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Executive Summary The existing HP product distribution comprises of 3 major and 4 minor channels plus an online refurbished-product unit Even though these channels cover a wide range of consumers in the US HP has not fulfilled customers needs efficiently and conveniently via the internet The internet channel today is one of the most important commercial channels in the US as there are 46 million Internet users in 1997 and this number is expected to grow to 150 million by 2000 Therefore buying behavior of the US population has increasingly been shifted from traditional brick-and-mortar store shopping toward e-shopping In meeting this new buying behavior HP needs to add this new important channel effectively as soon as possible This means providing complete product information obtaining customers feedback and selling all HP products directly to consumers Currently large retail accounts represent 90 of HPs printer sales both via physical channel and e-channel Therefore an important consideration in implementing direct online shopping strategy will be to ensure that conflict with retailers is minimized Since our plan is to offer all products on our official website actions must be taken to maintain relationship with retailers by various means 1 Why has HP set up such a complicated distribution system HPs existing distribution system currently consists of multiple channels which are geared or designed to focus and concentrate on different market segments Selective distribution See exhibit 1 The major distribution channels represent the bulk of the sales and is clearly defined and segmented by various variables The main one being customer purchasing behaviors Such a complicated system has allowed HP to capture a larger customer base through better market segmentation based on demographics psychographic customer purchasing behavioral models without the need to focus in detail on individual customers To do this HP has carefully selected various distribution channels that represent front line sales in various segments Companies can achieve a competitive advantage through the
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