86) 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) exclusive
B) selective
C) multichannel
D) intensive
E) disintermediated
Answer: D
Diff: 2 Page Ref: 352-353
AACSB: Analytic Skills
Skill: Application
Objective: 12-3
87) Which product will most likely be exclusively distributed?
A) BMW cars
B) Levi's blue jeans
C) Bazooka bubble gum
D) Prairie Farms yogurt
E) Coca-Cola
Answer: A
Diff: 2 Page Ref: 353
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 12-3
88) Tiffany & Co jewelry can only be found in a limited number of intermediaries. This is an example of ________ distribution.
A) exclusive
B) intensive
C) quality
D) high-end
E) independent
Answer: A
Diff: 2 Page Ref: 353
AACSB: Analytic Skills
Skill: Application
Objective: 12-3
89) Max Samuelson is a high-end fashion designer who markets his clothing lines through a limited number of highly reputable retailers. Max uses ________.
A) exclusive distribution
B) exclusive dealing
C) exclusive territorial agreements
D) full-line forcing
E) tying agreements
Answer: A
Diff: 3 Page Ref: 353
AACSB: Analytic Skills
Skill: Application
Objective: 12-4
90) Fresh Direct, an online grocer delivering to homes and offices in and around New York City, recently switched its entire fleet to biodiesel trucks. These trucks run on used cooking oil rather than gas, drastically reducing the company's carbon dioxide footprint. Fresh Direct has developed a(n) ________.
A) indirect marketing channel
B) green supply chain
C) tying agreement
D) intermodal transportation system
E) exclusive dealing system
Answer: B
Diff: 2 Page Ref: 358
AACSB: Analytic Skills
Skill: Application
Objective: 12-5
91) 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) rail
B) air
C) truck
D) the Internet
E) water
Answer: B
Diff: 2 Page Ref: 362
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 12-5
92) 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 coast. Management should consider switching from truck to ________ transport.
A) water
B) rail
C) pipeline
D) air
E) none of the above
Answer: A
Diff: 2 Page Ref: 362
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 12-5
93) Which of the following modes of transportation would most likely be used to quickly haul lettuce from California where it was grown to markets in Nevada?
A) trucks
B) piggyback
C) air
D) pipeline
E) water
Answer: A
Diff: 2 Page Ref: 362
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 12-5
94) Which type of vertical marketing system (VMS) gives an organization more control over both production and resale of its products, while at the same time increasing the organization's capital investment and its fixed costs?
A) administered
B) contractual
C) conventional
D) corporate
E) horizontal
Answer: D
Diff: 3 Page Ref: 346
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 12-2
95) Why is it important for manufacturers to be sensitive to the needs of their dealers?
A) Dealers have few legal rights.
B) Manufacturers have few legal rights.
C) Dealers can easily be replaced by third-party logistics providers.
D) Dealer support is essential to creating value for the customer.
E) Manufacturers cannot break commitments to channel.
Answer: D
Diff: 2 Page Ref: 355
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 12-4
96) What type of utility does warehousing provide to consumers by holding onto products until consumers need them?
A) time
B) ownership
C) production
D) form
E) packaging
Answer: A
Diff: 3 Page Ref: 360
AACSB: Reflective Thinking Skills
Skill: Synthesis
Objective: 12-5
97) A manufacturer that uses a third-party logistics provider to fulfill all of its logistics need is using a(n) ________.
A) direct marketing channel
B) conventional distribution channel
C) corporate vertical marketing system
D) horizontal marketing system
E) franchise organization
Answer: B
Diff: 3 Page Ref: 364
AACSB: Reflective Thinking Skills
Skill: Synthesis
Objective: 12-5
Refer to the scenario below to answer the following questions.
Miller Meat Company contracts with several Midwestern farmers to raise beef and pork for its meat processing center. To guarantee freshness, Miller Meat Company relies on a vast distribution network. For delivery to local grocers in Indiana, Miller Meat uses its own fleet of refrigerated trucks; delivery to these Indiana grocers constitutes 65 percent of Miller Meat's business. For deliveries in Illinois, Wisconsin, and points directly west of the Mississippi River, Miller Meat Company contracts with a refrigerated fleet that specializes in expediting smaller shipments. For faster delivery during peak times, Miller Meat Company often uses its own trucks to deliver to the expedited fleet's consolidation point from its distribution warehouse in Indiana. During the holiday season, however, several specialty distributors contract with Miller Meat Company to package specialty meats in gift boxes, then ship them directly to the recipients. For these specialty shipments within Indiana, Illinois, and Wisconsin, Miller uses its normal delivery mode. For all other specialty shipments, Miller ships from its distribution warehouse via air, then contracts with expedited carriers in various cities to deliver to the recipients.
98) Which of the following is one of Miller Meat Company's upstream partners?
A) local grocers in Indiana who sell the company's products
B) Midwestern farmers who raise beef and pork for the meat processing center
C) the refrigerated fleet that expedites small shipments
D) air carriers that take Miller's specialty shipments
E) recipients of Miller's gift boxes
Answer: B
Diff: 2 Page Ref: 340
AACSB: Analytic Skills
Skill: Application
Objective: 12-1
99) Management at a chain of Indiana grocery stores with a long history of purchasing products from Miller Meat is unhappy with the timing of deliveries. In fact, the grocery store's management is considering switching to another meat supplier who will delivery more frequently. This is an example of a(n) ________ conflict.
A) independent channel
B) vertical
C) horizontal
D) intermodal
E) conventional
Answer: B
Diff: 2 Page Ref: 344
AACSB: Analytic Skills
Skill: Application
Objective: 12-2
100) In using air transportation and then expedited truck carriers to deliver specialty items to customers outside of a designated delivery range, Miller Meats is using ________.
A) all of its supply chain
B) all of its value delivery network
C) direct marketing channels
D) intermodal transportation
E) a horizontal marketing system
Answer: D
Diff: 2 Page Ref: 362
AACSB: Analytic Skills
Skill: Application
Objective: 12-5
101) Producing a product or service and making it available to buyers requires building relationships not just with customers, but also with key suppliers and resellers in the company's supply chain.
Answer: TRUE
Diff: 1 Page Ref: 340
Skill: Concept
Objective: 12-1
102) The term supply chain may be too limited because it takes a make-and-sell view of the business.
Answer: TRUE
Diff: 2 Page Ref: 340
Skill: Concept
Objective: 12-1
103) Due to the success of the Internet, few producers sell through intermediaries today.
Answer: FALSE
Diff: 2 Page Ref: 340
AACSB: Use of Information Technology
Skill: Concept
Objective: 12-1
104) Imaginative distribution systems can be used to gain a competitive advantage.
Answer: TRUE
Diff: 2 Page Ref: 341
Skill: Concept
Objective: 12-1
105) 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.
Answer: TRUE
Diff: 2 Page Ref: 342
Skill: Concept
Objective: 12-1
106) Members of the marketing channel may help a company complete transactions by performing key functions such as promotion and negotiation.
Answer: TRUE
Diff: 2 Page Ref: 342-343
Skill: Concept
Objective: 12-1
107) It is accurate to say that distribution channels are fairly simple behavioral systems in which people and companies interact to accomplish individual company and channel goals.
Answer: FALSE
Diff: 2 Page Ref: 344
Skill: Concept
Objective: 12-2
108) In a conventional distribution channel, no channel member has much control over the other members, and no formal means exists for assigning roles and resolving channel conflict.
Answer: TRUE
Diff: 2 Page Ref: 345
Skill: Concept
Objective: 12-2
109) When Sherwin Williams Paint Company has single ownership of integrated, successive stages of production and distribution, it has created a corporate VMS.
Answer: TRUE
Diff: 2 Page Ref: 345
Skill: Concept
Objective: 12-2
110) Disintermediation as a trend is on the rise in U.S. business.
Answer: TRUE
Diff: 2 Page Ref: 350
Skill: Concept
Objective: 12-2
111) Disintermediation has occurred when an online marketer takes business away from traditional brick-and-mortar retailers.
Answer: TRUE
Diff: 2 Page Ref: 350
Skill: Concept
Objective: 12-2
112) 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.
Answer: FALSE
Diff: 2 Page Ref: 351
Skill: Concept
Objective: 12-3
113) 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.
Answer: TRUE
Diff: 2 Page Ref: 352
Skill: Concept
Objective: 12-3
114) Intensive distribution seeks many outlets in a market, while selective distribution seeks only one outlet in a given market area.
Answer: FALSE
Diff: 2 Page Ref: 352-353
Skill: Concept
Objective: 12-3
115) The producer and intermediaries need to agree on the terms and responsibilities of each member, including price policies, conditions of sale, territorial rights, and specific services to be performed by each party.
Answer: TRUE
Diff: 2 Page Ref: 353
Skill: Concept
Objective: 12-3
116) Distribution systems are relatively consistent from country to country, making it easy for international marketers to design channels.
Answer: FALSE
Diff: 2 Page Ref: 355
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 12-3
117) Under the strategy of exclusive distribution, a seller allows only certain retail outlets to carry its products.
Answer: TRUE
Diff: 2 Page Ref: 353
Skill: Concept
Objective: 12-4
118) Some major corporations such as P&G and General Motors have developed logistics systems that both maximize customer service and minimize distribution costs.
Answer: FALSE
Diff: 3 Page Ref: 358
Skill: Concept
Objective: 12-5
119) The key to managing inventory is to balance the costs and benefits of holding larger inventories with the costs and benefits of holding less.
Answer: TRUE
Diff: 2 Page Ref: 361
Skill: Concept
Objective: 12-5
120) Integrated logistics management aims to provide better customer service and trim distribution costs through teamwork, both inside the company and among all the marketing channel organizations.
Answer: TRUE
Diff: 2 Page Ref: 363
Skill: Concept
Objective: 12-5
121) Judy Smith is the manager of the local McDonald's franchise in Carterville. Recently the home office did not let her participate in co-op advertising like the other McDonald's in her district. Now she is irritated and demands fairness. This is an example of horizontal conflict.
Answer: FALSE
Diff: 3 Page Ref: 344
AACSB: Analytic Skills
Skill: Application
Objective: 12-2
122) 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.
Answer: TRUE
Diff: 2 Page Ref: 348
AACSB: Analytic Skills
Skill: Application
Objective: 12-2
123) 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.
Answer: TRUE
Diff: 2 Page Ref: 349
AACSB: Analytic Skills
Skill: Application
Objective: 12-2
124) In creating customer value, it is more important for a company to build relationships with downstream channel partners than with upstream supplier partners.
Answer: FALSE
Diff: 2 Page Ref: 340
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 12-1
125) When shipping large amounts of bulk products such as forest products, coal, sand, or rock over long distances, a company should choose large trucks because of their low cost per ton shipped.
Answer: FALSE
Diff: 2 Page Ref: 362
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 12-5
126) Explain why value delivery network is a more relevant expression to use than the term supply chain or demand chain.
Answer: Supply chain takes a make-and-sell view of the business, using materials and other inputs as the starting point for market planning instead of the needs of target customers. Demand chain takes a sense-and-respond view, starting with the needs of target customers and planning a chain of resources and activities with the goal of creating customer value. However, a demand chain is a step-by-step, linear view of purchase-production-consumption activities. This does not allow for the flexibility made possible by the Internet and other technologies. 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.
Diff: 2 Page Ref: 340-341
AACSB: Reflective Thinking Skills
Skill: Synthesis
Objective: 12-1
127) How do channel members add value to a marketing system?
Answer: 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.
Diff: 2 Page Ref: 342-343
AACSB: Analytic Skills
Skill: Application
Objective: 12-1
128) What are the eight key functions that members of the marketing channel perform?
Answer: Some help to complete transactions by gathering and distributing information, developing and spreading promotions, contacting prospective buyers, matching and shaping the offer to the buyer's needs, and negotiating price and other terms. Others help to fulfill the completed transactions through physical distribution, financing, and risk taking.
Diff: 2 Page Ref: 342-343
AACSB: Analytic Skills
Skill: Application
Objective: 12-1
129) Compare and contrast a conventional distribution channel with a vertical marketing system (VMS).
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, 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. On the other hand, a vertical marketing system is a unified system made up of producers, wholesalers, and retailers. While members of a conventional distribution channel seek to maximize their own profits, members of a vertical marketing system all cooperate because either one member owns the others, one has contracts with the others, or one wields a more power than the others.
Diff: 3 Page Ref: 345
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 12-2
130) Why are multichannel distribution systems gaining popularity today?
Answer: Multichannel distribution systems exist when a single firm sets up two or more marketing channels to reach one or more customer segments. Such a system offers advantages to firms facing large and complex markets. It allows the firms to expand sales and market coverage. It allows firms to tailor their products and services to the specific needs of diverse customer segments. Larger bottom-line profits may result.
Diff: 2 Page Ref: 349
AACSB: Reflective Thinking Skills
Skill: Synthesis
Objective: 12-2
131) How have changes in technology and the growth of online marketing affected the design of marketing channels?
Answer: Changes in technology and the growth of online marketing have increased disintermediation, which is the cutting out of marketing channel intermediaries by product or service producers, or the displacement of traditional intermediaries with radically new types. In many industries, traditional intermediaries are dropping by the wayside. For example, many airlines now sell directly to final buyers, cutting retailers and sales agents from their marketing channels. Online marketers take business from traditional brick-and-mortar retailers.
Diff: 2 Page Ref: 350
AACSB: Use of Information Technology
Skill: Application
Objective: 12-2
132) Compare and contrast the three distribution strategies, providing examples of products for each type of distribution.
Answer: 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.
Diff: 3 Page Ref: 352-353
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 12-3
133) Explain how companies select, motivate, and evaluate channel members.
Answer: When selecting intermediaries, the company should evaluate each channel member's qualifications and select those who best fit its channel objectives. The company should use economic criteria, control issues, and adaptive criteria to analyze each possible channel member. Once selected, channel members must be continuously motivated to do their best. The company must sell not only through the intermediaries but also to and with them. It should work to forge long-term partnerships with channel partners to create a marketing system that meets the needs of both the manufacturer and the partners. The company must also regularly check channel member performance against established performance standards, rewarding intermediaries who are performing well and assisting or replacing weaker ones.
Diff: 2 Page Ref: 353-355
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 12-4
134) Evaluate how public policy affects distribution decisions.
Answer: For the most part, companies are legally free to develop whatever channel arrangement 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. Exclusive territorial agreements in which a producer attempts to keep a dealer from selling outside of a designated territory have become a major legal issue. Producers are free to select their dealers, but they must have legitimate cause to terminate a relationship with a dealer.
Diff: 3 Page Ref: 356-357
AACSB: Ethical Understanding and Reasoning Abilities
Skill: Critical Thinking
Objective: 12-4
135) Why are more and more companies turning to third-party logistics providers (3PLs)?
Answer: A third-party logistics provider is an independent company that performs any or all of the functions required to get a producer's product to market, helping clients to tighten up sluggish, overstuffed supply chains, slash inventories, and get products to customers more quickly and reliably. Companies use third-party logistics providers because getting the product to market is the main focus of 3PLs, so they can often do it more efficiently and at a lower cost. Second, outsourcing logistics frees a company to focus more intensely on its core business. Finally, integrated logistics companies understand increasingly complex logistics environments. For example, third-party logistics partners can be especially helpful to companies attempting to expand their global market coverage.
Diff: 3 Page Ref: 364-365
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 12-5
136) What is the role of marketing intermediaries?
Answer: The role of marketing intermediaries is to transform the assortments of products made by producers into the assortments wanted by consumers.
Diff: 2 Page Ref: 342
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 12-1
137) Give an example of horizontal conflict.
Answer: This type of conflict occurs among firms at the same level of the channel; an example would be two Chevrolet dealers in the St. Louis area that complain that each is being undercut by the other.
Diff: 2 Page Ref: 344
AACSB: Analytic Skills
Skill: Application
Objective: 12-2
138) Give an example of vertical conflict.
Answer: This type of conflict occurs between different levels of the same channel; an example would be conflict created by a manufacturer toward its dealers when deciding to open an online operation.
Diff: 2 Page Ref: 344
AACSB: Analytic Skills
Skill: Application
Objective: 12-2
139) Explain channel power in a conventional distribution channel.
Answer: No channel member has much control over the other members, and no formal means exists for assigning roles and resolving channel conflict.
Diff: 2 Page Ref: 345
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 12-2
140) Explain channel power in a vertical marketing system.
Answer: One channel member owns the others, has contracts with them, or wields so much power that they must all cooperate.
Diff: 2 Page Ref: 345
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 12-2
141) How can a firm benefit from involvement in 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.
Diff: 3 Page Ref: 346
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 12-2
142) How can a firm benefit from participating in a horizontal marketing system?
Answer: Two or more companies at one level join together to follow a new marketing opportunity; by working together, companies can combine their financial, production, or marketing resources to accomplish more than any one company could alone.
Diff: 3 Page Ref: 348
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 12-2
143) Give two examples of multichannel distribution systems.
Answer: Students' answers will vary. Examples could include JC Penney's catalog distribution option and the retail store locations as well as Avon's door-to-door distribution and over-the-counter distribution options.
Diff: 2 Page Ref: 349
AACSB: Analytic Skills
Skill: Application
Objective: 12-2
144) What types of products are intensively distributed?
Answer: These convenience products must be available where and when consumers want them; examples include chewing gum, soft drinks, toothpaste, and candy.
Diff: 2 Page Ref: 352-353
AACSB: Analytic Skills
Skill: Application
Objective: 12-3
145) What types of products are exclusively distributed?
Answer: Exclusive distribution is often used for luxury brands, such as expensive automobiles and prestige clothing.
Diff: 2 Page Ref: 353
AACSB: Analytic Skills
Skill: Application
Objective: 12-3
146) What types of products are selectively distributed?
Answer: With this type of distribution, more than one, but fewer than all, of the intermediaries who are willing to carry a company's products are used. Products include appliances and some name-brand clothing.
Diff: 2 Page Ref: 353
AACSB: Analytic Skills
Skill: Application
Objective: 12-3
147) What are two considerations when selecting intermediaries?
Answer: A company may want to evaluate each channel member's years in business, other lines carried, growth and profit records, cooperativeness, and reputation.
Diff: 3 Page Ref: 353
AACSB: Analytic Skills
Skill: Application
Objective: 12-4
148) When would an exclusive dealing contract be legally problematic?
Answer: An exclusive dealing contract may be illegal if one party has not voluntarily agreed to the contract or if the arrangement substantially lessens competition or tends to create a monopoly.
Diff: 3 Page Ref: 356
AACSB: Ethical Understanding and Reasoning Abilities
Skill: Critical Thinking
Objective: 12-4
149) How can a company benefit through a just-in-time logistics system?
Answer: With such systems, producers and retailers carry only small inventories of parts or merchandise, often only enough for a few days of operations. This creates substantial savings in inventory-carrying and handling costs.
Diff: 2 Page Ref: 361
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 12-5
150) Explain why a firm's suppliers tap into the firm's inventory levels with a vendor-managed inventory system (VMI).
Answer: Some suppliers might actually be asked to generate orders and arrange deliveries for their customers, based on the customers' inventory levels; in these cases, the suppliers must know their customers' inventory levels.
Diff: 3 Page Ref: 363
AACSB: Reflective Thinking Skills
Skill: Synthesis
Objective: 12-5
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