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Online distribution


Read the following article Armani's online store seeks to tap Chinese market (you can either do this in the window below or you can open it in a separate window by following the previous link).

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Produce a report outlining a marketing strategy for a new high end product using an online focus.

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Cisco Systems

Cisco Systems, founded in 1984, was one of the first firms to sell computer routers. In late 2000, at the height of the dot-com boom, Cisco was the most valuable company in the world with a market capitalisation of more than US$500 billion. In July 2009, with a market capitalisation of about US$108.03 billion, it was still one of the world's most valuable companies.

Cisco adopted a brand-winning model by shedding its role as an equipment manufacturer. It no longer manufacturers most of what it sells, nor requires vast amounts of physical and human capital. Although the initial order goes to Cisco, suppliers ship 55% of orders direct to the customer. However, Cisco bills the customer, pays the supplier and keeps the rest. As a result it has no debt, yet has expanded rapidly. Cisco's return on capital is greater than 25%.

This new distribution method is not quite the same as outsourcing. Suppliers do not keep large inventories and are paid rapidly. There is little paperwork. Cisco has created a seamless supply chain through closer links with suppliers and through the operation of Just-in-Time methods. Most large corporations still manufacture most of what they sell and are highly integrated, e.g. Procter and Gamble. However, technology companies like Cisco, Dell and Microsoft have re-engineered their businesses. They have fewer blue-collar workers and many more skilled engineering and marketing employees. They are becoming 'brand-owning' companies. They are not so much selling products as selling customer satisfaction.

Ford is looking to follow the Cisco model, transforming itself into an e-businesses and a leaner and meaner company. As a result, it has spun-off parts of its business, selling physical assets and investing in more intangibles, such as brand names. In recent years Ford has paid out $12 billion to acquire brands such as Jaguar, Aston Martin, Volvo and Land Rover. They have little plant, but help to develop customer value. They hope that they can use the internet to change to product pull operations. Customer orders are quickly communicated down the supply chain. As a result paint manufacturers will know what colour pigments to order on a real time basis. Ford use Electronic Data Interchange - EDI - to send information down their distribution chains.

Ford is reaching out to the new generation, Generation Y, the baby boomers in the USA through the internet. By marketing through teen portals, they are engaging youngsters in issues such as the environment and new car design and features.