Competitive Advantage through Sales and Distribution

Which is world’s largest selling biscuit brand?? It’s that thing in yellow wrapper with that baby pic on it that has ruled the Indian market for some 75 years now. Yes, it’s Parle-G. It is a biscuit that has remained a strong favourite in the market despite not being very differentiated- a simple glucose biscuit. Significantly, they haven’t done much wrong over the years, sticking to a simple yet effective strategy- Be Available. What really differentiates Parle-G in the marketplace is their strong Sales and Distribution system. They make it a point never to lose out on a customer by being available in the remotest of locations- including several villages with populations of just about 500 people. Parle has an extensive network of over 1500 wholesalers who in cater to nearly 450,000 retailers. In a way thus, they have beaten competition not by spending multi millions on advertising but by using their extensive sales and distribution network as the key differentiating factor.

There are several other examples of companies who have used this approach to become industry leaders. Which channel a company uses to reach its consumers and how effectively it utilises these channels can go a long way in determining the success of their marketing strategy. Traditionally, there are 4 levels available between the manufacturer and the consumer.

With changes in the market place, this structure has changed dramatically. Earlier, most companies used one of the above channels to reach its customers leaving little room for differentiation on this basis. That however no more holds true with sales and distribution becoming an integral part of companies’ business model. Companies now look to beat competition by creating value for customers through their sales and distribution structures. Take Dell for example. Dell redefined the entire PC industry by using a direct selling model, the shipping companies being the only intermediary. They entered the industry at a difficult but quickly adapted to the retail chain evolution by adopting a radically different path and taking orders on the phone. The move paid off as they have gone to become one of the industry leaders.

The model in itself is not very difficult to copy, but Dell incorporated it as an integral part of their business model and was miles ahead of the pack by the time competition noticed. Some that did try to copy the model failed miserably as they failed to align the rest of their business to this model. A sales and distribution structure in itself cannot ensure success but has to be well aligned with the entire business model.

Strong positions taken up by companies in the market place on the basis of their sales and distribution structure also pose significant challenges for their competitors. Electrical equipment giants Schneider toiled for a over a decade to establish itself in the US market before deciding to purchase Square D- a local player with a strong presence with the electrical equipment wholesalers. The acquisition gave Schneider access to Square D’s extensive distribution network and eventually a stable position in the US market. IBM at its peak had a tremendous network of sales representatives who maintained good personal relations with IT managers making it difficult for competitors to crack the market.

While Parle used traditional sales channels established over several years in an established market, Dell used an innovative one in an emerging industry to create a competitive advantage competitors could not easily match. What this also shows however, is that no business is immune from the impact of effective channel strategies. Businesses need to continuously evaluate their channels on the basis of channel economics, alternatives available and emerging competition. They need to keep looking at how they can align the sales and distribution function better with the entire business model and if they can create or leverage any opportunities to create strategic advantage. Reading the market signals and reacting quickly can create substantial competitive advantage as Dell proved. As IBM on the other hand discovered, failure to move rapidly can be detrimental as they failed to adapt to the changing environment.

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