7. Distribution Channel Decisions/Strategy Flashcards Preview

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Flashcards in 7. Distribution Channel Decisions/Strategy Deck (48)
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Marketing channel: 2

  1. The set of interdependent organizations involved in the process of making a product or service
  2. Many services are distributed through marketing channels, but it need different activates


Objectives of distribution channels 6

  1. Increase the availability of the good or service to potential customers
  2. Satisfy customer requirements by providing high levels of service
  3. Ensure promotional effort
  4. Obtain timely and detailed market information
  5. Increase cost-effectiveness
  6. Maintain flexibility


Institutions Found in Marketing Channels 4

  1. Merchant wholesalers
  2. Agent midllemen
  3. Retailers
  4. Facilitating agencies


Merchant wholesalers

Take title to the goods the handle, sell primarily to other resellers, industrial and comercial customers


Agent midllemen 3

  1. Include manufacturer's representatuves and brokers.
  2. Also sell to other resellers, industrial or comercial customers, but do not take title to the goods.
  3. Usually specialize in the selling function and represent client manufacturers on a comission basis


Retailers 2

  1. Sell goods and services directly to ultimate customers for personal use.
  2. Take title to goods they handle, are compensated by the margin between the price they pay for those goods an the price they receive from their customers


Facilitating agencies

Include advertising agencies...etc specialised in one or more marketing functions, work on due for service basis to help clients perform those functions more effectively and efficiently


Channel Design Alternatives

individual consumers or organizational customers


The decision depends on: 3

  1. Which distribution objectives are considered most important
  2. which is influenced by the business’s competitive strategy
  3. Other components of the marketing program, including characteristics of the product


Availability and the Satisfaction of Customer Service Requirements

Achieving a desired level of product availability is largely a matter of gaining the cooperation of appropriate numbers and types of retail outlets


Three basic strategies of retail coverage: 3

  1. Intensive Distribution
  2. Exclusive Distribution
  3. Selective Distribution


Intensive Distribution

A form of distribution aimed at having a product available in every outlet e.g. toothpaste


Exclusive Distribution

one or a few dealers within a given area e.g. prestige clothing


Selective Distribution

A form of distribution achieved by screening dealers to eliminate all but a few in any single area e.g. home appliances


Multichannel Distribution 2

  1. Dual (two-channel) distribution systems
  2. Hybrid system


Channel Design for Global Markets

When designing marketing channels to reach customers in more than one country, the manager faces a couple of additional issues:

  • When entering a new national market for the first time, he or she must decide on an entry strategy.


Market Entry Strategies 3


  • Export merchants (buy and sell)
  • Export agents (sell on a commission basis)
  • Cooperative organisations (export for several producers/farm products)

Contractual entry modes

  • Licensing
  • Franchising
  • Contract manufacturing

Overseas direct investment

  • Joint ventures
  • Sole ownership



The simplest was to enter a foreign market because it involves the least commitment and risk


Contractual entry modes:

Nonequity arrangements that involve transfer of technology and/or skills to an entity in a foreign country


Contract manufacturing 4

Involves Sourcing a product from a manufacturer located in a foreign country for sale there or elsewhere

  1. Turnkey construction contract
  2. Coproduction
  3. Countertrade
  4. Buyback arrangement



A contractual arrangement whereby one company (the licensor) makes an asset available to another company (the licensee) in exchange for royalties, licence fees or some other form of compensation. 


Licensing Advantages: 5

  1. Reduces development costs and risks of establishing foreign enterprise.
  2. Lack capital for venture.
  3. Unfamiliar or politically volatile market.
  4. Overcomes restrictive investment barriers.
  5. Others can develop business applications of intangible property.


Licensing Disadvantages: 3

  1. Lack of control.
  2. Cross-border licensing may be difficult.
  3. Creating a competitor.



A form of licensing, which goes far beyond conventional licensing. The franchisor provides the franchisee with an extensive company concept, which comprises a successful product and marketing concept as well as the fundamentals of managing the business.


Franchising: Disadvantages 2

  1. Shared revenues
  2. Must sometimes train locals how to meet the standards of the franchiser


Turnkey construction contract:

require the contractor to have a project up and operating before releasing it to the owner



involves a company’s providing technical know-how and components in return for a share of output


Buyback arrangement

products being sold are used to produce other products.


Joint Venture

In most definitions involves the transfer of capital, equity, manpower and technology from the foreign partner to an existing local firm.

’ In exchange for:

  • Tacit knowledge about a market
  • Specific competencies
  • Access to a network Holistic market entry


Channel Alternatives 2

  1. domestic middlemen
  2. foreign middlemen