Distribution Management Page 1 of 13

The Environment of Marketing Channels

Topic: The Environment of Marketing Channels

Welcome Notes:
WELCOME BSBA STUDENTS!!!
Get ready to be challenge…
Learn something new every day by adapting the
‘New Normal’

I. INTRODUCTION:

In this module you will be learn the various environments market channel participants need to consider and
understand the impact it may bring to the channels.

II. OBJECTIVES:

At the end of this module, you should be able to:

1. Understand the impact of environment in a marketing channels context
III. PRELIMINARY ACTIVITIES:

Before you proceed to the main lesson, test yourself in this activity.

Define the following terms.

1. Economy - __________________________________________________________________________
2. Competition - ________________________________________________________________________
3. Social Culture - ______________________________________________________________________
4. Technology - ________________________________________________________________________
5. Laws - _____________________________________________________________________________

GREAT!!!
You may now proceed to the main lesson.
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The Environment of Marketing Channels

IV. LESSON PROPER

Based on the preliminary activities, what did you notice about it?
_______________________________________________________
CONGRATULATIONS!
You may now proceed to the lesson.

Let’s Begin!
The Environment of Marketing Channels
Marketing Channel and the Environment
 Marketing channels develop and operate in a complex environment that is continually changing.
 Channel managers must therefore have an understanding of the environment and how it can
influence channel management in order to plan effective marketing channel strategies for meeting
these changes successfully.
Major Environment
1. Economic environment
2. Competitive environment
3. Sociocultural environment
4. Technological environment
5. Legal environment
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The Environment of Marketing Channels

1. Economic environment
 The most obvious and pervasive category of variables affecting all members and
participants in the channel.
Major economic phenomena:
 Recession: 2 consecutive quarters of decline in the Gross Domestic Product (GDP), any
period in which the GDP is stagnant or increasing very slowly is often referred to as
‘recessionary” or at least and “economic slowdown.”
 Inflation: Inflation is the rate of increase in prices for goods and services.  When the price
level rises, each unit of currency buys fewer goods and services.
 There are a number of different measures of inflation in use. The most frequently quoted
and most significant ones are the Consumer Prices Index (CPI) and the Retail Prices Index
(RPI).
 Deflation: When the overall price level decreases so that inflation rate becomes negative, it
is called deflation. It is the opposite of the often-encountered inflation.
 Other economic issues:
Trade deficit
National debt/ budget deficit
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High interest rate

2. Competitive environment
Types of competition:
 Horizontal (Intratype) competition - Competition between firms of the same type.

 Intertype competition - Competition between different types of firms at the same channel
level.

 Vertical competition - Competition between channel members at different levels in the

channel.
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The Environment of Marketing Channels

 Channel system competition - Complete channels competing with other complete

channels.

3. Sociocultural environment
 Age patterns of population
 Changing ethnic mix
 Educational trends
 Family or household structure
 Changing role of women
4. Technological environment
 Scanners, Computerized inventory management & Portable computers help retailers &
wholesalers closely monitor success or failure of products they handle.
 Electronic data interchange - the concept of businesses electronically communicating
information that was traditionally communicated on paper, such as purchase orders and
invoices.
 Links together channel information systems
 Provides real-time responses
 Enhanced by Internet
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The Environment of Marketing Channels
 Enhance Distribution Efficiency
5. 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
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.
 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.
 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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The Environment of Marketing Channels

We had just finished the lesson on The Environment of Marketing

Channels. Let’s move on to the next higher level of activity/es or
exercise/s that demonstrates your potential skills/knowledge of what
you have learned.
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The Environment of Marketing Channels

V. ANALYSIS, APPLICATION AND EXPLORATION

Name: ______________________________ Course & Section: __________________

Instructions. Read each questions write your answer on the space provided.
A. Discuss the fundamental channel management issues associated with recessionary, inflationary
and deflationary periods in the economy.

B. Explain the four types of competition discussed in the chapter. Why is it important to recognize
these different forms of competition?
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Finally, let us summarize the lesson of what we had discussed today.

VI. GENERALIZATION

Name: ______________________________ Course & Section: __________________

A. Instructions: Read the situation carefully then answer the guided question below. Write your answer on
the space provided.

Situation A: 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.

Question: 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?
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________

B. Instructions: Discuss several major sociocultural forces that have emerged in recent years and how they
have already affected marketing channel strategy and management and how they might do so in the
future.
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KUDOS!
You have come to an end of Module 3.
OOPS! Don’t forget that you have still an assignment to do.
Here it is….

VII. ASSIGNMENT

Name: ______________________________ Course & Section: __________________

A. Instructions: Research for 2 laws in the Philippines that affect the channel participants in distributing their
products or services. Write a summary and a little explanation on the said law and do not the copy of whole
provision.
1. __________________________________

2. ___________________________________
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CONGRATULATIONS on reaching the end of this module!

You may now proceed to the next module.
Don’t forget to submit all the exercises, activities and portfolio
on ___________________.
KEEP UP THE GOOD WORK.
Well Done!!!