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Chapter 10 Value Chain Strategy

The document discusses strategies for value chain management, including different types of channel arrangements, factors that influence distribution decisions, and considerations for international channel selection. It also provides examples of channel maps and examines the relationship between marketing and supply chain strategies. The overall focus is on developing effective channel strategies to deliver value to customers.

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329 views24 pages

Chapter 10 Value Chain Strategy

The document discusses strategies for value chain management, including different types of channel arrangements, factors that influence distribution decisions, and considerations for international channel selection. It also provides examples of channel maps and examines the relationship between marketing and supply chain strategies. The overall focus is on developing effective channel strategies to deliver value to customers.

Uploaded by

mst_momena_akhter
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Strategic Marketing

1. Imperatives for Market-Driven Strategy


2. Markets and Competitive Space
3. Strategic Market Segmentation
4. Strategic Customer Relationship Management
5. Capabilities for Learning about Customers and Markets
6. Market Targeting and Strategic Positioning
7. Strategic Relationships
8. Innovation and New Product Strategy
9. Strategic Brand Management
10. Value Chain Strategy
11. Pricing Strategy
12. Promotion, Advertising and Sales Promotion
Strategies
13. Sales Force, Internet, and Direct Marketing Strategies
14. Designing Market-Driven Organizations
15. Marketing Strategy Implementation And Control
Chapter 10

Value Chain
Strategy
Learning Outcomes
After studying this chapter, the students should
be able to:

• Understand the Strategic role of value chain


• Develop Channel strategy
• Manage the channel
• Design International channels
Value Chain Strategy

•A value chain is a set of activities that a firm


operating in a specific industry performs in order
to deliver a valuable product(i.e., goods  and/or
services) for the market.
Strategic role of value chain (1)
Distribution functions:
– Buying and selling
– Assembly
– Transportation
– Financing
– Processing and storage
– Advertising and sales promotion
– Pricing
– Reduction of risk
– Personal selling
– Communications
– Servicing and repairs
Value chain structures - consumer products
Consumer Products

Producers

Supply Chains

Sales
Agents

Direct Wholesalers Wholesalers


Channel

Retailers Retailers Retailers

Consumers
Value chain structures - organizational products
Organizational Products

Producers

Supply Chains

Sales Sales
Agents Agents

Direct Distributors Distributors Distributors


Channel

Re-sellers

Organizational Customers
Factors influencing distribution decisions
– Buyer considerations
– Competitive considerations
– Product characteristics
– Financial and control considerations
Factors Favoring Direct Distribution by
Manufacturer
Profit margins Opportunity for
adequate to support competitive
Rapidly changing
distribution advantage
market environment
organization
Complete line Early stages of
of products Distribution product life cycle
by the
manufacturer
Purchases are Complex product
large and application
infrequent
Extensive
Small number of
purchasing
geographically Supporting
process
concentrated services are
buyers required
1. Types of Channel Arrangement

• Conventional channel: A channel


consisting of independent producers,
wholesalers, and retailers, each a
separate business seeking to maximize its
own profit even at the expense of profits
for the system as a whole.
Types of Channel Arrangement
Vertical marketing channel: A distribution channel
structure in which producers wholesalers and
retailers act as a unified system.

One channel member owns the others (Corporate


VMS), has contracts with them (Contractual VMS),
or has so much power that they all cooperate
(Administered VMS).
Distribution Intensity
Intensive Distribution-
Stocking the product in as many outlets as possible.
Selective Distribution-
In selective distribution, a producer sells its product
through multiple, but not all possible wholesalers
and retailers in a market where a consumer might
reasonably look for it.
Exclusive Distribution-
Under exclusive distribution, the supplier agrees to
sell its product only to a single wholesaling
middlemen and/or retailer in a market.
Factors influencing Channel configuration
– End-user considerations
– Product characteristics
– Manufacturer's capabilities and resources
– Required functions
– Availability and skills of intermediaries
Illustrative channel map for heating units

• Channel maps
Production = Consumption =
100,000 units Direct sales = 10,000 100,000 units
units

Commercial
Construction Construction
Independent 42,000 units 75,000 units Companies
Distributors Sub-
84,000 units Contractors (85,000 units)
42,000 units 7,000
Production Small 40,000 units
Of Central Hardware units
Heating Retailers 2,000
Boilers units

5,000 units Large


5,000 units
Hardware Domestic
Retailers Customers
(15,000 units)
Direct sales = 1,000 units
Marketing/supply chain relationship
• Focus on real drivers of customer value not
just technical
• Do not create inflexibility and inability to
respond to change
• Protect brands and competitive strength over
short-term cost savings
• Do not confuse supply chain strategy with
competitive advantage
International channels
• Examining international distribution patterns
• Factors affecting global channel selection
• Global issues regarding multichannel
strategies
International Channel of Distribution Alternatives
Home country Foreign country
The foreign marketer or
producer sells to or through

Domestic Open Exporter Importer Foreign Foreign Foreign


producer or distribution agent or retailer consumer
marketer sells via domestic merchant
to or through wholesale wholesalers
middlemen

Export management company


or company
sales force

Source: Philip R. Cateora, International Marketing, 7th ed., Homewood, Ill.: Richard D. Irwin, Inc., 1990, 572.

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