Posted: August 21st, 2024

Discuss the role of vertical integration in channel design

Discuss the role of vertical integration in channel design

Afterschool Depot: Channel Design and Implementation Plan-

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Scenario

Janet Hains is an entrepreneur and former afterschool programmer administrator. She has been monitoring the education industry for potential trends that may provide an opportunity for her to utilize her experience in starting a new business. In response to an identified increase in childhood obesity rates within the United States, coupled with the increased governmental grant offerings for youth nutrition programs, Janet has started a new company, Afterschool Depot.

Afterschool Depot will produce and sell materials to assist afterschool programmers in implementing nutrition-based programs. Afterschool Depot has just finalized its initial product line and is now in the process of preparing to market its line for sale within the United States as well as several international locations.

Due to financial and human resource constraints, Janet has decided to produce and sell only one product from the proposed product line during the first year of operation. She has selected the Healthy Kitchen to be her first product launch.

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The Healthy Kitchen is a mobile kitchen that can be wheeled out onto the playground or into the classroom. It includes an 8-week curriculum to assist afterschool programmers in conducting healthy cooking classes.

Although Afterschool Depot has spent considerable time researching and developing the initial product line, they have not spent much time on developing their overall marketing strategy to include its channel design and implementation plan.

Assume that you have been hired as the channel manager for Afterschool Depot. Beth Nammons, Marketing Director for Afterschool Depot, has assigned you to develop the channel design and implementation plan. She has asked that you complete the following three tasks in your report:

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Assess the four target markets that the company has selected.

Determine whether Afterschool Depot should include wholesalers as channel members or sell directly to retailers.

Prepare an instructional explanation that will help Beth understand the role of vertical integration in channel design and present your analysis of whether vertical integration will be valuable to Afterschool Depot.

TASK 1:

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Being aware that the first step in the channel design process is to segment the target market, assume that you reviewed the Healthy Kitchen's target market analysis performed by Beth. Your review uncovered the information shown in the table below.
Target Market Buying Process Purchasing Requirement Pertinent Information
U.S. Public School District Administrators

Buying decision is made at district level; thus district buyer purchases for all schools within its district.

Must obtain an approved purchase order prior to placing order.

Will not accept invoice prior to product delivery. Payment is delivered within 30 days of receiving invoice.

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Some public school programs have received twenty-first century grant funds that must be spent within this fiscal year.

Private Afterschool Program Administrators

Buying decision is made by individual program administrators; thus the administrator would purchase for his or her own program.

Does not require an approved purchase order prior to placing order. Will accept invoice prior to product delivery. Half the payment is provided at the time of placing the order. Rest of the payment is provided upon delivery.

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Some private programs have received twenty-first century grant funds that must be spent within this fiscal year.

Youth Weight Camp Administrators

Buying decision is made by individual camp administrators; thus administrator would purchase for his or her own program.

Does not require an approved purchase order prior to placing order. Will accept invoice prior to product delivery. Half the payment is provided at the time of placing the order. Rest of the payment is provided upon delivery.

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Youth Weight Camps have not been awarded twenty-first century funds.

Department of Defense Afterschool Program Administrators

Buying decision is made at the regional level; thus regional buyer purchases for all military base programs within their region.

Must obtain an approved purchase order prior to placing order. Will not except invoice prior to product delivery. Payment is delivered within 30 days of receiving invoice.

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Department of defense provides substantial budget for afterschool programs that are not tied to grant spending timelines or specifications.

To complete Task 1, you are to assess the four identified target markets using the service output demand (SOD) template in Word format for your analysis. Include the completed template and a 1-2 page explanation of your analysis as the first subset of your report to Beth. Prepare your report in MS Word format.

TASK 2:

To complete Task 2, you should use the target market information and your SOD analysis to determine whether including wholesalers as channel members will assist in creating a sustainable competitive advantage for Afterschool Depot. The alternative is to sell directly to retailers.

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In order to make a well-informed decision, you assessed Afterschool Depot's internal constraints that may affect channel member selection. Your assessment identified warehouse space and the sales representative compensation budget as potential constraints.
Once you have determined whether to include wholesalers as channel members, you must complete your analysis using the efficiency chart template in Word format. Include the completed template and a 1-2 page explanation of your analysis as the second subset of your report to Beth.

TASK 3:

Task 3 requires you to prepare an instructional explanation to Beth that will help her understand the following:

• The role of vertical integration in channel design
• Your analysis of whether vertical integration will be valuable to Afterschool Depot
• Your recommendation regarding whether the company should plan to utilize vertical integration.

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