List and briefly define the three basic types of channel relationships. Explain why they are described as a continuum.

Question

What will be an ideal response?

Answer 1

(1) In Arm's Length relationships, both parties retain their independence and pursue only their own interests while attempting to benefit from the goods and services provided by the other.
(2) At the opposite end of the relationship continuum from Arm's Length relationships is a situation where one company or several companies acting as one performs all channel functions. This is called an integrated relationship.
(3) Cooperative relationships exist between Arm's Length and integrated relationships. In general cooperative relationships are administered using some sort of formal contract. They tend to be more flexible than integrated relationships. They tend to be used when a company wants less ambiguity in the channel relationship than the Arm's Length can provide, but without the long-term and/or capital investment requires to achieve full integration.

The three basic types of channel relationships are organized by how close the buyer and the supplier interact with each other. Students need to understand that certain channel relationships can fall between Arm's Length and cooperative, or that a relationship can be integrated at some point and then cooperative at others. All of the factors that affect choice of channel type also can influence the relationship. A combination of relationships can exist--one that is kind of cooperative and still has a degree of Arm's Length can exist. A continuum indicates that relationships can and do fall at many points within the graphic representation.