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M Hasnain Sheramullah
Introduction
A vertical marketing system is a contained business unit where the manufacturer, distributor and retailer work together to sell products to the end consumer. There in which the three elements of a channel work independently to achieve the goal of moving product.
Definition
A vertical marketing system (VMS) is one in which the main members of a distribution channel producer, wholesaler, and retailer work together as a unified group in order to meet consumer needs.
Corporate VMS
Contractual VMS
Administered VMS
Retailer cooperatives
Franchise organizations
Corporate System
In a corporate VMS, production and distribution stages are combined under single ownership, in order to manage cooperation and conflict
management
for example, manufactures tires and owns the
Administered System
A vertical marketing system that coordinates
Contractual System
contractual VMS is a retailer cooperative, in which a
Retailer Cooperatives
Retailers join together to organize a new wholesaling business
Franchising
A franchise is a contractual company that makes
Advantages of VMS
Eliminate competition and conflict A centralized management has direct control over all aspects of the business Provide clear lines of authority and a tight span of control as a company can control all of the elements of producing and selling a product, which can lead to high operating efficiency.
Disadvantages of VMS
Employees at the bottom of a vertical structure may feel less valued than those higher up in the chain. It can also take a great deal of time for top management decisions to filter down through multiple layers, reducing the organization's ability to react quickly to a rapidly changing business climate. Because of the centralized control of power, weak leadership at the top can hamper the effectiveness of the entire organization.