The Channel Decision

This is made by a combination of intuition and analysis, and the exercise of judgment. The decision is complicated by the interdependencies existing between relevant factors. While it is difficult to quantify the many trade-offs associated with channel decisions, certain tools can be applied to them. Cost analysis techniques will give reasonable estimates of each channel cost. System analysis involves trade-offs in time, service and costs in order to maximize profits in the long run. Quantitative comparisons are made between alternative production runs, inventory holding levels, transport modes, customer service standards, order transmission, processing systems, etc. This must involve computer-oriented modeling techniques owing to the large number of variables to be considered.

In recent years, significant environmental changes have taken place:

• In recent years, significant environmental changes have taken place:
• Trend towards a short-order economy – the increase in inventory has meant that the best decision is to order frequently, forcing the primary supplier to carry the necessary inventory.
• Rapid expansion of product lines – this generates obsolescence and stock availability problems as well as inventory imbalance.
• Price differentials and discounts – legally speaking, these have to be cost-justified.
• Competitive strategies – at one time they centered on product features and price; now the emphasis is on indirect competition such as outperforming competitors on logistic planning and customer service.

The members of a marketing channel are interconnected by several different factors:

• The product line from manufacturer to end-user
• The flow of ownership from member to member
• The cash flow as payments are made by one member to another
• The exchange of information between channel members
• The advertising and sales promotion directed by channel members towards other members or end-users. Now we will study how a dealer is selected?

Qualifications/ Attributes to be Looked for in Prospective   Dealers
• Business reputation/standing   • Business capacity • Salesmanship • Expertise / experience in the line • Financial capacity and willingness to invest in the line • Creditworthiness • Capacity to offer assortments of products and services required by the customers • Capacity and willingness to extend credit to customers	• Capacity   to provide storage facilities, showrooms, shops, service workshops, salesmen and service personnel commensurate with the business   • Positive attitude towards the company • Good relations with: Consumers Opinion leaders in the area Government officials and others (as   applicable, depending on the nature of the business.