Directorate of distance education

Channel Structure
Channel structure may be viewed as a function of product life 
cycle, logistics systems, effective communication networks, product 
characteristics, or firm. However, the most detailed theory of channel 
structure was developed by Louis P. Bucklin, who staled that the purpose 
of the channel is to provide consumers with the desired combination of 
its outputs (i.e., lot size, delivery time, and market decentralization) at 

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minimal cost. Consumers determine channel structure by purchasing 
combinations of service outputs. 
The best channel forms when no other group of institutions 
generates more profits or more consumer satisfaction per dollar of product 
cost. Bucklin concluded that functions will be shifted from one channel 
member to another in order to achieve the most efficient and effective 
channel structure.
The Factors that Might Influence Channel Structure Include
1. Outsourcing.
2. Postponement and speculation.
3. Speed.
4. Technological, cultural, physical, social, and political factors.
5. Physical factors - geography, size of market area, location of 
production centers, and concentration of population.
6. Local, state, and federal laws.
7. Social and behavioural variables.
Flows in the Channel of Distribution
Channel of Distribution
An example of the various channels of distribution that a 
manufacturer of grocery products might use. The manufacturer sells its 
products to wholesalers, chain stores, cooperatives, and the military. The 
wholesalers and coops service retail accounts. Accounts are serviced by a 
national sales force.
Product and Information Flows
Illustrates the product and information flows that take place in a 
channel. Remember the product flows take place only after information 
flows are initiated. In addition to product and information flows, payments 
for the merchandise and promotional inventories back in the channel. 
The quality and speed of the information flows determine the safety stock 
held at each level of the channel.

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