Professional Documents
Culture Documents
INTRODUCTION
The author was assigned this project by Prof Mizanur Rahman, Dept of Marketing,
Dhaka University . The topic of the Internship Report is GPDC (GrameenPhone
Distribution Center) A new distribution channel of GrameenPhone
B. Purposes
Internship Report 1
Objective
The broad objective of this report is to provide with an general idea of the knowledge
gathered as an internee at GrameenPhone Limited, during the organizational
attachment period so that the theoretical learning can be related with the real life
business situation.
The intent of the study is to understand the distribution channels followed by the
mobile phone companies to deliver the products to the ultimate customers. To be
more specific the internship program (and the report) concentrates only on
GrameenPhone distribution channels followed in delivering the products to the end
users. The study also describes different problems faced in the existing channels and
the Project work is a means to solve the present distribution problem of
GrameenPhone.
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E. Methodology
I. Study Design
The study is descriptive in nature. It was conducted using the qualitative instrument.
Depth interviews as well as assessment of different historical data were used to
analyze the present scenario.
a. Secondary:
Majority of the secondary data was obtained from the Internet, Market Research and
Development Department of Grameenphone Ltd. Annual reports and different other
departmental analysis augmented this report to take a comprehensive shape.
F. Beneficiaries
This report has helped as instrument in clarifying the conceptual skills gathered
throughout the program. This exposure gained through working in the distribution
department of the company, GrameenPhone Limited has enabled to acquire practical
experience about the real marketing channeling used by a mobile operator. In the
future, this report will act as a guideline and provide valuable information to students
preparing similar reports. This report will be also helpful for those who are
conducting study on the mobile phone industry in Bangladesh.
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G. Limitations
Marketing has a vast area of operation it is not possible to enclose all the topics with
in a few pages of a report. Even operation and execution of distribution channels is
the composition of different factors that could not be depicted properly. Lack of
professional research expertise is weak area of the study. Most of the calculations
had to be made based on GPs figures as the industry average. Most of the relevant
literature and study materials on the telecom sector were not updated, and no
comprehensive in-depth study on the cellular industry could be found. Confidentiality
of information has limited the extent of presentation of this part of the work.
Respondents declined to furnish categories of information treated as business
secret, for obvious reasons.
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II GrameenPhone Limited: An Overview
A. About GrameenPhone
B. Historical Background
In 1996, Bangladesh was preparing to auction off private cell phone licenses to four
companies. So at the supervision of Dr. Muhammad Yunus (Grameen Banks founder)
but completely independent of Grameen Bank, a not-for-profit private company
called Grameen Telecom was created. Grameen Telecom, in turn, created a for-profit
company called GrameenPhone, found a foreign partner, and put in a bid;
GrameenPhone received one of the four licenses. GrameenPhone was offered a
cellular license in Bangladesh by the Ministry of Posts and Telecommunications on
November 28, 1996. The Company launched its service on March 26, 1997, the
Independence Day of Bangladesh
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GrameenPhone launched service in urban Dhaka on March 26, 1997. It makes its
profits by serving wealthier urban customers. But from the point of view of the
Grameen family and its strong anti-poverty mission, the for-profit, urban-only
GrameenPhone exists for only one reason: To fund, with its profits, the extension of
cell phones into rural Bangladesh in order to provide entrepreneurial opportunity to
Grameen Bank members through Village Phone. As Dr. Yunus puts it,
"GrameenPhone is merely what we need to do Grameen Telecoms Village Phone."
Three important and interesting structural aspects of operation on the largest scale
are:
First, that the not-for-profit Grameen Telecom actually owns the for-profit
GrameenPhone. The reason for this structure is that Grameen wants Grameen bank
members-- impoverished women who borrow from Grameen Bank-- to become
owners of the profit-making GrameenPhone.
Third is an understanding-- not made explicit in any legally binding contract but
arrived at in the shareholders agreement-- that after 6 years of GP operation,
Telenor and GT will actually switch ownership positions: Grameen Telecom will sell its
38% share to Telenor and Telenor will sell its 62% share to Grameen Telecom, which
will thus become the dominant partner and true manager of the system.
GrameenPhone is thus an unofficial, non-traditional form of Build, Operate, and
Transfer.
"GrameenPhone" might have been born in Bangladesh, but soon it is likely to join the
international cellular jargon. GSM MoU Association at GSM World Congress in Cannes
where many villagers made their first-ever call using pre-paid, recently rewarded
rural cellular marketing, by Vodaphone in South Africa. "GrameenPhone, the unique
cellular operator from Bangladesh, also made an impressive presentation at Cannes.
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Founding Partners of GrameenPhone
But currently Telenor holds 62% share & Grameen Telecom holds 38%
share
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C. Mission, Vision, Objectives & Strategies of
GrameenPhone
GrameenPhone's basic strategy is the coverage of both urban and rural areas. The
Company has devised its strategies so that it earns healthy returns for its
shareholders and at the same time, contributes to genuine development of the
country. In short, it pursues a dual strategy of good business and good development.
Serving the mass market is one of GP's primary goals. By serving the general public
as opposed to niche markets, the Company plans to achieve economies of scale and
healthy profits. At the same time, service to the general public means connectivity to
a wider population and general economic development of the country. In contrast to
the "island" strategy followed by some companies, which involves connecting isolated
islands of urban coverage through transmission links, GrameenPhone builds
continuous coverage, cell after cell. While the intensity of coverage may vary from
area to area depending on market conditions, the basic strategy of cell-to-cell
coverage is applied throughout GrameenPhone's network. In addition, GP has
positioned itself to capitalize on the declining prices of handsets, making its goal to
serve the general public realistic.
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iv. Company Strategy
GrameenPhones basic strategy is coverage of both urban and rural areas. In contrast
to the island strategy followed by some companies, which involves connecting
isolated islands of urban coverage through transmission links. GrameenPhone builds
continuous coverage, cell after cell. While the intensity of coverage may vary from
area to area depending on market conditions, the basic strategy of cell-to-cell
coverage is applied throughout GrameenPhones network.
v. Company Service
GrameenPhone believes in service, a service that leads to good business and good
development. Telephony helps people work together, raising their productivity. This
gain in productivity is development, which in turn enables them to afford a telephone
service, generating a good business. Thus development and business go together.
Establishing a nation wide network gives fair access to all geographical areas. From a
business point of view, this strategy serves both the long distances as well as the
rural markets. This emphasis on rural coverage brings a much-needed infrastructure
in the underdeveloped rural areas. In collaboration with Grameen Bank, which
provides micro-credit only to the rural poor, GP utilizes the bank borrowers to retail
telecom services in the rural areas. Leveraging on Grameen Bank borrowers reduces
the distribution costs of GrameenPhone's rural services, contributing to the
profitability of this segment.
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b. Village Phone Program
The Village Phone program is GrameenPhone's unique method of bringing
connectivity to the rural areas of Bangladesh. This program enables Grameen Bank's
borrowers to retail telephone service in their respective villages, and has the
potential to penetrate the rural areas rapidly and effectively.
A typical Grameen Bank borrower takes a loan of Tk 6000 without collateral from the
Bank to purchase, say, a cow. The cow would then produce milk that the borrower
could sell to her neighbors enabling her to make a living and pay off the loan. The
process allows the poorest of the poor to stand up on their feet. In the case of
Village Phone, a telephone also acts as an income generating mechanism for a
borrower; a telephone serves as another "cow." A woman borrows about Tk20, 000
from the Bank and purchases a handset and sell telephone services to the villagers,
making a living and thus paying off her loan. It creates a self-employment
opportunity in each village and provides access to telephones to all.
Grameen Telecom, Grameen Bank's arm for administering the Village Phone
operators, typically selects women by considering past borrowing records with the
Bank. There are 2144 Village Phones in operation today and soon thousands of
Village Phones around the country are expected across rural Bangladesh.
Post Paid
Pre-Paid
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i. POST PAID
Explore 1
Explore 2
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ii. PRE-PAID
SMILE
SMILE PSTN
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Table: Total number of GP products that are existing in the market
All the GP subscribers enjoy a number of GSM Features and Value Added Services
(VAS):
GP will introduce approximately 8 airtime bundling options and new products and
also plan to deliver customized product offering to its three market segments.
i. Main Strategies
Having a market share of 62%, GPs main strategy for the year 2005, is to have
more focus on the high end market that is to move upwards in the segment pyramid.
Apart from that, the overall strategy is also to retain high revenue generating
subscribers by building loyalty & encouraging usage and cater to the needs of the
different segments by developing new products..
The main strategies to be followed are shown below:
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Parameters granted as success factors by all segments are
* Coverage
* Satisfied Customers
* Easy Availability
* Customer Care
* Law Abiding Company
All of these success factors are lead by a major group. In order to keep the
Customers satisfied, we will provide affordable products and value added services.
GP will do strong branding that will strengthen GPs position in the market and help
maintain its image of being the market leader.
Distribution partners will look for profitable company and business in order to
enhance their business further. Affordable products and VAS which gives Value for
money and also strong branding will be favorable in the best of achievements for the
company. Satisfied Employees in a company always provides the best of output.
This issue reflects itself where skilled and satisfied employees come of benefit for the
company to be a profitable one and business comes of benefit to the employees.
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GP plans to deliver new products and new features to the market in 2005 which have
been planned keeping the need of different segments in the market, purchasing
power, and usage pattern.
Lifecycle
Cost Focus Area
1 Pride Talk
High in 2004
a Friends & Family
b Night Speak
GP
Regular
GP-GP 6
National
Anytime 300
Any Time 300
High Services
Low 3 4SMART
EASY Standar
Pre-Paid d Djuce Offered
Village
Phone
Low
Legend:
Note:
* Lifecycle cost includes start-up cost, access fee, and tariff.
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* Services offered include mobile to mobile connectivity, PSTN connectivity, NWD,
ISD, International Roaming facility, SMS, VMS, and info services.
* For details of the new products numbered in the illustration, refer below:
v. Distribution Strategy
Training the channel partners to further improve their skills with respect to
reporting, following routines, time management, educating customers, and effective
selling.
(Introduce uniform profiling of POS throughout the country to maintain GPs image
and bring in more customers to the POS.
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Logistics being the process of planning, implementing, and controlling the efficient,
cost effective flow and storage of materials (handsets, SIM) , in-process inventory,
finished products and related information from point of origin to point of consumption
for the purpose of meeting customer requirements, strengthens the company goal by
pursuing the following strategy
Under the Logistics Department falls the Prepaid Card distribution section. Prepaid
Card distribution is an imperative resource considering the company goal associated
with achievements in the mass market. The strategy followed by the distribution of
Prepaid Card is
Ensure the easy availability of Pre-paid Cards through out GP coverage areas
and at GP authorized POS.
Strengthen distribution system by implementing more control
Further improve service through distributors & GP authorized POS to end
users of pre-paid cards.
Coverage
International Roaming
Distribution Channel
Pre-paid Service
Provide low priced quality handsets & choice
Connecting Bangladesh with ease and care
Being user-friendly
Providing value for money
Providing simple and timely connection
Having a right and understandable process
Threat Opportunity
Weakness
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III. THE PROJECT
A. Distribution Channels
Since the inception of GrameenPhone, it has been very particular about its selection,
operation and control over its channel partners who are practically an extension of
GP to its subscribers and to general people. The selection process of all the channel
partners are highly standardized, and has become a model for Distribution Partner
selection process among top companies of the country. A range of tailor made
activities are carried out by the Distribution Department of GP before nominating a
channel partner. The logic behind the rigorous selection activity is GP believes in
taking only the best.
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GP Distribution Department also has a comprehensive monitoring and controlling
mechanism, which is put into effect through routine procedures as well as visits,
meetings, formal and informal interaction between supervising GP official and the GP
channel partners. The level of interaction and the controlling activities may vary from
channel partners to channel partners to some extent, bust the basic objectives and
criterions are deliberately kept at a uniform level. The first line of control is set by a
legal agreement between GP and the channel partner which clearly outlines the
followings:
The supervising officers broad job description basically revolves around keeping a
close eye on the activities of the channel partner and reporting to his/her
management the ways and extend to which the channel partner sticks to the
guidelines delineated in the agreement.
Based on the agreement daily, monthly, quarterly routines have been devised and
clear procedures for sales, service, paper and payment submission, interaction and
reporting procedures are made and communicated to the partners from time to time
and through these activities and reports Distribution Department tries to maintain
effective control over its channel partners.
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Note: Here distribution refers to the distribution of handsets and connections not the
distribution of scratch cards.
i. Distribution Channels of GP
GP follows one level channeling model to reach its customers. The channel design is
as follows:
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iii. Objectives of Distribution Channels of GP
To create customer value through hassle free and convenient sales and after
sales service.
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C. Distribution Channel Mix of GP
GP uses four types of channels to deliver products to the customers. These channels
are unique of their own. The channels are as follows:
Sales Centers
Dealers
Outlet Agents
Individual Agents
i. Sales Centers :
Sales Centers are GPs own Point of Sales (POS) that sells directly to the
customer. There are 05 Sales centers in five different zones.
It stands as a GP model outlet for setting standard of service for the other GP
channel partners.
Sales centers are fully controlled by GP.
Sales Centers can serve the segments of customer who want to buy GPs
product & services directly from the company.
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ii. Dealers:
Dealers have several Point of Sales throughout the country. Dealers are
Usually local agents of handset and provide after sales services on handsets.
a. Exclusive Dealer:
Dealers exclusively dedicated to GP product & services only are termed
as Exclusive Dealers. i.e. Grameen Telecom, Startel.
Features of Dealers:
2. Dealers are suppliers of different handset brands. Therefore, its POS may act
as service point for that particular brand. That will ensure customer service,
repeat purchase and additional income through handset service by the POS.
3. This will ensure healthy competition among large GP channel partners as well
as ensure uniformity in management, profiling and commission structure.
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4. Dealer can serve the segment of customers who want to have the handset
from its dealer. As GPs dealers are the importer of different handset, they
can surely serve the purpose.
iii. Outlets:
An outlet operates in one particular locality. They can only sale the GP product &
services of GrameenPhone. Example: Orange Telecom, Queen Traders, Air Cell.
Features of outlets:
As the Outlets are fully dedicated for GrameenPhone, the salespersons can
contribute to enhance GPs brand image by more dedication in selling of
GPs product.
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iv. Individual Agents:
Individual Agents are sales people who sell GP products and services from door to
door.
1. In some places, setting up an outlet is not feasible due to the small size of the
target customer. Individual Agent can play role in these places.
3. Individual Agents can sell the products even when the Dealer or Outlet POS
are closed (during Holidays and Vacations) ensuring round the clock selling of
GP products and services.
Reconciliation
Disbursements of commission
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E. Reasons for restructuring the distribution channels
i. Dealers Control
Although GP has three different channel wings to support its sales activities, Dealers
are the main streams of the distribution channel mixes within GPs system. Its
happened because of the following reasons:
Secondly, since dealers operate within the whole country, they have better coverage
of the market in compared to other two wings (Outlet and Agent) of distribution.
These two factors made dealers the attractive wing of operation. Thus, they also
have to go through though commitments. As, we all know the mobile market is
growing every day and all the operators are constantly fighting each other to reach
their expected market share. Thus, in order to keep with the market pace, even GP
has a steep target of sales. These targets are generally split within the total
distribution channels for implementation. Yet, as the dealers are the giants of the
distribution, they have to swallow the bigger bite of the market share without any
compromise of course.
In doing so, sometimes the distributors set their own rules in the market. They take
different imitates that work as catalyst in sales but harmful for GPs image.
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ii. Price Discrimination
In a short period of time a new problem occurred. In order to have a better market
control the handset providing dealers who are also GPs trusted dealers started to do
the split sale offering lower price for both the SIM and the handsets. This strategy
of the dealers really helped dealers to keep pace with both the market demand and
control, yet GP started to lose control over the market and over the people.
As the saying goes nature shapes everything the market has taken a distinct shape.
Although GP planned for only two levels of channels between the customer and the
product, there are sometimes more than two channeling phases working in the
middle. One of the very important channel segments is the curb market.
As said earlier that the mobile phone market is growing very fast, the marketing
instruments are also taking newer shape. Though GP planned to sell only the
packages, the dealers could not do so as they also import handsets for the market.
In order to sell the handsets in the market dealers need to depend on the curb
market. The dealers cannot sell the handsets directly from their franchises as they
are authorized for selling only the GP packages.
Thus the dependency on the curb market has given raise to a newer channel. This
channel helps dealers, to some extent outlets to reach their targets, but diminish
GPs control over the marketing channels.
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iv. Influence of the curb market
As GP has discovered the curb market is a major wing of the total market in our
country and the curb market controls the main functions in generating the sales. The
odd part is that GP does not have any control over the curb market.
v. Alternative Channeling
It has been observed that a big chunk of sales comes from unstructured sales
generally known as curb market. The tendency of the curb market is to distort the
desired market positioning of GP. The curb market is growing fast and eating away
the market share and market control of GP. So, GP has a thought of developing an
alternative channeling system. The objectives will be;
The mobile market is evolving very fast. With the increased demand the change in
mobile market has affected GPs structured channels. Curb market is successful in
creating its own position in selling products to the customer without even providing
the required service(s).
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The following tables and graphs will help to understand the present market situation
in a single look:
Table: The market share of curb market sales relative to the structured
sales
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Internship Report 32
Graph-3: The Structured Sales VS Curb Market sales
800000
700000
600000
500000
Sales
GP Channel Sale
400000
0
2000 2001 2002 2003
Year
Note: The different sales figures (i.e. total sales, structured sales, curb market sales
are only GPs sales)
The above statistical presentation depicts he real market scenario consisting of the
curb market. The existence and the growth of the curb market are clearly visible. In
graph 3 and in graph 4 the curb market growth and the curb market trend can be
seen. The important part is that the curb market is taking away the GPs structured
market share sharply. Thus, if it keeps going on like this, the threat is that GP could
lose its market control over the total mobile market in near future.
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The above situation forced GP to give a second thought about its channeling. In
order to achieve the target market control and market positioning, GP gave a
thought of restructuring its present marketing channels. The following channel
instruments are used in maturing GPs intention of market existence.
Project GPDC was launched in July, 2004. Before that Market was dominated by 7
10 informal market leaders. They had greater control over price. Dealers are
squeezed for price and other benefits by them. Besides, GP had lesser control over
authenticity of subscription papers as the unauthorized sales points supplied false
subscription papers. Moreover, Lack of system in distribution of stock throughout the
country by the informal leaders was prevailing. GP Lacked information regarding:
sales, area of sales, area demand.
ii. Objectives
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iii. Steps to be considered to mature the GPDC Project
Firstly, the market to be made dry before launch GPDC. This will create a vacuum
and let GrameenPhone establish its control.
Thirdly, freelancers will negotiate with GP and with dealers for ensuring the flow of
stock.
Lastly, The dealers and GP will take the initiative to make the collections of
subscription papers and payments.
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Subscription Paper
&
Payment
Dealers should recommend their third party contacts for registering with
GPDC.
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v. Registration Flowchart
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vi. Delivery & Collection Process
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DGM, Distribution
Manager Manager
Manager Manager
Zone 1 Zone 2
Officer Officer
(DNC) (DNC)
viii. Categorization
There are basically two different categories involved in the market, i.e. Wholesalers
and Retailers. The pricing for these two categories of market players are as follows;
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A) Wholesalers (W) Tk. 1,100
B) Retailers (R) Tk. 1,200
All the registered POS have been categorized in to the two categories (100-W & 550-
R)
The big informal market leaders trying to create under-rate, as their third
parties are breaking off from them.
Retailer confidence on selling GP products have increased substantially
Small & medium wholesalers are interested in doing business with GP.
There are several important achievements involved with the T004 project. Some of
these are as follows:
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The Kits (Prepaid SIM) are being delivered to the registered informal market
POS @ Tk. 1,100 (fixed and flat rate) D& C points are fully within GP
control.
Average activation have risen from 1200/day to 4500/ day, this shows retailer
confidence on GP products/ stable-price.
People have registered from out of Dhaka, the informal market leaders are
under pressure of losing parties (as they call it).
IV. FINDINGS
Alternative Channeling:
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It has been observed that a big chunk of sales comes from unstructured sales
generally known as curb market. The tendency of the curb market is to distort the
desired market positioning of GP. The curb market is growing fast and eating away
the market share and market control of GP. GP had planned to develop an alternative
channeling system for the proper and effective distribution of their products.
GrameenPhone is now directly considering the third party as the means to deliver
the product in the market. GrameenPhone is registering the total of the curb market
into its own distribution channel. Thus GrameenPhone is in the position to have
more control over the dealers as well as the market, as the curb market people are
different wings of the dealers to provide all the necessary services to the customers.
With the inauguration of GPDC project, the third party people were made partners of
GrameenPhone. These people were registered formally with GrameenPhone. They
are also given different distribution related instruction for smoothing their market
penetration and operation. Thus these people came closer to GrameenPhone
operational level. At the end with GPDC GrameenPhone successfully became closer to
the curb market and made them business partner of GrameenPhone.
After introduction of GPDC GrameenPhone was able to be more close to the curb
market. As GrameenPhone directly registered different third party people and
coordinated distribution through them the market vigilance developed in a better
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way. Thus it became easier for GrameenPhone to get market response. Now
GrameenPhone can get market information very quickly and effectively as market
change occurs.
III. CONCLUSION
Each year GrameenPhone is achieving a huge sales target in order to retain its
market share and have grater control over the market. GP is utilizing its marketing
channels for recovering its objective. Yet, it is not as simple as it seems. GP relies on
the structured distribution channels for the sales and services for the GP products.
These GP channels partners are also in tremendous pressure in executing the
required sales every month. So, they have to depend on the third party, generally
known as the curb market. The problem starts from this point as the curb market
has its own way of maturing sales and expansion. The curb market actually distorts
GPs exclusive policy and product delivery concept. The curb market establishes new
price and different variation of the original GP products which are really unwanted by
GP. GP is also conscious about losing the control of the price of the product. In order
to bring in harmony GP has decided to modify and develop the existing channels to
have sound operations and control.
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