Business Management 1 (Entre 1) PDF, Abra State Institute of Sciences & Technology, SY 2024-2025

Republic of the Philippines Doc. Ref. No. Abra State Institute of Sciences & Technology Effective Date Bangued Campus, Bangued, Abra Revision No.: Industrial Technology Departme...

Republic of the Philippines Doc. Ref. No. Abra State Institute of Sciences & Technology Effective Date Bangued Campus, Bangued, Abra Revision No.: Industrial Technology Department Page No.: BUSINESS MANAGEMENT 1 (ENTRE 1) 1st Semester: SY 2024-2025 (1)UNIT TITLE: INTRODUCTION to BUSINESS MANAGEMENT, ENTREPRENEURS, BUSINESS OPERATIONS, and LOGISTICS What is Business? Business is the practice of making one's living or making money by producing or buying and selling products and services. This refers to an organization that carries out professional activities. What is Business Management? Business management is the process of planning, organizing, directing, and controlling the activities of a business or organization to achieve its goals and objectives. It involves overseeing and supervising business operations, processes, and resources. TOPIC 1: UNDERSTANDING BUSINESS ENVIRONMENT What is Business Environment? All components that affect a business and can influence how the business functions. These could be internal, for example, HR policies and customers’ expectations, or external, for instance, government regulations and technological innovations. 2 Types of Business Environment Internal Environment (Micro Environment) This includes the internal factors that the business has full control over. Consists of elements within the company such as employees, company culture, physical resources, and internal policies. A positive work culture can greatly impact profitability, potentially leading to four times revenue growth. External Environment Market Environment This include factors that the business has limited control. This directly influences the business operations and includes suppliers, customers, competitors, and distributors. It requires businesses to build Page 1 of 20 MKBD  strong relationships and effective supply chain management to thrive. Understanding and managing this environment helps companies enhance their market position and profitability. Macro Environment This includes all the external factors that the business has no control over. This is concerned with the arrangement of conditions that exist in the economy, such as economic, political, legal, environmental, and technological factors. These elements often dictate the overarching opportunities and challenges in the marketplace and require careful analysis for strategic alignment. TOPIC 2: ROLE of ENTREPRENEURS in the ECONOMY Entrepreneurship has a significant role in driving economic progress. They don't just start businesses and get richer; they also affect the economy by making it more innovative and creating new jobs and opportunities, driving innovation, and developing new markets, products, and services. Without business owners, economic development would be very stagnant. Who are the Entrepreneurs? - An individual with an exclusive idea to initiate something new and they have the enthusiasm of bringing a change in the world. Entrepreneurs often have a reputation as being exceptionally business like. There is some truth to that, but they are more than that. Their work is artistic. They positively and productively impact other’s lives by their innovations. By combining resources creatively, they experiment with new forms of business. 1. Raises Standard of Living By creating new businesses, entrepreneurship improves the quality of life for both individuals and communities. 2. Creation of New Jobs By starting new businesses, entrepreneurs create employment opportunities. This help reduce unemployment rates. 3. Elimination of Poverty Entrepreneurship has the potential to lift people out of poverty by generating employment. 4. Community Development This can lead to increase investments to community, which can result in improved infrastructure, services, and amenities. Page 2 of 20 MKBD 5. Provides Economic Independence Entrepreneurs reduces the nations dependence on imported good and services and promote self-reliance. 6. Benefits to New Firms and Businesses It promotes innovation and competitiveness. 7. Encourages Capital Investments Entrepreneurship can encourage capital formation by attracting investment. 8. Optimal Use of Resources By identifying new business opportunities and introducing new production methods, entrepreneurs are able to create more efficient systems for utilizing resources. 9. Increases Gross National Product (GNP) and Per Capita Income (PCI) GNP measures the total economic output of a country while PCI calculates the average income per person. Entrepreneurs can contribute to GNP by creating new business which can lead to job creation. Increase to GNP leads to increase to PCI. Entrepreneurs takes the financial risk (and reaps the rewards!) of starting and managing a new venture. These people have:  Had an idea for a new business  Invested some of their own savings and capital  Accepted the responsibility of managing the business  Accepted the possible risks of failure QUALITIES OF AN ENTREPRENEUR:  Innovative  Commitment and self-motivation  Multi-skilled  Leadership skills  Belief in oneself  Risk taker PROBLEMS FACED BY START-UPS Even if an entrepreneur has all of the right qualities, success with a new business can never be guaranteed. Many businesses fail during the first year of operation, because of:  Competition Page 3 of 20 MKBD   Building a customer base  Lack of record keeping  Lack of working capital  Poor management skills  Changes in the business environment BUSINESS OBJECTIVES All businesses have objectives or aims to achieve. Their objectives may vary depending on the type of business and the situation the business is in. The most common objectives are: 1. Profit: Profit is what keeps a company going and is the main objective of most businesses. Normally a business will try to obtain a satisfactory level of profits so they do not have to work long hours to pay too much tax. 2. Increase added value: Value added is the difference between the price and material costs of a product. It could be increased by working on products so that they become more expensive finished products. One easy example of this is a mobile phone with a camera would sell for much more than one without it. Of course, you will need to pay for the extra camera but as long as prices rise more than costs, you get more profit. 3. Growth: Growth can only be achieved when customers are satisfied with a business. When businesses grow they create more jobs and make them more secure when a business is larger. The status and salary of managers are increased. Growth also means that a business is able to spread risks by moving to other markets, or it is gaining a larger market share. Bigger businesses also gain cost advantages, called economies of scale. Page 4 of 20 MKBD 4. Survival: If a business does not survive, its owners lose everything. Therefore, businesses need to focus on his objective the most when they are: starting up, competing with other businesses, or in an economic recession. 5. Service to the community: This is the primary goal for most government owned businesses. They plan to produce essential products to everybody who need them. TOPIC 3: LEADERSHIP and MANAGEMENT STYLES A management style refers to a leader’s distinctive approach to overseeing and guiding a team toward organizational goals. When a leader utilizes the right management style for their team or organization, it can greatly impact productivity, performance and workplace morale. Effectively motivating a team is at the core of successful management and being a good manager, and various styles offer distinct strategies to achieve this. The four most common styles are:  Autocratic (or Authoritarian)  Authoritative  Democratic  Laissez-faire 1. Autocratic (Authoritarian) Style One leader or member of the organization takes decisions on behalf of the company. This type of leadership style is seen mostly in businesses which are relatively small with fewer employees. Generally, an autocratic leader believes that he or she knows more than others. They make all the decisions with little input from team members. This type of leadership style is only effective in organizations where the nature of work requires quick decision-making. The sole responsibility of the decision and the outcome is with the leader. It is considered to be a flexible leadership style but some would argue that it is outdated now. 2. Authoritative Style Authoritative leaders, also called visionary leaders, tend to approach leadership like a mentor guiding a mentee. Instead of telling their team to follow instructions and do as they say, authoritative leaders put themselves in the scenario and utilize a “come with me” approach. They have a firm understanding of the challenges to overcome and the goals to reach, and have a clear vision for achieving success. Page 5 of 20 MKBD  Authoritative leaders inspire motivation. Unlike autocratic leaders, authoritative leaders take the time to explain their thinking: They don't just issue orders. Most of all, they allow people's input on how to achieve common goals. They offer direction, guidance, and feedback to maintain enthusiasm and a sense of accomplishment throughout a project or endeavor. 3. Democratic Style Democratic leaders encourage team members to participate and welcome ideas. This style of viewership is helpful in teams where members are highly skilled. Encouraging the participation of these individuals leads to increased creativity and new ideas. A democratic leadership style doesn't work well for a team that needs immediate results. Nor is it the best leadership style for groups of unskilled employees. There are numerous benefits to this participative leadership style. It can engender trust and promote team spirit and cooperation from employees. It allows for creativity and helps employees grow and develop. A democratic leadership style gets people to do what you want to be done but in a way that they want to do it. 4. Laissez-faire Style Laissez-faire leaders provide their teams with almost no guidance. Decision- making is left to team members. It's a good style when working with a group of highly qualified experts who need little direction and have a deep understanding of the situation. However, if team members lack motivation or experience, they will be less adaptable to ever-changing workplace conditions and quickly feel overwhelmed. And without proper guidance, employees may not feel qualified to make important decisions. You will become a more effective leader when you know your leadership style. If one style isn't working, consider trying another one. Whether you lead a small team, a big team or an entire organization, your leadership style will affect your team and how they report to you. Selecting the correct leadership style will help your team achieve your company's goals. BUSINESS OPERATIONS Business operations refer to the activities, processes and systems that a company uses to deliver its products or services to customers and achieve its business objectives. It includes everything from procurement and production to sales and Page 6 of 20 MKBD customer support. This means all the activities required to keep a business running efficiently and effectively. What makes up business operations? As a small business owner the key components of your business operations will most likely include:  The planning, organization and constant improvement of processes that will become an integral part of the day-to-day activities of your business.  The management of market research and the analysis of potential target audiences and consumer niches.  The management of manufacturing of goods and the product line of your business.  The management of staffing people, in particular your employees or manufacturers.  The management of resources, whether this means running an office, or supplies.  The management of processes, both for product production and the provision of services, but also for management of the company and its staff.  The management of technology, again to create and manage a product/service, or an office and staff.  The management of finances, budgets, payments, insurance for pure risk and payroll. When starting a business, all these components must work together to ensure that it is running smoothly and is best positioned for long term growth and profitability. 4 Key Business Operations All of the business operations components mentioned above can be categorized under these main themes: 1. Production: The process of creating goods or services that provide value to customers. 2. Marketing and sales: Activities aimed at identifying customer needs and promoting and selling the product or service. 3. Financial operations: Managing the company's finances, including budgets, investments, payroll, and financial reporting. 4. Human resources (HR): Overseeing the organizational structure and ensuring that the business effectively recruits, retains and develops its workforce. Benefits Associated with Efficient Business Operations The benefits and advantages of using or implementing business operations in your business development strategy, include: Page 7 of 20 MKBD   Improved efficiency and productivity  Better quality control and customer satisfaction  Increased profitability and revenue  Streamlined processes and reduced costs  Improved risk management Key Examples of Business Operations per Industry Here are some real-life examples or scenarios where business operations have been used effectively: A manufacturing company that uses automated production processes to increase efficiency and reduce costs. This allows it to produce more in a shorter amount of time, and with less resources. This means it has more inventory to sell, with greater potential to increase profitability. A retail store that uses a point-of-sale system to manage inventory and sales data. This leads to improved management of operating expenses and their business budget. It also means stock is managed effectively, leading to less frustration from customers. A merchandising company that uses data analysis tools to identify trends and optimize product offerings. This allows it to model products to respond to trends and capitalize on high demand for something. An e-Commerce business that uses a payment gateway to securely process online transactions. This helps created greater customer trust, makes customers more confident with buying from the business and helps the e- Commerce business protect its funds. A logistics company that uses GPS tracking technology to manage and monitor shipments per location. This leads to higher customer satisfaction and more referrals and business. Best Practices to Improve Business Operations 1. Establish clear goals and objectives for each component of business operations. From supply management, to manufacturing, to marketing and sales. Creating a business plan can be a vital asset for your business in this stage. 2. Regularly review and update processes and procedures to ensure they remain efficient and effective. Make improvements where necessary. Page 8 of 20 MKBD  3. Invest in technology and the right tools that can improve productivity and streamline processes via certain automations. This can be POS systems for payments, as one example. 4. Hire experienced managers who can effectively manage people, resources, and processes. 5. Stay informed about industry trends in order to always be ahead of the curve and learn from your competitors. Provide ongoing training to employees to ensure they have the most up to date knowledge and necessary skills to carry out their roles effectively. Common Challenges Associated with Operating a Business Operating a business comes with a number of potential challenges which include:  The cost of implementing new technologies or systems can be prohibitive for small and new businesses, which means lost opportunities for efficiency.  The need to constantly update processes and procedures to remain competitive. This can create challenges and expenses of its own that can be difficult to stay on top of consistently.  The complexity of managing all the different components of business operations effectively.  The potential for human error and the need for effective risk management strategies. TOPIC 4: PROCUREMENT and SUPPLY CHAIN MANAGEMENT What is Procurement? Procurement involves every activity involved in obtaining the goods and services a company needs to support its daily operations, including sourcing, negotiating terms, purchasing items, receiving and inspecting goods as necessary and keeping records of all the steps in the process. What is the purpose of procurement? In general, procurement teams work to obtain competitively priced supplies that deliver the most value. Types of Procurement 1. Direct Procurement Refers to obtaining anything that’s required to produce an end-product. For a manufacturing company, this includes raw materials and components. For a retailer, it includes any items purchased from a wholesaler for resale to customers. Page 9 of 20 MKBD  2. Indirect Procurement Typically involves purchases of items that are essential for day-to-day operations but don’t directly contribute to the company’s bottom line. This can include anything from office supplies and furniture to advertising campaigns, consulting services and equipment maintenance. 3. Goods Procurement Largely refers to the procurement of physical items, but it can also include items like software subscriptions. Effective goods procurement generally relies on good supply chain management practices. It may include both direct and indirect procurement. 4. Services Procurement Focuses on procuring people-based services. Depending on the company, this may include hiring individual contractors, contingent labor, law firms or on- site security services. It may include both direct and indirect procurement. 9 Steps in the Procurement Process Procurement processes vary greatly depending on each company’s structure and needs, but generally include the following nine core steps: 1. Identify which goods and services the company needs. First, a business must identify its requirements for a specific item or a service. This may be a new item that the company hasn’t previously purchased, a restock of existing goods or a subscription renewal. 2. Submit purchase request. When an employee or business group needs to procure a significant quantity of new supplies or services, they make a formal purchase request (also Page 10 of 20 MKBD  known as a purchase requisition). The department overseeing the purchase can then approve or deny the purchase request. If approved, the procurement team can proceed with selecting a vendor and making the purchase. 3. Assess and select vendors. With a clear list of requirements and an approved purchase request, now is the time to find the best vendor and submit a request for quote (RFQ) – this is what the purchasing team sends to potential suppliers in order to receive a quote – it is important to be as detailed as possible so you can compare apples to apples. Vendor assessment should focus not only on cost but also on reputation, speed, quality and reliability. 4. Negotiate price and terms. A common best practice is to get at least three quotes from suppliers before making a decision. Examine each quote carefully and negotiate where possible. If you need to walk away from a deal, be sure that you have concrete alternative options. Once you’ve agreed on final terms, be sure to get them in writing. 5. Create a purchase order. Fill out a purchase order (PO) and send it to the supplier. The PO should be sufficiently detailed to identify the exact services or goods needed and to enable the supplier to fill the order. 6. Receive and inspect the delivered goods. Carefully examine deliveries for any errors or damage. Make sure everything is delivered as specified in the PO and that the quality meets or exceeds expectations. 7. Conduct three-way matching. Accounts payable should conduct three-way matching by comparing the purchase order, order receipt or packing list and invoice. The goal is to ensure the goods or services received match the purchase order and to prevent payment for unauthorized or inaccurate invoices. 8. Approve the invoice and arrange payment. If the three-way match is accurate, approve and pay the invoice. A standardized process can help make sure invoices are always paid on time, which can prevent late fees and build good relationships with suppliers. Page 11 of 20 MKBD  9. Keep Records. It’s important to maintain records for the entire procurement process, from purchase requests to price negotiations, invoices, receipts and everything in between. These records may be useful for multiple reasons. They help the company reorder goods at the right price in the future, as well as assist with auditing processes and calculating taxes. Clear, accurate records can also help resolve any potential disputes. 3 Stages of Procurement The nine major steps of the procurement process can also be thought of in three distinct stages: the sourcing stage, the purchasing stage and the receiving stage. 1. Sourcing Stage This covers the initial steps in which the business identifies its needs, creates a purchase request and assesses vendors. Even after the initial sourcing steps are complete, it’s a good practice to build a strong relationships with suppliers. 2. Purchasing Stage This stage includes negotiating terms, creating orders and receiving and inspecting goods and services. 3. Payment Stage Accounts payable conducts three-way matching to ensure order and invoice accuracy. The invoice can then be approved and the payment is arranged. Records of all invoices, orders and payments should be kept and carefully maintained. Page 12 of 20 MKBD What is Supply Chain? A supply chain is the network of all the individuals, organizations, resources, activities and technology involved in the creation and sale of a product. A supply chain encompasses everything from the delivery of source materials from the supplier to the manufacturer through to its eventual delivery to the end user. Steps in the Supply Chain The fundamental steps of a supply chain in order are as follows:  Sourcing raw materials.  Refining those materials into basic parts.  Combining those basic parts to create a product.  Order fulfillment/Sales.  Product delivery.  Customer support and return services. The amount of time it takes any one of these processes from start to completion is known as lead time. Supply chains are managed by supply chain managers, who monitor lead time and coordinate the processes in each step to maximize customer satisfaction. Supply Chain Management Supply chain management (SCM) is the monitoring and optimization of the production and distribution of a company’s products and services. It seeks to improve and make more efficient all processes involved in turning raw materials and components into final products and getting them to the ultimate customer. Effective SCM can help streamline a company's activities to eliminate waste, maximize customer value, and gain a competitive advantage in the marketplace. What is the Difference of Procurement and Supply Chain? Procurement covers one aspect of supply chain management. Procurement includes sourcing, obtaining and paying for goods and services. Supply chain management also covers the logistics involved in obtaining goods, such as shipping and warehouse management, as well as transforming the procured goods into products and distributing them to customers. To recap, procurement is the process of acquiring the supplies you need to run your business operations. On the other hand, supply chain management encompasses how those supplies are transformed into finished products and delivered to the end-users. Page 13 of 20 MKBD Why Is Procurement Important in Business? Procurement is an important step in understanding supply chains, because it helps a company find reliable suppliers that can provide competitively priced goods and services that match the company’s needs. That’s the case whether the company is seeking raw materials for manufacturing, a marketing services provider or new office supplies. For example, if a company needs a new supplier to provide an ongoing service for an indefinite period of time — such as an email security solution — the procurement process helps the company choose the supplier that best meets all of the business’s requirements at a reasonable price. It enables the business to avoid wasting time, money and valuable resources dealing with an inadequate supplier. TOPIC 5: INVENTORY CONTROL and MANAGEMENT Having an efficient inventory control and inventory management system is essential to ensure that you have the right amount of stock in hand to meet consumer demands and minimize inventory investment. What is Inventory Management? Inventory management means procuring, storing and selling stock. It also collects data from inventory control and analyses it for important business decision making processes. For better inventory management, one must first focus on better inventory control. Inventory management involves forecasting stock replenishment which aims at when to order, how much to order and from whom to order. Some of the other functions of inventory management are:  To meet uncertainty in customer demand.  To meet smooth production requirements.  To avoid stock out situation.  To take advantage of quantity discounts. Automated inventory management software facilitate real-time inventory updates, which ultimately helps to improve the flow of goods to the customers. Thus, it helps in increasing sales. What is Inventory Control? Inventory control is also called stock control. It is a process of managing inventory in its warehouse or other storage locations. It includes managing the inventory levels in the company’s warehouse. It ensures that there are no overstocking or stock-outs. Further, it also ensures that all goods remain in a usable condition. It helps to set a balancing point between the finished goods and their optimum storage capacity. Some of the other functions of inventory control are: Page 14 of 20 MKBD   It helps to supply stock to different departments in the organization and keeps a record of the same.  It works on location, storage and accounting of inventories.  It bifurcates high-value stocks to help storage. In simple words, we can say that an effective inventory control system thoroughly monitors the movement, storage and usage of stocks. Automation of inventory control systems aims at maximizing profits with the least amount of inventory sitting in the warehouse. Comparison between Inventory Management and Inventory Control Both inventory control and inventory management work hand in hand, but still they have a few differences, which are narrated below: Topic 6: LOGISTICS and DISTRIBUTION STRATEGIES What is Logistics? Logistics refers to the strategic movement of goods and services from one place to another. It includes a variety of tasks like shipping, warehousing, managing inventories, packaging, and information flow. Logistics' main objective is to guarantee that goods and services are delivered to clients in a timely, and dependable manner while fulfilling their standards for quality. Key Elements of Logistics Management To move goods through the supply chain effectively and efficiently, logistics management requires several essential components. Page 15 of 20 MKBD  1. Transportation Since it entails the actual physical movement of goods from one location to another, transportation is a crucial component of logistics management. Optimizing transportation routes, selecting the most economical mode of transportation (such as trucks, trains, or ships), and making sure that goods are delivered on schedule and in excellent condition. 2. Warehousing The management and storage of items in a warehouse or distribution center is referred to as "warehousing." Effective warehousing management entails maintaining inventory levels to avoid stock-outs or overstocking, optimizing warehouse layout and storage systems to maximize space and efficiency, and making sure that products are kept and handled securely. 3. Management of Inventory To ensure that the correct products are available at the right time, inventory management involves the planning and control of inventory levels. Forecasting demand, choosing appropriate stock levels, and monitoring inventory levels in real-time are all essential components of effective inventory management. These steps help avoid stock-outs and overstocking. 4. Packaging and Labeling Packaging and labeling are crucial components of logistics management because they guarantee that goods are properly labeled and packaged for delivery. Choosing the right packaging materials to protect products during transit, labeling products with accurate information (such as product names, weights, and bar codes), and adhering to regulatory requirements for product labeling are all essential components of effective packaging and labeling management. Logistics' Importance in Business Operations By ensuring that goods and services are delivered to clients quickly and effectively, logistics plays a crucial role in the success of corporate operations. Here are some important things to think about: 1. Enhanced Customer Satisfaction Making sure that goods and services are delivered to customers on time, in the proper condition, and at the proper location is one of logistics' main objectives. Businesses can increase customer satisfaction and loyalty by continuously achieving these expectations, which can eventually result in repeat business and favorable word-of-mouth recommendations. Page 16 of 20 MKBD  2. A Competitive Edge By delivering goods and services more quickly, consistently, and affordably than rivals, an efficient and successful logistics operation can give firms a competitive edge. This can be particularly significant for companies that compete fiercely in sectors where efficiency and dependability are essential for success. 3. Better Management of Inventory To control inventory levels and make sure that the proper products are available when they are needed, logistics are essential. Businesses can avoid stock-outs, cut carrying costs, and lessen the risk of spoilage or obsolescence by using effective inventory management. In the end, this may result in greater earnings and increased customer pleasure. 4. Shorter Lead Times Logistics may assist organizations in reducing lead time, or the amount of time it takes to deliver goods or services from the point of order to the point of customer receipt, by optimizing transportation and delivery operations. In conclusion, logistics is essential to business operations because it enables businesses to provide goods and services effectively, affordably, and to a high standard. Logistics may assist businesses in increasing revenue, customer satisfaction, and general performance by streamlining transportation routes, enhancing inventory management, lowering lead times, and offering a competitive advantage. Challenges in Logistics Management Numerous obstacles that affect logistics management can impede workflow, add to delays, and raise costs. Businesses that rely on logistics for their operations must recognize and handle these issues. Here are some of the typical problems that logistic management faces and talk about solutions. 1. Transport expenses For businesses that rely on transportation for their operations, transportation expenses can be a significant barrier to logistics management. Increased fuel prices, fluctuating currency exchange rates, and alterations in legislation can all affect transportation expenses. To effectively manage transportation expenses, it is important to strike a balance between cost-cutting and upholding high standards of service and quality. Page 17 of 20 MKBD  2. Inventory Management Businesses that must balance the requirement to prevent stock-outs or overstocks with the need to maintain acceptable inventory levels may find inventory management problematic. Utilizing data and analytics to forecast demand, optimize inventory levels, and put policies in place to prevent excess inventory and reduce waste. 3. Disruptions to Supply Chains Natural disasters, political instability, or labor strikes are just a few examples of supply chain disruptions that can seriously affect logistical operations. To minimize the effects of supply chain-disruptions, effective logistics management includes creating backup suppliers or alternate transportation routes. 4. Coordinating and communication For good logistics management, coordination and communication must be effective. This can be difficult, especially for companies that operate in several regions or time zones. Utilizing technology and communication tools to improve coordination and communication among stakeholders, including suppliers, customers, and transportation providers, is a key component of effective logistics management. To overcome these obstacles and improve logistics operations, strategies must be put into practice. What is Distribution? Distribution means to spread the product throughout the marketplace such that a large number of people can buy it. It is the process of making a product or service available for the consumer or business user who needs it. Companies often look for new ways to generate sales, increase revenue margins and scale their business. Establishing an effective distribution strategy can help companies reach a wider audience of potential consumers and reduce the costs associated with marketing and delivering their products. What is a Distribution Strategy? A distribution strategy is a method of delivering goods or services to consumers or end-users. Companies may distribute their goods and services through direct or indirect distribution strategies. Some organizations choose to use multiple Page 18 of 20 MKBD distribution methods to deliver their goods or services to different types of consumers. For example, if you're selling recliners and want to appeal to people over the age of 60, you might decide to sell your product directly through a catalog. However, if you want to appeal to a younger customer base, you might decide to sell your recliners indirectly by working with a third-party retailer. Types of Distribution Strategies Here are five of the most popular types of distribution strategies that companies may use to reach consumers: Direct Distribution In the direct distribution strategy, manufacturers sell and send their products directly to consumers. They may accept consumer orders through an e- commerce website, catalog or over the phone. Once the manufacturer receives an order, they ship the product directly to the consumer's preferred address. Indirect Distribution a method in which a company uses intermediaries to deliver its products or services to customers. These intermediaries, known generally as partners. Examples of intermediaries that companies may choose to work with through an indirect distribution strategy include: Wholesaler: A wholesaler purchases products from a manufacturer in bulk and then sells them to retailers. They may receive a discount for purchasing a large quantity of products at once, which allows them to make a profit off of the products when they resell them. Retailer: Retailers may purchase products directly from a manufacturer or from a wholesaler. They may resell the products directly to consumers through their physical storefronts, e-commerce websites, social media platforms, catalogs or over the phone. Franchiser: Instead of building their own physical storefronts, manufacturers may sell the rights to their product or service and their brand name to an individual so they can open a franchise location. While the individual owns the franchise, the manufacturer still maintains a significant level of control through contractual agreements. Distributor: A distributor partners with a manufacturer to help them transport their products to retailers or other endpoint locations. Page 19 of 20 MKBD  Manufacturers may choose to work with a designated distributor to save on logistics and transportation. Intensive distribution In the intensive distribution strategy, companies place their products in as many retail locations as possible. Products that require minimal effort to sell typically perform the best with this type of distribution strategy. If your company produces an inexpensive product that customers purchase routinely, this distribution strategy may make sense for you. Exclusive distribution Through the exclusive distribution strategy, manufacturers make a deal to sell their product only to one specific retailer. They may also choose to sell their products only through their own brand via their website or physical storefronts. For example, if you sell luxury cars, your customers may only be able to purchase them directly from one of your company's stores. This strategy works well for expensive, highly sought-after items. Selective distribution The selective distribution strategy is a hybrid of intensive and exclusive distribution. Companies who use this strategy distribute their products to more than one location, but they are more selective about which retailers they work with than companies who use the intensive distribution strategy. For example, a high-end clothing company may choose to sell its products in its own stores and through a handful of carefully selected boutique shops instead of distributing its products to large chain retailers. Importance of Distribution Strategies in Business A well-planned distribution strategy is of immense importance to businesses for several reasons. Firstly, it helps businesses expand their reach and make their products or services accessible to a larger audience. By choosing the most suitable distribution channels, businesses can ensure that their offerings reach the target market efficiently and effectively. Secondly, distribution strategies play a key role in enhancing customer satisfaction. By making products or services readily available in the right place at the right time, businesses can cater to the demands and preferences of their customers. Besides, efficient distribution systems often contribute to factors such as shorter delivery times and reduced costs for the consumers. By implementing an effective distribution strategy, companies can minimize costs, maximize sales revenue, and reduce the chances of product spoilage. Page 20 of 20 MKBD