These firms extract, grow, or make products. A wide array of products is included, and firms vary in size from a one-person operation to those that employ several thousand people and generate billions in sales. Despite these differences, all are in business to satisfy the needs of markets. In order to do this, these firms must be assured that their products are distributed to their intended markets. Most producing and manufacturing firms are not in a favorable position to perform all the tasks that would be necessary to distribute their products directly to their final user markets. A computer manufacturer may know everything about designing the finest personal computer, but know absolutely nothing about making sure the customer has access to the product.
In many instances, it is the expertise and availability of other channel institutions that make it possible for a producer or manufacturer to even participate in a particular market. Imagine the leverage that a company like Frito-Lay has with various supermarket chains. Suppose you developed a super-tasting new snack chip. What are your chances of taking shelf-facings away from Frito-Lay? Zero. Thankfully, a specialty catalog retailer is able to include your product for a prescribed fee. Likewise, other channel members can be useful to the producer in designing the product, packaging it, pricing it, promoting it, and distributing it through the effective channels. It is rare that a manufacturer has the expertise found with other channel institutions.
- 1505 reads
