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Tuesday, July 27, 2010

No. 14: Build a New and Better Distribution Channel

A prestigious Japanese sake brewery filed for court protection. This sake brewery is famous for the brand sake supplied to the Emperor. The major reason of the failure is that people drink Japanese sake less in these days. However, the president cannot be free from the responsibility of the failure because not a few Japanese sake breweries are recording good results despite the dwindling sake consumption. No companies can survive unless they make strenuous efforts to sell their products by themselves. Every company should know that it is no longer possible to survive only by producing the established products and distribute them only through the established distribution channels. Innovation not only in production but also in distribution is vital for survival.

In the magazine report on the failure, the president of this sake brewery who studied engineering in college talked much about production and little about marketing in his remorse. This indicates the problem that many engineering-educated presidents have in common. All that he has in his mind is to produce excellent quality sake from excellent quality rice to maintain the tradition. His attitude should be praised, but he is lacking in the perspective to build a new distribution channel. However excellent his sake is, its sales will not grow unless he builds a new distribution channel suitable to the new age. Youth do not drink as their parents did in the past. Many liquor shops used to sell sake to salaried workers on a cup basis at the shopfront in Japan. Salaried workers used to grab a drink at a liquor shop on their way home, but no more.

He could have realized the necessity to build a new distribution channel if he had studied in detail how consumers purchased sake and where they drank sake. He should have realized much earlier the mistake to stick only with the long-established distribution channel. If he had worked on expanding business abroad, he could have taken advantage of the growing popularity of Japanese cuisines in foreign countries. Every company needs to abandon the idea to stick only with the distributors with whom it has been enjoying long and established business relations without trying to build a new and better distribution channel. Some companies may say, “We cannot do such a ruthless thing.” These companies will be wiped out from the market in the long run. It is not a ruthless idea to abandon the distributor that cannot cope with changes of the times.

In Japan, there was a famous phrase “Toyota’s marketing and Nissan’s technology” in the past. Possibly fascinated by this euphonious phrase, Nissan emphasized technology because it thought technologically excellent cars would sell fast. Nissan should have realized that marketing is much more difficult than production. While production is internal work, marketing is external work. No automaker can satisfy the infinite requirements imposed by consumers, no matter how big it is. Even the almighty Toyota cannot order a customer to buy a Toyota. Even Toyota salespeople can at most say, “We have built this car by getting together our wisdom and technology. Please check is closely. We would appreciate it very much if you would be interested in this car and purchase one.”

The story of the prestigious sake brewery tells the sorrow of an engineering-educated president who did not sell his products by himself and could not abandon the Ptolemaic theory that the distributor was selling his products very hard for him.

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