Tuesday, July 28, 2009

Filled Under:

Marketing Channels

"Marketing Channels are rote to sell the products"

In my 3rd semester of MBA I got opportunity to work on marketing channel's final project which is on pharmaceutical firm. The name of company is Highnoon Laboratories limited which is largest pharmasuitical company in Pakistan. The objective of our report is to analyze the current marketing cahnnels system of company and to find out the channel gaps.




High Noon has its own distributor named “Dynalog” which consists of 46 distributors in the major cities of Pakistan like Lahore, Karachi, Islamabad, Faisalabad, Multan, Hyderabad, Sukkar, Peshawar and Gujranwala. These branches have over 200 employees which go to retailers to sell medicine. Due to bad management, poor channel communication, limited HR activities and other profit generate problem specifically recovery and expiry claims High Noon decided to close “Dynalog” and it’s not in working now.

On the other hand, Highnoon has made a contract with a third party distributor named “Premier” which has its network all over the Pakistan.

FMCG & Pharmaceutical sector are quite different from each other, in pharmaceutical industry products sell to doctors (institutional sales) and to franchises (retailers. medical stores). End users (consumers) are not targeted by the company. Company’s sales team visit to doctors and different institutions (hospitals) include: Gulab Devi, Children, Meo hospital, & Ganga Ram and sell the products. There is a department named, ‘institutional department has 5 managers and this department is responsible for sales to institutions and doctors.

PHYSICAL POSSESSION: In Highnoon it’s the liability of “Dynalog” which is its distributor to store goods. But in this case High Noon is bearing the inventory holding cost. The company is accommodating Dynalog by providing office and store space in his own building that’s why transportation cost has been removed. High Noon is working more according to the concept of “Speculation” and keeps the safety for one month.

OWNERSHIP: Ownership transferred from Highnoon to Dynalog when goods once ordered through Dynalog network and also from Highnoon to its different direct clients in the same pattern mentioned above.

PROMOTION: Highnoon has its sales team which goes to franchises and doctors for its products promotion through delivering those presentations to doctor writing-pads, Stethoscope and medicines for trial purposes in product promotion.

NEGOTIATION: Highnoon and Dynalog have signed an agreement through mutual consent and negotiation. They both have equal rights to negotiate on terms of trade or any issue regarding their business.

FINANCING: It does also involve both parties participation. Sometimes the distributor does payments in advance but sometimes it takes goods on credit. Similar pattern followed by direct retailers or consumers.


The risk process involve the credit sales which are directly supplied to the few retailers and institution, when we are on the visit of High Noon we have seen document showing the percent of amount which they have to collect. In this way company is facing the bed debts. Distributor is also facing risk when selling is on credit and risk is increasing now a day’s because of expiry claims.


Normally ordering process start when company’s sale force visit the market and inform the doctors and retailers about forth coming products and use or benefits as well as their side effects. After getting order from retailer sales force send this order list to the distributor who then delivers order.


Normally High Noon does not like credit sales they simply work on advance payment. When we ask from the account manager “Mr. Hassan Shahid” about the payment flow, how you collect the payment from retailers? He answered we always received payment before delivering order.

Demand Side Factors:

Ability to meet target customers segments demands for service out put

Usually pharmaceutical Industries does not target the direct customer but they are targeting the disease. High Noon’s major focus is on Cardiology, Gastroenterology, Diabetes, and Psychiatry product line. We have selected a specific product targeting cardiology segment named “LOPRIN” the advanced version of DISPRIN.

The company’s ability to meet service output demand can be discussed into segments.

  • How company meets the service output demanded by the Distributer?
  • How distributor meets the service output demanded by the Retailers?

Service output demanded by Distributor:

Waiting Time:

Distributors are requiring low waiting time and want to get the product delivery from the production department very quickly.

Bulk breaking:

They do not desire for bulk breaking because they are ordering to production department for their requirement and only receive their desired quantity and defiantly they desired for bulk purchase. In this way they can reduce per unit cost.

Spatial Convenience:

Dynalog requires high spatial convenience (low transportation and storage cost) from the High Noon, which is meeting to the demand of distributor by providing storage and office space in its own building in this way High Noon has completely finished the transportation cost.

Information Provision:

Requirement for the information is very much high because it is case of life and death. It’s responsibility of the sales force agents of distributor to inform the retailers and doctors about the features and usage capabilities of their medicines.

Service output demanded by the Retailers:

Waiting Time:

Requirement for waiting time is very low because it belongs to emergency purchase.

Spatial Convenience:

All retailers are highly demanding for spatial convenience because they usually received orders on their stores and don’t like to go market for purchasing medicines. Our survey includes the question is it company’s responsibility to provide medicines to your door step? All respondents tick the yes; the result shows that they are willing for reducing their transportation cost.

Bulk breaking:

Demand for bulk breaking is very high during survey all respondents answered that they purchase according to their own desired some time like to purchase in bulk and some time in small quantity.

But we found the mostly effective and unique type of retailers including “Fazal Din’s” and “Servaid” are purchasing in bulk and use to hold safety stock for one week.

Information Provision:

Retailers are very sensitive in Pharmaceutical market they are requiring for very much information and helping material including Pamphlets and Medical books. Our survey found that company is not providing any type of these material but sales representatives are playing an important role in information provision by making presentation on specific products and informing them about the features and side effects of medicines.

Supply side factors:

Facilitation of Search:

Dynalog is playing the role of middleman by reducing the number of contacts. It helps High Noon in facilitation of search by providing the customer to the manufacturer and providing supplier for the retailers. Other information is presented in below diagram.

Power and Conflict


Power is a tool it can be used in right direction as well as in wrong direction. In High Noon case we have seen imbalanced power. The company is working under single authority of “ Seth Javed” whose decision is considered final and binding. So, any kind of planning doesn’t work in High Noon.

The uses of legitimate power as well as coercive power reduce the efficiency of all department which results in poor communication. In such kind of environment the coordination among the channel member is not possible.


High Noon has eliminated the role of Dynalog from distribution and company has signed a new contract with its new distributer named “PREMIER”. The reason behind this is conflict between Dynalog and High Noon. Question is that why High Noon use coercive power? What are major issues which insist company to breach of contract? All these questions can be answered only when we have measured the conflict.

· Counting Up the issues:

There are three major issues exist among the channel members one is Recovery and the second is Expiry Claims and the last is delay in delivery orders.

· Importance:

During the survey almost every participant claims that Dynalog is not effective in clearing the expiry problems. So, the major issue is expiry claims.

· Frequency of Disagreement

Whenever there is conflict between High Noon and Dynalog the reason is expiry” answered the Customer Relation Officer Mr. Obaid Iqbal during the interview.

· Intensity of dispute

Normally intensity measured on a scale from 0 to 10 (not very intense to very intense) during the survey we visit 10 retailers of High Noon from which 50% respondents answered the expiry, 10% delay in delivery and 40% not mention reason of conflict. So, the survey present the most important issue is Expiry claim.

Conflict = importance × frequency × intensity

Suggestions to improve the channel efficiency

After analyzing the gaps and finding out the sources of gaps and conflict, now we have to give suggestions to remove those gaps and resolve the conflicts.

Ø During the analysis we found that channel is not working efficiently because the Physical flow is incurring too much cost. The Efficiency Template presents that High Noon is Bearing the 50% cost of physical possession. To improve the efficiency and generate good profit company must have to reduce the cost of Physical possession.

Ø The imbalance use of power leads firm toward conflict, company needs to re-engineer the whole process and power should be equal.

Ø We found that there is gap between information demanded by the retailers and supplied by the manufacturer, so firm needs to increase the promotional activities.

Ø High Noon is not providing sufficient information to their customers it has to generate information for customers.

Ø Distributor must have to contribute in inventory holding cost to make the channel efficient, in High Noon case manufacture is providing space for storage to the distributor which result in high inventory cost to manufacturer.

Ø High Noon needs to generate its Company Sales force Agents while trusting only on the distributor’s DSF.

Ø When Dynalog is going to be closed on 28 of Feb company notice that a huge amount is not yet collected from the market. So High Noon has to make efforts to reduce the risk of bad debts.

Ø High Noon needs to expand and retract the level of service output.

Ø High Noon must have to evaluate their current channel member roles and its time to bring changes in the roles different channel members are playing.

Ø High Noon is working on the behalf of third party after manufacturing its distributor’s responsibility to sell the products or to go market according to its own wishes. Here comes the goal conflict High Noon is willing to maximize its profit while distributors seeking to gain more profit for himself.

Ø Simply, its time for High Noon to move from value chain to value constellation. By reconfiguring the roles of its channel members.

Ø Company needs to invest in new distribution technologies.


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