MKT 120-40 -- Chapter 13

You're helping two entrepreneurs get ready to launch a new product, Big Chill Water, a 20-ounce bottle of pure spring water that comes with an innovative new bottle designed to keep the contents cold for up to four hours, after a brief period of refrigeration. Big Chill Water is being marketed to consumers with active lifestyles and consumers who work or play outdoors, who would appreciate the convenience of carrying a stay-chilled bottle instead of lugging a cooler or looking for a nearby refrigerator. Your role is to help these entrepreneurs think about issues related to supply-chain management and marketing channels. You've been talking to major retailers about stocking Big Chill Water. They asked you a number of questions about order processing and inventory management for Big Chill Water. Which one of the following questions or comments pertains to order processing? a. "How can we implement efficient procedures for the physical handling of our goods, supplies, and resources?" b. "Can we submit orders electronically?" c. "We believe demand will be so strong that we want to avoid stock-outs." d. "Can we design a test to determine how many units each store will sell in a month?" e. "How quickly will you be able to fill orders once you receive them?"

"Can we submit orders electronically?"

Define electronic data interchange.

(EDI) which uses computer technology to integrate order processing with production, inventory, accounting, and transportation.

Firms must partner with multiple organizations in order to deliver their goods and services to their customers. The efficiency with which this is done can have a significant impact on how well customer needs are satisfied. The organizations involved in this process are part of the firm's marketing channel. The firm seeks to integrate these channel organizations in the most effective manner possible. Which of the following statements is true about channel integration? a. Combining channel members at the same level under one management is vertical channel integration. b. Members in conventional channel systems coordinate their efforts. c. A corporate VMS combines all stages of the marketing channel under one owner. d. Customers never perform channel functions. e. The administered VMS is the most popular type of vertical marketing system.

A corporate VMS combines all stages of the marketing channel under one owner.

Define exclusive dealing.

A situation in which a manufacturer forbids an intermediary from carrying products of competing

Early on, TAZA's promotion was: a. Providing samples b. All of these c. Visiting stores d. Personal selling

All of these

TAZA's business includes: a. Operations management b. Supply chain management c. All of these d. Supply management

All of these

What is a marketing channel?

Also called a channel of distribution or distribution channel, is a group of individuals and organizations that direct the flow of products from producers to customers within the supply chain.

Fill in the blanks with the words that would best complete the passage. (Note: Some words may be used more than once): i. A ___ directs the flow of products from producers to customers. (NOT possession utility, form utility, easier, industrial distributors) ii. Channel members sometimes create ___ by assembling the product to suit individual customer needs. iii. It is usually ___ to change prices or promotional efforts than to change marketing channels. iv. Eliminating intermediaries ___ remove the need for the services they provide. v. ___ often stock competing brands.

Channel of Distribution Form Utility Easier Would Not Industrial Distributors

Define vertical channel integration.

Combines two or more stages of the channel under one management.

More than 25 years after Nestlé introduced its first single-cup coffee brewing machine, the market for equipment and replacement coffee capsules has become piping hot. Although Nespresso still dominates the replacement capsule market, rivals such as Green Mountain Coffee Roasters and Mondelez International are eager to increase their market share. Nespresso not only pioneered the single-serve coffee machine, it pioneered the strategy of selling machines and replacement capsules directly to consumers who appreciate good coffee and see it as an affordable luxury. Today, Nespresso markets through its own network of Nespresso boutiques, by phone, by app, and online. The company has also opened stylish flagship cafés to make an image statement about the brand and allow consumers to sip its various coffees before they buy. You've just joined Nespresso as a member of the marketing team. Your boss has asked you to evaluate opportunities available for dual distribution and channel alliances. Which one of the following proposals would you recommend to your boss? a. Distribute Nespresso coffee capsules and brewing equipment through specialty food brokers that sell to deluxe resorts and hotels worldwide. The resorts and hotels can put Nespresso machines in each room and sell the machines and capsules in their shops. Consumers at these resorts will associate Nespresso with convenience and luxury at an affordable price. b. Distribute Nespresso coffee capsules through fashion boutiques in outlet malls. The brands appeal to similar customers and the malls attract large crowds, which would expand Nespresso's reach considerably. c. Distribute Nespresso coffee capsules through duty-free shops in airline terminals worldwide. This would allow busy travelers to buy replacements on the go, without having to look for a Nespresso store in their local area.

Distribute Nespresso coffee capsules and brewing equipment through specialty food brokers that sell to deluxe resorts and hotels worldwide. The resorts and hotels can put Nespresso machines in each room and sell the machines and capsules in their shops. Consumers at these resorts will associate Nespresso with convenience and luxury at an affordable price.

Fill in the blanks with the words that would best complete the passage. (Note: Some words may be used more than once): i. Although channel managers are not expected to be legal experts, they should be aware that attempts to control ___ functions might have legal repercussions. ii. When a supplier furnishes a product to a channel member with the stipulation that the channel member must purchase other products as well, it has negotiated a ___. iii. Some companies use ___ by using two or more marketing channels to distribute the same products to the same target market. iv. When a manufacturer forbids an intermediary to carry products of competing manufacturers, the arrangement is called ___. v. Within existing distribution channels, suppliers ___ legally refuse to deal with wholesalers or dealers merely because these wholesalers or dealers resist policies that are anticompetitive or in restraint of trade. vi. To tighten control over product distribution, a manufacturer may try to prohibit ___ from selling outside of designated sales territories.

Distribution Tying Agreement Dual Distribution Exclusive Dealing May Not Intermediaries

Market-leader Frito-Lay sells so many snacks to U.S. stores that it operates the country's seventh-largest private fleet of trucks and vans. It also uses its fleet to haul raw materials like fresh potatoes from farms to production facilities across the country. At the Frito-Lay plant in Casa Grande, Arizona, potatoes arrive by truck, vegetable oils arrive by rail, and corn arrives by rail. From the time they arrive in their raw state to the time they're processed and packaged as snacks, ready to be trucked to stores and warehouses, potatoes spend less than 36 hours at the plant. In all, the Casa Grande plant turns out 90 million pounds of snacks every year, including Sun Chips, Cheetos, Fritos, potato chips, and tortilla chips. One of Frito-Lay's distribution strengths is a strategy it calls "direct store distribution." To ensure that snacks arrive fresh and in good condition, Frito-Lay has its truck drivers deliver snacks directly to individual stores on a regular basis. For specialty snacks geared toward smaller target markets, however, Frito-Lay is experimenting with distribution through wholesalers that sell to delicatessens and other small stores. Frito-Lay fills wholesalers' orders with stock stored in its regional warehouses. Put yourself in the shoes of a marketer helping to plan for supply-chain and channel management at Frito-Lay. Assume that Frito-Lay is a channel captain. Does the following statement describe activities that Frito-Lay should undertake as channel captain? Establish channel policies for retailers to apply in the snack product category, extending beyond Frito-Lay's products. a. True b. False

False

Galaxy's Best Cookies has approached you for help in planning for marketing channels beyond its storefront on Main Street. This fast-growing bakery's gingerbread cookies are extremely popular in your area, and now the owner wants to make these cookies available in a wider area, preferably through small, independently owned stores in a number of markets. Select (from the drop-down menu) the appropriate marketing channel utility for each customer benefit: i. Galaxy's Best Cookies will be available in multi-cookie packages to meet customers' needs is an example of ___. ii. Galaxy's Best Cookies will be available where customers can buy them locally is an example of ___. iii. Galaxy's Best Cookies will be available in easy-to-store trays for future use is an example of ____. iv. Galaxy's Best Cookies will be available when customers want them is an example of ___.

Form Utility Place Utility Possession Utility Time Utility

A product attribute that must be considered by TAZA in choosing a marketing channel is: a. How quickly chocolate is broken b. How quickly chocolate is distributed c. How quickly chocolate melts d. How quickly chocolate is frozen

How quickly chocolate melts

TAZA is: a. In the upstream of the supply chain b. In the downstream of the supply chain c. A wholesaler d. A retailer

In the upstream of the supply chain

Define inventory management.

Involves developing and maintaining adequate assortments of products to meet customers' needs.

Define order processing.

Is the receipt and transmission of sales order information

Define JIT.

Just-in- time, an inventory-management approach in which supplies arrive just when need for production or resale

TAZA provides form utility by: a. Making the product b. Licensing the product c. Locating the product d. Providing timely delivery of the product

Making the Product

Define marketing intermediaries.

Middlemen that link producers to other intermediaries or ultimate consumers through contractual arrangements or through the purchase and resale of products.

You're helping two entrepreneurs get ready to launch a new product, Big Chill Water, a 20-ounce bottle of pure spring water that comes with an innovative new bottle designed to keep the contents cold for up to four hours, after a brief period of refrigeration. Big Chill Water is being marketed to consumers with active lifestyles and consumers who work or play outdoors, who would appreciate the convenience of carrying a stay-chilled bottle instead of lugging a cooler or looking for a nearby refrigerator. Your role is to help these entrepreneurs think about issues related to supply-chain management and marketing channels. Choose, from the drop-down menu, the most appropriate supply-chain concept for each marketing activity: i. ___ involves mapping the steps necessary to turn raw materials into finished products. ii. Contract with a company to provide the plastic for the water bottles is an example of ___. iii. ___ includes identifying retailers that carry specialty bottled waters. iv. Investigating transportation options for getting cases of bottled water to stores is an example of ___.

Operations Management Supply Management Channel Management Logistics Management

What is piggyback, fishyback, and birdyback?

Picky back is using truck trailers and railways flatcars. Fishyback is using truck trailers and water carriers. Birdyback is using truck trailers and air carriers.

Direct Trade is a: a. Producer to manufacturer channel b. Producer to broker to retailer channel c. Producer to retailer channel d. Producer to wholesaler to retailer channel

Producer to manufacturer channel

TAZA is a retailer by: a. Providing its products online b. Providing its products to wholesalers c. Providing its products to suppliers d. Providing its products to agents

Providing its products online

TAZA appears to use which type of distribution: a. Selective b. Exclusive c. Intensive d. Low quality

Selective

Fill in the blanks with the words that would best complete the passage. (Note: Some words may be used more than once): i. ___ is appropriate for shopping products, which include durable goods like televisions or computers. ii. Exclusive distribution is used for expensive high-quality products with high profit margins, such as ___. iii. ___ is appropriate for products that have a high replacement rate, require almost no service, and are bought based on price cues. iv. Most convenience products like bread, newspapers, and ___ are marketed through intensive distribution. v. ___ is suitable for products purchased infrequently, consumed over a long period of time, or that require a high level of customer service or information. vi. Selective distribution uses only some available outlets in an area to distribute a product, such as ___.

Selective Distribution BMWs Intensive Distribution Pepsi Product Exclusive Distribution Blu-Ray Player

TAZA manufactures more in the third quarter to prevent: a. Stockouts in the second quarter b. Stockouts in the third quarter c. Stockouts in the fourth quarter d. Stockouts in the first quarter

Stock outs in the fourth quarter

Define channel power.

The ability of one channel member to influence another member's goal achievement.

Define public transportation.

The book refers to private carriers on page 355, where companies may build their own transportation fleets. I would assume public transportation would be transportation that the general public would have access to it, trains with passenger cars, city buses, or Grayhound.

Define transportation.

The movement of products from where they are made to intermediaries and end users, is the most expensive physical distribution function.

Which of the following statements is true about channel leadership, cooperation and conflict? a. Channel members must agree on the best methods for achieving channel goals. b. A precise definition of each channel member's tasks is desirable, but not necessary. c. Channel cooperation is not necessary as long as each member just performs their role. d. The role of each channel member must be specified. e. The channel captain is always a producer.

The role of each channel member must be specified.

Galaxy's Best Cookies has approached you for help in planning for marketing channels beyond its storefront on Main Street. This fast-growing bakery's gingerbread cookies are extremely popular in your area, and now the owner wants to make these cookies available in a wider area, preferably through small, independently owned stores in a number of markets. The owner is considering selling his cookies through Galaxy's website as well as small stores in multiple markets. Which of the following strategic issues would be the most significant factor in this decision? a. The strategic issue of channel conflict. b. The strategic issue of vertical channel integration. c. The strategic issue of horizontal channel integration. d. The strategic issue of channel alliances. e. The strategic issue of channel captains.

The strategic issue of channel conflict.

Define dual distribution.

The use of two or more marketing channels to distribute the same products to the same target market.

Galaxy's Best Cookies has approached you for help in planning for marketing channels beyond its storefront on Main Street. This fast-growing bakery's gingerbread cookies are extremely popular in your area, and now the owner wants to make these cookies available in a wider area, preferably through small, independently owned stores in a number of markets. The owner wants you to determine if the company should sell its cookies through wholesalers. Which of the following is the best reason for selling the cookies through wholesalers? a. Galaxy's is guaranteed to make more profit by selling through wholesalers. b. Using wholesalers allows Galaxy's Best Cookies to not be concerned with customer opinion c. This is an efficient way for Galaxy's Best Cookies to connect directly with small retailers that buy in quantity. d. This will enable Galaxy's Best Cookies to learn first-hand about the market and about customers' needs. e. This will enable Galaxy's Best Cookies to reach many more customers through multiple retailers in multiple markets.

This will enable Galaxy's Best Cookies to reach many more customers through multiple retailers in multiple markets.

Marketing channels create what 4 types of utility?

Time, place, possession, and form

Market-leader Frito-Lay sells so many snacks to U.S. stores that it operates the country's seventh-largest private fleet of trucks and vans. It also uses its fleet to haul raw materials like fresh potatoes from farms to production facilities across the country. At the Frito-Lay plant in Casa Grande, Arizona, potatoes arrive by truck, vegetable oils arrive by rail, and corn arrives by rail. From the time they arrive in their raw state to the time they're processed and packaged as snacks, ready to be trucked to stores and warehouses, potatoes spend less than 36 hours at the plant. In all, the Casa Grande plant turns out 90 million pounds of snacks every year, including Sun Chips, Cheetos, Fritos, potato chips, and tortilla chips. One of Frito-Lay's distribution strengths is a strategy it calls "direct store distribution." To ensure that snacks arrive fresh and in good condition, Frito-Lay has its truck drivers deliver snacks directly to individual stores on a regular basis. For specialty snacks geared toward smaller target markets, however, Frito-Lay is experimenting with distribution through wholesalers that sell to delicatessens and other small stores. Frito-Lay fills wholesalers' orders with stock stored in its regional warehouses. Put yourself in the shoes of a marketer helping to plan for supply-chain and channel management at Frito-Lay. Assume that Frito-Lay is a channel captain. Does the following statement describe activities that Frito-Lay should undertake as channel captain? Develop eye-catching point-of-purchase displays for promoting Frito-Lay products in participating supermarkets. a. True b. False

True

Market-leader Frito-Lay sells so many snacks to U.S. stores that it operates the country's seventh-largest private fleet of trucks and vans. It also uses its fleet to haul raw materials like fresh potatoes from farms to production facilities across the country. At the Frito-Lay plant in Casa Grande, Arizona, potatoes arrive by truck, vegetable oils arrive by rail, and corn arrives by rail. From the time they arrive in their raw state to the time they're processed and packaged as snacks, ready to be trucked to stores and warehouses, potatoes spend less than 36 hours at the plant. In all, the Casa Grande plant turns out 90 million pounds of snacks every year, including Sun Chips, Cheetos, Fritos, potato chips, and tortilla chips. One of Frito-Lay's distribution strengths is a strategy it calls "direct store distribution." To ensure that snacks arrive fresh and in good condition, Frito-Lay has its truck drivers deliver snacks directly to individual stores on a regular basis. For specialty snacks geared toward smaller target markets, however, Frito-Lay is experimenting with distribution through wholesalers that sell to delicatessens and other small stores. Frito-Lay fills wholesalers' orders with stock stored in its regional warehouses. Put yourself in the shoes of a marketer helping to plan for supply-chain and channel management at Frito-Lay. Assume that Frito-Lay is a channel captain. Does the following statement describe activities that Frito-Lay should undertake as channel captain? Offer special pricing to retailers who make high-volume purchases during promotional periods. a. True b. False

True

Market-leader Frito-Lay sells so many snacks to U.S. stores that it operates the country's seventh-largest private fleet of trucks and vans. It also uses its fleet to haul raw materials like fresh potatoes from farms to production facilities across the country. At the Frito-Lay plant in Casa Grande, Arizona, potatoes arrive by truck, vegetable oils arrive by rail, and corn arrives by rail. From the time they arrive in their raw state to the time they're processed and packaged as snacks, ready to be trucked to stores and warehouses, potatoes spend less than 36 hours at the plant. In all, the Casa Grande plant turns out 90 million pounds of snacks every year, including Sun Chips, Cheetos, Fritos, potato chips, and tortilla chips. One of Frito-Lay's distribution strengths is a strategy it calls "direct store distribution." To ensure that snacks arrive fresh and in good condition, Frito-Lay has its truck drivers deliver snacks directly to individual stores on a regular basis. For specialty snacks geared toward smaller target markets, however, Frito-Lay is experimenting with distribution through wholesalers that sell to delicatessens and other small stores. Frito-Lay fills wholesalers' orders with stock stored in its regional warehouses. Put yourself in the shoes of a marketer helping to plan for supply-chain and channel management at Frito-Lay. Assume that Frito-Lay is a channel captain. Does the following statement describe activities that Frito-Lay should undertake as channel captain? Provide advice about where and how to display Frito-Lay snacks in convenience stores and other small stores. a. True b. False

True

Zara, owned by the Inditex Group in Spain, specializes in fast fashion. The company can develop new styles, manufacture them, and speed them to its 1,770 stores in 86 countries in less than one month, because of the company's skillful management of its supply chain. The process starts with in-house designers, who keep a close eye on the very latest styles and analyze sales trends while they create new garments. Reaction to new fashions can be unpredictable. Therefore, instead of placing large orders in advance of each fashion season, Zara's buyers order limited quantities, send them to stores worldwide, and monitor sales. If one color sells better than another, or customers tell store managers they prefer a different collar or belt, Zara can make immediate changes and restock stores in just a couple of weeks. Every store receives a shipment twice a week, so customers know fresh fashion and new merchandise are never more than a few days away. Because most of Zara's garments are made in 11 factories surrounding Arteixo, Spain, or in nearby plants, the company can respond quickly to market conditions by increasing production of popular styles and cutting back on unpopular styles. This flexibility is a major competitive advantage. Behind the scenes, garments made in Zara's Spanish factories are whisked via automated monorail to the firm's five-million-square-foot distribution center, where they're sorted and packed for delivery to individual stores. Having the hottest fashions in stock when demand is highest allows Zara to satisfy its customers, ring up profitable sales, and have little or no unsold merchandise left at the end of the season. Why would a company that relentlessly wrings costs out of its supply chain be willing to pay for expensive air transportation when shipping merchandise to overseas stores? Which one of the following statements best explains Zara's rationale for choosing air transportation to ship to overseas stores? a. Zara uses air transportation because it is the only overseas shipping option available. b. Zara's manufacturing facility is located closer to an airport than any other shipping venue. c. Zara's products are perishable so speed in shipping is important. d. Zara can get its products to stores quickly, before the fashions are outdated. e. Zara can charge a premium price for products that are always fully stocked.

Zara can get its products to stores quickly, before the fashions are outdated.