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Part 1: Marketing Channel Systems. The Environment of Marketing Channels. The external environment – five factors The economic environment The competitive environment Types of competition The sociocultural environment The technological environment The legal environment

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The Environment of Marketing Channels


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    Presentation Transcript
    slide2

    The external environment – five factors

    • The economic environment
    • The competitive environment
    • Types of competition
    • The sociocultural environment
    • The technological environment
    • The legal environment
    • Legal issues in channel management
    the external environment 5 factors
    The External Environment – 5 Factors

    1

    Consists of all external

    uncontrollable factors within which

    marketing channels exist

    Affects channel members and nonmembers, such as facilitating agencies

    =

    All channel participants

    the environment
    The Environment

    Producers

    & Manufacturers

    Locus of

    channel

    management

    Member

    participants

    Environment

    Economic

    Sociocultural

    Competitive

    Technological

    Legal

    Intermediaries

    Target Markets

    Nonmember

    participants

    Facilitating

    agencies

    the economic environment
    The Economic Environment

    2

    Recession

    Inflation

    Major Economic Forces

    Deflation

    recession
    Recession

    Reduced sales

    volume

    Reduced

    profitability

    Firms caught with

    large inventories

    Consumer

    and/or

    Corporate spending

    =

    Channel

    strategy:

    Manufacturers provide channel member support by financing high inventory costs

    inflation
    Inflation

    Continued high spending

    OR

    Drop-offs in spending, fueling a recession

    • Possible channel strategies:
    • 1. Reduce manufacturer’s product mix from higher-price to lower-price products
    • 2. Reduce inventory burden on members with:
      • Streamlined product line
      • Faster order processing & delivery
      • Higher inventory turnover through
    • stronger promotional support
    deflation
    Deflation

    Prices

    Challenge:

    Pass cost-induced price increases through channel

    when built-in cost pressures from labor contracts

    were negotiated several years earlier

    other economic factors
    Other Economic Factors

    1. Real interest

    rates

    2. Strong U.S. Dollar

    Difficult to sell

    products through

    channel members

    =

    Demand

    Costs

    =

    U.S. products

    less competitive

    the competitive environment
    The Competitive Environment

    3

    Global in scope: “No longer is it realistic for domestic firms to focus only on rivals within the boundaries of their own country.”

    Global marketplace, global arena, global competition; terms that describe today’s market.

    types of competition
    Types of Competition

    4

    Vertical

    Horizontal

    Channel System

    Intertype

    the sociocultural environment
    The Sociocultural Environment

    5

    Pervades all aspects of a society

    Influences both national and

    international

    marketing channels

    Influences wide variations among

    channel structures worldwide

    the technological environment
    The Technological Environment

    6

    Scanners & EDI

    Computerized inventory management

    & Portable computers

    Help retailers & wholesalers closely monitor success or

    failure of products they handle

    the technological environment1
    The Technological Environment

    EDI - Electronic

    Data

    Interchange

    = Enhanced

    Distribution

    Efficiency

    • Links together channel information systems
    • Provides real-time responses
    • Enhanced by Internet
    the technological environment2
    The Technological Environment

    “Computer sales

    People”

    Accelerating

    technology

    Mobile

    robots

    3-D

    modeling

    Ultra-wideband

    technology

    the legal environment
    The Legal Environment

    7

    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

    legislation affecting marketing channels
    Legislation Affecting Marketing Channels

    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

    legislation affecting marketing channels1
    Legislation Affecting Marketing Channels

    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

    legal issues in channel management
    Legal Issues in Channel Management

    8

    • 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

    legal issues in channel management1
    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

    legal issues in channel management2
    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
    discussion question 2
    Discussion Question #2

    Almost 80 percent of chief financial officers at the 100 largest retailers say that too much inventory is the greatest risk factor to the viability of their businesses during recessionary periods. High inventories lead to heavy discounting when consumer demand is lacking. This, in turn, undermines gross margins. When demand is very weak, gross margins can disappear completely as retailers may be forced to liquidate slow moving merchandise at prices below their wholesale cost. Paradoxically, retailers also worry about having too little inventory to meet consumer demand and thus losing sales when consumers cannot find the products they are looking for on retailers’ shelves. Hence, retailers attempting to manage their inventories during a recession often feel that when it comes to stocking their shelves, they are damned if they do and damned if they don’t.

    How might retailers deal with this inventory dilemma more effectively during recessionary periods? What might suppliers do to help retailers address this problem?

    discussion question 3
    Discussion Question #3

    Home Depot, Toys “R” Us, Staples, Best Buy and many other giant retailers (often referred to as “category killers” or “big box” retailers because of their dominance in particular merchandise categories and the sheer physical size of the stores) are fierce competitors and are frequently accused of driving small retailers out of business. Observers who have witnessed this competitive struggle take place over the past decade say the reason that small retailers go out of business is that they “can’t compete” with these giants. The verdict in most cases has been “no contest” between the retail giants and the little guys because the little guy so seldom wins or even gets to stay in business. From a competitive standpoint, is such an outcome inevitable?

    Discuss. Is it really the “big guys” driving the “little guys” out of business or is there something more fundamental at work here?

    discussion question 5
    Discussion Question #5

    By 2009, social media services, such as Facebook and Twitter, had become a popular marketing tool for small businesses. In fact, almost 25 percent of firms with fewer than 100 employees were using social media for marketing purposes. This was more than double the percentage of the prior year. Many of these firms cite the ease of use and low cost of these social media as the main reason for using them for reaching out to and communicating with potential and existing customers.

    How can the ability to communicate with customers via social media enhance channel management? Discuss.