Touhy Tires makes a broad range of tires for the automotive and truck markets. It sells its products directly to the original equipment manufacturers (OEMs; like Ford Motors), to wholesalers for delivery to small garages, and to large warehouse stores for mass consumption. The market Touhy sells to includes 68 million units sold to new car producers and 17.5 million in replacement tires for existing automobiles, 65% of which are sold through wholesalers and 35% through large warehouse stores. Touhy has a 15% market share in both markets. The tires sell for an average of $100 each.

Touhy has all of the channel costs of a large company. The distribution of these costs is detailed in the table below:

REQUIRED:

a. Calculate the channel costs by category and channel.

b. What are the total channel costs for OEMs? Wholesalers? Warehouse stores?

c. Calculate the revenue by channel.

d. What is the channel cost as a percentage of revenue for OEMs? Wholesalers? Warehouse stores?

e. Which channel seems the best for Touhy? Why?

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Touhy Tires Channel Cost Category Channel Cost % to Wholesalers % to Warehouse Stores % to OEM's Channel management $40,000,000 30% 40% 30% Channel maintenance $60,000,000 50% 35% 15% Advertising, promotion, and marketing $80,000,000 40% 40% 20% Product liability $50,000,000 35% 40% 25% Trade show costs $25,000,000 50% 30% 20% Marketing staff costs $12,000,000 30% 50% 20%