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Chapter 3

Chapter 3. The Environment of Marketing Channels. The Environment. Objective 1:. 3. Consists of all external uncontrollable factors within which marketing channels exist. Affects channel members and nonmembers, such as facilitating agencies = All channel participants.

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Chapter 3

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  1. Chapter 3 The Environment of Marketing Channels

  2. The Environment Objective 1: 3 Consists of all external uncontrollable factors within which marketing channels exist Affects channel members and nonmembers, such as facilitating agencies = All channel participants

  3. The Environment 3 Producers & Manufacturers Environment Economic Sociocultural Competitive Technological Legal Locus of channel management Member participants Intermediaries Target Markets Nonmember participants Facilitating agencies

  4. The Economic Environment Objective 2: 3 Recession Inflation Major Economic Forces Deflation

  5. Recession 3 Consumer and/or Corporate spending Reduced sales volume Reduced profitability Firms caught with large inventories = Channel strategy:Manufacturers provide channel member support by financing high inventory costs

  6. Inflation 3 Continuedhigh spending OR Spending, fueling a recession Possible channel strategy: • Reduce manufacturer’s product mix from higher-price to lower-price products • Reduce inventory burden on members with: Streamlined product line Faster order processing & delivery Higher inventory turnover through stronger promotional support

  7. Deflation 3 Prices Challenge: Pass cost-induced price increases through channel when built-in cost pressures from labor contracts were negotiated several years earlier

  8. Objective 3: 3 Other Economic Factors Real interest rates Strong U.S. Dollar Difficult to sell products through channel members 1. 2. = Demand Costs = U.S. products less competitive

  9. The Competitive Environment Objective 4: 3 Global in scope

  10. Types of Competition Objective 5: 3 Vertical Horizontal Channel System Intertype

  11. Horizontal Competition 3 M M W W R R

  12. Intertype Competition 3 M M W W R R

  13. Vertical Competition 3 M W R

  14. Channel System Competition 3 M M M M M M

  15. The Sociocultural Environment Objective 6: 3 Pervades all aspects of a society Influences both national and international marketing channels Influences wide variations among channel structures worldwide

  16. Sociocultural Developments 3

  17. The Technological Environment Objective 7: 3 Scanners Computerized inventory management & Portable computers Help retailers & wholesalers closely monitor success or failure of products they handle

  18. The Technological Environment 3 EDI - Electronic Data Interchange = Enhanced Distribution Efficiency • Links together channel information systems • Provides real-time responses • Enhanced by Internet

  19. The Technological Environment 3 “Computer sales People” Accelerating technology Mobile robots 3-D modeling Ultra-wideband technology

  20. The Legal Environment Objective 8: 3 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

  21. Legislation Affecting Marketing Channels 3 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

  22. Legislation Affecting Marketing Channels 3 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

  23. Objective 9: 3 Legal Issues in Channel Management • Dual Distribution, or multi-channel distribution Producer or manufacturer uses 2 or more different channel structures for distributing the same product • Exclusive Dealing Supplier requires its channel members to sell only its products or to refrain from selling directly to competitive suppliers •Full-Line Forcing Supplier requires channel members to carry a full-line of its products in order to sell any particular products in supplier’s line

  24. 3 Legal Issues in Channel Management • Price Discrimination Supplier sells at different prices to the same class of channel members • Price Maintenance Supplier dictates prices charged by channel members to their customers • Refusal to Deal Supplier has right to refuse to deal with whomever they want as channel members

  25. 3 Legal Issues in Channel Management • Resale Restrictions Manufacturer 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 Integration Firm owns and operates organizations at other levels of the distribution channel

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