This PPT slide, part of the 159-slide Strategy Frameworks Manual PowerPoint presentation, focuses on the critical factors involved in developing a distribution strategy, particularly emphasizing the relationship between the number of retail outlets and distribution costs. It outlines how costs evolve as a company increases its retail presence. The text highlights several key cost components: outlet costs, handling and inventory costs, and local delivery costs.

As the number of retail outlets grows, outlet costs rise due to initial investments and the need for additional staff. This increase is described as a step function, indicating that costs do not rise linearly, but rather in increments as new outlets are established. Handling, inventory, and order processing costs are also noted to escalate proportionally with the number of outlets. This suggests that as a company expands its distribution network, it must account for the additional labor and stock needed to support each new location.

The accompanying graph illustrates the total distribution costs in relation to the number of retail outlets. It indicates that while there is an "optimum number" of outlets from a cost perspective, other factors may outweigh cost considerations when determining the ideal distribution strategy. This insight is crucial for decision-makers, as it underscores the importance of balancing cost efficiency with strategic objectives.

Overall, the slide serves as a valuable resource for executives looking to refine their distribution strategies. It provides a clear framework for understanding how retail outlet decisions impact overall costs, while also prompting consideration of broader strategic factors that may influence distribution choices.

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Strategy Frameworks