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Channel Management and Power

Channel Management and Power. Vertical integration Channel power Channel conflict Causes Solutions. Company structures Sole business unit (e.g., manufacturing, wholesaling, retailing, services) Conglomerates Japanese keiretsus. Make or buy? Leverage Expertise Control

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Channel Management and Power

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  1. Channel Management and Power • Vertical integration • Channel power • Channel conflict • Causes • Solutions

  2. Company structures Sole business unit (e.g., manufacturing, wholesaling, retailing, services) Conglomerates Japanese keiretsus Make or buy? Leverage Expertise Control Product quality and design Steady supply Vertical Integration

  3. Layers of Performance: An Example RETAILING WHOLESALING/CHANNEL MOVING MARKETING PRODUCT MANUFACTURING COMPONENT MANUFACTURING

  4. Costs Opportunity cost of personnel Difficulty in hiring appropriate managers Potential over-capacity Labor situation--may find lower costs in Non-union environment Lower cost area Benefits Dependability Synergy (?) Brand extensions Control Vertical Integration: Costs and Benefits

  5. Reasons for Outsourcing • Motivation • Specialization • “Survival of the fittest” • Economies of scale • Market coverage • Independence from specific manufacturer

  6. Channel Power: Sources • Reward • Coercive • Expert • “Legitimate” • Referent (“brand name”)

  7. Channel Conflict • Channel members have different objectives--e.g., • Brand unit sales vs. category unit sales • Pricing • Service output • Terms of sale: price, payment, quantities, returns

  8. Information intensive approaches: Sharing of information Expensive(-) Risky (-) May build trust (+) Third party (mediation) Establishment of norms (“rules of the game”) Accommodation Confrontation Avoidance Compromise Conflict Resolution Approaches

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