The Company I Would Like To Open
The company that I would like to open is a distribution company that deals with creating distribution channels from the producer to the ultimate consumer of a product. It will strictly deal with distribution of non food and non electronic goods. It will be a company that distributes on a wholesale level, but will establish retailing channels to ensure that the product will come from the producers and that it reaches the consumer (Kotler, 2009). Basically, the company will distribute goods like toys, kitchen utensils, bathroom and cleaning products like detergents and soaps, candles and stationary.
The distribution industry is set in a way such that there is a channel that has to be formed and it includes intermediaries, the less they are the better because the price of the product will not be too high and more consumption will be expected. The structure of the industry is such that the five big distribution companies control 56% of the entire market share this means that the rest of the small distribution companies make up control the rest of the 44%. I plan on starting small by making quick and overnight deliveries to the retailers directly from the producer in the local area, this means the company will be competing at the local level
Locally there are no restrictions in entry or exit into the distribution of goods; however the state laws dictate that the company must have several conditions put in place. First and foremost the distributor must have at least two trucks to distribute the commodities, they must have a go down that is relative to the size in distribution quantity, a driver and a manager and a licence from the state county council.
Most of the competitors offer distribution to other cities and other states and from there as well, however the company will offer distribution within the city.
The plan is to ensure that the producer does not worry on how his product will be distributed locally. All the things that will be distributed are mostly found under one roof so distribution to the retailer makes it easier. Having done a survey around town by asking questions, it was realized that most retailers have to worry about how their orders will be delivered because most in town producers do not offer delivery. At a fee the company will readily and on time deliver these goods to the final owner. There should be first of all a channel that has been drawn up that ensures all retailers will be getting their commodities on different days and different times. This means there will be a timetable, which will be strictly followed for convenience (Kotler, 2009).
The potential competition is there because this is a loophole that has been left by more advanced and bigger companies that can fill in once they are aware of it. This is the main reason why the company will start small, basically to be able to create a personal touch and contact between it and the clients that the big companies cannot. There is also the chance where in order to expand as a company I would be willing to partner with these companies but this is only after proper legislation and establishment of the firm and if the other company made the first offer.
The main disadvantage at a personal level is that to start the company requires funds that are hard to raise, the regulations of the state on the company to have a go down increases the cost because it has operational cost . This means that the business must have funds readily available for all these roles.
There is also the risk that before the company picks up well the big companies can crush it by buying it out. At a more general level the disadvantage is that the producer will loose the personal touch that they had with their consumers. The advantage of the firm is that it creates convenience for both the retailers and the producers (Kotler, 2009). This is because the producers will simply deal with one distributor and can easily dictate the price of their commodities. On the other hand the retailer can rest assured that he will always have enough stock of commodities without moving from his premise of business to the producer. He can also be assured that for several commodities sold at his premise he will be dealing with one strict distributor. It also cuts down on cost for both the producer and also the retailer. This is because the producer can cut down on the administrative costs of dealing with different retailers and their orders, the retailer can save on the trips to the different producers and back. The other advantage is that as the distributor my company gets to charge a small fee to both the retailer and the producer. This gives enough to cater for the transportation and administration costs that will be experienced.
Indirect competition is from the producers who sell their own products in their shops. This is because there are many manufacturers of goods especially toys who produce in their homes and sell in their shops and to other shops they offer distribution to the retail premise in a marketing strategy to try and put their product out there and look at the competitors (Kaliski, 2001). These manufacturers will create indirect competition; having established that there is a small-scale distribution channel that I will be willing to do for them when they will be otherwise engaged and to the far sides of the city.
This will be charged a relatively low price, as it will help in nurturing an infant company that may flourish.
Having already found a market, the price for distribution will be slightly lower than that of the big companies; this is because they charge higher prices that with a slightly lower price the firm can even capture their clients. This price will not remain low forever it is for a short while so as to lure the clients and offer them a quality service they long to have. In order to cater for the expansion of the company the price will be slowly increased to match that of the competitors (Kaliski, 2001).
The most essential thing that the company lacks is the necessary funds to be put into action. The requirements are on my own personal level and on the regulation of the state to have at least two trucks, a go down, two drivers and finally the contact with the clientele, everything else is available, that is time, knowledge of the city and what is missing and the strategies of how to meet this need.
Kotler, K. B. (2009). Marketing Management, Pearson Education Australia; Frenchs Forest
Kaliski, B. (2001). Encyclopaedia of Business and its Environment 2nd Edition, Macmillan, New York
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