Reference no: EM132284043

Compaq Computers In mid-1992, Compaq Computer Corporation introduced its Prolinea line of personal computers. This new line was aggressively priced to meet and in many cases beat the price of competitive PCS. Compaq believed that this new product line would appeal to a new and significantly larger market because it was now within the price range of small businesses and consumer PC users. Since its inception a decade earlier, Compaq had been following a very selective distribution channel strategy using only 1) high quality, full-service distributors to sell to its large corporate accounts that used the computers in their daily operations (such as hospitals, school systems, etc…) and 2) a limited number of retailers that could reach small business users and consumers. But soon after the introduction of the Prolinea line, Compaq signed agreements with three large retail chains: CompUSA, Office depot, and Circuit city. Almost immediately, the number of stores selling Compaq computers grew from less than 200 to 600, and plans called for as many as 3,000 retail stores to be selling Compaq products by 1998.

Why was Compaq faced with a channel design decision? Discuss.

Please note that this case is not related to wholesalers.