Channel Strategy of HP Laptop:

Laptop is a shopping product in Bangladesh. It is also a complex and high costly product.
That is why; developing a channel strategy is relatively difficult for a laptop. HP needs to
consider some decisions to develop channel strategy. HP needs to consider (1) type of
distribution channel, (2) Intensity of distribution, and Channel configuration. These
decisions should be considered to achieve the objectives of channel of distribution strategy.
Exhibit 1 shows the channel selection strategy:

1. Type of distribution channel

Horizontal Marketing
Conventional Vertical Marketing System
system

Administered
Ownership Contractual
Relationship

2. Intensity of distribution

Intensive Selective Exclusive

3. Channel Configuration

Exhibit 1 Channel Selection Strategy

The appropriate channel strategy for HP laptop is evaluated on the basis of above steps.
These are described on the next page.
1. Type of distribution:
HP will sell laptop to two types of customer: (i) Individual customers and (ii)
Organizational buyers. Individual buyers include students and high profession persons
such as CEOs, teachers, engineers, doctors etc. Organizational buyers include multinational
and domestic companies, educational institutions, and Government. Therefore, HP has to
develop two different types of channels for each of the segment.

Channel for Individual Buyers:

Mainly, HP may select four major cities (Dhaka, Chittagong, Rajshahi, and Khulna) of
Bangladesh to sell its laptop. The following distribution channel will be applicable for
individual buyers of these four cities.

Producer
(HP Laptop)

Supply chains

Sales Agents
Direct
Channel

Retailer Retailer Retailer

s s s

Individual Consumers

Exhibit 2 Channel structure for Individual Buyers

At first, HP sends the laptops to sales agents in each city through its supply chain. Then,
the sales agents will distribute laptops to its selected retailers in the city. Buyers will be
able to purchase from those shops. Again, HP supply chain may also select a retailer
bypassing the sales agent and then sell to the customers. HP also can appoint sales
personnel to sale directly to the high profile customers such as CEOs, doctors, engineer,
teachers, businessmen etc.

Channel for Organizational Buyers:

Mainly, HP selected two major cities (Dhaka, and Chittagong) of Bangladesh to sell to
the organizational buyers. The following distribution channel will be applicable for
organizational buyers of these four cities.

Producer
(HP Laptop)

Supply chains

Direct Sales Agents

Channel

Distributors Distributors

Organizational Buyers

Exhibit 3 Channel structure for organizational Buyers

At first, HP sends the laptops to sales agents in each city through its supply chain. Then,
the sales agents will distribute laptops to the distributors in the city. The Distributors
will deliver the laptops to the buyers. HP supply chain may also select a distributor
bypassing the sales agent and then sell to the customers. Again, HP can appoint sales
 personnel to sale directly to the organizations or they can take order via internet and
deliver to customer through the distributor.

2. Intensity of distribution:
HP laptop is considered as a shopping product. Moreover, it is very high cost product and
people need information to compare one brand with other. HP has not got a good market
share. They have to fight with Accer, Lenovo, Dell, ASUS, and Prolink for market share.
Therefore, HP will go for selective distribution by considering nature of the product,
resources of the company, competitors’ strategy, and finally capabilities of the buyers.

HP is targeting four major cities in Bangladesh—Dhaka, Chittagong, Rajshahi, and Khulna.

It is required to select important locations in each city. It is also necessary to divide the
cities into different parts to place the retail shops.

At first, Dhaka city can be divided in four zones. There will be a retailer in each zone. Thus,
there will be four retailers of who will carry the HP Laptop in the Dhaka city. The retailers
will be located at Motijheel, Banani, Dhanmondi, and Mirpur. Each retailer will cover its
surrounding areas such as retailer at Dhanmondi will cover Mohammadpur, Adabor,
Farmgate, Azimpur, and University area.

Then, Chittagong city can be divided in four zones. There will be a retailer in each zone.
Thus, there will be four retailers of who will carry the HP Laptop in the Chittagong city. The
retailers will be located at GEC circle, Station road, Sholoshore, and CDA Avenue. Each
retailer will cover its surrounding areas.
Next, Rajshahi city can be divided in two zones. There will be a retailer in each zone. Thus,
there will be four retailers of who will carry the HP Laptop in the Rajshahi city. The
retailers will be located at Shaheb bazar and New market. Each retailer will cover its
surrounding areas.
Finally, Khulna city can be divided in two zones. There will be a retailer in each zone. Thus,
there will be four retailers of who will carry the HP Laptop in the Khulna city. The retailers
will be located at Station road and Fullpur. Each retailer will cover its surrounding areas.

After acquiring initial familiarity and market share, HP should go forward with mass or
intensive distribution strategy. HP will focus on over all market rather than selective one or
two segments.

3. Channel configuration:
The third step in selecting the distribution strategy is deciding:
A. how many levels of organizations to include in the vertical channel,
B. the specific kinds of intermediaries to be selected at each level

Several factors may influence the choice of one the channel configurations. These are
End user considerations: It is important to know where the targeted end users might
expect to purchase the laptop. Customers may want to buy laptop from HP directly or from
agents or retailers.

Product characteristics: HP laptop is complex in nature and requires after sales service.
That is why; short and direct distribution channel is preferable for HP.

HP’s capabilities and Resources: As HP has extensive capabilities and resources, and
having so many participants in distribution channel creates conflicts, it should use direct
distribution channel.

Required functions: Since laptops need after sales services, it is better for HP having
direct contact with the customers. In some cases, a full-service wholesaler may be essential.
Questions- 1: What should the company’s strategic focus be in each stage of
PLC?

Ans: strategic focus in each stage of PLC is shown here.

Introduction Growth Maturity Decline

Creating awareness about Try to maximize Try to Try to reduce
the laptops and their market share by maximize expenditure in
configurations and building profit by promotional activities
characteristics to the awareness and reducing cost and milk the brand. In
customers by extensive interest in the while this stage, HP also can
ads and sales promotion mass market. defending merge with other
activities market share companies and add extra
features in the laptops.

Questions-2: Which channel should be used in each stage?

Ans: Channel should be used in each stage

Introduction Growth Maturity Decline

Selective It is suggested to build Build more intensive Go selective, phase
distribution intensive distribution distribution is out less profitable
channel is with the increase in suggested for outlets to reduce
preferable here. market share. maturity stage. cost.

In introductory stage, market share of HP laptop is very small. So, selective distribution
strategy is productive here. In growth stage, with the rise of market share intensive
distribution strategy is suggested. In maturity stage, the market share reaches in extreme
level. Here, more intensive distribution is more useful. In decline stage, market share of HP
laptop will drop but cost will increase severely. So in this stage, HP should phase out the
less profitable outlet and come back to selective distribution strategy again.
Questions-3: In which stages of PLC will margins be the highest?

Ans: PLC curve shows which stage(s) will provide highest margins.

Figure: Product life cycle curve

From the above PLC curve, we can easily know that in the maturity stage, the profit margin
is highest with the highest amount of sales.

Questions-4: Which stages should be the most intermediaries and which

stage(s) should use the fewest?

Ans: Most intermediaries: In maturity stage there should be the most intermediaries.
Here long and intensive channels are used.

Producer Agents Wholesalers Retailers Consumer

Figure: Distribution channel having the most intermediaries.

 Fewest intermediaries: In the decline period, fewer intermediaries should be used
to reduce cost. Here, in most cases, direct marketing can be used. Again one or two
selective channel can be used.

Producer Producer
(HP laptop) (HP laptop

Sales force Sales agent

Customers Customers

Figure: Distribution channel having the fewest intermediaries.

Conclusion:
Since HP laptop is complex goods and after sales service are needed, a close contact
between customers and the producer are needed. As a result, it will be easier for HP laptop
to provide application assistance, service, and other supporting activities to the customers.

Since most of the customers’ income level is very low, they are price conscious. It is the
responsibility of HP to reduce the cost of laptop. Here it can follow an alternative strategy
which is followed by most mobile phone companies in Bangladesh. HP can follow intensive
distribution to distribute products. But it should have several central customer care centers
in strategic areas. This strategy will help reduce the expertise cost related providing after
sales service.