Car distribution organization : strategic issues in four configurations
Abstract: This study is concerned with car distribution organization, a context characterized by overcapacity, intense competition, and manufacturers heavily focusing on brands. In the study, different distribution solutions are investigated through applying a framework of four strategic issues. First, the pressure to keep distribution costs low while conveying a clear brand message gives rise to decisions on solus or multi franchising; second, the choice of either selling through one channel that is likely to be committed to the brand, or through multi channels competing with each other; third, the choice of selling the products through own outlets or through independent dealers, the latter giving rise to conflicting interests; fourth, the choice of mechanisms for coordinating channel members' efforts and knowledge exchange.The empirical part of the study contains slightly more than 100 interviews with manufacturers, importers, dealers and experts in Sweden, Germany, the UK, Spain and Australia.The study reveals that, among other forces in the distribution setting, industry overcapacity appears to undermine efforts to create constructive relationships between channel members. Order-to-delivery systems and systems to feed back market knowledge are superseded by the pressure to sell pre-produced cars. Particularly volume brands suffer from fierce competition, while a premium brand provides some protection from competitive forces.The findings of the study are synthesized as four distribution chain configurations. In the brand-based chain, channel members' efforts create a consistent brand experience throughout the chain. The efficiency-based chain is focused on keeping costs low without neglecting other demands, e.g. the ability to handle industry overcapacity. The flexibility-based chain is led by a powerful dealer group who manages a portfolio of brands and dealerships. As new opportunities in the market emerge, the dealer group restructures the portfolio accordingly. The premium aspiration chain, finally, represents an inferior strategy by trying to be a premium brand while lacking an attractive product, thus creating a situation of confused customers and excessive distribution costs.
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