Transcript Chapter 4 PP - HCC Learning Web

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 – a product in demand
where many suppliers sell it without
qualitative differentiation
Demand up, price goes up and vice versa
• Perceived value
Depends on the buyer
•
Perceived quality + perceived services / EP cost
© 2011 John Wiley and Sons, Inc.
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ECONOMIC FORCE (CONT.)
• As-Purchased (AP) Cost
Price charged by the supplier
• Edible-Portion (EP) Cost
AP Price divided by the edible yield percentage
• Monopolistic competition
Each supplier can set their own prices by
differentiating their products and services
© 2011 John Wiley and Sons, Inc.
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POLITICAL FORCE
• Lobbyists
• The NRA (Nat’l Restaurant Association)
• AHLA (Amer Hotel and Lodging Assoc)
• Primary sources have the most influence
• Typically used to influence produce
availability, prices, and channel member
behavior
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ETHICAL FORCE
• What is ethical?
Fair and Honest business practices
• Codes of ethical behavior
Written codes that a company may adopt to
regulate the ethical and honesty
• Examples
• Illegal Rebate
• Kickback
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LEGAL FORCE
• Sherman Antitrust Act (1890)
Forbids any action to reduce or eliminate competition
• Meat Safety Legislation
Sinclair Lewis’ The Jungle (meat packing industry)
USDA established in 1862
• Pure Food Act (1906)
• Meat Inspection Act (1906)
• Poultry Products Inspection Act (1957)
Primarily focuses on meat, poultry, and eggs
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LEGAL FORCE (CONT.)
• Meat safety legislation (cont.)
Wholesome Meat Act (1967)
Wholesome Poultry Products Act (1968)
Safe-Handling Procedures
• The Federal Food, Drug, and Cosmetic Act
(1906)
FDA administers this law
Evaluates contaminate levels (EPA)
© 2011 John Wiley and Sons, Inc.
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LEGAL FORCE (CONT.)
• Seafood safety legislation
Only a voluntary program at this time
Packed under Federal inspection (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
© 2011 John Wiley and Sons, Inc.
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LEGAL FORCE (CONT.)
• Hart Act (1966-1969)
Fair Packaging and Labeling Act
•
•
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.)
•
•
•
•
•
•
•
•
Franchise law – franchisor can enforce
Contract law – binding agreement
Agency law – authority
Title to goods – when buyer owns product
Consignment sales – not common
Warranties and guarantees
Patents and copyrights
Rebates – gifts of cash or product
© 2011 John Wiley and Sons, Inc.
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TECHNOLOGY FORCE
• Genetically engineered foods
• Product preservation
irradiation
• Value-added foods
Convenience Food
• Transportation
• Packaging
Packaging accounts for 8% of purchase price
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OTHER FORCES
• Intangible Forces
Not easily determined by the buyer
•
•
Advertising and promotions
Credit terms
Differentiation of supplier and sales person
© 2011 John Wiley and Sons, Inc.
All Rights Reserved