An Empirical Investigation of the Internal Political Economy of Food Vertical Marketing

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ABSTRACT

The typology of administered, contractual and corporate vertical marketing systems is tested using the political economy framework (McCammon, 1970; Stern & Reve, 1980). Through transactional form and interorganizational climate constructs, our results show significant differences in the structure and behavior among the three types of organizational modes within the grocery distribution industry in the province of Quebec.

INTRODUCTION

Distribution and especially the channel concept lies at the very heart of theoretical foundations in marketing (Bartels, 1962). The emergence and development of vertical marketing systems has been one of the most significant developments in channels of distribution (Arndt, 1979; Cox, 1958; Harrigan, 1983, 1984; McCammon & Bates, 1965). An understanding of how vertical marketing systems function and are organized contribute to the growth and advancement of knowledge in marketing.

The expression vertical marketing system (Bucklin, 1970; McCammon, 1970) is no longer part of the mainstream channel vocabulary used by most researchers. It has been replaced by such expressions as value chain analysis (Porter, 1985) with its related terms such as downstream and upstream analysis. And much of what is referred to as supply chain management (Ross, 1998), strategic alliances (Mentzer, 1993), strategic networks (Ouchi, 1980; Thorelli, 1986; Jarillo, 1988; Achrol, 1997) or relationship marketing (Robicheaux & Coleman, 1994) either with suppliers or distributors is in reality another way of studying the organization and behavior of vertical marketing systems. This research will henceforth use the original term coined by McCammon almost thirty years ago as we attempt to better understand the structure of distribution channel in the grocery industry.

The basic objective of this research is to understand and explain how vertical marketing systems function in food distribution, especially for consumer packaged goods purchased mainly in supermarkets, through the political economy framework (Stern & Reve, 1980). Vertical marketing systems theory has yet to be updated to take into account the theoretical and empirical contributions offered by the political economy framework (Stern & Reve, 1980; Amdt, 1983; Robicheaux & Coleman, 1994).

So far, a number of authors have examined one or more aspects of this framework empirically through transactional cost analysis (Williamson, 1975,1985) and relational exchange (Mcneil, 1980). However, very few of these studies have been concerned with the similarities and differences in the structure and functioning of vertical marketing systems (Brown, 1981; Dwyer & Oh, 1987, 1988; Dwyer & Welsh, 1985; Etgar, 1976). More importantly, not one study has actually been carried out in which all forms of channel arrangements, as proposed by vertical marketing systems theory, have been examined simultaneously. Thus, our study contributes to our understanding by empirically examining the link between vertical integration (i.e., administered, contractual and corporate) and the constructs of internal political economy as measured through the dimensions of transactional form (e.g., locus of decision making and structural bureaucracy) and interorganizational climate (e.g., internal polity such as goal compatibility). Table 1 presents a summary of the constructs used in this research.

While other researchers have studied industry groups such as financial services, general merchandise and petroleum products among others, food distribution offers a unique testing ground for vertical marketing systems. In fact, McCammon's theoretical development was mainly inspired by the channel arrangements he noted in grocery distribution. As such, corporate chains, voluntary groups and unaffiliated retailers also referred to as corporate, contractual and administered vertical marketing systems are the main entities under study (McCammon 1970; Stern, El-Ansary, & Coughlan, 1996). …