Page 99 - Marketing the Basics 2nd

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FMS for cockpit systems, and Pratt and Whitney for the auxiliary power unit, suppliers from both Europe and North America in this case. Tier II suppliers would be supply these suppliers with parts and sub-modules in turn.
MARKETING CHANNELS
As we said earlier, choosing the channels to market is vitally impor- tant in business. Once established, a marketing channel is almost mollified. Given the stakes involved as a consequence of globaliza- tion, the question arises why would a manufacturer, particularly a large sized one, trust intermediaries to bring their product to market? Surely developing a well-functioning marketing channel is difficult, but not impossible.
Louis W. Stern and Adel I. El-Ansary offer a useful explanation as to why a producer would rely on an intermediary:
Intermediaries smooth the flow of goods and services. This procedure is necessary in order to bridge the discrepancy between the assortment of goods and services generated by the producer and the assortment demanded by the consumer. The discrepancy results from the fact that manufacturers typically produce a large quantity of a limited variety of goods, whereas consumers usually desire only a limited quantity of a wide variety of goods.
Consumers want convenience and variety. The cost to reach a critical mass of customers is simply too high to justify creating a proprietary channel for most manufacturers. By specializing, producers can concentrate on activities they’re best at, which is designing, developing and manufacturing their product. Shifting the responsibilities of distribution and selling – which requires competencies in logistics, warehousing, information gathering and a network of sales agents – is in the interest of the manufacturer with production competencies. Efficiency increases and production costs decrease. It is these two factors that provide economic incentives for manufacturers to create relationships with intermediaries. Intermediaries add customer value.