Chapter 13 MANAGING MARKETING CHANNELS AND SUPPLY CHAINS Test Item Table

Major Section of the Chapter Level 1: Definition (Knows Basic Terms & Facts) Avons Makeover is More than Cosmetic (pp. 281) Nature and Importance of Marketing Channels (pp. 282-283) Channel Structure and Organization (pp. 284-289) 5, 9, 10, 11, 13, 17, 18, 19, 20, 21, 24, 25, 26, Level of Learning Level 2: Conceptual (Understands Concepts & Principles) 4 Level 3: Application (Applies Principles) 1, 2, 3

8, 14, 16, 28, 29, 156, 157

6, 7, 12, 15, 22, 23, 27, 30, 31,

33, 39, 44, 47, 50, 53, 58, 62, 64, 67, 69, 71, 72, 73, 75, 76, 77, 78, 79, 160

34, 36, 40, 41, 42, 43, 46, 51, 52, 54, 59, 60, 68, 80, 158, 159

32, 35, 37, 38, 45, 48, 49, 55, 56, 57, 61, 63, 65, 66, 70, 74, 81,

Channel Choice and Management (pp. 290-293)

85, 87, 91, 103, 104, 105, 107, 110, 111,

82, 83, 90, 92, 93, 94, 96, 101, 102, 106, 113, 161, 162, 163, 164

84, 86, 88, 89, 95, 97, 98, 99, 100, 108, 109, 112, 114,

Logistics and Supply Chain Management (pp. 294-297)

115, 117, 118, 119, 120, 121, 124, 127, 128, 166

122, 123, 125, 165, 167

116, 126, 168, 169

Two Concepts of Logistics Management in a Supply Chain (pp. 297-298)

131, 132, 135, 136, 137, 138, 140, 142, 143, 144, 145, 149, 150,

129, 130, 133, 134, 139, 151, 170

141, 146, 147, 148, 152,

Video Case: Creston Vineyards (pp. 300-301)

155,

153, 154,

Note: Bold numbers indicate short essay questions.

829

CHAPTER 13 MANAGING MARKETING CHANNELS AND SUPPLY CHAINS MULTIPLE CHOICE QUESTIONS
13-1 CHAPTER OPENING EXAMPLE: AVON Avon is most closely associated with which type of distribution strategy? a. b. c. d. e. intensive indirect distribution direct distribution dual distribution selective indirect distribution electronic distribution APPLICATION

Answer: c Page: 281 Rationale: Avon's system of independent representatives is an example of direct distribution, while its website (www.avon.com) is an electronic channel and the shop-within-a-store format is used in selected JCPenney stores. 13-2 CHAPTER OPENING EXAMPLE: AVON APPLICATION

Avon's research showed that 59 percent of women who don't buy Avon products would if they were more accessible. These women were saying that Avon's distribution system that used only independent representatives did not create adequate __________ utilities. a. b. c. d. e. time and creation place and time form and place possession and form application and time

Answer: b Page: 281 Rationale: Avon's independent representatives did not make the cosmetics available when and where its potential customers wanted them.

830

13-3 CHAPTER OPENING EXAMPLE: AVON

APPLICATION

Avons decision to make its cosmetics available through independent sales representatives, at JCPenney stores, and on its website, provided: a. b. c. d. e. bimodal positioning. off peak pricing. access to new customers. dual targeting. indirect placement.

Answer: c Page: 281 Rationale: Avons marketing research indicated that 59 percent of women who dont buy Avon products would if they were more accessible. JCPenney stores and online shopping provide access to new customers, not the same people that our representatives are serving directly. 13-4 CHAPTER OPENING EXAMPLE CONCEPTUAL

Which of the following factors had the greatest impact on Avon's channel choice? a. b. c. d. e. environmental factors supplier factors product factors competitor factors consumer factors

Answer: e Page: 281 Rationale: Avon's research showed that 59 percent of women who don't buy Avon products would if they were more accessible. Thus, Avon expanded its channels. 13-5 MARKETING CHANNEL DEFINITION

Individuals and firms involved in the process of making a good or service available are considered members of a: a. b. c. d. e. distribution line. marketing channel. consortium. cartel. distribution mix.

Answer: b Page: 282 Rationale: Key term definitionmarketing channel

831

13-6 MARKETING CHANNEL

APPLICATION

Rob stops at the supermarket to purchase a package of Oreos and other groceries. He is the ultimate consumer in a pipeline from the producer through intermediaries including the grocery store. This pipeline is actually a: a. b. c. d. e. consumer market. marketing intermediary. marketing channel. transactional function. logistical function.

Answer: c Page: 282 Other Location: web Rationale: Marketing channels can be compared with a pipeline through which water flows from a source to an endpoint. Marketing channels make possible the flow of goods from a producer, through intermediaries, to a buyer. 13-7 MARKETING CHANNEL APPLICATION

You probably own several pairs of blue jeans. Further, it is highly likely you purchased those jeans at retail stores located in a shopping mall. It is quite unlikely you bought the jeans directly from the manufacturer. In fact, most goods are brought to you via a(n) __________, which consists of individuals and firms involved in the process of making a product or service available for our use as consumers. a. b. c. d. e. organizational chain of command organizational hierarchy marketing channel marketing hierarchy marketing chain of command

Answer: c Page: 282 Other Location: web Rationale: From automobiles to blue jeans, most of the products we purchase are made available to us by a marketing channel. A marketing channel is a series of individuals and firms involved in the process of making a product or service available to a buyer.

832

13-8 VALUE CREATED BY INTERMEDIARIES

CONCEPTUAL

Two students, Nick and Lee, were studying for an upcoming exam in their introduction to marketing course. While studying the chapter on marketing channels and wholesalers, Nick made the following statement: "If it weren't for wholesalers and other intermediaries in the channel of distribution, the products we buy would cost a lot less!" After contemplating Nick's statement, Lee said, "Wait a minute. We learned in class that channel intermediaries actually make marketing more efficient by minimizing the number of transactions necessary to sell products." Lee's statement refers to: a. b. c. d. e. value created by channel intermediaries. channel intermediary development. price inflation by channel intermediaries. channel intermediary promotional efforts. an inaccurate statement by Lee; Nick was correct.

Answer: a Page: 282; Figure 13-2 Rationale: Intermediaries make possible the flow of products from producers to ultimate consumers by performing three basic functions: transactional, logistical and facilitating. 13-9 MIDDLEMAN DEFINITION

A(n) __________ is any intermediary between a manufacturer and end-user markets. a. b. c. d. e. dealer agent or broker retailer wholesaler middleman

Answer: e Page: 282; Figure 13-1 Rationale: As shown in Figure 13-1, a middleman is any intermediary between manufacturer and end-user markets. 13-10 AGENT DEFINITION

A(n) __________ is any intermediary with legal authority to act on behalf of the manufacturer. a. b. c. d. e. dealer agent or broker retailer wholesaler disintermediary

Answer: b Page: 282; Figure 13-1 Rationale: As shown in Figure 13-1, an agent or broker is any intermediary with legal authority to act on behalf of the manufacturer.

833

13-11 WHOLESALER

DEFINITION

A(n) __________ is any intermediary who sells to other intermediaries, usually to retailers, and usually in consumer markets. a. b. c. d. e. dealer agent or broker retailer wholesaler disintermediary

Answer: d Page: 282; Figure 13-1 Rationale: As shown in Figure 13-1, a wholesaler is any intermediary who sells to other intermediaries, usually to retailers, and usually in consumer markets. 13-12 RETAILER APPLICATION

Several artists in Charleston, South Carolina, have created an arrangement to sell their paintings. They have set up an art gallery in downtown Charleston so tourists and art-lovers can look at their paintings and buy the ones they like. Each artist takes a turn acting as the sales clerk at the gallery. In terms of the marketing channel, the artist who is on duty in the gallery is acting as a(n): a. b. c. d. e. ultimate consumer. retailer. wholesaler. brokerage firm. end user.

Answer: b Page: 282; Figure 13-1 Rationale: A retailer is any intermediary (the artist on duty) who sells to consumers (tourists and art-lovers). 13-13 DEALER Which type of an intermediary is a dealer? a. b. c. d. e. a middleman a wholesaler a retailer a distributor any of the above DEFINITION

Answer: e Page: 282; Figure 13-1 Rationale: As shown in Figure 13-1, a dealer is an imprecise term that can mean the same as distributor, retailer, wholesaler, and so on.

834

13-14 INTERMEDIARIES

CONCEPTUAL

Which of the following statements about the terms used for marketing intermediaries is true? a. b. c. d. e. The most precise terms used to describe marketing intermediaries are dealer and distributor. A retailer sells to business markets. An agent has no legal authority to act on behalf of a manufacturer. A middleman is any intermediary between a manufacturer and end-user markets. A broker is a synonym for a dealer.

Answer: d Page: 282; Figure 13-1 Rationale: Dealer and distributor are described as the two least precise terms. A retailer sells to ultimate consumers. An agent has legal authority to act on behalf of a manufacturer. A broker is an intermediary similar to an agent. Alternative d is correcta middleman is any intermediary between a manufacturer and end-user markets. 13-15 INTERMEDIARIES APPLICATION

Most producers will not sell to consumers. It is far too expensive and time-consuming for the producer to sell one or a few items to a consumer on credit, for example. If General Mills tried to sell to consumers rather than wholesalers and supermarkets, consumers interested in purchasing their cereals would have to go to a factory to purchase just a few boxes! Clearly this would be very inefficient. By including the wholesalers and supermarkets in the marketing channel, General Mills assures consumers of time and place utility and obtains an advantage itself since it deals with far fewer individuals in order to get its cereals into consumers homes. Intermediaries such as the wholesalers and supermarkets make the selling of goods more efficient by: a. b. c. d. e. maximizing the number of contacts necessary between producer and consumer. identifying target markets. reducing manufacturing costs. minimizing the number of sales contacts between producer and consumer. eliminating inventory costs.

Answer: d Page: 282-283 Rationale: Producers (such as General Mills) recognize that intermediaries (the wholesalers and supermarkets) make selling goods and services (breakfast cereals) more efficient because they minimize the number of sales contacts necessary to reach a target market.

835

13-16 INTERMEDIARIES The three basic functions performed by intermediaries are: a. b. c. d. e.

CONCEPTUAL

accommodating functions, logistical functions, and transactional functions. implementation functions, accommodating functions, and contractual functions. contractual functions, facilitating functions, and logistical functions. facilitating functions, accommodating functions, and implementation functions. transactional functions, logistical functions, and facilitating functions.

Answer: e Page: 283; Figure 13-2 Rationale: Intermediaries make possible the flow of products from producers to buyers by performing three basic functions. They are (1) transactional--buying, selling, and risk taking, (2) logisticalassorting, storing, sorting, transporting and(3) facilitatingmaking goods and services more attractive to buyers through financing, grading, and marketing information and research. 13-17 TRANSACTIONAL FUNCTION DEFINITION

Intermediaries performing a transactional function in distribution are engaged in buying, selling, and: a. b. c. d. e. channeling. strategizing. liaising. risk taking. merchandising.

Answer: d Page: 283; Figure 13-2 Rationale: As shown in Figure 13-2, transactional functions include buyingpurchasing products for resale or as an agent for supply of a product, sellingcontacting potential customers, promoting products, and seeking orders, and risk takingassuming business risks in the ownership of inventory that can become obsolete or deteriorate. 13-18 TRANSACTIONAL FUNCTION Transactional function activities involve: a. b. c. d. e. buying, selling, and risk taking. assorting, sorting, and storing. financing and grading. transportation. marketing information and research. DEFINITION

Answer: a Page: 283; Figure 13-2 Rationale: As shown in Figure 13-2, transactional functions include buyingpurchasing products for resale or as an agent for supply of a product, sellingcontacting potential customers, promoting products, and seeking orders, and risk takingassuming business risks in the ownership of inventory that can become obsolete or deteriorate.

836

13-19 TRANSACTIONAL FUNCTION

DEFINITION

In terms of distribution, when marketing channel members are engaged in buying, selling, and risk taking, they are performing __________ functions. a. b. c. d. e. logistical transformational facilitating implementing transactional

Answer: e Page: 283; Figure 13-2 Rationale: As shown in Figure 13-2, transactional functions include buyingpurchasing products for resale or as an agent for supply of a product, sellingcontacting potential customers, promoting products, and seeking orders, and risk takingassuming business risks in the ownership of inventory that can become obsolete or deteriorate. 13-20 LOGISTICAL FUNCTION Logistical function activities include: a. b. c. d. e. buying and selling. assorting, storing, sorting, and transporting financing and grading. risk taking. marketing information and research. DEFINITION

Answer: b Page: 283; Figure 13-2 Rationale: As shown in Figure 13-2, logistical functions include assortingcreating product assortments from several sources to serve customers, storingassembling and protecting products at a convenient location to offer better customer service, sortingpurchasing in large quantities and breaking into smaller amounts desired by customers, and transportingphysically moving a product to customers.

837

13-21 LOGISTICAL FUNCTION

DEFINITION

In terms of distribution, when marketing channel members are engaged in assorting, storing, sorting, and transporting, they are performing __________ functions. a. b. c. d. e. logistical transformational facilitating implementing transactional

Answer: a Page: 283; Figure 13-2 Rationale: As shown in Figure 13-2, logistical functions include assortingcreating product assortments from several sources to serve customers, storingassembling and protecting products at a convenient location to offer better customer service, sortingpurchasing in large quantities and breaking into smaller amounts desired by customers, and transportingphysically moving a product to customers. 13-22 LOGISTICAL FUNCTION APPLICATION

Which of the following is a logistical function that a lawn and garden center provides? a. b. c. d. e. selling only ten or more trees at a time to consumers providing a summer patio collection of items from various producers for consumers to buy having trees available at their garden location, not their store, which is 30 miles outside of town specializing in selling a single type of tree from only one grower requiring customers to provide their own transportation for items they buy

Answer: b Page: 283; Figure 13-2 Rationale: As shown in Figure 13-2, logistical functions include assortingcreating product assortments from several sources to serve customers, (not specializing in selling a single type of tree from only one grower); storingassembling and protecting products at a convenient location to offer better customer service, (not having trees available at their garden location which is 30 miles outside of town); sortingpurchasing in large quantities and breaking into smaller amounts desired by customers, (not requiring customers to purchase at least ten trees); and transporting physically moving a product to customers (not requiring customers to provide their own transportation for items they buy). Alternative b is correct because by making a patio collection available from a number of producers for consumers, they are creating product assortments from several sources to serve customersthe assorting part of the logistical function.

838

13-23 LOGISTICAL FUNCTION

APPLICATION

When Hunter went to the hardware stare looking for gloves to wear while refinishing a table, he bought one pair because that was all he needed, but when the hardware store purchased the gloves, it purchased a case containing 100 pairs of identical gloves. Which logistical function did the hardware store perform for Hunter? a. b. c. d. e. marketing buying sorting assorting risk taking

Answer: c Page: 283; Figure 13-2 Rationale: As shown in Figure 13-2, logistical functions include assortingcreating product assortments from several sources to serve customers, storingassembling and protecting products at a convenient location to offer better customer service, sortingpurchasing in large quantities and breaking into smaller amounts desired by customers (in this case buying 100 pairs of identical gloves and offering 1 pair of gloves for Hunter), and transportingphysically moving a product to customers. 13-24 FACILITATING FUNCTION Facilitating function activities include: a. b. c. d. e. buying and selling. assorting, sorting, and storing. financing, grading, and marketing information and research. risk taking. transportation. DEFINITION

Answer: c Page: 283; Function 13-2 Rationale: As shown in Figure 13-2, facilitating functions include financingextending credit to customers, gradinginspecting, testing, or judging products, and assigning them quality grades, and marketing information and researchproviding information to customers and suppliers, including competitive conditions and trends.

839

13-25 FACILITATING FUNCTION

DEFINITION

In terms of distribution, when marketing channel members are engaged in financing, grading, marketing information and research, they are performing the __________ function. a. b. c. d. e. logistical transformational facilitating implementing transactional

Answer: c Page: 283; Figure 13-2 Other Location: web Rationale: As shown in Figure 13-2, logistical functions include assortingcreating product assortments from several sources to serve customers, sortingassembling and protecting products at a convenient location to offer better customer service, sortingpurchasing in large quantities and breaking into smaller amounts desired by customers, and transportingphysically moving a product to customers. 13-26 FACILITATING FUNCTION DEFINITION

Intermediaries perform facilitating function activities, which assist producers in making goods and services more attractive to buyers. These activities include: a. b. c. d. e. producing, assembling, and distributing. transportation and distribution. buying, selling, and risk taking. assorting, sorting, and storing. financing, grading, and marketing information and research.

Answer: e Page: 283; Figure 13-2 Other Location: web Rationale: As shown in Figure 13-2, logistical functions include assortingcreating product assortments from several sources to serve customers, sortingassembling and protecting products at a convenient location to offer better customer service, sortingpurchasing in large quantities and breaking into smaller amounts desired by customers, and transportingphysically moving a product to customers.

840

13-27 FACILITATING FUNCTION

APPLICATION

Before consumers see a movie, it is assigned a rating such as G or PG based on its language and content. This rating system is most closely related to which facilitating function activity performed by marketing intermediaries? a. b. c. d. e. grading sorting risk taking marketing assorting

Answer: a Page: 283; Figure 13-2 Rationale: As shown in Figure 13-2, logistical functions include assortingcreating product assortments from several sources to serve customers, sortingassembling and protecting products at a convenient location to offer better customer service, sortingpurchasing in large quantities and breaking into smaller amounts desired by customers, and transportingphysically moving a product to customers. 13-28 VALUE CREATED BY INTERMEDIARIES CONCEPTUAL

Marketing channels create customer value from all of the following utilities EXCEPT: a. b. c. d. e. possession. form. quality. place. time.

Answer: c Page: 283 Rationale: Marketing channels help create value for consumers through the four utilities: time, place, form, and possession. Quality is not a utility although it does have an effect on customer value. 13-29 FOUR UTILITIES CONCEPTUAL

Marketing channels help create value for consumers through four utilities. The utilities are: a. b. c. d. e. product, price, promotion, and place. intangibility, heterogeneity, perishability, and consistency. time, place, form, and possession. the four environmental dichotomies. transactional, logistical, facilitating, and marketing.

Answer: c Page: 283 Rationale: Marketing channels help create value for consumers by providing goods and services they want (possession), when they want them (time), where they want them (place), and in the form they want them (form).

841

13-30 FOUR UTILITIES

APPLICATION

When you arrive at a motel at 2 A. M. and are hungry, a snack vending machine located in the motel creates __________ utility. a. time and creation b. place and time c. form and place d. possession and form e. application and time Answer: b Page: 283 Rationale: The vending machine made the snack ready at the time (2 A.M.) and place (the motel) it was needed. 13-31 FOUR UTILITIES APPLICATION

An artist can buy white blank dishes and figurines, glaze (paint) them, fire the glazed pieces in a kiln, and sell the finished work to customers. By decorating the pieces and increasing their aesthetic value, the artist creates __________ utility. a. b. c. d. e. form application possession time place

Answer: a Page: 283 Rationale: Form utility involves enhancing a product or service to make it more appealing to buyers. In this case, the artist decorated the blank dishes and figurines to make them more appealing to buyers.

842

13-32 MARKETING CHANNELS FOR CONSUMER GOODS

APPLICATION

A small electronics company manufactures a line of low to moderate quality stereo components that are distributed through wholesalers to mass market retailers such as Wal-Mart. The electronics company has begun production of a small line of high quality, professional studio model components. How should the small electronics company distribute its new products? a. b. c. d. e. use its established channel distribute directly to mass market retailers distribute through agents who sell to specialty electronics stores who will feature the new line sell directly to specialty electronics stores who will feature the new line cannot be determined from the information given

Answer: c Page: 284 Rationale: The new products need an up-scale outlet, but the electronics company does not have the sales force to call on thousands of specialty stores, and there is no indication that the new products warrant creating such a sales force. 13-33 DIRECT CHANNEL DEFINITION

A(n) __________ exists when producers and ultimate consumers deal directly with each other. a. b. c. d. e. strategic channel alliance direct channel subsidiary channel indirect channel dual distribution channel

Answer: b Page: 284; Figure 13-3 Rationale: Text term definitiondirect channel 13-34 DIRECT CHANNEL In a direct channel, all channel functions are performed by: a. b. c. d. e. retailers. wholesalers. producers. brokers and agents. middlemen. CONCEPTUAL

Answer: c Page: 284 Rationale: In a direct channel the producer and ultimate consumer deal directly with each other. Because there are no intermediaries in a direct channel, the producer must perform all channel functions.

843

13-35 DIRECT CHANNEL

APPLICATION

World Book Educational Products performs all of the channel functions including selling door to door so that the salesperson can fully explain the benefits of owning these books. What type of marketing channel should World Book Educational Products use to distribute its books? a. b. c. d. e. direct channel indirect channel strategic channel alliances marketing channel dual distributive channel

Answer: a Page: 284; Figure 13-3 Rationale: A direct channel is one in which the producer and ultimate consumers deal directly with each other. Because there are no intermediaries with a direct channel, the producer must perform all channel functions, including sales as in this situation. 13-36 DIRECT CHANNEL CONCEPTUAL

Schwan's Sales Enterprises of Marshall, Minnesota, markets a full line of frozen foods in 48 states and parts of Canada using door-to-door salespeople who sell from refrigerated trucks. This particular method of distribution is called a: a. b. c. d. e. direct channel. indirect channel. facilitated channel. customer-service channel. truck jobber channel.

Answer: a Page: 284 Rationale: A direct channel is one in which the producer and ultimate consumers deal directly with each other. Because there are no intermediaries with a direct channel, the producer must perform all channel functions, including sales as in this situation. 13-37 DIRECT CHANNEL APPLICATION

In an episode of the Andy Griffith television series, two local farmers were selling the produce they grew on their farms from the back of their pickup trucks to local people that drove by on the road. The farmers selling their products without wholesalers or retailers were an example of a: a. b. c. d. e. roadside channel of distribution. traveling channel of distribution. intermediate channel of distribution. informal channel of distribution. direct channel of distribution.

Answer: e Page: 284 Rationale: A direct channel is one in which the producer and ultimate consumers deal directly with each other. Because there are no intermediaries with a direct channel, the producer must perform all channel functions, including sales as in this situation.

844

13-38 DIRECT CHANNEL

APPLICATION

Longaberger baskets are sold at parties. A hostess invites friends and neighbors to admire the baskets the company has sent to display and takes orders. In return, the hostess is able to purchase the baskets at a discount. Longaberger uses which type of marketing channel? a. b. c. d. e. clustering direct channel indirect channels marketing channel strategic channel alliances

Answer: b Page: 284 Rationale: A direct channel is one in which the producer and ultimate consumers deal directly with each other. Because there are no intermediaries with a direct channel, the producer must perform all channel functions, including sales as in this situation. 13-39 INDIRECT CHANNELS Indirect channels for consumer goods: a. b. c. d. e. occur when one firm's marketing channels are used to sell another firm's products. include producers and end-users dealing directly with each other. include intermediaries that are between the producer and consumer and perform numerous channel functions. are arrangements whereby a firm reaches different buyers by employing two or more different types of channels for the same basic product. are accurately described by none of the above. DEFINITION

Answer: c Page: 284 Other Location: web Rationale: Text term definitionindirect channels

845

13-40 INDIRECT CHANNELS

CONCEPTUAL

The most common indirect channel moves product from producer to retailer to consumer. This type of channel is most likely to exist when: a. b. c. d. e. the retailer is large and can buy in large quantities. the cost of inventory makes it too expensive to use a wholesaler. there are so many product variations that a wholesaler could not carry them all in sufficient quantity. the cost of maintaining inventory is high. all of the above conditions exist.

Answer: e Page: 284 Other Location: web Rationale: A retailer is most commonly added when the retailer is large and can buy in large quantities from a producer or when the cost of inventory makes it too expensive to use a wholesaler. In addition this type of indirect channel is used when there are so many variations in the product that it would be impossible for a wholesaler to stock all the models required to satisfy buyers. 13-41 INDIRECT CHANNELS CONCEPTUAL

Adding a wholesaler to the marketing channel for consumer goods is most common for: a. b. c. d. e. low-cost, low unit value items. low-cost, high unit value items. high-cost, low unit value items. high-cost, high unit value items. any item regardless of cost as long as there is sufficient product variety.

Answer: a Page: 285 Rationale: Adding a wholesaler is most common for low-cost, low-unit value items that are frequently purchased by consumers such as candy, confectionery items, and magazines. 13-42 INDIRECT CHANNELS CONCEPTUAL

The most indirect channel for consumer goods incorporates agents, wholesalers, and retailers and is most commonly used when: a. b. c. d. e. there are only a few large manufacturers but many small retailers. there are low-cost, low unit volume goods. there are many small manufacturers and many small retailers. there is too large an inventory to be carried by wholesalers. there are many manufacturers with a limited inventory competing for a small group of retailers.

Answer: c Page: 285 Rationale: The most indirect channel is used when there are many small manufacturers and many small retailers and an agent is used to help coordinate a large supply of the product.

846

13-43 CONSUMER AND BUSINESS CHANNELS

CONCEPTUAL

Consumer and business channels are somewhat different. Which of the following is true regarding the difference(s) between these two types of channels? a. b. c. d. e. Business channels typically are shorter than consumer channels. Business channels have fewer intermediaries than consumer channels. Business channels use industrial distributors and consumer channels dont. Both business and consumer channels may use agents. All of the above statements are true.

Answer: e Page: 285 Rationale: In contrast with channels for consumer products, business channels typically are shorter and rely on one intermediary or none at all because business users are fewer in number, tend to be more concentrated geographically, and buy in larger quantities. An industrial distributor performs a variety of marketing channel functions, including selling, stocking, and delivering a full product assortment and financing. In many ways industrial distributors are similar to wholesalers in consumer channels. Both business and consumer channels may use agents that represent the supplier or producer to the customer. 13-44 INDUSTRIAL DISTRIBUTOR DEFINITION

A(n) __________ is an intermediary that performs a variety of marketing channel functions involving selling, stocking, and delivering a full product assortment as well as providing financing for industrial goods and services. a. b. c. d. e. agent wholesaler disintermediary channel captain industrial distributor

Answer: e Page: 285 Rationale: Text term definitionindustrial distributor

847

13-45 INDUSTRIAL DISTRIBUTOR

APPLICATION

International Products, a Burlington, New Jersey, firm that sells industrial cleansers and lubricants wanted to sell its product to factories, hospitals and labs in China, but it did not have the necessary expertise. As a result International Products hired Asia Marketing & Management to sell, stock, and deliver a full assortment of products to the Chinese market. Asia Marketing & Management is an example of a(n): a. b. c. d. e. agent. wholesaler. disintermediary. retailer. industrial distributor.

Answer: e Page: 285 Rationale: An industrial distributor is an intermediary that performs a variety of marketing channel functions involving selling, stocking, and delivering a full product assortment as well as providing financing for industrial goods and services. 13-46 INDUSTRIAL DISTRIBUTOR CONCEPTUAL

Industrial distributors perform functions that are most like which intermediary in the consumer goods marketing channel? a. b. c. d. e. manufacturers retailers agents wholesalers brokers

Answer: d Page: 285 Rationale: An industrial distributor performs a variety of marketing channel functions, including selling, stocking, and delivering a full product assortment and financing. In many ways, industrial distributors are like wholesalers in consumer channels. 13-47 AGENT DEFINITION

A(n) __________ is the independent selling arm of producers, and represents a producer to industrial users. a. b. c. d. e. dealer agent retailer wholesaler industrial distributor

Answer: b Page: 286; Figure 13-5 Rationale: Text term definitionagent

848

13-48 ELECTRONIC MARKETING CHANNELS

APPLICATION

MachineTools.com sells grinders, boring mills, and engine lathes. The website has listed goods from over 700 machinery manufacturers, 2,500 distributors of new equipment, and 650 dealers of used inventory for sale at the website. MachineTools.com relies on a well-established channel of manufacturers, distributors, and machinery dealers to provide the merchandise that is sold through this: a. b. c. d. e. internet distribution channel. electronic marketing channel. virtual marketing channel. consumer-responsive channel. product-driven channel.

Answer: b Page: 286 Rationale: Electronic marketing channels employ the Internet to make goods and services available to consumers or business buyers. 13-49 MARKETING NEWSNET APPLICATION

Cereal Partners Worldwide (CPW) joined the manufacturing and marketing capabilities of U.S.based General Mills with the worldwide distribution of Swiss-based Nestl. Thus, in Paris your breakfast can include Nestl Cheerios miel armandes as well as coffee and a croissant. CPW illustrates which recent innovation in marketing channels? a. b. c. d. e. dual distribution multi-channel distribution cooperative distribution a strategic alliance bilateral trade agreement

Answer: d Page: 287 Other Location: web Rationale: Strategic alliances are popular in global marketing, where the creation of marketing channel relationships is expensive and time consuming. The General Mills-Nestle strategic alliance is also likely to increase the worldwide ready-to-eat market share of these companies to 20 percent worldwide. 13-50 DUAL DISTRIBUTION DEFINITION

__________ is an arrangement whereby a firm reaches different buyers by employing two or more different types of channels for the same basic product. a. b. c. d. e. A strategic channel alliance Multiple level selling Parallel distribution Dual distribution Multi-layered distribution

Answer: d Page: 287 Rationale: Key term definitiondual distribution

849

13-51 DUAL DISTRIBUTION

CONCEPTUAL

Pharmaceutical companies sell to hospitals and clinics directly. They market their products to large retail chains that distribute the medicines to their stores across the nation. They also sell to drug wholesalers that sell to the remaining independent drugstores in the U.S. What method of distribution is used by pharmaceutical companies? a. b. c. d. e. dual distribution vertical distribution horizontal distribution direct distribution exclusive distribution

Answer: a Page: 287 Rationale: Dual distribution is an arrangement whereby a firm reaches different buyers by employing two or more different types of channels for the same product. 13-52 DUAL DISTRIBUTION CONCEPTUAL

The channel strategy demonstrated when Black & Decker sells its tools in the consumer market under the Black & Decker name and basically the same tool to the business market using the Dewalt brand name. Black & Decker is using: a. b. c. d. e. strategic channel alliance. multi-channel distribution. parallel distribution. dual distribution. multi-product distribution.

Answer: d Page: 287 Rationale: Dual distribution is an arrangement whereby a firm reaches different buyers by employing two or more different types of channels for the same basic product. 13-53 STRATEGIC CHANNEL ALLIANCES DEFINITION

A recent innovation in marketing channels whereby one firm's marketing channel is used to sell another firm's products is called a(n): a. b. c. d. e. dual distribution. a strategic channel alliance. cooperative distribution. a integrated channel alliance. a multi-channel venture.

Answer: b Page: 287 Rationale: Text term definitionstrategic channel alliances

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13-54 STRATEGIC CHANNEL ALLIANCES

CONCEPTUAL

Which type of marketing channel arrangement is good for a firm to use in international marketing where the creation of marketing channel relationships is expensive and time consuming? a. b. c. d. e. dual distribution strategic channel alliance cooperative distribution integrated global channel alliance multi-channel distribution

Answer: b Page: 287 Rationale: Strategic channel alliances use one firms marketing channel to sell another firms products. Strategic channel alliances are popular in global marketing, where the creation of marketing channel relationships is expensive and time consuming. 13-55 STRATEGIC CHANNEL ALLIANCES APPLICATION

Abbott Laboratories, a manufacturer of several popular over-the-counter medications, warehouses and delivers all of 3M's medical and surgical products to hospitals across the nation. The agreement between Abbott Laboratories and 3M is an example of: a. b. c. d. e. multi-channel distribution. a direct marketing channel. a cooperative distribution channel. a strategic channel alliance. a dual distribution agreement.

Answer: d Page: 287 Other Location: web Rationale: A strategic channel alliance occurs when one firm's marketing channel is used to sell another firm's products. In this case, 3M uses Abbott Laboratories marketing channel to sell its medical and surgical products to hospitals.

851

13-56 STRATEGIC CHANNEL ALLIANCES

APPLICATION

Meyers, Inc. is an American company that manufactures and distributes coffee products in the U.S. Because of the wide popularity of its products in the U.S., Meyers wants to initiate distribution internationally as soon as possible. The most efficient distribution arrangement in terms of cost and time for Meyers Inc. to use would be: a. b. c. d. e. multi-channel distribution. direct marketing. cooperative distribution. a strategic channel alliance. a dual distribution agreement.

Answer: d Page: 287 Rationale: A strategic channel alliance occurs when one firm's marketing channel is used to sell another firm's products. Strategic channel alliances are popular in international marketing because developing marketing channel relationships are expensive and time consuming. 13-57 STRATEGIC CHANNEL ALLIANCES APPLICATION

An example of a(n) __________ occurs when Kraft Foods uses the distribution system of Ajinomoto, a major Japanese food company, to market its Maxwell House coffee in Japan. a. b. c. d. e. direct marketing channel industrial distributor dual distribution system strategic channel alliance franchising operation

Answer: d Page: 287 Rationale: A strategic channel alliance occurs when one firm's marketing channel is used to sell another firm's products. Strategic channel alliances are popular in international marketing because developing marketing channel relationships are expensive and time consuming. 13-58 VERTICAL MARKETING SYSTEMS DEFINITION

__________ marketing systems are professionally managed and centrally coordinated marketing channels designed to achieve channel economies and maximum marketing impact. a. b. c. d. e. Integrated Horizontal Vertical Functional Cooperative

Answer: c Page: 287 Rationale: Key term definitionvertical marketing systems

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13-59 VERTICAL MARKETING SYSTEMS The purpose of a vertical marketing system is to: a. b. c. d. e.

CONCEPTUAL

dissuade retailers from dealing with other manufacturers or wholesalers. limit the number of retail outlets served, or maintain a limited service region. achieve channel economies and maximum marketing impact. eliminate competition by narrowing the channel from supplier to consumer. maximize the number of wholesalers a supplier can deal through.

Answer: c Page: 287 Rationale: Vertical marketing systems are professionally managed and centrally coordinated marketing channels designed to achieve channel economies and maximum marketing impact. 13-60 COPRORATE VERTICAL MARKETING SYSTEMS CONCEPTUAL

Cessna is considered the volume leader for the executive-jet market. It has been described as almost totally vertically integrated. This quote means that the Cessna corporation: a. b. c. d. e. does not fall under the jurisdiction of any federal regulatory agency. has eliminated economies of scale. has achieved a high level of social responsibility. achieves coordination of production and distribution through ownership, which results in more control. uses outsourcing for all component parts and materials.

Answer: d Page: 288 Rationale: The combination of successive stages of production and distribution under a single ownership is a corporate vertical marketing system. 13-61 CORPORATE VERTICAL MARKETING SYSTEMS APPLICATION

A new company produces paint and other home decorating products. Its goal is to choose the best marketing channel arrangement that would give it the most control and the least amount of conflict. Which marketing channel arrangement should this company choose? a. b. c. d. e. a corporate vertical marketing system a contractual vertical marketing system an administered vertical marketing system an integrated marketing system a corporate horizontal marketing system

Answer: a Page: 288 Rationale: The combination of successive stages of production and distribution under a single ownership is a corporate vertical marketing system. This results in more control since ties among the intermediaries are the strongest when they are all under the same ownership.

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13-62 CORPORATE VERTICAL MARKETING SYSTEM

DEFINITION

The combination of successive stages of production and distribution under a single ownership is called a(n): a. b. c. d. e. corporate vertical marketing system. integrated marketing system. contractual vertical marketing system. corporate horizontal marketing system. contractual horizontal marketing system.

Answer: a Page: 288 Rationale: Text term definitioncorporate vertical marketing system 13-63 CORPORATE VERTICAL MARKETING SYSTEM APPLICATION

The Fox Entertainment Group counts among its assets a thriving TV production unit, a Hollywood movie studio, 33 TV stations, a half-dozen national cable networks, and 21 regional sports networks. Since most of the shows produced at its TV production unit and many of the movies made at its studio are made just for televising on its cable networks, Fox Entertainment Group is an example of a(n): a. b. c. d. e. corporate vertical marketing system. integrated marketing system. contractual vertical marketing system. corporate horizontal marketing system. contractual horizontal marketing system.

Answer: a Page: 288 Rationale: A corporate vertical marketing system combines successive stages of production and distribution under a single ownership. In this case, Fox Entertainment Group produces and distributes made-for-TV movies to its own stations, resulting in more control. 13-64 FORWARD INTEGRATION DEFINITION

When a producer owns an intermediary at the next level down in the marketing channel, it is called: a. b. c. d. e. forward integration. backward integration. vertical channel. horizontal channel. horizontal integration.

Answer: a Page: 288 Rationale: Text term definitionforward integration

854

13-65 FORWARD INTEGRATION

APPLICATION

Hart Schaffner & Marx is a producer of men's suits and sports coats that operates 100 menswear stores. Hart Schaffner & Marx uses__________ to distribute its suits and sports coats. a. b. c. d. e. dual distribution forward integration backward integration horizontal integration strategic alliance

Answer: b Page: 288 Rationale: Forward integration occurs when a producer owns an intermediary at the next level down in the marketing channel. 13-66 BACKWARD INTEGRATION APPLICATION

Sears operates a network of warehouses as part of its distribution system. Sears also obtains over 50 percent of its goods from companies that it partly or wholly owns. Sears is engaged in: a. b. c. d. e. dual distribution. forward integration. backward integration. horizontal integration. strategic alliance.

Answer: c Page: 288 Rationale: Backward integration is the practice of a retailer owning a manufacturing operation. 13-67 BACKWARD INTEGRATION When a retailer owns a manufacturing operation, it is called: a. b. c. d. e. forward integration. backward integration. vertical integration. joint venture. horizontal integration. DEFINITION

Answer: b Page: 288 Rationale: Text term definitionbackward integration

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13-68 CONTRACTUAL VERTICAL MARKETING SYSTEMS

CONCEPTUAL

Which of the following is the most popular type of vertical marketing system, accounting for about 40 percent of all retail sales? a. b. c. d. e. corporate vertical marketing systems horizontal marketing systems contractual vertical marketing systems administered vertical marketing systems wholesaler-sponsored voluntary systems

Answer: c Page: 288 Other Location: web Rationale: Contractual systems (including franchises) are the most popular among the three types of vertical marketing systems and are estimated to account for about 40 percent of all retail sales. 13-69 WHOLESALER-SPONSORED VOLUNTARY CHAIN DEFINITION

Which type of contractual vertical marketing system involves a contractual relationship between a wholesaler and small independent retailers to standardize and coordinate buying practices, merchandising programs, and inventory management efforts? a. b. c. d. e. service-sponsored retail franchise system retailer-sponsored cooperative administered vertical marketing system manufacturer-sponsored retail franchise system wholesaler-sponsored voluntary chain

Answer: e Page: 288; Figure 13-6 Rationale: Text term definition 13-70 RETAILER-SPONSORED COOPERATIVE APPLICATION

Lighting-One is a national ___________ that allows its members, retailers of lighting fixtures, to concentrate their buying power through wholesalers and more importantly plan collaborative promotional and pricing activities. a. b. c. d. e. service-sponsored retail system retailer-sponsored cooperative administered cooperative system manufacturer-sponsored cooperative wholesaler-sponsored voluntary chain

Answer: b Page: 288 Other Location: web Rationale: Retailer-sponsored cooperatives exist when small, independent retailers form an organization that operates a wholesale facility cooperatively. Member retailers then concentrate their buying power through the wholesaler and plan collaborative promotional and pricing activities.

856

13-71 RETAILER-SPONSORED COOPERATIVE

DEFINITION

Which type of contractual vertical marketing system involves small independent retailers forming an organization that operates a wholesale facility cooperatively? a. b. c. d. e. service-sponsored retail system retailer-sponsored cooperative administered cooperative system manufacturer-sponsored cooperative wholesaler-sponsored voluntary chain

Answer: b Page: 288: Figure 13-6 Rationale: Text term definitionretailer-sponsored cooperative 13-72 CONTRACTUAL VERTICAL MARKETING SYSTEM Franchising is a form of: a. b. c. d. e. corporate vertical marketing systems. horizontal marketing systems. contractual vertical marketing systems. administered vertical marketing systems. wholesaler-sponsored voluntary systems. DEFINITION

Answer: c Page: 288; Figure 13-6 Rationale: The most visible variation of contractual systems is franchising, a contractual arrangement between a parent company and an individual or firm that allows the franchise to operate a certain type of business under an established name and according to specific rules. 13-73 FRANCHISING DEFINITION

A contractual arrangement between a parent company and an individual or firm that allows the individual or firm to operate a certain type of business under an established name and according to specific rules is called: a. b. c. d. e. a corporate vertical marketing system. a wholesaler sponsored voluntary chain. a retailer sponsored cooperative. franchising. an administered vertical marketing system.

Answer: d Page: 288; Figure 13-6 Rationale: Key term definitionfranchising

857

13-74 FRANCHISING

APPLICATION

Jacob has developed a lawn care service that will revolutionize the lawn care industry. Jacob, however, has limited operating capital and yet, still wants a wide distribution of his new product. Which of the following options might he choose? a. b. c. d. e. He might develop an administered vertical marketing system in order to achieve distribution. He might establish a corporate vertical marketing system to control the distribution system established. He might open up branch offices around the country to provide the exposure he needs. He could establish a wholesaler-sponsored vertical marketing system to obtain greater economies of scale. He can establish a contractual vertical marketing system (franchise).

Answer: e Page: 288 Rationale: The most visible variation of contractual systems is franchising, a contractual arrangement between a parent company and an individual or firm that allows the franchise to operate a certain type of business under an established name and according to specific rules. In a franchise vertical marketing system, Jacob can establish a contract that allows the franchisee to use the product and the name, but provide the operating capital to run independent businesses. Jacob would get a profit or sales royalty to gain income. 13-75 MANUFACTURER-SPONSORED RETAIL FRANCHISE DEFINITION

__________ are commonly used in the automobile industry. With this system, a manufacturer licenses dealers to sell its cars subject to various sales and service conditions. a. b. c. d. e. Service-sponsored producer franchise systems Service-sponsored retail franchise systems Manufacturer-sponsored wholesale systems Manufacturer-sponsored retail franchise systems Administered vertical marketing systems

Answer: d Page: 289; Figure 13-6 Rationale: Text term definitionmanufacturer-sponsored retail franchise systems 13-76 MANUFACTURER-SPONSORED WHOLESALE SYSTEM DEFINITION

The __________ system is common in the soft drink industry where the manufacturer sells its concentrate to wholesalers, who carbonate it, and market the finished product to retailers. a. b. c. d. e. service-sponsored franchise service-sponsored retail franchise manufacturer-sponsored wholesale franchise manufacturer-sponsored retail franchise administered vertical marketing

Answer: c Page: 289; Figure 13-6 Rationale: Text term definitionmanufacturer-sponsored wholesale franchise systems

858

13-77 SERVICE-SPONSORED RETAIL FRANCHISE SYSTEMS

DEFINITION

Which type of vertical marketing system is provided by firms that have designed a unique approach for performing a service and wish to profit by selling the franchise to others? a. b. c. d. e. corporate vertical marketing systems service-sponsored retail franchise systems contractual vertical marketing systems administered vertical marketing systems interactive vertical marketing systems

Answer: b Page: 289; Figure 13-6 Rationale: Text term definitionservice-sponsored retail franchise systems 13-78 SERVICE-SPONSORED FRANCHISE SYSTEMS DEFINITION

Which type of vertical marketing system exists when franchisors license individuals or firms to dispense a service under a trade name and specific guidelines? a. b. c. d. e. corporate vertical marketing system integrated vertical marketing system contractual vertical marketing system administered vertical marketing systems service-sponsored franchise systems

Answer: e Page: 289: Figure 13-6 Rationale: Text term definitionservice-sponsored franchise systems 13-79 ADMINISTERED VERTICAL MARKETING SYSTEMS DEFINITION

Which type of vertical marketing system achieves coordination at successive stages of production and distribution by the size and influence of one channel member rather than through ownership? a. b. c. d. e. corporate vertical marketing system integrated vertical marketing system contractual vertical marketing system administered vertical marketing systems interactive vertical marketing system

Answer: d Page: 289; Figure 13-6 Rationale: Text term definitionadministered vertical marketing systems

859

13-80ADMINISTERED VERTICAL MARKETING SYSTEMS

CONCEPTUAL

Which of the following statements describes the most significant distinction between a corporate vertical marketing system and an administered vertical marketing system? a. b. c. d. e. Administered vertical marketing systems gain power through ownership while vertical marketing systems gain power through corporate agreement. Administered vertical marketing systems gain power through size and influence of one channel member and ownership. Administered vertical marketing systems achieve coordination at successive stages of production and distribution by the size and influence of one channel member rather than through ownership. Administered vertical marketing systems gain power through contractual agreement and ownership. Administered vertical marketing systems are usually larger and more profitable than corporate vertical marketing systems.

Answer: c Page: 289 Rationale: A corporate vertical marketing system combines successive stages of production and distribution under a single ownership. An administered vertical marketing system achieves coordination at successive stages of production and distribution by the size and influence of one channel member rather than through ownership. Size and influence of a single channel member is the factor in administered vertical marketing systems, whereas ownership is the key factor in corporate vertical marketing systems. 13-81 ADMINISTERED VERTICAL MARKETING SYSTEMS APPLICATION

Because Procter and Gamble has a broad product assortment and is able to obtain excellent cooperation from supermarkets in displaying, promoting, and pricing its products, Procter and Gamble represents which type of vertical marketing system? a. b. c. d. e. corporate vertical marketing system integrated vertical marketing system contractual vertical marketing system administered vertical marketing systems interactive vertical marketing system

Answer: d Page: 289 Rationale: Procter and Gamble can achieve coordination of production and distribution because of its size and influence rather than through ownership of the marketing channel.

860

13-82 FACTORS AFFECTING MARKETING CHANNEL CHOICE

CONCEPTUAL

Which of the following do marketing executives consider when choosing a marketing channel and intermediaries? a. b. c. d. e. coverage of the target market satisfying buyer requirements profitability of the channel and intermediaries density and type of intermediaries used at the retail level of distribution all of the above

Answer: e Page: 290 Rationale: Marketing executives consider three items when choosing a marketing channel and intermediaries: (1) target market coverage, including density and type of intermediaries used at retail, (2) satisfying buyer requirements, and (3) profitability of the channel and intermediaries. 13-83 DEGREES OF DISTRIBUTION DENSITY The three degrees of distribution density are: a. b. c. d. e. intensive, extensive, and selective. extensive, concentrated, and selective. intensive, exclusive, and selective. extensive, pervasive, and concentrated. concentrated, exclusive, and intensive. CONCEPTUAL

Answer: c Page: 290 Rationale: Achieving the best coverage of the target market requires attention to the density that is, the number of stores in a given geographical areaand type of intermediaries to be used at the retail level of distribution. Three degrees of distribution density exist: intensive; exclusive; and selective. 13-84 INTENSIVE DISTRIBUTION APPLICATION

When Kraft Foods introduced Planters Trail Mix snack food, it was a low-involvement convenience product. Which type of distribution should Kraft have used with this new product? a. b. c. d. e. exclusive distribution direct distribution intensive distribution dual distribution selective distribution

Answer: c Page: 290 Rationale: Intensive distribution means that a firm tries to place its products and services in as many outlets as possible. Intensive distribution is usually chosen for convenience products or services, such as candy and newspapers. Since this is a product that customers are not likely to spend much time searching for, convenience becomes the key attribute of distribution. Thus, intensive distribution is the answer.

861

13-85 INTENSIVE DISTRIBUTION

DEFINITION

The density of distribution whereby a firm tries to place its products or services in as many outlets as possible is called __________ distribution. a. b. c. d. e. intensive extensive selective exclusive concentrated

Answer: a Page: 290 Other Location: web Rationale: Key term definitionintensive distribution 13-86 INTENSIVE DISTRIBUTION APPLICATION

Breath mints, bottled water, and nail clippers would most likely use which density of distribution? a. b. c. d. e. intensive distribution extensive distribution selective distribution exclusive distribution concentrated distribution

Answer: a Page: 290 Rationale: Intensive distribution means that a firm tries to place its products and services in as many outlets as possible. Intensive distribution is usually chosen for convenience products or services; for example, chewing gum, automatic teller machines, and soft drinks. 13-87 EXCLUSIVE DISTRIBUTION DEFINITION

The density of distribution whereby a firm tries to place its products or services with only one retail outlet in a specified geographical area is called __________ distribution. a. b. c. d. e. intensive extensive selective exclusive concentrated

Answer: d Page: 290 Other Location: web Rationale: Key term definitionexclusive distribution

862

13-88 EXCLUSIVE DISTRIBUTION

APPLICATION

John Deere manufactures and distributes industrial and farm equipment. These types equipment are considered to be specialty products. Which type of market coverage does the company use? a. b. c. d. e. intensive distribution extensive distribution selective distribution exclusive distribution concentrated distribution

Answer: d Page: 290 Rationale: Exclusive distribution means that only one retail outlet in a specified geographical area carries the firms products. Exclusive distribution is typically chosen for specialty products or services. 13-89 EXCLUSIVE DISTRIBUTION APPLICATION

Which type of distribution density is used by Rolls Royce when the car manufacturer maintains only one dealership in any large metropolitan area? a. b. c. d. e. intensive distribution extensive distribution selective distribution exclusive distribution private label distribution

Answer: d Page: 290 Rationale: Exclusive distribution means that only one retail outlet in a specified geographical area carries the firms products. Exclusive distribution is typically chosen for specialty products or servicesfor example, automobiles, some women's fragrances, men's suits, and yachts. 13-90 EXCLUSIVE DISTRIBUTION CONCEPTUAL

For which of the following products would the manufacturer be most likely to use exclusive distribution? a. b. c. d. e. Timex watches, Hanes underwear, and Nike shoes Chanel perfume, Steinway pianos, and Baccarat crystal Oreos, Teddy Grahams, and vanilla wafers paper clips, light bulbs, and file folders Lean Cuisine meals, Breyer's ice cream, and Coca-Cola

Answer: b Page: 290 Rationale: Exclusive distribution means that only one retail outlet in a specified geographical area carries the firms products. Exclusive distribution is typically chosen for specialty products or services; for example, automobiles, some women's fragrances, men's suits, and yachts.

863

13-91 SELECTIVE DISTRIBUTION

DEFINITION

The density of distribution whereby a firm tries to place its products in a few retail outlets in a specific geographical area is called __________ distribution. a. b. c. d. e. intensive extensive selective exclusive concentrated

Answer: c Page: 290 Rationale: Key term definitionselective distribution 13-92 SELECTIVE DISTRIBUTION CONCEPTUAL

The target market coverage and distribution density associated with shopping goods such as overcoats, work boots, and dining room furniture is called: a. b. c. d. e. intensive distribution. exclusive distribution. selective distribution. primary distribution. secondary distribution.

Answer: c Page: 290 Rationale: Selective distribution means that a firm selects a few retail outlets in a specific geographical area to carry its products. Selective distribution combines some of the market coverage benefits of intensive distribution with the control over resale possible with exclusive distribution. For this reason, selective distribution is the most common form of distribution density and is usually associated with shopping goods or services. 13-93 SELECTIVE DISTRIBUTION Which type of market coverage is usually associated with shopping goods? a. b. c. d. e. intensive distribution extensive distribution selective distribution exclusive distribution concentrated distribution CONCEPTUAL

Answer: c Page: 290 Rationale: Selective distribution means that a firm selects a few retail outlets in a specific geographical area to carry its products. Selective distribution combines some of the market coverage benefits of intensive distribution with the control over resale possible with exclusive distribution. For this reason, selective distribution is the most common form of distribution density and is usually associated with shopping goods or services.

864

13-94 SELECTIVE DISTRIBUTION

CONCEPTUAL

The Hallmark Card Company is able to maintain good dealer relationships because it limits the number and maintains the quality of outlets through which it sells. Hallmark uses __________ distribution. a. b. c. d. e. intensive extensive selective exclusive concentrated

Answer: c Page: 290 Rationale: Selective distribution means that a firm selects a few retail outlets in a specific geographical area to carry its products. Selective distribution combines some of the market coverage benefits of intensive distribution with the control over resale possible with exclusive distribution. For this reason, selective distribution is the most common form of distribution density and is usually associated with shopping goods or services. 13-95 TARGET MARKET COVERAGE APPLICATION

IBM has long been perceived as the leader in computer technology. As such, for many years IBM computers were available only from selected, authorized IBM retailers. Currently, IBM has changed its distribution strategy. Consumers can now purchase IBM computers at several wellknown department and discount stores, including Wal-Mart and K-Mart, located throughout the country. Initially, IBM employed __________ distribution and made its products available only through a single retail outlet in specific locations. Currently, as computers have become more of a shopping good, IBM is using __________ distribution, as it seeks to broaden the degree of its distribution and make its computers available in several retail outlets in specific areas. a. b. c. d. e. intensive; exclusive exclusive; intensive intensive; selective selective; exclusive exclusive; selective

Answer: e Page: 290 Rationale: Marketers seek to achieve the best coverage of their target markets by selecting the type and density of intermediaries used at the retail level. Exclusive distribution involves the use of one specific retailer in a certain geographic region as the only outlet for a product. Selective distribution means that a firm selects a few retail outlets in a specific geographical area to carry its products. Selective distribution combines some of the market coverage benefits of intensive distribution with the control over resale possible with exclusive distribution. For this reason, selective distribution is the most common form of distribution density and is usually associated with shopping goods or services.

865

13-96 CHANNEL DESIGN: SATISFYING BUYER REQUIREMENTS

CONCEPTUAL

Which of the following is a major consideration for satisfying buyer requirements when designing distribution channels? a. b. c. d. e. information convenience variety pre- or post-sale services all of the above

Answer: e Page: 290 Rationale: Satisfying four buyer requirements is another objective in channel design: (1) information, (2) convenience, (3) variety, and (4) pre- or post-sale services. Information is an important requirement when buyers have limited knowledge or desire specific data about a product or service. Properly chosen intermediaries communicate with buyers through in-store displays, demonstrations, and personal selling. Convenience has multiple meanings for buyers, such as proximity or driving time to a retail outlet or hours of operation. Variety reflects buyers interest in having numerous competing and complementary products carried by intermediaries, which enhances their attractiveness to buyers. Services provided by intermediaries are an important buying requirement for products such as large household appliances that require delivery, installation, and credit. 13-97 CHANNEL DESIGN: SATISFYING BUYER REQUIREMENTS APPLICATION

Channels are typically designed to satisfy one or more of four consumer interests. When a membership book club allows its members to use the Internet to notify the company whether they want to receive the next month's issue, the book club is appealing to which buyer requirement? a. b. c. d. e. information convenience variety attendant services all of the above

Answer: b Page: 290-291 Rationale: Satisfying four buyer requirements is another objective in channel design: (1) information, (2) convenience, (3) variety, and (4) pre- or post-sale services. Information is an important requirement when buyers have limited knowledge or desire specific data about a product or service. Properly chosen intermediaries communicate with buyers through in-store displays, demonstrations, and personal selling. Convenience has multiple meanings for buyers, such as proximity or driving time to a retail outlet or hours of operation. Variety reflects buyers interest in having numerous competing and complementary products carried by intermediaries, which enhances their attractiveness to buyers. Services provided by intermediaries are an important buying requirement for products such as large household appliances that require delivery, installation, and credit. In this case, convenience
866

means being able to respond without having to find a stamp and take the letter to the mailbox.

867

13-98 CHANNEL DESIGN: SATISFYING BUYER REQUIREMENTS

APPLICATION

Which buyer requirement would be most important in choosing a channel design for a financial service? a. b. c. d. e. information context variety attendant services none of the above would be more important

Answer: a Page: 290 Rationale: Satisfying four buyer requirements is another objective in channel design: (1) information, (2) convenience, (3) variety, and (4) pre- or post-sale services. Information is an important requirement when buyers have limited knowledge or desire specific data about a product or service. Properly chosen intermediaries communicate with buyers through in-store displays, demonstrations, and personal selling. In this case, the buyer would need information obtained from personal selling or perhaps, from a website. Convenience has multiple meanings for buyers, such as proximity or driving time to a retail outlet or hours of operation. Variety reflects buyers interest in having numerous competing and complementary products carried by intermediaries, which enhances their attractiveness to buyers. Services provided by intermediaries are an important buying requirement for products such as large household appliances that require delivery, installation, and credit. 13-99 MARKETING NEWSNET APPLICATION

When Apple Computer opened the Apple stores to allow customers to create a less stressful and more supportive environment for shopping for a new PC, Apple used: a. b. c. d. e. dual distribution. forward integration. backward integration. horizontal integration. strategic alliance.

Answer: b Page: 290 Rationale: Forward integration occurs when a producer owns an intermediary at the next level down in the marketing channel.

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13-100 MARKETING NEWSNET

APPLICATION

Which of the following buyer requirements has Apple provided in its own retail stores? a. b. c. d. e. information convenience variety pre- or post-sale services all of the above

Answer: e Page: 290 Rationale: Satisfying four buyer requirements is another objective in channel design: (1) information, (2) convenience, (3) variety, and (4) pre- or post-sale services. Information is an important requirement when buyers have limited knowledge or desire specific data about a product or service. Properly chosen intermediaries communicate with buyers through in-store displays, demonstrations, and personal selling. Since Apple owns these retail stores, they have chosen to provide a Genius Bar staffed with knowledgeable sales people to provide information. Convenience has multiple meanings for buyers, such as proximity or driving time to a retail outlet or hours of operation. Apple has over 110 stores in the U.S. providing convenience. Variety reflects buyers interest in having numerous competing and complementary products carried by intermediaries, which enhances their attractiveness to buyers. In their stores, Apple keeps inventory in stock for over 300 third-party software products for creative people. Services provided by intermediaries are an important buying requirement for products that require delivery, installation, and credit. Here the computer purchase may require extending credit. 13-101 PROFITABILITY Which of the following is true about channel profitability? a. b. c. d. e. Channel profitability is determined by the revenues earned minus cost for each channel member and for the channel as a whole. Cost is the critical factor of channel profitability. The extent to which channel members share these costs determines the profitability of each member and of the channel as a whole. Distribution, advertising, and selling expenses are critical factors. All of the above are true about channel profitability. CONCEPTUAL

Answer: e Page: 291-292 Rationale: Channel profitability is determined by the revenues earned minus cost for each channel member and for the channel as a whole. Cost is the critical factor of channel profitability. These costs include distribution, advertising, and selling expenses. The extent to which channel members share these costs determines the profitability of each member and of the channel as a whole.

869

13-102 CHANNEL RELATIONSHIPS Which of the following statements is true regarding channel relationships? a. b. c. d. e. Channels consist of independent individuals and firms. There is always potential for disagreement in a channel. Channel disagreements include who performs which channel functions. Channel disagreements include how profits are distributed. All of the above statements about channel relationships are true.

CONCEPTUAL

Answer: e Page: 292 Rationale: Unfortunately, because channels consist of independent individuals and firms, there is always potential for disagreements concerning who performs which channel functions, how profits are distributed, which products and services will be provided by whom, and who makes critical channel-related decisions. 13-103 CHANNEL CONFLICT DEFINITION

__________ arises when one channel member believes another channel member is engaged in behavior that prevents it from achieving its goals. a. b. c. d. e. Channel conflict Disintermediation Cross-docking Partnership inconsistency Relationship variance

Answer: a Page: 292 Other Location: web Rationale: Key term definitionchannel conflict 13-104 CHANNEL CONFLICT The two types of channel conflict are: a. b. c. d. e. divisional and organizational. horizontal and vertical. transactional and transformational. external and internal. supervisor-subordinate and subordinate-subordinate. DEFINITION

Answer: b Page: 292 Rationale: Key term definitionchannel conflict

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13-105 VERTICAL CONFLICT __________ conflict occurs between different levels in a marketing channel. a. b. c. d. e. Corporate Horizontal Vertical Administered Contractual

DEFINITION

Answer: c Page: 292 Rationale: Text term definitionvertical conflict 13-106 VERTICAL CONFLICT Which of the following is NOT a source of vertical conflict? a. b. c. d. e. when disintermediation occurs when channel members disagree on how profit margins are distributed among channel members when a manufacturer increases its distribution coverage in a geographic area when a manufacturer believes a wholesaler or retailer is not devoting sufficient attention to its products when a channel member bypasses another member and sells or buys a product direct CONCEPTUAL

Answer: c Page: 292 Rationale: Vertical conflict occurs between different levels in a marketing channel; for example, between a manufacturer and a wholesaler or between a wholesaler and a retailer. Three sources of vertical conflict are most common. First, conflict arises when a channel member bypasses another member and sells or buys products direct, a practice called disintermediation. Second, disagreements over how profits are distributed among channel members produce conflict. Finally, when manufacturers believe wholesalers or retailers are not giving their products adequate attention, conflicts may arise. Alternative c is a source of horizontal channel conflict. 13-107 DISINTERMEDIATION DEFINITION

When a channel member bypasses another member and sells or buys products direct, this is called: a. b. c. d. e. disintermediation. unethical. channel conflict horizontal conflict. resale restrictions.

Answer: a Page: 292 Rationale: Key term definitiondisintermediation

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13-108 DISINTERMEDIATION

APPLICATION

While Maytag appliances have the leading brand name, its sales are third in the industry. One of the things the company has done to spur sales is to create a website where potential customers can find the answers to the questions most asked during the appliance purchase process. While Maytag considered using __________ (allowing customers to purchase at the site), it decided against it and simply provides the name and address of the nearest Maytag dealers. a. b. c. d. e. transactional function horizontal integration horizontal innovation cross-docking disintermediation

Answer: e Page: 292 Rationale: Disintermediation occurs when a channel member bypasses another member and sells or buys products direct. In this case, by allowing customers to purchase at the site, Maytag would have been bypassing their retailers and allowing customers to purchase direct from Maytag. 13-109 CHANNEL CONFLICT APPLICATION

Which of the following types of vertical marketing systems is likely to experience the least channel conflict? a. b. c. d. e. corporate vertical marketing system wholesaler-sponsored voluntary chain retailer-sponsored cooperative franchise system administered vertical marketing system

Answer: a Page: 292 Rationale: Vertical conflict occurs between different levels in a marketing channel; for example, between a manufacturer and a wholesaler or between a wholesaler and a retailer. Three sources of vertical conflict are most common. First, conflict arises when a channel member bypasses another member and sells or buys products direct, a practice called disintermediation. Second, disagreements over how profits are distributed among channel members produce conflict. Finally, when manufacturers believe wholesalers or retailers are not giving their products adequate attention, conflicts may arise. There will be very little vertical conflict among channel members when all intermediaries are owned by a single organization.

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13-110 HORIZONTAL CONFLICT

DEFINITION

Conflict occurring between intermediaries at the same level in a marketing channel, such as between two or more retailers that handle the same manufacturers brands is called __________ conflict. a. b. c. d. e. corporate horizontal vertical administered contractual

Answer: b Page: 292 Rationale: Text term definitionhorizontal conflict 13-111 CHANNEL CAPTAIN DEFINITION

A channel member who coordinates, directs, and supports other channel members is called a: a. b. c. d. e. product champion. product captain. channel captain. director of distribution. channel coordinator.

Answer: c Page: 292 Rationale: Text term definitionchannel captain 13-112 CHANNEL CAPTAIN APPLICATION

Bombardier makes corporate jets. The aircraft company coordinates outside suppliers that supply design services. For its newest plane, the Continental, Bombardier has about 30 lead suppliers about ten of those have been involved since the initial design phase. Bombardier often suggests ways in which these suppliers can reduce costs while keeping the same level of quality. Bombardier is the leading marketer of corporate jets. Bombardier is an example of a: a. b. c. d. e. product champion. product captain. channel captain. director of distribution. channel coordinator.

Answer: c Page: 292 Rationale: A channel captain is a channel member who coordinates, directs, and supports other channel members. In this case, Bombardier coordinates outside suppliers, and directs them in how to improve product quality, thus influencing their production facility.

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13-113 CHANNEL CAPTAIN

CONCEPTUAL

Which of the following is the source of power determining which channel member will be the channel captain? a. b. c. d. e. economic power expertise identification with a particular channel member legitimate rights through contracts any of the above

Answer: e Page: 292 Rationale: A firm can become a channel captain because it is typically the channel member with the ability to influence the behavior of other members. Influence can take four forms: economic; expertise; identification with a channel member; and contractual rights. 13-114 CHANNEL CAPTAIN APPLICATION

During the 1990s, Sports Port, a motorcycle and fishing boat retailer located in a small northern Minnesota town was the world's largest dealer for Crestliner fishing boats. In order to meet the demand of his many customers, the owner of Sports Port worked with a wide variety of channel members, ranging from the manufacturer of the boats to trucking firms, other retailers, and even detailers. Such a diverse channel of distribution often resulted in channel conflict. However, due to his strong consumer following, the owner of Sports Port had the power to resolve disputes between channel members. The owner of Sports Port served as the __________ in the channel of distribution. a. b. c. d. e. wholesaler producer channel captain channel spokesperson sole channel intermediary

Answer: c Page: 292 Rationale: A channel captain is a channel member that coordinates, directs, and supports other channel members. Channel captains can be producers, wholesalers, or retailers. In this case, Sports Port is a retailer that is a channel captain. A firm becomes a channel captain because it is the channel member with the ability to influence the behavior of other members. This influence can take four forms: (1) economic influence arising from the ability of a firm to reward other members because of its strong financial position, (2) expertise in managing inventory and streamlining order processing, (3) identification with a particular channel member, and (4) the legitimate right of one channel member to direct the behavior of other members. Because of its strong consumer following, Sports Port has the ability to influence the other members of its channel, thus making it the channel captain.

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13-115 LOGISTICS

DEFINITION

The performance of activities that focus on getting the right amount of the right product to the right place at the right time at the lowest possible cost is called: a. b. c. d. e. strategic distribution. movement and storage. logistics. direct selling. logistical-assisted manufacturing (LAD).

Answer: c Page: 293 Rationale: Key term definitionlogistics 13-116 LOGISTICS APPLICATION

UPS Logistics earned more than $1 billion in revenue in a recent year and is one of the fastest growing divisions of UPS. UPS Logistics designs and manages entire transportation and customer service networks for global clients that include Ford Motor Co. and National Semiconductor. UPS Logistics: a. b. c. d. e. creates utility for these companies' customers. assumes the role of freight forwarder. increases the number of steps in the value proposition. assumes the role of drop shipper. does not influence their clients' supply chain.

Answer: a Page: 293 Rationale: Logistics focus on getting the right amount of the right product to the right place (time and place utility) at the right time at the lowest possible costin this case, for the customers of Ford and National Semiconductor. 13-117 LOGISTICS Logistics is most closely related to which element of the marketing mix? a. b. c. d. e. product production place promotion price DEFINITION

Answer: c Page: 293 Rationale: Key term definitionlogistics

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13-118 LOGISTICS MANAGEMENT

DEFINITION

Organizing the cost-effective flow of raw materials, in-process inventory, finished goods, and related information from point-of-origin to point-of consumption to satisfy customer requirements is called: a. b. c. d. e. physical distribution management. logistics management. customer service. production management. manufacturer distribution logistics.

Answer: b Page: 293 Other Location: web Rationale: Text term definitionlogistics management 13-119 LOGISTICS MANAGEMENT DEFINITION

Logistics management is organizing the cost-effective flow of raw materials, in-process inventory, finished goods, and related information from point-of-origin to point-of-consumption to: a. b. c. d. e. satisfy customer requirements. create maximum profit. maintain organizational culture. eliminate all competition. none of the above.

Answer: a Page: 293 Rationale: Text term definitionlogistics management 13-120 LOGISTICS MANAGEMENT DEFINITION

If you were to draw a graphic representation of logistics management, it would most likely resemble a(n). a. b. c. d. e. diamond. abstract figure. pyramid. pipeline. circle.

Answer: d Page: 293 Rationale: Logistics management is organizing the cost-effective flow of raw materials, inprocess inventory, finished goods, and related information from point-of-origin to point-ofconsumption to satisfy customer requirements. Logistics is the practice of organizing the effective flow of raw materials to finished products, suggesting the flow through a pipeline.

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13-121 SUPPLY CHAIN

DEFINITION

A(n) __________ is a series of firms that perform activities required to create and deliver a good or service to consumers or industrial users. a. b. c. d. e. effective response system demand channel strategic information alliance supply chain product-specific delivery system

Answer: d Page: 293 Other Location: web Rationale: Key term definitionsupply chain 13-122 SUPPLY CHAIN CONCEPTUAL

A marketing expert described a __________ as looking like a butterfly. The manufacturer is the body of the butterfly with many different suppliers accumulated on one side of the body for the left wing and a large number of buyers collected on the other side to form the right wing. a. b. c. d. e. logistical flow demand chain materials handling facility supply chain retailer cooperative

Answer: d Page: 293 Other Location: web Rationale: A supply chain is a sequence of firms that perform activities required to create and deliver a good or service to consumers or industrial users, suppliers (the left wing) providing inputs to the firm that processes them and sends them as finished products to customers (the right wing).

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13-123 SUPPLY CHAIN

CONCEPTUAL

Which of the following statements describes how a supply chain differs from a marketing channel? a. b. c. d. e. A communication is more important in the marketing channel than in the supply chain. The marketing channel places more emphasis on cost-effectiveness than the supply chain. A supply chain includes suppliers that provide raw material inputs to a manufacturer. A marketing channel includes suppliers that provide raw material inputs to a manufacturer. There is no difference between the two.

Answer: c Page: 293-294 Rationale: A supply chain is a series of firms that perform activities required to create and deliver a good or service to consumers or industrial users. It differs from a marketing channel in terms of the firms involved. A supply chain includes suppliers who provide raw material inputs to a manufacturer as well as the wholesalers and retailers who deliver finished goods to you. The management process is also different. Supply chain management is the integration and organization of information and logistics activities across firms in a supply chain for the purpose of creating and delivering goods and services that provide value to consumers. An important feature of supply chain management is its application of sophisticated information technology that allows companies to share and operate systems for order processing, transportation scheduling, and inventory and facility management. 13-124 SUPPLY CHAIN MANAGEMENT DEFINITION

__________ is the integration and organization of information and logistics across firms in a supply chain for the purpose of creating and delivering goods and services that provide value to consumers. a. b. c. d. e. Supply chain management Logistics management Point-to-point management Just-in-time management Cost-effective flow

Answer: a Page: 293-294 Other Location: web Rationale: Text term definitionsupply chain management

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13-125 SUPPLY CHAIN

CONCEPTUAL

Supply chain management impacts all of the following aspects of the marketing mix strategy EXCEPT: a. b. c. d. e. the target market selection decision. product mix decisions. pricing decisions. promotion decisions. distribution decisions.

Answer: a Page: 293-294 Rationale: Target market selection is not part of the marketing mix. 13-126 SUPPLY CHAIN APPLICATION

Bombardier makes corporate jets and its strategy involves streamlining production activities, maintaining its reputation for quality, and reducing its costs. It has developed the Continental, an airplane assembled from just a dozen large component parts. While building planes with subassemblies is not new, Bombardier is the first not to use vertical integration. All parts are supplied by carefully chosen independent companies that share the development costs and market risk. In terms of its supply chain, Bombardier has a. b. c. d. e. lengthened its supply chain unnecessarily. implemented a just-in-time materials handling policy. created a marketing channel. harmonized its supply chain and its marketing strategy. used a production repositioning strategy.

Answer: d Page: 295 Rationale: Because Bombardier manufactures corporate jets, one can assume the marketing strategy is to satisfy the needs of the customer segmentcorporate executives. The supply chain is developed to assure that customer needs are met by choosing independent companies which also are concerned with maintaining quality and reducing costs, two goals that are also important to the segment targeted by Bombardiers marketing strategy. 13-127 CROSS-DOCKING DEFINITION

__________ is a practice that involves unloading products from suppliers, sorting products for individual stores, and quickly reloading products on trucks, which will deliver the products to specific stores. a. b. c. d. e. Dual distribution Intermodal distribution An effective merchandise response (EMR) system Piggy-backing Cross-docking

Answer: e Page: 296 Rationale: Text term definitioncross-docking

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13-128 CROSS-DOCKING Cross-docking is most closely related to: a. b. c. d. e. efficient supply chain activities. intermodal transportation. increasing lead time. reverse logistics. materials handling

DEFINITION

Answer: a Page: 296 Rationale: Text term definitioncross-docking 13-129 OBJECTIVES OF LOGISTICS CONCEPTUAL

The objectives of logistics management in a supply chain are to minimize relevant logistics costs and to: a. b. c. d. e. maximize marketing objectives. minimize employee productivity. minimize shareholder's return on investment. deliver maximum customer service. maximize up-stream task transference.

Answer: d Page: 297 Rationale: The objective of logistics management in a supply chain is to minimize total logistics costs while delivering the appropriate level of customer service. 13-130 OBJECTIVES OF LOGISTICS CONCEPTUAL

The objectives of logistics management in a supply chain are to deliver maximum customer service and to: a. b. c. d. e. minimize relevant logistics costs. minimize employee productivity. minimize shareholder's return on investment. minimize employee layoffs. maximize employee wages.

Answer: a Page: 297 Other Location: web Rationale: The objective of logistics management in a supply chain is to minimize total logistics costs while delivering the appropriate level of customer service.

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13-131 TOTAL LOGISTICS COST Total logistics cost includes expenses associated with: a. b. c. d. e. order processing. materials handling and warehousing. transportation. inventory and stockouts. all of the above.

DEFINITION

Answer: e Page: 297; Figure 13-9 Other Location: web Rationale: Key term definitiontotal logistics cost 13-132 TOTAL LOGISTICS COST DEFINITION

__________ includes expenses associated with transportation, materials handling and warehousing, inventory, stockouts, and order processing. a. b. c. d. e. Supplier service cost Manufacturing cost Total logistics cost Social responsibility cost Total marketing cost

Answer: c Page: 297; Figure 13-9 Rationale: Key term definitiontotal logistics cost 13-133 TOTAL LOGISTICS COST Which of the following is an element of total logistics cost? a. b. c. d. e. new product development advertising inventory personal selling all of the above CONCEPTUAL

Answer: c Page: 297; Figure 13-9 Rationale: Total logistics cost includes expenses associated with transportation, warehousing and materials handling, inventory, stockouts, order processing and returned goods handling.

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13-134 TOTAL LOGISTICS COST

CONCEPTUAL

Which of the following best describes the goal of a firm's combination of inventory and transportation costs? a. b. c. d. e. minimize required inventory costs minimize required transportation costs minimize the sum of required inventory and transportation costs maximize the difference between required inventory and transportation costs set a level of transportation costs and minimize the required inventory costs

Answer: c Page: 297 Rationale: Logistics costs are dependent on customer service level, which serves as a strategic goal. Because inventory and transportation costs interact, the goal is to minimize the sum. Minimizing the cost of either one independently can cause the cost of the other to skyrocket. 13-135 TOTAL LOGISTICS COST DEFINITION

The four key logistics costs in a supply chain include transportation, warehousing and materials handling, order processing, and: a. b. c. d. e. communication between buyer and seller. inventory management. order cycle time. effective handling of problems. on-time delivery of product.

Answer: b Page: 297; Figure 13-9 Rationale: Key term definitiontotal logistics cost 13-136 TOTAL LOGISTICS COST DEFINITION

The four key logistics costs in a supply chain include warehousing and materials handling, order processing, inventory management, and: a. b. c. d. e. communication between buyer and seller. effective handling of problems. order cycle time. transportation. on-time delivery of product.

Answer: d Page: 297; Figure 13-9 Rationale: Key term definitiontotal logistics cost

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13-137 TOTAL LOGISTICS COST

DEFINITION

The four key logistics costs in a supply chain include transportation, order processing, inventory management, and: a. b. c. d. e. communication between buyer and seller. effective handling of problems. order cycle time. warehousing and materials handling. on-time delivery of product.

Answer: d Page: 297; Figure 13-9 Rationale: Key term definitiontotal logistics cost 13-138 TOTAL LOGISTICS COST DEFINITION

The four key logistics costs in a supply chain include transportation, warehousing and materials handling, inventory management and: a. b. c. d. e. order processing. communication between buyer and seller. order cycle time. effective handling of problems. on-time delivery of product.

Answer: a Page: 297; Figure 13-9 Rationale: Key term definitiontotal logistics cost 13-139 CUSTOMER SERVICE CONCEPT The customer service concept implies firms should: a. b. c. d. e. automate customer service. maximize customer service levels. minimize customer service levels. establish logistics costs and let customer service follow. set customer service levels and logistic costs simultaneously in order to achieve strategic goals. CONCEPTUAL

Answer: e Page: 297 Rationale: Customer service and logistics costs interact. The former may lead in importance, but striving to attain desired levels may erode profit too far, so customer service levels and logistics costs must be considered together.

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13-140 CUSTOMER SERVICE

DEFINITION

Within the context of a supply chain, __________ is the ability of a logistics system to satisfy users in terms of time, dependability, communication, and convenience. a. replenishment b. distribution management c. stockout creation d. customer service e. lead time Answer: d Page: 197 Other Location: web Rationale: Key term definitioncustomer service 13-141 CUSTOMER SERVICE CONCEPT APPLICATION

Which of the following customer-service components is likely to be most critical for Ford when it purchases original-issue automobile tires (tires put on new Ford cars)? a. b. c. d. e. lead time dependability and on-time delivery communication convenience none of the above

Answer: b Page: 297 Rationale: The production schedule based on on-time parts availability is the critical factor. Late deliveries can shut down the production line. 13-142 CUSTOMER SERVICE CONCEPT DEFINITION

Supply chain managers balance total logistics cost factors against customer service factors. Customer service factors include: a. b. c. d. e. time, convenience, communication, and dependability. assurance, reliability, flexibility, and tangibles. tangibles, dependability, responsiveness, and flexibility. time, assurance, responsiveness, and tangibles. convenience, flexibility, time, and empathy.

Answer: a Page: 297; Figure 13-9 Rationale: Key term definitioncustomer service

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13-143 ORDER CYCLE TIME The time from ordering an item until it is received and ready for use is called: a. b. c. d. e. order cycle time. order handling time. lag time. purchase cycle. logistics cycle.

DEFINITION

Answer: a Page: 297 Rationale: Text term definitionorder cycle or replenishment time 13-144 ORDER CYCLE TIME DEFINITION

In a logistics setting, order cycle time refers to the time from ordering an item until it is: a. b. c. d. e. billed to the customer. acknowledged by the customer. billed and paid for. promised for delivery. received and ready for use or sale.

Answer: e Page: 297 Rationale: Text term definitionorder cycle or replenishment time 13-145 ORDER CYCLE TIME Replenishment time is sometimes referred to as: a. b. c. d. e. physical distribution sequence. total logistics cycle. logistical support time. order cycle time. billing cycle time. DEFINITION

Answer: d Page: 297 Rationale: Text term definitionorder cycle or replenishment time

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13-146 REPLENISHMENT TIME

APPLICATION

Saks Fifth Avenue employs a quick response system to order fast-moving fashion items. Saks point-of-sales scanner records each sale. When stock falls below a minimum level, the system automatically sends an electronic order to the vendor (e.g., Donna Karan), which processes the order within 48 hours. This system has effectively reduced __________. a. b. c. d. e. customer response cycle. product flow. replenishment time. supply lag. logistical lag.

Answer: c Page: 297 Rationale: Within the context of a supply chain, customer service is the ability of logistics management to satisfy users in terms of time, dependability, communication, and convenience. Time in this instance refers time between the ordering of an item and when it is received and ready for use48 hours. 13-147 CUSTOMER SERVICE APPLICATION

Many organizations have realized that customer service is a key element of supply chain management. Firms the world over have discovered that customer service is closely related to customer satisfaction and the sale of goods and services. The logistics manager who seeks to provide clients with complete customer service must satisfy those clients in terms of: a. b. c. d. e. dependability of product replenishment. communication between buyer and seller. convenience for the buyer. time between placing an order and receiving the order. all of the above.

Answer: e Page: 297; Figure 13-9 Rationale: Within the context of a supply chain, customer service is the ability of logistics management to satisfy users in terms of time, dependability, communication, and convenience. 13-148 ORDER CYCLE TIME APPLICATION

Saks Fifth Avenue has employed a quick response delivery system since the mid-1990s. When stock falls below a minimums level, the system: a. b. c. d. e. alerts management that the stock needs replenishment. automatically issues advertising for other, in-stock merchandise. automatically suggests possible re-order quantities. automatically generates a replenishment order. automatically raises the price of the remaining stock.

Answer: d Page: 297 Rationale: The store's point-of-sale scanner system records each day's sales. When stock falls below a minimum level, the system automatically generates a replenishment order.

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13-149 EFFICIENT CONSUMER RESPONSE

DEFINITION

Saks Fifth Avenue has a point-of-sale scanner system to record each sale. When stock of fashion merchandise, such as a Donna Karan jacket, falls below a minimum level, the system automatically generates a replenishment order. When the Donna Karan vendor receives it, the electronic order is processed within 48 hours. This is an example of a(n): a. b. c. d. e. efficient manufacturing program. customer service policy. customer loyalty program. manufacturing and distribution alliance. efficient consumer response delivery system.

Answer: e Page: 297 Rationale: Text term definitionefficient consumer response 13-150 VENDOR-MANAGED INVENTORY (VMI) DEFINITION

A __________ is an inventory-management system whereby the supplier determines the product amount and assortment a customer, such as a retailer needs and automatically delivers the appropriate items. a. b. c. d. e. supplier-managed inventory supply chain inventory logistics-managed inventory just-in-time system vendor-managed inventory

Answer: e Page: 297 Rationale: Key term definitionvendor-managed inventory (VMI) 13-151 VENDOR-MANAGED INVENTORY (VMI) CONCEPTUAL

Pharmaceutical companies such as Eli Lilly and SmithKline Beecham use __________ to make sure retailers carrying their products maintain predetermined inventory levels in stock. The pharmaceutical companies do this by a daily monitoring of sales at individual stores. a. b. c. d. e. supplier-managed inventory supply chain inventory logistics-managed inventory just-in-time system vendor-managed inventory

Answer: e Page: 298 Rationale: An inventory-management system whereby the supplier like Lilly determines the product amount and assortment a customer, such as a retailer needs and automatically delivers the appropriate items is termed a vendor-managed inventory.

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13-152 VENDOR-MANAGED INVENTORY (VMI)

APPLICATION

At the end of a recent year, Solectron, a big Milpitas, California, electronics contractor, made half of its purchases under vendor-managed inventory programs. Solectron: a. b. c. d. e. used a system in which its suppliers determined the product amount and assortment that should be in stock. had its suppliers perform all materials handing activities. authorized its suppliers to eliminate as many wholesaling functions as possible from the supply chain. authorized the use of distribution centers to provide quicker customer response times. balanced its total logistics cost by eliminating the convenience service factor.

Answer: a Page: 298 Rationale: Vendor-managed inventory is a system whereby the supplier determines the product amount and assortment a customer (such as a retailer) needs and automatically delivers the appropriate items. 13-153 VIDEO CASE: CRESTON VINEYARDS APPLICATION

One of the channels of distribution for Creston Vineyards involves distributors that purchase several brands at the same time from a warehouse intermediarynot directly from the vineyard. Distributors who buy from the warehouse are expecting the warehouse to perform which logistical functions for them? a. b. c. d. e. assorting, sorting, and storing financing, grading, and marketing marketing research, buying, and storing risk taking, storing, and sorting transporting, storing, and financing

Answer: a Page: 300; Figure 13-2 Rationale: Assorting is creating product assortments from several sources to serve customers. Storing is assembling and protecting products at a convenient location to offer better customer service. Sorting is purchasing in large quantities and breaking into smaller amounts desired by customers. 13-154 VIDEO CASE: CRESTON VINEYARDS APPLICATION

For most consumers fine wine is considered a shopping good, and they expect to find it available at liquor stores. Therefore, Creston Vineyards should use __________ distribution. a. b. c. d. e. intensive extensive selective exclusive concentrated

Answer: c Page: 300 Rationale: Shopping goods are typically sold using selective distribution.

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13-155 VIDEO CASE: CRESTON VINEYARDS A broker working with Creston Vineyards would NOT: a. b. c. d. e. train distributors' sales forces. provide marketing information to distributors. assist in making sales calls to retailers. create product assortments for distributors. take title to the wine.

CONCEPTUAL

Answer: e Page: 300 Rationale: Brokers are wholesalers that do not take title to the merchandise they sell.

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CHAPTER 13 MANAGING MARKETING CHANNELS AND SUPPLY CHAIN SHORT ESSAY QUESTIONS
13-156 FUNCTIONS PERFORMED BY INTERMEDIARIES What are the functions performed by intermediaries? Answer: Intermediaries perform three basic functions. These are: 1) a transactional function (involving buying, selling, and risk taking because they stock merchandise in anticipation of sales) 2) a logistical function (involving the assorting, storing, sorting, and transporting of products) 3) a facilitating function (involving financing, grading, and marketing information and research). Page: 283; Figure 13-2 13-157 UTILITIES CONCEPTUAL CONCEPTUAL

What are the utilities created by marketing intermediaries? How do intermediaries create these utilities? Answer: Marketing intermediaries help create four utilities: time (having a product or service when consumers want it), place (having a product available where consumers want it), form (enhancing a product to make it more appealing to buyers), and possession (entails efforts by intermediaries to help buyers take possession of a product or service. Page: 283 13-158 KEY DIFFERENCES BETWEEN CHANNELS Distinguish between a direct and an indirect consumer channel. Answer: A direct channel occurs when a producer and ultimate consumers deal directly with each other. Because there are no intermediaries, the producer must perform all channel functions. Indirect channels occur when intermediaries are inserted between the producer and consumers and perform numerous channel functions. Page: 284-285; Figure 13-3 CONCEPTUAL

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13-159 DUAL DISTRIBUTION AND STRATEGIC CHANNEL ALLIANCES CONCEPTUAL Define and describe a similarity and difference between dual distribution and strategic channel alliances. Answer: Dual distribution occurs when a firm employs two or more different types of channels for the same product (e.g. GE sells its large appliances directly to home and apartment builders but uses retailers to sell them to consumers). Dual distribution is used for a multibrand strategy. This is done to minimize cannibalization of the firms family brand and to differentiate the channels. Strategic channel alliances allow one firm's marketing channel to be used to sell another firm's products (e.g. Lipton iced tea distributed by Pepsi bottlers). A similarity between the two terms is that both are used by firms to reach different market segments in a more cost-effective manner. A difference between the two terms is that for dual distribution, a single producer selects the intermediaries to reach its target market segments whereas in a strategic channel alliance, one producer uses the marketing channel developed by another firm (sometimes a competitor in a product class) to reach its target market segments. Page: 287 13-160 VERTICAL MARKETING SYSTEMS List and define the three major types of vertical marketing systems. Answer: There are three major types of vertical marketing systems--corporate, contractual, and administered. Corporate vertical marketing systems combine successive stages of production and distribution under a single ownership. Contractual systems consist of independent production and distribution firms signing written agreements and integrating their efforts to obtain greater functional economies and marketing impact than they could achieve alone. Administered systems achieve coordination at successive stages of production and distribution by the size and influence of one channel member rather than through ownership. Page: 288-289; Figure 13-6 13-161 CHANNEL DESIGN CONSIDERATIONS CONCEPTUAL DEFINITION

Why are marketing channels important in a marketing strategy? What factors affect channel choice and management? Answer: A marketing channel not only links a producer to its buyers, but also provides the means through which a firm implements various elements of its marketing strategy. The final choice of a marketing channel by a marketing executive depends on a three factors (1) target market coverage (2) satisfying buyer requirements (3) profitability Page: 290-291

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13-162 CHANNEL DESIGN CONSIDERATIONS

CONCEPTUAL

What are the three questions marketing executives consider when choosing a marketing channel and intermediaries? Answer: Marketing executives typically consider three questions when choosing a market channel and intermediaries: 1) Which channel and intermediaries will provide the best coverage of the target market? 2) Which channel and intermediaries will best satisfy the buying requirements of the target market? 3) Which channel and intermediaries will be the most profitable? Page: 290 13-163 CHANNEL DESIGN: BUYER REQUIREMENTS CONCEPTUAL

List the four interests that buyers might want fulfilled by a marketing channel. Why are they important? Answer: A consideration in channel design is gaining access to channels and intermediaries that satisfy at least some of the interests buyers might want fulfilled when they purchase a firm's goods or services. These interests fall into four categories: information, convenience, variety, and preand post-sale services. Information is important when buyers have limited knowledge or desire specific data. Convenience can have multiple meanings such as proximity or driving time to a retail outlet. Variety reflects buyers' interests in having many items from which to choose. Preand post-sale services such as delivery, installation, and credit can also be very important. Page: 290-291 13-164 CHANNEL CAPTAIN CONCEPTUAL

What is a channel captain? What is its function when there is channel conflict? Answer: Conflict can have destructive effects on the workings of a marketing channel, so it is necessary to secure cooperation among channel members. One means is through a channel captain, a channel member who coordinates, directs, and supports other channel members. Channel captains can be producers, wholesalers, or retailers. Page: 292

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13-165 SUPPLY CHAIN

CONCEPTUAL

Briefly explain the differences between the terms supply chain management and marketing channel. Answer: A supply chain is a sequence of firms that performs activities required to create and deliver a good or service to consumers or industrial users. It differs from a marketing channel in terms of membership. A supply chain includes suppliers that provide raw material inputs to a manufacturer as well as the wholesalers and retailers that deliver the finished goods. In contrast, a marketing channel involves only the distribution of finished goods from the manufacturer through wholesalers and retailers to the buyers. Supply chain management is the integration and organization of information and logistic activities across firms in a supply chain for the purpose of creating and delivering goods and services that provide value to consumers. Page: 293-294 13-166 TOTAL LOGISTICS COST CONCEPT DEFINITION

What specific decisions are associated with the flow of goods and together make up total logistics costs? Answer: There are at least nine decision areas: 1) traffic and transportation 2) warehousing and storage 3) materials handling 4) inventory control 5) order processing 6) stockouts 7) return goods handling. Page: 297; Figure 13-9 13-167 TOTAL LOGISTICS COST TRADE-OFFS CONCEPTUAL

What are some specific cost trade-offs that can be made in a logistics system? Answer: Logistics attempts to minimize the total cost of moving and storing the goods a firm uses and produces while achieving a given service level. There are many individual cost elements present in a logistics system, including transportation, warehousing and materials handling, various inventory costs, stockouts, and order processing. As one cost increases, another may decrease. For example, as the number of warehouses increases, inventory costs rise and transportation costs fall. Page: 297

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13-168 SUPPLY CHAIN MANAGEMENT AND MARKETING STRATEGY APPLICATION A profusion of low-cost components and communications protocols is beginning to blur the line between cell phones and handheld computers and present new purchasing options for the electronic supply chain. As the worlds largest handset original equipment manufacturer, Nokia Corporation works with multiple service providers to try to evaluate the various directions the market will take. There is a lot of thought that goes into determining the must-haves, the nicehaves, how much memory for a given price point, how much we can fit in the handset, and then how to prioritize the feature sets, said Adam Gould, VP of technology development for Nokias CDMA business unit in Irvine, CA. (taken from Electronic Business News, Smart phone designs hang up industry, June 9, 2003. http://www.ebnews.com/showArticle?articleID=10300249 ) In order to align the Nokia supply chain with marketing strategy, and choose the correct supply chain to make and distribute handsets in the future, what marketing strategy step(s) should Nokia follow and why? Answer: 1) Understand the customer. To understand the customer, a company must identify the needs of the customer segment being served. These needs, such as a desire for a low price or convenience of purchase, help a company define the relative importance of efficiency and responsiveness in meeting customer requirements. In the quote from the Nokia executive, the company is clearly trying to understand what the customer is interested in regarding phone handset features and benefits. 2) Understand the supply chain. A company must understand what a supply chain is designed to do well. Supply chains range from those that emphasize being responsive to customer requirements (the Nokia case) and demand, to those that emphasize efficiency with a goal of supplying products at the lowest possible delivered cost. 3) Harmonize the supply chain with the marketing strategy. A company needs to ensure that what the supply chain is capable of doing well is consistent with the targeted customers needs and its marketing strategy. As Nokia gathers data on the target market desired benefits, they should be sure that suppliers can effectively provide the benefits with the products they provide to Nokia for handset manufacturer that satisfies the customer. Since Nokia is the worlds largest handset OEM manufacturer, one could assume they have been successful with this in the past and will continue to be successful in the future. Page: 295

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13-169 SUPPLY CHAIN MANAGEMENT AND MARKETING STRATEGY APPLICATION Samsung is a company that thrives in low-margin consumer electronics by concentrating on producing hardware rather than software and reducing the time from production to market. It is a large conglomerate that makes everything itself. By 2005, a Samsung factory being built in Tangjung, Korea will produce LCD sheets as big as a queen-size mattress and will halve prices of large-screen LCD TVs. In order to align the Samsung supply chain with marketing strategy, and choose the correct supply chain to make and distribute Samsung hardware in the future, what marketing strategy step(s) should Samsung follow and why? 1) Understand the customer. To understand the customer, a company must identify the needs of the customer segment being served. These needs, such as a desire for a low price or convenience of purchase, help a company define the relative importance of efficiency and responsiveness in meeting customer requirements. Samsungs strength is in inventing technology that helps it lead in the area of consumer electronics hardware. Samsung is actually in front of customer desires because of the exceptional R & D group that it employs. 2) Understand the supply chain. A company must understand what a supply chain is designed to do well. Supply chains range from those that emphasize being responsive to customer requirements (Samsung discovers new solutions that the customer is not yet aware of) and demand, to those that emphasize efficiency with a goal of supplying products at the lowest possible delivered cost. Samsung will offer the best new products at the lowest price available because they are a very efficient company. Halving the price of large-screen TVs by 2005 is an example. 3) Harmonize the supply chain with the marketing strategy. A company needs to ensure that what the supply chain is capable of doing well is consistent with the targeted customers needs and its marketing strategy. Samsung is in a unique position in that it is vertically integrated, so it has complete control over its supply chain. Thus a large advantage accrues to Samsung in that it has harmonization of the supply chain and the marketing strategy since both are done internally. Page: 295 13-170 COST VERSUS SERVICE FACTORS CONCEPTUAL

List and briefly describe the four customer service factors that must be balanced in a logistics system. Answer: 4) Time: The order or replenishment time between the ordering of an item and when it is ready for use or sale. 5) Dependability: The consistency of replenishment (consistent lead time, safe delivery, and complete delivery). 6) Communication: Two-way link between buyer and seller that helps in monitoring customer service and anticipating future needs. 7) Convenience: Minimizing the effort necessary on the part of the buyer to do business with the seller. Page: 297-298; Figure 13-9

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