chapter 12copyright ©2008 by south-western, a division of thomson learning. all rights reserved 1...
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Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 1
MKTG
Designed byAmy McGuire, B-books, Ltd.
Prepared byDeborah Baker, Texas Christian University
Lamb, Hair, McDaniel 2008-2009 Marketin
g Channels and Supply Chain Management
12
CHAPTER
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 2
Learning Outcomes
Explain what a marketing channel is and why intermediaries are needed
Define the types of channel intermediaries and describe their functions and activities
Describe the channel structures for consumer and business products and discuss alternative channel arrangements
LO1
LO2
LO3
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 3
Learning Outcomes
Define supply chain management and discuss its benefits
Discuss the issues that influence channel strategy
Explain channel leadership, conflict, and partnering
Describe the logistical components of the supply chain
LO4
LO5
LO6
LO7
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 4
Learning Outcomes
Discuss new technology and emerging trends in supply chain management
Discuss channels and distribution decisions in global markets
LO8
LO9
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Explain what a marketing channel is
and why intermediaries are
needed
Marketing ChannelsMarketing ChannelsLO1
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LO1
Marketing Channels
A set of interdependent
organizations that ease
the transfer of ownership
as products move from
producer to business
user or consumer.
Marketing Channels
Marketing Channels
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LO1
Marketing Channels
The connected chain of
all the business entities,
both internal and external
to the company, that
perform or support the
logistics function.
Supply ChainSupply Chain
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LO1
Marketing Channel Functions
Specialization and division of labor Specialization and division of labor
Overcoming discrepancies Overcoming discrepancies
Providing contact efficiency Providing contact efficiency
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LO1
Specialization and Division of Labor
Creates greater efficiency
Provides lower costs
Achieves economies of scale
Aids producers who lack resources to market directly
Builds good relationships with customers
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LO1
Overcoming Discrepancies
Discrepancyof
Quantity
Discrepancyof
Quantity
Discrepancyof
Assortment
Discrepancyof
Assortment
The difference between the amount of product produced and the amount an end user
wants to buy.
The difference between the amount of product produced and the amount an end user
wants to buy.
The lack of all the items a customer needs to receive full satisfaction from a product or
products.
The lack of all the items a customer needs to receive full satisfaction from a product or
products.
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LO1
Overcoming Discrepancies
TemporalDiscrepancyTemporal
Discrepancy
SpatialDiscrepancy
SpatialDiscrepancy
A situation that occurs when a product is produced but a
customer is not ready to buy it.
A situation that occurs when a product is produced but a
customer is not ready to buy it.
The difference between the location of a producer and the
location of widely scattered markets.
The difference between the location of a producer and the
location of widely scattered markets.
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 12
LO1
Providing Contact Efficiency
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REVIEW LEARNING OUTCOMELO1
Marketing Channels
Providing Specialization and Division of Labor
Providing Specialization and Division of Labor
OvercomingDiscrepancies
OvercomingDiscrepancies
Providing ContactEfficiency
Providing ContactEfficiency
MarketingChannel
SupplyChain
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Define the types of channel intermediaries
and describe their functions and activities
Channel IntermediariesChannel IntermediariesLO2
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Channel Intermediaries
LO2
RetailerRetailer A channel intermediary that sells mainly to customers.
A channel intermediary that sells mainly to customers.
MerchantWholesalerMerchant
Wholesaler
An institution that buys goods from manufacturers, takes title
to goods, stores them, and resells and ships them.
An institution that buys goods from manufacturers, takes title
to goods, stores them, and resells and ships them.
Agents andBrokers
Agents andBrokers
Wholesaling intermediaries who facilitate the sale of a product by representing channel members.
Wholesaling intermediaries who facilitate the sale of a product by representing channel members.
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 16
Channel Intermediaries
LO2
RetailersRetailers
Merchant WholesalersMerchant
Wholesalers
Agents and
Brokers
Agents and
Brokers
Take Title to GoodsTake Title to GoodsTake Title to GoodsTake Title to Goods
Take Title to GoodsTake Title to GoodsTake Title to GoodsTake Title to Goods
Do NOT Take Title to GoodsDo NOT Take Title to GoodsDo NOT Take Title to GoodsDo NOT Take Title to Goods
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 17
Factors Suggesting Type of Wholesaling Intermediary to Use
LO2
Product characteristicsProduct characteristics
Buyer considerationsBuyer considerations
Market characteristicsMarket characteristics
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Factors Suggesting Type of Wholesaling Intermediary to Use
LO2
Factor Merchant Wholesalers
Agents/ Brokers
Nature of product Standard Nonstandard, custom
Technicality of product Complex Simple
Product’s gross margin High Low
Frequency of ordering Frequent Infrequent
Time between order and receipt of shipment
Shorter lead time Longer lead time
Number of customers Many Few
Concentration of customers Dispersed Concentrated
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 19
Channel Functions Performed by Intermediaries
LO2
Contacting/Promotion
Negotiating
Risk Taking
Researching
Financing
Physically distributing
Storing
Sorting
FacilitatingFunctions
FacilitatingFunctions
TransactionalFunctions
TransactionalFunctions
Logistical Functions
Logistical Functions
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 20
LO2
Logistics
LogisticsThe process of strategically
managing the efficient flow
and storage of raw materials,
in-process inventory, and
finished goods from point of
origin to point of
consumption.
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 21
REVIEW LEARNING OUTCOMELO2
Channel Intermediaries and Functions
CHANNELINTERMEDIARIES
CHANNELINTERMEDIARIES
Retailers
Wholesalers
Agents and Brokers
Retailers
Wholesalers
Agents and Brokers
CHANNELFUNCTIONSCHANNEL
FUNCTIONS
Transactional
Logistical
Facilitating
Transactional
Logistical
Facilitating
Perform
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 22
Describe the channel structures for consumer and business products
and discuss alternative channel
arrangements
Channel StructuresChannel StructuresLO3
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Channels for Consumer ProductsLO3
A distribution channel in
which producers sell
directly to consumers.
Direct Channel
Direct Channel
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Channels for Consumer ProductsLO3
Producer Producer Producer Producer
Consumers Consumers Consumers Consumers
Retailers Retailers Retailers
Wholesalers Wholesalers
Agents orBrokers
WholesalerWholesalerChannelChannel
RetailerRetailerChannelChannel
DirectDirectChannelChannel
Agent/BrokerAgent/BrokerChannelChannel
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 25
Channels for Business ProductsLO3
Producer
IndustrialUser
DirectDirectChannelChannel
Producer
Govt.Buyer
DirectDirectChannelChannel
Producer Producer Producer
IndustrialUser
IndustrialUser
IndustrialUser
IndustrialDistributor
IndustrialDistributor
Agents orBrokers
Agents orBrokers
Agent/BrokerAgent/BrokerChannelChannel
IndustrialIndustrialDistributorDistributor
Agent/BrokerAgent/BrokerIndustrialIndustrialChannelChannel
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 26
Business-to-Business Exchanges on the Internet
LO3
Agents link buyers and sellersAgents link buyers and sellers
Companies drop the intermediary from the supply chainCompanies drop the intermediary from the supply chain
“Private exchanges” with select suppliers automate the supply chain
“Private exchanges” with select suppliers automate the supply chain
Online
http://www.sherwinwilliams.com
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Alternative Channel ArrangementsLO3
Multiple channels
Strategic channel alliances
Nontraditional channels
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Biz Flix
LO3Casino
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REVIEW LEARNING OUTCOMELO3
Channel Structures
CONSUMERCHANNELS
CONSUMERCHANNELS
Direct
Retail
Wholesaler
Agent/broker
Direct
Retail
Wholesaler
Agent/broker
BUSINESSCHANNELSBUSINESSCHANNELS
Direct
Industrial
Agent/broker
Agent/brokerindustrial
Direct
Industrial
Agent/broker
Agent/brokerindustrial
ALTERNATIVECHANNELS
ALTERNATIVECHANNELS
Multiple
Nontraditional
Strategicalliances
Multiple
Nontraditional
Strategicalliances
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 30
Define supply chain management and
discuss its benefits
Supply Chain ManagementSupply Chain ManagementLO4
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 31
LO4
Supply Chain Management
Supply ChainSupply Chain
A management system that
coordinates and integrates all
of the activities performed by
supply chain members into a
seamless process, from the
source to the point of
consumption, resulting in
enhanced customer and
economic value.
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 32
LO4
Role of Supply Chain Management
Physical flow process that engineers the movement of goods
Physical flow process that engineers the movement of goods
Communicator of customer demand from point of sale to supplier
Communicator of customer demand from point of sale to supplier
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 33
LO4
Responsibilities of Supply Chain Managers
Channel strategy decisions
Sourcing and procurement of raw materials
Production schedules
Order processing
Inventory management
Finished goods/supplies transportation and storage
Customer service coordination
Supply chain information flow management
Partner relationships
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 34
LO4
The Supply Chain Process
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LO4
Benefits of Supply Chain Management
Means of differentiationMeans of differentiation
Greater supply chain flexibility Greater supply chain flexibility
Improved customer serviceImproved customer service
Higher revenuesHigher revenues
Reduced costs Reduced costs
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 36
REVIEW LEARNING OUTCOMELO4
Supply Chain Management
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Discuss the issues that influence
channel strategy
Making Channel Strategy DecisionsMaking Channel Strategy DecisionsLO5
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Channel Strategy DecisionsLO5
Factors Factors Affecting Affecting Channel Channel ChoiceChoice
Factors Factors Affecting Affecting Channel Channel ChoiceChoice
Producer FactorsProducer Factors
Product FactorsProduct Factors
Market FactorsMarket Factors
Exclusive DistributionExclusive Distribution
Selective DistributionSelective Distribution
Intensive DistributionIntensive Distribution
Level ofLevel ofDistributionDistribution
IntensityIntensity
Level ofLevel ofDistributionDistribution
IntensityIntensity
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 39
Market FactorsLO5
Market Market FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices
Market Market FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices
Customer profilesCustomer profiles
Consumer or IndustrialCustomer
Consumer or IndustrialCustomer
Size of marketSize of market
Geographic location
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 40
Product FactorsLO5
Product Product FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices
Product Product FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices
Product Complexity Product Complexity
Product StandardizationProduct Standardization
Product Life CycleProduct Life Cycle
Product DelicacyProduct Delicacy
Product PriceProduct Price
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 41
Product FactorsLO5
Producer Producer FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices
Producer Producer FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices
Producer Resources Producer Resources
Number of Product LinesNumber of Product Lines
Desire for Channel ControlDesire for Channel Control
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 42
Levels of Distribution IntensityLO5
IntensiveIntensiveA form of distribution aimed at having a product available in every outlet
A form of distribution aimed at having a product available in every outlet
SelectiveSelectiveA form of distribution achievedby screening dealers to eliminate all but a few in any single area
A form of distribution achievedby screening dealers to eliminate all but a few in any single area
ExclusiveExclusiveA form of distribution that established one or a few dealers within a given area
A form of distribution that established one or a few dealers within a given area
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 43
Levels of Distribution IntensityLO5
IntensiveAchieve mass marketselling. Convenience goods.
Many
Selective
Exclusive
Work with selected intermediaries. Shopping and some specialty goods.
Work with singleintermediary. Specialty goods and industrial equipment.
Several
One
Intensity Level Objective Number of
Intermediaries
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 44
REVIEW LEARNING OUTCOMELO5
Issues Influencing Channel Strategy
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Discuss the issues that influence
channel strategy
Managing Channel RelationshipsManaging Channel RelationshipsLO6
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Social Dimensions of Channels
LO6 PartneringPartnering
ConflictConflict
LeadershipLeadership
ControlControl
PowerPower
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Channel Power, Control, and Leadership
LO6
ChannelPower
ChannelPower
A channel member’s capacity to control or influence the behavior of other channel members
A channel member’s capacity to control or influence the behavior of other channel members
ChannelControl
ChannelControl
A situation that occurs when one marketingchannel member intentionally affects another member’s behavior
A situation that occurs when one marketingchannel member intentionally affects another member’s behavior
Channel Leader
Channel Leader
A member of a marketing channel that exercises authority/power over the activities of other members
A member of a marketing channel that exercises authority/power over the activities of other members
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 48
Channel Conflict and Partnering
LO6
ChannelConflict
ChannelConflict
A clash of goals and methods
between distribution channel
members
A clash of goals and methods
between distribution channel
members
ChannelPartnering
ChannelPartnering
The joint effort of all channel members to create a supply chain that serves customers and creates a competitive advantage
The joint effort of all channel members to create a supply chain that serves customers and creates a competitive advantage
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 49
Channel Conflict
LO6
Conflicts may occur if channel members:
Have conflicting goals
Fail to fulfill expectations of other channel members
Have ideological differences
Have different perceptions of reality
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 50
Channel Partnering
LO6
Supplier / Manufacturer Relationships
Short-termAdversarialIndependentPrice important
Long-termCooperativeDependentValue-added services
Number of Suppliers Many Few
Transaction-Based Partnership-Based
Information Sharing Minimal High
InvestmentRequired Minimal High
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 51
REVIEW LEARNING OUTCOMELO6
Channel Leadership, Conflict, & Partnering
ChannelRelationship
Synergy
ChannelRelationship
Synergy
Channel Conflict
Horizontal Vertical
Channel Power,Control, Leadership
Channel Partnering
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 52
Discuss global issues
in services marketing
Global Issues in Global Issues in Services MarketingServices MarketingLO7
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 53
Logistical Components of the Supply Chain
LO7
SupplySupplyChainChainTeamTeam
Sourcing & ProcurementSourcing & Procurement
Production SchedulingProduction Scheduling
Order ProcessingOrder Processing
Inventory ControlInventory Control
Warehouse & Materials HandlingWarehouse & Materials Handling
TransportationTransportationLo
gis
tics
Info
rma
tio
n S
yste
mL
og
isti
cs In
form
ati
on
Sys
tem
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 54
Sourcing and Procurement
LO7
Plan purchasing strategies
Develop specifications
Select suppliers
Negotiate price and service levels
Reduce costs
The Role of Purchasing:The Role of Purchasing:
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 55
Production Scheduling
LO7
Push / Pull Strategy
Traditional Focus
Push
Start of Production
Manufacturing
Inventory-Based
Mass Production
Customer Focus
Pull
Customer-Order Based
Mass Customization
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 56
Just-in-Time Manufacturing
LO7
A process that redefines and
simplifies manufacturing by
reducing inventory levels and
delivering raw materials just
when they are needed on the
production line.
JITJIT
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 57
Benefits of JIT
LO7
Reduces raw material inventories Shortens lead times Creates better supplier relationships Reduces production and storeroom costs Reduces paperwork
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JIT Requirements
LO7
Receive high-quality parts Receive high-quality parts
Meet supplier delivery commitmentsMeet supplier delivery commitments
Have a crisis management planHave a crisis management plan
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 59
Order Processing
LO7
Information technology that
replaces paper documents that
accompany business
transactions with electronic
transmission of the information.
ElectronicData
Interchange
ElectronicData
Interchange
http://www.walmartstores.com
Online
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 60
Order Processing
LO7
A method of developing
and maintaining an
adequate assortment of
materials or products to
meet a manufacturer’s or
a customer’s demand.
InventoryControlSystem
InventoryControlSystem
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 61
Order Processing
LO7
MaterialsRequirement
Planning(MRP)
MaterialsRequirement
Planning(MRP)
An inventory control system that manages the replenishment of raw materials, supplies, and components from the supplier to the manufacturer.
An inventory control system that manages the replenishment of raw materials, supplies, and components from the supplier to the manufacturer.
DistributionResourcePlanning
(DRP)
DistributionResourcePlanning
(DRP)
An inventory control system that manages the replenishment of goods from the manufacturer to the final consumer.
An inventory control system that manages the replenishment of goods from the manufacturer to the final consumer.
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 62
Materials Handling Functions
LO7
Receive goods into warehouse
Dispatch the goods totemporary storage
Recall, select, or pick the goods for shipment
Identify, sort, and label goods
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 63
Transportation
LO7
Airways
Water
Pipelines
Motor Carriers
Railroads
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Transportation Mode Choice
LO7
Cost Transit time Reliability Capability Accessibility Traceability
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Criteria for RankingModes of Transportation
LO7
Relative CostTransitTime
Reliability
Capability
Accessibility
Traceability
HighestHighest LowestLowest
Air WaterPipeRailTruck
Water Rail Pipe Truck Air
Pipe Truck Rail Air Water
Water
Truck
Rail Truck Air Pipe
Rail Air Water Pipe
Air Truck Rail Water Pipe
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 66
Discuss new technology and
emerging trends in supply chain management
Trends in Supply Chain Trends in Supply Chain ManagementManagementLO8
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Trends in Supply Chain Management
LO8
Electronic distributionElectronic distribution
Outsourcing of logistics functionsOutsourcing of logistics functions
Advanced computer technologyAdvanced computer technology
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Advanced Computer Technology
LO8
Automatic identification systems
- Bar coding
- Radio frequency technology
Communications technology
Supply chain software systems
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Outsourcing Logistics Functions
LO8
Outsourcing BenefitsOutsourcing Benefits
Reduce inventories
Locate stock at fewer plants and distribution centers
Provide same or better levels of service
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 70
Discuss channels and
distribution decisions
in global markets
Channels and Distribution Channels and Distribution Decisions for Global Markets Decisions for Global MarketsLO9
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LO9
Channels and Distribution Decisions for Global Markets
Global Channel Development
Global Channel Development
Channel structure and type differ
Channel structure and type differ
Gray marketing channelsGray marketing channels
Global SupplyChain Management
Global SupplyChain Management
Awareness of trade legalitiesAwareness of trade legalities
Transportation IssuesTransportation Issues
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 72
REVIEW LEARNING OUTCOMELO9
Global Market Channel & Distribution Decisions
Distribute directly or through foreign partners
Different channel structures than indomestic markets
Illegitimate “gray”marketing channels
Legal and infrastructure differences
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 73
Beyond
the
Book
Channels and Distribution Decisions for Services
NOTE: Supplemental content – not in book.
Identify the special problems and opportunities
associated with distribution in service
organizations
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 74
Beyond
the
Book
Channels and Distribution Decisionsfor Services
NOTE: Supplemental content – not in book.
Minimizing wait times
Managing service capacity
Improving service delivery
Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 75
Beyond
the
Book
Distribution in Service Organizations
NOTE: Supplemental content – not in book.