Page 186 - DMGT547_INTERNATIONAL_MARKETING

Unit 10: International Logistics and Distribution Channels

Steps in Value Chain Analysis Notes

Value chain analysis can be broken down into a three sequential steps:
1. Break down a market/organisation into its key activities under each of the major headings
in the model;

2. Assess the potential for adding value via cost advantage or differentiation, or identify
current activities where a business appears to be at a competitive disadvantage;
3. Determine strategies built around focusing on activities where competitive advantage
can be sustained

Self Assessment

Fill in the blanks:
10. More control over the distribution process requires more involvement by a firm in terms
of ………….., ……………… and …………………
11. The situation where the specific ethnic groups control the distribution systems is called
………………….
10.6 Modes of Transportation

Whenever a new company is to be established, the transportation function is to be kept in mind
before selecting the site of the company. To supply a product both between the countries and
within a country there are fundamentally three modes of transportation: air, water (ocean and
inland) and land (rail and truck).

The appropriate transportation mode depends on (i) market location, (ii) speed and (iii) cost.
A firm must first consider market location. Contiguous markets can be served by rail or truck as
the case may be. To supply goods between continents sea or air transportation is needed.

Speed is another consideration to decide the mode of transport. When speed is essential, air
transportation is preferred mode of distribution.
The cost is another factor to be considered in the selection of the transportation. Cost is directly
related to speed – a quick delivery costs more.
The three different modes of transportation are discussed in the following sub-sections.

10.6.1 Land

Land transportation is the common mode of transport for any shipment whether local or
international. Some type of land transport is essential in moving goods to and fro an airport or
seaport. The land transportation involves rail or truck when the goods in large quantity are to
be moved for a long distance over land. However, rail can prove to be more economical than the
trucks. Europe and Japan have modern train systems that are capable of moving merchandise
efficiently. Developing countries like India have yet to provide an efficient and fast rail
transportation system to the business.

On the other hand, trucks are capable of going to more places. In addition, trucks may be needed
to take cargo to and from the railway station. When countries have joined boundaries, moving
cargo by truck or train is often a practical solution.

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