Competition and Cooperation in Marketing Channel Choice: Theory and Application

Abstract

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

International entrepreneurial orientation and regional expansion

“…While this important question has received very little empirical attention in the international business and entrepreneurship literatures, the marketing channel management literature provides helpful insights to draw from when addressing this question. Importantly, the industrial marketing literature indicates that marketing channels are inter-organizational and institutional arrangements for regulating and supporting the flow of value from production to the market (Coughlan, 1985). Also referred to as marketing intermediaries (including distributors, wholesalers, retailers, agents, and marketing companies), marketing channels are the most important component of any value chain system: they represent a substantial opportunity cost, by providing firms with market knowledge to facilitate efficient and effective conversion of potential buyers into profitable customers.…”

“…Viewed from an absorptive capability and knowledge-based view perspective, there are arguments that marketing channels are often characterized by cooperation and knowledge exchange between cooperating partners (Coughlan, 1985). To this end, Cohen and Levinthal contend that the "ability of a firm to recognize the value of new, external information, assimilate it, and apply it to commercial ends" (1990, p. 128) is critical to its ability to expand to international markets (Lane et al, 2001).…”

Invited Paper—A Keyword History of Marketing Science

“…Note that the first appearance of a word on this plot marks the time at which a word first became popular enough to enter the top 10 in market share, not the first time the word appeared in the literature. For example, even though Coughlan (1985) is the first paper published in Marketing Science to use the keyword "game theory," the topic did not become popular until the mid-1990s. That is, there can be a response latency between a word's first appearance and when it becomes popular.…”

The choice of organizational form: Vertical financial ownership versus other methods of vertical integration

“…In terms of product quality and service, Harrigan (1986) persuasively argues that new pioneering products and high quality differentiated products require vertical financial ownership to insure that quality is maintained through the linkages of the value-added chain (Anderson & Coughlan, 1987). A manufacturer can use forward integration to differentiate her product by providing a higher level of service at the distribution level than would an independent distributor (Coughlan, 1985;Etgar, 1978 (Shepard, 1990) between the manufacturer and retailers mitigates free-rider problems (Goldberg, 1984;Oster, 1984;Telser, 1960) by eliminating discounters and enabling the manufacturer to signal quality via retail endorsement (Klein & Murphy, 1988;Marvel & McCafferty, 1984). This seems to have been the rationale explaining resale price maintenance for high quality products such as Lenox china and Magnavox televisions (Goldberg, 1982), Sony electronics, Florsheim shoes, and London Fog and Misty Harbor raincoats (Overstreet, 1983).…”