Distribution channel is the flow system of which services and goods move from the vendor to the consumer. As we have learned in class, the channel can be direct, directly from the vendor to the consumer, or there can be intermediaries and several connections, such as wholesaler, distributor, agents, and retailers. The distribution channel is also referred to as the marketing channel.

Michael Porter defines competitive advantage as the ability of one firm to outperform its rivals by establishing a difference and preserving it. The results of having an advantage over other firms in the market are more customers which lead to higher sales and more profits. Product offered, firm’s cost structure, consumer support and distribution network are examples of ways in gaining competitive advantage in the market. Rosenbloom define sustainable competitive advantage as “a competitive edge that cannot be quickly or easily copied by competitors. In recent years, it has become far more difficult for companies to attain such an advantage through product, price, and promotion strategies” (Rosenbloom, 2004).

Another way for firms to gain competitive advantage is through their distribution channel by using Porter’s Five Forces (rivalry, threat of substitutes, buyer power, supplier power, and threat of new entrants and entry barriers). We will be focusing on strategic alliance and direct channel. Strategic alliance is defined as the relationship created between firms where their knowledge is combined to increase sales and reduce cost of their good and services. The main goal for firms in creating strategic alliance is reducing their distribution cost; improve market penetration and so on. The reason of getting into an alliance also depends on the firm’s initial goal. Laura Ashley, a home furnishing company, created a strategic alliance with FedEx Company in the beginning