Very few products are sold by their producer directly to the final customer. The
vast majority pass through the hands of one or more intermediaries, such as wholesalers, dealers, brokers or retailers. When trading links are established between these intermediaries, a marketing channel is formed. Intermediaries create value by reducing the spatial separation - the physical distance between the actual point of production and the point of consumption - between manufacturers and final users of products and services. The relationship between marketing and physical distribution is not clearly defined. There is a disagreement over what can legitimately be regarded as physical distribution. The broad definition includes decisions on the number of outlets to be supplied and choice of intermediaries, as well as the physical organization of transport and storage operations. A more specific definition assumes that "the basic framework of outlets and intermediaries is already established and sees the role of physical distribution to be the efficient movement of goods through these predetermined channels" (Hawkins.
1999). As we can see from the history of Star Chemical Co. the managers have nearly no experience in choosing and handling the appropriate channels of distributions. Also Star Chemical's sales force have no experience in selling to wholesalers or retail firms in the consumer area. Therefore before we continue any further, we must first understand the meaning of marketing channels and the importance of selecting them. So a marketing channel can be defined as "exchange relationships that create customer value in the acquisition, consumption and disposition of products and services" (Pelton, Lou, E. 2001). This definition implies that exchange relationships emerge from market needs, as a way of serving market needs. Channel members must enter the marketplace well equipped to be flexible enough for any changes in the market needs and wants. To...