Channel selection and competition

Abstract

The distribution decision, which is the determination of the most profitable ways to reach the market, is an important input to the planning of other marketing efforts. A different plan of pricing, advertising, and other marketing activity should be needed, depending on the structure of a distributional channel. The first purpose of this thesis is to analyze the effect of competition in marketing channels on the design of channel structures. We analyze the competition of channels, which practice pricing and other marketing activities in game theoretic framework. Also we suggest an appropriate channel structure under various competing circumstances. We showed in the analytical study that interchannel competition is intensified leading to lower prices, lower profits, and higher communication levels when the communication cost is reduced, when the margin rate of communication decision maker is increased, when the competing brands are perceived to be more similar. If channel captains can determine the structure of their channels, there are situations they choose decentralized channels as a Nash equilibrium. In this equilibrium, the channel captains may delegate communication decisions to the other channel member. The second purpose is to empirically investigate the relationships among the channel configuration, its major antecedents, and its outcomes. Particularly, we consider analytical and empirical literature to suggest the relation of channel structure and competitive behavior. For this purpose, we perform two empirical studies. One is for Korea pharmaceutical Market. Another is for consumer product market. Especially, the latter study is done, considering dynamic interactive behavior of advertising competition in real world market. In the former empirical study, an interesting finding on channel control is that channel integration interactively influence the control with power related variable. Especially, we found percent of foreign capital, product substitut...