Channels of Distribution
In the uncertain fluctuating market of today, it is essential for a company to hold on and face those uncertainties in order to survive. Consumers can be an aid for a company's survival, thereby it is essential for consumers to get the goods of a company whenever and however they need them. Here is where distribution channels come in and give hand. "Channels of distribution are the different paths that goods passed through in moving from the producer to the consumer", (Meyer et al, 1988). With the help of distribution channels, companies are able to overcome the time, place and possession gaps that separate goods and services from the consumers. As said by ...view middle of the document...
There are two types of marketing systems. They are conventional distribution channels and vertical marketing system.
Conventional Distribution Channel
According to Kotler and Armstrong (2001), a conventional distribution channel is a channel consisting of one or more independent producers, wholesalers, and retailers, each a separate business seeking to maximize its own profits even at the expense of profits for the system as a whole. In this case, intermediaries operate independently or enter into some form of arrangements with suppliers and other intermediaries. Moreover, a conventional channel network tends to be fragmented because manufacturers, wholesalers and retailers bargain aggressively with each other over the prices and others.
Since channel members are separated and acts independently, none of them has much control over the other members. For example, in a conventional distribution channel, manufacturers, distributors and retailers act independently so the manufacturers as the producer of the goods, cant decide anything for the other members, lets say, on what price should the distributors and retailers sell, where should they sell, etc. the manufacturers or the other members has no formal authority over each other. Moreover, in a conventional distribution channel, many conflicts may occur since there is the absence of a formal contract and also in most cases, their goals and aims differ. Another weakness of a conventional distribution system is that each and every member tries to reap a lot of profits in order to pursue their own corporate objectives. This may cause drawbacks for the system as each independent firm shows little concern for overall channel performance.
Vertical Marketing System
According to Evangelista, et al (1984), an improvement over the conventional marketing system, is the integrated marketing system which may be vertical or horizontal. "A vertical marketing system is a network of two or more levels of channel members as in the case of arrangement between manufacturers and wholesalers, wholesalers and retailers or between a manufacturer and a number of wholesalers and retailers" (Evangelista et al, 1984). So here, all the members act as a single unified system.
To illustrate the statement above, let's take an example of a writer. This writer writes his own books, owns the publishing company that publishes the book, creates a website that promotes his books, has a marketing company that advertise and markets his books and he also handles the distribution and shipping of the final product. Here it is clear that the author is aware of all the processes of producing the book and is able to control all the elements. This can be beneficial for the company because if in case a problem occurs in any area, he can quickly tackle it. He knows when the books are going to be printed, when and where it is to be shipped, etc and will e aware of any emergency arising. In this case, we can...