Quiz 3

• The environment of marketing channels consists of all the external uncontrollable factors within which marketing channels exist
• The five environments outlined in this chapter are:

  1. Economic environment

  2. Competitive environment

  3. Sociocultural environment

  4. Technological environment

  5. Legal environment
• In the economic environment, factors like recession, inflation, deflation, and high interest rates can significantly impact channel member behavior and performance
• Recession occurs when there are two consecutive quarters of a decline in the Gross Domestic Product (GDP), leading to reductions in sales volume and profitability for all members of the marketing channel
• Inflation can lead to changes in consumer buying behavior, requiring adjustments in channel strategy to reduce the inventory burden on channel members
• Deflation or static prices can create serious channel management difficulties, making it challenging to increase prices and pass on cost increases to other channel members
• High interest rates, especially the real interest rate, can pose problems even in moderate inflation scenarios, affecting the economy and channel member decisions
• Competitive environment includes horizontal, intertype, vertical, and channel system competition, each impacting channel member behavior and strategy
• Horizontal competition is between firms of the same type, while intertype competition is between different types of firms at the same channel level
• Vertical competition occurs between channel members at different levels, and channel system competition involves complete channels competing with each other
• Competitive structure and channel management require the channel manager to determine the most efficient distributors and dealers for the firm's products, considering factors like scrambled merchandising
• The sociocultural environment influences marketing patterns and channel structure, with globalization, consumer mobility, social networking, and the Green Movement playing significant roles
• Globalization focuses on interconnectedness and trade flows among countries, impacting international supply chains and consumer travel
• Consumer mobility and connectedness refer to the degree of mobility people experience while staying connected, leading to the rise of mobile commerce channels
• Social networking involves interaction in networks based on common interests, facilitated by the Internet-based World Wide Web
• The Green Movement emphasizes preserving the environment and human health, providing opportunities and challenges for channel managers to support its aspirations
• The technological environment in marketing channels includes:

  • Electronic Data Interchange (EDI): Links channel member information systems for real-time responses, enhancing distribution efficiency
  • Scanners, Computerized Inventory Management, and Portable Computers: Allow for electronic inventory replenishment and improved inventory management at the retail level
  • The Digital Revolution and Smartphones: Describes the shift to digital technology, enabling new opportunities like m-commerce
  • RFID (Radio Frequency Identification): Uses tags to track products, enhancing inventory control and supply chain efficiency
  • Cloud Computing: Enables businesses to access sophisticated computer applications via the Internet without needing their own hardware or software
• Cloud computing allows firms of any size to obtain computing capabilities needed for channel management applications cost-effectively
• Legal issues in channel management include:

  • Dual Distribution: Using multiple channel structures to distribute the same product
  • Exclusive Dealing: Requiring channel members to sell only the supplier's products
  • Full-Line Forcing: Requiring channel members to carry a broad group of products to sell any particular product
  • Price Discrimination: Selling at different prices to the same class of channel members
  • Price Maintenance: Supplier controlling the prices charged by channel members for its products
  • Refusal to Deal: Suppliers can select channel members and refuse to deal with others
  • Resale Restriction: Stipulating to whom channel members may resell products and in what geographical areas
  • Tying Agreements: Selling a product on the condition that the channel member also purchases another product
  • Vertical Integration: Firm owning and operating organizations at different levels of the distribution channel for control and economies of scale