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
4
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
Consumers
Technological
Force
Other Forces
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.
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ECONOMIC FORCE (CONT.)
• What is the difference between AP price
and EP cost?
• Monopolistic competition
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POLITICAL FORCE
• Lobbyists –The NRA
• Primary sources have the most influence
• Typically used to influence produce
availability, prices, and channel member
behavior
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ETHICAL FORCE
• Define ethical behavior
What is ethical?
• Codes of ethical behavior
• Examples
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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.
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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
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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.
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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.
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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.
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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.
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LEGAL FORCE (CONT.)
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•
•
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•
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Franchise law
Contract law
Agency law
Title to goods
Consignment sales
Warranties and guarantees
Patents and copyrights
Rebates
© 2011 John Wiley and Sons, Inc.
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TECHNOLOGY FORCE
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Genetically engineered foods
Product preservation
Value-added foods
Transportation
Packaging
© 2011 John Wiley and Sons, Inc.
All Rights Reserved