ABSTRACT
The study focused on distribution strategies and marketing performance of soft –drink manufacturing companies in South-East, Nigeria. The objectives of the study were to; examine the effect of mass distribution on the customer patronage of selected soft-drink manufacturing companies in South-East, Nigeria; investigate the effect of selective distributorship on the competitive advantage of selected soft drink manufacturing companies in South-East, Nigeria: examine the effect of mass distribution on the competitive advantage of selected soft-drink manufacturing companies in South-East, Nigeria and examine the effect of selective distributorship on the customer patronage of selected soft-drink manufacturing companies in South-East, Nigeria. The study adopted survey research design. The population of the study was 660 staff in the sales, warehousing, logistics, public relations and marketing departments of the Nigerian Bottling Company plc and Seven UP Company plc respectively in South-East, Nigeria. A sample size of 249 (Two hundred and forty-nine) was drawn from the population using Taro Yamani statistical formula. Four hypotheses were formulated and tested with Simple Linear Regression models. The major findings in the study showed that: there is a significant effect of mass distribution on the customer patronage of the studied firms in South-East, Nigeria; there is a significant effect of selective distributorship on competitive advantage of the studied firms in South-East, Nigeria; there is a significant effect of mass distribution on competitive advantage of the studied firms in South-East, Nigeria and there is a significant effect of selective distributorship on customer patronage of the studied firms in South-East, Nigeria. Hence, we concluded that distribution strategies are predictors of marketing performance for the studied firms in South-East, Nigeria. We, therefore, recommended that management of soft-drink firms should pay adequate attention to distribution strategies that showed significant effect and relationship with each of the marketing performance constructs in order to improve on marketing performance.
TABLE OF CONTENTS
Title Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgements v
Table of Contents vi
List of Tables x
List of Figures xii
Abstract xiii
CHAPTER 1: INTRODUCTION 1
1.1 Background of the Study 1
1.2 Statement of the Problem 3
1.3 Objectives of the Study 4
1.4 Research Questions 5
1.5 Research Hypotheses 5
1.6 Significance of the Study 5
1.7 Scope of the Study 6
1.8 Operational Definition of Terms 7 CHAPTER 2: REVIEW OF RELATED LITERATURE 8
2.1 Conceptual Framework 8
2.1.1 Mass distribution 8
2.1.2 Indirect distribution 9
2.1.3 Direct distribution 10
2.1.4 Selective distribution 10
2.1.5 Marketing Performance 12
2.1.5.1 Customer patronage 14
2.1.5.2 Competitive advantage 15
2.1.6 Channel structure 17
2.1.6.1 Channel modification 19
2.1.6.2 Multiple channel 20
2.1.7 Channel control 22
2.1.8 Evaluation of distribution channel 23
2.1.9 Communication and control 24
2.1.10 Channel conflict 24
2.1.11 Physical distribution (distribution logistics) 26
2.1.11.1 Components of a physical distribution system 26
2.1.11.2 Transportation 31
2.1.11.3 Choice of forms of transport 34
2.1.12 Service level 36
2.1.13 Concept of strategy 37
2.1.14 Marketing mix strategy 38
2.1.15 Company performance 39
2.1.16 Channels of distribution 40
2.1.17 Profile of companies 43
2.2 Theoretical Framework 44
2.2.1 Resource based view theory (1889-1991) 44
2.2.2 Dynamic capability model (1911-1997) 45
2.2.3 Postponement-speculation theory (1918- 2003) 45
2.2.4 Channel design model (1924-2009) 48
2.2.5 Transaction cost economy theory (1900-1979) 50
2.2.6 The depot theory of distribution (1912-1994) 50
2.2.7 Contingency theory (1933-1999) 51
2.2.8 Theory adoption 52
2.3 Review of Empirical Studies 52
CHAPTER 3: RESEARCH METHODOLOGY 56
3.1 Research Design 56
3.2 Area of Study 56
3.3 Population of the Study 57
3.4 Sample Size Determination 57
3.5 Sampling Technique 58
3.6 Method of Data Collection 59
3.7 Instrument for Data Collection 59
3.8 Validation of Instrument 59
3.9 Reliability of Instrument 59
3.10 Method of Data Analysis 60
3.11 Model Specification 60
CHAPTER 4: RESULTS AND DISCUSSION 62
4.1 Questionnaire Response Rate 62
4.2 Respondents’ Characteristics 62
4.3 Mass Distribution Strategy 65
4.4 Selective Distributorship strategy 66
4.5 Customer Patronage 67
4.6 Competitive Advantage 68
4.7 Hypotheses Testing 69
4.8 Discussion of Findings 72
CHAPTER 5: FINDINGS, CONCLUSION AND RECOMMENDATIONS 75
5.1 Summary of Findings 75
5.2 Conclusion 75
5.3 Recommendations 76
5.4 Implications of Findings 76
5.5 Contributions to Knowledge 77
5.6 Areas for Further Study 77
References 79
Appendices 86
LIST OF TABLES
2.1 Selection of suitable Distribution policies based on the relationship
between type of Product and type of store 12
2.2 Ten ways to manage channel conflict 26
3.1 Population distribution of Management and Staff of Nigerian Bottling
Company (NBC) and 7up Bottling Company in South-East of Nigeria 57
4.1. Questionnaire response rate 62
4.2. Respondents gender 63
4.3. Respondents age 63
4.4. Respondents marital status 63
4.5. Respondents educational qualifications 64
4.6. Respondents designation 64
4.7. Respondents working experience 64
4.8. Frequency distribution showing responses on mass distribution strategy
by the studied soft drink firms 65
4.9. Frequency distribution showing responses on selective distributorship
strategy by the studied soft drink firms 66
4.10. Frequency distribution showing responses on customer patronage by
the studied soft drink firms 67
4.11. Frequency distribution showing responses on competitive advantage by
the studied soft drink firms 68
4.12 Simple regression table below presents effect of mass distribution on
the customer patronage of selected soft drink manufacturing companies
in South-East, Nigeria 69
4.13 Simple regression table below presents the effect of selective
distributorship on competitive advantage of selected soft-drink companies
in south- east, Nigeria 70
4.14 Simple regression table below presents the effect of mass distribution on
competitive advantage of selected soft-drink companies in south- east,
Nigeria 71
4.15. Simple regression analysis showing the effect of selective distributorship on
customer patronage of selected soft-drink companies in south- east, Nigeria 72
LIST OF FIGURES
2.1 Schematic diagram showing the conceptual framework of the study 8
2.2 Channel structure for consumer and industrial products 18
2.3 The postponement- speculation concept to determine channel structure 46
2.4 Designing a distribution channel matrix 49
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Creating a successful strategy in distribution in today's fierce competitive environment is a complex undertaking. Market globalization and deregulation have intensified competitive rivalry and motivated soft drink companies to re-examine their current distribution strategies and inherent weaknesses of these strategies and their inability to address current challenges and opportunities (Stern & Sturdivant, 2006). Implementing the most efficient distribution method for a business is key to obtaining revenue and retaining customer loyalty. Distribution strategy, at its core, should be based on firms’ ideal customer- how does the average client buy goods? How could a producer make the purchasing process easier? Is it an extensive purchase where buying the item directly from the manufacturer could be worth the potential hassle or is it a routine item where the customer would rather receive the product quickly and on demand through a retailer?
The role that an item plays in a client’s life and the type of purchase decision associated with a product are important aspects to consider when determining a strategy. Five different distribution strategies are identified from the manufacturer’s viewpoint (Kotler, Armstrong & Opresnik., 2018): Direct distribution, Indirect distribution, Mass distribution, Selective distribution and Exclusive distribution. These account for a large portion of economic activity in modern societies, thereby contributing to development and performance of global and national economies (Thabit and Raewf, 2018). The best distribution strategy for organization depends on factors such as ideal demographic, item type and current logistical set up. Because there are so many parts associated with distribution, many companies opt to use an indirect distribution strategy or to purchase distribution software - automation, cloud-based system, etc which enable flexibility and accessibility to streamline the process. Walker, Jarvenpaa and Davenport (2002) stated that to achieve desired performance levels, a firm’s distribution strategies and the resources available to it must interact positively with the requirements of the firm’s markets. A key concern in the emerging strategic performance management in the current business environment is the need for organizations to implement systems and frameworks that not only deliver performance improvements (Witcher & Chau, 2008), but also the ability to control them against top level targets (Witcher & Chau, 2008). This remains the case for both commercial and regulated public sector companies.
According to economic distribution channel theory, the “ideal” distribution system is one determined by exploring what the consumers want in terms of service outputs from the distribution channel, how much they are willing to pay for a given service level, how the services can be provided to them, and what the costs of the alternative distribution channels are (Stern et al., 2006). As a result they argued that it can be determined which distribution system most efficiently meets the customers’ wants and it can be pointed out that the distribution channel strategy adopted by a firm should take a customer perspective and analyze the output from the commercial part of the different distribution channels and relates it to the customers‟ costs and benefits from the different levels of service output offered by the available distribution channels (Cohen, Nelson & Walsh, 2003). Based on this information it can be determined which distribution system most efficiently meets the customers’ wants. Thus, an economic distribution channel model puts the customer perspective in the forefront, analyses the output from the commercial part of the different distribution channels and relates it to the customers’ benefits and costs from the different levels of service output offered by the available distribution channels.
In the contemporary competitive market, firms that build distinctive and inimitable products’ distribution strategies develop competitive advantage which positions such firms for enhanced performance than competing rivals (Ford & Mottner, 2003). This indicates that a firm’s strategy to optimize performance can be achieved through distribution strategies. In Nigeria’s soft drink industry, distribution strategies play a crucial role in the launch of new products to the market. The distribution of soft drink products in south-east Nigeria has evolved in a unique way. The soft drink industry in the country is more retail oriented and bulk of distribution is done by distributors (Khan & Sharmin, 2011).
The process of determining the performance of an organization requires the selection and the measuring of a set of key variables that can allow the organization to detect as well as monitor its competitive position in the business in which it engages. The firm’s performance could be measured by various concepts, such as sales per employee, value of export, total assets and operation profit ratio. Companies in every industry are seeking ways to get a clear, accurate view of operational performance to financial results. To attain success in operation, many organizations feature various marketing intermediaries that perform a variety of marketing functions to enhance sales. Also, the positive relationship between distribution strategies and performance is also observed in research in marketing that focuses on firm-level, sales-based measures of operational performance. Pancras, Sriram and Kumar (2012) showed the positive impact of an increase in distribution strategy on overall sales at a retail chain. They noted that this impact is influenced by how the distribution strategy is implemented. However, results differ when the unit of analysis for sales performance is the individual store (rather than the overall chain) – Nishida’s (2017) explanation of sales performance at the outlet level is that there is a tradeoff between the sales-enhancing repetition effect and the cannibalization effect of increased distribution strategy.
1.2. STATEMENT OF THE PROBLEM
As one of the key elements of a company's success, selecting the proper distribution strategy has been a focal point in marketing channel structure. The distribution strategy decision is usually based on finding the most profitable way to reach a market (Ford & Mottner, 2003). Successful distribution strategy selection, implementation, and management cannot only help to meet the shopping needs and habits of the target customers efficiently under the cost constraints of the seller; they must also mitigate the disadvantages caused by distribution channel conflicts such as double marginalization.
According to Porter (1985), organizational competitive advantage can be achieved if the firm implements a value-creating strategy that is not simultaneously being implemented by any current or potential competitors. This can be interpreted to mean that sustained competitive advantage results from strategic assets; which Barney (1991) regards as those that are internally controlled and permit the firm to formulate and implement strategies that expand its efficiency and effectiveness. A firm’s distribution strategy of its products and services is such a strategic asset.
Several studies have been undertaken locally and internationally on the subject area of distribution strategies adopted by various local companies. Irimu (2009), undertook a research on the effects of distribution strategies employed by sewing machine industry in Kenya on channel members 2009; a case of Amedo Centres (k) Ltd. In her study, she found out that the location of the service facility is especially important for such business since many target customers may lack the funds for public transportation or they may feel psychologically uncomfortable to visit distance outlets. On her part, Alumila (2004) researched on the distribution strategies used by Health maintenance organization in Kenya. She found out that health care customers unlike other services value the face-to-face contact with the seller and also emphasize a trustful relationship.
Furthermore, studies in extant literature have focused on the implementation of distribution strategies from different perspectives: Gabrielson et al. (2002) focused on multiple strategies in the European personnel computer industry; Jurate et al. (2011) investigated changes in marketing channel formation; Kabadayi et al. (2007) studied the performance implication of multiple channels strategy; Kauferle and Reinartz (2015) studied multiple channels in industrial wholesaling while Stoikovic et al. (2016) focused on multichannel strategy as a dominant approach in modern retailing. It is worthy of mention that studies in Nigeria on distribution strategies and performance are few and none of them focused on distribution strategies of soft drink manufacturing companies in south-East, Nigeria, which necessitated this study. This study therefore seeks to establish the effect of marketing distribution strategies on the marketing performance of Nigerian soft drink manufacturing companies in south-east Nigeria.
1.3 OBJECTIVES OF THE STUDY
The main objective of the study was to examine the effect of distribution strategies on marketing performance of selected soft-drink manufacturing companies in south-east, Nigeria. The study specifically sought to:
examine the effect of mass distribution on the customer patronage of selected soft-drink manufacturing companies in south-East, Nigeria;
ascertain the effect of selective distributorship on competitive advantage of selected soft-drink manufacturing companies in south-East, Nigeria;
investigate the effect of mass distribution on the competitive advantage of selected soft drink manufacturing companies in south-East, Nigeria;
examine the effect of selective distributorship on customer patronage of selected soft-drink manufacturing companies in south-East, Nigeria.
1.4 RESEARCH QUESTIONS
The research questions raised to guide the conduct of this study were:
What is the effect of mass distribution on the customer patronage of selected soft-Drink manufacturing companies in south-East, Nigeria?
What is the effect of selective distributorship on competitive advantage of selected soft-Drink manufacturing companies in south-East, Nigeria?
What is the effect of mass distribution on the competitive advantage of selected soft-Drink manufacturing companies in south-East, Nigeria?
What is the effect of selective distributorship on customer patronage of selected soft-Drink manufacturing companies in south-East, Nigeria?
1.5 STATEMENT OF HYPOTHESES
The research hypotheses formulated in the null form for the study were:
Ho1: Mass distribution has no significant effect on the customer patronage of selected soft-Drink manufacturing companies in south-East, Nigeria.
Ho2: Selective distributorship has no significant effect on competitive advantage of selected soft-Drink manufacturing companies in south-East, Nigeria.
Ho3: Mass distribution has no significant effect on the competitive advantage of selected soft-Drinks manufacturing companies in south-East, Nigeria.
Ho4: Selective distributorship has no significant effect on customer patronage of selected soft-Drink manufacturing companies in south-East, Nigeria
1.6 SIGNIFICANCE OF THE STUDY
The study is significant to the following groups; entrepreneurs and manufacturing firms, researchers, academics, students, and marketers/salesmen. The study is significant to entrepreneurs and manufacturers because it enhances small but growing theoretical and practical knowledge on the influence of distribution strategy dimensions on corporate performance in manufacturing business environment. Theoretical implications of the research include gaining understanding of how distribution strategy dimensions impact on corporate performance.
This study fills the gap in the corporate performance research, and adds to the research base by utilizing distribution strategy variables as predictor on corporate performance. This study is useful to students who could obviously be engaged in similar studies as they will use this work as reference material.
The practical knowledge lies in the findings which could provide empirical evidence on the distribution strategy dimensions that influence the soft-Drinks manufacturing companies. Therefore, sales and human resources departments will be able to determine whether their firms have the kind of distribution strategies enhance high performance. Furthermore, the study would be able to equip managers in the firms with a knowledge of distribution strategy dimensions that derive high corporate performance, thus enabling them to formulate relevant polices in training and development, selection and recruitment, and rewards and recognitions in preparation to alleviate the intense competitive environment in the manufacturing services business.
Hopefully, the study would help the Human resource personnel and managers of firms to identify the need to employ qualified manpower to review distribution strategies. This will lead to improved business practice. The findings would bridge the gap between theories and practice in distribution strategies used in manufacturing companies in South- East region of Nigeria in particular and Nigeria in general.
1.7 SCOPE OF THE STUDY
The scope of the study covered the content scope, geographic scope, unit scope and time scope. 1 Content Scope: The study was domiciled in distribution management with emphasis on how distribution strategies affect the performance of soft drink manufacturing firms in south-east of Nigeria. The study variables for distribution strategies are intensive, selective, direct and indirect strategies, while the performance is proxied by customer patronage and competitive advantage. The study showed how distribution strategies used by the studied soft drink manufacturing firms in south-east of Nigeria affected the overall performance.
Geographic Scope: The study was carried out in the south-east region of Nigeria. The region has boundary with Cameroon and the Atlantic Ocean. South East region consists of five (5) states namely: Enugu State, Ebonyi State, Imo State, Anambra State and Abia State respectively. The study looked into the various distribution strategies used by Nigerian Bottling Company (NBC) plc and Seven-UP (7-UP) Bottling Company plc respectively which are direct distribution, indirect distribution, intensive distribution and selective distribution and the marketing performance of the firms in terms of customer patronage, market share, competitive advantage and sales volume respectively. The study covered two (2) manufacturing firms in South East region which are Nigerian Bottling Company (NBC) plc and Seven-UP (7-UP) Bottling Company plc respectively.
Unit of analysis: The employees of Nigerian Bottling Company (NBC) plc and Seven-UP (7-UP) Bottling Company plc formed the subject of the study as they were interviewed on how marketing performance was influenced by distribution strategies. The population of the study was drawn from the staff of these manufacturing organizations.
1.8 OPERATIONAL DEFINITION OF TERMS
(a) Marketing Strategy: This is the roadmap or route taken by business unit to create value for customers and satisfy them.
(b) Distribution Strategy: This refers to the planned activities of firms intended to get their products to the consumers.
(c) Marketing Performance: This refers to the effectiveness or otherwise of a firm measured in terms of share of the market, profit level, sales volume etc.
(d)Sales volume: This is the amount/number of sales as at a particular point in time.
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