Vertical marketing systems

SUPPLEMENTARY READING

SPEECH PRACTICE

1.Summarize the information in Unit 15 and speak on the topic “Distribution”. Make up a plan of your summary.

2. Suppose you have developed and will produce a new golf tee (мітка для м’яча у гольфі) that increases golfers’ accuracy and driving distance. Design a marketing channel (or channels) for your product. Explain why your choice of channels would be most effective for this product.

3. Which distribution channel would you select for the following products:

a. A car seat for kids

b. An income tax preparation service

c. Forklift trucks (вантажні підйомники)

d. Pears

4. Which type of market coverage would be best for the following products:

a. Rolls-Royce automobiles

b. Bubble gums

c. Men’s cologne

d. Bulldozers and other earth moving equipment

Vertical channel integration is the joining of two or more stages of a channel under a single management. A vertical marketing system (VMS) is a centrally managed channel resulting from vertical channel integration. This merging eliminates the need for certain intermediaries. One member of a marketing channel may assume the responsibilities of another member, or it may actually purchase the operations of that member. For example, a large-volume discount retailer that ships and warehouses his own stock directly from manufacturers will no longer require a wholesaler. Total vertical integration occurs when a single management controls all operations from production to final sale. Oil companies that own wells, transportation facilities, refineries, terminals, and service stations exemplify total vertical integration.

There are three types of VMSs: administered, contractual, and corporate. In an administered VMS, one of the channel members dominates over other members, perhaps because of its large size. Under its influence, the channel members collaborate on production and distribution. A powerful manufacturer, such as Procter & Gamble, receives a great deal of cooperation from intermediaries that carry its brands. Although the goals of the entire system are considered when decisions are made, control rests with individual channel members, as in conventional marketing channels. Under a contractual VMS, cooperative arrangements and the rights and obligations of channel members are defined by contracts or other legal measures. In a corporate VMS, ownership is the vehicle by which production and distribution are joined. A grocery store chain, for example, may obtain its bread products from several of its own large bakeries. Most vertical marketing systems are organized to improve distribution by combining individual operations.

Дата добавления: 2014-11-29