Chapter 15

_____ is often the approach of choice in markets with insufficient or underdeveloped distribution systems. A. Direct marketing B. A big wholesale store C. Internet selling D. A discount house E. Television advertising

A. Direct marketing Sometimes called direct marketing, selling directly to the consumer through mail, by telephone, or door-to-door is often the approach of choice in markets with insufficient or underdeveloped distribution systems. The approach, of course, also works well in the most affluent markets.

Which of the following has proved to be an important way to break the trade barrier imposed by the Japanese distribution system? A. Direct sales through catalogs B. Large wholesale stores C. Street corner kiosks D. Internet shopping E. Television advertising

A. Direct sales through catalogs Direct sales through catalogs have proved to be a successful way to enter foreign markets. In Japan, it has been an important way to break the trade barrier imposed by the Japanese distribution system.

Which of the following characterizes the business philosophy of the Japanese distribution channels? A. Loyalty B. Direct sales C. Fast delivery D. Variety E. Price competition

A. Loyalty Coupled with the close economic ties and dependency created by trade customs and the long structure of Japanese distribution channels is a relationship-oriented business philosophy that emphasizes loyalty, harmony, and friendship. The value system supports long-term dealer-supplier relationships that are difficult to change as long as each party perceives economic advantage.

_____ take title to manufacturers' goods and assume the trading risks. A. Merchant middlemen B. Brokers C. Buying offices D. Export agent E. Agent middlemen

A. Merchant middlemen Merchant middlemen actually take title to manufacturers' goods and assume the trading risks, so they tend to be less controllable than agent middlemen. Merchant middlemen provide a variety of import and export wholesaling functions involved in purchasing for their own account and selling in other countries.

The Webb-Pomerene Act of 1918 made it possible for American business firms to join forces in export activities without being subject to the _____. A. Sherman Antitrust Act B. Federal Communications Act C. Trade Commission Act D. Food, Drug, and Cosmetics Act E. Robinson-Patman Act

A. Sherman Antitrust Act

Which of the following statements is true regarding an import-oriented distribution structure? A. The importer-wholesaler traditionally performs most of the marketing functions. B. The relationship between the importer and any middleman is similar to that found in a mass-marketing system. C. Several independent agencies providing functions such as advertising, marketing research, financing are part of this distribution structure. D. The idea of a channel as a chain of intermediaries performing specific activities is common. E. This distribution system is national in scope.

A. The importer-wholesaler traditionally performs most of the marketing functions. An import-oriented distribution structure is considered as a traditional distribution structure. The import-oriented distribution systems are local rather than national in scope, and the relationship between the importer and any middleman in the marketplace is considerably different from that found in a mass-marketing system. Since the importer-wholesaler traditionally performs most marketing functions, independent agencies that provide advertising, marketing research, warehousing, and storage are nonexistent or underdeveloped.

Which of the following is the reason why global retailers like IKEA, Costco, Sears Roebuck, and Walmart are becoming major domestic middlemen for international markets? A. They maintain their core marketing approaches while localizing the array of products, promotions, and other peripheral aspects of their operations. B. They work under the names of the manufacturers and function as low-cost, independent marketing departments with direct responsibility to the parent firms. C. They have minimum investment costs as they do not commit to investing in company personnel. D. They serve as the producer's export department but have a short-term relationship, cover only one or two markets, and operate on a straight commission basis. E. They offer reduction of export costs, demand expansion through promotion, trade barrier reduction, and improvement of trade terms through bilateral bargaining.

A. They maintain their core marketing approaches while localizing the array of products, promotions, and other peripheral aspects of their operations. As global retailers like IKEA, Costco, Sears Roebuck, Toys "R" Us, and Walmart expand their global coverage, they are becoming major domestic middlemen for international markets. Their successes seem to result from maintaining their core marketing approaches while localizing the array of products, promotions, and other peripheral aspects of their operations.

Sixty percent of the Japanese population lives in the _____ market area, which essentially functions as one massive city. A. Tokyo-Nagoya-Osaka B. Komaki-Tokoname-Kariya C. Nagoya-Handa-Seto D. Nishio-Okazaki-Inazawa E. Inuyama-Nisshin-Takahama

A. Tokyo-Nagoya-Osaka

Great Britain has epitomized distribution through specialty-type middlemen, distributors, wholesalers, and retailers. In recent years, however, there has been a trend toward broader lines, conglomerate merchandising, and mass marketing. This suggests that a firm that neglects the growth of self-service, scrambled merchandising, or discounting may find that it has lost large segments of its market only because its channels no longer reflect the _____ of the market. A. character B. continuity C. control D. cost E. capital requirement

A. character Channel captains must be aware that channel patterns change; they cannot assume that once a channel has been developed to fit the character of both company and market, no more need be done. Great Britain, for example, has epitomized distribution through specialty-type middlemen, distributors, wholesalers, and retailers; in fact, all middlemen have traditionally worked within narrow product specialty areas. In recent years, however, there has been a trend toward broader lines, conglomerate merchandising, and mass marketing.

In the context of the use of the Internet in international marketing channels, technically, e-commerce is a form of _____ selling. A. direct B. parallel C. dual D. mass E. targeted

A. direct Technically, e-commerce is a form of direct selling; however, because of its newness and the unique issues associated with this form of distribution, it is important to differentiate it from other types of direct marketing. E-commerce is used to market B2B services, consumer services, and consumer and industrial products via the World Wide Web. It involves the direct marketing from a manufacturer, retailer, service provider, or some other intermediary to a final user.

A major disadvantage of _____ is that they can seldom afford to make the kind of market investment needed to establish deep distribution for products. A. export management companies B. trading companies C. import associations D. global retailers E. complementary marketers

A. export management companies A major disadvantage of export management companies is that they seldom can afford to make the kind of market investment needed to establish deep distribution for products because they must have immediate sales payout to survive.

In the context of the types of domestic middlemen, the WTO in 2003 ruled _____ to be in violation of international trade rules, thus starting a major trade dispute with the European Union. A. foreign sales corporations B. direct marketing partnerships C. trading companies D. export promotion companies E. Webb-Pomerene export associations

A. foreign sales corporations

In the context of controlling middlemen, parallel importing is also known as _____. A. secondary wholesaling B. black marketing C. backwashing D. industrial piracy E. smuggling

A. secondary wholesaling

Most middlemen have little loyalty to their vendors. They handle brands in good times when the line is making money but quickly reject such products within a season or a year if they fail to produce during that period. This is an example of problems associated with which of the following six Cs of distribution channel strategy? A. Character B. Continuity C. Control D. Cost E. Capital requirement

B. Continuity Channels of distribution often pose longevity problems. Most middlemen have little loyalty to their vendors. They handle brands in good times when the line is making money but quickly reject such products within a season or a year if they fail to produce during that period.

Which of the following is one of the six Cs of distribution channel strategy? A. Communication B. Continuity C. Capacity D. Commission E. Contribution

B. Continuity cost, capital, control, coverage, character, and continuity.

Which of the following modes of distribution affords the most control over the distribution channels but often at a cost that is not practical? A. Complementary marketers B. Direct sales force C. Export associations D. Trading companies E. Export management companies

B. Direct sales force

_____ has long been considered the most effective nontariff barrier to the Japanese market. A. Population in Japan B. Distribution in Japan C. Culture in Japan D. Import and export procedures in Japan E. Intense competition in Japan

B. Distribution in Japan Distribution in Japan has historically been considered the most effective nontariff barrier to the Japanese market. However, the market is becoming more open as many traditional modes of operation are eroding in the face of competition from foreign marketers and as Japanese consumers continue to focus on lower prices.

Which of the following is a type of domestic middleman? A. Sole proprietors B. Export management companies C. Foreign distributors D. Lessors E. Joint ventures

B. Export management companies

Which of the following distribution structures is also known as a traditional distribution structure? A. Export-oriented B. Import-oriented C. Manufacturer-oriented D. Service-oriented E. Customer-oriented

B. Import-oriented An import-oriented distribution structures is also known as a traditional distribution structure.

In a _____ distribution structure, an importer controls a fixed supply of goods and the marketing system develops around the philosophy of selling a limited supply of goods at high prices to a small number of affluent customers. A. domestic B. traditional C. manufacturer-oriented D. service E. customer-oriented

B. In an import-oriented or traditional distribution structure, an importer controls a fixed supply of goods, and the marketing system develops around the philosophy of selling a limited supply of goods at high prices to a small number of affluent customers. In the resulting seller's market, market penetration and mass distribution are not necessary because demand exceeds supply, and in most cases, the customer seeks the supply from a limited number of middlemen.

Which of the following makes Walmart's transactions with suppliers highly efficient and lowers its cost of operations? A. Clean business reputation B. Internal Internet-based system C. Ability to beat competitors D. Outreach programs to placate small retailers E. Ability to influence foreign governments

B. Internal Internet-based system One of Walmart's strengths is its internal Internet-based system, which makes its transactions with suppliers highly efficient and lowers its cost of operations.

Apex Corp. is a wholesaler for Global Electronics in the French market. Global Electronics discovered that Apex Corp. was diverting some of its goods to the English market. Apex Corp. could get a greater profit in the English market because the goods were bought by the firm at a cheaper price in France. In the context of the above scenario, which of the following forms of business is Apex engaged in? A. Black marketing B. Parallel importing C. Backwashing D. Industrial piracy E. Smuggling

B. Parallel importing A company's goods intended for one country are sometimes diverted through distributors to another country, where they compete with existing retail or wholesale organizations. This is known as parallel importing or secondary wholesaling.

Which of the following actions should be taken to begin the search for prospective middlemen? A. Short-listing the middlemen B. Studying the target market C. Evaluating the available financial resources D. Designing the sales force required E. Understanding the mission of the manufacturing firm

B. Studying the target market The search for prospective middlemen should begin with study of the market and determination of criteria for evaluating middlemen servicing that market.

Which of the following statements is true regarding agent middlemen? A. They take title to the merchandise. B. They work on commission and arrange for sales in the foreign country. C. Manufacturers cannot control them as much as they control merchant middlemen. D. They do not represent the best interests of the manufacturer. E. They assume trading risks.

B. They work on commission and arrange for sales in the foreign country. Agent middlemen work on commission and arrange for sales in the foreign country but do not take title to the merchandise.

A disadvantage when using home-country middlemen as intermediaries in the distribution process is the: A. large financial investment required. B. limited control over the distribution process. C. large managerial investments required. D. limited number of retailers in the foreign country who can be reached. E. large amount of commission.

B. limited control over the distribution process. A major trade-off when using home-country middlemen is limited control over the entire process. Domestic middlemen are most likely to be used when the marketer is uncertain or desires to minimize financial and management investment.

A major goal of the Export Trading Company (ETC) Act was to: A. allow U.S. companies to bypass tax laws with respect to international trading. B. remove antitrust disincentives to export activities. C. bypass trade barriers in foreign countries. D. earn the highest possible profits in foreign countries. E. combine export shipments within single containers.

B. remove antitrust disincentives to export activities. The Export Trading Company (ETC) Act allows producers of similar products to form export trading companies. A major goal of the ETC Act was to increase U.S. exports by encouraging more efficient export trade services to producers and suppliers to improve the availability of trade finance and to remove antitrust disincentives to export activities

For companies seeking entrance into the complicated Japanese distribution system, _____ offer one of the easiest routes to success because they virtually control distribution through all levels of channels in Japan. A. trade representatives B. trading companies C. brokers D. export management companies E. complementary marketers

B. trading companies The omnipresent trading companies virtually control distribution through all levels of channels in Japan. Because trading companies may control many of the distributors and maintain broad distribution channels, they provide the best means for intensive coverage of the market.

Which of the following factors affects the choice of distribution channels? A. Distance from manufacturer B. Language spoken in the target market C. Available distribution intermediaries D. Consumer literacy levels E. Country's per capita income

C. Available distribution intermediaries

Which of the following countries has the largest number of retailers? A. United States B. Argentina C. China D. Brazil E. Japan

C. China has the largest number of retailers. Refer to Exhibit 15.2-Retail Structure in Selected Countries.

General Motors, _____, and DaimlerChrysler have created a single online site called Covisint for purchasing automotive parts from suppliers. A. Toyota Motor Corporation B. Honda Motor Company C. Ford Motor Company D. Nissan Motor Company E. Tata Motors

C. Ford Motor Company General Motors, Ford Motor Company, and DaimlerChrysler have created a single online site called Covisint (www.covisint.com) for purchasing automotive parts from suppliers, which is expected to save the companies millions of dollars.

In the context of factors affecting choice of channels, which of the following is one of the key elements in distribution decisions? A. Selection of optimum container sizes B. Volume discounts and rebates C. Functions performed by middlemen D. Local advertising modes E. Target market culture

C. Functions performed by middlemen Distribution channels vary depending on target market size, competition, and available distribution intermediaries. Key elements in distribution decisions include the functions performed by middlemen (and the effectiveness with which each is performed), the cost of their services, their availability, and the extent of control that the manufacturer can exert over middlemen activities.

In Japan, under the Large-Scale Retail Store Law, all proposals for new "large" stores were first judged by the _____. A. Transport and Tourism Department B. Internal Affairs and Business Council C. Ministry of International Trade and Industry D. Health and Welfare Committee E. Local Retailers Union

C. Ministry of International Trade and Industry In Japan, under the Large-Scale Retail Store Law, all proposals for new "large" stores were first judged by the Ministry of International Trade and Industry.

Which of the following statements is true of the Japanese market? A. The costs of Japanese consumer goods are among the lowest in the world. B. Manufacturers are independent of wholesalers for a multitude of services to other members of the distribution network. C. The Japanese distribution structure supports long-term dealer-supplier relationships. D. Japanese law favors the establishment of large retail stores. E. Japanese consumers favor price over personal service.

C. The Japanese distribution structure supports long-term dealer-supplier relationships. Coupled with the close economic ties and dependency created by trade customs and the long structure of Japanese distribution channels is a relationship-oriented business philosophy that emphasizes loyalty, harmony, and friendship. The value system supports long-term dealer-supplier relationships that are difficult to change as long as each party perceives economic advantage.

Which of the following statements is true regarding merchant middlemen? A. They represent the best interests of a manufacturer. B. They can be controlled better than agent middlemen. C. They assume trading risks. D. They work on commission and arrange for sales in the foreign country. E. They do not take title to manufacturers' goods.

C. They assume trading risks.

Companies with marketing facilities or contacts in different countries with excess distribution capacity or a desire for a broader product line sometimes take on additional lines for international distribution. The formal name for such activities is _____. A. skimming B. backhauling C. complementary marketing D. export marketing E. demand shifting

C. complementary marketing

One of the reasons that channels of distribution often pose longevity problems is that most middlemen _____. A. do not maintain sufficient inventory to serve customers B. lack product knowledge resulting in low sales volume C. have little loyalty to their vendors D. tend to slow down distribution to extract higher commissions E. do not have sufficient knowledge of the target market

C. have little loyalty to their vendors

Complementary marketing is commonly known as _____. A. backhauling B. demand shifting C. piggybacking D. shape shifting E. skimming

C. piggybacking

James Barker is the marketing manager of a firm with small international sales volume. He is looking for a middleman who can take responsibility for promotion of the company's products, credit arrangements, physical handling, and market research. Also, the middleman must be able to provide information on financial, patent, and licensing matters. In addition, the middleman should agree to work under the name of the firm. Which of the following types of middlemen would be the best choice for Mr. Barker if he wants to meet his objectives? A. A manufacturer's export agent B. An export merchant C. A trade representative D. An export management company E. A complementary marketer

D. An export management company The EMC functions as a low-cost, independent marketing department with direct responsibility to the parent firm. The export management company may take full or partial responsibility for promotion of the goods, credit arrangements, physical handling, market research, and information on financial, patent, and licensing matters.

In the context of the different types of middlemen, which of the following is an example of a manufacturer's retail store? A. Toys "R" Us B. Walmart C. Costco D. Benetton E. IKEA

D. Benetton

Which of the following is one of the highest costs of doing business in China? A. Money required for the transportation of goods B. Money required for obtaining appropriate permits C. Cost of local advertising D. Capital required to maintain effective distribution E. Cost of customizing products for the Chinese market

D. Capital required to maintain effective distribution

In which of the following modes of distribution in the foreign market will a company have to make maximum financial investment? A. Export management companies B. Trading companies C. Export associations D. Direct sales force E. Complementary marketers

D. Direct sales force Maximum investment is usually required when a company establishes its own internal channels, that is, its own sales force. Use of distributors or dealers may lessen the capital investment, but manufacturers often have to provide initial inventories on consignment, loans, floor plans, or other arrangements.

Which of the following is true of the distribution process? A. It does not involve the physical handling and distribution of goods. B. It includes activities related to the promotion of goods and services. C. The ownership title remains with the distributor even on completion of the transaction. D. It includes buying and selling negotiations. E. The behavior of channel members is not affected by the cultural environment.

D. It includes buying and selling negotiations. In every country and in every market, urban or rural, rich or poor, all consumer and industrial products eventually go through a distribution process. The distribution process includes the physical handling and distribution of goods, the passage of ownership (title), and—most important from the standpoint of marketing strategy—the buying and selling negotiations between producers and middlemen and between middlemen and customers.

Who are frequently criticized for not representing the best interests of a manufacturer? A. Global wholesalers B. Trading companies C. Consumers D. Merchant middlemen E. Brokers

D. Merchant middlemen Merchant middlemen actually take title to manufacturers' goods and assume the trading risks, so they tend to be less controllable than agent middlemen. Because merchant middlemen primarily are concerned with sales and profit margins on their merchandise, they are frequently criticized for not representing the best interests of a manufacturer.

_____ is a subject area that should be on the checklist of criteria for evaluating middlemen servicing a market. A. Flexibility B. Hypersensitivity C. Cultural empathy D. Productivity E. Breadth of knowledge

D. Productivity The checklist of criteria differs according to the type of middlemen being used and the nature of their relationship with the company. Basically, such lists are built around four subject areas: productivity or volume, financial strength, managerial stability and capability, and the nature and reputation of the business.

_____ are considered to be the foundation of the Japanese distribution system. A. Consumers B. Brokers C. Manufacturers D. Small retailers E. Wholesalers

D. Small retailers The Japanese system has four distinguishing features: (1) a structure dominated by many small middlemen dealing with many small retailers, (2) channel control by manufacturers, (3) a business philosophy shaped by a unique culture, and (4) laws that protect the foundation of the system—the small retailer.

Home-country middlemen are also known as _____ middlemen. A. area B. local C. merchant D. domestic E. regional

D. domestic

A _____ provides a selling service for a manufacturer, has a short-term relationship, and operates on a straight commission basis. A. manufacturers' retail store B. trading company C. global retailer D. manufacturer's export agent E. complementary marketer

D. manufacturer's export agent

In the context of distribution patterns, the rate of change in retailing around the world appears to be directly related to the _____. A. literacy rate B. rate of inflation C. population growth D. speed of economic development E. currency exchange rate

D. speed of economic development Retailing around the world has been in a state of active ferment for several years and the rate of change appears to be directly related to the stage and speed of economic development, and even the least developed countries are experiencing dramatic changes. Supermarkets of one variety or another are blossoming in developed and underdeveloped countries alike

Which of the following is a critical element associated with using a particular type of middleman? A. Knowledge of the culture of the target market B. Number of employees C. Mode of transportation for moving goods D. Influence over the target market E. Cash-flow patterns

E. Cash-flow patterns Capital requirement and cash-flow patterns are critical elements associated with using a particular type of middleman.

Which of the following arrangements is undertaken when a firm wants to keep its seasonal distribution channels functioning throughout the year? A. Price skimming B. Using the services of a trading company C. Establishing a retail store D. Using the services of an export management company E. Complementary marketing

E. Complementary marketing Most complementary marketing arrangements are undertaken when a firm wants to fill out its product line or keep its seasonal distribution channels functioning throughout the year. Companies may work either on an agency or merchant basis, but the greatest volume of piggyback business is handled on an ownership (merchant) purchase-and-resale arrangement.

Which of the following statements is true regarding an export management company (EMC)? A. It acts as a middleman for firms with relatively large international sales volume. B. It operates under its own name while providing services to another firm. C. It does not have direct responsibility to the parent firm. D. It acts as a middleman for firms willing to involve their own personnel in international functions. E. It calls for minimum investment from the parent firm to get into international markets.

E. It calls for minimum investment from the parent firm to get into international markets. The export management company (EMC) is an important middleman for firms with relatively small international volume or those unwilling to involve their own personnel in the international function. Two of the chief advantages of EMCs are minimum investment on the part of the company to get into international markets, and no commitment of company personnel or major expenditure of managerial effort.

Which of the following is true of a physical distribution system? A. It involves only the physical movement of goods. B. It is a total systems approach to the management of the distribution process. C. It includes decisions involving an activity that has no impact on the cost and efficiency of one or all others. D. It excludes the interdependence of the costs of each activity. E. It includes transportation mode, inventory quantities, and packing.

E. It includes transportation mode, inventory quantities, and packing. A physical distribution system involves more than the physical movement of goods. It includes the location of plants and warehousing (storage), transportation mode, inventory quantities, and packing. The concept of physical distribution takes into account the interdependence of the costs of each activity; a decision involving one activity affects the cost and efficiency of one or all others. In fact, because of their interdependence, the sum of each of the different activity costs entails an infinite number of "total costs."

In the context of cultural reactions when engaging in e-commerce, the color red is associated with socialism in _____. A. the United States B. China C. Brazil D. Uruguay E. Spain

E. Spain The different cultural reactions to color can be a potential problem for websites designed for global markets. While red may be highly regarded in China or associated with love in the United States, in Spain it is associated with socialism.

Which of the following, according to experienced exporters, is the only way to select a middleman? A. Conduct a background check on all the distributors available in the target market B. Issue a request-for-proposal to all distributors in the target market and evaluate their responses C. Consult other manufacturers of similar products and select the distributor recommended by them D. Consult trade organizations and select the distributor recommended by them E. Talk personally to ultimate consumers to find whom they consider to be the best distributors

E. Talk personally to ultimate consumers to find whom they consider to be the best distributors Experienced exporters suggest that the only way to select a middleman is to go personally to the country and talk to ultimate users of your product to find whom they consider to be the best distributors. Visit each possible middleman once before selecting the one to represent you; look for one with a key person who will take the new product to his or her heart and make it a personal objective to make the sale of that line a success.

Which of the following statements is true of a traditional distribution structure? A. The distribution system is national in scope. B. The relationship between the importer and any middleman is similar to that found in a mass-marketing system. C. The idea of a channel as a chain of intermediaries performing specific activities and each selling to a smaller unit beneath it until the chain reaches the ultimate consumer is common. D. Independent agencies providing functions such as advertising, marketing research, and financing are part of this distribution structure. E. The marketing system develops around the philosophy of selling a limited supply of goods at high prices to a small number of affluent customers.

E. The marketing system develops around the philosophy of selling a limited supply of goods at high prices to a small number of affluent customers. In an import-oriented or traditional distribution structure, an importer controls a fixed supply of goods, and the marketing system develops around the philosophy of selling a limited supply of goods at high prices to a small number of affluent customers. In the resulting seller's market, market penetration and mass distribution are not necessary because demand exceeds supply, and in most cases, the customer seeks the supply from a limited number of middlemen.

Which of the following is true of foreign sales corporations? A. They are commonly called piggybackers. B. They can only be related to a manufacturing parent and not an independent broker. C. They virtually control distribution through all levels of channels in Japan. D. They accumulate, transport, and distribute goods from many countries. E. They can function as principal or commissioned agents.

E. They can function as principal or commissioned agents. A foreign sales corporation can function as a principal, buying and selling for its own account, or a commissioned agent. It can be related to a manufacturing parent or can be an independent merchant or broker.

In the context of distribution patterns, wholesaling shows a greater diversity in its structure than does retailing.

FALSE Retailing shows even greater diversity in its structure than does wholesaling.

A(n) _____ is a domestic middleman set up in a foreign country or U.S. possession that can obtain a corporate tax exemption on a portion of the earnings generated by the sale or lease of export property. A. Webb-Pomerene export association B. manufacturer's export agent C. export management company D. complementary marketer E. foreign sales corporation

E. foreign sales corporation A foreign sales corporation (FSC) is a sales corporation set up in a foreign country or U.S. possession that can obtain a corporate tax exemption on a portion of the earnings generated by the sale or lease of export property. Manufacturers and export groups can form FSCs. An FSC can function as a principal, buying and selling for its own account, or a commissioned agent.

A(n) _____ is an individual agent middleman or an agent middleman firm providing a selling service for manufacturers that covers only one or two markets. A. manufacturer's retail store B. export management company C. Webb-Pomerene export association D. global retailer E. manufacturer's export agent

E. manufacturer's export agent The manufacturer's export agent (MEA) is an individual agent middleman or an agent middleman firm providing a selling service for manufacturers. Unlike the EMC, the MEA does not serve as the producer's export department but has a short-term relationship, covers only one or two markets, and operates on a straight commission basis.

E-commerce is more developed in _____ than the rest of the world, partly because of the lower cost of access to the Internet than found elsewhere. A. China B. Brazil C. Switzerland D. South Africa E. the United States

E. the United States E-commerce is more developed in the United States than the rest of the world, partly because of the vast number of people who own personal computers and partly because of the much lower cost of access to the Internet than found elsewhere.

A physical distribution system involves only the physical movement of goods.

FALSE A physical distribution system involves more than the physical movement of goods. It includes the location of plants and warehousing (storage), transportation mode, inventory quantities, and packing.

Merchant middlemen tend to be more controllable than agent middlemen because they take title to manufacturers' goods.

FALSE Agent middlemen work on commission and arrange for sales in the foreign country but do not take title to the merchandise. Merchant middlemen actually take title to manufacturers' goods and assume the trading risks, so they tend to be less controllable than agent middlemen.

Legal advice is not necessary when entering distribution contracts with middlemen.

FALSE Competent legal advice is vital when entering distribution contracts with middlemen. But as many experienced international marketers know, the best rule is to avoid the need to terminate distributors by screening all prospective middlemen carefully.

Domestic middlemen offer many advantages for companies with large international sales volume.

FALSE Domestic middlemen offer many advantages for companies with small international sales volume, those inexperienced with foreign markets, those not wanting to become immediately involved with the complexities of international marketing, and those wanting to sell abroad with minimal financial and management commitment.

In an import-oriented distribution structure, supply often exceeds demand.

FALSE In an import-oriented or traditional distribution structure, an importer controls a fixed supply of goods, and the marketing system develops around the philosophy of selling a limited supply of goods at high prices to a small number of affluent customers. In the resulting seller's market, market penetration and mass distribution are not necessary because demand exceeds supply, and in most cases, the customer seeks the supply from a limited number of middlemen.

In the United States, if a middleman is terminated, the company is required to pay 1 percent of the middleman's average annual compensation multiplied by the number of years the middleman served as a final settlement.

FALSE In the United States, termination is usually a simple action regardless of the type of middlemen; they are simply dismissed. However, in other parts of the world, the middleman often has some legal protection that makes termination difficult.

In a traditional distribution structure, distribution systems are national rather than local in scope.

FALSE In the traditional distribution structure, distribution systems are local rather than national in scope, and the relationship between the importer and any middleman in the marketplace is considerably different from that found in a mass-marketing system. The idea of a channel as a chain of intermediaries performing specific activities and each selling to a smaller unit beneath it until the chain reaches the ultimate consumer is not common in an import-oriented system.

In the context of distribution structures, one of Walmart's strengths is its ability to influence foreign governments.

FALSE One of Walmart's strengths in distribution is its internal Internet-based system, which makes its transactions with suppliers more efficient and lowers its cost of operations.

In the context of the distribution structure in Japan, it has been observed that Japanese consumers favor cheaper prices over personal service.

FALSE The Japanese consumer contributes to the continuation of the traditional nature of the distribution system through frequent buying trips, small purchases, favoring personal service over price, and a proclivity for loyalty to brands perceived to be of high quality. Additionally, Japanese law gives the small retailer enormous advantage over the development of larger stores and competition.

The Japanese distribution structure is similar to the one found in the United States or in Europe.

FALSE The Japanese distribution structure is different enough from its U.S. or European counterparts that it should be carefully studied by anyone contemplating entry. The Japanese system has four distinguishing features: (1) a structure dominated by many small middlemen dealing with many small retailers, (2) channel control by manufacturers, (3) a business philosophy shaped by a unique culture, and (4) laws that protect the foundation of the system—the small retailer.

A distinguishing characteristic of the Japanese distribution channel system is that it is controlled by a few small retailers found in the country.

FALSE The Japanese system has four distinguishing features: (1) a structure dominated by many small middlemen dealing with many small retailers, (2) channel control by manufacturers, (3) a business philosophy shaped by a unique culture, and (4) laws that protect the foundation of the system—the small retailer.

In the context of the different kinds of middlemen, the WTO in 2003 ruled export management companies to be in violation of international trade rules.

FALSE The WTO in 2003 ruled foreign sales corporations to be in violation of international trade rules, thus starting a major trade dispute with the European Union that still simmers and occasionally boils over.

The distribution channel process includes all activities, beginning with the manufacturer and ending with the retailer.

FALSE The distribution channel process includes all activities, beginning with the manufacturer and ending with the final consumer. This inclusion means the seller must exert influence over two sets of channels: one in the home country and one in the foreign-market country.

The distribution process includes promotion of goods and services by sellers and resellers.

FALSE The distribution process includes the physical handling and distribution of goods, the passage of ownership (title), and—most important from the standpoint of marketing strategy—the buying and selling negotiations between producers and middlemen and between middlemen and customers.

An e-vendor in a foreign market can generally ignore culture as an important variable because the commerce is being done via the Internet, which is culturally insensitive.

FALSE The website and the product must be culturally neutral or adapted to fit the uniqueness of a market, because culture does matter.

Export management companies work under their own names

FALSE Typically, the EMC becomes an integral part of the marketing operations of its client companies. The export management companies work under the names of the manufacturers. An export management company functions as a low-cost, independent marketing department with direct responsibility to the parent firm.

Using foreign-country middlemen moves the manufacturer away from the market and the company becomes less involved with problems of language, physical distribution, communications, and financing.

FALSE Using foreign-country middlemen moves the manufacturer closer to the market and involves the company more closely with problems of language, physical distribution, communications, and financing. Foreign middlemen may be agents or merchants, they may be associated with the parent company to varying degrees, or they may be hired temporarily for special purposes

Domestic middlemen are most likely to be used when the marketer desires to minimize financial and management investment.

TRUE A major trade-off when using home-country middlemen is limited control over the entire process. Domestic middlemen are most likely to be used when the marketer is uncertain or desires to minimize financial and management investment.

Agent middlemen work on commission and do not take title to the merchandise

TRUE Agent middlemen work on commission and arrange for sales in the foreign country but do not take title to the merchandise. By using agents, the manufacturer assumes trading risk but maintains the right to establish policy guidelines and prices and to require its agents to provide sales records and customer information.

Channels of distribution often pose longevity problems.

TRUE Channels of distribution often pose longevity problems. Most agent middlemen firms tend to be small institutions. When one individual retires or moves out of a line of business, the company may find it has lost its distribution in that area.

Trading companies provide the best means for intensive coverage of the market in Japan

TRUE For companies seeking entrance into the complicated Japanese distribution system, the Japanese trading company offers one of the easiest routes to success. Because trading companies may control many of the distributors and maintain broad distribution channels, they provide the best means for intensive coverage of the market.

Ideally, a website should be translated into the languages of the target market.

TRUE Ideally, a website should be translated into the languages of the target markets. This translation may not be financially feasible for some companies, but at least the most important pages of the site should be translated.

In the traditional distribution structure, independent agencies that provide facilitating functions are nonexistent or underdeveloped.

TRUE In a traditional distribution structure, the importer-wholesaler performs most of the marketing functions. Hence, independent agencies that provide advertising, marketing research, warehousing and storage, transportation, financing, and other facilitating functions found in a developed, mature marketing infrastructure are nonexistent or underdeveloped.

In the context of retail patterns, direct marketing works well in affluent markets as well as in markets with underdeveloped distribution systems.

TRUE Selling directly to the consumer through mail, by telephone, or door-to-door is often the approach of choice in markets with insufficient or underdeveloped distribution systems. The approach, of course, also works well in the most affluent markets.

The Export Trading Company Act allows producers of similar products to form export trading companies.

TRUE The Export Trading Company (ETC) Act allows producers of similar products to form export trading companies. A major goal of the ETC Act was to increase U.S. exports by encouraging more efficient export trade services to producers and suppliers to improve the availability of trade finance and to remove antitrust disincentives to export activities.

The behavior of channel members in the distribution process is the result of the interactions between the cultural environment and the marketing process.

TRUE The behavior of channel members is the result of the interactions between the cultural environment and the marketing process. Channel structures range from those with little developed marketing infrastructure, such as those found in many emerging markets, to the highly complex, multilayered system found in Japan.

As traditional channel structures are changing, importers and retailers are also becoming involved in new product development.

TRUE Traditional channel structures are giving way to new forms, new alliances, and new processes—some more slowly than others, but all are changing. Multinational marketers are seeking ways to profitably tap market segments that currently are served by costly, traditional distribution systems. Direct marketing, door-to-door selling, hypermarkets, discount houses, shopping malls, catalog selling, the Internet, and other distribution methods are being introduced in an attempt to provide efficient distribution channels. Importers and retailers also are becoming more involved in new product development.

Traditional channels in developing countries evolved from economies with a strong dependence on imported manufactured goods.

TRUE Traditional channels in developing countries evolved from economies with a strong dependence on imported manufactured goods. In an import-oriented or traditional distribution structure, an importer controls a fixed supply of goods, and the marketing system develops around the philosophy of selling a limited supply of goods at high prices to a small number of affluent customers.

An export management company functions as a low-cost, independent marketing department with direct responsibility to the parent firm.

TRUE Typically, the export management company (EMC) becomes an integral part of the marketing operations of its client companies. Working under the names of the manufacturers, the EMC functions as a low-cost, independent marketing department with direct responsibility to the parent firm. The working relationship is so close that customers are often unaware they are not dealing directly with the export department of the company.