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Case 4
Precision Electronics Corporation
Case Objectives
1) To provide students with an opportunity to compare various channel structure alternatives
in an industrial marketing context.
2) To offer a vehicle for comparison and contrasting industrial distributors to
manufacturers’ representatives.
Problem Situation
Precision Electronic Corporation (PEC) must decide whether to use manufacturers’
Teaching Suggestions
A good way to handle this case is to divide the class into two “camps.” The first would make the
arguments in favor of manufacturers’ representatives and the second could make the case for
Case Discussion
Since the rough calculations shown on page 541 suggest that a direct sales force to market the
relays throughout the U.S. would be too expensive, the analysis should focus on the two other
Looking first at manufacturers’ representatives, an argument favoring this channel structure
could be based on the following:
▪ Costs are variable based only on commission from sales by the reps.
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But, arguments can also be made against using industrial distributors based on such
possible disadvantages as:
▪ No stocking of inventory.
Turning now to industrial distributors, an argument favoring their use can be based on such
factors as the following:
▪ They stock inventory.
▪ Can provide numerous value-added services.
▪ The technical knowledge of the sales force tends to be lower because they sell so
many different products.