Environmental Factors: Other vital factors affecting the choice of channels of distribution include environmental factor such as economic condition and lawful constraints. Environmental factors can be both internal and external to a business. S few internal factors of a business include its value system, mission and objectives, and internal relationships. External factors of a business include competitors, economic factors and technological factors. In a depressed economy marketers use shorter channels to distribute their goods in an economical way.
The environmental factors which include competitors’ channels, economic conditions, legal restrictions, fiscal structure etc., as given below, affect significantly the channel choice.
(i) Economic Conditions: When economic conditions are bright such as inflation, it is desirable to opt for indirect channel of distribution because there is an all-round mood of expectancy, market tendencies are bullish and favourable.
(ii) Legal Restrictions: The legislative and other restrictions imposed by the state are extremely formidable and give final shape to the channel choice.
(iii) Competitors’ Channel: This also influences the channel choice decision. Mostly, in practice, similar types of channels of distribution used by the competitors are preferred.
(iv) Fiscal Structure: Fiscal structure of a country also influences the channel choice decision.