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Chapter 10

BUS 343 Chapter Notes - Chapter 10: Customer Service, Professional Wrestling Throws, Private Label

Business Administration
Course Code
BUS 343
Jason Ho

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Chapter 10: Channels and Supply
Chain Strategy
Channels of Distribution: The Final Frontier
Channels of distributions may be the only one of the four Ps for which there is an
opportunity for sustainable competitive advantage
Channel means making goods and services available where and when customers need
and want them
The Importance of Distribution: You Cant Sell What isnt There
Structure channel so that it can adapt rapidly to competitive advantage
What is a Distribution Channel
Channel of distributionthe series of firms or individuals that facilitates the movement of a
product form the producer to the final customer
Include an organized network of manufacturers, wholesalers, and retailers that develop
relationships and work to ether to make products conveniently available to buyers
Direct channela producer and a customer
Indirect channelones that contain channel intermediaries
oFirms or individuals such as wholesalers, agents, brokers, and retailers that help move a
product from the producer to the consumer or business user
Channel Objectives
First step in deciding on a distribution plan
oDevelop appropriate objectives that support the organizations overall marketing
In general overall objective of any distribution planning is to make a firms product
available when, where, and in the quantities customers want and need at a minimum
Evaluating the Environment

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Marketers must consider internal and external environments
Organization must examine such issues:
oAbility to create distribution channels
oWhat channel intermediaries are available
oAbility of customer to access these intermediaries etc.
Studying competitors distribution strategies, marketers can learn success and failure
Choosing a Distribution System
Planning distribution strategies means making at least three decisions
oNumber of levels in the distribution channel
oWhat type of channel relationship (conventional, vertical, or horizontal)
oDistribution intensity or the number of intermediaries at each level of the channel
Conventional, Vertical and Horizontal Marketing System
Systems take form in conventional, vertical, and horizontal
Conventional marketing system a multiple level distribution channel in which channel
members work independently of one another
oRelationship is limited to buying and selling to one another
oSeeks benefit with little concern for other channel members
oAll members of the channel are working for the same goals build demand,
reduce costs, and improve customer satisfaction
oChannel members know that its in everyones best interest to treat other channel
members fairly
Vertical marketing system (VMS) a channel of distribution in which there is a
cooperation among members at the manufacturing, wholesaling, and retailing level
oWork together and depend on each other like links in a chain
oMembers share information and provide services to other members recognizing
that such coordination makes everyone more successful
Administered VMS
oChannel members remain independent but voluntarily agree to work together
Corporate VMS
oFirms have ownership control of some or all of a distribution channel
oBuys agent companies
Contractual VMS
oCooperation is enforced by contracts, legal agreements that spell out each
members rights and responsibilities and how they will cooperate
Wholesaler VMS
oWholesaler get retailers to work together under their leadership in a voluntary
oUse common name, cooperate in advertising and other promotion, and eve
develop their own private label products
Retailer cooperative
oGroup of retailers that has established a wholesaling operation to help them
compete more effectively with the large chains

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oEach retailer owns shares in wholesaler operation and obligated to purchase a
certain percentage of inventory from the cooperative operation
Franchise organizations
oType of contractual VMS
oChannel cooperation explicitly defined and strictly enforced through contractual
oFranchiser provides a variety of services for the franchisee in return for
percentage of revenue
oFrom manufacturers perspective, franchising a business is a way to develop a
widespread product distribution with minimal financial risk, while maintaining
control over product quality
Horizontal marketing system (HMS) an arrangement within a channel of distribution
in which two or more firms at the same channel level work together for a common
Functions of Distribution Channels
Channels that include one or more intermediaries can often accomplish certain
distribution functions more effectively and efficiently than can a single organization
Channels provide form, time, place, information, and possession utility for customers
Utilities in marketing and distribution measures the ability to a good or service to satisfy a
customers needs or wants
Form Utility all activities used to change the appearance or composition of a good or
service with the intent of making it more attractive to potential and actual users
Time utility all activities that increase satisfaction by making products available at the
time consumers want them
Place utility increased usefulness created by making a product available at a location
preferred by consumers
Information utility the value given to a product that provides the user with useful
Possession utility increased usefulness created by making it possible for a consumer
to own, use, and consume a product
Function of a distribution channels is increasing the efficiency of the flow of goods from
producer to consumer
Distribution channels create efficiencies by reducing the number of transactions
necessary for goods to flow from many different manufacturers to large numbers of
Bulk breaking dividing larger quantities of goods into smaller lots to meet the needs of
Creating assortments providing a variety of products in one location to meet the
needs of buyers
Facilitating functions functions of channel intermediaries that make the purchase
process easier for customers and manufacturers
oCustomer service
International distribution channels can make global marketing easier
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