Question

xxx3)

The Peloton exercise bike company produces and distributes its own content, manages its own delivery and installation, and controls its retail and distribution. Peloton is an example of

	A.	Administered vertical integration
	B.	Contractual vertical integration
	C.	Conventional integraiton
	D.	Corporate vertical integration
	E.	A direct marketing channel

Answer 1

The correct answer to the asked question is Option D i.e. corporate vertical integration. The reason why it is said so is because corporate vertical integration is the marketing system in which the ownership of all levels weather it is production, delivery, distribution or installation lies with a single company. Similarly here we can see that Peloton Exercise Bike Company produces and distributes its own content and also takes care of the distribution channels, delivery and installation by itself only. Hence it is an example of corporate vertical integration.

Let’s understand why other options are not the right choice:

• Administered vertical integration: Administered vertical integration is a vertical marketing system in which one of the members related to either distribution or production possesses the control and is dominant throughout the process because of its sheer size. That member is responsible for taking the crucial decisions and it organizes the nature of the vertical marketing system informally. In this scenario it is not mentioned anywhere that any member holds more power or is dominant, hence it is not the right choice.
• Contractual vertical integration: As the name is suggests, it is like a formal contract or agreement between various levels of production and distribution channels to coordinate the overall process. For example, giving franchisee for your brand. Hence it is also not the right choice as Peloton Exercise Bike Company does not offers franchisee and manages its retail and distribution by itself.
• Conventional integration: Conventional marketing integration consists of one or more manufacturer, distributor or retailer. Each business answers to its own shareholder, owner or board of directors. In the mentioned scenario there is only one manufacturer, distributor or producer i.e. Peloton Exercise Bike Company. Hence, it is not the right choice.
• Direct marketing channel: Direct marketing channel refers to the series of marketing methods which are used to market a certain product or service. Its purpose is to put an organization directly in front of its target customers by using certain medium such as social media, TV advertisements, SMS etc. It has no relevance to the production part of the organization but here we can see that Peloton Exercise Bike Company is producing its own content. Hence, it is not the right choice.