Eighth Edition Purchasing Selection and Procurement for the Hospitality Industry ANDREW HALE FEINSTEIN AND JOHN M STEFANELLI © 2011 John Wiley and Sons, Inc All Rights Reserved CHAPTER Forces Affecting the Distribution Systems © 2011 John Wiley and Sons, Inc All Rights Reserved YOU SHOULD BE ABLE TO: • Identify and differentiate the economic and political forces that affect the channel of distribution • Describe the role of ethics in the channel of distribution • Explain the legal restrictions that affect the channel of distribution • Provide examples of technological advances that are impacting the ways in which products are distributed © 2011 John Wiley and Sons, Inc All Rights Reserved FORCES AFFECTING THE DISTRIBUTION CHANNEL Economic Force Political Force Sources (growers, manufatuures, and processors) Intermediaries (middlemen) Ethical Force Retailers (hospitality operators) Legal Force Technological Force Other Forces Consumers ECONOMIC FORCE • Supply and demand Basic commodities are typically acquired through a bidding procedure Co-op farmers Established market prices • Perceived value Perceived quality + perceived services / EP cost © 2011 John Wiley and Sons, Inc All Rights Reserved ECONOMIC FORCE (CONT.) • What is the difference between AP price and EP cost? ã Monopolistic competition â 2011 John Wiley and Sons, Inc All Rights Reserved POLITICAL FORCE • Lobbyists –The NRA • Primary sources have the most influence • Typically used to influence produce availability, prices, and channel member behavior © 2011 John Wiley and Sons, Inc All Rights Reserved ETHICAL FORCE • Define ethical behavior What is ethical? ã Codes of ethical behavior ã Examples â 2011 John Wiley and Sons, Inc All Rights Reserved LEGAL FORCE • Sherman Act (1890) • Meat safety legislation Sinclair Lewis’ The Jungle Pure Food Act (1906) Meat Inspection Act (1907) USDA established in 1862 • Primarily focuses on meat, poultry, and eggs © 2011 John Wiley and Sons, Inc All Rights Reserved LEGAL FORCE (CONT.) • Meat safety legislation Poultry Products Inspection Act (1957) Wholesome Meat Act (1967) Wholesome Poultry Products Act (1968) • The Federal Food, Drug, and Cosmetic Act (1906) FDA administers this law Evaluates contaminate levels © 2011 John Wiley and Sons, Inc All Rights Reserved LEGAL FORCE (CONT.) • Seafood safety legislation PUFI for a fee FDA has authority to examine seafood in interstate commerce • Federal Trade Commission (1914) Amended by the Wheeler-Lea Act (1938) Deals with advertising, deceptive promotions, monopolies, and conduct in the marketplace © 2011 John Wiley and Sons, Inc All Rights Reserved LEGAL FORCE (CONT.) • Clayton Act (1914) Used to control antitrust violations • Tying agreements • Exclusive dealings • Perishable Agricultural Commodities Act (1930) Control interstate commerce Prohibits unfair practices in sale of produce © 2011 John Wiley and Sons, Inc All Rights Reserved LEGAL FORCE (CONT.) • Agricultural Adjustment Act (1933) & Agricultural Marketing Agreement Act (1937) Ensure steady flow of perishable products • Robinson-Patman Act (1936) Known as the “small business protection act” Promotional discounts favoritism through a quantity limits provision Predatory pricing • Gas station example © 2011 John Wiley and Sons, Inc All Rights Reserved LEGAL FORCE (CONT.) • Hart Act (1966-1969) Packaging pictorial aspects Misleading descriptions and illustrations Package label regulations • The Internal Revenue Service (IRS) • The Bureau of Alcohol, Tobacco, and Firearms (BATF) © 2011 John Wiley and Sons, Inc All Rights Reserved LEGAL FORCE (CONT.) • • • • • • • • Franchise law Contract law Agency law Title to goods Consignment sales Warranties and guarantees Patents and copyrights Rebates © 2011 John Wiley and Sons, Inc All Rights Reserved TECHNOLOGY FORCE • • • • • Genetically engineered foods Product preservation Value-added foods Transportation Packaging © 2011 John Wiley and Sons, Inc All Rights Reserved ... manufatuures, and processors) Intermediaries (middlemen) Ethical Force Retailers (hospitality operators) Legal Force Technological Force Other Forces Consumers ECONOMIC FORCE • Supply and demand Basic.. .CHAPTER Forces Affecting the Distribution Systems © 2011 John Wiley and Sons, Inc All Rights Reserved YOU SHOULD BE ABLE TO: • Identify and differentiate the economic and political forces... are impacting the ways in which products are distributed © 2011 John Wiley and Sons, Inc All Rights Reserved FORCES AFFECTING THE DISTRIBUTION CHANNEL Economic Force Political Force Sources (growers,