MKT 111 Chapter 10

24) Which of the following is true of a conventional distribution channel? A) It has each channel member acting as a separate business unit trying to maximize its own profits. B) It consists of producers selling their products directly to customers without the use of intermediaries. C) It has one channel member owning the other channel members. D) It is a distribution channel where a producer is owner of all the other channel members. E) It has all members of the channel working together as a single organization.

A Diff: 2 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

39) For over 10 years, Erudite, a publishing and educational company that produces college textbooks, has been selling its books online through studysmart.com, a popular online retailer that sells textbooks published by different companies. Recently, Erudite stopped selling its books through studysmart.com and set up its own website to sell its books. This change in channel organization is called ________. A) disintermediation B) intensive distribution C) brokering D) franchising E) selective distribution

A Diff: 2 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

57) Selective distribution is a strategy in which ________. A) more than one, but fewer than all, willing intermediaries are used by a seller B) products are stocked in as many outlets as possible by a seller C) products are not sold through intermediaries but directly to customers from producers D) all willing intermediaries are given rights to sell a product E) common household goods are preferred over luxury products by intermediaries

A Diff: 2 LO: 10-3: Identify the major channel alternatives open to a company. AACSB: Analytical thinking

83) Which of the following is true of logistics? A) Companies can gain a powerful competitive advantage by using improved logistics to enhance customer service or lower prices. B) The cost savings to a company and its customers due to improved logistics is typically nominal. C) Less than 5 percent of an average product's price is accounted for by shipping and transport. D) The cost of logistics is considerably less than advertising. E) Shaving off a small fraction of logistics costs has very little impact on savings.

A Diff: 2 LO: 10-5: Discuss the nature and importance of marketing logistics and integrated supply chain management. AACSB: Analytical thinking

85) In a just-in-time logistics system, ________. A) retailers carry small inventories of merchandise to last for only a few days B) retailers store products for long periods to avoid an interruption in supply C) producers supply products to resellers before customers place their orders D) producers that are geographically far from their retailers use an express-delivery system E) retailers incur high inventory-carrying and inventory-handling costs

A Diff: 2 LO: 10-5: Discuss the nature and importance of marketing logistics and integrated supply chain management. AACSB: Application of knowledge

11) Using ________, a company uses one or more levels of intermediaries to help bring its products to final buyers. Examples: most of the things you buy-everything from toothpaste to cameras to cars. A) retailer marketing systems B) indirect marketing channels C) wholesaler marketing channels D) direct marketing channels E) social media

B Diff: 2 LO: 10-1: Explain why companies use marketing channels and discuss the functions these channels perform. AACSB: Analytical thinking

20) Which of the following is an example of a horizontal conflict in a distribution channel? A) a Nike shoe dealer complaining that the shoes provided to the dealer are defective B) a Ford car dealer complaining that another Ford dealer is underpricing the same models C) a FedEx agent complaining that a DHL agent is cutting off his business D) a Walmart executive complaining to a Pepsi executive for not replenishing stocks on time E) a Gucci executive complaining to Gucci's suppliers of delays in shipping consignments

B Diff: 2 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

27) Integrating the entire distribution chain - from its own design and manufacturing operations to distribution through its own managed stores - has turned Spanish clothing chain Zara into the world's fastest-growing fast-fashion retailer. This is an example of a(n) ________ marketing system. A) contractual VMS B) corporate vertical C) administered VMS D) horizontal E) direct

B Diff: 2 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

38) Victoria's Closet, a manufacturer of bohemian-style clothing and accessories, sells its products through its online website, a catalogue, and specialty boutiques that target women. Which kind of channel arrangement does Victoria's Closet employ to distribute its products? A) horizontal marketing system B) multichannel distribution system C) administered VMS D) contractual VMS E) corporate vertical marketing system

B Diff: 2 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

21) Vertical conflicts in distribution channels are conflicts that occur between ________. A) same levels in the same channel B) different levels of the same channel C) same levels of different channels D) different levels of different channels E) retailers and customers

B Diff: 2 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Application of knowledge

35) Changes in technology and the explosive growth of direct and online marketing are having a profound impact on the nature and design of marketing channels. One major trend is toward ________ insofar as product or service producers cut out intermediaries and go directly to final buyers or when radically new types of channel intermediaries displace traditional ones. A) intermediation B) disintermediation C) vertical marketing systems D) horizontal marketing systems E) corporate vertical marketing systems

B Diff: 2 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Information technology

55) Which of the following is true of an intensive distribution strategy? A) It gives sole rights to select dealers in a given area. B) It strives to make products available where and when consumers want them. C) Compared with other distribution strategies, it uses the least number of intermediaries to sell products. D) Compared with other distribution strategies, it provides the best support for dealers of luxury products. E) It discards traditional intermediaries and uses direct marketing to reach customers.

B Diff: 2 LO: 10-3: Identify the major channel alternatives open to a company. AACSB: Analytical thinking

58) ________ distribution typically allows manufacturers to develop good working relationships with intermediaries and expect a better-than-average selling effort. It also gives producers good market coverage with more control and less cost than intensive distribution. A) Vertical B) Selective C) Horizontal D) Comprehensive E) Inclusive

B Diff: 2 LO: 10-3: Identify the major channel alternatives open to a company. AACSB: Analytical thinking

71) Bateman Gray Motors sells the cars it produces using dedicated dealers who only sell Bateman Gray's products at their outlets. What kind of marketing strategy has Bateman Gray adopted with its car dealers? A) direct marketing B) exclusive dealing C) disintermediation D) horizontal integration E) vertical integration

B Diff: 2 LO: 10-4: Explain how companies select, motivate, and evaluate channel members. AACSB: Analytical thinking

82) In a logistics system, minimizing distribution costs most likely involves ________. A) flexible assortments B) large shipping lots C) rapid delivery D) large inventories E) liberal return policies

B Diff: 2 LO: 10-5: Discuss the nature and importance of marketing logistics and integrated supply chain management. AACSB: Analytical thinking

80) Outbound logistics refers to moving ________. A) unwanted, excess products from resellers to producers B) raw materials from suppliers to the factory C) excess materials from the factory to suppliers D) products from the factory to resellers and ultimately to customers E) broken, damaged products from customers to producers

D Diff: 2 LO: 10-5: Discuss the nature and importance of marketing logistics and integrated supply chain management. AACSB: Application of knowledge

13) Kevin Pinker is a freelance computer programmer who writes computer algorithms for companies such as SoftStar and BlueHill. SoftStar and BlueHill use these algorithms to make specific programs based on online market research. These programs are then sold to the online retailer, Abundon, which then sells them to individual consumers and businesses. Which of the following is a marketing intermediary in this chain? A) SoftStar B) BlueHill C) the consumer D) Abundon E) Kevin Pinker

D Diff: 3 LO: 10-1: Explain why companies use marketing channels and discuss the functions these channels perform. AACSB: Application of knowledge

14) The USA Cotton Growers Cooperative sells unfinished cotton to The Weaving Experts who refine the raw material for sale to The Sheet Factory. It's then used in the manufacturing process of 300, 400, and 500 thread count bed sheet sets. The Sheet Factory distributes their products through a number of wholesalers, including Linen Traders. Linen Traders then resells the bed sheet sets to retailer Bedding Plus who markets the products to consumers. Which of the following represents a marketing intermediary transaction? A) only Linen Traders B) only Bedding Plus C) only The Weaving Experts D) Linen Traders selling to Bedding Plus E) The Weaving Experts selling to Linen Traders

D Diff: 3 LO: 10-1: Explain why companies use marketing channels and discuss the functions these channels perform. AACSB: Application of knowledge

31) Luccia's is a restaurant based in Illinois that exclusively sells Italian food. Luccia's sells the rights to its recipes to a British firm, Clover Trading, which then opens an outlet in London under the Luccia's brand name. Which kind of channel arrangement does Luccia's most likely have with Clover Trading? A) a horizontal marketing system B) a direct marketing system C) an administered VMS D) a contractual VMS E) a corporate vertical marketing system

D Diff: 3 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

2) The authors suggest that the term "supply chain" may be too limited because it takes a "make-and-sell" view of the business. They believe the term ________ is more appropriate because it suggests a "sense-and-respond" view of the market. A) "upstream chain" B) "downstream chain" C) "market chain" D) "production chain" E) "demand chain"

E Diff: 3 LO: 10-1: Explain why companies use marketing channels and discuss the functions these channels perform. AACSB: Analytical thinking

45) A horizontal marketing system can develop between a company and its competitor.

TRUE Diff: 1 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

60) Global marketers must usually adapt their channel strategies to the existing structures within each country.

TRUE Diff: 1 LO: 10-3: Identify the major channel alternatives open to a company. AACSB: Diverse and multicultural work environments

76) In exclusive dealing, a producer may agree not to sell to other dealers in a given area.

TRUE Diff: 1 LO: 10-4: Explain how companies select, motivate, and evaluate channel members. AACSB: Application of knowledge

72) Many companies are now installing integrated high-tech partnership relationship management (PRM) systems to coordinate their whole-channel marketing efforts.

TRUE Diff: 1 LO: 10-4: Explain how companies select, motivate, and evaluate channel members. AACSB: Information technology

93) Customer-centered logistics starts with the marketplace and works backward to the factory.

TRUE Diff: 1 LO: 10-5: Discuss the nature and importance of marketing logistics and integrated supply chain management. AACSB: Analytical thinking

97) With a vendor-managed inventory system, the supplier takes full responsibility for managing inventories and deliveries.

TRUE Diff: 1 LO: 10-5: Discuss the nature and importance of marketing logistics and integrated supply chain management. AACSB: Analytical thinking

94) Supply chain management involves managing both upstream and downstream value-added flows of materials.

TRUE Diff: 1 LO: 10-5: Discuss the nature and importance of marketing logistics and integrated supply chain management. AACSB: Application of knowledge

16) Channel members add value by bridging the major time, place, and possession gaps that separate goods and services from those who use them.

TRUE Diff: 2 LO: 10-1: Explain why companies use marketing channels and discuss the functions these channels perform. AACSB: Reflective thinking

43) Each channel member plays a specialized role in the channel.

TRUE Diff: 2 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

41) In a multichannel distribution system, a single firm sets up two or more marketing channels to reach one or more customer segments.

TRUE Diff: 2 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Application of knowledge

73) Exclusive dealing that creates a monopoly comes under the scope of the Clayton Act of 1914.

TRUE Diff: 2 LO: 10-4: Explain how companies select, motivate, and evaluate channel members. AACSB: Ethical understanding and reasoning

98) Companies green up their supply chains through greater efficiency, and greater efficiency means lower costs and higher profits. In other words, developing a sustainable supply chain is not only environmentally responsible, it can also be profitable.

TRUE Diff: 2 LO: 10-5: Discuss the nature and importance of marketing logistics and integrated supply chain management. AACSB: Ethical understanding and reasoning

61) Companies should state their marketing channel objectives in terms of targeted levels of customer service.

TRUE Diff: 3 LO: 10-3: Identify the major channel alternatives open to a company. AACSB: Reflective thinking

5) Producers use marketing intermediaries because they ________. A) create greater efficiency in making goods available to target markets B) supply inexpensive raw materials for manufacturing products C) provide technical expertise for faster production D) monitor day-to-day activities during production E) form a part of the company's direct channel

A Diff: 1 LO: 10-1: Explain why companies use marketing channels and discuss the functions these channels perform. AACSB: Analytical thinking

29) Which type of channel arrangement is a retailer like Home Depot likely to follow? A) administered VMS B) horizontal marketing system C) contractual VMS D) corporate vertical marketing system E) direct marketing system

A Diff: 1 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

33) Sonic Shack, an audio equipment retailer, signs an agreement with PineWire, a renowned electronics company, to sell PineWire products. The deal requires Sonic Shack to provide PineWire products with superior displays, shelf space, and promotion compared to competing products. Sonic agrees to these terms as PineWire products command a huge share in the market. Which of the following types of channel arrangements do PineWire and Sonic Shack most likely have? A) administered VMS B) corporate vertical marketing system C) indirect marketing system D) wholesaler franchise system E) horizontal marketing system

A Diff: 3 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

22) Performance Inc. sells its newest athletic shoe styles to The Sneaker Store and distributes dated or slightly defective merchandise through Sports Discounters. Performance Inc.'s main competitor is Topnotch Manufacturers. Performance Inc. also markets its products through the company website. They decide to offer a short-term online promotion to encourage consumers to buy their newest athletic shoes, promoting a 20 percent discount off current retail prices. In such a distribution channel, which of the following would be considered a vertical conflict? A) a conflict between Performance Inc. and The Sneaker Store B) a conflict among Performance Inc., The Sneaker Store, and Sports Discounters C) a conflict between The Sneaker Store and Sports Discounters D) a conflict between Performance Inc. and Sports Discounters E) a conflict between Performance Inc. and Topnotch Manufacturers

A Diff: 3 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Application of knowledge

81) When Toyota announces a product recall on its Camry model due to a faulty igniter, they are using ________ to coordinate with dealers and car owners. A) reverse logistics B) outbound logistics C) inbound logistics D) inventory logistics E) disintermediation

A Diff: 3 LO: 10-5: Discuss the nature and importance of marketing logistics and integrated supply chain management. AACSB: Analytical thinking

49) What is a contractual vertical marketing system? Give an example of a type of business that works as a contractual VMS.

A contractual VMS consists of independent firms at different levels of production and distribution that join together through contracts to obtain more economies or sales impact than each could achieve alone. Channel members coordinate their activities and manage conflict through contractual agreements. The franchise organization is the most common type of contractual relationship. In this system, a channel member called a franchiser links several stages in the production-distribution process. Almost every kind of business has been franchised - from motels and fast-food restaurants to dental centers and dating services, from wedding consultants and handyman services to funeral homes, fitness centers, and moving services. For example, Two Men and a Truck moving services - "Movers Who Care" - grew quickly through franchising. Started 30 years ago by two brothers with a pickup truck looking to make extra money while in high school, Two Men and a Truck now has a national network of 306 independently owned franchise locations with 1,900 trucks, pulling in $350 million in annual revenues. Diff: 2 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

48) Compare a conventional distribution channel and a vertical marketing system.

A conventional distribution channel consists of one or more independent producers, wholesalers, and retailers. Each is a separate business seeking to maximize its own profits, perhaps even at the expense of the system as a whole. No channel member has much control over the other members, and no formal means exists for assigning roles and resolving channel conflict. Historically, conventional distribution channels have lacked leadership and power, often resulting in damaging conflict and poor performance. In contrast, a vertical marketing system (VMS) consists of producers, wholesalers, and retailers acting as a unified system. One channel member owns the others, has contracts with them, or wields so much power that they must all cooperate. The VMS can be dominated by the producer, the wholesaler, or the retailer. Diff: 2 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

47) Disintermediation occurs when product or service producers cut out intermediaries and sell directly to final buyers.

Answer: TRUE Diff: 1 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Application of knowledge

9) In which of the following situations is a producer guaranteed full control over product sales? A) a corporate marketing channel B) a direct marketing channel C) a contractual distribution channel D) a horizontal marketing system E) an administered marketing system

B Diff: 1 LO: 10-1: Explain why companies use marketing channels and discuss the functions these channels perform. AACSB: Analytical thinking

1) Which of the following would be considered an upstream partner in a company's supply chain? A) a firm that resells a finished product and shares the net sales with the producer B) a firm that provides technical expertise in the production of a product C) a firm that markets a product to consumers through social media D) a firm that buys products at wholesale cost from the company E) a firm that exclusively markets a product to other businesses

B Diff: 2 LO: 10-1: Explain why companies use marketing channels and discuss the functions these channels perform. AACSB: Analytical thinking

84) Which of the following is a difference between storage warehouses and distribution centers? A) Storage warehouses are used to store agricultural products, while distribution centers are used to store nonagricultural products. B) Storage warehouses store goods for moderate to long periods, while distribution centers are used to move goods rather than just store them. C) Storage warehouses are always owned by a producer, while distribution centers are rented. D) Storage warehouses are more likely to use newer, computer-controlled systems, while distribution centers generally use outdated materials-handling methods. E) Storage warehouses are exclusively used by government agencies, while distribution centers are exclusively used by private businesses.

B Diff: 2 LO: 10-5: Discuss the nature and importance of marketing logistics and integrated supply chain management. AACSB: Analytical thinking

92) Under ________, a customer shares real-time data on sales and current inventory levels with a supplier, and the supplier then takes full responsibility for managing inventories and deliveries. A) periodic inventory systems B) vendor-managed inventory systems C) selective-trading inventory systems D) manual inventory replenishment systems E) customer-managed inventory systems

B Diff: 2 LO: 10-5: Discuss the nature and importance of marketing logistics and integrated supply chain management. AACSB: Analytical thinking

4) ________ is a set of interdependent organizations that help make a product or service of a company available for use by consumers or business users. A) A research and development channel B) An upstream channel C) A marketing channel D) A raw materials supplier E) A backward integration chain

C Diff: 1 LO: 10-1: Explain why companies use marketing channels and discuss the functions these channels perform. AACSB: Application of knowledge

54) Producers of convenience products and common raw materials typically seek ________ distribution—a strategy in which they stock their products in as many outlets as possible. A) selective B) exclusive C) intensive D) exponential E) comprehensive

C Diff: 1 LO: 10-3: Identify the major channel alternatives open to a company. AACSB: Analytical thinking

88) Which of the following is most efficient for short hauls of high-value merchandise and is highly flexible in its routing and time schedules? A) water carriers B) pipeline C) trucks D) air carriers E) railroads

C Diff: 1 LO: 10-5: Discuss the nature and importance of marketing logistics and integrated supply chain management. AACSB: Analytical thinking

79) Moving products and materials from suppliers to the factory is known as ________ logistics. A) outbound B) reverse C) inbound D) downstream E) inventory

C Diff: 1 LO: 10-5: Discuss the nature and importance of marketing logistics and integrated supply chain management. AACSB: Application of knowledge

7) Mary Kay Cosmetics and Amway sell their products through home and office sales parties, online websites, and social media. Both companies use a(n) ________ channel to distribute their offerings. A) functional B) indirect C) direct D) layered E) behavioral

C Diff: 2 LO: 10-1: Explain why companies use marketing channels and discuss the functions these channels perform. AACSB: Analytical thinking

28) More than 80 percent of McDonald's restaurants worldwide are owned and operated by franchisees. This illustrates a(n) ________ marketing system. A) corporate vertical B) horizontal C) contractual VMS D) administered VMS E) direct

C Diff: 2 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

70) Many athletic stadiums enter into contractual agreements with national beverage companies and food franchises to distribute only their brand-name products at the respective venues. This is an example of ________. A) horizontal price fixing B) disintermediation C) exclusive dealing D) selective distribution E) horizontal integration

C Diff: 2 LO: 10-4: Explain how companies select, motivate, and evaluate channel members. AACSB: Analytical thinking

68) ________ is a practice whereby a producer agrees to sell a brand to a dealer only if the dealer agrees to sell some or all of the rest of the producer's merchandise. A) Horizontal price fixing B) Horizontal integration C) Full-line forcing D) Direct marketing E) Disintermediation

C Diff: 2 LO: 10-4: Explain how companies select, motivate, and evaluate channel members. AACSB: Ethical understanding and reasoning

91) The use of both rail and trucks for transporting goods is called ________. A) trainshipping B) fishybacking C) piggybacking D) airtrucking E) autoracking

C Diff: 2 LO: 10-5: Discuss the nature and importance of marketing logistics and integrated supply chain management. AACSB: Application of knowledge

23) Jupiter Steel is the chief provider of metals to Greystone Motors. Greystone Motors has two models of cars—one for commercial and regular consumers and another for professional car racing teams. Greystone Motors has designated dealers to sell its commercial cars to consumers, while racing cars are sold directly to the racing teams. In such a distribution channel, which of the following would be considered a horizontal conflict? A) a conflict between Jupiter Steel and Greystone Motors B) a conflict between Jupiter Steel and Greystone dealers C) a conflict between two Greystone Motors car dealerships D) a conflict between a Greystone Motors car dealership and a racing team E) a conflict between Greystone Motors and its car dealerships

C Diff: 3 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

30) Rage, a leading motor vehicle manufacturer, introduces a new superbike model. It invites proposals from independent dealers who are willing to set up exclusive showrooms that only sell Rage's superbikes. Chosen dealers will sell and service the superbikes, and Rage will oversee national advertising. This is most likely an example of a(n) ________. A) administered VMS B) horizontal manufacturing marketing system C) manufacturer-sponsored retailer franchise system D) manufacturer-sponsored wholesaler franchise system E) direct marketing system

C Diff: 3 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

77) How do companies generally manage and motivate their channel members? What technological tools are available to help with this task?

Channel members must be continuously managed and motivated to do their best. The company must sell not only through the intermediaries but also to and with them. Most companies see their intermediaries as first-line customers and partners. They practice strong partner relationship management to forge long-term partnerships with channel members. This creates a value delivery system that meets the needs of both the company and its marketing partners. In managing its channels, a company must convince suppliers and distributors that they can succeed better by working together as a part of a cohesive value delivery system. Many companies are now installing integrated high-tech partnership relationship management (PRM) systems to coordinate their whole-channel marketing efforts. Companies can now use PRM and supply chain management (SCM) software to help recruit, train, organize, manage, motivate, and evaluate relationships with channel partners. Diff: 2 LO: 10-4: Explain how companies select, motivate, and evaluate channel members. AACSB: Information technology

64) Differentiate between intensive distribution, exclusive distribution, and selective distribution strategies. Provide examples of products that would be appropriate for each.

Companies must determine the number of channel members to use at each level of a value network chain. Three strategies are available: intensive distribution, exclusive distribution, and selective distribution. Producers of convenience products and common raw materials typically seek intensive distribution—a strategy in which they stock their products in as many outlets as possible. These products must be available where and when consumers want them. For example, toothpaste, candy, and other similar items are sold in millions of outlets to provide maximum brand exposure and consumer convenience. Kraft, Coca-Cola, Kimberly-Clark, and other consumer goods companies distribute their products in this way. By contrast, some producers purposely limit the number of intermediaries handling their products. The extreme form of this practice is exclusive distribution, in which the producer gives only a limited number of dealers the exclusive right to distribute its products in their territories. Exclusive distribution is often found in the distribution of luxury brands. Between intensive and exclusive distribution lies selective distribution - the use of more than one but fewer than all of the intermediaries who are willing to carry a company's products. Most television, furniture, and home appliance brands are distributed in this manner. Diff: 3 LO: 10-3: Identify the major channel alternatives open to a company. AACSB: Analytical thinking

63) How does a company determine its channel objectives? What factors influence the channel objectives of a company?

Companies should state their marketing channel objectives in terms of targeted levels of customer service. Usually, a company can identify several segments wanting different levels of service. The company should decide which segments to serve and the best channels to use in each case. In each segment, the company wants to minimize the total channel cost of meeting customer service requirements. The company's channel objectives are also influenced by the nature of the company, its products, its marketing intermediaries, its competitors, and the environment. For example, companies selling perishable products may require more direct marketing to avoid delays and too much handling. In some cases, a company may want to compete in or near the same outlets that carry competitors' products. In other cases, companies may avoid the channels used by competitors. Finally, environmental factors such as economic conditions and legal constraints may affect channel objectives and design. For example, in a depressed economy, producers will want to distribute their goods in the most economical way, using shorter channels and dropping unneeded services that add to the final price of the goods. Diff: 3 LO: 10-3: Identify the major channel alternatives open to a company. AACSB: Analytical thinking

34) A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity is referred to as a(n) ________. A) corporate vertical marketing system B) contractual VMS C) direct marketing system D) horizontal marketing system E) administered VMS

D Diff: 1 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Application of knowledge

56) High-end luxury brands like Bentley for cars, Louis Vuitton for handbags, and Rolex for watches use ________ distribution, giving a limited number of dealers the sole right to sell products in a specified geographic territory. A) inclusive B) horizontal C) intensive D) exclusive E) vertical

D Diff: 1 LO: 10-3: Identify the major channel alternatives open to a company. AACSB: Analytical thinking

8) All the institutions in a channel are connected by several types of flows. When a retailer conveys to a wholesaler that a new line of hip-hop clothing is not selling, this is an example of ________. A) payment flow B) flow of ownership C) physical flow D) information flow E) promotion flow

D Diff: 2 LO: 10-1: Explain why companies use marketing channels and discuss the functions these channels perform. AACSB: Analytical thinking

12) A(n) ________ is considered a marketing intermediary. A) customer B) producer C) manufacturer D) wholesaler E) advertiser

D Diff: 2 LO: 10-1: Explain why companies use marketing channels and discuss the functions these channels perform. AACSB: Application of knowledge

3) A ________ is made up of a company, its suppliers, distributors, and, ultimately, customers who "partner" with each other to improve the performance of the entire system. A) manufacturing chain B) distribution center C) marketing intermediary D) value delivery network E) disintermediation system

D Diff: 2 LO: 10-1: Explain why companies use marketing channels and discuss the functions these channels perform. AACSB: Application of knowledge

67) Which of the following is an advantage of exclusive dealing between a seller and a dealer? A) The seller gains more shelf power compared to competitors' products. B) The seller can avoid using any intermediary and sell the product directly to customers. C) Customers get more loyal and dependable outlets. D) The seller's distinctive position is reinforced through customer service and the dealer obtains steady support from the seller. E) The dealer can freely choose what products to sell without any interference from the seller.

D Diff: 2 LO: 10-4: Explain how companies select, motivate, and evaluate channel members. AACSB: Analytical thinking

89) Which mode of transportation is best for carrying perishable goods to distant markets? A) railroads B) water carriers C) trucks D) air carriers E) pipelines

D Diff: 2 LO: 10-5: Discuss the nature and importance of marketing logistics and integrated supply chain management. AACSB: Analytical thinking

37) Faber Motors manufactures three lines of cars: high-end security cars for government agencies, commercial cars for consumers and individuals, and professional racing cars. The high-end security cars are sold directly to government buyers by the company. The consumer cars are sold through dedicated dealers who only sell Faber's lines at their outlets. For its professional racing cars, Faber collaborates with Radium Tires, an innovative and renowned tire manufacturer. Faber provides the engine and body, while Radium provides the tires and its expertise on the racing industry. Which term best describes Faber's channel arrangements? A) direct distribution system B) horizontal marketing system C) corporate vertical franchise system D) multichannel distribution system E) administered VMS

D Diff: 3 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

53) What is disintermediation? With a suitable example, explain the opportunities and problems that disintermediation presents for producers and resellers.

Disintermediation occurs when product or service producers cut out intermediaries and go directly to final buyers or when radically new types of channel intermediaries displace traditional ones. Disintermediation presents both opportunities and problems for producers and resellers. Channel innovators who find new ways to add value in the channel can sweep aside traditional resellers and reap the rewards. In turn, traditional intermediaries must continue to innovate to avoid being swept aside. For example, when Netflix pioneered online DVD-by-mail video rentals, it sent traditional brick-and-mortar video stores such as Blockbuster into ruin. Then, Netflix itself faced disintermediation threats from an even hotter channel - video streaming. But instead of simply watching developments, Netflix has led them. Like resellers, to remain competitive, product and service producers must develop new channel opportunities, such as the Internet and other direct channels. However, developing these new channels often brings them into direct competition with their established channels, resulting in conflict. To ease this problem, companies often look for ways to make going direct a plus for the entire channel. Diff: 3 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

25) A ________ consists of producers, wholesalers, and retailers acting as a unified system. The system can be dominated by any one of the interdependent members. A) direct marketing system B) horizontal distribution channel C) lateral marketing system D) conventional distribution channel E) vertical marketing system

E Diff: 1 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Application of knowledge

32) In a(n) ________ marketing system, leadership over production and distribution is assumed through the size and power of one or a few dominant channel members. A) direct B) contractual VMS C) horizontal D) corporate vertical E) administered VMS

E Diff: 1 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Application of knowledge

59) When a seller requires that only certain dealers carry its products, its strategy is known as ________. A) horizontal conflict B) intensive distribution C) vertical distribution D) disintermediation E) exclusive distribution

E Diff: 1 LO: 10-3: Identify the major channel alternatives open to a company. AACSB: Application of knowledge

90) ________ involves combining two or more systems of transportation to move products. A) Vertical transportation B) Disintermediation C) Just-in-time management D) Vertical integration E) Multimodal transportation

E Diff: 1 LO: 10-5: Discuss the nature and importance of marketing logistics and integrated supply chain management. AACSB: Application of knowledge

10) A firm that uses direct marketing would sell its products through ________. A) one marketing intermediary B) big box retailers C) large wholesalers D) multiple intermediaries E) the company website

E Diff: 2 LO: 10-1: Explain why companies use marketing channels and discuss the functions these channels perform. AACSB: Analytical thinking

26) Which of the following is true of a vertical marketing system? A) It is formed when two or more companies at one level join together to follow a new marketing opportunity. B) It is formed when a single firm sets up two or more marketing channels to reach one or more customer segments. C) It does not give overall power to any one member in the channel. D) It has each channel member acting as a separate business unit trying to maximize its own profits. E) It has one channel member owning all the other channel members or has contracts with all other channel members.

E Diff: 2 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Application of knowledge

69) Which of the following is true of an exclusive dealing arrangement between a producer and a dealer? A) It prohibits the producer from selling outside the dealer's territory. B) It prevents the producer from using any other dealer to sell its products regardless of geographical area. C) It gives the producer's products more shelf power compared to a competitor's products being sold by the dealer. D) It can be considered illegal if it increases competition substantially. E) It does not allow other producers to sell to that dealer.

E Diff: 2 LO: 10-4: Explain how companies select, motivate, and evaluate channel members. AACSB: Ethical understanding and reasoning

86) Which of the following is true of RFID or "smart tag" technology? A) "Smart tag" technology eliminates the need for intermediaries and facilitates a direct marketing system. B) "Smart tag" technology can de-automate the entire supply chain. C) The use of "smart tag" technology makes it difficult to know where a product is located physically within the supply chain. D) Retailers and suppliers using "smart technology" have higher risks of shoplifting and robbery. E) "Smart shelves" can tell when it is time to reorder and can place orders automatically.

E Diff: 2 LO: 10-5: Discuss the nature and importance of marketing logistics and integrated supply chain management. AACSB: Analytical thinking

87) Which of the following is a cost-effective mode for shipping large amounts of bulk products—coal, sand, minerals, and forest products—over long distances? A) air carriers B) water carriers C) pipelines D) trucks E) railroads

E Diff: 2 LO: 10-5: Discuss the nature and importance of marketing logistics and integrated supply chain management. AACSB: Analytical thinking

6) Which of the following applies to a marketing intermediary who buys brand name toothpaste from 10 different manufacturers, consolidates offerings, and then resells the various brands to 500 supermarkets in Florida? A) facilitate the production of products without direct customer feedback B) help a company develop a direct channel selling system C) buy small quantities of products from producers and break them down into narrow assortments for customers D) increase the amount of work that must be done by producers and consumers E) transform the assortments of products made by producers into the assortments wanted by consumers

E Diff: 3 LO: 10-1: Explain why companies use marketing channels and discuss the functions these channels perform. AACSB: Analytical thinking

36) Brandy's, a national candy store chain, decides to open both a coffee house and ice cream shop within their stores to create a multi-faceted experience for shoppers. The company decides to enter into deals with two well-known retailers - The Beanery and Creamy Creations. As stipulated in their respective contracts, The Beanery and Creamy Creations cannot enter into the same type of agreement with any other candy retailers. All three companies will enjoy greater sales, and ultimately profits, from the arrangement. This is most likely an example of a(n) ________ marketing system. A) direct B) administered VMS C) corporate vertical D) contractual VMS E) horizontal

E Diff: 3 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

15) Introducing intermediaries into a distribution chain increases the number of direct channel transactions between a manufacturer and its customers.

FALSE Diff: 1 LO: 10-1: Explain why companies use marketing channels and discuss the functions these channels perform. AACSB: Analytical thinking

18) Intermediaries play a minimal role in matching supply and demand.

FALSE Diff: 1 LO: 10-1: Explain why companies use marketing channels and discuss the functions these channels perform. AACSB: Analytical thinking

17) Direct marketing is the longest distribution channel between a producer and consumer.

FALSE Diff: 1 LO: 10-1: Explain why companies use marketing channels and discuss the functions these channels perform. AACSB: Application of knowledge

46) Horizontal conflict occurs among firms at different levels of the channel.

FALSE Diff: 1 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

42) An administered VMS integrates successive stages of production and distribution under single ownership.

FALSE Diff: 1 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Application of knowledge

95) The goal of any logistics system should be to maximize sales, not profits.

FALSE Diff: 1 LO: 10-5: Discuss the nature and importance of marketing logistics and integrated supply chain management. AACSB: Analytical thinking

96) Inbound logistics involves managing the flow of products from an intermediary to a customer.

FALSE Diff: 1 LO: 10-5: Discuss the nature and importance of marketing logistics and integrated supply chain management. AACSB: Application of knowledge

40) Historically, conventional distribution channels have provided channel leadership and have had the power to assign roles and manage conflict.

FALSE Diff: 2 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

44) In an administered VMS, the producer assumes the leadership position in a distribution channel by default.

FALSE Diff: 2 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

62) Selective distribution is a strategy in which producers of convenience goods stock their products in as many outlets as possible.

FALSE Diff: 2 LO: 10-3: Identify the major channel alternatives open to a company. AACSB: Application of knowledge

74) Customer relationship management software is used for selecting, managing, and motivating individual channel members and evaluating their performance over time.

FALSE Diff: 2 LO: 10-4: Explain how companies select, motivate, and evaluate channel members. AACSB: Application of knowledge

75) Full-line forcing is considered an illegal arrangement that violates the Clayton Act.

FALSE Diff: 2 LO: 10-4: Explain how companies select, motivate, and evaluate channel members. AACSB: Ethical understanding and reasoning

66) What criteria should a firm consider before choosing a channel alternative?

If a company has identified several channel alternatives and wants to select the one that will best satisfy its long-run objectives, each alternative should be evaluated against certain economic, control, and adaptability criteria. Using economic criteria, a company compares the likely sales, costs, and profitability of different channel alternatives. The company must also consider control issues. Using intermediaries usually means giving them some control over the marketing of the product, and some intermediaries take more control than others. Other things being equal, the company prefers to keep as much control as possible. Finally, the company must apply adaptability criteria. Channels often involve long-term commitments, yet the company wants to keep the channel flexible so that it can adapt to environmental changes. Thus, to be considered, a channel involving long-term commitments should be greatly superior on economic and control grounds. Diff: 2 LO: 10-3: Identify the major channel alternatives open to a company. AACSB: Reflective thinking

99) What is marketing logistics? What are the components of marketing logistics?

Marketing logistics—also called physical distribution—involves planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of consumption, to meet customer requirements at a profit. Marketing logistics involves (a) outbound logistics, which is moving products from the factory to resellers and ultimately to customers, (b) inbound logistics, which is moving products and materials from suppliers to the factory, and (c) reverse logistics, which is reusing, recycling, refurbishing, or disposing of broken, unwanted, or excess products returned by consumers or resellers. Diff: 2 LO: 10-5: Discuss the nature and importance of marketing logistics and integrated supply chain management. AACSB: Analytical thinking

19) What are the different functions of the members of a marketing channel?

Members of a marketing channel perform many key functions. Some help to complete transactions, which include: Information: Gathering and distributing information about consumers, producers, and other actors and forces in the marketing environment needed for planning and aiding exchange. Promotion: Developing and spreading persuasive communications about an offer. Contact: Finding and communicating with prospective buyers. Matching: Shaping offers to meet the buyer's needs, including activities such as manufacturing, grading, assembling, and packaging. Negotiation: Reaching an agreement on price and other terms so that ownership or possession can be transferred. Others help to fulfill the completed transactions, such as: Physical distribution: Transporting and storing goods. Financing: Acquiring and using funds to cover the costs of the channel work. Risk taking: Assuming the risks of carrying out the channel work. Diff: 2 LO: 10-1: Explain why companies use marketing channels and discuss the functions these channels perform. AACSB: Analytical thinking

51) Explain multichannel distribution systems with an example.

Multichannel distribution occurs when a single firm sets up two or more marketing channels to reach one or more customer segments. For example, John Deere, a manufacturer of agricultural machinery, sells its familiar green-and-yellow lawn and garden tractors, mowers, and outdoor power products to consumers and commercial users through several channels, including John Deere retailers, Lowe's home improvement stores, and online. It sells and services its tractors, combines, planters, and other agricultural equipment through its premium John Deere dealer network. It sells large construction and forestry equipment through selected large, full-service John Deere dealers and their sales forces. Diff: 2 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

52) What are the advantages and disadvantages of using a multichannel distribution system?

Multichannel distribution systems offer many advantages to companies facing large and complex markets. With each new channel, the company expands its sales and market coverage and gains opportunities to tailor its products and services to the specific needs of diverse customer segments. But such multichannel systems are harder to control, and they can generate conflict as more channels compete for customers and sales. For example, when John Deere, a manufacturer of agricultural machinery, began selling selected consumer products through Lowe's home improvement stores, many of its dealers complained loudly. To avoid such conflicts in its Internet marketing channels, the company routes all of its website sales to John Deere dealers. Diff: 2 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Reflective thinking

100) Explain integrated logistics management and the different ways through which a company can achieve it.

The concept of integrated logistics management recognizes that providing better customer service and trimming distribution costs require teamwork, both inside the company and among all the marketing channel organizations. Inside, the company's various departments must work closely together to maximize its own logistics performance. Outside, the company must integrate its logistics system with those of its suppliers and customers to maximize the performance of the entire distribution network. This can be achieved by: 1. Cross-functional teamwork inside the company: This can be achieved by creating close working relationships between departments. Some companies have created permanent logistics committees composed of managers responsible for different physical distribution activities. Companies can also create supply chain manager positions that link the logistics activities of functional areas. Companies can also employ sophisticated, system-wide supply chain management software, now available from a wide range of software enterprises. 2. Building logistics partnerships: This can be achieved by working with other channel partners to improve the whole-channel distribution. The success of each channel member depends on the performance of the entire supply chain. Smart companies coordinate their logistics strategies and forge strong partnerships with suppliers and customers to improve customer service and reduce channel costs, while other companies partner through shared projects. 3. Outsourcing logistics to third-party logistics (3PL) providers: Companies use third-party logistics providers for several reasons. First, because getting the product to market is their main focus, using these providers makes the most sense, as they can often do it more efficiently and at a lower cost. Outsourcing typically results in a 10 to 25 percent cost savings. Second, outsourcing logistics frees a company to focus more intensely on its core business. Finally, integrated logistics companies understand increasingly complex logistics environments. Diff: 3 LO: 10-5: Discuss the nature and importance of marketing logistics and integrated supply chain management. AACSB: Analytical thinking

65) What are the responsibilities of channel members?

The producer and the intermediaries need to agree on the terms and responsibilities of each channel member. They should agree on price policies, conditions of sale, territory rights, and the specific services to be performed by each party. The producer should establish a list price and a fair set of discounts for the intermediaries. It must define each channel member's territory, and it should be careful about where it places new resellers. Mutual services and duties need to be spelled out carefully, especially in franchise and exclusive distribution channels. In turn, franchisees must meet company standards for physical facilities and food quality, cooperate with new promotion programs, provide requested information, and buy specified food products. Diff: 2 LO: 10-3: Identify the major channel alternatives open to a company. AACSB: Analytical thinking

50) Differentiate between the three types of franchises and provide examples of each type.

There are three types of franchises. The first type is the manufacturer-sponsored retailer franchise system - for example, Ford and its network of independent franchised dealers. The second type is the manufacturer-sponsored wholesaler franchise system - Coca-Cola licenses bottlers (wholesalers) in various world markets that buy Coca-Cola syrup concentrate and then bottle and sell the finished product to retailers locally. The third type is the service-firm-sponsored retailer franchise system - for example, Burger King and its nearly 12,100 franchisee-operated restaurants around the world. Diff: 2 LO: 10-2: Discuss how channel members interact and how they organize to perform the work of the channel. AACSB: Analytical thinking

78) Describe the legal aspects of exclusive arrangements such as exclusive dealing and exclusive distribution.

When a seller allows only certain outlets to carry its products, this strategy is called exclusive distribution. When the seller requires that these dealers not handle competitors' products, its strategy is called exclusive dealing. Both parties can benefit from exclusive arrangements: the seller obtains more loyal and dependable outlets, and the dealers obtain a steady source of supply and stronger seller support. But exclusive arrangements also exclude other producers from selling to these dealers. This situation brings exclusive dealing contracts under the scope of the Clayton Act of 1914. They are legal as long as they do not substantially lessen competition or tend to create a monopoly and as long as both parties enter into the agreement voluntarily. Exclusive dealing often includes exclusive territorial agreements. The producer may agree not to sell to other dealers in a given area, or the buyer may agree to sell only in its own territory. The first practice is normal under franchise systems as a way to increase dealer enthusiasm and commitment. It is also perfectly legal—a seller has no legal obligation to sell through more outlets than it wishes. The second practice, whereby the producer tries to keep a dealer from selling outside its territory, has become a major legal issue. Diff: 3 LO: 10-4: Explain how companies select, motivate, and evaluate channel members. AACSB: Analytical thinking