The essence of distribution is thus reduced to harmonization of demandand supply. Such an adjustment is only possible through amassing and providingcustomers with products of a particular structure and specific usage properties.Levelling the differences between production and consumption area is also animportant issue.strategy of distribution, distribution channels;

Joanna Nowakowska-Grunt

English

Research Papers in Economics

Annales Universitatis Apulensis Series Oeconomica, 11(2), 2009 
 
 
875 
 
STRATEGY OF DISTRIBUTION IN FOOD INDUSTRY COMPANIES  
 
 
Joanna Nowakowska-Grunt
1 
 
 
ABSTRACT: The essence of distribution is thus reduced to harmonization of demand and supply. 
Such an adjustment is only possible through amassing and providing customers with products 
of  a  particular  structure  and  specific  usage  properties.  Levelling  the  differences  between 
production and consumption area is also an important issue. 
 
Key words:  strategy of  distribution, distribution channels; 
 
JEL Codes: L6 
 
 
Introduction: Strategy as an element of business management 
Strategies  adopted  by  companies,  especially  by  management  has  significant  impact  on 
success or failure of an enterprise as well as on its bankruptcy or survival in the market.   
“A strategist, i.e. a manager who thinks and manages strategically is a person who focuses 
on  rules  for  operation,  creates  visions  for  future  state  of  environment  and  who  seeks  for  best 
concepts of survival and development of a company.”(
 1 M. Romanowska, 1995, p.2). 
„[…]  Nowadays  managers  sometimes  have  to  be  confronted  with  three  fundamental 
strategic questions in order to understand if and how a company offers its customers to satisfy their 
needs. These are the questions  about  the  sense of existence of companies and  visions of their 
operation in the future, about the markets and products and dominating model of operation.  
 
Fig. no.1  Fundamental strategic choices 
Source: K. Obłój, „Strategia organizacji. W poszukiwaniu trwałej przewagi konkurencyjnej”, 
wydanie II zmienione, PWE, Warsaw 2007, p. 19 
 
Answers to the above questions are strategic choices which create a ‘theory of business’ referred to 
by P.F. Drucker. ‘They form an organization, dedicate decisions relating to what the organization 
does and what it does not, define what an organization recognizes as vital progress. They include 
assumptions  for  the  markets,  for  identification  of  recipients  and  competitors,  their  values  and 
activity. They determine the technology and dynamics of its changes, weaknesses and strengths in 
companies. They are assumptions for what companies are paid for. […] Each organization, in or out 
                                                 
1 Czestochowa University of Technology,jng@zim.pcz.pl; 
Dominant model  
of operation 
Strategic vision 
Markets and products Annales Universitatis Apulensis Series Oeconomica, 11(2), 2009 
 
 
876 
 
of business has its theory of business which, if clear, transparent and precise, has a powerful effect.’ 
(K. Obłój, 2007, p.19) 
Application of strategies for efficient operation in companies is a kind of game in order to 
shape a future for the companies. Each game has its rules and the gamers chose and make some 
decisions in order to improve the chances of success. Companies which play in the domestic or 
international  markets  have  to  consider  competition  with  all  interactions  between  potentials  of 
companies and can not neglect any type of signals from environment. 
Process of strategic choices while formation of strategies must include two components. 
First component concerns strategic analysis of environment, which contain all opportunities and 
threats through in depth analysis of environment including an environment in which the company 
operates, striving for a more detailed assessment of competition through analysis of a branches and 
strategic groups. The latter relates to analysis of organization which will reveal both strengths and 
weaknesses through analysis of resources and abilities existing both in company’s culture, history 
and operation. (K. Obłój,  2007, p.40,41). 
‘Essence  of  strategy  formulation  is  striving  to  find  answers  to  the  following  four 
fundamental questions: 
  what is the current position of a company and what are its development opportunities? 
  which position the company would like to have in the future and which goal do they want to 
achieve in a strategic period, i.e. the period for which the strategy has been prepared? 
  what impedes currently and what can impede achievement of future position of the company? 
   what  has  to  be  done  in  order  to  switch  from  current  to  the  desired  position  and  to  be 
successful?’ (J. Penc, 1994, p.146). 
The rules which should be followed by managers for strategy formulation: 
  depart from one sided and short sighted thinking (balance, profits) 
  never neglect and ignore any, even temporary opportunity to gain an advantage, 
  develop and deepen well known scopes of activities (‘novelty’ in the market)  
  through diversification of production, it is better to launch products which develop gradually 
(maintaining good position) 
   accept  that  the  most  important  strategic  rule  is  not  to  fight  competition  but  providing 
customers with products (services) 
  systematically seek innovation 
  make efforts to extend and invest in the market (fast and flexible contacts with recipients) 
  energetic development of cooperation with overseas companies (joint ventures)  
   focus  on  seeking  appropriate  (modern  technologies)  cooperation  with  research  sector  i.e. 
universities R&D institutes, scientists) 
  watch the environment closely (competition and legal, sociological, political, ecological and 
technology aspects) (J. Penc, 1994, p.151 152). 
 
Distribution strategy as an element of competition in companies 
Observation of the mechanisms which stimulate behaviour of participants of particular 
markets  indicates  that  one  of  the  most  important  areas  where  most  of  companies  expects 
opportunities and where they form the basis for its advantage over competitors is distribution of 
goods i.e. its quality. 
Economic  approach  shows  distribution  with  division  of  broadly  understood  goods 
among members of society. This division depends on social, economical and political systems 
in  each  country.  They  include  various  allocations  of  benefits  and  funds,  although  market 
economy  causes  that  distribution translates  into exchange of goods and cash, as a result of 
which the goods find its final recipient. Macroeconomic point of view treats distribution in 
categories of processes and proper structure through which the flow of goods takes place from 
the point of manufacturing to the place of final reception. This transfer is enabled through the Annales Universitatis Apulensis Series Oeconomica, 11(2), 2009 
 
 
877 
 
channels  with  technical  and  material  equipment  and  the  interrelations  between  them  which 
impact on the choice of flow of goods. 
Microeconomic approach to distribution impacts on decisions made during formulation 
of company strategy since it is presented as a choice of method of sale and way of finished 
goods to final recipients. The products offered in right place just in time and which suite for 
their tastes and preferences present point of view of distribution in the company, which satisfies 
the wishes and needs of customers through making right decisions and taking right action.   
Time and space aspects of flow throughout the system is also vital as is the quantity and 
quality of the goods offered to final recipients i.e. customers. Providing consumers with the 
desired goods forces companies to execute numerous and complex tasks. These tasks include 
e.g.: 
￿  Delivering  finished  products  to  consumption  or  use  by  recipients,  with 
consideration of quality, durability and guarantee of storage or appropriate packaging; 
￿  reduction in time of delivery, if it is forced by such a need; 
￿  distribution cost reduction (I. Dembińska Cyran, M. Jedliński, B. Milewska, s.125); 
￿  making lead time flexible with consideration of delivery cancel or individual lead 
times; 
￿  extension of services for customers when such a need arises; 
￿  ensuring delivery according to the specific orders i.e. compliance with quantity, 
quality and assortment and completeness of equipment; 
￿  market  analysis  in  the  context  of  demand  with  consideration  of  competitive 
companies standing (S.E. Dworecki, 1999, s.209). 
Execution  of  the  necessary  tasks  forces  manufacturers  to  choose  right  channels  of 
distribution and methods of physical relocation of goods so that the previously prepared plans 
of  sales  level  are  executed  and  the  appropriate  customer  service  level  is  ensured,  with 
consideration  of  costs.  Distribution  becomes  more  attractive  to  customers,  thus  proper 
realization of tasks is necessary; functions performed by distributions turn out to be very useful. 
Through this the differences between demand and supply in terms of types, quantity and range 
of products as  well  as  time and place  of production and  consumption  may  effectively fade 
away. Ensuring undisturbed flow of material, information and finance streams causes that the 
need  for  distribution  channel  participants  cooperation  arises,  thus  coordination  and 
organizational functions of distribution are useful for efficient flow.  
 
Information  system  of  the  logistics  centre  in  the  Wielkopolska  Gildia  Rolno 
Ogrodnicza S.A in Poznań (WGRO)  
As the sources are giving the Gildia is equipping about 5000 of companies, usually located 
in the area of median western and northern Poland, and their annual turnover is reaching 400   500 
mln. of PLN. Taking under remark the objects which are entering into its composition, it is possible 
to single out the links as it is shown on picture 2. The most important of objects functioning on the 
mentioned exchange is the logistics and distribution center. This center has a main task to organize 
and co ordinate bigger supplies and standardized games of agricultural gardening commodities for 
clients. Annales Universitatis Apulensis Series Oeconomica, 11(2), 2009 
 
 
878 
 
 
Fig. no. 2   Schema of the logistics system on the WGRO S.A market. 
Source: Fechner I., Onion and potatoes in kilobites, „Logistics” no 3/2001, 4/2001, 6p 
 
In  the  functioning  object  as  is  the  commodity  exchange,  it  is  possible  to  distinguish 
according to logistics classic partitions, three basic phases of physical goods flows. They are: the 
supply phase, the processing phase and the distribution phase. 
Physical goods and information flows refer to both individual and organized deliverers in 
the supply phase. Here it means the individual producers of agricultural food commodities, as well 
as  producers  groups  and  specialized  processing  companies.  Producers  groups  are  the  most 
profitable deliverers from the efficiency point of view, because they are supplying at one time 
bigger,  usually  good  qualitatively  deliveries.  In  this  case  so,  producers  groups  are  deliverers 
privileged group and they have in WGRO specialist consulting and necessary production products 
deliveries ensured (like seeds, seed potatoes, fertilizers etc.). Assigning to organizing into producers 
groups by single deliverers is resting on the logistics and distribution center (Grabara J., Kot S., 
2004 s.171 177 ).  
Processing  logistics  includes  the  activity  linked  with  compiling  of  deliveries  and  with 
supplying  the  network  of  big  commercial  clients  with  agri gardening  products.  Department  of 
compiling has modern devices for compression and tagging of commodities with bar codes what is 
causing  that  commodities  going  through  this  phase  of  the  exchange  performance  are  growing 
standardized, high qualitatively products. To point apart from such solutions, but also important 
WGRO activity is immediate sale realized in the modern hall. It refers to small games offered by 
single, not associated producers of commodities. It seems that this form of activity will be more 
vanished, because in spite of the periodic increase in turnover, it is possible to notice the drop in the 
interest in purchases from the small and average buyers, who were still posing recently the main 
group of clients on the stock exchange. It is connected with changes which took place about market 
agents. More often on the market cash & carry are buying actively big commercial networks and 
PRODUCER 
LOGISTICS  
AND DISTRIBUTION 
CENTER 
CUSTOMER  LOGISTICS 
OPERATOR 
Information    Product   Annales Universitatis Apulensis Series Oeconomica, 11(2), 2009 
 
 
879 
 
mediators, however the number of purchases  realized by small  groups  of  dealers who are just 
equipping  themselves  at  cash  &  carry  type  wholesalers  rather  is  falling.  Because  of  that  big 
commercial networks are more and more significant clients of WGRO, they require not only the 
high quality commodities and proper packages and the sign of compatibly with the EAN system 
standards, but also deliveries at the right place and right time in accordance to the Just in Time 
system. Individual deliverers are not capable to fulfill such requirements. 
The department of marketing and trade is playing the essential part in the sphere of the 
WGRO  distribution.  Tasks  of  the  marketing  department  are  concentrating  on  the  influence  on 
buyers  in  the  purpose  of  stock  exchange  popularization,  and  promoting  modern  forms  of  the 
wholesale business with a promotion of Polish products. The trade department is supposed to search 
for clients effectively. It is collaborating with the logistics and distribution centre in the information 
exchange, which is delivering necessary information to contact with clients and associating them 
with deliverers offering commodities. The commercial offer elaborated by the trade department is 
then published on the Internet, what gives the access to it for all objectives, not only for those, 
which are located in the proximity area. 
In pointed the next links of the logistics chain is not characterized so far one of elements   
the logistic operator activity. In WGRO such an operator is Paker company, which has a task to 
provide a range of services as: accepting supplies from deliverers, sort, the short term store, packing 
in collective and individual packages, forming of logistic units and feeding the commodity to the 
consumers. So activities of the service company are managing to enriching products with new, 
attractive application values that they are attractive for big market clients like supermarkets and 
retail networks. 
The significant meaning in the commodity exchange supply chain possesses the information 
flow. Such a flow is being done in the peculiar way in restated WGRO. Because the full trade offer 
of exchange is available through the Internet as the electronic form – Trade Information System 
(SIR), so also all the information gathered from the producers should be in Internet. But because 
accessibility to this carrier of information is very small at farmers, stock exchange in collecting 
information is using means of offices, as well as the agricultural consulting centers. Farmers are 
able in these places to fill the document in the questionnaire form, and then the trained workers of 
communes and centers are typing it out to the electronic form made it also available in the e 
catalogue.  The  flow  of  information  is  paper less,  however  information  given  by  producers  is 
coming to the data base managed by the WGRO S.A Logistics and Distribution Center. The system 
of exchange information with the Internet usage is completed by the system of information and 
training meetings, while the producers learn about possibilities and principles of cooperation with 
WGRO S.A, as well as about many substantive questions. 
 
Conclusions 
Wholesale market, with the good example of Wielkopolska Gildia Rolno Ogrodnicza S.A, is 
fulfilling  the  broader  and  broader  role  in  the  supply  chain.  By  the  intentional  and  conscious 
operations it is creating the market of deliverers, with promoting and awarding beneficial from 
supply chain point of view solutions as producers groups. Also the processing and distribution 
sphere are modern and both using logistics operators, which provide complex logistics services, and 
all that allows for create value added for goods offered by Gildia. In Informational flow sphere the 
Gildia  is  initiating  the  activities  with  the  purpose  on  easy  accession,  even  if  there  are  some 
difficulties  in  flow  realization  (small  availability  to  the  Internet  observed  among  agricultural 
products producers). All these activities make the Gildia a intermediary link for goods exchange 
between deliverers and customers of agricultural food goods, and it becomes a specific logistics 
center  which  take  an  important  place  in  the  agricultural food  industry  supply  chain.  It  is  also 
fulfilling the very important role as the intermediary link for information exchange between sellers 
and consumers. Annales Universitatis Apulensis Series Oeconomica, 11(2), 2009 
 
 
880 
 
 
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STRATEGY OF DISTRIBUTION IN FOOD INDUSTRY COMPANIES

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Research Papers in Economics