Ch. 3 Building and Editing the Channel Value Chain I: The Key Principles

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Ch. 3Building and Editing the Channel Value
Chain I The Key Principles
I. Industry PC Company Dell
Table 3-1 PC Channel Share in the U.S.
1984 1988 1994
Direct Dealer/VAR/SI Retail 25 70 5 24 68 8 18 58 24
Total Units 7.7Million 9.23Million 15.60Million
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Ch. 3Building and Editing the Channel Value
Chain I The Key Principles
Table 3-2 PC Channel Shipment Share in the U.S.
2001 2003 2005
Direct inbound Direct outbound Internet Direct Dealer/VAR/SI Retail Others 23 18 8 28 19 5 19 23 13 22 20 4 17 25 12 20 21 4
Total Units 46.07Million 52.70Million 64.14Million
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Ch. 3Building and Editing the Channel Value
Chain I The Key Principles
II. More than Timing Secret of Dells Success
1. Ability to Time the Market 2. Very
Tight Configuration of Value Chain (both
Supply Chain and Demand Chain) III. How Dell
Builds and Edits the Channel Value Chain 1.
Value creation starts with the customer. 2.
Benchmark offerings against key competitors
3. Channel capabilities and demand chain
requirements influence each other.
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Ch. 3Building and Editing the Channel Value
Chain I The Key Principles
Principle 1 Value creation starts with the
customer. 1. Need for market segmentation
SOD ex) Dell Transactional or Relational
Customers Principle 2 Benchmark offerings
against key competitors - Calibrate your
capabilities and costs ex) Dell Foray
into retail in early 1990s
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Ch. 3Building and Editing the Channel Value
Chain I The Key Principles
Principle 3. Channel capabilities and demand
chain requirements influence each other. ex)
Dell Need to target large companies for growth
? Chip sets by Chips Technologies Premier
Pages Translating Principles 1. Dell is a
masterful retailer. Do you agree? 2. Your
intermediaries are your customers. Do you
agree?
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Ch. 4Building and Editing the Channel Value
Chain II A Framework for Getting Started
Six-step Framework (example Alpha Company) Step
1 Start from the perspective of the end-user
customer. Step 2 Prioritize and segment
customers by demand-chain needs.
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Ch. 4Building and Editing the Channel Value
Chain II A Framework for Getting Started
Six-step Framework (example Alpha Company) Step
3 Measure the (current) channels capability to
serve those needs. Step 4 Benchmark key
competitors. ? Customers Other options
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Ch. 4Building and Editing the Channel Value
Chain II A Framework for Getting Started
Step 5 Configure and evaluate new
capabilities that address customers needs. Step
6 Evaluate alternative channel options and
shape one that best fits the insights from the
prior steps.
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Ch. 4Building and Editing the Channel Value
Chain II A Framework for Getting Started

• Three Archetypes of Channel Systems
• Vertically Integrated
• Third-party delegated
• Composite (Partially Integrated)