An administered vertical marketing system (VMS) is a form of distribution organization in which the successive stages of production and distribution (manufacturer, wholesaler, retailer) are effectively coordinated not through formal contractual obligations or common ownership, but through the size, economic power, and market power of one of the parties. This dominant party, usually a large manufacturer or a large retailer, effectively enforces common rules and policies.
This system is based on informal leadership and economic leverage. The market dominant in the system imposes certain standards, pricing policies, and promotional terms on the other participants, as they depend on it for access to key products or markets. An administered VMS provides a high degree of cooperation and control of the channel without the need for complex legal or ownership structures, thereby achieving economies of scale and better market efficiency.
