THE

ENVIRONMENT
OF MARKETING
CHANNELS
THE MARKETING CHANNEL AND ENVIRONMENT
 The Economic Environment
• The economy is probably the most obvious
RECESSION
• The official definition among professional
and persuasive category of environmental economists is two consecutive quarters of
variables affecting all members of the decline in the Gross Domestic Product
marketing channel. (GDP), any period in which the GDP is
stagnant or increasing very slowly is often
• All these parties must pay careful attention
referred to as “recessionary” or at least as an
to what is happening in the economy.
“economic slowdown”
• From a manufacturer raising capital for a
• Recessionary periods unfolds, consumer
long-term investment to a consumer buying
spending, (especially for such durable goods
a pound of coffee in the supermarket, all are
as automobiles, major appliances and
affected by economic variables
personal computers which consumers can
• Economic factors are a critical determinant postpone purchasing) usually slows down,
sometimes drastically
of channel member behavior
 INFLATION
• Over the past two decades, the rate of
inflation as measured by the Consumer Price
(CPI) has stayed well below 5 percent.

• Even though inflation rates have been

relatively low for a considerable period of
time, there is no guarantee that they will
remain at such low levels in the future.

• Many mainstream economists argue that

inflation rates could increase significantly if,
for instance, the economy were to grow too
rapidly, if the money supply were loosened
excessively, if a world crisis were to create
energy shortages leading to spiraling energy
prices
 DEFLATION
• Deflation on wide scale resulting in a
decline in prices across a broad spectrum
of goods and services has not occurred in
the United States since the Great
Depression of the 1930s.
• Most economist do not expect a
deflationary environment broad enough to
cause a sustained decline in the Consumer
Price Index to emerge in the foreseeable
future.
• Deflation, static prices or even very low
rates of price increases can create serious
channel management difficulties.
OTHER ECONOMIC ISSUES
• Recession, inflation and deflation are not
the only variables in the economic
environment. The federal budget deficit,
the national debt, and the trade deficit,
which have risen dramatically in recent
years, are all continuing concern as we
move into the second decade of the twenty-
first century.
• High interest rates can affect all members
of the marketing channel. Even though
consumers may be slow to recognize the
effects of high real interest rates, eventually
THE COMPETITIVE ENVIRONMENT
 TYPES OF COMPETITION
• HORIZONTAL COMPETITION – a competition between firms of the
same type.
• INTERTYPE COMPETITION – a competition between different types
of firms at the same channel level.
• VERTICAL COMPETITION – refers to competition between channel
members at different levels in the channel.
• CHANNEL SYSTEM COMPETITION – refers to complete channels
competing with other complete channels
 Vertical marketing system are classified into three types:
• Corporate channels – production and marketing facilities are owned by
the same company
• Contractual channels – independent channel members (producers or
manufacturers, wholesalers and retailers) are linked by a formal
contractual agreement
• Administered channel system – from a strong domination by one of the
channel members.
 Competitive Structure and Channel Sociocultural Environment
• The sociocultural environment pervades
Management virtually all aspects of a society. Marketing
• In designing the marketing channel, the channels (and particularly the structure of
channel manager needs to determine which marketing channels) are therefore also
kinds of distributors and/or dealers can influenced by the sociocultural
provide the most efficient and effective environment within which they exist.
distribution of the firms products.
• Several other sociocultural factors also
• Given that the competitive structure of contribute to the complex and inefficient
distributors that should sell particular channel structure in Japan.
products can quickly become obsolete.
• More recent studies of emerging countries
• Scrambled merchandising – the selling of such as Brazil, China, and India, as well as
products through nontraditional outlets several Latin American countries also show
that sociocultural factors specific to these
countries have s significant influence on the
structure of channel of distribution in these
regions.
 Other Sociocultural Forces The Technological Environment
• In recent years, several sociocultural • Technology is the most continuously and
phenomena have emerged that are not unique rapidly changing aspect of the
to any particular country or region. environment.

• Arguably, the most important of these • In the face of this rapidly accelerating
sociocultural factors in terms of their technology, the channel manager has to
relevance to marketing channels are: sort out those developments that are
relevant to his or her own firm as well as
the participants in the marketing channel
1. Globalization and then determine how these changes
2. Consumer mobility and connectedness might affect the channel participants.
3. Social networking • While it is not possible to present a
4. The green movement comprehensive list of technological
developments impinging on the marketing
channel, several are indicative of the kinds
of advancements that should be watched
carefully.
 Electronic Data Interchange
• Electric Data Interchange (EDI) refers to the
linking together of channel member
information systems to provide real-time
responses to communication between channel
members.
• The emergence of the Internet in recent years
has enhanced the potential of EDI because the
Internet enables firms to be connected and
communicate in a fashion similar to EDI but
with considerably less investment in computer
hardware and software.
Scanners, Computerized Inventory
Management and Handheld Computers
• Electronic scanning and computerized
inventory management, enhanced by
portable computers, cellular phone
technology and the Internet, have created a
new world in retailing and wholesaling.
• Not only in this technology drastically
reduced the amount of labor and paperwork
involved in inventory management, but it has
also made a vast array of timely and valuable
information available to managers, enabling
them to make better merchandising
decisions.
 The Digital Revolution and Smartphone
• The digital revolution is the term commonly
used to describe the huge transformation that
has taken place over the past three decades
and mechanical technology to digital
technology.
• The digital revolution already has and will
continue to have profound effects on channel
structure and strategy. This technology has
made online shopping via the Internet a
mainstream marketing channel in both B2C
and B2B markets since the mid-1990s.
• The potential managers to use this technology
strategically to enhance the design and
management of marketing channels is
practically unlimited.
Radio Frequency Identification
• A technology that uses a device called an
RFID tag attached to a person or object,
such as product, that enables that person
or product to be identified and tracked
using radio waves.
• By implanting RFID chips or tags in or on
a product, detailed information, including
price, basic characteristics, date of
manufacture, origin, and current location,
can be recorded. The RFID tag can then
transmit the information by radio waves to
electronic readers, enabling products
embedded with the chips to be scanned
remotely and in bulk
 Cloud Computing
• Cloud computing is an Internet-based
technology that enables both large and small
business and organizations to utilize highly
sophisticated computer application without
having to have their own hardware, software,
office computing space and staff.
• Given that the user of cloud computing
services does not have to invest in the
information technology needed to support
sophisticated applications, including facilities
and staff, the cost savings can be substantial.
The Legal Environment
• The legal information refers to the set of
laws that impact marketing channels. The
legal structure resulting from these laws is
not a static code.
• Fortunately, the marketing channel
manager need not an expert on the legal
aspects of marketing channel.
• The channel manager still needs a general
knowledge of some legislation pertaining to
channels and familiarity with some of the
legal issues relevant to channel
management.
 Legislation Affecting Marketing Legal Issues in Channel Management
Channels • Dual Distribution
• While there are many federal, state, local and
even international laws that can affect • Exclusive Dealing
marketing channels, five pieces of federal
legislation underlie most of the major channel • Full-Line Forcing
management legal issues:
• Price Discrimination
• Sherman Antitrust Act
• Price Maintenance
• Clayton Act
• Refusal to Deal
• Federal Trade Commission Act
• Resale Restrictions
• Robinson-Patman Act
• Tying Agreements
• Celler-Kefauver Act
• Vertical Intregration
THANK YOU!