Chapter 17 - Value Chain Flashcards
Channel of distribution
Series of firms or individuals that facilitates the movement of a product from the producer to the final customer.
Channel Intermediaries
Firms or individuals such as wholesalers, agents, brokers, or retailers who help move a product from the producer to the consumer or business user.
Producers
- Large quantity, small variety
Consumers
- Small quantity, large variety
Functions of Channel Partners
- Break Bulk
- Accumulate Bulk
- Assemble & Sort
- Create assortment
- Reduce transactions
- Transportation & Storage
- Communication
- Repair
- Service
- Credit/finance
- Risk Taking
Breaking Bulk
Dividing larger quantities of goods into smaller lots in order to meet the needs of buyers.
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.
Direct Supply Chain
From producer to customers
Indirect Supply Chain
Include partners to help perform functions
Disintermediation of the Chain
Elimination of some layers of the channel of distribution in order to cut costs and improve the efficiency of the channel
Wholesaling Intermediaries
Firms that handle the flow of products from the manufacturer to the retailer or business user.
Independent Intermediaries
Not controlled by any manufacturer but do business with many different manufacturers and customers
Merchant Wholesalers
Buy goods from manufacturers and sell to retailers and other customers
Take Title
To accept legal ownership of a product and the accompanying rights and responsibilities of ownership.
Push Strategy
Promote/communicate to partners and down the line. Information flows to each level.
Pull Strategy
Promotion directly from producer to consumer.
- Pulls you into the store.
Merchandise agents or brokers
Provide services in exchange for commissions but never take title to the product.
Channel levels
The number of distinct categories of intermediaries that populate a channel of distribution.
Hybrid Marketing Systems
Use a number of different channels and communication methods to serve a target market.
Conventional Marketing System
Multiple-level distribution channel in which channel members work independently of one another.
Vertical Marketing System
There is cooperation among members at the manufacturing, wholesaling, and retailing levels.
Horizontal Marketing System
Arrangement within a channel of distribution in which two or more firms at the same channel level work together for a common purpose.
Intensive distribution
Selling a product through all suitable wholesalers or retailers that are wiling to stock and sell the product.
Exclusive Distribution
Selling a product only through a single outlet in a particular region.
Selective Distribution
Distribution using fewer outlets than in intensive distribution but more than in exclusive distribution.
Channel Leader
- Takes a leadership role
- Establishes norms and processes
- Economic power
- legitimate Power
- Reward or Coercive Power
Logistics
The process of designing, managing, and improving the movement of products through the supply chain.
Supply Chain
All firms that engage in activities necessary to turn raw materials into a final good or service.
Value Chain
SC that looks at how each firm receives inputs, adds value to the inputs, and passes them along
Physical Distribution
Activities used to move finished goods to final customers.
- Warehousing, materials handling, transportation, and inventory control.
Warehousing
Storing goods in anticipation of sale.
Materials Handling
Moving of products into and out of warehouses.
Inventory Control
Activities to ensure that goods are always available to meet customer’s demands.
Dual Partner Problem
It is acceptable for producers to sell to a variety of wholesalers but not to the wholesalers customers.
- Occurs because there are many retailers to sell to. When they start competing for the same customer, the dual partner problem takes place.
Non-traditional partners
Thinking outside of the box.
- Ex. Cologne in departments stores sold at a record company.
Gray Markets
Unauthorized use of channel partners
- Better exchange rate.
Reverse Channels
Recycling
- Channels bring products from customer to marketer.
Channel Selection Considerations
- Market Mix
- Company Resources
- Customer
- Availability
Transportation
- Dependability
- Cost
- Speed
- Accessibility
- Capability
- Traceability
Wheel of Retailing
- Companies come into the market a low prices.
- As they establish foolhold, they move up and add services to the product
- This increases cost, so they have to increase price
- New entrants cause competition with lower prices
- The wheel starts over again.
