Channel strategy adaptation

Using transaction cost theory, considerable research in marketing has focused on the conditions under which firms would use direct or vertically integrated versus indirect or arms length channels of distribution. Data from the field, however, indicate that channel configurations are more varied and complex, with multiple channels and composite channels being just as common as direct and indirect channels. In an attempt to explain this variety, this paper revisits the influence on channel structure of another contending variable, namely environmental complexity. We explore the role and influence of its two components, namely volatility (stability) and heterogeneity (homogeneity). Our study of 139 firms in the healthcare industry reveals that firms facing highly volatile and customer concentrated environments tend to use direct channels, and firms facing highly stable and heterogeneous environments tend to use distribution channels. Intermediate forms such as composite channels and multiple channels were favored by firms facing combinations of the environment where the intensity of one component was high and the other low. In general, firms seem to first choose a business strategy to address their external environment, and then choose a channel strategy to support that business strategy. Firms did not always adapt by making structural changes. Under certain conditions, they simply reallocated channel functions within the same structure, thus virtually deriving all the benefits of a new structure without having to create one.marketing; channels of distribution;

Vertical Channel Analysis of the U.S. Milk Market

The objective of the research in this study is to evaluate the pricing and market conduct of milk manufacturers and retailers. Using data from a U.S. Midwestern state, we estimate a random coefficient logit demand model (RCL) to empirically investigate a range of possible scenarios in the milk supply chain. These include vertical leader-follower model with underlying Bertrand-Nash pricing, models allowing for nonlinear pricing contracts, and collusion scenarios at various levels in the supply chain. This study contributes to the literature in the following ways. First, it generalizes the RCL demand model via Box-Cox power transformation. While previous studies rely on ad hoc specified linear indirect utility, this procedure allows data to determine the functional form of utility. Power transformation parameters cannot be obtained analytically with product-level data, given that consumer choices are unobserved. We propose an algorithm to estimate the transformation and consumer heterogeneous taste parameters sequentially. The model is identified using annual variation in consumer demographics along with cross-sectional and time series variation in milk consumption. Finally, the milk choice set is allowed to vary across markets. It should be mentioned that jointly estimating the manufacturing sector, the vertical channel, and the retail sector will more likely yield reliable estimates of structural parameters vis-à-vis studies investigating food supply chain sectors in isolation. Several key results are obtained from the research. First, the estimate of demand “superelasticity”suggests that retailers have incentives to adjust retail markups to enhance their market power. Next, supply selection bias associated with imposing restriction on the demand-side framework is shown to have formidable policy implications. Namely, empirical results from the general demand show that retailers are more powerful than they would appear otherwise. In the face of high concentration and a small presence of Wall-Mart in these markets this seems a plausible scenario.Market conduct, random coefficient logit, vertical chain, Box-Cox power transformation, Agricultural and Food Policy, Demand and Price Analysis, Industrial Organization, D43, L13,

Co-opetition of TV broadcasters in online video markets : a winning strategy?

This article focuses on TV broadcasters adopting co-opetition strategies for launching online video services. It is claimed that the emergence of online video platforms like YouTube and Netflix is driving TV broadcasters to collaborate with their closest competitors to reduce costs and reach the necessary scale in the global marketplace. The article sheds light on online video platforms that were developed following a co-opetition strategy (Hulu and YouView). The establishment of joint ventures in online video, however, has been scrutinised by competition authorities which fear that collaboration between close competitors lessens rivalry and reduces consumer choice. Therefore, several co-opetition projects (among others BBC’s Kangaroo and Germany’s Gold) have been prohibited by competition authorities

The Applicability of Transaction Costs Economics to Vertical Integration Decision: Evidences from a Brazilian Beef Processor

This article aims to explore the vertical integration decision of a beef processor from an integrated approach operations strategy and transaction costs economic theory. In this research, vertical integration as a structural decision of operations strategy determined by the occurrence of transaction costs. The paper presents one case study carried out in one beef Processor Company which illustrates the main theoretical assumptions. The results suggest that transaction costs economics helps to identify key points of major strategic decisions on vertical integration due to its behavioural perspective, reducing the effect of uncertainty and asset specificity of this decision. At the end of the paper, future research is suggested.vertical integration, operations strategy, transaction costs economics, Agribusiness, Agricultural Finance, Industrial Organization,

The strategic evolution of Aer Lingus from a full-service airline to a low-cost carrier and finally positioning itself into a value hybrid airline

Aer Lingus has been an unique airline as it transitioned from a full-service airline to a low-cost carrier and is currently positioned as a value hybrid airline. It has coexisted with Ryanair for decades and it encountered three imminent periods where bankruptcy prevailed from 1993 to 2009. The research aims to uncover the various strategies that were applied to structurally re-engineer the carrier in order to adapt to its evolving competitive landscape. The key pillars underpinning Aer Lingus’ turnaround as a value hybrid were as follows: strict adherence to capacity discipline; relentless cost control and value-adding, consumer-driven product differentiation; innovative partnerships including contract flying to alleviate its problematic seasonality issues inherent in Aer Lingus markets; and by re-engineering its Dublin-based hub airport. A visionary master plan for the hub was fabricated to capitalize on Ireland’s geographical positioning which targeted the traffic flows between UK/European and North American destinations through its synchronized connection network at Dublin