Why do we need intermediaries: transactional function buying, selling, risk taking, logistical function storing, dispersing, assorting, facilitating function financing, providing marketing information, grading. Consistent of one or more independent channel members. Each seeking to maximize its own profits. Channel members act as a unified system. One channel member owns, has contracts with, or has so much power that they all cooperate. Benefits should include greater control, less conflict, and economies of scale due to the size of the system. Successive stages of production and distribution under a single ownership. Independent production and distribution firms collaborate based on contracts. Coordination at successive stages of production and distribution based on power of one channel member. Factors affecting channel choice: environmental factors - ex. Social, economic, technological, competitive, regulatory: consumer/market factors - ex. Target market characteristics: product factors - ex. Luxury vs low end, good vs service, standardized vs customized: company factors - ex. Vertical conflict between different levels in marketing channel.