Distribution Flashcards
When it comes to distribution, what is a natural characteristic of B2B interactions because each participant tries to negotiate terms that are most favorable to itself?
Conflict
When it comes to distribution the firm’s ability to negotiate depends on what?
Power
What are the four determinants of buyer/seller power in distribution?
- Economic Leverage: who accounts of whose sales? Ex. Walmart
- Product Differentiation (commoditization) Ex. credit cards (bargaining)
- Importance of Brand Name Ex. Nike; Intel
- Influence on Consumer Decision Making Ex. technical goods; credence goods
Porter’s 5 forces framework focuses on model’s two power components, which also happen to be the most marketing-relevant components:
Bargaining Power of Buyers
Bargaining Power of Suppliers
Define vertical integration.
Firm owns its supplier or distributor and provides complete control over the partner.
When can vertical integration be ineffective?
When suppliers and distributors face competitive markets
What is another option for firms when it comes to vertical integration?
Outsourcing
The logic of vertical integration can be extended to other decisions that are squarely within the domain of marketing (particularly, product development, sales, and advertising). For these other activities, the question is whether the firm should ______ ______ ______ them.
“buy versus make“
What marketing function is almost always outsourced and sees a great deal of conflict?
Advertising
What do we not know the answer to yet when it comes to outsourcing?
Whether innovation can be outsourced
What five reasons have lead to outsourcing becoming a preferred approach?
- Lower Cost
- Flexibility (rapid hiring and termination)
- Legal Protection?
- Higher Competence & Innovation
- Strategic Focus (& core competence)
When deciding whether to a outsource a firm should carefully assess these three areas:
- True Cost Savings
- Loss of Control (e.g., salesforce)
- Switching Costs
