Chapter 13

Marketing Channels and Supply Management

Multiple Choice

1. Caterpillar Company charges premium prices for its heavy equipment. It is successful because _____.a. the equipment is high qualityb. its distribution is unparalleledc. its customer support system is strongd. both a and b

(d; Moderate; p. 397)

2. Another reason for Caterpillar’s success is that its dealers _____.a. operate at low costb. build strong customer relationships in their communitiesc. are skilled in promotiond. discount prices to their best customers

(b; Moderate; p. 398)

3. Why is Caterpillar’s service to dealers and customers such an advantage in winningand keeping customers?a. The high quality equipment reduces downtime combined with fast service.b. There is no freight charge on parts with a minimum order.c. All service personnel have at least six years experience in their jobs.d. All of the above are true.

(a; Challenging; 398)

4. Choose the item below that is not a reason why Caterpillar enjoys a close working relationship with its dealers.a. extraordinary dealer supportb. dealer performancec. Internet communicationd. dealer profitability

(a; Moderate: 398)

5. Which of the following is not a typical supply chain member?a. resellerb. customerc. intermediaryd. intermediary’s creditor

(d; Easy; p. 399)

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6. _____ from the manufacturer or service provider is the set of firms that supply the raw materials, components, parts, information, finances, and expertise needed to create a product or service.a. Downstreamb. Upstreamc. Separatedd. None of the above

(b; Moderate; p. 399)

7. A better term for supply chain would be _____.a. supply and demand chainb. demand chainc. channel of distributiond. distribution channel

(b; Easy; p. 399)

8. With the advent of the Internet, most companies are forming _____ with other firms.a. stronger relationshipsb. more numerous and stronger relationshipsc. more numerous and complex relationshipsd. more profitable relationships

(c; Challenging; p.399)

9. When suppliers, distributors, and customers partner with each other to improve the performance of the entire system, they are participating in a _____.a. value delivery networkb. channel of distributionc. supply chaind. demand chain

(a; Moderate; p. 399)

10. The logistics and distribution manager of BeltWay Enterprises, Inc. regularly deals with the four major questions concerning marketing channels. Identify the one that is not associated.a. How do channel firms interact and organize to do the work of the channel?b. What is the nature of marketing channels and why are they important?c. What problems do companies face in designing and managing their channels?d. What role do financial and transportation members play in retaining customers?

(d; Challenging; p. 399)

275

11. Most producers today sell their goods to _____.a. final usersb. final users and marketing membersc. intermediariesd. the government at various levels

(c; Easy; p. 400)

12. A company’s channel decisions directly affect every other_____.a. channel memberb. marketing decisionc. customer’s choicesd. employee in the channel

(b; Moderate; p. 400)

13. Distribution channel decisions often involve _____ with other firms.a. short-term commitmentsb. long-term commitmentsc. major problems d. financial losses

(b; Moderate; p. 400)

14. Joe Blanco has discovered that his intermediaries usually offer his firm more than it can achieve on its own because of their contacts, experience, specialization, and _____.a. financial supportb. fast servicec. scale of operationd. working relationships with foreign distributors

(c; Moderate; p. 400)

15. From the economic system’s point of view, the role of marketing intermediaries is to transform the _____ made by producers into the _____ wanted by consumers.a. products; productsb. assortment of products; productsc. products; assortment of productsd. assortment of products; assortment of products

(d; Moderate; p. 401)

16. Producers benefit from using intermediaries because they _____.a. offer greater efficiency in making goods available to target marketsb. operate less expensivelyc. save a lot of workd. are generally backlogged with orders

(a; Easy; p. 401)

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17. Intermediaries play an important role in matching _____.a. dealer with customerb. supply and demandc. product to regiond. none of the above

(b; Easy; p. 401)

18. What are the three gaps that separate goods and services from those who woulduse them?a. time, place, formb. place, possession, formc. time, place, possessiond. place, time, need

(c; Moderate; p. 401)

19. One of the following is not a key function that intermediaries play in completingtransactions. Choose it.a. promotionb. informationc. negotiationd. financing

(d; Moderate; p. 402)

20. One of the following is not a key function that intermediaries play in helping tofulfill a completed transaction. Choose it.a. physical distributionb. promotionc. financingd. risk taking

(b; Challenging; p. 402)

21. There is an old saying, “You can eliminate the middleman, but you cannot eliminate the _____.”a. middleman’s functionsb. profit lostc. time lostd. lost customers

(a; Easy; p. 402)

22. In marketing terms, we say that the number of intermediary levels indicates the_____ of a channel.a. depthb. complexityc. involvementd. length

(d; Easy; p. 402)

277

23. As a producer of goods, you would be concerned that a greater number of channel levels means _____ and greater channel complexity.a. less profitb. less controlc. more potential ideasd. all of the above

(b; moderate; 402)

24. All of the institutions in a channel are connected by several types of flows, including physical flow, flow of ownership, payment flow, information flow, and _____ flow.a. promotionb. acquisitionc. customerd. return product

(a; Challenging; p. 403)

25. An advantage of a channel of distribution over selling direct to consumers is thateach channel member plays a _____ in the channel.a. time-saving partb. specialized role c. decisional roled. informational role

(b; Moderate; p. 403)

26. Joanie Calvert is experiencing a disagreement with intermediaries in the channelover who should do what and for what rewards. Joanie is experiencing _____.a. channel delusionb. channel problemsc. channel conflictd. channel mismanagement

(c; Easy; p. 404)

27. When two Burger King restaurants have a disagreement over who should be ableto sell in quantity at a discount to local athletic teams, they are in a _____ conflict.a. verticalb. problematicc. no-wind. horizontal

(d; Easy; 404)

278

28. Staples Office Supply opened an online store that created competition with many of its dealers. The corporate office created _____ conflict.a. verticalb. problematicc. no-wind. horizontal

(a; Easy; p. 404)

29. Historically, conventional channels have lacked the leadership to _____.a. assign channel member roles and attain efficiencyb. attain efficiency and assign member rolesc. assign member roles and manage conflictd. all of the above

(c; Challenging; p. 405)

30. A conventional distribution channel consists of one or more _____ producers, wholesalers, and retailers.a. product-relatedb. independentc. contractd. estranged

(b; Easy; p. 405)

31. An advantage of a vertical marketing system (VMS) is that it acts as a _____system.a. unifiedb. more efficient c. modernd. customer-driven

(a; Challenging; p. 405)

32. A corporate VMS has the advantage of controlling the entire distribution chainunder _____.a. a profit-maximizing strategic planb. single ownershipc. mass distributiond. few intermediaries

(b; Easy; p. 405)

33. What are the three major types of vertical marketing systems?a. corporate, contractual, chainb. contractual, corporate, independentc. corporate, contractual, administeredd. administered, independent, franchised

(c; Moderate; p. 405)

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34. A distinguishing feature of a contractual VMS is that coordination and conflictamong the independent members of the channel are attained through _____.a. oral agreementsb. working partnershipsc. limited liability corporationsd. contractual agreements

(d; Easy; p. 405)

35. The most common type of contractual agreement in business is the _____.a. franchise organizationb. vertical marketing systemc. conventional marketing channeld. corporate VMS

(a; Moderate; p. 406)

36. This is the scenario. You and your best friend are exploring the possibility ofbuying into a franchise but are not sure what type to go into. You discover that one of the following is not a common type and want to stay clear of it. Which one is it?a. manufacturer-sponsored retailer franchise systemb. manufacturer-sponsored wholesaler franchise systemc. wholesaler-sponsored retail franchise systemd. service-firm-sponsored retailer franchise system

(c; Challenging; p. 406)

37. Leadership in this type of marketing system is assumed not through commonownership or contractual ties but through the size and power of one or a few dominant channel members.a. horizontal marketing systemb. administered VMS c. corporate VMSd. conventional marketing channel

(b; Easy; p. 407)

38. The most common type of hybrid marketing channel is the _____.a. dual distribution systemb. multichannel distribution systemc. administered franchised. horizontal multichannel system

(b; Moderate; p. 408)

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39. As marketing manager for Globe Imports and Experts, you want to start reapingthe benefits of a multichannel distribution system. You should enjoy all of the following except one. Please find it.a. expand salesb. expand market coveragec. sell at a higher gross margind. gain opportunities to tailor products and services to needs of diverse segments

(c; Challenging; p. 408)

40. The use of multichannel systems in the United States is _____.a. deceasingb. increasingc. holding steadyd. spreading abroad fast

(b; Easy; p. 408)

41. The major disadvantage of a multichannel system is that it is harder to control andit can generate _____.a. greater conflictb. less net profitc. fewer domestic salesd. inefficiency

(a; Easy; p. 408)

42. Studies show that _____ is a major trend whereby product and service producersare bypassing intermediaries and going directly to final buyers, or that radically new types of channel intermediaries are emerging to displace traditional ones.a. the vertical marketing systemb. the corporate marketing systemc. disintermediationd. the corporate merger

(c; Challenging; p. 408)

43. Designing a channel system calls for analyzing consumer needs, setting channelobjectives, _____, and evaluating them.a. establishing a budgetb. identifying major channel alternativesc. seeking regulatory approvald. seeking legal advice

(b; Moderate; 409)

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44. To increase a channel’s service level, it must provide a greater assortment ofproducts, more add-on services, and _____.a. lower pricesb. become more efficientc. faster deliveryd. better terms

(c; Moderate; p. 409)

45. In establishing add-on services, you would consider all except which of the following?a. deliveryb. creditc. repairsd. customer assembly

(d; Easy; p. 409)

46. Companies should state their channel objectives in terms of targeted levels of _____.a. co-op advertisingb. fair pricesc. customer serviced. efficiency and reduced conflict

(c; Moderate; p. 411)

47. Which type of product might require a more direct marketing channel to avoiddelays and too much handling?a. lower-priced productsb. perishable productsc. higher-priced productsd. products in their maturity or decline stage

(b; Moderate; p. 412)

48. When identifying the major channel alternatives, it is best to consider in terms oftypes, number, and ___ of intermediaries.a. sizeb. powerc. responsibilitiesd. none of the above

(c; Easy; p. 412)

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49. When determining the number of channel members to use at each level, threestrategies are available: intensive, exclusive, and _____ distribution.a. multichannelb. selectivec. internationald. direct

(b; Easy; p. 413)

50. Chewing gum is stocked in many outlets in the same market or community; in fact, it is placed in as many outlets as possible. This is an example of _____ distribution.a. exclusiveb. selectivec. multichanneld. intensive

(d; Easy; p. 413)

51. This type of distribution is used when the producer wants more than one, but fewer than all, of the intermediaries who are willing to carry its products.a. exclusiveb. selectivec. intensived. dual

(b; Moderate; p. 413)

52. Sometimes a producer chooses only a few dealers in a market area to distributeits products or services. Generally these dealers are given a right to _____.a. exclusive distributionb. selective distributionc. intensive distributiond. administered distribution

(a; Easy; p. 413)

53. When establishing the responsibilities of channel members, the producer mustestablish a list price, give a fair set of discounts for intermediaries, and define each channel member’s _____.a. sales volumeb. territoryc. legal rightsd. customers

(b; Moderate; p. 414)

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54. Evaluating the major alternatives for channel members should be centered aroundall of the following except which one?a. economic factorsb. controlc. adaptive criteriad. channel leadership

(d; Moderate; p. 414)

55. It is common for international marketers to _____ their channel strategies for eachcountry.a. extendb. adaptc. restrictd. seek approval for

(b; Easy; p. 414)

56. It is especially difficult for many Western firms to break into the closely knittradition-bound _____ distribution network.a. Chineseb. Japanesec. Mexicand. Canadian

(b; Moderate; p. 414)

57. China and India each contain more than a billion people. However, the markets areactually much smaller that they appear because of _____.a. inadequate distribution systemsb. indifference toward Western productsc. government controld. a lack of resources

(a; Challenging; p. 415)

58. You are faced with channel management at work. This calls for selecting,managing, _____, and evaluating channel members over time.a. reducing conflictb. reducing wastec. motivatingd. all of the above

(c; Easy; p. 415)

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59. When selecting intermediaries, a company should determine and evaluate eachchannel member’s years in business, other lines carried, growth and profit record, cooperation, and _____.a. reputationb. financial standingc. employees’ skillsd. executives’ ability to plan strategically

(a; Challenging; p. 416)

60. Most companies practice strong PRM to forge long-term relationships with channel members. What does PRM stand for?a. primary relationship managementb. potential relationship managementc. perennial relationship managementd. partner relationship management

(d; Easy; p. 416)

61. Producers must regularly check channel member performance against standardssuch as which of the following?a. sales quotasb. average inventory levelsc. customer delivery timed. all of the above

(d; Moderate; p.418)

62. Sometimes a seller requires its dealers to abstain from handling competitors’products in an arrangement called _____.a. exclusive distributionb. exclusive dealingc. selective distributiond. exclusive pricing

(b; Easy; p.418)

63. For the most part, companies are _____ to develop whatever channel arrangements suit them.a. inclinedb. legally biasedc. legally freed. coerced

(c; Moderate; 418)

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64. Exclusive dealing is legal as long as it does not _____ or tend to create amonopoly and as long as both parties enter into the agreement _____.a. substantially lessen competition; legallyb. restrict trade; voluntarilyc. substantially lessen competition, voluntarilyd. none of the above

(c; Challenging; p. 418)

65. _____ describes those arrangements whereby the producer of a strong brand sells it to a dealer only if the dealer will take some or all of the rest of the line.a. Exclusive distributionb. Exclusive dealingc. Exclusive tyingd. Tying agreement

(d; Easy; p. 419)

66. Exclusive territorial agreements are normal practices in _____.a. vertical marketing systemsb. franchisesc. integrated marketing systemsd. horizontal marketing systems

(b; Moderate; p. 419)

67. In today’s global marketplace, selling a product is sometimes easier than ______.a. making itb. advertising itc. getting it to the customerd. positioning it

(c; Easy; p. 419)

68. Marketing logistics (physical distribution) involves getting the right product to theright customer in the right place at the right time. Which one of the following is notincluded in this process?a. planningb. implementingc. controlling the physical flow of goods, services, and informationd. gathering customer’s ideas for new products.

(d; Easy; p. 419)

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69. Today’s marketers prefer customer-centered logistics thinking. To be current in their thinking, managers of ReadMore Magazines would consider all of these types of distribution except ______.a. outboundb. inboundc. inversed. reverse

(c; Challenging; p. 419)

70. Why are companies placing greater emphasis on logistics?a. to give customers better service or pricesb. tremendous cost savings to the company and its customersc. a need for improved logistics managementd. all of the above

(d; Moderate; p. 419)

71. For a company to minimize distributions costs, it must use slower delivery, smaller inventories, and ______.a. smaller shipping lotsb. larger shipping lotsc. eliminate small-order dealersd. reduce personnel in the supply chain

(b; Easy; p. 420)

72. For Wilheight Company to provide maximum customer service, it must provide rapid delivery, large inventories, liberal return policies, and _____.

a. low cost merchandiseb. flexible assortmentsc. more credit optionsd. all of the above

(b; Moderate; p. 420)

73. The difference between distribution centers and storage warehouses is that the former are designed to _____. a. store goods for longer periods b. hold larger volumes c. move goods rather than just store them d. none of the above(c; Easy; p. 420)

287

74. To reduce inventory management costs, many companies use a system where they carry only small inventories of parts or merchandise, often only enough for a few days of operation, called _____.

a. reduction-inventory managementb. just-in-time logisticsc. limited inventory logisticsd. supply chain management

(b; Easy; p. 421)

75. Which of the following transportation modes is used for digital products? a. truck b. rail c. Internet d. air(c; Easy; p. 421)

76. This transportation mode accounts for more than 69 percent of actual tonnageshipped in the United States today. Which one is it?a. truckb. railc. waterd. air

(a; Easy; p. 422)

77. Jewels for the Rich and Famous sells very exclusive jewelry with a minimum price of $25,000 to customers around the world. Speed of delivery to distant markets is a

must. Management should consider using _____ as its main carrier.a. railb. airc. truckd. brown (UPS)

(b; Moderate; p. 422)

78. Grayville Rock and Gravel, located in a seaport town, sells rock, gravel, and sand to local markets. It has just been awarded a contract with a company 500 miles down the seacoast. Management should consider switching from truck to _____ transport.a. waterb. railc. pipelined. none of the above

(a; Challenging; p. 422)

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79. In choosing a transportation mode for a product, shippers must balance the considerations of speed, dependability, cost, and _____.a. weightb. customer choicec. availabilityd. distance

(c; Challenging; p. 423)

80. Match these intermodal transportation combinations: 1. rail and truck, 2. water and truck, 3. water and rail.a. fishyback; airtruck; trainshipb. piggyback; airtruck; fishybackc. trainship; fishyback; piggybackd. piggyback; fishyback; trainship

(d; Moderate; p. 423)

81. Companies manage their supply chains through _____.a. skilled operatorsb. informationc. the Internetd. transportation modes

(b; Easy; p. 423)

82. When major producers or suppliers work directly with a major retailer in ordering and shipping products, they often use _____ to save much time and money.a. dual distribution modesb. continuous inventory replenishment systemsc. the Internetd. their own trucking and distribution systems

(b; Challenging; p. 423)

83. Julie Newmar recognizes that her company needs to provide better customer serviceand trim distribution costs through teamwork, both inside the company and among all the marketing channel organizations. Julie will begin the practice of _____.a. integrated logistics managementb. supply chain managementc. customer relationship managementd. horizontal marketing system

(a; Challenging; p. 423)

84. What is the goal of integrated supply chain management?a. reduce costsb. increase services with minimal costc. harmonize all of the company’s logistics decisionsd. reduce conflict and increase cooperation among channel members

(c; Challenging; p. 424)

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85. Smart companies coordinate their logistics strategies and forge strong partnerships with suppliers and customers to improve customer service and reduce channel costs through _____.a. cross-functional teamsb. cross-company teamsc. partneringd. cross-functional, cross-company teams

(d; Challenging; 424)

86. The success of each channel member depends on the performance of _____.a. key channel membersb. the entire supply chainc. the channel captaind. the manufacturer

(b; Moderate; p. 424)

87. When Home Depot allows key suppliers to use its stores as a testing ground for new merchandising programs, it is using _____. a. shared services b. partnership management c. shared projects d. none of the above(c; Easy; p. 425)

88. Today, a growing number of firms now outsource some or all of their logistics to _____. a. subcontractors b. third parties c. channel members d. third-party logistics providers(d; Easy; 425)

89. Last year, U.S. manufacturers and distributors spent more than _____ on third-party logistics services, and the market has been growing by _____ per year. a. $41 billion; 10 percent b. $51 billion; 20 percent c. $61 billion; 20 percent d. $71 billion; 30 percent(c; Moderate; p. 427)

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90. Companies use third-party logistics providers for all of the following reasons except one. Which do you think it is? a. It is more efficient to use them in many cases. b. They can perform the services at less cost. c. The company is free to focus more on its core business. d. ICC and the federal government are beginning to mandate and regulate some

industries.(d; Challenging; p. 427)

True – False

91. The reasons for Caterpillar’s success is high-quality products, flexible and efficient manufacturing, a steady stream of innovative new products, and a lean organization that is responsive to customer needs.

(True; Moderate; p. 397)

92. Caterpillar’s exceptional parts department gives it a high advantage in winning and keeping customers.(False; Easy; p. 398)

93. Producing a product or service and making it available to buyers requires buildingrelationships not just with customers, but also with key suppliers and resellers in the company’s supply chain.

(True; Easy; p. 399)

94. Supply chain is a common term used for a channel of distribution. It may be too limited because it takes a make-and-sell view of the business.(True; Moderate; p. 399)

95. With the success of the Internet, few producers sell through intermediaries today.(False; Easy; p. 400)

96. Companies often forget to pay enough attention to their distribution channels so asto make long-term commitments to other firms.

(True; Moderate; p. 400)

97. A major role played by intermediaries is to buy large quantities of products from many producers and break them down into the smaller quantities and broader assortments wanted by consumers.

(True; Easy; p. 401)

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98. Members of the marketing channel perform many key functions, such as helping to complete information, promotion, contact, matching, and negotiation transactions. They can also help to fulfill the completed transactions like e-procurement, financing, and risk taking.

(False; Challenging; p. 402)

99. A growing trend is to use a direct marketing channel, which has no intermediary levels so the company sells directly to consumers.

(True; Easy; p. 402)

100. It is safe to say that distribution channels are complex behavioral systems in which people and companies interact to accomplish individual, company, and channel goals.

(True; Moderate; p. 403)

101. Judy Smith is the manager of the local McDonalds franchise in Carterville. Recently the home office did not let her participate in coop advertising like the other McDonalds in her district. Now she is irritated and demands fairness. This is an example of horizontal conflict.

(False; Challenging; p. 404)

102. 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, 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.

(True; Moderate; p. 405)

103. When Sherwin Williams Paint Company integrates successive stages of production and distribution under a single ownership and attains coordination and conflict management through regular organizational channels, it is using a corporate VMS.

(True; Challenging; p. 405)

104. The franchise organization is the second most common type of contractual relationship wherein a channel member called a franchiser links several stages of the production-distribution process.

(False; Moderate. 406)

105. When the NewWay Dry Cleaners and The Easy Laundromat in your hometown join forces to follow a new marketing opportunity, they are forming a horizontal marketing system.

(True; Easy; p. 407)

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106. Always Fresh Produce Company has a route selling to more than 100 groceries, schools, and restaurants at wholesale prices. Last week the owners opened up a walk-in discounted consumer produce outlet. Always is now using a multichannel distribution system.

(True; Moderate; p. 408)

107. The faster the delivery, the greater the assortment provided, and the more add-on services supplied, the more the channel’s service level is restricted.

(False; Challenging; p. 409)

108. Disintermediation as a trend is on the rise in U.S. business.(True; Easy; p. 410)

109. Generally speaking, a company’s marketing channel objectives are influenced by the level of customer service sought, the nature of the company, its products, its marketing intermediaries, its competitors, and the environment.(True; Moderate; p. 411)

110. Most companies identify their major channel alternatives in terms of types of intermediaries, the number of intermediaries, and the cooperation of each channel member.

(False; Challenging; p. 412)

111. Intensive distribution seeks many outlets in a market, selective distribution seeks several outlets, and exclusive seeks only one outlet in a given market area.

(False; Moderate; p. 413)

112. The producer and intermediaries need to agree on the terms and responsibilities of each member. They should agree on price policies, conditions of sale, territorial rights, and specific services to be performed by each party.

(True; Moderate; p. 414)

113. Once marketers learn how to penetrate foreign markets and their distribution systems, all of them become a challenging but relatively easy job.

(False; Easy; p. 414)

114. In managing its channels, a company must convince distributors that they can succeed better by working together as a part of a cohesive value delivery system.

(True; Easy; p. 416)

115. A producer must regularly check each channel member’s performance against standards. These standards typically include sales quotas, average cash flow levels, customer delivery time, treatment of damaged and lost goods, and services to the customer.

(False; Challenging; p. 418)

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116. The tasks 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 describes supply chain management.

(False; Challenging; p. 419)

117. Some of the major corporations like Proctor & Gamble and General Motors have developed logistics systems that both maximize customer service and minimize distribution costs.

(False; Challenging; p. 420)

118. The key to managing inventory is to balance the costs of carrying larger inventories against resulting sales and profits.

(True; Moderate; p. 421)

119. When shipping large amounts of bulk products such as forest products, coal, sand, or rock over large distances, large trucks are a good choice because of their low cost per ton shipped.

(False; Easy; p. 422)

120. The basis behind integrated logistics management is providing better customer service and trimming distribution costs. This requires teamwork, both inside the company and among all the marketing channel organizations.

(True; Moderate; p. 423)

121. Today, almost all companies, large and small, outsource most of their logistics to third-party logistics (3PL) providers.

(False; Easy; p. 425)

122. Companies use third-party logistics providers because they can often do it more efficiently and the company can concentrate on its main focus.

(True; Easy; p. 427)

Essay

123. The terms supply chain and demand chain are limited. Explain why “value delivery network” is a more relevant expression to use.

Supply chain takes a make-and-sell view of the business and demand chain takes a step-by-step linear view of the purchase-production-consumption activities. Value delivery network is more appropriate because it is made up of the company, suppliers, distributors, and ultimately customers who partner with each other to improve the performance of the entire system.

(Easy; p. 399)

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124. How do channel members add value to a marketing system?

Intermediaries reduce the amount of work that must be done by both producers and consumers. They transform the assortment of products made by producers into the assortment wanted by consumers. They buy large quantities from many producers and break them down into the smaller quantities and broader assortments wanted by consumers. Intermediaries help to match supply and demand. Channel members add value by bridging the major time, place, and possession gaps that separate goods and services from those who would use them.

(Moderate; p. 401)

125. What are the eight key functions that members of the marketing channel perform?

Some help to complete transactions by providing information, promotion, contact, matching, and negotiations. Others help to fulfill the completed transactions with physical distribution, financing, and risk taking.

(Easy; p. 402)

126. Compare and contrast a conventional distribution channel with a vertical marketing system (VMS).

The former consists of one or more independent producers, wholesalers, and retailers. Each is a separate business seeking to maximize its own profits, 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.

In contrast, a 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, wholesaler, or retailer.

(Challenging; p. 405)

127. Why are multichannel distribution systems gaining popularity today?

These systems exist when a single firm sets up two or more marketing channels to reach one or more customer segments. Such systems offer advantages to firms facing large and complex markets. It allows the firms to expand sales and market coverage. It allows firms to gain opportunities to tailor its products and services to the specific needs of diverse customer segments. Larger bottom-line profits may occur.

(Moderate; p. 408)

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128. Distinguish between the three distribution strategies.

Producers of convenience products and common raw materials typically seek intensive distribution as a strategy to stock their products in as many outlets as possible. The goods are available where and when consumers want them, such as chewing gum. Selective distribution is used when selling to more than one, but fewer than all of the intermediaries who are willing to carry a company’s products in a given market. Examples are name brand blue jeans and computers. Exclusive distribution is used when the producer wants to stock its products with only one or a few dealers in an area. Examples are expensive cars and prestige clothing.

(Easy; p. 413)

129. Discuss the major public policy and distribution decisions.

For the most part, companies are legally free to develop whatever channel arrangement that suits them, 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. When the seller allows only certain outlets to carry its products it is using exclusive distribution. When the seller restricts the territory where its goods may be sold it engages in exclusive territorial agreements. Others engage in tying agreements when they sell a strong brand to dealers only if the dealers will take some or all of the rest of the line.

(Challenging; pp. 418-419)

130. Explain the difference between marketing logistics and supply chain management. Why are more companies using third-party logistics providers?

Marketing logistics deals with the planning, implementing, and controlling of 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. Supply chain management is concerned with outbound, inbound, and reverse distribution. Supply chain management manages upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumers.

Third-party logistics providers allow the distributor to focus on its core business. They can generally distribute the goods more efficiently and at lower cost. More time can be spent with employees, customers, and planning.

(Challenging; pp. 419, 427)

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