Download legal force (cont.)

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 have no differentiation
Established market prices
Price to Sell
• Perceived Value
What the buyer sees as important
Perceived Value =
Perceived Quality + Perceived Supplier Services
Perceived EP Cost
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
ECONOMIC FORCE (CONT.)
• AP Cost – price charged by vendor
• EP Cost – cost of the edible portion
EP Cost = AP Price per Portion / Edible Yield %
• Monopolistic competition
Manipulation of products in order for them to be
unique and create a need for it
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
POLITICAL FORCE
• Political influence to ensure industry
interested are served and protected
Lobbyists or Political Action Committee (PAC)
•
•
•
National Restaurant Association
American Hotel & Lodging Association
Global Business Travel Association
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
POLITICAL FORCE (CONT.)
• 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
• Ethical Behavior
Fair and Honest Business Practices
What is “ethical” to you?
• Codes of ethical behavior
International Society of Hospitality Purchasers
• Examples
•
•
•
Gift of a Case of Wine
Buying from a Relative
Treated to a suite at a Texans game
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
LEGAL FORCE
• Sherman Antitrust Act (1890)
Forbids any action that eliminates/reduces competition
• Meat Safety Legislation
Sinclair Lewis’ The Jungle
Pure Food Act (1906)
Meat Inspection Act (1906)
USDA established in 1862
• Authority to inspect any channel member (except seafood)
• Primarily focuses on red meat, poultry, and eggs
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
LEGAL FORCE (CONT.)
• Meat Safety Legislation (cont.)
Poultry Products Inspection Act (1957)
Wholesome Meat Act (1967)
Wholesome Poultry Products Act (1968)
Hazard Analysis Critical Control Points Rule
•
•
•
HACCP was added in 1996
HACCP 7 Principles
Safe Handling Procedures
Food Safety Inspection Service (FSIS)
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
LEGAL FORCE (CONT.)
• The Federal Food, Drug, & Cosmetic Act (1906)
Food & Drug Administration (FDA) administers
this law rather than USDA (primarily meat)
Inspects over 50,000 food processing plants
Evaluates contaminate levels in food
Uses the HACCP system as well
Law has evolved and become more powerful
•
•
1938 – remove foods below standard
1996 – regulates pesticides use
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
LEGAL FORCE (CONT.)
• Seafood Safety Legislation
Seafood does not undergo inspections
Follows HACCP requirements since 1997
US Department of Commerce
•
•
•
Voluntary Inspections for a fee
National Oceanic & Atmospheric Administration
Packed Under Federal Inspection (PUFI) Label
FDA has authority to examine seafood in
interstate commerce and imported seafood
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
LEGAL FORCE (CONT.)
• Federal Trade Commission (1914)
Amended by the Wheeler-Lea Act (1938)
Deals with advertising, deceptive promotions,
monopolies, and unprofessional conduct in the
marketplace
Created to clarify the Sherman Act and enhance power
© 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)
Allows primary sources and distributors to work
together to ensure steady flow of perishable
products (anti-antitrust)
• Robinson-Patman Act (1936)
“Small Business Protection Act”
Eliminates discount discrimination
Forbids predatory pricing to eliminate competition
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
LEGAL FORCE (CONT.)
• Fair Packaging and Labeling Act (1966)
Also known as The Hart Act
Package label regulations
•
•
•
•
•
•
•
Legal Name
Processor Information
Net Contents
Ingredients
Serving Size
Nutritional Information
Safe Handling Instructions
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
LEGAL FORCE (CONT.)
• Franchise Law
Required standards and quality
• The Internal Revenue Service (IRS) and
The Bureau of Alcohol, Tobacco, Firearms,
and Explosives (BATF)
Enforce the orderly and legal sale, distribution
and purchase of alcoholic beverages
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
LEGAL FORCE (CONT.)
• State and Local Legislation
May have more strict laws
• Contract law
Legal agreement between two parties
• Agency law
Buyer has the authority
• Title to goods
Who owns the goods and at what point?
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
LEGAL FORCE (CONT.)
• Consignment sales
No payment until item is sold
• Warranties and guarantees
Assurances that food or service is provided
• Patents and copyrights
Exclusive rights held by inventor
• Rebates
Gifts of cash or product
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
TECHNOLOGICAL FORCE
• Genetically engineered foods
Improves flavor or shelf life
• Product preservation
Preserve food through distribution channel
Irradiation Technique – treated with radiation
• Productivity
Use of hormones to improve quantity
“Hormone Free”
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
TECHNOLOGICAL FORCE (cont.)
• Value-Added Foods
Convenience Foods – expensive but saves time
and money
• Transportation
Movement of the goods
• Packaging
8% of the cost is contributed to packaging
Affects quality, shelf life and convenience
© 2011 John Wiley and Sons, Inc.
All Rights Reserved
OTHER FORCES
• Intangible Forces
Items you can’t see, touch, or feel
Advertising, Credit Terms, Relationship
© 2011 John Wiley and Sons, Inc.
All Rights Reserved