Implications of Asian Paints Distribution Strategy

AP’s distribution strategy had its associated implications. AP had to take due of them and face them squarely.

Going to Individual Consumers Implied Wide Product Range and Complex Distribution

Had AP concentrated on the bulk buyer segment, it could have managed with a limited product range, at least, in the initial years. But, AP’s decision to turn to the individual consumers necessarily meant a wide product range. In the nature of things, the individual consumer segment involves a very wide choice in terms of products, materials, shades and pack sizes. On top of this, AP believed in making products based on the preferences of consumers. It gathered feedback from the consumers and turned out products, shades and pack sizes on the basis of such feedback. This policy resulted in a further burgeoning o the product range.

Smaller Packs proliferated the product depth further:

At the time of AP’s entry, paint companies were supplying paints in containers of 500 ml or larger. AP saw that there was a felt need in the market for paints in smaller packs. All end uses did not require a large quantity. Moreover, it was common practice for consumers to buy paint initially in a larger quantity and supplement and shared supplying its pacts in small packs – in 200ml, 100ml and 50ml packs. This proliferation in pack sizes also contributed to AP’s growing product range. AP was by now manufacturing and marketing as many as 2,000 distinct items of paints none of which was strictly a substitute for the other.

Wide Product range Implied Expensive distribution:

The policy o having the widest range of products colors and pack sizes had its implications on AP’s distribution. When 2,000 different items had to be made available to the consumers, it automatically meant that the company had to be prepared for high inventory holding in its various depots/retail outlets. Accounting and sales arrangements had also to be provided for on a matching level. Naturally, distribution was becoming more complex and expensive for AP.

The decision to go to the semi-urban and rural markets instead of confining to the urban markets also meant enlargement of the distribution function. AP had to go in for more dealers in order to serve the scattered semi urban and rural market. The decision also meant that AP could not opt for a simple, centralized distribution of its products from its factory. It had to go for a decentralized, field focused distribution, which a network located all over the country/marketing territory. Without such extensive and intensive distribution network, it would to have been possible for AP to cover the semi urban and rural markets.

Going retail Implied Deep Involvement in Channel Management:

Through its decision to go retail, AP was getting deeply involved in physical distribution and channel management. In the system chosen by AP, the physical cum channel management task was far more demanding compared to the wholesaler oriented system practiced by the other paint companies. While, for companies that embraced the wholesale oriented system, it was enough to service a handful of distributors. AP had to service a network of thousands of retail dealers. Having taken the decision to go retail, AP necessarily had to create and service a vast dealer network It also had to crate the physical distribution facilities required for servicing such a large network.

National Marketing necessitated nationwide organization:

Extent of marketing territory and complexity of distribution organizations are interrelated. The moment AP voted for nationwide it was getting into intensive as well as extensive physical distribution and channel management AP thus had to create a nationwide distribution cum marketing organization.

Main steps in the Implementation Process

1. AP crated a large network of dealers
2. It established a network of company depots to service the dealers.
3. It created a marketing organization that matched its distribution.
4. It successfully resolved the cost service conflict in distribution.
(a) A strong commitment to distribution cost control without compromising service level.
(b) Effective inventory management.
(c) Erective control of credit out standings
(d) IT initiatives in distribution cost control.