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BUS 343 - Chapter 10.pdf

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Simon Fraser University
Business Administration
BUS 343
Robert Krider

By Mark Liangco | BUS 343 Chapter 10 (Week 12) What is a distribution channel? - The series of firms or individuals that facilitate the movement of a product from the producer to the final customer. You can eliminate the middleman, but not the middleman’s function. - Why have online stock trading sites been very successful in bypassing stock brokers, while online insurance sites have had much more limited success in bypassing insurance brokers? o Because you get more value by learning the ropes in online stock trading than in insurance (you only do insurance once a year!). Functions of distribution channels Assortment / Convenience - Provide a variety of products in one location - Assortment is mostly found in retail. Breaking Bulk - retailer buy the bulk (for cheaper) and people buy individual Sorting / Grading / Certifying - agricultural products Consolidating - Products are shopped across the world. Channel Width vs. Channel Length Channel Width - Number of retailers that sell the actual product. Channel Length - Number of distributors from manufacturer to retail. Choosing a distribution System: 1) Conventional marketing system - A multiple-level distribution channel in which channel members work independently of one another. 2) Vertical marketing system - A channel of distribution in which there is cooperation among members at all levels. 3) Horizontal marketing system - An arrangement within a channel of distribution in which two or more firms at the same channel level work together for a common purpose (Air Canada and Lufthansa cooperate in providing passenger air service. Wholesaling intermediaries - Firms that handle the flow of products from manufacturer to the retailer or business user. By Mark Liangco | BUS 343 Type of wholesaling intermediaries: 1) Independent intermediaries - They are not controlled by any manufacturer but rather do business with many different manufacturers and many different customers. o Merchant wholesalers  Firms that handle the flow of products from the manufacturer to the retailer or business user.  They become legal owners of the goods. o Full service merchant wholesalers  Provide a wide range of service besides just handling the goods. o Agents and brokers (no ownership of the goods)  Provide services in exchange for commissions. They represent buyers or sellers of the product.  Broker - suppose to be a neutral party  Agent - agent
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