Distribution strategies refer to the measures that the company has in place to ensure that products reach the intended recipient. There are several means through which a company can do this. The particular measure or measures taken are dependent on the nature of business the organization is in, its size, and the overall strategy. In some instances, the company may follow a direct distribution strategy, whereby its products are sold to the end consumer directly. In other instances, the company chooses to use an agent, who then sells to the end consumer. Other strategies have longer chains, with several players. There may be a wholesaler, agent, retailer, among others, all determined to find the easiest way that the product can be marketed.
Pharmaceuticals are ultimately responsible for whichever distribution channel they use. However, the payers influence the exact nature of these channels. The company, such as GSK must consider distributors, controllers, payers, regulators and dispensers in its decision makers.
GSK uses several means to ensure that its products reach the market. The first among these is the strategy which involves selling directly to hospitals. The distribution mechanism ensures that the medicines can then be distributed as prescription drugs to patients through the respective hospital’s pharmacy. The importance of this channel is that it has a wider coverage, on top of being an excellent way of accessing a large size of the market (McCain, 2012).
The second distribution model involves using super agents. These agents stock GSK products on their premises. They are responsible for selling the drugs on behalf of the company, using whichever strategy they use. However, any agreement requires the super agent to be responsible and ethical in supply, so that the drugs are not used for the wrong purpose. The super agent is so called because they do not supply to the end consumer. Instead, they in turn supply to hospitals and agents who distribute to the end consumer. This type of distribution has its advantages and challenges. While the company is able to sell more drugs due to the ability of the super agent to reach more customers (GSK, 2012; Weitz & Jap, 1995).
Another facet of the distribution strategy that the organization has adopted involves sales agents. The sales agents are involved in contracting the different buyers, including agents, super agents, hospitals, clinics and drug stores. They sell the wares to these parties, for onwards distribution to the end consumer or other distributors in the chain. The difference between the super agent and the sales person is that while the sales person is employed by the company, the super agent is a different entity. It is cheaper to sell the drugs through a salesperson than through the agent, but the sales volumes are considerably less (Gupta, Mandhav & Ojha, 2015).
The company also distributes drugs through drug stores. In a conventional sense, the drug store is an agent who does not sell the drug to other sellers, but instead dispenses them to the end consumer. The end consumer may be accompanied with a prescription note by a physician where necessary. In other cases, the drugs do not require a prescription note. The company sells most of its - over the counter medicine in using this channel (Gupta, Mandhav & Ojha, 2015). The different facets of this distribution strategy are illustrated in the flowchart below.
To support the distribution channels described above, the company has created a positive relationship with several institutions in the country. This factor enables them to get firsthand information about the preferences of different parties and the changing trends. Furthermore, it allows them to access past records to determine the common challenges connected to their products. Therefore, the organization uses its distribution channels not only to distribute products, but also to obtain valuable market intelligence (Black et al, 2002).
Not included in this model is the export segment of the GSK Australian market. GSK’s business has a significant export component. The company exports drugs to several countries in Asia and beyond. The company may either be shipped to GSK branches in these countries, or directly to agents or other intermediaries. Apart from this, the channel followed is similar to what has been discussed above under other distribution models (Gupta, Mandhav & Ojha, 2015; GSK, 2017).
The Australian market that GSK controls is large. It is among the major players in the country, controlling up to 5% of the Australian market (DIIS, 2017). The country is also large geographically. This means that it is not practical to have only one distribution model, since it will face serious limitations. The company is therefore justified in seeking to sell its products through several channels as it does (Black et al, 2002).
It may sometimes be impractical to sell the product directly to customers. GSK deals in drugs which are extremely harmful if not consumed through the right directions, which means a physician’s prescription. This means that the drugs that the company sells must be sold in a controlled way, which the different channels of distribution provide. More importantly, the company does not deal directly with the end user. The middlemen therefore in this case perform an essential role of ensuring ethical practice (Tse & Yim, 2008).
The size of the company is also an important consideration in determining the distribution channels it will use. For smaller companies, many distribution models are likely to result in operational inefficiencies, which will result in the organization losing money. GSK is a large company present in more than 150 countries, however. This means that it is well placed to employ these distribution models since it has the financial ability and operational capacity to support them. In short, it has both the products needed, and the people to sell the products to (Tse & Yim, 2008).
The results of this approach have been that GSK’s Australian business has grown well over the last few years, mirroring the overall growth in the Australian pharmaceutical industry. GSK’s growth has been a product of expanding markets, as well as improved operational and distribution efficiencies. Ultimately, the most important element of its success is how well it is able to get its product to the end user. It is also dependent on the decisions of important players such as physicians and governments, and how well GSK is able to influence thme. This refers to how well the company is able to collect market intelligence form its distribution channels.
The distribution channels that a company chooses are dependent on several factors. This includes size of market, size of company, size of its market in terms of geography, and the nature of the product. For this reason, GSK has found a hybrid model of distribution, which has worked well for them.
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