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A Brief Review of Channel Governance Distribution Channel Strategy L P Bucklin Spring 2000 Channel Governance Definition The use of hierarchical type controls to coordinate activities throughout the channel instead of market forces to provide superior end user service to motivate members to adhere to a common marketing plan to limit conflict among channel members Coordination requires the presence of power and its judicious use Payoff from Coordination Insure effective service delivery Obtain wide stocking Reynolds Wrap Insure similar products service pattern across all EUI Pizza Hut Provide appropriate pre and post sale services Cummins Caterpillar Ford Simplify end user shopping costs Ford Insure image consistency Standardized facilities Pizza Hut Greater efficiency Ford Kraft Governance Requires Power Power the ability one one channel member to influence the behavior of another The degree of power depends heavily upon the relative dependence of the governed party The greater the degree of control sought in a channel the greater the need for a form of governance which will that power Channel Governance Modes Spot channels control through open markets and short term transactions Administered channels control through rewards expertise and the power to punish Contractual channels control by long term agreements and the power of the contract Vertically integrated channels control by ownership and authority of a single firm Channel Governance Modes Market Based Controls Control Reynolds Wrap Intensive distribution Administered Contractual Hierarchy Unilateral Governance Asymmetric Dependence Anasazi Selective distribution Cummins Engine long term incentive Pizza Hut franchise contract Kraft Food integration Bilateral Governance Symmetric Dependence Channel Structure Tools Greater Power Source Form of Channel Governance Degree of Channel Closure Intensive Distribution Selectivity by Reseller Type Selective Distribution by Market Area Contractual Channel Exclusive

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