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Chapter 27 .docx

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Management Studies
MGST 391
Ahmad Ali Sohrabi

Chapter 27 : Place Place / Distribution Channels / Delivery System Place is selection of distribution channels to deliver goods to consumers. Key issues in Distribution Channel::  Coverage and density (Exclusive, Selective, Intensive)  Channel length (no. of intermediaries between consumer and producer)  Power and alignment of different elements  Logistic and physical distribution  Support and after sale service  Channel design decision (Customer, Product characteristics, Distributor characteristics, Channel choosed by competitors, Supplier‟s own characteristics) Nature and Importance and Functions of Marketing Channels: Marketing Channel (distribution channel) is a set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by consumer or business user. Each organization performs a specialized and specified role. Importance includes: 1. Channel decisions affect other marketing decisions 2. Competitive advantage could be gained. 3. Involves long term commitments to other firms 4. Channel members add value through a. Their contacts, experience, specialization and scale (economies) of operation. b. Matching supply and demand c. Bridging Time, Place and Possession gap Functions performed by members of marketing channel: Functions that help to complete transactions: 1. Information (Marketing research and intelligence information) 2. Promotion (Developing and spreading persuasive communication) 3. Reselling (Finding and communicating with prospective buyers) 4. Matching (shaping and fitting to the buyers’ needs e.g. assembling, packing) 5. Negotiation Functions that help to fulfill the completed transactions: 6. Physical distribution (Transportation, storing and Inventory management) 7. Financing (Acquiring and using funds) 8. Risk taking (Assuming the risk of carrying out the channel work) “You can eliminate middle man, but not middle man‟s functions” Types of Distribution channels: Direct distribution channel has no intermediary.  Intermediaries don‟t get their share.  Intermediaries don‟t get dominant  Own sales force is best for geographically centered buyers. Indirect distribution channel has one or more intermediaries.  Where resources are insufficient to finance large sales force.  Where no local knowledge of market  Suitable for geographically spread buyers. Types of Distributors: a) Franchisees: “Trade in name of parent in exchange of initial fee + share of sales volume” b) Distributors/Dealers: “Buy and resell a
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