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Chapter 15

BUS 346 Chapter 15: Supply Chain and Channel Management

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BUS 346
Jason Varley

o Marketing channel management: also called supply chain management; refers to a set of approaches and techniques firms employ to efficiently and effectively integrate their suppliers o Supply chain management: refers to a set of approaches and techniques firms employ to efficiently and effectively integrate their suppliers, manufacturers, warehouses, stores, and transportation intermediaries into a seamless value chain in which merchandise is produced and distributed in the right quantities, to the right locations, and at the right time, as well as to minimize quantities costs while satisfying the services levels their customers require The importance of marketing channel/supply chain management o Wholesaler: firm engaged in buying, taking title to, often sorting, and physically handling goods in large quantities, then reselling the goods (usually in smaller quantities) to retailers or industrial or business users o Viral marketing program: a promotional strategy that encourages people to pass along a marketing message to other potential customers • Marketing Channels add value • Marketing channel management affects other aspects of marketing o Distribution center: a facility for the receipt, storage, and redistribution of goods to company stores or customers; may be operated by retailers, manufacturers, or distribution specialists o Fulfillment centers: warehouse facilities used to ship merchandise directly to customers Designing marketing channels • Direct marketing channel: the manufacturer sells directly to the buyer • Indirect marketing channel: when one or more intermediaries work with manufacturers to provide goods and services to customers Managing the Marketing Channel and supply chain • Vertical channel conflict: a type of channel conflict in which members of the same marketing channel, for example, manufacturers, wholesalers, and retailers, are in disagreement or discord • Horizontal channel conflict: a type of channel conflict in which members at the same level of a marketing channel, for example, two competing retailers or two competing manufacturers, are in disagreement or discord, such as when they are in a price war • Managing the marketing channel and supply chain through vertical marketing systems o Independent (conventional) marketing channel: a marketing channel n which several independent members - a manufacturer, wholesaler, and retailer - each attempts to satisfy its own objectives and maximize its profits, often at the expense of other members o Vertical marketing system: a supply chain in which the members act as a unified system; there are three types: administered, contractual, and corporate o Administered vertical marketing system: a supply chain system in which there is no common ownership and no contractual relationships, but the dominant channel member controls the channel relationship • Power: a situation that occurs in a marketing channel in which one member has the means or ability to have control over the actions of another member in a channel at a different level of distribution, such as if a retailer has power or control over a supplier • Reward power: a type of marketing channel power that occurs when the channel member exerting the power offers rewards to gain power, often a monetary incentive, for getting another channel member to do what it wants it to do • Coercive power: threatening or punishing the other channel member for not undertaking certain tasks. Delaying payment for late delivery would be an example • Referent power: a type of marketing channel power that occurs if one channel member wants to be associated with another channel member. The channel member whit whom the others wish to be associated has the power and can get them to do what they want • Expertise power: when a channel member uses its expertise as leverage to influence the actions of another channel member • Information power: a type of marketing channel power within an administered vertical marketing system in which one party (e.g., the manufacturer) provides or withholds important information to influence the actions of another party (e.g., the retailer) • Legitimate power: a type of marketing channel power that occurs if the channel member extorting the power has a contractual agreement with the other channel member that requires the other channel member to behave in a certain way. This type of power occurs in an administered vertical marketing system o Contractual vertical marketing system: a system in which independent firms at different levels of the supply chain join together through contracts to obtain economies of scale and coordination and to reduce conflict • Franchising:
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