VALUE-CHAIN STRATEGY

Chapter 10
m.Sulthan akram
Farha fauzia
Kevin s
Strategy Role of Value Chain
• Distribution Functions
The channel of distribution is a network of value-chain organizations
performing functions that connect good and services with end-users. The
distribution channel consist of internet dependent and interrelated
institutions and agencies, functioning as a system or network, cooperating
in their efforts to produce and distribute a product to end-users.
• Channels for Services
Services such as air travel, banking, entertainment, health care, and
insurance also involve distribution channels. The services provider
renders the services to the end-users rather than it being produced like
a good and moved through marketing intermediaries to the end-user.
Because, of this, the distribution networks for services differ somewhat
from those used for goods.
• Direct Distribution by Manufacturers
We consider channel of distribution strategy from a manufacturer’s
point of view, although many of the strategic issues apply to firms at
any level the value chain--supplier, whole sale, or retail. The factors
that influence the distribution decision include buyer considerations,
product characteristics, and financial and control factors
i. Buyer considerations
ii. Competitive considerations
iii. Product characteristics
iv. Financial and control considerations
Channel Strategy
the decisions that are necessary in
developing a channel of
distribution strategy include
• (1) determining the type of
channel arragement,
• (2) deciding the intensity of
distribution
• (3) selecting the channel
configuration.
Types of channels
• Conventional channel
• Vertical marketing systems
I. Ownership vms
II. Contractual vms
III. Administered vms
IV. Relationship vms
• Horizontal marketing sytems
• Digital channels
Distribution intensity
The second step on channel strategy is selecting distribution intensity. Distribution
intensity is best examined in reference to how many retail stores carry a particular brand in
a geographical area.
Choosing the right distribution intensity depends on management’s targeting and
positioning strategies and product and market characteristics. The major issues in deciding
distribution intensity are :
•Identifying what is feasible, taking into account the size and characteristics of the market
target, the product, and the requirements likely to be imposed by prospective
intermediaries.
•Selecting the alternatives that are compatible with the proposed market target and
marketing program positioning strategy.
•Choosing the alternative that (1) offers the best strategic fit, (2) meets management’s
financial performance expectations, and (3) is attractive enough to intermediaries so that
they will be motivated to perform their assigned functions.
Channel Configuration
• End user considerations
• Product characteristic
• Manufacturer’s capabilities and resources
• Required functions
• Avalability and skills of intermediaries
Channel maps
• It is often useful to produce a map of existing or planned channel strategy,
to allow comparison with competitor and to identify new opportunities
Selecting the channel strategy
• Market access
• Value added competencies
• Financial considerations
• Flexibility and control considerations
• Channel strategy evaluation
Changing channel strategy
• Channel strategy modification
• Channel Migration
• Channel Innovation
• Channel Audit
Managing the channel
• Channel leadership
• Management structure and systems
• Physical distribution management
• Supply chain strategy
• E procurement
• Channel relationships
• Degree of collaboration
• Commitment and trust among channel members
• Power and dependence
• Channel globalization
• Multichanneling
• Conflict resolution
• Channel performance
• Legal and ethical considerations
International channels
• Examining international distribution patterns
• Global market structure differences
• Distribution in emerging markets
• Factors affecting global channel selection
• Global issues regarding multichannel strategies