A Corporate vertical marketing system (VMS) is an organizational structure that allows a company to control and manage multiple levels of production and distribution. This system ensures efficiency and smooth operations from the factory to the hands of the end consumer. By vertically integrating various stages of the supply chain, companies can streamline their processes, eliminate unnecessary costs, and deliver products or services effectively.
Advantages of a Corporate Vertical Marketing System
1. Improved Supply Chain Management:
A corporate VMS enables companies to have complete control over their supply chain, from sourcing raw materials to delivering the final product. This control ensures better coordination, reduced lead times, and improved efficiency throughout the process.
2. Enhanced Quality Control:
Companies with a corporate VMS have direct oversight of every stage of production. This allows them to implement stringent quality control measures, ensuring that products meet their standards and those of the end consumers.
3. Cost Savings and Efficiency:
Vertical integration in the supply chain eliminates the need for intermediaries, reducing costs associated with distribution, transportation, and other related expenses. Companies can achieve economies of scale and cost savings by optimizing their internal processes.
Types of Corporate Vertical Marketing Systems
1. Corporate-Administered VMS:
In a corporate-administered VMS, a company fully owns and controls each level of production and distribution. This level of control allows for centralized decision-making, streamlined coordination, and consistent implementation of marketing activities.
2. Contractual VMS:
Under a contractual VMS, independent firms come together through contractual agreements to coordinate their activities. The contracts outline the roles, responsibilities, and collaboration between the participating companies without the need for full ownership or control.
3. Administered VMS:
In an administered VMS, a dominant company with considerable market power coordinates the activities of independent firms within the supply chain. While not necessarily owning these firms, the dominant company exerts influence over pricing, distribution, and promotional strategies.
Examples of Corporate Vertical Marketing Systems
Tesla, the renowned electric vehicle manufacturer, maintains a corporate VMS by controlling various stages of production and distribution. From designing and manufacturing electric vehicle components to selling their vehicles directly through Tesla-owned stores, they have complete control over the customer experience.
Samsung, a global technology brand, operates a corporate VMS by owning multiple subsidiaries involved in the production and distribution of their products. This allows them to maintain control over the quality, design, and distribution channels of their electronic devices and appliances.
A corporate vertical marketing system provides companies with the ability to control and manage multiple levels of production and distribution, ensuring efficiency, quality, and cost savings. Whether through full ownership, contractual agreements, or influence, a company can streamline its operations and deliver a consistent, high-quality customer experience. Examples such as Tesla and Samsung illustrate the effectiveness of this approach in achieving success in the market.