LAYTON. Marketing Systems a Core Macromarketing Concept

7/31/2019 LAYTON. Marketing Systems a Core Macromarketing Concept

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Journal of Macromarketing

DOI: 10.1177/0276146707302836

2007; 27; 227Journal of MacromarketingRoger A. Layton

Marketing SystemsA Core Macromarketing Concept

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writers including Cox, Goodman, and Fichandler (1965), a

concept sometimes referred to as the macromarketing system.

The societal marketing system is itself a subsystem of one or

more global marketing systems (Sheth and Sisodia 2006)

where groups of nations form and reform trading blocs or

alliances driven by the imperatives of globalization. Both are

examples of highly aggregated marketing systems. At theother (disaggregated) extreme, a marketing system may con-

sist of two or more individuals engaged in mutually beneficial

trade over time. These exchanges may be studied as a mar-

keting system per se or as part of higher-level networks of

exchange up to and including the societal marketing system.

Where these exchanges take place between willing sellers and

buyers, each seeking to serve his or her own ends through

price negotiation, the resulting network of exchange is called

a market system; where the exchanges take place only

when sanctioned by tradition (or reciprocity) or when

approved by authority (or redistribution), the networks are

called tradition or command systems. This article is con-

cerned with marketing systems at all levels of aggregation andwhere all three broad exchange patterns are possible.

The importance of the marketing system was recognized by

Hunt in 1977. In 1981, he defined macromarketing as the

study of (a) marketing systems, (b) the impact and conse-

quences of marketing systems on society, and (c) the impact

and consequences of society on marketing systems (p. 7). He

restated this view in Hunt (1981) and noted that it (a) allowed

for varying levels of aggregation, (b) included work on social

responsibility and economic development, and (c) picked up

the impact of differing legal,political, and social value systems.

Alderson (1964) saw the marketing function as playing a

vital role in the dynamic process of matching goods and

needs and in organising institutions and processes to servethis ultimate purpose (p. 94). His functionalist view was

grounded in a total systems approach, devising descriptive

generalizations of marketing activities and institutions

(p. 106) in which organized behavior systems played a

central role. Fisk (1967), in his seminal work on marketing

This article highlights the central role that the study of mar-

keting systems could and should play in the discipline of

macromarketing. Drawing from a wide-ranging literature, a

new definition of marketing systems is shared. The study of a

marketing system furthermore can be approached in one or

more of at least four ways. Each approach discussed raises

issues of modeling and measurement, of attributes, and of

inputs and outputs, which increasingly often will provide

insights into system design alternatives. Placing the concept

of a marketing system at the center of macromarketing puts in

context much if not all of the concepts, ideas, and research

that have been part of macromarketing for the past thirty or

more years and provides a bridge to the wealth of relevant

studies now being undertaken in many related fields.

Keywords: marketing systems; flows in marketing systems;

measurement in marketing systems; marketing

system design

The purpose of this article is to propose that the concept of a

marketing system lies at the core of this thinking about

macromarketing. If exchange is central to marketing theory,

then it is plausible that exchange systems, and more specifi-

cally marketing systems (where the exchange involves an eco-

nomic quid pro quo), will lie at the core of macromarketing.

Where the outcome of an exchange is a sale or sales, the end

result for a marketing system is an assortment. Where the suc-

cess of an exchange is defined in terms of benefit or profit,

the effectiveness of a marketing system can be identified in the

contribution of the assortments generated by the system to thequality of life of the relevant community.

Although central to the authors thinking about macromar-

keting, the concept of a marketing system per se has in recent

years been little studied and left largely undefined. An excep-

tion, perhaps, is to be found in the idea of the societal (or

aggregate) marketing system, described in some detail for a

developed economy such as the United States by Wilkie and

Moore (1999), Bloom and Gundlach (2001), and earlier by

227

Marketing SystemsA Core Macromarketing Concept

Roger A. Layton

Journal of Macromarketing, Vol. 27 No. 3, September 2007 227-242

DOI: 10.1177/0276146707302836

2007 Sage Publications


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systems, adopted an approach based on general systems

theory and identified seven levels of organization from the

individual to the global or world economy. He noted that

marketing systems develop in response to the need for

peaceful exchange of commodity surpluses (p. 3). He went

on to say that unique to marketing among these prerequi-

sites for a marketing system are commodity surpluses fortrade, physical distribution networks, markets and transac-

tions (p. 4). Dowling (1983), in an application of general

systems theory to marketing systems, defined a marketing

system as a complex social mechanism for coordinating

production, distribution and consumption decisions (p. 22).

Dixon (1984) noted that the marketing system is a differ-

entiated sub-system of the society and concluded that the

marketing system has an impact on other social systems, the

cultural system, and the material environment (p. 4). Arndt

(1986) suggested that marketing systems could be thought

of as relational networks, noting that most transactions are

effected not through ad hoc market encounters but in the

context of stable relationships within networks (p. 125).

Dixon and Wilkinson (1989) argued for a new paradigm for

marketing theory, one based on a functionalist approach, in

which the system of action studied was a nested hierarchy

of systems of action in which system levels are differenti-

ated in terms of their functions (p. 64). They went on to

identify seven levels in such a hierarchy, ranging from the

individual marketing role, through households and firms,

markets, channels, and the marketing system.

Meade and Nason (1991), looking back over the field of

macromarketing, identified as a covert theme a search for

understanding how exchange systems are coordinated and

controlled (p. 73). They went on to note that macromar-keting is developed as the study of the complex coordination

and control processes underpinning growth, evolution, and

design of exchange systems (p. 72). In a review of market-

ing and development, Klein and Nason (2000) identified the

structural and functional elements of a marketing system as

including methods of distribution, channel structure, prod-

ucts and services available, advertising and other forms of

marketing information and pricing methods and policies

(p. 264). Wilkie and Moore (1999) discussed the aggregate

marketing system for a society, noting that marketing is a

social institution that is highly adaptive to its cultural and

political context . . . easily go around the world to locate

societies with very different marketing systems (p. 10).Dixon (2002), in a detailed historical review of the origins

of macromarketing, commented that since society is struc-

tured by social institutions, the nature of the market and the

role that it plays is interrelated with other institutions.

Macromarketing is the study of such interactions (p. 737).

This brief sampling of references to the concept of a mar-

keting system in the marketing literature points to commonal-

ity as well as diversity in thinking about the underlying idea.

There is broad agreement that marketing systems are complex,

adaptive, social networks in which both structure and function

are important and in which purpose derives from a dynamic

matching of goods and needs. There is some diversity in the

level of aggregation that might be involved in an emphasis on

structure or function, in the roles of coordination and control,

in the link with broader exchange or economic systems, and in

the identification of system boundaries and components.

EXAMPLES

Some examples from a range of economic and social

settings may help to fix ideas.

Trade Routes across Aboriginal Australia

Some years ago I stood on the dusty bank of a dry river

in Central Australia and, looking down, found that I was

standing in the middle of an aboriginal camp site. Chipped

stone artefacts, and other remnants of aboriginal life were allaround, and it was likely that the site was one of many

located on the trade routes that once crossed the continent.

These complex long-distance networks that linked aborigi-

nal societies stretched from the Kimberley coast to southern

Australia, from Carpentaria to Spencers Gulf. Along these

routes high-quality goods such as pearl and baler shell, red

ochre, axe heads, boomerangs, softwood for shields, and the

narcotic tobacco, pituri were traded. Although goods, sto-

ries, and ideas were exchanged across the continent, indi-

vidual traders did not travel the whole distance, Exchange

occurred at trade centers or markets, where people from sev-

eral regions met regularly, exchange rates were worked out,

and bargains agreed. Exchange also occurred at quarries andother sites where the manufacture of highly desired and

scarce goods occurred (Keen 2004).

The Makola Marketplace in Central Accra, Ghana

On Saturday, August 18, 1979, the Makola markets were

bulldozed into a heap of rubble. This was partly due to failures

in economic policy (widespread shortages, rampant inflation,

corruption, and incompetence) and the need for a suitable, vis-

ible scapegoat and partly a consequence of a common resent-

ment of the roles played by trade intermediaries, often

stigmatized as parasites by both farmers and consumers. Within

a week the traders were back, in the same place, but this timewithout a roof. Robertson (1983), in a detailed study of the mar-

kets and their role in the local economy, noted that the accom-

plishments of the traders have been triumphs of intelligence,

determination, and sometimes desperation (p. 490).

The Makola markets had evolved over centuries into a

sophisticated wholesale and retail market. Together with other

similar markets in Accra, the daily attendance of traders in

1966 was more than 25,000, and some 70 percent of the food

for Accra passed through the markets (Lawson 1971). The

228 SEPTEMBER 2007




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traders, mostly women, sold small quantities of fish, vegeta-

bles, grains, canned foods, and some household items in over-

crowded, dusty conditions. Many traders were both retailers

and wholesalers and in some instances were also producers or

manufacturers. All were intermediaries, linking farmers or

producers scattered across the country with consumers in

Accra. Illiteracy among the traders was high, business recordswere kept in the head, informal property rights to specific stall

spaces had been established, and some respected merchants,

called queen mothers, filled the role of commercial judges.

Credit was essential and bad debts common. Innovation was

difficult, especially if it involved investment, as capital was

scarce and interest rates high.

The Aalsmeer Flower Market

The cooperative flower markets in the Dutch village of

Aalsmeer are the largest in the world and a significant hub

in the global trade in flowers. An average of 19 million

flowers and 2 million plants change hands every day within

a surface area of 1 million m2. These are supplied by more

than 6000 growers world-wide, and bought by 1100 whole-

salers and exporters. Within a couple of hours they are

exported to almost every country in the world. Aalsmeer

Flower Auctions market share is 44%. Our 1991 employees

achieved an annual turnover of almost 1.6 billion Euro in

2003 (Bloemenveiling Aalsmeer2006).

Auctioning at the market uses the Dutch Auction system.

A large clock runs from the highest to the lowest price, which

is always per unitthat is, per single flower or plant. The

buyer sees the lights around the clocks edge, indicating the

current price, which run backward from one hundred to one. Ifa buyer wants to buy a product at a price that is acceptable, he

or she quickly pushes a button and the clock stops at the

desired price. If the number of the buyer appears on the clock

face, it means that the buyer was the first to stop the clock and

therefore is the buyer. At the same time, he or she tells the auc-

tioneer, using his or her headset with microphone, how much

of the consignment he or she wants to buy (the auctioneer

determines the minimum amount). The details of the transac-

tion are immediately entered in the central computer, from

which the transaction information is sent to the buyers laptop,

to the invoice system of the market, and to the system that

determines payment to the growers. In this way, 1,500 transac-

tions are processed per hour (Bloemenveiling Aalsmeer2006).

Ito-Yokada and the 7-Eleven ConvenienceStores in Japan

It is late at night and commuters are streaming out of a sub-

urban railway station in Tokyo heading for home. Many, how-

ever, stop first at a brightly lit 7-Eleven store, where they can

buy a late dinner chosen from a wide array ofbento boxes and

onigiri rice balls delivered fresh within the past few hours.

Others are paying bills, buying concert tickets, choosing

clothes, or perhaps settling water, gas, and electricity bills.

In 1973 Toshifumi Suzuki established the 7-Eleven store

concept in Japan under license from Southland in the United

States. The concept was ideal for Japan, with a dense urban

population, tiny kitchens, little storage space, crowded

roads, and myriads of small mom and pop stores. By 2003there were 9,800 such 7-Eleven stores, about 25 percent of

all combini or convenience stores, each carrying around

3,000 items or lines. The success of the 7-Eleven concept in

Japan was such that in 1991 Ito-Yokado, under the leader-

ship of Suzuki, bought 70 percent of the American company.

Suzuki adopted a market dominance strategy, clustering

stores in select areas. Franchises were offered to local stores,

reducing funding requirements and allowing stores to be

located in the best positions. Franchises benefited from

access to a huge product range, strong buying power, coor-

dinated deliveries, and advice from field counselors.

Distribution within each select area was outsourced to cen-

tralized warehousing and trucking firms, with deliveries

coordinated by temperature to reduce spoilage. Marketing

costs (primarily TV) were reduced through the concentra-

tion on select regional areas.

Underpinning this complex structure was a highly sophis-

ticated information system. The company in 2003 was track-

ing sales in every store with a point of sale terminal that

included a customer register and using satellite-based order-

ing that provided detailed weather forecasts to allow store

managers to know whether to order more hot noodles or fresh

vegetables. Codevelopment links were established with man-

ufacturers to improve quality and facilitate new product

development on an exclusive basis. The key to the 7-Elevensuccess lies in the innovative management of information

flows. As Suzuki noted, We are not in the retail business but

rather the information business (Weill and Vitale 2001: 224;

see also Ishikawa and Nejo 1998; Time Asia 2003).

SalaulaSecondhand Clothing in Zambia

It is a hot, brain-stiflingly humid afternoon in the remote

Zambian city of Chipata. In a nameless alley on the outskirts

of a large open-air market, an extraordinary scrum is going on

at my feet. Around forty women are stooping over a pile of

old clothes, pulling out shirts and tops, and tossing them this

way and that with appreciative squeals. Mary, the stallholder,

has just slit open a fresh bale of garments all the way from

England. (Durham 2004)

The writer, Michael Durham, a reporter for The Guardian,

was tracking a blouse that two months before had been hang-

ing in a closet in Leicester in the United Kingdom.

From a charity bin near Leicester, the blouse went to a

rag merchant, RagTex, who collected the garments left in

the bin for the charity, paying the charity an annual fee for

the opportunity. RagTex, which handles ninety-five tons of

JOURNAL OF MACROMARKETING 229




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old clothes a week, sorts and bales the clothes for dispatch

around the world. From Leicester, the blouse went to Beira

in Mozambique, once a center for gold, copper, slaves, and

ivory and now a hub in the old clothes commodity trade. Its

destination was Chipata, where the dealer, Khalid, who had

bought the bale from the rag merchant, was located. He buys

up to twenty container loads a year from RagTex and sells tosmall traders who travel up to 150 kilometers out of the

African bush. He finds that English clothes are the best and

American clothes are usually worn out. His shop is a bare

whitewashed unit with bales stacked against the back wall

and a wooden counter to the side where he sits, his knees

drawn up, overseeing affairs (Durham 2004).

The bale with the blouse from Leicester was marked on a

blackboard for sale at $250. Several buyers showed some

interest, but only one, Mary, had the cash. A porter picks up

the 45kg bale and sets off down the street, fords a stream,

climbs a small hill, and dumps the bale at Marys stall.

Salaula, a Bemba word meaning to rummage in a pile,

begins and the blouse is bought by Priscilla, a domestic sci-

ence teacher, for about $2.50. New, it had sold a year or so

before in the United Kingdom for around $75 (Hansen

2000; The Guardian 2004).

These examples are chosen to illustrate the diversity of the

contexts within which marketing systems can be found. Each

is an example of a wider set of similar systems. Trading net-

works have been found in many early hunter/gatherer soci-

eties and have played an important role in the economic

evolution of these communities (Sahlins 1974). The Makola

market is just one example of the peasant markets,pasars or

bazaars, found in developing countries that often continue to

play an important role as an informal counterpart to a modernsector. The Dutch flower market at Aalsmeer highlights the

increasing sophistication of trading mechanisms, which have

their roots in traditional bargaining and are today at the core

of markets ranging from eBay in cyberspace to the public auc-

tion of electromagnetic spectrum rights to the operation of the

stock exchanges in financial markets. The 7-Eleven experi-

ence in Japan takes us back to the more traditional concerns

of managerial marketing, with a focus on strategic choice and

strategy implementation in a competitive environment,

shaped by social, economic, and political change. And

salaula generalizes to any of the derivative or secondhand

markets associated with primary flows of cars, computers,

and household goods, markets that may take on new signifi-cance in a world where sustainability is increasingly critical

(Kilbourne, McDonagh, and Prothero 1997).

Assuming for the moment that each is indeed an example

of a marketing system, the questions have to be asked:

What is common to all of these and similar examples? and

What is it that marketing is able to contribute to an under-

standing of these systems and their role in a broader social

or economic context that cannot be contributed by other

cognate disciplines?

WHAT THEN IS A MARKETING SYSTEM?

A working definition might run as follows:

A marketing system is a network of individuals, groups,

and/or entities linked directly or indirectly through sequential

or shared participation in economic exchange that creates,

assembles, transforms, and makes available assortments of

products, both tangible and intangible, provided in response

to customer demand.

As noted earlier, a marketing system may initially be spec-

ified or modeled at one or more levels of aggregation, where

the entities composing the network are themselves marketing

systems. Deciding which entities (individuals, groups, busi-

nesses, and networks) are to be included is an essential step in

system specification or modeling, where the choices made

define system boundaries and identify inputs and outputs.

These choices also determine which individuals, groups, or

entities are to be regarded as endogenous (behavior deter-

mined within the system) or exogenous. This may be particu-larly important in choosing whether suppliers or customers

are to be included or excluded from a system specification.

The outputs of a marketing system are assortments. In this

context an assortment is a set of products, tangible and intan-

gible, differentiated by attributes, by location in space and

time, or by factors such as cost, price, or quality. A physically

identical product, offered for sale at two different locations or

at different points in time or at different prices, might,

depending on the level of aggregation, be treated as two dis-

tinct members of an assortment. Not all participants in a mar-

keting system will have access to the full assortment

generated by the system. An accessible assortment then is

specific to each participant in the marketing system and may

vary by place and time. The existence of a difference between

an accessible assortment and a desired assortment is a major

factor influencing the efficiency and effectiveness of a mar-

keting system, and the inability of some (marginal or vulner-

able) participants to access a desired assortment is a major

source of concern on equity grounds (Hill 2004). From the

point of view of a participant then who may see only part of

the wider assortment generated by the marketing system, per-

ceptions of the variety offered by the accessible assortment

are important factors influencing purchase decisions (Hoch,

Bradlow, and Wansink 1999; Van Herpen and Pieters 2002).

Variety, in this setting, is one aspect of the value or potency ofthe assortment held by a participant (concepts introduced by

Alderson 1965 and explored in some depth by Houston,

Gassenheimer, and Maskulla 1992).

Economic exchange refers to exchange transactions that

are voluntary, in that each party has a power of veto and

freely agrees to the terms, and that involve an economic quid

pro quo. As Alderson (1965) noted, exchange will occur if

both parties are able to improve the value or potency of the

assortments each hold as a result. To the extent that interest

230 SEPTEMBER 2007




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centers on the buyer-seller transaction per se, the linkage in

the marketing system is direct; where interest extends

beyond the immediate transaction to the wider context in

which it occurs, where participants in the transaction bene-

fit from shared costs, risks, infrastructure, or information,

shared across many sellers and buyers, the relevant linkages

are indirect as well as direct. In either case, the strength ofthe linkages may range from the transitory or casual to long-

term relationships reflecting shared social, economic, or

political interests or commitments.

A market is a forum for carrying out such exchanges

(McMillan 2002) and will often in itself constitute a market-

ing system. Although a market may simply emerge as a con-

sequence of a flow of exchange transactions over time, it may

also be considered to be a social construction that can be sub-

ject to purposeful design. McMillan (2002) suggests that mar-

ket design would be concerned with the mechanisms that

organize buying and selling; channels for the flow of infor-

mation; state set laws and regulations that define property

rights and sustain contracting; and the markets culture, its

self-regulating norms, codes and conventions (p. 9). The

Internet is a contemporary example of the problems associ-

ated with design in an emerging market, where many of the

design issues noted by McMillan have yet to be resolved

(Weill and Vitale 2001). Here, as in other markets where, for

example, intangible rights are traded, technology is creating

new contexts for marketing systems and raising new ques-

tions as to effective and efficient design.

A marketing system will often link many such markets in

the creation, assembly, transformation, and dispersion of

assortments in response to customer demand. It is possible that

the marketing system may arise in a reverse format, whereused goods are collected and recycled or otherwise eliminated.

The relationships between the markets comprising a marketing

system may be horizontal (e.g., shopping malls, main street,

periodic markets, or geographically dispersed but related mar-

kets) and/or vertical (e.g., as in vertically integrated businesses,

supply chains linking manufacturers, franchise systems, and

retailer dominated systems). This points to at least three ways

of looking at a marketing system: the first being a horizontal

or cross-sectional view (the shopping center or mall perspec-

tive; Pryor and Grossbart 2005a), the second following

through the successive stages in a system (the vertical per-

spective; e.g., Mittelstaedt and Stassen 1994) leading to the

Aldersonian concept of a transvection, and the third a mappingof the systemic changes that occur over time (the historical

perspective; Braudel 1979; North 2005).

As Alderson (1965; Wooliscroft, Tamilia, and Shapiro

2006) suggests, markets may be discrepant in that products

desired by customers as part of an accessible assortment

may not be offered, or products are offered that are not

sought by customers. Where this occurs, markets become

dynamic, with assortment changing over time as suppliers in

the system add new products and delete existing products.

Equilibrium in this context is an unlikely phenomenon.

Perhaps the closest approach to this may be found in the

Zen-like quality of life said to be found at one stage among

the Bushmen people of Namibia (Sahlins 1974). In a world

where technology, economic, and social change are almost

universal, discrepant markets are commonplace, and assort-

ments will be continually changing. This raises the interest-ing question: Under what circumstances will the variety of

an assortment generated by a marketing system remain con-

stant? Is it perhaps inevitable that assortments generated by

a marketing system will over time widen and deepen, con-

fronting us with the paradox of (unwanted) choice

(Schwartz 2004) in a world where sustainability is an

increasingly urgent concern?

Whether a marketing system is considered at a point in

time or over time, it is always part of and conditioned by an

environment that provides the essential infrastructurethe

social, political, and economic frameworksthat although

often taken for granted make possible the functioning of the

system (Dixon 2002). An appreciation of the importance of

these frameworks has been strengthened by the work of eco-

nomic sociologists such as Lie (1997), Smelser and Swedberg

(2005), Fligstein (2001), and White (2002). Although econo-

mists have tended to see participation in a marketing system

as a consequence of rational choice processes, economic soci-

ologists have been concerned with the politics of power, with

the importance of social networks, with the cultural impacts

both of the system on the culture and vice versa, and with the

flows of information within the system.

FLOWS IN MARKETING SYSTEMS

Fisk (1967), drawing on the earlier work of the functional

and institutional schools in marketing, identified five dis-

tinct flows associated with the operation of a marketing sys-

tem. These are the flows of ownership, possession, finance,

risk, and information (for an earlier and slightly larger list-

ing, see Vaile, Grether, and Cox 1952). Underpinning these

flows are elements of an economic, social, cultural, and

physical infrastructure. Ownership may or may not transfer

within the channel depending on the nature of the products

involved. Aboriginal trade may involve access to inalienable

assets, such as land, water, or food sources, without granting

ownership rights; in contemporary markets, leasing is com-mon, and the problems associated with the transfer or

preservation of intellectual property are well known. Codes

of conduct, cultural norms, and legal rules are essential ele-

ments in defining ownership. As Pryor (2005) notes, rules

of property are found in human societies at all stages of

development (p. 8). Possession may or may not coincide

with ownership and adds a logistics dimension (transport,

storage, transformation, display, and dispatch) to the opera-

tion of a marketing system. Physical infrastructure is an





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essential element in the flow of possession and does much to

determine efficiency and effectiveness. The Food and

Agriculture Organization of the United Nations (FAO), for

example (Abbott 1963, 1968), has been concerned for many

years with logistics issues in developing countries, such as

the loss of rice in a complex distribution system because of

storage and transport defects (see also Etgar 1983).Underlying most if not all exchange in monetized markets

is a flow of finance. From the bank pasar in Indonesia (Dewey

1962; Alexander 1987) to the back alley informal banking

networks of China (Tsai 2002) to the microfinance networks

of banks such as the Grameen Bank in Bangladesh (de

Aghion and Morduch 2005) to the routine financing of inter-

national trade at the present time, credit for producers, traders,

and customers is an essential part of the operation of a mar-

keting system. Closely linked to but separate from the flow of

finance is the management of risk within the marketing sys-

tem. This can be handled through the careful selection of trad-

ing partners and the creation of reciprocal relationships on

social or economic grounds (e.g., guanxi in Chinese business

networks, relationship management in Western marketing, or

a considered choice between cooperation and competition) or

more formally through insurance and risk management.

The last of the five flows is concerned with the flow of

information in the marketing system. Although less than

perfect information is the norm for most transactions within

a marketing system, asymmetric information is seen as a

problem. This arises when some of the parties to a transac-

tion are better informed than others and are able to favorably

influence present or future outcomes. Where the costs of

being wrong are high, specialist providers emerge to man-

age information flows. Advertising agencies, marketresearch firms, public relations specialists, search agencies,

venture capitalists, and government bureaus are some of the

ways that deficiencies in information flows are addressed.

The diffusion of information through social networks con-

tinues to be a major area of research in marketing, behav-

ioral economics, and economic sociology.

RESEARCHING MARKETING SYSTEMS

One of the best known classifications is that due to

Polanyi, Arensberg, and Pearson (1957), who suggested that

the social problem of providing people with desired assort-ments could be solved in one of three ways: (a) reciprocity,

usually involving families, kinship groups, or neighbor-

hoods; (b) redistribution, usually through allocations made

by a central authority; and (c) exchange, in which distribu-

tion is achieved through price making in markets. Of these

it is the third that is of most interest here, although clearly

both reciprocity and redistribution play an important role in

the community interactions along a trade route, and a redis-

tributive model is critical to a central planning society.

Swedberg (2005), adopting a semihistorical approach

based on economic sociology, identified six different social

configurations: external markets, internal markets, markets

for merchants, national markets, modern mass markets, and

international markets. External markets emerge where the

only trade permitted is trade between neighboring commu-

nities, typically along trade routes. Reciprocity or redistrib-ution prevail within each community. Internal markets begin

to develop when community members trade with each other

and not just with foreigners, drawing on local producers for

the bulk of traded goods. The Greek Agora (Dixon 1995)

and countless other local or community markets provide

examples. In these markets, specialist roles emerged, such

as the agoranamoi in Athens, who had a responsibility to

ensure fair dealing, money changers, and bankers, together

with specialist traders in fish, vegetables, wine, and count-

less other products. Markets for merchants developed as

markets drew on more distant sources for goods to be traded.

In these markets, specialist merchants with links in many

markets provided much of the variety and interest.

The many early and medieval European fairs in the region

between Flanders and Italy and the great markets in Canton are

examples of the intense commercial activity that characterized

these occasions. In Europe, the lex mercatoria became wide-

spread, bills of exchange facilitated trade, and reputation and

trust became crucial to participation. Power flowed with

money and the merchants became increasingly influential.

Guilds tightly controlled who was allowed to produce and sell

in the markets. A national market only emerged as the State

began to challenge the forces preserving fragmentation, estab-

lishing a foundation for a great burst of industrial development.

This challenge, together with innovations in communication,travel, and transport, created genuine national markets and led

in the next phase to the emergence of the mass market, where

competition replaced medieval regulation as the basis

for trade. Mass production technologies, mass distribution

through new channels of distribution, mass communication,

and the emergence of the multidivisional enterprise all con-

tributed to the modern mass market. Finally Swedberg points

to the internationalization of markets, where national markets

become increasingly interdependent.

Both the Polanyi and Swedberg classifications deal prima-

rily with markets. However, the interest here is in marketing

systems, and with this in mind, it is necessary to go further

and explore four key aspects or dimensions of such systemsincluding the economic and social structure of the linkages

characterizing a (suitably specified) marketing system, the

possible existence and relevance of parallel or linked market-

ing systems that need to be considered, whether the primary

focus is on the marketing system as a whole or on one or more

specific components (such as locations, participants, roles, or

flows), and the distinctive characteristics of the relevant sys-

tem environment, both specific and generic, that might influ-

ence the interaction between system and environment.

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Before commenting on these key aspects of a marketing

system, a further complication should be noted arising from

the possibility, as El-Ansary and Liebrenz (1981) and,

somewhat later, Dixon and Wilkinson (1989) point out, of

systems being defined at differing levels of aggregation. The

latter authors suggested seven levels of aggregation derived

from a nested hierarchy of systems of action in which sys-tem levels are differentiated in terms of their functions . . .

(in which) . . . lower level outputs are the inputs for higher

level systems (p. 64). Their classification began with indi-

vidual marketing roles, then to households and firms, mar-

kets, unit flow channels, transvection channels, transvection

channel groups, and marketing systems.

An effort to characterize a marketing system could then

apply to marketing systems involving households and firms

(the second level of aggregation) and higher, with the char-

acterization changing at each level. The specification of

nodes (individuals or entities) can change, with higher-level

nodes being lower-level systems. For example, a study of

fresh food marketing systems might at a high level center on

the roles and relationships between retail chains, major man-

ufacturers, wholesalers, produce markets, and producer

groups. Dropping down a level, interest might center on the

complex supply chains established by a major retailer, or by

a manufacturer, or on the interactions between the many par-

ticipants in a produce market. At the next level down, the

focus might be on a specific product category, where the rel-

evant marketing system (a node within the supply chain or in

a produce market) might be specified in terms of a pattern of

committed relationships between individual firms as produc-

ers and/or buyers.

One important consequence of this point of view is that thetask environment of a decision maker at one level is often

dominated by the attributes of the marketing system at the next

higher level. This points the way to a fresh approach to envi-

ronment that moves away from simple lists of factors to be

considered to a conceptualization based on an understanding

of marketing systems at different levels of aggregation, one

that draws not only on macromarketing but also on work in

economic sociology concerned with the idea of a field and on

the continuing interest in the strategic management literature.

Returning to the four questions noted previously, we con-

tinue to our next sections.

1. What Is the Essential Economic and SocialStructure of the Marketing System?

Implicit in a response to this question is a determination of

the boundaries of the marketing system (what is inside and

what outside), an identification of the participating entities

(individuals, organizations, and marketing systemsdepend-

ing on the levels of aggregation involved), and a specification

of the linkages between or among these entities. Working

from these modeling choices, four alternative patterns can be

identified: pure exchange, structured exchange, centralized

exchange, and networked exchange. Pure exchange, as the

name suggests, includes exchange along trade routes where

the assortments in existence at each point or trade center are

added to, transformed, or reduced. It also includes the internal

markets identified by Swedberg (2005), where trade occurs

not only between but also within communities, often in cen-tral places such as a pasaror bazaarand usually involving

local producers, traders, and customers. Bargaining is com-

mon and money may or may not be in use. In structured

exchange, specialized intermediaries emerge, in response to

transaction economics, to fill stable roles in the system, pro-

viding social and economic structure and standardizing the

processes underlying the flow of transactions. Examples

include the markets for merchants identified by Swedberg, the

Aalsmeer flower market, Internet auctions, and the large

wholesale/retail produce markets found in most major cities.

In a centralized exchange system, economic or political

power is used to direct flows of transactions in ways that

contribute to the goals of the entity exercising power. The 7-

Eleven case described earlier is an example; so too is the

complex distribution structure created for the distribution of

Hindustan Lever products in India (Prahalad 2005). Most

vertical marketing systems fall into this group, from simple

structures involving a manufacturer/retailer relationship to

the complex supply chains established by leading retailers

such as Wal-Mart in the United States or Woolworths in

Australia. Other important examples include the interna-

tional franchising activities of brands such as Starbucks or

McDonalds (C. J. Thompson, Rindfleisch, and Arsel 2006).

In networked exchange systems, the focus is on the rela-

tionships linking individuals and entities in the marketingsystem, relationships that underpin the flows of transactions.

The strength of each relationship reflects the economic and

social investment made in the relationship by the parties

involved. The network as a whole (the individuals and enti-

ties that act as nodes and the links or ties between these

nodes) has a structure where power or authority flows from

position within the network and which is an important deter-

minant of overall capacity to respond to external challenge

or change. Cooperation and competition may coexist in net-

worked exchange as individuals and entities (including cen-

tralized exchange systems) seek to build on existing links or

to form new links with current or potential participants.

Networked exchange systems emerge as individuals andentities begin to realize the benefits arising from carefully

managed relationships built around economic, social, or cul-

tural links. Access to assortments, matching flows of infor-

mation, finance, and risk, to infrastructure and resources, are

all benefits that flow to well-connected network partici-

pants; the disadvantages to the marginal, weakly connected

participants are simply excluded from the benefits of partic-

ipation. For this group, where differential access is an

important concern, out of sight may also be out of mind.





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Examples range from salaula, the marketing system for

secondhand clothing in Zambia, where small-scale networks

of African agents and U.K. or U.S. merchants compete in local

city markets, to the broader apparel industry where small- and

large-scale networks of firms have existed for hundreds of

years. A small but successful Australian importer established a

strong network of Chinese firms who will manufacture textilesand clothing to quality-controlled specifications for the

Australian market. Li & Fung, a Hong Kong trading company,

established for more than one hundred years, has links with

more than 8,000 suppliers/manufacturers in more than forty

countries and acts as a supply chain coordinator for retailer

customers, arranging for each stage of manufacture to occur in

the most favorable location, responding to political and eco-

nomic change by shifting production within the system.

In many cases, a networked exchange marketing system

has as major nodes centralized exchange systems and is char-

acterized by intense competition between nodes and coopera-

tion within each nodal system (for a detailed discussion of

networks in marketing, see Wilkinson 2001). The airline

industry, automobile manufacturing and retailing, the banking

industry, universities, entertainment, and media and communi-

cation are just some of the major sectors that today constitute

networked exchange marketing systems. The nodal marketing

systems, which as noted previously may often be classified as

centralized exchange systems, might also be classified as net-

worked exchange systems, depending on the extent of the eco-

nomic or political power exercised. Whether centralized or

networked, the nodal systems could also be thought of as busi-

ness ecosystems (Thorelli 1986; Moore 2006; Iansiti and

Levien 2004), drawing on the concept of a biological ecosys-

tem. Accordingly, a business ecosystem can be thought of asmade up of a large number of loosely connected participants,

acting as a community, each relying for mutual effectiveness

and survival on each other through a complex web of interde-

pendencies. In most successful ecosystems, the appearance of

richly connected hubs, at all scales, is almost inevitable

(Iansiti and Levien 2004: 9). They go on to note that these

hubs take the form of active keystones whose interests are

aligned with those of the ecosystem as a whole and who serve

as critical regulators of ecosystem health (p. 9). As Moore

(2006) comments, the ecosystem form of economic coordi-

nation has become pervasive on the business landscape.

Business ecosystems surround, permeate, and reshape markets

and hierarchies. Managers establish business ecosystems tocoordinate innovation across complementary contributions

arising within multiple markets and hierarchies. The activities

of business ecosystems set the agenda for co-evolution of mar-

kets and hierarchies and their outputs (p. 32).

2. Are There Relevant Parallel or Linked MarketingSystems that Should Be Considered?

Parallel marketing systems are found where structurally

distinct marketing systems coexist in serving the same or

similar sets of needs. Examples include food marketing sys-

tems where an informal marketing system parallels a formal,

modern supermarket system; the Other Path described by

Hernando de Soto (2000) in his study of the shadow econ-

omy in Lima; the parallel development of state-owned and

private enterprise distribution systems; the growth of cyber-

space marketing alternatives to the bricks and mortar of theshopping mall that was in turn an alternative to the local

mom and pop stores; and the uneasy relationship between

the marketing of new and secondhand automobiles. In each

of these examples, the existence of the parallel system is

sanctioned by the community (or state). Other examples of

parallel systems that may lack community support include

gray markets involving unauthorized distribution channels

and black or criminal markets for goods and services that for

one reason or another are restricted or banned.

In many of these situations, the relation between the par-

allel systems is changing, with one gradually supplanting

the other. This is the case with the introduction of super-

market retailing in many countries such as Indonesia, where

some 70 percent of food sales are through the traditional or

informal network ofpasars and small local stores, similar to

those noted previously in Accra. In China, both the state-

owned distribution system and the informal system that

came into being as markets became accepted are being grad-

ually replaced by supermarkets, with the old wet markets

being auctioned off to regional supermarket chains.

Parallel systems often differ in terms of economic and

social structure. The traditional or informal marketing sys-

tem may be best characterized as pure or structured

exchange, whereas the emerging system is likely to begin as

a structured exchange system and rapidly evolves into a cen-tralized or networked system. The flows of possession, own-

ership, finance, risk, and information are also likely to be

very different depending, for example, on whether the sys-

tem excludes or is expanded to bring in small, isolated

farmer/producers and customers who may lack experience

with the supermarket format.

3. Is the Focus on the Marketing System as aWhole or on One or More Components?

In each of the examples outlined earlier, the focus was on

a marketing system as a whole. In many research settings,

however, the focus is necessarily narrowed to one or moreaspects or components of the system. Specific studies might

be concerned with one or more of the flows that are essen-

tial to the operation of the marketing systemflows of own-

ership, possession, finance, risk, and information. Although

the flow of ownership and/or possession is often the starting

pointfrom traded objects in aboriginal trade routes to cut

flowers to secondhand clothinga full understanding of the

primary system requires consideration of the interface with

each of the secondary systems associated with the flow of

ownership, possession, finance, risk, and information.

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For example, in the salaula marketing system, the primary

focus was on the exchanges generating the flow of second-

hand clothing in Zambia. Important secondary systems are

those associated with the physical logistics of the primary sys-

tem or with the provision of finance to participants or with the

flows of information needed to bring buyers and sellers

together or with the varying needs of participants to managethe risks of the transactions or finally with the legal and other

participants who determine ownership at each stage. Failure

or breakdown in any of these secondary systems would affect

directly the operation of the primary system. It follows that a

full description of the primary system must also spell out the

ways in which each of the flows is managed. Hansen (2000)

does this for salaula in her richly detailed study.

In practice many of the studies that are of interest will

focus on system components at varying levels of detail.

These include the study of a transvection (e.g., the travels of

a t-shirt, reported by Rivoli 2005), of a market that is part of

a wider system (the Aalsmeer flower market), of ownership

and possession in supply chains (Reddy and Reddy 2001),

of the flow of finance supporting a market (e.g., bank sav-

ings in Ghana; Dadzie, Akaah, and Dunson 1989; informal

back alley banking in China, Tsai 2002), or of information

in social networks (e.g., the role ofguanxi in Chinese busi-

ness networks; Gold, Guthrie, and Wank 2002), the function

of significant intermediaries (e.g., stock and station agents

in rural distribution in Australia and New Zealand; Ville

2000), and the politics of distribution (Palamountain 1955;

Hutt, Mowka, and Shapiro 1986; Cordell 1993). Some, like

many of those mentioned, will be concerned with the system

or system components at a point in time, and others will

focus on system change or dynamics. Examples include theemergence of a marketing system (e.g., the transformation

of a freshwater fishery in China [Wang 2005]; changing pat-

terns of competition [e.g., Moore 1996] on the death of com-

petition [Prahalad and Ramaswamy 2004] on the

redefinition of markets in a world where the roles of the firm

and the customer converge to cocreate value), the operation

of reverse channel networks (Barnes 1982; Fuller, Allen, and

Glaser 1996), the emergence of trading networks in P.O.W.

camps (Radford 1945) to studies where the focus is on col-

lapse and recovery (Shultz 1997; Shultz et al. 2005).

4. What Are the Distinctive Characteristicsof the Relevant System Environment, BothSpecific and Generic?

As noted earlier, an essential starting point in the study of

a marketing system is a determination of the boundaries of the

marketing system (what is inside and what is outside), an

identification of the participating entities (individuals, organ-

izations, and marketing systemsdepending on the levels of

aggregation involved), and a specification of the linkages

between or among these entities. Implicit in these determina-

tions is a specification of the environment of the system,

sometimes taken as a given but always important in shaping

the past, present, and future of the marketing system.

Just where the relevant system stops and the environ-

ment of the system begins is often difficult to decide.

Boundary definition could and perhaps should be consid-

ered as a fuzzy concept, with participating entities and link-

ages sometimes in and sometimes outside the system.However the systemic boundaries are specified, macromar-

keting interest is clearly identified with an exploration of the

interactions between the system and its environment and

with the way these interactions are influenced by the struc-

ture and dynamics of the environment itself.

An exploration of environmental structure and dynamics

could center on specific characteristics (such as the physical,

institutional, economic, and social setting; North 2005) or on

generic characteristics (such as stability, growth, and turbu-

lence). The need for a detailed understanding of the specific

environmental factors affecting a marketing system is in a

sense obvious and an essential precursor to the abstractions

involved in a generic analysis. At a national level, Carman and

Dominguez (2001) provide a detailed assessment of the links

between marketing system transformation and characteristics

of the institutional environment, highlighting the need to

reduce market distortions and reform provisioning systems. In

their analysis, the devil is in the detail. An alternative

approach at an abstract level might explore the links between

national or regional marketing systems and generic character-

istics, such as stability and turbulence, suggesting perhaps that

traditional exchange works well under stable conditions, while

networked exchange is likely to emerge where there is envi-

ronmental turbulence and uncertainty (Urry 2003).

MODELS, ATTRIBUTES, AND MEASUREMENT

Models of marketing systems have tended to fall into two

broad groups, the first being descriptive models of an exist-

ing system usually based on intensive and detailed field

analyses (e.g., book-length studies such as those by Goldman

1963; Hansen 2000; Tsai 2002; Wang 2005; Hohnen 2003;

papers such as those by Speece 1990; Etgar 1983; G. Porter

1996; the channel mapping studies of Harrison et al. 1974;

the ethnographic main street studies of Pryor and Grossbart

2005a, 2005b, forthcoming) and the second including the

many detailed studies of agricultural marketing systemsundertaken over the years by the FAO, USAID-funded

research (such as the Latin America Marketing Project

[LAMP] studies from Michigan State University), the World

Bank and the Asia Development Bank, research centers such

as the Australian Centre for International Agricultural

Research, and many others. Also included in this group of

descriptive models are the detailed comparative studies of

economic sociologists such as Pryor (2005); historians such

as Braudel (1979), Brotton (2002), and Jardine (1996); and

in this field the work of marketing historians such as Shapiro





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and Doody (1968), Dixon (1995), Darian (1985), Hollander

et al. (2005), Mittelstaedt and Stassen (1994), and Witkowski

(1994). A third group of studies that might also be included

are those reporting contemporary marketing systems, often

from the distinctive points of view of disciplines, such as

strategic management, economics, architecture, and sociol-

ogy. Examples include studies of the new market space cre-ated by the Internet (e.g., Weill and Vitale 2001; Barwise,

Elberse, and Hammond 2003), work on health delivery sys-

tems in different settings, creating urban market centers in

city planning (Calabi 2004), and research into social net-

works (Gold et al. 2002). Although this work is scattered

across many quite different disciplines, each study could

add to the understanding of a marketing system. Recognizing

this and acting on it is a major challenge to this discipline of

macromarketing.

The second broad group of models of marketing systems

are more analytical in nature and range from relatively sim-

ple graphical models showing variables linked in a graph or

flowchart to more formal mathematical models of systems

such as those derived from graph theory (e.g., Casti 1995) or

calculus (e.g., White 2002; Ingene and Parry 2004) to com-

puter simulations (e.g., Arquitt and Cornwell 2005) to

abstract models drawing on work in game theory (e.g.,

Richartz 1970) or complexity science (e.g., Wilkinson 1990)

to aggregate studies where sector- or economy-wide models

are built using variants of input/output and trade flows

analyses (e.g., Layton 1981a, 1981b, 1985). In each of these

model types, interest might center on the possibility of sys-

tem equilibrium or, more often, on dynamic properties such

as path dependence, system growth, and possible collapse

(e.g., Arthur 1994). In each model type, the modeling maybe abstract, looking at ways in which system attributes

might affect system behavior over time, or it may be empir-

ical, concerned with both understanding and prediction for

real-world marketing systems.

Once a marketing system is suitably specified and mod-

eling begins, interest usually turns to a study of relevant sys-

tem attributes, inputs, and outputs. Early studies of system

attributes focused on the number of levels or members in the

system (Wadinambiatchi 1965), measures of concentration

of economic or social power (M. Porter 1980; Stern and

Reve 1980), and levels of distribution (Bucklin 1966, 1970).

Arndt (1979, 1981), Thorelli (1986), and Redmond (1989)

drew attention to the growing interest of managers in stabil-ity enhancement, noting the growth in domesticated mar-

kets and the importance of business networks that fall

between markets and hierarchies. Redmond (1993), in a

contribution to comparative marketing studies, used these

ideas and related literature to suggest five important struc-

tural attributes or dimensionscentralization, heterogene-

ity, stability, configuration, and scaleand went on to

propose eight plausible links between these various attrib-

utes, which could be the subject of further research. More

recently, drawing on work in social networks, graph, and

complexity theory, a number of system attributes have been

suggested. These include centrality, strength of ties, local

versus global, power, complexity, embeddedness, distance,

density, and degree of separation.

The study of system outputs goes directly to the study of

assortment and more generally to quality of life (Lee andSirgy 2004; Leelakuhlthanit, Day, and Walters 1991; Sirgy

et al. 1991) and the nature and extent of externalities. In recent

years, assortment has been of interest, with contributions from

authors such as Hoch et al. (1999) and Van Herpen and Pieters

(2002). The focus here has been on entropy-based measures

of assortment at the level of the retail store, and it appears that

very little has been done to look at assortment from a market-

ing systems point of view. Width and depth are imprecise but

possible measures, limited by definitional issues arising from

inherent complexity. A possible way forward is suggested by

work in biodiversity, where measures based on the number of

species (species richness), the idea of entropy embodied in the

Shannon-Weaver diversity index and derivatives, and hetero-

geneity indices (similar to the Herfindahl index in economics)

and derivatives have been explored.

Measurement of these and other system attributes raises

yet another set of challenges. At the macrolevel, where

economy-wide statistics are available, Cox et al. (1965),

Layton (1981a, 1981b, 1985), and Sybrandy, Pirog and

Tuninga (1991) have constructed trade flow tables that pro-

vide broad insights into the nature and extent of marketing

flows. Despite access to official statistics, the resulting esti-

mates of flows are beset by specification and measurement

problems. Sector specification is usually linked to produc-

tion sectors, with distribution being relegated to a secondaryrole with little available detail. Flows through the marketing

system have to be inferred from data on prices and value

added. The links between trade flow models and input-out-

put models (both static and dynamic) have yet to be worked

through in any detail.

At all levels of aggregation, definitional issues dominate.

The choice of the system to be studied, definitions of bound-

ary conditions, nodes and link parameters, the extent of

drill down into system details, and extension to related

flow studies are some aspects of common specification that

are far from any standardization in macromarketing

research, to say nothing of the many studies that should be

part of this field but are judged at present to lie outside.

A SYSTEMS PERSPECTIVE

Returning now to the starting point, Hunts definition of

macromarketing placed the study of marketing systems at

the center of macromarketing thought. If the concept now

moves back to center stage, then in keeping with Hunts

definition, as one begins to study a marketing system, a

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macromarketing analysis will focus on one or more of the

essential elementsboundary definition and environment,

system nodes linkages and flows, system attributes and

properties, and the outcomes resulting from system activity.

Drawing on the earlier discussion, some examples of the

factors that might be considered in each of these categories

are set out in Table 1. In terms of Hunts (1977) definition ofmacromarketing, studies that focus on the outcomes or

impacts of a marketing system fall into his second category,

those that primarily concern the impacts of environmental

(in the broadest sense) factors on the working of a market-

ing system fall into the third category and those that con-

sider a marketing system, its components, attributes, and

properties fall into the first.

As an example of the way Table 1 might be used in fram-

ing a macromarketing study, consider questions that could

be asked about the emergence of cybermarkets as marketing

systems. System environment issues include scope, partici-

pants, governance, rules, and accepted behavior patterns. A

focus on components might center on transaction costs, the

roles played by the participants, the nature of their relation-

ships, the role of trust, and the trading mechanisms (such as

auctions), flows of information finance, and risk. A study of

system attributes and characteristics could lead to a consid-

eration of the source of value added, tradeoffs between

cooperation and competition, parallels with peasant market-

ing systems, and capacity for self-organization. A concern

with outcomes might lead to a study of market or trading

efficiencies, access issues, relative pricing, distributional

effects, potential criminality, and culture change.

IS DESIGN AN OPTION?

Two contemporary examples illustrate the potential

importance of design in the development of a marketing sys-

tem. A recent article by Spar (2006) asked whether there

was a market in human fertilitysperm, eggs, hormones,

surrogate mothers, embryos and concluded that there was

but that it was highly imperfect. High prices, undersupply,

undefined property rights, and equity issues were just some

of the difficulties. A second example, quite unrelated, arose

from the oil for food scandal that reached from the United

Nations to a major Australian supplier of wheat to Iraq and

involved many hundreds of millions of dollars in bribes.In both sets of issues, marketing systems have a role to

play. Is it possible to design marketing systems to meet

social or political standards of effectiveness and efficiency?

Is design an issue in the delivery of health services, in the

market for babies, in managing the consequences of an

imposed sanctions regime? Clearly a marketing systems

analysis is only a part, perhaps a small part, of the complex

social and economic concerns raised by these and similar

questions. However, do we have something to contribute?

McMillan (2002) addressed the question directly, arguing

that the design of markets (and, by implication, marketing

systems) has five elementsinformation flows smoothly;

people can be trusted to live up to their promises; competition

is fostered; property rights are protected but not overpro-

tected; and side effects on third parties are curtailed (p. 135).

He goes on to note that market designs most fundamentalquestion is, where should the scope of markets end? (p. 135).

The possibility of effective market design has been part

of macromarketing since the work of Slater et al. in the

LAMP studies in Latin America (Harrison et al. 1974). It

has been taken for granted by Abbott et al. at the FAO

(Abbott 1963, 1968), part of the United Nations, for more

than forty years now, in a wide-ranging series of studies

directed toward improving food marketing systems in many

developing countries. Prahalad (2005) showed how the bot-

tom of the pyramid could be reached through effective sys-

tem design, with examples ranging from Hindustan Lever

and the soap market in India to CEMEC in Mexico with an

innovative approach to housing for the poor to banking inno-

vations such as the ICICI Bank in India and the Grameen

Bank in Bangladesh. Arnould and Mohr (2005) added fur-

ther weight to the bottom of the pyramid concept in their

study of industry clusters using the example of leather work-

ers in West Africa. The promise of action research, where

the study is embedded in a change program, is being explored

by Spriggs and Chambers (2005) and his colleagues in Papua,

New Guinea, Cambodia, and Laos.

The need for effective design of marketing systems is not

limited to developing or transitional countries or regions.

Designing for sustainability is rapidly emerging as a major

challenge for the developed world. Advances in technologycreating virtual markets for intangibles that cut across

national boundaries are part of the design issues emerging

from the globalization of economic life. The need for effec-

tive regulation of marketing system growth and change is

widely recognized. These and similar challenges from both

the developed and developing economies add some urgency

to the interest in understanding marketing systems.

SYSTEM AS ENVIRONMENT!

The concept of the environment of an organization has

been part of the literature of organization theory, marketing,and more recently strategic management for many years.

Dill (1958) focused attention on the task environment, and

J. D. Thompson (1967) proposed that uncertainty seemed to

be the fundamental issue for complex organizations and that

dealing with uncertainty was the essence of the administra-

tive process (p. 159). In more recent years, the distinction

between the task and the wider institutional environment

was sharpened. A number of studies investigated the impact

of the institutional environment on organizational behavior,





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where the institutional environment could include interna-

tional, political, social, economic, and technological factors

or dimensions (North 2005).

The marketing literature from the mid-1960s adopted a

strongly managerial focus and, with an emphasis on the

marketing concept or marketing orientation, began to

238 SEPTEMBER 2007

Environment, boundaries, inputs, and initial conditions

Scope: global, national, regional, local; single product, multiproduct;tangibles, intangibles

Location: time, space; fixed, floating; physical attributesParticipants: international entities, nations, regions, firms, groups,

individuals; motivations, objectives, goalsAggregation: levels (nodes as subsystems), suprasystemsEconomic development: preindustrial, industrial, postindustrial;

static, transitional, modern, postmodernBoundary conditions: open, closed system; imposed, impliedRules: formal, informal; external, internal; enforcement; property

rights; entry, exitEndowment: tangible, intangible resources; physical, financial,

knowledge, social capital; technology levels and accessPatterns of behavior: traditional or modern marketing practice; tra-

ditional or modern customer/consumption patterns; perceptionsof marketing and marketing systems

Level of technology: low, high tech; simple exchange to eBay trad-ing; acceptance level

Cultural context: demography, religion, education, social structures,social change, government; impacts on individuals, groups; con-cern for minorities; history; morality perceptions; values (collec-tive or individual)

Incentives: formal, informalInstitutional setting: role of government, law, finance, risk, regula-

tory contextPolitical setting: stability, crisis, revolution, war, recovery; terrorism;

degree of predictabilityInfrastructure: transport, communicationPhysical environment: benign, changing, challenging; low risk, high

risk; risks known, unknownSystem environment: stable, changing, turbulent; simple, complex;

supportive, competitive, confrontational; predictable, probabilis-tic, uncertain

Components

Transaction and related costsNodes: subsystems, roles (e.g., traders or intermediaries, suppli-

ers, customers)Decision processes: options, choice, information, risk,

values/ethics; business modelsResource allocation across nodes: tangible, intangible; access

optionsExchange elements: physical products, services, experiencesLinkages: exchange, transactions, transvections; fixed, random;

precise, fuzzy; capacity constraints; physical, electronicRelationships: arms length, related; trust, guanxi, contractualFlows: information, goods, possession, risk, financeActivities: sorting, shifting (time, space), dispersing, transformingStakeholders: public, private; employee, consumerMarkets: bazaars, auctions; traditional, modern; bargaining, negoti-

ated, fixed price; physical, electronic; real, virtualSubsystems: marketing systems as subsystems; dual, parallel,

grey, black; distribution of power; interactions

Attributes

Static/equilibrium attributesNodes: number, distribution: size, resource/power access, linkages,

centrality, heterogeneity

Nodal relationships: nil, arms length; competitive, cooperative,associated, controlled

Linkage characteristics: fixed, random; cooperation/competition;cohesion/conflict; stability/change

Flows through linkages: transfers of information, ownership,possession, risk, finance; volumes, capacity levels; fixed, ran-dom; timing; response speeds

Nodal location of value added, profit allocationsConnectivity: level; thresholds; shortest, longest distance (channel

length); small world measures; dynamicsMicro- to macro-aggregation: summation, emergencePatterns, clusters, coalitions: existent, emergentStructure: hierarchical, network, swarm, cloud/null structure; open,

closed; planned, unplannedGovernance: central control, limited/mixed, networksDynamic/adaptive system attributesStability characteristics: response to small, moderate, large, cata-

strophic shockCapacity to learn, adaptEnvironment system linkagesEmergent characteristics: stress points, fractures, groupingsShifts over system participants, in resources, capital assets, powerComplex adaptive system attributes: self-organization, edge of

chaos, evolutionary responses, co-evolution, power lawsDegree of innovation: adaptive, evolutionary, disruptive

Outcomes

Characteristics: static, dynamic; shifts, jumps, discontinuities, muta-tion, change

Economic outcomes: Gross National Product equivalents, flowmeasures, value added, productivity measures, excess capac-ity; efficiency (partial, holistic, short term, long term)

Price structure (e.g., across nodes, levels, offers, by customer

groups), statistical distribution, dynamics (lags, variation overtime, space, etc.)

Customer satisfaction/dissatisfaction: acquisition, consumption,possession, maintenance, disposition

Distributional effects: access, income, consumption; existence ofinequity, remedies; ethics; power, conflict, crime

Institution building, growthResource allocation outcomes: capital (financial, social, etc.),

power, knowledgeQuality of l ife measures, impacts, by segment/groupCommunication systems: infrastructure, mediaCulture and social change effects: positive, negative; adaptive,

destructive; impacts on symbols and signs, on meaning, onstructure and fragmentation

Market and/or system failures, distortions, corruption, criminalityMarket dysfunctionalities: by groups, segments; access, exploita-

tion; vulnerable subgroups; pricing, information flows, access,assortment; safety, health

Physical infrastructure: markets, main street, shopping malls,cityscapes

Externalities: environmental impacts, waste, sustainability; rules;true costs; subsidies; quotas; compliance costs; cultural change

System design changes: institutional reforms, political implications

TABLE 1

RESEARCHING MARKETING SYSTEMS

SOURCE: Adapted from Layton and Grossbart (2006).




14/17

explore both the task and distant or institutional environ-

ments. For the most part, this exploration took the form of

lists of factors that managers should consider in decision

making. Kotler (1980) proposed five layers for the organiza-

tion environment. Outside the internal organization environ-

ment is a task environment that includes suppliers,

marketing intermediaries, and market. Another layer definesthe competitive environment, then a public environment that

includes government, media, financial, general, local, and

citizen-action publics. The last layer is a macroenvironment

that covers demography, economics, natural resources, tech-

nology, law and politics, and culture. The listing of environ-

mental factors proposed by Kotler included some specific

aspects not identified in the business policy and organization

theory literature, such as the media, financial markets, natu-

ral resources, politics, and the public.

The strategic management approach emphasized the

necessity to scan and assess the environment, to find a fit

between opportunities, organizational capabilities, and mana-

gerial desires. Typical of many similar studies, Daft,

Sormunen, and Parks (1988) found that the task environment

(customer, competitor, and technological sectors) often

changed faster than the general, or institutional, environment

(although recent experiences such as September 11 and the

Asian tsunami are obvious exceptions) and was therefore per-

ceived to be more important by executives. Their work intro-

duced a sectoral approach, including customers, suppliers,

competitors, political/legal, economic, technological, social-

cultural, and several environmental characteristics (i.e.,

change rate, complexity, and sector importance).

Looked at from the perspective of multilevel marketing

systems, perhaps the most important point to note is that thetask environment for a decision maker at one level (e.g., a

manager of an enterprise) is largely if not entirely deter-

mined by the properties of the marketing system in which

the business is embedded. The characteristics of the system

define the context in which the managers decisions will

take effect. The balance between competition and coopera-

tion, the nature and extent of corporate networks and

alliances, the impacts of cultural and demographic change

on customers and competitors, the possibility of chaos or

emergent order, and concerns about sustainability of an

assortment are just some of the ways in which perceptions

of the structure and dynamics of the higher-level marketing

system will influence strategy. Inherent in this awareness ofthe implications of multilevel system structure is another

way to think of the micro-macro link.

CONCLUDING COMMENTS

Many years ago, Paul Mazur suggested that the major

societal task in the United States was to continuously

improve the standard of living. This idea became embodied

in a definition of marketing as being concerned with the cre-

ation and delivery of a standard of living. Although the ori-

gin of the idea and the strength of the underlying logic might

be somewhat controversial, Mazur identified a link between

the output of a marketing system and the standard of living

enjoyed by a society. This link is found in the concept of

assortment.This article suggests that the study of marketing systems

is central to macromarketing and that the output of a mar-

keting system is an assortment of goods, tangible and intan-

gible, offered in response to customer demand. At the level

of the societal marketing system, the assortment created and

delivered by the system has a direct bearing on standards of

living (not infrequently defined in terms of consumer price

indices based on a representative bundle of goods and serv-

ice), and in doing so the system also generates a wide range

of externalities that ultimately might challenge its very exis-

tence. Although these effects are easily visible at the socie-

tal level, they are also to be found at each level of

disaggregation as we drill down through the nodes at each

level, in the process uncovering further levels of complexity.

The study of marketing systems at different levels of

aggregation is not however restricted to the narrow disci-

pline of macromarketing. Much of the work mentioned ear-

lier comes from cognate fields, such as economic sociology,

economic anthropology, strategic management, behavioral

economics, and the mathematics of complexity. It also

draws on the detailed, pragmatic studies that the FAO and

similar bodies have conducted in many parts of the world for

many years. This leaves open the question as to just what

marketing in general and macromarketing in particular can

contribute. This contribution begins with a deep understand-ing of the decision processes followed by participants

individuals, households, managers, and firmsand an

appreciation of the subtleties associated with the marketing

flows linking system participants. It should not however end

there. It should be found in the full and informed imple-

mentation of Hunts original prescription for macromarket-

ing and center, in both a positive and normative sense, on the

study of marketing systems. Although the necessary empha-

sis on marketin

Documents

LAYTON. Marketing Systems a Core Macromarketing Concept