Channel Strategy of HP Laptop: Laptop is a shopping product in Bangladesh. It is also a complex and high costly product. That is why; developing a channel strategy is relatively difficult for a laptop. HP needs to consider some decisions to develop channel strategy. HP needs to consider (1) type of distribution channel, (2) Intensity of distribution, and Channel configuration. These decisions should be considered to achieve the objectives of channel of o f distribution strategy. Exhibit 1 shows the channel selection strategy:
1. Type of distribution distribution channel
Conventional
Vertical Marketing System
Ownership
Contractual
Horizontal Marketing system
Administered Relationship
2. Intensity of distribution distribution
Intensive
Selective
Exclusive
3. Channel Configuration
Exhibit 1 Channel Selection Strategy
The appropriate channel strategy for HP laptop is evaluated on the basis of above steps. These are described on the next page.
1. Type of distribution: HP will sell laptop to two types of customer: (i) Individual customers and (ii) Organizational buyers. Individual buyers include students and high profession persons such as CEOs, teachers, engineers, doctors etc. Organizational buyers include multinational and domestic companies, educational institutions, and Government. Therefore, HP has to develop two different types of channels for each of the segment.
Channel for Individual Buyers: Mainly, HP may select four major cities (Dhaka, Chittagong, Rajshahi, and Khulna) of Bangladesh to sell its laptop. The following distribution channel will be applicable for individual buyers of these four cities.
Producer (HP Laptop)
Supply chains
Sales Agents
Direct Channel
Retailer
Retailer
Retailer
Individual Consumers
Exhibit 2 Channel structure for Individual Buyers
At first, HP sends the laptops to sales agents in each city through its supply chain. Then, the sales agents will distribute laptops to its selected retailers in the city. Buyers will be able to purchase from those shops. Again, HP supply chain may also select a retailer
bypassing the sales agent and then sell to the customers. HP also can appoint sales personnel to sale directly to the high profile customers such as CEOs, doctors, engineer, teachers, businessmen etc.
Channel for Organizational Buyers: Mainly, HP selected two major cities (Dhaka, and Chittagong) of Bangladesh to sell to the organizational buyers. The following distribution channel will be applicable for organizational buyers of these four cities.
Producer (HP Laptop)
Supply chains
Sales Agents
Direct Channel
Distributors
Distributors
Organizational Buyers
Exhibit 3 Channel structure for organizational Buyers
At first, HP sends the laptops to sales agents in each city through its supply chain. Then, the sales agents will distribute laptops to the distributors in the city. The Distributors will deliver the laptops to the buyers. HP supply chain may also select a distributor bypassing the sales agent and then sell to the customers. Again, HP can appoint sales
personnel to sale directly to the organizations or they can take order via internet and deliver to customer through the distributor.
2. Intensity of distribution: HP laptop is considered as a shopping product. Moreover, it is very high cost product and people need information to compare one brand with other. HP has not got a good market share. They have to fight with Accer, Lenovo, Dell, ASUS, and Prolink for market share. Therefore, HP will go for selective distribution by considering nature of the product, resources of the company, competitors’ strategy, and finally capabilities of the buyers.
HP is targeting four major cities in Bangladesh— Bangladesh—Dhaka, Chittagong, Rajshahi, and Khulna. It is required to select important locations in each city. It is also necessary to divide the cities into different parts to place the retail shops.
At first, Dhaka city can be divided in four zones. There will be a retailer in each zone. Thus, there will be four retailers of who will carry the HP Laptop in the Dhaka city. The retailers will be located at Motijheel, Banani, Dhanmondi, and Mirpur. Each retailer will cover its surrounding areas such as retailer at Dhanmondi will cover Mohammadpur, Adabor, Farmgate, Azimpur, and University area.
Then, Chittagong city can be divided in four zones. There will be a retailer in each zone. Thus, there will be four retailers of who will carry the HP Laptop in the Chittagong city. The retailers will be located at GEC circle, Station road, Sholoshore, and CDA Avenue. Each retailer will cover its surrounding areas. Next, Rajshahi city can be divided in two zones. There will be a retailer in each zone. Thus, there will be four retailers of who will carry the HP Laptop in the Rajshahi city. The retailers will be located at Shaheb bazar and New market. Each retailer will cover its surrounding areas.
Finally, Khulna city can be divided in two zones. There will be a retailer in each zone. Thus, there will be four retailers of who will carry the HP Laptop in the Khulna city. The retailers will be located at Station S tation road and Fullpur. Each retailer will cover its surrounding areas.
After acquiring initial familiarity and market share, HP should go forward with mass or intensive distribution strategy. HP will focus on over all market rather than selective one or two segments.
3. Channel configurat configuration: ion: The third step in selecting the distribution strategy is deciding: A. how many levels of organizations to include in the vertical channel, ch annel, B. the specific kinds of intermediaries to be selected at each level l evel
Several factors may influence the choice of one the channel configurations. These are End user considerations: It is important to know
where
the targeted end users might
expect to purchase the laptop. Customers may want to buy laptop from HP directly or from agents or retailers.
Product characteristics: characteristics: HP laptop is complex in nature and requires after sales service. That is why; short and direct distribution channel is preferable preferable for HP.
HP’s capabilities and Resources: As HP has extensive capabilities and resources, and having so many participants in distribution channel creates conflicts, it should use direct distribution channel.
Required functions: Since laptops need after sales services, it is better for HP having direct contact with the customers. In some cases, a full-service wholesaler may be essential.
Questions- 1: What should the company’s strategic focus be in each stage of PLC? Ans: strategic focus in each stage of PLC is shown sho wn here. Introduction
Growth
Maturity
Decline
Creating awareness about Try to maximize
Try to
Try to reduce
the laptops and their
market share by
maximize
expenditure in
configurations and
building
profit by
promotional activities
characteristics to the
awareness and
reducing cost
and milk the brand. In
customers by extensive
interest in the
while
this stage, HP also can
ads and sales promotion
mass market.
defending
merge with other
market share
companies and add extra
activities
features in the laptops.
Questions-2: Which channel should be used in each stage? Ans: Channel should be used in each stage Introduction
Growth
Maturity
Decline
Selective
It is suggested to build
Build more intensive
Go selective, phase
distribution
intensive distribution
distribution is
out less profitable
suggested for
outlets to reduce
maturity stage.
cost.
channel preferable here.
is with the increase in market share.
In introductory stage, market share of HP laptop is very small. So, selective distribution strategy is productive here. In growth stage, with the rise of market share intensive distribution strategy is suggested. In maturity stage, the market share reaches in extreme level. Here, more intensive distribution is more useful. In decline stage, market share of HP laptop will drop but cost will increase severely. So in this stage, HP should phase out the less profitable outlet and come back to selective distribution strategy again.
Questions-3: In which stages of PLC will margins be the highest? Ans: PLC curve shows which stage(s) will provide highest margins.
Figure: Product life cycle curve From the above PLC curve, we can easily know that in the maturity stage, the profit margin is highest with the highest amount of sales.
Questions-4: Which stages should be the most intermediaries and which stage(s) should use the fewest? Ans: Most intermediaries: In maturity stage there should be the most intermediaries. Here long and intensive channels are used.
Producer
Agents
Wholesalers
Retailers
Consumer
Figure: Distribution channel having the most intermediaries.
Fewest intermediaries: In the decline period, fewer intermediaries should be used to reduce cost. Here, in most cases, direct marketing can be used. Again one or two selective channel can be used.
Producer
Producer
(HP laptop)
(HP laptop
Sales force
Sales agent
Customers
Customers
Figure: Distribution channel channel having the fewest intermediaries.
Conclusion: Since HP laptop is complex goods and after sales service are needed, a close contact between customers and the producer are needed. As a result, it will be easier for HP laptop to provide application assistance, service, and o ther supporting activities to the customers.
Since most of the customers’ customers’ income level is very low, they are price conscious. It is the responsibility of HP to reduce the cost of laptop. Here it can follow an alternative strategy which is followed by most mobile phone companies in Bangladesh. HP can follow intensive distribution to distribute products. But it should have several central customer care centers in strategic areas. This strategy will help reduce the expertise cost related providing after sales service.
