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The changing landscape of supply chain management, marketing channels o

distribution, logistics and purchasin

Article in Journal of Business & Industrial Marketing · December 2006

DOI: 10.1108/08858620610708911

CITATIONS

101
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2,784

4 authors

Some of the authors of this publication are also working on these related projects:

Global Returns Management Process Across Different Regions View projec

The role of the shopper within the supply chain in an omni-channel environment View project

Gregory T. Gundlac

University of North Florida

74 PUBLICATIONS 6,161 CITATIONS

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Yemisi A Bolumol

Michigan State University

27 PUBLICATIONS 787 CITATIONS

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Reham A. Eltantawy

University of North Florida

18 PUBLICATIONS 1,252 CITATIONS

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Robert Frankel

University of North Florida

45 PUBLICATIONS 1,771 CITATIONS

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https://www.researchgate.net/publication/241708510_The_changing_landscape_of_supply_chain_management_marketing_channels_of_distribution_logistics_and_purchasing?enrichId=rgreq-d74a5f144680d17a17515ed5618bb24f-XXX&enrichSource=Y292ZXJQYWdlOzI0MTcwODUxMDtBUzoxMDQ0NzE2MzU5NTU3MjJAMTQwMTkxOTM4NzQ0NQ%3D%3D&el=1_x_2&_esc=publicationCoverPdf

https://www.researchgate.net/project/Global-Returns-Management-Process-Across-Different-Regions?enrichId=rgreq-d74a5f144680d17a17515ed5618bb24f-XXX&enrichSource=Y292ZXJQYWdlOzI0MTcwODUxMDtBUzoxMDQ0NzE2MzU5NTU3MjJAMTQwMTkxOTM4NzQ0NQ%3D%3D&el=1_x_9&_esc=publicationCoverPdf

https://www.researchgate.net/project/The-role-of-the-shopper-within-the-supply-chain-in-an-omni-channel-environment?enrichId=rgreq-d74a5f144680d17a17515ed5618bb24f-XXX&enrichSource=Y292ZXJQYWdlOzI0MTcwODUxMDtBUzoxMDQ0NzE2MzU5NTU3MjJAMTQwMTkxOTM4NzQ0NQ%3D%3D&el=1_x_9&_esc=publicationCoverPdf

https://www.researchgate.net/?enrichId=rgreq-d74a5f144680d17a17515ed5618bb24f-XXX&enrichSource=Y292ZXJQYWdlOzI0MTcwODUxMDtBUzoxMDQ0NzE2MzU5NTU3MjJAMTQwMTkxOTM4NzQ0NQ%3D%3D&el=1_x_1&_esc=publicationCoverPdf

https://www.researchgate.net/profile/Gregory_Gundlach?enrichId=rgreq-d74a5f144680d17a17515ed5618bb24f-XXX&enrichSource=Y292ZXJQYWdlOzI0MTcwODUxMDtBUzoxMDQ0NzE2MzU5NTU3MjJAMTQwMTkxOTM4NzQ0NQ%3D%3D&el=1_x_4&_esc=publicationCoverPdf

https://www.researchgate.net/institution/University_of_North_Florida?enrichId=rgreq-d74a5f144680d17a17515ed5618bb24f-XXX&enrichSource=Y292ZXJQYWdlOzI0MTcwODUxMDtBUzoxMDQ0NzE2MzU5NTU3MjJAMTQwMTkxOTM4NzQ0NQ%3D%3D&el=1_x_6&_esc=publicationCoverPdf

https://www.researchgate.net/profile/Yemisi_Bolumole?enrichId=rgreq-d74a5f144680d17a17515ed5618bb24f-XXX&enrichSource=Y292ZXJQYWdlOzI0MTcwODUxMDtBUzoxMDQ0NzE2MzU5NTU3MjJAMTQwMTkxOTM4NzQ0NQ%3D%3D&el=1_x_4&_esc=publicationCoverPdf

https://www.researchgate.net/institution/Michigan_State_University?enrichId=rgreq-d74a5f144680d17a17515ed5618bb24f-XXX&enrichSource=Y292ZXJQYWdlOzI0MTcwODUxMDtBUzoxMDQ0NzE2MzU5NTU3MjJAMTQwMTkxOTM4NzQ0NQ%3D%3D&el=1_x_6&_esc=publicationCoverPdf

https://www.researchgate.net/profile/Reham_Eltantawy?enrichId=rgreq-d74a5f144680d17a17515ed5618bb24f-XXX&enrichSource=Y292ZXJQYWdlOzI0MTcwODUxMDtBUzoxMDQ0NzE2MzU5NTU3MjJAMTQwMTkxOTM4NzQ0NQ%3D%3D&el=1_x_4&_esc=publicationCoverPdf

https://www.researchgate.net/profile/Robert_Frankel?enrichId=rgreq-d74a5f144680d17a17515ed5618bb24f-XXX&enrichSource=Y292ZXJQYWdlOzI0MTcwODUxMDtBUzoxMDQ0NzE2MzU5NTU3MjJAMTQwMTkxOTM4NzQ0NQ%3D%3D&el=1_x_4&_esc=publicationCoverPdf

The changing landscape of supply chai

management, marketing channels of
distribution, logistics and purchasing
Gregory T. Gundlach, Yemisi A. Bolumole, Reham A. Eltantawy and Robert Frankel

Coggin College of Business, University of North Florida, South Jacksonville, Florida, USA

Abstract
Purpose – The paper seeks to examine the changing landscape of supply chain management, marketing channels of distribution, logistics an

purchasing.
Design/methodology/approach – The authors examine and take stock of the changing nature and landscape surrounding the related disciplines of
supply chain management, marketing channels of distribution, logistics and purchasing. This examination highlights the considerable evolution and
significant advances occurring within and between these disciplines.
Findings – The authors find that this new landscape provides both opportunities and challenges for future scholarship and practice in these relat

disciplines.
Originality/value – The examination and findings should be of value to those attempting to understand the evolving nature and interrelationship of
these fields, and those who currently practise within them.

Keywords Supply chain management, Distribution channels and markets, Distribution management, Purchasing

Paper type Viewpoint

The last two decades have witnessed the development and

continuing evolution of a number of related discipline

including supply chain management (SCM), marketing

channels of distribution, logistics and purchasing. Reflective

of both academic development and managerial innovation

advances occurring within these fields and across them have

yielded considerable insights and furthered busine

knowledge and practice. At the same time, this evolution

has fundamentally altered the scholarly landscape addressing

these related fields and their managerial practice.
Examples of such changes include the increasing

expansion and prominence of supply chain management

as a field of inquiry and practice, its encompassment of

logistics, the evolving sophistication and re-emergence of

purchasing as a strategic function, and the increasing

emphasis of relationships and dynamic considerations

within marketing channels research and practice. In this

essay, we examine and attempt to take stock of this new

landscape to better understand the nature and

interrelationship of these disciplines and the implications

of changes occurring within and across them for

scholarship and their consequences for practice. Our

examination highlights the ongoing changes occurring in

these fields, reveals insights regarding the nature of their

inter-relationship, and points to a number of opportuniti

and implications for

scholarship and practice.

Background

Drawing on selected literatures and with the intention of

providing background (versus an in-depth review), we first

overview accepted definitions and research topics of interest

for each area, common units and levels of analysis applied to

research, prevalent theories and methods for such research,

and recent trends identified for both research and practice.

Table I organizes our analysis framework and summarizes the

key findings of this overview.

Supply chain and supply chain management
Definition
The supply chain is generally conceptualized as a network of

companies from suppliers to end-users, which have with the

intention of integrating supply/demand via coordinated

company efforts. The origin of the term “supply chain

management” is thought to reside in the work of consultan

during the early 1980s (Oliver and Webber, 1982). A review

of the supply chain management literature during the late

1980s and the early 1990s reveals the interchangeable use of

neologisms: logistics management, network sourcing,

supplier-base reduction, and inter-organizational integration.

In the late 1990s, to some extent, supply chain management

supplanted the term “logistics” (Rogers and Leuschner,

2004). In an attempt to clarify confusion surrounding the

term, the Council of Supply Chain Management

Professionals (CSCMP) announced a modified definition of

SCM and a statement that clarified its scope and boundaries.

CSCMP, formerly the Council of Logistics Management

(CLM) and the National Council of Physical Distribution

Management (NCPDM), was formed in 1963 with the

objective to develop the theory and understanding of the

supply chain processes and to foster professional dialogue and

development in the field. Academic textbooks and researche

in the field of logistics and supply chain management typically

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0885-8624.htm

Journal of Business & Industrial Marketing

21/7 (2006)

428

–

438

q Emerald Group Publishing Limited [ISSN 0885-8624]

[DOI 10.1108/08858620610708911]

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The changing landscape

Gregory T. Gundlach et al.

Journal of Business & Industrial Marketing

Volume 21 · Number 7 · 2006 · 428–438

429

adopt the CSCMP definitions. According to the CSCMP (see

www.cscmp.org):

Supply chain management encompasses the planning and management of all
activities involved in sourcing and procurement, conversion, and all logistics
management activities. Importantly, it also includes coordination and
collaboration with channel partners, which can be suppliers, intermediaries,
third-party service providers, and customers. In essence, supply chain
management integrates supply and demand management within and across
companies.

This is a broader and more detailed definition of SCM than

those put forward by researchers to date, some of which

include:

The integration of key business processes from end user through original
suppliers, that provides products, services, and information that add value
for customers and other stakeholders (Croxton et al., 2001).

The systemic, strategic coordination of the traditional business functions and
the tactics across these business functions within a particular company and
across businesses within the supply chain, for the purposes of improving the
long-term performance of the individual companies and the supply chain as
a whole (Mentzer et al., 2001, p. 18).

The efficient management of the end-to-end process of designing, planning
and forecasting, sourcing though complex supplier networks, manufacturing,
and distributing products from raw material to the end customer, and the
final disposal of the product by the customer (Chan and Lee, 2005, p. 31).

The design and management of seamless, value-added processes across
organizational boundaries to meet the real needs of the end customer
(Institute of Supply Management,

2005).

Although differences exist in terms of the scope of SCM

among these definitions, there are many commonalities. Each

relies on terms such as coordination and integration and

emphasizes the harmonization of operations among supply

chain members. A further commonality is their focus on

cross-functional business processes with the objective of

providing value for the entire supply chain (Lambert et al.,
2005).

Domain of interest
In the early 1980s researchers focused on understanding the

system integration of business processes throughout the

supply chain. Emphasis was given to reengineering the chain

in order to meet customer requirements and improve

customer service (Lee et al., 1997). SCM research has since
evolved to encompass a combination of trends in the

management literature, such as industrial markets,

integrated materials management, systems integration, the

“quality” revolution, management of relationships, and

business process integration and management.
During the late 1990s attempts were made to integrate

different frameworks and views of SCM and, thereby, better

define the domain of SCM. Since the late 1990s, several

frameworks have been developed to guide research and

practice, such as the Global Supply Chain Forum (GSCF)

(Cooper et al., 1997) framework, the Supply-Chain
Operations References (SCOR) model (Supply-Chain

Council, 2003), and Srivastava et al.’s (1999) business
processes and shareholder value framework.
Today, according to Mills et al. (2004), research in the area

of SCM has developed into two distinct streams:
(1) descriptive research on industrial networks conducted by

researchers from industrial marketing and purchasing;

and
(2) prescriptive research on supply chain management,

based in the fields of strategic management, operations

management and logistics.

This situation is not a perfect dichotomy, however, as

researchers in each of these areas have carried out both, and

other forms of research.

Unit and level of analysis
The predominant unit of analysis in early SCM research was

the dyad, emphasizing the management of boundary-

spanning activities. As the field evolved in the late 1990s,

the unit of analysis became predominantly the network as

firms increasingly recognized their role as part of a number of

supply chains, having multiple customers and multiple as well

as alternative suppliers. During the 2000s, the systems

approach has been used to provide a framework for

understanding SCM. “This systems approach provides the

framework in which to best respond to business requirements

that otherwise would seem to be in conflict with each other”

(Hugos, 2003). Current interest in differing units of analyses

continues as SCM research aims to provide analytical depth

and implementation models for SCM practice. Apart from

differing units of analysis, SCM research has encompassed a

range of analysis levels including tactical, operational, strategy

and strategic orientations.

Theory and methodology
Because SCM is at the confluence of many other disciplines,

drawing on these fields to inform its integrative philosophy, it

necessarily incorporates the various concepts, theories and

methods found in each of these other disciplines. These

include concepts and theories from marketing (customer

relationship management, buying strategies), industrial

economics (make-or-buy, procurement, supplier/customer

evaluation), operations management (inventory

management, production planning), logistics (distribution

planning, transportation management), international business

and organizational management (teams and internal

coordination, strategic issues, organization and procedure,

partnering and strategic alliances), and information

technology (electronic data interchange, online bidding, bar

coding). Particular theories include transaction cost theory,

knowledge and resource-based theories of the firm for

example resource dependency theory, relational contract

theory, institutional theory, open systems theory, agency

theory, and relational models theory,

to name a few.

As may be predicted, researchers have also drawn on

various methodologies for examining SCM. These include

qualitative, contextual, analytical, and quantitative

approaches. A primary research focus in SCM has been to

provide a widely accepted definition and model of

management implementation. As a result, it is not

uncommon to find the predominant use of exploratory

research methods such as pilot surveys, literature review, and

case studies.
Today, while some researchers still continue with the

pursuit of a definitional consensus, others have followed a

shift in SCM research emphasis to developing management

models to guide SCM implementation (i.e. of relationships

and alliances, customer/supplier segmentation, business

process standardization, supply chain performance

measurement).

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Volume 21 · Number 7 · 2006 · 428–438

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Marketing channels and marketing channel

management
Definition
The very earliest formal conceptions of marketing channels

focused on the functions performed by a distribution system

and the associated utility of these functions and the overall

system. Reflecting their presence in industrial and transitional

economies, marketing channels gradually came to be viewed

as the set of interdependent organizations involved in the

process of making a product or service available for use or

consumption (Coughlin et al., 2001). This institutional-
oriented perspective draws attention to those members (e.g.

wholesalers, distributors, retailers, etc.) comprising the

distribution system and engaged in the delivery of goods

and services from the point of conception to the point of

consumption (Anderson and Coughlan, 2002). The

management of such institutions through marketing channel

management involves the planning, organizing, coordinating,

directing and controlling efforts of channel members.
Today, according to some scholars the institutional

perspective of marketing channels and their management is

giving way to a more customer-focused view of the channel

(El-Ansary, 2005). Reflecting marketing channels within

newer experienced-based economies and involving value

adding chains and larger networks of members, this

emerging perspective emphasizes marketing channels as

providing for the conception, promotion and delivery of

positive customer experiences.

Domain of interest
Consistent with the functional conception of marketing

channels, early research in channels, circa the 1950s and

1960s (see Alderson, 1957), focused on identifying the

various functions provided by marketing channels and

explaining when and why these functions have utility

(Anderson and Coughlan, 2002). Paralleling modern

emphasis of the institutions occupying a channel,

contemporary research in marketing channels has focused

on the organization and ongoing management among these

institutions. This research examines the managerial behavior

and decisions essential to the development and functioning of

a marketing channel.
According to Anderson and Coughlan (2002), important

areas of research occupying the institutional domain of

marketing channels include market channel structure,

governance, and relationship management. As these scholars

explain, to enhance effectiveness and efficiency across the

various functions performed by members of a marketing

channel, each attempts to influence others to operate in a

coordinated fashion and in a manner that recognizes that their

interdependence creates common interests. Because

structure, governance and relationship management reflect

how firms garner and then exert influence over one another in

order to be successful and to compete against other marketing

channel systems, these areas have become a dominant focus of

research under the institutional perspective.
Informal review of recent contributions to the literature

substantiates the observations of Anderson and Coughlan

(2002). These include contributions that inform our

understanding of the systemic nature and qualities

associated with larger channel systems, the role of dual

channel structures, marketing channels and their interplay

with supply chain processes and logistical functions, the

emergence of electronic (e.g. internet) channels of

distribution, the nature, qualities and performance of inter-

firm relationships, the governance of such relationships, the

use of inter-firm influence and power, channel performance

and the choice of channels by consumers among other topics.
Detailing scholarly contributions to the literature, Frazier

(1999) reports that considerable progress has been made in

our understanding of managerial behavior and decisions

surrounding the development and functioning of a marketing

channel. Frazier (1999, p. 226) notes for example that:

. . . the knowledge that has accumulated in relation to how interfirm power

originates and is then applied, how control of the channel relationship is

facilitated, and what intrachannel conflict and channel member satisfaction

are based on is impressive. Recent efforts to better understand how strong,

long-term channel relationships develop – including the impact of trust

commitment and relational norms on channel interactions are noteworthy.

Furthermore, some progress has been made in our understanding of

organizational decisions relating to vertical integration, the use of multiple

channels, distribution intensity and bureaucratic structuring.

The author observes, however, that while the current

knowledge base provides a reasonable foundation of

thought, a variety of issues still exist regarding constructs

and topics examined in prior research. In particular, Frazier

(1999, p. 226) details that the role of power in channel

relationships is often confused. Interfirm monitoring efforts

have received little attention. Few of the various different

facets of interfirm communication have been examined in any

depth. Intrachannel conflict and its impact on long-term

channel relationships have been largely overlooked. The

relationship marketing paradigm as applied to distribution

channels has been pushed beyond its practical and natural

boundaries. Important factors likely to shape channel

integration, distribution intensity, and bureaucratic

structuring remain largely unexplored. The use and

management of multiple channels have been barely touched

on. Physical distribution processes and technologies have not

received the attention they should in research on channel

organization and management. Further, according to Frazier,

many important managerial issues relating to the organization

and management of channels of distribution have yet to be

addressed in empirical channels research. Among those

considered most important are:
(1) how resource allocations to channels should be made

across global product markets;
(2) how functions are shared-split between channel

members;
(3) what combination of push and pull strategy is

appropriate for firms using indirect channels;
(4) when and how the internet should be used as a sales-

distribution channel;
(5) how coordination is achieved among distributors in

integrated supply networks;
(6) how goals are set, plans are developed, and performance

appraised among channel members; and
(7) how distributors should operate their businesses (Frazier,

1999, p. 226).

In terms of the future, as the traditional domain of marketing

channels set around the institutional perspective of channel

constituents gives way to a more customer-focused definition,

it is likely the domain of marketing channels research will

further expand to include related topics of interest (El-Ansary,

2005).
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Gregory T. Gundlach et al.
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Volume 21 · Number 7 · 2006 · 428–438

431

Unit and level of analysis
Attendant to the functional perspective of marketing
channels, early research adopted the channel system and its
functions as its primary unit and level of analysis. As the field

evolved to a more institutional perspective, research similarly
evolved to capture a particular channel institution’s (most
often the manufacturer or “channel captain”) perspective and

their efforts at designing and managing the channel. Viewing
the channel as most often dominated by the manufacturer and
involving a strategic asset of the firm, inquiry focused on
informing the question of what is the best marketing channel

for a particular firm’s product or service (Coughlin et al.,
2001).
As both the nature of marketing channels and research

attempting to understand such a phenomenon has evolved,
the unit and level of analysis adopted by researchers have
similarly evolved. This evolution has lead to current emphasis

on dyadic relationships and emerging inquiry of triadic and
larger network and system-based configurations of the
channel and involving both strategic as well as more day-to-
day managerial activities. In the future, increasing emphasis of

customer-focus marketing channels will likely call for
adoption of units and levels of analysis that comply with
those held by the customer.

Theory and methodology
In pursuit of insights and understanding, channels researchers
have drawn upon a variety of theories and research methods
to inform and conduct their work. In addition to descriptive

field research intended to portray the practices and
performance outcomes associated with channels, scholars
have also employed quasi-experimental settings to isolate and
examine phenomenon associated with the workings of a

channel. Analytic models, both mathematical and empirical,
have also serviced such inquiry.
Beyond a multitude of research settings and methods,

scholars have also borrowed from a number of different
theoretical frameworks to inform their understanding of such
practices and phenomenon. As inventoried recently by
Anderson and Coughlan (2002), these include:
. from economics – explanations attendant to transaction

cost analysis, agency theory, game theory, analytical

models of competition and market response and
evolutionary economics;

. from sociology – theories of dependence/power and group
processes and institutional theories of legitimacy;

. from psychology – theories of social influence,
interpersonal relationships and conflict; and

. from marketing and strategic management – theories of
trust, competitive advantage and path dependence and
from other areas, political economy and life-cycle theories,

to name a few.

Given this eclectic state of affairs, these scholars contend that
the field of marketing channels research is currently in a pre-

paradigmatic state with little agreement about how to frame
issues and what the appropriate mode of inquiry is. Such a
state poses both opportunities and challenges for the future.

Given the lack of consensus, on the one hand, researchers
examining channel phenomenon have considerable freedom
to proceed in a manner of their choice. At the same time, the
lack of consensus (and at times competition among differing

perspectives and methods) has made it more difficult to
achieve consensus and thus to accumulate findings that yield

robust generalizations concerning important phenomenon.

Despite these challenges, as may be observed across time,

results from these multiple perspectives and methods are

beginning to converge with some agreement in findings and
explanations about what issues in marketing channels merit

further inquiry (Anderson and Coughlan, 2002).

Logistics and logistics management
Definition
“Logistics” refers to the inbound and outbound flow and

storage of goods, services, and information within and

between organisations. As a managerial activity, early
conceptions of logistics focused on its role in the

distribution of products and as a way to support an

organization’s business strategy and to provide time and

place utility. Prior to the 1980s, logistics was primarily
concerned with the outbound flow of finished goods and

services, with an emphasis on physical distribution and

warehouse management. During the 1980s, industry

globalization and transportation deregulation led to the
expansion of logistics beyond outbound flows to include

recognition of materials management and physical

distribution as important elements. In 1986, the CLM

(considered by many to be the pre-eminent professional
organization for academics and practitioners in the logistics

field) defined logistics as: “the process of planning,

implementing, and controlling the efficient, cost-effective
flow and storage of raw materials, in-process inventory,

finished goods, and related information flow from point of

origin to point of consumption for the purpose of conforming

to customer requirements” (see www.clm1.org). During the
1990s, accelerated market changes due to shrinking product

lifecycles, demand for customization, responsiveness to

demand, and increased reliance on information technology

led to logistics being defined as “the process of strategically
managing the procurement, movement and storage of

materials, parts and finished inventory and related

information flow through the organization and its marketing

channels” (Christopher, 1998).
The 2000s experienced further changes to how logistics is

defined. Developments in international trade, supply chain

management, technology, and business process re-engineering
generated a need to re-evaluate the logistics concept. During

this period, CLM annually reviewed its definition of logistics

and revised that definition several times: in 2001, CLM
defined logistics as “that part of the supply chain process that

plans, implements and controls the efficient, effective flow

and storage of goods, services, and related information from

the point of origin to the point of consumption in order to
meet customer requirements”. Between this time and before

2003, CLM again modified its definition to: “that part of the

supply chain involved with the planning, implementing and

controlling of the efficient, effective flow and storage of goods,
services, and related information from the point of origin to

the point of consumption for the purpose of conforming to

customer requirements” (see www.clm1.org). Differences

among these definitions reflected the CLM’s attempts to
capture differences between, and the scopes of, logistics

management and supply chain management.
The most recent definition of logistics from CLM (now the

Council of Supply Chain Management Professionals –

CSCMP), in 2003 is: “that part of supply chain

management that plans, implements and controls the

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Volume 21 · Number 7 · 2006 · 428–438

432

efficient, effective forward and reverse flow and storage of

goods, services, and related information between the point of
origin and the point of consumption in order to meet
customers’ requirements” (see www.cscmp.org). Many
academic textbooks and articles in the logistics discipline
typically adopt this CSCMP definition of logistics and
logistics management (as an example, see Stock and
Lambert, 2001), while some more recent examples provide

an alternative, albeit related definition – for example that
“logistics refers to the responsibility to design and administer
systems to control movement and geographical positioning of
raw materials, work-in process, and finished inventories at the
lowest total cost” (Bowersox et al., 2006, p. 22). Most
definitions accept the notion that, as in the CLM definition,
the emphasis is on leveraging low cost information against

more expensive logistics assets such as inventory,
warehousing, labor and transportation.

Domain of interest
Early logistics management research focused on the
management of transportation and warehouses. Today,
research in logistics addresses two aspects:
(1) supply chain logistics, concerned with the flow of goods;

and
(2) service response logistics, concerned with the co-

ordination of non-material activities necessary for the
fulfillment of the service in a cost – and customer service
– effective manner.

An informal review of research topics appearing in the Journal
of Business Logistics (JBL) between 2000 and 2005 identifies
traffic and transportation, warehousing and storage, inventory
management, packaging and return goods handling, salvage
and scrap disposal as key foci of supply chain logistics; and
order processing and information systems, customer service
and procurement as key foci of service response logistics. Over

time, logistics research has evolved from a pure internal focus
on cost control, and functional areas of inventory,
transportation, warehousing and order processing to their
role and impact within business process integration regarding
suppliers and customers.

Unit and level of analysis
Historically, logistics research focused on the firm and its
profitability. In the mid-1990s, recognition of the importance
of dyadic relationships for achieving this objective emerged.
With increasing emphasis on end-to-end logistics integration
and the linkage of multiple dyads, the focus of logistics
research further shifted in the 2000s to its present state and
focus on the system as its primary unit of analysis.
Paralleling this broadening has been shifts in the level of

analysis employed in logistics research, from a focus on the
management of operations to optimizing logistics operations
to attain efficiency of the flow of goods, and to service
response logistics. Today, the scope of logistics management

and research includes external and strategic orientations
encompassing consideration of the value adding activities
involved in the process of bringing a product to market.

Theory and methodology
Surveying theories applied in logistics research, Stock (1995)

concluded that logistics benefits from borrowing from other
theories as it is suited to approaches which “adopt
multidisciplinary methodological pluralism”. Although
logistics has benefited from application of insights from

mathematics to psychology, theories of particular relevance

include those having origins in economics, organizational

strategy, and marketing including transaction cost theory,

resource-based theory, relational contracting theory and
dyadic coordination theory. Reflecting its evolution to

include more systemic and strategic considerations, logistics

has most recently begun to integrate systems and network

theory.
Logistics research has also evolved in its use of research

methods. Some research tends to be more positivist in nature,

utilizing variations of quantitative approaches, while others
tend to be more interpretative, and as such qualitative in

nature. Frankel et al. (2005) examined articles published in
the Journal of Business Logistics between 1999 and 2004 and
found a variety of data gathering techniques and forms of
analysis including literature reviews, interviews, personal

observation surveys/questionnaires, focus groups, cases

studies, experiments and content analysis. They identified a

number of trends including the increasing use of case analysis,
multi-method (triangulation) approaches and use of the

internet for data collection.
The current state of logistics research reflects its evolution

from an emphasis on operational and functional areas to an

emphasis on the efficiencies that can be gained through the

integration and interface(s) between disparate areas and other

functional departments within the organization including
manufacturing, human resources, finance/accounting, etc.

Today, logistics research is responding to recent calls for

measuring the performance of the logistics system and sub-

systems and its implications for overall firm performance,
especially with an emphasis on the efficiencies that can be

gained from extending this functional integration through

collaboration across the entire supply

chain.

Purchasing and purchasing management
Definition
Purchasing involves the satisfaction of individual firms’

requirements. Early definitions of purchasing emphasized

the tactical and clerical decisions involved in the purchasing of

products and supplies. During the 1990s purchasing evolved
to be viewed as part of a broader function called procurement

or “the systematic process of deciding what, when, and how

much to purchase; the act of purchasing it; and the process of

ensuring that what is required is received on time in the
quantity and quality specified” (Burt and Pinkerton, 2003,

p. 64). As a function, procurement included purchasing,

consumption management, vendor selection, contract

negotiation and contract management (Poirier, 1999, p. 64).
At the beginning of the 2000s, the terms “purchasing” and

“procurement” became synonymous in the profession

(Monczka et al., 2002).
Today, many researchers are taking a broader view of

purchasing that emphasizes “managing the supply” of

materials, services, and information. Supply management

research tends to focus on studying the phenomenon of
purchasing defined as requirement (i.e. need) satisfaction.

While there is no agreement on the exact definition and scope

of supply, professionals at all levels do agree that supply is a

series of linked relationships that add value at various levels
(Kauffman, 2002). Supply management encompasses

“organizing the optimal flow of high-quality, value-for-

money materials or components to manufacturing

companies from a suitable set of innovative suppliers”

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(Wagner, 2003). Concepts of interest in supply management

include management, development and integration of

suppliers (Antonette et al., 2002).

Domain of interest
Early research in purchasing focused on improving the

internal efficiency of an individual firm within the supply

network. Researchers focused on exploring the most efficient

approaches to performing purchasing responsibilities in

relation to: direct or strategic materials needed to produce

the company’s products, and indirect or MRO (maintenance,

repair, and operations) products consumed by the company

as part of its daily operations (Poirier, 1999).
From the late 1990s on, researchers took a broader view of

purchasing. Emphasis was given to “managing the supply” of

materials, services, and information and resulted in a shift

from focus on internal efficiency to other long-term outcomes

such as collaborative learning, reductions in cycle time, and

new product development cycle. This emphasis extended into

the use of the internet and technology developments and

examining team driven decision-making, which fostered

collaborative activities with suppliers aimed at meeting the

goals of the firm (Giunipero and Handfield, 2004).
With the beginning of the 2000s, researchers began to

realize the importance of coordinating the supply of products,

services, and information rather than merely focusing on

buying the least expensive materials. After reviewing the

Journal of Supply Chain Management (JSCM, considered by
many to be the leading journal in purchasing and supply

research), Carter and Ellram (2003) reported several changes

in the subject categories of topics across time that reflect the

evolution from purchasing to supply management. According

to the authors, one-third of the contributions to “purchasing

performance” and the “status” and “recognition” of the

purchasing function were made during 1975-1979. The

majority of the contributions to “inventory and production

management” were made in the 1970s and 1980s. Material

requirements planning (MRP) appeared from 1977 to 1984,

while the majority of just-in-time (JIT) contributions were

made from 1986 to 1994. In the 1990s the emphasis on the

strategic impact of purchasing emerged. Almost all

contributions dealing with supply chain issues were made

after 1994, emphasizing the broadening and integration of

purchasing into supply management and supply chain

management. This also mirrors the general recognition of

the supply chain concept by purchasing professionals and

scholars (Carter and Ellram, 2003).

Unit and level of analysis
Early purchasing research emphasized the internal

performance of individual firms’ purchasing function as a

unit of analysis and focused on the performance of the

purchasing department, measured by cost savings. With the

increased recognition that the success of purchasing depends

on the extent to which its performance fits the needs of the

business and on the consistency between purchasing

capabilities and the competitive advantage sought by the

business, in the 1990s the unit of analysis expanded to include

assessment of dyadic relationships. Emphasis on supply

management during the 2000s motivated researchers to

extend their unit of analysis to include second tier suppliers

and to collect data from multiple sources in the same supply

chain.

Expansion of the unit of analysis employed by researchers

in purchasing has also been accompanied by changes in the

level of analysis. Early research addressed purchasing in

relation to its tactical/clerical role. During the 1970s and the

1980s purchasing was viewed as a non-strategic function and

had less organizational status relative to other major functions

in the firm (Ammer, 1989). The 1990s brought a change in

the focus of purchasing to include strategic considerations

with an emphasis on total cost savings and value-added

activities (Burt and Pinkerton, 2003). Today, research on

purchasing is beginning to examine the value of cooperation,

redirecting the tactical focus on internal efficiency toward

strategic network improvement, and soliciting the help of

willing partners interested in building a dominant supply

chain in a particular industry (Burt and Pinkerton, 2003).

Theory and methodology
Early research on purchasing utilized transaction cost theory

to examine purchasing’s contribution to internal efficiency,

i.e. cost savings attained by reducing raw materials costs and

selecting suppliers that offer the lowest prices, within a firm’s

boundaries. From that time, purchasing/supply researchers

have incorporated other theories including interdependence

theory to explore dyadic considerations between purchasers

and suppliers. Other researchers used agency theory,

management theory, resource-based theory of the firm,

decision theory, and gaming theory to analyze the impact of

purchasing/supply strategies on performance.
During the early 1990s, typically, purchasing/supply

research relied upon descriptive methods with the objective

of identifying best practices and assisting purchasing

professionals in their benchmarking efforts. Although

descriptive and benchmarking research is still widely used

today, researchers from the 1990s onwards employed a variety

of methods and modeling techniques ranging from qualitative

contextual approaches to analytical quantitative ones.
Today, the most influential trend on purchasing/supply

research is the emergence of SCM (Carter and Narasimhan,

1996). SCM denotes the integration of purchasing and supply

with other functions in the firm (Wisner and

Tan, 2000).

With the realization of the importance of coordinating the

supply of products, services, and information with the other

functions, rather than focusing on buying the least expensive

materials, most purchasing researchers’ attention shifted from

“purchasing” to “supply management”. Terms such as

“integrated purchasing strategy” are being used in the

literature today to address certain elements or stages of this

new management philosophy (i.e. SCM). Many researchers

today assess purchasing and supply strategies’ contribution on

the basis of their contributions to SCM success (Wisner and

Tan, 2000).

Analysis and discussion

Our overview of the related disciplines of supply chain

management, marketing channels of distribution, logistics and

purchasing highlights significant developments and changes

occurring in these fields reveals insights regarding the

relationship among them and points to a number of

opportunities and challenges for scholarship and attendant

consequences for practice. We briefly describe key findings

here.

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Volume 21 · Number 7 · 2006 · 428–438

434

Key developments and changes

A number of significant developments and changes that have

the potential of impacting scholarship and practice within

each of the disciplines are identifiable from our examination.

Supply chain and supply chain management
Perhaps the most prominent of these involves the rapid

development and evolution of the field of SCM. Arising in the

mid-1980s, the field has expanded through its process

orientation to integrate processes and functions which

include institutional concepts and issues addressed in

marketing channels, flows common to logistics and activities

previously the domain of purchasing. Importantly, while these

fields remain vital in their own right, the emergence and

development of SCM has yielded an overarching domain that

aspires to provide for their common integration and

coordination in ways not imagined before.
As a discipline, SCM continues to become increasingly

market oriented, assessing and responding to the needs of

target customers and other stakeholders by organizing and

coordinating resources and activities with the goal of creating

value. Such an evolution reflects the natural maturation of the

field’s original goals.
At the same time, a considerable lack of consensus

continues to exist within the field of SCM in relation to its

precise definition and whether the field constitutes a

management philosophy, implementation of a management

philosophy, or a set of management processes. Such confusion

should not be unexpected given the field’s early stage of

development and rapid evolution and will likely be resolved

over time both in terms of scholarship and practice.

Marketing channels and marketing channel management
Within marketing channels, paralleling a shift in the larger

discipline of marketing from focus on transactional exchange

to include exchange relationships, perhaps the most impactful

development has been the field’s emphasis of relational (e.g.

collaborative) versus competitive (e.g. arm’s length)

interactions among institutions comprising the marketing

channel. This change has fundamentally altered the scholarly

landscape and practice of marketing channels and marketing

channel management.
Accompanying the field’s emphasis of relationships and

collaborative interaction has been a broadening of its

institutional perspective from that of an individual

institution (and its channel) to that of dyads and larger and

more complex units of analysis including triads, networks and

systems of institutions and their relationships. This evolution

has also been accompanied by expansion of marketing

channel concepts and theory from that which is informative

to understanding the organization and management of a

dominant institution’s channel at a point in time to concepts

and theory helpful for understanding the organization and

management of relationships and larger configurations of

relationships comprising a marketing channel over time.
Together, the changes and developments in marketing

channels represent considerable progress in understanding the

institutions and functioning of marketing channels and

marketing channel management. As a result, these changes

will likely enable the field to better understand and explain

phenomenon occurring within marketing channels of

distribution.

Logistics and logistics management
The field of logistics has also undergone important

developments and changes that are likely to be impactful to

scholarship and practice. Reflecting its independent origin yet

subsequent importance and association with SCM, the field

has redefined itself over time to both conceive of logistics as

part of SCM, but also an independent function of broadening

and strategic importance to the firm. Both perspectives have

merit given the acknowledged critical role of logistics in SCM

(i.e. logistics is recognized as an integrative support

mechanism to enhance efficiencies across the supply chain)

as well as the separable functions which define the field of

logistics itself. Together, these developments and changes

represent important advances for the field that will likely pay

dividends through elevating our understanding of logistics

and enhancing the development of SCM both in terms of

scholarship and practice.

Purchasing and purchasing management
Finally, important changes in the field of purchasing that are

likely to impact scholarship and practice include its evolution

from a tactical and internal efficiency oriented function

encompassing the firm and its immediate suppliers to include

strategic and external effectiveness based considerations

encompassing the firm and the larger network of firms

occupying the value chain. These changes reflect both the

independent development of the field and the impact of SCM

and are captured in the evolution of terminology describing

the field.
Consequently, the broadening of the discipline of

purchasing implies a greater emphasis on the implications of

purchasing decisions on firm and supply chain performance.

Today, effective purchasing is not necessarily one that

promises maximum efficiency or least total cost, but rather

one that fits the needs of the business and strives for

consistency between its capabilities and the competitive

advantage being sought throughout the supply chain. These

developments and changes reflect advances that are likely to

enhance the role and prominence of purchasing in both

scholarship and practice.

Connections across the disciplines

Taken together, recognition of the important changes and

developments in each of the disciplines helps to provide

insights for understanding how these disciplines relate to one

another including their similarities and distinctions. Notable

in this regard is how some recent conceptions of SCM inform

this understanding through defining marketing channels,

logistics and purchasing as part of SCM. For example, SCM

is defined by CSCMP to “include coordination and

collaboration with channel partners” – a key thrust of

marketing channel management and to “include [as a part of

SCM] all logistics management activities” and further in

relation to purchasing, “all activities involved in [. . .]

procurement”. Further credence to this conception is

provided through logistics definitions that conceive of the

field of logistics as “part of the supply chain” and its

management.
The basis for including marketing channels, logistics and

purchasing as part of SCM likely extends from SCM’s

integrative orientation and therefore necessarily expansive

scope compared to the more functional orientation and

narrower breadth of these related disciplines. Integrating such

The changing landscape
Gregory T. Gundlach et al.
Journal of Business & Industrial Marketing
Volume 21 · Number 7 · 2006 · 428–438

435

functions across the supply chain is an important and useful

goal. Of note, however, is that some more recent conceptions
of SCM are not limited to merely the integration of these

functional areas. For example, read literally, the recent
CSCMP definition advances beyond integration to include

the actual “planning” and “management” of these functions
as well as other business processes across the supply chain.
What implications attend a conception of SCM as

including, beyond its integrative orientation, the actual
planning and management of the functional domains of

marketing channels, logistics and purchasing? What
consequences result for scholarship and practice within

SCM? Within each of the functional domains? The answers
to such questions appear more than academic given they are

currently under consideration by those within the field of
SCM. The Journal of Business Logistics (2006), for example, in
recognition of the intense and continuing interest in SCM for
two decades, but still remaining “uncertainty as to what SCM
is and what functions and/or processes should be included

within it”, recently issued a call for a special issue of the
journal to “document and describe the scope and domain of

supply chain management”. The insights and understanding
developed from such an effort and others is likely to be

important to both SCM and its related fields.
For those who might be concerned with the breadth and

depth of intellectual and practice-based aspirations reflected
by CSCMP’s conception of the SCM discipline, a helpful
distinction is that SCM’s larger philosophy has been

suggested by others to be limited to the integration and
coordination of the respective disciplines it embraces rather

then their more specific planning and management (Mentzer
et al., 2001; Chan and Lee, 2005; Croxton et al., 2001).
These distinctions have also been addressed by others. For
example, the alternative perspectives represented in the

different viewpoints of CSCMP and others has been labeled
by Larson and Halldorsson (2002) as reflecting the
“Unionist” versus the “Intersectionist” view of SCM.

According to Larson and Halldorsson (2002), under the
“Unionist” view, where SCM subsumes logistics, marketing,

operations management, purchasing, etc., supply chain
managers have greater decision making authority than other

functional managers, requiring that the reporting
relationships within the firm be altered. This view is
generally consistent with the perspective offered by the

CSCMP through its definition of SCM. Alternately,
according to Larson and Halldorsson (2002), under the

“Intersectionist” view, SCM is considered a broad strategy
which cuts across business processes both within the firm and

through the channels. This view is generally consistent with
Mentzer et al.’s (2001) perspective that supply chain
management involves the strategic coordination of
traditional business functions and the tactics across these
business functions as well as Croxton et al.’s (2001)
perspective that supply chain management involves a change
from managing individual functions to integrating activities

into key supply chain processes. In this fashion, the
intersectionist perspective of SCM does not imply a union

of marketing, logistics, and purchasing. Rather, under such a
perspective SCM coordinates cross-functional efforts across

multiple firms (Mentzer et al., 2001; Chan and Lee, 2005).
Importantly, for both perspectives most agree that SCM is

critically dependent on the depth of understanding and

managerial insights developed in each of the functional

disciplines for achieving its goals. Such knowledge is essential

for overcoming hurdles to achieving SCM’s goals. For

example, observers have noted that such goals are often

countered by conflict and individual firm’s efforts to

maximize their own performance through exercise of power

and control and the use of opportunistic business practices.

Such behavior and its resolution is at the core of research

efforts within marketing channels. Integration and reliance on

such knowledge should be helpful to SCM in overcoming

such challenges. Indeed, absent such reliance and continued

development of other insights within the individual disciplines

of relevance to SCM, it will likely be challenging for the

expansive and worthy goals of SCM to be fully achieved.

Opportunities and challenges for scholarship

Examination and assessment of the developments and

changes occurring in SCM, marketing channels of

distribution, logistics and purchasing also reveals a number

of implications for scholarship. These include both

opportunities and challenges for research (i.e. knowledge

generation) as well as teaching and instruction (i.e. knowledge

dissemination) within and across the fields.

Research
Of particular note for research are the increasing overlaps in

definitions and topics of interest that have developed over

time across these disciplines. For example, both SCM and

marketing channels identify and specify the coordination and

collaboration of channel partners as a topic of interest,

although from different vantage points and applying varying

methods and theories. Further, SCM specifically identifies the

field of logistics as encompassed in its domain of interest.

Similar observations and overlaps are present and attend the

relationship of purchasing and SCM.
Accepting differences in perspective and orientation, the

presence of such overlaps yield significant opportunities for

interdisciplinary research and development. In some instances

such cross-disciplinary efforts have already been identified

and are currently being explored to a considerable extent (e.g.

SCM/logistics) and in other instances to a somewhat lesser

extent (e.g. SCM/purchasing). In both cases, continued

across disciplinary efforts are likely to prove fruitful.
In other areas (e.g. SCM and marketing and marketing

channels as well as other functional areas) such integration

remains a continued opportunity. For example, Grimm

(2004, p. 59) points out:

While many academic disciplines are conducting research in supply chain,
there is an unfortunate lack of communication and cooperation amongst the
various disciplines regarding supply chain research. [. . .] This is unfortunate,
as each field offers contributions to the whole of the cross-disciplinary world
of supply chain management.

With particular respect to SCM and marketing, the evolution

of SCM to focus on end-user considerations overlaps with

core marketing concepts including the marketing concept and

market orientation. Further development and integration of

these fundamental insights both within and across each

discipline is likely to be beneficial to both. In addition, in

relation to marketing channel management and SCM,

development and integration of insights regarding the

coordination and collaboration of channel partners has the

potential of furthering understanding of such phenomenon in

ways that elevate the efficiency and effectiveness of managerial

initiatives in both SCM and marketing channels.

The changing landscape
Gregory T. Gundlach et al.
Journal of Business & Industrial Marketing
Volume 21 · Number 7 · 2006 · 428–438

436

Teaching and instruction
In addition to research, implications for instruction and
teaching, including curriculum enhancement, extend from the

changes and developments occurring within and across the

disciplines of SCM, marketing channels, logistics and
purchasing. Many of these implications may be cast as

questions for consideration and contemplation by those
involved in such efforts.
Of first impression is whether existing curricula adequately

cover the changes and developments that are occurring within

these subject areas? Although programs designed to instill
knowledge of many of the specific functions (e.g. logistics,

marketing channels, etc.) may be identified, is the content in
these curricula adequate given the changes and developments

that have occurred within these disciplines? Do such curricula

require amendment to adequately address these changes and
developments?
A further question is whether existing curricula should be

integrated to cover and bridge these related disciplines? Do

existing curricula adequately cover the subject knowledge that
has developed over time and currently resides within and

across these related disciplines? Should they? What challenges
result in attempting to develop such an integrative

curriculum? What content should be included? Excluded?
A related question regards how curricula intended to cover

and bridge these subjects should be labeled? Given the
integrative goals of SCM, should such curricula be labeled

similarly and include content on the functional areas?

Alternately, given the functional orientation of marketing
channels, logistics and purchasing, should such labels remain

with the addition of SCM as a kind of capstone perspective
intended to provide students with insights and understanding

(if not a philosophy) of how such functions can be successfully
integrated to achieve optimal performance across the supply

chain? Or should such a philosophic orientation as provided
through SCM be positioned as a foundation course, with

those functions that it coordinates being positioned as
elements to be embraced and added as courses over time?

At present, both pedagogical approaches may be found

currently in practice (or under consideration) at many
institutions where consideration is being given to how best

to include supply chain management in their curricula
(Rutner and Fawcett, 2005).
Finally, a larger question regards how other business

functions should be treated with respect to the changes and

developments that have occurred within and across these
related disciplines? Overall, the challenge for educational

institutions is to expand their perspective while at the same
time improving the relevance and quality of their offerings. In

this regard, it is important that these and other questions be

approached following an integrative process-oriented
pedagogy that provides ample opportunity for the input and

participation of relevant stakeholders.

Consequences for practice

Together with the implications for scholarship, important

consequences for practice extend from the changes and
developments occurring within and across the related fields of

supply chain management, marketing channels of
distribution, logistics and purchasing and their

interconnections. Many of these parallel those already
discussed. For example, although the practice of SCM has

been adopted and progressed in many organizations, given its

rapid emergence, other organizations have yet to benefit from

its application. At the same time, lack of consensus about

what SCM is and what it is not likely has resulted in confusion

and in some instances inhibited its adoption its adoption in

ways that provide benefits to practice.
Other parallels are also identifiable. For example, the shift

in focus from competitive to collaborative interaction in

marketing and marketing channel management is detectable

in many aspects of marketing channel practice ranging from

the increasing prevalence of institutions such as joint ventures,

strategic alliances, and partnerships to the nature of

interactions that may be found in many day-to-day channel

exchanges. Similarly, the integration of logistics into SCM is

also identifiable in many organizations. Finally, the evolution

and broadening of purchasing to include strategic and

external effectiveness considerations may be found in some

organizations.
Also paralleling changes and developments within each of

the areas of SCM, marketing channel, logistics and

purchasing management is consideration by many

organizations of how best to go about the managerial

challenges of practising across these related areas. While

some organizations continue to work on them, others have

successfully met the challenges of understanding and

integrating these related disciplines to their overall benefit.

For example, although very different retailers, Wal-Mart and

Target have been able to achieve profitable sales, increase

customer count, increase trip frequencies, increase

transaction size, increase productivity; and reduce costs by

aligning and focusing all marketing (including marketing

channels), purchasing and logistics functions on achieving

their overall supply chain goals (Hoyt and Company, 2005).

Conclusion

The related disciplines of supply chain management,

marketing channels of distribution, logistics and purchasing

have undergone significant development and evolution in the

last two decades. Spurred by both external and internal

forces, changes in and across these disciplines have

fundamentally altered the scholarly landscape to which they

relate and the way in which they are practiced. This essay

sought to examine and take stock of this new landscape and to

reveal its opportunities and challenges for scholarship and its

consequences for practice.

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unf.edu

The changing landscape
Gregory T. Gundlach et al.
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Multiple Channel Strategies in the European Personal Computer
Industry By: Mika Gabrielsson; V. H. Manek Kirpalani; Reijo Luostarinen.
In: Journal of International Marketing. 10(3):73-95; American Marketing
Association, 2002. Language: English. Abstract: The authors examine
sales channel strategies for international expansion as a means of
compensating for constantly decreasing unit prices and margins in the
personal computer (PC) industry operation in the European Union
market. The authors describe and analyze the development from single
(direct or indirect) to multiple (dual or hybrid) sales channel strategy for
international expansion on the basis of four theoretical approaches. The
methodology used is a qualitative research strategy. The authors
conduct a longitudinal multiple case study consisting of 20 top
management interviews related to four cases. They examine the
development of the sales channel strategies of selected large
companies in the European PC business. Multiple sales channels,
especially the hybrid ones, are an optimal solution for expanding sales
volumes. The results contribute to the relatively underresearched area
of multiple channels, and the managerial implications drawn should be
helpful not only to PC companies but also to other firms, such as “born
globals.” (AN: edsjsr.25048900)

JSTOR Journals

Multiple Channel Strategies in the European Personal Computer Industry

ABSTRACT
The authors examine sales channel strategies for international expansion as a means of compensating for
constantly decreasing unit prices and margins in the personal computer (PC) industry operation in the
European Union market. The authors describe and analyze the development from single (direct or indirect) to
multiple (dual or hybrid) sales channel strategy for international expansion on the basis of four theoretical
approaches. The methodology used is a qualitative research strategy. The authors conduct a longitudinal
multiple case study consisting of 20 top management interviews related to four cases. They examine the
development of the sales channel strategies of selected large companies in the European PC business.
Multiple sales channels, especially the hybrid ones, are an optimal solution for expanding sales volumes. The
results contribute to the relatively underresearched area of multiple channels, and the managerial implications
drawn should be helpful not only to PC companies but also to other firms, such as “born globals.”

The personal computer (PC) industry has a fiercely dynamic market characterized by intense speed of
competition and consolidation, high scale and learning advantages, globalization and cost pressures, and
shortening life cycles for both technology and products. In 1999, the leading five PC companies in Europe
handled more than 50% of the total PC units versus only 30% in 1990 (International Data Corporation [IDC]
2000). In 2000, IBM had lost the leading position that it had in the beginning of the 1990s and slipped to fourth,
as Compaq, Fujitsu Siemens, and Dell, in that order, bypassed it, whereas Hewlett-Packard held the same fifth
position through the decade. Moore’s law, which initially stated that technological development will enable the
PC’s central processing unit to double in speed every second year for the same price (Dhebar 1996, p. 38),
has been revised to incorporate even faster development. Prices of PCs were found to decrease annually by
some 20% to 40% in the 1980s, and the decline further intensified in the 1990s. Product life cycles lasted

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approximately one year in the mid-1980s but had shrunk to some three months by 1999 (Curry and Kenney
1999, pp. 8-12). This market situation has led to constantly decreasing unit prices and margins in the PC
industry. As a solution to this problem, it is extremely important for PC companies to increase their sales
constantly to benefit from scale economies and compensate for lower margins.

In this article, we examine the international expansion of sales channels in the European Union (EU) market as
a partial solution to this problem. More specifically, we formulate the research question to study the problem as
follows: What are the alternative sales channel strategies for a PC company to expand its sales volumes in
Western Europe, and how and why have these strategies developed over time? Naturally, PC companies will
also consider several other partial solutions to overcome the profitability decline–for example, speeding up the
introduction of new product models to benefit from higher prices in the early phases of the product life cycles or
improving their competitiveness in the high-end product range. In addition, both the operation strategy and the
market strategy could offer partial solutions to the research problem. The rationalization of production and
location of production facilities can indeed increase the sales and profitability of the PC companies. Also, the
expansion to developing markets, such as the Far East, would be one means of increasing sales volumes. As
stated previously, we recognized these other partial solutions to the research problem but did not study them in
this research. The study does not deal with the impact of e-commerce, because that impact is still not clear.
We concentrate on the strategic choice of other sales channels and therefore discuss e-commerce only in
passing along with other channels and in the concluding remarks. The findings and analysis of data in this
sector should prove useful to other PC makers with lower market shares and to academics who want to
research the impact of the strategic choice of sales channels in other industries that involve consumer
durables.

The development of sales channels in the PC industry has been turbulent since the beginning of the 1980s,
when the leading companies started to reorganize their single channels to form new, multiple channels. Earlier
PC companies had used a single either direct or indirect channel (Moriarty and Moran 1990, p. 146).
Increasing e-commerce will add one more alternative to the channels. In future research efforts, we intend to
research the impact of e-commerce on channel strategies. Nevertheless, these changes in the industry raise
the importance of channel strategy research in general. The previous literature has examined channel choice
from a single channel approach, whereas multiple channels as a means of international expansion have been
underresearched and form a research gap. Furthermore, empirical studies with a longitudinal approach on
channels in transition are also scarce (see, e.g., Frazier 1990, pp. 256-71). Neither has the international
business (IB) literature studied and explained multiple channels explicitly, though their existence has been
recognized (Luostarinen 1979; Luostarinen and Welch 1990, pp. 22-24). This article therefore has the following
objectives: ( 1) to describe, on the basis of existing theoretical approaches, the impact of entry and penetration
(marketing) operation modes on different sales channel strategy alternatives and their development for
international expansion; ( 2) to describe and analyze the development of sales channel strategies in the PC
industry in Europe through the empirical data collected; and ( 3) to present a framework describing channel
choice and development.

SALES CHANNEL STRATEGIES
The IB and marketing literature has developed distinct definitions of sales channel structures that, however,
can easily give rise to confusion. Many dimensions for these definitions, such as the degree of directness and
ownership of the channel, the variety and number of the channels, and the degree of selectivity of the channel,
are important in both research streams. However, the IB literature views these dimensions from the foreign
market entry mode (Kirpalani, Reid, and Rosson 1987; Luostarinen and Welch 1990) and internationalization
stage perspective (Luostarinen 1970, 1979, 1994); the marketing literature views it from a strategic perspective

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as a means to reach the end user within the domestic market or in a single-market context, such as the EU
(Hardy and Magrath 1988, pp. 14-22).

The target country internationalization process model (Luostarinen 1970, 1979, p. 110) and the knowledge
commitment establishment chain model (Johanson and Vahlne 1977, p. 23) have been used in prior research
that deals with entry strategies to foreign markets.( n1) The latter presents an establishment pattern by which
companies start with no regular export, sell through an agent, then sell through a sales subsidiary, and finally
establish a production subsidiary (Johanson and Vahlne 1977, p. 25). In contrast, the internationalization
process model recognizes two main groups of marketing operations, which form a base for channel strategies:

1. Export operations, part of the nondirect investment marketing operation modes (NIMOS): indirect export
mode, direct export mode, and own export mode (Luostarinen 1970, p. 13; see also Luostarinen 1979;
Luostarinen and Welch 1990), and

2. Sales and marketing subsidiary operations, part of the direct investment marketing operation modes
(DIMOS) (Luostarinen 1970, 1979; Luostarinen and Welch 1990, pp. 166-69).

In the internationalization process approach, the export and DIMOS are regarded as alternative entry modes
into the target country markets. They are followed by direct investment production operations (Luostarinen
1970, 1979). The explanatory logic of movement from NIMOS to DIMOS is detailed subsequently.

According to the marketing literature (Stern, El-Ansary, and Brown 1989, p. 5), “Marketing channels can be
viewed as sets of interdependent organizations involved in the process of making a product or service
available for use or consumption” within a target country. The choice of channel is viewed from the strategic
perspective of optimal effectiveness and efficiency in reaching the end customer. “Not only do marketing
channels satisfy demand…, they also stimulate demand by the promotional activities of the units composing
them” (Stern, El-Ansary, and Brown 1989, p. 5). Furthermore, there are two main sales channel alternatives
(see, e.g., Hardy and Magrath 1988, pp. 15-22): ( 1) the indirect sales channel and ( 2) the direct sales
channel.

The indirect sales channel means that the independent channel intermediaries located in the target market are
used. Such a channel can have either a first-tier structure or a second-tier structure. The first tier refers to the
use of resellers or retailers selling directly to end customers, whereas the second tier refers to the existence of
an additional level, the distributors, between the sales subsidiary and the resellers or retailers. Naturally, in
some cases, the channel may be even longer than this, with a third tier of importers or agents. In a direct sales
channel, the producer sells directly to end customers by using its own sales force (Hardy and Magrath 1988,
pp. 14-22). The relations between marketing operation modes and sales channel international strategies are
illustrated in Figure 1.

The mainstream internationalization path of companies has been to internationalize their sales and marketing
activities first, through NIMOS and only second through DIMOS (Luostarinen 1979). In the first NIMOS stage,
the company can choose among three main entry mode alternatives: indirect exporting, direct exporting, and
its own exporting. The indirect export mode exists when another company located in the home market carries
out export activities on its behalf. In the direct exporting mode, the producing firm takes care of exporting
activities directly with the first intermediary located in a target country (Luostarinen and Welch 1990, pp. 21-
25). When the firm uses its own export mode, there is no domestic or foreign intermediary between the
producer and the end customer. The producer’s own export personnel is involved in sales activities to serve
end customers; e-sales or mail order may be used (Luostarinen and Welch 1990, p. 27).

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As the operation expands and becomes more experienced in foreign markets, thereby reducing the risk and
uncertainty, the producer may decide to establish a sales or marketing subsidiary to serve the market better
(Luostarinen 1979, p. 188). If the producer takes care of selling to the end customer through the sales or
marketing subsidiary, the sales channel is direct. If the producer has a subsidiary carrying out the role of a
distributor but uses resellers or retailers for selling to the end customer, the channel is indirect. The sales
channel strategy may therefore be either direct or indirect.

In the PC industry, multiple channels are sometimes used. One such structure is a dual sales channel in which
both direct and indirect sales channels are used simultaneously (Hardy and Magrath 1988, pp. 15-22; see
Figure 2).

In addition to the sales channel strategy, the PC producer also must consider a great variety of channel
intermediaries at each channel level. The vocabulary used in this study in respect to the channel members is
specific to the PC industry. Channel intermediaries can be classified into distributors, resellers, and retailers.
By definition, distributors usually do not sell directly to end customers but use either resellers or retailers as
intermediaries. Resellers can be further divided into dealer chains (or corporate resellers); local dealers;
indirect fax, telephone, or Internet resellers; and value-added resellers, which add software and services to the
PCs. The retail stores can be further divided into PC superstores, PC stores, and general merchandisers. The
resellers sell to industrial organizations, whereas retailers sell to consumers through retail outlets. However,
because the definitions of intermediary types vary greatly from industry to industry and even from company to
company, it is more important for a producer to consider the functions a particular intermediary can perform
than to pay attention to names per se. The sales channels target a variety of customers. In this study, they are
divided into two broad groups: consumers, which includes people who buy the PCs from a personal budget,
and business organizations from different fields of industry and services.

In addition to sales activities, the marketing subsidiary is also defined to be engaged in sales promotion
activities, usually targeting end customers and/or channel intermediaries in addition to performing other tasks
such as intelligence and service (Luostarinen and Welch 1990, pp. 166-68).

In connection with a marketing subsidiary, any of the previously discussed direct, indirect, or dual channels
may be used, and a fourth alternative, a hybrid sales channel, may be selected. In a hybrid sales channel, the
marketing functions are shared by the producer and the channel intermediary; the former usually handles
promotion and customer-generation activities, whereas the intermediary is in charge of sales and distribution,
as is shown schematically in Figure 2. The distinctive difference between the two multiple strategies, in this
study, is that the dual channel strategy is an adversarial channel strategy, whereas the hybrid channel strategy
is based more on cooperation and partnership.

THEORETICAL REVIEW
In this article, we review four theoretical approaches for explaining the sales channel strategy choice and
development, namely, ( 1) the internationalization process and multinational corporation (MNC) management
orientation stages, ( 2) the economic structure of the sales channel (transaction cost analysis [TCA]), ( 3) long-
term relations, and ( 4) product-technology life cycles. These approaches have been selected for their ability to
explain dynamism, longitudinal development, and transitions. (For a summary of the theories and applications
explaining the sales channel structure decision, see Table 1.) Other approaches considered but not selected
were the original microeconomic approaches (e.g., Bucklin 1966), because we believe that TCA captures
elements from both microeconomic and sociopolitical approaches and is therefore appropriate because of its
more precise explanatory power. We also considered the population ecology approach (e.g., Levins 1962),

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agency theory (e.g., Eisenhardt 1989b), and the resource-based approach (e.g., Barney 1991). The population
ecology view is too limited in research scope. The agency theory’s focus on the principal-agency contract
seems less suitable than TCA, because it ignores other environmental factors that impinge directly on channel
choice (Eisenhardt 1989b, p. 64). The resource-based view focuses excessively on the internal resources of
the company and is therefore not as suited for analysis of channel systems as are the selected theories.

The internationalization process literature focuses on explaining the outward pattern of stages companies
follow as they gradually proceed toward more demanding products, operations, and markets on both the
country level (Luostarinen 1970, 1994; see also Johanson and Vahlne 1977 and a review of other early models
by Leonidou and Katsikeas 1996) and the company level (Luostarinen 1979). In addition to the outward
process, companies have been found to follow a holistic process of internationalization, whereby the first step
is the domestic stage, followed by the inward stage, then the outward stage, and finally the cooperative stage
of internationalization (Luostarinen 1994). Thus, each producer has an individual product, operations, and
market posture, reflecting the degree of internationalization (see, e.g., Luostarinen and Welch 1990, p. 257)
that affects the sales channel selection. The underlying rationale for the internationalization pattern is the
lateral rigid behavior of the decision makers in the firms. Firms are rigid laterally in taking steps into new
directions, beyond their present knowledge and earlier experience, but they are elastic forward, in doing what
they have done earlier. This can be overcome through the organizational learning process (Luostarinen 1979).
Likewise, Johanson and Vahlne’s (1977, p. 26) model of knowledge development suggests that market
knowledge can be increased through commitments to and activities in foreign markets. We also suggest that
this rationale applies to sales channel selections on the sales or marketing subsidiary level. Therefore, for
example, we propose that the producer’s positive experience of a particular channel strategy either in the home
country or in other foreign markets increases the probability of weight being given to the choice of a similar
type of channel strategy for a new product entry. We therefore expect the internationalization process to
explain the choice of channel structure in the entry and penetration stage.( n2)

The MNC management orientation stage literature (Bartlett and Ghoshal 1989; Doz 1986; Hedlund 1985;
Heenan and Perlmutter 1979) centers on the global integration/local responsiveness dilemma. Accordingly, an
MNC’s organizational structure varies depending on whether it is in an ethnocentric, polycentric, regiocentric,
geocentric,( n3) or more advanced organizational (multifocal/heterarchical/transnational)( n4) stage of
development.

The PC companies are expected to select a single sales channel in the ethnocentric stage, minimizing risks
and following the one used in the home country or already experienced in other countries. Likewise, a single
sales channel strategy will be used in regiocentric or geocentric stages because of the integration advantages
achieved through standardization of the channel strategies. Furthermore, the polycentric stage is expected to
result in a dual sales channel strategy because the subsidiaries probably have more freedom to select the
appropriate sales channel on the basis of the need for local adaptation on the country and the customer
segment level. Finally, hybrid channels are expected to suit the heterarchical or other advanced MNC
structures, because in these advanced MNC organizations, production and marketing functions are dispersed
into several units, assets are distributed throughout the company, subsidiaries have differentiated roles, and
knowledge is accumulated in different parts of the organization. Also, coalitions with other companies become
more important as the flexibility of the MNC’s boundaries increases. In conclusion, the MNC management
orientation stage approach is expected to best explain the horizontal composition of the channel structure and
the decision to use single, dual, or hybrid channels.

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The objective of the sales channel economic structure literature is to explain the channel selection on the basis
of cost and efficiency considerations. One of the most common approaches is TCA, based on the early work of
Williamson (1985), because it suggests a level of vertical integration (market or hierarchical control) based on
the efficiency of transactions. Because it is difficult to measure such costs, we use the following proxies
suggested by Williamson and other TCA researchers: asset specificity, external uncertainty, internal
uncertainty, and transaction volume (size x frequency). The underlying rationale of TCA is based on both
economic and sociopolitical considerations. One of the main conclusions that can be drawn is that direct sales
channels, especially when the asset specificity is high, make the most sense when the transaction size is
large. Furthermore, TCA suggests that multiple sales channels are optimal for increasing the sales volume in
the case of highly diversified markets because of economies of scale and scope in handling a large number of
transactions and for managing the external uncertainty created by such diversity. However, TCA’s main power
is in its ability to explain the choice of degree of vertical channel structure integration.

The primary objective of the long-term channel relationship literature is to explain the development of the
relationship over time (Dwyer, Schurr, and Oh 1987). It is argued that the channel relationship can lead to
either partnership advantages (Sethuraman, Anderson, and Narus 1988) or channel conflicts (Moriarty and
Moran 1990).( n5) This is moderated by several relationship variables, namely, power, trust, and commitment
(see, e.g., Dwyer, Schurr, and Oh 1987, pp. 18-19).( n6) We focus on the influence channel relationships may
have on channel selection in comparison with the current channel relation and alternatives. We argue that
channel relationships are especially useful in explaining the selection among multiple channels (dual, hybrid).
Hybrid channels would be selected because partnership advantages achieved through trustworthy and
committed relationships are important when customers are served in cooperation between the producer’s
marketing organization and channel members. Dual channels decrease trust because the producer is
competing directly with the channel members for customers; therefore, dual channels are selected when the
relative power of the PC manufacturer is strong and channel conflicts can thereby be overcome.

The objective of the product-technology life cycle model is to describe the stages through which a product-
technology passes (see, e.g., Moore 1991). The question addressed is which channels are the best
alternatives for targeting customers in a particular product-technology life cycle stage. The main suggestion of
this theory seems to be that in the introduction stage (innovators and early adopters), firms use single (direct
sales representatives or indirect specialized) channels to satisfy the heavy customer support needs; in the
growth stage (spreading to early majority customers), firms use dual channels to provide availability to all
customer groups; and in the maturity stage (late majority market), firms use multiple (dual, hybrid) channels to
service the customers, and interest shifts from value-added services to low price. Finally, in the decline stage
(laggards), firms use hybrid or direct (marketing) channels because low-cost channels become most important
(Lele 1986; Moore 1991).

METHODOLOGY
We examined the choice and development of sales channel strategy in the PC industry, which has been
turbulent since the beginning of the 1980s when the leading companies started to reorganize their channel
activities toward multiple channels. These were expected to, and did, become dominant in the 1990s (Moriarty
and Moran 1990, p. 146). We selected the multiple-case study approach, based on longitudinal analysis of four
PC companies. The case methodology has a distinct advantage over other research methods because its
target is to explain and deal with complex issues. Furthermore, the researcher has no control over behavioral
events (experimenting with strategies is not possible) (Yin 1989, pp. 17-20). Because the PC industry is
relatively oligopolistic (the ten largest firms account for 70% of the market), a case study seems more
appropriate than a survey. We selected the case companies so that we could cover different channel structures

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as widely as possible. The time period under investigation is from 1982 to 1997 in regard to direct interviews,
but the investigations through literature research have continued until the present.

The process of theory building from case study research depicted by Eisenhardt (1989a, p. 533) was followed
in this study. Also, Yin’s (1989, pp. 113-15) explanation-building approach, especially in case selection and
analysis, resembles the methodology used in this study. In brief, the data-gathering and analysis process used
in this study may be divided into the following steps, presented by Eisenhardt (1989a, p. 533).

First, in the getting started phase, specifying as precisely as possible the research questions and, if possible,
building in prior constructs is important. Therefore, this study includes prior defined research questions and
several identified prior constructs related to factors of channel strategy based on a literature review. Yin (1989,
pp. 30-31) depicts a process in which initial theoretical (working) propositions are compared with empirical
case study evidence and revised accordingly, thus acting as a link between theory and empirical data. In this
study, the working propositions were based on the theoretical review of the four theoretical approaches
presented previously, which are not presented here for space economy. The working propositions were then
used for empirical testing and further developed into the propositions shown in Table 2.

Second, in the selection of cases phase, the prior specification of the population and theoretical sampling are
important. In this study, the effects and the size of the industry have been eliminated by the selection of one
industry, PCs, and by a focus on large PC producers. The similar case companies selected were Fujitsu ICL,
IBM, and Siemens Nixdorf (SNI), whereas the dissimilar case was Compaq. In the initial stage, Dell was also
selected, but it refused to participate, stating lack of time as the reason, and it was decided that Dell could be
examined through secondary sources. Nevertheless, the participating firms represent most of the large
companies with a greater than 30% share of the total PC sales volume in Europe (IDC 2000). Furthermore, the
sampling logic has followed literal replication (cases selected so that they predict similar results) and
theoretical replication logic (cases predicting contrary results to some extent but for predictable reasons) (Yin
1989, p. 53).

The third step includes the use of multiple data collection methods to triangulate the findings, combining
qualitative and quantitative methods. Altogether, we implemented 20 top management interviews related to
these four case companies during autumn 1996 and spring 1997, using both pre-structured and open-ended
questions. As to the number of case companies, four has been regarded as enough for this type of study by
leading researchers such as Eisenhardt (1989a) and Yin (1989). The people interviewed ranged from chief
executive officers to sales or marketing directors. We emphasized interviewing experienced managers who
had been in the company for a long period; literature has referred to these as “key informants” (Yin 1989, p.
41). If some of the people interviewed had a shorter history in the case company, we performed an additional
interview with a person who had been working for a longer period in the company. This is justifiable case
interview research methodology. In addition, recent statistics and the business press supplemented the study.
This has enabled triangulation of interview data by a comparison with secondary data on sales channel
structure. It has also enabled us to monitor the latest developments.

The fourth step, entering the field, combines the simultaneous collection of data and analysis with the use of
flexible and opportunistic data-collection methods. This is one of the strengths qualitative research offers. The
primary data collection and analysis were carried out during a two-year period (1996-97), which included
continuous mirroring of gathered data and emerging theory (variables, constructs, and definitions). As stated
previously, this was further complemented with secondary data. The case companies with a similar sales
channel structure development (Fujitsu ICL, IBM, and SNI) are analyzed with literal replication. The other

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company (Compaq), having a different sales channel strategy development, is studied with theoretical
replication. In the former, the findings are replicated across similar cases, and in the latter, the contrary results
between different cases should understandably be based on theory (Yin 1989, p. 53).

The fifth step comprised sharpening of the working propositions by use of iterative tabulation of the evidence
for each construct, replication logic across cases, and search evidence for the “why” behind relationships. This
process began as part of the analysis process and was continued throughout the study. (For the results, see
Table 2.)

Eisenhardt’s (1989a, p. 533) last two steps are the use of literature as a comparison in terms of similar and
conflicting findings and finally “closure” when theoretical saturation is reached.

Although we followed a sound research process, this study faces the risk of including unreliable results or
invalid conclusions, as do all qualitative studies. To improve the construct validity and reliability of the data
gathering, we followed three principles suggested by Yin (1989, pp. 95-103). First, we used multiple sources of
evidence and triangulation of findings (see also Eisenhardt 1989a). For example, we used annual reports,
internal documents, articles in newspapers or magazines, and private consulting companies’ reports
(Dataquest, IDC) to corroborate the findings. Second, we created a database to separate the data and the
reports. Third, we maintained a chain of evidence throughout the case studies. Furthermore, to increase the
internal validity (causality) and external validity (generalizability), we considered both a general strategy and a
dominant mode of analysis, as proposed by Yin. As a general strategy, we analyzed the case study on the
basis of the preliminary/emerging theoretical working proposals and grouping of theoretical concepts (Yin
1989, pp. 105-15). The dominant mode of analysis was explanation building, in which the final explanation and
outcome are not fully stipulated at the beginning of the analysis. Therefore, we examined the case study
evidence, revised theoretical working propositions, and examined the evidence again (Yin 1989, pp. 113-15).

DEVELOPMENT OF SALES CHANNELS
The sales channel structure of Fujitsu ICL, IBM, and SNI in Europe followed a similar path in the 1980s. The
sales channel used in all of the companies before the introduction of the PC products was based on a direct
sales channel located in the sales subsidiary of the target country. The introduction of the PC products into the
product line changed the channel structure in all of the companies from a purely single direct sales channel
strategy to a dual sales channel strategy.

Compaq’s sales channel strategy differs completely from the channel strategy selected by the three other case
companies. Compaq used an indirect sales channel strategy, consisting of authorized dealers (resellers)
selling mainly to business customers when it entered the European PC market instead of changing to a dual
one. This has been largely due to its reliance on channel members being the most cost efficient but also is an
effective means of expanding international sales. The dealers were expected to carry out a wide range of
channel functions, which included sales, technical support, service, and demand creation. Compaq used its
dealers to complement its worldwide sales coverage; in 1984, it had 330 international dealers in 13 countries
worldwide and 3 foreign sales subsidiaries, all of which were located in Europe (the United Kingdom, France,
and Germany). In 1990, there were 1600 European dealers located in 21 countries and 13 European sales
subsidiaries. The success of Compaq’s indirect sales approach was probably one of the main factors
influencing similar companies to increase indirect sales and thus leading to the dual sales channel strategy.

Compaq started to develop its channel strategy in the early 1990s toward a hybrid sales channel–that is,
taking control over customer-generation and sales promotion functions, whereas the intermediaries were to
handle the sales and distribution–to better service its introduction of new consumer products and high-end

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server products for professional customers. These initiatives involved the establishment of a distribution center
in the Netherlands and the creation of direct customer relations by setting up major account development
teams in its subsidiaries and moving to open distribution. In the mid-1990s, Compaq again reshaped the
channel structure by decreasing the number of channel partners served directly to develop closer relations with
a smaller number of channel partners. Compaq has lately continued to add “hybrid elements” in its channel
structure by setting up call and support centers in Dublin and Glasgow, for example, to provide presales advice
and sales support.

The sales channel structures of Fujitsu ICL, IBM, and SNI have also followed a similar path in the 1990s, from
a dual to a hybrid sales channel. All of the companies used a sales subsidiary-based, dual sales channel
approach until the early 1990s. However, they decided to abandon it in the mid-1990s in favor of a more
indirect distribution channel. In the case of Fujitsu ICL, the change was related to a reorganization in which PC
products were demerged from ICL (a direct sales channel of Fujitsu ICL) and placed under the control of
worldwide Fujitsu PC operation (which treated all indirect channels equally). Furthermore, IBM maintained
control of certain channel functions, which resulted in a hybrid sales channel, and SNI and Fujitsu ICL had
similar plans for maintaining control of certain channel functions. In all companies, vertical channel conflicts
were the main reason for the decision to change from dual to hybrid. The channel members believed that the
producer’s direct sales competed with their own sales.

According to the business press, Dell uses a single channel, mainly the direct sales channel approach. Dell’s
direct sales approach can be divided into direct sales representatives that serve “relationship customers” (large
public and corporate customers) and fax-, telephone-, and Internet-based channels that serve consumers and
small and medium-sized enterprises. On the basis of the directness of the channel, Dell can be compared to
the early development of the similar case companies of this study, which then turned to dual channel
strategies. Our question is whether Dell will continue to follow the development of similar case companies into
multiple channels (dual or hybrid) or remain mainly direct. However, Compaq and many other companies are
currently considering moving even one step further, from the hybrid sales channel to the dual sales channel, as
a countermove to the threat posed by the success of Dell’s direct sales approach (e.g., McDougall 2000).

The case companies have expanded their sales volume in Western Europe heavily since they entered the PC
business. Naturally, one indication of performance is the trend in market share. According to IDC statistics on
PC market shares (based on delivered units) in Western Europe for 1987-97, all the examined companies
have been able to increase their market shares: IBM from 8% to 9%, Fujitsu ICL from less than 1% to more
than 4%, Compaq from less than 1% to 15%, SNI from less than 1% to 5%, and Dell from 0% to 6%
(Gabrielsson 1999, p. 145). On the basis of these figures, only limited generalizations can be made on the
impact of sales channel strategies on performance. However, development toward multiple channels and, in
particular, hybrid channels seems to increase the sales volumes. In addition, Dell’s direct sales channel model
seems highly effective. For the framework related to sales channel strategy choice and development in the PC
industry, see Figure 3.

The case companies developed from single to multiple (either dual or hybrid) channels when they entered the
cooperative stage of the “holistic internationalization process” (see Luostarinen 1994, p. 19). These channels
are a response to increasing product-market diversity–for example, consumers, small and medium-sized
enterprises, and large customer markets. In this kind of environment, firms can carry out the channel functions
at relatively low cost by applying a multiple (dual, hybrid) sales channel strategy. Not only costs but also
partnership advantages (market expansion ability, services, and finance) are targeted. The change of strategy
from single to multiple channels is often triggered by increased environmental uncertainty caused by

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successful different channel strategies of competitors, which lead to multiple channel selections because of
lateral rigidity and risk avoidance in decision making. (See P , P , P , P , and P in Table 2.)

A recent phenomenon increasing the environmental volatility is the growing use of the Internet in international
marketing channels. This study has not focused on e-commerce, the importance of which is still relatively
limited in Europe. The Internet can be used for improved communication with channel intermediaries and end
customers. This leads to an increase in hybrid sales channels (see, e.g., McDougall 2000).

The development by similar case companies from a single direct to dual sales channels seems parallel to their
organizational development toward either polycentric or regiocentric MNC structures, which has enabled the
sales subsidiaries and regions to adapt to the diversifying marketplace (business/consumers) and has entailed
the increasing use of channel intermediaries in firms’ solution-based sales.( n7) The dual sales channel
strategy, however, has been plagued by continuous conflicts and thereby has provided fewer partnership
advantages. Only the leading PC companies either on the global/European level or in the home market with
high producer power have been able to manage this channel strategy successfully. (See P , P , and P in
Table 2.)

The similar case companies developed from dual to hybrid sales channel strategy as they decided to abandon
direct sales to reduce channel conflicts and thus increase partnership advantages. The new emerging hybrid
sales channel strategy is a mixture of an indirect distribution channel and producer control of marketing
functions (new customer development and promotion). The selection of a hybrid sales channel has been
accompanied by organizational development toward an advanced (geocentric, heterarchic) organizational
structure and further standardization of the technology. In the face of the decreasing power of producers in
relation to channel intermediaries, the firms increasingly achieve control by developing trustworthy and
committed channel relations, which is also a prerequisite for achieving partnership advantages. (See P , P ,
P , and P in Table 2.)

Because of the risk of sales channel conflicts, the dissimilar case (Compaq) retained its successful single
indirect sales channel strategy and did not change to a dual sales channel strategy as the similar companies
did. However, Compaq started to develop its strategy to include some hybrid elements, which then became the
model for the competitors’ channel strategy. The development of the dissimilar case from a single indirect to a
hybrid sales channel seems to corroborate the findings of the similar cases related to MNC organizational and
technological development (see P and P in Table 2).

As a synthesis of this study, eight propositions are outlined. They are based on working propositions
emanating from the literature, which then were used for empirical testing through the case interviews and
finally were developed into the propositions summarized in Table 2.

DISCUSSION OF THE RESULTS
The empirical findings related to the influence of the degree of internationalization (P ) on the sales channel
strategy revealed an interesting result. It was found that as the degree of internationalization of companies
increases, the sales channel strategy does not necessarily change from a lower degree of vertical integration
to a higher degree of vertical integration but rather may be dependent on various other aspects. For example, it
may depend on the existence or experience of channels or partnership advantages achieved through
cooperation with the channel intermediaries. This is understandable, because the internationalization process
literature (e.g., Luostarinen 1979) takes a stand related to operation strategy selection and not to channel
strategy per se. This finding, however, is also consistent with internationalization process studies that

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emphasize the importance of cooperation as the step following the outward internationalization stage (see
Luostarinen 1994, pp. 18-21).

As indicated in P , the empirical results showed that a relationship between the MNC management orientation
stages and selection of the sales channel strategy can be identified. However, some deviations were also
noted. First, the use of the dual sales channel strategy was noted in both the polycentric (expected) and the
regiocentric (unexpected) stage. This can be explained by the existence of lateral rigidity in the decision
making, which leads to continuation of the selected sales channel strategy though the MNC’s organizational
structure changes. Second, the hybrid sales channel was used in both the geocentric and heterarchic
organization stages. This seems to reflect that the stages are relatively close to each other; indeed, heterarchic
organizations are one type of geocentric organization (Hedlund 1985, pp. 15-16).

The economic structure (TCA) literature was useful in explaining both single channel choices and development
toward multiple channels. The increasing product-market diversity (P ) and increased environmental
uncertainty caused by competition and the introduction of new technologies (P ) were able to explain the
channel development toward multiple sales channels (see Klein, Frazier, and Roth 1990). In relation to
product-market development across markets, the EU integration process seems to be standardizing the
channel strategies of PC companies across markets. Variation among countries exists more in respect to
degree of usage (e.g., proportion between direct and indirect) than to strategy level (direct, indirect, dual,
hybrid). Also, an expected result was that the relative cost of performing the channel functions between
producers and channel members is decisive in channel design. A surprising result was that the influence of
internal uncertainty was not explicitly identified, as previous studies had suggested (see, e.g., Anderson 1985),
and therefore it was not included in P .

The long-term relations approach was able to explain the development from a single sales channel to multiple
ones and the selection between dual and hybrid channels. The high partnership advantages influence the
channel development from single (direct, indirect) to multiple (dual, hybrid), whereas the conflict potential
drives development from dual to hybrid channels, as postulated in P . This finding supports the assumption
that there is interaction between the channel strategy selection and long-term relations development, as has
been proposed by many leading researchers (see, e.g., Frazier 1990, pp. 296-98; Moriarty and Moran 1990).
Finally, it was noted that the relationship factors (power, trust, and commitment) influence the channel choice
only indirectly as moderators, as argued in P . The trend in this study from vertical integration–based control to
control based on long-term relations is probably part of a wider change in society. Furthermore, the
consolidation of the channel intermediaries into powerful pan-European or global ones has altered the power
interdependence so that PC producers can no longer rely on power-based control (e.g., coercive means).
Trustworthy and committed long-term channels need to be built.

The stages based on the product-technology life cycle usually used in the model (e.g., introduction, growth)
were adapted to respond to PC industry development (proprietary technology, solution-based technology,
standard technology; see P ). The strongest point of the product-technology life cycle seems to be its ability to
explain the development aspects of channels. The predictions of the product-technology life cycle are fully in
line with the empirical TCA studies, in which the level of asset specificity has been found to relate positively to
the vertical integration degree (see, e.g., Anderson 1985; Klein, Frazier, and Roth 1990).

Finally, the ability of the theories to explain the channel development varies. The traditional outward
internationalization literature (Luostarinen 1979) is able to explain the choice of sales channel structure in the
entry stage through the level of uncertainty and lateral rigidity in the decision-making process. Whereas, the

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growth beyond the ethnocentric MNC management orientation stage (Heenan and Perlmutter 1979) as well as
the movement to the cooperative stage in the holistic internationalization process (Luostarinen 1994) seems to
explain the development toward multiple channels better. Traditional TCA (Williamson 1985) seems to explain
well the development from single direct or indirect to dual channels but loses ground in regard to the less
economics-oriented area–that is, the selection of hybrid sales channels; instead, the literature based on long-
term channel relations is better able to explain the partnership benefits acquired through such cooperation
(Sethuraman, Anderson, and Narus 1988). The product-technology life cycle is able to explain the channel
expansion into multiple channels through the diffusion of the product technology into a broader customer base
(Lele 1986).

The findings of the study are limited to the qualitative research strategy of multiple case study methodology
selected, and generalizations should be limited to the theoretical aspects. Therefore, it may be inappropriate to
draw conclusions regarding behavior in the PC industry in general (Yin 1989, p. 21).

CONCLUSIONS
The results of the article are expected to be useful to the academicians for research and teaching and
practitioners for managerial application. The topic, being relatively under-researched, has provided a fruitful
study area (see, e.g., Frazier 1990, pp. 256-71). We present the theoretical contributions, managerial
implications, and future research suggestions based on this study.

It is possible to pinpoint some research results that make a theoretical contribution. First, the multiple channels
in the context of international business have not previously been the object of an explicit study. The
conventional view has been to consider sales channel decisions from a single channel viewpoint. Therefore,
the multiple sales channel strategy alternatives, choice, and development studied here contribute by narrowing
this research gap (see also Gabrielsson 1999). For example, Figures 1 and 2 contribute by presenting the
channel alternatives in relation to international marketing operation modes. Second, this study has applied and
developed the existing internationalization process and other theories, constructs, and concepts in examining
the multiple sales channels. For example, a relationship between the outward/cooperative internationalization
process stages (see Luostarinen 1994, p. 19) and channel selection was also identified. As the companies
become highly internationalized, their tendency to cooperate and form alliances increases, which leads them to
select hybrid sales channels. The results of the study may also be valid for the born globals. For them, time is
money, and rapid market entries, penetration processes, and escalations are needed for global success.
Therefore, the early use of strategic alliances and multiple channel strategies may be of importance for them.
Third, the development of a dynamic framework (Figure 3) and propositions to guide further research related to
the sales channel strategy choice and development for international expansion in the PC industry is a
contribution. The propositions summarized in Table 2 are important results of this study.

In terms of managerial implications, the study results increase the knowledge related to sales channel
strategies for international expansion. This is important because inappropriate channel selections are difficult
to change and have a long-term impact on company performance. There are three main managerial
implications: First, the entry and penetration marketing mode influences the sales channel strategy. Producers
using indirect export and their own export do not use multiple channels; indirect exporting uses indirect sales
channels, whereas their own exporting uses direct sales channels. Direct exporting opens up the possibility of
using multiple channels: dual, in which both end customers and channel members are sold to simultaneously,
and hybrid, in which sales and distribution are handled through foreign channel intermediaries but sales
promotion is handled by the producer. As this study shows, the PC companies with a sales and marketing
subsidiary within the market area are in the best position to use either dual or hybrid sales channels. Second,

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the result that the hybrid sales channel strategy is the favored or even the optimal solution for expanding the
sales volume in the PC industry in Europe is of considerable managerial value. The importance of hybrid sales
channels is growing in Europe. All of the four PC companies have begun to use hybrid sales channels. Third,
managers in some other information technology industries will find that many of the research results may also
be applicable in their business context. Hybrid sales channels have been used increasingly in other fields as
well. In previous studies, multiple sales channel arrangements have also been found not only in PC industries
but also in the hospital, health care equipment, and air conditioning equipment industries (see, e.g., Anderson,
Day, and Rangan 1997, p. 66).

We present the following suggestions for further research: First, the influence of operation modes on sales
channels is still in need of further empirical research. Second, hybrid sales channels will become central in the
future as e-business takes off in Europe. The evolving hybrid sales channel for Compaq and other leading PC
companies allows customers to place orders on the producers’ Web site, while installation and service is
handled by the local reseller, which receives a commission on the sale (McDougall 2000). The e-business
influence on sales channels and the possible increase of hybrid sales channels in various industries in the
future are worth studying. Finally, born global companies that are under heavy pressure to globalize their
activities could immediately or rapidly start using multiple (dual or hybrid) sales channels. Through partnerships
with strong and leading partners, multiple channels provide a way for these firms to expand rapidly to global
markets while maintaining control over their marketing. Thus, they may be able to solve the problem of early
globalization–that is, the lack of marketing experience and financial resources. We are involved in a research
project examining this aspect.

NOTES
(n1.) See also Leonidou and Katsikeas (1996).

(n2.) The entry and penetration stages are the stages after the entry stage, as defined by Luostarinen (1994).

(n3.) Decision making varies depending on the organization (ethnocentric: home culture dominated;
polycentric: subsidiary dominated; regiocentric: regional subsidiary based; geocentric: headquarters controlled)
(Heenan and Perlmutter 1979).

(n4.) A multifocal organization enables the firm to shift decision making from the national concern to the global
(Doz 1986). A heterarchical organization exploits competitive advantages derived locally and seeks
advantages from its global operation (Hedlund 1985). A transnational organization is one in which assets are
interdependent and specialized with subsidiary operation (Bartlett and Ghoshal 1989).

(n5.) The partnership advantages provide a coordinated effort that is focused on jointly satisfying the
requirements of the customer marketplace (Sethuraman, Anderson, and Narus 1988, pp. 327-31). Channel
conflicts involve behavior that impedes one of the members from achieving its goals (Stern, El-Ansary, and
Brown 1989, p. 361).

(n6.) A firm’s power is based on the nature of the other firm’s dependence in the relationship. Trust is a party’s
expectation that another party is reliable in the relationship. Commitment refers to an implicit or explicit pledge
of relational continuity between parties (Dwyer, Schurr, and Oh 1987).

(n7.) Solution-based sales include hardware that has become standardized and software applications that
require system integration skills.

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Table 1. Summary of Theories and Applications Explaining the Sales Channel Structure Decision
Legend for Chart:

A – Theory/Application
B – Objective
C – Underlying Rationale
D – Factors
E – Sales Channel Structure

A B
C D
E

Internationalization Explaining the
process outward and holistic
internationalization
pattern

Laterally rigid Product, operations,
decision making, and market
organizational posture; producer;
learning and channel factors

Choice of channel
structure in entry
and penetration
stage

MNC management Explaining the
orientation organization structure
stages and locus of
decision making

Headquarters predisposition Ethnocentric, polycentric,
toward regiocentric,
global integration geocentric, or
and local responsiveness heterarchical stage

Choice of horizontal
composition of
channel structure

Sales channel Explaining the
economic structure economic structure
(TCA) and processes
of the channel

Cost and efficiency Asset specificity,
of performing the external uncertainty
distribution and (volatility,
transaction functions diversity), internal
uncertainty, transaction
volume (frequency,
size)

Choice of degree of
vertical integration
of channel
structure

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Long-term Explaining the
relationship development of
the channel relationship
over time

Interdependence Partnership advantages,
development, comparison sales channel
level conflicts, and
relationship factors

Choice between
multiple channel
structures

Product-technology Explaining the
life cycle product technology
development

Diffusion and Life cycle stages
adoption of a new
innovation

Choice of channel
Structures

Table 2. Summary of Propositions
P : A low degree of internationalization increases the probability of the use of an indirect sales channel
strategy. In contrast, a higher degree of internationalization increases the probability that an existing channel or
one from which positive experience has been gained is used in the outward stage and a multiple (dual, hybrid)
channel is used in the cooperative stage.

P : The MNC structure development of a PC company influences the probability of a particular channel
strategy (on the company level): A single (indirect or direct) sales channel is used in the ethnocentric stage, a
dual sales channel in the poly-/regiocentric stage, and a hybrid sales channel in the geo-/heterarchic stage.

P : The higher the product-market diversity, the higher is the probability of the choice of multiple (dual, hybrid)
channels over single (direct or indirect) channels, which again are guided by transaction size economies.

P : In the proprietary technology stage, direct (sales representatives) channels are more probable; in the
solution stage, indirect sales channels are more probable. The dual sales channels are created through
transformation into a new stage from the previous one. In the standard technology stage, the probability of the
selection of hybrid sales or direct (marketing) channels increases.

P : The higher the environmental uncertainty (volatility and diversity) caused by competition and new
technologies (e.g., the Internet), the higher is the probability of the choice of multiple (dual, hybrid) sales
channels over single (indirect, direct) sales channels.

P : Diversity in the relative cost of performing channel functions between producer and channel intermediaries
increases the probability of the choice of multiple (dual, hybrid) sales channels over single (direct or indirect)
channels.

P : Potential for high partnership advantages influences the development of the sales channel strategy from
single (direct, indirect) to multiple (dual, hybrid), whereas high conflict (potential) influences it from a dual to a
hybrid sales channel strategy.

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P : High producer power enables the producer to keep dual sales channel conflicts minimal, whereas
commitment and development of trust are requirements for the partnership advantages of the indirect/hybrid
sales channel strategy.

DIAGRAM: Figure 1. Entry, Penetration Modes, and Sales Channels for International Expansion

DIAGRAM: Figure 2. Multiple Sales Channels in the PC Industry

DIAGRAM: Figure 3. Framework for Sales Channel Strategy Choice and Development in the PC Industry

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Submitted September 2000

Revised October 2001

~~~~~~~~
By Mika Gabrielsson; V. H. Manek Kirpalani and Reijo Luostarinen

Mika Gabrielsson is Professor of International Business, Helsinki School of Economics.

V. H. Manek Kirpalani is Distinguished Professor Emeritus of Marketing and International Business, Concordia
University; Dean International, EMPI, Delhi; and Visiting Professor of International Business, Helsinki School of
Economics.

Reijo Luostarinen is Professor and Head of International Business, Director of the Center for International
Business Research, and former Vice-Rector, Helsinki School of Economics.

Copyright of Journal of International Marketing is the property of American Marketing Association and its
content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder’s
express written permission. However, users may print, download, or email articles for individual use.

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