It is said that in the United States the modern big business came into being and continued to grow through the addition, combination, and integration of specialized functions and units. Especially, in 1880-1900 the urban and national markets grew as the result of the rapid development of railways. And it became the main goal of many enterprises to actualize mass sales to these large markets. In order to attain this goal, rational and efficient marketing system were necessary.
There appear the following problems concerning the marketing functions held by manufacturers and retailers : (1) why and how manufacturers and retailers integrated marketing functions, (2) what role has the integration of marketing functions played, (3) why existing middlemen could not keep their position, (4) what kinds of struggles have appeared among retailers, manufacturers and middlemen. The objective of the author is to investigate these problems from the viewpoint of marketing strategy and corporate growth of the companies which deal in consumer goods.
In the last half of the 19th century, some of the manufacturers began to integrate marketing functions aggressively because of the inadequacy of existing wholesaler network for their products. They were of two types. Firstly, there were the producers of relatively complex durable goods like sewing machines. Secondly there were the producers of perishable goods such as meat packers. Moreover, as the dense market grew, manufacturers of products like oil and rubber who had no difficulties in their marketing, found it convenient and efficient to integrate some of the marketing functions.
There also appeared modern mass retailers such as department stores, mail order houses, and chain stores. These mass retailers developed through the addition of product lines and stores. Besides, one of the common strategies of them was mass sales with low prices, and they integrated backward or wholesale functions.
On the contrary, there were some industries in which middlemen continued to play important roles till the beginning of the 20th century, because of the nature of the commodities and the competitive conditions. Among these, there were manufacturers of groceries, drugs, hardware, etc. Even in these industries, however, after mass retailers began to become national chains and to buy directly from manufacturers, and advertising by producers developed, the power of the middlemen was correspondingly weakened. At the same time, mass retailers began to show their countervailing power against large manufacturers by rationalizing their activities through the integration of the marketing functions. Thus, by the end of the 1910's the old marketing systems disappeared and new ones have been formed.
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