CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

As the economy advances, there is a narrowing of gap between producers and consumers due to the emergence of the advancement in technology and distribution fulfils the critical function of integrating the economy into society to serve human needs. The major reason for business is to sell its products and services, that can satisfy their customers at profit and also to ensure effective operation. The increases in output of goods and services necessitated the development of the channel of distribution. Every manufacturer requires consumers for survival but there is slim possibility that manufacturers will succeed in reaching all the consumers without using the services of market intermediaries (Ehikwe, 2002). The reasons are obvious because consumers are scattered in various geographical locations and the consumer’s demographic profiles to be examined includes lifestyles, age, education, sex, status, income, health and other relevant parameters of consumer’s interest.

In order to be efficient and effective, the Nigerian Pharmaceutical industries develop produces and market drugs for use as medications (Brian, 2011). Pharmaceutical companies are allowed to deal in generic and/or brand medication and medical devices. Pharmaceutical firms have devised distribution strategies that enable them to reach out to a wider spectrum of the society (patients) for patronage. The interaction of these strategies and the relevant environmental factors determines the performance of product marketing (Akinyele, 2010).

Today, obtaining and retaining a dominant position in the market has become very difficult due to the vast spread of products and services and the aggressive competition on one side and increasing customer demand on the other side.

The poor choice of distribution strategy is one of the challenges that have left many manufacturers crumbling with their high quality products. There are chances that the strategy selected may not be effective when confronted with task of withstanding the pressure from competitors. To compete, an organization must understand the basis of competition for each product group within the distribution channel. Furthermore, Harrison and Hoek, (2008) stated that “the key advantage provided by distribution is availability of conforming product in the marketplace at low cost”.

The Pharmaceutical industry according to Whewell (2009), is a very complex industry with many markets, products and regulations. Pharmaceutical products are used by every person at one time or the other in life. Sale and distribution of pharmaceutical products is emerging as a major issue for pharmaceutical firms. In Nigeria setting health workers have accounted for some pharmaceutical sales while majority of pharmaceutical products are distributed through various wholesale and retail channels. Typically, the manufacturer sells the drugs to a wholesaler who in turn distributes to retail pharmacies.

It is nevertheless crucial to acknowledge the factors affecting the good or bad of performance of Pharmaceutical firms. If the Pharmaceutical firm is doing poorly, it has to unravel the reason for the current situation so that it can form a plan for a brighter future. On the other hand, a firm doing well must understand what the most influential factors behind its success and what can sustain its competitive position in the future.

To emphasize the importance of understanding long term value of company resources, (Reed and Defillippi, 1990) state that “ambiguous causalities in relationship between competitive advantage in the market place and competitive advantage in resource may lead to allowance of dissipation of comparative resource advantage”. The contribution of (Nwokoye, 2000) is highly instructive and conclusive, in all discussion that the choice or selection of distribution strategy relates directly to distribution function.

1.2 STATEMENT OF THE PROBLEM

Indigenous producers in the pharmaceutical industry in Nigeria, specifically in Delta State are faced with fierce competition from the importation of pharmaceutical products, most especially from China and India. This situation is worsened as a result of regulations governing the industry, government policies affecting the industry, lack of assessable roads to aid smooth distribution of the products, low level of consumer knowledge, counterfeit of drugs, high cost of production and poor credit facility to producers, wholesalers and retailers have affected the quantity produced, purchased and sold. Though distribution is very important to the productivity of indigenous firms (Mavondo, 2000), it is therefore necessary for local manufacturers to manage efficiently the various resources available to them especially their distribution activities, since it is very costly to attract and maintain an effective sales force.

Many of the pharmaceutical firm’s products remain unsold as a result of these problems which in turn affects the marketing performance of the firm, which this research intends to address.

1.3 OBJECTIVES OF THE STUDY

Distribution of pharmaceutical products is worth studying because in Nigeria majority of person’s is suffering from one ailment or the other. Therefore the overall objective of this study is intended to determine the relevance of distribution strategy on marketing performance of pharmaceutical industries in Nigeria and the specific objectives will be:

1 To determine the impact of distribution channel on market share.

2 To ascertain the impact of transportation on sales volume.

3 To ascertain the impact of distribution technique on customer acquisition and retention.

4 To determine the distribution technique that leads to increased profitability.

1.4 RESEARCH QUESTIONS

Based on the aforementioned, the study will attempt to provide answers to the following research questions:

1 To what extent does distribution channel impact on market share?

2 To what extent does transportation impact on sales volume?

3 To what extent does distribution techniques adopted by pharmaceutical firms impact on customer acquisition and retention?

4 To what extent does distribution technique adopted by pharmaceutical firms leads to increased profitability?