chapter 3 the environment of marketing channels
DESCRIPTION
Key Topics for Ch. 3 Meaning of Business Environment Economic Environment* Competitive Environment* Social/Cultural Environment Technological Environment Legal EnvironmentTRANSCRIPT
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Chapter 3Chapter 3The Environment of Marketing Channels
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Key Topics for Ch. 3
1. Meaning of Business Environment2. Economic Environment*3. Competitive Environment*4. Social/Cultural Environment5. Technological Environment6. Legal Environment
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The Business EnvironmentThe Business Environment
Consists of all externaluncontrollable factors within
which marketing channels exist
Affects channel members and nonmembers, such as facilitating
agencies =
All channel participants
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Nonmember participants
The Environment*The Environment*
Environment
1. Economic (M)2. Socio-cultural (M)3. Competitive (m)4. Technological (M)5. Legal (m)
Producers& Manufacturers
Intermediaries
Target Markets
Facilitatingagencies
Memberparticipants
Focus ofchannel
management
A Question: “Right” boundary of a firm?
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I. The Economic I. The Economic Environment*Environment*
Major EconomicForces
Recession Inflation
Deflation
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RecessionRecession
Consumer and/orCorporate
spending =
Channelstrategy: Manufacturers provide channel
member support by financing high inventory costs
Ex) Current U.S. Economy
Reduced sales volume
Reduced profitability
Firms caught with large
inventories
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InflationInflationContinued high spending Price Increase
OR Spending, fueling a recession
Possible channel strategy:• Reduce manufacturer’s product mix from higher-price to lower-price products• Reduce inventory burden on channel members with:
Streamlined product lineFaster order processing & deliveryHigher inventory turnover through
stronger promotional support
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DeflationDeflation
Prices =\= Demand
Challenge:Pass cost-induced price increases through channelwhen built-in cost pressures from labor contracts
were negotiated several years earlier
Ex) Japan’s lost decades
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Other Economic FactorsOther Economic Factors
Real interest
rates
Demand
Costs
=
1. 2. Strong U.S. Dollar
Difficult to sellproducts throughchannel members
= U.S. products become less competitive
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II. The Competitive II. The Competitive Environment*Environment*
Local Regional National Global in scope
* Opportunity and Threat
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Types of Competition in Types of Competition in Channels*Channels*
Horizontal
Intertype
Vertical
Channel System
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Horizontal CompetitionHorizontal Competition
M
W
R R
W
M
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Vertical Competition*Vertical Competition*
M
R
W
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Inter-type CompetitionInter-type Competition
M
W
R
M
W
R
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Channel System CompetitionChannel System Competition
M
R
W
R
W
M
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III. The Sociocultural III. The Sociocultural EnvironmentEnvironment
Pervades all aspects of a society
Influences both national and international
marketing channels
Influences wide variations among channel structures worldwide*
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Sociocultural DevelopmentsSociocultural Developments
Population Age Patterns
Ethnic Mix
Educational Trends
Family or Household Structure
U.S. pop. Becoming both younger & older # of minority-owned businesses Levels = people more demanding Smaller & more varied
Role of Women
Importance of Time
# = changing shopping needs
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IV. The Technological IV. The Technological EnvironmentEnvironment
Help retailers & wholesalers closely monitor success orfailure of products they handle
ScannersComputerized inventory management
Portable computers
Effect on Channel Structure: Unbundle and Rebundle
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The Technological EnvironmentThe Technological Environment
EDI - Electronic Data
Interchange
• Links together channel information systems• Provides real-time responses• Enhanced by Internet
= Enhanced
Distribution Efficiency
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The Technological EnvironmentThe Technological Environment
Acceleratingtechnology
“Computer salesPeople”
Mobilerobots 3-D
modeling
Ultra-widebandtechnology
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V. The Legal Environment*V. The Legal Environment*
The set of laws that impact marketing channels
• Continually evolving • Affected by changing values, norms, politics,
& precedents• Knowledge of basics helps channel manager
avoid serious & costly legal problems
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Legislation Affecting Marketing Legislation Affecting Marketing ChannelsChannels
Sherman Antitrust Act 1890; Fundamental antimonopoly law
Public welfare best served through competition
Clayton Act 1914; Strengthen Sherman Antitrust Act
Prohibits specific practices among competing firms
Federal Trade Commission Act 1914; Established FTC
Power to investigate & enforce
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Legislation Affecting Marketing Legislation Affecting Marketing ChannelsChannels
Robinson-Patman Act 1936; Amendment to Clayton Act
Prohibits price discrimination Allows price differentials to different customers
under specific circumstances
Celler-Kefauver Act 1950; Amendment to Clayton Act
Prohibits vertical mergers & acquisitions
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Legal Issues in Channel Legal Issues in Channel ManagementManagement
• Dual Distribution, or multi-channel distributionProducer or manufacturer uses 2 or more different channel
structures for distributing the same product
• Exclusive DealingSupplier requires its channel members to sell only its products or to
refrain from selling directly to competitive suppliers
•Full-Line ForcingSupplier requires channel members to carry a full-line of its products
in order to sell any particular products in supplier’s line
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Legal Issues in Channel Legal Issues in Channel ManagementManagement
• Price DiscriminationSupplier sells at different prices to the same class of channel
members
• Price MaintenanceSupplier dictates prices charged by channel members to their
customers
• Refusal to DealSupplier has right to refuse to deal with whomever they want as
channel members
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Legal Issues in Channel Legal Issues in Channel ManagementManagement
• Resale RestrictionsManufacturer attempts to stipulate to whom and in what geographical
market channel members may resell the manufacturer’s products• Tying Agreements
Supplier sells a product to a channel member on condition that the channel member also purchase another product
• Vertical IntegrationFirm owns and operates organizations at other levels of the
distribution channel