a study to determine the significance of market

A STUDY TO D E T E R M I N E T H E S I G N I F I C A N C E O F

M A R K E T P E N E T R A T I O N IN T H E CONSUMER

E L E C T R O N I C P R O D U C T S INDUSTRY

A P P R O V E D :

G r a d u a t e C o m m i t t e e :

^ a j o r P r o f e s s o r t c Vj

C o m m i t t e e M e m b e r

Memjyg

Corn

vwf R u s i n e s s v A d m i n i D e a n of t h ^ C o l l e g e of Bus in.es s^Admini s t r a t i on

Dean of trie G r a d u a t e School

ABSTRACT

Thornton , Nelson JL,, J r . , _A Study to D e t e r m i n e the Signi f icance

of Ma.rket P e n e t r a t i o n in the Consumer E lec t ron i c P r o d u c t s Indus t ry .

Doctor of Phi losophy (Marketing), May, 1973, 291 p p . , 45 t a b l e s ,

b ib l iography , 252 t i t l e s .

The p u r p o s e s of th is s tudy, in addi t ion to t e s t ing the h y p o t h e s e s ,

w e r e to p r e p a r e an a n a l y s i s of the s i ze , growth, s t r u c t u r e , and p r o b -

l e m s of the indus t ry ; d e t e r m i n e the inf luence of i m p o r t s on the gen -

e r a l s t r u c t u r e of the indus t ry ; d e t e r m i n e the s ign i f i cance of m a r k e t

p e n e t r a t i o n to d o m e s t i c m a n i u a c t u r e r s , w h o l e s a l e r s , r e t a i l e r s , and

f o r e i g n m a n u f a c t u r e r s and i m p o r t e r s ; and e x a m i n e the m a r k e t p e n e -

t r a t i o n r e p o r t i n g m e c h a n i s m , i ts a c c u r a c y , u s e f u l n e s s , p r o m p t n e s s

in feedback of da ta , and the advan tages and d i s advan tages of m a i n -

ta in ing s e c r e c y of da ta . The hypo theses w e r e t h e s e : t he m e c h a n i s m

f o r r e c o r d i n g and r epo r t ing indus t ry s a l e s is i n a c c u r a t e ; and t he d e -

s i r e of United States m a n u f a c t u r e r s to m a i n t a i n or i n c r e a s e m a r k e t

p e n e t r a t i o n r e s u l t s in g r e a t e r e m p h a s i s on s a l e s of uni ts than on

do l l a r s a l e s or p ro f i t p e r p roduc t group, comple t e con t ro l o r d o m i -

nance by the m a n u f a c t u r e r of the m a r k e t i n g channe l s , the power of

the m a n u f a c t u r e r to e s t a b l i s h and cont ro l p r i c e s at the w h o l e s a l e and

r e t a i l l eve l , t he power of the m a n u f a c t u r e r to f o r c e fu l l l ine se l l ing ,

* I \

t

the power of the m a m i f a c t u r e r to con t ro l m a r k e t i n g a c t i v i t i e s of i t s

who lesa l ing and r e t a i l i ng organizat ion, s t r u c t u r e , and r educed p r o f i t s

f o r the w h o l e s a l e r and r e t a i l e r f r o m what they o t h e r w i s e would b e .

P r i m a r y data w e r e obtained f r o m p e r s o n a l i n t e rv i ews wi th

r e t a i l e r s and w h o l e s a l e r s , and f r o m q u e s t i o n n a i r e s comple t ed by

m a n u f a c t u r e r s and i m p o r t e r s , w h o l e s a l e r s , r e t a i l e r s , l a r g e s c a l e

r e t a i l e r s , and spec i a l u s e r s cf the p roduc t . Unpublished da ta w e r e

f u r n i s h e d by g o v e r n m e n t agenc ie s , t r a d e a s s o c i a t i o n s , and o t h e r s

a s s o c i a t e d with the i ndus t ry . Secondary data w e r e d r a w n f r o m

c u r r e n t books and p e r i o d i c a l s .

P r e l i m i n a r y in t e rv i ews with m e m b e r s of the i ndus t ry r e v e a l e d

m a r k e t pene t r a t i on to be of s ign i f i can t i m p o r t a n c e to t he i ndus t ry .

A need to ana lyze the p r o b l e m s of the i n d u s t r y in a l l a r e a s which

r e l a t e to m a r k e t p e n e t r a t i o n was d e t e r m i n e d . These p r o b l e m s

w e r e : an ana ly s i s of the indus t ry and its r e p o r t i n g m e c h a n i s m f o r

r e c o r d i n g data , the i m p o r t a n c e of i m p o r t s , m a r k e t p e n e t r a t i o n ,

m a r k e t and sa l e s potent ia l , d i s t r ibu t ion , p roduc t , p r i c i n g , p r o -

mot ion , a t t i tudes of the m a r k e t , c o n s u m e r i s m , channel conf l ic t ,

and the l ega l env i ronmen t .

The study inc ludes s ix c h a p t e r s . Chapter I is the in t roduc t ion .

Chapte r II p r e s e n t s an a n a l y s i s of t he growth of the i ndus t ry , in-

cluding i m p o r t s . Chap te r s III and IV d i s c u s s the p r o b l e m s of the

i ndus t ry in the areas which r e l a t e t e m a r k e t p e n e t r a t i o n . Chap te r

V is a n a n a l y s i s of the data compi led f r o m comple t ed q u e s t i o n n a i r e s .

Chapter VI inc ludes the summary , conc lus ions , and r e c o m m e n d a -

t i o n s .

The f indings of the s tudy r e v e a l the i n d u s t r y to be of con-

s i d e r a b l e s i ae , highly c o n c e n t r a t e d a t the m a n u f a c t u r i n g l eve l ,

e x t r e m e l y compet i t ive , and unde r i n c r e a s e d p r e s s u r e s f r o m f o r e i g n

goods . It is concluded t h a t m a r k e t p e n e t r a t i o n is u s e d both a s a

m e a s u r e m e n t tool and a s a company goal . F u r t h e r m o r e , it i s

concluded tha t the d e s i r e f o r main ta in ing o r i n c r e a s i n g m a r k e t

p e n e t r a t i o n r e s u l t s in the power of the m a n u f a c t u r e r and o t h e r

s u p p l i e r s to e s t a b l i s h and con t ro l p r i c e s , to f o r c e fu l l l ine se l l ing

even of unpro f i t ab l e p r o d u c t s , and to con t ro l the m a r k e t i n g a c -

t i v i t i e s of o t h e r s . The d e s i r e f o r m a r k e t p e n e t r a t i o n c a u s e s e m -

p h a s i s to be p laced on unit s a l e s r a t h e r than do l l a r s a l e s o r p r o f i t ,

and t he r e s u l t is l ower p r o f i t s f o r w h o l e s a l e r s and r e t a i l e r s than

would o t h e r w i s e have b e e n r e a l i z e d .

Since the d e s i r e f o r ma in t a in ing or i n c r e a s i n g m a r k e t p e n e -

t r a t i o n r e s u l t s in m a n y p o s s i b l y i l legal p r a c t i c e s and d e e m p h a s i z e s

p r o f i t , it is r e c o m m e n d e d tha t m a r k e t p e n e t r a t i o n not be u s e d a s a

company goal . It should be used a s a m e a s u r e m e n t too l only when

the da ta is known to b e a c c u r a t e .

A STUDY TO D E T E R M I N E T H E SIGNIFICANCE O F

IViARKET P E N E T R A T I O N IN THE CONSUMER

E L E C T R O N I C P R O D U C T S INDUSTRY

DISSERTATION

P r e s e n t e d to t he G r a d u a t e Counci l of t h e

N o r t h T e x a s Sta te U n i v e r s i t y in P a r t i a l

F u l f i l l m e n t of t h e R e q u i r e m e n t s

F o r the D e g r e e of

DOCTOR O F PHILOSOPHY

By

N e l s o n L. Thorn ton , J r . , B. B. A. , M, B. A,

Denton, T e x a s

May, 1973

Copyright by-

Nelson L. Thornton, J r .

1973

TABLE O F CONTENTS

"Pa. a 0

J. < 0 w

LIST OF TABLES . . v i

Chap te r

L INTRODUCTION . . . • • • 1

i Background of the Consumer E l e c t r o n i c

P r o d u c t s Indus t ry Pu r p o s e of th i s Inves t iga t ion Hypotheses of Study Sources of Data Methods of Study Definition of T e r m s Del im ita t ions O r d e r of P r e s e n t a t i o n

JL AN ANALYSIS O F THE CONSUMER ELECTRONIC PRODUCTS INDUSTRY 13

E a r l y F o r m a t i o n of the E l ec t ron i c Indus t ry Genera l Growth of the E l e c t r o n i c s Indus t ry Individual P roduc t Sales Growth Census C o m p a r i s o n of Growth Individual Product. Development S t r u c t u r e of the Indust ry Compet i t ion Signi f icance of Impor t s to Indus t ry

III. MARKET PENETRATION. MARKET POTENTIAL, AND THE REPORTING MECHANISM FOR RECORDING INDUSTRY DATA . 73

P r o b l e m s of the Indus t ry Ma rket Penetration Marke t and Sales Po ten t i a l The Report ing M e c h a n i s m fo r Record ing

Indus t ry Data

Chapte r Pa g®

IV. THE MARKETING MIX AND OTHER INDUSTRY PROBLEMS 1 IT

Other P r o b l e m s of the Indus t ry Dis t r ibu t ion P r o b l e m s P roduc t P r o b l e m s P r i c i n g P r o b l e m s P r o m o t i o n P r o b l e m s At t i tudes of the Marke t C o n s u m e r i s m Channel Confl ic t Channel Cont ro l Legal Env i ronmen t

V. PRESENTATION AND ANALYSIS O F PRIMARY DATA . . . 16?

Sample Size and Response Quality and Coverage of Response Value of Study The Signi f icance of Marke t P e n e t r a t i o n The Repor t ing Sys tem f o r Record ing

Marke t P e n e t r a t i o n Data Signif icance of Dol la r and Unit Sales Control o r Dominance of the Marke t ing Channel The Power to Control P r i c e s The Power to Control Market ing Ac t iv i t i e s The Power of the Supplier to F o r c e

Ful l Line Selling P r o f i t Re la t ionsh ips Other P r o b l e m s of the Indus t ry Ways to I n c r e a s e Marke t P e n e t r a t i o n

VI. SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS 221

S u m m a r y Conclus ions R e c o m m e n d a t i o n s

A P P E N D I C E S 241

BIBLIOGRAPHY 273

v

LIST O F TABLES

Tab le P a g e

I. Indus t ry S u m m a r y of F a c t o r y Sales by Selected Y e a r s , 1925 -1970 16

II. Total U. S. Sales of Te lev i s ion R e c e i v e r s , Rad ios , Phonographs and R e c o r d s 1960-1970 . . . . » . « . 19

III. Quantity and Value of Shipments of a l l

P r o d u c e r s : 1967 and 1963; F o r Home Use 20

IV. F a c t o r y Sales of C o n s u m e r P r o d u c t s 23

V. Tota l U. S. Sales of Audio Home Magnet ic Tape

R e c o r d e r s and R e p r o d u c e r s , 1960-1970 . . . . . . 25

VI. Tota l U. S. Sales of Phonographs , 1946-1970 28

VII. U. S. Radio Set Sales 1922-1949 31

VIII. Total U. S. Sales of Radios , 1950-1970 32

IX. Tota l U. S. Sales of Te lev i s ion R e c e i v e r s , 1946-1970 36

X. R e t a i l e r s and Publ ic Level P u r v e y o r s in Some p h a s e of A p p l i a n c e - R a d i o - T V Merchand i s ing . . . . 45

XI. Ma jo r Appl iance , Radio, TV, Musica l I n s t r u m e n t s Sales by kind of B u s i n e s s Handling the P r o d u c t s . . 46

XII. Repor ted Sales of Home E n t e r t a i n m e n t Lines by Type of Outlet , 1967, 1963 49

XIII. Te lev i s ion R e c e i v e r s (Monochrome and Color ) and Combina t ions , U. S. Shipments , I m p o r t s f o r Consumption, Expor t s of Domes t i c M e r c h a n d i s e , and Apparen t Consumpt ion , 1966-71 . 59

vi

Table Page

XIV, Radio R e c e i v e r s - -U. S. Shipments , I m p o r t s f o r Consumption, Expor t s of Domes t i c Merchand i se , and Appa ren t Consumpt ion , 1966-71 . 61

XV. Phonographs and Record P l a y e r s - -U . S. Sh ipments , I m p o r t s f o r Consumpt ion , Expor t s of Domes t i c M e r c h a n d i s e , and Apparen t Consumption, 1966-71 . 62

XVI. Radio - P h o n o g r a p h Combinat ions - - U . S. Sh ipments , Impor t s f o r Consumpt ion, Expor t s of D o m e s t i c M e r c h a n d i s e , and Apparen t Consumpt ion , 1966 -71 . 64

XVII. Tape P l a y e r s and R e c o r d e r s - -U. S. Sh ipments , I m p o r t s f o r Consumpt ion and Appa ren t Con-sumpt ion , 1966-71 . . . . . . . 66

XVIII. Sample Size and Response by Segment of Indus t ry . . 169

XXIV.

P® XIX. Job Con'

s i t ion Held by P e r s o n s plet ing Ques t i onna i r e s „ 173

XX. Types Man

of F r o d u c t s Marke ted by u f a c t u r e r s and I m p o r t e r s

XXI. Marke t Eva and

P e n e t r a t i o n a s a Signif icant Means of luat ing M a n u f a c t u r e r s , W h o l e s a l e r s , R e t a i l e r s

XXIL A ve ra ge P u r c h a s e s of L a r g e Scale R e t a i l e r s by P r o d u c t Type Shipped to Dis t r ibu t ion C e n t e r s

XXIII. The Ways M a n u f a c t u r e r s Record Sales to Special U s e r s

Opinions of Channel M e m b e r s Relat ing to A c c u r a c y of the Repor t ing Mechan i sm f r o m a Najtional and Local Viewpoint . . . . . . .

XXV. Channel M e m b e r s Agree ing Marke t P e n e t r a t i o n Data is Re tu rned Soon Enough to be of Value .

174

179

183

184

185

185

v u

Table

XXVI. Types of Quotas Ass igned by M a n u f a c t u r e r s to Who le sa l e r s . .

Page

IS?

XXVII, Type Quotas 'Wholesalers Indica te They a r e Ass igned by Suppl ie rs . . . . . .

XXVIII. Response of Channel M e m b e r s Regard ing "Whether the D e s i r e f o r Maintaining o r I nc r ea s ing M a r k e t P e n e t r a t i o n Resu l t s in G r e a t e r E m p h a s i s on Unit Sales than on Dol lar Sales when Applied to U. 3. and F o r e i g n Manuf a c t u r e r s , and to W h o l e s a l e r s

187

189

XXIX. Response of Channel M e m b e r s Regard ing Whether the D e s i r e f o r Maintaining or I n c r e a s i n g M a r k e t P e n e t r a t i o n Resu l t s in G r e a t e r E m p h a s i s on Unit Sales than on P r o f i t when Applied to U. S. and F o r e i g n M a n u f a c t u r e r s , and to W h o l e s a l e r s . . 190

XXX. P e r c e n t a g e of M a n u f a c t u r e r s and I m p o r t e r s Selling to Each Type of C u s t o m e r 192

XXXI. P r i c e Bes t Desc r ib ing P u r c h a s e P r i c e of Special U s e r s 195

XXXII. P u r c h a s i n g P r a c t i c e s of Special U s e r s by P e r c e n t a g e Fol lowing P r a c t i c e 196

XXXIII. Response of Channel M e m b e r s Regard ing Whether the D e s i r e f o r Mainta ining o r I n c r e a s i n g Marke t P e n e t r a t i o n r e s u l t s i.n Dominance of the Market ing Channel when Applied to U. S. M a n u f a c t u r e r s , F o r e i g n M a n u f a c t u r e r s , and to Who le sa l e r s 199

XXXIV. Response of Channel M e m b e r s Regard ing Whether the D e s i r e f o r Maintaining or I n c r e a s i n g Marke t Pene t r a t i on Resu l t s in the Power of the M a n u f a c t u r e r to Es t ab l i sh and Cont ro l P r i c e s at the Wholesa le and Reta i l Leve l . . . . 202

v i u

Tabl« Fag?

XXXV. Response of Channel Members Regarding Whether the Des i re for Maintaining o r Increasing Market Penet ra t ion Resul ts in the Power of the Wholesaler to Es tab l i sh and Control P r i c e s at the Retai l Level , * , 203

XXXVI. Response of Channel Members Regarding Whether the Des i re for Maintaining o r Increasing Market Pene t ra t ion Resul t s in the Power of the Manufacturer to Control Marketing Activit ies of its Wholesaling and Retailing Organization St ructure 205

XXXVII. Response of Channel Members Regarding Whether the Desire for Maintaining o r Increasing Market Penet ra t ion Resul ts in the Power of the Wholesaler to Control Marketing Activit ies of its Retai l Organi -zation St ruc ture 206

XXXVIII. Response of Channel Members Regarding Whether the Desire fo r Maintaining or Increasing Market Penet ra t ion Resul ts in the Power of the Supplier to F o r c e Foil Line Selling, Even on Products which a r e Unprofitable, when Applied to U. S. Manu-f a c t u r e r s , Fore ign Manufac ture rs , and to Wholesalers 208

XXXIX. Prof i t Rating by Product as Applied by Channel Member Group 209

XL. Reasons Indicated by Channel Members f o r Continuing to Car ry Marginal P ro f i t and Unprofitable Produc ts 212

XLI. Response of Channel Members Regarding Whether the Desi re of Manufac turers to Maintain or Increase Market Pene t ra t ion Results in Reduced Prof i t s for the Whole-sa le r and Reta i ler F r o m What They Otherwise Would Be 214

IX

Table P a g e

XL.JL Response of Channel M e m b e r s Rega rd ing Whether the D e s i r e of W h o l e s a l e r s to Maintain or .Increase Marke t P e n e t r a t i o n Resu l t s in Reduced P r o f i t s f o r t h e R e t a i l e r F r o m What They O t h e r w i s e Would Be . <. 2.15

XLIIL Percentage of R e t a i l e r s and W h o l e s a l e r s Indicating tb.e E f f e c t s cf the Ris ing Cost of Insurance 216

XLIV. Percentage of Channel M e m b e r s Rat ing the Effects of Publ i shed R e p o r t s of Private Test ing Organ iza t ions 217

XLV. Response of Channel M e m b e r s Agree ing That C o n s u m e r Tes t ing Organ iza t ions P rov ide a F a i r Tes t of a P r o d u c t 218

CHAPTER I

INTRODUCTION

Background of the C o n s u m e r E l e c t r o n i c P r o d u c t s Indus t ry

The dynamic n a t u r e of the indus t ry , the? l a r g e po ten t ia l vo lume

of b u s i n e s s ava i lab le , and the in tense compet i t ion which e x i s t s h a s

tended to cause the c o n s u m e r e l e c t r o n i c p r o d u c t s i n d u s t r y to

eva lua t e i tself on the b a s i s of i ts s h a r e of m a r k e t in each p roduc t

c a t e g o r y . Share of m a r k e t is g e n e r a l l y d i s c u s s e d in t e r m s of

" m a r k e t pene t r a t i on . " Since a s ingle p e r c e n t a g e point change in

m a r k e t s h a r e in any p r o d u c t c l a s s amoun t s to s e v e r a l mi l l ion

d o l l a r s o r t ens of t housands of un i t s in s a l e s , the s i gn i f i c ance of

m a r k e t p e n e t r a t i o n to the m a n u f a c t u r e r b e c o m e s m o r e a p p a r e n t .

Until r e c e n t y e a r s , United States m a n u f a c t u r e r s have been ab le

to domina t e the d o m e s t i c m a r k e t fo r c o n s u m e r e l e c t r o n i c p r o d u c t s .

Recen t ly , however , i m p o r t p roduc t s have p e n e t r a t e d the m a r k e t

wi th s o m e d e g r e e of s u c c e s s in each p roduc t a r e a . In s o m e in-

s t a n c e s United States m a n u f a c t u r e r s have coun te r ed the f o r e i g n

b r a n d compet i t ion by m a n u f a c t u r i n g p r o d u c t s in o the r na t ions .

Other m a n u f a c t u r e r s have i n c r e a s e d t h e i r p r o m o t i o n a l a c t i v i t i e s ,

appl ied p r e s s u r e to t h e i r d i s t r ibu t ing o r g a n i z a t i o n s , sold d i r e c t l y to

l a r g e b u y e r s , o r accep ted a decl in ing m a r k e t s h a r e . Some m a n u -

f a c t u r e r s have d iscont inued m a r k e t i n g c e r t a i n p r o d u c t s .

The p r o b l e m of ma in ta in ing or i n c r e a s i n g s h a r e of m a r k e t is

v i t a l to the m a n u f a c t u r e r , yet each m a n u f a c t u r e r g u a r d s i ts m a r k e t

p e n e t r a t i o n data in a m o s t s e c r e t i v e m a n n e r . Data a r e co l l ec ted

by and known only to the E lec t ron i c I n d u s t r i e s A s s o c i a t i o n .

P u r p o s e of t h i s Invest igat ion

'This s tudy was e x p l o r a t o r y in n a t u r e . Its p u r p o s e s w e r e to

1. P r e p a r e an a n a l y s i s of the s i ze , g rowth , s t r u c t u r e , and

problems; of the c o n s u m e r e l e c t r o n i c p r o d u c t s i ndus t ry .

2. Deter m i r e the s ign i f i cance of m a r k e t p e n e t r a t i o n to m a n u -

f a c t u r e r s , w h o l e s a l e r s , and r e t a i l e r s .

3. Examine the m a r k e t p e n e t r a t i o n r e p o r t i n g m e c h a n i s m , i ts

a c c u r a c y , u s e f u l n e s s , p r o m p t n e s s in f e e d b a c k of da ta , and

the advan tages and d i sadvan tages of m a i n t a i n i n g s e c r e c y

of da ta .

4. D e t e r m i n e if the d e s i r e f o r ma in t a in ing or i n c r e a s i n g m a r -

ke t pene t r a t i on by United States m a n u f a c t u r e r s r e s u l t s in

a . G r e a t e r e m p h a s i s on gales of un i t s t h a n on do l l a r s a l e s

or p r o f i t p e r p roduc t g roup .

b . Complete con t ro l or dominance by the m a n u f a c t u r e r of

t h e m a r k e t i n g channe l s .

c . The power of the m a n u f a c t u r e r to e s t a b l i s h and con t ro l

p r i c e s at the who le sa l e and r e t a i l l e v e l .

d. The power of the m a n u f a c t u r e r to f o r c e fu l l l ine se l l ing .

e . The power of the m a n u f a c t u r e r to con t ro l m a r k e t i n g

ac t iv i t i e s of i ts wholesa l ing and r e t a i l i n g o r g a n i z a t i o n

s t r u c t u r e .

f. Redticed p r o f i t s f o r the w h o l e s a l e r and r e t a i l e r f r o m

what p r o f i t s o t h e r w i s e would be .

5. D e t e r m i n e t he s ign i f i cance of m a r k e t p e n e t r a t i o n to f o r e i g n

m a n u f a c t u r e r s and i m p o r t e r s .

6. D e t e r m i n e the inf luence of i m p o r t s upon the g e n e r a l

s t r u c t u r e of the i n d u s t r y .

Hypo t h e s e s of Study

The hypo theses of th i s s tudy a r e

1, T h e d e s i r e f o r main ta in ing or i n c r e a s i n g m a r k e t p e n e -

t r a t i o n by United States m a n u f a c t u r e r s r e s u l t s in

a . G r e a t e r e m p h a s i s on s a l e s of un i t s than on d o l l a r s a l e s

o r p r o f i t p e r p roduc t g roup .

b. Comple te con t ro l o r dominance by the m a n u f a c t u r e r of

the m a r k e t i n g channe l s .

c . The power of the m a n u f a c t u r e r to e s t a b l i s h and c o n t r o l

p r i c e s a t the who le sa l e and r e t a i l l eve l .

d. H ie power of the m a n u f a c t u r e r to f o r c e fu l l l ine se l l i ng .

e . The power of the m a n u f a c t u r e r to con t ro l m a r k e t i n g

ac t iv i t i e s of its -wholesaling and r e t a i l i ng o r g a n i s a t i o n

s t r u c t u r e .

f. Reduced p r o f i t s f o r the -wholesaler and r e t a i l e r f r o m

what they o t h e r w i s e would be.

2. The m e c h a n i s m f o r r e c o r d i n g and r e p o r t i n g i ndus t ry s a l e s

is i n a c c u r a t e .

Sources of Data

P r i m a r y data w e r e obtained f r o m

1. A p r e l i m i n a r y s e r i e s of p e r s o n a l i n t e r v i e w s wi th two m a n u -

f a c t u r e r s , f o u r t e e n w h o l e s a l e r s , and t en r e t a i l e r s to de-

t e r m i n e if m a r k e t p e n e t r a t i o n was a s ign i f i can t a r e a of

s tudy within the c o n s u m e r e l ec t ron i c p r o d u c t s i ndus t ry .

2. R e s p o n s e f r o m a l e t t e r r e q u e s t i n g i n d u s t r y data f o r w a r d e d

to the fol lowing

a . One hundred seventy m a n u f a c t u r e r s and i m p o r t e r s ,

r e p r e s e n t i n g to ta l c o v e r a g e of t he Merchand i s ing Week

l i s t ing of m a n u f a c t u r e r s and i m p o r t e r s .

b. S ix ty-f ive m a r k e t and aud ience r e s e a r c h o r g a n i z a t i o n s

r e l a t e d to the c o n s u m e r e l e c t r o n i c p r o d u c t s i n d u s t r y

as compi led by Te lev i s ion Fac tbook .

c. I V o hundred n ine teen a d v e r t i s i n g , p r o m o t i o n , and

public r e l a t i o n s compan ie s a s s o c i a t e d with the con-

s u m e r e l e c t r o n i c p r o d u c t s i n d u s t r y .

d. F o r t y - n i n e b u s i n e s s and t r a d e j o u r n a l s r e l a t ed to t he

indus t ry .

e. Twenty-one indus t ry t r a d e a s s o c i a t i o n s .

f. Twelve gove rnmen t d e p a r t m e n t s , a g e n c i e s , c o m -

m i s s i o n s , and c o m m i t t e e s r e l a t e d to the i ndus t ry a s

compi led by Te lev is ion Fac tbook .

g. Twelve b r o a d c a s t e r s , banks , f i n a n c i a l and r e l a t e d in-

d u s t r y s o u r c e s .

3. A second s e r i e s of p e r s o n a l i n t e rv i ews with t h i r t e e n whole -

s a l e s and s ix r e t a i l e r s who w e r e ava i l ab le in Da l l as , T e x a s ,

f o r comple t ing q u e s t i o n n a i r e s .

4. Specia l ly p r e p a r e d q u e s t i o n n a i r e s f o r w a r d e d to the fo l lowing;

a . All m a n u f a c t u r e r a and i m p o r t e r s l i s t ed in Me rch smd.ising

Week ' s " F i r s t Annual Di s t r ibu to r D i r e c t o r y " and in

Te lev i s ion Fac tbook . The ini t ia l ma i l i ng of 195 q u e s -

t i o n n a i r e s w a s fol lowed by a ma i l i ng of 15 q u e s t i o n -

n a i r e s to d o m e s t i c m a n u f a c t u r e r s who fa i led to r e p l y to

the f i r s t q u e s t i o n n a i r e . In addi t ion, one q u e s t i o n n a i r e

was m a i l e d to a f o r m e r p r e s i d e n t of a m a j o r f i r m .

b. Two hundred s e v e n t y - f o u r of t he 1 ,631 w h o l e s a l e r s

l i s t e d in Merchand i s ing Week's " F i r s t Annual D i s t r i -

bu to r D i r e c t o r y . " The s a m p l e cons i s t ed of e v e r y

d i s t r i b u t o r in Texas . In addi t ion, 182 w h o l e s a l e r s

loca ted in 13 m a r k e t s %vhere 5 o r m o r e d o m e s t i c

b r a n d s w e r e being d i s t r ibu ted w e r e s e l e c t e d by s t r a t i -

f ied r a n d o m sampl ing . Six w h o l e s a l e r c o o p e r a t i v e s

and 11 w h o l e s a l e r s a l e s m e n w e r e s u r v e y e d . They

w e r e s e l e c t e d f r o m n a m e s a p p e a r i n g in t r a d e publ i -

ca t ions .

c . F o r t y - n i n e r e t a i l e r s of c o n s u m e r e l e c t r o n i c p roduc t s

se lec ted a t r a n d o m f r o m the 127 l i s t e d in the October

1971 Sou thwes te rn Bell Telephone Company G r e a t e r

Dal las Yellow Page D i r e c t o r y .

d. F i f t y - f i v e large scale retailers. Of these, 19 w e r e

selected from. Texas wholesaler responses a s having

s ign i f i can t influence on the Texas market. The b a l a n c e

of 36 la.rge scale retailers were selected from depart-

ment store, discount, mail order, j e w e l r y , and mass

merchandising chains in the United States listed in Dun

and Brad street Million Dollar Directory a s having s a l e s

of over $100, 000, 000 in 1970.

e . S ixty-one s p e c i a l type u s e r s of c o n s u m e r e l e c t r o n i c

p r o d u c t s who w e r e c o n s i d e r e d to b e po ten t i a l d i r e c t

p u r c h a s e r s f r o m the m a n u f a c t u r e r . The s a m p l e was

s e l ec t ed at random f r o m t r a d e j o u r n a l and t r a d e a s s o -

c ia t ion l i s t i n g s of mob i l e h o m e m a n u f a c t u r e r s , e l e c -

t r o n i c s e r v i c e compan ie s , rental f i r m s , p r e m i u m and

incent ive m e r c h a n d i s i n g f i r m s , large p r e m i u m b u y e r s ,

c r e d i t c a r d compan ie s , and t r a d i n g s t a m p c o m p a n i e s .

5. Government a g e n c i e s , pub l i ca t ions , and. r e p o r t s .

Secondary da ta w e r e d r a w n f r o m

l t C u r r e n t p e r i o d i c a l s in, and r e l a t e d to , t h e c o n s u m e r

e l e c t r o n i c p r o d u c t s i ndus t ry .

2. C u r r e n t books , pub l i ca t ions , and o t h e r l i b r a r y s o u r c e s .

Methods of Study

By means-of a s e r i e s of p r e l i m i n a r y p e r s o n a l i n t e rv i ews wi th

m a n u f a c t u r e r s , w h o l e s a l e r s , and r e t a i l e r s , and th rough a t ho rough

s tudy of indus t ry t r a d e publ ica t ions , it w a s d e t e r m i n e d tha t m a r k e t

penetra t ion, was a s u b j e c t of s ign i f i can t i m p o r t a n c e to each m e m b e r

of the. indus t ry , but of s p e c i a l i m p o r t a n c e to the m a n u f a c t u r e r and

w h o l e s a l e r . The r e t a i l e r a p p e a r e d to be l e s s i n t e r e s t e d in m a r k e t

p e n e t r a t i o n , but is a f fec ted by t h o s e ac t ions of h i s s u p p l i e r s d i r e c t e d

t oward a t t a inment of t h e i r m a r k e t p e n e t r a t i o n g o a l s .

P r e l i m i n a r y in t e rv i ews and a s e a r c h of s e c o n d a r y s o u r c e s of

da ta a l s o p e r m i t t e d the iden t i f i ca t ion of i ndus t ry p r o b l e m s having a

r e l a t i o n s h i p to m a r k e t p e n e t r a t i o n . These p r o b l e m s p e r t a i n e d to

the i m p o r t a n c e of i m p o r t s to the i ndus t ry , and to d e t e r m i n a t i o n of

t he a c c u r a c y of the r e p o r t i n g s y s t e m f o r r e c o r d i n g i n d u s t r y da ta ,

m a r k e t and s a l e s po ten t i a l s , compet i t ion , p h y s i c a l d i s t r i b u t i o n ,

p r o d u c t s , p r ic ing , p romot ion , a t t i t udes of t he m a r k e t , con-

s u m e r i s m , channel conf l ic t , and the l ega l e n v i r o n m e n t .

L e t t e r s r eques t ing da ta r e l a t i n g to the fo rego ing indus t ry p r o b -

l e m s w e r e m a i l e d to 548 po ten t i a l i ndus t ry s o u r c e s a s d e s c r i b e d

u n d e r " s o u r c e s of da ta . " The r e s p o n s e f r o m t h e s e l e t t e r s c o m -

bined wi th s econda ry s o u r c e s of da ta m a d e it p o s s i b l e to ana lyze

e a c h p r o b l e m .

A s e r i e s of f ive q u e s t i o n n a i r e s (see Append ices ) w e r e deve loped

to d e t e r m i n e the opinions of i ndus t ry p a r t i c i p a n t s r e g a r d i n g indus t ry

p r a c t i c e s r e l a t i ng to the p u r p o s e s and h y p o t h e s e s of the study and to

o the r indus t ry p r o b l e m s . Sepa ra t e q u e s t i o n n a i r e s w e r e des igned

f o r and m a i l e d to m a n u f a c t u r e r s and i m p o r t e r s , w h o l e s a l e r s , r e -

t a i l e r s , l a r g e s c a l e r e t a i l e r s , and potent ia l s p e c i a l u s e r s of t he

p r o d u c t . A n u m b e r of the w h o l e s a l e r and r e t a i l e r q u e s t i o n n a i r e s

w e r e comple ted by p e r s o n a l i n t e rv i ews b e c a u s e p e r s o n s w e r e ava i l -

ab le , Completed q u e s t i o n n a i r e s m a d e it p o s s i b l e to va l ida t e t he

h y p o t h e s e s of the s tudy.

Defini t ion of T e r m s

The fol lowing def in i t ions a r e p rov ided a s an explana t ion of the

m e a n i n g of each t e r m a s it is u s e d in the c o n s u m e r e l e c t r o n i c p r o -

duc ts i n d u s t r y :

Marke t p e n e t r a t i o n is the r a t i o of a c o m p a n y ' s s a l e s to the

t o t a l i n d u s t r y s a l e s in a given geog raph ic a r e a and t i m e p e r i o d .

Brand s h a r e is the r a t i o of a s ing le b r a n d ' s s a l e s to t he to t a l

i ndus t ry s a l e s of a l l b r a n d s of a given c o m m o d i t y in a g iven geo-

g r a p h i c a r e a and t i m e p e r i o d .

Share of m a r k e t is c o n s i d e r e d to be the s a m e a s m a r k e t p e n e -

t r a t i o n and b r and s h a r e ; h o w e v e r , r e f e r e n c e is g e n e r a l l y d i r e c t e d

• 1 0

t oward e i the r the c o m p a n y ' s s a l e s o r the "brand's s a l e s . Sales can

be c o n s i d e r e d in t e r m s of e i the r uni ts or d o l l a r s of a g iven p roduc t

c a t e g o r y .

Marke t p e r f o r m a n c e is a b r o a d e r t e r m than, s h a r e of m a r k e t

and inc ludes such evalua t ion f a c t o r s as deve lopmen t of a f i r m and

b rand image , a d v e r t i s i n g e f f e c t i v e n e s s , p e r c e n t a g e of o r d e r s f i l l ed ,

p r o m p t n e s s in de l i ve ry , d e a l e r deve lopment , p r o d u c t s e r v i c i n g , and

o t h e r s , a s well a s s h a r e of m a r k e t .

Marke t potent ia l is "a ca lcu la t ion of m a x i m u m p o s s i b l e s a l e s

oppor tun i t i e s fo r a l l s e l l e r s of a good or s e r v i c e dur ing a s t a t ed

p e r i o d ,

Consumer e l e c t r o n i c p r o d u c t s in th is s tudy a r e c o n s i d e r e d to

be r a d i o s , phonographs , s t e r e o s , t ape r e c o r d e r s , and t e l e v i s i o n

s e t s .

Del imi ta t ions

This study includes only t h o s e p roduc t s men t ioned in the de f i -

n i t ion of c o n s u m e r e l e c t r o n i c p r o d u c t s . Such i t e m s a s e l e c t r o n i c

o r g a n s , p ianos , g u i t a r s , and o ther m u s i c a l i n s t r u m e n t s , as wel l a s

1 A m e r i c a n Marke t ing Assoc ia t ion , C o m m i t t e e on Def in i t ions , Marke t ing Definit ions (Chicago, I960), p. 15.

I i

phonograph r e c o r d s , pho tograph ic e q u i p m s m , and au tomobi le r a d i o s

a r e not included. F requen t ly c o n s u m e r e l e c t r o n i c p r o d u c t s a r e r e -

f e r r e d to a s "home e n t e r t a i n m e n t " o r "home e l e c t r o n i c " p r o d u c t s .

O r d e r of P r e s e n t a t i o n

Chapte r II p r e s e n t s an a n a l y s i s of the deve lopmen t of t he con-

s u m e r e l ec t ron i c p r o d u c t s indus t ry , i ts f o r m a t i o n , s i ze , g rowth ,

and deve lopmen t of individual p r o d u c t s . The s ign i f i cance of i m -

p o r t s to t he indus t ry is t r e a t e d a s wel l as the n a t u r e of compe t i t i on

wi th in the indus t ry .

C h a p t e r s III and IV examine the p r o b l e m s of t he i n d u s t r y a s

d e t e r m i n e d f r o m p r e l i m i n a r y in t e rv i ews and s e c o n d a r y data.. Data

f r o m a l l s o u r c e s o the r than mul t ip l e q u e s t i o n n a i r e s and i n t e r v i e w s

f o r comple t ing q u e s t i o n n a i r e s a r e t r e a t e d in t h e s e c h a p t e r s . The

s u b j e c t s of m a r k e t pene t r a t i on , m a r k e t and s a l e s po ten t ia l , and

the r e p o r t i n g s y s t e m f o r r e c o r d i n g indus t ry da ta a r e d i s c u s s e d in

Chap te r III.

Chapte r IV includes a d i s c u s s i o n of the i ndus t ry p r o b l e m s r e -

l a t ed to d i s t r ibu t ion , p r o d u c t s , p r i c i n g , p r o m o t i o n , a t t i t udes of the

m a r k e t , c o n s u m e r i s m , channel conf l ic t and con t ro l , and t he l ega l

e n v i r o n m e n t .

Chapter V p r e s e n t s and a n a l y s e s the da ta compi led f r o m

m u l t i p l e q u e s t i o n n a i r e s . Response f r o m t h e s e q u e s t i o n n a i r e s

e x p r e s s e d the opinions of the f ive groups of x cspondcnts r e g a r d i n g

i n d u s t r y p r a c t i c e s r e l a t i ng to the purposes and h y p o t h e s e s of t he

s tudy and r e l a t e d indus t ry p r o b l e m s .

Chapter VI inc ludes the s u m m a r y , conc lus ions , and r e c o m -

m e n d a t i o n s .

CHAPTER II

AN ANALYSIS OF THE CONSUMER ELECTRONIC

PRODUCTS INDUSTRY

E a r l y F o r m a t i o n of the E l ec t ron i c Indus t ry

The h i s t o r y and f o r m a t i o n of the c o n s u m e r e l e c t r o n i c p r o d u c t s

i n d u s t r y can be t r a c e d to the deve lopment of the r e c o r d i n g m a c h i n e

in the l a t e n ine teenth cen tu ry . F r o m the r e c o r d i n g m a c h i n e c a m e

the beginning of the phonograph and the r e c o r d i n d u s t r y . Radio,

h o w e v e r , w a s the f i r s t e l e c t r o n i c p roduc t of the i n d u s t r y .

The c o m m e r c i a l p o s s i b i l i t i e s of rad io w e r e r e c o g n i z e d immed i -

a te ly fol lowing World War I when t he United States Navy f o r e s a w

the need f o r a United States o rgan iza t ion to con t ro l r a d i o c o m m u n i -

ca t ion in the United S ta tes , Until th i s t i m e , the B r i t i s h Marcon i

Company, with i ts s u b s i d i a r y , the Marcon i W i r e l e s s T e l e g r a p h

Company of A m e r i c a , held the dominant pos i t i on of l e a d e r s h i p and

t h r e a t e n e d wor ld con t ro l of r ad io communica t i on . To p r e v e n t such

con t ro l , t he Navy Depa r tmen t sugges ted to the Gene ra l E l e c t r i c

Company tha t it not s e l l c e r t a i n equipment to Marcon i , but t ha t

Gene ra l E l e c t r i c a t t e m p t to get Marconi to d ives t i tself of the

13

. • 14

A m e r i c a n Marconi Company, including p a t e n t s . F r o m t h e s e nego-

t i a t ions and gove rnmen t p r e s s u r e s , the Radio C o r p o r a t i o n of

A m e r i c a w a s f o r m e d in 1919 by combining the pa t en t r i gh t s and

i n t e r e s t s of the Marconi W i r e l e s s T e l e g r a p h Company of A m e r i c a

and t h e Genera l E l e c t r i c Company,

The founding of the Radio Corpora t ion of A m e r i c a s e e m e d to

c l ea r the pa ten t deadlock that ex i s ted at the t i m e be tween the

West inghouse E l e c t r i c and Manufac tur ing Company, A m e r i c a n

Telephone and Te leg raph Company, and the In te rna t iona l Radio

Te l eg raph Company. C r o s s - l i c e n s e a r r a n g e m e n t s m a d e it p o s s i b l e

f o r i m p r o v e m e n t s to be m a d e in t r a n s m i s s i o n and r ece iv ing equip-

m e n t . Publ ic b r o a d c a s t i n g began with a s ing le s t a t ion in N o v e m b e r ,

19^0. Instant s u c c e s s a c c e l e r a t e d the ins t a l l a t ion of o ther new

s t a t i o n s .

Nea r ly t h r e e hundred s ta t ions w e r e in o p e r a t i o n by the end of

1922, be tween f ive hundred and s ix hundred by mid -1926 , and

n e a r l y s e v e n hundred in mid -1927 . * This b rough t about t he i m -

m e d i a t e a c c e p t a n c e of r ad io a s is indicated by the fo l lowing:

P r i o r to 1921, the s a l e of r ad io a p p a r a t u s o the r than tha t u s e d f o r public r a d i o - t e l e g r a p h communica t ion p u r p o s e s was confined chief ly to the s a l e of r ad io p a r t s and vacuum

* John George Glover and Wil l iam B. Cornel l , The Develop-m e n t of A m e r i c a n Indus t r i es , r ev . ed. (Englewood Cl i f f s , N. J . , 1941), p7 836. ~ ~

15

t ubes to a m a t e u r s and e x p e r i m e n t e r s f o r t h e i r p e r s o n a l 'use: but when lav i n t e r e s t was a r o u s e d by t he e a r l y b r o a d c a s t i n g ac t i v i t i e s , the demand f o r s impl i f i ed r a d i o r e c e i v e r s f o r h o m e e n t e r t a i n m e n t g rew to such v o l u m e du r ing 1922 to 1923 tha t , a t t i m e s , m a n u f a c t u r i n g f a c i l i t i e s w e r e b a r e l y able to cope wi th the demand . Thus, the s a l e of r ad io r e c e i v e r s g rew f r o m a b u s i n e s s of a few thousand d o l l a r s p e r annum in 1922 to h u n d r e d s of m i l l i ons of d o l l a r s p e r annum s u b s e -

2 quent to 1922.

Genera l Growth of the E l e c t r o n i c s Indus t ry

Table I p r e s e n t s an indus t ry s u m m a r y of f a c t o r y s a l e s by

s e l e c t e d y e a r s s ince 1925. Tota l i ndus t ry s a l e s g rew f rom. $180

m i l l i o n in 1925 to ove r $24 b i l l ion in 1970. Today, a s in i ts in-

cubat ion pe r iod , the indus t ry is inf luenced, a s we l l a s suppor t ed ,

to a l a r g e d e g r e e by t he g o v e r n m e n t , e s p e c i a l l y the m i l i t a r y . The

g o v e r n m e n t s e c t o r h a s accounted f o r a p p r o x i m a t e l y f o r t y - s e v e n to

f i f t y - s e v e n p e r cent of i ndus t ry s a l e s f o r the l a s t f i f t e e n y e a r s .

The second l a r g e s t s e g m e n t of the i n d u s t r y is the i n d u s t r i a l

s e g m e n t . This s e g m e n t is expe r i enc ing the m o s t r a p i d g rowth and

now r e p r e s e n t s a p p r o x i m a t e l y o n e - t h i r d of i n d u s t r y s a l e s . If r e -

p l a c e m e n t components a r e included with the i n d u s t r i a l s e c t o r , to ta l

i n d u s t r i a l s a l e s exceeded $8.6 b i l l ion in 1970.

C o n s u m e r e l e c t r o n i c p r o d u c t s a l e s have cont inued to g row, but

not a t t he r a t e of g rowth of t he e l e c t r o n i c s i n d u s t r y . P r i o r to 1951,

^Ibid. , p . 844.

x b

W

<

H

o r~ o •—i i m 04 o

CO rt <4 H

Q H H U H J

H CO

r—1 m o CO H W «w J "

<5 CO

b 3 Ph d

O §

h

o H

fl ® 2 n b 2 ® S O O rt & CL >-"

S 6 o5

a)

i b

>

0

Q

O u ft.

d (3 .2 S

a s o U

u ^ CQ 0 d w u O 0 Q

** A a* J5 ft* u ^

CO d o U ft*

<3 0) Jx

o o i n o i n o o i n c o o m m O O O ^ O N f O r } ' i f i O - « H ^ so . H M N H CO C"~ CO 04 CO « sD sD

£**- m fvj r-«i o t*~ o ^ ^ vo csj m ^ o

^ h in h- N

•eK

H ^ f o i ^ t ^ o o o u n o o c<-» to ^ H H M (sj <\j ea

o o o o m m o o o m o o r -

(M 04 CO sO in m vq o "vD r- vO •m-

r - o i n m o o m ^ ^ o ^ o c o r - c ^ P O O O ^ O ^ O r O M N ^ v O ( M \ O Q O O O

oo o r*- m 04 vd sO vD H !> »—«

h on ^ vo oo oo •-< M ra h

o o o o m o o oa co co vo in la o o o oo «~-i o4 o f-n o <o m co vD N co \0 o

^ ^ nH to v.o o r-*Pr

m in m co o o o o un o oo rH oo o o o O ^ o r - C v a r - O o ^ o o o o v o ' - H o ^ r ^ ' - H r s j ^

04 »—i h oo m CO CO -vO O vO sO co so oo o

rt H H >H H (\J f\J CO ^ ^ fO 4&

m f> o iH CO 0s- tsw o r— r- 00 O CO m r- 00 o o esi (S3 (M CO CO CO in m in UO m <vO s£> sO sO *4D NO r-

O O cr- O o o 0N 0s" o 0s G'v o o 0X o <T-rH r«i r-«i H ,r—4 f-H rH i—4 i—i rH H r*l 1—! rH rH r»*n rH rH

m -p

o a s <D rQ flj i—! d &0 • |m£ 0) *-«

O

05 O -d

d o 4*» c3 •h o o ?&



0 rd A O • r<< d o u

U 0>

a

i> O rH 4 0 Q W ctS 4~> ca Q

•m 0 r-*4

1

d o 4~ u

t4l u

"Q CO n a) d u o

a I

* 3 W (3

17

c o n s u m e r e l ec t ron i c p roduc t s domina ted the e l e c t r o n i c s i n d u s t r y

with ove r f i f ty p e r cent of i ts annual s a l e s . By 195 8 th i s had d e -

cl ined to about twenty p e r cent . In 1970, c o n s u m e r e l e c t r o n i c s

accounted f o r only s ix t een p e r cen t of the to ta l s a l e s of the e l e c -

t r o n i c s indus t ry . In d o l l a r s , c o n s u m e r e l e c t r o n i c p roduc t s a l e s

g r ew f r o m $92 mi l l ion in 1925 to $1. 5 b i l l ion in 1950, $1. 6 b i l l ion

in 1953, $2. 0 b i l l ion in I960, and n e a r l y $4, 0 b i l l ion in 1970,

Dol lar s a l e s have i n c r e a s e d subs tan t i a l ly ; howeve r , when the

g rowth y e a r s of co lor TV, 1964-1967, a r e excluded "you s e e

some th ing s t a r t l i ng and even unique: c o n s u m e r e l e c t r o n i c s g rows

today at a r a t e SLOWER than Gross National Produc t !"* '

It should be noted t h a t the data in Table I a r e d o m e s t i c l abe l

s a l e s which include p roduc t s e i t he r p roduced in the United States

or impor t ed by United States m a n u f a c t u r e r s f o r s a l e with t h e i r

b r a n d n a m e . T h e r e f o r e , f o r e i g n l abe l i m p o r t s a l e s a r e excluded,

and the s ign i f i cance of c o n s u m e r e l e c t r o n i c p r o d u c t s a l e s is under-

s ta ted b e c a u s e of i m p o r t s . Domes t i c p roduc t ion is o v e r s t a t e d

b e c a u s e s o m e d o m e s t i c b r a n d s a r e p roduced in f o r e i g n na t ions .

3 A l b e r t o Socolovsky, The Decade of E l e c t r o n i c s (New York, 1970), p . 6.

' "• •- 13

Individual P roduc t Sales Growth

E lec t ron ic Indus t r i e s Associa t ion da ta , co l lec ted on an annual

b a s i s , indicate the size arid growth of individual p r o d u c t s . The

da ta p r e s e n t e d in Table II a r e to ta l U. S. s a l e s by product in uni ts

and d o l l a r s f r o m I960 to 1970. All f i g u r e s a r e in thousands and

include impor t s a l e s , a s well a s domes t i c m a n u f a c t u r e r s 1 s a l e s .

Impor t do l la r f i g u r e s a r e basad on the a v e r a g e va lue of to ta l im-

p o r t s as e s tab l i shed by the Depar tment of C o m m e r c e .

Combined sa l e s of rad io , t e lev is ion , phonograph, and r e c o r d e r

p roduc t s grew f r o m $1. 3 bi l l ion in i960 to $3.2 b i l l ion in 1970.

Unit s a l e s fo r t h e s e p roduc t s i n c r e a s e d f r o m 28. 6 mi l l ion to 60. 3

mi l l i on during the s a m e per iod of t i m e . All p r o d u c t s had phe -

nomena l growth dur ing the 1960's with the excep t ion of phono-

g r a p h s . While unit s a l e s of phonographs i n c r e a s e d f r o m 4. 5

mi l l i on in I960 to 5 .6 mi l l ion in 1970, do l la r s a l e s i n c r e a s e d only

$17 mi l l ion , f r o m $359 mi l l ion to $376 mi l l ion .

R e c o r d e r s a l e s i n c r e a s e d f r o m fewer than 300 thousand uni ts

in I960 to m o r e than 8 . 4 mi l l ion uni ts in 1970. Dol lar s a l e s of

r e c o r d e r s i n c r e a s e d f r o m $14. 6 mi l l ion to $243. 8 mi l l ion f o r the

s a m e y e a r s . Unit s a l e s of r ad ios n e a r l y doubled f r o m 18 million,

uni ts in I960 to 34 mi l l ion uni ts in 1970. Dol lar s a l e s of r a d i o s

did double f r o m $190 mi l l ion to $380 mil l ion. Unit s a l e s of

M J

< 5 H

m

m u 0)

U Q V <D

O

> o r—!

H

cs »«*

r~* O Q

CO 4^

%.~4

8

rd ft. CIS

m o 3 D

fi CO 4~* j3 &

CO U <§ r—j o Q

m -y

d &

m u ctf

f-H *~4 o Q

m

$

it> 0) !x

^ ^ 00 «"*« i f i lf»

O f\3 O <»

O ?>- (M o

m

co

00 CO

o Cx!

If) \Q iCl rM r~4 tft iO CO O \C l> NsO l> o N ^ sO CO in ^ sT> i n

o tn

c i i> i n

CO

o <M

co

ir>

<-H »—i (S3 CO CO CO ^ !Ti ^0 OD

o o »-•« o m od o co o so m o co cm o cm oo o o i> co o co ^ ^ *r> •£) ^ i n ^ oo

c o o ^ c m o o c o v j d m o o cm oo m ^ m co o cm o cm cm lO O r-H, r—1 r-H CO vO CO xO

^ co ^ i n i n mo vD -4^ *rT un

o o r -O On o r~< r-«l fsj

o r - oo so r - o CM '• H tM CO CO

CO CO CO

r-l CM O h N CO CO ^ CO

H ^ H |V3 00 0 s Ov- rt* CO IT) 00 o i n 00 !> 00 O v o r ^ s o i n ^ o r - ^ D

O O c O N H c O c O f — i ^ H N N M N f l c O c O

r -o

00

IT) O o

o O 00 xO o co co

0s- r -

vO

o

i n

r^ r -N0

m oo U1

o CM

CM CM CM <M (S3

o m ^ co M H ff) CO o oo co i—i o

i> !>

i n so s>-

r-H vQ r - i d

nT -T

00 o CO

r<H ca

•» * «

CO cf) CM

o <MI CM

O ^ C M C O ^ i D v D r ^ o o o ^ o v O x D x O - s D v O v O v J D v O v D s D C ^ < > 0 0 0 0 0 0 0 O Qs O vm\ t m m , 1 * 4 ^ r**

0 o - r-a 4»>

O o C?i

m CL>

03 0

d

CM ^ O f\3 ^ 00 ^ O

•* n «K CO O ^ CM CO CO

1 9

20

t e l e v i s i o n s e t s i n c r e a s e d f r o m 5, 8 miliioxi in I960 to 12.2 m i l l i o n

in 1970 whi le do l l a r s a l e s n e a r l y t r i p l e d f i o m $797 m i l l i o n to $2, 2

b i l l ion . Te lev i s ion accounted f o r ove r t w o - t h i r d s of d o l l a r s a l e s

f o r a l l p r o d u c t s in 1970.

Census C o m p a r i s o n of Growth

In o r d e r to c o m p a r e data , Table III p r e s e n t s an a b s t r a c t i o n

showing quant i ty and va lue of s h i p m e n t s and do l l a r t o t a l s f o r e a c h

T A B L E III

QUANTITY AND VALUE O F SHIPMENTS O F A L L PRODUCERS: 1967 AND 1963 FOR HOME USE

1967 1963

Unit Quantity (Million)

Dol la r Value

(Million)

Unit Quant i ty (Million)

Dol lar Value

(Million)

Tota l Radio 11. 1 4 7 5 . 4 10.5 3 4 3 . 4

Tota l Te lev i s ion 9. 7 2, 191. 5 7. 7 1, 067. 1

Tota l Phonograph 3. 7 138.5 3. 6 127. 6

Tota l R e c o r d e r _0._8 4 9 . 6 0 . 4 43. 5

Tota l f o r Home Use 25. 3 2, 855 .0 22. 2 1, 581 .6

S t a t i s t i c s , Jan . 1971, U. ,S. D e p a r t m e n t of C o m m e r c e Publ ica t ion-

p r o d u c t with which th i s s tudy is c o n c e r n e d . The Census of Manu-

f a c t u r e r s 1 da ta in Table III a r e c o n s i d e r a b l y l e s s in un i t s in e v e r y

p r o d u c t c a t e g o r y than the E l ec t ron i c I n d u s t r i e s A s s o c i a t i o n da ta

• . • ' ' "> I r , 5 \ , - . * " * » • »ek

p r e s e n t e d in Table II f o r c o m p a r a b l e y e a r s . D i f f e r e n c e s a r e s u b -

s t an t i a l in s o m e in s t ances , such a s the twenty mi l l ion unit d i f f e r -

ence in r a d i o s a l e s in 1967. One r e a s o n f o r p a r t of t h e s e m a j o r

d i f f e r e n c e s is the inc lus ion of i m p o r t s a l e s in Table IX,

Although the unit s a l e s a r e l e s s for r ad io and phonograph p r o -

duc t s , the to ta l do l la r s a l e s a r e g r e a t e r . F o r 1967, t he Census of

M a n u f a c t u r e r s r e p o r t e d rad io s a l e s to be 11. 1 mi l l i on un i t s and

$475 mi l l i on . Te lev i s ion s a l e s w e r e 9 .7 mi l l i on uni ts and $2, 1

b i l l ion . Phonograph s a l e s w o r e 3. 7 mi l l ion un i t s and $138 m i l l i o n

whi le r e c o r d e r s a l e s w e r e 800 thousand uni t s and $49. 6 mi l l i on .

Combined s a l e s f o r a l l p roduc t s in 1967 w e r e 25. 3 mi l l i on un i t s

and $2. 8 bi l l ion.

Average Growth

Accord ing to the U. S. Indus t r i a l Outlook 1971, the a v e r a g e

growth of the c o n s u m e r e l e c t r o n i c p roduc t s i n d u s t r y sh ipmen t s b e -

tween 1963 and 1970 has been about 5 , 5 p e r cen t p e r y e a r . The y e a r

1970 was a d e p r e s s e d one fo r the indus t ry and growth r a t e dec l ined

f rom, p r e v i o u s y e a r s . Export va lues dur ing th i s pe r iod i n c r e a s e d

a t an annual r a t e of t h i r t e e n p e r cent while i m p o r t s i n c r e a s e d a t an

annual r a t e of t h i r t y - t w o p e r cen t . Expor ts r e p r e s e n t e d fou r p e r

cent of p r o d u c t s h i p m e n t s dur ing 1970. ^

4 U . S. Domest ic and In terna t iona l Bus ines s A d m i n i s t r a t i o n , U. S. Indus t r i a l Outlook, 1971 (Washington, 1971), pp. 296-297.

Average Unit Selling P r i c e

The a v e r a g e . m a n u f a c t u r e r ' s se l l ing p r i c e o£ each -p roduc t f o r

t he y e a r 1971 th rough Sep tember was $87. 08 f o r m o n o c h r o m e t e l e -

v i s ion s e t s , $340.41 f o r color t e l ev i s i on s e t s , $15.95 f o r r a d i o s ,

$40.50 f o r tab le and p o r t a b l e phonographs , and $196.53 f o r conso le

phonographs . These da ta a r e included in Table IV.

Individual P roduc t Deve lopment

R e c o r d e r

The r e c o r d e r was developed dur ing the l a t e n ine teen th c e n t u r y .

Most of t he e a r l y p r o d u c t s w e r e c o m m e r c i a l t ypes used in the p r o -

c e s s f o r p roduc ing phonograph r e c o r d s . P r o d u c t i o n of r e c o r d e r s

f o r h o m e u s e was ins ign i f i can t unt i l a f t e r World War II, a l though

c o n s i d e r a b l e deve lopment o c c u r r e d dur ing the l a t e 1930's t h rough

World War II, p a r t i c u l a r l y in Ge rmany . ®

E a r l y p roduc t ion of r e c o r d e r s w a s of the d i s c and w i r e t y p e s .

By 1 954, a l l s a l e s w e r e of the magne t i c t a p e type of r e c o r d e r .

Until the deve lopment of the t r a n s i s t o r , t he m a j o r i t y of r e c o r d e r s

r e t a i l e d f o r m o r e than $200.

^ Paul Kagon, "No Blank Ca r t r i dge , " B a r o n ' s Weekly, X.LIX (September 8, 1969), 11.

2 3

> KH

W J

ca < H

W H Q t> Q

O

Ph cq , ffj rt

w 3 5 1 °

B q

W T3

o 1,5

U ,2 h c O D

w W <

to ><

ffi O H U < fx.|

O o o *d <

o t> er-

as 0 o

u flj

CD

s 0) 4a PM a>

co

<o ? <»

* .3 © •£ > t>

< 1 ^

r~ o

0) 4-i

P

0 +»

f-i aS

I* ?H

B CD 01 a)' m

m u di

rH "HI a

O.

<» 4~S • r i d

ID

<D fl) m ci H

s -

03 14 (tf

O Q

03 44 • H d

*4- u 0 O

a .

f*®4 » o? o >o o u0 o l o | CO u*j f O o a CO tn 1>I CO f '•• i * « • * m • * * # «n

CM Ci o in | o t> r\j LO CO NO IT) r<n CM CO CO OC/ m 1 o (Ns "«-4 p-*4 CO o l CO CO ft-4 I 00 fH | c I <M i»H

NO H 0,- vX> CT- CO vO CO o %o IT) i»H r- ins C"^ cn sO O •O r»H «—4 vD C\] 1 00 r- O i*H t-0 co| ; ^ 00 ?> c>0 CO 0 o CM CM VO xO CO H vDj 1 co' •vO CO cT o' CN m oi fC un CO I ' 00 Is- f«M( CO CO UO m f—HI m (M I (Si o f *"* rH »«H

H r-

CO O 00 Cv3 o NO ID oo rH CO o vO !>v r-»i r< CO CO !> vD Is- vO CQ CM in o !vi cO <M IT) 1^ I> H CO vO sO Cs3 l>

.. f. * ev *< «•

CO rn cn rH CO m

fM ca' I co r—< cn f-4 in CO r- vO LH ; o

iH CO; o NO un o r- o LO o o to O 00 * 9 1 * #' • o » * V • * * » «

CN3 o h>< o 00 00 CO *n co o CM CO CM 00 00 s>3 "•H r*«4 rH rH cn a - cn CO O vO

H cn (M 5

00 r- LTf O; co in CO CO NO LO vO rH •H ; CO O rH o o 00 00 r- m CO

00 LTl m o 0V rH i-H CO NO rH NO sO •* «\ «« •> 4K •> •N o CM CM rH m O rH NO r- CM r m

SO r~4 in vO ,-H CO o NO C- <M CO ca CO xf r*4

r-H j ,-H

c*

fM

oO >o

NO CO | 0 CO CM CM 00 o m m 00 CO O f CO NO uo xO r- O CO rH Xp <0 ?*o NO o CM co m CM 00 00 rH o o o o CO NO o

! * •s 4>k *

CO J 00 i> CM %o CM CM rH

> rH <D

B

0}

a o u

43 u o c o

0> f-H

rO rt 4-> JL, o &

08 0)

0)

JD

a o

U

<D —j 4* «5

O fS

o o 03 sS § ^ o

o H

fi o

r»I o

O

d o IG >

<D r-4 0)

H

<3 -4~> o

H

oa o • H T* <3

pi

a> ^ n" °

,JQ Q flj r-i

H U

o> *—?

& ($ 4J

0 01

a3 4»» o

H

05 o •

73 CO ^

42 re.

Co H b o

6 o -

o •A

<D *-H 4a rt 4^ *« o $4

o ^ a) ^

d o

43 04

o CQ £

o Q

ct5 Pi

43

O ®

d

CJ

JS o

H

i 4

«*0

0)

a • i~4

0

O

1

i

> t-H

H J

m

< 1

H

o

o

0

Pi a>

* §

o +•>

p -

a>

C O

o

c3

0)

S> 4->

o .

a>

c o

&> m cd

a $ u 4

0 $

GO

U a H

a

<n

d

0 m Q Cw jS

U A 0) c$

> > <

m u

»—(

O

Q

CO

4->

d

S

U 0 * 0

O u d *

fTS fT, o c. ra

49 * •

O C D

0 1 O O D

fsl

•sO m r - I I r—4 o

M l v & O UT^

#t «\ ^ f

^ v O r-»4 o '

r - m 0 0

r a v O

r-« i

o o o

r - IX) M

0 0 r -

r—i rsT

O c o l >

UD m r -

• • •

O \ 0 v D

crv

r-H

Is-

0) US

, d , Q

Cu CO

c« t !

M £ b O P

o H-i

d o

£

cs 4~>

o

B

® - §

Xi ca

•iS H U

o

c$

O (G

d o

ctf

o

C O r\J o

m CS3 s D o

?r% !-"« C D

IK •4 w<i

m o i n i n

cr* ^ m Q N

r H rvj o

c < n

^ CO r ~

m ^ s O

c n o

m (N3 m

CO 4 J

U

2

T *

O

H i

U 0 %

m d o

U

o

H

& o

<-«4

• m4

4 J

0)

r *

1-4

I

ci .<-4

u

a

G*

03 <

® 0 .*4

u AJ~ m 0

U A

d o

4-»

U

0

< | u

^ d

' p !

a

O -<h> W )

d **••4

Xi w aJ

u ^

© u

d

t B

d ©

m

cd

c u

© Q

Cfi

& U

m

o

? 0

d

d

a

ju, *4-i

a) & as

o

o

d .,-4

?-f

0 T 3

k

O

u

<D

h

05

O ,

eg

o

50

a) H

cS

Cft

03 a) 4-*

it

tn

*o 0 4 ^ .<*>»

P

r«J

ftJ 4->

o 4->

4 ^

6

w a> 4-> &

u

d

© J Q

CEl

E h

0)

C O

•rf

a

D

o

r -

f-H

d

d

o

C O

( M

• W -

d <4 m 4->

» r1^

d 3

d o

co

o 4~> o

•".£i

0 %

d

o

s s D

•Sfijr

d ctf

CO 4->

" d

d ca

O

r d

o

M D

C' s

G3

0)

*>«4

Gi yj

O

MA c

d a)

o

3L,

0) &

Q) d

d

4J>

> N

H

1-4

0)

d fH

o

Q

d

o

Q

O

rt

to

a?

i d

o

u

0)

0>

u

3

o

a

CO

. 0)

F*

c S

o

cc 4 ^

?»4

0

1

© r—I

aS

to

*wrl

csS + A

O

4 ^

s4-{ o

4-»

d 0)

u

. 0 ) c u

m

o

4-> 'id 0) d »r-(

u

<D

- o

n d

0$

X !

d o *1*4

Q d

O

u a i

03

a> • p

S 5

t ?

<D 4-> »*mI

d &

o

r -

o

f-H

tti

u 0

1 *»Wi

Rl

d

feO • r4



0 ^

03

1 3

a

«s

^ 2

CD

0)

o

o

r -

o

m 0

r^f aS m r~l

O

M-4

o

" S

0)

u

u 0 a

s -4^

A * fm$ 0

d

c«

a)

tM

O

s

s-»

o

0 O d r~4

<tf

0)

rC|

o V 4

T J

0)

O

a

a &

25

> W

CQ

<!

H

w

J

<3

H

O

H

in . -i-1

f-, ®

f—4 fmj c6 r$

1 o S E-f

i-H 0) rO

CQ 4 H-1 ?-{ 0 d a. bC d **-4 C3 0

hH

O

<D rJQ rt

ca J

Jj o O .M a » I 8

a o

Q

® 0 0 u

c3 ^ W "g

>S U u o 4 u <tt

a CO

^ m rO fO ^ CO ^ CO ^ %D vD o h co o r- m o —< *o co

sJD H o (Nj O (M Ol CO CO ^ 00

^ od a* r- co co o co on

rHi r*"*? i~*l t~*-{ r»—i CM

m xo m r-t H ur> ix> on on o o 0s- N£> r- ^ so r- so r- co m

*-« so co m «£* n£s it. m cj"

r-T h co co to oo ^ m vD od

m co co ^ o o on n m h c o o « — ' o o o o c r ^ v O t n » — « o no r-4 o co o r- c- co »-* m on

if) m m c- ^ n n h <> id r H H r s j f O c o ^ i n o o o r o

m r - a ^ o o o c o c a o o o o o o O Is- O if) ^ C T ^ N ^ ^ O rthNcOOMDlfi^N^h-

h N1 (^ N M ^ IT vO*1

^ fsJ CO \D on ^ r- oo o ^ ^ co co ia

>• CO o o o o H ^ M H (\J LO on o co h co a-

^ ^ o 0 s on \D ca CM ^ so

m on m 0* m o in ^ in oo H N N N r O O v O J f l ^ N O O

r—< co m vO oo co

o h o o ^ ^ o h o ^ ( m en in s o m N H ^ ^ N H i n N o o to in \0 \D ^ vO vjO h m o- *r>

oo oo ^ rH q\ o m vo 0 s m «—i on *44 m in co %o m ^ ?n ^

N ttl o>

5>i

in no r H O v D m o D o o G ^ v O p-h 00 sO ^ iT) OD rn s£5 oo lO h oo

CO ^ ^ \0 oo J> V0 xO CO

o ^ N r n ^ i n o h o o ( > o vO ^0 •>£) sD vO \C n0 <vO vO !>-0s" 0% 0s- O O 0 s 0 s 0 s 0 s 0 s 0 s

d o

a> 03 <3

,n

so & 4-> $

g • r«i 4J S3

W

I >s Q i2 ^

0) Ct >0X)

a

04

-d rt 0$

c-vO cr*

?-i o • r«S

0,

0) Ps

*—» CtJ >

u ($ r~4 o

'V 4-i

O Pu X 0)

d

a

ci

m a -

o

o u 2 ^

-H 0) nS U

P ^ H o

u 0a a> ?-i

o

0)

I

o u

02 nd

U a$ d)

•° 2 a) Q m Cu'd

U +» o

^ u a « t j w

SL ^

JS ^ u ° ^ «5

2 o 05 4-> tQ

<D

? f r j h M U a <D o ^4 t-0 -+-> 4-i ? o H

^ d

w d 0 (3 CO

s a> 4 to N 02

U «#«Hi m 0

CD

s>d d d o

c«

d d

i3

<1>

!5

d 0)

a

01

^ >N <y

U Q O <D a * d d *T3

, a £

o a

e H > .s

S 2 V~«4 4«»

4> fl m

v t3 » 0) Q y 43 3 +»

1 «

S . " • *>

s a rCS <« a «

® -O +» c fl d CD ?h

a * cu ^

• p«4 •«*! d o) ,g

cp -*•*

« 'S 0) ^

d *w«i u d

m 0)

0) H

CQ

<a>

o

N 0) U d

n3 o

Pu ^ *d pu

0 L4 0) M

44 

d o .r-t 4-> rd

• *>4

U o m m <

m 0

m d

d o

4 u ©•

u

r-0N

rM 0 o PQ

o5 Q

4 -0)

?H cti

s

d o m 4 u Q

*•«<

w

Q

Q

W r* ® S u a U bG d d o -pi

w *5 5Q c$

p

i*»0

-The.Ampex-Corpora t ion r e p o r t e d indus t ry s a l e s f o r 1969 to b e

8. 8 m i l l i o n uni ts , which is cons ide rab ly h ighe r than the 6. 9 m i l l i on

uni ts r e p o r t e d by E l ec t ron i c i ndus t r i e s A s s o c i a t i o n as p r e s e n t e d is.

Table IV. Ampex a l so h a s p r o j e c t e d r e t a i l s a l e s of t ape r e c o r d e r s

to exceed one bi l l ion d o l l a r s in 1975. Only o n e - t h i r d of United

States househo lds owned t ape r e c o r d e r s m 1969. Thus , the po-

t en t i a l f o r continued growth is g r e a t when c o m p a r e d to t he m o r e

t h a n n ine ty pe r cent s a t u r a t i o n l eve l s of o the r c o n s u m e r e l e c t r o n i c

p r o d u c t s . ^

Phonograph

Development of the phonograph o c c u r r e d p r i o r to the i n t r o -

duc t ion of e l e c t r o n i c s . The invention is a t t r i bu t ed to Thomas A.

Edison in 1877. The phonograph was one of the e a r l i e s t h o m e en-

t e r t a i n m e n t p roduc t s , and tended to condit ion A m e r i c a n s to e n t e r -

t a i n m e n t in the l iving r o o m . People look to t e l e v i s i o n , r ad io , and

phonograph p roduc t s f o r e n t e r t a i n m e n t . F o r th i s r e a s o n , the

c o n s u m e r e l e c t r o n i c s i ndus t ry is freqxiently r e f e r r e d to a s the h o m e

e n t e r t a i n m e n t p roduc t s i ndus t ry .

L

Ampex Corpora t ion , Consumer Equipment Divis ion, The Sound Idea Manual (Elks Grove Village, HI . , 1970), p . II, A / 1 .

7 "The Publ ic Impact of Science in the Mass Media, " B u s i n e s s

Topics , VI (Fall , 1958), 12.

Total d o m e s t i c s a l e s of phonographs f r o m 1946 to 1970 a r e

shown in Table VI. Unit s a l e s decl ined f r o m 3,. 9- m i l l i o n un i t s in

.1946 to 1. 35 mi l l ion in 1952, Dol lar s a l e s f o r the s a m e y e a r s de -

cl ined f r o m $216 mi l l i on to $51 mi l l i on d o l l a r s . Although s a l e s

have i n c r e a s e d s ince 1952, t h e r e h a s been c o n s i d e r a b l e v a r i a t i o n

f r o m one y e a r to the next f o r r e a s o n s to be expla ined . Unit s a l e s

in 1970 w e r e 5 . 6 mi l l i on . Dollar s a l e s f o r the s a m e y e a r w e r e

$376 mi l l i on .

It was not unt i l the beginning of the e l e c t r o n i c s age in the

1920's tha t the sound box was r e p l a c e d by e l e c t r o n i c a m p l i f i c a t i o n .

With the deve lopment of r ad io , many p e r s o n s p r e d i c t e d the dea th

of the phonograph . Sales did dec l ine and t he phonograph p layed a

s e c o n d a r y r o l e to r ad io dur ing the d e p r e s s i o n y e a r s of the 1930 's

and War y e a r s of the 1940 's . The pent up c o n s u m e r demand and

the cumula t ion of individual sav ings r e su l t ing f r o m World War II

p rov ided the n e c e s s a r y s t i m u l u s f o r i n c r e a s i n g s a l e s fol lowing t he

War f o r a p e r i o d of t h r e e y e a r s .

The in t roduct ion of 45 R P M and 33 1 /3 R P M long-p lay ing pho-

n o g r a p h s y s t e m s o c c u r r e d in 1948 and 1949. The compe t i t i ve

ba t t l e be tween s y s t e m s and the l a ck of i ndus t ry s t a n d a r d s tended

to confuse b u y e r s and cont r ibuted to a d e p r e s s e d m a r k e t , Hi - f ide l i ty

e n t h u s i a s t s ' i n t e r e s t in b e t t e r qual i ty sound s y s t e m s dur ing the e a r l y

28

I—i >

W J FQ <

H

o c-Cf> r-H I

>£> O

0} 5

C Ptf a o z o ffi A fo

O m

W J < t/D

uy

6

a <

H o H

o o o

•"d

C

$ O

H *n

o

N O P-I jH G n

«) rO flj 1 - 3 ,

rt ,1 w> o « H

o

o H

u

o i*

o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o

o V If) N if) H 00 N O O !> (> C> (> h o u{ H O O H N ^ i f i L n c o o ^ ^ i n c o m o o o ^ ^ o

• —* h rg n co co ro f in M CO N H H

N ^ v O N O ^ O i n r O ^ O O O O c n ^ c O ^ ^ N ^ O CO O lO O ^ ^ 'JO O 00 N 00 ifi l> O N CO if} ^ if) CO c> n o o m co vo o r- vo o co m 0s »—i r-i

00 CO <\3 rH » — « < — i H N N r O ^ C O ^ ^ C O ^ i ^ ^ v O

sD r- 00. o o r-H N2 CO I f ) vD r~ CO o ra 00 1*1 m m m m *n m in m m m vO vO vD vD %o

O o <T- o 0x o o o o o o o o o O o O o O o r~H rH H r-H i-H r-H r-H r-H r—1 r-H r*H r*H rH t~4 r**"< r~5 »—i »«4 i*H r-H

2 9

x t

0) r* d

0 O

1

i f-H :>

M J

« H

Ctf +> O

H

d cxS

O

<D

10

s ^

| S» o

I f-i O

01 u

H *.~i o n

$q

<3 i—t rH

a

(3 4^ o

H

o o o o o o o o o o o o

o 0*1 o 00 o cr- r -^4 in CO

no m o o (M O {N3 CNJ sO ^ CO \£>

•V **. »* »* no VO \O m

o o o o o o o o o o o o

00 o fs3

m oo m o r<j l o cm

n o m vo

jm $ 0)

{H

o o o o o o o o o o o o o o o

** «* ** *.» »\

oo o m i—* 04 in 00 vO 00 in i1 ^ ^ co

CO f—f {>" UO f-H O O xO O CO ^ O c>

<* *» ** «v * vo m m ^ co

SO r - O) o o xO vO MO vO f -o a - Gv o

»—•t p-«4 -—1

Q

<8 -2

+ Z

d

&o &

, n

d &jq $

<D <~i «J

d o>

a &:

«r*4

u*

o 0) a .

dJO d

• •>*•»•

Q

0

13 0

0 , 5Q

<D 0

4*s> u «s

tH 3

1

8

13 <D

4->

CQ a>

o m o

f *n

•T3I 6 r* o OS

u

rQ 0 , o -{ 0

d o

t ? o *«

4"> d «,»i

CD rCj 4-* s

rO

Tf 0 4> C§

*3

?•*» &

rQ 4~> J-f 3

0) u

0)

£

a

cO m o

d • w4

r&

S

00 m o r-l

d • w

05

S <D

bO 3 o

rC{

cd

€<J

0)

a o 02

0) a

•t**i

o

o

a 0)

rCj 4<»

d as

vD sO O

« r«

a> q«

o 4«>

13

13 d a> 4^

<D H

03

ri r—| r-4 0

(»

-d

a>

0) £

CQ «> »~4

m

u

0$ rH H D

Tl bjo S

a f»«i u 0

13

0

02 d o CQ d

a> u

m

m

Q

fti

a? CO $ <D

Q tf

13 0)

.3 m o u

0) >

CO 0)

r.{ 0$ (0

02 r-4

u &

<

d o

Wtsw4 02 t> ©

a

o a

13 d $

t? © 4»* U* S oa

O

C$

rQ,

>, a$ j*~? a -

0) 13

U

o u o

05 U

<D 13 JL| o o

0) k

o 4* 0

4 }

CO 4^ <p ri4

u

v$

• • 30

s h i f t f r o m co-Moles to p o r t a b l e , m o d u l a r { and c6tS.j3a.et m u J i c §y®»

t e m s a l so occur red* Unit s a l e s have coutiiitied to i i i c f e a s e beCEtiga

of the lower cos t of impor ted phor.Ograph§«

x .ad i§

C o m m e r c i a l r ad io s e t rcianvifaeturing had i ts beginning ill f h s

1926'Si The c o n s u m e r e l e c t r o n i c p roduc t s indus t ry t ends to Us§

1920 as i t s b i r t h y e a r r a t h e r than the e a r l i e r b i r t h da te of thg pho*

nographi Approx ima te ly 100 thousand uni ts with a r e t a i l valu£ of

$5 mi l l ion w e r e p roduced in 1922 j Table VII ind ica tes tha t by

1925 p roduc t ion to ta led 2 mi l l i on r ad ios with a r e t a i l va lue of $200

mi l l ion . Data in Table Vill r e v e a l that unit s a l e s iri 1970 to ta led

34 mi l l i on uni t s with a m a n u f a c t u r e r s ' value: Of $380 miliiori, A

d e s c r i p t i o n of t he growth p a t t e r n follows*

Growth of r ad io was continuous th rough the 1930's arid 1940'g,

bu t t ended to be a f fec ted by the in t roduc t ion of t e l e v i s i o n fol lowing

World War i l A leve l ing of r ad io s a l e s o c c u r r e d be tween 1948

and 1958 and many be l ieved rad io to be a dying i n d u s t r y j Be-

ginning in 1958* s e v e r a l f a c t o r s cont r ibuted to a r e s u r g e n c e of

r ad io s a l e s : f i r s t* a s t rong t eenage of yOuth m a r k e t with afi. ifl*

t e r e s t iri r a d i o developed; second, b r o a d c a s t i n g s t a t ions changed

t h e i r p r o g r a m f o r m a t to m a t c h the wan t s of th is younger tiia.rket;

t h i r d , the t r a n s i s t o r was developed and appl ied to r ad io cons t ruc t ion ;

T A B L E VII

U, S,.. RADIO SET SALES 1922-1949

31

Y e a r

Tota l Rad io Se t s Manufa c t u r ed

Y e a r Numb e r R e t a i l Value

1922 100 ,000 $ 5 , 0 0 0 , 0 0 0 1923 5 5 0 , 0 0 0 30, 000, 000 1924 1, 500, 000 1 0 0 , 0 0 0 , 0 0 0 1925 2 , 0 0 0 , 0 0 0 165 0 0 0 , 0 0 0 1926 1 , 7 5 0 , 0 0 0 2 0 0 , 0 0 0 , 0 0 0 1927 1 , 3 5 0 , 0 0 0 168, 000, 000 1928 . 3 , 2 8 1 , 0 0 0 4 0 0 , 0 0 0 , 0 0 0 1929 4, 428, 000 6 0 0 , 0 0 0 , 0 0 0 1930 3 , 8 2 7 , 0 0 0 300 0 0 0 , 0 0 0 1931 3 ,420 , 000 225, 000, 000 1932 3 , 0 0 0 , 0 0 0 140, 000, 000 1933 3 , 8 0 6 , 0 0 0 180, 500, 000 1934 4, 084, 000 214, 500, 000 1935 6 , 0 2 6 , 8 0 0 3 3 0 , 1 9 2 , 4 8 0 1936 8, 248, 000 450, 000, 000 1937 8, 064, 780 4 5 0 , 0 0 0 , 0 0 0 1938 6,.000, 000 210, 000, 000 1939 10, 500 ; 000 354, 000, 000 1940 1 1 , 8 0 0 , 0 0 0 4 5 0 , 0 0 0 , 0 0 0 1941 1 3 , 0 0 0 , 0 0 0 4 6 0 , 0 0 0 , 0 0 0 1942 4, 400, 000 154, 000, 000 1943 1944

* « * * • • •

1945 5 0 0 , 0 0 0 2 0 , 0 0 0 , 0 0 0 1946 1 4 , 0 0 0 , 0 0 0 7 0 0 , 0 0 0 , 0 0 0 1947 17, 000, 000 8 0 0 , 0 0 0 , 0 0 0 1948 1 4 , 0 0 0 , 0 0 0 6 0 0 , 0 0 0 , 0 0 0 1949 1 0 , 0 0 0 , 0 0 0 500, 000, 000

S o u r c e : B r o a d c a s t i n g 1971 Yea rbook , Compi led by-M a r k e t i n g World , Ltd. , New York .

3 2

>

J

PQ <

H

o r -o r-H

I o m o

CO

0 HH

Q <

C*J

p q

0

1 0

W

J <

1 0

CO

J < H

O

H

o o o

XS <

c3

0

H

0) & co <§

4-» H-l f-J o a a . &*> f* .r~! a a>

o |£|

(D

r Q

M

ts a)

a o

Q

o o o o o o 0 o o

I > CO s O vO NS ^ 001 CO t o

o d i n n r o 0 s r - ^ n I s * ^ h ( s i o o o>- o <-* ^ c o c o r~4 cm id i f ) r - c o l o o o o i n c o <*> M CM fN3 h CO O I s - l > O x D r - v O UO v O f -

h V " s o h o o cr^ o i n c o r o ^ m r o h ^ H H H ( % 3 N ( \ J f \ J f O C O

o o o

00 00

o o o o o o

o m

u C$ nj

! *

<M m CM m i n O O O O u n 0 0 O CO CM H M i n f O O I > M H nO h - \ D N

r-H o m oo m o 0 s »-h r*-

H N UT) h * N (S3 m N h -H r~*i r—f r H r H

h * H r - r—4 0 0 CO

o 0 4

o o o o o o o o o o o o o o o o o o o o o o o o o o o

O <M O O C"*- <7X f s j r-H m 0s (?• o o r - h- h ro r—I r—t «—H I-H ( M f—< r—i ( M ( M

n,0 O O 0 0 ^ »--< ( M S> CO O v O <M 0 0 r - i ^ n i n s o c o , m i n n ^ h o h o o r o h v o N ^ N N O H f O C ^ N C M n i n O O ^ O O O O ^

o r - !>- s o r ~ o o c o c o c r - ~ i h c > c c o ^

O h n o") ^ t n s O h o o o O h r g r-o ^ u i s p m m m m i n m i n i f ) m m v O s O ^ v D ^ v D s o o ^ o o o N c r ^ a ^ o ^ o o ^ o o o o o o o o

33

T3 Q) 3

d o

U

> w

J ffl

H

03

o H

0) rQ

m 4 t-J

u O fS a &B

S *3

o

0)

u

i. *-4 4-> CO CP o

Q

o o o

CO ~~t CO l > CO CO

o o o o o o

*\3 O fsj 00

CO

^ ca oo c-a O 0 )

r-H ^ CO 0 0

r—4 •<# o

CO CO

o o o o o o

nT O CO 00 r-H

o o o o o o

\C vO i n l o csj N*

nO CNI i—4 sO r"~4 v,,£i

CsT H

O SO CM Cs3

o o o o o o

o o CM f~4

O O o o o o

vD ^ vO OO!

u & Q >*

oo o vD nO un vo •*

fsj *—«

o CO o

o r - "

r - 00 ON O sO N0 MD J> 0 0 ' O O f»-4 rHI 5f—4 ^-t

Q

4-*

o g -

,. £ « £ — u

• s . w 0

» . 3

• £ 2 as •-<

e> "0 a ^ g

-Q M y j "0 ® . 

O - 4

05 O

s * 3 ^ • s * *> 2 ^ o &* M +* W " P >N (S 'O In

» s §

O ffi

. £ o <+-i

0) 0" m h£ O 0) v3 *•* &G U Q U <D d rt > 2 ^ at g o

d 0

o O £ h0

rrf -H ! § 0 0)

a> -

<z? &

s §

•g a

£ ^ k 0 ^ (S

k % 4)

-• e j >

I ) ^ " t J fc -a

I -®" a

0)

Q r-4 on ©

u

o

.Q m m

i « fi 4 m a) u ^ ^

.a ® i

* 1

:§ 10

O

CD ?-i

3 2 p

rO . 4 «U OS

g w

aS

o D 5

4) -O U 4^ 0) 0) 0 4 - 5 + ^

* o o Pu CU s g

•H .w O o m m <

to «>

• r-»

02

5

[ u

& « o o ?HI p «

a* eft

4^ © Q 5 o

"O

o 6

0 d

(12 R 0) ?«<

a u 0$

1 cl

S

a * ***4 0> u o

H-4 «,H o i>* u

4)

J3 wlS

ca " §

ca

m c$

o v *

St cS

o X u

6

3 4

Table VIII ind ica tes tlie i f cpor t ance of i m p o r t r ad io s a l e s .

Cu r r en t l y , i m p o r t r a d i o s cons t i tu te about 91. 5 p e r cent of t h e to t a l

d o m e s t i c m a r k e t , but nea r ly 20 p e r cent of the impor t ed r a d i o s a r e

sold u n d e r a d o m e s t i c m a n u f a c t u r e r ' s b r a n d .

The Radio Adver t i s ing Bureau e s t ima ted tha t 62 mi l l i on

United Sta tes h o m e s , o r m o r e than 98 per cent , w e r e r a d i o equipped

8

in 1970. In addition,, p o r t a b l e r ad ios , au tomobi l e r a d i o s , and

mu l t i p l e s e t ownersh ip expanded the m a r k e t f u r t h e r . Domes t i c

s a l e s of r a d i o s be tween 1965 and 1970 exceeded the popula t ion of [ i

the United S ta tes . ; I

Te lev is ion ? }

"Apr i l 30, 1939 m a r k e d the r e a l beginning of m o d e r n t e l e v i s i o n ;

when P r e s i d e n t Rooseve l t f o r m a l l y opened the New York W o r l d ' s j

F a i r . Only a few hund red r e c e i v e r s , m o s t of t h e m h o m e m a d e , j 9 F-w e r e in e x i s t e n c e to tune in to th i s c e r e m o n y . " 5

Although l i t t l e growth in t e l ev i s i on s a l e s o c c u r r e d unt i l a f t e r

1946, p r inc ipa l l y b e c a u s e of the War and g o v e r n m e n t p roh ib i t ion

on new cons t ruc t i on of f a c i l i t i e s , the g rowth r a t e of few i n d u s t r i e s

I

: "~™~ ! ' " ! ~~ ' ! ' ~ ' ~ ~ | .

^Broadcas t i ng , 1971 Yearbook (Washington, 1971), p . 64. .

^Albe r t W. F r e y , Adver t i s ing (New York, 1961), p . 251.

can c o m p a r e to that of the t e l e v i s i o n indus t ry . F a c t o r y s a l e s ,

shown in Table IX, moved f r o m an e s t i m a t e d 6, 000 uni t s va lued a t

one mi l l i on d o l l a r s in 1946 to ove r seven mi l l i on uni t s valued a t

o v e r one b i l l ion d o l l a r s in 1950, Af t e r t h i s r ap id s a l e s i n c r e a s e ,

t e l e v i s i o n s e t s a l e s suddenly s tab i l i zed and it was not unt i l 1965

tha t do l l a r s a l e s exceeded t h o s e of 1950. Total t e l e v i s i o n s a l e s in

1970, including i m p o r t s , w e r e 12.2 mi l l ion un i t s wi th a va lue of

$2,. 2 b i l l ion .

The GTE Sylvania Marke t ing R e s e a r c h D e p a r t m e n t r e p o r t s

t ha t f r o m 1946 th rough 1970, a to ta l of 174, 775, 000 t e l ev i s i on s e t s

have been sold in the United S ta tes . The to t a l n u m b e r of s e t s in

u s e in 1970 was 62, 850, 000, o r about f ive t i m e s annual sa l e s - The

n u m b e r of s e t s s c r a p p e d each y e a r when c o m p a r e d to new se t s sold

t he s a m e y e a r has been i n c r e a s i n g . During 1968, 1969, and 1970

the s c r a p p a g e r a t e has been a p p r o x i m a t e l y s i x t y - f i v e to s ix ty -

s e v e n p e r cent of annual p roduc t ion . Thus, the r e p l a c e m e n t m a r -

ke t is v i ta l to the i n d u s t r y .

In 1969, 58. 3 mi l l i on (ninety-f ive p e r cen t ) of the 61. 3 m i l l i on

d o m e s t i c households had t e l ev i s ion s e t s . Th i r ty p e r cent of United

States f a m i l i e s had m o r e than one se t , and the to t a l n u m b e r of s e t s

10 Te lev is ion Factbook, 1971-72 (Washington, 1971), p . 75 -a .

3 6

X 1-4

W

- 3

<

H

o r -o

I

-~o

o

w o

P i W . o

f H hh «~j

W * 3

Q ^

CO u oS

r H

Cl ftf

to 2 o

w

o HH

5 9

> H

h-1

w

EH

h

O

to

s « 1-1 ••* <5 CO

£

• 5 c # P

J

< !

H

O

H

$« i ° * r~H

o o d Q <2

s • »

r H © <5

4J- M 0 o

f H M

0) & nS

J S3

.Sf* *3 k o

h

aS 0>

>4

o U*>

sO rb f > cm t - o ^ r a m c o o o

O (M r -r~"i CV

OD O CO O r - oo v o c a o o oo r ~

c o r ~ xp 0s- r-H 0 0 h GO

vO O r -

o r-

o r~

O 0 s '

i n m oo

<M O

o o I s * r—f CO ^

C30 m ! >

H OO IT) I >

r~» 00 CO -vO

• o m 04

C<5 0 0 CO

i f ) vO vO r - c^- v o m vO t o ND

oa c o

h ^ co co co m

i n o o u ^ a o o * > c a o c o c o o <n3 ^

O v D i n CM

r a

^ r - ^ ^ o o oo C*- 0 ^ ^ V0 f > n$* vO in oo o o *-< o o

H n£> vO o F~ co r o oo o m m o o o s o c o r - t * -

sO o i >

o s>

o r -

ON O

OsJ

m m c 0

r# <T-

o m r - o oo

GO oo £s*"

r*~i 00 ***"$ m oo m 00 00 o

CQ i-H CO

m *-0 s o i > t*~ i > x o m * n v D

o o I s -c a

r -o

U0 m

nO l > 00 O n o ^ ^ ^ m m

O x 0 s CT"- 0 s

tss oo r h m u i m m m ^ 0 s CJn

s o r - o o m i n m o o

o *-» if't ^-D vD

CT-

37

©

d . ,-4

"8 O

u

w *3 ffl

<1 H

u

i O

§ O § o

s ^

"5 Oi Q H

jf a

B £

u

& J 1

d too

.!-' 0)

o tn

&>

JM o a -

0) rQ

3

C» O

O Q

ns 0)

Sx

m o a - o : m (M o O aD v£> —1 r-s. CO O o o CO CO un Lfi

*>, *% M. «v r> •* r—i rt i-< (H—4 rsJ fS5 C4 fQ

rt* r - r-{ •00 O €*} OD xp sD H O r—j 0S. rf r - to (M CO CO

#% «, #* «v <*. #v r - l> 0S r—i rsi' r-4 on t o Cs3 r—# f«"1 r—< r~4 j—4

o o co r -

cO

Cm

r -Tt*

O CO 00 O O uO H H H (sj ff) 1^

CO m

fsj 0^

m

d o

ttfi £

43 (fi

£

(3

u O CQ m

<

w 0)

sS* xO o

00 r - C\3 CO f-^ 00 •vC xD CO CO r-H —H r*H C4 CJ H <M CO 00 in r - tN3 S> <~H

r>l

00 00 o 'n ^«. H fv3 m uo 00 ur» NO »—i sD O rH r# CO o O O m

CI *4 •s. •V

r-i ra N3 f—f -4

00 Is- OsJ CO ra CO TP o o 1—-j xO r - CO

J> M1 xD o in o t - r -•» * •V tv »s », *

H S\J m in m m

oo 00 a r - o CO o ca CM r - f—( o co %e H

00 CO 00 00 i - in in

00 O 00 C^ O o ul H (VJ o 00 0 s

i f ) O O —* (S3

\ 0 oo oo i> irT

00 r«-4 r - o o ••

r - !>«*! r - Q O

m tr» u

ra CO i n vD c— 00 o ^ o vD NO sO \D vO xO xC; i -O 0 s o o 0 s o o H t—i r ( r-H r~~4 I—< r-4 '-H 1—4

3

u

4-J <» ca ©

rH! 0a

.^i 4-» r-H 2 s

W 4^ Q CO

U 0

H o u

TJ

43

•XJ H o

43 *

$ 1

a> d

O

d o

s

s* 4-> 43 m

• t-4 a> >*

H

ctf CP d CO

£ Q m 3

GQ 75 H 0

43 Ci?

0 , d 4-4 0) 05 1

d 0

<+4 o d o 4->

M 4 » 0 d 6 a

a> r-w{

o T1

d <$

a 0)

o s 0)

45

H3 0)

nc? d 0) 4->

d o

0) d a> a

o H o a

0) 43 4^

03 4)

2 O

43

CO |

rfl

.,fl| m.i

4*M O «

d o

• fW«J w >

o B

-» !, o

Ni •

a a

o >£> cr*

>iM <D >

m

it d o

. w <4*>

!4 £

*

5 -

h S

•» f-0 • d

y ^

^ h - 5

5 o .2 6 -<-» cS bd

•X3 Pi

§ ' 3

,0 5 u

,£< ^

?H ^ «5 0) m

6 t?

ftO S . 5 s

§

i w

o 43 

Tt

<

• . 'J.J- - Jijj '

^ 38 *

Othe r c o n s u m e r e l e c t ron ic products tend t o l i ave h igh r e p l a c e -

m e n t d e m a n d a l s o . Seduc t ion In the retai l p r i c e s of a l l p r o d u c t s ,

coupled wi th i n c r e a s i n g c o s t s for r e p a i r s e r v i c e , c o n t r i b u t e to t h e

i n c r e a s i n g s c r a p p a g e r a t e . Some p r o d u c t s , s u c h a s p o r t a b l e t e l e -

v i s i o n and r a d i o , a l m o s t a t t a in a d i s p o s a b l e s t a t u s s i n c e it f r e -

quen t ly c o s t s l e s s to p u r c h a s e a new p r o d u c t t h a n to r e p a i r t he old

o n e .

S t r u c t u r e of the I n d u s t r y

D i s t r i b u t i o n S y s t e m

T r a d i t i o n a l l y , t h e c o n s u m e r e l e c t r o n i c s i n d u s t r y h a s t ended

to m a k e u s e of a " t w o - s t e p " d i s t r i b u t i o n a p p r o a c h w h e r e b y s a l e of

t h e p r o d u c t m o v e d f r o m m a n u f a c t u r e r s to w h o l e s a l e r s to r e t a i l e r s

to c o n s u m e r . While m o s t m a j o r d o m e s t i c m a n u f a c t u r e r s con t inue

to m a k e a t l e a s t p a r t i a l u s e of t h i s " t w o - s t e p " d i s t r i b u t i o n a p p r o a c h ,

t h e p a t t e r n s of d i s t r i b u t i o n have changed f r e q u e n t l y s i n c e Wor ld

W a r II. A " o n e - s t e p " a p p r o a c h is u s e d by a n u m b e r of m a n u f a c -

t u r e r s who s e l l d i r e c t l y to t he r e t a i l e r . In t h i s s y s t e m , s a l e s m e n

w o r k i n g d i r e c t l y f o r t he m a n u f a c t u r e r c a l l on r e t a i l e r s . The s a l e s -

m e n m a y w o r k out of b r a n c h o f f i c e s , e i t h e r with, o r wi thou t w a r e -

h o u s e f a c i l i t i e s , o r t h e y m a y w o r k out of a c e n t r a l n a t i o n a l o f f i c e .

X 9

Many smal l domest ic manufac tu re r s make use of independent

m a n u f a c t u r e r s ' r ep re sen t a t i ve s who c a r r y re la ted l ines of goods

and sel l p r i m a r i l y to special ized types of who lesa le r s , l a r g e sca le

r e t a i l e r s , and chain s to re buye r s . The m a j o r i t y of fore ign manu-

f a c t u r e r s se l l through domes t ic m a n u f a c t u r e r s , i m p o r t e r s , and

independent m a n u f a c t u r e r s ' r ep re sen t a t i ve s . A few of the l a r g e r

and m o r e popular fore ign manufac tu re r s make use of national sa l e s

agents , and have recent ly begun to es tabl i sh the i r own national

sel l ing organizat ions . Exclusive and mult iple d is t r ibut ion sys -

t e m s a r e used by both domest ic and fore ign m a n u f a c t u r e r s .

Scrambled merchandis ing has caused many m a n u f a c t u r e r s to

change to a policy of mul t iple dis t r ibut ion. Even though exclusive

d is t r ibut ion is provided to wholesa le r s or r e t a i l e r s , m o s t manu-

f a c t u r e r s tend to have specia l sa les depar tments for the purpose

of sell ing to special ized l a rge sca le buye r s . These buyer s include

p r e m i u m , incentive, and s tamp merchandis ing f i r m s , and hotels ,

mo te l s , leas ing companies , d i r ec t ma i l companies , mobile home

m a n u f a c t u r e r s , and o the r s . Also, a number of domes t ic and

fo re ign manufac t \ i r e r s engage in manufac tur ing pr iva te b rands fo r

other m a n u f a c t u r e r s and l a rge sca le r e t a i l e r s .

Vert ical Cc-nipetiti on

The consumer e l ec t ron i c p r o d u c t s i ndus t ry is h ighly c o m p e t i t i v e .

Competition, ex is t s ho r i zon ta l ly on each l eve l of d i s t r i b u t i o n a m o n g

d i f f e r e n t b rands being sold by n u m e r o u s d i f f e r e n t t y p e s of b u s i n e s s .

Ve r t i c a l compet i t ion a l s o ex i s t s f o r the b u s i n e s s of l a r g e s c a l e

b u y e r s and u s e r s of the p roduc t among r e t a i l e r s , -wholesa le rs ,

m a n u f a c t u r e r s , and t h e i r r e p r e s e n t a t i v e s . An e l e m e n t of v e r t i c a l

conf l i c t ex i s t s among s e l l e r s of the s a m e b r a n d f o r the p r i v i l e g e of

se l l ing to l a r g e s c a l e b u y e r s and spec i a l u s e r s .

The indus t ry ex i s t s unde r the p r e s s u r e and conf l i c t of which

b r a n d and which s e l l e r wi l l m a k e t he s a l e . A. R. Oxenfe ld t ' s in-

v e s t i g a t i o n of the t e l e v i s i o n set i ndus t ry conc luded : ' ' m a n a g e m e n t

th inks , p lans , s c h e m e s , and t a lks about s a l e s . C o n c e r n wi th s a l e s

p e r m e a t e s eve ry d e p a r t m e n t of e v e r y b u s i n e s s in t he i n d u s t r y .

Concen t ra t ion o_f M a n u f a c t u r e r s

The United States output of household r a d i o r e c e i v e r s , t e l ev i s ion s e t s , r a d i o - p h o n o g r a p h s , p h o n o g r a p h s , and r e c o r d p l a y e r s in 1950 w a s over 1, 600 m i l l i o n d o l l a r s , an amount which f a r exceeded the s h i p m e n t s of a l l o t h e r c l a s s e s of r ad io combined . Over 76 p e r cen t of t he t o t a l output came f r o m 21 f i r m s among the 1, 000 l a r g e s t m a n u -f a c t u r i n g compan ie s . The leading f i r m s w e r e A d m i r a l Corpora t ion , Motorola , Inc. , Phi lco C o r p o r a t i o n and Radio Corpora t ion of A m e r i c a . . . . T h e s e f o u r f i r m s

A l f r e d R, Oxenfeldt , Marke t ing P r a c t i c e s in t he TV Set Indus t ry (New York, 1964), p . 255.

nl2

suppl ied 44 p e r cent of the United Scales output, and the

f i r s t e ight compan ie s supplied over 59 p e r cent , *-5

Concen t ra t ion of s a l e s among d o m e s t i c m a n u f a c t u r e r s h a s in-

c r e a s e d s i nce 1950 and is g r e a t e r in the m o r e spec i a l i z ed h igh

vo lume p r o d u c t a r e a s of t e l ev i s ion , radio , phonograph , and r e -

c o r d e r s . During 1967 the fou r l a r g e s t d o m e s t i c m a n u f a c t u r e r s

p r o d u c e d s i x t y - f o u r p e r cent of the value of t e l e v i s i o n s e t s sh ipped ,

f o r t y - e i g h t p e r cent of household and au tomobi le r a d i o s , and

twen ty -e igh t p e r cent of r e c o r d e r s and phonographs . The e ight

l a r g e s t d o m e s t i c r n a n u f a c t u r e r s p roduced e i g h t y - s i x p e r cent of

the va lue of t e l ev i s ion s e t s , seven ty - two p e r cent of r a d i o s , and

f o r t y - t w o p e r cent of r e c o r d e r s and phonographs . The twenty

l a r g e s t compan ie s p roduced n ine ty -n ine p e r cent of the va lue of

t e l e v i s i o n se t s shipped, n ine ty - f ive per cent of r a d i o s , and seven ty -

f ive p e r cent of r e c o r d e r s and phonographs , ^ The twenty f i r m s

who p r o d u c e v i r t ua l l y t he e n t i r e output of the i ndus t ry p o s s e s s a

m a j o r e l e m e n t of p o w e r .

S. F e d e r a l T r a d e Commiss ion , Repor t of the F e d e r a l T r a d e C o m m i s s i o n on Indus t r i a l Concent ra t ion and P r o d u c t Di-v e r s i f i c a t i o n in the 1000 L a r g e s t Manufac tur ing Compan ie s : 1950 (Washington, 1950), p . 104.

S. Bureau of the Census , Census of M a n u f a c t u r e r s , 1967, Special Repor t S e r i e s : Concen t ra t ion Rat ios in Manufac tur ing , P a r t 2 (Washington, 1971), pp. SR2-81.

Impor t S t r u c t u r e

F o r e i g n m a d e e l e c t r o n i c p r o d u c t s - - p r i m a r i l y J a p a n e s e p r o d u c t s -

r e a c h the United States m a r k e t g e n e r a l l y t h r o u g h the m a n u f a c t u r e r ' s

own m a r k e t i n g o rgan iza t ions and through United States m a n u f a c -

t u r e r s , r e t a i l e r s and spec i a l i zed i m p o r t e r s .

U. S. m a n u f a c t u r e r s , such a s Genera l E l e c t r i c and RCA, accoun t f o r an e s t i m a t e d 15% of i m p o r t s a l e s . T h e s e f i r m s have e i the r opened t h e i r own f a c t o r i e s a b r o a d or they have con t r ac t ed work to loca l m a n u f a c t u r e r s , which is sold do-m e s t i c a l l y under t h e i r well known b rand l a b e l s . The i r i m p o r t s a l e s have been growing but a t the expense of t h e i r own do-m e s t i c product ion , and t he i r a c tua l s h a r e of m a r k e t h a s b e e n dec l in ing . . . . Such c o m p a n i e s as Sony, Panason ic , Hi tachi , and Toshiba , typify the J a p a n e s e r n a m i f a c t u r e r s who a l s o m a r k e t t h e i r own p roduc t s in t he United S ta tes . T h e s e c o m -p a n i e s have an e s t i m a t e d 15-20% of the i m p o r t e d m a r k e t . . . A number of compan ie s , such a s Sea r s , Korve t te , and Mont-g o m e r y Ward, have t h e i r own impor t o rgan i za t i ons to s e r v i c e t h e i r own r e t a i l ou t l e t s . We be l ieve t h e s e compan ie s have an e s t i m a t e d 15-20% of the i m p o r t m a r k e t . . . The i m p o r t e r is u sua l ly a s m a l l company (under $75 mi l l i on in s a l e s ) whose p r o d u c t s have r e l a t i v e l y l i t t l e b rand i m a g e . Yet t h e s e c o m -p a n i e s p robab ly account f o r a s much a s 50% of the i m p o r t m a r -ke t .

I m p o r t e r s des ign t he p roduc t l ine , c o n t r a c t f o r m a n u f a c t u r i n g ,

i m p o r t , w a r e h o u s e , and se l l to r e t a i l ou t l e t s . Many se l l to s p e c i a l t y

w h o l e s a l e r s while o t h e r s engage in m a i l o r d e r ca ta log b u s i n e s s

d i r e c t to t he c o n s u m e r . Lead t i m e of s ix to n ine mon ths is r e -

q u i r e d , which m a k e s f o r e c a s t i n g d i f f icul t and the r i s k s h igh .

1 Gintel and Company, " Inves tment R e s e a r c h , Bas ic R e p o r t :

Soundesign Corpora t ion , " unpubl ished p a p e r , Oc tober , 1970, pp . 3 - 4 ,

Wholesalers

T ^ e s . - -The distribution s t ructure of the consumer electronics

products industry includes most wholesale middlemen classif ications

saeh as merchant wholesalers, manufac turers ' sa les branches and

oiiices, merchandise agents and brokers , and impor te r s . Mer-

chandise in route f r om the manufacturer to the ult imate consumer

may move through one or several of the aforementioned wholesale

middlemen.

Number and sa les . - - The exact number of wholesalers of con -

sumer electronic products or their sales in the United Sta.tes is not

known. Merchandising Week, in its "F i r s t Annual Distributor Di-

r ec to ry" listed 1, 631 and estimated there were over 2, 000 whole-

sa l e r s in 1970. 1 6 The 1967 Census of Business shows 16,730

establishments (not companies) with sales of $34 billion for Standard

Industrial Classification (SIC) number 506 e lect r ica l goods. This

code number includes three major segments: SIC 5063 electr ical

apparatus, equipment, and supplies with 7, 742 establishments and

$17 billion sales; SIC 5064 electr ical appliances, TV and radio sets

with 2, 935 establishments and $8. 1 billion sa les ; and SIC 5065

1 & "Fi rs t Annual Distributor Directory, » Merchandising Week.

CII (September 14, 1970), Sec. II, 6-66. ~ '

e lec t ron ic pa r t s and equipment with. 6, 05 3 es tab l i shments and $6,2

17

bil l ion s a l e s . It is unfor tunate that the Census of Business does

not publish data specif ical ly per ta in ing to the consumer e lec t ronic

p roduc t s industry. Such data a r e included with that of o ther in-

d u s t r i e s .

Re ta i le rs

Potential number , - -Consumer e lec t ronic products have m a s s

appeal . As a resu l t , the number and kinds of r e t a i l outlets a r e

v i r tual ly unlimited. An example of the vast number of potential

r e ta i l outlets fo r consumer e lec t ronic produc ts as tabulated f r o m

sa les r e c o r d s of a manufac tu r e r s 1 r e p r e s e n t a t i v e ' s cu s tomer s is

shown in Table X. While this l ist ing includes eighteen d i f fe ren t

kinds of r e t a i l e r s with 427, 558 potential out lets , it could be ex-

panded f u r t h e r by such s to re s as fu rn i tu re , jewelry , and o the r s .

Since many manufac tu re r s produce both appl iances and e lec -

t ron ic products , and a l a r g e percentage of wholesale and r e t a i l

midd lemen engage in sel l ing appliances and e lec t ronic products ,

much of the available data r e f l ec t both product ca t egor i e s . This

m a k e s it diff icult to analyze each product by i t se l f . The Census of

17 U. S. Department of Commerce , Wholesale Trade - Subj ect

Repor ts , Vol. Ill of 1967 Census of Bnsmess , 5 vols . (Washington, 1971), pp. 1-6, 1-66, 1-67.

45

T A B L E X

R E T A I L E R S AND PUBLIC L E V E L PURVEYORS IN SOME PHASE O F APPLIANCE-- RADIO- TV MERCHANDISING

Type Outlet Number Out le ts

D e p a r t m e n t S tores 14, 500 Discount Houses 4, 727 R a d i o - T V D e a l e r s 47, 396

Spor t s Goods S tores 12, 413

S ta t ione r s 15, 540

Audio- Visual Suppl iers 715

P r e m i u m Cata logue Houses 14, 826

Chains 1, 312

Drug S to re s 5 4 , 6 2 7

H i - F i Component D e a l e r s 1 ,919

Hard-ware S tores 30, 260

Music M e r c h a n t s 7, 727

Off ice Supply D e a l e r s 7, 678

S u p e r m a r k e t Chains 13 ,821

Toy R e t a i l e r s 5, 484

Var i e ty S to res 32, 613 Se rv i ce Repa i r Shops 120 ,000

Sound Salon In t e r io r D e c o r a t o r Shop s 4 2 , 0 0 0

Total 427, 558

Sou rce : "Who Sells "What, " NSDA J o u r n a l , E l e c t r o n i c I n f o r m a t i o n Bureau , October 1970, p. 4 .

B u s i n e s s Reta i l T rade c o m b i n e s app l i ance and e l e c t r o n i c p r o d u c t s

da ta and is p r e s e n t e d in Table XI.

This t a b l e ind ica tes tha t r e t a i l s a l e s of m a j o r app l i ances , r ad io ,

TV, and m u s i c a l i n s t r u m e n t s w e r e $10 b i l l ion in 1967. The t ab l e

46

T A B L E XI

MAJOR APPLIANCE, RADIO, TV. MUSICAL INSTRUMENTS SALES BY KIND OF BUSINESS HANDLING THE PRODUCTS

1967* E

% of Tota l Sa les E s t a b - 1967 Accounted f o r by

l i s h m e n t Sales the Speci f ied Kind of B u s i n e s s Number (1, 000) Kind of B u s i n e s s

Building m a t e r i a l s , h a r d w a r e , and f a r m equ ipmen t d e a l e r s 86, 373 219, 573 2. 2

G e n e r a l m e r c h a n d i s e g roup s t o r e s 67, 307 3, 113 ,894 30. 9

D e p a r t m e n t s t o r e s 2, 625, 738 26. 0

Automot ive d e a l e r s 105, 500 4 5 6 , 2 3 1 4. 5 Home, auto, and TBA d e a l e r s 446 ,770 4. 4

F u r n i t u r e , home f u r -n i sh ings , and equip-m e n t s t o r e s 98, 826 5, 442 ,487 53. 9

F u r n i t u r e s t o r e s 33 ,274 6 8 4 , 8 6 8 6, 8 Household app l i ance 26 ,806 2, 229, 418 22. 1 Radio and TV 22 ,813 1 ,655, 298 1 6 . 4 Mus i ca l i n s t r u m e n t and r e c o r d shops 22, 813 862 ,310 8. 6

Drug s t o r e s , p r o -p r i e t a r y s t o r e s 53 ,722 99, 885 1. 0

Drug s t o r e s 96, 195 1 .0

M i s c e l l a n e o u s r e t a i l 288, 772 221, 041 2 . 2

N o n s t o r e r e t a i l e r s 98, 468 499, 989 5. 0 Mail o r d e r h o u s e s 3 7 3 , 2 0 8 3. 7 D i r e c t se l l ing e s -t a b l i s h m e n t s 126 ,208 1. 3

A l l o t h e r r e t a i l e r s 4 0 , 1 4 7 . 3 Tota l 798 ,698 10 ,093 ,247 100 .0

.. 1 ^ R e p r e s e n t s to ta l e s t a b l i s h m e n t s in group , not

r e p o r t i n g .

Source : U. S. B u r e a u of Census , _1j96>J7_ Census Re ta i l T r a d e - S u b j e c t R e p o r t s , Vol. 1.

j u s t t h o s e

of B u s i n e s s ,

also indicates the major kinds of business which sell these products

necessary to provide anv benefits. Such analysis would not provide

total accuracy however, as many kinds of business would not be

represented and the product lines would not be reported if only

sold as secondary lines.

An indication of market potential can be detected in Table XI

by the total number of establishments in the major kinds of busi-

nesses handling the products,. These major groups represent

798, 968 establishments or over forty-seven per cent of all retail

establishments in the United States. Nearly one-half of all the

retail establishments in the United States are potential outlets for

either major appliances, radio, TV, or musical instruments.

Thus competition at the retail level is great even in terms of con-

servative estimates. Manufacturers and wholesalers are eager

to reach these potential outlets and therefore frequently design

their strategies with the objective being to sell to as many outlets

as possible.

Sales by type of outlet. - -Sales of home entertainment products

through selected types of outlets are reported in the Census of

Business after being compiled by the U. S. Census Bureau. Not

all types of outlets are included, nor does each type of outlet have

an exact breakdown of its sales by product when it carries multiple

,"v« 4j •

l i n e s of goods . In addi t ion, only out le ts with p a y r o l l s a r e included,

and th i s e l i m i n a t e s many s m a l l s c a l e r e t a i l e r s . T h e r e f o r e , t o t a l

r e t a i l s a l e s would be l e s s than ac tua l . But t h e s e da ta do p r o v i d e

s o m e indicat ion of s a l e s ac t iv i ty a t the r e t a i l l eve l and the r e l a t i v e

s h a r e of m a r k e t by type of out le t .

Table XII ind ica tes that t o t a l do l la r s a l e s of h o m e e n t e r t a i n m e n t

l i n e s in 1967 w e r e $2, 9 bi l l ion, up 76 p e r cen t ove r the 1963 s a l e s

of $1.6 bi l l ion. Of th i s to ta l , the se l ec ted ou t le t s of r a d i o - T V

s t o r e s accounted fo r 44. 5 p e r cent of 1967 s a l e s , d e p a r t m e n t

s t o r e s and m a s s m e r c h a n d i s e r s 38. 6 pe r cent , and app l i ance

s t o r e s 14 .7 p e r cent of to ta l s a l e s . The r a d i o - T V s t o r e s i n c r e a s e d

t h e i r s h a r e of m a r k e t by 4. 5 p e r cent while d e p a r t m e n t s t o r e s in-

c r e a s e d t h e i r s h a r e by 3 . 4 p e r cent , Appl iance s t o r e s ' s h a r e of

m a r k e t dropped by 7. 2 p e r cent to 14. 7 p e r cent of the to ta l m a r -

ke t . .Record shops and m u s i c s t o r e s accounted f o r a combined 2. 2

p e r cent of the to ta l m a r k e t in 1967.

R e t a i l e r concen t r a t ion . ---Industry c o n c e n t r a t i o n among r e -

t a i l e r s wi thin the rad io , t e l ev i s ion , and m u s i c s t o r e g roup is

c e n t e r e d around the growth of chain s t o r e s . In 1967, 4. 4 p e r cent

of the chain s t o r e o rgan i za t i ons r e p r e s e n t e d 12 p e r cent of the t o t a l

ou t l e t s arid 27 .7 p e r cent of t o t a l s a l e s , whi le in 1963, 37 p e r cent

49

X

W

CO « ;

H

& J

H

a W

S

< -H r -p j &

W £

h

c~t H g

H 13 o

CO • o a -

m r*H i~H o

Cj

6

o E

O

? O

o

w y W Mh ^ £

< H

W ^

Q «

W H

Ph O P i w

>» r-i £ -o

CQ 0) rd 0

<-h u

*00 m

d ^

4d O ° ^ O

r- j CO i 2 VO O 0 s

H "*

o t -

vO

# 2«

o «—4 4-*

5

«5 4-> 0)

OS

Q> cu

vO

nD t*~

o

o o

o o

00 •

tM

o

ea

m -

m u 0)

u

o u 0) 14

>

H

co i n Q% ^ i n

s4D c S co un o O'V Q \ —| 00 CO 4- -4~ i " 4* - r

o ^ cr^ i n c\i

© if? - o rvj ^ CO N

If* vD '<S) t > * * • » «

^ oo ^ o h m H

i n O o C<5 o « * # * • *

m r CM CO » • * • •

O O O IT) 00 «-H <\3 c-1 ^ tO i ^

>M| rr«4

&

03

<D

04

£0

o ^ £ o

C6 4) ffi *4

m O a<

0) *—{

4-> 2 o

x> 0) -P u a>

03 0) 54 O

. . Chi &0 ,

. 9 O

rt 0)

0 3

p u f t 0) 0)

CO 34

& s ^ J4 . 2 <6 *-4 O cu a< o m a u

<D

**H o

c$ 0 14 0

P3

CO

u £*l

c CO

o • r*

S «-4 <D

a5 »s u

iO v C | Pu o 0 - C«5

m a

4^ o «

o u

a

u o

• r-i cd d r -« o

0 &r

01 o> r -

sO

2 .2 ^ f-t ' j j rt\ r*4 •!* ri Q W

o na

a o

0)

' 2 M T3 +J - 5 ^

P 3 S «n ^ r £ O 00 * h

H T>

U vO - te -

rn ^ °

I ^ 5 "S «

o o bC S .mJ T

o CG ^

0 o

r r •4 P* d +» 0) U ^ n «> U 0 « CU w 0 u) ^ m

S - § . s

?4 4^ 3> 54

CJ CO ^

o . . *H

j 2 T3

"d

O 2

Q 4J> u

o> o

Q

a* m

fc s M d CO a> ^ ^

" i o

CU ' r ^ d h ( j ••*<

50

of the i i r m s controlled only 7, 4 per cent of the «watlets and 15. 5 per

cent of total sa les 'or the group.

Compet i t ion

Ma nuf a ctur er s

Manufacturers compete in technological deve lopments , product

s ty le , quality, features , pricing, production s y s t e m s , distribution,

advert is ing and promotional offerings , warranty and s e r v i c e , and

other act iv i t ies . Each year manufacturers speafcd mi l l ions of dol lars

in each of the foregoing competit ive act iv i t ies t o mainta in or im-

prove their market position. Strategies among manufacturers differ

s ignif icantly as to the approach taken in a given, compet i t ive situation.

These s trategies are being increasingly inf luenced by fore ign com-

petition,.

Competitive Problems of Wholesa lers

Independent merchant who le sa l er s . - - At t h e -wholesale l eve l of

distribution, the dominant force continues to b e the independently

owned merchant wholesa lers representing a m a j o r domest ic brand.

The independent wholesa lers , however, tend ts> fee in a squeeze

1B A. C. Schipper, "Department Stores, Specialty Units Get

Larger Slice of Pie, 11 Home Furnishings Daily,, XL III (June 23, 1971), 18.

between a few l a r g e m a n u f a c t u r e r s arid an i nc r ea s ing n u m b e r of

giant r e ta i l ing chains p lus a growing number of i m p o r t s . In ad -

dit ion, the independent w h o l e s a l e r s a r s los ing s a l e s to d i r e c t spec ia l

m a r k e t p u r c h a s e r s , such a s p r e m i u m companies and o t h e r s .

P robab ly the independent wholesaler ' s . g r e a t e s t f e a r is the

poss ib i l i t y of being rep laced by a f ac to ry b r a n c h . As the inde-

pendent l o s e s control of c e r t a i n segments of his m a r k e t b e c a u s e

of d i r e c t se l l ing by m a n u f a c t u r e r s , his ba rga in ing pos i t ion weakens .

The who le sa l e r today can be commanding a l a r g e share .of the m a r -

ke t over which he has control , but h is p e r f o r m a n c e m a y be diluted

by m a n u f a c t u r e r s a l e s to spec ia l u s e r g roups in the w h o l e s a l e r ' s

m a r k e t . Manufac tu r e r s s o m e t i m e bel ieve they can do a b e t t e r job

than independent w h o l e s a l e r s and t h e r e f o r e wil l d i s t r i bu t e th rough

m a n u f a c t u r e r s a l e s b r a n c h opera t ions . Bus iness Week, in I960,

de tec ted a t r e n d toward b r a n c h d i s t r ibu t ion and commen ted :

With, s l im p ro f i t s and l ack of capi ta l squeez ing the d i s -t r i b u t o r , the m a n u f a c t u r e r inc reas ing ly has to r e l y cn h i s own f o r c e s . As a p r o d u c e r , he has two p r i m a r y c o n c e r n s : to keep the plant rol l ing, and to hang on to h i s s h a r e of the m a r k e t . P ro f i t a t the d i s t r ibu t ion level b e c o m e s seconda ry . ^

Declining p r o f i t s , i nc reas ing competi t ion, i n c r e a s i n g p r e s s u r e s

f r o m the m a n u f a c t u r e r s , high investment , and r e t i r e m e n t age of

1 9 " B r a n c h Dis t r ibut ion Trend Gains, " Bus ines s Week (Sep-t e r abe r 10, I960), 67.

52.

o w n e r s w e r e r e a s o n s for m a n y independent who le sa l er s d ropp ing

out ox the b u s i n e s s during t he 1 % 0 ' s .

In su rvey ing the l i terature, no def in i te l a s t i n g t r e n d of m a n u -

f a c t u r e r s r e p l a c i n g independents with b r a n c h e s could be d e t e c t e d .

During the e a r l y 1960 's , t h e r e was a tendency f o r manufacturers

to e s t a b l i s h b r a n c h e s in m a j o r metropolitan a r e a s on t h e a s s u m p t i o n

tha t t h e s e m a r k e t s could be eas i ly s e r v e d b e c a u s e they r e p r e s e n t e d

a l a r g e portion of the tola] m a r k e t and would be prof i table . Seldom

was t h i s assumption trvie, howeve r , b e c a u s e the l a r g e m a r k e t s w e r e

m o r e competit ive, r e q u i r e d g r e a t e r investments t h a n anticipated,

and s e l d o m r e a l i z e d any profit .

Rathe r than de tec t ing a t r e n d toward b r a n c h e s , it a p p e a r s t h a t

t h e r e is a t endency f o r f a c t o r y b r a n c h e s to i n c r e a s e when g e n e r a l

e conomic condi t ions a r e good. As the g e n e r a l economy s l o w s , the

b r a n c h e s a r e r e p l a c e d by independents , A r e c e n t a r t i c l e in Home

F u r n i s h i n g s Daily t ends to v e r i f y t h i s pos i t ion . "Manufacturers

don ' t want to ge t into d i s t r i bu t ion . Look a t t he TV b u s i n e s s . The re ,

a l l the p r o d u c e r s a r e s c r a m b l i n g f o r independent d i s t r i b u t o r s . They

don ' t want f a c t o r y b r a n c h e s . „20 V i

rtually all domestic manufacturers

have several branch operations however* General Electric Company 20

Jim Cattani , " D i r e c t Selling May Mean End for Independent Distributors, n Home Furnishings Daily, XLJII (July 26, 1971), 15*

and F h i l c o - F o r d have a l a r g e r n u m b e r of f a c t o r y b r a n c h e s than

m o s t m a j o r m a n u f a c t u r e r s .

Selling agents and m a n u f a c t u r e r s ' r e p r e s e n t a t i v e s . - - Selling

agen t s and -manufac tu re r s 1 r e p r e s e n t a t i v e s have t ended to o p e r a t e

in the highly spec i a l i s ed audio componen t s f i e ld . As i m p o r t m e r -

chand i s e began to t ake on g r e a t e r s ign i f i cance , t h e s e agen t s and

r e p r e s e n t a t i v e s grew in i m p o r t a n c e by se l l ing f o r e i g n b r a n d s of

c o n s u m e r e l e c t r o n i c p r o d u c t s . T h e s e m i d d l e m e n o f t en s e e k out

l a r g e s c a l e b u y e r s as wel l a s se l l ing to s e v e r a l w h o l e s a l e r s in the

s a m e geograph ic a r e a .

Many of the m i d d l e m e n have l o s t r e p r e s e n t a t i o n of l i ne s b e -

c a u s e of doing too good a se l l ing job. As they bui l t s a l e s and

a c c e p t a n c e f o r a b r and , t hey f r e q u e n t l y w e r e r e p l a c e d by a m a n u -

f a c t u r e r ' s b r a n c h or se l l ing o rgan i za t i on . Los ing the l i ne s they

have been r e p r e s e n t i n g a p p e a r s to be a p r o b l e m now fac ing r e p r e -

s e n t a t i v e s f o r s o m e of the b e t t e r known i m p o r t b r a n d s whose

m a n u f a c t u r e r s a r e beginning to e s t ab l i sh United Sta tes s u b s i d i a r i e s

and s a l e s o r g a n i z a t i o n s . Impor t b r a n d s with l i t t l e a c c e p t a n c e in

t he m a r k e t wi l l l ike ly continue to be d i s t r i b u t e d th rough agen t s

and m a n u f a c t u r e r s ' r e p r e s e n t a t i v e s .

Trend t oward d i s t r ibu t ion c e n t e r s . - - T h e r e is a t r e n d among

both d o m e s t i c and f o r e i g n m a n u f a c t u r e r s to e s t a b l i s h s u p p l e m e n t a l

I-,-;

physical distribution centers at several iocaticms throughoxit the

United States. These distribution centers service the manufac-

turer1 s normal wholesale and retail distribiifcios system. It is

possible that the trend of manufacturer owned distribution centers

could result in independent wholesalers becoming selling organi-

zations only, as is the case with several import brands; manu-

facturers using their own selling organizations,, and eliminating

independent wholesalers; or independent wholesalers merging into

regional wholesalers and taking over the rrianuf actur er ' s distri-

bution centers. Any one of these possibilities would likely reduce

overall distribution cost without sacrificing effectiveness.

Currently, major domestic manufacturers selling through

branches and/or wholesalers generally have f rom seventy to ninety

distribution points. Studies reveal that five distribution points

could provide one day delivery to ninety per cent of the United

States market while reducing inventory costs substantially.

Retail Competition

It was revealed that the total number of establishments in the

major kinds of business handling consumer electronic products

represented forty-seven per cent of the retail establishments in

the United States. This fact, combined with the "use of these pro-

ducts as promotional items by other retailers, indicates the extreme

competitive situation at the retail level.

S c r a m b l e d m e r c h a n d i s i n g . - - The r e t a i l i ng of c o n s u m e r e l e c -

t r o n i c p roduc t s h a s b e c o m e t r u l y " s c r a m b l e d . " With the v a s t

n u m b e r of d i f f e r e n t t ypes of ou t le t s se l l ing c o n s u m e r e l e c t r o n i c

p r o d u c t s , i t a p p e a r s tha t indus t ry e f f o r t s a r e be ing d i r e c t e d t o -

w a r d se l l ing to a l l i n t e r e s t e d r e t a i l e r s . Pau l Schuenemann, J r .

had t h i s to s a y at a Mar t Magazine Dea le r Adv i so ry Board m e e t i n g :

Today t h e r e a r e in many c a s e s m o r e TV s e t s and h o u s e w a r e s suppl ied by banks than r e t a i l e r s . . . A lot of vo lume is be ing done by gas s t a t ions and oil c o m p a n i e s in g e n e r a l . Between July '67 and July '69, $1 m i l l i o n in r a d i o s and so f o r t h moved th rough oil company c r e d i t c a r d s . , . In addi t ion, t h e r e a r e d rug s t o r e s , s u p e r -m a r k e t s , and o ther types of s t o r e s se l l ing a c o n s i d e r a b l e amount of m e r c h a n d i s e tha t we should be se l l ing . Also ano the r f a c t o r is the t r ad ing s t a m p and p r e m i u m b o u s e s tha t r e p r e s e n t a f a i r s i s e vo lume .

Mult iple tin it o p e r a t i o n s . - - T h e t r e n d t oward mu l t i p l e uni t

o p e r a t i o n s h a s continued wi th the g r e a t e s t mu l t i p l e uni t expans ions

o c c u r r i n g among d e p a r t m e n t s t o r e s , d i scount , m a i l o r d e r , v a r i e t y ,

d rug , and h a r d w a r e cha ins . Also, r e t a i l e r c o o p e r a t i v e s have ex-

panded whi le f r a n c h i s e ope ra t i ons such as the Tandy Corpora t ion ,

wh ich inc ludes All ied Radio and Radio Shack, have been i n c r e a s i n g

t h e i r ou t le t s subs t an t i a l l y .

21 Pau l Schuenemann, J r . , "Value of F r a n c h i s e s Today Seen

a s Mean ing les s , " Mar t , XIV (August 15, 1970), 12.

Prob lems of smal l r e t a i l e r s . - - P rob lems of t h e smal l dea l e r

center around the following f a c t o r s : (1) lack cf buying power, which

p reven t s h im f r o m being offered spec ia ls ; (2) inability to buy in

quantity for lower p r i ce s ; (3) inability to build adver t i s ing funds;

and (4) the vas t number of outlets with which he mus t compete . His

product knowledge, sa les and se rv i ce ability, and pe r sona l at tention

to cus tomer needs a r e the f a c t o r s which keep h im in bus ines s . To

overcome the i r p rob lems , independent r e t a i l e r s have, in some

e a s t e r n m a r k e t s , begun to f o r m r e t a i l e r coopera t ives . A few of

the coopera t ives , such as Marta, which now has an annual volume

22 of $310 mil l ion, have attained a degree of s u c c e s s .

Significance of Imports to Industry

Development of Fore ign Industry

Af ter World War II, Japan, under the guidance of General Douglas Mac Arthur , switched f r o m the manufac tu re of guns to that of r ad ios . The ideal thought for p r o g r e s s , "Switzerland for watches , Japan for rad ios , " was con-ceived fo r Japan by the l e a d e r s of the Occupation, and th is bo re f ru i t , Japan becoming the wor ld ' s l a r g e s t pro™ ducer of radios .

2 2 W a l l i s E, Wood, "Mar ta : Why Deale rs Are in I t--And How It ' s Evolving, " Mart, XV (March 15, 1971), 27.

"Hideo Hirayama, "Message from. Japan, " Mart , XIV (De-c e m b e r 1-15, 1970), 26.

57

Soon after World War II the United States b e g a n impor t i ng con-

s u m e r e l e c t r o n i c products, p a r t i c u l a r l y r a d i o s , phonographs , and

componen t s , from European na t ions . These p r o d u c t s had l i t t l e i n -

f l u e n c e on the United States market. Most had E u r o p e a n r a t h e r

than A m e r i c a n s tyl ing and were priced near or above c o m p a r a b l e

United States p roduced goods; therefore, E u r o p e a n m a n u f a c t u r e r s

w e r e imable to s ign i f i can t ly p e n e t r a t e the United Sta tes m a r k e t .

Japan , on the o the r hand, began shipping low p r i c e d , low

qua l i ty tube type r a d i o s and phonographs to the United Sta tes in

t h e e a r l y 1950's and w a s able to m a k e deep p e n e t r a t i o n s into the

m a r k e t wi th the t r a n s i s t o r r ad io dur ing the 1955-1960 p e r i o d . Suc-

ceed ing wi th r a d i o s , the J a p a n e s e b roadened t h e i r p roduc t l i n e s to

inc lude phonographs and t ape r e c o r d e r s , b lack and whi te s m a l l

s c r e e n t e l ev i s ion , and then co lo r t e l e v i s i o n .

Hong Kong, Taiwan, and South Korea deve loped e l e c t r o n i c s

i n d u s t r i e s p a t t e r n e d a f t e r J a p a n ' s s u c c e s s . Hong Kong today i s

ca l l ed the low cos t r ad io cap i ta l of the wor ld . Taiwan h a s a t -

t r a c t e d m a n y United States owned m a n u f a c t u r i n g p l an t s in r e c e n t

y e a r s .

Sales Growth

Tab les XIII to XVII, p r e p a r e d by the United Sta tes Tar i f f

C o m m i s s i o n , point out t he deep p e n e t r a t i o n which f o r e i g n p roduced

* • & T ' s " '

58

goods have m a d e into t he d o m e s t i c m a r k e t . Shipments data, in

t h e s e t a b l e s a r e d o m e s t i c p roduc t ion acd a r e the s a m e a s t h o s e

pub l i shed by the Census of Manuf a c t u r e r s . Appa ren t consumpt ion

is equal to sh ipmen t s p lus i m p o r t s l e s s e x p o r t s . I m p o r t and ex -

p o r t da ta should be the m o s t a c c u r a t e data ava i l ab le b e c a u s e of

the f o r c e d r e p o r t i n g s y s t e m involving c u s t o m s du t i e s and c o n t r o l s .

I m p o r t s of t e l ev i s ion s e t s , - - I m p o r t s of t e l ev i s i on s e t s , a s

p r e s e n t e d in Table XIII, have i n c r e a s e d f r o m 1. 5 m i l l i o n uni t s in

1966 to 4. 5 mi l l i on un i t s in 1970, and to an e s t i m a t e d 5 . 4 m i l l i o n

in 1971. The r a t i o of uni ts i m p o r t e d to a p p a r e n t consumpt ion w a s

twelve p e r cent in 1966, t h i r t y - e i g h t p e r cent in 1970, and f o r t y

p e r cent in 1971. Dol lar value of i m p o r t e d t e l e v i s i o n s e t s ha s in -

c r e a s e d f r o m $116 mi l l i on in 1966 to $316 m i l l i o n in 1970, and to

an e s t i m a t e d $413 mi l l i on in 1971. The r a t i o of do l l a r va lue of

t e l e v i s i o n s e t s impor ted to a p p a r e n t consumpt ion was f ive p e r cen t

in 1966, s e v e n t e e n pe r cent in 1970, and an e s t i m a t e d twenty p e r

cen t in 1971.

All i m p o r t da ta r e l a t e d to va lue tend to be u n d e r e s t i m a t e d if

r e l a t e d to ac tua l m a r k e t va lue b e c a u s e the da ta exc lude i m p o r t

du t i e s , f r e i g h t c h a r g e s f r o m t h e f o r e i g n coun t ry , i n s u r a n c e , and

o the r c h a r g e s not n o r m a l l y included in d o m e s t i c p roduc t ion . Total

e s t i m a t e d a p p a r e n t consumpt ion in 1971 was 13 .5 mi l l i on uni t s wi th

a va lue of $2 .0 bi l l ion.

5 9

X W

PQ <5 H

CO z o H < fc & o HH PQ W 5 H /5 p4 o J ft Q X 2 H < .

5" §

3 H O & o S

9 |

< o

H u

2 tf o o o w ^ En 0 f£j 55 0 2 & g S

^ * Ph CO w > F-H W O

H £ W

CO

W % PS ju a m

a H4 >

w

w H

H J2I W «

< ft ft <

§ <

w CO t-H Q £ o 5 ^ u &*

° s

&3 S 2 J-H R o U

rt o

4-v

d 4* d) CM M 6 A M

3 Pu CO a rt < 0 U

EG 4 Q a

I

CD +> M D a, g

Ou • M CO

$ 0) >4

m 4~> •«-i

d

<4-1 O £» T$ «

00

o X

H

£ rt

a

cm ^ <mi oo o H m ^ ^

o sO rHI o <7v as 00 CM r- sO CM —i r— CO CO o CM o l> o i—i a- I> cr* m fv3 CO H 00 o co rHI ca CO 04 oi c\f CM" rH CM r—i H (—j J—{ f~-4 «—« *—|

0 a CH 0 CO d

CO %D fst o sO 00 CO xO •sD co sO i—i CM CM rq CO rsi 00

i—t r—< t~H r—i r~? j—i S

<D r-i

Tf« o CO rHE > vO sO sO SD CO CM -*-H r—4 CO in i*H (M o a^ r-HI r-H in ND r- o m fH f-H C\J CM co

«s m. •\ #»

r*H r—( Cs3 in

co H r> CO o o CM o rs. o r**» o iH rg o m a^ C\3 in »-H o sO l> CO 0^ in co (—j CM 00 in r-

* -V •% e\ *

i—i as o oc Is- OD CM i-H H i-H t-H r-H

^-f|

SO h- CO a^ o p-f o fs- 00 a^ o r~H sO sO s£? sD r- r> s O sO SO sD r -o a-v a- a- o a- as as a^ as r-i H f-4 r—{ i—i r^i r-H r-H H i-H r-t

m nO co Tf i> o f""! H C\J

a o m

w

a 0

U

• r-4

01 H

m

Q

•8

o $

4** CO V

& 4-J

rO *0 0) 44 «s S

m

U}

f) V / - J

I m p o r t s of r ad ios , - - I m p o r t s of r a d i o s , a s p r e s e n t e d hi Tab le

XIV, have i n c r e a s e d f r o m 25. I m i l l i o n un i t s in 1966 to 33. 3 m i l l i on

un i t s in 1970, and to an e s t i m a t e d 34. 1 m i l l i o n un i t s in 1971. The •

r a t i o of un i t s impor t ed to a p p a r e n t consumption, w a s 4 1 . 4 p e r cent

in 1966, 73. 7 p e r cent in 1970, and an e s t i m a t e d 73. 5 p e r cen t in

1971. Dol la r va lue of i m p o r t e d r a d i o s ha s i n c r e a s e d f r o m $144

mi l l i on in 1966 to $343 mi l l i on in 1970, and to an e s t i m a t e d $358

in 1971. The r a t i o of do l la r va lue of r a d i o s i m p o r t e d to a p p a r e n t

consumpt ion was 25. 3 p e r cen t in 1966, 55. 4 p e r cent in 1970, and

an e s t i m a t e d 57, 1 pe r cent in 1971.

The da ta in Table XIV include au tomobi l e r a d i o s . The s i g -

n i f i c a n c e of i m p o r t s , howeve r , is not g r e a t l y d i m i n i s h e d b e c a u s e

i m p o r t s of au tomobi le r a d i o s have been l e s s t h a n t e n p e r cen t of

the to t a l of r a d i o s Impor ted . Also, d o m e s t i c p roduc t i on of auto -

m o b i l e r a d i o s ha s r anged a round ten mi l l i on un i t s a y e a r f o r t h e

p e r i o d c o v e r e d . Total e s t i m a t e d a p p a r e n t consumpt ion in 1971 w a s

4 6 . 4 m i l l i o n uni t s with a value of $627 m i l l i o n .

I m p o r t s of phonographs . - - I m p o r t s of phonographs and r e c o r d

p l a y e r s , a s p r e s e n t e d in Table XV, have i n c r e a s e d f r o m 3. 8 m i l l i on

un i t s in 1968 to 4. 4 mi l l ion un i t s in 1970, and to an e s t i m a t e d 5. 3

m i l l i o n uni t s in 1971, The r a t i o of un i t s i m p o r t e d to a p p a r e n t con-

sumpt ion w a s f o r t y - f i v e p e r cent in 1968, f i f t y - t h r e e p e r cen t in

6 1

> i - I

X

W T HH

CO < H

IS O i—i H ft

£3 to & O U

O fo

to H Ci! O ft

r~ i

vO o

to H Z w 2 w & 2 fc—i ffi

to

to £3 i i

to Pi W > n w 0 w 01

Q C

Q £ <

W Q

55 < 5 " X

p4 9 W f-i 2 ft o s f-1 ^ H tp w £

o O H

Ui K O e< to 3 H ft

A O < ft X H

O Q

<3 Q

B a * * o * '£

m * &

a ? , g

. s i S « "S u 0 0

d o

+>

d n a m & TO g-

3d £ < 5 o

O

u o 04 X

W

k O a

a-»r4 65

(d >*

CQ 4-» . w d &

o o o

4

d ctf d a

xF vO H CT- I> m j C l 00 o CO rt« rH e • • • «• » > « « o • »

r *-H CO o CO CO LO iNl o CO in !> m •sD {s_ r- C\?. CO • < ^ ' m m

r-H j

o O 00 in o , in CO r- o r-00 o o m T—i IT ra CS?, m 00 r-H LO ra f f— ; o r-H a> m o I>

CT) xO r~ r - «««4 o T# in <%3 rH

l»|N CO a" r-'H in CO sQ '4/ p—i r-i H r-H

c6 >

c^ o rH 00 CO 00 J> m 00 vO CO 00 r<3 o vO 00 CO O CO o CO NO 00

fs3 f-H CO r™i r-H I> i r- O

ID o co -£ cvT vO oo 00 fS3 (M co CO CO CO j> m CO Xp LO

r-"4 r- CO CO CO

vD l> o o O o o r- o OX o m PH sD H o r\l r - f\5 o

m UT> c- O o CM O CO o

00 i> l> m r i co' r# C\f in O m CN3 r~5 r—«i cH i-H r—4 CO sO o r - ON CO

CO CO oO r<j

r-j|

xO CO O f—4 N D r- 00 cr o rH X0 vD • •o r - (>*. •-£> viD vX) f>-cr- o O o o o o^. o o ON o

f-H H r-Hl «"H H H i i r-H t—i r-H rH rH

"d CD

s *tr4 4-> tQ w

CO

« 4*» cn

**<h c$ *r»{ a -t-4 JM V? o a o u

d o •t-4 CO • so TS ' <D

4* (t* u

O £ U d »»«< Hj ai "£ « fl$ 4->

EH CU a)

CO U rjQ

0) o

^ 53 4) ®

£) $ d o

0) 0 rCl ^ ^ o

+» r n g ^ 2 s a ^ t* a s 1 O G)

U Q

a> o u d o

co

to

0 A 4* *+-f o

6 2

>

w - q

ffl C H

rt o

co H &

O

P .

2

P a <

CO H-i q £ «

XC H

£

H

S u

£ rt ° H U ^

t q < 3 ^

w ^ 1 - 1

i > i

t o

£

I I

CO

Pi H >H < A Oh

Q

ctf

O

O

H

c d

Q £

C

xn ffl A

< ffj

O

o

a

o

X PH

u & O

• H

H

ft s

J 3

CO

ft 2

o o

m U

EH .CO

W

S

O

Q

H

O M

ft 2 x 3 H S

. ft z < o H

ft

2

E 3

§ O

U

£ l Q _< © £ S o °

h J ! 5

" n c 4

a ® s — & • SS

. 3 I 3 4«S n

•Pi

fl o 4-i .i-i

0) g* h -o O o CO

•* CO o 0 0 0 0

c o l

^ H H v£> s C N

O v O t - s o

s o m o o f - i o oo oo ^ o m o v o I s - o < > i n

^ ^ ^ <rT o o

cm

n O O 0 0 o O I-H o n o \ D v o r -o o c>- o c n

CD "nO s O 0 s l O ( \J r«4 f s j ^

o o

© $ r~i

O O *"*•"• v O C\J s O i f ) ^ 0 0 f s i Tt* CO

c o ^ ^ i n

r<i v o c o <-H o n i n r a vt» o o N (M N r-4 N l rH

c o l

^ 0 0 CO CO C<S f s l (SJ

m

a o CO ^

f IT) NO

O H CO ^ ^ o M C N h h ^ rvj c-a ( \3 fv3 f-—i r- i

o a

s o r^- o c o o - 4 NO NO VD n o I s - r -0 * v ^ £ > 0 0 ^ 0

r j

K*

4 ^

! 5

c n

m

" H j cs3J c o (

O

CO u •*^

4A CQ

• w

* J t ** r I ^ ^

- - 63

.1970. and an e s t i m a t e d s i x t y - o n e p e r cent in 1971. Dol la r va lue of

i m p o r t e d phonographs ha s I n c r e a s e d f r o m $43 mi l l ion in 1968 to $50

m i l l i o n in 1970, and to a n e s t i m a t e d $62 m i l l i o n in 1971. The r a t i o

of do l l a r va lue of phonographs to a p p a r e n t consumpt ion w a s s i x t een

p e r cent in 1968, t w e n t y - f i v e p e r cent in 1970, and an e s t i m a t e d

t h i r t y - o n e p e r cent in 1971, Total e s t i m a t e d a p p a r e n t consumpt ion

of phonographs in 1971 was 8. 7 mi l l ion un i t s wi th a value of $199

m i l l i o n .

I m p o r t s of r a d i o - p h o n o g r a p h combina t ions . - - I m p o r t s of r a d i o -

phonograph combina t ions , as p r e s e n t e d in Table XVI, have i n c r e a s e d

f r o m 828 thousand uni ts in 1966 to 1 .5 mi l l i on un i t s in 1970, and an

e s t i m a t e d 1. 5 mi l l ion uni t s in 1971, The r a t i o of un i t s impor t ed to

a p p a r e n t consumpt ion was t h i r t y - t h r e e p e r cent in 1966, f o r t y - n i n e

p e r cent in 1970, and an e s t i m a t e d f i f t y - o n e p e r cent in 1971. Dol lar

va lue of i m p o r t e d r a d i o - p h o n o g r a p h combina t ions ha s i n c r e a s e d

f r o m $17 mi l l i on in 1966 to $45 mi l l ion in 1970, and to an e s t i m a t e d

$54 mi l l i on in 197i . The r a t i o of do l la r va lue of r ad io -phonograph

combina t ions to a p p a r e n t consumpt ion was f ive p e r cent in 1966,

f o u r t e e n p e r cen t in 1970, and an e s t i m a t e d n ine t een p e r cent in

1971. Total e s t i m a t e d a p p a r e n t consumpt ion of r a d i o - p h o n o g r a p h

combina t ions in 1971 was 3. 0 mi l l i on uni ts wi th a va lue of $290

m i l l i o n .

' "i;

64

> X W A

fq < H

f4 O i*» w EH rf o ft

w H

W *5 ft H-i E w

00 £

i g

S s H g

HH fl

s o u

5! ft < a

o

o £ o K P. S

o fl

 CO £ O O

d o I-! 0 H a 0

^ a o £

H-S o

a o • r-l 4-> cu a 0 m £ O O

;<d 0 4

4

ro co m oo H co -sp ^ m

CO i> (N2 o r-H C\S C- r~ <N2 O m o IT) CM o

•v n * «S C\ X

oa CO CO CO CO CO

<*\

00 O 00 O Is-H H H f\3 fsj 0-3

co un h co cn !-h <\J ,-H r~i IT? r- CO oo co no so in m

CsS o f\3 (\2 *-* o O ro 00 ^ vO O r- h- (> oo sc un

vD 00 o o H O Co sO SO I> r-ON r~"i

o r—i

O i—< Qv H

o <r~i

io r~ t* o c^

(M

h- in oo ^ o ^ o sO f-t o <y > ^ c0 CO

(\3 CO CO ^ CO ^

J> vo o njo in ^ ^ N rO tO ^ ifi

(M Th o kq un o H (\S h« fv ^ CO CO CO CO N M

nO t> 00 O O vO O 'sD vO h h-O Cs o o

ci o *HI 03 CO • «~1 a .a o U m *4H c3

H

aJ

Q>

*-M o

<4-4 cti 4-* Cfj

A

>S

'"d Q)

4-> CO

&3j

o Cfj O 4 SQ (d

ui O ?-<

0 &o

nd O

d §

$ •M o f-l

>s -1 4«S

o.

a) > • r«i u Q

*0

d o *#•*

>i*>

CO p u f—{ ri U

to

<! ca f

Impor t s of r e c o r d e r s , - - i m p o r t s of t ape p l a y e r s and r e c o r d e r s ,

a s p r e s e n t e d in Table XVII, have inc reased f r o m 7. 7 million, uni ts

in 1968 to 13 ,2 mi l l ion uni ts tn 1970, and to an e s t i m a t e d 15. 1

mi l l ion uni ts in 1971. The r a t io of uni ts i m p o r t e d to a p p a r e n t con-

sumpt ion was ninety- two p e r cent in 1968, n i n e t y - s e v e n p e r cent in

1970, and. an es t ima ted n i n e t y - s e v e n p e r cent in 1971. Dol lar va lue

of impor ted tape p l a y e r s and r e c o r d e r s h a s i n c r e a s e d f r o m $180

mi l l i on in 1968 to $335 mi l l ion in 1970, and to an e s t i m a t e d $372

in 1971 „ The r a t io of do l l a r value of t ape p l a y e r s and r e c o r d e r s

to a p p a r e n t consumpt ion was seven ty -n ine p e r cent in 1968, n ine ty

p e r cent in 1970, and an e s t ima ted n ine ty -one p e r cent in 1971.

Total e s t ima ted appa ren t consumpt ion of t ape p l a y e r s and r e c o r d e r s

in 1971 was 15. 5 mi l l ion uni ts with a va lue of $408 mi l l ion .

Data included in Table XVII a r e not d i r e c t l y c o m p a r a b l e with

o the r data s o u r c e s because the t ab le includes au tomobi le types of

r e c o r d e r s and p layback uni t s . The data subs t an t i a t e , h o w e v e r ,

the f a c t tha t the domes t i c tape r e c o r d e r m a r k e t i s a l m o s t to ta l ly

domina ted by impor t s s ince the r a t io of i m p o r t s to consumpt ion in

both uni t s and do l l a r va lue exceeds ninety p e r cent.

C u r r e n t posi t ion. - - T h e data p r e s e n t e d in Tab les XIII to XVII

indica te tha t impor t m e r c h a n d i s e has moved to a pos i t ion of d o m i -

nance in the domes t ic m a r k e t f o r c o n s u m e r e l e c t r o n i c p roduc t s

66

> X W J fQ < H

Pi o in H Pi o Oh %

r-i

sO o

w Z & O £ W S Pk

P ! I

Q p4 o

H CL. S o

K ca «> 2

. O w o

H

. W

0 2 A <J

o 9 w 5

Q 15 Z O < H w P-f ^ s lJ 5

CO < z -3 O 04 U w 04 < H

®

VV a!

co in r- i> o o cr* o

to 4-> ®i—4 d O <44 0 % *d d $ ID & 0 rj

4-> d ctf 3 a

o CO in. r-H XJD

rH vD CO NT CO

f—•} fmmi

rs!i

|> CO i-H rH CO O H N h- I s N H

^ h H en in 4 J ?—4 rH r—!

CG U a) H

<rHI o Q *+-* o

CO d o

^ OD 0 s nO O h in vo co a^oN

na

Is- if) N CO CO N lA N H h- O H H (\3 ^ fO

CNJ

i m m o co m cm h- O 00 h ol h H H N rO CO

00 sO ( > o ^ o o f t> m ur o s5 oo vo ^ ^

n i

%jD t**" 00 o r*H sD \D vO vD h N qn 0s 0s 0s 0s

fs3 O N ^ 00 NO m m ^ ^ co co

(N3(

vD r- oo o f—i sD vo vo vD r- i> o cr o o o

rO $ H *pHI >

4-» o £

d o •H to C& .f~i a a o

O

03

EH

to

<D

tn o tH C6 4 tQ Q)

•gus

XX *V 1) 4-> ctf a

*r>4 4-» 03

W M|

<4»* 0

u .f-4 K? • H 4 <S 03 r—{ .2 '0

*4-4 o

o U

rJ H ® d ^ o

*-» Q w 05

S 2 o *

u U tn & ItJ U

N * 3 o

u *H 0)

I o

® ~ *»m{ W' ro , r3 *"•** <$ **-« M d a. ^ .M (D B « O rQ ° a>

s i £ ° ^ 4-3

rr* Q

7J > rt .2 0) ^ a> £ ® « M

03 S

a * Q

co a. 0)

"aT ^ ^ 2 a> P r*—4 «| P Ri £ ®

W

6

a> r{

^ o ^ -H

^ o nd 4- o> d

Q) " i H g «

u oL a>

•* Q 0) M

o • 0 o •

co D 0) rC|

4->

0 d 0)

w

0 Ot 1

CO r7-4 * U § l> 0 ^ I 0-» £0 ^ X S o ^ d o

0)i-i § a m

.S-.3 rt ^ ^ i? » ?!

Cl ^ „ O »

j2 ® ^

2 1 5 4 0D O 2 4-> d

s ince 1 966, The e s t i m a t e d p e r c e n t a g e of i m p o r t s to consumpt ion

in 1971 exceeded f i f ty p e r cent in a l l p roduc ts , with except ion of

t e lev i s ion , which was e s t ima ted at fo r ty p e r cent . A dock s t r i k e

dur ing the l a t t e r p a r t of 1971 preven ted i m p o r t p e r c e n t a g e s f r o m

being g r e a t e r than e s t i m a t e s indica te . Very l ikely i m p o r t s of

b lack and white t e l ev i s ion exceeds f i f ty p e r cent pene t ra t ion ,

leaving color t e l ev i s ion a s the only product not being to ta l ly d o m i -

nated by i m p o r t s in un i t s .

The do l la r value ra t io of i m p o r t s to a p p a r e n t consumpt ion is

lower than unit r a t i o s and does not indicate dominance in p r o d u c t s

o ther than rad ios and t ape r e c o r d e r s . However , indicat ions a r e

tha t i m p o r t s p e n e t r a t e the m a r k e t f i r s t with low value un i t s . As

i m p o r t s gain accep tance , the do l l a r value r a t i o of i m p o r t s to con-

sumpt ion i n c r e a s e s at a f a s t e r r a t e than the r a t i o of impor ted

uni t s to appa ren t consumpt ion.

Cur ren t In terna t ional Situation

During 1971 a n u m b e r of th ings occu r red which could have

s ign i f ican t e f fec t s on the in te rna t iona l s e c t o r , p a r t i c u l a r l y Japan .

Impor t s to the United States w e r e affected by the economic r e -

c e s s i o n . Also, a dock s t r i k e t ied up goods in p o r t s fo r m o n t h s .

Accusa t ions of "dumping" in the United States m a r k e t w e r e being

d i r ec t ed at the J apanese . As a r e s u l t of t h e s e dumping c h a r g e s ,

, j i v \ c t £ ' ^ '"

iff ^;;iv:v .. •;. ' •-• 68

J a p a n e s e c o n s u m e r s l e a r n e d of the lower p r i c e s being o f f e r e d in

the United States and went on a b u y e r s ' s t r i k e . S e v e r e p r i c e

cutting o c c u r r e d at the r e t a i l l eve l in Japan which weakened t h e

m a n u f a c t u r e r s ' con t ro l ove r i t s d o m e s t i c m a r k e t . In August , t he

United States imposed a t en p e r cent s u r c h a r g e t a x on a l l i m p o r t s .

However , m o s t m a n u f a c t u r e r s t ended to a b s o r b t h e s u r c h a r g e s to

avoid i n c r e a s i n g p r i c e s in the United Sta tes m a r k e t at a t i m e when

the m a r k e t was showing indica t ions of r e c o v e r y .

The fo rego ing o c c u r r e n c e s p l aced J a p a n e s e m a n u f a c t u r e r s in

a p r o f i t squeeze . The r eva lua t i on of i n t e r n a t i o n a l c u r r e n c i e s ,

h o w e v e r , p robab ly wil l have the g r e a t e s t and m o s t l a s t i ng e f f e c t .

The u p w a r d r eva lua t ion of the yen and the deva lua t ion of the do l l a r

h a s m a d e d o m e s t i c m a n u f a c t u r e r s ' goods m o r e c o m p e t i t i v e . How-

e v e r , the ne t e f f ec t of r e v a l u a t i o n r e m a i n s u n c l e a r . Jt is p o s s i b l e

t h a t United States m a n u f a c t u r e r s can hold t h e i r r e m a i n i n g m a r k e t s

and be in a b e t t e r pos i t ion to engage compe t i t i on in m a r k e t i n g new

p r o d u c t s , a s well a s being m o r e compe t i t i ve in t h e i n t e rna t i ona l

m a r k e t .

J a p a n e s e R e c e s s i o n C a r t e l s

As the J a p a n e s e economy h a s s lowed, m a n y of i ts i n d u s t r i e s

have f o r m e d r e c e s s i o n c a r t e l s .

A recess ion ca r t e l can be formed bv a group of Japanese m a n u f a c t u r e r s - - w i t h the approval of M1TI and the Fa i r Trade Commiss ion (FTC/--when the m a r k e t p r i c e s of the product a r e below its ave rage cost of p ro-duction and a substant ia l propor t ion of the e n t e r p r i s e s af fec ted would be endangered by the r e c e s s i o n in spi te of ra t ional izat ion. ^

With the p r io r approval of the FTC, r e c e s s i o n ca r t e l s can

regu la te production, s a l e s , p r i ce s , and s h a r e of m a r k e t . These

c a r t e l s a r e general ly l imited to six months dura t ion although ex-

tens ions a r e avai lable . Policing n o n - m e m b e r s becomes a p rob lem

since genera l ly only seventy to eighty per cent of the m a r k e t mus t

be r ep re sen t ed . These ca r t e l s , if formed by the e lec t ron ics in- .

dus t ry , could c rea t e legal p rob lems for United States f i r m s in-

volved in joint ven tures with a Japanese t rading pa r tne r as well

as increas ing the intensi ty of competit ion.

Japanese Marketing Strategy

The t rend of Japanese manufac tu re r s toward d i r ec t sel l ing,

promot ing the i r own b rands , and expanding the i r own dis t r ibut ion

organizat ions in the United States marke t is one of the g r e a t e r

t h r ea t s to domest ic m a n u f a c t u r e r s and who le sa l e r s . Japanese

m a n u f a c t u r e r s , in the i r home m a r k e t s , have t radi t ional ly moved

24"Recess ion Car te ls Spread in Japanese Indus t r ies : Dilemma f o r Fore ign P a r t n e r s , " Business International, XIX (March 10, 1972), 73.

70

in d i rec t ions of integrating with or controlling eve ry level m the

d is t r ibut ion s t ruc tu re . 2 " it is l ikely that th is pa t te rn will be fol-

lowed in the United States,

Jh ea r ly a rguments f o r controls on Japanese impor t s and

warnings of dangers facing the United States consumer e lec t ron ics

indust ry , the Electronic Industry Associat ion commented :

a . That the r eason for the Japanese success is the "ex t reme low cos t" of Japanese products , m a d e poss ib le by low wages plus the fac t that the quality is "sufficiently good to make them competi t ive in mos t ins tances; 1 '

b. that aamage has a l ready been infl icted on sma l l U, S. e lect ronics m a n u f a c t u r e r s with l imited product l ines , who "cannot shif t to other products with the s a m e ease as l a r g e r companies with a m o r e d ivers i f ied output;"

c. that if impor t s a r e not r e s t r i c t ed , "thousands of w o r k e r s in th is indiastry m a y lose the i r j o b s ; "

d. that U. S. aid and U. S. pr iva te inves tments and l icensing a r r angemen t s have "put Japanese manu-f a c t u r e r s on a footing equal or super ior to many Amer i can compet i tors in t e r m s of mode rn production f ac i l i t i e s ; "

e. that the Japanese " s e c t o r - b y - s e c t o r technique of m a r k e t explorat ion" is to f i r s t send in a t r i ck l e of impor ts to judge the m a r k e t potential , then "a gush" to fee l out the competition, and then flood the m a r k e t if the f i r s t two s teps a r e promis ing;

f. that the e lec t ronics industry is essen t ia l to defense , but U. S. manufac tu re r s "can ' t respond adequately (to the needs of national emergency) if uncontrolled impor t s have fo rced cur ta i lment of production.

25 i o r detailed explanation of the Japanese marke t ing s y s t e m

s e e : Donald N. Thompson, Contractual Marketing System (Lex-ington, M a s s . , 1971), pp. 271-291.

26 Committee for a National Trade Policy, "The Elec t ronics

Industry and U. S. Trade Policy, " unpublished paper , Washington, no date, pp. 4 -5 .

Low

technique

United Sta

^ excepting

world ma

cost proauct9, United States aid, and a s e c t o r - b v - s e c t o r

appear to oe tne means by which entry was made into the

tes market. It would appear.that these same techniques,

United States aid, are now being uti l ised in opening other

rkets.

In the

consumer

products,

foregoing d i s cus s ion , the h i s t o r y and f o r m a t i o n of the

e l ec t ron ic p roduc t s indus t ry was t r a c e d f r o m the in-

vent ion of jthe r eco rd ing mach ine in the l a t e n ine teen th cen tu ry to

the p r e s e n t . Phonographs w e r e the f i r s t c o m m e r c i a l l y p roduced

followed by r a d i o s , b lack and white t e l ev i s i on s e t s , re-~

corders , and color t e l ev i s ion sets# P roduc t i m p r o v e m e n t has

been continuous and has been gene ra l ly accompan ied by lower p r i c e s

to t h e c o n s u m e r . While the to ta l va lue of indus t ry sh ipmen t s h a s

b e e n conccsntrated among a few domes t i c m a n u f a c t u r e r s , t h i s con-

has not p r even ted f o r e i g n produced goods f r o m d o m i -

eonsnimer e l ec t ron i c p roduc t s m a r k e t in r e c e n t y e a r s ,

been shown tha t the c o n s u m e r e l e c t r o n i c p roduc t s in-

centration

nat ing the

It h a s

dustry is. extremely competitive at every leve l in the distribution

structure. Vertical competition as well as horizontal competition

was found to exist in the industry. Foreign produced products were

shown to be of increasing importance in the domest ic market .

Problems Ox. concern to the industry, such as determining the

extent of market penetration and establishing potentials for

individual products, by m a r k e t r e q u i r e tha t a c c u r a t e data be ava i l -

able , H i e problems of m a r k e t penetration.., m a r k e t po ten t ia l s , and

the r epo r t ing s y s t e m fo r r eco rd ing indus t ry da ta a r e d i s c u s s e d in

Chapter III.

'• "f\ I". •; "• r '

CHAPTER i n

MARKET PENETRATION, MARKET POTENTIAL,

AND THE REPORTING MECHANISM FOR

RECORDING INDUSTRY DATA

Prob lems of the Industry

P re l im ina ry interviews with, m a n u f a c t u r e r s , who le sa l e r s , and

r e t a i l e r s , and a thorough study of industry t r a d e publicat ions r e -

vealed m a r k e t penet ra t ion to be a s ignif icant p r o b l e m within the

consumer e lec t ronic products industry . In addition, t he se i n t e r -

views and t r a d e publications indicated that o ther indust ry p rob lems

have a re la t ionship to m a r k e t penet ra t ion . These other indust ry

p rob l ems included the following, m a r k e t po ten t ia l s , the repor t ing

m e c h a n i s m for record ing industry data, d i s t r ibu t ion , product ,

pr ic ing , promotion, at t i tudes of the m a r k e t , c o n s u m e r i s m , channel

conflict and control, and the legal envi ronment within which the in-

dus t ry ope ra t e s .

Market penet ra t ion is the cen t ra l topic of t h i s study. T r e a t -

ment of the subject includes a study of: (1} the value and u se s of

m a r k e t penetra t ion, (2) the p rob lems re la ted to m a r k e t penet ra t ion,

(3) the f a c t o r s affect ing a f i r m ' s s h a r e of m a r k e t , (4) the unit and

73

'• " : ' '• 74 *•

do l l a r s ign i f i cance of m a r k e t p e n e t r a t i o n , and {5) t h e e l e m e n t of

s e c r e c y p l aced by the indus t ry on m a r k e t p e n e t r a t i o n da t a .

Since quota a s s i g n m e n t s a r e an in t eg ra l p a r t of e v e r y s e g m e n t '

of the i ndus t ry , it i s n e c e s s a r y tha t they b e a s a c c u r a t e a s p o s s i b l e .

M a r k e t po ten t i a l s a r e a b a s i s fo r quota a s s i g n m e n t s ; t h e r e f o r e , a n

a n a l y s i s is m a d e of the fo l lowing: (1) the u s e s of m a r k e t p o t e n t i a l s ,

(2) the ways of developing m a r k e t po t en t i a l s , and (3) t he t e c h n i q u e s

ava i l ab l e f o r improv ing m a r k e t po t en t i a l s . The r e p o r t i n g m e c h a -

n i s m f o r r e c o r d i n g i ndus t ry da ta is ana lyzed f r o m the v iewpoint

of d e t e r m i n i n g the ava i l ab l e da ta s o u r c e s , and t h e a c c u r a c y of

da ta s o u r c e s . A c c u r a t e data is e s s e n t i a l to d e t e r m i n i n g a f i r m ' s

s h a r e of m a r k e t .

Dis t r ibu t ion p r o b l e m s of the i ndus t ry a r e a s f o l l o w s : (1) t h e

v a s t n u m b e r of spec i a l u s e r s of c o n s u m e r e l e c t r o n i c p r o d u c t s ,

(2) t he compet i t ion among channel m e m b e r s d i r e c t e d t oward se l l ing

the s p e c i a l u s e r m a r k e t , (3) t he s t r u g g l e a m o n g channe l m e m b e r s

f o r con t ro l of the d i s t r i bu t ion channel , and (4) t h e e f f e c t s of t r a n s -

shipping on channel con t ro l and m a r k e t p e n e t r a t i o n . The n a t u r e

of t he p roduc t p r o b l e m s of the i ndus t ry r e l a t e t o : (1) p roduc t c o m -

pe t i t ion , (2) fu l l l ine f o r c i n g , (3) p r o d u c t i n t roduc t ion and m o d e l

changes , (4) p roduc t de le t ion , (5) s e r v i c e and w a r r a n t y p o l i c i e s ,

(6) p r o d u c t s of the f u t u r e , and (7) p r o d u c t s t a n d a r d i z a t i o n .

75

P rob lems of the indust ry as they relate to pr ic ing include the

following; {1} pr ice competi t ion among channel members, (2) f r e -

quency of p r i c e changes, (3) prof i t marg ins , (4) e f fo r t s of supp l i e r s

to control re ta i l p r i c e s , and (5) specia l p r i c e s o f fe red to l a r g e

sca le p u r c h a s e r s . Since all levels of the consumer e lec t ron ic p r o -

ducts indust ry a r e promotional ly or iented, the p rob lems of the

industry relat ing to promot ion include the following: (1) types of

promot iona l act ivi t ies , (2) expendi tures , and (3) cooperat ive ad-

ve r t i s ing .

Atti tudes of the m a r k e t a r e pr inc ipal ly concerned with f a c t o r s

influencing consumers in the i r purchas ing dec i s ions . In addition,

the at t i tudes of the m a r k e t toward impor t p roduc ts a r e of c u r r e n t A

s igni f icance . The indus t ry ' s p rob lems as re la ted to c o n s u m e r i s m

a r e as fol lows: (1) the object ives of c o n s u m e r i s m , (2) the legal

impl icat ions of consumer i sm, and (3) the e f fec t s of p r iva te con-

s u m e r organizat ions on the indust ry .

Channel conflict and channel control a r e defined and re la ted to

power . Means of channel control by channel m e m b e r s a r e d i scussed .

Legal p rob lems of the consumer e lec t ronic p roduc t s industry r e l a t e

pr inc ipal ly to an t i - t r u s t legis la t ion which includes collusive and

monopol is t ic p rac t i ce s , such as p r i ce fixing, exclusive dealing, full

l ine forc ing, p r ice d iscr imina t ion , and o t h e r s . In addition, the

76

r e a s o n a b l e p robab i l i ty of f i r m s having the p o w e r to cont ro l m a r k e t s

is i m p o r t a n t .

The p r o b l e m s of the c o n s u m e r e l e c t r o n i c p r o d u c t s i n d u s t r y to

be d i s c u s s e d in t h i s chap te r inc lude m a r k e t p e n e t r a t i o n , m a r k e t

p o t e n t i a l s , and the r e p o r t i n g m e c h a n i s m f o r r e c o r d i n g i n d u s t r y

d a t a . Chapter IV is a p r e s e n t a t i o n of the r e m a i n i n g i n d u s t r y p r o b -

l e m s , which include d i s t r ibu t ion , p roduc t , p r i c i n g , p r o m o t i o n ,

a t t i t udes of the m a r k e t , c o n s u m e r i s m , channel conf l ic t and con t ro l ,

and the l ega l env i ronmen t within which the i n d u s t r y o p e r a t e s .

Marke t Pene t r a t i on

It h a s been shown tha t t he c o n s u m e r e l e c t r o n i c p r o d u c t s in-

d u s t r y o p e r a t e s within a highly compet i t ive e n v i r o n m e n t . Each

channe l m e m b e r , p a r t i c u l a r l y m a n u f a c t u r e r s and w h o l e s a l e r s , is

c o n c e r n e d with h i s f i r m ' s o r b r a n d ' s s a l e s pos i t i on r e l a t i v e to t he

s a l e s pos i t ion of o the r f i r m s o r b r a n d s in t he i n d u s t r y . A f i r m

m a y r e l a t e i ts s a l e s to t he total s a l e s of the i n d u s t r y . This p r o v i d e s

the f i r m i t s s h a r e of m a r k e t . As p r e v i o u s l y indica ted , th i s is m o s t

f r e q u e n t l y r e f e r r e d to in the c o n s u m e r e l e c t r o n i c p r o d u c t s i ndus t ry

a s m a r k e t pene t r a t i on .

Value and Uses of M a r k e t P e n e t r a t i o n

M a r k e t p e n e t r a t i o n is used a s a m e a s u r e m e n t tool to ind ica te

a f i r m ' s o r b r a n d ' s s a l e s pos i t ion r e l a t i ve to tha t of to ta l i ndus t ry

sa l e s in un i t s o r d o l l a r s . The f i r m is ab le to note ne t changes in

r e l a t i v e pos i t ion which t a k e p l ace , and is not m i s l e d by s a l e s in-

c r e a s e s not accompan ied by an i n c r e a s e in the f i r m ' s s h a r e of

m a r k e t . Any change in r e l a t i v e pos i t ion wi thin the i n d u s t r y can

he d e t e c t e d . As a r e s u l t , m a r k e t p e n e t r a t i o n data b e c o m e a tool

f o r d e c i s i o n making . When a f i r m ' s s h a r e of m a r k e t is r i s i n g , .

p r e s e n t po l i c i e s of the f i r m a r e l ike ly to cont inue . When m a r k e t

s h a r e is dec l in ing, the f i r m ' s p o l i c i e s a r e l ike ly to be r e v i s e d .

The r e s u l t of such ac t ions is the e s t a b l i s h m e n t of a spec i f i c s h a r e

of m a r k e t as a company ob jec t ive , even though such an ob jec t ive

m a y not have ex i s ted b e f o r e .

By combining m a r k e t p e n e t r a t i o n da ta wi th o ther da ta , such a s

t he f i r m ' s m a r k e t i n g mix , it i s p o s s i b l e to d e t e r m i n e the e f f e c -

t i v e n e s s of the f i r m ' s s t r a t e g y . The e f f e c t i v e n e s s of the m a r k e t i n g

m i x of c o m p e t i t o r s can be eva lua ted in s i m i l a r f a sh ion . C o r r e l a t i o n

can be e s t ab l i shed be tween expend i tu re s and changes in m a r k e t

s h a r e in many i n s t a n c e s .

M a r k e t p e n e t r a t i o n data p r o v i d e a tool f o r evaluat ing m a n a g e r i a l

e f f e c t i v e n e s s . The f i r m can eva lua te its p e r f o r m a n c e individual ly

c o m p a r e d to i ts p a s t p e r f o r m a n c e o r as c o m p a r e d to o ther f i r m s

within the indus t ry . Also, a n a l y s i s of individual p r o d u c t s , p r i c e

c l a s s e s , and m a r k e t s a r e p o s s i b l e . F r o m th i s s e g m e n t e d app roach ,

fci ^ '•< i

;.;•= - •. ?8

t he f i r m can de tec t t r e n d s at an e a r l y s t age and can ident i fy s e a -

sona l v a r i a t i o n s . These addi t ional data a id is p r e p a r i n g s a l e s

f o r e c a s t s .

Another impor t an t u s e of m a r k e t p e n e t r a t i o n da t a is tha t of

planning s t r a t e g i e s , p a r t i c u l a r l y t hose r e l a t e d to p r o d u c t add i t ions ,

de l e t i ons , and mod i f i ca t ions , p r i c i n g d e c i s i o n s , p r o m o t i o n a l p l a n s ,

and d i s t r i bu t ion pol icy . The expend i tu re s and r e l a t i v e e m p h a s i s

p l aced on each of t h e s e f a c t o r s have a s ign i f i can t e f f ec t on t he a t -

t a i n m e n t of the d e s i r e d s h a r e of m a r k e t by t he f i r m .

It is p o s s i b l e f o r a f i r m to s e p a r a t e n o n - c o n t r o l l a b l e f a c t o r s

in t he to ta l env i ronmen t f r o m t h o s e which a r e con t ro l l ab l e by m a n -

a g e m e n t . T h e r e is a tendency f o r n o n - c o n t r o l l a b l e f o r c e s ou t s ide

t he indus t ry to a f f ec t the s a l e s of the e n t i r e i n d u s t r y a t the s a m e

t i m e , though not a lways a f fec t ing each f i r m equa l ly .

Marke t p e n e t r a t i o n data a r e u se fu l in m o d e l bui lding and a r e

s u b j e c t to s t a t i s t i c a l a n a l y s i s , which con t r i bu t e s to t he deve lopmen t

of s a l e s f o r e c a s t s . Such t echn iques a s m u l t i p l e - f a c t o r a n a l y s i s ,

c o r r e l a t i o n and r e g r e s s i o n a n a l y s i s , and Markov cha in a n a l y s i s

a r e e f fec t ive ly u t i l i sed in m a r k e t a n a l y s i s .

Many f i r m s m a k e u s e of m a r k e t p e n e t r a t i o n da ta when t e s t

m a r k e t i n g , in t roducing new p roduc t s , o r in i t ia t ing spec i a l p r o -

m o t i o n s . Genera l ly , s t o r e aud i t s and c o n s u m e r p a n e l s a r e u s e d

in t h e s e s i tua t ions in o r d e r to s e c u r e i m m e d i a t e f eedback of s a l e s .

" •' 'M* $• ' 1

79

F i r m s m a y u s e m a r k e t p e n e t r a t i o n da ta f o r p u r p o s e s of l imi t ing

t h e i r s h a r e o£ m a r k e t . When a s ingle f i r m con t ro l s a l a r g e s h a r e of

the to ta l m a r k e t f o r a given p roduc t , the f i r m m a y not want to in-

c r e a s e i ts s h a r e f o r f e a r of a n t i - t r u s t v io l a t ions . In such s i t ua t ions ,

a f i r m may e lec t to d i r e c t i ts e f f o r t s toward i n c r e a s i n g t he p r i m a r y

demand f o r the p roduc t type r a t h e r than s e l e c t i v e d e m a n d f o r t h e

f i r m ' s b r a n d .

When adequa te m a r k e t pene t r a t i on da ta a r e ava i l ab l e o r can b e

a s s e m b l e d the data wil l pinpoint a l l c o m p e t i t o r s in the m a r k e t p l a c e .

Such da ta p e r m i t the de tec t ion of e n t r i e s into the m a r k e t and ex i t s

f r o m the m a r k e t , as we l l a s the e f f ec t s of m e r g e r s wi thin the in-

d u s t r y .

A f i r m ' s m a n a g e m e n t f e e l s tha t i ts s t a tu s h a s b e e n i m p r o v e d

when t h e f i r m ' s m a r k e t p e n e t r a t i o n pos i t ion ha s i m p r o v e d . Man-

a g e m e n t d e s i r e s to r a n k a s high a s p o s s i b l e wi th in the i ndus t ry so

long as the l eve l of m a r k e t penetra t ion, does not lead to l ega l d i f f i -

c u l t i e s . As a r e s u l t , m a r k e t pene t r a t i on t ends to b e c o m e an ob-

j e c t i v e of t he f i r m r a t h e r than s e r v i n g only a s a m e a s u r e m e n t too l .

C o m m e n t s f r o m m a r k e t i n g l i t e r a t u r e . - - Marke t ing l i t e r a t u r e

t ends to e m p h a s i z e the s ign i f i cance of m a r k e t p e n e t r a t i o n a s a too l

o r s t a n d a r d of m e a s u r e m e n t and a s a m a r k e t ob j ec t i ve o r goal .

• :;#! 5":

80

Treatment oI the subject, however , t ends to l a ck depth in c o v e r a g e .

Examples of statements found in m a r k e t i n g l i t e r a t u r e a r e t he f o l -

lowing;

As a guide in s a l e s planning, an ob jec t ive p i c t u r e of your s h a r e of indus t ry vo lume is e s s e n t i a l . You should have th i s in fo rmat ion on each m a j o r p roduc t , both nationally and in a s much deta i l a s poss ib l e . There a r e m a n y p r a c t i c a l appl ica t ions of t h i s in format ion . One of the m o s t i m p o r t a n t is in planning your o v e r - a l l s a l e s s t r a t e g y , if you a l r e a d y have the l ion ' s s h a r e of t he indus t ry vo lume , your p r o m o -t iona l p r o b l e m is to expand indus t ry vo lume r a t h e r t h a n to t r y to s e c u r e s a l e s gains a t the expense of c o m p e t i t o r s . *

Ra the r than be guided by the p ro f i t mo t ive , m a n y c o m p a n i e s s t r i v e fo r t h e i r s h a r e of c u s t o m e r s . ^

By se t t ing a s i ts m a r k e t i n g goal a s t a t ed s h a r e of the m a r k e t , a company is m o r e apt to m a i n t a i n i ts m a r k e t pos i t i on than it would if i ts goal w e r e p r o f i t s a lone . 3

M e a s u r e s of t he c o m p a n y ' s m a r k e t s h a r e in the i n d u s t r y a r e an impor t an t y a r d s t i c k f o r m e a s u r i n g p r o g r e s s in t he ne t , desp i t e ups and downs in i n d u s t r y s a l e s . ^

The t a s k of d e t e r m i n i n g indus t ry vo lume , the s i z e of the m a r k e t fo r spec i f i c p roduc t s , and the compe t i t i ve pos i t i ons of company within the indus t ry r a n k s h ighe r t h a n o the r

* R ichard D. Cr i sp , How to Reduce Dis t r ibu t ion Cos t s (New York, 1948), p. 213. ~~ '

^ Ralph E. Mason and P a t r i c i a Mink Rath, Marke t ing and Dis t r ibu t ion (New York, 1968), p . 304.

3 3b id.

4 R ichard D. Cr i sp , "Company P r a c t i c e s in Marke t ing Re-

s e a r c h , " Hie Market ing Job (New York, 1961), p. 116.

81

m a r k e t i n g r e s e a r c h ac t i v i t i e s « . , among c o n s u m e r p roduc t s m a n u f a c t u r e r s . This point is s ign i f i can t , b e -c a u s e it unde r l i ne s an impor t an t t r e n d .

Marke t posi t ion (usually def ined as a f i r m ' s s h a r e o r p e r c e n t a g e of the to t a l m a r k e t ) cons t i tu tes one of the p r i n c i p l e m e a s u r e m e n t s m a d e by b u s i n e s s f i r m s . Not in f requent ly , m a r k e t i n g p lans a r e e x p r e s s l y f o r m u l a t e d wi th a view toward e i the r i nc rea s ing the l eve l of th i s v a r i a b l e or a t l e a s t ma in ta in ing it a t s o m e d e s i r e d l e v e l . More usua l ly , m a r k e t s h a r e p rov ides an impor t an t m e a -s u r e of the f i r m ' s m a r k e t i n g e f f o r t s and r e p r e s e n t s an i n t e r m e d i a t e v a r i a b l e f o r de r iv ing c a s h f lows r e q u i r e d in the evaluat ion of a l t e r n a t i v e p lans , °

Marke t s h a r e m e a s u r e m e n t is among the m o s t widely u s e d of al l b u s i n e s s too l s , and it is consequen t ly s u r p r i s i n g t h a t one cannot find any w h e r e a ful l d i s c u s s i o n of why i t is u sed , the a s s u m p t i o n s it imp l i e s , and t he o c c a s i o n s when it is l ike ly to be r e l i a b l e o r t h o s e when it wi l l l ead one a s t r a y . ^

P r o b l e m s Rela ted to Marke t P e n e t r a t i o n

Although it h a s b e e n shown tha t m a r k e t p e n e t r a t i o n is s ign i f i can t

a s a m e a s u r i n g tool and a company ob jec t ive , m a r k e t p e n e t r a t i o n

da ta have w e a k n e s s e s and p r e s e n t p r o b l e m s . The p r o b l e m s c r e a t e d

s o m e t i m e s outweigh the advan tages to be d e r i v e d f r o m m a r k e t pen®*

t r a t i o n da ta .

5 Ibid.

° W r o e Anderson and Paul E. Green , P lanning and P r o b l e m Solving in Market ing (Homewood, I l l inois , 1964), p . 170.

^Al f red R. Oxenfeldt , "How to Use M a r k e t - S h a r e M e a s u r e m e n t , " H a r v a r d Bus iness Review, XXXVII ( J a n u a r y / F e b r u a r y , 1959), 59.

. 1.. ''-"V . ! • <v.

When used as a m e a s u r e m e n t too], m a r k e t p e n e t r a t i o n data

show the f i r m ' s s a l e s posi t ion r e l a t i v e to the pos i t ion of o t h e r i n -

d u s t r y f i r m s . Until m a r k e t pene t r a t i on data is r e l a t e d to o t h e r

i n fo rma t ion , however , it p rov ide s nothing e l s e .

As a company ob jec t ive , m a r k e t p e n e t r a t i o n f r e q u e n t l y r e s u l t s

in a s a c r i f i c e of p ro f i t to ma in t a in o r i m p r o v e m a r k e t pos i t i on .

I n c r e a s e d expend i tu res and p r i c e r educ t ions tha t may be n e c e s s a r y

to m a i n t a i n o r i n c r e a s e a f i r m ' s m a r k e t s h a r e m a y m o r e than o f f -

s e t any r e s u l t i n g i n c r e m e n t s in p ro f i t . Improv ing a f i r m ' s m a r k e t

s h a r e of ten b e c o m e s an ob jec t ive to be "ach ieved at any cos t , "

I nc r ea sed m a r k e t p e n e t r a t i o n does not n e c e s s a r i l y m e a n in-

c r e a s e d p r o f i t as , o f ten , no r e l a t ionsh ip e x i s t s be tween the two.

Adopting a g r e a t e r m a r k e t s h a r e a s an ob jec t ive l e a d s to conf l i c t s

with o ther bus ines s ob jec t ives , pa r t i cu la r ly , when g r e a t e r m a r k e t

p e n e t r a t i o n b e c o m e s the p r i m a r y goal of the f i r m , as is the c a s e

with many f i r m s in the c o n s u m e r e l e c t r o n i c s i ndus t ry . Thus, the

s t r u g g l e f o r main ta in ing or improv ing m a r k e t p e n e t r a t i o n b e c o m e s

a dominant compet i t ive c h a r a c t e r i s t i c of the i ndus t ry . M o r e o v e r ,

when t he m e a s u r e m e n t of m a r k e t p e n e t r a t i o n t e n d s to be in un i t s

r a t h e r than in d o l l a r s , the danger of los ing s ight of m o r e impor t an t

company goa l s is g r e a t e r .

fn

It is not unusua l f o r e x t r e m e pressure fo r increased m a r k e t

p e n e t r a t i o n to be applied to the f i r m ' s o rgan i za t i on and d i s t r i b u t i o n

s y s t e m s . P r e s s u r e can r e s u l t in f u r t h e r i n e f f i c i e n c i e s . Too m u c h

p r e s s u r e weakens m a n a g e r i a l e f f e c t i v e n e s s within the o r g a n i z a t i o n

s t r u c t u r e and conf l ic t s with goals of d i s t r i bu t ion channel m e m b e r s .

Data Avai labi l i ty and Sources of I n a c c u r a c i e s

The amount of m a r k e t p e n e t r a t i o n data ava i l ab le at a low cos t

t ends to be l imi t ed . Secur ing adequa te da ta r e l a t i ng to compe t i t i ve

m a r k e t s h a r e s f o r m e m b e r s of the i ndus t ry by p roduc t and by m a r -

ket can be e x t r e m e l y cos t ly . T r a d e a s s o c i a t i o n s typ ica l ly f u r n i s h

only to t a l indus t ry s a l e s by p roduc t and m a r k e t . Specia l ized r e -

s e a r c h is n e c e s s a r y in m a n y s i tua t ions if compe t i t i ve i n f o r m a t i o n

is to be s e c u r e d b e c a u s e such da ta tend to be highly conf iden t ia l .

Since data change daily and a r e a c c u r a t e only f o r the pe r iod r e -

po r t ed it is n e c e s s a r y to cont inual ly tipdate m a r k e t p e n e t r a t i o n

da ta .

B e c a u s e of the di f f icul ty and c o s t s of s e c u r i n g data , m a n y

f i r m s m a k e e s t i m a t e s of c o m p e t i t o r s ' s h a r e of m a r k e t . These

e s t i m a t e s tend to be i n a c c u r a t e b e c a u s e of the p r e j u d i c e of o n e ' s

own s t r e n g t h . This p r e j u d i c e t ends to u n d e r e s t i m a t e compe t i t i ve

s t r e n g t h s . At the s a m e t i m e , a f i r m ' s o p t i m i s m t o w a r d its own

abi l i ty to i n c r e a s e its s h a r e of m a r k e t l e a d s to expans ion of

: " ' - ' : 8 4

f a c i l i t i e s and ove rp roduc t ion , which eventua l ly r e s u l t s in p r i c e r e -

duc t ions , dumping, and e x t r e m e compe t i t ion wi thin t he i n d u s t r y .

Addit ional example s of p o s s i b l e i n a c c u r a c i e s of da ta r e s u l t

f r o m f a i l u r e of indus t ry m e m b e r s to r e p o r t t h e i r s a l e s to t he E l e c -

t r o n i c Indus t r i e s Assoc ia t ion , Other f i r m s wi l l hold s a l e s to t h e

end of an account ing pe r iod b e f o r e r e p o r t i n g , or if t h e i r pos i t ion

looks good, f i r m s will c a r r y s a l e s f r o m one y e a r to the nex t in

o r d e r to m i s l e a d compet i t ion . S imi l a r s i t ua t i ons o c c u r when

f i r m s r e p o r t s a l e s in a d i f f e r e n t a r e a f r o m w h e r e sold . Whole-

s a l e r s s o m e t i m e s do th i s in o r d e r to m a k e t h e i r p e r f o r m a n c e

look m o r e ba l anced .

Inaccu ra t e data r e s u l t f r o m f a i l u r e of i m p o r t s a l e s to b e in-

cluded in indus t ry s a l e s . Also d i r e c t s a l e s to c o n s u m e r s , to

l a r g e s c a l e r e t a i l e r s who r e d i s t r i b u t e to a s s o c i a t e s t o r e s , and

t r a n s s h i p p i n g among w h o l e s a l e r s and r e t a i l e r s t end to p l a c e s a l e s

in m a r k e t s o ther than w h e r e o r ig ina l ly sold and r e c o r d e d . Since

t o d a y ' s l a r g e m a r k e t s e n c o m p a s s s e v e r a l coun t ies , r e t a i l e r s f r e -

quent ly m a k e s a l e s ou ts ide the county w h e r e the r e t a i l e r is l o c a t e d .

Marke t pene t r a t i on , when m e a s u r e d in un i t s a s opposed to

do l l a r m e a s u r e m e n t s , wi l l p r o v i d e a d i f f e r e n t s h a r e of m a r k e t

f o r f i r m s wi thin t he indus t ry , as s o m e f i r m s e m p h a s i z e low p r i c e d

r a t h e r than high p r i c e d m e r c h a n d i s e . Such f i r m s could h a v e a

b t

• ' ' 85-

l a r g e p e r c ea t of tbe to ta l m a r k e t in uni ts , but a low p e r c e n t a g e of

m a r k e t in do l la r s a l e s .

Data a c c u r a c y is f u r t h e r i m p a i r e d when i n d u s t r y data a r e

g a t h e r e d a t the point of m a n u f a c t u r e , o r m a n u f a c t u r e r s ' s h i p m e n t s

to w h o l e s a l e r s , or even w h o l e s a l e r s ' s h i p m e n t s to r e t a i l e r s . While

p rov id ing va luable da ta , t h e s e poin ts of m e a s u r e m e n t a r e not the

s o u r c e of the m o s t v i ta l data, -which should b e g a t h e r e d a t t he

point of s a l e to the u l t i m a t e c o n s u m e r . Other poin ts of m e a s u r e -

m e n t do not r eco rd the locat ion of the f ina l s a l e .

T ime Lag in Repor t ing Data

Any r epo r t i ng s y s t e m will have s o m e l ag be tween t h e t i m e of

s a l e and the feedback of i n fo rma t ion . Desp i te a t i m e lag of s e v e r a l

m o n t h s , t r a d e a s soc ia t ion da ta a r e g e n e r a l l y a v a i l a b l e s o o n e r t han

g o v e r n m e n t data . T h e r e f o r e , v i r t ua l l y a l l s a l e s p r o j e c t i o n s a r e

b a s e d on the pa s t r a t h e r than on what is happening a t t he m o m e n t .

The delay in s ecu r ing s a l e s da ta m a k e s it d i f f i cu l t to a n a l y z e

a c t i v i t i e s of the f i r m and i ts compet i t ion which took p l a c e s e v e r a l

m o n t h s b e f o r e , when the s a l e s w e r e m a d e . To o v e r c o m e the t i m e

l ag p r o b l e m would involve ma in ta in ing a cont inuous inven tory of

t he f i r m s ' ac t iv i t i e s a s wel l as the ac t i v i t i e s of i t s c o m p e t i t o r s in

e v e r y m a r k e t . Such an inventory would be w o r t h w h i l e , but p robab ly

would be too cost ly to j u s t i fy . To o v e r c o m e t h e p r o b l e m , m a n y

f i r m s employ outs ide m a r k e t r e s e a r c h f i r m s to m e a s u r e r e t a i l

s a l e s to c o n s u m e r s by b r and and by m a r k e t . Such r e s e a r c h f i r m s

r e d u c e the t i m e lag to be tween four and s ix w e e k s .

Data Ut i l iza t ion

M a r k e t pene t r a t i on data o f ten a r e sub j ec t ed to an emot iona l

eva lua t ion . A decl ine in a f i r m ' s m a r k e t p e n e t r a t i o n m a y be

viewed by m a n a g e m e n t a s a p e r s o n a l f a i l u r e . To m a n y p e r s o n s

in the f i r m a dec l ine in m a r k e t p e n e t r a t i o n s u g g e s t s tha t the f i r m

is f ac ing potent ia l bankrup tcy . Marke t p e n e t r a t i o n da ta do not

p r o v i d e explanat ions of the c a u s e s of dec l ine o r i m p r o v e m e n t in

p r o d u c t s a l e s p e r f o r m a n c e . Since t h e r e a r e so m a n y v a r i a b l e s

which can cause changes in the s h a r e of m a r k e t , it is d i f f icu l t fo r

a f i r m to ma in t a in its r e l a t i v e pos i t ion in t he m a r k e t . This is e s -

pec i a l l y t r u e s ince m a n a g e r i a l ab i l i ty d i f f e r s a inong f i r m s , and

r e s o u r c e s a r e not ava i l ab le to a l l f i r m s wi th in an indus t ry on the

s a m e r e l a t i ve ly p r o p o r t i o n a t e b a s i s . And, c e r t a i n l y , t h e s e r e -

s o u r c e s a r e not applied to the m a r k e t i n g m i x in the s a m e m a n n e r .

When es tab l i sh ing m a r k e t p e n e t r a t i o n g o a l s , f i r m s f r e q u e n t l y

a s s u m e no new e n t r i e s into n o r ex i t s f r o m the i ndus t ry , and do not

c o n s i d e r m e r g e r s , s t r i k e s o r shutdown, o r the e f f e c t s of t h e s e

f a c t o r s on the f i r m or i ts competLtion. By not r e p o r t i n g s a l e s to

t he E l e c t r o n i c Indus t r i e s Assoc i a t i on , new f i r m s m a y e n t e r t he

i ndus t ry and go unnoticed until they have f i r m l y en t r enched t h e m -

s e l v e s in the m a r k e t .

M a n u f a c t u r e r s who tend to g r a d e each loca l m a r k e t on t h e

b a s i s of nat ional a v e r a g e m a r k e t pene t r a t i on a r e expect ing the i m -

p o s s i b l e , a s t h e r e is no way in which eve ry m a r k e t can exceed

na t iona l a v e r a g e . Also, t h e r e is l i t t l e cons i s t ency in s a l e s by p r o -

duct be tween nat ional m a r k e t s and loca l m a r k e t s . All m a r k e t s tend

to behave d i f f e r en t ly . Since t r e n d s begin in loca l m a r k e t s , each

m a r k e t should be s tudied individual ly .

F a c t o r s Affecting a Fi.rm1 s Share of M a r k e t

To ana lyze a l l of the factor£5 which a f f e c t a f i r m ' s s h a r e of

m a r k e t would b e c o m e a study within i t se l f . Most of the f a c t o r s

r e l a t e to the f i r m ' s deve lopment of a ba lanced m a r k e t i n g m i x and

t he e f f i c i en t u t i l iza t ion of the f i r m ' s r e s o u r c e s in the p e r f o r m a n c e

of m a r k e t i n g funct ions to m e e t the needs of the m a r k e t . A l i s t i ng

of the m o r e f requent ly men t ioned f a c t o r s a f f ec t ing a f i r m ' s m a r k e t

s h a r e inc lude : (1) m a r k e t demand and c o n s u m e r a t t i t udes , (2) the

d i s t r i b u t i o n s y s t e m , (3) p roduc t l ine and w a r r a n t y pol icy , (4) c o m -

pe t i t i ve p r i c i n g , (5) ex tens ive p romot ion , (6) s t r e n g t h and e f f e c -

t i v e n e s s of compet i t ion , (7) m e r g e r s and new e n t r i e s into the

indus t ry , (8) wholesa le and r e t a i l c r ed i t , (9) l ega l r e s t r i c t i o n s ,

and (10) t he d e g r e e of c o m m i t m e n t to ach ieve a given m a r k e t s h a r e

by the f i r m .

88

Unit, and Dol lar S igni f icance

Indus t ry s a l e s da ta f o r 1970 r e f l e c t the un i t and do l l a r i m p o r -

t a n c e of m a r k e t p e n e t r a t i o n . Each one p e r cent s h a r e of m a r k e t f o r

a m a n u f a c t u r e r o r i m p o r t e r r e p r e s e n t e d 122,200 un i t s in t e l e v i s i o n

o r $22, 020, 000 in r evenue ; 340. 000 uni t s in r a d i o or $3, 800, 000 in

r e v e n u e ; 56, 200 uni ts in phonographs o r $3, 760, 000 in r e v e n u e ; and

84 ,590 uni t s in r e c o r d e r s o r $2,438, 360 in r e v e n u e . Total do l l a r

va lue of s a l e s of al l c o n s u m e r e l e c t r o n i c p r o d u c t s in 1970 w e r e

$3 ,201, 836, 000. 8

Indus t ry C o m m e n t s

Execut ive t u r n o v e r . - - I n d u s t r y t r a d e j o u r n a l s r e v e a l t ha t t u r n -

o v e r of m a n a g e m e n t wi th in the c o n s u m e r e l e c t r o n i c p r o d u c t s in-

d u s t r y is high. Much of the c a u s e of the t u r n o v e r a p p e a r s to r e l a t e

to f a i l u r e in ma in ta in ing o r improv ing m a r k e t p e n e t r a t i o n of t he

f i r m involved. Genera l ly t h e new top execu t ive m a k e s changes in

key execu t ive pos i t i ons , and s o m e t i m e s c o m p l e t e l y r e o r g a n i z e s the

f i r m . F o r example , . . Sylvania n a m e d a new s e n i o r v i c e -

p r e s i d e n t f o r e n t e r t a i n m e n t p r o d u c t s - - T h o m a s H. Cash in- -who

p r o m p t l y b rough t in 137 new m a n a g e m e n t peop l e . Appa ren t ly

8 S e e Table II, p. 19.

^ "Co lo r TV's Rainbow F a d e s a Bit, " B u s i n e s s Week ( F e b r u a r y 1, 1969), p . 38.

' 89

d i s t r e s s e d by tbe f i r m ' s e m p h a s i s cm m a r k e t p e n e t r a t i o n ratb.er than

p r o f i t Cashin c o m m e n t e d : "We've h i d our f i l l of e n t r e p r e n e u r s who

10 wanted to se l l t b e m o s t s e t s , -whether or not it was p r o f i t a b l e . n

Changing s t r a t e g i e s . - - T h e new a s s i s t a n t g e n e r a l m a n a g e r of

Motoro la , Inc. ' s Consumer P r o d u c t s Divis ion, Edward P . Reavey,

J r . , r e f l e c t e d tha t the c o n s u m e r e l ec t ron i c p r o d u c t s i ndus t ry s u f -

f e r s f r o m s a m e n e s s . "One company cuts a p r i c e , so eve ryone

e l s e cuts a p r i c e . What th i s i n d u s t r y ca l l s m a r k e t i n g is s l a sh ing

p r i c e s and dumping m e r c h a n d i s e . 1,1 * Reavey be l i eved t h e i n d u s t r y

to be unsoph i s t i ca t ed in i ts m a r k e t i n g a p p r o a c h b e c a u s e f i r m s fa i l ed

to de f ine what b u s i n e s s they a r e in o r what t h e i r c u s t o m e r s ' needs

a r e , and t hey do not do su f f i c ien t m a r k e t r e s e a r c h or t e s t m a r k e t i n g .

On a s s u m p t i o n of h i s new pos i t ion ' h e found Motoro la m a n a g e m e n t

12

f ight ing to r e v e r s e a decl in ing s h a r e of the co lor TV m a r k e t . . . "

By fol lowing a to ta l m a r k e t i n g concept which included def ining

t he n a t u r e of the b u s i n e s s , c u s t o m e r needs , m a r k e t r e s e a r c h , and

t e s t m a r k e t i n g , Reavey w a s ab le to i n c r e a s e s a l e s , m a r k e t p e n e -

t r a t i o n , and p ro f i t in co lor TV. In addit ion, a s v i c e - p r e s i d e n t and

1 03bid.

** "Color TV's Renegade, " Sales Management , CXI (May 1, 1969), 35.

1 2 I b i d .

90

g e n e r a l m a n a g e r of the consu tne r p roduc t s d iv i s ion of Motoro la ,

Reavey added one. thousand r e t a i l a ccoun t s , doubled employmen t ,

changed t h i r t y - f o u r p e r cent of the d i s t r i b u t o r s in one y e a r , in -

c r e a s e d m a r k e t e f f o r t and penetrat ion, of c o l o r TV in the ho t e l -

m o t e l f ie ld to over twen ty- f ive p e r cent , improved s e r v i c e s , and

In t roduced a sol id s t a t e t r a n s i s t o r i z e d c h a s s i s with p l u g - i n c i r -

13

c u l t s .

A r j o y Mi l le r , p r e s i d e n t of the F o r d Motor Company, ind ica ted

t he job of turning- Phi lco a round w a s m o r e d i f f i cu l t t han was a n t i c i -

pated a t t h e t i m e of the p u r c h a s e . Fo rd p u r c h a s e d Ehilco b e c a u s e

of P h i l c o ' s s t rong r e s e a r c h and deve lopment b a s e in m i l i t a r y and

s p a c e e l e c t r o n i c s , and b e c a u s e of i ts d e f e n s e c o n t r a c t s a l e s .

Unfor tunate ly , P h i l c o ' s s t r o n g pos i t ion in d e f e n s e was m o r e than o f f s e t by i ts c o n s u m e r e l e c t r o n i c s b u s i n e s s . P h i l c o ' s r ad io , TV, and app l iance l i n e s had been los ing t h e i r s h a r e of the m a r k e t (as wel l a s money ) f o r y e a r s . The c o m p a n y ' s o ld - fash ioned d i s t r i bu t ion s y s t e m - - t h r o u g h s o m e 20 ,000 d e a l e r s , m o s t l y of the "Mom and P o p " v a r i e t y - - had been fa l l ing a p a r t , ^

A f t e r los ing money in c o n s u m e r e l e c t r o n i c p r o d u c t s f o r s e v e r a l

y e a r s whi le unde r the d i r ec t i on of F o r d m a n a g e m e n t , Mi l l e r h i r e d

1 "Motorola Eyeing No. 2 Color Spot, " Home F u r n i s h i n g s

Daily, XLIII (December 14, 1971), 1, 4.

^ " P h i l c o - F o r d : The Ba lance Sheet, " F o r b e s , XCT.X (March 1, 1967), 54.

91

Robert O. Fickes as president of Philco's consumer products group.

A fo rmer president of Norge and department head for General

Electric,, Fickes began to reorganize the division. In a comment

to Forbes Fickes said:

One of my advantages over my predecessor has been that I did not come f r o m the Ford Motor Company, Ford Motors is basically a one-product company where f r an -chised dealers have a contract to handle a single line apiece. In appliances and TV sets you can have a dozen competitors on the same dea le r ' s f loor .

In order to re turn Philco to a profi table operation, Fickes '

reorganization included hiring executives experienced in consumer

electronic products. One such executive was Carl E. Lanty, fo r -

m e r president of Admiral Sales Corporation, Other actions

included the following: (1) replacing the old regional manager

system with the factory- to-dis t r ibutor system; (2) conducting

marke t r e sea rch which included extensive in-depth consumer in-

terviews, product revision and model expansion; (3) doubling the

number of volume dealers ; and (4) quadrupling capital expenditures

to around $125 million. ^

Pr ice competition. - -Competition, par t icular ly in the f o r m of

pricing, appears to plague the industry. Merle Kremer, president

l 5 Ib id . ^ I b i d . , pp. 54-55,

92

of GTE Sylvania, I nc . , "believes t h e color TV indus t ry to b e •un-

n e c e s s a r i l y -combative, p a r t i c u l a r l y in the way it cu ts p i ' iceg , The

r e a s o n s f o r th is a r e ". . , the indus t ry h a s too ratten e x c e s s c a p a -

ci ty and nobody wants to l o s e Lis s h a r e of m a r k e t . ^

L,ittle doubt ex i s t s t ha t the indus t ry does o p e r a t e in an en-

v i r o n m e n t of f r equen t p r i c e changes . The typ ica l a p p r o a c h in t he

i n d u s t r y i s one of in t roducing new mode l s at a p a r t i c u l a r p r i c e and

then cutt ing the e s t ab l i shed in t roduc to ry p r i c e th roughout the y e a r .

Sylvania r e c e n t l y in t roduced m o d e l s a t h ighe r p r i c e d l e v e l s than

t h o s e p r e v i o u s l y used , but as K r e m e r r e f l e c t s . . compe t i t i on

wouldn ' t l e t t h e m s tay t h e r e . The p r o b l e m w a s we wai ted too long

b e f o r e reduc ing t h e m , and tha t cos t us m a r k e t p e n e t r a t i o n . . .

Communica t ions . - -Al l m e m b e r s of the i ndus t ry do not a d m i t

the s ign i f i cance of planned m a r k e t i n g ac t i v i t i e s o r of m a r k e t p e n e -

t r a t i o n . The Matsush i ta E l e c t r i c Corpora t ion of A m e r i c a , a United

States s u b s i d i a r y of the J apanese m a n u f a c t u r e r of P a n a s o n i c r e -

vea led t he fol lowing:

. . • we don ' t have any p r o f e s s i o n a l m a r k e t i n g p r o -g r a m . Our m a r k e t i n g is done on a n i n f o r m a l b a s i s . Our

17 'Manning Greenbe rg , "S lashe r Asks 'What P r i c e Compet i t ion

in Color T V ? , " Home F u r n i s h i n g s Daily, XL,III (December 16. 1971), 1.

18 Thirl.

93

s a l e s execut ives keeping c lose con tac t s with the s a l e s f o r c e and key d e a l e r s th roughout the coun t ry , Also , we m a k e constant a n a l y s i s of inventory t r e u d s ^ ^ ^

With the high d e g r e e of s u c c e s s of the P a n a s o n i c b r a n d of m e r -

chand i se , it is l ikely t h a t a b e t t e r m a r k e t i n g p r o g r a m h a s ex i s ted

than indica ted , The i m p o r t a n c e which Ma t sush i t a a t t a c h e s to c o m -

m u n i c a t i o n s between m a n a g e m e n t and its s a l e s f o r c e and key

d e a l e r s , and to inven tory t r e n d s should be a guide f o r o the r m a n u -

f a c t u r e r s to fo l low.

Data a n a l y s i s . - - R C A conducts m e e t i n g s each Monday to d i s -

c u s s produc t ion , s a l e s , and inven to ry to p e r m i t g r e a t e r p r e c i s i o n

in f o r e c a s t i n g . S ta t i s t i ca l data a r e p r e s e n t e d a t t h e s e m e e t i n g s

which r e f l e c t " f ac to ry s a l e s , f a c to ry inven tory , w e e k ' s supply ,

d i s t r i b u t o r s a l e s , d i s t r i b u t o r inventory , w e e k ' s supply a t t he d i s -

20

t r i b u t o r l eve l and . . . p e r cent s h a r e of i n d u s t r y . " While t he

s y s t e m is even m o r e soph i s t i ca t ed than p r e s e n t e d , i t l a c k s con-

s i d e r a t i o n of d e a l e r i nven to r i e s , or of what i s c u r r e n t l y taking

p l a c e at the point of u l t i m a t e consumpt ion .

19 7 C o r r e s p o n d e n c e f r o m Susan K e n n e m e i e r , Execut ive Off ices ,

Ma t sush i t a E l e c t r i c Corpo ra t i on of A m e r i c a , New York, November 24, 1970.

^ D a v i d J . McC-arty, "The T h r e e C ' s of Sales F o r e c a s t i n g , " Marke t ing P r e c i s i o n and Execut ive Action. P r o c e e d i n g s of the F o r t y - F i f t h National Confe rence of t he A m e r i c a n Marke t ing A s s o -c ia t ion , edi ted by Char l e s H. H i n d e r s m a n (Chicago, 1962), p . 249.

94

Industry comments r evea l increas ing at tent ion to inven tor ies .

The burden of car ry ing inventory b.as tended to sh i f t somewhat f r o m

r e t a i l e r to wholesaler to manufac tu re r in r ecen t y e a r s . "In. the TV

industry, fo r example, dea l e r s today c a r r y 35-40 p e r cent of the

to ta l pipeline inventories while f ac to r i e s and d i s t r ibu to r s c a r r y

21

60-65 per cent. " In y e a r s pas t it was not unusual fo r r e t a i l e r s

to c a r r y 50 per cent, d i s t r ibu to r s 30 per cent, and m a n u f a c t u r e r s

20 pe r cent of the total inventory in p ipe l ines .

A s imi l a r but l e s s sophist icated s y s t e m than that of RCA

exis t s at Zenith for analyzing d is t r ibu tor s a l e s and inventor ies ,

Fo r Zenith, "an important purpose of the m a r k e t pene t ra t ion

ana lys i s is to bols ter poor d i s t r ibu tor p e r f o r m a n c e .

Secrecy of Data

Industry m e m b e r s place grea t s ignif icance on the i r s h a r e of

m a r k e t within the industry, yet they tend to want th is data to r e -

m a i n confidential . While the Elect ronic Industr ies Associa t ion

h a s s h a r e of m a r k e t data for domes t i c b rands , the Associa t ion is

not pe rmi t ted to publish the data . The Elect ronic Indus t r ies

2 1 Ibid. , p. 250.

22 "Use of Sales Analysis in Guiding Dis t r ibu tors and Con-

t rol l ing Inventory-- Zenith Sales Corporat ion, " Sales Analys is , Studies in Business Policy, No. 113 (New York, 1965), p„ 17.

95

Assoc ia t ion provides..mdixstry. s a l e s fo r the United States a s a whole

and f o r individual s t a t e s and count ies to m e m b e r s . The i n d u s t r y

m e m b e r s can then d e t e r m i n e t h e i r s h a r e of m?„rket. P r i v a t e r e -

s e a r c h o rgan iza t ions o r o ther m e a n s m u s t be used by i ndus t ry

m e m b e r s , however , to d e t e r m i n e t h e i r c o m p e t i t i o n ' s m a r k e t p e n e -

t r a t i o n .

I m p o r t da ta a r e r e c o r d e d and publ i shed by the U. S. Cus toms

D e p a r t m e n t by type of p roduc t and or ig ina t ing coun t ry of s h i p m e n t .

Cus toms invoices and d e c l a r a t i o n s contain data by b r a n d o r c o m -

pany produc ing the p roduc t , and th i s i n f o r m a t i o n would be b e n e -

f i c i a l to t he domes t i c i n d u s t r y if pub l i shed . This type da ta would

have benef i t ed United Sta tes compan ies in m e e t i n g f o r e i g n c o m p e -

t i t ion but appa ren t ly no e f f o r t was m a d e by the i n d u s t r y o r t he EIA

to e n c o u r a g e the Cus toms D e p a r t m e n t to publ i sh th i s da ta . Also ,

t h e r e h a s b e e n l i t t l e e n c o u r a g e m e n t by the i ndus t ry or i m p o r t e r s

and f o r e i g n m a n u f a c t u r e r s to jo in o r r e p o r t s a l e s to the EI A.

Reasons f o r s e c r e c y . - - I n the c o n s u m e r e l e c t r o n i c p r o d u c t s

i ndus t ry individual f i r m s d e s i r e data to r e m a i n s e c r e t b e c a u s e

t hey c o n s i d e r t h e i r s h a r e of m a r k e t to be p r i v a t e i n f o r m a t i o n .

Maintaining s e c r e c y i s an e f f o r t to p r e v e n t compe t i t ion f r o m knowing

anything about the f i r m ' s b u s i n e s s . Many in the i ndus t ry b e l i e v e

tha t if m a r k e t p e n e t r a t i o n da ta w e r e publ ic i n fo rma t ion , c o m p e t i t o r s

96

would i n c r e a s e t h e i r e f f o r t s when o t h e r s in the i n d u s t r y w e r e in-

c r e a s i n g t h e i r m a r k e t s h a r e . It is f e a r e d tha t if a f i r m ' s s h a r e

w a s dec l in ing , the f i r m ' s c o m p e t i t o r s would m a k e th i s f a c t known

t h r o u g h a d v e r t i s i n g . In addi t ion, many s u p p l i e r s do not want t h e i r

c u s t o m e r s to know how good or bad the f i r m o r i ts b r a n d m a y be

p e r f o r m i n g r e l a t i v e to the to t a l i ndus t ry .

Other r e a s o n s why f i r m s hold t h e i r m a r k e t p e n e t r a t i o n da t a

conf ident ia l a r e the fo l lowing: (1) to p r e v e n t compe t i t i on f r o m de -

t e r m i n i n g the e f f e c t i v e n e s s of p r o d u c t i n t roduc t ion and m a r k e t i n g

p r o g r a m s ; (2) to m a k e compet i t ion be l i eve the f i r m is ove r spend ing

and wil l soon be f o r c e d to r e d u c e m a r k e t i n g e f f o r t s ; (3) to p r e v e n t

compe t i t i on f r o m d e t e r m i n i n g the f i r m ' s s t r o n g m a r k e t a r e a s ,

t h e r e b y p r e v e n t i n g the p o s s i b l e l o s s of d i s t r i b u t i o n ou t l e t s ; (4) to

g row and b e c o m e en t r enched in the m a r k e t b e f o r e compe t i t i on fu l ly

r e a l i z e s the f i r m ' s s t r eng th ; (5) to r e t a i n the ab i l i ty to withhold in-

f o r m a t i o n f r o m s t o c k h o l d e r s unt i l s i tua t ions h a v e been c o r r e c t e d ;

(6) to p r o v i d e a shie ld a g a i n s t p e r s o n a l a t t a c k s on a f i r m ' s m a n -

a g e r i a l ab i l i ty by i n d u s t r y t r a d e j o u r n a l s ; and (7) to p r e v e n t m a n -

a g e m e n t f rom, r eac t i ng too quickly in combat ing changes in m a r k e t

s h a r e s of c o m p e t i t o r s .

D i sadvan tages of s e c r e c y . - - M o s t of t he f o r e g o i n g advan tages

of s e c r e c y f o r a p a r t i c u l a r f i r m a r e d i s a d v a n t a g e s f o r the f i r m ' s

competitor. '?. F o r example , publ ic inforrrration could pos s ib ly p r e -

ven t new e n t r i e s into a m a r k e t f r o m becoming wel l e s t a b l i s h e d

b e f o r e p r e s e n t i ndus t ry m e m b e r s b e c o m e to ta l ly a w a r e of t h e i r

p r e s e n c e and s t r eng th . Had in fo rma t ion r e g a r d i n g the i n c r e a s i n g

s t r e n g t h of i m p o r t b r a n d s been publ ic , it is p o s s i b l e tha t d o m e s t i c

f i r m s could have ac ted to r e t a r d the e a r l y g rowth of i m p o r t e d m e r -

chand i se .

The d i sadvan tages in ma in ta in ing s e c r e c y of m a r k e t p e n e t r a t i o n

data inc lude the fo l lowing: (1) the d i f f icu l ty in d e t e r m i n i n g the a c -

c u r a c y of ava i l ab le da ta ; (2) the t endency to o v e r e s t i m a t e c o m p e - •

t i t i ve s t r e n g t h s ; (3) the d i f f icu l ty in r e l a t ing s h a r e of m a r k e t da ta

to b u s i n e s s cyc les and g e n e r a l economic condi t ions ; (4) t he d i f f i -

cul ty in p romot ing the s i gn i f i c ance of s i z e o r g rowth of the f i r m ;

(5) the cos t of s e c u r i n g compe t i t i ve data , p a r t i c u l a r l y f o r e v e r y

m a r k e t ; (6) the f a c t tha t m a n a g e m e n t is f r e q u e n t l y not a w a r e of

poor p e r f o r m a n c e unti l the s i tua t ion ha s b e c o m e c r i t i c a l ; and (7)

t he f a c t tha t s e c r e c y does not allow s tockho lde r s and c u s t o m e r s to

be a w a r e of a b r a n d ' s p r o b l e m s unt i l the b r a n d ' s image a s wel l a s

p r o f i t s have d e t e r i o r a t e d .

It is p o s s i b l e tha t t he advan tages to be de r ived by the c o n s u m e r

e l e c t r o n i c p r o d u c t s i ndus t ry f r o m making m a r k e t p e n e t r a t i o n data

publ ic could v e r y wel l outweigh the advan tages of ma in ta in ing

98

s e c r e c y of data., a t l e a s t f r o m a national point of view. Since the

indust ry has been de termined to be highly competi t ive, a s well a s

concerned with marke t penetra t ion, the re a p p e a r s to he l i t t l e f o r '

the indust ry to f e a r f r o m having accu ra t e public data r a t h e r than

costly, incomplete, or no data which r e m a i n s s ec r e t i ve .

Market and Sales Potent ia l

Market potential is "a calculation of maximum, poss ib le sa l e s

opportuni t ies f o r all s e l l e r s of a good or s e r v i c e during a s ta ted

23

per iod . " Market potential r e p r e s e n t s a f o r e c a s t of indust ry

s a l e s . F r o m the total industry m a r k e t potent ia l , individual f i r m s

e s t ima te the sa les potential that exis ts fo r the f i r m fo r spec i f ic

products by brand and fo r specif ic geographic a r e a s by f i r m , p ro -

duct, and brand. After sa les potent ials a r e de te rmined they

genera l ly become the b a s i s fo r the e s t ab l i shment of quotas .

Uses of Market Potent ia ls

The m o r e f requent uses of m a r k e t potent ial data a r e to de t e r -

mine the following: (1) sa les t e r r i t o r i e s ; (2) s a l e s quotas; (3) t r a d e

channels; {4) allocation of promot ional e f for t ; (5) plant, b ranch , and

warehouse location; (6) equitable sa les compensat ion p lans ; (7) sa l e s

^ A m e r i c a n Marketing Associat ion, Commit tee on Definitions, Marketing Definitions (Chicago, I960), p. 15.

f o r c e e f fec t iveness ; (8) p r o s p e c t s , and (9) new p roduc t in t roduc t ions

7 \

and m a r k e t expansion. ""T When m a r k e t pene t r a t i on is a f i r m ' s goal,

the goal becomes a s a l e s quota.

Since quota a s s i g n m e n t s a r e an in tegra l p a r t of e v e r y s egmen t

of the indus t ry , quotas should be as a c c u r a t e a s p o s s i b l e . Conflict

among channels of d i s t r ibu t ion a r i s e s b e c a u s e of the fee l ing of in-

equity bel ieved to exis t in quota a s s i g n m e n t s by m a n u f a c t u r e r s and

w h o l e s a l e r s to the i r c u s t o m e r s .

Developing po ten t ia l s

With only a few except ions , consumer p roduc t m a n u -f a c t u r e r s can look to one or both of two me thods f o r the b a s i c technique to develop potent ia l s ; the Sales Data Method and the Index Method. ^5

In making u s e of the Sales Data Method, a l l the s a l e s of the

indus t ry m u s t be r epo r t ed by p roduc t by geograph ic a r e a to a

c e n t r a l data collection agency. In this m a n n e r ac tua l total i ndus t ry

sa l e s f o r m the ba s i s f o r es t imat ing m a r k e t po ten t ia l s f o r t h e f u t u r e . |

When data a r e ava i lab le fo r a pe r iod of s e v e r a l y e a r s , r e a s o n a b l y jj

jp a c c u r a t e t r e n d s can be e s t ab l i shed . The m o s t obvious c h a r a c - ! j .

t e r i s t i c of the Sales Data Method is that a d i f f e r e n t m a r k e t potent ia l l [{ j j :

? a 1 i F r a n c i s E. Hummel, Marke t and Sales Po ten t i a l s (New York, H

1961), p . 9. ' :j

25 John M. Brion, Corpo ra t e Market ing Planning (New York, j

1967), p . 355. !

100

wi l l .result f o r each p roduc t s ince the m a r k e t po ten t i a l is b a s e d or-

a c t u a l s a l e s . F o r example , i ndus t ry s a l e s ha T e x a s f o r r a d i o s

du r ing 1970 was 4 , 5 8 9 p e r cent of t he na t iona l m a r k e t ; f o r c o l o r

t e l e v i s i o n s , 5 ,582 p e r cent ; f o r conso le p h o n o g r a p h s , 6 . 5 9 8 p e r

cent ; f o r po r t ab l e phonographs , 5. 18? p e r cen t ; f o r M a c k and whi te

2£i t e l e v i s i o n s , 5 . 0 4 8 pe r cent , and f o r t ape r e c o r d e r s , 4, 78 p e r cent,,

Since r e l i ab l e and a c c u r a t e da ta a r e not a lways a v a i l a b l e a t a *

m o d e r a t e cos t i t f r e q u e n t l y b e c o m e s n e c e s s a r y to u s e the Index

Method to develop m a r k e t po ten t ia l s f o r the i n d u s t r y . This t e c h -

nique ' employs a g e n e r a l m e a s u r e m e n t of p u r c h a s i n g power a s the

b a s i s f o r e s t ima t ing tbe m a r k e t potent ia l f o r a g iven commodi ty . ^

A n u m b e r of g e n e r a l m a r k e t f a c t o r s , such as popula t ion , p e r s o n a l

o r f a m i l y income, r e t a i l s a l e s , who le sa l e s a l e s , Income tax r e -

t u r n s , bank depos i t s , and o t h e r s , a r e combined t o p r o d u c e a s ingle

index . On occas ion , only one of the a f o r e m e n t i o n e d f a c t o r s wi l l b e

u t i l i zed a s a s ing le index. F requen t ly , r e t a i l s a l e s a r e u s e d to

f o r m a s ing le index b e c a u s e they r e p r e s e n t a c t u a l p u r c h a s e s of

goods and s e r v i c e s .

26 P e r c e n t a g e s ca lcu la ted f r o m : E l ec t ron i c I n d u s t r i e s A s s o -

c ia t ion , E lec t ron ic Marke t Data Book, 1971 (Washington, 1972), pp . 10, 11, 26, 31-33; and Ampex Corpo ra t i on , C o n s u m e r Equip-m e n t Division, The Sound Idea Manual (Elk Grove Vil lage, HI. , 1970), p . II, A / 1 .

27 Lyndon O. Brown, Market ing and D i s t r i bu t i on R e s e a r c h

(New York, 1955), p. 433.

A number of p r e p a r e d indexes , such a s the Rand-McNal ly Index,

the Crowell Index, and the McCarta Index a r e ava i lab le . The Sales

Management "Survey of Buying P o w e r " is a p r e p a r e d index u s e d

ex tens ive ly ia the consumer e l ec t ron ic p roduc t s indus t ry . It i s

d e s c r i b e d a s being

a weighted index tha t conver t s t h r e e b a s i c e l e m e n t s - -population, Effect ive Buying Income and Retai l Sales - -into a m e a s u r e m e n t of a m a r k e t ' s abi l i ty to buy, and e x p r e s s e s it a s a pe r cen t age of the U. S. potent ia l , It is calculated by giving a weight of 5 to the m a r k e t s p e r cent of the U. S. Effect ive Income, 3 to i ts p e r cent of U, S. r e t a i l s a l e s , and 2 to its per cent of U. S. popu-la t ion. The total of t h e s e weighted p e r cen ts is then divided by 10 to a r r i v e at the BPL

Sales Management ind ica tes that i ts s u b s c r i b e r s u s e the "Sur-

vey of Buying P o w e r " to e s t ab l i sh quotas and t e r r i t o r y po ten t i a l s ,

t o s e l e c t m a r k e t s to t e s t or concen t ra te e f f o r t s , to u s e the a d v e r -

t i s ing do l la r m o r e ef fec t ive ly , to d e t e r m i n e the rou te s of the s a l e s

f o r c e , to e s t ab l i sh new produc t m a r k e t i n g , and to loca te d i s t r ibu t ion

poin ts .

The g r e a t e s t weakness of the Sales Management Buying Index,

a s is t r u e of all s ingle index me thods , is tha t the index f a i l s to

7R . "Behind the Small Type in the Sales Management Survey of

Buying Power , " Sales Management , CIV (June 10, 1970), 7.

"How Subsc r ibe r s Use the Survey of Buying Power , " Sales Management , LXXVIII (May 10, 1957), 34-43.

LOS

account fo r differences ' hi the m a r k e t s fo r daffereoit product©,, la

the discussion of the Sales Data .Method the d i f ference m the per-

centage of national sa les o£ each consumer e lectronic product sold

in Texas was shown to va ry f r o m 4. 589 p e r cent f o r radio to 6. 598

per cent fo r console phonograph. The s ingle 1970 Sales Manage-

ment Buying Power Index fo r Texas was 5, 2046. p e r cent of the

United States total. If quotas had been established on the 5 ,2046

p e r cent BPI* an ove res t ima te of radio potential by 49, 142 units

and an underes t imate of 15, 140 console s tereo ^.-nits in Texas

would have resu l ted . These variations would fee r e f l ec t ed in o ther

s ta tes as well .

When the 1970 Sales Management Buying Ftower Index was ap-

plied to actual 1970 unit sa les , the average p e r cen t of e r r o r of a l l

s t a tes was 16.4 pe r cent fo r radio sa les , 16. 0 p e r cent f o r color

TV, 29. 6 pe r cent for black and white TV sa l e s , 22. 5 per cent for

console phonographs, 20. 7 pe r cent for portable phonographs, and

16, 2 per cent for tape recorders . The range of error was from

one-half pe r cent to ninety - one per cent, indicating that the Sales

Management Buying Power Index is apparently inadequate for e s -

tabl ishing market potentials for consumer electronic products*

Sales Management, CIV (June 10, 1970 >, 33- 161*

\ 7 1 %j$

Imp rev ait/ Tech.ni.cmes f o r E s t i m a t i n g

M a r k e t Po ten t i a l

Bi o r d e r to i m p r o v e the technique f o r e s t i m a t i n g m a r k e t po-

t en t i a l , it is n e c e s s a r y to c o n s t r u c t an index f o r each s e p a r a t e

p r o d u c t . Marke t f a c t o r s should v a r y f o r each p r o d u c t . By m e a n s

of r e g r e s s i o n ana lys i s , weights can be a s s i g n e d to each f a c t o r which

wi l l ach ieve improved a c c u r a c y over p r e p a r e d indexes of publ i shed

s o u r c e s .

Even though g r e a t e f f o r t m a y be put f o r t h in p r e p a r i n g indexes ,

m o s t of the f a c t o r s c o n s i d e r e d r e l a t e to p u r c h a s i n g power . Such

f a c t o r s a s c o n s u m e r buying hab i t s a r e not u sed in the p r e p a r a t i o n

of t h e s e indexes , ye t inf luence the s a l e of p r o d u c t s .

The Repor t ing M e c h a n i s m f o r Record ing Indus t ry Data

Data Col lect ion Sources

Data co l lec t ion s o u r c e s f o r c o n s u m e r e l e c t r o n i c p r o d u c t s a r e

t r a d e a s s o c i a t i o n s , g o v e r n m e n t a l agenc ie s , b u s i n e s s m a g a z i n e s ,

t r a d e j o u r n a l s , and p r i v a t e s o u r c e s . The m o s t i m p o r t a n t i n d u s t r y

t r a d e a s s o c i a t i o n is the E l ec t ron i c I ndus t r i e s Assoc i a t i on (EIA).

Other a s s o c i a t i o n s of va ry ing i m p o r t a n c e a s i n f o r m a t i o n s o u r c e s

include t he National Appl iance and R a d i o - T V D e a l e r s Assoc i a t i on

(NARDA), National E l ec t ron i c D i s t r i b u t o r s A s s o c i a t i o n (NEDA),

104

Nat ional Assoc i a t ion of B r o a d c a s t e r s (NAB), Radio Adver t i s ing

Bureau (RAB), and E l e c t r o n i c R e p r e s e n t a t i v e s Assoc ia t ion (ERA).

The E l e c t r o n i c I n d u s t r i e s Associat ion, of J apan , which ha s no r e -

l a t ionsh ip to the United States o rgan iza t ion , i s b e c o m i n g i m p o r t a n t

a s an i n fo rma t ion s o u r c e .

The Depa r tmen t of C o m m e r c e and i ts m a n y d iv i s ions is t h e

m o s t important: g o v e r n m e n t s o u r c e . Vi r tua l ly a l l o t h e r U. S. gov-

e r n m e n t d e p a r t m e n t s p r o v i d e da ta of s o m e type , p a r t i c u l a r l y t h e

T r e a s u r y Depar tmen t , t he Depa r tmen t of Labor , and the D e p a r t -

m e n t of Health, Educat ion and W e l f a r e .

Bus ines s m a g a z i n e s arid t r a d e j o u r n a l s do m u c h to keep the

i ndus t ry pos ted on c u r r e n t even t s . Most of t h e s e j o u r n a l s m a k e

u s e of da ta co l lec ted by t r a d e a s s o c i a t i o n s , p a r t i c u l a r l y EIA, and

g o v e r n m e n t data in t h e i r r e p o r t i n g . F r e q u e n t l y , s t ud i e s o r i g i n a t e

and a r e r e p o r t e d in j o u r n a l s i m p o r t a n t to t he i n d u s t r y , such as

Home Fu rn i sh ings Daily, Mar t , E l e c t r o n i c s , B r o a d c a s t i n g , E lec -

t r o n i c s Dis t r ibu t ing and Marke t ing , NEDA J o u r n a l , Te l ev i s ion

Digest , Te levis ion Factbook, and n u m e r o u s o t h e r s spec ia l i z ing in

v a r i o u s s e g m e n t s of the i ndus t ry .

P r i v a t e r e s e a r c h o r g a n i z a t i o n s , such a s Audi ts and Surveys ,

Marke t R e s e a r c h C o r p o r a t i o n of A m e r i c a , Daniel S ta rch , Trend ex,

Inc. , Samson Trends , and A r t h u r D. Li t t le , I n c . , per form

3.05

spec i a l i z ed s tud ies g e n e r a l l y t a i l o red tc the s p e c i f i c needs and r e -

q u e s t s of t h e i r c l i en t s . Much of th i s da ta b e c o m e s t he p r o p e r t y of

the c l ient and r e m a i n s conf ident ia l . Publ ic u t i l i t i e s in many a r e a s

co l lec t s a l e s data . These da ta a r e publ i shed in the u t i l i t i e s ' own

pub l i ca t ions , a s wel l a s in such t r a d e m a g a z i n e s a s M a r t and

D e a l e r 3 c o p e . Pun and B r a d s t r e e t and the E l e c t r o n i c s Engineer

now o f f e r c u s t o m r e s e a r c h to the i ndus t ry . F inanc ia l a n a l y s t s a l s o

p e r f o r m indus t ry r e s e a r c h , p a r t i c u l a r l y when the r e s e a r c h p e r -

t a i n s to individual f i r m s .

A c c u r a c y of Data Sources

F o r t u n e m a g a z i n e e d i t o r s m a k e the fol lowing c o m m e n t about

t h e a c c u r a c y of i ndus t ry d a t a :

A s e r i o u s e f f o r t to ana lyze the home goods m a r k e t soon encoi in ters a h a z i n e s s in the s t a t i s t i c s . The in-d u s t r y ' s s a l e s data extend no f u r t h e r than the f a c t o r y or d i s t r i b u t o r l e v e l s , so p r e c i s e knowledge of the un i t s sold a t r e t a i l and what they f e t c h is l ack ing . Some a p -p l i ance m a n u f a c t u r e r s ana lyze the w a r r a n t y c a r d s t h e i r c u s t o m e r s t u r n in. O the r s r e l y on s ampl ing s u r v e y s , o r b a s e rough e s t i m a t e s on wholesa le f i g u r e s . One r e -su l t of the l ack of a c c u r a t e r e t a i l da ta is t ha t to ta l inven tory pos i t ion of individual p r o d u c t s in r e t a i l e r s ' hands is only ske tch i ly known, J *

3 J Marke t s of the Sevent ies , by the e d i t o r s of F o r t u n e (New York,

1968), p. 82.

106

Government data, - -For tune magazine indicates that total re tai l

value of sa les of consumer goods is loiown to a f a i r degree of ac-

curacy in Department of Commerce data, but then suggests that

sales a r e understated because of allocations to construction, in-

vestment, or some other sector ra ther than the consumer sector . -

Questions exist pertaining to how volume is allocated.

Government data will frequently differ among departments of

the govermnent and even within such departments as the Department

of Commerce, For example, consumer e lectronics production data

published in the U. S. Industrial Outlook, 1971, d i f fe rs f r o m Census

of Manufacturers data.

Much of the problem in analyzing data collected by government

sources pertain to data comparability. Accurate determination of

the exact number of f i r m s and their sales of any single consumer

electronic product type is difficult because of such fac tors as pro-

duct diversif ication and conglomerate s t ruc tu res ; confusion of data

reported by establishments as opposed to companies; extensive

use of footnotes and re fe rence to definitions: uncertainty as to which

Standard Industrial Classification number applies to sales of manu-

fac tu re r s , wholesalers, and re ta i le rs ; combination types products

3 2 Ib id . . pp. 82-83.

• : " . • \ • 107

in one uni t ; domes t i c b r a n d s p roduced in. f o r e i g n na t ions ; and op-

e r a t i o n s which a s s e m b l e impor ted componen t s in t h e United S ta tes ,

Gove rnmen t a g e n c i e s have m a d e s ign i f i can t p r o g r e s s t o w a r d

achieving g r e a t e r a c c u r a c y , but t h e r e a p p e a r s t o b e a need f o r

f u r t h e r s t a n d a r d i s a t i o n in c l a s s i f y i n g da ta , a n e e d f o r q u i c k e r pub-

l i ca t ion of da ta , and a need to pub l i sh da ta in a f o r m which would

spec i f i c a l l y d e s c r i b e the i ndus t ry .

E l ec t ron i c Indus t r i e s A s s o c i a t i o n da ta . - - T h e Radio Manufac-

t u r e r s Assoc ia t ion , f o r m e d in 1924 to s e r v e t he n e e d s of t he r ad io

indus t ry , w a s the beginning of what is known a s the E l e c t r o n i c In-

d u s t r i e s Assoc i a t ion today . The A s s o c i a t i o n h a s a s taff of 95 and

m e m b e r s h i p of over 300 m a n u f a c t u r e r s . Its p r i n c i p l e d iv i s ions

a r e C o n s u m e r P r o d u c t s , D i s t r i bu to r P r o d u c t s , I n d u s t r i a l E l e c -

t r o n i c s , Governmen t P r o d u c t s , P a r t s , Tubes , and Semi -conduc to r

P r o d u c t s . It has s e p a r a t e c o m m i t t e e s func t ion ing to s tudy p r o b l e m s

r e l a t i n g to a l l p a r t s of the i n d u s t r y . Sales da t a f u r n i s h e d by m e m -

b e r s and r e p o r t i n g f i r m s is pub l i shed a s t o t a l s in s e v e r a l weekly ,

month ly , and annual pub l ica t ions to m e m b e r s and s u b s c r i b e r s .

Daniel l L. Dailey, D i r e c t o r of Marke t ing S e r v i c e s , exp la ins

the C o n s u m e r P r o d u c t Divis ion and the A s s o c i a t i o n ' s da ta co l lec t ing

s y s t e m in th i s m a n n e r :

;_i.s jfeAfl

108

While .the Assoc ia t ion regularly compi les data f r o m over 7(50 U. S, manufacturers of e l e c t r o n i c equipment and components, our po l ic ies prohibit t he r e l e a s e of any information that might indicate the concentration, industry position, or actual volume of any spec i f i c company for any product. We are a lso prevented f r o m becoming involved in any manner in the pricing or pricing prac t i ces of industry.

All except one of the manufacturers of t e l ev i s ions regu-l a r l y r e p o r t their data to EIA and we are able to e s t imate rel iably for that f i r m according to the quantity, s i z e s , and t iming of b is picture tube purchases (all Tube suppl iers par-t icipate in. EIA programs) . Similar prac t i ces are followed to permit accurate es t imates for the few non-participant manufacturers of r a d i o s , phonographs and tape r e c o r d e r s .

Sales are reported by manufacturers to EIA by county of destination of each shipment. This does not n e c e s s a r i l y conform to the county pattern of sa l e s at reta i l and we make no effort to report the latter . Obviously, shipments to d i s -count houses , mobile home manufacturers , hote ls or mote l s , and others are included in shipments f rom the factory by county of destination. ^3

Since all m a n u f a t u r e r s do not report s a l e s , the data become

es t imates of a sort . Manufacturers tend to become unhappy with

po l i c i e s followed by the Assoc iat ion and drop m e m b e r s h i p on

occas ion. Zenith., Packard-Bel l , and Emerson w e r e not m e m b e r s

of the Associat ion in March of J 970. It is poss ib l e that these

f i r m s may have continued to report s a l e s . But s ince reporting is

^ C o r r e s p o n d e n c e f r o m Daniell L. Dailey, Director of Mar-keting Services , Electronic Industries Associat ion, Washington, November 13, 1970.

<0 A

Ron Marin, "EIA Consumer Divis ion P r e s s i n g Federation Plan Following Wayman Victory, " Merchandising Week, CI1 (January 26, 1970), 20.

•• • "• • 1 " 109

voluntary, unhappiness on the par t cf these, not i -member 3 could

delay or dis tor t -data . As a f u r t h e r indication of possible inaccuracy

of data, over 500, 000 h i - f i ins t ruments were marke ted in 19o8 by

Elect ronic Corporat ion of Amer ica , a division of Morse Elec t ro

Products Corp. of New York, which were not repor ted in E1A data .

Nearly 250, 000 compact s t e r eo sys t ems and over 300,000 consoles

w e r e not included in 1969 EIA data. "Why? Because the company

is known p r i m a r i l y as an a s s e m b l e r ra ther than as a m a n u f a c t u r e r

35

and is t h e r e f o r e miss ing f r o m the r anks . " This many units would

d ra s t i ca l l y change industry data as it r e p r e s e n t s about ten pe r cent

of the domest ic indus t ry ' s s a l e s . The sha re cf m a r k e t of domes t i c

p r o d u c e r s would change substantial ly with the inclusion of t he se

s a l e s .

No impor t e r s or fo re ign m a n u f a c t u r e r s a r e repor t ing sa l e s to

the EIA; thus, al l sa les data for fo re ign f i r m s would have to come

f r o m other sources , pa r t i cu la r ly United States government s o u r c e s .

There is l i t t le possibi l i ty of the EIA- USA getting together with the

EIA-Japan because the United States organizat ion has continually

lobbied f o r controls on fore ign impor t s .

"Assembler Finds Its Niche with a Mix fo r the Masses , " Mart , XIII (September 15, 1969), 8.

" ' - / ' ' no

P.eports to the Electronic Industr ies Associa t ion a r e

except fo r production data, which a r e expressed in dol lar amoimts .

Sales a r e repor ted by m a n u f a c t u r e r s to EIA by county of dest inat ion

of each shipment. It should be noted that shipments a r e r e p o r t s of

who lesa l e r s ' sales to r e t a i l e r s where a two-s tep dis t r ibut ion p r o -

ces s is used . In one-s tep dis t r ibut ion shipments would include the

m a n u f a c t u r e r shipments to the d i rec t p u r c h a s e r . It is not total ly

c lear at th is point whether a p r iva te brand m a n u f a c t u r e r r e p o r t s

sa les to the billing point (location where invoices a r e paid) or the

shipment destination point (location where m e r c h a n d i s e is shipped)

or if sa les a r e repor ted at a l l .

It becomes increas ingly c lear that m a n u f a c t u r e r s ' sh ipments

to l a r g e sca le p u r c h a s e r s could d i s to r t m a r k e t s t a t i s t i c s con-

s iderab ly . For example, a r e t a i l chain with 300 s t o r e s a c r o s s the

United States and a single dis t r ibut ion center could rece ive all its

o r d e r s at the dis t r ibut ion point; thus , the sa les volume of the county

in which the distr ibution point is located would be inflated by sa les

from, 300 s to res . While ad jus tments could be made fo r one such

si tuation, it is doubtful that the sa les volume fo r the g rea t number

of r e t a i l chain s t o r e s and l a rge sca le special ty p u r c h a s e r s could

be adjus ted under the p resen t sys tem to achieve any degree of

m e a s u r a b l e accuracy . Until t h e r e is a way of m e a s u r i n g sa les

' >' ' ' ' ~ - 111

accurately at the retail levels the industry will ecmtinue to use the

vague guidelines which the present system offers.

Much data are provided, by the Electronic Industries Association;

however, some manufacturers do not know how •much inventory exists

at the wholesale level., &rd once sales have been made to retailers,

few manufacturers know the amount of inventory held at the retail

level. This seemed to be the cause of problems in the television

industry in 1951.

Rolling happily along at an annual prewfection rate of 8, 000, 000 sets, the television industry wss "blissfully un-aware that retailers had some. 1, 500, 000 xaisold sets on hand. Factory and wholesaler inventories brought the total to nearly 2, 250, 000.

Result: two out of three production lines had to be closed down and production cut back to a lew-el of 3, 000, 000 sets a year. ^6

Industry losses were significant and result eel in the departure

of over one hundred firms from the industry. Consequently, manu-

facturers began to make greater use of private research organiza-

tions because of their ability to collect data at fee retail level. The

Electronic Industries Association also placed greater emphasis on

inventories, but this emphasis is still at the manufacturing and

wholesale levels. It would seem that the EIA steould place greater

Thomas L. Berg and Abe Schuchman, Product Strategy and Management (New York, 1963), p. 609.

*U .V

e m p h a s i s on r e s e a r c h of m e r c h a n d i s e flow f r o m the f a c t o r y to con-

s u m e r .

F r o m t h e fo regoing it would appea r tha t , while- the E l e c t r o n i c

Indus t r i e s Assoc ia t ion h a s a m e c h a n i s m fo r r e c o r d i n g and r e p o r t i n g

indus t ry s a l e s , the m e c h a n i s m does not m e e t the needs of a l l in-

d u s t r y m e m b e r s and t he data r e p o r t e d a r e of ques t ionab le a c c u r a c y .

P r i v a t e r e s e a r c h o rgan i za t i ons . - - B e c a u s e of the d i s c r e p a n c i e s

in data and the l ack of da ta r e g a r d i n g spec i f i c compe t i t i ve b r a n d s

and individual m a r k e t s , p r i v a t e r e s e a r c h o rgan i za t i ons have b e -

c o m e impor t an t , A r t h u r C. Nei lson, J r . s u g g e s t s :

A continuing audi t which m e a s u r e s the c o n s u m e r s a l e s of the e n t i r e p roduc t c a t e g o r y and tha t of each i m p o r t a n t b r a n d , toge the r wi th its s h a r e of the t o t a l m a r k e t , i s one a c c u r a t e and p r a c t i c a l way to eva lua te c o n s u m e r r e s p o n s e to m a r k e t i n g expend i tu r e s . This p r o c e d u r e p r o v i d e s a dynamic p i c t u r e of the changing m a r k e t p l a c e . ^

Although the A. C. Nei l son Company developed r e t a i l index

s e r v i c e s , Nei lson is no longer engaged in r e s e a r c h p e r t a i n i n g to

c o n s u m e r e l ec t ron i c p r o d u c t s . Ne i l son ' s a c t i v i t i e s a r e p r e s e n t l y

r e s t r i c t e d to food and d rug p r o d u c t s . Audits and Surveys , Inco r -

p o r a t e d , however , compi l e s r e t a i l indexes f o r c o n s u m e r e l e c t r o n i c

p r o d u c t s s i m i l a r to those, of Nei l son .

^ E v e l y n Konrad and Rod Er i ckson , e d i t o r s , Marke t ing Re-s e a r c h ; A Management Overview (New York, 1966), p. 70.

' - i n

F i r m s such a s Ar thur X), LittJ.s, tec, , tend to accep t m a r k e t i n g

and m a n a g e m e n t a s s i g n m e n t s of a zxrich b r o a d e r n a t u r e . F o r ex-

a m p l e , A r t h u r D. Li t t le , inc. , r e l e a s e d a spec i a l r e p o r t , ' 'Home

E l e c t r o n i c s 1967-1973" in July of 196S wi th s a l e s p r o j e c t i o n s m a d e

t h r o u g h 1973 f o r each type c o n s u m e r e l e c t r o n i c s p r o d u c t . The p r o -

j e c t i o n s a p p e a r to be m a d e f r o m E lec t ron i c Indus t ry Associat ion.

38

and U. S. Cus toms da ta b a s e .

Trendex , Inc. , f a m o u s f o r i ts t e l e v i s i o n b r o a d c a s t r a t i n g s ,

p r e p a r e s buyer ship r e p o r t s f o r al l c o n s u m e r e l e c t r o n i c p r o d u c t s .

Data a r e a cqu i r ed exc lus ive ly f r o m te lephone s u r v e y s f r o m a s a m -

p l e of 70, COO homes f o u r t i m e s a y e a r . Data co l lec ted in t h i s

m a n n e r c o s t s m u c h l e s s than would be the c a s e wi th the p e r s o n a l

i n t e rv i ew m e t h o d s . The type of data suppl ied to c l ien t s include

b r a n d s h a r e , p r ev ious b r a n d p u r c h a s e d , mon th of p u r c h a s e , r e g i o n

(urban v. non-urban) , y e a r of p rev ious s e t p u r c h a s e d , and o ther

d a t a . Many United States m a n u f a c t u r e r s s u b s c r i b e to t h i s synd i -

39

ca ted s e r v i c e .

individual ly p r e p a r e d s tud ies a r e cos t ly when p e r s o n a l i n t e r -

v i ews a r e used , and as a r e s u l t cannot be p e r f o r m e d with any d e g r e e

" ^ A r t h u r D. Lit t le , Inc . , "Home E l e c t r o n i c s , 1 9 6 7 - 1 9 7 3 , " unpubl i shed r e p o r t , July, 1968, pp. 27-31 .

39 T rendex , Inc . , " T r e n d e x : R e s e a r c h by Telephone, " un -

publ i shed r e p o r t , New York, May, 1972, pp. 1 - 1 1 .

' * ' » 1, •« <•' , '

114

of f requei icy i Typical of ilia t i m e r e q u i r e d f o r an in te rv iew and a c -

con'ipanyirig cha rges -for the s e r v i c e s is t he "Marke t ing A s s i s t a n c e

P r o g r a m " conducted by The. Mect rcmic Eng inee r . Brand a w a r e n e s s

i n t e r v i e w s of ten minute du ra t i on cos t $8 p e r ca l l ; buying inf luence

iden t i f i ca t ion in te rv iews r u n f i f t e e n minu t e s and cos t $12 pe r ca l l ;

arid r n a r k e t pene t r a t i on and c u s t o m e r s a t i s f a c t i o n i n t e rv i ews a r e f o r

twenty minu te s and cos t $14 p e r cal l , ^ High c o s t s m a k e it v i r -

t ua l l y i m p o s s i b l e for r e p r e s e n t a t i v e s a m p l e s of u l t i m a t e c o n s u m e r s

to be made* Opinions of r e t a i l e r s and w h o l e s a l e r s a r e s tudied by

t he m a r k e t , but n o r m a l l y not with any d e g r e e of f r e q u e n c y b e c a u s e

of high c o s t s j

Since the m a j o r i t y of p r i v a t e r e s e a r c h o r g a n i s a t i o n s m a k e u s e

of s ampl ing t echn iques in t h e i r a n a l y s e s , it would be n e c e s s a r y to

s tudy t he techniques in g r e a t e r depth in o r d e r to d e t e r m i n e t he

va l id i ty of t h e i r findings*

Publ ica t ions . - - S a l e s f o r e c a s t s p r e p a r e d by the M a r k e t Se rv i ce s

D e p a r t m e n t of E l e c t r o n i c s m a g a z i n e a r e e s t i m a t e s b a s e d on r e -

s p o n s e f r o m mai l s u r v e y q u e s t i o n n a i r e s sen t to m a r k e t i n g m a n a g e r s ,

ana ly s t s i and p l a n n e r s in al l s e g m e n t s of the e l e c t r o n i c s i ndus t ry .

Chilton E l e c t r o n i c s ana In s t rumen ta t i on Group, "Marke t ing A s s i s t a n c e P r o g r a m , " unpubl i shed d o c u m e n t s of E l e c t r o n i c En-ginee i ' j New York, Apr i l , 1972, pp. 1 -12 .

115

Electronics sales es t imates a r e m o r e conservat ive than actual

sa les reported by the Electronic Industries Association. Since the

industry tends to overproduce, perhaps conservat ive sa les f o r e c a s t s

a r e des i rab le .

On February 22nd of each year Merchandising Week publishes

a "Statistical and Marketing .Report" which includes industry growth

t ab les . Included is the re ta i l value.of manufac tu re r s ' unit sa les .

These re ta i l sales a r e a m e a s u r e of the re ta i l p r i ce value of manu-

f a c t u r e r s ' sales, which is somewhat misleading as re ta i l sa les a r e

not always made in the same year that the products a r e produced.

The repor t also indicates that value was based on manufac tu re r s

suggested re ta i l p r i ces and not actual selling p r i c e s . In analyzing

units shipped, it was determined that Merchandising Week uses

Electronic hidustrj.es Association data which includes domest ic

production only, with the exception of tape r e c o r d e r s . As a resul t ,

this does not re f lec t total re ta i l sa les because it excludes impor ts .

The repor t is inaccurate and misleading to its many r e a d e r s .

In the foregoing discussion, the consumer e lectronic industry

problems of marke t penetrat ion, marke t potent ials , and the r e -

porting mechanism for recording industry data, were d i scussed .

Market penetrat ion was shown to be used as a measu remen t tool

and as a company goal. Central among the weaknesses of m a r k e t

: 116

p e n e t r a t i o n is tha t i t -mus t be relaxed to o ther i n fo rma t ion ; o t h e r w i s e

i t shows nothing o ther than the f i r m ' s pos i t i on r e l a t i v e to the Bales

of the e n t i r e i ndus t ry . As a company ob jec t ive , m a r k e t p e n e t r a t i o n

r e s u l t s in a s a c r i f i c e of p ro f i t to a t t a in t he ob j ec t i ve .

Es tab l i sh ing m a r k e t po ten t i a l s is a p r e r e q u i s i t e to quota a s -

signments . . The Sales Manap,ement Buying Power Index p r o v e d to

be inadequate f o r p r e p a r i n g m a r k e t po ten t i a l s and quotas f o r t he

i n d u s t r y . Substant ia l p roduc t and m a r k e t da ta a r e ava i l ab l e to the

i ndus t ry , but i ts a c c u r a c y h a s been shown to be ques t i onab l e .

Addit ional p r o b l e m s of c o n c e r n to the i ndus t ry a r e d i s c u s s e d

in Chapte r IV. These, p r o b l e m s include t he fo l lowing: d i s t r i bu t i on ,

p r o d u c t , p r i c ing , p romot ion , a t t i tudes of the m a r k e t , c o n s u m e r i s m ,

channe l conf l ic t and con t ro l , and the lega l e n v i r o n m e n t wi th in which

the i ndus t ry o p e r a t e s .

CHAPTER IV

THE MARKETING MIX AND OTHER

INDUSTRY PROBLEMS

Other P r o b l e m s of the Indust ry

Among the p r o b l e m s of the indus t ry a r e t h o s e which r e l a t e to

t h e m a r k e t i n g m i x : d i s t r ibu t ion , p roduc t , p r i c ing , and p r o m o t i o n .

In addi t ion , the c o n s u m e r e l e c t r o n i c p roduc t s i n d u s t r y is c o n c e r n e d

wi th m a r k e t a t t i t udes , c o n s u m e r i s m , channel conf l i c t and con t ro l ,

and t he l ega l e n v i r o n m e n t . Since these p r o b l e m s have an i m p a c t

on a f i r m ' s o r b r a n d ' s m a r k e t pene t r a t i on , e ach wi l l be d i s c u s s e d .

Dis t r ibu t ion P r o b l e m s

Cont rac tua l A g r e e m e n t s

The c o n s u m e r e l e c t r o n i c p roduc t s i n d u s t r y ha s been p r e v i o u s l y

d e s c r i b e d a s g e n e r a l l y following the t r a d i t i o n a l " t w o - s t e p " d i s t r i -

bu t ion a p p r o a c h in which the goods flow f r o m m a n u f a c t u r e r to

w h o l e s a l e r to r e t a i l e r to c o n s u m e r . It h a s a l so b e e n noted tha t a

few m a n u f a c t u r e r s m a k e u s e of the " o n e - s t e p " s y s t e m in which the

goods f low f r o m m a n u f a c t u r e r to r e t a i l e r to c o n s u m e r . In e i t h e r

of the a f o r e m e n t i o n e d s y s t e m s , a g r e e m e n t s which out l ine the

117

'• . I I S

r e s p o n s i b i l i t i e s of each pa r ty a r e gex?orally negot ia ted be tween

s e l l e r and b u y e r . Such c o n t r a c t s , whe ther w r i t t e n - o r v e r b a l , wi l l

out l ine the geograph ic t e r r i t o r y a s s igned to each charm el m e m b e r (

t he p r o d u c t s and b r a n d s involved, i nven to ry r e q u i r e m e n t s , p a y m e n t

m e t h o d s , s a l e s quota as s i gnmen t s , a d v e r t i s i n g and p r o m o t i o n

po l i c i e s , s a l e s t r a i n i n g r e q u i r e m e n t s , p r o d u c t w a r r a n t y and s e r -

v ice r e s p o n s i b i l i t i e s , and method of c o n t r a c t t e r m i n a t i o n . Con-

t r a c t u a l a g r e e m e n t s in r e c e n t y e a r s have b e c o m e v e r y g e n e r a l in

n a t u r e b e c a u s e of f e a r of v iola t ing a n t i - t r u s t l a w s .

Special U s e r s and Channel Member Confl ic t

Although the d i s t r i bu t i on s y s t e m sounds s i m p l e , conf l i c t s a r i s e

among channel m e m b e r s . A f r e q u e n t s o u r c e of conf l ic t p e r t a i n s to

which channel m e m b e r should be enti t led to m a k e s a l e s to b u y e r s

o t h e r than household c o n s u m e r s . R e t a i l e r s be l i eve they should

m a k e a l l s a l e s to f ina l b u y e r s , both c o m m e r c i a l and household con-

s u m e r s , W h o l e s a l e r s f e e l they should m a k e a i l s a l e s to c o m m e r c i a l

b u y e r s who p u r c h a s e mu l t i p l e un i t s . On the o t h e r hand, m a n u f a c -

t u r e r s tend to be l i eve they should be the channel m e m b e r s who m a k e

the s a l e f o r al l goods not des t ined to the household c o n s u m e r . Manu-

f a c t u r e r s f e e l t he i r r e t a i l e r s and w h o l e s a l e r s would be compe t ing

wi th m a n u f a c t u r e r s of o the r b r a n d s and would l o s e the s a l e s a s a

r e s u l t . T h e r e f o r e , to p r o t e c t the sa le , the m a n u f a c t u r e r s compe te

119

•with o t h e r m a n u f a c t u r e r s by a t t empt ing to soil d i r e c t l y to c o m -

m e r c i a l u s e r s .

C o m m e r c i a l o r s p e c i a l u s e p u r c h a s e r s include ho te l s and

m o t e l s , mobi le home m a n u f a c t u r e r s , t r a d i n g s t a m p c o m p a n i e s ,

p r e m i u m and incent ive m e r c h a n d i s i n g f i r m s , d i r e c t m a i l m e r c h a n -

dis ing compan ies , and pos t exchanges . These f i r m s a r e f r e q u e n t l y

capab le of making r e l a t i v e l y s i zeab l e p u r c h a s e s f o r d e l i v e r y at one

t i m e or acco rd ing to a scheduled de l ive ry p lan . In s o m e i n s t a n c e s ,

h o w e v e r , both the o r d e r s and d e l i v e r i e s involve s m a l l quan t i t i e s .

Vir tual ly a l l m a n u f a c t u r e r s se l l d i r e c t l y to spec i a l use p u r -

c h a s e r s . In s e v e r a l f i r m s , spec i a l d e p a r t m e n t s o r s u b s i d i a r i e s

have b e e n e s t ab l i shed to develop th is type of b u s i n e s s . An e x a m p l e

of such a d e p a r t m e n t is p rov ided by r e c e n t o rgan i za t i on changes

wi th in Phi lco- Fo rd , ' 'Phi lco - F o r d has s e t up t h r e e o f f i c e s in i ts

d o m e s t i c c o n s u m e r p r o d u c t s d iv i s ion . One wi l l d e a l wi th s a l e s

t h r o u g h c o m p a n y - o p e r a t e d d i s t r i b u t o r s , one wi th s a l e s t h rough in-

dependent d i s t r i b u t o r s , and one with s a l e s t h rough na t ional and

r e g i o n a l accoun t s . "*

A l a r g e s ize p u r c h a s e m a d e by a spec i a l u s e r can subs t an t i a l l y

change a b r a n d ' s s h a r e of m a r k e t , p a r t i c u l a r l y in the m a r k e t a r e a

1 "News and T r e n d s , " Mar t , XV (September 1, 1971), 8.

- • [20

w h e r e the sa l e is r e c o r d e d . TJie_corainor.. compla in t by w h o l e s a l e r s

i s tha t they have l i t t l e cont ro l over s a l e s m a d e d i r e c t l y by m a n u -

f a c t u r e r s to l a r g e s c a l e p u r c h a s e r s , yet t hey a r e eva lua ted by s h a r e

of m a r k e t a t t a ined .

The s i z e of each of t h e s e spec i a l u s e m a r k e t s is s u b s t a n t i a l .

F o r e x a m p l e , the Admira l C o r p o r a t i o n "s igned an a g r e e m e n t wi th

t he Shera ton Corpo ra t i on of A m e r i c a to f u r n i s h an ini t ia l 10, 000

co lo r t e l ev i s ion r e c e i v e r s in 1970 f o r h o t e l s , m o t o r inns , and

7

f r a n c h i s e m o t o r inns owned and o p e r a t e d by Shera ton , "" In 1971,

Te lesound, a s u b s i d i a r y of Ph i l co - F o r d indica ted they would . . 3

i n s t a l l m o r e than 41, 000 color TV s e t s , 10, 000 m o r e than in 1970, "

P r o j e c t i o n s by Telesound indica te s a l e s of 4 6 , 0 0 0 uni t s in 1972.

Coope ra t ives

The t r e m e n d o u s buying power of the l a r g e cha in s t o r e o r g a n i -

za t ions ha s r e s u l t e d in r e t a i l o f f e r i ngs which s m a l l s c a l e r e t a i l e r s

f ind d i f f icu l t to m e e t . Many r e t a i l e r s have found they can i n c r e a s e

buying power and b e c o m e m o r e compe t i t i ve by jo ining buying g roups

and f o r m i n g c o o p e r a t i v e s . Coopera t ives have had s o m e d e g r e e of

s u c c e s s in the n o r t h e a s t e r n sec t ion of the United S ta tes ,

2 "Shera ton Buying A d m i r a l Color TV, " Mar t , XIV (May 15,

1970), 17.

3 A r t Weinberg, "More Phi lco TVs R e g i s t e r in Hote ls , " Home

F u r n i s h i n g s Daily, XLIII (October 8, 1971), 10.

121

These groups a r e so much a pa r t of the New York-New J e r s e y buying s c e n e , t ha t whe ther 03.* not a s t o r e is a m e m -b e r t he s t o r e owner m u s t jus t i fy to h imse l f the r e a s o n s why he is not a m e m b e r , whe the r he should join, and whether he ga ins anything f r o m being a m e m b e r . ^

P r i v a t e B rands

The i m p o r t a n c e of p r i v a t e b r a n d s to t he i n d u s t r y is i n c r e a s i n g ,

A U. S. Tar i f f C o m m i s s i o n s tudy shows that p r i v a t e b r a n d s e t s

e

"accounted f o r about 20 p e r cent of all t e l ev i s i on s a l e s in 1971.

P r i v a t e b r a n d s , which a r e s o m e t i m e s ca l led s t o r e , r e t a i l e r , o r

con t ro l l ed b rands , a r e u s e d by v i r t ua l l y e v e r y l a r g e s c a l e r e t a i l e r

in the United States . Control of the brand s h i f t s f rom, the m a n u -

f a c t u r e r to the r e t a i l e r o r w h o l e s a l e r who owns the b r a n d .

Nat ional Cont rac t s

The l a r g e s c a l e r e t a i l e r s , p a r t i c u l a r l y the t i r e , b a t t e r y , and

a c c e s s o r y cha ins , and s o m e m a s s m e r c h a n d i s e r s have negot ia ted

na t iona l c o n t r a c t s with m a n u f a c t u r e r s which p e r m i t the r e t a i l e r to

s e l l the m a n u f a c t u r e r ' s b r and in a l l of the r e t a i l e r ' s s t o r e s through-

out the na t ion . Such c o n t r a c t s f o r c e the w h o l e s a l e r to s e l l to each

^ Manny Hoffman, "Independent R e t a i l e r s Split on Joining Big Buying Groups , " Home F u r n i s h i n g s Daily, X.LIII (September 29, 1971), 15.

5 " P r i v a t e Label TV Set Sales Mount, " Home F u r n i s h i n g s Daily, XL.IV (January 13, 1972), 11.

; ; • ' ' ; • 3 2?,

of the-- re ta i ler 4 s s t o r e s loca ted in the w h o l e s a l e r ' s a s s i g n e d t e r r i -

t o r y . ID. t h i s m a n n e r , the w h o l e s a l e r l o s e s con t ro l over d i s t r i b u t i o n

and m u s t follow the d i c t a t e s of the m a n u f a c t u r e r . If the w h o l e s a l e r

r e f u s e s to coopera te , the m a n u f a c t u r e r m a y e l ec t to se l l to the n a -

t i ona l chain d i r ec t ly .

Hie w h o l e s a l e r h a s l i t t l e con t ro l over the n a t i o n a l - c o n t r a c t

r e t a i l e r , p a r t i c u l a r l y with r e s p e c t to p r i c i n g , inven to ry r e q u i r e -

m e n t s , and a d v e r t i s i n g . .In addi t ion, t he w h o l e s a l e r ' s con t ro l ove r

h i s o ther r e t a i l ou t le t s is weakened . D i s s a t i s f a c t i o n t a k e s p l a c e

among r e t a i l e r s b e c a u s e t h e s e nat ional c o n t r a c t s f r e q u e n t l y d i s -

t u r b exc lus ive d i s t r i bu t ion a g r e e m e n t s p r e v i o u s l y g r a n t e d by who le -

s a l e r s to r e t a i l e r s . .Also, nat ional c o n t r a c t s m a y r e s u l t in r e t a i l e r s

who a r e loca ted a d j a c e n t to each o ther se l l ing t he s a m e b r a n d , o r

the r e s u l t m a y be an e x c e s s i v e n u m b e r of r e t a i l ou t le t s s e l l i ng t he

s a m e b r a n d in a p a r t i c u l a r m a r k e t .

P r e s s u r e Exe r t ed by La rge Scale R e t a i l e r s

.If t h e r e is doubt a s to the p r e s s u r e tha t l a r g e s c a l e r e t a i l

cha ins a r e capable of exe r t i ng , m a n u f a c t u r e r s should look to the

u l t i m a t u m K Mar t gave h o u s e w a r e s m a n u f a c t u r e r s - - e i t h e r the m a n u -

f a c t u r e r s s e l l d i r e c t l y to K M a r t or K M a r t would not se l l the l ine . ^

^ E a r l Li fshey , "If You Ask Me, Dis t r ibu t ion Has to Cost Somebody, " Home F u r n i s h i n g s Daily, XI.J1I (July 19, 1971), 1, 31,

iX 3

Such s itnatioas e m p h a s i z e tha t m a r k e t power does ex i s t among l a r g e

retail cha ins . It i s p o s s i b l e that K M a r t had o b s e r v e d that t he A r m y

and Air F o r c e Exchange Service., the t h i rd l a r g e s t r e t a i l e r in the

coun t ry with art annual voiume of an e s t i m a t e d $3 b i l l ion , gave

no t i ce chat the Exchange Se rv ice would m a k e its e l e c t r i c h o u s e w a r e s

p u r c h a s e s d i r ec t l y f r o m the maimf a ctur e r . Since K Mart's p a r e n t

company , the Kre sge Company ' s vo lume exceeded $2.5 b i l l ion in

1970, K Mart p robab ly f e l t j u s t i f i ed in mak ing the s a m e d e m a n d s

on m a n u f a c t u r e r s a s the Exchange S e r v i c e .

T r a n s sh ipping

Transsh ipp ing t ends to r e m o v e an e l e m e n t of d i s t r i b u t i o n con-

t r o l f r o m m a n u f a c t u r e r s and w h o l e s a l e r s who m a k e an e f f o r t to be

s e l e c t i v e in d i s t r i bu t ion po l i c i e s and a t t e m p t to s t ab i l i z e r e t a i l

p r i c e s . Although the s u p p l i e r s e x e r c i s e s o m e e l e m e n t of con t ro l

o v e r t h e i r i m m e d i a t e p u r c h a s e r s , they cannot l ega l ly con t ro l t he

m a r k e t s e r v e d by the p u r c h a s e r . Chain s t o r e s , f o r e x a m p l e , f r e -

quent ly buy in one a r e a and r e d i s t r i b u t e to t h e i r s t o r e s loca ted in

a n o t h e r a r e a . In addi t ion , w h o l e s a l e r s and r e t a i l e r s wi l l f r e q u e n t l y

m a k e s a l e s outside of t h e i r n o r m a l m a r k e t a r e a b e c a u s e they can

7 "PX Bids f o r Di rec t E l e c t r i c s , " Home F a m i s h i n g s Daily,

XL.I (May 8, 1969), 1.

t u r n d o l l a r s m o r e quickly . R e t a i l e r s wil l m a k e a r r a n g e m e n t s to

buy f r o m m e r c h a n t s loca ted in o ther a r e a s v/hen a m a n u f a c t u r e r o r

w h o l e s a l e r in t h e i r own a r e a r e f u s e s to s e l l a -par t icular b r a n d . A

s e c o n d a r y l ine of d i s t r i b u t i o n ex i s t s among m e r c h a n t s who r e d i s -

t r i b u t e m e r c h a n d i s e to anyone, any p lace , who can pay for the

m e r c h a n d i s e .

The fo rego ing d i s t r i bu t i on p r a c t i c e s a r e f o r m s of t r a n s s h i p p i n g

and a r e d i f f icu l t to lega l ly con t ro l . F u r t h e r m o r e , t r a n s s h i p p i n g

a f f e c t s a f i r m ' s s h a r e of m a r k e t by o v e r s t a t i n g the o r i g ina l s e l l e r ' s

s h a r e and u n d e r s t a t i n g the b r and s h a r e f o r the a r e a w h e r e the goods

a r e ac tua l ly so ld .

A s i m p l i f i e d t r a d i t i o n a l "oue or t w o - s t e p " d i s t r ibu t ion s y s t e m

does not ex i s t wi thin the indus t ry . Ins tead, t h e r e e x i s t s a r a t h e r

complex mul t i - channel s y s t e m . To m a k e the s y s t e m even m o r e

complex , " s c r a m b l e d m e r c h a n d i s i n g " has r e s u l t e d in d i s t r i bu t i on

th rough d i f f e r e n t k inds of w h o l e s a l e r s to spec ia l ty m a r k e t s such a s

d rug , h a r d w a r e , h o u s e w a r e s , and e l e c t r o n i c p a r t s ou t l e t s .

P roduc t P r o b l e m s

The c o n s u m e r e l e c t r o n i c p roduc t s i n d u s t r y f r o m its incept ion,

h a s b e e n dynamic in n a t u r e . M a n u f a c t u r e r s unwil l ing to a c c e p t

change have not been ab le to s u r v i v e the compe t i t i ve e n v i r o n m e n t

which has pe rvaded the i ndus t rv .

12,5

Precnict Compet i t ion

Compet i t ion among mamti 'aclii i-ers o r i g i n a t e s wi th r e s p e c t to

which p r o d u c t s to m a r k e t , A few of the l a r g e r domest ic , rnamifac - •

t u r e r s have a t t empted to m a r k e t al l types of c o n s u m e r e l e c t r o n i c

p r o d u c t s while o t h e r m a n u f a c t u r e r s have s p e c i a l i z e d in one o r two

p r o d u c t t y p e s . New f i r m s en t e r ing the i n d u s t r y have tended to

r e s t r i c t t h e i r p r o d u c t o f f e r i n g s . F i r m s such a s Cur t i s - M a t h e s in

t he 1950 's , M o r s e E l e c t r o n i c s in the l a t e 1960 's , and m a n y f o r e i g n

m a n u f a c t u r e r s have fol lowed th i s a p p r o a c h . But as they b e c o m e

s u c c e s s f u l in one p a r t of a p r o d u c t l ine , s o m e m a n u f a c t u r e r s ex -

pand t h e i r l ine a n d / o r move into o the r p roduc t l i n e s .

A f t e r a dec i s i on ha s been m a d e to m a r k e t c e r t a i n p r o d u c t s ,

t he m a n u f a c t u r e r s m u s t dec ide whe the r to m a k e o r buy the p roduc t .

The t r e n d in r e c e n t y e a r s has been toward p roduc ing in f o r e i g n

na t i ons a n d / o r buying m e r c h a n d i s e p roduced in f o r e i g n n a t i o n s .

This p r a c t i c e can be a t t r i bu t ed to the subs t an t i a l l y lower p roduc t ion

c o s t s in f o r e i g n c o u n t r i e s , p a r t i c u l a r l y Japan .

When l ines have become too b road } a few m a n u f a c t u r e r s have

d ropped lower p r i c e d i t e m s which have b e e n c h a r a c t e r i z e d by in-

t e n s i v e p r i c e compe t i t ion . Motoro la h a s b e e n t h e m o s t r e c e n t

m a n u f a c t u r e r to wi thdraw f r o m the p o r t a b l e and t a b l e r ad io , p o r t a b l e

phonograph , and p o r t a b l e tape p l a y e r b u s i n e s s . T h e s e a r e i t ems

-- -V'. - 12&

t h a t are identif ied as personal electronic products and are •usually

p r i c e d below one hundred d o l l a r s . The r e a s o n given by Motoro la

f o r d i scont inu ing the p e r s o n a l p r o d u c t s i s tha t "mul t ip le d i s t r i b u t i o n

h a s moved p e r s o n a l e l e c t r o n i c p roduc t s into a b r o a d v a r i e t y of r e -

t a i l ou t le t s and th i s h a s b e c o m e a b u s i n e s s r e q u i r i n g s p e c i a l i z e d

m e r c h a n d i s i n g . Other r e a s o n s f o r d ropp ing the p r o d u c t s a r e

l a ck of p ro f i t , d e c r e a s i n g vo lume, and p lans to d i r e c t e f f o r t t o w a r d

t e l e v i s i o n and l a r g e r packaged audio prod-acts.

Ful l Line Fo rc ing

M a n u f a c t u r e r s g e n e r a l l y r e q u i r e t he i r w h o l e s a l e r s to c a r r y an

inven to ry of a l l p r o d u c t l i ne s the m a n u f a c t u r e r p r o d u c e s . Since it

is not unusua l f o r one or m o r e of the p roduc t l i ne s to be u n p r o f i t -

ab le o r to r e q u i r e an unusua l amount of t i m e and e f f o r t to se l l , both

w h o l e s a l e r s and r e t a i l e r s p r e f e r not to buy and se l l such l i n e s . Yet

m a n u f a c t u r e r s f r e q u e n t l y cont inue to p r o d u c e the l e s s d e s i r a b l e p r o -

duc ts in o r d e r to o f f e r a fu l l r a n g e of p r o d u c t s to the c o n s u m e r .

Both w h o l e s a l e r s and r e t a i l e r s f ee l they a r e f o r c e d to cont inue t c

buy unwanted and unp ro f i t ab l e p r o d u c t s . Confl ic t r e s u l t s f u r t h e r

w h e n the s a m e m a n u f a c t u r e r s s e l l d i r e c t l y to s p e c i a l u s e r s and

l a r g e s c a l e r e t a i l e r s who p u r c h a s e only the i t e m s they d e s i r e .

^"News and T rends , " Mar t , XV'I (March 1, 1972), 8.

- ' • 127

P r o d u c t lr>treduction

Tota l ly new p roduc t deve lopmen t s occur .slowly. Lee Adler ,

in a s tudy of c a se h i s t o r i e s of p roduc t deve lopment , found tha t t e l e -

v i s ion took f i f t y - f i v e y e a r s f r o m the t i m e the deve lopmen t was known

to be conce ivable to the t i m e in i t ia l m a r k e t i n g began , Adle r sug-

g e s t s that u n d e r e s t i m a t i n g the t i m e n e c e s s a r y f o r o r d e r l y m a r k e t

deve lopment is the p r i m e cause, of p r o d u c t f a i l u r e . ^ Most new p r o -

duc t s in c o n s u m e r e l e c t r o n i c s r e p r e s e n t i m p r o v e m e n t s over s i m i l a r

ex i s t ing p r o d u c t s , Rober t G. W a r r e n , Motoro la v i c e - p r e s i d e n t ,

s u g g e s t s the t i m e span f o r c o n s u m e r p roduc t a c c e p t a n c e ha s changed ;

A few y e a r s ago it could t ake e n d l e s s m o n t h s to c r e a t e p roduc t demand . With t o d a y ' s m o r e knowledgeable , m o r e a f f luen t , m o r e a w a r e c o n s u m e r , m a r k e t s can and a r e be ing c r e a t e d overn igh t , ^

Model Changes

Trad i t iona l ly the i n d u s t r y h a s o f f e r e d annua l mode l changes .

Some indus t ry m e m b e r s be l i eve t h e s e annual changes to be u n n e c e s -

s a r y ; o the r m e m b e r s b e l i e v e the annual showings a r e the b a s i s f o r

o r g a n i z e d and r enewed e f f o r t s on the p a r t of the e n t i r e i ndus t ry .

F r e q u e n t l y , annual changes a r e s u p e r f i c i a l b e c a u s e few i m p r o v e m e n t s

g Lee Adle r , " T i m e Lag in New P r o d u c t Development , " J o u r n a l

of Marke t ing , XXX (January , 1966), 17.

1 0 Jack Adams , "The Balance Sheet, " Mar t , XVI (May 15, 1972), 46.

v - " • 1 2 8

or s ty l e changes a r e m a d e . P robab ly a m o r e s e r i o u s c h a r g e a g a i n s t

m a n u f a c t u r e r s Is tha t addi t ional mode l s a r e in t roduced e v e r y s ix ty

to n ine ty days th roughout the y e a r . The s o u r c e of compla in t is tha t

t h e s e " d r o p - i n " m o d e l s r e p r e s e n t changes in m o d e l n u m b e r s only

and tend to be b e t t e r va lues than cxirrent y e a r r e g u l a r m o d e l s . As

a r e s u l t , t he " d r o p - i n " m o d e l s tend to m a k e c u r r e n t m o d e l s obso l e t e .

Specia l m o d e l s a l so g e n e r a l l y r e c e i v e the g r e a t e s t a m o u n t of p r o -

m o t i o n a l e m p h a s i s by m a n u f a c t u r e r s .

P roduc t Delet ion

As indicated in the fo rego ing d i s c u s s i o n , s o m e m a n u f a c t u r e r s

cont inue to p roduce p r o d u c t s which a r e l ike ly to be u n p r o f i t a b l e to

t h e m s e l v e s as wel l a s to w h o l e s a l e r s and r e t a i l e r s . P r o d u c t s which

a r e weak s e l l e r s " c r e a t e a b u r d e n of h idden c o s t s , p l a c e heavy d e -

m a n d s on a m a n a g e r ' s t i m e , and t i e up p roduc t i on on s h o r t r u n s . 1,1 *

In addi t ion , the amoun t of t i m e taken by t he se l l i ng o r g a n i z a t i o n

f r o m m o r e p r o f i t a b l e p r o d u c t s r e p r e s e n t s add i t iona l l o s s e s .

In an age of dynamic p roduc t compe t i t ion , p r o d u c t - l i n e p run ing m u s t be c o n s i d e r e d a s a p r o b l e m on a pa r with p r o -duct i m p r o v e m e n t and n e w - p r o d u c t d e v e l o p m e n t . Yet m o s t m a n a g e m e n t s have no s y s t e m a t i c p r o c e d u r e f o r p run ing w e a k e r p r o d u c t s ; t h e s e p r o d u c t s o f ten l i nge r in t he m i x unt i l they j u s t f a d e away, in the m e a n t i m e , they d e p r e s s

1 1 Rober t W. Eck le s , " P r o d u c t Line Delet ion and S impl i f ica t ion , B u s i n e s s Hor izons , XIV (October, 1 9? 1), 71.

129

the company ' s o v e r a l l l eve l of p ro f i t ab i l i t y ; they c o m -p l i ca t e the t a s k of a l loca t ing s c a r c e company r e s o u r c e s ; and they hold the company back f r o m a g g r e s s i v e l y d e -veloping new oppor tun i t i e s . ^

When s a l e s , p r o f i t , and p r i c e leve ls of a p roduc t fol low a

downward t r e n d over an extended pe r iod of t i m e , the p r o d u c t i s a

p o s s i b l e candida te f o r e l imina t ion . Before e l imina t ion , h o w e v e r ,

p r o d u c t changes and i m p r o v e m e n t s should be c o n s i d e r e d , new u s e s

and new m a r k e t s r e s e a r c h e d , and pos s ib l e ways of r educ ing p r o -

duc t ion a n d / o r m a r k e t i n g cos t s s tudied.

Se rv i ce and W a r r a n t y

M a n u f a c t u r e r s ' s e r v i c e and w a r r a n t y po l i c i e s tend to v a r y a s

m u c h a s o ther a s p e c t s of m a n u f a c t u r e r s ' m a r k e t i n g s t r a t e g i e s , ye t

t h e s e po l i c i e s a r e of i m p o r t a n c e f r o m the s tandpoin t s of cos t and

m e r c h a n d i s i n g . Se rv ice tends to be m o r e d i r e c t l y r e l a t e d to the

ques t i on of who is capab le of r e p a i r i n g a p r o d u c t , whi le w a r r a n t y

c o n c e r n s i tself with who will pay f o r the r e p a i r .

Trad i t iona l ly , the m a n u f a c t u r e r has a s s u m e d the r e s p o n s i b i l i t y

f o r t r a i n ing the w h o l e s a l e r ' s s e r v i c e m a n a g e r a n d / o r s e r v i c e m e n .

The w h o l e s a l e r h a s a s s u m e d the r e s p o n s i b i l i t y f o r t r a i n i n g r e t a i l

s e r v i c e m e n in ins ta l l a t ion and s e r v i c e t echn iques . The r e t a i l e r

h a s a s s u m e d r e s p o n s i b i l i t y f o r r e p a i r i n g p r o d u c t f a i l u r e s .

12 Phil ip Kotler , "Phas ing Out Weak P r o d u c t s , " H a r v a r d

B u s i n e s s Review, XL,III (March-Apr i l , 1965), 118.

^ • • n o

With the in t roduc t ion of t e l ev i s ion , m a n u f a c t u r e r s and whole -

s a l e r s began es t ab l i sh ing in m e t r o p o l i t a n m a r k e t s c e n t r a l i z e d s e r -

v i c e o r g a n i z a t i o n s which cha rged f o r r e p a i r s e r v i c e s o r o f f e r e d

c o n t r a c t r a t e s to r e t a i l e r s and c o n s u m e r s . R e t a i l e r s and inde-

pendent s e r v i c e d e a l e r s g e n e r a l l y have opposed c e n t r a l i z e d s e r v i c e

o r g a n i z a t i o n s and s o m e t i m e s have a l igned t h e m s e l v e s behind b r a n d s

which did not o f f e r c e n t r a l i z e d s e r v i c e .

W a r r a n t i e s by the m a n u f a c t u r e r , p r i o r to World War II, gen-

e r a l l y w e r e f o r n inety days on p a r t s and l a b o r , The m a n u f a c t u r e r

r e p l a c e d de fec t ive p a r t s a t no c h a r g e when the p a r t s w e r e r e t u r n e d

to h i m f r e i g h t p r e p a i d . Labor cos t f o r r e p l a c i n g the de fec t ive p a r t

w a s a r e spons ib i l i t y of the r e t a i l e r . The t h e o r y behind th i s p r a c t i c e

w a s tha t the d e a l e r r e a l i z e d enough p r o f i t m a r g i n f r o m the s a l e of

the p r o d u c t to cover n o r m a l p roduc t f a i l u r e s . A n u m b e r of m a n u -

f a c t u r e r s cont inue to fol low th i s p r a c t i c e today .

With the in t roduc t ion of b l ack and whi te t e l ev i s ion , w a r r a n t i e s

w e r e extended to one y e a r on the p i c t u r e tube . L a t e r , co lor p i c t u r e

tube w a r r a n t i e s w e r e extended to two, t h r e e , and even f ive y e a r s .

Cen t r a l s e r v i c e o r g a n i z a t i o n s . - - D u r i n g the 19501 s r e t a i l e r s

began to d i scont inue se l l ing low p r i c e d r a d i o s and phonographs b e -

c a u s e of e x c e s s i v e l abo r cos t s and compet i t ion f r o m d i s c o u n t e r s .

As a r e s u l t , s o m e m a n u f a c t u r e r s , such as the G e n e r a l E l e c t r i c

«> iV.-.K **• •>

' .. • '•''••• ; ' 131

C o m p a n y , began e s t a b l i s h i n g c e n t r a l s e r v i c e a g e n c i e s f o r r a d i o s

and p h o n o g r a p h s , and s o o n inc luded l a b o r r e p a i r coa t in t h e w a r -

r a n t y . O t h e r m a n u f a c t u r e r s w e r e s low to fo l l ow t h i s p r a c t i c e , and

t h i s p r o v i d e d G e n e r a l E l e c t r i c and a f e w o t h e r m a n u f a c t u r e r s w i th

a n o p p o r t u n i t y to e n l a r g e t h e i r m a r k e t f o r low p r i c e d r a d i o s and

p h o n o g r a p h s . It shou ld b e no ted t h a t t h e s e e a r l y c e n t r a l s e r v i c e

o r g a n i z a t i o n s p r o v i d e d m a n u f a c t u r e r s and w h o l e s a l e r s w i th a n o p -

p o r t u n i t y to s e l l to d i s c o u n t e r s and o t h e r r e t a i l e r s who did no t h a v e

o r w a n t to i n v e s t in s e r v i c e f a c i l i t i e s , but who w e r e c a p a b l e of

s e l l i n g a l a r g e v o l u m e of p r o d u c t s .

As f o r e i g n p r o d u c e r s b e g a n s e l l i n g in t h e d o m e s t i c m a r k e t ,

t h e y m e t t h e d o m e s t i c m a n u f a c t u r e r c o m p e t i t i o n by pay ing f o r l a b o r

r e p a i r c o s t s o r by e s t a b l i s h i n g c e n t r a l s e r v i c e o r g a n i z a t i o n s w h i c h

a b s o r b e d t h i s c o s t . L a t e r , f o r e i g n m a n u f a c t u r e r s b e g a n to o f f e r

o v e r - t h e - c o u n t e r r e p l a c e m e n t of p r o d u c t s w i th low un i t v a l u e .

T h e s e c o m p e t i t i v e a c t i o n s t a k e n by f o r e i g n p r o d u c e r s h e l p e x p l a i n

why d o m e s t i c m a n u f a c t u r e r s b e g a n to l o s e t h e m a r k e t f o r low p r i c e d

r a d i o s , p h o n o g r a p h s , a n d t a p e r e c o r d e r s . The c o m b i n a t i o n of e x -

t r e m e l y low p r i c e s coup led wi th a c t u a l r e p l a c e m e n t of a d e f e c t i v e

p r o d u c t w a s m o r e t h a n m a n y d o m e s t i c m a n u f a c t u r e r s could a b s o r b .

T h e s e c o m p e t i t i v e s t r a t e g i e s l a t e r b e c a m e a b a r g a i n i n g po in t f o r

d o m e s t i c m a n u f a c t u r e r s who w e r e s e e k i n g l o w e r p r i c e s f r o m

f o r e i g n s o u r c e s of s t ipply .

132

E f f e c t s of extended w a r r a n t i e s . - - O r g a n i z e d c o n s u m e r m o v e -

m e n t s of r e c e n t y e a r s have r e s u l t e d in the u s e of b e t t e r qua l i ty

con t ro l by m a n u f a c t u r e r s plus a f u r t h e r ex tens ion of w a r r a n t y

c o v e r a g e on p roduc t s with h igher unit p r i c e s . Led by RCA on a

na t iona l b a s i s , s e v e r a l m a n u f a c t u r e r s now p a y the e n t i r e w a r r a n t y

cos t and p e r m i t the c u s t o m e r to have any approved t e c h n i c i a n

th roughou t the coun t ry p e r f o r m the r e p a i r s . This s y s t e m a ids

t r a n s s h i p p e r s , and in t u r n c a u s e s the m a n u f a c t u r e r and whole -

s a l e r to l o s e s o m e con t ro l ove r a s e l ec t i ve d i s t r i b u t i o n system..

Also , the m a n u f a c t u r e r f inds it e a s i e r to s e l l to spec i a l u s e r s of

the p roduc t , such as p r e m i u m , incent ive , m a i l o r d e r , and l e a s i n g

f i r m s . Thus, extended w a r r a n t y c o v e r a g e e n l a r g e s the m a r k e t

oppor tun i t i e s ava i l ab l e to m a n u f a c t u r e r s , A g r e a t e r amount of

p o w e r is sh i f ted f r o m the r e t a i l e r and w h o l e s a l e r to the m a n u -

f a c t u r e r .

F u t u r e P r o d u c t s

Indica t ions a r e tha t i m p r o v e m e n t s in ex i s t ing p r o d u c t s help to

m a i n t a i n and i n c r e a s e s a l e s ; h o w e v e r , it ha s b e e n indicated tha t

the indus t ry needs a new p roduc t occas iona l ly to keep p a c e wi th

the g e n e r a l e c o n o m i c g rowth of the na t ion . New p r o d u c t s now

e m e r g i n g include h o m e video r e c o r d e r s , l a r g e r s c r e e n t e l ev i s ion ,

and r e c o r d e r s , phonographs , and r ad io s wi th quad raphon ic sound.

' .fj

133

Other p r o d u c t s , such a s t h r e e d i m e n s i o n a l p i c t u r e s and m o d u l a r -

e l e c t r o n i c r o o m s cons i s t ing of a comple te c o m p u t e r i z e d c o m m u n i -

ca t ions system., a r e s t i l l v i s ions of the f u t u r e f r o m a m a r k e t i n g

viewpo int.

P r o d u c t S tandard iza t ion

The ques t f o r the new, the b e t t e r , the d i f f e r e n t , and t he m o r e

convenient h a s b rough t about a cont inuous f low of new p r o d u c t s .

F r e q u e n t l y each new p roduc t can be des igned in s e v e r a l w a y s . In-

d u s t r y m e m b e r s tend to f o r m compe t i t ive m e r c h a n d i s i n g g r o u p s ,

e a c h wage r ing on which s y s t e m des ign the c o n s u m e r wil l a c c e p t .

The r e su l t i ng new p r o d u c t s a r e in t roduced to t he m a r k e t soon a f t e r

deve lopmen t , a s m a n u f a c t u r e r s a r e eage r to be f i r s t on the m a r k e t .

Thus , the e a r l y c o n s u m e r s , a s wel l a s the p r o d u c e r s , a r e l o s e r s

when a new p r o d u c t s y s t e m is not accep ted by a l a r g e s e g m e n t of

t he m a r k e t and m u s t be d i scon t inued . Although p r o d u c t i n t r o -

duct ion would be s l ower , t h e r e is a need f o r g r e a t e r i n d u s t r y

coope ra t i on in developing a s ing le s t a n d a r d f o r p r o d u c t s b e f o r e

in t roduc ing the p r o d u c t to the m a r k e t .

P r i c ing P r o b l e m s

Most of the p r i c ing p r o b l e m s a r i s e f rom, compe t i t i on among

channel m e m b e r s , the high f r e q u e n c y of p r i c e changes , and t he

' • ' V , "v 134

e f fo r t s . o f s u p p l i e r s to con t ro l r e t a i l p r i c e s . The i n d u s t r y is

c h a r a c t e r i z e d by f r e q u e n t p r i c e changes a t a l l l eve l s of d i s t r i bu t i on .

Domes t i c m a n u f a c t u r e r s announce p r i c e s at t h e i r annua l new m o d e l

showing, ye t d i scoun ts and spec i a l 'buying incen t ives a r e o f f e r e d a t

the f i r s t showing. A f t e r a l l m a n u f a c t u r e r s have shown the i r l i n e s ,

p r i c e a d j u s t m e n t s begin to t ake p l ace . Each m a n u f a c t u r e r con-

s t an t ly a d j u s t s p r i c ing th rough ac tua l p r i c e changes , s p e c i a l p r o -

m o t i o n a l a l lowances , o r the in t roduc t ion of new m o d e l s .

P r i c e Compet i t ion

A s t r a n g e p a r a d o x h a s ex i s ted within the i n d u s t r y f o r the p a s t

twenty y e a r s . While the Consumer P r i c e Index f o r a l l i t e m s h a s

been i n c r e a s i n g f r o m a 100 p e r cent b a s e in 1952, the p r i c e index

13

f o r app l i ances , TV s e t s , and r a d i o s h a s been d e c r e a s i n g . Yet

t he i ndus t ry ha s i n c r e a s e d qual i ty , u t i l i ty , and p e r f o r m a n c e .

El is ha Gray II, C h a i r m a n of the Board of the Whir lpool Corpora t ion ,

wh ich owns a m a j o r po r t i on of the Warwick E l e c t r o n i c s Company,

t he m a j o r supp l i e r to S e a r s , Roebuck and Company, expla ined t he

p a r a d o x to the Joint Economic Commi t t ee of C o n g r e s s in t h i s m a n n e r :

The roo t of the a c c o m p l i s h m e n t h a s been compe t i t ion - -compet i t ion f o r a l a r g e and cap r i c ious m a r k e t . With t he

13 Assoc ia t ion of Home Appl iance M a n u f a c t u r e r s , "How the In-

d u s t r y Has Achieved the Continuing Value P e r f o r m a n c e , " Inc red ib le Value Story (Chicago, 1970), p. 2.

135

i n c r e a s e s in populat ion, h o m e s , g r o s s na t iona l p r o d u c t and the r e l a t e d c o n s u m e r d i sposab le income, it is an ex -panding m a r k e t . The size and po ten t ia l of the m a r k e t h a s f o s t e r e d the compet i t ion and it is th i s compe t i t ion tha t ex -e r c i s e d a s t rong d i sc ip l ine on p r i c e , u t i l i ty , p e r f o r m a n c e , qual i ty , sa fe ty , s e r v i c e and a s s u r a n c e in the f o r m of w a r -r a n t i e s ,

Mr , Gray went on to say :

While t h e r e have been, m a n y avenues used in ach iev ing the p e r f o r m a n c e to m e e t compet i t ion , t h e r e is one c o m -m o n to al l in the indus t ry - - s m a l l e r p r o f i t m a r g i n s . This is a f a c t of l i f e at a l l l e v e l s - - m a n u f a c t u r e r s , d i s t r i b u t o r s and d e a l e r s . ^

Since t h e r e ex i s t s p roduc t ion capac i ty to exceed m a r k e t r e -

q u i r e m e n t s , compet i t ion has not p e r m i t t e d p r i c e s to i n c r e a s e f o r

any extended per iod of t i m e . Gray f u r t h e r c o m m e n t e d , "I don ' t

e v e r r e c a l l a b u s i n e s s m a n reduc ing a p r i c e excep t to m a i n t a i n

pos i t i on in a compe t i t i ve m a r k e t . P r i c e h a s been , t h e r e f o r e ,

a dominan t f o r c e in d i r ec t ing the e f f o r t s of channel m e m b e r s t o -

w a r d ma in ta in ing t h e i r s h a r e of m a r k e t . P r i c e r educ t ions have

g e n e r a l l y m e a n t s h o r t e r m a r g i n s f o r the p a r t i c i p a n t s , but l o w e r

p r i c e s and g r e a t e r va lue f o r the u l t i m a t e c o n s u m e r .

A d m i n i s t e r e d P r i c i n g

T h e r e a r e many who be l ieve tha t the c o n s u m e r e l e c t r o n i c

p r o d u c t s i ndus t ry u t i l i z e s a d m i n i s t e r e d p r i c i n g , as t h e r e is l i t t l e

^ I b i d . 1 5 Ib id . 1 ^Ib id .

136

s t ab i l i t y in p r i c i n g . M a n u f a c t u r e r s who se l l d i r e c t l y to r e t a i l e r s

h a v e been m o r e p r o n e to a d m i n i s t e r r e t a i l p r i c e s . Those manu-

facturers s e l l ing through, w h o l e s a l e r s a p p e a r to have a d m i n i s t e r e d

cos t p r i c e s and m a r g i n s of p ro f i t in such a m a n n e r tha t r e t a i l p r i c e s

a r e con t ro l l ed within a l im i t ed r a n g e .

P r i c e compet i t ion is e x t r e m e in the c o n s u m e r e l e c t r o n i c p r o -

duc t s indus t ry , w h e r e a s in a d m i n i s t e r e d p r i c e i n d u s t r i e s , p r i c e

compe t i t i on ha s been d e s c r i b e d a s being weak . H ie Twent ie th

Century Fund s t a t e s tha t p r i c e compet i t ion e x i s t s in a d m i n i s t e r e d

p r i c e i n d u s t r i e s "in t h e f o r m of s e c r e t p r i c e cu ts , va ry ing d i s -

counts g iven by d e a l e r s , in t roduct ion of new m o d e l s a t l ower

p r i c e s when a f i r m is unwil l ing to cut the quota t ion on a given

] 7

m o d e l , and o ther dev ious r o u t e s , " All of t h e s e devious r o u t e s

a r e t e chn iques u s e d in the c o n s u m e r e l e c t r o n i c p roduc t i n d u s t r y .

P r o f i t Marg ins

Indus t ry g r o s s m a r g i n s of p r o f i t fol lowing World War II r anged

f r o m t h i r t y p e r cent to a s m u c h a s f i f ty p e r cent off se l l ing p r i c e

f o r r e t a i l e r s . These m a r g i n s p e r m i t t e d a l l owances f o r t r a d e - i n

m e r c h a n d i s e . The g rowth of d i scount s t o r e s and p r i c e cutt ing b e -

gan dur ing the e a r l y 1950 ' s . L i s t p r i c e s w e r e soon r e g a r d e d a s

^ T w e n t i e t h Century Fund, An t i t ru s t Pol icy (New York, 1958), p . 419.

137

inf la ted and f i c t i c ious , a s eve ryone was d iscount ing off l i s t to s o m e

d e g r e e . The Genera l E l e c t r i c Company is c r ed i t ed with mak ing t he

f i r s t f o r m a l move in r e s t r u c t u r i n g p r i c e s , Since the i n d u s t r y w a s

showing a decl ining interest , in t r a d e - i n m e r c h a n d i s e and d i scount ing

w a s becoming a c o m m o n p r a c t i c e , t he Ckuieral E l e c t r i c Company

r e s t r u c t u r e d its p r i c e s so tha t r e t a i l p r o f i t m a r g i n s w e r e a p p r o x i -

m a t e l y twen ty - f ive p e r cen t . As a r e s u l t , Genera l E l e c t r i c w a s

able to s e l l to d i scount s t o r e s , con t ro l r e t a i l p r i c ing to s o m e d e g r e e ,

and a s s u m e a pos i t ion of p r i c e l e a d e r s h i p within the i n d u s t r y .

The policy was one of r educ ing p ro f i t m a r g i n s to r e a l i s t i c r e -

t a i l p r i c e l eve l s and avoiding f u r t h e r p r i c e cut t ing. Other f i r m s

w e r e slow to follow Genera l E i e c t r i c ' s r e s t r u c t u r i n g of p r i c e s , but ,

eventual ly , v i r tua l ly a l l of the indus t ry fol lowed i ts p a t t e r n .

M a n u f a c t u r e r s who se l l d i r e c t l y to d e a l e r s have c l a i m e d to

o f f e r h ighe r p ro f i t m a r g i n s to r e t a i l e r s b e c a u s e a m i d d l e m a n is

b y - p a s s e d . At one t i m e th i s c l a i m was poss ib ly t r u e ; in r e c e n t

y e a r s , however , compet i t ion has tended to f o r c e r e t a i l p ro f i t

m a r g i n s to a p p r o x i m a t e l y the s a m e level on m o s t b r a n d s . What

l i t t l e p r i c e advantage m a y ex i s t today in the m a n u f a c t u r e r to r e -

t a i l e r d i s t r ibu t ion s y s t e m is g e n e r a l l y ba lanced by w h o l e s a l e r s

wi th o f f e r i n g s of f r e e f l o o r p l a n s , no m i n i m u m o r d e r r e q u i r e m e n t s ,

l ower t r a n s p o r t a t i o n cos t s , and l a r g e r coope ra t i ve a d v e r t i s i n g

a l l owances .

Jnil'a&jice of P r i v a t e Brands on P r i c e s

Jt. should be noted tha t p r i v a t e b r a n d m e r c h a n d i s e in f luenced

p r i c i n g dur ing the 1950's s ince r e t a i l e r owned b r a n d s did not g e n -

e r a l l y a c c e p t t r a d e - i n m e r c h a n d i s e . As a r e s u l t , p r i v a t e b r a n d s

w e r e p r i c e d subs t an t i a l l y below na t iona l b r a n d s . " F r o m one s t a n d -

point , t he rap id growth of the p r i v a t e - l a b e l s h a r e of the m a r k e t is

a s y m p t o m of unwise p r i c i n g on t he p a r t of the n a t i o n a l - b r a n d

s e c t o r of the indus t ry . ® P r i v a t e b r a n d c o n s u m e r e l e c t r o n i c p r o -

duct s a l e s i n c r e a s e d b e c a u s e the inf la ted p r i c e s of na t iona l b r a n d s

p rov ided a p r o t e c t i v e sh ie ld f o r the lower p r i c e d p r i v a t e b r a n d s

f o r s o m e p e r i o d of t i m e .

Robe r t T. B rooke r , p r e s i d e n t of M a r c o r , the p a r e n t company

of M o n t g o m e r y - W a r d r e v i e w s indus t ry p r i c i n g ac t ions a s fo l l ows :

When you put your p r i c e down, your c o m p e t i t o r wi l l m e e t you. Tha t ' s not a p robab i l i ty ; i t ' s a dead c e r t a i n t y . When you cut p r i c e s , you won ' t be t h e r e a lone long . . , u s u a l l y if you cut the p r i c e on an i m p o r t a n t i t em, you won ' t ge t a b i g g e r s h a r e of the m a r k e t . ^

P r i c e L e a d e r s

The u s e of p r i c e l e a d e r m e r c h a n d i s e is p r a c t i c a l l y an o b s e s s i o n

wi th e v e r y f i r m at e v e r y l eve l of the indus t ry . Or ig ina l ly a

1 Q

" Joe l Dean, " P r i c i n g Po l i c i e s f o r New P r o d u c t s , " Modern Marke t ing St ra tegy, edi ted by Edward C. B u r s k and John F . Chapman (Cambr idge , M a s s . , .1964), p . 334.

^ M i c h a e l K. Torf , "Inside M a r c o r wi th Tom B r o o k e r , " D e a l e r s c o p e South (June- July, 1970), 12.

spec i a l l y p r i c e d m o d e l o r two in a l ine was be l i eved to be a good

m e a n s of a t t r a c t i n g p a t r o n a g e to a s t o r e . Today m a n u f a c t u r e r s

include s e v e r a l p r i c e l e a d e r i t e m s in each p r o d u c t l i ne . F o r ex-

a m p l e , r a t h e r than one p r i c e l e a d e r f o r a l ine of r a d i o s , a m a n u -

f a c t u r e r wil l f r e q u e n t l y have a p r i c e l e a d e r f o r AM p o r t a b l e s , F M

p o r t a b l e s , AM table m o d e l s , F M t ab l e m o d e l s , AM c locks , F M

c locks , and n u m e r o u s o t h e r s wi thin each p r o d u c t type .

Typical ly , p r i c e l e a d e r s a r e compe t i t i ve ly p r i c e d , s h o r t p r o f i t

m a r g i n p r o d u c t s , yet p r i c e l e a d e r s may account f o r a l a r g e p e r -

cen t age of a f i r m ' s uni t s a l e s . E x c e s s i v e c o n c e n t r a t i o n on s h o r t

m a r g i n l e a d e r m o d e l s wil l f r e q u e n t l y r e s u l t in p r o f i t l o s s f o r t he

e n t i r e p roduc t l ine o r p e r h a p s f o r the e n t i r e company .

R e s a l e P r i c e Main tenance

A s t r a n g e p a r a d o x e x i s t s wi th in the i n d u s t r y b e c a u s e m a n u -

f a c t u r e r s and w h o l e s a l e r s g e n e r a l l y a t t e m p t to u s e s o m e f o r m of

r e s a l e p r i c e m a i n t e n a n c e whi le ope ra t i ng in an e n v i r o n m e n t of con-

s t an t p r i c e changes . One of the r e a s o n s f o r t h i s p a r a d o x is tha t t he

supp l i e r d e s i r e s to be ab le to man ipu la t e r e t a i l p r i c e m o v e s to m e e t

compe t i t ion as wel l a s lead compet i t ion . With an e l e m e n t of con t ro l

o v e r r e t a i l p r i c ing , m a n u f a c t u r e r s and w h o l e s a l e r s a r e able to

m a k e t h e i r m o v e s quickly and, on s o m e o c c a s i o n s , s e c r e t l y . Sup-

p l i e r s a l s o be l i eve they m u s t con t ro l the ac t i v i t i e s of o v e r e n t h u s i a s t i c

.'/••• •- 140

r e t a i l e r s who d e s i r e to cut p r i c e s . Uncontrol led p r i c e cutt ing d e -

t e r i o r a t e s t he p r i c ing and p i of it m a r g i n s t r u c t u r e , and eventua l ly

wi l l weaken the r e t a i l d e a l e r s t r u c t u r e f o r a b r a n d of goods .

F a i r t r a d e l aws . - - With the except ion of s t a t e f a i r t r a d e l aws ,

any f o r m of r e s a l e p r i c e m a i n t e n a n c e pol icy is i l l ega l . The c o u r t s

cont inue to hold tha t once a s e l l e r h a s m a d e a s a l e to a p u r c h a s e r ,

the p u r c h a s e r m a y se l l the m e r c h a n d i s e a t any p r i c e he w i s h e s

and a t any p l ace he d e s i r e s . Yet s u p p l i e r s , f o r the m o s t p a r t , do

m a k e an e f f o r t to con t ro l r e t a i l p r i c i n g a s a p a r t of t h e i r o v e r a l l

m a r k e t i n g s t r a t e g y . M a n u f a c t u r e r s and w h o l e s a l e r s have e x e r c i s e d

c o n s i d e r a b l e caut ion r e c e n t l y in view of the F e d e r a l T r a d e Com-

m i s s i o n ' s c h a r g e s of p r i c e f ix ing and con t ro l by Magnavox in 1970.

Approaches to r e t a i l p r i c e s tab i l i ty . - - In a s tudy by Louis W.

Stern of c o n s u m e r goods m a n u f a c t u r e s , t he fo l lowing a p p r o a c h e s

to ach iev ing r e t a i l p r i c e s tab i l i ty w e r e l i s t e d : (1) g e n t l e m e n ' s

a g r e e m e n t s , (2) l im i t ed d i s t r ibu t ion , (3) d i r e c t se l l ing f r o m m a n u -

f a c t u r e r to r e t a i l e r , (4) s e l ec t i ve d i s t r i bu t ion which avoids s a l e s

to known d i s c o u n t e r s , (5) slow d e l i v e r i e s and p lead ing 'out of s tock '

to d e a l e r s who cut p r i c e s , {6} p romot iona l a l lowance o f f e r i n g s , (7)

s p e c i a l m o d e l s which r e d u c e p r o f i t m a r g i n s to a l eve l which p r e -

ven t s f u r t h e r d i scount ing , (8) spec i fy ing t r a d e - i n a l l owances o r

7 A

e l i m i n a t i o n of t r a d e - i n a l l owances , and (9) m o r a l s u a s i o n , " Manu-

f a c t u r e r s and w h o l e s a l e r s h a v e c o n s i d e r a b l e c o n t r o l ove r to whom

they se l l in i t ia l ly ; h o w e v e r , once they se l l to a b u y e r , s p e c i a l

caut ion m u s t be t aken in r e f u s i n g to s e l l to t h e buye r in the f u t u r e .

R e f u s a l to se l l b e c a u s e of f a i l u r e of a d e a l e r t o m a i n t a i n p r i c e s is

a n i l l ega l r e s t r a i n t of t r a d e ; t h e r e f o r e , when s u p p l i e r s r e a c h the

point of r e f u s i n g to se l l , they g e n e r a l l y o f f e r s o m e r e a s o n , such a s

f a i l u r e to p rov ide s e r v i c e to c o n s u m e r s , o r no r e a s o n a t a l l .

All of the a f o r e m e n t i o n e d a p p r o a c h e s to r e s a l e p r i c e m a i n t e -

nance a r e u t i l i sed in the c o n s u m e r e l e c t r o n i c p r o d u c t s i n d u s t r y

even though any f o r m , wi th the except ion of f a i r t r a d e l aws , i s

l ega l ly r e s t r i c t i v e in n a t u r e and a v io la t ion of t he S h e r m a n , Clayton,

and F e d e r a l T r a d e C o m m i s s i o n Acts . In p r a c t i c e , the w i l l i ngnes s

of r e t a i l e r s to p e r m i t t h e i r s u p p l i e r s to c o n t r o l p r i c e s depends on

the va lue and p r o f i t a b i l i t y of the s u p p l i e r ' s b r a n d to the r e t a i l e r .

P r i c e m a i n t e n a n c e of i m p o r t p r o d u c t s . - - M a n u f a c t u r e r s and

d i s t r i b u t o r s of m a j o r b r a n d s of i m p o r t e d p r o d u c t s p r o b a b l y a d h e r e

m o r e s t rong ly to r e s a l e p r i c e m a i n t e n a n c e p o l i c i e s than do m a n u -

f a c t u r e r s and w h o l e s a l e r s of d o m e s t i c b rands* This a d h e r e n c e ,

20 Louis W. Stern, "Approaches to Achiev ing Reta i l P r i c e

Stabil i ty, " P r i c e P o l i c i e s and P r a c t i c e s , ed i ted by Donald F . Mulvihi l l and Stephen Pa rank a (New York, 196?), pp. 134-151.

combined with, l a r g e r p r o f i t m a r g i n s , is one of the p r i n c i p a l r e a s o n s

p r o d u c e r s of f o r e i g n p r o d u c t s w e r e able to ga in a c c e p t a n c e by d e -

p a r t m e n t s t o r e s , d rug , h a r d w a r e , and spec ia l ty p roduc t c h a i n s .

With the g rea t ly expanded n u m b e r of out le ts in which f o r e i g n b r a n d s

a r e se l l ing , p r i c e m a i n t e n a n c e wi l l be m o r e d i f f icu l t to con t ro l . It

i s l ike ly tha t the d i s t r i bu t i on of m a j o r f o r e i g n b r a n d s wi l l f ind t h e m -

s e l v e s unde r the wa tchfu l eye of the F e d e r a l T r a d e C o m m i s s i o n and

J u s t i c e D e p a r t m e n t in the f u t u r e .

P r o d u c e r s of l e s s e r known f o r e i g n b r a n d s m a k e no a t t e m p t to

m a i n t a i n p r i c e s . The i r i n t e r e s t a p p e a r s to be in mak ing the s a l e s ,

and the lower the p r i c e , the b e t t e r .

Specia l U s e r P r i c ing

P r i c i n g within the i ndus t ry is f u r t h e r compl i ca t ed by the n u m -

b e r of spec i a l u s e r type p u r c h a s e r s in e x i s t e n c e today . P r i c e s to

s p e c i a l u s e r s v a r y . In s o m e in s t ances , c o n t r a c t s a r e nego t i a t ed

be tween t he m a n u f a c t u r e r and the spec ia l u s e r f o r s p e c i a l p r i c e s .

Also, b ids a r e m a d e by the m a n u f a c t u r e r to t he spec i a l u s e r who

m a y be planning to buy a quant i ty of m e r c h a n d i s e . F u r t h e r m o r e ,

s p e c i a l p e r m a n e n t p r i c i n g is o f f e r e d by m a n u f a c t u r e r s to s p e c i a l

u s e r s . Confl ic t o c c u r s when s p e c i a l u s e r s p u r c h a s e a t w h o l e s a l e

o r even lower p r i c e s , but in v e r y s m a l l quan t i t i e s . The t r a d i n g

s t a m p , p r e m i u m , and incent ive f i r m s a r e e x a m p l e s of s p e c i a l

' 143

u s e r s who may buy s m a l l quant i t i es at low prices , , While t h e r e a r a

a n u m b e r of e x t r e m e l y l a r g e f i r m s capable of buying in l a r g e quan-

t i t i e s , t h e r e a r e many m o r e s m a l l f i r m s who buy in quan t i t i e s

s m a l l e r than m o s t r e t a i l e r s but r e c e i v e p r i c e s tha t a p p r o x i m a t e

•wholesa le r ' s cos t . The lega l i ty of such t r a d e d i scoun t s b e c o m e s

ques t i onab l e .

P r o m o t i o n P r o b l e m s

P r o m o t i o n a l Act iv i t ies

All l eve l s of the c o n s u m e r e l ec t ron i c p r o d u c t s i ndus t ry a r e

p r o m o t i o n a l l y o r i en t ed with p r o m o t i o n a l a c t i v i t i e s be ing i m p l e -

m e n t e d a t each l eve l . M a n u f a c t u r e r s m a k e u s e of a l l m e d i a to

t r a n s m i t t h e i r m e s s a g e s . P r o m o t i o n a l m a t e r i a l s in the f o r m of

ou t s ide ident i f ica t ion , d i sp l ays , point of s a l e m a t e r i a l , c a t a logues ,

and s a l e s t r a i n ing m a t e r i a l s a r e p roduced by v i r t u a l l y a l l m a n u -

f a c t u r e r s . Such m a t e r i a l is g e n e r a l l y sold to w h o l e s a l e r s who m a y

c h a r g e it b a c k to coopera t ive adve r t i s i ng funds and then give o r s e l l

the m a t e r i a l s to r e t a i l e r s at r e d u c e d c o s t s .

In addi t ion to p romot iona l m a t e r i a l s and coope ra t i ve a d v e r t i s i n g ,

s t r o n g u s e is m a d e of con te s t s , incen t ives , p r e m i u m s , g i f t s , and

p u s h - m o n e y , as wel l as f inancing and p r o f e s s i o n a l r ecogn i t ion .

144

Exp en d i tur e s

M a n u f a c t u r e r s a r e be l ieved to spend b e t w e e n 1. 5 and 2. 0 p e r

cent of t h e i r to ta l s a l e s in a d v e r t i s i n g , a s t h e i r s h a r e of c o o p e r a t i v e

a d v e r t i s i n g funds a r e typ ica l ly around 1. 5 p e r cant , which is gen -

e r a l l y m a t c h e d by w h o l e s a l e r s . W h o l e s a l e r s o f f e r po r t i ons of th i s

3. 0 p e r cent to ta l to r e t a i l e r s who g e n e r a l l y wil l pay f r o m 25 to 50

p e r cent of the cos t of the ads they run loca l ly . Nat ional a d v e r t i s i n g

of r a d i o and t e l e v i s i o n p r o d u c t s th rough the TV m e d i u m r o s e f r o m

$6. 2 m i l l i on in 1958 to over $38 mi l l ion in 1969. ^*

Coopera t ive Adver t i s ing

Coopera t ive a d v e r t i s i n g funds a r e c u r r e n t l y a p r o b l e m a r e a f o r

a l l m e m b e r s of the i ndus t ry s ince the F e d e r a l T rade C o m m i s s i o n

(FTC) e s t ab l i shed guide l ines f o r a d m i n i s t e r i n g funds in 1969. The

p u r p o s e of the guide l ines was to p r e v e n t d i s c r i m i n a t o r y p r a c t i c e s

in a l loca t ing funds and to be c e r t a i n funds w e r e a l loca ted p r o p o r -

t iona te ly to a l l p u r c h a s e r s . Funds t r a d i t i o n a l l y had been a l loca ted

by w h o l e s a l e r s who f r e q u e n t l y f avo red l a r g e p u r c h a s e r s with e x t r a

a l l owances , one hundred p e r cent funds , and even p e r m i t t e d double

b i l l ing . When r e t a i l e r s opened new s t o r e s , p lanned a n n i v e r s a r y

2 1 Lincoln Diamant , T e l e v i s i o n ' s C l a s s i c C o m m e r c i a l s : The

Golden Yea r s , 1948-1958 (New York, 1971), pp. 281, 283.

1.45 i

s a l e s , o r d e s i r e d to e r e c t outs tanding s igns and d i s p l a y s , f u n d s

w e r e p rov ided , but not a lways to a l l d e a l e r s .

Since the -Supreme Court h a s he ld tha t t h e r e t a i l e r is the m a n u

f a c t u r e r ' s c u s t o m e r , the m a n u f a c t u r e r is now r e s p o n s i b l e f o r f a i r

and p r o p o r t i o n a t e a d m i n i s t r a t i o n of coope ra t i ve funds . R e t a i l e r s ,

u n d e r p rov i s ions of the Robinson- Pa t man Act, a r e a l so r e s p o n s i b l e

f o r knowingly r ece iv ing such funds . Any inducemen t to get m a n u -

f a c t u r e r s to dev ia te f r o m the i r c o o p e r a t i v e a d v e r t i s i n g po l icy is a

22

v io la t ion of F T C gu ide l ines .

As a r e s u l t of the fo rego ing changes , s o m e m a n u f a c t u r e r s a r e

doing away with coope ra t i ve a d v e r t i s i n g f u n d s . Motoro la was one 23

of the f i r s t to e l i m i n a t e r e t a i l coope ra t i ve a d v e r t i s i n g . Ap-

p a r e n t l y the cos t s of a d m i n i s t e r i n g funds in a c c o r d a n c e with gu ide-

l i nes and the r i s k s of v io la t ion a r e too g r e a t f o r s o m e m a n u f a c -

t u r e r s to a s s u m e . Other m a n u f a c t u r e r s a r e cont inuing wi th coop-

e r a t i v e funds a s in the p a s t , whi le s t i l l o t h e r s a r e s imp ly deduct ing

a n a d v e r t i s i n g a l lowance f r o m the f a c e of the invoice . While m o s t

d o m e s t i c m a n u f a c t u r e r s have t r i e d to comply with the gxiidelines,

22 "What ' s the Status of Co-op Adve r t i s i ng Money, " Mar t , XJ.V (October 15, 1970), 48.

'23"Motorola j> r 0 ps All Co-op Ads, " Merchand i s ing Week, CI (December 15, 1970), 7,

MO

m a n y f o r e i g n m a n u f a c t u r e r s a r e s t i l l p rovid ing s p e c i a l funds to

l a r g e p u r c h a s e r s .

F e d e r a l T r a d e C o m m i s s i o n Guidel ines w e r e intended to he lp

and p r o t e c t the s m a l l d e a l e r in h i s compet i t ive s t r u g g l e wi th l a r g e r

r e t a i l e r s . " I ronica l ly , the e f fec t of the F T C ' s guides . . . m a y b e

24 to h u r t h i m by kil l ing co -op e n t i r e l y . "

At t i tudes of the M a r k e t

Dea le r Rating of Consumer Buying Decis ions

A Mar t m a g a z i n e s u r v e y of r e t a i l e r s ' opinions a s to which

f a c t o r s inf luenced c o n s u m e r s m o s t in t h e i r p u r c h a s i n g d e c i s i o n s

r e v e a l e d p r i c e to be the m o s t impor t an t f a c t o r f o r f o u r of the s even

d i f f e r e n t t ypes of home e n t e r t a i n m e n t equ ipment c o n s i d e r e d . Brand

n a m e repu ta t ion was t he second m o s t impor t an t f a c t o r c o n s i d e r e d

by b u y e r s in f ive p roduc t t y p e s . In addi t ion, it w a s the m o s t i m -

p o r t a n t f a c t o r f o r co lor t e l e v i s i o n and the t h i r d m o s t i m p o r t a n t

25 f a c t o r f o r compac t m o d u l a r s t e r e o .

7 A "Co-op Ad F u n d s : F T C Guides May Hur t Sma l l e r D e a l e r s , "

Mar t , XIV (March 15, 1970), 7.

"How Dea le r s Rate F a c t o r s in Consumer Buying Dec i s ions , " Mar t , XV (August 1, 1971), 8.

147

Why D e a l e r s Buy I m p o r t s

In a s u r v e y of r e t a i l e r s a c r o s s the United S ta tes , Dea le r s cope

South d e t e r m i n e d tha t p r i c e was the m o s t s ign i f i can t r e a s o n r e -

t a i l e r s p u r c h a s e d and sold f o r e i g n m a d e goods . Styling was the

second m o s t impor t an t r e a s o n , and demand and qual i ty t ied f o r

t h i r d . Other r e a s o n s f o r c a r r y i n g f o r e i g n m a d e goods w e r e f e a -

t u r e s of p roduc t , exchange pol icy , good s e r v i c e and w a r r a n t y ,

v e r s a t i l i t y , va lue , and p e r f o r m a n c e . R e t a i l e r s w e r e m o s t c r i t i c a l

about the ava i lab i l i ty of p a r t s and s e r v i c e f o r i m p o r t m e r c h a n d i s e .

Adve r t i s ing , s tyl ing, f e a t u r e s , p e r f o r m a n c e , and p r o d u c t r e l i ab i l i t y

w e r e f a c t o r s which r e t a i l e r s r a t e d high about i m p o r t m e r c h a n d i s e . ^

U. S. Publ ic At t i tudes Toward I m p o r t s

A Newsweek study, conducted by National F a m i l y Opinion, I n c . ,

w a s m a d e in 1970 to d e t e r m i n e publ ic a t t i tudes t oward J a p a n e s e

p r o d u c t s in the U. S. m a r k e t . The s tudy r e v e a l e d tha t J a p a n e s e

p r o d u c t s w e r e c o n s i d e r e d to have the h ighes t qual i ty i m p r o v e m e n t s

du r ing the p a s t t en y e a r s when c o m p a r e d with p r o d u c t s p roduced

in the United States , England, and West G e r m a n y .

In c o m p a r i n g the qual i ty of individual p r o d u c t s m a d e by both the

United Sta tes and Japan, the p r o d u c t s m a d e in the United States had

2 6 "What ' s t he Source of I m p o r t ' s S t r e n g t h ? , 11 D e a l e r s cope

South (October , 1971), pp. 12-13.

148

h i g h e r r a t i ngs f o r eve ry p roduc t type , I l ie s tudy ind ica t e s a p r e -

f e r e n c e fo r domestic, m a d e goods , bat an a c c e p t a n c e of J a p a n e s e

m a d e goods, ^

With b u s i n e s s and publ ic a t t i t udes now condi t ioned t oward a c -

cep tance of J a p a n e s e m a d e goods, d o m e s t i c m a n u f a c t u r e r s wil l

h a v e to i m p r o v e t h e i r p roduc t o f f e r ings and p r i c i n g in o r d e r to

avoid f u r t h e r m a r k e t l o s s in the f u t u r e . Domes t i c m a n u f a c t u r e r s

s t i l l have the big advan tage of c u s t o m e r p r e f e r e n c e Ln the d o m e s t i c

m a r k e t , howeve r .

C o n s u m e r i s m

Objec t ives of Cons time r i s m

C o n s u m e r i s m , l ike a l l " i s m ' s , " b e c o m e s d i f f icu l t to def ine

b e c a u s e a s the m o v e m e n t grows i ts ob jec t ives b e c o m e b r o a d e r and

m o r e e n c o m p a s s i n g . What began as a s m a l l g roup seek ing p r o -

t ec t ion f o r b u y e r s of c e r t a i n t ypes of p roduc t s h a s expanded into

a highly o rgan ized m o v e m e n t d i r e c t e d f r o m the Off ice of the P r e s i -

dent of t he United S ta tes .

C o n s u m e r s a r e demand ing m o r e i n f o r m a t i o n , including m o r e

d i s c l o s u r e s of c o r p o r a t e and g o v e r n m e n t i n f o r m a t i o n . In a f r e e

27 National F a m i l y Opinion, Inc. , Publ ic At t i tudes Toward Im-

p o r t e d P r o d u c t s in the U. S. Marke t (New York, 1970), pp. 12-23."

149

e n t e r p r i s e s y s t e m , b u y e r s should h a v e a m e a n i n g f u l c h o i c e of p r o -

d u c t s and shou ld b e p r o v i d e d wi th enough i n f o r m a t i o n to m a k e a

c h o i c e . The o u t c o m e would r e w a r d t h e b e t t e r p r o d u c t and p e n a l i z e

28

t h e p o o r e r qua l i t y p r o d u c t . " In t h e buy ing p r o c e s s , t h e c o n s u m e r

shou ld not b e d e c e i v e d in t h e d e c i s i o n m a k i n g p r o c e s s and shou ld

b e p r o t e c t e d b e f o r e and a f t e r t h e p u r c h a s e .

Mos t b u s i n e s s e s would f i n d l i t t l e a r g u m e n t w i th t h e a f o r e m e n -

t i o n e d g e n e r a l i z a t i o n of c o n s u m e r i s m and i t s o b j e c t i v e s . M o s t

wou ld s a y t h e y fo l low t h e s e p r a c t i c e s , bu t R a l p h N a d e r b e l i e v e s

d i f f e r e n t l y :

U n f o r t u n a t e l y , in f a r too m a n y i n s t a n c e s , w h a t b u s i n e s s s a y s is no t wha t b u s i n e s s d o e s . C o m p e t i t i o n , l i k e l e v i t a t i o n , is not a cond i t i on t h a t is n a t u r a l t o m a n . The l a r g e c o r p o r a t i o n s d r e a m of m o n o p o l y , b u t s i n c e t h a t i s not p o s s i b l e f o r m o s t of t h e m , t h e y p r a c t i c e v a r i e t i e s of c o l l u s i o n , c o n s c i o u s p a r a l l e l i s m , p r o t e c t i v e l i m i t a t i o n o r s i m i l a r m i m i c r y of t h e d o m i n a n t f i r m . All t h e s e p o l i c i e s add up to k e e p i n g t h e c o n s u m e r in t h e d a r k abou t t h e p r o d u c t o r s e r v i c e and b r i n g i n g aboi.it t h e c o r -p o r a t e Va lha l l a of a c l o s e d m a r k e t and con t ro l led , e n t e r -

. ? Q p r i s e . 7

P e t e r D r u c k e r d e c l a r e s c o n s u m e r i s m to b e " the s h a m e of t h e

t o t a l m a r k e t i n g c o n c e p t . Jt is e s s e n t i a l l y a m a r k of t h e f a i l u r e of

t h e c o n c e p t . Such c o n d e m n a t i o n r e s u l t s f r o m t h e c o n t i n u e d

^®Ralph N a d e r , " C o n s u m e r P r o t e c t i o n and C o r p o r a t e D i s -c l o s u r e , " B u s i n e s s Today (Autumn, 1968), p . 20 .

2 9 To id.

30 P e t e r D r u c k e r , " T h e S h a m e of M a r k e t i n g , " M a r k e t i n g / Com-m u n i c a t i o n s , CCXCV1I (August , 1969), 60 .

- 150

b u s i n e s s p r a c t i c e of viewing the wor ld f r o m the s e l l e r ' s point of

v iew r a t h e r than the b u y e r ' s point of view, a s the m a r k e t i n g concep t

woiild sugges t .

Legal Impl ica t ions of_ C o n s u m e r i s m

The c o n s u m e r e l e c t r o n i c p roduc t s indus t ry has a cho ice . The

i n d u s t r y m u s t a d j u s t vo lun ta r i ly to the needs of b u y e r s by prov id ing

i n fo rma t ion , avoiding decep t ive p r a c t i c e s , and a s s u m i n g p roduc t

r e s p o n s i b i l i t i e s , o r m u s t a c c e p t g o v e r n m e n t in t e rven t ion to a c c o m -

p l i s h the s a m e th ings . Indus t ry needs only to look at the c a u s e s of

such l eg i s l a t ion as the I n t e r s t a t e C o m m e r c e C o m m i s s i o n Act,

Slier m a n Act, Clayton Act, F e d e r a l T r a d e C o m m i s s i o n Act, and

t h e R o b i n s o n - P a t m a n Act to d e t e r m i n e tha t s o m e s e g m e n t of in-

d u s t r y w a s taking u n f a i r advantage of ano the r s e g m e n t . This u n f a i r

advan tage a f f ec t ed soc i e ty as c o n s u m e r s .

During the 1 960 ' s a lone , the c o n s u m e r e l e c t r o n i c s i ndus t ry h a s

s e e n s p e c i f i c l eg i s l a t i on r e l a t ing to m e a s u r e m e n t of t e l e v i s i o n s c r e e n

s i z e s , t r a n s i s t o r counts , decep t ive a d v e r t i s i n g p r a c t i c e s , c o o p e r a -

t i ve a d v e r t i s i n g gu ide l ines , co lor t e l ev i s i on r ad i a t i on e m i s s i o n s ,

t r u t h in lending, t r u t h in packaging, and p r o d u c t s a f e t y . Since

a l m o s t e v e r y f e d e r a l gove rnmen t agency has e s t a b l i s h e d one o r

m o r e c o n s u m e r s e r v i c e s d e p a r t m e n t s , and s ince a m a j o r i t y of

s t a t e s now have a spec i f i ca l l y des igna ted c o n s u m e r o f f i c e r , m e m b e r s

151

of t he e l e c t r o n i c s indus t ry m u s t be ca r etui to comply with the many-

r u l e s . C o n s u m e r i s m is now p a r t of the l ega l e n v i r o n m e n t wi th in

3x-

which the indus t ry m u s t operate, ,

C o n s u m e r i s m is a popula r word today and r e c e i v e s s t r o n g

c o v e r a g e by the communica t ions m e d i a . Any m e n t i o n of a f i r m v io-

l a t i ng the p r inc ip l e s of c o n s u m e r i s m , w h e t h e r e s t a b l i s h e d by law

or not, can m e a n a s h a r p dec l ine in a f i r m ' s s a l e s and r e s u l t i n g

s h a r e of m a r k e t . Indus t ry m u s t p lan and work to m e e t the n e e d s

of c o n s u m e r s in o r d e r to avoid addi t ional r e g u l a t i o n by g o v e r n m e n t .

A r m i n Allen, v i c e - p r e s i d e n t of c o n s u m e r a f f a i r s f o r Ph i l co - F o r d .

c a l l s c o n s u m e r i s m a c a t c h - a l l word tha t :

can be def ined a s the i n c r e a s i n g ro l e of g o v e r n m e n t a s it a t t e m p t s to r egu la t e t r a d e and l e g i s l a t e i ts v iews of what wil l b r ing about c o n s u m e r s a t i s f a c t i o n . ^2

Although s o m e f i r m s have t r i e d to fu l f i l l t he ob j ec t i ve s of con-

s u m e r i s m , the i ndus t ry in g e n e r a l needs to m a k e i m p r o v e m e n t in

the a r e a s of decep t ive t r a d e p r a c t i c e s , decep t ive a d v e r t i s i n g , p r o -

duct s e r v i c e , and fu l f i l lmen t of w a r r a n t y ob l iga t ions .

*2 1 "The Quest ion of a F e d e r a l Consumer P r o t e c t i o n Agency, "

C o n g r e s s i o n a l Digest , L ( F e b r u a r y , 1971), 33-64 .

Wall is E. Wood, " C o n s u m e r i s m : It Won' t Go Away, " Mar t , XVI ( F e b r u a r y 1, 1972), 13.

152

Coli,stamers Union

One of the m o s t in f luenc ia l c o n s u m e r o r g a n i s a t i o n s is t he Con-

s u m e r s Union cf Mount Vernon, New York, p u b l i s h e r of C o n s u m e r

R e p o r t s . The impac t of C o n s u m e r s Union on the c o n s u m e r e l e c -

t r o n i c p roduc t s i ndus t ry is be l ieved to b e c o n s i d e r a b l e , as m o r e

than s ix t e s t r e p o r t s have been publ i shed in each of the p a s t f i v e

y e a r s . M a n u f a c t u r e r s have indicated tha t good r a t i ngs given to t h e i r

p r o d u c t s subs t an t i a l ly i n c r e a s e b u s i n e s s and poor r a t i n g s p r o v e d i s -

33

a s t r o u s . A p r o b l e m f o r the indus t ry i s how to counte r the e f -

f e c t i v e n e s s of good or poor r a t i n g s to t h o s e r e a d e r s who a r e in-

f luenced by publ i shed r e p o r t s .

Channel Confl ict

Confl ict in d i s t r i b u t i o n m a y be viewed b e h a v i o r a l l y a s a f o r m of oppos i t ion which is o p p o n e n t - c e n t e r e d ; b a s e d on incompat ib i l i ty of goals , a i m s , o r va lues of opposing f i r m s ; d i r e c t ; and p e r s o n a l ; in which the opponent o r op-pos ing f i r m con t ro l s the goal or ob jec t d e s i r e d by both p a r t i e s . Such c o n f l i c t - - b e h a v i o r which t h w a r t s , i n j u r e s , or d e s t r o y s an o p p o n e n t - - i s p r e s e n t in a l l soc ioeconomic s y s t e m s , including channels of d i s t r i bu t ion . ^

" C o n s u m e r s Union Puts on Muscle , " B u s i n e s s Week (December 23, 1967), p . 86.

Louis W. Stern, "Po ten t i a l Conflict Managemen t M e c h a n i s m s in Dis t r ibu t ion Channels : An In t e ro rgan i za t i ona l Ana lys i s , " Con-t r a c t u a l Market ing Sys tem, edi ted by Donald N. Thompson (Lex-ington, M a s s . , 1971), p . I l l ,

153

in a s tudy by Henry A s s a e l of nine d i f f e r e n t i n d u s t r i e s and t h e

r o l e of individual i ndus t ry t r a d e a s s o c i a t i o n s "between 1947 and

1965, t he c h a r a c t e r i s t i c c a u s e s of m o s t d i s t r i b u t i v e conf l i c t s we re ,

d e t e r m i n e d to be the fo l lowing:

F i r s t , m a n u f a c t u r e r s ' r e q u i r e m e n t s to m a i n t a i n p roduc t ion and cover high f ixed cos t s c r e a t e p r e s s u r e s on d e a l e r s to i n c r e a s e s a l e s vo lume . The r e s u l t is f r i c t i o n in the a r e a of p r i c e , r e t a i l i nven to ry l e v e l s , and d iscount m e r c h a n d i s i n g . Second, a b s o r p t i o n by one p a r t of d i s t r i bu t i ve func t ions p r e v i o u s l y he ld by ano the r h a s r e s u l t e d in conf l ic t over m a n u f a c t u r e r s b y p a s s i n g w h o l e s a l e r s , s a l e s by f a c t o r y - o w n e d r e t a i l ou t le t s , and con t ro l ove r loca l p r o m o t i o n s . Th i rd , d i f f e r i n g i n t e r -p r e t a t i o n s of the r o l e of the w h o l e s a l e r s o r r e t a i l e r s t e m f r o m d i f f e r ing economic ob jec t ives r e f l e c t i n g the t r a d e s t a tus and f i nanc i a l r e s o u r c e s of the d i s p u t a n t s . This has l ed to conf l i c t s be tween m a n u f a c t u r e r s and r e t a i l e r s concern ing the f r a n c h i s e , r e p r e s e n t a t i o n a l po l i c i e s , and func t iona l d i scoun t s . It h a s a l s o led to conf l ic t s be tween d iscount and t r a d i t i o n a l r e t a i l e r s . ^

Indus t r i e s included in the study w e r e t he d rug , au tomobi l e ,

p e t r o l e u m , food, e l e c t r i c a l p roduc t s , t e l e v i s i o n r e c e i v e r s , p e s t i -

c ides , l i quor , and f a r m equipment i n d u s t r i e s . Rat ings a c c o r d i n g

to in tens i ty of conf l ic t f o r the t e l ev i s ion r e c e i v e r i n d u s t r y w e r e

d e r i v e d f r o m an ana ly s i s of the f r e q u e n c y and in t ens i ty of conf l ic t

a s documented in i n d u s t r y t r a d e pub l ica t ions and g o v e r n m e n t

s o u r c e s . Sources of conf l i c t s r a t e d a s i n t ense w e r e b y p a s s i n g

35 Henry Assae l , "The Po l i t i ca l Role of T r a d e Assoc i a t i ons in

D i s t r ibu t ive Conflict Resolut ion , " Dis t r ibu t ion Channe l s : Be-h a v i o r a l Dimens ions , edi ted by Louis W. S t e rn (Boston, M a s s . , 1969), p." 213.

154

w h o l e s a l e r s , d i s c o u n t e r s v e r s u s t r a d i t i o n a l i s t s , f a i r t r a d e , r e t a i l

o r who le sa l e inventory l e v e l s , and f r a n c h i s e cance l l a t ion . Sources

of conf l i c t s indicated a s m o d e r a t e included b y p a s s i n g r e t a i l e r s ,

p r i v a t e v e r s u s na t ional b r a n d s , too many d e a l e r s , p r i c e d i s c r i m i -

na t ion or d i scount s t r u c t u r e , p r o m o t i o n a l a l l owances , s e r v i c e and

3 A

w a r r a n t y , and m a n u f a c t u r e r involvement in s t o r e m a n a g e m e n t .

Each of the fo regoing c a u s e s of conf l ic t wi th in the channel s t r u c t u r e

have been s t r e s s e d in t h i s s tudy a s p r o b l e m s of the c o n s u m e r e l e c -

t r o n i c p roduc t s i ndus t ry .

Included in Henry A s s a e l ' s o r ig ina l pub l ica t ion of s t ud i e s r e - .

l a t ing to t he t e l ev i s ion r e c e i v e r i ndus t ry a r e t h e s e s ign i f i can t c o m -

m e n t s : "The m a n u f a c t u r e r d e s i r e s that a high vo lume , low p r o f i t 37

m a r k e t i n g app roach be t aken by h i s d i s t r i b u t o r s and d e a l e r s . "

"Independent d i s t r i b u t o r s e x e r c i s i n g a p r i c i n g phi losophy which is

a l i e n to tha t d e s i r e d by the m a n u f a c t u r e r m a y be r e p l a c e d by a o o

f a c t o r y con t ro l l ed d i s t r i b u t o r . " ° In ano the r c o m m e n t , it is sug-

ges t ed tha t " a f t e r r e t a i l ou t le t s have been so l i c i t ed and o rgan i zed ,

m a n u f a c t u r e r s wil l encou rage (and s o m e t i m e s f o r c e ) d e a l e r s to 3 6 I b i d . 3 7

' R o b e r t G. B i e d e r m a n n and Richard L. Tabak, "The Te lev i s ion R e c e i v e r Industry, " The Po l i t i c s of Dis t r ibu t ive T rade A s s o c i a t i o n s : A Study in Conflict Resolut ion, edited by Henry Ass a el, H o f s t r a Uni-v e r s i t y Yearbook of Bus ines s , Se r i e s 4, Vol. 1 (Hempstead, New York, 1967), p. 258.

3 8Xbid.

i 55

c a r r y l a r g e vo lumes of inven tory . "~>9 Each of t h e s e f ind ings a r e

s ign i f i can t to th i s r e p o r t and to the indus t ry , a s e a c h have s t r o n g

l ega l imp l i ca t i ons .

In a n o t h e r s tudy of s m a l l c o n s u m e r e l e c t r o n i c p roduc t r e t a i l e r

a t t i t udes p r e p a r e d by D e a l e r s c o p e , s even ty -one p e r cen t of the r e -

spondents indicated the d i s t r i b u t o r ' s d e s i r e f o r vo lume to be the

c a u s e of the m o s t d i f f icu l ty f o r s m a l l d e a l e r s . Over one-ha l f of

a i l r e t a i l e r s did not be l i eve tha t d i s t r i b u t o r s have equal po l i c i e s in

e i t h e r p r i c i n g o r a d v e r t i s i n g with r e s p e c t to the r e t a i l e r s the d i s -

t r i b u t o r s s e r v e . F i f t y - e i g h t p e r cent of t he d e a l e r s a g r e e d tha t

m a n u f a c t u r e r s and d i s t r i b u t o r s " a r e out to get the buck and nothing

e l s e . And vo lume d e a l e r s a r e w h e r e they a r e get t ing it. "40

The under ly ing p r o b l e m in channel conf l ic t c o n c e r n s i t se l f with

channe l m a n a g e m e n t . T h e r e ex i s t s an i n t e rdependence be tween

n o r m a l l y independent o r g a n i z a t i o n s tha t m u s t r e f l e c t i tself in co-

o p e r a t i o n a s wel l as conf l i c t . "Where such i n t e r d e p e n d e n c e is c o m -

b ined with an imba lance in p o w e r - - a s in the au tomobi l e , p e t r o l e u m ,

and t e l e v i s i o n i n d u s t r i e s - - t h e potent ia l f o r d i s t r i b u t i v e conf l ic t is

h igh. "4 1 Where a channel m e m b e r has the ab i l i ty to apply p r e s s u r e

s u c c e s s f u l l y , the p robab i l i t y of f r i c t i o n i n c r e a s e s .

3 9 I b i d .

40 "The Small Dea le r , " D e a l e r s c o p e South (May, 1972), p. 13.

A s s a e l , "The Po l i t i ca l Role of T r a d e A s s o c i a t i o n s , " p . 315.

156

Channel Control

Defini t ion and Rela t ionship to Power

Channel con t ro l is u s e d h e r e to denote the ab i l i ty of one channel

m e m b e r to con t ro l the m a r k e t i n g ac t i v i t i e s and po l i c i e s of a n o t h e r

channe l m e m b e r f o r a given p roduc t or b r a n d . Cont ro l l ing and d i -

r ec t i ng t he e f f o r t s of o t h e r s r e q u i r e s an e l e m e n t of p o w e r . "An

individual o r an o rgan iza t ion , in o r d e r to p r e v a i l in t he s t r u g g l e

f o r s u r v i v a l , m u s t ac t in a way to p romote t he power to a c t .

This is r e f e r r e d to a s t he power p r i n c i p l e .

Source of Power

The s o u r c e s of power f o r channel m e m b e r s inc lude e c o n o m i c

s t r e n g t h , po l i t i ca l power , pa t en t s , exc lus ive p r o d u c t s , i n f luence

ove r o t h e r s , e x p e r t n e s s in f ie ld , s u p e r i o r knowledge, e s t a b l i s h e d

repu ta t ion , and s u p e r i o r m a r k e t i n g abi l i ty . Some t imes p o w e r m a y

not be d e s i r e d by channel m e m b e r s while at o ther t i m e s p o w e r m a y

r e s u l t f r o m ine f f i c i enc i e s in the m a r k e t i n g channel , o r p o w e r m a y

be l ega l ly g r an t ed . Rewards , pena l t i e s , and c o e r c i o n f r e q u e n t l y

f o r m a b a s e fo r a c q u i r i n g and e x p r e s s i n g power .

^ W r o e Anderson , Market ing Behavior and Execu t ive Act ion (Homewood, I l l inois , 1957), p . 51.

157

Cont ro l by M a m i f a c t u r e r s

in. many d i s c u s s i o n s of channel cont ro l , the m a n u f a c t u r e r is

c a s t in the r o l e of channel c o m m a n d e r , e s p e c i a l l y if h e is l a r g e ,

e conomica l l y sound, ha s good p r o d u c t a c c e p t a n c e , and m a k e s u s e

of s e l e c t i v e d i s t r i bu t i on po l i c i e s , "In t h s background l i e s the p o s s i -

b i l i ty tha t m a n u f a c t u r e r s ' out le ts m a y t ake over the who lesa l ing and

r e t a i l i ng func t ions o r t h a t exc lus ive d i s t r i b u t o r s h i p s m a y be g ran t ed

to m o r e doc i l e d i s t r i b u t o r s . "Small m a n u f a c t u r e r s m a y a l so

s e r v e a s po ten t ia l s o u r c e s of con t ro l and d i r e c t i o n of a v e r t i c a l

i n t e r o r g a n i z a t i o n a l s t r u c t u r e . Control is p o s s i b l e w h e r e a good

p r o d u c t is known to ex i s t even though economic power of the m a n u -

f a c t u r e r m a y be weak .

Control by Who le sa l e r s

W h o l e s a l e r s have po ten t ia l channel con t ro l when loca ted in l a r g e

m a r k e t s , when economica l ly s t rong , or when they have a s t rong

se l l ing o rgan iza t ion . Also, in t h o s e c a s e s w h e r e the m a n u f a c t u r e r ' s

p r o d u c t is weak, h i s d iscount s t r u c t u r e is u n a t t r a c t i v e , o r h i s p a s t

43 Corwin Edwards , Big Bus ines s and t he Pol icy of Compet i t ion

(Cleveland, 1956), p. 47.

^ R o b e r t W. Li t t le , "The Market ing Channel : Who Should Lead This E x t r a c o r p o r a t e Organ iza t ion? " Market ing Channels , edi ted by Wil l iam G. Mol ler and David Wileman (Homewood, I l l inois , 1971), p . 315,

158

45

reputa t ion is poor, the wholesa ler is the potential channel l eader ,

"Usually wholesa le rs have gone to g rea t length to coopera te with

supplying manufac tu r e r s , of ten when it might have been m o r e p r o -46

f i table to reduce the number of competing b rands c a r r i e d . "

Control by Large Scale Reta i le rs

Large sca le r e t a i l e r s have begun to challenge other channel

m e m b e r s fo r control as a r e su l t of their growing s ize . In addition,

r e t a i l e r ownership of p r iva te brands contr ibutes to the likelihood of

r e t a i l e r control . "The growth of m a s s r e t a i l e r s is increas ingly

challenging the manufac tu re r fo r channel l eade r sh ip , as the manu-

f a c t u r e r challenged the wholesa ler in the ea r ly p a r t of this century.

Some students of marke t ing see the mass r e t a i l e r as the na tura l

l e ade r of the channel because of his c loseness to the consumer and

his abil i ty to de te rmine consumer needs.

45-"William R. Davidson, "Channels of Dis t r ibut ion--One Aspect

of Market ing Strategy, " Marketing fasights, edited by Clifton Anderson and Philip R. Cateora (New York, 1968), p. 348.

E d w i n H. Lewis, Marketing Channels: S t ruc ture and Strategy (New York, 1968), p. 65.

^ B r u c e Mailen, "A Theory of Reta i le r -Suppl ier Conflict, Con-t r o l and Cooperation, " Distr ibution Channels,. Behavioral Dimen-s ions , edited by Louis W. Stern (Boston, 1969), p. 183.

159

Control by Smal l Scale R e t a i l e r s

The f o r m a t i o n of r e t a i l e r - o w n e d c o o p e r a t i v e s is one of two ways

in which s m a l l s c a l e r e t a i l e r s m a y gain channe l con t ro l . The o t h e r

me thod is the t h r e a t of appea l to g o v e r n m e n t s i nce f e d e r a l , s t a t e ,

and l o c a l g o v e r n m e n t s tend to be s m a l l b u s i n e s s o r i e n t e d . Despi te

i ts sympa thy , g o v e r n m e n t ha s b e e n r e l u c t a n t to p a s s r e s t r i c t i v e

l e g i s l a t i o n r e l a t i ng to d i s t r i bu t ion . Appeals h a v e been m a d e th rough

i n d u s t r y t r a d e a s s o c i a t i o n s with l im i t ed s u c c e s s b e c a u s e the E l ec -

t r o n i c L idus t r i e s A s s o c i a t i o n ' s m e m b e r s h i p i s p r i n c i p a l l y c o m -

posed of m a n u f a c t u r e r s , and the National Appl iance and Radio - TV

D e a l e r s Assoc ia t ion r e p r e s e n t s only a s m a l l p o r t i o n of a l l r e t a i l e r s .

Cont ro l by F o r e i g n F i r m s

Cont ro l of m a r k e t i n g channe l s is not r e s t r i c t e d to United Sta tes

f i r m s . The fol lowing quota t ion r e f l e c t happen ings in J apan :

Dis t r ibu t ion s y s t e m s in h igh l eve l , m a s s consumpt ion e c o n o m i e s have t ended to evolve f r o m p r o d u c t f lows th rough a s e r i e s of au tonomous m a r k e t s to p r o d u c t f lows th rough a m a r k e t dominated by a channe l l e a d e r . T h r e e t r e n d s have p r o d u c e d th i s evolut ion in Japan ; f i r s t , t he downward ex-pans ion of l a r g e m a n u f a c t u r e r s th rough the channel : second , t he upward expans ion of m a s s d i s t r i b u t o r s into p roduc t ion f a c i l i t i e s ; and t h i rd , the c o r r e s p o n d i n g expans ion of e s t a b -l i shed w h o l e s a l e r s into p roduc t ion a n d / o r r e t a i l ope ra t i ons . ^®

^8;Masanori T a m u r a , "The Evolution of Va r ious F o r m s of Con-t r a c t u a l Marke t ing Sys t ems in Japan , " C o n t r a c t u a l Marke t ing S y s t e m s , edi ted by Donald N. Thompson (Lexington, M a s s . , 1971)» p. 271.

160 »

With i m p o r t m e r c h a n d i s e , p a r t i c u l a r l y J a p a n e s e , continuing to

show r a p i d growth r a t e s , it m a y be w i se f o r United States f i r m s t o

note how Japanese f i r m s have in tegra ted t h e i r m a r k e t i n g channe l s .

If g rowth r a t e s of J a p a n e s e c o n s u m e r e l e c t r o n i c p r o d u c t s slow to

any a p p r e c i a b l e d e g r e e , it is l ike ly that g r e a t e r i n t eg ra t i on by

J a p a n e s e m a n u f a c t u r e r s into wholesa l ing and r e t a i l i n g wil l t ake

p l a c e . Some in tegra t ion into m a n u f a c t u r i n g by J a p a n e s e t r a d i n g

c o m p a n i e s has , a s was noted, a l r e a d y t aken p l a c e .

Danger in E x e r c i s i n g Power

The e x e r c i s e of power by a f i r m wil l f r e q u e n t l y c a u s e conf l ic t

s ince o the r f i r m s tend to r e s i s t such a t t e m p t s . "In planning s t r a t e g y ,

t he ob jec t ive m u s t be to e s t a b l i s h r e l a t i o n s h i p s of mu tua l t r u s t .

When one of the p a r t i e s involved is f e l t to have the uppe r hand , the

s e e d s of f u t u r e f r i c t i o n have been p lanted . Wroe A n d e r s o n h a s

s u g g e s t e d :

The g r e a t e s t r i s k of al l f o r anyone e x e r c i s i n g power is tha t of losing it by pushing it too f a r . The power p r i n c i p l e s u g g e s t s a r e a s o n a b l e r e s t r a i n t in the e x e r c i s e of power , both a s to the goals f o r which it is to be u s e d and a s to the f o r m in which it is to be e x e r t e d ,

^ F e r d i n a n d ,F. M a u s e r , Modern Marke t i ng Managemen t : An In tegra ted Approach (New York, 1961), p . 327.

5 0 Anderson , p. 52.

Ihl

A n d e r s o n f u r t h e r sugges t s tha t no s y s t e m e x i s t s wi thout r i s k s

and tha t "the r i s k s a s s o c i a t e d wi th inac t ion a r e o f ten m o r e s e v e r e

than t he r i s k s of ac t ion . 1 C o n t r a r y to th i s view of r i s k s , in -

ac t ions f r e q u e n t l y only r e f l e c t de l ays in a c c o m p l i s h i n g an ob j ec t i ve ,

w h e r e a s the exe r t ion of power m a y r e s u l t in t he l o s s of a c u s t o m e r

o r s u p p l i e r s , o r m a y r e s u l t in the m o r e s e v e r e c h a r g e s of a n t i t r u s t

v io l a t i ons .

Legal Env i ronmen t

. The c o n s u m e r e l e c t r o n i c p r o d u c t s i ndus t ry o p e r a t e s wi thin a

s t r o n g l ega l env i ronmen t . In the p a s t and continuing to t he p r e s e n t ,

t he i n d u s t r y ' s p r o b l e m s have been c e n t e r e d , f o r the m o s t p a r t ,

a round a n t i t r u s t l eg i s l a t i on . F o r m a n y y e a r s the channel s t r u c t u r e

h a s been connected by r e l a t i v e l y s t rong and m e a n i n g f u l f r a n c h i s e

a g r e e m e n t s . Many of t he f r a n c h i s e a g r e e m e n t p r o v i s i o n s have been

d e c l a r e d i l lega l , o r of ques t ionab le lega l i ty , h o w e v e r , As a r e s u l t ,

f r a n c h i s e a g r e e m e n t s have l o s t m u c h of t h e i r s t r e n g t h .

A n t i t r u s t p r o b l e m s p e r t a i n to co l lus ive a g r e e m e n t s and m o n o -

po l i s t i c p r a c t i c e s , such as p r i c e f ixing, exc lus ive dea l ing , fu l l l ine

f o r c i n g , p r i c e d i s c r i m i n a t i o n , tying c l a u s e s , and o t h e r s . Channel

m e m b e r s have unknowingly v io la ted a n t i t r u s t l aws in m a n y i n s t a n c e s .

5 1 Ibid.

162

Violat ions , e i t he r knowingly or unknowing ly, con t inue to be pract iced

in the industry t oday . The participants probably fee l t h e i r ac t ions

a r e r e a s o n a b l y b e n e f i c i a l and harmful to no one. The c o u r t s have

he ld , however , tha t a d e g r e e of r e a s o n a b l e n e s s does not e x i s t in

restraint of tra.de, and any such ac t ions a r e Ln v io la t ion of t he law.

In the United States v. T ren ton P o t t e r i e s Company c a s e the 'reason-

able probability dictum' held that a f i r m or f i r m s wi th the power to

control markets , whether they exerc i s ed t h e power reasonably or

not, was in violation of the law. The dec i s ion of the court may be

summarized:

The a i m and resu l t of every pr ice f i x ing agreement , if effect ive, is the el imination of one f o r m of competition. The power to f ix pr ices , whether reasonably e x e r c i s e d or not, involves power to control the market and to f i x arbi -trary and unreasonable pr ices . . . . Agreements which create such potential power may wel l be held to be in them-s e l v e s unreasonable or unlawful re s tra in t s , without the neces s i ty of minute i nqu i ry whether a part icular pr ice i s reasonable or unreasonable as f ixed. . . « ^

Federal Trade Commiss ion

A growing organized consumer movement h a s s e e n many of its

d e s i r e s become administrat ive law. The Federa l Trade Com-

m i s s i o n , with increased power in recent y e a r s , has exerted

52 Supreme Court R e p o r t e r , Cases Argued and Determined in

t he United States Supreme Court , October Term, 1926, permanent edition, Vol. 47, St. Paul," 1928, p. 379.

163

cons iderab le p r e s s u r e on and increased its control over the indus t ry .

The Commiss ion has given its g r ea t e s t at tent ion to cha rges of p r i c e

fixing, deceptive t r a d e p r ac t i c e s , d i s c r imina to ry adver t i s ing and

promot ional al lowances, and d i sc r imina to ry pr ic ing pol ic ies . De -

ceptive t r a d e p rac t i ces r e l a t e to ma t t e r s such a s f ic t ic ious and

compar i son pricing, and f a l s e o r misleading adver t i s ing c l a ims .

Recent moves by the F e d e r a l Trade Commission r e f l ec t a m o r e

organized approach in cooperat ion with other government depa r t -

ments toward protect ion of the consumer .

Robinson- Patman Act

As l a r g e sca le r e t a i l e r s have continued to grow and i nc r ea se

the i r buying power, they find themse lves in danger of violating

provis ions of the Robinson-Patman Act. When demanding a n d / o r

willingly accepting p r i c e s of a d i sc r imina to ry na ture , they a r e in

violat ion of the Act.

Cur ren t Danger of Economic Concentrat ion

Domest ic indus t r ies . - -B ig bus iness and economic concentra t ion

of domest ic indust r ies continue to be under a t tack by l e a d e r s of con-

s u m e r movements , the Fede ra l Trade Commiss ion and. Jus t ice

Depar tment , and An t i -Trus t Committees within Congress . The

F e d e r a l Trade Commission, in its f i r s t proposed an t i t rus t suit

164

a g a i n s t an oligopoly, is a t t empt ing to b r e a k tip the b r e a k f a s t iood

i ndus t ry , if the C o m m i s s i o n is s u c c e s s f u l , t he p r e c e d e n t could

l ead to d i s m e m b e r m e n t of i n d u s t r i e s account ing fo r m o r e than one-

t h i r d of the United States e c o n o m y ' s annual s a l e s vo lume. The

c o n s u m e r e l ec t ron i c p r o d u c t s i n d u s t r y would b e one of the one

hundred i n d u s t r i e s c o n s i d e r e d to be an oligopoly and would t h e r e -

53

f o r e be sub j ec t to d i s m e m b e r m e n t . ~

In a s i m i l a r ac t ion , Senator Phi l ip A. Har t , C h a i r m a n of the

Senate Ant i - T r u s t Commi t t ee , h a s announced l eg i s l a t i on d i r e c t e d

t o w a r d b reak ing up United States monopoly p o w e r . Tit led the In-

d u s t r i a l Reorgan iza t ion Act, s even m a j o r i n d u s t r i e s , including

t he e l e c t r o n i c s indus t ry , would be sub jec t to r e o r g a n i z a t i o n p lans .

The bi l l would f u r t h e r outlaw monopo l i e s . Senator H a r t s a id the

b i l l "is a imed not a t c o n g l o m e r a t e s a s such but a t monopo l i e s and

o l igopol ies which he sa id inf la te p r i c e s , r e d u c e jobs and f r e e z e 54

out c o m p e t i t o r s . "

F o r e i g n i n d u s t r i e s . - - F o r e i g n na t ions have not c o n c e r n e d t h e m -

s e l v e s with a n t i - t r u s t in the m a n n e r of the United S ta tes . Many

^ H a l Taylor , " F T C ' s F i r s t Oligopoly A s s a u l t is Aimed Agains t Ce rea l Giants, " Home F u r n i s h i n g ? Daily, XLIII (December 17, 1971), 1 - 2 .

^ D a l l a s T imes Hera ld , July 23, 1972, p. 1.

165

na t ions , p a r t i c u l a r l y in Europe , have p e r m i t t e d c a r t e l s to ex i s t b e -

c a u s e of t he e f f i c i enc i e s d e r i v e d f r o m e c o n o m i e s of s ca l e , and t he

r e s u l t i n g ab i l i ty to compe te in te rna t iona l ly . S imi la r s i tua t ions

e x i s t in Japan, even though an A m e r i c a n imposed f o r m of a n t i t r u s t

l e g i s l a t i o n which was p a s s e d dur ing the U, S. Occupat ion pe r iod

fol lowing World War II r e m a i n s on t h e i r s t a tu t e books . R a r e l y do

t he J a p a n e s e "confuse a n t i - t r u s t idea ls wi th economic r e a l i t y . . . .

Indus t ry is encouraged to ' coope ra t e 1 to p r e v e n t d e s t r u c t i v e c o m -

55

pe t i t i on . " ' It would b e e a s y fo r such po ten t ia l f o r m s of co l lus ion

t o i n f i l t r a t e the A m e r i c a n m a r k e t i n g scene . Col lus ion among the .

g iant f i r m s of Japan could r e p r e s e n t g r e a t power in the United

Sta tes m a r k e t .

Pos i t ion of Domes t i c M a n u f a c t u r e r s

Domes t i c m a n u f a c t u r e r s of c o n s u m e r e l e c t r o n i c p r o d u c t s a r e

c u r r e n t l y conf ron ted with the poss ib i l i t y of d i s m e m b e r m e n t b e c a u s e

of v io la t ing a n t i t r u s t l aws , whi le at the s a m e t i m e t he f i r m s a r e

t r y i n g to compe te with f o r e i g n f i r m s whose na t iona l g o v e r n m e n t s

e n c o u r a g e i ndus t ry coope ra t ion . Crea t ing an i n d u s t r y of s m a l l

f i r m s does not a p p e a r to be the a n s w e r f o r compet ing with i n t e r -

na t iona l c a r t e l s . It is p o s s i b l e tha t s o m e i n d u s t r y - w i d e s y s t e m of

55 Dean S. A m m e r , "Our Ant i t rus t Laws a r e Ant icompet i t ive , "

B u s i n e s s Hor izons , XIV (October , 1971), 37.

166

cooperat ion must be pe rmi t t ed in o rde r to r e m a i n competi t ive m the

internat ional s ec to r .

In the foregoing d iscuss ion , dis t r ibut ion, p roducts , pr ic ing ,

promotion, marke t a t t i tudes, consumer i sm, channel conflict and

control , and legal environment were d iscussed as p rob lems of the

consumer e lec t ronic products industry. Each of these p rob lems

w e r e shown to have an influence on industry sa les , and on a f i r m ' s

or b r a n d ' s marke t pene t ra t ion . Many p rac t i ce s of the industry

w e r e shown to r e su l t in conflict among channel m e m b e r s . Also,

many industry p r a c t i c e s w e r e shown to be quest ionable f r o m a

legal viewpoint.

Additional data re la t ing to industry p r ac t i c e s is p resen ted in

Chapter V. This chapter p r e s e n t s the opinions of indust ry p a r -

t ic ipants regarding industry p rac t i ces re la ted to the purposes and

hypotheses of the study. These opinions w e r e compiled f r o m

s e p a r a t e ques t ionnai res designed fo r and completed by manufac -

t u r e r s and impor t e r s , wholesa le r s , r e t a i l e r s , l a rge sca le r e t a i l e r s ,

and potential special u s e r s of the product .

C H A P T E R Y

PRESENTATION AND ANALYSIS

O F PRIMARY DATA

Sample Size and Response

In o r d e r to gain g r e a t e r ins ight into ac tua l condi t ions and

p r a c t i c e s exis t ing within the c o n s u m e r e l e c t r o n i c p r o d u c t s indus t ry

and to t e s t the hypo theses of the s tudy, a s e r i e s of f ive q u e s t i o n -

n a i r e s w a s developed . Sepa ra t e q u e s t i o n n a i r e s w e r e des igned f o r -

m a n u f a c t u r e r s and i m p o r t e r s , w h o l e s a l e r s , r e t a i l e r s , l a r g e s c a l e

r e t a i l e r s , and s p e c i a l u s e r s who w e r e c o n s i d e r e d to be po ten t i a l

d i r e c t p u r c h a s e r s . The me thods of se lec t ing the s a m p l e have been

d e s c r i b e d under Sources of Data . In te rv iews f o r the p u r p o s e of

comple t ing q u e s t i o n n a i r e s w e r e conducted wi th t h i r t e e n w h o l e s a l e r s

and s i x r e t a i l e r s loca ted in Dal las , Texas be tween July 1, 1971 and

August 15, 1971. In addit ion, 669 q u e s t i o n n a i r e s w e r e m a i l e d b e -

tween November 23, 1971 and Apr i l 11, 1972.

A r e s p o n s e was r e c e i v e d f r o m 273, o r 3 9 . 6 8 p e r cent , of the

688 f i r m s s a m p l e d . Of t h e s e , 104 r e s p o n s e s w e r e not c o n s i d e r e d

u s a b l e b e c a u s e of the fol lowing r e a s o n s ; the f i r m had m o v e d o r was

no longe r in b u s i n e s s ; the f i r m did not se l l t he c o n s u m e r e l e c t r o n i c

167

1 k ^ i> V-1 w

p r o d u c t s being s tudied in t h i s r e p o r t ; the f i r m c o n s i d e r e d the p r o -

ducts to be an ins ign i f i can t p a r t of i t s b u s i n e s s ; the f i r m r e t u r n e d

g e n e r a l i n f o r m a t i o n o r incomple te q u e s t i o n n a i r e s ; o r the f i r m con-

s i d e r e d the i n f o r m a t i o n r e q u e s t e d to be conf iden t ia l .

The u s a b l e r e s p o n s e of comple ted q u e s t i o n n a i r e s was 167, o r

24. 27 p e r cent of the to t a l s a m p l e . Sample s i z e and r e s p o n s e by-

s e g m e n t of the i ndus t ry a r e shown in Table XVIII.

M a n u f a c t u r e r Sample

Ques t i onna i r e s w e r e m a i l e d to 211 m a n u f a c t u r e r s and i m p o r t e r s

of c o n s u m e r e l e c t r o n i c p r o d u c t s . Of the s i x t y - n i n e r e t u r n s , t h i r t y -

two w e r e cons ide red u s a b l e . The usab le r e t u r n s cons i s t ed of twenty

d o m e s t i c m a n u f a c t u r e r s and twe lve i m p o r t e r s . G e n e r a l E l e c t r i c ,

Magnavox, Motorola , and T e l e t r o n i c s w e r e t he only known d o m e s t i c

t e l ev i s ion m a n u f a c t u r e r s who fa i l ed to r e s p o n d .

Wholesa le r Sample

Q u e s t i o n n a i r e s w e r e d i r e c t e d to 306 w h o l e s a l e r m i d d l e m e n , co -

o p e r a t i v e s , and w h o l e s a l e r s a l e s m e n . The s a m p l e cons i s t ed of 287

of the 1631 w h o l e s a l e r s l i s t ed in Merchand i s ing Week ' s " F i r s t Annual

D i s t r i b u t o r D i r e c t o r y , " and 6 coope ra t i ve s and 13 w h o l e s a l e r s a l e s -

m e n s e l e c t e d at r a n d o m f r o m indus t ry t r a d e pub l i ca t ions . Included

in the g roup of 287 w h o l e s a l e r s w e r e a l l of t he 105 d i s t r i b u t o r s l o -

cated in Texas (13 w e r e p e r s o n a l l y in t e rv iewed and 92 w e r e s u r v e y e d

169

> X

• J

PQ

H

rtS O Z. 0

# H

A

to %

^ .2 D

I +» 5

0 CD m

rO O5 02

D O PU SO <D

m &£)

O 4*5 .*-« f-t

^ H M RT

2

©

<—4 0$

S0 £

4-5 0 o a* H w 0)

Pi

R^J

A> & * * . S O

* D FL

O

U

w Q ?H

•r-4

OS H3 D O D «—I

.2 *5 +> J S CQ ^ 0)

!>* FH

4~> CO

0 ••D £ •

A O

a 60 H co in CM • • s> • « o r- sn m r—I

ca »<—i <M CM CM

CO A>

CM CO

CO CM

Q\ V£>

NO o CO CO

CO o

ro O <M ( V

G5 ?4

CQ 0)

M 0) ctS u CD CTF A>

RH o £ fJZ| £> 2

M <M

CM M

{S.

FS3 ITS CM

Q V

CM

M in IR> NO

VO o

CN in M S O

05 0) 4* CP u CP 0 a w

iH aS u £ - ^ CO A 0) CO • r-< o

T2 aJ Q£) M 4«* m

& <$ Pi J

4^ o <D

02 ?-I

0)

Q

CO

<D

^ 2

.3 J ci u M S-J

m (£

R -VO

o o tf> OD r- o m NO

* • • « * • o CM 0^ in {>-CO CO

CO O CM

OD OD NQ

O

ON NO ND

D

H

170

by ma l l ) . In addit ion, the group of 289 w h o l e s a l e r s included 182

w h o l e s a l e r s located in 13 c i t i e s w h e r e 5 o r m o r e d o m e s t i c b r a n d s

w e r e being d i s t r i bu t ed . These 13 c i t i e s w e r e s e l ec t ed by a s t r a t i f i e d

r a n d o m sampl ing p r o c e s s in o r d e r to p rov ide a s a m p l e of the United

States m a r k e t . The s a m p l e included al l w h o l e s a l e r s loca ted in each

of the fol lowing c i t i e s : B i r m i n g h a m , Alabama; Dayton, Ohio;

Phoenix, Ar izona ; At lanta , Georg ia ; F a r g o , North Dakota; Indiana-

pol i s , Indiana; Omaha., Neb ra ska ; Denver . Colo v ado; San Diego,

Ca l i fo rn ia ; Har t fo rd , Connect icut ; Huntington, West Virginia ;

Char l e s ton , West Virginia ; and New York, New York. A r e s p o n s e

was r ece ived f r o m 123 w h o l e s a l e r s , of which 83 w e r e u s a b l e .

R e t a i l e r Sample

Re ta i l e r q u e s t i o n n a i r e s w e r e d i r ec t ed to 49 of the 127 r e t a i l e r s

of c o n s u m e r e l e c t r o n i c p roduc t s l i s t ed in the October 1971 South-

w e s t e r n Bell Telephone Company G r e a t e r Dal las Yellow P a g e s d i -

r e c t o r y . Six in te rv iews with r e t a i l e r s f o r the p u r p o s e of comple t ing

q u e s t i o n n a i r e s w e r e a l so conducted in Dal las , mak ing a to ta l s a m p l e

of 55 r e t a i l e r s . The re w e r e 27 r e s p o n s e s of which 25 w e r e u s a b l e .

All r e sponden t s w e r e loca ted in Dal las County, Texas ,

L a r g e Scale R e t a i l e r Sample

F i f t y - f i v e q u e s t i o n n a i r e s w e r e f o r w a r d e d to l a r g e s c a l e r e -

t a i l e r s . Of t h e s e , 19 w e r e s e l ec t ed f r o m q u e s t i o n n a i r e s comple t ed

171

prev ious ly by Texas wholesa le r s who indicated these f i r m s to have

a s ignif icant influence cr. the Texas m a r k e t . The balance of 36

ques t ionnai res was mai led to r e t a i l e r s se lec ted f r o m depar tment

s to re , discount, ma i l o rde r , j ewel ry and m a s s merchandis ing chains

in the United States having sa les ox over $J00, 000, 000 in 1970. The

a r b i t r a r y $100, 000, 000 sa l e s figxire made it poss ib le to sample all

known f i r m s meeting this qualif icat ion. Response was rece ived

f r o m 25 of those surveyed. Twelve of the r e t u r n s were usab le .

Special User Sample

Sixty-one ques t ionnai res w e r e forwarded to spec ia l type u s e r s

of consumer e lec t ronic products who were cons idered to be potential

d i r ec t p u r c h a s e r s . These specia l p u r c h a s e r s included mobile home

m a n u f a c t u r e r s , e lec t ronic se rv ice companies t r en ta l f i r m s , p r e -

m i u m and incentive merchandis ing f i r m s , l a r g e p r e m i u m buye r s ,

c r ed i t card companies , and t rading s tamp companies . The sample

was selected at random f r o m t r ade journals and t r a d e assoc ia t ion

l i s t ings of m e m b e r s . A smal l sample was believed n e c e s s a r y in

o r d e r to t e s t the specia l u s e r influence on the m a r k e t . Twenty-nine

r e t u r n s w e r e received with 15 of these being usable . The 15 usab le

r e t u r n s consis ted of 53. 3 pe r cent p r e m i u m and incentive m e r -

chandising f i r m s , 20. 0 per cent mobile home m a n u f a c t u r e r s , and

26. 7 pe r cent l a rge p r e m i u m buyers a n d / o r c red i t card companies .

.72

Quality and Coverage of Response

Job Posi t ions

The job posit ions held by respondents w e r e pr incipal ly of a

management na tu re . Included among the wholesa le r and r e t a i l e r

groups of respondents w e r e a l a r g e number of owners . Large sca le

r e t a i l e r and specia l u s e r respondents w e r e pr inc ipa l ly buye r s and

m e r c h a n d i s e m a n a g e r s . Table XIX p re sen t s the job posi t ions held

by al l pe r sons completing ques t ionna i res .

Types of Produc ts Marketed

Manufac turers and i m p o r t e r s . - - M a n u f a c t u r e r s and i m p o r t e r s

va ry as to the types of product l ines they m a r k e t . Domestic manu-

f a c t u r e r s tend to m a r k e t a g r e a t e r number of product l ines than

i m p o r t e r s , with the s t ronges t concentrat ion of p roduc ts being in

console s t e reo , color te levis ion, and monochrome te levis ion. Im-

p o r t e r s ' me rchand i se of fer ings a r e concentrated in radio, tape

r e c o r d e r , phonograph, and compact s t e r eo p roduc t s . The p e r -

centage of m a n u f a c t u r e r s and impor t e r s marke t ing each type product

is shown in Table XX.

Re ta i l e r s . - - M o r e than eighty per cent of the r e t a i l e r s m a r k e t

each of the consumer e lec t ronic products included in the study.

173

X HH X

W J

« c H

CO W Ph hh <

£ s o

H c o H £ a a

£ i-( H W J Pk 3 o u

t o £

0 w 0 1 w a .

! x M

P J

W

£ £ s H H-4 10 O fc

« o *n

Q

10

Jk u a)

t / ) f j

<D ^ w> *8

S tf

4->

0) no

o Ou CO

0)

fl)

a >n

H

S4 <D

r—{ »k«4 c3 ©

M Q>

H $ CO <D

r—5

o

!

«> %o

o o

i n v o o

CM

f > vC

vO

n o t"" t*" r ^ j o -sO O \ 0 vO vO! O

vO O cm oa

- O \D s O j O o

M

'-O CM

o o O o o o o o o o o o o o

• • • • » • e o (\3 Xf4 00 00

r-s CM

CO CO

(S3 CO

CO CO oa o t o C\J m o o r~i r~4 vO o rsj (NJ o o • « • 9 * ff • • ,

CO 0") un m V© iTi NO m o r-4 oa H C l o

f—*<

CO 0

r-4 a a a

o o

i i CO

0) 0 rJO r*

& P rO

jj5 O H*

•S § S 8 ,0 s ~ Ctf » j j

« * > no Phi ^

a> £3

^ Jt* "~* ^ "fl* O 5 frt Q f e > O P Q t $ 5 0 k c o

W bJD

Tf 03 ft

U rrt VI

« § * ® ® *5

i n PQ S U c $

flj

g o H

CO 00 t > o CO CO n£> vD o

# • * • « 00 00 S 0 vO o

m ^ H o •—4

r^* o o o o o o o o r - o CO r - oo CO r~i r~4 o

• • • 0 » • • m • » « rHI 00 CO tD o CO H i n »—! o CO CO o

H

174

T A B L E XX

T Y P E S O.F PRODUCTS MARKETED BY MANUFACTURERS AND IMPORTERS

P e r Cent Marke t ing Type of P r o d u c t P r o d u c t

Radio . . . . . . . . . . . . . . . . . 67, 85 Phonograph 7 1 . 5 2 Tape R e c o r d e r s . . . . . . . . . . . 65 .85 Console S te reo 5 3 . 5 7 Compact Stereo 65 .85 Monoch rome Te lev i s ion . . . . . . . 4 6 . 4 2 Color Te lev i s ion . . . . . . . . . . . 46. 42

Monochrome t e l ev i s ion ranked h ighes t among the types of p r o d u c t s

m a r k e t e d by r e t a i l e r s .

Brand Rep re sen t a t i on

M a n u f a c t u r e r s and i m p o r t e r s . - - A tota l of t h i r t y - t h r e e d o m e s t i c

b r a n d s and f i f t e e n f o r e i g n b r a n d s w e r e r e p o r t e d being m a r k e t e d by

m a n u f a c t u r e r s and i m p o r t e r s . The d o m e s t i c b r a n d s r e p r e s e n t m o r e

t han n ine ty p e r cent of the s h a r e of m a r k e t f o r co lo r t e l e v i s i o n and

f o r m o n o c h r o m e t e l ev i s ion .

W h o l e s a l e r s . - - W h o l e s a l e r m i d d l e m e n r e p o r t e d they d i s t r i b u t e d

a to ta l of s i x ty -n ine d i f f e r e n t b r a n d s . The n u m b e r of d i s t r i b u t o r s

of each m a j o r d o m e s t i c b r and r e p r e s e n t e d in t h e s tudy was a s fo l lows :

f o u r w e r e A d m i r a l , f ive w e r e E m e r s o n , f o u r w e r e G e n e r a l E l e c t r i c ,

! 7E

one w a s Magnavox, one was M o r s e , seven w e r e Motoro la , two w e r e

Packa rd -Be l l j , two w e r e Ph i l co - Fo rd , eight w e r e RCA, f ive w e r e

Sylvania, and seven w e r e Zenith d i s t r i b u t o r s .

R e t a i l e r s . - - R e t a i l e r s r e p r e s e n t e d in the study m a r k e t twen ty -

f o u r d i f f e r e n t b r a n d s of m e r c h a n d i s e . The b r a n d r e p r e s e n t a t i o n by

type of p roduc t among r e t a i l e r s v a r i e d f r o m eight b r a n d s of conso le

s t e r e o to f i f t e e n b r a n d s of c o m p a c t s t e r e o .

L a r g e s c a l e r e t a i l e r s . - - A to ta l of twenty d i f f e r e n t b r a n d s w e r e

being sold by l a r g e s c a l e r e t a i l e r s . R e p r e s e n t a t i o n was a l m o s t

equal ly divided be tween d o m e s t i c b r a n d s and e i t he r p r i v a t e o r

f o r e i g n b r a n d s .

Special t t s e r s . - - Special u s e r s of the p r o d u c t s had p u r c h a s e d

t w e n t y - s e v e n d i f f e r e n t b r a n d s . The b r a n d s p u r c h a s e d ranged f r o m

t h i r t e e n d i f f e r e n t b r a n d s of co lor t e l ev i s i on and m o n o c h r o m e t e l e -

v i s ion to t w e n t y - t h r e e d i f f e r e n t b r a n d s of r a d i o .

Type of B u s i n e s s

W h o l e s a l e r s . - - T h e c l a s s e s of w h o l e s a l e r m i d d l e m e n included

seven ty p e r cent independent m e r c h a n t w h o l e s a l e r s and t h i r t e e n p e r

cent f a c t o r y b r a n c h e s . Audio s t o r e s , i m p o r t e r s and o t h e r s w e r e in-

cluded in the r e m a i n i n g seven teen p e r cent of w h o l e s a l e r m i d d l e m e n .

176

T h r e e - f o a r t l i s of t h e r e s p o n d e n t s s p e c i a l i s e d in t e l e v i s i o n and app l i -

ance p r o d u c t s whi le t he r e m a i n d e r of the r e s p o n d e n t s s p e c i a l i z e d in

g e n e r a l m e r c h a n d i s e , e l e c t r o n i c , h a r d w a r e , d rug , f u r n i t u r e , a i r

condi t ioning, audio, e l e c t r i c a l , and o the r types of p r o d u c t s .

R e t a i l e r s , - - Re tu rns indicated tha t n e a r l y t w o - t h i r d s of the r e -

t a i l e r s w e r e independent t e l ev i s ion and app l i ance s t o r e s . The

p r i n c i p l e n a t u r e of the b u s i n e s s of the b a l a n c e of t he r e t a i l e r s w a s

evenly divided among d r u g cha ins , audio s t o r e s , f u r n i t u r e s t o r e s ,

m a s s m e r c h a n d i s e r s , d e p a r t m e n t s t o r e s , e l e c t r o n i c s e r v i c e and

s a l e s s t o r e s , r e c o r d and home e n t e r t a i n m e n t s t o r e s , and h a r d w a r e

s t o r e s .

L a r g e s c a l e r e t a i l e r s . - - One-half of the l a r g e s c a l e r e t a i l e r s

w e r e chain s t o r e s and o n e - t h i r d w e r e m a s s m e r c h a n d i s e r s . The

r e m a i n i n g l a r g e s c a l e r e t a i l e r s w e r e m a i l o r d e r cha ins and d e -

p a r t m e n t s t o r e s . Included among the r e s p o n d e n t s w e r e J . C.

Penny Company, M o n t g o m e r y - W a r d , F . W. Woolworth, All ied

S to re s Marke t ing Corpora t ion , Gambles . M c C r o r y - M c C u l l a n S to re s ,

P e o p l e s Drug S to res , and o the r s i m i l a r l y l a r g e f i r m s .

Special u s e r s . - - S p e c i a l u s e r s included E. F . Mac Donald In-

cen t ive Company, Gold Bond Stamp Company, S p e r r y and Hutchinson

Company, Texas Gold Bond Stamp Company, and o the r t r a d i n g s t a m p ,

177

p r e m i u m , and incent ive m e r c h a n d i s i n g c o m p a n i e s . Lane Wood In-

d u s t r i e s , i nco rpo ra t ed and Open Road Indus t r i e s w e r e among the

m o b i l e h o m e m a n u f a c t u r e r s r e s p o n d e n t s . Humble Oil Company and

Shell Oil Company w e r e among the l a r g e u s e r s and c r e d i t c a r d m e r -

chandis ing f i r m s .

Value of Study

R e s p o n s e f r o m channel m e m b e r s s u r v e y e d indica ted tha t t h r e e -

f o u r t h s o r m o r e of the m a n u f a c t u r e r s , w h o l e s a l e r s , and r e t a i l e r s

be l i eved tha t a n s w e r s to the ques t ions included in the q u e s t i o n n a i r e

would be of s o m e va lue to the i ndus t ry . Also , m o r e than e igh ty-

f i v e p e r cen t of the m a n u f a c t u r e r s , w h o l e s a l e r s , and r e t a i l e r s in-

d i ca t ed t h a t the type of ques t ions included in t he q u e s t i o n n a i r e would

apply to the appl iance indus t ry as wel l a s to the c o n s u m e r e l e c t r o n i c

p r o d u c t s i ndus t ry .

The Signif icance of Marke t P e n e t r a t i o n

One of the p u r p o s e s of th i s s tudy was to d e t e r m i n e the s ign i f i -

c a n c e of m a r k e t p e n e t r a t i o n to m a n u f a c t u r e r s , w h o l e s a l e r s , and

r e t a i l e r s . A m a j o r i t y of each group of r e s p o n d e n t s w a s in a g r e e -

m e n t tha t m a r k e t p e n e t r a t i o n is a s ign i f i can t m e a n s of eva lua t ing

m a n u f a c t u r e r s , w h o l e s a l e r s , and r e t a i l e r s , with t h r e e excep t ions :

a m a j o r i t y of l a r g e s c a l e r e t a i l e r s did not a g r e e tha t m a r k e t

178

p e n e t r a t i o n is a s ign i f i can t m e a n s of evaluat ing w h o l e s a l e r s ; m a n u -

f a c t u r e r s w e r e evenly divided in t h e i r opinion tha t m a r k e t p e n e t r a t i o n

is a s ign i f i can t m e a n s of evaluat ing r e t a i l e r s ; and a m a j o r i t y of r e -

t a i l e r s did not a g r e e tha t m a r k e t pene t r a t i on is a s ign i f i can t m e a n s

of evaluat ing r e t a i l e r s . Table XXI p r e s e n t s t he r e s p o n s e of e a c h

group of channel m e m b e r s .

Goals of the Industrv

W h o l e s a l e r s be l ieved tha t the m a n u f a c t u r e r s ' ob j ec t i ve s inc lude

p r o f i t as the n u m b e r one company ob jec t ive , fol lowed by m a r k e t

p e n e t r a t i o n , i n c r e a s i n g o r m a x i m i z i n g s a l e s , s e r v i c i n g the p roduc t ,

p r o m o t i n g g rowth of the f i r m , and having the n u m b e r one b r a n d in

t e r m s of s a l e s . P r o f i t w a s be l ieved by w h o l e s a l e r s to be the n u m -

b e r one ob jec t ive of r e t a i l e r s , fol lowed by growth of the f i r m and

s e r v i c i n g c u s t o m e r s . W h o l e s a l e r s ranked t h e i r own company ob-

j e c t i v e s in the fol lowing o r d e r : p r o f i t , g rowth of f i r m , s h a r e of

m a r k e t , m a x i m i z i n g s a l e s , improv ing s e r v i c e to r e t a i l e r s , and in-

c r e a s i n g the n u m b e r of r e t a i l ou t l e t s .

P r e s s u r e E x e r t e d by Suppl ie rs

On r e t a i l e r s . - - N e a r l y n ine ty - f i ve pe r cent of the r e t a i l e r s in -

d ica ted they w e r e p r e s s u r e d by d o m e s t i c m a n u f a c t u r e r s and by

w h o l e s a l e r s to i n c r e a s e m a r k e t p e n e t r a t i o n . A s m a l l e r m a j o r i t y

X!

X

w

J «

H

O

CO

0.

u

• «m£ n bi>

® a*

«s 5

.2 ^ r-H

fl ^ o r ^ T> w $ *h h o

+•* 0) CO

d a o & ft J

CO u

d 4-> 0) «

!3

rH o o o fSS o o

• • 9 * ! O m o o

tr, f*- H

03 O ^

!*

o CN o o o t"1-* o o

• # o o o m m 00 o

r-4 00 r<5 o - t 00 vO o

* •» * . o c- o

CM oa r -

05 ® &

ix

o\ r~ 00 o UO NO rO o

• • • o NJ o

t - UO 00

m r-i o 0 s

U0 00 o • • • •

vO 00 rH o 00 o 00 r~

u

Q

1

m

"8 a?

*d PI o a. CO <D

•g St d>

a> ^

& O h o* L

m Q

o 00 o CO r ! o

* * * • o N£> CO o PH «—t 00

CO <\J

I*-r -

CS3 <M

CO

<D 05 ?-f u 2 0 4-> r—S u aJ $ «s

«4-|

2 0)

*—f ti o

1 1

CO U 

a>

J2 »

S J co d

CL? +s bJO 0)

M ^

1 BO

of t h e r e t a i l e r s r e v e a l e d tha t f o r e i g n m a n u f a c t u r e r s e x e r t p r e s s u r e

f o r i n c r e a s e d m a r k e t p e n e t r a t i o n ,

On l a r g e s c a l e r e t a i l e r s . - - A m o n g t h e l a r g e s c a l e r e t a i l e r s

s u r v e y e d , on ly o n e - t h i r d i n d i c a t e d t h a t p r e s s u r e i s e x e r t e d by d o -

m e s t i c and f o r e i g n m a n u f a c t u r e r s f o r i n c r e a s e d m a r k e t p e n e t r a t i o n .

H o w e v e r , m o r e t h a n f o r t y p e r cen t of t h e l a r g e s c a l e r e t a i l e r s b e -

l i e v e d t h e i r w h o l e s a l e r s e x e r t e d p r e s s u r e f o r i n c r e a s e d m a r k e t

p e n e t r a t i o n .

On w h o l e s a l e r s . - - A l l r e t a i l e r s ind ica ted a be l i e f t h a t t h e i r

d i s t r i b u t o r i s p r e s s u r e d by t h e m a n u f a c t u r e r f o r i n c r e a s e d m a r k e t

p e n e t r a t i o n . This s u g g e s t s a r e i n f o r c e m e n t of p r e s s u r e d i r e c t e d

f r o m t h e m a n u f a c t u r e r to t h e w h o l e s a l e r and e v e n t u a l l y app l i ed to

t h e r e t a i l e r .

A r e l a t i o n s h i p b e t w e e n p u r c h a s e s and m a r k e t p e n e t r a t i o n w a s

shown to e x i s t . M o r e t h a n f o r t y p e r cen t of t h e w h o l e s a l e r r e -

s p o n d e n t s i n d i c a t e d t h a t w h e n m a r k e t p e n e t r a t i o n d a t a w e r e r e v i e w e d

w i th t h e m by t h e i r s u p p l i e r , t h e r e w a s an a t t e m p t to ge t t h e m to

p u r c h a s e enough m e r c h a n d i s e to g ive the w h o l e s a l e r n a t i o n a l a v e r a g e

m a r k e t p e n e t r a t i o n w h e n t h e s e g o o d s and e x i s t i n g i n v e n t o r y w e r e

s o l d .

181

The Reporting System for Recording Market Penet ra t ion Data

One hypothesis of th is study is that the m e c h a n i s m for record ing

and repor t ing industry sa les data is inaccura te . The pr inc ip le in-

dus t ry organizat ion for collecting, recording, and d isseminat ing

data is the Electronic Industr ies Associat ion of Washington, D. C.

Causes of Inaccuracy

Manufac turers and i m p o r t e r s . - - F e w e r than two- th i rds of the

domes t ic manu fac tu r e r s and approximate ly one- four th of the im-

p o r t e r s indicated that they a r e m e m b e r s of the Elect ronic Indus t r ies

Associat ion. Response f r o m th i r ty -one m a n u f a c t u r e r s and im-

p o r t e r s revea led that only one- four th r epo r t the i r sa les by county

to the EIA. Of the domest ic m a n u f a c t u r e r s , only for ty- two p e r

cent r e p o r t sa les by county, while no i m p o r t e r s r e p o r t the i r s a l e s

by county to the EIA.

A ma jo r i t y of the domest ic m a n u f a c t u r e r s not repor t ing sa les

by county to the EIA a lso do not r epor t the i r national sa les to the

Associa t ion. Only one of eight i m p o r t e r s indicated that they r e p o r t

t he i r nat ional sa les to the EIA.

Wholesa le rs . - - M o r e than one- th i rd of al l who lesa le r s indicated

that they do not have to r epo r t the i r sa les to the i r m a n u f a c t u r e r .

182

Approximately the s a m e number of wholesa le r s do not r epo r t s a l e s

by county to the i r suppliers,,

Wholesa le rs have been known to hold s a l e s f r o m one t i m e per iod

to another in o rde r to make the i r r e p o r t s to m a n u f a c t u r e r s look

b e t t e r . Response f r o m wholesa le r s revealed that twelve p e r cent

s t i l l follow this p r ac t i c e . In addition, eight p e r cent of the whole-

sa l e r middlemen indicated they somet imes make ad jus tment in the i r

county r e p o r t s in o rde r to show a bet ter sa l e s balance among al l

count ies .

Large sca le r e t a i l e r s . - -Since the l a rge sca le r e t a i l e r s cons i s t

l a rge ly of mult iple m a r k e t operat ions , they w e r e asked how they

r epo r t s a l e s for each product . Nine of the ten respondents indicated

they r e p o r t sa les to no one outside the company.

When sa les a r e repor ted to a county where a regional warehouse

or national sa les off ice is located, the sa les of this county become

inflated when the merchand i se is t r a n s f e r r e d and sold in some other

county. Large sca le r e t a i l e r s w e r e questioned on the quantity of

each type of consumer e lec t ronic product purchased and shipped to

d i s t r ibu t ion cen te r s be fo re being reshipped to re ta i l s t o r e s or cus -

t o m e r s . The ave rage pu rchase s of each type of product moving into

d is t r ibut ion cen te r s exceeded sixty pe r cent. These^data a r e p r e -

sented in Table XXII.

183

TABLE XXII

AVERAGE PURCHASES OF LARGE SCALE R E T A I L E R S BY PRODUCT T Y P E SHIPPED TO DISTRIBUTION C E N T E R S

P e r Cent Shipped to P r o d u c t Type D i s t r i b u t i o n Cen te r

Radio 87. 5 P h o n o g r a p h . 6 0 . 0 Tape R e c o r d e r . 78. 0 Console S te reo . 75. 0 Compac t S te reo . 6 9 . 0 M o n o c h r o m e Te lev i s ion . . . , 6 7 . 2 Color Te lev i s ion 6 1 . 2

The s ign i f i cance of r e c o r d i n g s a l e s a t a po in t w h e r e a d i s t r i -

bu t ion c e n t e r is loca ted is exempl i f i ed by t h e f a c t tha t the l a r g e

s c a l e r e t a i l e r s included in th i s s tudy o p e r a t e d a n a v e r a g e of 8. 8

d i s t r i b u t i o n c e n t e r s p e r r e sponden t . T h e s e 8. 8 d i s t r i b u t i o n c e n t e r s

w e r e r e d i s t r i b u t i n g m e r c h a n d i s e to an a v e r a g e of 1, 326 r e t a i l s t o r e s

p e r r e s p o n d e n t . Each d i s t r i bu t ion c e n t e r w a s t h e r e f o r e s e r v i c i n g

a p p r o x i m a t e l y 150 r e t a i l s t o r e s .

Special u s e r s . - -Al l spec i a l u s e r s ind ica ted t h a t they do not

r e p o r t w h e r e t he i r s a l e s a r e m a d e to t h e i r s u p p l i e r s . When m a n u -

f a c t u r e r s w e r e ques t ioned on how s a l e s to s p e c i a l u s e r s w e r e r e -

co rded , no c o m m o n p r a c t i c e f o r r e p o r t i n g s a l e s w a s d e t e r m i n e d .

The ways in which m a n u f a c t u r e r s r e c o r d s a l e s t o s p e c i a l u s e r s is

p r e s e n t e d in Table XXIII.

.184

T A B L E XXIII

THE WAYS MANUFACTURERS RECORD SALES TO SPECIAL USERS

P e r Cent of Ways Reco rded M a n u f a c t u r e r !

R e p o r t s a l e s to county shipped to 45. 0 Repor t s a l e s to the county b i l led to . . . 15. 0 Repor t s a l e s to t he county shipped f r o m . 5. 0 Repor t s a l e s to the county b i l led f rom. 5 . 0 Repor t s a l e s to no one 20. 0 Do not r e p o r t s a l e s by county 10. 0

Channel Member Opinions Regarding A c c u r a c y of the Pveporting Mechan i sm

All channel m e m b e r s w e r e ques t ioned d i r e c t l y about the a c c u r a c y

of t he r e p o r t i n g m e c h a n i s m f o r col lec t ion of c o n s u m e r e l e c t r o n i c

p r o d u c t d a t a . A m a j o r i t y of w h o l e s a l e r s be l i eved t he r e p o r t i n g

m e c h a n i s m to be a c c u r a t e f r o m a nat ional v iewpoint ; m a n u f a c t u r e r s

and r e t a i l e r s w e r e divided in t h e i r opinions, and a m a j o r i t y of the

l a r g e s c a l e r e t a i l e r s did not a g r e e that t he r e p o r t i n g m e c h a n i s m

w a s a c c u r a t e f r o m a na t iona l s tandpoint . J A m a j o r i t y of each g roup

of channel m e m b e r s a g r e e d tha t the r epo r t ing m e c h a n i s m is inac -

c u r a t e f r o m a loca l s tandpoin t . Opinions of channe l m e m b e r s r e -

la t ing to a c c u r a c y of the r e p o r t i n g m e c h a n i s m a r e p r e s e n t e d in

Tab le XXIV.

T A B L E XXIV

OPINIONS O F CHANNEL MEMBERS RELATING TO ACCURACY OF THE REPORTING MECHANISM F R O M A NATIONAL AND LOCAL VIEWPOINT

185

Indus t ry Repor t ing M e c h a n i s m is A c c u r a t e

Channel M e m b e r F r o m a National F r o m a Loca l Respondent Group Viewpoint Viewpoint

Yes No Yes No % % % %

M a n u f a c t u r e r s - I m p o r t e r s 51. 85 48. 15 37. 50 6 2 . 5 0

W h o l e s a l e r s 60. 60 3 9 . 4 0 40. 63 5 9 . 3 7 R e t a i l e r s 36. 84 63. 16 21. 05 78 .95

L a r g e Scale R e t a i l e r s 5 0 . 0 0 50. 00 37. 50 62. 50

Delay in Rece iv ing Data

F i f t y p e r cent o r m o r e of each channel m e m b e r g roup a g r e e d

tha t m a r k e t pene t r a t i on data a r e not r e t u r n e d to w h o l e s a l e r s and

r e t a i l e r s soon enough to be of va lue . Response f r o m each channe l

m e m b e r g roup is included in Table XXV.

T A B L E XXV

CHANNEL MEMBERS AGREEING MARKET P E N E T R A T I O N DATA IS RETURNED SOON ENOUGH TO B E O F VALUE

Channel M e m b e r P e r Cent Agree ing

M a n u f a c t u r e r s - I m p o r t e r s . . . . . . . . . . . . . 4 3 . 4 8 W h o l e s a l e r s 39, 39 R e t a i l e r s 27. 78 L a r g e Scale R e t a i l e r s 50. 00

186

Secrecy of Data

When asked if the r e p o r t i n g m e c h a n i s m would be b e t t e r if m a d e

publ ic , a l a r g e m a j o r i t y of each r e sponden t group, with the except ion

of r e t a i l e r s , r ep l i ed nega t ive ly . M a n u f a c t u r e r s and w h o l e s a l e r s ,

in p a r t i c u l a r , d e s i r e to r e t a i n the e l e m e n t of s e c r e c y which c u r r e n t l y

e x i s t s in the E l ec t ron i c i ndus t ry A s s o c i a t i o n ' s s y s t e m of r e c o r d i n g

and r e p o r t i n g da t a .

Signif icance of Dol lar and Unit Sales

Quota A s s i g n m e n t s

M a n u f a c t u r e r s . - - M a n u f a c t u r e r s w e r e a s k e d what t ypes of quo tas

w e r e a s s igned to w h o l e s a l e r s . The i r r e s p o n s e s indicated tha t uni t

quotas w e r e a s s igned by the l a r g e s t p e r c e n t a g e of m a n u f a c t u r e r s ,

fo l lowed by a s s i g n m e n t s of do l l a r p u r c h a s e quotas f o r a l l p r o d u c t s

combined , s h a r e of m a r k e t quo tas , and do l l a r quotas f o r each p r o -

duct t ype . Table XXVI r e l a t e s the p e r c e n t a g e of m a n u f a c t u r e r s

a s s i gn ing each type quota to w h o l e s a l e r s .

The combined unit and s h a r e of m a r k e t quo tas ind ica te t ha t a

m a j o r i t y of the m a n u f a c t u r e r s p l ace g r e a t e r e m p h a s i s on un i t s a l e s

than on d o l l a r s a l e s . No r e sponden t m a d e any men t ion of a p r o f i t

quota .

.18?

TABLE XXVI

T Y P E S OF QUOTAS ASSIGNED BY MANUFACTURERS TO WHOLESALERS

P e r Cent of Manuf a c t u r e r a Type of Quota Ass igned Ass ign ing Quota Type

Unit quotas by p roduc t 40, 00 Dol la r p u r c h a s e qxiotas f o r al l p roduc t s 26, 6? Share of m a r k e t quotas 20, 00 Dol la r quo tas by p r o d u c t , 13, 33

W h o l e s a l e r s , - - Many w h o l e s a l e r s indica ted tha t they have m o r e

than one type of quota to ach ieve , A m a j o r i t y of the w h o l e s a l e r s

ind ica ted uni t quotas by p roduc t to b e the type of quota they are

a s s i g n e d by t h e i r s u p p l i e r s . In descending o r d e r , the o the r types

of quotas a s s igned to w h o l e s a l e r s a r e s h a r e of m a r k e t quo tas ,

do l l a r quotas by p roduc t , and do l l a r p u r c h a s e quotas f o r a l l p r o -

duc t s combined . Table XXVII p r e s e n t s da ta r e l a t i n g to the t ypes

of quotas w h o l e s a l e r s indica te they a r e a s s i g n e d ,

TABLE XXVII

T Y P E QUOTAS WHOLESALERS INDICATE THEY A R E ASSIGNED BY SUPPLIERS

P e r Cent of Who le sa l e r s Type Quota Indicat ing Quota Typo

Unit quota by p roduc t 65, 71 Share of m a r k e t 48, 57 Dol la r quota by p r o d u c t , 2 8 , 5 7 Dol lar quota f o r a l l p r o d u c t s combined , , , . . 17, 14 Other tvnes of nnnf-s « 0 A

1 SB

Marke t P e n e t r a t i o n Rela t ionship to Unit Sales , Dol lar Sales , and P r o f i t

A hypo thes i s of th i s study is tha t the d e s i r e of United Sta tes

m a n u f a c t u r e r s to m a i n t a i n o r i n c r e a s e m a r k e t p e n e t r a t i o n r e s u l t s

in g r e a t e r e m p h a s i s on s a l e s of un i t s than 011 do l l a r s a l e s o r p r o f i t

p e r p r o d u c t g roup .

Unit s a l e s v e r s u s do l l a r s a l e s , - - R e s p o n s e of channel m e m b e r s

p r e s e n t e d in Table XXVIII c o n f i r m s that not only United Sta tes m a n u -

f a c t u r e r s , but a l so f o r e i g n m a n u f a c t u r e r s and w h o l e s a l e r s p l a c e

g r e a t e r e m p h a s i s on uni t s a l e s than on do l l a r s a l e s . A s u b s t a n t i a l

m a j o r i t y of each group of r e s p o n d e n t s , with the exception, of l a r g e

s c a l e r e t a i l e r s , a g r e e d with the p ropos i t ion .

Unit s a l e s v e r s u s p r o f i t . - - Table XXIX r e v e a l s tha t f i f t y p e r

cen t o r m o r e of each channel m e m b e r g roup a g r e e d with the hy-

po thes i s tha t the d e s i r e of United States m a n u f a c t u r e r s to m a i n t a i n

or i n c r e a s e m a r k e t pene t r a t i on r e s u l t s in g r e a t e r e m p h a s i s on uni t

s a l e s than on p r o f i t . One - th i rd o r m o r e of each group of r e s p o n d e n t s

a g r e e d with the p ropos i t i on when applied to f o r e i g n m a n u f a c t u r e r s .

A m a j o r i t y of a l l channel m e m b e r s , with except ion of the m a n u -

f a c t u r e r group, a g r e e d tha t w h o l e s a l e r s p l a c e g r e a t e r e m p h a s i s on

uni t s a l e s than on p r o f i t as a r e s u l t of the w h o l e s a l e r ' s d e s i r e to

m a i n t a i n o r i n c r e a s e m a r k e t pene t r a t ion .

.89

> X

X

W J fQ < H

03 (U

rHI

m

• 3 ^

co fi 0)

0 1 ed oq

m u c$ ctf

l a

« a

h 2

2 g $ <D

O

?**I 0)

rH CS* Cft 0?

O X

u <t>

£< 1*3 &0 43

•*•* u

2 * ^ *>H o 0

k g

?a 0 ^

, 0 k o Z ^

i®

M 0 u $

44 u $

1

m

i *

5 5 *

w w=> 0

>«

co

. t s

0 T? >a a d fl

I

0 a

J

H h |

S I ' S § * ? ?

s ^ j d 0 P* u ^ w

Oj

ijTi 0 m xp fs3 CM r -

* # « ft r—4 r - 0 0 CO r o p-H

i n fH m SO *>•• {N.» csa m

• • • » CO p-H m NO NO CO i n

0 0 CO h -!—J (\J £'*,

• e * m o

^ ^ e o

oa rsj 0 0 0 0 t - ^3

0 0 ^ ( > i n i n %o

o ^ o 0 0 i n o

• • m 00 i-h o CO c%3 h

r-H vD O •—• O

• • *

*-e 0 0 O v£> r - o

0 0 i n o H sO M

w u 0 u 3

4 » a

*w p

d

1

02 03 u *•<

0 CD +* CD JH rt *« 0 as <U a 0) H

5

t"»<f O rt

4*» 0)

rt

0 0

r -

04 <NJ

M f\J

O i n

(M sO

o m

r -c o

0 s

m

H g u 2

l o d

V 4-1 bC <u

iJ ^

JJ

1 9 0

a

X X

w

J pq

< H

W

S3 H

W r !

s g S

H 2 52

I ^ | g

A & W

, t5 2 w %

g § w ^ a

h 3 oi B W o

W <j H fr-t C4 H

^ W H q O q

S fS 2 8 h §

S i s s t e l ^ a £5 15 c4

M o i ^ o ^ a s

n O ^ g cq H <J

9 O « ) «j . w

9 & H K J3 g w (£4 |-H {--{ Lj FH H-t

H § t> O 5 O

a s ^ a §

S b S I

H H ft ^

g « s

h w ^ 0 § £ °

W h ^

g S *

o Q

ft

a

m a> rH $

4>

P

d 0

co •h m c§ & Pu

1

0)

0)

0

>> pq

u Q) «~H

03 0)

o

0)

(W| ^ & 3 m £ "7? Q r ,oj *1 m

§ «S

s

?-< 0 u

CO I

*

& "3 fc! ti h~4 fS%

i f -

m <Q so

^ '

Jp & ^

EQ £ *

p > p £ * -

m

u o>

f

;* Z

m

Is

H3

o

Pu m 0 PS

.tj>

! S §

§ •§ 1 ctt S o

X ® Cu O % m

Pi

CO m xO 0 CO 1—1 O 0

• ft » t> rr> co rH m IT) H M

r-- iO 0 sO 00 cva 0

• * «, •

NO »-H CO in un co

vQ 0 0 i> Cw 0 H N£) • * • •

rH xfl tp sD 1—1 in UD sD

0 CO CO rH CO CO

• • • • CO in in CO 00 00

00 CM ^ vo ra

1 u Q m ^ u 0 0) 4-> 4* U U

"3

0

1

w u o r~1 C0 ta 0 rH 0

1

0 m 0 0 0 CO 0 0

• » m • 0 0 0 0 m rH m

0 m 0 0 0 sO 0 0

• • • • 0 0 0 0 in 00 0 m

0 \

CO U 0 rH

ctS -4-» a> &

t-H UA

nS ^ u ® to rS

o jS

W) <s> % °i

A

191

Control o r Dominance of the Market ing Channel

H ie following d e s c r i b e s how d i f f e r en t channel m e m b e r g roups

s t r i v e f o r dominance and con t ro l of the m a r k e t i n g channe l .

P r e s s u r e f o r I n c r e a s e d Sales

Nine pe r cent of the w h o l e s a l e r s and j e v e n t e e n p e r cent of the

r e t a i l e r s indicated that t hey w e r e s a t i s f i ed with t h e i r p r e s e n t vo l -

u m e of b u s i n e s s , yet t h i r t y - t w o p e r cent of the w h o l e s a l e r s and

f o r t y - t w o p e r cent of the r e t a i l e r s indicated tha t t h e i r s u p p l i e r s

p r e s s u r e t h e m to i n c r e a s e s a l e s beyond the point they d e s i r e . This

s u g g e s t s a conf l ic t in goa l s within t he channel of d i s t r i b u t i o n a s wel l

a s a high d e g r e e of p r e s s u r e be ing exe r t ed on channel m e m b e r s by

t h e i r s u p p l i e r s .

Wri t ten F r a n c h i s e A g r e e m e n t s

One - th i rd of the m a n u f a c t u r e r s r e p o r t e d having a w r i t t e n

f r a n c h i s e a g r e e m e n t with t h e i r d i s t r i b u t o r s . Approx ima te ly t he

s a m e p e r c e n t a g e of f o r e i g n m a n u f a c t u r e r s o f f e r e d w r i t t e n f r a n c h i s e s .

Manufac tu r e r Dis t r ibu t ion Sys t ems

M a n u f a c t u r e r s used a v a r i e t y of channels of d i s t r i bu t ion . In

m o s t i n s t a n c e s m a n u f a c t u r e r s sold th rough s e v e r a l types of c u s t o -

m e r s . F o r example , a m a j o r i t y of the m a n u f a c t u r e r s and i m p o r t e r s

r e p o r t e d se l l ing to each of the fol lowing: m a n u f a c t u r e r agen t s o r

191

r e p r e s e n t a t i v e s , independent d i s t r i b u t o r s , na t iona l cha ins and l a r g g

r e t a i l e r s , p r e m i u m compan ies , p r i v a t e b r a n d s , and p o s t excl iangeg.

The p e r c e n t a g e of m a n u f a c t u r e r s and i m p o r t e r s se l l ing to each typ§

c u s t o m e r i s shown in Tab le XXX.

T A B L E XXX

P E R C E N T A G E O F MANUFACTURERS AND I M P O R T E R S SELLING TO EACH T Y P E OF CUSTOMER

(29 Responden t s )

P e r c e n t a g e of M a n u f a c t u r e r a Type of C u s t o m e r Sell ing to C u s t o m e r Typ§

M a n u f a c t u r e r Agents o r R e p r e s e n t a t i v e s 5 1 . 7 2 Independent D i s t r i b u t o r s . 7 9 . 3 1 Coopera t ive -Owned W h o l e s a l e r s . „ . . 2 0 . 6 9 F a c t o r y - O w n e d B r a n c h e s 37. 93 D i r ec t to a l l R e t a i l e r s 24. 14 National Chain S tores and L a r g e R e t a i l e r s 65. 52 Hote ls , Motels , Mobile Home M a n u f a c t u r e r s . . . 13. 79 P r e m i u m Companies . 55. 17 Expor t Agents 20. 69 P r i v a t e B rands „ . 51. 72 P o s t Exchanges 55. 17 D i r e c t Mail to Consumer 3 . 4 5

Over one-ha l f of the m a n u f a c t u r e r s m a k e u s e of m u l t i p l e d i s -

t r i b u t o r s , and o n e - f o u r t h of t he m a n u f a c t u r e r s m a k e u s e of a s s o -

c i a t e d i s t r i b u t o r s . L i t t l e d i s t inc t ion in d i s t r i b u t i o n pol icy w a s

found be tween d o m e s t i c m a n u f a c t u r e r s and i m p o r t e r s .

, a

193

Wholesa ler Versus Manufac tu re r

W h o l e s a l e r s compete with m a n u f a c t u r e r s f o r m a n y of the s a m e

c u s t o m e r s . A m a j o r i t y of the w h o l e s a l e r s , f o r example , s e l l to

h o t e l s , m o t e l s , a p a r t m e n t s , pos t exchanges , and p r e m i u m c o m -

p a n i e s . Confl ict be tween w h o l e s a l e r and m a n u f a c t u r e r c o m e s about

b e c a u s e m o r e than sixty p e r cent of the w h o l e s a l e r s indica ted they

ob jec ted to t h e i r s u p p l i e r s se l l ing d i r ec t ly to s p e c i a l u s e r s .

E f f ec t s of Di rec t Sales on Market P e n e t r a t i o n

One - th i rd of the w h o l e s a l e r s indicated tha t d i r e c t s a l e s by the

m a n u f a c t u r e r helped the w h o l e s a l e r ' s m a r k e t p e n e t r a t i o n . This

s u g g e s t s tha t l a r g e amoun t s of m e r c h a n d i s e a r e be ing included in

i ndus t ry s a l e s in a m a r k e t , but m a n u f a c t u r e i s a r e not including

t h e s e s a l e s in the b r and s h a r e f o r p u r p o s e s of evaluat ing t he whole-

s a l e r .

Special U s e r s

D i r ec t p u r c h a s e s . - - Special u s e r s p u r c h a s e f r o m f o r t y - s ix to

s e v e n t y - f i v e p e r cent of t h e i r p u r c h a s e s , depending on the p roduc t ,

d i r e c t l y f r o m m a n u f a c t u r e r s . The m a j o r i t y of the ba l ance of t h e i r

p u r c h a s e s w e r e m a d e f r o m independent w h o l e s a l e r s .

Type and quant i ty of p roduc t s p u r c h a s e d . - - A m a j o r i t y of t he

s p e c i a l u s e r s p u r c h a s e na t ional b r a n d s of m e r c h a n d i s e a s wel l a s

194

r egu la r l ine models of the manufac tu re r . More than one- four th of

the specia l u s e r s , however, purchased pr iva te b rands and specia l

models designed especial ly fo r the special u s e r .

Total units purchased during 1970 by each of the specia l u s e r s

ranged f r o m a few units to as many as 65, 000 rad ios , 4, 000 phono-

graphs , 30, 000 tape r e c o r d e r s , 28, 000 s tereophonic se t s , 20, 000

monochrome televis ion se ts , and 3, 500 color s e t s . The p r e m i u m ,

incentive, t rading s tamp, and c red i t card merchandis ing f i r m s w e r e

the l a r g e s t p u r c h a s e r s of p roduc t s .

Pr ic ing to specia l u s e r s . - -Special u s e r s tended to buy at m o r e

than one p r i ce . Two-thi rds of the special u s e r s indicated whole-

s a l e r s ' cos t f r o m the fac tory as the pr ice bes t descr ib ing the i r

pu rchase p r i ce . One- thi rd of the special u s e r s indicated they p u r -

chase at l e s s than wholesa le r s ' cost f r o m fac to ry . Response to the

p r i c e which bes t de sc r ibes the purchase p r i c e of specia l u s e r s is

included in Table XXXI

The m a j o r i t y of specia l u s e r s indicated the i r pu rchase p r i ce

included p a r t s war ran ty , labor war ran ty , and incoming t r a n s p o r -

ta t ion. Approximately one- four th of the specia l u s e r s indicated

the pu rchase p r i ce included advert is ing and promot ional a l lowances .

It is to be noted that labor war ran ty and incoming t r anspor t a t ion

195

TABLE XXXI

PRICE BEST DESCRIBING PURCHASE PRICE OF SPECIAL USERS

Per Cent Purchasing P r i c e a t P r i c e *

Wholesaler Pr ice to Retai ler , 20. 00 Wholesaler Cost f r o m Factory 66.67 Less than Wholesaler Cost f r o m Fac tory . » , 33. 33 Slightly above Wholesale Cost 6 , 67

^Exceeds 100% because some specia l u s e r s p u r c h a s e at m o r e than one p r ice .

a r e not always included in the p r i ce which who le sa l e r s and r e t a i l e r s

pay fo r merchandise .

Order s ize and del ivery. - -More than one p rac t i ce Is followed

by special u s e r s in placing o r d e r s . While the m a j o r i t y of special

u s e r s purchase in a quantity, for ty pe r cent pu rchase one unit at a

t ime . The variat ions in purchasing p rac t i ce s a r e shown in Table

XXXII.

Special u s e r s apparently have an option as to how del ivery of

the i r purchases is made . Delivery may be m a d e to one location, a

choice of locations, or d i rec t ly to the special mser ' s cus tomer .

Product and Production

Annual model changes. - -Many in the indus t ry question the

necess i ty of annual model changes. However, ove r for ty per cent

19"

T A B L E XXXII

PURCHASING PRACTICES OF SPECIAL USERS BY P E R C E N T A G E FOLLOWING P R A C T I C E

P e r c e n t a g e of Special U s e r P u r c h a s i n g P r a c t i c e Fol lowing P r a c t i c e *

One uni t a t a t i m e 40. 00 Quantity p u r c h a s e 60. 00 Specia l quota t ion given f o r a quant i ty

f o r d e l i v e r y as needed 6 . 6 7 Labor in tens ive uni ts a r e d rop shipped

f r o m f a c t o r y to r e c i p i e n t ' s h o m e . . . . . . . . 6. 67 Buy in quant i ty but s o m e i t e m s a r e

d e l i v e r e d by p a r t i a l sh ipmen t s 6. 67 Specia l quotat ion with de l i ve ry a s needed,

e . g . , F . O. B, c r e d i t c a r d c u s t o m e r . . . . . . 6. 67

^Exceeds 100% b e c a u s e s o m e spec ia l u s e r s fol low m o r e t h a n one p u r c h a s i n g p r a c t i c e .

of t he w h o l e s a l e r r e sponden t s be l ieved annual m o d e l changes to be

n e c e s s a r y and b e n e f i c i a l . W h o l e s a l e r s in te rv iewed w e r e r e l u c t a n t

to s ay tha t the p r a c t i c e should be changed b e c a u s e of i t s p r o m o -

t iona l va lue and i t s abi l i ty to r enew and r e v i v e e n t h u s i a s m wi th in

the i n d u s t r y .

Supplementa l m o d e l s . - - O n e - f i f t h of the w h o l e s a l e r s and a

m a j o r i t y of the r e t a i l e r s be l ieved tha t m a n u f a c t u r e r s in t roduce new

m o d e l s throughout the m o d e l y e a r a s a t echn ique of gett ing a round

p r i c e g u a r a n t e e s . Severa l p e r s o n s in te rv iewed be l i eved m a n u f a c -

t u r e r s should a d j u s t the p r i c e s of c u r r e n t m o d e l s and p r o m o t e t h e m

wi thout p roduc ing addi t ional m o d e l s .

' 197

Special mode l s . - - -Reta i le rs have been known to be c r i t i c a l of

m a n u f a c t u r e r s for building spec ia l m o d e l s ava i l ab le only to large

r e t a i l e r s . Re ta i l e r s have a lso been c r i t i c a l of s u p p l i e r s who se l l

them merchandise and then se l l the same merchandise to discount

operations. As a poss ib le solution to both problems, reta i lers and

w h o l e s a l e r s were asked whether a manufacturer should build a

brand for independent r e t a i l e r s only. In response , forty- three

per cent of the r e t a i l e r s and twenty-three per cent of the whole-

s a l e r s were in favor of such a practice .

Private brands. - -Two-thirds of all the manufacturers reported

that they engage in private brand manufacturing. The majority of

the respondents who manufacture private brands manufacture for

chain and department s tores and for other manufacturers .

Market Penetration and Dominance

A hypothesis of the study is that the des ire for maintaining or

increasing market penetration by United States manufacturers r e -

sults in complete control or dominance by the manufacturer of the

marketing channel. Fifty per cent or more of each group of channel

members were in agreement with this hypothesis . A majority of

the manufacturers, wholesalers , and reta i lers a lso agreed with the

hypothesis when applied to foreign manufacturers . Wholesalers ,

198

r e t a i l e r s , and l a rge sca le r e t a i l e r s agreed with the hypothesis

when applied, to who lesa le r s . Data relat ing to th is hypothesis is

included in "Table XXXIII. Obviously, all m e m b e r s cannot control

the channel but they can opera te in a manner that will i n c r e a s e the i r

dominance over pa r t or al l of the channel.

The Power to Control P r i c e s

Influence of Market Penet ra t ion

Wholesalers , r e t a i l e r s , and la rge sca le r e t a i l e r s w e r e asked

what r e su l t the p r e s s u r e for m a r k e t penetra t ion had on pr ic ing .

Two-th i rds of the wholesa le r s and over ninety pe r cent of the r e -

t a i l e r s agreed that m a r k e t penet ra t ion p r e s s u r e s resu l ted in lower

r e t a i l p r i c e s . Fewer than one- four th of the l a r g e sca le r e t a i l e r *

followed th is thinking.

A substant ial m a j o r i t y of all respondents indicated that the

p r e s s u r e fo r marke t penet ra t ion resul ted in an inc reased amount of

p r i c e cutting. While a m a j o r i t y of wholesa le r s bel ieved that the

p r e s s u r e for m a r k e t penetra t ion resul ted in lower dea le r cost

p r i c e s , one-foxirth or l e s s of the r e t a i l e r s and l a r g e sca le r e t a i l e r s

shared this belief .

199

X X X H J PQ < H

°3 Z A

g a A o Q ft

a

0) o .. § * B «

II S-j rd c u rH o 4-» « O &

& 3 Q Jh ©

<3 °

u n> i—i cd & «-H o A3 &

u

P *3 bo .£* S 8 o ^ ^ s

3

u

• 4 Uj o

<&

* 1

& *P £

m !» ^

,Q

>*

*3 *-$

CQ 0) >4

CD 4-* £ ?H 0) 0) 13 r& tf " O

sx ci

a £ A o

f*S

a> 0 3 ^ § § * j u 3

fl

-d « o a m

N0 !> CO 00 sD CO • «*

NO CO i-H CO

CO tw r-H CO vO • «< •

00 CO r-If) oo -D

00 i—t N.0 H un ro

• • •

r—( xjQ \0 ^ Xp cO

fvj ^ 00 ^ vO • • • CO CO 00

m in vo

N N v£) n oo m 00 »-4 co rs3 in

oo oo O *~4 ^ l> i>

00 ^ S> QS

r~ nO vO xO

CO 00 CO CO

o o

*

o in

o o o m

oo m oo vo f—* m r—i

a> m

Cu <P ao 0

00

R e s a l e P r i c e Maintsimric_8

More than, o n e - t h i r d of the m a n u f a c t u r e r s and one-ha l f Q£

w h o l e s a l e r s m a k e u s e of a r e s a l e p r i c e m a i n t e n a n c e pol icy .

F a i r T r a d e . - - T h o s e r e s p o n d e n t s us ing F a i r T r a d e p r i c i n g in

F a i r T r a d e law s t a t e s included twenty- two p e r cent, of t he m a n u -

f a c t u r e r r e sponden t s and t h i r t y - s e v e n p e r cent of the w h o l e s a l e r

r e s p o n d e n t s .

Suggested l i s t p r i c e s , - -Sugges ted or m a n u f a c t u r e r ' s l i s t p r i c e s

w e r e u s e d by n e a r l y t h r e e - f o u r t h s of the m a n u f a c t u r e r s and o v e r

n ine ty p e r cent of the w h o l e s a l e r s .

Other f o r m s . - - O t h e r f o r m s of con t ro l l ing r e s a l e p r i c e s r e -

p o r t e d a s being used by m a n u f a c t u r e r s and w h o l e s a l e r s included

p r o d u c t c o n t r a c t s , impl ied a g r e e m e n t s , s e p a r a t e p roduc t design®

f o r s t o r e s r e q u i r i n g a high m a r g i n of p ro f i t , p r i o r d i s c u s s i o n of

the sub j ec t with the d e a l e r , e s t a b l i s h m e n t of m i n i m u m r e s a l e

p r i c e s , r e f u s a l to honor coope ra t i ve a d v e r t i s i n g , and p r o f i t d i s -

c u s s i o n s with d e a l e r s .

R e a s o n f o r r e s a l e p r i c e m a i n t e n a n c e . - -Seven ty p e r cent of th©

w h o l e s a l e r r e s p o n d e n t s indicated a r e s a l e p r i c e m a i n t e n a n c e pol icy

at the r e t a i l l eve l he lps to improve the s h a r e of m a r k e t of a b r a n d

of goods .

• . . .V,./ 2 0 1

Compl iance bv r e t a i l e r s . - - O v e r one-half of the r e t a i l e r s i n -

d ica ted tha t they w e r e r e q u i r e d to ma in t a in p r i c e s a s s u g g e s t e d b y

t he m a n u f a c t u r e r . F o r t y - f i v e p e r cent of the r e t a i l e r s w e r e r e -

qu i r ed to m a i n t a i n p r i c e s a s sugges ted by the w h o l e s a l e r . Since

a l l r e g u l a r r e t a i l e r r e s p o n d e n t s w e r e loca ted in Texas , and s i nce

Texas is a n o n - F a i r T r a d e s t a t e , f l ag ran t v io la t ion of s t a t e and

f e d e r a l law i s taking p l a c e . Re tu rns f r o m l a r g e s c a l e r e t a i l e r s

ind ica ted tha t t h i r t y p e r cent w e r e r e q u i r e d to m a i n t a i n p r i c e s

sugges t ed by the m a n u f a c t u r e r , and e ighteen p e r cent w e r e r e q u i r e d

to m a i n t a i n p r i c e s sugges ted by the w h o l e s a l e r .

Power of M a n u f a c t u r e r to Control P r i c e s

A hypo thes i s of the s tudy is tha t the d e s i r e f o r ma in t a in ing o r

i n c r e a s i n g m a r k e t p e n e t r a t i o n by U. S. m a n u f a c t u r e r s r e s u l t s in

t he power of t h e s e m a n u f a c t u r e r s to e s t ab l i sh and con t ro l p r i c e s

a t t he who le sa l e and r e t a i l l eve l . The r e s p o n s e p r e s e n t e d in Tab le

XXXIV r e v e a l s tha t ove r f o r t y p e r cent of each g roup of channel

m e m b e r s a g r e e d with the hypo thes i s . A s i m i l a r p e r c e n t a g e of each

g roup of channel m e m b e r s a g r e e d with the hypo thes i s when appl ied

to f o r e i g n m a n u f a c t u r e r s . When t h e s e p e r c e n t a g e s of a g r e e m e n t

wi th t he hypo thes i s a r e combined with, r e s p o n s e s to o the r ques t ions

r e l a t i n g to the power to con t ro l p r i c e s , the hypo thes i s is c o n s i d e r e d

to b e va l id .

202

> X! X! X

W

J

CQ c H

H

D <S> u

*1*4.

u &

!>%

2 «

d ^

r S > U a> PCJ J

a H

Cu rC{

.2 ,S —I ^

• 5 ^

>J d

t » «

W h

o —i ai

© £ o

S |

s ^

eo 'B a +> 3 !tf

CQ Q

(0

<D & 'h &o d

.M 4^ a) u ^ a o *ti

h g

m u <D

3 U

. « 13 * 3

a

w

g *

03 CD W©

i * 6 -

, 0 o £ fc-

W o #

i *

u a?

i

m +>

fl a>

O a. CQ (!)

^ U 2 o> 3 rQ § g

,£2 0)

O s

0) *0 & O £X to <o

Pi

m CM ND o (N3 O o

• • * m vO r - oo o i n CO m

i n CO o r*- o m o

• • • * CO CQ i-H o

i n NO i n

vNi H o o oo (\3 o o

* • • » 00 sD i n o m CO i n i n

00 O o o f-H t - o o

• • # • r*H CO i n o

vO i n

00 o i n cm

u Q) CO w U u 0 0) <D

4-i r~l U u as

0 C0 V4 ( X <D 3 d H

«} 0

Q0 <D

203

Power of Wholesa l e r to Centre^ P r i c e s

Response of channel m e m b e r s included in Table XXXV i nd ica te s

t ha t m o r e than f o r t y p e r cent of each group of r e s p o n d e n t s a g r e e d

t h a t the d e s i r e f o r ma in ta in ing o r i n c r e a s i n g m a r k e t p e n e t r a t i o n by

w h o l e s a l e r s r e s u l t s in the power of the w h o l e s a l e r to e s t a b l i s h and

control pr ices at the retai l l eve l .

TABLE XXXV

RESPONSE OF CHANNEL MEMBERS REGARDING WHETHER THE DESIRE FOR MAINTAINING OR INCREASING MARKET

PENETRATION RESULTS IN THE POWER OF THE WHOLESALER TO ESTABLISH AND CONTROL

PRICES AT THE RETAIL LEVEL

Channel Member Respondents

Number Respondents

Power of Wholesaler to Control P r i c e s at

Retail Level

Yes %

No %

Manufacturer- Importer 16 50. 00 50 .00

Wholesaler 61 45. 90 54. 10

Retai ler 21 4 7 , 6 2 5 2 . 3 8

Large Scale Retailer 10 40. 00 60. 00

P r i c e Discr iminat ion

Manufacturers w e r e questioned regarding their bill ing pr i ce s

to different channels of distribution. Response indicated that forty-

eight per cent of the manufacturers se l l to all cus tomers at the

204

same pr ice . Thus, over one-half of all responding manufacturers

have different se l l ing p r i c e s for different cus tomers . In addition,

over one-f i f th of the respondents indicated that they sold to national

chains, l arge re ta i l ers , and/or specia l u s e r s at lower p r i c e s than

they se l l to independent distributors, factory branches , and c o -

operat ive wholesa lers .

The Power to Control Marketing Act iv i t ies

Power of Manufacturers

A hypothesis of the study is that the d e s i r e of United States

manufacturers to maintain or increase market penetrat ion re su l t s

in the power of these manufacturers to control marketing act iv i t ies

of their wholesa le and retai l organization s tructure . Response of

channel m e m b e r s presented in Table XXVI indicates that a major i ty

of each channel member group, with exception of large s c a l e r e -

ta i l e r s , agreed with the hypothesis . More than one-third of each

group of respondents agreed with the hypothesis when applied to

fore ign manufacturers .

Power of Wholesalers

Response of channel m e m b e r s presented in Table XXXVII r e -

vea l s that a majority of manufacturers , who le sa l er s , and r e t a i l e r s

agreed that the des ire of who lesa lers to maintain or i n c r e a s e

205

TABLE XXXVI

RESPONSE OF CHANNEL MEMBERS REGARDING WHETHER THE DESIRE FOR MAINTAINING OR INCREASING MARKET

PENETRATION RESULTS IN THE POWER OF THE MANUFACTURER TO CONTROL MARKETING

ACTIVITIES OF ITS WHOLESALING AND RETAILING ORGANIZATION

STRUCTURE

Channel Member

Respondent

1

Number Respondents

!

Power to Control Marketing Activi t ies of Wholesa le rs and Re ta i l e r s

When Applied To: Channel Member

Respondent

1

Number Respondents

U. S. Manufac ture rs

Fore ign Manufac tu re r s

Channel Member

Respondent

1

Number Respondents

Yes %

No %

Yes %

No %

Manuf ac tur e r -Impor te r 16 56. 25 43. 75 38. 46 61 .54

Wholesa lers 57 71. 93 27. 07 47. 73 52. 27

Re ta i l e r s 18 66. 67 33. 33 46. 15 53. 85

La rge Scale Re ta i l e r s 8 37. 50 62. 50 37.50 62. 50

m a r k e t penetrat ion r e su l t s in the power of the wholesa le r to control

marke t ing act ivi t ies of its r e ta i l organizat ion s t r u c t u r e .

The Power of the Supplier to F o r c e Full Line Selling

Purchase Requi rements

Manufac turers w e r e asked if the i r who lesa le r s w e r e expected

to buy and sel l al l products in the i r l ine. Approximately one- th i rd

206

T A B L E XXXVII

RESPONSE O F CHANNEL MEMBERS REGARDING WHETHER THE DESIRE FOR MAINTAINING OR INCREASING MARKET

PENETRATION RESULTS IN THE POWER OF THE WHOLESALER TO CONTROL MARKETING

ACTIVITIES OF ITS RETAIL ORGANIZATION STRUCTURE

Channel Member Respondent

Number Respondents

Power of Wholesaler to Control Marketing Activi t ies of its

Retail Organization Structure

Yes %

No . %

Manuf a ctur e r -Importers 17 58. 82 M

* 00

Wholesalers 60 51. 67 4 8 . 3 3

Reta i lers 19 6 8 . 4 2 3 1 . 5 8

Large Scale Retai lers 9 44, 44 5 5 . 5 6

of both domest ic manufacturers and importers responded that they

expected wholesa lers to buy and se l l all products in their l ine.

More than one-half of the wholesa ler respondents indicated that

they were required to buy, stock, and se l l al l products of fered by

the manufacturer they represented.

One-fourth of the re ta i l ers indicated that they were required to

buy al l products in a l ine offered by a distributor, . Thus, full l ine

forcing is practiced by s o m e who lesa lers as well as manufacturers .

207

Market Penetra t ion and power to F o r c e Full Line Selling

A hypothesis of the study is that the d e s i r e of United States

m a n u f a c t u r e r s to mainta in or inc rease m a r k e t pene t ra t ion r e s u l t s

in the power of these m a n u f a c t u r e r s to f o r ce ful l l ine sell ing, even

on products which a r e unprof i table to its channel m e m b e r s . The

r e sponse of channel m e m b e r s presented in Table XXXVIII r evea l s

that f i f ty p e r cent or m o r e of each group of channel m e m b e r s , with,

the exception of l a rge sca le r e t a i l e r s , agreed with the hypothesis .

When applied to fore ign manufac tu re r s , a m a j o r i t y of the whole-

s a l e r s and r e t a i l e r s agreed with the hypothesis . "When applied to

who lesa l e r s , a ma jo r i t y cf the manufac tu r e r s , who lesa le r s , and

l a r g e sca le r e t a i l e r s agreed with the hypothesis .

Prof i t Relationships

Product P rof i t Rating

Each group of channel m e m b e r s was asked to r a t e each type

product in t e r m s of net prof i t a f t e r all product , promotion, and

dis t r ibut ion costs have been deducted. A rat ing of good, marg ina l ,

o r poor p rof i t was used for each product . P rof i t rat ing by product

as each group of channel m e m b e r s responded is included in Table

XXXIX.

2 0 8

> X

X

X w

J

C P < H

w

ft

P K =

S I

m

w >

d

£ 

% o

V 0

> D

i n

C O

•*t s

ir\

! 2 ^ C O ^

C O

C O

i n

0 0 0 0

r-Hi r -

* •

r*H r ~

r ^

c a M 0 0 c a

• » 0 0 N J

i n CM

t f i f w s O C O

r - s D o o r * -

• • • •

0 0 v O ( M

V 0 r -

m C O N f s 3 C O <—i c v j

« V •

r—f C O l > 0 4

c o i n m f a

O o v O 0 0

o m C O r -

r * • •

O t > s D r * ~

i n (NJ C O i >

o r— (NJ

o v O < \ 3

• • • • o (Si C O c a

i n h - v O t s S

00 00 N h m w

i ?•<

a ;

u k

$ (0 4*± 4 ^

u m

ctf O

* 3 &

II

CO

5-i

r—{ flj

% 0 )

o

CO JL(

0 ) t—I . r - t

a S 4 - i (D

a i

J 2 m

* 3 £ o ®

w d

a) +» s o S > "

h P d

' 09

X! t-H X! X X!

W - 1 cq

H

ft

O Pi o «

w CQ

S H

2 J

H . 2 : £

s o >«

n

Q W H-{ J ft ft <5 t o <5

H O S3 Q

O

0 .

>H

PQ

O 55 M H <1 «

H tH ft o ptj ft

to

"S ;tJ « t J

nrj O a }* O ft CU ^

CD ri *5 o *M

o

a 0)

u

A

W)

4-» <$

o) rt CM

d

6

j a

4^ **>4 o

5

T3 0

S

u fl S -i o on o

^ u i o ^t5 ^ ^

r>. x 0

vO

O if> *~i o O 00 o

O O CO O '-H CNJ «-»

o o o O vO O • * •

o ^ o

o o

CO ID vO IT) CO Is-

H If) ^ CO f\J

o o

o 00

CT* »—i «—i H (V|

u 0>

1 0)

T$ 0 O

§* o m

^ r j CO w

&

a 0 rg O U &

r-H O ^ 00 o

• • »

^ t\3 IX\ *>P 00 NK

CO CO

CO CO

00 o r"* xO CV5

O

O CO 'XI O M 00

• * 9

Lf> co (\3 CVJ ^

O o

o CO

o r- co o ^ co • • *

m x o co i> co

o o

o n£>

o r- -h C4 vO (V3

0) w

O CO w

bJD Q> m ® W Q

• d

rt

a . ctj s-t bfi O «

O fi

00 0N O ID sJD O • • *

— t o o CO cvl ^

'D

co fx!

CV3 CO O ^ vD O

• e • oo in o \Q \Q i f )

CO

o ^ o H v O N

<D m

ra co a>

as oo 0)

4 <D

U J4 O U a> PS 0) a

H

o ©

<D 4-> cn

t-t o CQ

o U

2 1 0

xf <D

6 d 0 U 1 !

X H H N X x w J «

c H

m 4-* d 4 a ® £! • s O

2 pLi a w

CO 4 ^ 4) u

rt r 2 T ?

r! ° O u «w Q J a © bo U «

m "S

® a r - H E

$

•M *.-4

o u s

o o

c a N O o o r -

o o

O c\2 ^

U <D

1

w " 8

X f d O o , «5 0>

?4 "• O O l

• * *

r - o o (sj c M m i d

o o

c\i mo M H 00

• * *

CS3 0 N <\J r - i n ^

o o

o o

0 0 r*H j"H r*~ fvj

o

m u CP 03

0 <D - P *-4

<D

OS w

® o a> U $ U ifo *~f J S « ® 5 H-f «1 wxt "V *« a

a) a>

 o j

o a>

Q #

u c$ a. s o O

O H ^ o ^ m

• • « O ^ r H

o o

<%2 (\1 N 0 O 00 00

v O C O r o r - r o i n

o i n

r -c o

0 0 v O (S3 O £>• \ Q • • # C O H ^fi N \ D r o

O i n

v O

C O C O Lf) H s O C M

00

m u <D m u u £ °

r~: CO

<D r-4 Ctf

o n$ j-s m «5 02 &

^ n 3 ® £ 7 1 rt & 0 <D S 2 4 S ^ a j • $ £ 5 ? «s ^ £ £ j J

> H

a>

a o u

X o o d Q

O s£> o O 00 o

« * «•

O <N3 O

o o

m t*- v o «--« m ^

N O o o o o ^ H f O

r -m

o o M

iT) r - ^ c o < n m * • • P O 0 0 H Ifi s O

C O

C O i n C M

CO Jh 0) u 2

4-3 u

t+4 0

d

m u Q) —< CO

fH 03 P i

0)

u ® w n 2

 H

o r—f o U

' • f:<wv •

• Ci I

The products which f i f ty p e r cent or m o r e of a respondent group

' r a t ed as good prof i t products w e r e : radios by l a r g e sca le r e t a i l e r s ;

tape r e c o r d e r s by m a n u f a c t u r e r s and l a rge sca le r e t a i l e r s ; console

s t e r eo by al l groups; compact s t e reo by m a n u f a c t u r e r s , who lesa l e r s ,

and l a r g e sca le r e t a i l e r s ; and monochrome TV by all groups of r e -

spondents . Phonographs w e r e the only produc t whose p rof i t was

* not r a ted as good by a m a j o r i t y of any group of respondents* The

ba lance of the products w e r e ra ted by each responding group as

being unprof i table or producing marg ina l p ro f i t .

Reasons fo r Maintaining Marginal or Unprofi table Products

Manufac tu re r s . - -Manufac tu re r s were asked to wr i te in r e a s o n s

why they continued to mainta in products in the i r l ine which the manu-

f a c t u r e r had indicated to be marg ina l or unprof i table . Their r e a s o n s

included the following: investment plus other in terac t ion f a c t o r s ,

en t ry into marke t , to s e c u r e new dea l e r s , to o f fe r a complete one-

stop sou rce to a dea le r , absorpt ion of admin i s t r a t ive and engineer ing

costs over m o r e than one product line, t r end improvement , to o f fe r

a ful l l ine, planning to discontinue, and ego sa t i s fac t ion .

Other channel m e m b e r s . - -"Wholesalers, r e t a i l e r s , and l a r g e

sca le r e t a i l e r s were asked to check the r ea sons why they continued

212

to m a i n t a i n p r o d u c t s in t h e i r l ine which w e r e u n p r o f i t a b l e o r of

m a r g i n a l p r o f i t to t h e m . The i r r e s p o n s e is included in Table XL.

To o f f e r a fu l l l ine was the r e a s o n p rov ided by the l a r g e s t n u m b e r

of r e s p o n d e n t s in each group .

TABLE XL

REASONS INDICATED BY CHANNEL MEMBERS F O R CONTINUING TO CARRY MARGINAL P R O F I T

AND UNPROFITABLE PRODUCTS

Channel M e m b e r Group

Wholesa le r R e t a i l e r L a r g e Scale

R e t a i l e r

Number Respondents 69 %*

20 %'f

6 %*

R e a s o n f o r Ca r ry ing M a r -ginal and Unprof i tab le P r o d u c t s :

Supplier R e q u i r e m e n t s 14. 49 30. 00 16 .67

To Of fe r a Ful l Line 76. 81 40. 00 6 6 . 6 7

Ant ic ipa te P roduc t to B e c o m e P r o f i t a b l e 17 ,39 25. 00 16. 67

To Use a s P r i c e L e a d e r 15. 99 30. 00 16 .67

Demand of Marke t 20. 29 _ _

To P r o m o t e the Brand N a m e 39. 13 „

Other Reasons 15. 99 . 15 .00 33. 33

*Total p e r cent exceeds 100% b e c a u s e r e s p o n d e n t s checked m o r e than one r e a s o n .

213 I-

Marke t P e n e t r a t i o n and P r o f i t

P r e s s u r e f o r m a r k e t p e n e t r a t i o n . - - F i f t y - f i v e p e r cent of t he

w h o l e s a l e r s indicated they w e r e se l l ing m a r g i n a l o r u n p r o f i t a b l e

p r o d u c t s b e c a u s e t h e i r s u p p l i e r s d e s i r e d to i n c r e a s e o r m a i n t a i n

a c e r t a i n p e r c e n t a g e of s h a r e of m a r k e t . A m a j o r i t y of w h o l e s a l e r s

a l s o be l i eved that p r o f i t oppor tun i t i e s would i m p r o v e if d i s t r i b u t o r s

w e r e not under p r e s s u r e f o r m a r k e t p e n e t r a t i o n . Over t h r e e -

f o u r t h s of the r e t a i l e r s indica ted t h a t r e t a i l e r p r o f i t oppor tun i t i e s

would i m p r o v e if d i s t r i b u t o r s w e r e no t unde r p r e s s u r e f o r m a r k e t

p e n e t r a t i o n .

P r i c e cut t ing. - - N e a r l y f o r t y p e r cent of the w h o l e s a l e r s indi -

ca ted tha t cutting the p r i c e is g e n e r a l l y t he u l t i m a t e weapon f o r

i n c r e a s i n g m a r k e t p e n e t r a t i o n .

Reduced p r o f i t s . - - A hypo thes i s of the study is t ha t the d e s i r e

of United States m a n u f a c t u r e r s to ma in t a in or i n c r e a s e m a r k e t

p e n e t r a t i o n r e s u l t s in r e d u c e d p r o f i t s f o r the w h o l e s a l e r and r e -

t a i l e r f r o m what they o t h e r w i s e would be . R e s p o n s e of channel

m e m b e r s p r e s e n t e d in Tab le XLI r e v e a l s tha t a m a j o r i t y of each

g roup of channe l m e m b e r s a g r e e d wi th the h y p o t h e s i s . When a p -

p l ied to f o r e i g n m a n u f a c t u r e r s , a m a j o r i t y of each g roup of channel

214

T A B L E XLI

RESPONSE O F CHANNEL MEMBERS REGARDING WHETHER THE DESIRE O F MANUFACTURERS TO MAINTAIN OR

INCREASE MARKET PENETRATION RESULTS IN REDUCED PROFITS FOR THE WHOLESALER

AND R E T A I L E R FROM WHAT THEY OTHERWISE WOULD B E

Channel M e m b e r

Respondent Number

Respondents

Reduced P r o f i t s f o r W h o l e s a l e r s and R e t a i l e r s When Applied To:

Channel M e m b e r

Respondent Number

Respondents U. S.

Manufac tu r e r s F o r e i g n

M a n u f a c t u r e r s

Channel M e m b e r

Respondent Number

Respondents

Yes %

No %

Yes %

No %

M a n u f a c t u r e r -I m p o r t e r s 15 6 4 . 2 9 3 5 . 7 1 46. 67 53. 33

W h o l e s a l e r s 58 70. 69 29. 31 55. 32 44. 68

R e t a i l e r s 19 78. 95 21, 05 61. 54 3 8 . 4 6

L a r g e Scale R e t a i l e r s 8 62, 50 37. 5-0 62. 50 37. 50

m e m b e r s , with the except ion of the m a n u f a c t u r e r - i m p o r t e r g roup ,

a g r e e d with the h y p o t h e s i s .

R e s p o n s e of channel m e m b e r s included in Table XLII ind ica tes

t ha t n e a r l y one-hal f o r m o r e of each group of channel m e m b e r s

a g r e e d tha t the d e s i r e of w h o l e s a l e r s to m a i n t a i n o r i n c r e a s e m a r -

ke t p e n e t r a t i o n r e s u l t s in r educed p r o f i t s f o r the r e t a i l e r f r o m what

t hey o t h e r w i s e would be .

215

T A B L E XLII

RESPONSE OF CHANNEL MEMBERS REGARDING WHETHER THE DESIRE OF WHOLESALERS TO MAINTAIN OR

INCREASE MARKET PENETRATION RESULTS IN REDUCED PROFITS FOR THE RETAILER

FROM WHAT THEY OTHERWISE WOULD BE

Channel M e m b e r Respondent

T 1 i

Number Respondents

Reduced P r o f i t s f o r the R e t a i l e r F r o m What

They Othe rwi se Would Be

Yes %

No %'

Manuf a c tur e r -I m p o r t e r s 15 53, 33 4 6 . 6 7

W h o l e s a l e r s 60 48. 33 51. 67

R e t a i l e r s 18 83, 33 16. 67

L a r g e Scale R e t a i l e r s 8 50. 00 50. 00

Other P r o b l e m s of the Indus t ry

Other Indust ry p r o b l e m s which have an e f f ec t on s a l e s and

m a r k e t p e n e t r a t i o n include t r ans sh ipp ing , i n s u r a n c e , and c o n s u m e r

t e s t i ng o rgan i za t i ons . Opinions of channel m e m b e r s r e l a t i n g to

t h e s e indus t ry p r o b l e m s a r e p r e s e n t e d in the fol lowing p a r a g r a p h s .

T rans sh ipp ing

The m o v e m e n t of m e r c h a n d i s e outs ide the n o r m a l l y a s s igned

channe l s of d i s t r i bu t ion of a supp l i e r is r e f e r r e d to as t r a n s s h i p p i n g .

216 4

Transshipping becomes a p rob lem because s o u r c e s of supply tend to

lose an element of control over distr ibution and p r i c e s . When asked

whether t ransshipping is increas ing, two- th i rds of the who le sa l e r s

and m o r e than one-half of the manufac tu r e r s indicated that it i s .

Insurance

A quest ion was d i rec ted to wholesa le r s and r e t a i l e r s to de-

t e r m i n e the ef fec ts of the r is ing cost of insu rance . Response to

the question is included in Table X.LIIL F o r t y - f i v e per cent of the

r e t a i l e r s and th i r t y - seven per cent of the who lesa l e r s w e r e pu r -

chasing in s m a l l e r quanti t ies , and fo r ty - f ive p e r cent of both

r e t a i l e r s and wholesa le r s had reduced warehouse inven tor ies .

TABLE XLIII

PERCENTAGE OF RETAILERS AND WHOLESALERS INDICATING THE EFFECTS OF THE

RISING COST OF INSURANCE

Effect of Rising Cost of Insurance Reta i le rs %

Wholesa le rs %

Purchas ing in Smaller Quantities 45. 83 37. 14 No Change in Purchas ing Habits 50. 00 35. 71 Reduced Floor Display 8. 33 11. 43 Reduced Warehouse Inventory 45. 83 45. 71 Reduced Small Item Inventory 16. 67 30. 00

When r e t a i l e r s and wholesa le r s were asked if an Lnsuratice

plan, s i m i l a r to f loor plan financing, to cover f i r e and the f t would

111

induce t h e m to px'.rchase ir* qii&iiiities, only o n e - t h i r d of t he

r e t a i l e r s and f ewer than oae- iiitL -J£ i se Wholesa le r s a g r e e d tha t it

would.

Consumer Tes t ing Organ iza t ions

All channel m e m b e r s w e r e surveyed as to what e f f e c t s (con-

s i d e r a b l e , v e r y l i t t le , o r none) publ ished r e p o r t s of p r i v a t e t e s t i n g

o r g a n i z a t i o n s such as Consumer Repor ts have on s a l e s of a p r o d u c t

which they have t e s t e d and eva lua ted . One-half o r m o r e of each r e -

spondent group ra ted the e f f ec t s a s c o n s i d e r a b l e , L e s s than t e n p e r

cent of the m a n u f a c t u r e r s and w h o l e s a l e r s r a t e d the e f f e c t s a s none .

Response to the ques t ion is p r e s e n t e d in Table XLIV.

T A B L E XLIV

P E R C E N T A G E O F CHANNEL MEMBERS RATING THE E F F E C T S O F PUBLISHED REPORTS O F

PRIVATE TESTING ORGANIZATIONS

Channel Member

E f f ec t s of Pub l i shed R e p o r t s

M a n u f a c t u r e r -I m p o r t e r s

%

i

"Wholesalers %

i

R e t a i l e r s %

L a r g e Scale

R e t a i l e r s %

Cons ide r ab l e 50. 00 53. 33 54. 17 50. 00

Very Li t t le 42. 31 46 .67 37. 50 50. 00

None 7. 69 G. 00 8. 33 0. 00

218

Channel m e m b e r s w e r e asked if they bel ieve p r iva te tes t ing

organizat ions such as Consumer Reports provide a f a i r t e s t of a

product . Response of channel m e m b e r s is p resen ted in Table X.LV.

TABLE XLV

RESPONSE OF CHANNEL MEMBERS AGREEING THAT CONSUMER TESTING ORGANIZATIONS

PROVIDE A FAIR TEST OF A PRODUCT

Percen tage of Group Agreeing Channel Member Group That a F a i r Test is Provided

Manufac tu r e r - Impor t e r s 46. 15 Wholesa lers 16. 22 Re ta i l e r s 13.04 La rge Scale Reta i le rs 66. 67

Ways to Inc rease Market Penet ra t ion

Retai ler Response

Re ta i l e r s indicated by w r i t e - i n answer s how they helped the i r

sou rces of supply to i nc r ea se thei r s h a r e of m a r k e t . The ways

included good product p resen ta t ion and demons t ra t ions , ca r ry ing

one brand exclusively, ca r ry ing a good inventory of the b rands

sold, good reputation with, cus tomer , consis tent and t ime ly adver -

t is ing, good product display, buying the i r dea ls , i n - s t o r e promotion,

and "sel l ing what they load us with. "

219

Wholesaler Response

Wholesalers -were asked the m o s t effect ive v/ays fo r a -whole-

s a l e r to inc rease his sha re of m a r k e t . The answer s m o s t f requent ly

provided included the following: sa les t ra in ing to r e t a i l e r , s e r v i c e

to r e t a i l e r , extensive promotion, heavy adver t i s ing , ca r ry ing ade -

quate inventory, pr ic ing competi t ively, analyzing competi t ion and

taking action, providing incentives for s a l e smen , providing good

t e r r i t o r y coverage by sa lesmen , increas ing out lets , maintaining

good p a r t s supply, work, developing dea le r loyalty, p r i c e s tabi l i ty

and maintenance, management t ra ining and p rof i t ana lys i s , opening

his own re ta i l s t o re s , and promoting through exist ing d e a l e r s .

Manufacturer Response

Manufac turers indicated that who lesa le r s could m o s t effect ively

i n c r e a s e thei r m a r k e t penetra t ion in the following ways : buying in

volume, extensive promotion, planning sa l e s mee t ings fo r d e a l e r s ,

adver t i s ing extensively, offer ing low competi t ive p r i c e s , offer ing

pro tec ted t e r r i t o r i e s to dea l e r s , ca r ry ing adequate inventory, p r o -

viding se rv ice to dea l e r s , employing an exper t sa les fo rce , having

good r e t a i l e r represen ta t ion , offer ing a r e t u r n pr iv i lege to r e t a i l e r ,

and ca r ry ing the full l ine.

This chapter included a p resen ta t ion of the opinions of industry

m e m b e r s relat ing to the purposes and hypotheses of the study.

220

These opinions were drawn f rom a s e r i e s of f ive ques t ionna i res

completed by m a n u f a c t u r e r s and impor t e r s , who lesa le r s , r e t a i l e r s ,

and specia l u s e r s of consumer e lec t ronic p roduc t s . Based on the \

data p resen ted in this and previous chapters , a s u m m a r y of the

study, conclusions, and recommendat ions a r e p resen ted in the

following chapter .

CHAPTER VI

SUMMARY, CONCLUSIONS, AND

RECOMMENDATIONS

Summary

This study has concerned itself with de t e rmin ing the s ignif icance

of m a r k e t penetra t ion to the consumer e l ec t ron ic produc ts industry .

The p rob lems of g r ea t e s t cu r r en t s ignif icance re la t ing to m a r k e t

pene t ra t ion were se lec ted for individual study. These p rob lems

included:

1. An ana lys is of the s ize , growth, arid s t r u c t u r e of the con-

s u m e r electronic, products indus t ry ,

2. The impor tance of impor ts to the indus t ry .

3. The na ture of competi t ion within the indus t ry .

4. Market penet ra t ion .

5. Market and sa les potent ia ls ,

6. An analys is of the repor t ing m e c h a n i s m f o r r ecord ing

industry data .

7. Distr ibution.

8. P roduc t s .

9. Pr ic ing .

10. Promot ion .

?.?i

222

11. At t i tudes of the m a r k e t .

12. C o n s u m e r i s m .

13. Channel conf l i c t and con t ro l .

14. The l ega l env i ronmen t .

Each of the fo rego ing p r o b l e m s was d e s c r i b e d and ana lyzed ,

us ing s e c o n d a r y data to p r e s e n t the p r o b l e m e f fec t ive ly . T h e s e

a n a l y s e s w e r e fol lowed by a p r e s e n t a t i o n of t he opinions of m a n u -

f a c t u r e r s and i m p o r t e r s , w h o l e s a l e r s , r e t a i l e r s , l a r g e s c a l e r e -

t a i l e r s , and spec ia l u s e r s as d e t e r m i n e d by q u e s t i o n n a i r e s c o m -

ple ted by each of t h e s e f ive g r o u p s . These opinions r e l a t e d to

m a r k e t p e n e t r a t i o n and to indus t ry p r o b l e m s and p r a c t i c e s .

Conclus ions

Marke t P e n e t r a t i o n

Signif icance of m a r k e t pene t r a t i on . - - F r o m the a n a l y s i s of in-

d u s t r y p r o b l e m s and f r o m q u e s t i o n n a i r e s comple ted by m e m b e r s of

the indus t ry , it is concluded tha t m a r k e t p e n e t r a t i o n is of con-

s i d e r a b l e s ign i f i cance to the i ndus t ry , p a r t i c u l a r l y a s a m e a n s of

evaluat ing m a n u f a c t u r e r s and w h o l e s a l e r s . M a r k e t p e n e t r a t i o n is

a va luab l e m e a s u r e m e n t tool, but only when a c c u r a t e da ta a r e

ava i l ab l e .

223

When m a r k e t penet ra t ion is used a s . a company goal it f r equen t ly

confl icts with other goals of the f i r m , pa r t i cu l a r ly that of p ro f i t . As

a company objective, m a r k e t penet ra t ion r e s u l t s in a s a c r i f i c e of

p ro f i t to a t ta in the object ive; t h e r e f o r e , it is de te rmined that m a r k e t

pene t ra t ion should not be used as a company object ive .

Market penet ra t ion hypothesis . - - I t is concluded that the d e s i r e

f o r maintaining or increas ing m a r k e t pene t ra t ion by United States

m a n u f a c t u r e r s r e su l t s in g r e a t e r emphas i s on unit sa les than on

dol lar sa les per product group, g r e a t e r emphas is on unit s a l e s

than on prof i t per product group, complete control or dominance

by the manufac tu re r of the marke t ing channels , the power of the

m a n u f a c t u r e r to es tab l i sh and control p r i c e s at the wholesa le and

r e t a i l level , the power of the m a n u f a c t u r e r to f o r c e fu l l l ine sel l ing,

the power of the manufac tu re r to control the marke t ing act iv i t ies of

i ts wholesaling and reta i l ing organizat ion s t r uc tu r e , and reduced

p ro f i t s fo r the wholesa le r and r e t a i l e r f r o m what p ro f i t s o therwise

would be .

It was de te rmined that in genera l the d e s i r e to main ta in or

i n c r e a s e m a r k e t penet ra t ion has the s ame r e s u l t s f o r both d o m e s -

t ic and fore ign m a n u f a c t u r e r s . It is the d e s i r e fo r m a r k e t pene-

t r a t ion which causes f i r m s to es tab l i sh pol ic ies which lead to the

aforement ioned r e s u l t s . Many of these r e s u l t s conflict with goals

224

of o the r channel m e m b e r s . In addi t ion, the r e s u l t s m a y be i l -

l ega l .

P r e s s u r e f o r m a r k e t pene t r a t i on , - -I t is d e t e r m i n e d tha t g r e a t

p r e s s u r e is exe r t ed by d o m e s t i c m a n u f a c t u r e r s , f o r e i g n m a n u -

f a c t u r e r s , and by w h o l e s a l e r s to each of t h e i r c u s t o m e r s to in-

c r e a s e m a r k e t pene t r a t i on . In s o m e in s t ances , p r e s s u r e is appl ied

by s u p p l i e r s to t h e i r c u s t o m e r s to i n c r e a s e s a l e s beyond the point

t h e s e c u s t o m e r s d e s i r e . P r e s s u r e is a l so r e f l e c t e d in the m a n u -

f a c t u r e r ' s ex tens ive u s e of unit quotas by p roduc t and in s h a r e of

m a r k e t quo tas .

Sec recy of da ta . - - M a n u f a c t u r e r s and w h o l e s a l e r s indica ted a

d e s i r e to r e t a i n s e c r e c y of m a r k e t pene t r a t i on da ta whi le r e t a i l e r s

f a v o r e d publ ic i n fo rma t ion . It is concluded tha t the d i s advan t ages

outweigh the advan tages of main ta in ing s e c r e c y ; t h e r e f o r e , m a r k e t

p e n e t r a t i o n data should b e c o m e public i n fo rma t ion .

The M e c h a n i s m f o r Record ing and Repor t ing Indus t ry Data

Gove rnmen t . —It is concluded tha t g o v e r n m e n t da ta is f r e q u e n t l y

i ncons i s t en t among g o v e r n m e n t a l d e p a r t m e n t s , In addi t ion, inac -

c u r a c i e s occu r b e c a u s e a l loca t ion of sa les a r e m a d e to b r o a d g roup

c l a s s i f i c a t i o n s r a t h e r than to the c o n s u m e r e l e c t r o n i c s i n d u s t r y

' \ 225

tr

s p e c i f i c a l l y . F u r t h e r m o r e . the de lay be tween compi l ing a ad pub-

l i sh ing gove rnmen t data d i m i n i s h e s i ts u s e f u l n e s s . The U. S.

Cus toms Depar tmen t h a s da ta r e l a t i ng to i m p o r t s , but it does not

pub l i sh the data by b r and or by company p roduc ing the p r o d u c t .

E lec t ron ic Indus t r i e s A s s o c i a t i o n . - - T h e E l e c t r o n i c I n d u s t r i e s

A s s o c i a t i o n ' s s y s t e m of col lec t ing data is concluded to b e i n a c c u r a t e

f r o m both a local and na t iona l s tandpoin t . A l a r g e p e r c e n t a g e of

m a n u f a c t u r e r s and i m p o r t e r s do not r e p o r t s a l e s , e i t h e r in t o t a l

o r by county, to the a s s o c i a t i o n . .In. addi t ion, m a n y w h o l e s a l e r s

do not r e p o r t t h e i r s a l e s to t h e i r m a n u f a c t u r e r , e i t h e r in t o t a l o r

by county. Confusion ex i s t s a s to how s p e c i a l u s e r s and cha in

s t o r e s deal ing in p r i v a t e b r a n d s r e p o r t t h e i r s a l e s . Vi r tua l ly a l l

l a r g e s c a l e r e t a i l e r s r e p o r t s a l e s to no one ou t s ide t h e i r f i r m . In

addi t ion , no data a r e r e c o r d e d as to what is t ak ing p l a c e a t the r e t a i l

l eve l , which is the m o s t i m p o r t a n t m e a s u r e m e n t point .

Jhfluenc e of I m p o r t s

It is concluded tha t f o r e i g n p roduced goods , p a r t i c u l a r l y

J a p a n e s e , have had a s ign i f i can t in f luence on t he d o m e s t i c i n d u s t r y

and m a r k e t . Bus ines s and publ ic a t t i t udes a r e condi t ioned t o w a r d

a c c e p t a n c e of J a p a n e s e m a d e goods . Unit s a l e s of i m p o r t e d p r o -

ducts domina te d o m e s t i c s a l e s of a l l c o n s u m e r e l e c t r o n i c p r o d u c t s

with the except ion of t e l ev i s ion p r o d u c t s . Domes t i c m a n u f a c t u r e r s

have been fo r ced to e s t a b l i s h p roduc t ion f a c i l i t i e s in fo re ign na t ions

in o r d e r to r e m a i n compe t i t i ve with foreign, p r o d u c e r s .

The high d e g r e e of m a n u f a c t u r e r concen t r a t i on in t h e United

Sta tes h a s not p r e v e n t e d f o r e i g n p r o d u c e r s f r o m en te r ing the m a r -

ke t . In addi t ion, compet i t ion may in tens i fy with the p o s s i b l e

f o r m a t i o n of c a r t e l s in Japan .

Dis t r ibu t ion P r o b l e m s

Domes t i c m a n u f a c t u r e r s . - - It is d e t e r m i n e d tha t d o m e s t i c

m a n u f a c t u r e r s have the g r e a t e s t amount of con t ro l ove r the m a r k e t i n g

channel f o r c o n s u m e r e l e c t r o n i c p r o d u c t s . This con t ro l , o r d o m i -

nance , is e x e r c i s e d in d i s t r i bu t i on p o l i c i e s , in us ing m a n y channe l s

of d i s t r ibu t ion , in se l l ing to spec i a l u s e r s , in con t ro l l ing what is

p roduced and when it is p roduced , and in engaging in p r i v a t e l abe l

m a n u f a c t u r i n g . The con t ro l of d o m e s t i c m a n u f a c t u r e r s is be ing

cha l lenged by f o r e i g n manuf a c tur e r s and l a r g e s c a l e r e t a i l e r s .

F o r e i g n m a n u f a c t u r e r s . - - J a p a n e s e m a n u f a c t u r e r s have t r a -

d i t ional ly moved toward in tegra t ing or con t ro l l ing e v e r y l eve l in

the d i s t r i bu t i on s t r u c t u r e in t h e i r home m a r k e t . T r e n d s ind ica te

tha t th i s s a m e pol icy wil l be fol lowed in the United S ta tes .

I

?-> 7 lUMK* f

Supplementa l d i s t r ibu t ion c e n t e r s . - - A t r e n d e x i s t s among

d o m e s t i c and f o r e i g n m a n u f a c t u r e r s to e s t a b l i s h supp l emen ta l d i s -

t r i b u t i o n c e n t e r s at s e v e r a l loca t ions throughout the coun t ry . It

i s d e t e r m i n e d tha t t h i s could r e s u l t in independent w h o l e s a l e r s

b e c o m i n g se l l ing o r g a n i s a t i o n s only, in m a n u f a c t u r e r s us ing t h e i r

own se l l ing o rgan i za t i ons and e l imina t ing independent w h o l e s a l e r s ,

o r in w h o l e s a l e r s m e r g i n g into r eg iona l w h o l e s a l e r s and taking

o v e r the m a n u f a c t u r e r s ' d i s t r i bu t ion c e n t e r s .

W h o l e s a l e r s . - - I t is concluded that the w h o l e s a l e r can c o m -

m a n d a l a r g e s h a r e of the m a r k e t ove r which h e ha s con t ro l , but

h i s p e r f o r m a n c e is di luted by d i r e c t s a l e s of the m a n u f a c t u r e r to

s p e c i a l u s e r s loca ted in the w h o l e s a l e r ' s m a r k e t .

Independently owned w h o l e s a l e r s f e a r be ing r e p l a c e d by f a c t o r y

b r a n c h e s al though no l a s t ing t r e n d could be de t ec t ed . A cyc le of

f a c t o r y b r a n c h e s i n c r e a s i n g when g e n e r a l economic condi t ions a r e

good s e e m e d to ex i s t . As the g e n e r a l economy s lows down, b r a n c h e s

a r e r e p l a c e d by independents .

L a r g e s c a l e r e t a i l e r s . - - I t is concluded tha t the g rowth of

l a r g e s c a l e r e t a i l chain s t o r e o p e r a t i o n s have b e c o m e a t h r e a t to

o the r channe l m e m b e r s . The l a r g e s i ze of t h e s e o r g a n i z a t i o n s

m a k e s it p o s s i b l e fo r t h e m to f ind m a n u f a c t u r e r s who wil l s e l l to

* r /V'# 'V.*; ) 'V 'N*4 ''

• . . .. . 228

them d i r ec t . This r e su l t s in a loss o£ sa l e s to w h o l e s a l e r s . Also,

smal l r e t a i l e r s lack buying power to pu rchase in quantity for l ower

p r i c e s which a r e n e c e s s a r y to compete with the l a r g e sca le r e -

t a i l e r s .

Special u s e r s . - -Spec ia l u s e r s a r e purchas ing a m a j o r i t y of

the i r r equ i r emen t s d i rec t f r o m the m a n u f a c t u r e r . Generally, t hese

p u r c h a s e s a r e of substant ia l s ize , although in m a n y ins tances the

p u r c h a s e is one unit at a t ime . Pu rchase p r i c e is genera l ly whole-

s a l e r s ' cost although many special u s e r s p u r c h a s e at a p r i c e l e s s

than who le sa l e r s ' cost . It is concluded that m a n u f a c t u r e r s a r e

pe r fo rming special ized s e rv i ce s for specia l u s e r s , such as one at

a t ime shipments d i rec t to u l t imate c o n s u m e r s , a t p r i c e s which

a r e lower than those offered to the i r other c u s t o m e r s .

Trans shipping. - -Transsh ipp ing of m e r c h a n d i s e has the e f fec t

of overs ta t ing the or iginal s e l l e r s ' sha re of m a r k e t and unders ta t ing

the brand s h a r e in the a r e a where the m e r c h a n d i s e is actual ly sold.

It is concluded that an element of control over d i s t r ibu t ion and

pr ic ing is los t by m a n u f a c t u r e r s and who le sa l e r s when t r a n s -

shipping takes place in the i r m a r k e t . Although m a n u f a c t u r e r s and

who le sa l e r s bel ieve t ransshipping to be inc reas ing , t h e r e is l i t t le

that can be done legal ly to prevent t r anssh ipp ing .

*4 H i / JC. 1 Cm

P r o d u c t P r o b l e m s

P r o f i t . - - C o n s u m e r d e m a n d h a s f o r c e d m a n u f a c t u r e r s to p r o -

d u c e b r o a d l i n e s of m e r c h a n d i s e . It is d e t e r m i n e d t h a t o f t e n s o m e

of t h e s e l i n e s p r o d u c e m a r g i n a l p r o f i t o r a r e u n p r o f i t a b l e f o r tli§

m a n u f a c t u r e r and h i s channe l m e m b e r s . The p r i n c i p l e r e a s o n f§f

cont inu ing to c a r r y t h e s e p r o d u c t s is to o f f e r a f u l l liri§i A rft&-

j o r i t y of w h o l e s a l e r s a r e s e l l i ng t h e s e m a r g i n a l p r o f i t of u n p r o f i t -

a b l e p r o d u c t s b e c a u s e t h e i r s u p p l i e r d e s i r e s to m a i n t a i n a cert3.ill

p e r c e n t a g e s h a r e of m a r k e t . Both w h o l e s a l e r and r e t a i l e r p r o f i t

o p p o r t u n i t i e s would i m p r o v e if it w e r e not f o r t h e p r e s s u r e ; 8S

s u p p l i e r s f o r m a r k e t p e n e t r a t i o n .

Model c h a n g e s . - - I t is conc luded tha t annua l changes and tii£

i n t r o d u c t i o n of " d r o p - i n " m o d e l s to a p r o d u c t lines a r e uhrieecSss&fy

when l i t t l e change in p r o d u c t i m p r o v e m e n t of s t y l e is m a d l j

Annua l m o d e l c h a n g e s , o t h e r w i s e , a r e b e n e f i c i a l to th£ i r i dus t fy

only in t ha t t he i n d u s t r y r e o r g a n i z e s and r e n e w s i t s s a l e s e f f o r t s

in a c o n c e n t r a t e d m a n n e r . R e t a i l e r s a g r e e t h a t t h e i n t roduc t ion

of new m o d e l s t h r o u g h o u t t he y e a r is a technique; u s e d by man t i -

f a c t u r e r s to get a r o u n d p r i c e g u a r a n t e e s . Many f e t a i l e r s and

w h o l e s a l e r s , h o w e v e r , b e l i e v e d t h a t the m a n u f a c t u r e r should bu i id

a b r a n d of m e r c h a n d i s e f o r independent r e t a i l e r s only ;

230

Serv ice arid w a r r a n t y . - - C e n t r a l i s e d s e r v i c e o r g a n i z a t i o n s have

enabled manuf ac t u r e r s and w h o l e s a l e r s to expand t h e i r m a r k e t s . It

is concluded fihat c e n t r a l s e r v i c e o rgan i za t i ons and extended w a r - •

r a n t i e s a id t r a n s s h i p p e r s and p e r m i t m a n u f a c t u r e r s to s e l l d i r e c t

m o r e e a s i l y to spec i a l u s e r s of the p r o d u c t .

.Pricing P r o b l e m s

P r i c e l e a d e r s . - - E x c e s s i v e c o n c e n t r a t i o n on p r i c e l e a d e r s by

the e n t i r e indtxslry is concluded to r e s u l t in r e d u c e d p r o f i t s f o r the

i n d u s t r y .

E f fec t of m a r k e t p e n e t r a t i o n . - - I t is concluded tha t the p r e s s u r e

f o r m a r k e t p e n e t r a t i o n r e s u l t s in l ower r e t a i l p r i c e s . T h e s e

p r e s s u r e s a l so r e s u l t in an i n c r e a s e d amoun t of p r i c e cut t ing .

R e s a l e p r i c e m a i n t e n a n c e . - - R e s a l e p r i c e m a i n t e n a n c e p o l i c i e s ,

f r e q u e n t l y i l legal , a r e r e l a t i v e l y c o m m o n among m a n u f a c t u r e r s and

w h o l e s a l e r s . A l a r g e n u m b e r of r e t a i l e r s a l so indica ted tha t they

a r e r e q u i r e d to m a i n t a i n p r i c e s e s t a b l i s h e d by t h e i r s u p p l i e r s . It

i s concluded that many m a n u f a c t u r e r s and w h o l e s a l e r s a r e involved

in p r i c e f ix ing .

P r i c e d i s c r i m i n a t i o n . - - A m a j o r i t y of m a n u f a c t u r e r s o f f e r

d i f f e r e n t p r i c e s to d i f f e r e n t c u s t o m e r s . Many m a n u f a c t u r e r s s e l l

to s p e c i a l u s e r s and l a r g e s c a l e r e t a i l e r s a t l ower p r i c e s than they

se l l to independent d i s t r i b u t o r s and f a c t o r y b r a n c h e s . It i s .con-.

eluded tha t m a n u f a c t u r e r s p r a c t i c e d i s c r i m i n a t o r y p r i c i n g .

P r o m o t i o n P r o b l e m s

D i s c r i m i n a t o r y a l l o w a n c e s . - - It is c oncluded tha t d i s c r i m i n a t o r y

p r a c t i c e s in the f o r m of p r o m o t i o n a l a l lowances and s e r v i c e s a r e

a l s o c o m m o n in the i n d u s t r y . Ma jo r f o r e i g n m a n u f a c t u r e r s and

i m p o r t e r s , in p a r t i c u l a r , a r e involved in t h e s e d i s c r i m i n a t o r y

p r a c t i c e s . L a r g e s ca l e r e t a i l e r s b e c o m e involved in t h e s e i l l ega l

p r a c t i c e s by accep t ing such p r i c e s and a l l o w a n c e s .

Coopera t ive a d v e r t i s i n g . - - It is concluded tha t c o o p e r a t i v e

a d v e r t i s i n g funds a r e be ing d iscont inued by s o m e m a n u f a c t u r e r s .

The r e a s o n f o r d iscont inuing such funds is tha t it is d i f f i cu l t f o r

the m a n u f a c t u r e r to comply with F e d e r a l T r a d e C o m m i s s i o n gu ide -

l i n e s f o r a d m i n i s t e r i n g f u n d s . Discont inuance of c o o p e r a t i v e funds

m a y be d e t r i m e n t a l to the s m a l l r e t a i l e r .

Other Indus t ry P r o b l e m s

I n s u r a n c e . - - T h e r i s i n g cos t s of i n s u r a n c e a r e conc luded to

r e s u l t in w h o l e s a l e r s and r e t a i l e r s p u r c h a s i n g s m a l l e r quan t i t i e s

; V- ' *> ?.? • ^ r I«#%•*-«

and reducing t h e i r w a r e h o u s e inventory . A p lan is needed to coun te r

the t r e n d toward s m a l l e r o r d e r and in ventory s i z e .

Consumerism. - - It is concluded that the industry must adjust

to the needs of consumers by providing information, avoiding de-

ceptive pract ices , and assuming product respons ib i l i t i e s . Should

the industry not adjust to the needs of consumers , government

intervention can be expected.

Consumer test ing organization. - -The resu l t s of the t e s t s of

consumer e lectronic products published in Consumer Reports a r e -

concluded to increase the sa les of a particular brand when the

report is favorable and to d e c r e a s e the brand's s a l e s when the

report is unfavorable., There is some doubt that a fa ir tes t of th©

product is being provided by these organizations s ince only a s ingle

sample of each product is tes ted.

Channel Conflict and Control

Channel conflict and control. - - I t is concluded that conflict in

distribution resul ts f r o m the incompatibility of goals , a ims , or

values of channel m e m b e r s . Each channel member has s o m e

means of acquiring power to control the channel of distribution.

233

Legal P r o b l e m s

Ant i - t rus t . - - I t is concluded that violat ions of a n t i - t r u s t laws

a r e common in the industry. Typical among violations a r e collu-

sive ag reemen t s and monopolis t ic p r a c t i c e s such as p r i c e f ixings

exclus ive dealing, fu l l l ine forc ing , and o t h e r s . Since the cour t s

have held that a degree of r easonab leness does not exis t in r e s t r a i n t

of t r ade , al l such act ions a r e in violation of the law. F u r t h e r m o r e ,

a f i r m with the power to control m a r k e t s , whether it e x e r c i s e s the

power reasonably or not, is in violation of the law.

Dismemberment . - -The F e d e r a l Trade Commiss ion and the

Senate An t i -Trus t Committee a r e making e f fo r t s to b r e a k up ol i -

gopolies, which would include the consumer e lec t ron ic products

indus t ry . Therefore , it is concluded that domes t i c m a n u f a c t u r e r s

a r e cur ren t ly caught in the posit ion of facing d i s m e m b e r m e n t be -

cause of violating a n t i - t r u s t laws while at the s a m e t ime they a r e

t ry ing to compete internat ional ly with f i r m s whose national gov-

e rnmen t s encourage industry cooperat ion.

Recommendat ions

Market Penet ra t ion

Deemphasis . - -It is r ecommended that the u s e of m a r k e t pene-

t r a t ion be deemphasized. It should not be used as a company goal

234

b e c a u s e the d e s i r e fo r main ta in ing or inc reas ing m a r k e t pene t r a t i on

r e s u l t s in many poss ib l e i l legal p r a c t i c e s , and conf l ic t s with o the r

goals of the f i r m and goals of o ther channel m e m b e r s . Marke t

pene t r a t i on should be used as a m e a s u r e m e n t tool only when the

da ta is known to be a c c u r a t e .

Publ ic in format ion . - - M a r k e t pene t ra t ion da ta should be m a d e

publ ic in format ion . Complete , a c c u r a t e publ ic in format ion , with

r e s t r i c t i o n s against i ts u s e in adver t i s ing , would benef i t individual

f i r m s and cons iderably r educe the cos t of s ecu r ing da ta .

Evaluation p r o c e d u r e s . - - I t is r e c o m m e n d e d that m a n u f a c t u r e r s

eva lua te w h o l e s a l e r s only on that por t ion of the m a r k e t over which

the who le sa l e r has con t ro l . M a n u f a c t u r e r s ' d i r e c t s a l e s to spec ia l

u s e r s and o the r s should be s epa ra t ed f r o m to ta l s a l e s in o r d e r to

p e r m i t evaluat ion of w h o l e s a l e r s on actual po ten t ia l ava i l ab le to

t h e m . F u r t h e r study should be m a d e of r e d i s t r i b u t i o n of p roduc t s

by l a r g e s ca l e r e t a i l e r s and of t r a n s s h i p m e n t s in o r d e r to develop

a s y s t e m of r eco rd ing s a l e s at the point of u l t ima te consumpt ion .

The Report ing System fo r Record ing Industry Data

Government . - - I t is r e c o m m e n d e d that t he gove rnmen t col lec t

and publ ish s e p a r a t e da ta fo r c o n s u m e r e l ec t ron ic p r o d u c t s . This

jwsv-i - 235

is p a r t i c u l a r l y needed in the publico.ti.or. of da ta f o r w h o l e s a l e and

r e t a i l s a l e s . Such da ta should be publ i shed soon a f t e r compi l a t ion .

in o r d e r to be u s e f u l to the indust ry*

The United States Cus toms Depar tmen t should publ i sh i m p o r t

da ta by brand or by the company producing t he p r o d u c t . This would

enable d o m e s t i c m a n u f a c t u r e r s to be m o r e a w a r e of the a c t i v i t i e s

and s a l e s of f o r e i g n b r a n d s .

E l e c t r o n i c I ndus t r i e s Assoc ia t ion . - - E v e r y e f f o r t should be.

m a d e by the E lec t ron i c Indus t r i e s Assoc ia t ion to get t h o s e b r a n d s

not r e p o r t i n g s a l e s to do so . When r epor t ing da ta , the A s s o c i a t i o n

should note what p e r c e n t a g e of s a l e s a r e e s t i m a t e s , and which

f i r m s o r b r a n d s r e p o r t and do not r e p o r t s a l e s . It is r e c o m m e n d e d

that the EIA e s t a b l i s h a s y s t e m of m e a s u r i n g s a l e s by b r a n d at t he

r e t a i l l eve l .

Dis t r ibu t ion

M a n u f a c t u r e r s . - - I t is r e c o m m e n d e d tha t m a n u f a c t u r e r s r ou t e

t h r o u g h w h o l e s a l e r s a n d / o r r e t a i l e r s those s a l e s to spec ia l u s e r s

who a r e not capab le of buying or accept ing d e l i v e r y in l a r g e

q u a n t i t i e s .

Supplementa l d i s t r i bu t ion c e n t e r s . - - M a n u f a c t u r e r s should

e s t a b l i s h an op t imum n u m b e r of supp lementa l d i s t r i b u t i o n c e n t e r s

.C 30

to s e r v e the nation. Sepa ra t e distributor i n v e n t o r i e s should h e

e l i m i n a t e d to r educe costs of operation. It is r e c o m m e n d e d tha t

w h o l e s a l e r s be in teg ra ted into t h e s e d i s t r i bu t i on c e n t e r s and be

p e r m i t t e d to s e l l to all c u s t o m e r s to whom the m a n u f a c t u r e r now

s e l l s on a d i r e c t b a s i s . This would e l i m i n a t e compe t i t i on f o r t he

s a m e s a l e be tween s e p a r a t e o rgan i za t i ons which m a r k e t the s a m e

b r a n d s .

W h o l e s a l e r s , - - I t is r e c o m m e n d e d tha t ne ighbor ing w h o l e s a l e r s

which se l l the s a m e b r a n d s m e r g e to form, r eg iona l who lesa l ing

o r g a n i z a t i o n s . In th is m a n n e r they could i n t e g r a t e t h e m s e l v e s into

the m a n u f a c t u r e r ' s d i s t r i b u t i o n cen t e r o r e s t a b l i s h t h e i r own r e -

g ional d i s t r i bu t ion c e n t e r .

Smal l r e t a i l e r s . - - Small r e t a i l e r s should c o n s i d e r f o r m i n g co-

o p e r a t i v e s in o r d e r to i n c r e a s e t h e i r buying p o w e r . T h e s e r e t a i l e r s

should in i t ia te f u r t h e r s tudy of c o o p e r a t i v e s in the c o n s u m e r e l e c -

t r o n i c p r o d u c t s indus t ry b e f o r e jo ining t h e m .

P roduc t

Delet ion. - - iVJanufacturers should e s t a b l i s h a s y s t e m f o r e l i m i -

na t ing p r o d u c t s which a r e unp ro f i t ab l e to t h e m s e l v e s a n d / o r t h e i r

channel m e m b e r s .

7?7 ** «*.' I

Model changes . ---Annual model changes should cont inue, but it

is recommended that they be l imi ted to products in which signif icant

improvement or s ty le change is m a d e . Many l e a d e r models and

special ized furniture s ty les should remain in the l ine on an annual

bas i s . The practice of "drop-in" models should be discontinued

in favor of promotion of regular line merchandise -with price pro-

tection to wholesalers and reta i lers .

Manufacturers should consider building l ines of goods to be

sold through small independent retai lers only. Short l ines with

l imited model changes f r o m year to year would prove beneficial

to all .

Standardization. - - I t is recommended that the industry stand-

ardize new product sys tems before introducing them to the market.

This could be administered through the Electronic Industries A s s o -

ciation and could poss ible avoid intervention by the government.

Pricing and Promotion

Resale price maintenance. - - It is recommended that manu-

facturers and wholesalers discontinue resa le pr ice maintenance

pract ices in order to avoid charges of price f ixing.

Piscriminatory pricing and promotional al lowances . - - Manu-

facturers should review their pricing pol ic ies in an effort to

238

de te rmine whether they a r e d iscr iminat ing agains t any channel

m e m b e r s . Such p rac t i ce s should be el iminated, as should d i s -

c r imina to ry se rv ices and promot ional a l lowances . Large seal©

r e t a i l e r s should avoid accepting specia l pr ic ing and promot ional

al lowances which a r e not of fered to everyone on an equally p r o -

por t ionate ba s i s .

P ro f i t m a r g i n s . - -It is recommended that domes t ic manu-

f a c t u r e r s improve the i r p rof i t m a r g i n s to channel m e m b e r s to

avoid losing additional sa les to fore ign b rands .

Cooperative adver t i s ing . - -I t is recommended that the F e d e r a l

T rade Commission review its guidelines f o r adminis te r ing coop-*

e ra t ive adver t i s ing funds . The difficulty in following these guide-

l ines is causing some m a n u f a c t u r e r s to discontinue cooperat ive

adver t is ing funds. This may prove to be de t r imen ta l to smal l

r e t a i l e r s r a the r than helpful to them, which was the or iginal p u r -

pose of the guidelines.

Consumer i sm

Pr inc ip le s . - - I t is recommended that the indus t ry adhe re to the

pr inc ip les of consumer i sm by providing adequate information,

avoiding deceptive p rac t i ce s , and assuming produc t r espons ib i l i t i e s ,

Unless it does so government intervention can be expected.

239

Pr iva te testing organizations,, - -in. o rde r to counter the publi-

cation of pr iva te t e s t s conducted by such organiza t ions as Con-

s u m e r Reports , it is recommended that m a n u f a c t u r e r s publ ish

r e s u l t s of the i r own t e s t s at the t ime of annual model changes .

This data could be made available to the E lec t ron ics Indust r ies

Associa t ion fo r publication..

Insurance

Suppliers should consider offer ing an insurance plan to cover

f i r e , thef t , and robbery in o rder to prevent f u r t h e r reduct ion in

s izes of purchases and warehouse stock levels of r e t a i l e r s and

-wholesalers .

The Legal Environment

Domest ic m a n u f a c t u r e r s . - - I t is recommended that the gov-

e rnment not pursue i ts e f fo r t s to b reak up m a n u f a c t u r e r s into

s m a l l e r uni ts . This would fu r t he r prevent the indust ry f r o m being

compet i t ive with its internat ional r iva l s . Although a high deg ree

of concentrat ion exis ts among manufac tu re r s , this has not prevented

new domest ic manufac tu re r s f r o m success fu l ly enter ing the bus ines s ,

nor has it prevented a v i r tua l t ake -over by fore ign prodticed m e r -

chandise . The government should pe rmi t domest ica l ly owned p r o -

duce r s to combine t he i r fore ign production and technological and

marke t ing abil i t ies when competing for sa l e s in other count r ies .

240

Foreign, manufacturers. - -It is recommended that the Federal

Trade Commiss ion investigate the act iv i t ies of fore ign manufacturers

for poss ib le violation of anti-trust laws and decept ive prac t i ces in

the s a m e manner as they investigate domest i c manufacturers .

APPENDIX A

WHOLESALER DISSERTATION RESEARCH QUESTIONNAIRE

Check the n a t u r e of your b u s i n e s s : a . Independent w h o l e s a l e r

F a c t o r y b r a n c h F a c t o r y r e p r e s e n t a t i v e

or agent Wholesa l e r coope ra t i ve R e t a i l e r coope ra t ive Audio s t o r e I m p o r t e r Other

> _c.

_d, e.

J, _g-h.

Check you r job pos i t ion : a . Owner

Genera l m a n a g e r Sales m a n a g e r S a l e s m a n

e. Other

_b. _c. ~d.

Check the type of m e r c h a n d i s e you g e n e r a l l y s p e c i a l i z e in: a . Te lev i s ion and app l i ances b. Gene ra l m e r c h a n d i s e w h o l e s a l e r c. E l e c t r o n i c p a r t s w h o l e s a l e r d. H a r d w a r e w h o l e s a l e r e. Drug w h o l e s a l e r f . G r o c e r y w h o l e s a l e r g. Dry goods w h o l e s a l e r h . Other

How m a n y y e a r s have you o r your f i r m been in b u s i n e s s ?

What b rand n a m e s of the following p roduc t s do you s e l l ? Radio Phonograph Tape r e c o r d e r Console s t e r e o Compac t s t e r e o B & W TV Color TV

241

242

In t e r m s of to ta l do l la r and uni t s a l e s of al l p r o d u c t s , how do you .rani'; each of the fol lowing f o r your o rgan i za t i on . ( P l e a s e c i r c l e )

Rank in Dol lar Sales Rank in Unit Sales Radio 1 2 3 4 5 6 1 2 3 4 5 6 Phonog raph 1 2 3 4 5 6 1 2 3 4 5 6 Tape r e c o r d e r 1 2 3 4 e

mJ 6 1 2 3 4 5 6 Console s t e r e o I 2 3 4 5 6 1 2 3 4 5 6 Compact s t e r e o 1 2 3 4 5 6 1 2 3 4 5 6 B & W I V 1 > 3 4 5 6 1 2 3 4 5 6 Color TV 1 2 3 4 5 6 1 2 3 4 5 6

Is the s u b j e c t " m a r k e t p e n e t r a t i o n " (brand s h a r e of m a r k e t ) one of c o n s i d e r a b l e s ign i f i cance to the c o n s u m e r e l e c t r o n i c p r o d u c t s in-d u s t r y ? y e s no

Do you f e e l m a r k e t pene t r a t i on to be a s ign i f i can t m e a n s of eva lu -a t ing the fo l lowing: ye s no a . m a n u f a c t u r e r s y e s no b . w h o l e s a l e r s ye s no c . r e t a i l e r s

Is your supp l i e r a m e m b e r of the E l e c t r o n i c I ndus t r i e s A s s o c i a t i o n ? y e s no

Do you r e p o r t your s a l e s , by county, to your s u p p l i e r ? y e s no

If no, to wha t o r g a n i z a t i o n do you r e p o r t s a l e s ?

Do you f e e l the r e p o r t i n g m e c h a n i s m f o r co l l ec t ion of c o n s u m e r e l e c t r o n i c p roduc t d a t a : ye s no a . is a c c u r a t e f r o m a na t iona l s t andpoin t . ye s no b . is a c c u r a t e f r o m a loca l s t andpoin t . y e s no c. would be m o r e a c c u r a t e if m e a s u r e d a t the

point of s a l e f r o m r e t a i l e r to c o n s u m e r . y e s no d. is fedback to w h o l e s a l e r s and r e t a i l e r s soon

enough to be of va lue . y e s no e . should cont inue to be handled in a conf iden t ia l

s e c r e t i v e m a n n e r . y e s no f . would be b e t t e r if m a d e pub l ic .

243

A r e you r equ i r ed to buy stock, and se l l a l l p r o d u c t l ines o f f e r e d by the m a n u f a c t u r e r you r e p r e s e n t ? yes no

Do you f e e l your s u p p l i e r s p r e s s you to i n c r e a s e your s a l e s beyond the point you d e s i r e ? ye s no

Rank t he following in o r d e r of i m p o r t a n c e (1, 2, 3, e tc . ) as be ing your c u r r e n t company o b j e c t i v e s . Leave b lank t h o s e not con-s i d e r e d cixrrent ob j ec t ives ,

P r o f i t Growth of f i r m M a x i m i s e s a l e s I m p r o v e s e r v i c e to d e a l e r I n c r e a s e n u m b e r of out lets I m p r o v e s h a r e of m a r k e t Other Other

What do you be l i eve your supp l i e r s ob jec t ives to b e ? Rank in o r d e r : 1. . ' 2. 3.

What do you be l ieve your r e t a i l d e a l e r ob j ec t ives to b e ? Rank in o r d e r : 1. 2. ~ 3.

In t e r m s of ne t p ro f i t ( a f t e r a l l p roduc t , p romo t ion , and d i s t r i b u t i o n cos t s have been deducted) how do you r a t e each of the fol lowing p r o -duc ts ? (P l ea se check}

Good Marg ina l Unprof i t ab le Radio Phonograph Tape r e c o r d e r Console s t e r e o Compac t s t e r e o B & W TV ~~ Color TV ~

244

If indicated as m a r g i n a l or unpro f i t ab le , why do you cont inue to m a i n t a i n any of the a f o r e m e n t i o n e d p roduc t s in you r l i n e ?

to o f f e r a fu l l l ine demand of m a r k e t an t ic ipa te p roduc t to b e c o m e u n p r o f i t a b l e to p r o m o t e b r and n a m e u s e a s p r i c e l e a d e r o t h e r

Do you f e e l you a r e se l l ing m a r g i n a l o r unpro f i t ab l e p r o d u c t s b e -c a u s e your suppl ie r d e s i r e s to i n c r e a s e or m a i n t a i n a c e r t a i n p e r c e n t a g e s h a r e of m a r k e t . yes no _____

Do you have a wr i t t en f r a n c h i s e a g r e e m e n t wi th your s o u r c e of supply? yes no

A r e you r e q u i r e d to r e p o r t s a l e s to d e a l e r s b a c k to the m a n u f a c t u r e r s ? ye s no

Do you e v e r hold s a l e s f r o m one t i m e pe r iod to ano the r in o r d e r to m a k e your r e p o r t s to t he m a n u f a c t u r e r look b e t t e r ? yes no _

Do you eve r m a k e a d j u s t m e n t s be tween count ies when r e p o r t i n g s a l e s in o r d e r to show b e t t e r b a l a n c e ? ye s no

Check the types of quo tas w h o l e s a l e r s a r e a s s i g n e d : a . unit quote by p roduc t b . do l la r quote by p roduc t e . do l l a r p u r c h a s e quote f o r a l l p r o d u c t s d. s h a r e of m a r k e t quote e. o the r types

When can d i s t r i b u t o r s o r d e r f o r s tock (not spec i a l o r d e r s ) ? a . da i ly d. q u a r t e r l y b, weekly c, month ly

e. o the r f . only when r e q u e s t e d to

o r d e r

Do you f e e l your r e t a i l e r s tend to be s a t i s f i e d with t h e i r p r e s e n t vo lume of b u s i n e s s ? yes no

245

A r e you sa t i s f i ed with your p r e s e n t vo lume of b u s i n e s s ? yes no

Check which of the following e f f ec t s will r e s u l t f r o m the 10% s u r -c h a r g e t a x :

a , no e f f ec t s on the r a t e of . m p o r t goods in the U, S. b . i m p o r t goods will b e c o m e l e s s compe t i t i ve c. i m p o r t goods wi l l cont inue to i n c r e a s e in i m p o r t a n c e d . o the r e f fec t s

Is the in t roduc t ion of new m o d e l s dur ing the m o d e l y e a r a t e c h n i q u e u s e d to get a round p r i c e g u a r a n t e e s ? yes no _____

A r e annual m o d e l changes n e c e s s a r y ? ye s no _____

Should a m a n u f a c t u r e r build a brand fo r independent r e t a i l e r s only? (A r e v e r s e approach to building spec ia l m o d e l s f o r l a r g e d e a l e r s . ) yes no _____

Would an i n s u r a n c e p lan ( s im i l a r to f loor plan) to cqver f i r e and t h e f t induce you to p u r c h a s e in g r e a t e r q u a n t i t i e s ? ye s no

Check if the c u r r e n t r i s i n g cos t of i n s u r a n c e p r o t e c t i o n r e s u l t s in any of the following by r e t a i l e r s :

a , p u r c h a s i n g in s m a l l e r quant i t ies b . no change in p u r c h a s i n g hab i t s

_ c . r e d u c e d i sp lay _ d. r educe w a r e h o u s e inven tory _ e. r e d u c e s m a l l i t e m inven tory

f , o the r

Is cut t ing the p r i c e g e n e r a l l y the u l t ima te weapon f o r i n c r e a s i n g m a r k e t p e n e t r a t i o n ? yes no

Do you f e e l p ro f i t oppor tun i t i es would i m p r o v e if d i s t r i b u t o r s w e r e not unde r p r e s s u r e f o r m a r k e t pene t r a t i on? yes no

Check if you f e e l the p r e s s u r e f o r m a r k e t p e n e t r a t i o n r e s u l t s in any of t he fo l lowing:

a . l ower d e a l e r cos t p r i c e s d. a d e c r e a s e d amount b . l ower r e t a i l p r i c e s of p r i c e cutt ing c . an i n c r e a s e d amount of e. l a r g e r i nven to r i e s

p r i c e cutt ing

246

Do you be l i eve a r e s a l e p r i c e m a i n t e n a n c e po l icy at the rete. i l l eve l he lps to improve the s h a r e of m a r k e t of a b r a n d of goods ? ye s no

Do you m a k e use of the following? y e s no a . r e s a l e p r i c e m a i n t e n a n c e po l i cy y e s no b, sugges ted or m a n u f a c t u r e r s l i s t p r i c e s y e s no c. F a i r T r a d e in F a i r T r a d e law s t a t e s ye s no d. o the r

Check the fol lowing ways you fee l r e t a i l e r s help t h e i r s o u r c e s of supply i n c r e a s e the i r s h a r e ox m a r k e t s :

a . cons i s t an t a d v e r t i s i n g of b rand n a m e b. p romot ion of l o s s l e a d e r s c . d isplaying and se l l ing the fu l l l ine d. pu rchas ing d e a l s e . se l l ing one l ine exc lus ive ly f . s a c r i f i c i n g p r o f i t f o r vo lume g. p rov id ing s e r v i c e a f t e r the s a l e h . o the r

When m a r k e t pene t r a t i on data is r ev iewed by you r s u p p l i e r , is t h e r e any a t t e m p t to get you to p u r c h a s e enough goods tha t when added to ex i s t ing inventory and if a l l sold would give you na t ional a v e r a g e m a r k e t p e n e t r a t i o n ? ye s no

Which of the following do you se l l on a d i r e c t b a s i s ? a . ho te l s , m o t e l s , a p a r t m e n t s b . b u i l d e r s c . mob i l e home m a n u f a c t u r e r s d. p o s t exchanges e. p r e m i u m compan ie s

Does your s o u r c e of supply s e l l to t he se d i r e c t b u y e r s a l s o ? ye s no

Do t h e s e d i r e c t s a l e s by the m a n u f a c t u r e r he lp y o u r m a r k e t p e n e -t r a t i o n in any way? y e s no

Do you ob jec t to your supp l i e r m a k i n g d i r e c t s a l e s ? y e s no

24?

Would you l i s t the names of l a rge p u r c h a s e r s (such as bu i lde rs , p r e m i u m companies, chain s to re s , and mobile home m a n u f a c t u r e r s in your a r e a whose pu rchases a r e possibly included in your m a r k e t a r e a , but whose sa le may be made in some other a r e a , thus , could be affecting your t rue s h a r e of m a r k e t ? Name City

Is t ransshipping a c r o s s d i s t r ibu to r s ' ass igned a r e a s i nc reas ing? ye s no

What a r e the th ree mos t effect ive ways for a wholesa le r to i n c r e a s e his sha re of m a r k e t ? 1. 2. 3.

What ef fec ts do published r epo r t s of pr iva te tes t ing organizat ions (such as Consumer Repor ts ) have on sales of a product which they have tes ted and evaluated? (Check one)

Considerable Very l i t t le _ _ _ None

Do you bel ieve pr ivate tes t ing organizat ions such as Consumer Reports provide a fa i r t e s t of a product? yes no

Do you fee l the des i r e f o r maintaining or increas ing m a r k e t pene-t ra t ion (share of m a r k e t ) by the following sources of supply r e su l t in: a . g r ea t e r emphasis on sa les of units than on dollar sa l e s

yes no 1. by U. S. m a n u f a c t u r e r s yes no 2. by fo re ign m a n u f a c t u r e r s yes no 3. by wholesa le r s

b. g r e a t e r emphasis on sa les of units than on prof i t pe r product group. yes no 1. by U. S. m a n u f a c t u r e r s yes no 2. by fo re ign m a n u f a c t u r e r s yes no 3. by wholesa le r s

>43

c. dominance by the supp l i e r of the m a r k e t i n g channe l s . yes no 1. by U. S. m a n u f a c t u r e r s ye s no 2. by f o r e i g n m a n u f a c t u r e r s yes. no 3. by -wholesalers

d. the power of the m a n u f a c t u r e r to e s t ab l i sh and con t ro l p r i c e s at the who le sa l e and r e t a i l l eve l . yes no 1. by IT. S. m a n u f a c t u r e r s yes no 2. by f o r e i g n m a n u f a c t u r e r s

e. the power of the w h o l e s a l e r to e s t ab l i sh and con t ro l p r i c e s a t the r e t a i l l eve l . ye s no

f . lower r e t a i l p r i c e s f o r c o n s u m e r s . yes no

g. the power of the supp l i e r to f o r c e ful l l ine se l l ing , even on p r o d u c t s which a r e unp ro f i t ab l e fo r i ts channel m e m b e r s , y e s no 1. by U. S. m a n u f a c t u r e r s ye s no 2. by f o r e i g n m a n u f a c t u r e r s y e s no 3, by w h o l e s a l e r s

h . the power of the m a n u f a c t u r e r to con t ro l m a r k e t i n g ac t i v i t i e s of i ts wholesa l ing and r e t a i l i ng o rgan iza t ion s t r u c t u r e . yes no 1. by U. S. m a n u f a c t u r e r s ye s no 2. by f o r e i g n m a n u f a c t u r e r s

j . r e d u c e d p r o f i t s f o r the w h o l e s a l e r and r e t a i l e r f r o m what they o t h e r w i s e would be . yes no 1. by U. S. m a n u f a c t u r e r s yes no 2. by f o r e i g n m a n u f a c t u r e r s

k . r educed p ro f i t s f o r the r e t a i l e r f r o m what they o t h e r w i s e would be . ye s no by w h o l e s a l e r s

Check which of the fol lowing p r o d u c t s which you f e e l p r i v a t e b r a n d s a r e domina t ing or will domina te indus t ry s a l e s in the f u t u r e :

P r e s e n t l y Dominate Will Dominate in 5 Yea r s r a d i o phonograph

t* *v Q

t ape r e c o r d e r conso le s t e r e o c o m p a c t s t e r e o B & W TV co lo r TV

P r e s e n t l y P o m mate Will Domina te in 5 Yea;

Would you include t o t a l i ndus t ry s a l e s for the y e a r 1970 f o r your home o f f i ce county f o r each of the fol lowing p r o d u c t s a s r e p o r t e d back to you by your s u p p l i e r ? rad io . un i t s phonograph uni t s t ape r e c o r d e r un i t s conso le s t e r e o uni t s c o m p a c t s t e r e o un i t s B & W TV uni t s co lor TV uni t s

Name of h o m e o f f i ce county: ; i ___

Would you p e r m i t a p e r s o n a l in te rv iew with y o u r s e l f , o r s o m e o n e within your o rgan i za t i on o r o r d e r tha t the sub jec t can be exp lo red in g r e a t e r depth or comple t e a m o r e ex tens ive q u e s t i o n n a i r e tak ing a p p r o x i m a t e l y 25 m i n u t e s . yes no

Check h e r e if you would d e s i r e a s u m m a r y of the f ind ings oi th i s s tudy.

Your n a m e Ti t l e _____

Company n a m e

S t r e e t a d d r e s s — City State ___________________ Zip

Would the a n s w e r s to such ques t ions as shown above b e of va lue o r bene f i t to the indus t ry in any way ? yes no

Do the ques t i ons above r e l a t e to the app l iance i n d u s t r y a s w e l l a s the c o n s u m e r e l e c t r o n i c s i n d u s t r y ? yes no

Would you f o r w a r d a copy of any m a r k e t p e n e t r a t i o n r e p o r t s f o r the y e a r 1970 including c o m p e t i t o r s ? Al l r e p o r t s a r e conf iden t i a l and any r e f e r e n c e would be d i sgu i sed if used in any m a n n e r .

R e p o r t s a t t ached .

APPENDIX B

MANUFACTURER - IMPORTER DISSERTATION RESEARCH QUESTIONNAIRE

Check the p r inc ip l e n a t u r e of your b u s i n e s s : a . m a n u f a c t u r e r _____ b . i m p o r t e r c . o t h e r

Check which of the fol lowing p roduc t s you m a n u f a c t u r e o r i m p o r t ? L i s t b r a n d n a m e s , P r o d u c t B r a n d s

r ad io phonograph conso le s t e r e o compac t s t e r e o c c l o r TV

" B & W TV tape r e c o r d e r

In t e r m s of to ta l do l l a r and uni t s a l e s of a l l p r o d u c t s , how do you r ank each of the fol lowing f o r your o r g a n i z a t i o n ? ( P l e a s e c i r c l e )

Rank in Dol lar Sa les R a n k in Unit Sa les r a d i o 1 2 3 4 5 6 1 2 3 4 5 6 phonograph 1 2 3 4 5 6 1 2 3 4 5 6 conso le s t e r e o 1 2 3 4 5 6 1 2 3 4 5 6 c o m p a c t s t e r e o 1 2 3 4 5 6 1 2 3 4 5 6 B & W TV 1 2 3 4 5 6 1. 2 3 4 5 6 co lor TV 1 2 3 4 5 6 I 2 3 4 5 6 t ape r e c o r d e r 1 2 3 4 5 6 I 2 3 4 5 6

Do you f e e l m a r k e t p e n e t r a t i o n to be a significaaat m e a n s of evalu-a t ing the fol lowing: ye s no a . m a n u f a c t u r e r s y e s no b. w h o l e s a l e r s ye s no c. r e t a i l e r s

A r e you a m e m b e r of the E l e c t r o n i c I n d u s t r i e s A s s o c i a t i o n ? y e s no

250

Zh 1

Do you r e p o r t your s a l e s , by county, to the EIA? yes no

If no, to what o rgan i za t i on do you r e p o r t s a l e s ?

Do you f e e l the r e p o r t i n g m e c h a n i s m f o r co l l ec t ion of c o n s u m e r e l e c t r o n i c p roduc t d a t a : y e s _ no a . is a c c u r a t e f r o m a na t iona l s t andpoin t . yes no b . is a c c u r a t e f r o m a l oca l s tandpoin t . y e s no c. would be m o r e a c c u r a t e if m e a s u r e d a t t h e

point of s a l e f r o m r e t a i l e r to c o n s u m e r , y e s no d. is fedback to w h o l e s a l e r s and r e t a i l e r s soon

eoungh to be of va lue . y e s no e . should continue to be hand led in a conf iden t i a l

s e c r e t i v e m a n n e r . yes no f , would be b e t t e r if m a d e publ ic .

In t e r m s of net p r o f i t (af ter a l l prod\ ic t , p r o m o t i o n , and d i s t r i b u t i o n cos t s have been deduc ted) how do you r a t e each of the fol lowing p r o -d u c t s . (P lease c i r c l e )

Good Marg ina l Unprof i t ab le r a d i o phonograph conso le s t e r e o c o m p a c t s t e r e o B & W TV ~ co lo r TV t a p e r e c o r d e r

if indicated as m a r g i n a l or unp ro f i t ab l e , why do you cont inue to m a i n t a i n any of the a f o r e m e n t i o n e d p r o d u c t s in your l i n e ?

Do you have a w r i t t e n f r a n c h i s e a g r e e m e n t wi th each d i s t r i b u t o r ? y e s no

Check the types of quo tas w h o l e s a l e r s a r e a s s i g n e d : a . unit quota by p r o d u c t b . do l la r quota by p roduc t

__ c. do l l a r p u r c h a s e quota f o r al l p r o d u c t s _ d. s h a r e of m a r k e t quota _ e. o the r types

252

Do you m a k e u s e of the fo l lowing: yes no a . r e s a l e p r i c e m a i n t e n a n c e p o l i c y ye s no b. sugges ted or m a n u f a c t u r e r s l i s t p r i c e s yes no c. F a i r T r a d e in F a i r T r a d e law s t a t e s ye s no d. o the r

Check the fol lowing m e a n s you m a k e u s e of in s e c u r i n g m a r k e t s a l e s da ta of compet i t ion .

a . compet i t ion f u r n i s h e s b . E. I. A. f u r n i s h e s c. i n d u s t r i a l spying

_____ d. m a r k e t i n g r e s e a r c h agenc i e s e. l i c ens ing and p a t e n t s f . w h o l e s a l e r s p r o v i d e g. a d v e r t i s i n g agency h. o ther

A r e your w h o l e s a l e r s expected to buy and s e l l a l l p roduc t s in your l i n e ? ye s no

What a r e the t h r e e m o s t e f fec t ive ways f o r a w h o l e s a l e r to i n c r e a s e h i s s h a r e of m a r k e t ? 1. 2. 3. __

What e f f e c t s do publ i shed r e p o r t s of p r i v a t e t e s t i n g o r g a n i z a t i o n s (such a s C o n s u m e r R e p o r t s ) have on s a l e s of a p r o d u c t which they have t e s t e d and eva lua ted? (Check one)

C o n s i d e r a b l e Very l i t t l e None

Do you b e l i e v e p r i v a t e t e s t ing o rgan i za t i ons s u c h a s C o n s u m e r R e p o r t s p rov ide a f a i r t e s t of a p r o d u c t ? y e s no

Check the fol lowing channe ls of d i s t r i bu t i on wh ich your f i r m s e l l s to :

a . m a n u f a c t u r e r agent o r r e p r e s e n t a t i v e b . independent d i s t r i b u t o r s c . coope ra t i ve -owned w h o l e s a l e r s d. f a c t o r y - o w n e d b r a n c h e. d i r e c t to al l r e t a i l e r s f . na t ional cha in s t o r e s and l a r g e r e t a i l e r s g. ho te l s , m o t e l s , mob i l e h o m e m a n u f a c t u r e r s

_ h . p r e m i u m companies i, expor t agencies , j . p r i v a t e b r a n d s

_ k. p e s t exchanges 1, o t h e r

m . o ther .

How a r e s a l e s r e p o r t e d f o r channels n u m b e r f - k in t h e f o r e g o i n g : a . to the county w h e r e shipped to b . to the county w h e r e b i l l ed to

_____ c. to the county w h e r e shipped f r o m d. to the county w h e r e b i l led f r o m

Is the p r i c e you bi l l t he p u r c h a s e r the s a m e f o r a l l t he a f o r e m e n -t ioned channels of d i s t r i bu t ion? yes no

Do channe l s n u m b e r f - k in the fo rego ing buy a t p r i c e s l e s s than channel b, c, and d? yes no

Do you m a n u f a c t u r e p r i v a t e b rands ? y e s no

If y e s , check the fol lowing: N a m e of P r i v a t e Brand a . f o r yourse l f b . f o r other m a n u f a c t u r e r s c. f o r your w h o l e s a l e r s _ d. f o r chain and d e p a r t m e n t s t o r e s ______ . e= f o r sma l l s c a l e r e t a i l e r s _____ f . f o r expor t f i r m s ___ e. o the r •

Do you m a k e u s e of mu l t i p l e d i s t r i b u t o r s ? ye s no

Do you m a k e use of a s s o c i a t e d i s t r i b u t o r s ? ye s no

How do chain s t o r e s deal ing in p r i v a t e b r a n d s r e p o r t t h e i r s a l e s ? a . by county w h e r e each unit is so ld . b . into county w h e r e zone o f f i ce is l o c a t e d . c. into county w h e r e na t ional o f f i ce is l o c a t e d . d. into county w h e r e r eg iona l w a r e h o u s e i s l o c a t e d . e, into county w h e r e p r i v a t e l abe l m a n u f a c t u r e r i s l oca t ed . f . o the r s

A r e i m p o r t s a l e s of f o r e i g n m a n u f a c t u r e r s inc luded in to t a l i ndus t ry s a l e s by county? ye s no

234

What organizat ion r eco rds sa les of foreign m a n u f a c t u r e r s in t he United Sta tes? m —

Is t ransshipping a c r o s s d is t r ibutor assigned a r e a s inc reas ing? yes no

Check which of the following effects will r e su l t f r o m the 10% impor t su r cha rge tax:

a . no effects on the sa le of import goods. b. impor t goods will become less ef fec t ive . c. impor t goods will continue to i n c r e a s e in impor tance . d. other ef fec ts _ _

Do you fee l the de s i r e fo r maintaining of increas ing m a r k e t pene-t ra t ion (share of marke t ) by the following sou rces of supply r e su l t in: a. Grea te r emphasis on sales of units than on dol lar s a l e s ,

yes no 1. by U. S. m a n u f a c t u r e r s yes no 2. by fore ign m a n u f a c t u r e r s yes no 3. by wholesa le r s

b. Grea te r emphasis on sales of units than on p rof i t pe r product group. yes no 1. by U, S„ m a n u f a c t u r e r s yes no 2. by fore ign m a n u f a c t u r e r s yes no 3. by wholesa le rs

c. Dominance by the suppl ier of the market ing channels , yes no 1. by U. S, manu fac tu r e r s yes no 2. by fore ign manufac tu r e r s

d. The power of the manufac tu re r to es tabl i sh and control p r i c e s at the wholesale and re ta i l level . yes no 1. by U, S, manufac tu re r s yes no 2. by fore ign manufac tu r e r s

e. The power of the wholesaler to es tabl ish and control p r i c e s at the r e t a i l level . yes no ________

f. Lower r e t a i l p r i ce s for consumers . yes _ no

g. The power of the supplier to f o r ce full l ine sell ing, even on products which a r e unprofi table for its channel m e m b e r s , yes no 1. by U. S. m a n u f a c t u r e r s yes no 2. by fore ign m a n u f a c t u r e r s yes no ' 3. by wholesa le r s

h. The power of the manufac tu re r to control marke t ing ac t iv i t ies of its wholesaling and retai l ing organizat ion s t r u c t u r e . yes no 1. by TJ. S. m a n u f a c t u r e r s yes no 2, by fore ign m a n u f a c t u r e r s

i. The power of the wholesa ler to control marke t ing act ivi t ies of its r e t a i l organization s t r uc tu r e . yes no

j . Reduced prof i t s for the wholesa ler and r e t a i l e r f r o m what they o therwise would be. yes no 1. by U. S. manu fac tu r e r s yes no 2. by fore ign m a n u f a c t u r e r s

k. Reduced prof i t s for the r e t a i l e r f r o m what they o therwise would be. yes no by wholesa le r s

Check what new products you feel the indust ry will be sel l ing in some apprec iab le quantity f ive y e a r s f r o m now:

Video tape r e c o r d e r s Modular e lec t ron ic r o o m s Video telephones Other Home computer Other

Would you p e r m i t a personal interview with yourself o r someone within your organizat ion or be willing to answer a m o r e extensive 30 minute quest ionnaire in o rde r that the subjec t can be explored in g r e a t e r depth. yes no

Check h e r e if you would d e s i r e a s u m m a r y of the findings of th is study.

Your name Ti t le

Company name

St ree t Address

City State Zip

256

Would the answers to such questions as shown above be of value or benefit to the industry in any way? yes no

Do the questions above relate to the appliance industry as well as the consumer electronics industry? yes no

APPENDIX' C

RETAILER DISSERTATION RESEARCH

Check the type of re ta i l bus iness -which mos t c losely r e s e m b l e s your opera t ion:

a. independent te levis ion and appl iance d e a l e r b. chain s to re _*YPe

c, audio s to re d, f u rn i t u r e s to re e. m a s s m e r c h a n d i s e r f . depar tment s t o r e g. s e r v i c e dea l e r h . other

How many y e a r s have you been in b u s i n e s s ?

Counting yourse l f , how many p e r s o n s do you employ?

"What brand names of the following produc ts do you s e l l ? radio phonograph tape r e c o r d e r console s t e r eo compact s t e r e o B & W TV ^ J color TV i ~

In t e r m s of total sa les of all p roducts , how do you ranlc each of the following fo r your organization? (Please c i r c l e )

Rank in Dollar Sales Rank in Unit Sales radio 1 2 3 4 5 6 1 2 3 4 5 6 phonograph 1 . 2 3 4 5 6 1 2 3 4 5 6 tape r e c o r d e r 1 2 3 4 5 6 1 2 3 4 5 6 console s t e r eo 1 2 3 4 5 6 1 2 3 4 5 6 compact s t e r eo 1 2 3 4 5 6 1 2 3 4 5 6 B & W TV 1 2 3 4 5 6 1 2 3 4 5 6 color TV 1 2 4 5 6 1 2 3 4 5 6

257

Oi

In t e r m s of net profi t (after al l product; - prombfiSh; and d i s i r iMt iSS costs have been deducted), how i d you-rate each of the folidwi&g | f § : ducts : (Please check)

Goofl .MaxglhaJ. Hhrjtf 61'i ishlii: radio phonograph tape r e c o r d e r console s t e r e o compact s t e r eo B & W TV color TV

If any of the aforementioned products a r e uhpr ofitabld why do y©ii continue to stock and sel l these products? (Check the following)

suppl ier r equ i rements to offer a full line anticipate product to become prof i table use as p r i ce leader (or draw t ra f f ic ) p l ea se l is t other r ea sons

Do you fee l the report ing mechan i sm for collect ion 61 cOhsuiriif e lec t ronic product data: yes no a. is accu ra t e f r o m a national standpoint yes no b. is accu ra t e f r o m a local standpoint yes no c. would be m o r e accura te if m e a s u r e d at tfe<§

point of sa le f r o m r e t a i l e r to consumer ; yes no d. is fedback to wholesa le rs and r e t a i l e r s soon

enough to be of value. yes no e, should continue to be handled ih a confidential!

s ec re t ive manner'; yes no f , would be' be t te r if madd pubiiS.*

Do you fee l m a r k e t penetra t ion (brand s h a r e of ma rke t ) to £ signif icant means of evaluating of the following: yes no a. m a n u f a c t u r e r s yes no b. wholesa le r s yes no c. r e t a i l e r s

Do you fee l the d is t r ibu tor is p r e s s u r e d lay the f ac to ry for increased m a r k e t penet ra t ion? yes ___ he _____

Do you fee l prof i t opportunit ies would improve if d i s t r ibu to r s w e r e not under p r e s s u r e for m a r k e t penetra t ion? yes no

9..-J

2S9

Check if you fee l the "p re s su re f o r m a r k e t pene t r a t i on r e s u l t s in. any of the following:

a . lower dea le r cos t p r i c e s b. lower r e t a i l p r i c e s c . a n inc reased amount of p r i c e cutt ing d. a dec reased amount of p r i c e cutt ing e. l a r g e r inven tor ies

Do you f ee l you a r e p r e s s u r e d to i n c r e a s e m a r k e t pene t r a t ion by the fol lowing: yes _ no a . by U. S, m a n u f a c t u r e r s yes no b . by fo re ign m a n u f a c t u r e r s yes no c. by w h o l e s a l e r s

Do you f ee l the d e s i r e f o r mainta in ing or i n c r e a s i n g m a r k e t p e n e -t r a t i o n (share of m a r k e t ) by the following s o u r c e s of supply r e s u l t in: a . G r e a t e r emphas is on sa les of uni ts than on d o l l a r s a l e s ,

yes no a . by U. S. m a n u f a c t u r e r s yes no b. by fo re ign m a n u f a c t u r e r s yes no c. by w h o l e s a l e r s

b. G r e a t e r emphas is on sa les of uni ts than on p r o f i t p e r p roduc t

by U. S. m a n u f a c t u r e r s by f o r e i g n m a n u f a c t u r e r s by w h o l e s a l e r s

group.

yes BO a. yes HO b.

yes no c*

c. Dominance by the suppl ie r of the m a r k e t i n g channe l s .

yes ^ so a . by U. S, m a n u f a c c a r e r s yes no b. by fo re ign m a n u f a c t u r e r s yes no Cm by w h o l e s a l e r s

d. The power of the m a n u f a c t u r e r to e s t ab l i sh and con t ro l p r i c e s at the wholesa le and r e t a i l leve l , yes no a . by U. S. m a n u f a c t u r e r s yes no b . by fo re ign m a n u f a c t u r e r s

e. The power of the who lesa l e r to e s t ab l i sh and con t ro l p r i c e s at the r e t a i l l eve l . yes no _____

?M

f. The power of the suppl ier to f o r ce fuil l ine sell ing, even on products which a r e unprof i table f o r its channel m e m b e r s , yes no a. by U. S. m a n u f a c t u r e r s yes no b. by fore ign m a n u f a c t u r e r s yes no c. by wholesa le r s

g. The power of the manufac tu r e r to control marke t ing act iv i t ies of its wholesaling and retai l ing organizat ion s t r u c t u r e . yes no a . by U. 3. m a n u f a c t u r e r s yes no b. by fore ign m a n u f a c t u r e r s

h« The power of the wholesa le r to control marke t ing act ivi t ies of its r e t a i l organizat ion s t r uc tu r e , yes no

i. Reduced prof i t s fo r the wholesa le r and r e t a i l e r f r o m what they o therwise would be. yes no a. by U. S, m a n u f a c t u r e r s yes no b. by fore ign m a n u f a c t u r e r s

j . Reduced prof i ts fo r the r e t a i l e r f r o m what they o therwise would be: yes no by who le sa l e r s .

Are you requi red to buy all products within a product l ine of fe red by a d i s t r ibu to r? yes no

Are you requ i red to mainta in p r i c e s ? yes no as suggested by the m a n u f a c t u r e r yes no as suggested by the wholesa le r

Is the introduction of new models during the model year a technique used to get around p r i ce gua ran tees? yes _ no

Are annual model changes necessary , benef ic ia l? yes no

Should a manufac tu re r build a brand for independent r e t a i l e r s only? (A r e v e r s e approach to building special models for l a r g e d e a l e r s . ) ye s no

Would an insurance plan (s imilar to f loor plan) to cover f i r e and thef t induce you to purchase in g r ea t e r quant i t ies? yes ; no

Check if tlie increasing current rising cost of i n s u r a n c e p r o t e c t i o n results in any of the fol lowing:

a,, purchasing in smaller quantities b. no change in purchasing habits c. reduce d i sp lay d. r e d u c e w a r e h o u s e i nven to ry e. r e d u c e s m a l l i t e m inven to ry f . o the r

F r o m the s tandpoint of unit sales (not d o l l a r s ) in your s t o r e check the fol lowing produc t s a s to which are greater, i m p o r t s o r d o -m e s t i c a l l y produced l i n e s : P r o d u c t I m p o r t s D o m e s t i c r a d i o phonograph t a p e r e c o r d e r conso le s t e r e o c o m p a c t s t e r e o B & W TV color TV

Check the following p roduc t s a s to whe the r i m p o r t s o r d o m e s t i c a l l y p roduced p r o d u c t s p roduce a g r e a t e r to ta l con t r ibu t ion to p r o f i t s of your f i r m .

No P r o f i t P r o d u c t Impor t s D o m e s t i c on E i t h e r r a d i o . phonograph t ape r e c o r d e r conso le s t e r e o c o m p a c t s t e r e o B k W TV ^ „ . co lor TV

If a c o n s u m e r buys a p a r t i c u l a r b r a n d of one p roduc t , i s he l ike ly to l a t e r buy the s a m e b r a n d of ano the r p r o d u c t ? (Example : If a p e r s o n buys X b rand rad io , wil l he be inf luenced to buy X b r a n d T V? ) y e s no

Do you find t h e r e to be a d i r e c t c o r r e l a t i o n be tween n e w s p a p e r l i neage r u n by a p a r t i c u l a r b r a n d and the s h a r e of m a r k e t f o r t h a t b r a n d in a given m a r k e t ? (Example : If b r a n d X be n u m b e r one o r two in s a l e s in tha t m a r k e t ? ) ye s no

262

What e f fec ts do published r epo r t s of pr ivate l i s t ing organiza t ions (such, as Consumer Reports) have on sa les of a p roduc t which they have tes ted and evaluated? (Check one) _____ considerable very l i t t le none

Do you believe pr ivate testing organizat ions , such a s Consumer Reports , provide a f a i r tes t of & product? y e s no

Are you satisfied with your present volume of bus iness? yes _ no

Do you feel that your suppliers press you to increase your sa les beyond the volume of business you desire? y e s no

Check your approximate cost of doing business a s a percentage of total product sales:

a« l e s s than 10% e. f rom 26-30% b. from 11-15% __ _ f, f r o m 31-35% c. from 16-20% g. f rom 36-40%

______ d. from 21-25% h. above 40%

If your source of supply would offer you a good price protection plan, check the following things you would be will ing to provide him:

a. mail warranty cards daily as sets are sold b. mail a weekly sales report by model c. mail a monthly inventory report of se t s in stock d. other

Which of the following retail outlets do you fee l wil l move the greatest amount of video tape recording and playback equipment in the future?

a. tape centers b. photographic departments c. audio stores d, television and appliance stores e. department and discount stores f. other [

Check which of the following effects on consumer electronic pro-ducts will result from a 10% import surcharge tax:

a. no effects on the sale of import goods b. import goods will become l e s s competitive

263

c. i m p o r t goods wil l cont inue t c i n c r e a s e in impor tance-d, o t h e r e f f ec t s

L i s t ways you f e e l you he lp your s o u r c e s of supoly to i n c r e a s e t h e i r s h a r e of m a r k e t :

Check h e r e if you would d e s i r e a s u m m a r y of the f indings of th i s s tudy .

Your n a m e Ti t le

Company n a m e

S t r ee t a d d r e s s

City Sta te Zip

Would the a n s w e r s to such ques t ions as shown above be of va lue , o r benef i t to t he indus t ry in any way? y e s no

Do t h e ques t ions above r e l a t e to the app l i ance i ndus t ry a s we l l a s the c o n s u m e r e l e c t r o n i c s i n d u s t r y ? ye s no

P l e a s e r e t u r n q u e s t i o n n a i r e to : SAM HOUSTON S T A T E UNIVERSITY

'ATTN: NELSON L . THORNTON D E P A R T M E N T CF BUSINESS ADMINISTRATION HUNTSVILLE, TEXAS 77340

APPENDIX D

LARGE SCALE RETAILERS DISSERTATION RESEARCH

Check the type of r e t a i l b u s i n e s s which m o s t c lo se ly r e s e m b l e s your ope ra t i on :

a . m a i l o r d e r Type b. chain s t o r e Type c. m a s s m e r c h a n d i s e r d. o t h e r

Type Type

What b r and n a m e s of the Who m a n u f a c t u r e s t h e s e b r a n d s : fol lowing p roduc t s do you s e l l : r ad io phonograph t ape r e c o r d e r console s t e r e o _ compac t s t e r e o _ _ B & W TV ^ • color TV

What p e r cent of your p u r c h a s e s of c o n s u m e r e l e c t r o n i c p r o d u c t s a r e m a d e d i r e c t :

% a. f r o m d o m e s t i c m a n u f a c t u r e r s ? % b. f r o m fo re ign m a n u f a c t u r e r s ? % c. f r o m w h o l e s a l e r s ?

Do you r e p o r t s a l e s f o r each p roduc t by county to any of t he f o l -lowing: ( P l e a s e check)

a. the E lec t ron ic I n d u s t r i e s Assoc i a t ion b. t he m a n u f a c t u r e r who supplied the p r o d u c t s c. to no one outs ide the company d. o the r

Approx ima te ly how many d i s t r ibu t ion c e n t e r s (wa rehouses ) do you have to s e r v i c e the above ment ioned r e t a i l ou t le t s in the United S t a t e s ? In T e x a s ?

264

265

Approx ima te ly hew many r e t a i l stores do you o p e r a t e (or s e r v i c e ) in the United States ? In T e x a s ?

What p e r c e n t a g e of each of the following products which you p u r -c h a s e a r e shipped into one of your d i s t r i b u t i o n c e n t e r s b e f o r e be ing r e s h i p p e d to one of your retail stores or c u s t o m e r s ? P r o d u c t % to Dis t r ibu t ion C e n t e r s r ad io phonograph t ape r e c o r d e r . conso le s t e r e o c o m p a c t s t e r e o B & W TV color TV

Do you f e e l m a r k e t p e n e t r a t i o n (brand s h a r e of m a r k e t ) to b e a s ign i f i can t m e a n s of evaluat ing t he fo l lowing: yes no a, marxufa c tu r e r s yes no b. wholesalers yes no c. retailers

Do you f e e l the r e p o r t i n g m e c h a n i s m f o r co l l ec t ion of c o n s u m e r e l e c t r o n i c p roduc t d a t a : yes no a. is a c c u r a t e f r o m a na t iona l s t andpoin t y e s no b. is accurate from a local standpoint y e s no c. would be more a c c u r a t e if m e a s u r e d a t the

point of s a l e f r o m retailer to c o n s u m e r ' y e s no tL is fedhack to w h o l e s a l e r s and r e t a i l e r s soon

eoungh to be of va lue y e s no e . should cont inue to b e hand led in a confidential .

secretive manner yes no f . would be better if made public

What p e r c e n t a g e of the na t iona l m a r k e t uni t s a l e s do you f e e l you a r e se l l ing in each of the fol lowing p roduc t s (or how m a n y uni t s did you s e l l l a s t y e a r in each of the fo l lowing p r o d u c t s ) ? P r o d u c t % of Marke t 1971 Unit Sales r ad io phonograph t a p e r e c o r d e r conso le s t e r e o c o m p a c t s t e r e o B & W TV co lo r TV

Check if you fee l the p r e s s u r e f o r market : p e n e t r a t i o n r e s u l t s in any of the fo l lowing:

a . lower d e a l e r cos t p r i c e s b . l ower r e t a i l p r i c e s c„ an i n c r e a s e d amount of p r i c e cut t ing. d. a d e c r e a s e d amount of p r i c e cut t ing e . l a r g e r i nven to r i e s

Do you fee l the p r e s s u r e f o r m a r k e t p e n e t r a t i o n r e s u l t s in any of t he fo l lowing: yes no a . by U, S* m a n u f a c t u r e r s yes no b . by f o r e i g n m a n u f a c t u r e r s yes no c. by w h o l e s a l e r s yes no d. by yoxxr f i r m

Do you f e e l the d e s i r e f o r ma in ta in ing or i n c r e a s i n g m a r k e t p e n e -t r a t i o n ( sha re of m a r k e t ) by the following s o u r c e s of supply r e s u l t in: a . G r e a t e r e m p h a s i s on s a l e s of un i t s t han on do l l a r s a l e s ,

yes no a . by U. S. m a n u f a c t u r e r s ye s no b. by f o r e i g n m a n u f a c t u r e r s ye s no _ _ _ c. by w h o l e s a l e r s

b . G r e a t e r emphas i s on s a l e s of uni ts than on p r o f i t p e r p roduc t g roup . ye s no a . by U. S. m a n u f a c t u r e r s ye s no b. by f o r e i g n m a n u f a c t u r e r s ye s no c. by w h o l e s a l e r s

c . Dominance by the supp l i e r of the m a r k e t i n g channe l s , y e s no a . by U. S. m a n u f a c t u r e r s ye s no b. by f o r e i g n m a n u f a c t u r e r s ye s no c. by w h o l e s a l e r s

d. The power of the m a n u f a c t u r e r to e s t a b l i s h and con t ro l p r i c e s at the who lesa l e and r e t a i l l eve l . ye s no a . by U» S. m a n u f a c t u r e r s ye s no _____ b. by f o r e i g n m a n u f a c t u r e r s

e . The power of the w h o l e s a l e r to e s t ab l i sh and con t ro l p r i c e s a t t he r e t a i l l eve l . yes no _____

f f-\ 'J

f. The power of iiie supp l i e r to f o r c e fiiil l i ne sel l ing; ev£h fe>S p r o d u c t s which a r e unp ro f i t ab l e for i t s channel m e m o i r § » yes no a . by U, S, M a n u f a c t u r e r s yes no b, by fo re ign rn.ahufS.ietiirt.fs ye s no c. by w h o l e s a l e r s

g. The power of the m a n u f a c t u r e r to cont ro l m a r k e t i n g ac t iv i t i e s of i ts wholesa l ing and r e t a i l i ng o rgan i za t i on s t r u c t u r e s ye s no a, by U. S. m a n u f a c t u r e r s yes no b. by f o r e i g n m a n u f a c t u r e r s

h . The power of the w h o l e s a l e r to cont ro l m a r k e t i n g ac t iv i t i e s 6f i ts r e t a i l o rgan iza t ion s t r u c t u r e ; ye s hd

i. Reduced p r o f i t s f o r the w h o l e s a l e r and r e t a i l e r f r o m what thdy o t h e r w i s e would be . yes no a . by U, S. m a n u f a c t u r e r s

. ye s no b. by f o r e i g n m a n u f a c t u r e r s

j . Redticed p r o f i t s f o r the r e t a i l e r f r o m what they o t h e r w i s e would b e : ye s no by w h o l e s a l e r s

A r e you r e q u i r e d to ma in ta in p r i c e s : ye s no a, a s sugges ted by the m a n u f a c t u r e r yes no b . a s sugges ted by tHe w h o l e s a l e r

What e f f e c t s do publ ished r e p o r t s of p r iva t e t e s t i n g o rgan i za t i ons (such as C o n s u m e r R e p o r t s ) have on sa l e s of a p r o d u c t which they have t e s t e d and evalua ted: (Check one)

c o n s i d e r a b l e v e r y l i t t l e noh£

Do yoxi be l i eve p r i v a t e t e s t ing o rgan iza t ions , such as C o n s u m e r R e p o r t s , p rov ide a f a i r test, of a p roduc t ? yes nd ~™__.

In t e r m s of to ta l s a l e s of a l l p r o d u c t s , how do you r a n k each of the fol lowing f o r your o rgan i s a t i on . (Check one)

Rank in Dol la r .Sa les Rank in..Unit.Sales r ad io 1 2 3 4 5 6 1 2 3 4 5 6 phonograph 1 2 3 4 5 6 1 2 3 4 5 6 t ape r e c o r d e r 1 2 3 4 5 6 1 2 3 4 5 6 conso le s t e r e o * 2 3 4 5 6 1 2 3 4 5 6

Rank in D o l l a r S a l e s R a n k in Uni t S a l e s c o m p a c t s t e r e o 1 2 3 4 5 6 1 2 3 4 5 6 B & W TV 1 2 3 4 5 6 1 2 3 4 5 6 c o l o r TV 1 2 3 4 5 6 1 2 3 4 5 6

In t e r m s of n e t p r o f i t ( a f t e r a l l p r o d u c t , p r o m o t i o n , and d i s t r i b u t i o n c o s t s h a v e b e e n d e d u c t e d ) how do y o u r a t e e a c h of t h e f o l l o w i n g p r o -d u c t s : ( P l e a s e check)

Good M a r g i n a l U n p r o f i t a b l e r a d i o p h o n o g r a p h t a p e r e c o r d e r c o n s o l e s t e r e o c o m p a c t s t e r e o 3 & W TV c o l o r T V

If any of t h e a f o r e m e n t i o n e d p r o d u c t s a r e u n p r o f i t a b l e , why do you c o n t i n u e to s t o c k and s e l l t h e s e p r o d u c t s ? ( C h e c k t h e fo l lowing)

a . s u p p l i e r r e q u i r e m e n t s b . to o f f e r a f u l l l i n e c . a n t i c i p a t e p r o d u c t to b e c o m e p r o f i t a b l e d t u s e a s p r i c e l e a d e r (or d r a w t r a f f i c ) e . p l e a s e l i s t o t h e r r e a s o n s _____

F r o m t h e s t a n d p o i n t of un i t s a l e s (not d o l l a r s ) in y o u r s t o r e s , c h e c k t h e fo l l owing p r o d u c t s a s to w h i c h a r e g r e a t e r , I m p o r t s o r d o m e s -t i c a l l y p r o d u c e d l i n e s . P r o d u c t I m p o r t s D o m e s t i c r a d i o p h o n o g r a p h t a p e r e c o r d e r c o n s o l e s t e r e o c o m p a c t s t e r e o B & V/ TV ~ c o l o r TV

C h e c k t h e fo l lowing p r o d u c t s a s to w h e t h e r i m p o r t s o r d o m e s t i c a l l y p r o d u c e d p r o d u c t s p r o d u c e a g r e a t e r t o t a l c o n t r i b u t i o n to p r o f i t s of y o u r f i r m .

P r o d u c t I m p o r t s D o m e s t i c No P r o f i t on E i t h e r r a d i o p h o n o g r a p h

269

P r o d u c t I m p o r t s D o m e s t i c No P r o f i t on E i t h e r t a p e r e c o r d e r _ c o n s o l e s t e r e o c o m p a c t s t e r e o __ B & W T V ~ c o l o r TV

C h e c k h e r e if y o u would d e s i r e a s u m m a r y of t h e f i n d i n g s of t h i s study*

Your n a m e T i t l e

C o m p a n y n a m e

S t r e e t a d d r e s s

C i ty _____ S t a t e Zip

P l e a s e r e t u r n q u e s t i o n n a i r e t o : SAM HOUSTON S T A T E UNIVERSITY A T T N : NELSON L . T H O R N T O N D E P A R T M E N T O F BUSINESS ADMINISTRATION H U N T S V I L L E , T E X A S 77340

:.7G

APPENDIX E

DISSERTATION RESEARCH QUESTIONNAIRE

Check the n a t u r e of your b u s i n e s s : I . h o t e l - m o t e l 2. a p a r t m e n t bui ld ings 3. bu i lde r 4. s e r v i c e company

5. p r e m i u m - p r o m o t i o n f i r m 6. mob i l e home m a n u f a c t u r e r 7. o the r 8. o ther

F r o m which of the fol lowing do you p u r c h a s e the l i s t ed p r o d u c t s :

P r o d u c t r ad io phonograph t a p e r e c o r d e r s t e r e o B & W TV co lo r TV

D i r e c t f r o m m a n u f a c t u r e r R e t a i l e r

Independent w h o l e s a l e r s

F a c t o r y b r anch Other

L i s t t he b r a n d s you g e n e r a l l y p u r c h a s e in each of the d u c t s : r ad io phonograph t ape r e c o r d e r s t e r e o B & W TV co lor TV

fol lowing p r o -

Check the following types of p r o d u c t s which m a k e up your p u r c h a s e s ; _____ 1, p roduc t s a r e r e g u l a r l ine m o d e l s of m a n u f a c t u r e r

2. p r o d u c t s a r e bui l t to your s p e c i f i c a t i o n s 3. p roduc t s a r e spec i a l m o d e l s f o r you r type b u s i n e s s 4. p roduc t s a r e na t iona l b r a n d s

_______ 5. p r o d u c t s a r e p r i v a t e b r a n d s 6. o the r

271

A p p r o x i m a t e l y how m a n y un i t s in each of the fo l lowing p r o d u c t l i n e s did you p u r c h a s e du r ing 1970? r a d i o p h o n o g r a p h t a p e r e c o r d e r s t e r e o B & W TV c o l o r TV

Check which of the fo l lowing b e s t d e s c r i b e s y o u r p u r c h a s e p r i c e : 1. r e t a i l p r i c e 2. g r e a t e r t han r e t a i l p r i c e 3. w h o l e s a l e r ' s p r i c e to r e t a i l e r s 4. w h o l e s a l e r ' s c o s t f r o m f a c t o r y 5. l e s s than w h o l e s a l e r ' s c o s t f r o m f a c t o r y 6. o t h e r _ _ _ _ _ _

Check how p u r c h a s e s a r e m a d e : 1. one a t a t i m e 2. in a quan t i ty (dozen, 100, c a r l o a d ) 3. s p e c i a l quo ta t ion g iven f o r quant i ty f o r d e l i v e r y at one t i m e 4. s p e c i a l quo ta t ion given f o r quant i ty f o r d e l i v e r y a s n e e d e d 5, o t h e r

Check how d e l i v e r y of y o u r p u r c h a s e s a r e m a d e : 1. to one l o c a t i o n 2, to cho ice of s e v e r a l l o c a t i o n s 3. d i r e c t t o c u s t o m e r

Check t he fo l lowing inc luded in t h e p r i c e you p a y : 1. p a r t s w a r r a n t y 2. l a b o r w a r r a n t y 3. i ncoming t r a n s p o r t a t i o n 4. an a d v e r t i s i n g o r p r o m o t i o n a l l o w a n c e

Do you h a v e to r e p o r t to you r s u p p l i e r w h e r e s a l e s a r e m a d e (other t h a n t h e n o r m a l w a r r a n t y c a r d ) ? ye s no

Do you m a k e s a l e s to c u s t o m e r s ou t s ide the n o r m a l n a t u r e of you r b u s i n e s s ? ye s no

Do you m a k e s a l e s to r e g u l a r r e t a i l d e a l e r s ? y e s no

72

F i r m n a m e

S t r e e t a d d r e s s Ci ty _

Your n a m e T i t l e

NOTE: Should you have an e x t r a s e t of p r i c e l i s t s , o r copy, p l e a s e include it when you r e t u r n th i s s u r v e y .

All i n f o r m a t i o n is conf ident ia l and wi l l b e r ev iewed as t o t a l s .

Check h e r e if you would d e s i r e a s u m m a r y of the comple ted r e p o r t .

R e t u r n f o r m s to : SAM HOUSTON STATE UNIVERSITY" ATTN: NELSON L . THORNTON D E P A R T M E N T OF BUSINESS ADMINISTRAU. ON HUNTS VILLE, TEXAS 77340

BIBLIOGRAPHY

Books

Adle r , Lee, ed i to r , Plot t ing Market ing S t ra tegy , New York, Simon and Schus te r , Inc. , 1967.

Agnew. Hugh E. and o t h e r s , Outl ines of Marke t ing , New York, McGraw-Hi l l Book Company, 1950.

Almon, Clapper , The A m e r i c a n Economy to 1975, New York, H a r p e r and Row P u b l i s h e r s , Inc . , 1966.

A m e r i c a n .Marketing Assoc ia t ion , Commit tee on Def in i t ions , Marke t ing Def in i t ions , Chicago, A m e r i c a n Marke t ing A s s o -cia t ion, 1966.

Amp ex Corpora t ion , C o n s u m e r Equipment Division, The Sound Idea Manual , Elk Grove Vil lage, HI. , Amp ex Corpo ra t i on , 1970.

Ande r son , Wroe, Marke t ing Behavior and Execut ive Action, Homewood, HI. , R i c h a r d D. Irwin, Inc. , 1957.

and Pau l E. Green , Planning and P r o b l e m Solving in Marke t ing , Homewood, HI . , Richard D. Irwin, Inc. , 1964.

Andrews , Kenneth Richmond, The Concept of C o r p o r a t e S t ra tegy , Homewood, HI. , Dow J o n e s - I r w i n , I n c . , 1971.

A s s a e l s Henry , "The Po l i t i ca l Role of T r a d e A s s o c i a t i o n s in D i s t r ibu t ive Confl ict Resolut ion, !l D i s t r ibu t ion Channe l s ; Behav io ra l D imens ions , edi ted by Louis W. Stern , Boston, Houghton Miff l in Company, 1969.

, ed i to r , The Po l i t i c s of D i s t r ibu t ive T r a d e A s s o -c ia t ions , Hemps tead , N. Y. , Hofs t r a Unive r s i ty , 1967.

Assoc i a t ion of Home Appl iance M a n u f a c t u r e r s , "How the Indus t ry Has Achieved the Continuing Value P e r f o r m a n c e , " Inc red ib le Value Story, Chicago, The Assoc ia t ion , 1970.

273

Backman , Jules,, Adve r t i s i ng and Compet i t ion , New York, New York Univer s i ty P r e s s , 1967.

B a r k s d a l e , H. C . , ed i to r , Marke t ing in P r o g r e s s P a t t e r n s and Po ten t i a l s , New York, Holt, R ineha r t and Winston, i n c . , 1964.

Baumal , Wi l l i am J. , "Models of Economic Compet i t ion , " Models , M e a s u r e m e n t and Marke t ing , edi ted by P e t e r Langhoff and o t h e r s , Englewood Cl i f fs , N. J, , P r e n t i c e - H a l l , Inc . , 1967,

Berg , Thomas L. and Abe Schuchman. e d i t o r s , P r o d u c t S t ra tegy and Management , New York, Holt, R i n e h a r t and Winston, Inc . , 1963.

B i e d e r m a n n , Rober t G. and Richard L, Tabak , "The Te lev i s ion R e c e i v e r Indus t ry , " The Po l i t i c s of D i s t r i b u t i v e T r a d e A s s o -c ia t ion : _A Study in Confl ict Resolu t ion , ed i ted by Henry A s s a e l , Hemps tead , N. Y. , H o f s t r a U n i v e r s i t y Yearbook of B u s i n e s s , Se r i e s 4, Vol. 1, 1963,

B l i s s , Penny, Marke t ing and the Behav io r a l S c i e n c e s , Boston, Allyn and Bacon, Inc . , 1963,

Bogar t , Leo, ed i to r , C u r r e n t Centrover. s i e s in Marke t ing Re-s e a r c h , Chicago, M a r k h a m Publ i sh ing Company, 1969.

Br ion, John M. , C o r p o r a t e Marke t ing P lann ing , New York, John Wiley and Sons, Inc. , 1967,

Br i t t , S tewar t Hende r son and H a r p e r W, Boyd, J r . , Marke t ing Management and A d m i n i s t r a t i v e Action, New York, McGraw-Hill Book Company, 1968.

Broadcas t ing , 1971 Yearbook, Washington, B r o a d c a s t i n g Pub l i -ca t ions , I nc . , 1971.

Brown, Lyndon O. , Marke t ing and D i s t r i bu t i on R e s e a r c h , New York, Ronald P r e s s Company, 1955,

Bur sk , Edward C. , Cases in Marke t ing Managemen t , Englewood Cl i f fs , N. J . , P r e n t i c e - Hall, Inc. , 1965.

Canfie ld , B e r t r a n d R. , Sales A d m i n i s t r a t i o n , Englewood Cl i f fs , N. J . , P r e n t i c e - H a l l , Inc . , 1961.

:?5

Cohen, Kalman J, , Theory of the F i r m : R e s o u r c e Al locat ion in Marke t Economy, Englewood Cliffs , N. J . , P r e n t i c e - H a l l , I nc . , 1965.

Conve r se , Paul D. and o t h e r s , E l emen t s of Marke t ing , Englewood Cliffs, N. J. , Pren.tice-Ha.il/lncr, 1965.

Cook, Victor J. and Thomas F . Schutte, Brand Pol icy D e t e r m i -nat ion, Boston.. Allyn and Bacon, Inc . , 1967.

Cowan, Donald R. G, , "Marke t Po ten t ia l s and Marke t ing Manage-men t , " Marke t Po ten t i a l s and U, S. Census Data, Chicago, A m e r i c a n Marke t ing Assoc i a t i on .

Cox, Edward F inch and o t h e r s , Nader Repor t on the F e d e r a l T r a d e C o m m i s s i o n , New York, Richard W. Ba ron Company, 1969.

Cox, Reavis and o t h e r s , Dis t r ibu t ion in a H igh-Leve l Economy, Englewood Cli f fs , N. J . , P r e n t i c e - H a l l , I n c . , 1965.

C r i sp , Richard D. , "Company P r a c t i c e s in Market ing R e s e a r c h , " The Market ing Job, New York, A m e r i c a n Management A s s o -cia t ion, 1961.

, How to Reduce Dis t r ibu t ion Costs , New York, Modern Industry Magazine , 1948.

Davidson, Wil l iam R . , "Channels of D i s t r i b u t i o n - - O n e Aspec t of Marke t ing St ra tegy, " Market ing Insights , edi ted by Cl i f ton Anderson and Phi l ip R, Ca t co ra , New York, Appieton- Cen tu ry C r o f t s , 1968.

, "Marke t ing R e n a i s s a n c e , " P r o c e e d i n g s of the Winter Confe rence of the A m e r i c a n Marke t ing A s s o c i a t i o n : Toward Scient i f ic Marke t ing , edi ted by A m e r i c a n Marke t ing Assoc ia t ion , Boston, Mass . , A m e r i c a n Marke t ing Assoc i a t i on , 1963.

Dean, Joel , " P r i c i n g Po l i c i e s f o r New F r o d u c t s , " Modern M a r -ke t ing St ra tegy, edi ted by Edward C. B u r s k and John F . Chapman, Cambr idge , M a s s . , H a r v a r d Un ive r s i t y P r e s s , 1964.

Diamant , Lincoln, Te l ev i s ion ' s C l a s s i c C o m m e r c i a l s : The, Golden Y e a r s , 1948-1958, New York, Has t ings House P u b l i s h e r s , I nc . , 1971.

2ry /

t o

D i r e c t o r y c£ P r e m i u m and Incentive Buye r s , New York, S a l e s m a n ' s ~Gui.de," 1972. *

Edwards . Cor win D. , Big B u s i n e s s and t he Po l icy of Compet i t ion . Cleveland, P r e s s of Case W e s t e r n R e s e r v e Un ive r s i ty , 1956.

E l e c t r o n i c Indus t r i e s Assoc ia t ion , Consumer E l e c t r o n i c s Group, C o n s u m e r E l e c t r o n i c s 1971, Washington, The Assoc ia t ion , 1971.

F r a n k , Nathal ie D. , Marke t Ana lys i s , New York, S c a r e c r o w P r e s s , Inc. , 1964.

F r e y , Alber t W. , Adver t i s ing , New York, Ronald P r e s s Company, 1961.

Glover , John George and Wil l iam Bouck Corne l l , e d i t o r s , The Development of A m e r i c a n I n d u s t r i e s : Thei r Economic Sig-n i f i cance , New York, P r e n t i c e - Ha3.1, Inc . , 1.941.

Green , Paul E. and Donald S. Tall , R e s e a r c h f o r Marke t ing De-c i s ions , Englewood Cli f fs , N. J , , P r e n t i c e - H a l l , Inc . , 1966.

Haibent , Michael , The Meaning and Sources of Marke t ing Theory , New York, McGraw-Hi l l Book Cmnpany, 1965,

H a r m s , John, Our F lounder ing F a i r T rade , New York, Expos i t ion P r e s s , I nc . , 1956.

H a r p e r , Donald V. , "The Nature of P r i c e s and P r i c i n g , " M a r -ke t ing Management and A d m i n i s t r a t i v e Action, edi ted by S tewar t Hende r son Br i t t and H a r p e r W. Boyd, J r . , New York, McGraw-Hi l l Book Company, 1968.

Hill, W.. Clayton, "Reorgan iz ing Dis t r ibu t ion f o r Higher P r o f i t s , " Marke t ing Channels , edited by Wil l iam G. Mol le r and David Wileman, Homewood, 111., R ichard D. Irwin, Inc . , 1971.

Ho lmes , P a r k e r M. and o t h e r s , e d i t o r s , Readings in Marke t ing , Columbus , Ohio, Cha r l e s E. M e r r i l l Publ i sh ing Company, 1963.

Howard, M a r s h a l l C. , Legal Aspec t s of Marke t ing , New York, M c G r a w - H i l l Book Company, 1964.

Hummel, F ranc i s Hi. , Market zna Sales Potential , New York, Ronald P r e s s Company, 1961.

Konrad, Evelyn and Rod Erickson, edi tors , Marketing R e s e a r c h : A Management Overview, New York, Amer i can Management Associat ion, 1966.

Langhoff, Pe te r , edi tor , Models, Measurement and Marketing, Englewood Cliffs, N. J . , P ren t i ce -Ha l l , Inc. , 1965.

Lewis, Edwin H. , Marketing Channels: S t ruc ture and Strategy, New York, McGraw-Hill Book Company, 1968.

Little, Robert W. , "The Marketing Channel: Who Should Lead This Extra corpora te Organizat ion?, " Marketing Channels, edited by William G. Moller and David Wileman, Homewood, HI., Richard D. Irwin, Inc. , 1971.

.Lynn, Robert A . , P r i ce Pol icies and Marketing Ma nag emea t , Homewood, HI. , Richard D. Irwin, Inc. , 1967.

Magee, John F . , Physical Distr ibution Systems, New York, McGraw-Hil l Book Company, 1967.

Mallen, Bruce, "A Theory of Reta i le r -Suppl ie r Conflict, Control, and Cooperation, " Distr ibution Channels, Behavioral Dimen-sion, edited by Louis W. Stern, Boston, Houghton Mifflin Company, 1969.

Mansfield, Edwin, edi tor , Monopoly Power and Economic P e r -fo rmance , New York, W. W. Norton and Company, Inc. , 1964.

Markets of the Seventies, by the edi tors of For tune , New York, Viking P r e s s , Inc. , 1968.

Marting, Elizabeth, edi tor , The Marketing Job, New York, Amer ican Management Associat ion, 1961.

Mason, Edward Sagendorph, Economic Concentrat ion and Monopoly Prob lem, Cambridge, Mass . , Harvard Universi ty P r e s s , 1957.

Mason, Ralph E. and Pa t r i c i a Mink Rath, Marketing and Dis t r i -bution, New York. Gregg Division, McGraw- Hill Book Com-pany, 1968.

-> TO <* 4 O

M a s s e l , M a r k S , , C o m p e t i t i o n and Monopoly , L e g a l and E c o n o m i c I s s u e s , Washington., B r o o k i n g s Ins t i tu t ion , 1962,

M a u r e r , F e r d i n a n d F. , M o d e r n M a r k e t i n g M a n a g e m e n t : An In te -g r a t e d A p p r o a c h , New York, M c G r a w - H i l l Book C o m p a n y , 1961.

M c C a r t y , 1 David J . , "The T h r e e C ' s of .Sales F o r e c a s t i n g , " M a r -k e t i n g P r e c i s i o n and E x e c u t i v e Ac t ion , P r o c e e d i n g s of t h e F o r t y - F i f t h Na t iona l C o n f e r e n c e of t h e A m e r i c a n M a r k e t i n g A s s o c i a t i o n , e d i t e d by C h a r l e s H. H i n d e r s m a n , Ch icago , A m e r i c a n M a r k e t i n g A s s o c i a t i o n , 1962.

M c L u h a n , H e r b e r t M a r s h a l l , M e c h a n i c a l B r i d e ; F o l k l o r e of In-d u s t r i a l Man, New York , Vanguard P r e s s , Inc. , 1951.

M e a n s , G a r d i n e r Coit , P r i c i n g P o w e r and t h e P u b l i c I n t e r e s t , A , Study B a s e d on Stee l , New York , H a r p e r and Row P u b l i s h e r s ,

I n c . , 1962. •"

M e r e d i t h , G e o r g e , E f f e c t i v e M e r c h a n d i s i n g with. P r e m i u m s , New York , M c G r a w - H i l l Book Company , 1962.

M i l l e r , E r n e s t G. , M a r k e t P l a n n i n g , New York , A m e r i c a n Man-a g e m e n t A s s o c i a t i o n , 1967.

M o l l e r , W i l l i a m G. and David L. W i l e m a n , e d i t o r s , M a r k e t i n g C h a n n e l s : A S y s t e m s Viewpoin t . H o m e w o o d , H I . , R i c h a r d D, I rw in , I n c . , 1951.

Mulv ih i l l , Donald F . and S tephen P a r a n k a , P r i c e P o l i c i e s and P r a c t i c e s : A S o u r c e Book in Read ing , New York , J o h n Wiley and Sons, Inc. , 1967.

M u r d i c k , R o b e r t G. and A r t h u r E, S c h a e f e r , Sa les F o r e c a s t i n g F o r L o w e r C o s t s and Highe r P r o f i t s , Eng lewood C l i f f s , N. J . , P r e n t i c e - H a l l , I n c . , 1967.

N a r v e r , John C. , C o n g l o m e r a t e M e r g e r s and M a r k e t C o m p e t i t i o n , B e r k e l e y , U n i v e r s i t y of C a l i f o r n i a P r e s s , 1967.

N a t i o n a l F a m i l y Opinion, I n c . , P u b l i c A t t i t u d e s T o w a r d I m p o r t e d P r o d u c t s in t h e U„ jS. M a r k e t , New York , N e w s w e e k , I n c . , 1970.

279

Nat ional Survey _of Te lev i s ion Sets in IT. S, Households - - J a n u a r y 1969 Including Color and UHF, New York., A d v e r t i s i n g Re-s e a r c h Foundat ion, Inc . , 1969.

Nelson, Ralph Lowell , Concen t ra t ion in t h e Manufac tu r ing In-d u s t r i e s of the United Sta tes , New Haven, Conn . , Yale Uni-v e r s i t y P r e s s , 1963.

N y s t r o m , Paul H. and Albe r t F r e y , e d i t o r s , M a r k e t i n g Handbook, New York, Ronald P r e s s Company, 1954.

Or i en ta l Economis t , J a p a n e s e Economic Yearbook 1970, New York, In te rna t iona l Pub l ica t ions Se rv ice , 1970.

Ot teson, Schuyler F r a n k l i n and o t h e r s , Marke t ing , the F i r m s ' Viewpoint, New York, Macmi l l an Company, 1964.

Owen, Geof f r ey , Indus t ry in the U. S. A . , B a l t i m o r e , Penguin Books, Inc. , 1966.

Qxenfeldt , A l f r ed R. , Execut ive Act ion in Marke t i ng , Be lmon t , C a l i f . , Wadswor th Publ i sh ing Company, inc . , 1966.

, Marke t ing P r a c t i c e s in t h e TV Set Indus t ry , New York, Columbia Univer s i ty P r e s s , 1964.

, P r i c ing f o r Marke t ing E x e c u t i v e s , San F r a n c i s c o , Wadswor th Publ i sh ing Company, Inc. , 1961.

and C a r r o l l Swan, M a n a g e m e n t of t h e A d v e r -t i s i ng Funct ion , Belmont , Calif . , Wadswor th Publ i sh ing Company, Inc. , 1964.

P r e s t o n , Lee E. , ed i to r , Social I s sues in M a r k e t i n g : Read ings f o r Ana lys i s , Glenview, HI. , Scott F o r e s m a n and Company, 1968.

R.adio Corpo ra t i on of A m e r i c a , The Radio Decade , New York, Radio C o r p o r a t i o n of A m e r i c a , 1930.

R e i c h a r d , Rober t S. , P r a c t i c a l Techniques of Sales F o r e c a s t i n g , New York, McGraw-Hi l l Book Company, 1966.

ISO

Reuzan, David A. , "The Evaluat ion o£ Channel E f f e c t i v e n e s s , " Marke t ing Channels , edi ted by Wil l iam G. Mol le r and David Wileman, Homewood, HI, , R ichard D. I rwin, Inc., , 1969.

Rewoldt, S tewar t and o t h e r s , Introduct ion to Marke t ing Manage-m e n t , Home-wood, 111. , R icha rd D. Irwin, Inc . , 1969.

Seven, C h a r l e s H. , Marke t ing Produc t iv i ty Ana lys i s , St. Louis , McGraw-Hi l l Eook Company, 1965.

Socolovsky, Alber to , The Decade of E l e c t r o n i c s , New York, Chilton Book Company, 1970.

Stanton, Wi l l i am J . , Fundamen ta l3 of Marke t ing , New York, McGraw-Hi l l Book Company, 1964.

and R icha rd H. Buski rk , Management of the Sales F o r c e , Homewood, Jll. , Richard D. Irwin, Inc. , 1969.

Stern , Louis W. , "Approaches to Achieving Reta i l P r i c e Stabi l i ty , " P r i c e Po l i c i e s and P r a c t i c e s , edi ted by Donald F . Mulvihi l l and Stephen P a r a n k a , New York, John Wiley and Sons, IQC. , 1967.

and John R. G r a b n e r , Compet i t ion in t he M a r k e t -p l ace , Glenview, HI. , Scott F o r e s m a n and Company, 1970.

. Dis t r ibu t ion Channels : Behav io ra l Dimens ion , Boston, Houghton Miff l in Company, 1969.

I I Poten t i a l Confl ict Management M e c h a n i s m s in Dis t r ibu t ion Channe ls : An In t e ro rgan i za t i ona l Ana lys i s , " Con t rac tua l Marke t ing Sys tem, edited by Donald N. Thompson , Lexington, M a s s . , Heath Lexington Books, 1971.

S u p r e m e Court R e p o r t e r , Cases Argued and De te rmined in the United States Supreme Court , October T e r m , 1926, p e r m a -nent edi t ion, Vol. 47, St. Paul , West Publ i sh ing Company, 1928.

Sylos, Labini Paolo, Oligopoly and Technica l P r o g r e s s , Cambr idge , M a s s . , Ha rva rd Univers i ty P r e s s , 19o2.

281

Tarrmra, .ivta s a n e r i, "The Evolution of Var ious F o r m s of Con-t r a c t u a l Marke t ing Sys tems in Japan, " Con t r ac tua l Marke t ing S y s t e m s , edi ted by Donald N. Thompson, Lexington, M a s s . , Heath Lexington Books, 1971.

Te lev is ion Faclbook, 1971-72, Washington, T e l e v i s i o n Diges t , I nc . , ~1971.

Thompson, Donald N . , ed i to r , Cont rac tua l Marke t ing S y s t e m s , Lexington, M a s s . , Heath Lexington Books, 1971.

Twent ie th Century Fund, An t i t ru s t Pol icy , New York, Simon L. Whitney Company, 1958.

"Use of Sales Ana lys i s in Guiding D i s t r i b u t o r s and Control l ing Inven to ry - - Zenith Sales Corpora t ion , " Sales Ana lys i s , Studies in B u s i n e s s Pol icy , No. 113, New York, Confe rence Board , Inc. , 1965.

Value Line, Select ion and Opinion, Arnold B e r n h a r d and Company, Inc . , Vol. XXV,' 19761

Van Hise, C h a r l e s R icha rd , Concen t ra t ion and Con t ro l : A Solution of t he T r u s t P r o b l e m in the United Sta tes , New York, Macmi t l an Company, 1912.

Viner , Jacob, Dumping a P r o b l e m in In t e rna t iona l T rade , New York, Augus tus M. Kelley, P u b l i s h e r s , 1966.

W a l t e r s , S. George and o t h e r s , Marke t ing M a n a g e m e n t Viewpoints , Dal las , Sou th -Wes t e rn Publ i sh ing Company, 1970.

Wasson , Ches t e r R. and David H. McConaughy, Buying Behavior and Marke t ing Dec i s ions , New York, Apple ton- Cen tu ry C r o f t s , 1968. "

Whitney, Simon New comb, An t i t r u s t P o l i c i e s : A m e r i c a n E x p e r i e n c e in Twenty Indus t r i e s , New York, Twent ie th Cen tu ry Fund, 1958.

Woytinsky, E m m a Shadkhan, P r o f i l e of t he U. S, Economy, New York, P r a e g e r P u b l i s h e r s , Inc. , 1967.

282

A r t i c l e s

A d a m s , Jack s "The Ba lance Sheet, " Mar t , XVI (May 15, 1972), 46.

Ad le r , Lee, " T i m e Lag in New P r o d u c t Development , " J o u r n a l of Marke t ing , XXX (January , 1966), 17-21.

A m i n e r , Dean S, , "Our An t i t r u s t Laws a r e An t i compe t i t i ve , " B u s i n e s s Hor izons , XIV (October , 1971), 37-48 .

A lexande r , R. S . , "The Death and B u r i a l of 'S ick ' P r o d u c t s , " Jou rna l of Marke t ing , XXVIII (April, 1964), 1 - 7 .

" A s s e m b l e r F inds Its Niche With, a Mix f o r the M a s s e s , " Mar t , XIII (September 15, 1969), 8.

"Behind the Small Type in the Sales Managemen t Survey of Buying P o w e r , " Sales_ Management , CIV (June 10, 1970), 7 - 3 0 .

Belt , F o r e s t H . , "Te l ev i s ion : 20 Y e a r s f r o m Now, " E l e c t r o n i c s World, LXXX (January , 1970), 25-29 .

"Bob Sarnoff Runs a New Game, " B u s i n e s s Week ( Janua ry 24, 1970), pp. 84-85, 88-89.

" B r a n c h Dis t r ibu t ion T r e n d Gains, " B u s i n e s s Week (September 10, I960), pp. 65-68.

"Color TV's Rainbow F a d e s a Bit, " Bus ines s Week ( F e b r u a r y 1, 1969), pp. 38, 40 -41 .

"Color TV's Renegade , " Sales Management , CII (May 1, 1969), 35-37 . " " ~~

" C o n s u m e r E l e c t r o n i c s : What is S e a r s , Roebuck ' s Sha re of the B u s i n e s s ? , " Mar t , XIV (October 15, 1970), 46.

C o n s u m e r R e p o r t s , XXXIV (January , 1969), 3.

" C o n s u m e r s Union Pu t s on Musc le , " B u s i n e s s Week (December 23, 1967), pp. 84-86 .

-> O a*» W *J

"Co-op ad Funds ; F T C Guides May Hurt Sma l l e r D e a l e r s , " Mar t , XIV (March 15, 1970), 7.

D r u c k e r , P e t e r , "The Shame of Market ing , " M a r k e t i n g / G n n m u a i -ca t ions , CCXCVil (August, 1969), 60 -64 .

Eck le s , Rober t W. , " P r o d u c t Line Deletion and S impl i f i ca t ion , " B u s i n e s s Hor izons , XIV (October, 1971), 71-74 .

E l e c t r o n i c In fo rma t ion Bureau , ""Who Sells What, " NEDA Jou rna l , XXV (October , 1970), 4.

" E l e c t r o n i c s M a r k e t s , 1963, " E l e c t r o n i c s , XXXVI ( January 4, 1963), 67-72 .

" E l e c t r o n i c s M a r k e t s , 1966, " E l e c t r o n i c s , XXXIX (January 10, 1966), 114-119.

E l e c t r o n i c Indus t r i e s Assoc ia t ion , Marke t ing Se rv i ce s D e p a r t m e n t , E l ec t ron i c T r e n d s - TJ, S, A. (September , 1971), p . 8.

"Fancy Meeting You Here , " D e a l e r s c o p e South (November , 1970), pp. 12-13.

" F i r s t Annual D i s t r i bu to r D i r e c t o r y , " Merchand i s ing Week, CII, Sec, II (September 14, 1970), 1 - 7 0 .

" F u r n i t u r e That Does Every th ing , " F o r b e s , XCIX, 30-32, 37-39 .

H i r a y a m a , Hideo, " M e s s a g e f r o m Japan, " Mar t , XIV (December 1 -15 , 1970), 26.

"How D e a l e r s Rate F a c t o r s in Consumer Buying Dec i s ions , " Mar t , XV (August 1, 1971), 8.

"How S u b s c r i b e r s Use the Survey of Buying P o w e r , " Sales Manage-m e n t , LXXVIII (May 10, 1957), 34-43,

Kagon, Paul , "No Blank C a r t r i d g e , " B a r o n ' s Weekly, XLIX (September 8, 1969, 11, .14-17,

Kinkaid, J a m e s C. , "Data Gap Broadens , " E l e c t r o n i c Dis t r ibu t ing and Marke t ing , 4 (July, 1970), 16.

Kinkaid, J a m e s C , , "Lack of Support Ends Serv ice A m e r i c a Venture , " E lec t ron ic Dis t r ibut ing and Marke t ing , LUX (January , 1972), 13.

Kot ler , Phi l ip , "Phas ing Out Weak P r o d u c t s , " Karvar_d B u s i n e s s Review, XLIU. (March -Apr i l , 1965), 107-118."

Les s ing , Lawrence , "Stand by f o r the C a r t r i d g e TV Explos ion, " F o r t u n e , LXXXHI (June, .1971), 81..

Mar in , Ron, "EIA Consumer Division P r e s s i n g F e d e r a t i o n P l a n Fol lowing Way-man Victory, " Merchand i s ing Week, CI1 ( January 26, 1970), 1, 20.

The M e r c h a n d i s e r , Magazine of Mass Reta i l ing , XXVIII ( F e b r u a r y , 1972), 10.

Merchand i s ing Week, S ta t i s t i ca l and Market ing Repor t , C1II ( F e b r u a r y 22, 1*971), 22-23 .

"Mex ico ' s B o r d e r Development P r o g r a m P a y s Off f o r U. S. E l ec -t r o n i c F i r m s , " Mar t , XV (December 1 -15 , 1971), 53 -54 .

Morton, John, "Consumer P.epor ts : Read, R e s p e c t e d - - A n d F e a r e d , " The National O b s e r v e r , Repr in t of F e b r u a r y 26, 1968, Dow Jones and Co . , I nc . , pp. 1 - 2 .

"Motoro la Drops a l l Co-op Ads, " Merchand i s ing Week, CI (De-c e m b e r 15, 1969), 3.

"Motoro la Eyeing No, 2 Color Spot, " Home F u r n i s h i n g s Dally, CCXLI (December 14, 1971), 1-47

Nader , Ralph, "Consumer P r o t e c t i o n and C o r p o r a t e D i s c l o s u r e , " B u s i n e s s Today, I (Autumn, 1968), 20.

N a g a s h i m a , Aki ra , "A C o m p a r i s o n of J a p a n e s e and II. S. At t i tudes Toward F o r e i g n P r o d u c t s , " Journa l of Marke t ing , XXXIV (January , 1970), 68-74 .

"News and T r e n d s , " Mar t , XIII ( F e b r u a r y 15, 1969), 11-12.

"News and T r e n d s , " Mar t , XV (September 1, 1971), 7 - 8 .

2 85

"News and Trends , " Mar t , XVI (March 1, 1972), 7 -8 .

Oxenfeldt, Al f red R„ , "How to Use M a r k e t - S h a r e Measu remen t , " Ha rva rd Bus iness Review, XXXVII ( J a n u a r y / F e b r u a r y , 1959), 59-68.

" P h i l c o - F o r d Begins Leas ing Color Sets to Cable C u s t o m e r s , " Mar t , XV (October 1, 1971), 7.

" P h i l c o - F o r d : The Balance Sheet, " F o r b e s , XCIX (March 1, 1967), 54-55.

"The Publ ic Impact of Science in the Mass Media, " Bus iness Topics , VI (Autumn, 1958), 11-15.

"Push Money = Spiff = Br ibe , " Consumer Repor t s , XXXVI (January, 1971), 24.

"The Question of a F e d e r a l Consumer P ro tec t ion Agency, " Con-g r e s s i o n a l Digest, L (Februa ry , 1971), 33-64.

"RCA Opens Advanced Plant fo r Making C e r a m i c Integrated Ci rcu i t Modules, " Mar t , XV (October 1, 1971), 45.

"Recess ion Car te l s Spread in Japanese Indus t r i e s : Di lemma fo r Fo re ign P a r t n e r s , " Bus iness In ternat ional , XIX (March 10, 1972), 73-74.

Sales Management , CIV (June 10, 1970), D-176.

Schuenemann, Paul , J r . , "Value of F r a n c h i s e s Today Seen a s Meaningless , " Mar t , XIV (August 15, 1970), 30.

"Sears Of fe r s VTR P r i c e d at $1600 for June Del ivery , " Mart , XVI ( F e b r u a r y 15, 1972), 44.

"Shera ton Buying A d m i r a l Color TV, " Mar t , XIV (May 15, 1970),

17.

"The Small Dealer , " Dea l e r scope South (May, 1972), pp. 12-13, 31.

Snyder, J a m e s D. and Rober t F . Hick ox "Washington Repor t , " Mar t , XVI (May 15, 1972), 12.

7'r 50

Torf , Michael K . , " Ins ide Mar co r with Tom. B r e a k e r , " Dea le r 3 cope South (June- July, 19~G), p« 12,

"The Troub le s of T e l e v i s i o n - - A n d a Coming Revolut ion, " U. S. News and World J^go j - t^ LXIX (December 21, 1970), 58-60 .

"U. S. M a r k e t s F o r e c a s t , 11 E l e c t r o n i c s , VL ( J anua ry 3, 1972), 73-76,

" W a r d ' s Co. Shoots f o r Annual Sales of $100 Mil l ion, " Mar t , XIII (August 15, 1969), 8.

"What ' s the Source of I m p o r t ' s S t r e n g t h ? , " D e a l e r scope South, (October, 1971), pp . 12-13, 16.

"What ' s t he Status of Co-op Adver t i s ing Money, " M a r t , XIV (October 15, 1970), 48.

Wood, Wall is E . , " C o n s u m e r i s m : It Won' t Go Away, " M a r t , XVI ( F e b r u a r y 1, 1972), 13-14, 16.

, " M a r i a : Why D e a l e r s A r e I11 I t - - A n d How I t ' s Evolving, " Mar t , XV (March 15, 1971), 2 7 - 3 2 .

, "The Company S to re : How Wes t inghouse is Operat ing T h r e e of t hem, " Mar t , XIV (May 1, 1970), 27 -28.

Publ ic Documents

U. S. Bureau of the Census , Census of M a n u f a c t u r e r s , 1967, Special Repor t S e r i e s : Concen t ra t ion R a t i o s in Manufac tur ing , P a r t 2, Washington, Government P r i n t i n g Off ice , 1971.

U. S. B u r e a u of the Census , 1967 Census of B u s i n e s s , Reta i l T r a d e Subject Repor t s , Vol. I, Washington, Governmen t P r in t ing Off ice , 1971.

U. S. B u r e a u of the Census , 1967 Census of B u s i n e s s , Wholesa le T r a d e Subject R e p o r t s , Vol. Ill, Washington , Government P r in t ing Off ice , 1971.

287

U. S. Bureau of the Census , _U. S. Impor t £ f o r Consumpt ion and Genera l Impor t s , Washington, Government P r in t ing Off ice , 1971.

U. S. Domes t i c and In te rna t iona l Bus iness A d m i n i s t r a t i o n , U. S. Indus t r i a l Outlook 1971, Washington, Government P r in t ing Off ice , 1971.

U. S. F e d e r a l T r a d e Corn-mission, Repor t of the F e d e r a l T r a d e C o m m i s s i o n on Indus t r i a l Concen t ra t ion and P r o d u c t Divers i-f i c a t i on in the 1000 L a r g e s t Manufac tur ing Compan ie s ; 1 950, Washington, Government P r in t ing Off ice , 1950.

U. S. House of R e p r e s e n t a t i v e s , Commi t t ee on U n - A m e r i c a n Ac-t i v i t i e s , Guide to Subvers ive Organ iza t ions and Pub l i ca t ions , House Document No. 137, Washington, Government P r in t i ng Off ice , 1951.

U, S. Tar i f f C o m m i s s i o n , P r e l i m i n a r y Repor t on U. S, P roduc t ion , Expor t s , and Impor t s , Washington, J 972.

Unpublished M a t e r i a l s

Chilton E l e c t r o n i c s and Ins t rumen ta t ion Group, "Marke t ing a s A s s i s t a n c e P r o g r a m , " u n p u b l i s h e d documen t s of E l e c t r o n i c Eng inee r , New York, Apr i l , 1972.

C o m m i t t e e f o r a Nat ional T rade Policy, " H i e E l e c t r o n i c s Indus t ry and IT. S. T r a d e Pol icy , " unpubl ished p a p e r , Washington, The Commi t t ee , no publ ica t ion da te .

C o r r e s p o n d e n c e f r o m J i m Ander son , D i s t r i c t Manager fo r Magnavox Corpora t ion , Dal las , T e x . , November 13, 1970.

C o r r e s p o n d e n c e f r o m S. J. Argent in , Manage r , Marke t R e s e a r c h , A d m i r a l Co rpo ra t i on , November 17, 1970.

C o r r e s p o n d e n c e f r o m Daniel l L. Dailey, D i r e c t o r of Marke t ing S e r v i c e s , E l e c t r o n i c Indus t r i e s Assoc ia t ion , Washington, D. C. , November 13, 1970.

C o r r e s p o n d e n c e f r o m B. S* Durant , P r e s i d e n t . RCA Sales C o r -po ra t ion to RCA Victor D i s t r i bu to r s and D e a l e r s , J a n u a r y 3, 1966,

C o r r e s p o n d e n c e f r o m Monte F l o r m a n , Technica l D i r e c t o r , Con-s u m e r s Union, Mount Vernon, N. Y. , May 2, 1972.

C o r r e s p o n d e n c e f r o m Susan Henneme ie r , Execut ive Of f i ces , Matsush i t a E l e c t r i c C o r p o r a t i o n of A m e r i c a , New York, November 24, 1970,

C o r r e s p o n d e n c e f r o m Eugene J, Koschei la , A s s i s t a n t Staff Vice-P r e s i d e n t , C o n s u m e r E l e c t r o n i c s Group, E l ec t ron i c Indus-t r i e s Assoc ia t ion , Washington, D, C. , Apr i l 21, 1972.

C o r r e s p o n d e n c e f r o m J e r r y L. Snyder , Special Sales , RCA Sales Corpora t ion , Indianapol is , Ind. , Sep tember 3, 1969.

C o r r e s p o n d e n c e f r o m Ju les Ste inberg , Execut ive Vice P r e s i d e n t , Nat ional Appl iance and Radio - T V D e a l e r s Assoc ia t ion , Chicago, HI . , D e c e m b e r 22, 1970.

C o r r e s p o n d e n c e f r o m Rober t Stern , Senior Marke t ing Execu t ive , Doyle, Dane, Bernbach , Inc. , New York, D e c e m b e r 4, 1970.

C o r r e s p o n d e n c e f r o m Rober t C. Ull r ich, Manager , Marke t ing Re -s e a r c h , North A m e r i c a n Phi l ips Corpora t ion , New York, November 20, 1970.

Gintel and Company, " Inves tment R e s e a r c h , Bas ic R e p o r t : Sounde-s ign Corpora t ion , unpubl ished r e p o r t , Gintel and Company, Oc tober , 1970.

Li t t le , A r t h u r D . , Inc. , "Home E l e c t r o n i c s , 1967-1973, " unpub-l i shed r e p o r t , July, 1968.

" M a r k e t Improvemen t P r o g r a m , " RCA Sales Corpora t ion , In-d ianapo l i s , Ind.

T rendex , Inc. , " T r e n d e x : R e s e a r c h by Telephone, " unpubl i shed document , New York, May, 1972.

N e w s p a p e r s

Dal las , Nor th Texas R e t a i l e r , F e b r u a r y , 1972.

Dal las T imes Hera ld , July 23. , 1972.

New York, Home F u r n i s h i n g s Daily, May 8, 1969.

New York, Home F u r n i s h i n g s Daily, F e b r u a r y 1.1, 1970.

New York, Home F u r n i s h i n g s Daily, June 23, 1971 •

New York, Home F u r n i s h i n g s Daily, July 19, 1971. S

New York, Home F u r n i s h i n g s Daily, July 26, 1971. \

New York, Home F u r n i s h i n g s Daily, S e p t e m b e r 3>} 1971.

New York, Home F u r n i s h i n g s Dally, S e p t e m b e r 13, , 1971.

New York, Home F u r n i s h i n g s Daily, S e p t e m b e r 24, , 1971.

New York, Home F u r n i s h i n g s Daily, S e p t e m b e r 29, , 1971.

New York, Home F u r n i s h i n g s Daily, October 8, 1971.

New York, Home F u r n i s h i n g s Daily, N o v e m b e r 3, 1971.



New York, Home F u r n i s h i n g s Daily, November 16, 1971.


New York, Home F u r n i s h i n g s Daily, D e c e m b e r 16, 1971.

New York, Home F u r n i s h i n g s Daily, D e c e m b e r 17, 1971.

New York, Home F u r n i s h i n g s Daily, J a n u a r y 4, .1972.

New York, Home F u r n i s h i n g s Daily, J a n u a r y 13, 1972.

289

If 90

New York, Home F u r n i s h i n g s Daily, Jan.uary 24, 1972.

New York, Home F u r n i s h i n g s Daily, J anua ry 28, 1972.

New York, Home F u r n i s h i n g s Daily, F e b r u a r y 1, 1972.

New York, Wall S t r ee t Journa l , Apr i l 19, 1972.

New York, Wall S t ree t Journa l , May 11, 1972.

New York, Wall S t ree t Journa l , May 19, 1972.

In te rv iews

Bai ley, Bill, Sa l e sman , S tewar t Company, Dal las , Texas , August . 11, 1971.

Bell , E lmo, P r e s i d e n t and, m a j o r s tockho lde r , T and W D i s t r i -but ing Company, Dal las , Texas , August 10, 1971.

Boyd, J . G. , Owner , J . G. Boyd Good Housekeeping Company, Dal las , Texas , D e c e m b e r 20, 1971.

Cla rk , George, Sa lesman , Ad 1 eta Company, Dal las , Texas , August 12, 1971.

C rump , George , Southwes te rn Division Manage r , M o r s e E l e c t r o -P r o d u c t s Corpora t ion , Dal las , Texas , August 16, 1971.

Davis , Lou, Manager , Consumer P r o d u c t s Divis ion, S tewar t Com-pany, Dal las , Texas , July 21, 3 971.

E m b r y , Aust in , Zone Manager , Ph i lco- F o r d Company, Ar l ington, Texas , August 11, 1971.

F e r g u s o n , Jack, Gene ra l Sales Manager , United Dis t r ibu t ing Com-pany, Dal las , Texas , July 27, 1971.

F l a n d e r s , P . D . , Owner, F l a n d e r s Sales , I n c . , Dal las , Texas , August 12, 1971.

291

Karnby, Pawl, P r e s i d e n t and s t o c k h o l d e r , Uni ted D i s t r i b u t i n g C o m -p a n y , D a l l a s j T e x a s , July 27, 1971.

J o r d a n , John, O w n e r , John J o r d a n C o m p a n y , D a l l a s , T e x a s , D e c e m b e r 20, 1971.

M a c r a e , R, Vice P r e s i d e n t , RCA, D a l l a s , T e x a s , June 1, 1971.

M i l e s , Edward P . , Gene ra l M a n a g e r , Ad la t a C o m p a n y , D a l l a s , T e x a s , July 20, 1971.

M i l l e r , H a r v e y S. , Sen io r Staff S c i e n t i s t , Q u a n t u m S c i e n c e C o r -p o r a t i o n , P a l o Al to , C a l i f o r n i a , A p r i l 17, 1972.

M o r g a n , Bob, M a n a g e r , C o n s u m e r E l e c t r o n i c s , G e n e r a l E l e c t r i c Company., D a l l a s , T e x a s , A u g u s t 10, 1971.

Scha.ckm.an, M a u r i c e , O w n e r , S c h a c k m a n A p p l i a n c e Company , D a l l a s , T e x a s , Ju ly 21, 1971.

Scott , Bob, Reg iona l M a n a g e r , Magnavox. C o r p o r a t i o n , D a l l a s , T e x a s , Augus t 9, 1971.

S teed , Ray, Owner , S teed F u r n i t u r e C o m p a n y , G a r l a n d , T e x a s , A u g u s t 4, 1971.

U l r i c h , Lud, P a r t n e r and G e n e r a l M a n a g e r , N o r t h t o w n H o m e E n t e r -t a i n m e n t C e n t e r , Reg iona l M a n a g e r , Sy lvan ia E l e c t r i c P r o d u c t s C o m p a n y , D a l l a s , T e x a s , A u g u s t 6, 1971.

Van B r a u m a n , M a r t i n , O w n e r , Van B r a u m a n and C o m p a n y , D a l l a s , T e x a s , Augus t 13, 1971.

W e b b e r , R. A. , P r e s i d e n t , W e b b e r S a l e s C o m p a n y . D a l l a s , T e x a s , A u g u s t 13, 1971.

Whi te , A l b e r t D. , E x e c u t i v e Vice P r e s i d e n t of M a r k e t i n g and S t o c k h o l d e r , P o r t e r - B u r g e s s C o m p a n y , D a l l a s , T e x a s , July 26, 1971.