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Chanel Company’s Marketing Logistics

CHANEL is one of the most popular fashion houses in the world established as a small shop in 1908. Today, CHANEL is one of the most popular fashion brands attracting middle and high-class clients from all over the world. CHANEL developed a traditional supply chain based on the supplier- production- customer relationships model. Generally, fashion houses like CHANEL seem to assume more of these responsibilities partly because of size, know-how, and capability, and partly because they can stabilize production and iron out distribution fluctuations. They take the lead in developing services, marketing information, products, packages, brands, advertising, and sales promotion activities, they achieve greater degrees of channel control. In some instances, however, retailers perform most of these functions and control the channels of distribution (CHANEL History of Traditions 2008). This occurs most often in industries with small manufacturers who lack marketing know-how and financial resources and may be highly specialized.

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For CHANEL, multi-channel systems serve a pivotal and conflicting role. They are both selling and purchasing institutions, they have common and conflicting interests with other channel members, they are both independent and dependent, and they want to sell a particular manufacturer’s product line and yet offer adequate assortments to customers. For CHANEL, channel conflicts are evidenced by the reactions of independent retailers to chains, more traditional retailers to discount houses and wholesalers with their own private brands to manufacturers (Chanel S.A. Hoovers.2008).

In order to meet customer requirements and service quality, CHANEL values time and fast delivery options. The company has its own transportation system and logistics which help to deliver goods to CHANEL stores (CHANEL History of Traditions 2008). Dependability is explained by unique customer service and the ability of the company to deliver required or ordered products to any part of the world. A set of mutual expectations exists in channels amongst manufacturers and middlemen. CHANEL expects middlemen to furnish sales and promotional efforts, adequate product inventory and exposure, and required services and information. Middlemen expect product lines that are competitive, salable, and profitable, as well as territorial protection, merchandising assistance, and fair treatment (Cohen and Roussel 2004).

Communication is a core of effective supply chain relations. CHANEL pays special attention to communication with suppliers and between the company and its customers. For CHANEL, channel balance, which is difficult to achieve, must be realized at various levels. CHANEL desires an adequate number of distributors to blanket markets and would prefer even greater numbers. This desire must be balanced with distributors’ preference for limited numbers of distributing units with protected territories. In the end, the number of channels must reflect a compromise; there must be enough of them to ensure fairly adequate coverage, but not too many to prohibit segments profitable enough to protect the interests of each (CHANEL History of Traditions 2008). To get channels to function as integrated systems means that the programs and actions of each unit in the complex must be acceptable and coordinated with those of other units. This is not easy to achieve, but the benefits can be considerable. Substantial savings can be realized through such devices as contractual arrangements, which specify obligations between manufacturers and distributors, and permit each to plan, program, and benefit accordingly. Continuing channel contacts and formal contracts help stabilize markets, encourage automation, and result in lower costs. Adequate incentives are necessary at each stage of the data-and-product flow in order to develop a coordinated distribution program Chanel S.A. Hoovers.2008).

The dimension of convenience is explained by unique logistics solutions and the computerization of the supply chain system. For CHANEL, demand characteristics are directly related to physical distribution systems, and it is required that companies choose alternative solutions. In general, the main alternatives are the company sales force, manufacturer’s agency, and industrial distributors (Kotler and Armstrong 2008, p. 348). Where demand is widely variable, then distribution facilities are usually concentrated in alternative channels (CHANEL History of Traditions 2008). Where demand is continuous and rather consistent, as is the case for some food products, distribution facilities can be decentralized. A highly variable demand makes it difficult to design effective physical distribution systems and control costs, while a stable demand permits it. In between these extremes, where demand patterns can be discerned through analysis, as with seasonal products, reasonable distributions systems may be approximated (Christopher, 2005).

The general factors which influence CHANEL’s facilities location are geographic location, transportation facilities, and a distance to Chanel’s stores. For CHANEL, product characteristics help to determine the optimal design and type of channels structure and number of intermediaries. Following Kotler and Armstrong (2008), a company can use intensive distribution, extensive distribution, and selective distribution. The ability of products such as luxury items to absorb costs is particularly important. High-value items, if heavily stocked, mean a heavy inventory investment and hence increased costs (Christopher, 2005). Their storage is often minimized. For them, transportation is a modest amount of the total price. A heavy stock of low-value items, on the other hand, does not have a significant effect on total inventory costs, but costs of these items are greatly affected by transportation costs (CHANEL History of Traditions 2008).

In the USA, the best location for a CHANEL facility is Washington City, the capital of the USA. This city has a 588,292 million population and an excellent transportation system. CHANEL manufacturing does not depend on natural resources, so trade relations with other parts of the world are more important for this company. In Washington, the efficiency of the intermediaries is measured in terms of the cost of inputs as they relate to outputs. If the costs cannot be reduced further without reducing the level of service, then obviously the system is highly efficient. It should be noted that various functional centers, such as inventory, traffic, and warehousing can be efficient, they can keep their individual costs low, while the total costs and total service are inefficient. Different functions have different and sometimes competing and objectives. Thus, inventory managers might like to reduce inventory costs even if this increases transportation costs, while the traffic manager prefers the reverse (CHANEL History of Traditions 2008). Ideally, a systems approach should be adopted that balances costs and benefits from the perspective of the whole organization. Intermediaries are diverse, and one ideal form of organization does not exist. Decisions concerning the level of executive responsibility of the physical distribution officers, the activities to be grouped within the department, and the functional area to which the physical distribution department is attached, vary for similar businesses. The main problem is that “using intermediaries usually means giving them some control over the marketing of the product” (Kotler and Armstrong 2008, p. 349). Logistical decisions and the design of a company’s movement-and-storage system result from cost-market requirement analysis of alternatives. Thus, physical distribution is dynamic, responding to market shifts and competitive forces. Its policies must be flexible and reviewed frequently to achieve a balance between the goals of servicing the markets and reducing distribution costs (Christopher, 2005).

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Washington is a cultural and business center of America, so it has professional and skillful labor resources for such a company as CHANEL. The district of Columbia provides favorable taxation policies for international businesses and designers. So, CHANEL will not have a taxation burden or double taxation problems in this district. Washington has three transportation systems: air transportation, land transportation, and water transportation. This system will help CHANEL to save costs on delivery and logistics. The main opportunity is that CHANEL can find new suppliers in the USA and save costs on delivery from France and other European countries. Distribution channels are the vehicles for matching companies with customers. They move products and information to markets and provide the funnel for the feedback of information to the producer. As networks of marketing agencies, they constitute a system; a loose but formal coalition of independent entities linked together to distribute products and services. The total channel pattern constitutes one element of the distribution mix, the other being physical distribution (Kotler and Armstrong 2008).

In Washington, CHANEL can follow its traditional trade strategy: it distributes its products through boutiques. Quality of life in Washington allows people to buy luxuries brands and spend dollars on cosmetics and perfumes. The location in Washington will help CHANEL to trade with Canada and Latin American countries. In this case, distribution channels are critical components of the marketing mix. As the links between companies and markets, they can impede or foster the effectiveness of the rest of the marketing mix. Distribution channels cover a wide range of situations (Stroh, 2006; Herlihy 2008). At one end are the complicated linkage of manufacturers and their branches, agents and brokers, other wholesalers, and retailers for the movement of certain consumer goods. At the other is the direct distribution of heavy machinery. In between, lie a variety of channel assortments. Which one works best depends on the company and its products and markets at a certain time (Kotler and Armstrong 2008). Free trade zones will not have a great impact on CHANEL’s trade strategies and distribution. Thus, CHANEL can open more stores in Mexico and Argentina, Bolivia and Chile, Columbia and Haiti. Taking into account the grid systems, it is possible to say that the lowest cost location for CHANEL is Chile thus it is not the most cost-effective one because t will help to trade in the Latin American countries only. Such savings can be a vital element in company profits. Theoretically, distribution systems are designed to give customers the maximum service; yet they are also supposed to minimize distribution costs. The former goals suggest many distribution centers, large inventories, and rapid transportation; the latter suggests the opposite.

In sum, channels are always selected or devised on a rational basis. Many channels just grow and become habitual and institutionalized. In the future, they must be planned more effectively because marketing tasks (which are shaped by technological changes, sociological and psychological factors, new product development, automation, and dynamic global markets) are becoming more complex. The case of CHANEL shows that the channel of distribution is a model for studying the links that facilitate the movement of products, services, and their title. In reality, total integration is not achieved, as competition, conflict, and lack of coordination appear.

Works Cited

Christopher, M. Logistics & Supply Chain Management: creating value-adding networks. FT Press; 3 edition, 2005.

Chanel S.A. Hoovers. 2008. Web.

CHANEL. History of Traditions. 2008. Web.

Coco avant Chanel sets sights on US studio. 2008. Web.

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Cohen, Sh., Roussel, J. Strategic Supply Chain Management. McGraw-Hill, 2004;.Herlihy, J. Chanel. 2008. Web.

Kotler, Ph., Armstrong. G. Principles of Marketing, 12ed, Pearson Prentice-Hall, 2008.

Stroh, M. A Practical Guide to Transportation and Logistics. Logistics Network Inc, 2006.

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