No abstract

Manufacturers introducing an industrial product to a foreign market face a difficult decision. Should the product be marketed primarily by captive agents (company salesforce and company distribution division) or by independent intermediaries (outside sales agents and distributors)? This is an issue of downstream vertical integration. The authors explore the issue through an empirical investigation of distribution channel choice in foreign markets by U.S. semiconductor companies. Using original interview data, they develop scales to measure key variables. With these measures they build a logistic regression model of what factors affect the form of the distribution channel chosen in various foreign markets. The results indicate that integration is associated with the degree of transaction specificity of assets in the distribution function and whether or not the product being introduced is highly differentiated. There is evidence that the product will be sold through whatever channel is already in place, if any. Further, American firms seem more likely to integrate the distribution channel in highly developed industrialized countries (Western Europe) than in Japan and Southeast Asia, which are more culturally dissimilar. Implications for managers faced with a channel choice are explored.

This paper discusses the problem of choosing a vertical marketing channel in a product-differentiated duopolistic market. Firms choose product price and the form of the marketing channel to maximize profits. It is shown that integration of the marketing function results in greater price competition and lower prices than does the use of independent marketing middlemen. The profitability of reducing price competition by using such middlemen is investigated. Two hypotheses—that integration is negatively associated with the products' substitutability and that symmetric channel structures are stable—are tested in a preliminary way and supported with survey data from the international semiconductor industry.distribution channels, vertical integration, game theory. semiconductor industry

Product returns cost U.S. companies more than $100 billion annually. The cost and scale of returns management issues necessitate a deeper understanding of how to deal with product returns. We develop an analytical model that describes how consumer purchase and return decisions are affected by a seller's pricing and restocking fee policy. Taking into account the consumers' strategic behavior, we derive the seller's optimal policy as a function of consumer preferences, consumer uncertainty about product attributes, consumer hassle cost for returns, and the effectiveness of the seller's forward and reverse channel capability. We allow for two sources of consumer uncertainty and show how the seller may use its price and restocking fee as a means of targeting a segment of consumers who know their product consumption utilities. We find that even if it is possible to eliminate returns costlessly through the provision of information about the fit between consumer preferences and product characteristics, returns can nevertheless be part of an optimal product sales process. That is, we identify conditions under which it is (or is not) optimal to provide product fit information to consumers. We show that the marginal value of information to the seller is decreasing in the operational efficiency of the seller's forward and reverse logistics process as well as the level of product uncertainty. We identify the impact of multiple product options and sources of consumer uncertainty on the model's results. The analysis generates testable hypotheses about how consumer-level and seller-level parameters affect the return policies observed in the marketplace.OM-marketing interface, product returns, restocking fees, reverse logistics, demand management

No abstract