mktg. ch. 11

exclusive dealing lessens competition if it:

-accounts for substantial market share -involves a substantial dollar amount -involves a big supplier & smaller intermediary

5 important sources of power that are relevant in a channel setting

-coercive power -reward power -expert power -referent power -legitimate power

actions that increase a firm's control of the channel but decrease flexibility to change

-hiring an in-house sales force -investing in a fleet of trucks -building a warehouse facility -pursuing a corporate VMS thru vertical integration -engaging in a contractual VMS w/ other intermediaries

actions that decrease firm's control of channel but increase flexibility to change

-hiring brokers -hiring manufacturing agents -hiring common carriers

logistics aspects of supply chain mgt. that require close attention by marketing managers

-order processing -warehousing & materials handling -inventory mgt. -transportation

elements of a value network

-overarching process focus is value co-creation -share vision exists w/i network w/ common aim of fostering value co-creation -value co-creation viewed as emanating from the expertise and competencies of all parties w/i network -network & team relationships are key elements in co-creation -value viewed as network value -relationships conflicts are viewed as potential barriers to creation of network value

a VMS channel member:

-owns the others -has contracts w/ them -simply forces cooperation thru sheer clout w/i the channel

transaction & communication

-selling -buying -mktg. communications: incentives from manufacturers to to participate in helping promote products in the channel

corporate VMS

a channel member has invested in backward or forward vertical integration by buying a controlling interest in other intermediaries. creates powerful competitive advantage for firms b/c cost and process efficiencies are realized when a channel is controlled by one entity.

manufacturers' agent

agent that usually operates on an extended contract, often sells within an exclusive territory, handles noncompeting but related lines of goods, and has limited authority to price & create terms of sale. do not take title to product.

impulse goods

also appropriate for intensive distribution; their sales rely on the consumer seeing the product, feeling an immediate want, and being able to purchase now.

outbound logistics

an internal flow going one direction.

value network

an overarching system of formal and informal relationships within which the firm participates to procure, transform & enhance, and ultimately supply its offerings in final form within a market space. are fluid and complex.

facilitating agent

assists in the performance of distribution tasks other than buying, selling, & transferring title.

channel conflict

can occur when channel members experience disagreements and their relationship can become strained or fall apart.

materials requirement planning (MRP)

component of ERP systems; guides overall mgt. of the inbound materials from suppliers to facilitate minimal production delays.

channel of distribution

consists of interdependent entities that are aligned for the purpose of transferring possession of a product from producer to consumer or business user. a system of interdependent relationships among a set of organizations that facilitates the exchange process.

contractual VMS

consists of otherwise independent entities that are bound together legally thru contractual agreement. most famous example: franchise organization.

vertical marketing system (VMS)

consists of vertically aligned networks behaving & performing as a unified system. can be set up in 3 ways: corporate systems, contractual systems, & administered systems.

indirect channel

contains one or more intermediary levels.

reverse logistics

deals with how to get goods back to a manufacturer or intermediary after purchase.

franchise organization

designed to create a contractual relationship b/w a franchisor that grants the franchise & the franchisee, or the independent entity entering into an agreement to perform at the standards required by the franchisor. highest-potential start-up & growth mechanism for small business owners.

intensive distribution

designed to saturate every possible intermediary, esp. retailers. used when objective is to obtain max. product exposure throughout the channel. typically associated w/ low-cost convenience goods and impulse goods.

agent intermediaries

don't take title to the product. perform a variety of physical distribution, transaction & communication, and facilitating functions that make exchange possible. ex: broker, manufacturers rep.

network (virtual) organization

eliminates many in-house business functions & activities in favor of focusing only on those aspects for which it is best equipped to add value. pursued to provide quicker market response and to free resources to focus on the firm's core deliverables.

retailer

engaged in selling to end-user consumers. take title to product.

benefits of network organization

facilitates concentration on one's own distinctive competencies while efficiently gathering value from outside firms that are concentrating their efforts in their own areas of expertise w/i your value network.

pull strategy

focuses much of its promotional investment on the end-user consumer. heavy advertising in mass media, direct marketing, couponing, and other direct-to-consumer promotion are expected to create demand from intermediaries from the bottom of the channel upward. incentives would likely be greatly reduced versus a push strategy.

benefits of value network approach

frees up internal resources so a firm can be more nimble in addressing external uncontrollable opportunities & threats, thus yielding a potential competitive advantage over firms that have high costs associated w/ performing many of the value chain functions themselves.

transportation & storage

functions that are among the most commonly provided channel intermediary activities - pushing finished goods out the door & into the channel of distribution.

ex. of push strategies

funding an extra incentive to a wholesale drug salesperson for pushing a particular medication to an independent pharmacy or paying a slotting allowance or shelf fee to secure distribution in an intermediary's inventory listing & warehouse or onto a retail shelf.

just-in-time (JIT) inventory control systems

goal: to balance the double-edge sword of potentially having too many goods on hand and creating unnecessary warehousing costs, with the chance of having so little inventory in stock that stock-outs occur.

partner relationship mgt. (PRM) strategies

goal: to share resources, esp. knowledge-based resource, to effect optimally profitable relationships b/w 2 channel members.

shopping goods

goods for which a consumer may engage in a limited search.

creating assortments

happens when intermediaries accumulate products from several sources and then make those products available down the channel as a convenient assortment for consumers.

tying contact

if a seller requires an intermediary to purchase a supplementary product to qualify to purchase the primary product the intermediary wishes to buy. products are tied together as terms of sale. are illegal.

if item is not in stock:

inbound replenishment processes are triggered

retailer cooperative

independent retailers across a variety of product categories have banded together to gain cost & operating economies of scale in the channel.

coercive power

involves an explicit or implicit threat that a channel captain will invoke negative consequences on a channel member if it does not comply w/ the leader's request or expectations.

channel captain/leader

lead player in administered VMS situations; have the ability to control many aspects of that channel's operations. ex: P&G, Walmart in recent years

how some network organizations operate

like a shell: most or all of the actual manufacturing, distribution, operations, and R&D and marketing execution are outsourced to efficient experts.

what value network suggests

looking for such opportunities as alliances, strategic partnerships, nontraditional channel approaches, and outsourcing opportunities to provide unique sources of competitive edge

enterprise resource planning (ERP) systems

manage much of the logistics process for many firms. a software app designed to integrate info related to logistics processes throughout the organization. allows employees throughout system to take ownership of their piece of the supply chain and to accurately communicate order status both to the customer and among themselves.

jobber

middleman that buys from manufacturers and sells to retailers.

push strategy

much of the intensive promotional activities take place from the manufacturer downward thru the channel of distribution. it is an investment by the manufacturer in intermediaries so that they will have a maximal incentive to stock, promote, sell, and ship the firm's products. usually supported by heavy allowance payments to intermediaries for helping accomplish the manufacturer's goals.

direct channel

no intermediaries and operates strictly from producer to end-user consumer or business user.

breaking bulk

occurs within a channel to better match quantities needed to space constraints & inventory turnover requirements. could be performed by different types of intermediaries. goal: to not have too many units of a product on a store shelf.

accumulating bulk

opposite of breaking bulk. intermediaries take in product from multiple sources & transform it, often thru sorting it into different classifications for sales thru the channel.

if item is ordered in stock:

outbound processing from inventory occurs

exclusive distribution

part of an overall positioning strategy based on prestige, scarcity, and premium pricing. arises b/c a significant personal selling effort is required w/ the consumer before product purchase.

ways to involve customers both in B2B and B2C settings

participation in ongoing research; customer advisory panels; and providing recognition, rewards, and delightful surprises for customers that participate in the relationship at a high level.

intermediaries

play a role in the exchange process between producer and consumer.

wholesaler

primarily engaged in buying, taking title to, storing, and physically handling goods in large quantities. resell goods to retailers or to org. buyers.

exclusive territory

protects an intermediary from having to compete with others selling a producer's goods. for it to be legal, has to be demonstrated that the exclusivity doesn't violate any statuses on restriction of competition.

reducing transactions

reducing the amount of steps necessary to complete an exchange. having intermediaries in a channel can greatly reduce transactions.

distribution intensity

refers to the # of intermediaries involved in distributing the product. can be intensive, selective, or exclusive.

supply chain

represents all organizations involved in supplying a firm, the members of its channels of distribution, and its end-user consumers & business users. goal: coordination of these value-adding flows among entities in a way that maximizes overall value delivered & profit realized.

selective distribution

requires that intermediaries provide a modicum of customer service during the sale and, depending on the type of good, follow-up service after the sale. associated w/ shopping goods.

legitimitate power

results from contracts such as franchise agreements or other formal agreements.

wholesale cooperative

retailers contract for varying degrees of exclusive dealings w/ a particular wholesaler. ex: Ace Hardware

reward power

rewarding a company - ex: vendors want to do business with Walmart b/c they write big orders

internal logistics

sourcing materials and knowledge inputs from external suppliers to the point at which production begins.

merchant intermediaries

take title to the product. ex: distributor, wholesaler.

value co-creation

the core of value network. done by participating suppliers, customers, & other stakeholders in which the members of the network combine capabilities according to their expertise and the competencies required from the situation.

channel power

the degree to which any member of a marketing channel can exercise influence over the other members of the channel. power can directly influence the relationships w/i the channel.

physical distribution (logistics)

the integrated process of moving input materials to the producer, in-process inventory thru the firm, and finished goods out of the firm thru the channel of distribution.

reason companies are adopting value network perspective

the intense competition to cut costs and maximize process efficiencies every step of the way to market

supply chain mgt.

the management of the supply chain process.

administered VMS

the sheer size & power of one of the channel members places it in a position of channel control.

disintermediation

the shortening or collapsing of marketing channels due to the elimination of one or more intermediaries. common in the electronic channel.

nimble

to be in a position to be maximally flexible, adaptable, and speedy in response to the many key change drivers affecting business today. in the future, more firms will opt for a network organization approach to take advantage of the value network concept and to be more nimble.

expert power

utilizing a company's unique competencies to influence others in the channel. ex: sharing important product knowledge or sharing info about consumer preference data b/w buyers and vendors (Nordstrom & Clinique).

facilitating functions

variety of activities that help fulfill completed transactions & also maintain the viability of the channel relationships. -financing -market research -risk-taking -other services such as training others, repair & maintenance of products after a sale, accounting & billing, etc.

reference power

when a channel member is respected, admired, or revered based on one or more attributes. only the best of the best brands can rely on this power source.

insourcing (third-party logistics)

when a firm hands over one or more of its core internal functions to a third party that is an expert of such areas in order to better focus on its core business. attractive for firms whose core competencies do not include elements of supply chain mgt.

exclusive dealing

when a supplier creates a restrictive agreement that prohibits intermediaries that handle its product from selling competing firms' products.

stock-out

when item is not in stock

distributor

wholesale middleman, found esp. when selective or exclusive distribution is common & strong promotional support is needed. take title to product.