1) ________ are sets of interdependent organizations participating in the process of making a product or service available for use or consumption.
A) Marketing channels
C) Communication channels
D) Sales territories
E) Marketing terrains
2) Which of the following entities in the marketing channel is a merchant?
C) sales agents
E) advertising agencies
3) A(n) ________ is a facilitator who assists in the distribution process.
A) advertising agency
B) sales agent
C) manufacturer's representative
4) A manufacturer uses the company's sales force and trade promotions to carry, promote, and sell products to end users. Which of the following strategies is this manufacturer using?
A) personalization strategy
B) tailoring strategy
C) push strategy
D) pull strategy
E) consumer promotion strategy
5) Total Beverages, a maker of fruit juices and health drinks, recently launched a new brand of packaged drinking water called AquaPure. In order to induce distributors to carry the product, Total offers all its intermediaries a free refrigerator to store bottles of AquaPure. This is an example of a ________.
A) consumer promotion
B) push strategy
C) backward flow
D) reverse flow
E) pull strategy
6) Spike Inc. is a sportswear manufacturer that recently launched its new line of customizable running shoes. The shoes come with a digital component that allows them to adapt to the runner's biomechanics. To promote this new product, Spike launches an advertising campaign and also ropes in a famous athlete to endorse the product. This is an example of a ________.
A) trade promotion
B) reverse flow
C) push strategy
D) pull strategy
E) backward flow
7) When is a pull strategy appropriate?
A) when there is low brand loyalty
B) when consumers are able to perceive differences between brands
C) when brand choice is made in the store
D) when it is a low involvement purchase
E) when the product is an impulse item
8) Using the push strategy is most appropriate when ________.
A) consumers are able to perceive differences between brands
B) the product being sold is an impulse item
C) there is high brand loyalty for the product
D) the product is a high involvement purchase
E) consumers choose the brand before they go to the store
9) A firm uses its sales force to sell to large accounts and outbound telemarketing to sell to medium-sized accounts. The firm is using ________ marketing.
10) A computer manufacturing company allows customers to place orders online, which they can later pick up from a convenient retail location. Which of the following terms best represents this practice?
A) channel integration
B) mass customization
C) online personalization
D) push strategy
E) internal marketing
11) Which of the following is the most accurate description of a value network?
A) A system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings.
B) A system of organizations and resources involved in moving a product from supplier to customer.
C) An arrangement whereby an organization transforms inputs into finished goods.
D) A network that allows an organization take the finished products to the end-users.
E) A communication network that allows an organization to transfer information to end-customers.
12) Companies should first think of the target market and then design the supply chain backward from that point. This strategy is called ________.
A) demand chain planning
B) resource planning
C) external channel planning
D) materials planning
E) strategic business planning
13) Which of the following channel functions constitute only a backward flow?
A) movement of physical goods
B) placing orders with manufacturers
C) persuasive communication
D) storage of physical goods
E) overseeing actual transfer of ownership
14) Identify the channel function that constitutes both backward and forward flow.
A) obtaining funds for financing
B) storage of physical goods
C) persuasive communication
D) movement of physical goods
E) overseeing actual transfer of ownership
15) Producers often shift some functions to intermediaries. Which of the following is the most significant benefit of doing this?
A) It increases customer loyalty.
B) It provides the producer with greater control over operations.
C) It reduces the amount of direct customer interaction.
D) It lowers the producer's costs and prices.
E) It ensures greater information security.
16) Which of the following is an example of a zero-level channel?
A) A company takes online orders from customers and ships the products to them.
B) An organization uses a combination of direct salespeople and sales agencies to increase sales.
C) A company sells its products through wholesalers and retailers.
D) A company sells its products through chains of supermarkets and other large sellers.
E) A large company forms alliances with smaller companies to increase sales coverage.
17) Which of the following entities is present in a zero-level marketing channel?
18) A direct marketing channel is a ________.
A) one-level channel
B) two-level channel
C) zero-level channel
D) three-level channel
E) reverse-flow channel
19) A jobber in a three-level marketing channel is a(n) ________.
A) small-scale wholesaler
B) external broker
C) advertising agent
D) independent evaluator
E) communication channel
20) Which of the following activities is a reverse-flow channel of marketing?
A) raw materials movement
B) product recycling
C) materials ordering
D) finished goods storage
E) customer order placement
21) Toyota has an advantage over Lexus due to the fact that there are more Toyota dealers, which helps customers save on transportation and search costs in buying and repairing an automobile. Which of the following service outputs relates to this competitive advantage?
A) spatial convenience
B) service backup
C) lot size
D) waiting time
E) delivery time
22) As a service output produced by marketing channels, product variety refers to the ________.
A) units the channel permits a customer to purchase at once
B) assortment provided by the marketing channel
C) add-on services provided by the channel
D) ability of a product to provide incremental value
E) degree to which the channel makes it easy for customers to purchase a product
23) Which of the following terms refers to the add-on services, such as credit, delivery, installation, and repairs, provided by a marketing channel?
A) service backup
B) product accessories
C) external products
D) product variety
E) service extensions
24) Atburex is a furniture manufacturing company in the United States. The company provides a sixty day credit period and EMI options to customers and also offers on-site delivery and installation. These special benefits refer to which of the following service outputs?
A) good service backup
B) large product variety
C) spatial convenience
D) large lot size
E) short waiting time
25) Which of the following types of distribution involves severely limiting the number of channel intermediaries?
26) Which of the following allows a firm to maintain control over the service level and obtain more dedicated and knowledgeable selling?
A) selective distribution
B) intensive distribution
C) push strategy
D) exclusive distribution
E) pull strategy
27) Which of the following channel alternatives is most suited to handle complex products and transactions?
A) sales forces
B) the Internet
E) direct mails
28) Which of the following is a major disadvantage of using the Internet as a marketing channel?
A) It is less effective for complex products.
B) It lacks convenience and practicality.
C) It cannot be used to reach a wide audience.
D) It is considered expensive.
E) It causes the company to lose direct contact with customers.
29) Armon Apparels designs, manufactures, and distributes athletic apparel and accessories for men and women. The company has only nine distributors across the United States. These distributors control a nationwide network of 600 retailers. The company does not sell its products through other channels. This is an example of ________ distribution.
30) Exclusive dealing arrangements are mainly used by companies looking for an edge in markets increasingly driven by ________.
C) product variety
D) add-on services
E) spatial convenience
31) An intensive distribution strategy serves well for ________.
A) premium cars
B) commercial trucks
C) private label products
D) industrial equipment
32) Which of the following products is most likely to be sold using an exclusive distribution strategy?
A) designer luggage
C) alcoholic beverages
D) car fuel
33) Which of the following covers payment terms and producer guarantees?
A) conditions of sale
B) pricing policies
C) exclusive dealings
D) mutual services
E) territorial rights
34) ________ call(s) for the producer to establish a schedule of discounts and allowances that intermediaries see as equitable and sufficient.
A) Exclusive dealings
B) Mutual services
C) Territorial rights
D) Price policy
E) Tying agreements
35) Electrobar, a European manufacturer of industrial kitchenware, sells to industrial canteens, restaurants, hotels, and so forth. The company provides a one-year warranty on all products and also allows customers to pay in installments-they pay fifty percent on delivery and the rest as equal installments. This refers to which element in the "trade-relations mix"?
A) price policy
B) conditions of sale
C) distributors' territorial rights
D) exclusive dealings
E) mutual services and responsibilities
36) Which of the following channels is associated with the lowest cost per transaction?
C) retail stores
E) sales force
37) Which marketing channel is associated with the highest value added per sale?
A) retail stores
B) sales force
38) Which of the following problems is most likely when a sales agency is used instead of company salespeople?
A) The company will find it difficult to control the sales process.
B) They do not take title to goods or negotiate purchases or sales.
C) The value-added per sale is the lowest for sales agencies.
D) Agencies will pay less attention to customers who buy the most or in large volumes.
E) Sales agencies are often difficult to access due to strict contractual obligations.
Use of Power (Scenario)
Broomer manufactures fashion apparel for women, men, and children. Its products are in high demand and apparel stores are more than willing to carry and sell Broomer's garments. The company recently introduced a new clothing line named "Inducer", targeted at the youth. However, the new line is not well-received by the market, and sales fail to take off even three months after its launch.
39) In an effort to boost sales, Broomer offers its retailers a higher margin for promoting and selling products from the "Inducer" line to customers. This is an example of ________ power.
40) Because of the acceptance that the other Broomer products have in the market, retailers are willing to stock items from the new "Inducer" line of clothing. This is an example of ________ power.
41) Broomer threatens to withdraw all its other products from the retailers' stores if they are unwilling to push products from the "Inducer" line. This is an example of ________ power.
42) ________ power can be effective, but its exercise produces resentment and can lead the intermediaries to organize countervailing power.
43) A manufacturer offers its intermediaries an extra benefit for performing a promotional activity. This is an example of the use of ________ power.
44) A manufacturer is using legitimate power when it ________.
A) requests a behavior that is warranted under the selling contract
B) threatens to withdraw a resource or terminate a relationship
C) offers intermediaries an extra benefit for performing specific acts or functions
D) makes the intermediaries sell more of a particular product by offering rewards
E) sells more products by making use of its reputation in the market
45) Hewlett-Packard is a highly respected brand. Many retailers want to be associated with the brand because of this reputation. What kind of power does Hewlett-Packard obtain due to this reputation?
46) Which of the following types of power is objectively observable?
A) coercive power
B) legitimate power
C) group power
D) expert power
E) referent power
47) A new firm typically starts as a local operation selling in a fairly circumscribed market by ________.
A) finding and developing new intermediaries
B) using a few existing intermediaries
C) forming partnerships with the market leader
D) creating a special channel
E) forming partnerships with other firms
48) Who will most likely be willing to pay for high-value-added channels?
A) early buyers of a product
B) internal customers of a company
C) small and matured buyers of an industry
D) consumers of low involvement products
E) repeat customers of a product
49) A producer must modify its channel design and arrangements if ________.
A) consumer buying patterns change
B) the competition in the market stabilizes
C) the product is in the growth stage of its life cycle
D) the market size remains unchanged for a particular period
E) the firm's profits stabilize
50) What is the major difference between a conventional marketing channel and a vertical marketing system (VMS)?
A) Elements in a conventional marketing channel act as separate businesses whereas the elements in a VMS act as a unified system.
B) A VMS has many intermediaries whereas a conventional marketing channel has a limited number of intermediaries.
C) A VMS is characterized by an independent producer whereas a conventional marketing channel is characterized by multiple producers.
D) A conventional marketing channel has elements such as retailers and wholesalers whereas these elements are not present in a VMS.
E) Producers have complete control over the other members in a conventional marketing channel whereas this control is minimal in a VMS.
51) A(n) ________ includes the producer, wholesaler(s), and retailer(s) acting as a unified system.
A) parallel marketing channel
B) vertical marketing system
C) extensive marketing channel
D) internal marketing system
E) conventional marketing channel
52) A(n) ________ vertical marketing system combines successive stages of production and distribution under single ownership.
53) The most advanced supply-distributor arrangements for ________ vertical marketing systems rely on distribution programming.
54) Rotter Garder Inc. is a large-scale paint manufacturer and is known for its wide range of decorative paint products and industrial coatings. In addition to making paints, the company also owns and operates the retail stores which sell its products. This is an example of a(n) ________ vertical marketing system.
55) An administered VMS coordinates successive stages of production and distribution through ________.
A) an automated central control unit
B) single ownership
C) the combined efforts of all its members
D) the establishment of contractual obligations
E) the size and power of one of the members
56) A(n) ________ VMS consists of independent firms at different levels of production and distribution, integrating their programs on a contractual basis to obtain more economies or sales impact than they could achieve alone.
57) A group of small sellers take the initiative and organize a new business entity to carry on wholesaling and possibly some production. This initiative is called a(n) ________.
A) retailer cooperative
B) franchise organization
C) area-based cartel
D) sponsored voluntary chain
E) alternate selling channel
58) In a retailer cooperative, ________.
A) profits are equally divided among members
B) members plan their advertising jointly
C) nonmembers cannot buy through the co-op
D) members rely on distribution programming
E) members standardize their selling practices
59) A group of small grocery shops forms a new business entity to buy products directly from manufacturers. The group buys products in bulk which are then distributed among members. This helps the shops obtain better profit margins. Which of the following types of vertical marketing system can be observed here?
60) A franchise organization is an example of a(n) ________ vertical marketing system.
61) In a ________ marketing system, two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity.
A) reverse flow
E) forward flow
62) Which of the following is a major advantage of adding more channels for selling?
A) It helps the company increase its market coverage.
B) It helps the company reduce its fixed costs.
C) It reduces the likelihood of channel conflict.
D) It is the best strategy for selling low-involvement consumer products.
E) It results in economies of scale.
63) ________ channel conflict occurs between channel members at the same level.
64) Alcart Solutions is a large distributor of Aldor phones in Canada. The company distributes products to various retailers in the New Brunswick province. Recently Aldor received several complaints from its retailers that their orders are not delivered on time. They also complain that Alcart offers preferential treatment to some of the other retailers in the region. This is an example of ________ conflict.
65) A franchisee owner is unsatisfied because the manufacturer provides more benefits to a wholesaler. This conflict is an example of a(n) ________ conflict.
66) A manufacturer wants to achieve rapid market penetration through a low-price policy. However, its dealers prefer to work with high margins and pursue short-run profitability. The major reason for this conflict is ________.
A) goal incompatibility
B) unclear roles
C) ambiguous rights
D) differences in perception
E) dependence on the manufacturer
67) General Motors' executives work for a short time in some dealerships, and some dealership owners work in GM's dealer policy department. This strategy helps the company avoid conflicts with its dealers. This is an example of the ________ strategy.
A) employee exchange
B) dual compensation
C) joint membership
68) RX Corp. is a large manufacturer of electronic goods and sells its products through distributors and retailers. In order to keep pace with the growing use of the Internet, the company decides to start selling online. The company faces stiff opposition from its retailers as they believe that this will significantly reduce their profits. The company attempts to eliminate this resistance by offering its retailers commissions for processing and delivering orders received via the Web. This is an example of which of the following conflict resolution strategies?
A) dual compensation
B) joint membership
E) strategic pricing
69) Co-optation is an effort by one organization to win the support of the leaders of another by ________.
A) including them in advisory councils
B) engaging in mediation and arbitration
C) encouraging joint memberships in trade associations
D) encouraging employee exchanges
E) offering strategic justifications
70) Winstar is a large scale manufacturer which has more than a hundred partners across the globe. When making decisions concerning distribution and channel optimization, the company invites members from its channel partners to be part of its advisory committee. This helps the company maintain harmony with its partners. Which of the following conflict resolution techniques is Winstar using?
A) diplomatic counselling
E) joint membership
71) Which of the following channel conflict resolution techniques is used only if everything else proves ineffective?
A) legal recourse
E) superordinate goals
72) Which of the following is the most complete and accurate description of a pure-click company?
A) These are companies that launch a Web site without any previous existence as a firm.
B) These firms' business models are based on advertising revenue.
C) These are established companies that have an online site for selling products.
D) These companies get paid every time a user visits their Web site.
E) These companies sell online space to other Web sites and are paid for the service.
73) A large retail chain in the United States decides to expand its operations by adding an online site for e-commerce. This is called a(n) ________ company.
74) An Internet service provider (ISP) is a(n) ________ company.
B) brick and click
75) JSE Securities Exchange is the largest stock exchange in Africa. The JSE provides a market where securities can be traded freely under a regulated procedure. The company acts as an intermediary between the traders. JSE is an example of a(n) ________.
A) internal broker
C) customer community
D) market maker
E) third party arbitrator
76) Exxon Consulting, works as an agent on behalf of business consumers to collect information on various industrial products. When faced with buying decisions, businesses can approach Exxon to obtain detailed information on the various options available to them. The company earns revenue by selling such information to various customers. Marten Consulting can be called a(n) ________.
B) market maker
C) customer community
D) third party arbitrator
77) Consumer surveys suggest that one of the most significant inhibitors of online shopping is the absence of ________.
A) pleasurable experiences
B) competitive prices
C) adequate technical information
D) after-sales service
E) facilities to compare offerings
78) Which of the following is a major threat facing the brick-and-mortar manufacturers when they add an e-commerce channel?
A) It creates the possibility of a backlash from the existing intermediaries.
B) It increases the likelihood of product cannibalization.
C) Successful implementation leads to a significant increase in operational costs.
D) It significantly increases the resource requirements of the organization.
E) E-commerce channels often have low potential for attracting customers.
79) Which of the following is an example of a brick-and-click company?
A) IFB Industries, a company that sells products using various channels such as Internet, retailers, direct outlets, and franchisees.
B) Opera, a Web browser and Internet suite developed by Opera Software, performs common tasks such as displaying Web sites and sending and receiving e-mail messages.
C) Atrutron, a company that offers its customers access to the Internet using data transmission technology.
D) eBay Inc., an American company, facilitates online auctions and shopping to people and businesses across the globe to buy and sell a broad variety of goods and services.
E) Yahoo! Inc., an American corporation, provides services via the Internet such as directories, e-mail, news, advertising, online mapping, and so on.
80) M-commerce refers to ________.
A) conducting business using mobile channels
B) the use of mass media communications to attract customers
C) providing mobile and on-site services to customers
D) the use of a specific medium to communicate with prospects
E) using the Internet as a medium for doing business
81) Marketing channels are the set of pathways a product or service follows after production, culminating in purchase and consumption by the final end user.
82) Sales agents and brokers are called facilitators in a marketing channel.
83) A pull strategy is particularly appropriate when there is low brand loyalty in a category, brand choice is made in the store, the product is an impulse item, and product benefits are well understood.
84) Companies should first think of the target market and then design the supply chain backward from that point. This strategy is called demand chain planning.
85) A marketing channel overcomes the time, place, and possession gaps that separate goods and services from those who need or want them.
86) Marketing channel functions such as storage and movement and communications constitute a backward flow of activities.
87) All functions in a marketing channel use scarce resources and can be shifted among channel members.
88) A zero-level marketing channel typically uses a wholesaler and a retailer.
89) The flow of materials to refurbish products for resale constitutes a reverse flow.
90) Lot size refers to the total number of units a channel can transmit from the manufacturer's place to the service outlet.
91) Add-on services such as credit, delivery, installation, and repairs provided by the marketing channel are referred to as service backup.
92) Products such as heating and cooling systems are usually sold and maintained by the company or by franchised dealers.
93) When economic conditions are depressed, producers want to move goods to market using longer channels.
94) Intensive distribution relies on only some of the intermediaries willing to carry a particular product.
95) Intensive distribution is becoming a mainstay for specialists looking for an edge in markets increasingly driven by price.
96) An intensive distribution strategy serves well for products such as snack foods and soft drinks.
97) Distributors' territorial rights define the terms under which the producer will enfranchise other distributors.
98) Manufacturers can obtain greater control over the selling process by using a sales agency.
99) After a company has chosen a channel system, it must select, train, motivate, and evaluate individual intermediaries for each channel.
100) Channel power is the ability to alter channel members' behavior so they take actions they would not have taken otherwise.
101) A manufacturer is using reward power when it offers intermediaries an extra benefit for performing specific acts or functions.
102) When a manufacturer requests a behavior that is warranted under the contract, the manufacturer is using coercive power.
103) A manufacturer obtains referent power when it has special knowledge that intermediaries value.
104) Coercive and referent power are subjective and depend on the ability and willingness of parties to recognize them.
105) In competitive markets with low entry barriers, the optimal channel structure will inevitably change over time.
106) Early buyers might be willing to pay for high-value-added channels, but later buyers will switch to lower-cost channels.
107) The first step in global channel planning is to get close to customers.
108) A conventional marketing channel includes the producer, wholesalers, and retailers acting as a unified system.
109) Vertical marketing systems achieve economies through size, bargaining power, and elimination of duplicated services.
110) A corporate vertical marketing system combines successive stages of production and distribution under single ownership.
111) Advanced supply-distributor arrangements for administered vertical marketing systems do not rely on distribution programming.
112) Retailer cooperatives allow nonmember retailers to buy through them and share the profits.
113) Unrelated companies put together resources or programs in horizontal marketing systems.
114) Adding more marketing channels increases the channel cost of selling.
115) Conflicts between various franchisees of a company are an example of vertical channel conflict.
116) Multichannel conflicts are common when the members of one channel get a lower price based on larger-volume purchases.
117) Dual compensation pays existing channels for sales made through new channels.
118) Exclusive dealings and tying agreements are illegal and prohibited by law.
119) Brick-and-click companies are those that have launched a Web site without any previous existence as a firm.
120) Price pressure will be more for undifferentiated products than differentiated products.
Answer: Marketing channels are sets of interdependent organizations participating in the process of making a product or service available for use or consumption. They are the set of pathways a product or service follows after production, culminating in purchase and consumption by the final end user.
Some intermediaries—such as wholesalers and retailers—buy, take title to, and resell the merchandise; they are called merchants. Others—brokers, manufacturers' representatives, sales
agents—search for customers and may negotiate on the producer's behalf but do not take title to
the goods; they are called agents. Still others—transportation companies, independent warehouses,
banks, advertising agencies—assist in the distribution process but neither take title to goods nor
negotiate purchases or sales; they are called facilitators.
121) What are marketing channels? Briefly explain some of the different types of intermediaries.
Answer: A company can be seen as being at the center of a value network, a system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings. A value network includes a firm's suppliers and its suppliers' suppliers, and its immediate customers and their end customers. The value network includes valued relationships with others such as university researchers and government approval agencies. A company needs to orchestrate these parties in order to deliver superior value to the target market.
Managing a value network means making increasing investments in information technology (IT) and software. Firms have introduced supply chain management (SCM) software and invited such software firms as SAP and Oracle to design comprehensive enterprise resource planning (ERP) systems to manage cash flow, manufacturing, human resources, purchasing, and other major functions within a unified framework.
122) Explain the concept of a value network.
Answer: Some of the functions that the members of a marketing channel perform (storage and movement, title, and communications) constitute a forward flow of activity from the company to the customer; other functions (ordering and payment) constitute a backward flow from customers to the company. Still others (information, negotiation, finance, and risk taking) occur in both directions.
123) What are the various functions performed by members of a marketing channel? Provide examples.
Answer: A zero-level channel, also called a direct marketing channel, consists of a manufacturer selling directly to the final customer. The major examples are door-to-door sales, home parties, mail order, telemarketing, TV selling, Internet selling, and manufacturer-owned stores.
A one-level channel contains one selling intermediary, such as a retailer. A two-level channel contains two intermediaries. In consumer markets, these are typically a wholesaler and a retailer. A three-level channel contains three intermediaries. In the meatpacking industry, wholesalers sell to jobbers, essentially small-scale wholesalers, who sell to small retailers.
124) Briefly explain the various levels of marketing channels.
Answer: Channels produce five service outputs: (1) Lot size: The number of units the channel permits a typical customer to purchase on one occasion. (2) Waiting and delivery time: The average time customers wait for receipt of goods. Customers increasingly prefer faster delivery channels. (3) Spatial convenience: The degree to which the marketing channel makes it easy for customers to purchase the product. (4) Product variety: The assortment provided by the marketing channel. Normally, customers prefer a greater assortment because more choices increase the chance of finding what they need, although too many choices can sometimes create a negative effect. (5) Service backup: Add-on services (credit, delivery, installation, repairs) provided by the channel. The greater the service backup, the greater the work provided by the channel.
125) Briefly explain the various service outputs that marketing channels produce.
Answer: Exclusive distribution: This strategy focuses on severely limiting the number of intermediaries. It's appropriate when the producer wants to maintain control over the service level and outputs offered by the resellers, and it often includes exclusive dealing arrangements. By granting exclusive distribution, the producer hopes to obtain more dedicated and knowledgeable selling. It requires a closer partnership between seller and reseller and is used in the distribution of new automobiles, some major appliances, and some women's apparel brands.
Selective distribution: This distribution strategy relies on only some of the intermediaries willing to carry a particular product. Whether established or new, the company does not need to worry about having too many outlets; it can gain adequate market coverage with more control and less cost than intensive distribution.
Intensive distribution: This strategy places the goods or services in as many outlets as possible. This strategy serves well for snack foods, soft drinks, newspapers, candies, and gum-products consumers buy frequently or in a variety of locations.
126) Explain the three distribution strategies based on the number of intermediaries.
Answer: Channel power is the ability to alter channel members' behavior so they take actions they would not have taken otherwise.
Coercive power: A manufacturer threatens to withdraw a resource or terminate a relationship if intermediaries fail to cooperate. This power can be effective, but its exercise produces resentment and can lead the intermediaries to organize countervailing power.
Reward power: The manufacturer offers intermediaries an extra benefit for performing specific acts or functions. Reward power typically produces better results than coercive power, but intermediaries may come to expect a reward every time the manufacturer wants a certain behavior to occur.
Legitimate power: The manufacturer requests a behavior that is warranted under the contract. As long as the intermediaries view the manufacturer as a legitimate leader, legitimate power works.
Expert power: The manufacturer has special knowledge the intermediaries' value. Once the intermediaries acquire this expertise, however, expert power weakens. The manufacturer must continue to develop new expertise so intermediaries will want to continue cooperating.
Referent power: The manufacturer is so highly respected that intermediaries are proud to be associated with it. Companies such as IBM, Caterpillar, and Hewlett-Packard have high referent power.
Coercive and reward power are objectively observable; legitimate, expert, and referent power are more subjective and depend on the ability and willingness of parties to recognize them.
127) What is channel power? Explain the various types of channel powers.
Answer: International markets pose distinct challenges, including variations in customers' shopping habits, but opportunities at the same time. Behavior of markets and preferences for intermediaries differ across countries. Foreign markets provide an opportunity for growth and expansion. Many pitfalls also exist in global expansion, and retailers must also be able to defend their home turf from the entry of foreign retailers.
128) Comment on the challenges and opportunities that international markets pose.
Answer: A vertical marketing system includes the producer, wholesaler(s), and retailer(s) acting as a unified system. One channel member, the channel captain, owns or franchises the others or has so much power that they all cooperate. There are three types of VMSs: corporate, administered, and contractual.
A corporate VMS combines successive stages of production and distribution under single ownership.
An administered VMS coordinates successive stages of production and distribution through the size and power of one of the members. Manufacturers of dominant brands can secure strong trade cooperation and support from resellers.
A contractual VMS consists of independent firms at different levels of production and distribution, integrating their programs on a contractual basis to obtain more economies or sales impact than they could achieve alone.
129) What is a vertical marketing system (VMS)? What are the various types VMSs?
130) Differentiate between pure-click companies and brick-and-click companies.
Answer: Pure-click companies are those that have launched a Web site without any previous existence as a firm, while brick-and-click companies are existing companies that have added an online site for information or e-commerce.
There are several kinds of pure-click companies: search engines, Internet service providers (ISPs), commerce sites, transaction sites, content sites, and enabler sites. Brick-and-click companies are formed by adding an e-commerce channel to an existing business.
Answer: Considering that Sweet Treats is a startup, its products are likely to have low brand loyalty. Moreover, its products are likely to be impulse items. Thus, a push strategy would be more suitable.
131) Sweet Treats is a startup confectionery manufacturer that sells chocolates, boiled sweets, toffees, marshmallows, jelly candies, and so on. Should the firm adopt a push or a pull strategy? Explain your answer.
Answer: The company is using hybrid channels or multichannel marketing which involves the use of two or more marketing channels to reach customer segments. In multichannel marketing, each channel targets a different segment of buyers, or different need states for one buyer, and delivers the right products in the right places in the right way at the least cost.
132) The Norticon Group provides and manages computers and network systems for businesses and communities. Norticon sells its products through various means-it uses its sales force to sell to large customers and telemarketing to sell to smaller customers. The company also sells its products via the Internet. Briefly explain the marketing approach being used by the company.
Answer: The company can increase its sales by targeting different segments of customers through various channels. Multichannel marketing allows the company to deliver the right products in the right places in the right way at the least cost.
133) Garolds Stores operates as a low price retailer. It offers home fashion products, such as wall decor, frames, candles, bath and bedding products, furniture, home accents, and kitchen products. The firm has showrooms and retail stores across United States. Customers can buy products in three different ways: (1) they can place orders online and have the products shipped to their homes; (2) they can buy directly from the showrooms and retail outlets; or (3) they can place orders online and pick them up from the nearest showroom. What are the benefits that Garolds Stores could achieve by using various channels to sell to customers?
Answer: This strategy is called demand chain planning. This helps the companies have a clear focus on the target market.
134) Cortron Consultants provides business consulting services for startups. It helps customers design their supply chains by first evaluating the target market and then proceeds backward from that point. What is this strategy of reverse design called? Briefly explain.
Answer: The storage and movement of books from the company to the customer constitutes a forward flow. Ordering books and paying for them constitute a backward flow from customers to the company. Sharing information and risk taking are activities that occur in both directions.
135) Members of a marketing channel perform three types of functions. Provide examples of these three functions in the context of a publishing company that publishes books and magazines.
Answer: Suppliers —>Transporters -> Warehouses-> Dell ->Transporters-> Customers
136) Dell computers is a manufacturer of computers. Dell accepts orders for computers online and ships the products to the customer. Depict the likely physical flow of materials in this case.
Answer: The company is using a zero-level channel, i.e. the manufacturer sells directly to the final customer. This is the shortest channel.
137) Eureka Forbes, an Asian consumer appliances company, sells its vacuum cleaners through door-to door sales. This allows the company to obtain a high conversion ratio. Comment on the length of the channel in the case of Eureka Forbes' vacuum cleaners.
Answer: Lot size—Customers may be allowed to book as many tickets as they want, subject to availability.
Waiting and delivery time - This would refer to the average time customers take to book their tickets.
Spatial convenience—This refers to the ease of booking tickets. The location of Orion's retail ticketing outlets and whether the company offers online ticket booking services would be classified under spatial convenience.
Product variety—This refers to the assortment provided by the marketing channel in terms of travel destinations, holiday packages, hotel bookings, car rental services, and the like.
Service backup—This refers to the add-on services provided by the channel such as credit, discounts, delivery, refunds, and so on.
138) Orion Airlines is an American airline that provides domestic and international air transport services. Explain the five service outputs provided by marketing channels with reference to Orion.
Answer: The company can use exclusive distribution. It severely limits the number of intermediaries and reduces costs. This would help the company maintain greater control over service levels.
139) Ravake is a manufacturer of high-end designer apparel. Competition in the apparel industry is very severe and the market is driven by price. What distribution strategy would be best suited to help Ravake obtain an edge over its competitors?
Answer: The company has to use intensive distribution, which places the goods or services in as many outlets as possible. This strategy serves well for products consumers buy frequently or in a variety of locations.
140) National Beverage Corp. produces and distributes a wide range of beverages. It offers a selection of flavored soft drinks, juices, sparkling waters, energy drinks, nutritionally-enhanced waters, and other specialty beverages. What distribution strategy will be most suitable for the company's products?
Answer: Apple is so highly respected that intermediaries are proud to be associated with it. This gives Apple referent power.
141) Apple Inc., together with subsidiaries, designs, manufactures, and markets personal computers, mobile phones and media devices. It also sells software, services, and third-party digital content. Apple is a highly respected brand across the globe. What kind of channel power does this respect give Apple?
Answer: Here, the manufacturer is using coercive power. This power can be effective, but its exercise produces resentment and can lead the intermediaries to organize countervailing power.
142) Atronix Solutions is a major manufacturer of electronic measuring devices in the U.S. The company often threatens to terminate its relationship with its intermediaries if they do not agree with its terms and conditions. What channel power does Atronix use? What are its effects?
Answer: The firm is likely to start as a local operation selling in a fairly circumscribed market, using a few existing intermediaries. At this stage, it is often difficult to convince the available intermediaries to handle the firm's line. If the firm is successful, it might branch into new markets with different channels. In smaller markets, the firm might sell directly to retailers; in larger markets, through distributors.
143) A group of entrepreneurs is planning to start a food processing company. Comment on the likely evolution of the company's marketing channels.
Answer: Each entity in a conventional channel is a separate business seeking to maximize its own profits, even if this goal reduces profit for the system as a whole. A vertical marketing system, by contrast, acts as a unified system. This would make the company more profitable. VMSs achieve economies through size, bargaining power, and elimination of duplicated services.
144) DMM Industries, a manufacturer of composite metal products, sells its products using a conventional marketing channel. The company decides to adopt a vertical marketing system to improve its performance. What advantages could this provide?
Answer: The company is using a corporate VMS. A corporate VMS combines successive stages of production and distribution under single ownership.
145) Altrudex, Inc., is involved in the manufacture, distribution, and sale of consumer electronics. The company sources over half the products it sells from companies it partly or wholly owns. It also owns a large retail chain and sells its products through them. What marketing system is Altrudex using?
Answer: True Value is a type of contractual VMS. It is a retail cooperative wherein retailers take the initiative and organize a new business entity to carry on wholesaling and possibly some production.
146) True Value is a retailer-owned cooperative with over 4,000 independent retail locations worldwide. Members of True Value own their individual stores and operate independently. True Value helps its members procure materials at a low cost. What kind of a marketing system is True Value? Explain briefly.
Answer: This is an example of horizontal channel conflict, between channel members at the same level.
147) Flash Designs is an apparel manufacturing company and has adopted a franchising model to distribute and sells its garments. The company recently received complaints from a particular franchisee that another competing franchisee was infringing on its territory. What type of conflict is this?
Answer: This is a case of multichannel conflict. It exists when the manufacturer has established two or more channels that sell to the same market.
148) Crafted Jewels is a jewelry manufacturer that sells its designs to various jewelry retailers. The retailers often complain that the company's online store acts as a competitor and reduces their profitability. What type of conflict is this? Briefly explain.
Answer: This strategy of managing channel conflict is called an employee exchange which involves the exchange of persons between two or more channel levels. Thus participants can grow to appreciate each other's point of view.
149) UltraMotion Pictures produces and distributes music and television entertainment in the United States. The company distributes music in partnership with a large music retailer, Fromen Tunes. Fromen executives often work for a short time with UltraMotion and some of the UltraMotion executives work at the retail outlets to study Fromen's operations. This strategy minimizes the conflicts between partners. What strategy is being used here? Briefly explain.
Answer: eBay is a pure-click company whereas Procter & Gamble is a brick-and-click company. Pure-click companies are companies that have launched a Web site without any previous existence as a firm. Brick-and-click companies are existing companies that have added an online site for information or e-commerce.
150) eBay Inc. is an online auction and shopping company. Procter & Gamble is an American multinational corporation that manufactures a wide range of consumer goods. Both companies sell their products online. How are these companies different from a marketing channel perspective?