORETICAL BACKGROUND OF MANAGING

DISTRIBUTION CHANNELS OF PHARMACEUTICAL ENTERPRISES 7

1.1 DISTRIBUTION CHANNEL OF PHARMACEUTICAL ENTERPRISES .7

1.1.1 Concept of distribution channel .7

1.1.2 Role of distribution channel .10

1.1.3 Functions of distribution channel .11

1.1.4 Flows in distribution channel .12

1.1.5 Structure of distribution channel .13

1.1.6 Members of distribution channel .15

1.2 MANAGEMENT OF DISTRIBUTION CHANNEL OF PHARMACEUTICAL ENTERPRISES .16

1.2.1 Concept of distribution channel management .16

1.2.2 Objective of distribution channel management .17

1.2.3 Criteria for evaluating the results of the distribution channel management 19

1.2.4 Structure of distribution channel .21

1.2.5 Designing the management policy in distribution channel .24

1.3 FACTORS IMPACT ON DISTRIBUTION CHANNEL MANAGEMENT 29

1.3.1 Macro environment factors .29

1.3.2 Industrial Factors .30

1.3.3 Company Factors .32

CHAPTER 2: CURRENT MANAGEMENT OF DISTRIBUTION CHANNEL OF TRUONG GIANG COSMETIC PHARMACEUTICAL CO., LTD 34

2.1 INTRODUCTION OF TRUONG GIANG COSMETIC PHARMACEUTICAL CO., LTD .34

2.1.1 Milestones .35

2.1.2 Product lines .36

2.1.3 Organization chart .36

2.1.4 Business results of Truong Giang Cosmetic Pharmaceutical Co., Ltd from 2011 to 2014 .37

2.2 DISTRIBUTION CHANNEL STRUCTURE OF TRUONG GIANG PHARMACEUTICAL CO., LTD .41

2.2.1 The company distribution workforce .41

2.2.2 Structure of current distribution channels .42

2.2.3 Direct sale channel .44

2.2.4 Whole sales channel .46

2.2.5 Referent group channel .48

2.3 DISTRIBUTION CHANNELPOLICIES .50

2.3.1 Selecting members of distribution channels policies .50

2.3.2 Incentive policies for distribution channel members .53

2.3.3 Regulating dispute amongst distribution channel policies .57

2.3.4 Evaluating members’ operation policies .61

2.4 EVALUATING THE MANAGEMENT OF PHARMACEUTICAL DISTRIBUTION CHANNEL OF TRUONG GIANG COMPANY .62

2.4.1 Evaluation by criteria .62

2.4.2 Strengths and weaknesses of distribution channels management .65

2.4.2.1 Strengths .65

2.4.2.2 Weakness .66

CHAPTER 3: RECOMMENDATIONS ON THE DEVELOPMENT OF DISTRIBUTION CHANNEL MANAGEMENT OF TRUONG GIANG COSMETIC PHARMACENTICAL AND TRADE CO., LTD .69

3.1 FORECAST OF PHARMACEUTICAL MARKET IN VIETNAM BY 2020 69 3.2 RECOMMENDATIONS ON THE DEVELOPMENT MANAGEMENT OF DISTRIBUTION CHANNEL OF TRUONG GIANG COSMETIC AND PHARMACEUTICAL CO., LTD .70

3.2.1 Implement training programs .70

3.2.2 Improving structure of distribution channel .72

3.2.3 Strengthening policies of managing distribution channel .74

3.2.4 Other solutions .81

3.3 SOME PROPOSALS TO THE AUTHORITIES .84

CONCLUSION .87

LIST OF REFERENCES .88

LIST OF TABLE

Table 2.1 Business results of Truong Giang Co., Ltd (Pharmaceutical) .39

Table 2.2 Qualification of staffs of distribution channel .42

Table 2.3 Revenue of Channel Type 1 of Truong Giang Co., Ltd in 2012-2014 45

Table 2.4 Geographic distribution of intermediaries (up to 01/09/2015) .47

Table 2.5 Revenue of distribution channel type 2 of Truong Giang Company in

Table 2.9 Policies of encouraging distribution channel member of Truong Giang

Table 2.12 Survey result on policies of solving distribution channel’s conflict of

Truong Giang Company in 2014 .61

Table 2.13 Market share of pharmaceutical products of Truong Giang Company in

some major markets ( in terms of revenue) .62

Table 2.14 Market Coverage of Truong Giang in 2011-2014 .63

Table 2.15 Evaluating the satisfaction of members of distribution channel in

Truong Giang Company in 2014 .64

LIST OF FIGURE

Figure 1.1 Structure of distribution channel .14

Figure 1.2 Benefit of Intermediaries .19

Figure 1.3 Process of evaluating activities of channel members .28

Figure 2.1 Organization chart .37

Figure 2.2 Growth of total drug consumption and average for pharmaceutical products in Vietnam .38

Figure 2.3 Business results of Truong Giang Co., Ltd (Pharmaceutical) .40

Figure 2.4 Organization chart of the distribution channel .41

Figure 2.5 Structure of pharmaceutical distribution channel of Truong Giang Co., Ltd .43

Figure 2.6 Revenue of channel type 1 in 2012-2014 .45

Figure 2.7 Revenue of channel type 2 in 2012-2014 .48

Figure 2.8 Revenue of channel type 3 in 2012-2014 .49

Figure 2.9 Selection procedure of distribution channel members in Truong Giang Company .50

Figure 2.10 Results of selecting distribution channel member in 2011-2014 53

Figure 2.11 Member’s evaluation to policies of encouraging .56

Figure 2.12 Survey result on solving conflict in distribution channel .61

Figure 3.1 Proposed vertical link in pharmaceutical distribution of Truong Giang Company .72

Figure 3.2 System of internal applications .78

1 Rationale of the research

In business operation of each enterprise such as manufaturing and trade

trading companies, the production distribution process is one of the most

important steps to achieve their business goals In the period era of

globalization associated with high competition, enterprises are now more focus

on strengthening the capability of distribution channel management which

creates differences in competition competitive advantages Pharmaceutical

industry has many special characteristics which are different withfrom other

sectors in managing distribution channel Globalization and economic

integration influence every businesses, especially pharmaceutical enterprises,

facicreating many opportunities as well as challenges

Currently, Vietnam drug market is mainly supplied by two main

sources including domestic and imported drugs In recent years, the

pharmaceutical industry in Vietnam has made significant progress Domestic

production could meets 50% of demand of drugs users However, the domestic

pharmaceutical industry is still facing many challenges because foreign drugs

account for 60% of the market share While The local firms are not able to

produce the therapeutic class; mostly common drug categories are still used

In the context of market expansion, Vietnam has implemented made great

progress in order to open Pharmaceutical market as committed while joining

World Trade Organization (WTO), there are more and more foreign medical

enterprises entering the market According to the commitments of Vietnam to

WTO, since 1 st September 2009, foreign pharmaceutical companies are entitled

to establish branches in Vietnam and are engaged directly to in importing

drugs Therefore, foreign companies now have more chance to access medical

market in Vietnam In the past, most of the enterprises with foreign direct

investment (FDI) invested in medical factories However, there is about 70% to

80% of FDI companies changed to pharmaceutical distribution field This is a

great pressure to strengthen the distribution channel of Vietnamese

manufacturing companies.

Truong Giang Cosmetic Pharmaceutical and Trade Co., Ltd is now

specializing in distribution of pharmaceutical products, and cosmetics in Hanoi

and some provinces /cities nearby (The company's operation is bearing highly

competitive pressure from both domestic and foreign enterprises) In fact, the highly

competitive pressure from both domestic and foreign enterprises has borne heavily

on company’s operation In recent years, the operation of medical distribution

channel of the company has been slowing down, the profit is not as expected.

Thus, company needs to improve the management of distribution channel in

order to improve the effectiveness and efficiency of the business activities.

From the above analysis, along with the desire to contribute to the

operational efficiency of pharmaceutical product distribution of the company, the

author came up with the topic “Enhancing management of distribution channel

management of Truong Giang Cosmetic Pharmaceutical and Trade Co., Ltd”

for the study

2 Literature Review

There are many researches on distribution channel management

including a number of typical papersresearch such as:

- "Managing distribution channels" (Truong Dinh Chien, 2012)

addressed in a systematic way the content of managing distribution channel

from the viewpoint of manufacturing enterprises The thought and content of

the book is consistent with Phillip Kotler’s approach about managing

distribution channel Those approaches are considered as an important

guideline for Vietnamese manufacturing companies to establish and manage

the distribution channel.

- Scientific research at ministry level( xem lại từ này): "Assessment of the

status and orientation of organizing distribution channels for some major items

in our country up to 2015" Code: 2005-78-009 Ministry of Commerce (now

known as Ministry of Industry and Trade), of Assoc.Prof.Dr Dinh Van Thanh

In the research, the author assessed general situation of major items in

Vietnam as well as analyzed models of organizing distribution channel and

management policy in order to recommend solutions which can remedy to the

limitations.

- "The pharmaceutical distribution market in Vietnam"(E-commerce,

2012) noted that there are two main pharmaceutical distribution markets

including wholesale and retail Most of products in wholesale market are

imported by foreign distributors whose have good relationship with oversea

manufacturers As commitments of Vietnam to WTO, foreign firms have the

right to import directly medical products but they cannot enter the retail

market in Vietnam;, thus, Vietnam companies can occupy exclusively in this

market At present, the pharmaceutical retail market can be divided into 3

segments: manufacturers operatinge distribution activities, pharmacy chains

and private retail pharmacies.

- "The solution to perfect the system of distribution of pharmaceutical

enterprises in Vietnam in the context of international economic integration"

(Nguyen Thanh Tung, 2010) studied theories and circumstances of medical

distribution system as well as the development of the channel in a number of

drug firms in Vietnam Based on the study results, the author suggested

resolutions in order to improve the efficiency of distribution system in the

context of international economic integration

The above researches, especially the micro perspective studies have

contributed to enhance management progress the management of drug

distribution channel Therefore, the topic of managing medical distribution

channel is not a new issue;, however, there is not any study which has been done

there are no studies which have been done in Truong Giang Cosmetic

Pharmaceutical and Trade Co., Ltd

3 Objectives of the research

The main objective of this study is base d on to analyzinge theories and

current status of distribution channel management in Truong Giang Cosmetic

Pharmaceutical and Trade Co., Ltd to provide appropriate solutions which

improve the company’s distribution system in the future.

To achieve the above objectives, the thesis identifies several specific tasks as

follows:

- Identify Formulate the theoretical framework on the management of

distribution channels

- Analyze circumstances of distribution channels of Truong Giang

Cosmetic Pharmaceutical and Trade Co., Ltd; Illustrateidentify strengths and

weaknesses and possible causes of the weaknesses in the management of

distribution channel.

- Propose solutions in order to improve to the distribution channel

management inTruong Giang Cosmetic Pharmaceutical and Trade Co., Ltd

4 Scope of research

- Research object:

Distribution channel management of Truong Giang Cosmetic

Pharmaceutical and Trade Co., Ltd

- Research scope:

+ Content: Analyze management activities of the pharmaceutical

distribution channel of Truong Giang Cosmetic Pharmaceutical and Trade Co.,

Ltd, the cosmetic distribution system is not included in this research.

+ Location: Truong GiangCosmetic Pharmaceutical and Trade Co., Ltd

+ Time period: Data is collected in the period of 2011-2014; and

solutions to be proposed up to 2020.

5 Research Questions

To accomplish the goals, the following questions must be answered:

- What are the role, structure and organization of distribution channels

of pharmaceutical businesses to ensure efficiency and business goals?

- What are the impacts and basic contents of the management of the

distribution channels management of the pharmaceutical business enterprises?

- What is current status circumstance of managing medical distribution

channel in Truong Giang Cosmetic Pharmaceutical and Trade Co., Ltd? What

are weaknesses and its causes?

- What should company do in order to enhance the efficiency of

managing pharmaceutical distribution channel?

6 Methodology

6.1 Methodology

Thesis uses the methodology of dialectical materialism and survey in

combination with literature research as methodology of historical materialism of

Marxism - Leninism as key research methods throughout the entire paper The

system approach is presented as bellow:

Thesis uses system approach in the research process

6.2 Data collection

Thesis uses the following methods:

- Statistical methods for investigating and collecting data on situation of

managing pharmaceutical distribution channel of Truong Giang

Cosmetic Pharmaceutical and Trade Co., Ltd

- The methods used for the analysis includes: integrated approach,

Factors affect

distribution channel

Management of enterprise’s distribution channel

Objectives of managing distribution channel

chanel

Increase revenue, market share

Factors of

enterprises

Reduce cost of distribution channel

comparisone, interpretation, logic and history

6.3 Theoretical background

7 Thesis structure

The thesis is structured into three main chapters:

Chapter 1: Theoretical background of managing distribution channels

of pharmaceutical enterprises.

Chapter 2: The contextStatus quo of distribution channel management in

Truong Giang Cosmetic Pharmaceutical and Trade Co., Ltd

Chapter 3: Recommendations to enhance management on the development

of distribution channel management inTruongmanagement in Truong Giang

Cosmetic Pharmaceutical and Trade Co., Ltd.

Factors affect

distribution channel

Management of enterprise’s distribution channel

Objectives of managmening distribution channel

Set –up policies of distribution channel

Improve relationship, and profits for members in chanel

Increase revenue, market share

Factors of

enterprises

Reduce cost of distribution channel

CHAPTER 1 THEORETICAL BACKGROUND OF MANAGING

DISTRIBUTION CHANNELS OF PHARMACEUTICAL

ENTERPRISES

1.1 DISTRIBUTION CHANNEL OF PHARMACEUTICAL ENTERPRISES

1.1.1 Concept of distribution channel

1.1.1.1 Definition, characteristics and categories of pharmaceutical products

a) Definition of pharmaceutical products

According to Wikipedia: Pharmaceutical or drug are substances in the

form of single or mixed ones with clear origin , used for animals or for used

to diagnose, cure, treat, or prevent disease s .

Drug can be defined in two different ways: it is product that cures

diseases or it is product of producing process that is distributed and traded in the

market.

First, from the point of usage, pharmaceutical product is a complex

concept which is defined as drug and every activity related to drug (according

to Ministry of Health)

The drug is an element or mixture of substances which is used to

diagnose, cure, prevent disease or adjust the body physiological functions

includes ing finished products, raw materials, vaccines, and medical bio except

functional foods.

- Vaccines is a biological preparation that improves immunity to a

particular disease It is used for the purpose of prevention.

- Medical biois product of biological origin is used to diagnose, cure, and

prevent diseases.

- The medicinal materials are substances participating in the

composition of the product during the production of drugs.

- Finished drugs are forms of medication through all stages of

production, including packaging for the final package and labeling.

The drug-related activities include operations from primary processing,

manufacturing to packaging to get finished products in the market.

Second, the pharmaceutical is a commodity.

Pharmaceutical products as like other goods in the market are

influenced by the market rules However, they are also kind of special

commodity which has their own characteristics being different from other

ordinary products.

b) Characteristics of pharmaceutical product

Firstly, medical products have significant impact on human health and lives.

Therefore, firms have to prove their capability including human resources, medical

equipment as well as medical license in order to produce and trade pharmaceutical

products In addition, they also operate under the control Ministry of Health (in

particularly Vietnam Drug Administration) Based on that basis, product quality is

the priority goal for every pharmaceutical enterprise

Secondly, patient s need s prescription from their doctor s to use right drug.

Because patients do not know what kind of illness they get and how to cure it

Therefore, they need doctors to let them know exactly what kind of medicine, how

to use it and the side effects of medications while using them

Thirdly, the scope and demand for drugs is very large Demand for medicine

depends on many different factors such as population, natural conditions and

income, etc Each person, dependings on economic condition, has different needs

for medication In particularly, high income people prefer choosing imported drugs

(with high price) while low income people will choose domestic medicine with

lower price

The above characteristics of pharmaceuticals can lead to:

- Exclusivity in pharmaceutical manufacturing and business;

- Industrial secrets in processing and manufacturing;

- Competitiveness of pharmaceutical products depends not only on quality

and price but also on the expertise of doctors in each country

Thus, in order to enhance increase competitiveness, it is required to reduce

monopoly and publicity about for the technology, and to enhance capacity and

awareness of physicians

c) Categories of pharmaceutical products

It is important to categorize medical products Currently, there are

three main ways of classifications:

Usage: There are two types of pharmaceuticals including OTC

(non-prescription, sold in retail pharmacies) and medications (prescription drugs,

used in hospitals and health centers) However, in Vietnam many kinds of

medications in Vietnam are sold freely in the market, people can buy them

without doctor’s prescription

Copyright of manipulated drug: Pharmaceuticals are divided into generic

drugs (all generic property rights) and a patent (copyrighted)

Currently, the domestic pharmaceutical industry is mainly producing

generics which have ing low value and accounting for 69% of the total drug market

with categories related to antibiotics, conventional drugs (vitamins, analgesics,

fever)

Western medicine or traditional medicine:The Western medicine is the drug

that produced from synthetic chemicals or from the combination of medicine and

other chemical synthesis) Traditional pharmaceuticals which is made from raw

materials of natural origin such as animals, plants or minerals, is followed the

methods of Eastern traditional philosophies

1.1.1.2 Definition of pharmaceutical distribution channel

Based on different point of views, there are many various definitions of

distribution channel such as:

From the perspective of manufacturer: Distribution channel is the

network of individuals and firms involved in getting a product or service from

the producer to the customerconsumers.

From the perspective of intermediate distributor: Distribution channel is

the path that transfers the ownership of the good or service from the

manufacturer to the customerconsumers through intermediate distributor.

From the perspective of customerconsumers: Distribution channel is the

intermediary between producer and customerconsumers.

As the function of distribution: Distribution channel is a logistic system to

transfer a good, service or solution to consumer at a specific time and location.

As the management function: Distribution channel is an organization

that involves in distribution activities in order to help pharmaceutical producer

achieve its business goals.

This thesis will study distribution channel as a management function which

engages 3 main factors: (i) medical producers (source), (ii) intermediate

distributors (intermediary), (iii) end users (destination) Therefore,

distribution channel can be defined as a system chosen by pharmaceutical

firms to effectively utilize intermediate distributors in order to transfer

products to customerscustomers as well as achieve high profits.

1.1.2 Role of distribution channel

- Distribution is a tool of business in the field of distribution and exchange

of goods to satisfy meet the specific needs of target customerconsumers groups,

overcoming the separation of time, space and ownership of goods and services

(to those who want to use them ??.)

- Distribution performs the specialization and division of labor in order to

improve the efficiency of the use of production factors in business, to meet the

development of the market as well as the diversity of need Especially in the

currently period the increasingly fierce competition, the goods must be

standardized; the issue of quality of goods put on the market must be

guaranteed for granted

Efficient distribution of goods is able to obtain money in o to cover rder to

pay tthe costs of the stages of production and business processes However,

goods dDistribution inefficiency will lead to bottlenecks in business and cannot

afford costs leadingeventually to bankruptcy This practice poses is used for not

only manufacturing enterprises, but also trade and various business

enterprises operating in the distribution chain of goods circulation

-Distribution channel connects firm’s business with customerconsumers

and deploys other activities of marketing such as introducing new product,

promotion, pricing policy, sales service to satisfy customerconsumers’s needs.

Information from the distribution channel helps manufacturer to adjust

marketing strategy on timely Besides, a firm can only successfully make profit

when its distribution channel is implemented effectively.

1.1.3 Functions of distribution channel

Distribution functions of the business are to help solve the conflict

between producers’s production and ing a large volume and specialization with

consumers’s demand under various large and small volumes It's a specialized m

Manufacturers produce ing and sell ing a large volume number of products, but

each individual consumer buys a very small amount of product Retailers are

the "characters" to help resolve this contradiction

Distribution channels also help resolve the differences between

production sites and consumer location This is the basic reason for the use of

distribution structures having many intermediate levels The emergence of

commercial intermediaries is to reduce the total number of exchanges and

facilitate the transportation of bulk products at a long distance thus resulting in

the reduction of ing transportation costs

Distribution channel helps to regulate supply and demand over time due

to production time and time consumption the mismatch between producing and

consuming period That is true for some commodities having seasonal nature of

consumption

The purpose of distribution system is to address conflicts on the activity

of among the members of the channel It is necessary for Effective distribution

channel is necessary to connect producers with users, which means that it has

to satisfy meet the customerscustomers’s expectation

The basic functions of distribution channel are purchase, sale,

transportation, storage, classification, finance, risk, and market information.

Members who join the channel have to perform functions such as following:

- Exchange activity (buying and selling): Buying function means

searching and evaluating value of pharmaceutical products Selling function is

related s to consuming products consumption.

- Standardization and classification is related to arranging medical

products by categories and quantities that customerconsumers needs This

function facilitates trading because it reduces the needs of testing and choosing.

- Transportation helps to solve the spatial conflict between producers

and customercustomers.

- Storage involving activity of storing goods in warehouse where to meet

the demand on time The measurement of the match on time between manufacture

and consumption is speed of inventory turnover

- Financial functions provide cash and credit needed for production,

transportation, storage, promotion, sale, and purchase of steel.

- Risk-sharing function resolves uncertainties in the process of

distribution of pharmaceutical products in the market.

- The function of market information is related ing to collecting,

analyzinge and distributing e all the information necessary for the planning,

implementation and test activities of pharmaceutical product distribution

Negotiation functions Is to divide responsibilities and rights of the

members of the channel on the price and conditions of sales.

1.1.4 Flows in distribution channel

Those parts of the distribution channel are connected to each other by

multiple flows Most importantly, the flow follows:

- Physical flow is the transportation of the product from manufacturing

place to consumption location through warehouse system and means of

transport Product lines show cost and time needed to distribute production in

a specific distribution channel Product lines do are not directly related to

ownership transfer but it plays important role in saving expense and reducing

time for delivery

- Flow of ownership (little flow) is the transfer of ownership of the

product from one member to another member in the distribution channel The

transfer of ownership of distribution channels binds only to official members

that are not tied to the auxiliary members such as transportation companies, or

other intermediaries such as agencies, representatives and dealers.

- Flow of payments (payment flow) that flow in the opposite movement of

currency and payment documents from end buyers through middlemen back

to producer Payment flows is the a process that customercustomers pays

distributors bills via banks or other financial institutions to distributor, then

distributor pays to producers, and producers pays to suppliers

- Flow of information (information flow) is the a process where the

members of the distribution channel exchange information with each other on

the stage of the process of while putting transfering products and services from

the producers to the consumers’ places.

- Flow of fans (promotion flow) is the orientation ed affect line of

conducting (advertising, personal selling, promotion, propagation) spreading

from this member to the other members of the distribution channel

1.1.5 Structure of distribution channel

In organizational matteraspects, distribution channels are based on

product areas and consumer objects, which can be grouped into:

- Individual consumption channel is the channel that products mainly

serve individual demand This channel is characterized by a large number of

buyers but the volume in each market is small and spread over a large area.

Producers are difficult to organize network due to limited financial capacity so

they must use intermediaries This condition makes the product can access a

variety of clients and create competition among intermediaries in selling products

This can help a variety of clients get access to the products and create competition

among intermediaries in selling products

- Industrial consumption channel: Products which circulated ing in this

channel are mainly used as an input of manufacturing process Moreover,

CustomersCustomers in this channel often buy products in large quantities and

they were determined geographically Therefore, distribution channel for these

products are usually the short – distance channel one On the other hand, these

are products with high unit value high value products so if using long- distance

channel, it will increase costs and may face risks in transportation and storage

Costs and risks to transportation and storage can be increased

In the framework of the research, thesis is just mentioned individual

consumption channel Only individual consumption channel is mentioned in the

thesis

Structure of marketing channel of enterprise is often considered as a

network system because they it includes individual entrepreneurs and

independent, interdependent agencies;, in other words, members are related

connect to each other during operation This is a system which elements are

interrelated and dependent on each other It is a system of interrelated elements and

dependent on each other in the process of creating distribution channels

Consequently, pharmaceutical products are bought and used by consumers

Thus, the distribution channel structure describes the set of channel

members and the distribution of work allocated to them Each different

marketing channel is structured with division of work for members of different

channels

This definition emphasizes that in the development of channel structure,

channel manager has to face with assignment decision It is a set of distributed

work acquired to help achieve distribution goal.

Figure 1.1 Structure of distribution channel

Source: Truong Dinh Chien, Marketing Management, NEU, 2012

There are three basic elements to reflecting the channel structure:

- The length of the channel is defined by a number of intermediary

levels, which are presented in the channel When the level of the channel

increases, the channel is considered to increase the length.

- The width of the channel: Expression in number of intermediaries in

each channel level.

- The channel intermediaries.

Direct channel (first channel) means distribution channels through

which the producer sells goods directly to consumers without going through

any intermediary When By using this channel ,channel, profitable kind of

business that Pprofit is not being shared with other intermediaries;, on the other

hand, now there is are more opportunities y to interact directly with

customerscustomers thus being possible to understand exactly what consumers need

and how their demand changes accurately grasp the needs of consumers such as

changes in demand However, this type of channel is only suitable for small

customerconsumers - market segments and geographically concentrated When

the enterprise market that stretches over a vast geographical area, the use of

these channels were becomes difficult because of large number of sales staff

the company must maintain a large number of sales staff

Indirect channel (second, third and fourth channel) means that the

channels between producers and consumers appear more which implements

different intermediate duty to take transfer goods from producers to consumers.

In this channel, type of business goods may be consumed faster speeds, greater

volume sold quickly, in large quantities ,quantities, and products are sold on wider

geographical areas market The use of these channels can reduce a portion of the

business profits due to sharing with other intermediaries However, while using this

channel, a portion of business profit can be reduced due to sharing with other

intermediaries

For intermediate businesses, it is possible to face difficulty in controlling

their behavior in the consumption of products made by them, whichare independent

organizations now Intermediate businesses are likely to confront difficulties in

controlling their behavioursbehaviors in the consumption of products

The information about the market and feedback from customersCcustomers

regarding the product may not come exactly when the business is going through

many intermediate levels gGathering information and consumersconsumers’

feedback related to products will not be accurate when they go through intermediate

levels

Actions of businesses may be affected if there are conflicts between

consumers and intermediaries or between intermediaries and producers When

by using intermediaries who are knowledgableknowledgeable about areas where

they market and build distributor networks in the distribution channel, businesses

can reduce possible risks y to while penetrating e into a new market by

intermediaries who are knowledgeable about the area which they charge market and

they have built is a distributor network

Channel mix: the a kind of channels is created when businesses use a

variety of channels at once to deliver launch one or more products on a market

sector or many different market areas

1.1.6 Members of distribution channel

Basic members of distribution channels, including: (i) The producer; (ii)

The intermediate; (iii) end users

- Producers: are organizationpeople that produce goods and services to

meet the needs of the market and profitable for them Another question is why

the lessfewer direct manufacturers directly distribute their products to

end-consumers? Most manufacturing companies including large and small ones,

were are not in a favorable position to distribute their products directly to

end-use markets They lack the necessary scale and scale efficiently to efficiently

perform all the work necessary to distribute their products to end-users finally.

The experience in their production did is not automatically translate converted

into experience in the process of distribution.

By moving transferingtransferring the works in distribution channels to

other members of the channel such as wholesalers, retailers, affiliate

companies the producers can achieve relatively their goals thrifty.

- Intermediary: a distributor of who distribute productsdistribute products

from manufacturers to consumers Intermediaries include ing wholesalers and

retailers The type of wholesale include ing wholesale goods, broker, commodity

wholesale commission, affiliates and sales representatives from producer.

Retailers including include businesses selling goods to individual consumers or

households and the rental supplement for the sale of goods.

- The end user is the person using the product's manufacturing

enterprises.

PHARMACEUTICAL ENTERPRISES

1.2.1 1Management Concept of distribution channel management concept

According to "Management" - National Economic University, in 2012,

the "Management is a the process of planning, organizing, leadership, controlling

thecontrolling the resources and activities of the social system in order to achieve

the purpose of effective systems with high efficiency and sustainab ility le in the

condition of environmental conditions fluctuate "

Management impacts on the resources and activities of the social system.

The principal object of management is human relationships inside and outside

the system Entity of management has impacts on humans, through which the

impacts of physical factors and other immaterial suchimmaterial such as capital,

materials, machinery, technology and information is to create the final result of

the whole activity is created Thus, in essence, the social management system is

to manage people, many people turn use the power of the general strength of the

system to reach target

Thereby, the concept of distribution channel management of enterprise

products can be generalized as follows: Management's distribution business is

the process of organizing and managing the relationships between among

members during the flow channel transportation and disposal of products on

the market to achieve product sales of businesses Depending on the different

commodities is so different that the distribution channels of production

manufacturing enterprises have has different varousvarious characteristics,

according to which lead to complexity and diveristydiversity of distribution

channel management the management of enterprise distribution channels are also

the complexity and characteristics different

For operational management of enterprise’s pharmaceutical

distribution channels, there are have some of the following characteristics:

- Manage distribution channels of pharmaceutical business are is a

process that includes successive stage being which is continuously conducted

continuously, be over and repeating repeated at both the strategic levels (strategic

and distributing on plans) and tactic level (the specific distribution measures).

It is a sequence of work is starting ed from the study of the environment inside

and outside the enterprise in order to identify target customerscustomers now

have the ability to and satisfy meet their needs better than competitors, and meet

priority needs over therequirements better than competitors Second job task is

identifying how to bring products to target customerscustomers; again is putting

the product to the customerconsumers in any way Lastly, test, evaluate and

adjust the activities on a regular basis, in accordance with the changes of

business environment

- Manage distribution channels of pharmaceutical business are the

management by objectives includes both short-term goals and long term goals

Management of 's distribution activities of pharmaceutical enterprises are is to

achieve the intended objectives.

- Manage distribution channels management of pharmaceutical

enterprises is tasked affect the adjusting leveladjusting level, timing and

structure of the market demand At any particular time, actual demand can be

lower, equal or higher than the supply Management of distribution channels

will have to means finding a solution to solve all these situations problems, so that

supply meets demand and vice versa.

1.2.2 Objective of distribution channel management

Formulating an effective channel begins with the need to reach out to

define how the target market does These objectives could be used to measure

how well they serve customers and intermediaries operate

a level where customerconsumers service and intermediaries operate Each

manufacturer has implemented its objectives in the binding conditions from

customerscustomers, products, intermediaries, distributors, competitors, and

business policy and business environment.

Operations Manager product dDistribution business in general, in

particular pharmaceutical companies in particular, aims towards the following

objectives:

Management acitivitiesactivities of distribution channel of businesses in

general and pharmaceutical companies in particular aim for the following

objectives:

a) Strengthening links and interests between the members of the channel

Typically, trading relations between the members of the channel are

formed at random on the market under a free market mechanism Members of

the active channel act for their own goals, not the goal of for the whole channel

leading to inefficient corperationcorporation among members, so the cohesion

between the members of the loosely channel Therefore, management of product

distribution channels of production enterprises should aim to for

strengtheningfor strengthening the link between members of the channel,

marketing channel development alongdeveloping marketing channel - channel type

operation is with keywith key programs and high professionalism From thereAs

a result, the alignment of the channelconnection among members is igets closer ly

held, long- lasting, agreed on theconsistent with the objectives and plans of

action: the goal This is with the aim to of satisfying the market demand of the

canal system; simultaneously and , increasing e the benefit of the members of the

channel.

b) Increase in revenue, profit and market share for business

Increase revenue, profit, market share is the most important goal that

all businesses are aiming for To do this, besides the production of the goods

and products of having good quality, good design with lowestwith lowest cost,

then selling the goods to the market to earn revenues and profits for businesses

is also particularly extremely important crucial factor Thus, effective

management of distribution channels will have good products great impacts on

revenues, profits and market share of the business.

c) Reduction of distribution cost

TableFigure 1.1 Benefit of Intermediaries

Distribution without Intermediaries Distribution with Intermediaries

Figure 1.12 Benefit of Intermediaries

Source: The survey, 2015

Through a simple description in TableFigure 1.12, we can see that,

instead of distributing products to each final consumer, with the distribution

channel, businesses can save a lot of cost distribution

thanks to distribution channel, businesschannel, business can save a lot of

distribution costs instead of distributing products to end users

However, the profitability of the enterprise must share the commission's

intermediate distributors Intermediate distributors can get commission based on

profit of company earned Therefore, in order to run channel effectivelychannel

effective products, manufacturing enterprises need should be flexibility flexible

in the organization of channels organizing and construction of building up suitable

channel management policies with reasonable conditions based on of business

resources as well as the featured products enterprises typical products

1.2.3 Criteria for evaluating the results of the distribution channel

Producer

User 1

User 2

User

…

Producer

User 1

User 2

User

…

Intermadiaries

Results of distribution channel management can now be measured in a

number of basic criteria:

a) Revenue and profit of the business

Revenue is the top concern by of any enterprises Criteria of growth rate

in turnover is the most important Revenue growth rate shows the relative growth

rate (rate by(by percentage )percentage) over the period If the percentage is

smaller, it does not mean negative growth

the percentage growth in revenue, said revenue growth relative (in percent)

over the period This percentage is smaller which does not mean negative growth

In case if theIf the turnover in some last previous period is zero, the growth rate

of revenue is unidentified

The pProfittability of the construction business is the difference between

revenue and expenses that businesses spent to achieve those sales This is the

final financial results of production and business activities and , is a synthetic

quality indicator to evaluate the previous effectiveness of the entire production

and business activities of the construction business Production and business

profits is are considered as an important lever boosting economic lever economy

to develop and, ensuring the financially situation sustainable development of

businesses However, it is impossible to consider business profit is the only

criterion to assess business

Thus, turnover cannot be considered as the only standard to evaluate

whole activities of the company

b) Market share of businesses

Market share is the percentage of a market accounted for by a specific entity,

in other words, Market share is the share and the market that now dominates in

other words it is a market where products now widely consumed without any

difficulties y The market share is a criterion is representing competitive

position of the business This criterion is measured by turnover rate in a

certain period compared with total sales or market yields in the market Itcan

say that this is a general criterion of the above criteria This criterion is considered

as a summery for the above ones

In other words, market share of a business is superior to that of the other

business also reflects the effectiveness of distribution channel management

the part of the enterprise's predominant compared with the products of other

businesses also reflects the efficiency of product distribution operations of the

business

c) Market coverage of the business

Market coverage indicates how many areas in the country company has

covered (operated) In Vietnam, the pharmaceutical market is often

geographically divided by geography The development of intermediary

distribution network in the main channel is one of the tools that help

businesses penetrate into new markets; this activity has been promoting the

quantity of products that now is the greater consumption The better this activity has

been promoted, the greater quantity of products is consumed

Therefore, the criteria for market coverage are is as large as possible

d) Satisfaction of members in distribution channel

Members of the distribution channel of the business have a very

important role; they should be both professional and bring highest efficiency

for businesses They have acted act as buyers and sellers and the business cannot

do better by them.also Due to the direct contact and frequent interaction, often

with clients so they are understanding understand the customercustomers better

than anyone else They are knowledgeable about products and services of the

enterprise, and also know the needs of the market; we can say the members of

the distribution channel are arole as a bridge between enterprises and

consumers Therefore, each member of distribution channel is especially important

for enterprises to have a competitive advantage and access to the market

So now if we want to get a competitive advantage, access to markets, need

the role of the members of the distribution channel? It is essential for the enterprise

to facilitate and care about retailors so that they can advertise products and

encourage customers to use products which contribute to the development of

business

Therefore, an important issue for enterprises pose is to create favorable

conditions, care for retailers so they can advertise the image, products and services

of businesses and consultants, incentive consumers use the products and services of

businesses, contributing to the development of the business In other words,

enterprises have to satisfy the members of the distribution channel through with

reasonable policies

1.2.4 Structure of distribution channel

Distribution is an array of marketing functions in businesses, so

marketing department is the place that directly manages product distribution

system Especially:

- Marketing department conducts market research, build up marketing

strategy including product distribution strategy; Construction of strategic

planning and implementation of policies to implement distribution plans

Build up implementation plan and policies for product distribution strategy

- Business leaders, who assess, approve and direct the implementation of

product distribution plan.

- Director of business is the one directly organizing distribution channel,

selecting members, implementing incentive policies to members

- The direct marketing division will be organized distribution channels,

choose channel members, implementing policies to motivate and encourage the

members of the distribution channel; At the same time, conducting monitoring

supervising and evaluation evaluating activities to of channel members for

appropriate and timely adjustments in time

The organizational structure of the executive management and di distribution

channel is needed, the mManagement structure should be reasonable, flexible

decentralized operation mechanisms and decentralized flexibility, and

decentralization this will bring more efficiency in managing the channel

members After holding apparatus according to a certain structure, the staffing in

each structure which is also very important, because these people will perform

specific tasks happen every day, so the management and their professional major

influence on the efficiency of the work assigned, the ability to perform the task

After organizing a certain structure, it is also very important to allocate

workforce This is extremely necessary because they perform specific tasks on a

regular basis, their expertise and qualification have great impacts on efficient

implementation of works

a) Selection of structure of distribution channels

Structure of pharmaceutical distribution channels of pharmaceutical

enterprises is a group of members of a set of channels that who are assigned

distributione work allocated to them It depends on different channel structure to

allocate works to members

The different channel structure is dividing the different distribution to

members While development developing of the channel structure, channel

manager has to faced with the decision of the distribution division allocating

works to the members of the channel Each channel is a collection of distributed

work required to be done to achieve the goals of the enterprise’s distribution

that the manager had decided to assign members performing channels On the

other hand, the channel structure also reflects the way that the manager of this

division allocate works to between members of the channel

The Bbasic elements reflect the structure of the distribution channel are

is:

- The length of the channel is determined by a number of intermediate

levels presenting in the pharmaceutical distribution channel When the

intermediate level of the channel increases, channel is seen deem as increasing

in length The channel length ranges from direct distribution to the distribution

channels ones having many intermediate levels.

- Width of the channel: the display in the number of commercial

intermediaries in each level of the channel The number of members in each level

channel intermediaries in the channel can berth from one to countless disastersbe

various various. According to the width of the channel, there are 3 main

methods of distribution areincluding: wide distribution (now sell their

pharmaceuticals through a myriad of commercial intermediaries on the

market); Selective distribution is how businesses sell only their

pharmaceuticals through some commercial intermediaries are selected

according to certain criteria); Exclusive distribution (on each market area only

sell pharmaceutical business via a single commercial intermediaries).

- The intermediate types of channels at every level: in each intermediate

level in the channel can have many kinds of commercial middlemen involved

distribution.There are maymany kinds of commercial middlemen involved in

distribution activity in each intermediate level

In the distribution channel, businesses and individuals have independent

business working with other enterprises in the form of different channel

structures Channel structure is usually the product of the negotiation process

and the result of business practices over a long period of channel members.

Some pharmaceutical companies are trying to build structures based on their

selection selected channels by their initiative However, a number of other

businesses using that distribution channel structure are formed on the market

at random without analysis or careful consideration Businesses can also

develop distribution relationships distribution of pharmaceutical products through

activities such as using a direct sales force In fact, maybe a distribution

channel structure is created by thanks to experience will be more successful than

in the distribution channel with negotiations, analyze analyseanalyze and weigh

carefully selectedand careful consideration But most of the distribution channels

are formed as a result of the combination of past business experience and

proactive planning of the pharmaceutical business The channel structure is

formed based on the those combination so often sustainedis normally sustainable

in the long run.

Ability to organize appropriate distribution channels can help

businesses gain competitive advantage It is the reason why the management of

distribution channels is a fundamental part of the overall business strategy of

the enterprise Therefore, to be effective, the organization now aswhile

organizing product distribution channels, they must search and select the

channel structure to ensures the distribution division to achieve operational

requirements, of distribution and optimum material distribution

b) Choosing organized form of distribution channel

After identifying the structure of distribution channel, pharmaceutical

company can select the type of organizational link in the distribution channel

based on the interdependence level and long-term association of the channel

members In fact, there are three forms of organization channel based on level

of interdependence which admitted by channel members: single channel,

traditional channel and vertical connection channel

- The single channel:

Many trading activities were negotiated and implemented based on the

purchase contract which will not be repeated Each individual contract is dealt

when demand proposed from either sellers or buyers Then, both sides will

start to negotiate about terms in the contract Once they agree about all terms,

contract will be signed Negotiation in single channel is often stressful because

both sides want to maximize their profit

- Traditional channel:

Traditional channels are is expressed as the free flow of products on the

market from the producer to the final end user Commercial businesses joining

in traditional channel to search benefit wherever and whenever everywhere at

any time in the market They also sought seek to improve relations in the

channel and have full responsibility about the results of the distribution

channel That free market mechanism and price signals make up the traditional

channel where pharmaceuticalcreate traditional channel where sellers purchase

products are and traded to make profit by selling

Trading relationship among members in traditional channel is less and

less stable over time This channel can be easily broken when it loss members of

lose their interest attraction to any channel memberin trading relationship The

main weakness of traditional channel is that it is lack of centralized leadership,

inefficient operation and many conflicstconflicts Therefore, the main most

important element to link members in channel is trading price

- Vertical channel:

The pharmaceutical business can also develop vertical channel to

actively distribute their products to market Vertical channel will help medical

firms to control activities of the channel and proactively resolve conflict which

can bring economic scale achievement for them Each level in vertical channel

is operated at reasonable scale so marketing function in the system runs

effectively

There is interdependent relationship among channel members.

Nowadays, the competition in the market has changed from among competition

among independent businesses to that among distribution system of vertical

channel

Vertical channel in pharmaceutical industry can be categorized as

medical management, contract and group channel Each of these channel is

operated and controlled under has different mechanism to operate and control For

instance, in group vertical channel, the cooperation and conflict resolution are

achieved because they have the same owner While in contract vertical

channel, task and relationship are established by through contract among

members In managing vertical system, leadership depends belongs to one or

few the most powerful members in the channel.

1.2.5 Designing the management policy in distribution channel

After building the structure and form of distribution, pharmaceutical

companies need to develop policies to manage the channel, in which the basic

policies include:

a) The recruitment of distribution channels members

Based on research findings results analyzinged the operational

characteristics of the commercial intermediary on the pharmaceutical market,

the channel management manager will decide who are the members of the

business distribution channel The selection of participants in the distribution

channel in the channel organization depends largely heavily on the number, size

and operating characteristics of the existing pharmaceutical distribution

market Also, the choice depends on the distribution target distribution, type of

structure and form channels connection formin the of channelof channel link

Depending on the distribution channel strategy that people can channel

management system developmentdevelpdevelop of selection criteria system for

selecting members of different channels They should also assess the potential

channel of members for each criterion to select the best membersones Of

course, businesses large-scale pharmaceutical businesses, have market power will

have conditionsbe easier to select the desired channel member Small

pharmaceutical enterprises will have difficulty difficulties in choosing the

channel members, so they often sell products through small distributors

b) Policies to encourage members of the distribution channel

Members of the regular distribution channels must be encouraged to do

the best job To encourage the activities of the members of the system, the

manager of channel has to:

- Find out the needs and difficulties of channel members:

Members of the channel system are like the employees of a company. To

manage them better, it is first necessary to understand what they need and their

difficulty is that understand the needs and wishes of their troubles that can be

better managed

Members in the distribution system as well as any other organization of all

activities are governed by many factors not only objectively but also subjectively

Therefore, in order to To have adequate info of members, it is essential for not

only managers but the others to implement This presents objectivity and

truthfulness of members

have adequate information about the channel member requires not only the

management of the channel implementation that should have the new outsider

implementing meanwhile, demonstrate objectivity and truthfulness of the channel

members Once there is sufficient bulk of information about the members,

assessment work distribution channels will be to conducted assessment work

distribution channels to find out the needs and difficulties of the members

- Support members in channel system

+ Direct support: Manufacturer supports in advertising, exhibition in

showroom, warehouse, and transportation, etc

+ Cooperating form: Manufacturer cooperates with channel members to

help each other develop distribution systems.

+ Build a distribution program: The essence of this approach is to

develop a vertical channel that is planned and managed in a professional way.

This program is developed as a result of mutual effort corporation between

manufacturer and channel members.

- Encourage channel members:

+ Deploy specific incentive programs for members of the channel.

+ Recognize the importance of understanding the needs and difficulties

of certain member to deploy appropriate support.

+ Recognize important role of competent leader who can support and

encourage channel members

c) Policies regulating conflicts of distribution channel

The conflicts in distribution channels often cause obstacles to the

effective operation of the distribution activities of the enterprise’ products But

there are some conflicts that make healthy competition in the channel It may

require innovation in distribution channel which can be more dynamic and

flexible to adapt new environment The problem is that not only eliminate

conflict but also manage it well.

Conflicts that can be happened while operating channel system are:

- Vertical conflict: the conflict occurs at different levels of the channel

system,system; this kind of conflict is often due to economic interests.

- Horizontal conflict: the conflict occurs between members at the same

channel level.

- Multichannel conflict: when manufacturer establishes two or more

channels that compete to each other in the same market, it can create conflict

among them There are a number of causes such as:

- The conflict of purpose: This is a major contradiction that frequently

occurs For example, manufacturer wants fast-growing market through low

pricing policy but dealers want high profits and run under immediate

profitability.

- Conflict of unclear role and power.

- Conflict of the overlapping of territories, the geographical demarcation

is not clear among members of the channel.

- Conflicts of the differences in perception.

- Conflict of the dependence of intermediaries to manufacturer

As conflict occurs, channel managers need to find out the causes and

propose resolutions Measures can be taken to solve the conflict i includes:

- Accept the ultimate goal while sacrificinge unimportant goals.

Manager needs to base on take goals into consideration when designing channel

in order to suggest solutions For example, there is conflict among

intermediaries at in the same market, if the objective is to help users can buy

products easily, manager should maintain this kind of contradiction conflicts to

create competition If the goal is to encourage cooperation among members,

company needs to let each of them follow the rules to operate efficiently

- Exchange among the intermediate level members together to make

them understand and accept their work This method is usually applied when

the intermediary between have disagreement on that channel and their channel

functions to they undertake The discussions between the members together can

help them understand and consent to successfully perform their duties.

- Use the law (in case a dispute arises which cannot be resolved by way of

negotiation).

d) Assessment policy of distribution channel

The objectives to assess channel member are:

- Helping channel manager to maintain operational control of the

intermediate of which currently commercial products are selling commercial

products now

- Helping manager the channel has have a complete analysiscomprehensive

analysis of current and future activities of each commercial intermediary

The evaluation process consisting of 3 steps are is represented by the

following figure:

Figure 1.32 Process of evaluating activities of channel members

Develop standards of measures

Evaluate members via standards

Recommend to change the activities of

members