Armstrong Mai12 Tif 10

Marketing: An Introduction, 12e (Armstrong/Kotler)
Chapter 10 Marketing Channels: Delivering Customer Value

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
Answer: B
Difficulty: Moderate
Chapter LO: 1
Course LO: Compare and contrast different approaches to value chain organization
AACSB: Analytic thinking
2) Which of the following is true of downstream channels in a company's supply chain?
A) They provide their expertise in product design.
B) They manufacture the products of the company.
C) They supply raw materials and components to the company.
D) They contribute financially to the company during production.
E) They form an intermediary link between the company and its customers.
Answer: E
Chapter LO: 1
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
Answer: D
Chapter LO: 1
1
Copyright 2015 Pearson Education, Inc.
4) ________ are sets of interdependent organizations that help make the product or service of a
company available for use by consumers or business users.
A) Research and development channels
B) Upstream channels
C) Marketing channels
D) Raw materials suppliers
E) Backward integration chains
Answer: C
Difficulty: Easy
Chapter LO: 1
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
Answer: A
Difficulty: Easy
Chapter LO: 1
6) From the economic system's point of view, the role of marketing intermediaries is to
________.
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
Answer: E
Chapter LO: 1
7) Which of the following is true of a direct marketing channel?
A) It increases the number of channel transactions.
B) It enables retailers to reach many customers.
C) It does not use any intermediaries.
D) It gives limited distribution control to producers.
E) It creates a complex distribution channel.
Answer: C
Chapter LO: 1
2
8) Which of the following creates the shortest distribution channel between a producer and a
customer?
A) retail marketing
B) indirect marketing
C) share marketing
D) direct marketing
E) wholesale marketing
Answer: D
Difficulty: Easy
Chapter LO: 1
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
Answer: B
Difficulty: Easy
Chapter LO: 1
10) A firm that uses direct marketing would most likely sell its products through ________.
A) one marketing intermediary
B) big box retailers
C) large wholesalers
D) multiple intermediaries
E) the company Web site
Answer: E
Chapter LO: 1
3
11) Crowbar Records used to sell its music CDs through a network of retail outlets, record stores,
and music dealers but stopped using these agents with the advent of MP3 technology. Crowbar
now sells its music independently on its Web site, through personal mail, and on social
networking sites. Which type of marketing system has Crowbar most likely adopted?
A) an administered marketing system
B) a contractual marketing system
C) a horizontal marketing channel
D) a direct marketing channel
E) a vertical marketing channel
Answer: D
Chapter LO: 1
12) Which of the following is a marketing intermediary?
A) customers
B) producers
C) manufacturers
D) retailers
E) advertisers
Answer: D
Chapter LO: 1
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
Answer: D
Difficulty: Difficult
Chapter LO: 1
4
14) Mintel Agro provides raw materials in the form of agricultural products to Kiltmark Food
Company. Kiltmark produces flour-based edible products, which it distributes to a wholesale
company called Yellowstar Trading. Yellowstar Trading then sells Kiltmark products to the
discount retailer, Stroos. Stroos sells the products to consumers. Which of the following is
considered a marketing intermediary in these transactions?
A) only Kiltmark
B) only Stroos
C) only Yellowstar Trading
D) both Yellowstar Trading and Stroos
E) both Stroos and Mintel Agro
Answer: D
Chapter LO: 1
15) 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
Answer: B
Chapter LO: 2
16) 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
Answer: B
Chapter LO: 2
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17) Orion Steel is the chief provider of metals to Accline Cars, which manufactures two models
of vehiclescars and large buses. Accline dealers sell the firm's cars to individual citizens, but
buses are sold directly to government entities. In such a distribution channel, which of the
following would be considered a vertical conflict?
A) a conflict between Orion Steel and Accline Cars
B) a conflict between Orion Steel and Accline dealers
C) a conflict between two Accline car dealers
D) a conflict between Accline dealers and government entities
E) a conflict between Accline Cars and its dealers
Answer: E
Chapter LO: 2
18) Jupiter Steel is the chief provider of metals to Greystone Motors. Greystone Motors has two
models of carsone for commercial and ordinary 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
Answer: C
Chapter LO: 2
19) 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.
Answer: A
Chapter LO: 2
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20) In a ________, producers, wholesalers, and retailers act as a unified system. In such a
structure, one channel member owns the others, has contracts with them, or has so much power
that they all cooperate.
A) direct marketing system
B) horizontal distribution channel
C) lateral marketing system
D) conventional distribution channel
E) vertical marketing system
Answer: E
Difficulty: Easy
Chapter LO: 2
21) 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.
Answer: E
Chapter LO: 2
22) A(n) ________ marketing system combines successive stages of production and distribution
under single ownership, where channel leadership is established through common ownership.
A) contractual vertical
B) corporate vertical
C) administered vertical
D) horizontal
E) direct
Answer: B
Difficulty: Easy
Chapter LO: 2
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23) A(n) ________ marketing system is a marketing system in which independent firms at
different levels of production and distribution join together through binding agreements.
A) corporate vertical
B) horizontal
C) contractual vertical
D) administered vertical
E) direct
Answer: C
Difficulty: Easy
Chapter LO: 2
24) Which type of channel arrangement does a franchise organization most likely follow?
A) administered vertical marketing system
B) horizontal marketing system
C) contractual vertical marketing system
D) corporate vertical marketing system
E) direct marketing system
Answer: C
Difficulty: Easy
Chapter LO: 2
25) 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) ________.
B) horizontal manufacturing marketing system
C) manufacturer-sponsored retailer franchise system
D) manufacturer-sponsored wholesaler franchise system
E) direct marketing system
Answer: C
Chapter LO: 2
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26) Pastaliano is a restaurant based in Illinois that exclusively sells Italian food. Pastaliano sells
the rights to its recipes to a British firm, Clover Trading, which then opens an outlet in London
under the Pastaliano brand name. Which kind of channel arrangement does Pastaliano most
likely have with Clover Trading?
A) a horizontal marketing system
B) a direct marketing system
C) an administered vertical marketing system
D) a contractual vertical marketing system
E) a corporate vertical marketing system
Answer: D
Chapter LO: 2
27) 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 vertical
C) horizontal
D) corporate vertical
E) administered vertical
Answer: E
Difficulty: Easy
Chapter LO: 2
28) 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?
B) corporate vertical marketing system
C) indirect marketing system
D) wholesaler franchise system
E) horizontal marketing system
Answer: A
Chapter LO: 2
9
29) 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 vertical marketing system
C) direct marketing system
D) horizontal marketing system
E) administered vertical marketing system
Answer: D
Difficulty: Easy
Chapter LO: 2
30) TruMart, a leading retail chain, decides to open a restaurant inside its stores, so the firm
partners with MeatMe, a popular burger chain. MeatMe opens a restaurant inside TruMart. The
MeatMe chain of restaurants also has a deal with Westman Cola to serve only Westman soft
drinks at its outlets. This arrangement will benefit all three companies. What kind of channel
arrangement is being followed in this case?
C) direct marketing system
D) contractual vertical marketing system
E) corporate vertical marketing system
Answer: B
Chapter LO: 2
31) GreatWords is a book retailer. Due to the increasing demand for audiobooks, the firm decides
to sell audiobooks in its stores. GreatWords signs a deal with Carpem, a leading producer of
educational audiobooks. According to the deal, GreatWords will sell only Carpem's audio titles
in its stores, while Carpem will not sell its books through other retailer stores. GreatWords profits
from Carpem's popularity while Carpem, in return, enjoys better sales. This is most likely an
example of a(n) ________ marketing system.
A) direct
B) administered vertical
C) corporate vertical
D) contractual vertical
E) horizontal
Answer: E
Chapter LO: 2
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32) 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 highend 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
C) corporate vertical franchise system
D) multichannel distribution system
E) administered vertical marketing system
Answer: D
Chapter LO: 2
33) Clara's, a cosmetics manufacturer, sells many of its products through retail outlets. However,
the firm sells a few expensive, popular products only through direct selling methods. What kind
of channel arrangement does Clara's follow for all of its products together?
A) horizontal marketing system
B) multichannel distribution system
C) administered vertical marketing system
D) contractual vertical marketing system
E) corporate vertical marketing system
Answer: B
Chapter LO: 2
34) For over ten 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 for selling its books. This change in channel
organization is called ________.
A) disintermediation
B) intensive distribution
C) brokering
D) franchising
E) selective distribution
Answer: A
Chapter LO: 2
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35) ________ distribution is a product distribution strategy that involves stocking a product in as
many outlets as possible.
A) Selective
B) Exclusive
C) Intensive
D) Exponential
E) Comprehensive
Answer: C
Difficulty: Easy
Chapter LO: 3
36) 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.
Answer: B
Chapter LO: 3
37) ________ distribution gives a limited number of dealers the sole rights to distribute a
company's products in their territories.
A) Inclusive
B) Horizontal
C) Intensive
D) Exclusive
E) Vertical
Answer: D
Difficulty: Easy
Chapter LO: 3
38) 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
Answer: A
Chapter LO: 3
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39) ________ distribution gives producers good market coverage with more control and less
cost than does intensive distribution.
A) Vertical
B) Selective
C) Horizontal
D) Comprehensive
E) Inclusive
Answer: B
Chapter LO: 3
40) When a seller requires that only certain dealers carry its products, its strategy is known as
________.
A) horizontal restraint of trade
B) intensive distribution
C) vertical distribution
D) disintermediation
E) exclusive distribution
Answer: E
Difficulty: Easy
Chapter LO: 4
41) 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 dealer obtains a steady source of supply and more support from the seller.
E) The dealer can freely choose what products to sell without any interference from the seller.
Answer: D
Chapter LO: 4
42) ________ 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 its products.
A) Horizontal price fixing
B) Horizontal integration
C) Full-line forcing
D) Direct marketing
E) Disintermediation
Answer: C
Chapter LO: 4
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43) 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.
Answer: E
Chapter LO: 4
44) The Memphis Rock chain of restaurants has a deal with WestEnd Cola, according to which it
will serve only WestEnd sodas at its restaurants. What strategy has most likely been adopted by
WestEnd Cola?
A) horizontal price fixing
B) disintermediation
C) exclusive dealing
D) selective distribution
E) horizontal integration
Answer: C
Chapter LO: 4
45) 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
Answer: B
Chapter LO: 4
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46) PinWheel, a renowned electronics company, has an arrangement with SoundBite, an audio
equipment retailer. Through the agreement, Soundbite is to promote and sell PinWheel's audio
electronics and give PinWheel products better shelf space than competitors' products. The
agreement also requires that SoundBite sell additional non-audio PinWheel products at all
SoundBite stores. Which term best describes PinWheel's strategy?
A) horizontal price fixing
B) horizontal integration
C) full-line forcing
D) direct marketing
E) disintermediation
Answer: C
Chapter LO: 4
47) In supply chain management, moving products and materials from suppliers to the factory is
known as ________ logistics.
A) outbound
B) reverse l
C) inbound
D) downstream
E) inventory
Answer: C
Difficulty: Easy
Chapter LO: 5
48) 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
E) broken, damaged products from customers to producers
Answer: D
Chapter LO: 5
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49) Reverse 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) finished products from the factory to customers
E) finished products from producers to resellers
Answer: A
Chapter LO: 5
50) 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
Answer: B
Chapter LO: 5
51) A ________ is highly automated and designed to receive goods from various plants and
suppliers, take orders, fill them efficiently, and deliver goods to customers as quickly as possible.
A) distribution center
B) storage warehouse
C) cold storage unit
D) controlled-atmosphere unit
E) storage silo
Answer: A
Difficulty: Easy
Chapter LO: 5
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52) 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.
Answer: B
Chapter LO: 5
53) 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
Answer: A
Chapter LO: 5
54) 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.
Answer: E
Chapter LO: 5
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55) Which of the following is a cost-effective mode for shipping large amounts of bulk products
coal, sand, minerals, and forest productsover long distances?
A) air carriers
B) water carriers
C) pipelines
D) trucks
E) railroads
Answer: E
Chapter LO: 5
56) 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
Answer: C
Difficulty: Easy
Chapter LO: 5
57) 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
Answer: D
Chapter LO: 5
58) ________ 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
Answer: E
Difficulty: Easy
Chapter LO: 5
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59) The use of both rail and trucks for transporting goods is called ________.
A) trainshipping
B) fishybacking
C) piggybacking
D) airtrucking
E) autoracking
Answer: C
Chapter LO: 5
60) 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
Answer: B
Chapter LO: 5
61) Introducing intermediaries into a distribution chain increases the number of direct channel
transactions between a manufacturer and its customers.
Answer: FALSE
Difficulty: Easy
Chapter LO: 1
62) From a producer's point of view, a greater number of levels in a supply chain means less
control and greater channel complexity.
Answer: TRUE
Chapter LO: 1
63) A channel level is a layer of intermediaries that performs some work in bringing the product
and its ownership closer to the final buyer.
Answer: TRUE
Difficulty: Easy
Chapter LO: 1
19
64) A company that has no intermediary levels sells its products directly to its customers.
Answer: TRUE
Difficulty: Easy
Chapter LO: 1
65) Historically, conventional distribution channels have provided channel leadership and have
had the power to assign roles and manage conflict.
Answer: FALSE
Chapter LO: 2
66) A vertical marketing system is one in which the producer is always the dominant member of
the channel.
Answer: FALSE
Chapter LO: 2
67) In a vertical marketing system, producers do not use intermediaries to sell their products.
Answer: FALSE
Difficulty: Easy
Chapter LO: 2
68) The franchise organization is an example of a corporate vertical marketing system.
Answer: FALSE
Chapter LO: 2
69) In an administered VMS, the producer assumes the leadership position in a distribution
channel by default.
Answer: FALSE
Chapter LO: 2
70) A horizontal marketing system can develop between a company and its competitor.
Answer: TRUE
Difficulty: Easy
Chapter LO: 2
20
71) A multichannel marketing system is one in which a producer sells to multiple markets using
the same distributional channel.
Answer: FALSE
Difficulty: Easy
Chapter LO: 2
72) Disintermediation occurs when product or service producers cut out intermediaries and sell
directly to final buyers.
Answer: TRUE
Difficulty: Easy
Chapter LO: 2
73) Marketing channel design calls for analyzing consumer needs, setting channel objectives,
identifying major channel alternatives, and evaluating those alternatives.
Answer: TRUE
Difficulty: Easy
Chapter LO: 3
74) Companies selling perishable products generally prefer direct marketing, which minimizes
delays.
Answer: TRUE
Difficulty: Easy
Chapter LO: 3
75) Intensive distribution occurs when only one intermediary is used by a producer to sell all its
products.
Answer: FALSE
Chapter LO: 3
76) Exclusive dealing that creates a monopoly comes under the scope of the Clayton Act of
1914.
Answer: TRUE
Chapter LO: 4
77) Full-line forcing is a type of intensive distribution.
Answer: FALSE
Chapter LO: 4
21
78) Full-line forcing is considered an illegal arrangement that violates the Clayton Act.
Answer: FALSE
Chapter LO: 4
79) In exclusive dealing, a producer may agree not to sell to other dealers in a given area.
Answer: TRUE
Difficulty: Easy
Chapter LO: 4
80) Customer-centered logistics starts with the marketplace and works backward to the factory.
Answer: TRUE
Difficulty: Easy
Chapter LO: 5
81) Supply chain management involves managing both upstream and downstream value-added
flows of materials.
Answer: TRUE
Difficulty: Easy
Chapter LO: 5
82) According to the text, the goal of any logistics system should be to maximize sales, not
profits.
Answer: FALSE
Difficulty: Easy
Chapter LO: 5
83) Inbound logistics involves managing the flow of products from an intermediary to a
customer.
Answer: FALSE
Difficulty: Easy
Chapter LO: 5
84) With a vendor-managed inventory system, the supplier takes full responsibility for managing
inventories and deliveries.
Answer: TRUE
Difficulty: Easy
Chapter LO: 5
22
85) An independent logistics provider that performs all of the functions required to get a client's
product to market is known as a third-party logistics (3PL) provider.
Answer: TRUE
Chapter LO: 5
86) What are the different functions of the members of a marketing channel?
Answer: 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.
Chapter LO: 1
87) Compare a conventional distribution channel and a vertical marketing system.
Answer: 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.
Chapter LO: 2
23
88) What is a contractual vertical marketing system? Give an example of a type of business that
works as a contractual VMS.
Answer: 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 franchisedfrom
motels and fast-food restaurants to dental centers and dating services, from wedding consultants
and handyman services to fitness centers and funeral homes. For example, Anytime Fitness, "The
club for busy people," grew quickly through franchising. Only a decade or so after its founding,
Anytime Fitness now operates more than 2,100 clubs with 2 million members in all 50 states and
15 countries.
Chapter LO: 2
89) Differentiate between the three types of franchises and provide examples of each type.
Answer: There are three types of franchises. The first type is the manufacturer-sponsored retailer
franchise systemfor example, Ford and its network of independent franchised dealers. The
second type is the manufacturer-sponsored wholesaler franchise systemCoca-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-firmsponsored retailer franchise systemfor example, Burger King and its nearly 12, 300 franchiseeoperated restaurants around the world.
Chapter LO: 2
90) Explain multichannel distribution systems with an example.
Answer: 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, fullservice John Deere dealers and their sales forces.
Chapter LO: 2
24
91) What are the advantages and disadvantages of using a multichannel distribution system?
Answer: 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 Web site sales to John
Deere dealers.
Chapter LO: 2
92) What is disintermediation? With a suitable example, explain the opportunities and problems
that disintermediation presents for producers and resellers.
Answer: 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, superstore booksellers Borders and Barnes &
Noble pioneered huge book selections and low prices, sending most small independent
bookstores into ruin. Then, along came Amazon.com, which threatened even the largest brickand-mortar bookstores through online book sales. Now, both offline and online sellers of
physical books are being threatened by digital book downloads and e-readers. Rather than being
threatened by these digital developments, however, Amazon.com is leading them with its highly
successful Kindle ereaders. By contrast, Barnes & Noblethe giant that helped put so many
independent bookstores out of businessis a latecomer with its Nook e-reader and now finds
itself locked in a battle for survival. 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.
Chapter LO: 2
25
93) How does a company determine its channel objectives? What factors influence the channel
objectives of a company?
Answer: 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.
Chapter LO: 3
94) Differentiate between intensive distribution, exclusive distribution, and selective distribution
strategies, Provide examples of products that would be appropriate for each.
Answer: 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 distributiona 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 distributionthe 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.
Chapter LO: 3
26
95) What are the responsibilities of channel members?

Answer: 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.
Chapter LO: 3
96) What criteria should a firm consider before choosing a channel alternative?
Answer: If a company has identified several channel alternatives and wants to select the one that
will best satisfy its long-run objectives, then 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.
Chapter LO: 3
97) How do companies generally manage and motivate their channel members? What
technological tools are available to help with this task?
Answer: 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.
Chapter LO: 4
AACSB: Information technology
27
98) Describe the legal aspects of exclusive arrangements such as exclusive dealing and exclusive
distribution.
Answer: 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 legala 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.
Chapter LO: 4
99) What is marketing logistics? What are the components of marketing logistics?
Answer: Marketing logisticsalso called physical distributioninvolves 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.
Chapter LO: 5
28
100) Explain integrated logistics management and the different ways through which a company
can achieve it.
Answer: 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 15 to 30 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.
Chapter LO: 5
29

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Marketing: An Introduction, 12e (Armstrong/Kotler)

Chapter 10 Marketing Channels: Delivering Customer Value

49) Reverse logistics refers to moving ________.

95) What are the responsibilities of channel members?

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