tailieunhanh - Lecture Marketing channel strategy: Chapter 4 - TS. Đinh Tiến Minh

Learning objectives: Understand vertical integration as a continuum from make to buy rather than as a binary choice, explain why channel players (manufacturers, wholesalers, retailers) often integrate forward or backward with great expectations, only to divest themselves within a few years and other contents. | 1/28/2018 Chapter 4: Make-or-Buy Channel Analysis DINH Tien Minh LEARNING OBJECTIVES Understand vertical integration as a continuum from make to buy rather than as a binary choice. Explain why channel players (manufacturers, wholesalers, retailers) often integrate forward or backward with great expectations, only to divest themselves within a few years. Frame vertical integration decisions according to whether owning the channel, or some of its functions, improves longterm returns on investment. Recognize why outsourcing should be the base case for a market channel, rather than vertical integration. Define six categories of company-specific capabilities. 2 INTRODUCTION Should a firm vertically integrate by performing both upstream and downstream functions? In other words, Who should perform different channel functions? Should it be a single organization (manufacturer, agent, distributor, retailer—all rolled into one)? Should distribution functions be outsourced (upstream looking down)? Should production be outsourced (downstream looking up), or neither, such that manufacturers and downstream channel members remain separate entities? 4 1 1/28/2018 INTRODUCTION When the manufacturer integrates a distribution function, (making sales, fulfilling orders, offering credit), its employees do the work, and manufacturer has integrated forward or downstream from the point of production. Vertical integration also can begin from a downstream position, thereby integrates backward. Whether the manufacturer integrates forward or the downstream channel member integrates backward, the result is that one organization does all the work, and the channel is vertically integrated. 5 INTRODUCTION Managers need a structured way to analyze their make-or- buy issues that provides them with a coherent, comprehensive, easily communicated rationale for their decisions. 8 Degrees of Vertical Integration 9 2 1/28/2018 Example of institutions .