CHAPTER 11

MARKETING CHANNELS AND SUPPLY CHAIN MANAGEMENT

MULTIPLE CHOICE QUESTIONS
1. Caterpillar (famous for earth moving equipment) has a powerful partnership with
its dealers. Which of the following is one of the basic principles upon which this
successful partnership is built?
a. the Internet
b. advertising
c. dealer profitability
d. global networs
Answer: (c) Diic!"#$: (%) P&'e: ()*
!. "ost producers use ################### to bring their products to maret.
a. detailers
b. intermediaries
c. e$pediters
d. agents
Answer: (+) Diic!"#$: (1) P&'e: (),
%. & set of interdependent organi'ations involved in the process of maing a product or
service available for use or consumption by the consumer or business user is called a(
a. retailer.
b. wholesaler.
c. distribution channel.
d. logistics function.
Answer: (c) Diic!"#$: (%) P&'e: (),
). & ############## is a set of interdependent organi'ations involved in the process of
maing a product or service available for use of consumption by the consumer or
business user.
a. retailer
b. wholesaler
c. distribution channel
d. middleman
Answer: (c) Diic!"#$: (%) P&'e: (),
!)*
*. +hrough their contacts, e$perience, speciali'ation, and scale of operation,
############## usually offer the firm more than it can achieve on its own.
a. manufacturers
b. producers c. direct mareters d. intermediaries
Answer: (-) Diic!"#$: (%) P&'e: ())
-. .rom the economic system/s point of view, the role of mareting intermediaries is to
transform(
a. raw products into finished products.
b. consumer needs into producer needs.
c. consumer needs and wants into product desires.
d. assortments of products made by producers into the assortments wanted by
consumers.
Answer: (-) Diic!"#$: (%) P&'e: ())
0. Which of the following problems do intermediaries attempt to solve within the
distribution channel?
a. the need for a legal buffer between producer and consumer
b. the need to ensure a profit for the producer
c. the need to resolve the producer/s desire to mae narrow assortments in large
quantities against the consumer/s need for broad assortments in small quantities
d. the need for a manufacturer to be able to sell goods without having a final
responsibility for their usefulness
Answer: (c) Diic!"#$: (() P&'e: ())
1. & distribution channel moves goods and services from producers to consumers. It
overcomes the ma2or time, place, and ############## gaps that separate goods and
services from those who would use them.
a. possession
b. profit
c. image
d. psychological
Answer: (&) Diic!"#$: (%) P&'e: ())
3. "embers of the mareting channel perform many ey functions. Which of the
following would be among those ey functions?
a. negotiation
b. sensing
c. producing
d. creating
Answer: (&) Diic!"#$: (%) P&'e: ()). /00
!)-
14. 5haping and fitting the offer to the buyer/s needs, including activities such as
manufacturing, grading, assembling, and pacaging, describes which of the following
ey functions performed by members of the mareting channel?
a. information
b. promotion
c. contact
d. matching
Answer: (-) Diic!"#$: (%) P&'e: ()). /00
11. 6athering and distributing mareting research and intelligence about the mareting
environment is part of which of the following mareting channel functions?
a. information
b. promotion
c. contact
d. matching
Answer: (&) Diic!"#$: (1) P&'e: ()). /00
1!. 7eaching an agreement on price and other terms of the offer so that ownership
or possession can be transferred is associated with which of the following ey
functions performed by the mareting channel?
a. information
b. negotiation
c. contact
d. matching
Answer: (+) Diic!"#$: (1) P&'e: ()). /00
1%. +ransporting and storing goods is part of which of the following mareting channel
functions?
a. negotiation
b. physical distribution
c. contact
d. matching
Answer: (+) Diic!"#$: (%) P&'e: /00
!)0
1). ############### is a layer of intermediaries that performs some wor in bringing
the product and its ownership closer to the buyer.
a. & direct mareting channel
b. &n indirect mareting channel
c. & channel level
d. & channel switching system
Answer: (c) Diic!"#$: (() P&'e: /00
1*. With respect to a channel of distribution, the number of intermediary levels within
the channel indicates the ############ of a channel.
a. width
b. depth
c. length
d. similarity
Answer: (c) Diic!"#$: (%) P&'e: /00. /01. 1i'!re 112%A
1-. &(n) ################ is a mareting channel that has no intermediary levels.
a. direct mareting channel
b. indirect mareting channel
c. forward channel
d. hybrid channel
Answer: (&) Diic!"#$: (%) P&'e: /00. /01. 1i'!re 112%A
10. If a company sells its product directly to the consumer without using any
intermediaries, it is using a(n)(
a. direct mareting channel.
b. indirect mareting channel.
c. forward channel.
d. hybrid channel.
Answer: (&) Diic!"#$: (1) P&'e: /00. /01. 1i'!re 112%A
11. &von, &mway, and +upperware use which of the following forms of channel
distribution?
a. direct mareting channel
b. indirect mareting channel
c. forward channel
d. fashion channel
Answer: (&) Diic!"#$: (1) P&'e: /00
!)1
13. &(n) ################# is a channel that contains one or more intermediary levels.
a. direct mareting channel
b. indirect mareting channel
c. forward channel
d. synthetic channel
Answer: (+) Diic!"#$: (1) P&'e: /00. /01. 1i'!re 112%A
!4. "aers of televisions, cameras, tires, furniture, and ma2or appliances normally use
which of the following distribution channel forms?
a. direct mareting channel
b. indirect mareting channel
c. hori'ontal channel
d. synthetic channel
Answer: (+) Diic!"#$: (%) P&'e: /00. /01. 1i'!re 112%A
!1. 8sing manufacturer/s representatives or sales branches is usually a characteristic of
which of the following channel forms?
a. business mareting channels
b. customer mareting channels
c. service mareting channels
d. direct mareting channels
Answer: (&) Diic!"#$: (%) P&'e: /00. /01. 1i'!re 112%3
!!. &ll institutions in a mareting channel are normally connected by several types of
flows. Which of the following is 9:+ one of those flows?
a. physical flow
b. promotion flow
c. flow of ownership
d. regulatory flow
Answer: (-) Diic!"#$: (1) P&'e: /00
!%. ;isagreement over the goals and roles of mareting channel members is called(
a. channel challenge.
b. channel co<dependence.
c. channel frustration.
d. channel conflict.
Answer: (-) Diic!"#$: (1) P&'e: /0%
!)3
!). When channel conflict occurs, it can occur at the same level of the channel. +his
form of conflict is called(
a. parallel conflict.
b. system conflict.
c. hori'ontal conflict.
d. vertical conflict.
Answer: (c) Diic!"#$: (%) P&'e: /0%
!*. If =i''a Inn franchisees complain that other =i''a Inn franchisees are cheating on
ingredients, giving poor service, and are hurting the overall =i''a Inn image, these
complaints are indicative of a ##################.
a. parallel conflict
b. system conflict
c. hori'ontal conflict
d. vertical conflict
Answer: (c) Diic!"#$: (%) P&'e: /0%
!-. Conflicts between different levels of the same channel of distribution are referred to
as(
a. hori'ontal conflicts.
b. vertical conflicts.
c. layer<based conflicts.
d. parallel conflicts.
Answer: (+) Diic!"#$: (%) P&'e: /0%
!0. When a company lie Coca<Cola has disagreements with some of its bottlers over
business practices, it is a form of(
a. hori'ontal conflict.
b. vertical conflict.
c. layer<based conflict.
d. parallel conflict.
Answer: (+) Diic!"#$: (%) P&'e: /0%
!1. Cooperation, role assignment, and conflict management in the channel of distribution
are attained through strong channel(
a. power.
b. positioning.
c. leadership.
d. threats.
Answer: (c) Diic!"#$: (%) P&'e: /0(
!*4
!3. :ne way to overcome traditional conflicts found in conventional channels of
distribution is to construct a(
a. synchroni'ed channel of distribution.
b. global channel of distribution.
c. 9ore'i channel of distribution.
d. vertical channel of distribution.
Answer: (-) Diic!"#$: (%) P&'e: /0(
%4. When one or more independent producers, wholesalers, and retailers operating as
separate businesses mae up the channel of distribution, it comprises which type of
distribution channel?
a. power<based
b. hori'ontal
c. vertical
d. conventional
Answer: (-) Diic!"#$: (%) P&'e: /0(. 1i'!re 112(
%1. If independent producers, wholesalers, and retailers align together but still see
individually to ma$imi'e profits, even at the e$pense of profits for the system as a
whole, the group is most liely aligned in a(
a. conventional distribution channel.
b. power<based distribution channel.
c. hori'ontal distribution channel.
d. vertical distribution channel.
Answer: (&) Diic!"#$: (%) P&'e: /0(. 1i'!re 112(
%!. When producers, wholesalers, and retailers act as a unified system, they comprise a(
a. conventional mareting system.
b. power<based mareting system.
c. hori'ontal mareting system.
d. vertical mareting system.
Answer: (-) Diic!"#$: (%) P&'e: /0(. 1i'!re 112(
%%. Which of the following mareting systems is characteri'ed by a channel of
distribution where one channel member owns the others, has contracts with them, or
has so much power that they all cooperate?
a. conventional mareting systems
b. power<based mareting systems
c. vertical mareting systems
d. hori'ontal mareting systems
Answer: (c) Diic!"#$: (%) P&'e: /0(. 1i'!re 112(
!*1
%). &ll of the following would be considered to be forms of a vertical mareting system
(>"5) ?@C?=+(
a. corporate.
b. contractual.
c. global.
d. administered.
Answer: (c) Diic!"#$: (1) P&'e: /0(
%*. &(n) #################### is a vertical mareting system that combines
successive stages of production and distribution under single ownership.
a. power<based >"5
b. corporate >"5
c. contractual >"5
d. administered >"5
Answer: (+) Diic!"#$: (%) P&'e: /0(. /0/
%-. 5ears obtains more than *4 percent of its goods from companies that it partly or
wholly owns. +his would be an e$ample of a(n)(
a. power<based >"5.
b. corporate >"5.
c. contractual >"5.
d. administered >"5.
Answer: (+) Diic!"#$: (%) P&'e: /0(. /0/
%0. &(n) ###################### is a vertical mareting system in which independent
firms at different levels of production and distribution 2oin together through contracts
to obtain more economies or sales impact than they could achieve alone.
a. power<based >"5
b. corporate >"5
c. contractual >"5
d. administered >"5
Answer: (c) Diic!"#$: (%) P&'e: /0/
%1. Independent 6rocers &lliance (I6&), Western &uto, and ;o It Aest hardware are
all e$amples of(
a. franchise organi'ations.
b. retailer cooperatives.
c. manufacturer<sponsored retailer franchise systems.
d. wholesaler<sponsored voluntary chains.
Answer: (-) Diic!"#$: (() P&'e: /0/
!*!
%3. If a retailer 2oins other retailers in organi'ing a new, 2ointly owned business to carry
on wholesaling and possibly production, the retailer has formed a(
a. retailer ios.
b. retailer<sponsored voluntary chain.
c. retailer cooperative.
c. franchise.
Answer: (c) Diic!"#$: (() P&'e: /0/
)4. "ost motels and fast<food restaurants are considered to be(
a. retailer cooperatives.
b. voluntary chains.
c. franchise organi'ations.
d. administered >"5 organi'ations.
Answer: (c) Diic!"#$: (%) P&'e: /0/
)1. +he type of franchise operation used by the automobile industry is usually a(
a. service<firm sponsored franchise system.
b. manufacturer<sponsored retailer franchise system.
c. manufacturer< sponsored wholesaler franchise system.
d. service<firm sponsored direct channel franchise system.
Answer: (+) Diic!"#$: (() P&'e: /0/. /04
)!. Which type of vertical mareting system coordinates the stages of production and
distribution through the si'e and power of one of the parties?
a. administered >"5
b. independent >"5
c. contractual >"5
d. dependent >"5
Answer: (&) Diic!"#$: (%) P&'e: /04
)%. & ################### is a channel arrangement in which two or more
companies at one level 2oin together to follow a new mareting opportunity.
a. vertical mareting system
b. parallel mareting system
c. diversified mareting system
d. hori'ontal mareting system
Answer: (-) Diic!"#$: (%) P&'e: /04
!*%
)). When Coca<Cola and 9estle formed a 2oint venture to maret a ready<to<drin coffee
and tea worldwide, the type of mareting system that was formed would best be
described as being a(
a. vertical mareting system.
b. parallel mareting system.
c. diversified mareting system.
d. hori'ontal mareting system.
Answer: (-) Diic!"#$: (() P&'e: /04. /05
)*. & multichannel distribution system in which a single firm sets up two or more
mareting channels to reach one or more customer segments is called a(n)(
a. vertical mareting channel.
b. parallel mareting channel.
c. hybrid mareting channel.
d. hori'ontal mareting channel.
Answer: (c) Diic!"#$: (() P&'e: /05. /0*. 1i'!re 112/
)-. IA" at one time only sold through their own sales force. +oday, however, the maret
has caused changes in IA"/s distribution philosophy. +he company now has 11
new channels. +he correct description of this form of mareting would be to
characteri'e IA"/s approach as being one where #################### are used.
a. vertical mareting channels
b. parallel mareting channels
c. hybrid mareting channels
d. hori'ontal mareting channels
Answer: (c) Diic!"#$: (%) P&'e: /05. /0*. 1i'!re 112/
)0. What is one of the common complaints about a hybrid mareting channel and its
effectiveness?
a. e$panded sales functions
b. e$panded maret coverage
c. e$panded global networs
d. harder to control and more conflict
Answer: (-) Diic!"#$: (1) P&'e: /05. /0*. 1i'!re 112/
)1. +he displacement of traditional resellers from a mareting channel by radical new
types of intermediaries is called(
a. regeneration.
b. bounded distribution.
c. disintermediation.
d. territoriality.
!*)
Answer: (c) Diic!"#$: (%) P&'e: /0,
)3. +raditional intermediaries, to avoid being swept aside in the new wave of
disintermediation, must find new ways to(
a. generate profits.
b. advertise.
c. form binding networs.
d. add value in the supply chain.
Answer: (-) Diic!"#$: (%) P&'e: /0,
*4. If a company were seeing to design a channel system, the first step would be to(
a. analy'e consumer<service needs.
b. set the channel ob2ectives and constraints.
c. analy'e mareting intermediaries.
d. factor in foreign middlemen alternatives.
Answer: (&) Diic!"#$: (1) P&'e: /11
*1. &nother term or phrase for a mareting channel is(
a. customer value delivery system.
b. push<pull system.
c. service system.
d. flow system.
Answer: (&) Diic!"#$: (1) P&'e: /11
*!. &fter a company has defined its channel ob2ectives, it should ne$t identify its(
a. profit centers.
b. ma2or channel alternatives.
c. selection process.
d. motivation system.
Answer: (+) Diic!"#$: (%) P&'e: /1%
*%. When a mareter is in the process of identifying its ma2or channel alternatives, it
should determine all of the following ?@C?=+( (Choose the B?&5+ BIC?BD.)
a. the ownership of the intermediary.
b. the types of intermediaries.
c. the number of intermediaries.
d. the responsibility of each channel member.
Answer: (&) Diic!"#$: (() P&'e: /1%
!**
*). +he strategy whereby a company stocs its products in as many outlets as possible is
called(
a. intensive distribution.
b. e$clusive distribution.
c. selective distribution.
d. closed distribution.
Answer: (&) Diic!"#$: (1) P&'e: /1%
**. If a company sees to ma$imi'e brand e$posure, which of the following distribution
alternatives would be the correct choice?
a. intensive distribution
b. e$clusive distribution
c. selective distribution
d. open distribution
Answer: (&) Diic!"#$: (%) P&'e: /1%. /1(
*-. 6iving a limited number of dealers the e$clusive right to distribute the company/s
products in their territories is called #################.
a. intensive distribution.
b. e$clusive distribution.
c. selective distribution.
d. closed distribution.
Answer: (+) Diic!"#$: (1) P&'e: /1(
*0. 7olls 7oyce uses which of the following distribution formats?
a. intensive distribution
b. e$clusive distribution
c. selective distribution
d. open distribution
Answer: (+) Diic!"#$: (%) P&'e: /1(
*1. "aytag, Whirlpool, and 6eneral ?lectric prefer which of the following distribution
formats to distribute the ma2ority of their products?
a. intensive distribution
b. e$clusive distribution
c. selective distribution
d. open distribution
Answer: (c) Diic!"#$: (%) P&'e: /1(
!*-
*3. +he use of more than one, but fewer than all, of the intermediaries who are willing
to carry the company/s products is characteristic of which of the following
distribution formats?
a. intensive distribution
b. e$clusive distribution
c. selective distribution
d. open distribution
Answer: (c) Diic!"#$: (1) P&'e: /1(
-4. ?stimating the costs of selling different volumes through each proposed channel is
part of which decision area used in evaluating the ma2or channel alternatives?
a. promotional criteria
b. economic criteria
c. control criteria
d. adaptive criteria
Answer: (+) Diic!"#$: (() P&'e: /1/
-1. &ll of the following would be considered to be positive motivators to be applied to
channel members by other channel members ?@C?=+(
a. higher margins.
b. ownership in the supplying company.
c. special deals.
d. display allowances.
Answer: (+) Diic!"#$: (1) P&'e: /15
-!. When a seller of a product requires that its dealers not handle competitors/ products,
the seller/s strategy is called(
a. multilevel distribution.
b. prohibitive retailing.
c. e$clusive dealing.
d. bonded partnering.
Answer: (c) Diic!"#$: (%) P&'e: /1,
-%. +ying agreements, though not necessarily illegal, do tend to violate the ###########
if they tend to lessen competition substantially.
a. 7obinson<=atman &ct
b. 5herman &nti<trust &ct
c. Clayton &ct
d. Eatfield &ct
Answer: (c) Diic!"#$: (() P&'e: /1)
!*0
-). Which of the following terms is similar to the term Fmareting logistics?G
a. channel of distribution
b. vertical integration of distribution
c. physical distribution
d. hori'ontal distribution
Answer: (c) Diic!"#$: (%) P&'e: /1)
-*. ############## is the tass involved in planning, implementing, and controlling
the physical flow of materials, final goods, and related information from points of
origin to points of consumption to meet customer requirements at a profit.
a. & channel of distribution
b. >ertical integration of distribution
c. Eori'ontal distribution
d. =hysical distribution
Answer: (-) Diic!"#$: (1) P&'e: /1)
--. Customer<centered mareting logistics thining starts with(
a. products at the plant and tries to find low<cost solutions to get them to customers.
b. the maretplace and wors bacwards to the factory.
c. retailers and identifies their problems as a way to satisfy the ultimate consumer.
d. wholesalers and identifies their problems as being the secret to
successful distribution.
Answer: (+) Diic!"#$: (() P&'e: /1). /%0. 1i'!re 1124
-0. "anaging value<added flows of materials, final goods, and related information
between suppliers, the company, resellers, and final users is called(
a. a channel of distribution.
b. mareting networ analysis.
c. supply chain management.
d. conscription flow management.
Answer: (c) Diic!"#$: (%) P&'e: /1). /%0. 1i'!re 1124
-1. "oving broen, unwanted, or e$cess products returned by consumers or resellers
is called ########## distribution.
a. outbound
b. inbound
c. reverse
d. salvage
Answer: (c) Diic!"#$: (%) P&'e: /1)
!*1
-3. &bout ########### percent of an average product/s price is accounted for by
shipping and transportation.
a. *
b. 1*
c. 11
d. !!
Answer: (+) Diic!"#$: (() P&'e: /%0
04. +he goal of the mareting logistics system should be to provide(
a. a targeted level of promotional support.
b. a targeted level of customer service at the least cost.
c. a targeted level of transportation e$pense ratio.
d. a targeted level of field support.
Answer: (+) Diic!"#$: (%) P&'e: /%0
01. &ll of the following are considered to be ma2or logistics functions ?@C?=+(
a. promotion to wholesalers and retailers.
b. order processing.
c. inventory management.
d. transportation.
Answer: (&) Diic!"#$: (1) P&'e: /%1
0!. ;eciding on the number of and location for stocing facilities for storage of products
is part of which of the following physical distribution decisions?
a. order processing
b. warehousing
c. inventory
d. transportation
Answer: (+) Diic!"#$: (1) P&'e: /%1
0%. & large, highly automated warehouse designed to receive goods from various plants
and suppliers is called a(
a. storage bin.
b. collection point.
c. distribution center.
d. demarcation facility.
Answer: (c) Diic!"#$: (1) P&'e: /%1
!*3
0). +he mode of transportation that accounts for the largest percentage of cargo moved
in the 8nited 5tates is(
a. rail.
b. truc.
c. water.
d. pipeline.
Answer: (+) Diic!"#$: (%) P&'e: /%%
0*. +he most e$pensive form of transportation with respect to shipping goods is(
a. rail.
b. water.
c. air.
d. truc.
Answer: (c) Diic!"#$: (1) P&'e: /%%
0-. +he slowest form of transportation for shipping goods is(
a. rail.
b. water.
c. air.
d. truc.
Answer: (+) Diic!"#$: (1) P&'e: /%%
00. If a company were to piggybac its products, it would be using what is called(
a. alternative transportation.
b. dual transportation.
c. intermodal transportation.
d. train spotting.
Answer: (c) Diic!"#$: (%) P&'e: /%(
01. & growing number of firms now outsource their logistics to ################
providers such as 7yder 5ystems, 8=5 Worldwide Bogistics, or .ed?$ Bogistics.
a. ground system
b. point<to<point
c. speed factor
d. third<party logistics
Answer: (-) Diic!"#$: (1) P&'e: /%4
!-4
03. &ll of the following are reasons companies use third<part logistics providers
?@C?=+( (=ic the B?&5+ BIC?BD.)
a. these providers accept low profit margins willingly.
b. these providers can often get products to maret more efficiently and at a lower
cost.
c. outsourcing frees a company to focus more intensely on its core business.
d. integrated logistics companies understand increasingly comple$ logistics
environments.
Answer: (&) Diic!"#$: (%) P&'e: /%,
TRUE61ALSE QUESTIONS
14. "areting channel decisions are among the most important decisions that
management faces.
Answer: (Tr!e) Diic!"#$: (1) P&'e: (),
11. Companies often pay too little attention to their distribution channels.
Answer: (Tr!e) Diic!"#$: (1) P&'e: (),
1!. :ne of reasons that distribution decisions usually can be managed is that the channel
decision involves relatively short<term commitments.
Answer: (1&"se) Diic!"#$: (1) P&'e: (),
1%. "ost producers choose to not use intermediaries to bring their products to maret
because of the cost involved.
Answer: (1&"se) Diic!"#$: (%) P&'e: (),
1). & distribution channel is described as being a set of interdependent organi'ations
involved in the process of maing a product or service available for use or
consumption by the consumer or business user.
Answer: (Tr!e) Diic!"#$: (1) P&'e: (),
1*. .rom the economic system/s point of view, the role of mareting intermediaries is
to boost the profits of manufacturer/s who tend to drive the entire system.
Answer: (1&"se) Diic!"#$: (%) P&'e: ())
!-1
1-. 5everal ey functions operate a distribution channel. :ne of these, matching, is
described as being shaping and fitting the offer to the buyer/s needs, including
activities such as manufacturing, grading, assembling, and pacaging.
Answer: (Tr!e) Diic!"#$: (%) P&'e: ()). /00
10. & ey question in distribution management is whether such functions as matching,
negotiation, contact, promotion, information, financing, ris taing, and physical
distribution need to be performed.
Answer: (1&"se) Diic!"#$: (%) P&'e: ()). /00
11. & channel level is the layer of intermediaries that performs some wor in bringing
the product and its ownership closer to the final buyer.
Answer: (Tr!e) Diic!"#$: (1) P&'e: /00
13. &n indirect mareting channel has no intermediary levels.
Answer: (1&"se) Diic!"#$: (%) P&'e: /00
34. &ll institutions in the distribution channel are connected by several types of flows
and one of these flows is described as being flow of ownership.
Answer: (Tr!e) Diic!"#$: (1) P&'e: /00
31. +oday, channel members have learned to tae a broad view of channel success where
every member/s needs and long<term goals are appreciated and recogni'ed.
Answer: (1&"se) Diic!"#$: (%) P&'e: /0%
3!. >ertical conflict in a distribution channel occurs among firms at the same level of the
channel.
Answer: (1&"se) Diic!"#$: (%) P&'e: /0%
3%. 5ome conflict in the channel of distribution is considered to be healthy.
Answer: (Tr!e) Diic!"#$: (%) P&'e: /0%
3). >ertical mareting systems are now challenging conventional mareting channels
for dominance in distribution networs.
Answer: (Tr!e) Diic!"#$: (1) P&'e: /0(
!-!
3*. Western &uto would be a good illustration of a retailer cooperative.
Answer: (1&"se) Diic!"#$: (() P&'e: /0/
3-. Craft and 6eneral ?lectric would be good e$amples of firms that use
administered >"5.
Answer: (Tr!e) Diic!"#$: (() P&'e: /04
30. If "c;onald/s places one of its fast<food outlets in a Wal<"art store this would
be an illustration of a hori'ontal mareting system.
Answer: (1&"se) Diic!"#$: (%) P&'e: /04
31. :ne of the advantages of a hybrid mareting channel system is that it is easier to
control than traditional mareting channel systems.
Answer: (1&"se) Diic!"#$: (%) P&'e: /0*
33. +he displacement of traditional resellers from a mareting channel by radical new
types of intermediaries is called disintermediation.
Answer: (Tr!e) Diic!"#$: (%) P&'e: /0,
144. Intensive distribution occurs if a firm is stocing the product in as many outlets as
possible.
Answer: (Tr!e) Diic!"#$: (1) P&'e: /1%. /1(
141. & good illustration of selective distribution would be 7olls<7oyce and their system
of dealers.
Answer: (1&"se) Diic!"#$: (() P&'e: /1(
14!. "ost companies see their intermediaries as first<line customers.
Answer: (Tr!e) Diic!"#$: (%) P&'e: /15
14%. ?$clusive dealing has been declared strictly illegal by the Clayton &ct of 131).
Answer: (1&"se) Diic!"#$: (() P&'e: /1)
14). & channel of distribution is another term for physical distribution.
Answer: (1&"se) Diic!"#$: (%) P&'e: /1)
!-%
14*. Bogistics systems traditionally ma$imi'e customer service and minimi'e distribution
costs.
Answer: (1&"se) Diic!"#$: (%) P&'e: /%0
14-. +he ma2or logistics functions include order processing, warehousing, inventory
management, and transportation.
Answer: (Tr!e) Diic!"#$: (%) P&'e: /%1
140. & vendor<managed inventory system is a large, highly automated warehouse
designed to receive goods from various plants and suppliers, tae orders, fill them
efficiently, and deliver goods to customers as quicly as possible.
Answer: (1&"se) Diic!"#$: (() P&'e: /%1
141. Water carriers, because of the bul they can carry, account for the largest
percentage of cargo ton<miles among the ma2or transportation alternatives found
in the 8nited 5tates.
Answer: (1&"se) Diic!"#$: (() P&'e: /%%
143. If a distributor were to combine rail and truc to bring a good from point of
manufacture to the consumer, the distributor would have 2ust used the piggybac
system found in intermodal transportation.
Answer: (Tr!e) Diic!"#$: (%) P&'e: /%(
114. +he goal of integrated supply chain management is to harmoni'e all of the
company/s logistics decisions.
Answer: (Tr!e) Diic!"#$: (1) P&'e: /%/
111. & good illustration of a third<party logistics provider would be 7yder 5ystems.
Answer: (Tr!e) Diic!"#$: (%) P&'e: /%4
ESSAY QUESTIONS
11!. Caterpillar and its dealers wor in close harmony to find better ways to bring value
to customers. +his close woring relationship between Caterpillar and its dealers comes
down to more than 2ust formal contracts and business agreements. Bist and briefly
describe the five (*) principles and practices that Caterpillar/s powerful partnership rests
upon. Ae specific in wording and description.
!-)
Answer:
+he powerful partnership between Caterpillar and its dealers rests upon the following
principles and practices(
(a) Dealer profitability( Caterpillar/s rule is F5hare the gain as well as the pain.G When
times are good, Caterpillar shares the bounty with its dealers rather than trying to grab all
the riches for itself. When times are bad, Caterpillar protects its dealers.
(b) Extraordinary dealer support( 9owhere is this support more apparent than in the
company/s parts delivery system, the fastest and most reliable in the industry. +ogether,
Caterpillar and its dealers guarantee parts delivery within )1 hours anywhere in the
world. In contrast, it/s not unusual for competitor/s customers to wait four to five days
for a part.
(c) Communications( Caterpillar communicates with its dealers<<fully, frequently, and
honestly. +here are no secrets between the company and its dealers.
(d) Dealer performance( Caterpillar does all it can to ensure that its dealerships are run
well. It closely monitors each dealership/s sales, maret position, service capability,
financial situation, and other performance measures.
(e) Personal relationships( Caterpillar forms close personal ties with its dealers in a ind
of family relationship.
Diic!"#$: (%) P&'e: ()*. (),
11%. ?$plain why companies use mareting intermediaries and what ey functions are
performed within the channel.
Answer:
"areting intermediaries are used to increase efficiency in maing goods available to
target marets. +hough the intermediaries/ contacts, e$perience, speciali'ation, and scale
of operation, intermediaries usually offer the firm more than it can achieve on its own.
+he ey functions include providing( information, promotion, contact, matching,
negotiation, physical distribution, financing, and ris taing.
Diic!"#$: (1) P&'e: ()). /00
11). ;escribe and illustrate the concepts of channel level, a direct mareting channel, and
an indirect mareting channel.
Answer:
Channel level<<a layer of intermediaries that performs wor in bringing the product and
its ownership closer to the final buyer.
Direct marketing channel<<a mareting channel that has no intermediary levels. .or
e$ample if a manufacturer sells directly to the consumer there are no intermediary levels.
!-*
Indirect marketing channel<<a channel containing one or more intermediary levels. +he
traditional distribution channel (an indirect mareting channel) is one where a
manufacturer sells to a wholesaler who in turn sells to a retailer that then sells to a
consumer.
5ee .igure 11<! for additional e$amples.
Diic!"#$: (1) P&'e: /00. /01. 1i'!re 11A
11*. ?$plain what channel conflict is and the various forms it can tae.
Answer:
Channel conflict is disagreement among mareting channel members on goals and roles<<
who should do what and for what rewards.
Channel conflict can tae two primary paths. .irst, hori'ontal conflict occurs among
firms at the same level of the channel. .or e$ample, .ord dealers in a certain city can
complain about other dealers in the city who steal sales by being too aggressive in their
pricing and advertising or by selling outside their assigned territories. 5econd, vertical
conflict occurs between different levels of the same channels. .or e$ample, "c;onald/s
might come into conflict with its franchisees if it were to build company stores in areas
previously held by franchise operators. .rom the standpoint of "c;onald/s this would
be a way of e$panding corporate sales. .or the standpoint of the franchisees it would be
a way of reducing their particular sales.
Diic!"#$: (%) P&'e: /0%. /0(
11-. Identify what a vertical mareting system is and characteri'e the three primary
forms described in the te$t.
Answer:
& vertical mareting system (>"5) is a distribution channel structure in which
producers, wholesalers, and retailers act as a unified system. :ne channel member owns
the others, has contacts with them, or has so much power that they all cooperate.
+he three primary forms are(
(a) The corporate V!<<a vertical mareting system that combines successive stages of
production and distribution under single ownership<<channel leadership is established
through common ownership.
(b) The contractual V!<<a vertical mareting system in which independent firms at
different levels of production and distribution 2oin together through contracts to obtain
more economies or sales impact than they could achieve alone. .orms include the
wholesaler<sponsored voluntary chain, retailer cooperatives, and franchises (there are
three forms of franchises<<manufacturer<sponsored retailer franchise systems,
manufacturer<sponsored wholesaler franchise systems, and service<firm<sponsored
retailer franchise systems).
!--
(c) The administered V!<<a vertical mareting system that coordinates successive stages
of production and distribution, not through common ownership or contractual ties, but
through the si'e and power of one of the parties.
Diic!"#$: (() P&'e: /0(2/04. 1i'!re 112(
110. Characteri'e a hori'ontal mareting system and provide an illustration of such a
system.
Answer:
& hori'ontal mareting system is a channel arrangement in which two or more companies
at one level 2oin together to follow a new mareting opportunity. Ay woring together,
companies can combine their capital, production capabilities, or mareting resources to
accomplish more than one company could alone. Companies might 2oin forces with
competitors or noncompetitors. .or e$ample, "c;onald/s now places Fe$pressG versions
of its restaurants in Wal<"art stores. "c;onald/s benefits from Wal<"art/s considerable
store traffic, while Wal<"art eeps hungry shoppers from having to go elsewhere to eat.
Diic!"#$: (%) P&'e: /04. /05
111. ?$plain the phenomenon nown as disintermediation. What problems and
opportunities does disintermediation hold for both producers and intermediaries in the
future?
Answer:
;isintermediation is the displacement of traditional resellers from a mareting channel by
radical new types of intermediaries. Changes in technology and the e$plosive growth of
direct and online mareting are having a profound impact on the nature and design of
mareting channels. +o avoid being swept aside, traditional intermediaries must find
new ways to add value in the supply chain. Competition and conflict are bound to arise.
5ee "areting at Wor 11<1 for e$amples and ideas on how effective disintermediation
can be accomplished.
Diic!"#$: (%) P&'e: /0,2/10. M&r7e#in' &# 89r7 1121
113. Companies must mae decisions on how many mareting intermediaries to use at
any level of mareting distribution. +his is especially critical at the retail level. 9ame
and identify the three strategies that are available with respect to number of mareting
intermediaries. 6ive an e$ample of each form.
Answer:
(a) Intensive distribution<<stocing the product in as many outlets as possible. .or
e$ample, toothpaste and candy are sold in this way. Companies that frequently use this
method are =roctorH6amble, Coca<Cola, and Campbell 5oup.
!-0
(b) Exclusive distribution<<giving a limited number of dealers the e$clusive right to
distribute the company/s products in their territories. +his form is often used in the
distribution of new automobiles and prestige women/s clothing. 7olls<7oyce would use
this method.
(c) !elective distribution<<the use of more than one, but fewer than all, of the
intermediaries who are willing to carry the company/s products. "ost television,
furniture, and small appliance brands are distributed in this manner. "aytag, Whirlpool,
and 6eneral ?lectric use this method to distribute their products.
Diic!"#$: (%) P&'e: /1%. /1(
1!4. ;efine physical distribution and characteri'e the ma2or functions performed within a
physical distribution system.
Answer:
=hysical distribution (mareting logistics) is the tass involved in planning,
implementing, and controlling the physical flow of materials, final goods, and related
information from points of origin to points of consumption to meet customer
requirements at a profit.
+he ma2or functions performed within a physical distribution system include(
(a) "rder processing<<this is the method chosen by the firm to receive orders from the
customer. It could be by mail, telephone, through salespeople, or via computer or the
Internet. :nce received, orders must be processed quicly and accurately then shipped to
the customer.
(b) #arehousing<<every company must store its goods while they wait to be sold. +his
storage function is necessary because production and consumption cycles rarely match.
Companies can use either storage warehouses or distribution centers to process their
goods.
(c) Inventory management<<inventory decisions involve nowing both when to order and
how much to order. ;uring the past decade, many companies have greatly reduced their
inventories and related costs through 2ust<in<time logistics systems.
(d) Transportation<<the choice of transportation carriers affects the pricing of products,
delivery performance, and condition of the goods when they arrive<<all of which affect
customer satisfaction. +he ma2or forms that are available are rail, truc, water, pipeline,
and air.
Diic!"#$: (() P&'e: /1)2/%(
!-1
1!1. In shipping goods to its customers, a company can choose from among five
transportation forms. Bist and characteri'e each of these forms.
Answer:
(a) Trucks<<trucs have %3 percent of total cargo ton<miles (the most). +hey also account
for the largest portion of transportation within cities as opposed to between cities. +rucs
are highly fle$ible in their routing and time schedules, and they can usually offer faster
service than railroads. +hey are efficient for short hauls of high<value merchandise.
b). $ailroads<<second in cargo ton<miles with %1 percent. +hey are one of the most cost<
effective for shipping large amounts of bul products over long distances.
c). #ater carriers<<account for about 14 percent of ton<miles and use inland waterways
as well as coastal means. +he cost is low for shipping buly products, however, water is
a slow form of transportation and can be affected by the weather.
d). Pipelines<<a speciali'ed means of shipping petroleum, natural gas, and chemicals
from sources to marets.
e). %ir carriers<<transport less than 1 percent of the nation/s goods. &ir freight rates are
the highest forms of transportation but air freight e$cels in speed.
Diic!"#$: (%) P&'e: /%%
1!!. ;iscuss the term Fintegrated supply chain managementG and its implications.
Answer:
Integrated supply chain management is the logistics concept that emphasi'es teamwor,
both inside the company and among all the mareting channel organi'ations, to ma$imi'e
the performance of the entire distribution system. :utside, the company must integrate
its logistics system with those of its suppliers and customers to ma$imi'e performance of
the entire system. +he goal of supply chain management is to harmoni'e all of the
company/s logistics decisions.
Diic!"#$: (1) P&'e: /%(. /%/
APPLICATION QUESTION
1!%. Bisted below are three separate scenarios that require correct transportation
decisions to ensure that the products in question reach their final destination on time and
intact. .or each of the scenarios choose one of the established transportation means (air,
water, truc, pipeline, or rail) that seems to be most appropriate. Iustify and e$plain your
choice. Ae specific with your 2ustification and e$planation.
!-3
(a) Ierry Iones, president of .lowers<7<8s, wants to order some unique orchids from
Eawaii for the upcoming prom season in his local community. Ee has one month before
the big dances begin. Ee plans to use brochures to sell the flowers to his young
customers in local high schools. What would be "r. Iones/s best transportation
alternative?
(b) Ayrd Bumber Company has received a large order of lumber to build three new !44<
unit apartment comple$es. It is essential that the lumber arrive on time, however,
delivery is not required for three wees. Ayrd Bumber is located in Bubboc, +e$as, and
must order its goods from mills in :regon. What would be Ayrd/s best transportation
alternative?
(c) =hillips ;rilling of Eouston, +e$as, needs to order a new technical precision
surveying instrument from a supplier in +oronto, Canada. +he instrument is highly
sensitive and must be paced with great care. +he instrument is about the si'e of a
microwave oven and weights about 14 pounds. Its total value is J%4,444. +he company
needs the instrument as soon as possible but is under no emergency situation. What
would be =hillips/ best transportation alternative?
Answer:
&&&&&Instructor's (ote) !tudents may consider several transportation alternatives*
however* the choices made below are consistent with the data provided by the text in the
section on transportation+ (ote that this ,uestion can be used in con-unction with or as
an alternative to .uestion /010+ It is suggested that both ,uestions* because of
similarities* not be asked on the same exam+&&&&&
(a) +he best alternative for "r. Iones is to have the orchids shipped via air<freight. +he
te$t notes that among the most frequently air<freighted products are cut flowers because
of their perishability (a truc would delivery them from the airport or they could be
piced up by the firm itself). 5ome students might thin of 8=5, .ed?$, or the =ostal
5ervice, however, given the amount to be ordered, air<freight would be better.
(b) Ayrd Bumber would most liely choose rail to bring in the lumber. Water would be
out because of the time frame and location of the mills and final destination (there is no
water source close to Bubboc, +e$as). &s indicated by the te$t, one of the chief
products shipped by rail is forestry products. 7ail would be chosen over trucs because
of the amount of lumber needed to build three !44<unit apartment comple$es.
=iggybacing might be a possibility, however, straight rail would be most liely.
(c) =hillips ;rilling would most certainly choose air for its method of transportation.
?ven though trucing would be a possibility, air<freight is nown for transporting high<
value, low<bul products (for e$ample, technical instruments). +rucing could be used,
however, the lielihood of damage would probably not be worth the ris.
Diic!"#$: (%) P&'e: /%%. /%(
!04