Sertan Kabadayi, Nermin Eyuboglu, & Gloria P. Thomas
Executive Summary
A key marketing decisions that affects a firm's market strength is channel design. A recent trend in channel design has been a greater emphasis on multiple channels, whereby firms employ different combinations of company sales forces, distributors, sales representatives, catalogs, and the Internet to reach to their customers. Despite the prevalence of multiple channels across industries and despite the complexity of the design decision, the problem of guiding managers toward effective multiple channel design has received scant attention in the academic literature. In this article, the authors examine the performance implications of fitting designs of multiple channels with firms' strategies and market conditions. More specifically, the authors analyze the extent to which different combinations of strategy, environment, and multiple channel structure contribute to firms' profitability, sales, and growth. On the basis of empirical results from 291 electronic manufacturers, the authors provide managers with guidelines on (1) important design parameters (e.g., the number of channels, the relative use of direct versus indirect components in the multiple channel system) and (2) the structure and governance of the channel system (i.e., the extent to which managers should use vertical control, formal rules, and division of labor). The authors hypothesize that multiple channels make greater contributions to firm performance when firms follow one of two ideal configurations—that is, combinations of business strategy, multiple-channel structure, and environment. The first ideal configuration suggests that firms operating within highly dynamic, complex, and munificent environments should combine a differentiation strategy with a multiple channel system in which a large number of independently owned channels is augmented with a relatively larger number of company-owned channels and in which formal rules and authority are used sparingly. The second ideal configuration suggests that firms operating in stable, simple, and lean environments should combine a cost leadership strategy with a limited number of mostly indirect channels that are administered with strong manufacturer control, formality, and vertical division of labor.
The empirical results support these predictions. Multiple channel systems that are aligned as such with their firm's business strategy and environment make significantly greater contributions to the firm's performance than do channel systems that lack such alignment. Furthermore, the better the alignment, the greater is the contribution. Overall, the findings empirically validate the importance of aligning channel design with business strategy and environmental conditions.
Biography
Sertan Kabadayi is Assistant Professor of Marketing in the Graduate School of Business at Fordham University. He holds a PhD in Marketing from Baruch College, the City University of New York. His areas of expertise include marketing channel strategy, multiple channel design, use of control mechanisms in buyer–seller relationships, and Web site loyalty. His previous work appeared in Journal of Business Research, Journal of Business and Industrial Marketing and Marketing, and Journal of Marketing Channels among others.
Nermin Eyuboglu is Associate Professor of Marketing in the Zicklin School of Business at Baruch College, the City University of New York. She holds a PhD in Marketing from the University of North Carolina at Chapel Hill. Her areas of expertise include marketing channel strategy, interorganizational relationships in the supply chain, measure development and assessment, and negotiations. Her previous work appeared in Journal of Personal Selling and Sales Management, Industrial Marketing Management, Multivariate Behavioral Research, Psychology and Marketing, and Journal of Marketing Channels, among others. She has won several teaching awards, as well as an honorable mention in one of the Marketing Science Institute's doctoral dissertation proposal competitions.
Gloria P. Thomas is Professor of Marketing in the Zicklin School of Business at Baruch College, the City University of New York. She holds a BA in Mathematics from Wellesley College and a PhD in Marketing from the Temple University. Her areas of expertise include personal selling, interpersonal and nonverbal communication, and strategy. She has coauthored a book about personal selling and published articles in Journal of Marketing, Journal of Consumer Research, Journal of Business Research, and Journal of Advertising Research, among others. She has also served in various administrative positions, including associate dean of the Zicklin School of Business and director of the doctoral program in business at the City University of New York.
Journal of Marketing, Vol. 71, No. 4, October 2007
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