Unit 7: Developing and Managing the Value Chain Flashcards
The connected chain of all the business entities, both internal
and external to the company, that perform or support the
logistics function (aka Supply Chain)
Value Chain
A set of interdependent organizations that facilitate
the transfer of ownership as products move from producer
to business user or consumer.
Marketing Channels
% Margin =
$ Margin/Selling Price
$ Margin =
Selling Price - Unit Cost (COGS)
Unit Cost =
(for manufacturer/supplier, Cost of Good Sold)
Distribution/Wholesaler, Jobber/Broker, and Retailer are referred to as _________ options, because they rely on an additional entity (also known as an __________) to help the supplier reach the end customer more effectively and/or efficiently.
indirect channel, “intermediary”
Supplier’s Own Sales and Distribution is referred to as a ___________ option, because the supplier does not use an intermediary to reach the end customer and, therefore, must own and manage all of the functions and costs associated with distributing products and/or services.
direct channel
In fact, more and more organizations in more and more marketplaces are choosing a _____________ (more than one channel alternative) or even an _____________ (all available channel alternatives) as their approach to distribution.
multi-channel strategy, omni-channel strategy
Types of intermediaries:
retailer
distributor/wholesaler
jobber/brokers
The intentional efforts of a company to design, manage, and evolve its channel strategy in light of changes that arise in the competitive and customer environments is referred to as:
channel stewardship
The piece of the value chain that looks back toward the sourcing of raw materials is referred to as the ___________________
“supplier network.”
The piece of the value chain that looks forward toward the end customer is referred to as the ___________
“marketing channel.”
three disciplines of channel stewardship:
(1) mapping the industry channels to get an overall view of the external forces at play
(2) building and updating the company’s value chain at the field level
(3) aligning and influencing the roles of the various partners in the channel system and altering their behavior when necessary to promote a high level of system performance.
The channel steward should first map the status of each of four essential forces influencing channel strategy and then research how the forces came to their current positions:
customer wants and needs, channel capabilities and costs, channel power and influence, and competitive posture and actions.
______ within the marketing channel can provide efficiencies and economies of scale as channel members take on tasks that best utilize their expertise or strategic relationships.
Specialization or Division of labor
One configuration of a marketing channel entails producers selling to consumers without any intermediaries in the channel. This is called a(n):
direct channel
six conditions that most often affect the direct versus indirect decision-making:
- The size and distribution of the end customers.
- The nature of the product or service
- The role and position of the product in the end customer’s purchasing basket
- The nature of the producer firm.
- The relative size of the producer firm.
- The business strategy of the producer firm.
As part of the construction of the channel value chain, channel stewards must also make decisions about how available we want the products to be across the marketplace, which we call the intensity of market coverage or intensity of _____________.
channel coverage
Degrees of vertical integrations of channel structures
Integrated Distribution Network: Supplier, company-owned distribution center, company-owned retail outlets
Franchised Distribution Network: Supplier, distributor (exclusive to company), independently-owned but franchised retail outlet
Arms Length Distribution Network: Supplier, multibrand distributor, and multibrand retailer
________ is a form of distribution aimed at having a product available in every outlet where target customers might want to buy it.
Intensive
In deciding between an integrated versus an arm’s length approach to channel structure, trade-off considerations are important. Which trade-off is NOT part of these considerations?
High competition versus low competition
Burger King’s restaurants are independently owned, yet their managers adhere strictly to the policies laid out by the brand owner. This channel structure is called a(n):
franchised distribution network.
Hard Power comes in two forms:
having a unique product/technology or brand, which is typically more under the control of the supplier/producer
having market access and intelligence, which is typically more under the control of the distributors/wholesalers, and retailers
Soft Power is also often thought of in two forms:
Trust - the act of relying on the other person’s or entity’s words or actions as being the most likely to promote favorable outcomes for oneself
Commitment - the pledge of continuity and adoption of a long-term view, with a willingness to make investments and sacrifices to achieve a goal
___________ emerge between entities at different levels of the channel (e.g., between a supplier and a retailer).
Vertical Conflicts
When Black and Decker sells the drill directly, they could undercut the pricing of the retailers, since they would no longer have to give up that extra margin to them when selling directly to customers
vertical conflict
_____________ emerge between entities at the same level of the channel (e.g., between two or more retailers)
Horizontal Conflicts
a local hardware store might have more and more challenges competing against the big box stores (such as Home Depot and Lowe’s) in terms of breadth and depth of offerings and, critically, in terms of pricing.
horizontal conflict
What steps can you take to change the nature of the social structure within the channel to create a more even footing in negotiations?
Find ways to increase brand loyalty among shoppers.
Create, market, and grow a set of private-label branded products.
Find ways to improve the business of the national vendor (e.g., create special events or promotions, product tie-ins) that other retailers may be unable or unwilling to do.
Develop partnerships with other brands and celebrities to create uniqueness in the marketplace and attract fans of those brands.
Horizontal channel conflict can arise for a variety of reasons. An example would be a toy manufacturer selling its toys through toy stores, discount stores, department stores, and even drugstores. Which factor cited below contributes to horizontal channel conflict?
Undifferentiated products and variable prices in the various channels
A channel steward uses power to influence, motivate, and manage channel partners. An example of a channel steward’s use of hard power is a:
brand’s unique product design.
Sells products to end customers, usually individuals
through a variety of formats, including department
stores, mass merchandisers, supercenters, convenience
stores, discount stores, online, catalog, warehouse
clubs, & drug stores.
Retailer
Sells products to retailers or business end-users. They
own & take physical control of inventory; they also
promote the products or services, and arrange for
financing, ordering & payment with their customers.
Distributor/Wholesaler
Specialized sales agents hired by the supplier or
manufacturer that focus on a particular customer
segment. They typically do not take physical control of
the products or services they sell and are compensated
through commissions or fees
Jobber/Brokers
Do NOT Take Title to Goods
Jobbers/Brokers
A form of distribution achieved by screening dealers to eliminate all but a few in any single area
Selective
A form of distribution that established one or a few
dealers within a given area
Exclusive
Achieve mass market selling.
Convenience goods
Many intermediaries
Intensive
Work with selected intermediaries.
Shopping and some specialty goods.
Several intermediaries
Selective
Work with single intermediary. Specialty
goods and industrial equipment.
Exclusive level of distribution intensity
A clash of goals and methods between distribution channel
members
Channel Conflict
The joint effort of all channel members to create a supply chain
that serves customers and creates a competitive advantage
Channel Partnering
Dual Distribution (e.g. _________________)
can cause channel conflict
both indirect and direct
________________ lead to one company using
another’s marketing channel
Strategic Channel Alliances
The difference between the amount of product produced
and the amount an end user wants to buy
Discrepancy of Quantity
The lack of all the items a customer needs to receive full
satisfaction from a product or products.
Discrepancy of Assortment
A situation that occurs when a product is produced but a
customer is not ready to buy it.
Temporal Discrepancy
The difference between the location of a producer and the location of widely scattered markets
Spatial Discrepancy
Marketing Channel Benefits
Specialization and division of labor
Overcoming discrepancies
Providing contact efficiency
Channel Functions Performed by Intermediaries
Transactional Functions: Contacting/Promotion, Negotiating, and Risk Taking
Logistical Functions: Physically Distributing, Storing, Sorting
Facilitating Functions: Researching and Financing
