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From manufacturer to supplier: Driving forces and consequences
Linköping University, Department of Management and Engineering, Industrial Marketing and Industrial Economics . Linköping University, The Institute of Technology.
Linköping University, Department of Management and Engineering, Industrial Marketing and Industrial Economics . Linköping University, The Institute of Technology.
(English)Manuscript (preprint) (Other academic)
Abstract [en]

Purpose Historically, vertical integration is a corporate strategy of interest to the field of strategic management and organizational economics. There is no lack of explanations for vertical integration, among which, transactional cost economics (TCE) provides a theoretical basis for vertical integration. However, the current popularity of vertical integration marks a departure from traditional motivations based on altering industry structure and minimizing cost. Besides, most of the existing studies regarding vertical integration have been conducted at the micro-analytic level but analysis at the supply chain level is sparse, which might be more relevant and significant in today’s business environment. The purpose of this paper is exploring the driving forces for vertical integration, particularly downstream integration of distribution and the consequences in a chain of manufacturer-distributor-retailer.

Design/methodology/approach This study takes an exploratory case study research approach. The case chosen was a Swedish-based timber manufacturer that vertically integrated a distribution centre in the UK, thereby becoming a direct supplier to DIY retailers and builders’ merchants. Data was primarily collected through face-to-face interviews that used an open-ended format.

Findings Research findings include that large retail chains’ demands and manufacturer’s reposition strategy, regarding business focus and position in supply chain, are the most important factors driving the manufacturer’s vertical integration of distribution. Vertical integration has transformed the manufacturer into a supplier to large timber product sellers and offered the supplier with greater potential to provide integrated solutions, in turn, become a strategic partner to its customers.

Originality/value This empirical study examines a building material distribution channel, a subject not often studied in extant literature. The study results add empirical evidence to explanations and impacts of vertical integration, especially the integration of customer interface. This study also provides an empirical inquiry of the transformation from product to offering focusing on the retailing context.

 

Keyword [en]
Supply chain integration, Vertical integration, Distribution channel, DIY retailers, Builders’ merchants
National Category
Other Mechanical Engineering
Identifiers
URN: urn:nbn:se:liu:diva-64360OAI: oai:DiVA.org:liu-64360DiVA: diva2:389734
Available from: 2011-01-20 Created: 2011-01-20 Last updated: 2011-01-20Bibliographically approved
In thesis
1. Developments in Distribution Channels: A Case Study of a Timber Product Distribution Channel
Open this publication in new window or tab >>Developments in Distribution Channels: A Case Study of a Timber Product Distribution Channel
2010 (English)Licentiate thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis describes and analyses the trends and developments of actors along distribution channel. In particular, the study focuses on resellers and manufacturer based on the empirical material from one particular case study. The study has three main goals: (1) to investigate the challenges arising from channel actor developments, the effects of these developments on the structure of the retailer supply chain and their implications for manufacturers and suppliers, (2) to identify explanations for manufacturer’s vertical integration of distribution and the resulting impacts and, (3) to conduct a preliminary customer value analysis relating to the distribution channel of solid wood products.

The study has taken an exploratory and qualitative research approach with an abductive reasoning process. A case study strategy was adopted, which studied a distribution channel consisting of a Sweden-based timber manufacturer that vertically integrated a distributor in the UK. Semi-structured interviews comprised the primary data collection technique in this study. A two-step data collection process was conducted between May 2009 and April 2010, including 29 interviews with 24 interviewees from eight organizations, representing the manufacturer, distributor and reseller in the distribution channel. Non-participating observations were carried out by attending sales meeting and joining account managers on store visits. All interviews were documented and transcribed and the information was collated into case units, along with any supporting secondary data, such as company magazines, web resources, annual reports, sales reports, meeting presentations, etc.

This thesis has produced several findings. Reseller developments have promoted the formation of reseller demands, such as integrated solutions with respects to logistics, marketing, merchandising, innovation, etc. Retailer developments have driven the change of a retailer supply chain structure, and have opened up a number of new questions to be posed on manufacturer and its positioning in the supply chain. The most important factors driving the manufacturer’s vertical integration of distribution are customer demands, the manufacturer’s repositioning strategy with regard to its business focus and its positioning in the supply chain. The vertical integration of distribution transforms the manufacturer into a direct supplier to large timber product resellers. It also offers the supplier a great opportunity to enhance offerings and establish strategic relationship with customers. The output of suppliers has expanded from solely manufacturing goods to also include services and knowledge associated with goods. In practice, it can be complicated for a supplier to create and communicate value. A full understanding of what timber product customers seek in terms of value elements has not yet been achieved. This study has assisted in terms of understanding the differing value that channel actors place on a range of product, physical distribution, service and supplier value elements by developing a value analysis framework. Suppliers can use this framework when designing, customizing and marketing offerings for customers.

Place, publisher, year, edition, pages
Linköping: Linköping University Electronic Press, 2010. 114 p.
Series
Linköping Studies in Science and Technology. Thesis, ISSN 0280-7971 ; 1358
National Category
Other Mechanical Engineering
Identifiers
urn:nbn:se:liu:diva-64362 (URN)LiU-TEK-LIC 2010:29 (Local ID)978-91-7393-268-4 (ISBN)LiU-TEK-LIC 2010:29 (Archive number)LiU-TEK-LIC 2010:29 (OAI)
Presentation
2010-12-20, 3C:817, A Building, Campus Valla, Linköpings universitet, Linköping, 13:00 (English)
Opponent
Supervisors
Available from: 2011-01-20 Created: 2011-01-20 Last updated: 2011-03-23Bibliographically approved

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Guan, WeiRehme, Jakob

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CiteExportLink to record
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Citation style
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