Which vertical marketing system gives complete power to the parent company?

Introduction

In the world of marketing, vertical marketing systems (VMS) play a crucial role in determining the distribution and power dynamics between different entities within a supply chain. A vertical marketing system is a network of organizations that work together to distribute a product or service from the manufacturer to the end consumer. When it comes to the question of which vertical marketing system gives complete power to the parent company, it is important to analyze the various types of VMS and their respective power structures.

Corporate VMS

One type of vertical marketing system that gives complete power to the parent company is the corporate VMS. In this system, a single parent company owns multiple levels of the distribution channel, including manufacturing, wholesaling, and retailing. The parent company exercises full control over all aspects of the distribution process, from production to sales. This allows the parent company to dictate pricing, product placement, and marketing strategies across all levels of the distribution channel. Examples of corporate VMS can be seen in companies like Apple and Coca-Cola, where they have complete control over their manufacturing facilities, distribution centers, and retail stores.

Contractual VMS

Another type of vertical marketing system that gives significant power to the parent company is the contractual VMS. In this system, independent entities, such as franchisees or dealers, enter into contractual agreements with the parent company to distribute its products or services. The parent company sets specific guidelines and standards that the independent entities must follow, ensuring consistency and brand integrity. While the parent company may not have direct ownership over the distribution channels, it has the authority to enforce contractual obligations and maintain control over the overall distribution strategy. Examples of contractual VMS can be found in fast-food chains like McDonald’s and Subway, where franchisees operate under strict guidelines set by the parent company.

Administered VMS

In an administered VMS, the parent company holds a dominant position in the distribution channel, but it does not have complete power. Instead, the parent company relies on its influence and leadership to coordinate the activities of independent entities within the channel. The parent company may provide financial incentives, marketing support, or exclusive deals to encourage cooperation from the other entities. However, the independent entities still maintain a certain level of autonomy in their operations. Administered VMS can be seen in industries like automotive, where manufacturers work closely with independent dealerships to promote their products.

Conclusion

In conclusion, while there are different types of vertical marketing systems, the corporate VMS and contractual VMS are the ones that give complete power to the parent company. In a corporate VMS, the parent company owns and controls all levels of the distribution channel, while in a contractual VMS, independent entities operate under the parent company’s guidelines and standards. On the other hand, an administered VMS allows the parent company to exert influence and coordination but does not grant complete power. Understanding the dynamics of these vertical marketing systems is crucial for businesses to effectively manage their distribution channels and maintain control over their products or services.