CH-13 Marketing Channels and Supply-Chain Management – Foundations of Marketing : Exam Guide

Chapter 13 - Marketing Channels and Supply-Chain Management 1. What is supply chain management? List the activities involved in it. Answer: Supply-chain management is the set of approaches used to integrate the functions of operations management, logistics management, supply management, and marketing channel management so products are produced and distributed in the right quantities, to the right locations, and at the right time. It includes activities like manufacturing, research, sales, advertising, and shipping. Supply-chain management involves all entities that facilitate product distribution and benefit from cooperative efforts, including suppliers of raw materials and other components to make goods and services, logistics and transportation firms, communication firms, and other firms that indirectly take part in marketing exchanges. 2. How do marketing channel decisions influence the rest of the marketing mix? Answer: Channel decisions are critical because they determine a product’s market presence and accessibility. Without marketing channel operations that reach the right customers at the right time, even the best goods and services will not be successful. Marketing channel decisions have strategic significance because they generally entail long-term commitments among a variety of firms (e.g., suppliers, logistics providers, and operations firms). Once a firm commits to a distribution channel, it is difficult to change. Marketing channels also serve multiple functions, including creating utility and facilitating exchange efficiencies. 3. What are marketing intermediaries, and what are the activities that they perform? Answer: Marketing intermediaries link producers to other intermediaries or to ultimate consumers through contractual arrangements or through the purchase and resale of products. Marketing intermediaries play key roles in customer relationship management, not only through their distribution activities but by maintaining databases and information systems to help all members of the marketing channel maintain effective customer relationships. These marketing intermediaries facilitate exchanges, set promotional objectives, establish pricing policies, and encourage physical distribution. 4. Name and define the four types of utility created by marketing channels. Answer: Marketing channels create four types of utility: time, place, possession, and form. Time utility refers to making products available when the customer wants them. Place utility is making products available in locations where customers wish to purchase them. Possession utility means that the customer has access to the product to use or to store for future use. Possession utility can occur through ownership or through arrangements that give the customer the right to use the product, such as a lease or rental agreement. Channel members sometimes create form utility by assembling, preparing, or otherwise refining the product to suit individual customer needs. 5. How do marketing channels increase efficiency in exchange situations? Answer: Marketing intermediaries facilitate exchange efficiencies, often reducing the costs of exchanges by performing certain services and functions. Even if producers and buyers are located in the same city, there are costs associated with exchanges of goods and services. Marketing intermediaries can reduce these expenses by performing services and functions efficiently. They provide valuable assistance because of their access to and control over important resources used in the proper functioning of marketing channels. 6. Define an industrial distributor and state some of the disadvantages of using industrial distributors. Answer: An industrial distributor is an independent business that takes title to products and carries inventories. Industrial distributors usually sell standardized items, such as maintenance supplies, production tools, and small operating equipment. Industrial distributors may be difficult to control because they are independent firms. They often stock competing brands, so a producer cannot depend on them to promote its brand aggressively. Furthermore, industrial distributors incur expenses from maintaining inventories and are less likely to handle bulky or slow-selling items, or items that need specialized facilities or extra selling efforts. 7. When is selective distribution said to be at a desirable level of market coverage? Answer: Selective distribution is desirable when a special effort, such as customer service from a channel member, is important to customers. Shopping products require differentiation at the point of purchase. Selective distribution is often used to motivate retailers to provide adequate service. Dealers can offer higher-quality customer service when products are distributed selectively, such as Apple products, which are only distributed through authorized Apple dealers and Apple stores, and some cosmetics, which are only available in certain department stores. 8. List the three major levels of market coverage and define each of them. Answer: There are three levels of market coverage: intensive, selective, and exclusive. Different types of products are best handled using different intensities of market coverage. In choosing intensive distribution, producers strive to make a product available to all possible dealers. In selective distribution, only some outlets in an area are chosen to distribute a product that requires more consideration and effort on the part of the consumer before purchase. Exclusive distribution is used for more expensive items and usually gives a single dealer rights to sell a product in a large geographic area. 9. Describe the horizontal and vertical channel integration. Answer: Vertical channel integration combines two or more stages of the channel under one management. This may occur when one member of a marketing channel purchases the operations of another member, or simply performs the functions of another member, eliminating the need for that intermediary. Vertical channel integration represents a more progressive approach to distribution in which channel members become extensions of one another as they are combined under a single management. Combining organizations at the same level of operation under one management constitutes horizontal channel integration. An organization may integrate horizontally by merging with other organizations at the same level in the marketing channel. Although horizontal integration permits efficiencies and economies of scale in purchasing, marketing research, advertising, and specialized personnel, it is not always the most effective method of improving distribution. 10. Describe the three forms of vertical marketing systems. Answer: Most vertical marketing systems take one of three forms: corporate, administered, or contractual. A corporate VMS combines all stages of the marketing channel, from producers to consumers, under a single owner. In an administered VMS, channel members are independent, but informal coordination achieves a high level of inter-organizational management. A contractual VMS is the most popular type of vertical marketing system. Channel members are linked by legal agreements spelling out each member’s rights and obligations. 11. Discuss the importance of order processing in the physical distribution system. Answer: Order processing is the receipt and transmission of sales order information. Computerized order processing provides a platform for information management, allowing all supply chain members to increase their productivity. When carried out quickly and accurately, order processing contributes to customer satisfaction, decreased costs and cycle time, and increased profits. Order processing entails three main tasks: order entry, order handling, and order delivery. 12. Explain the electronic data interchange (EDI) method. Answer: The electronic data interchange (EDI) uses computer technology to integrate order processing with production, inventory, accounting, and transportation. Within the supply chain, EDI functions as an information system that links marketing channel members and outsourcing firms together. It reduces paperwork for all members of the supply chain and allows them to share information on invoices, orders, payments, inquiries, and scheduling. 13. Why is the choice of warehouse facilities an important strategic consideration? Answer: Choosing appropriate warehouse facilities is an important strategic consideration because they allow a company to reduce transportation and inventory costs and improve service to customers. The wrong type of warehouse can lead to inefficient physical distribution and added costs. Warehouses fall into two general categories: private and public. In many cases, a combination of private and public facilities provides the most flexible warehousing approach. 14. Identify the various transportation modes and describe in detail two modes of transportation. Answer: The basic transportation modes for moving physical goods are railroads, trucks, waterways, airways, and pipelines. Each has distinct advantages. Many companies adopt physical handling procedures that facilitate the use of two or more modes in combination. Trucks provide the most flexible schedules and routes of all major transportation modes in the United States because they can go almost anywhere. Trucks are more expensive and somewhat more vulnerable to bad weather than trains. They are also subject to size and weight restrictions on the loads they carry. Waterways are the cheapest method of shipping heavy or low-value, nonperishable goods. Water carriers offer considerable capacity. The vast majority of international cargo is transported by water at least part of the way. However, many markets are inaccessible by water transportation and must be supplemented by rail or truck. Droughts and floods also may create difficulties for users of inland waterway transportation. 15. A set of approaches used to integrate the functions of operations management, logistics management, and marketing channel management so products are produced and distributed in the right quantities, to the right locations, and at the right time is known as: A. supply-chain management. B. vertical channel integration. C. industrial management. D. industrial distribution. E. marketing management. Answer: A 16. Which of the following is true about supply-chain management? A. Supply chains for durable goods typically begin at raw materials and end at the retailer. B. Supply chains for durable goods typically begin at suppliers and end at the retailer. C. Supply chains for durable goods typically begin at raw materials and end at the customer. D. Supply chains for durable goods typically begin at suppliers and end at the customer. E. Supply chains for durable goods typically begin at retailers raw materials and end at the customer. Answer: C 17. Greenmart Corp. is working with its suppliers, using tools such as electronic billing, purchase order verification, and bar code technology, to integrate data used to improve overall performance. This is an example of: A. supply-chain management. B. a vertical marketing system. C. a horizontal marketing system. D. channel conflict. E. dual distribution. Answer: A 18. Revlon, a maker of cosmetics and skin-care products, is effectively involved in the management of its supply chain. It coordinates activities with both its suppliers and its distributors in order to produce and deliver products that its customers demand. Which of the following statements is most likely to be true about the impact of Revlon’s supply-chain management? A. Revlon demonstrates a product firm orientation which increases its competitiveness. B. Revlon demonstrates a market firm orientation which increases its competitiveness. C. Revlon demonstrates a sales firm orientation which increases its competitiveness. D. Revlon’s supply­chain management overlaps with all of the firm’s marketing functions but not its financial functions. E. Revlon’s primary objective is to maximize efficiency in its supply­chain. Answer: B 19. A channel of distribution is defined as a group of individuals and organizations that: A. consumes about one-half of every dollar spent on products in the United States. B. directs the flow of products from producers to customers. C. links producers to other marketing intermediaries. D. takes title to products and resells them. E. manages transportation and warehousing functions. Answer: B 20. The driving force behind marketing channel decisions should be: A. convenience. B. cost reduction. C. environmental concerns. D. customer satisfaction. E. quality. Answer: D 21. Which of the following links producers to consumers through the purchase and reselling of products or contractual agreements? A. Marketing intermediaries B. Distributors C. Suppliers D. Middle marketers E. Marketing channels Answer: A 22. Josh is the vice-president for the 20th Century Fox, a movie production company. He has the responsibility for managing the firm’s marketing channels and its relationships with its marketing intermediaries. As a manager of its marketing intermediaries, part of Josh’s role is to: A. link movie wholesalers to other wholesalers. B. link film producers to other middlemen. C. always oversee the sale of movies to retailers. D. maintain quality of the movie product. E. engage in short-term commitments to the least expensive channel member. Answer: B 23. Channel decisions are important to marketers mostly because: A. they are relatively flexible to change quickly. B. consumers value reasonable prices delivered through marketing channels. C. they dictate what promotional strategies companies should use. D. many businesses are marketing intermediaries. E. they involve long-term commitments and affect customer accessibility. Answer: E 24. If Nokia decides to make changes in its marketing channels, the strategic significance is that channel decisions are: A. long-term commitments. B. short-term commitments. C. easier to change than prices. D. easier to change than promotion. E. impossible to change. Answer: A 25. U.S. banks provide their banking services through brick and mortar sites, by phone, and through on-line access. These various ways in which a customer can access their account information is called _____________ A. possession utility B. place utility C. time utility D. possession utility E. information utility Answer: B 26. Possession utility is best described as: A. products being available in places where the customers wish to purchase them. B. the customer having access to the product to use now or store and use later. C. having a company's products available when a customer needs them. D. being able to legally own a product despite restrictions on trade. E. getting the products to the consumers in as short of time as possible for ownership. Answer: B 27. Consumers receive the benefits of place utility when: A. they have to travel excessively to obtain products they want. B. retailers remain open 24 hours a day. C. they can stock up on products they need but not use them right away. D. they make purchases with credit and debit cards. E. products are available in locations where consumers want to buy them. Answer: E 28. In a simple economy of five producers and five consumers, there would be ________ transactions possible without an intermediary and ten transactions possible with one intermediary. A. ten B. thirty C. fifteen D. sixteen E. twenty-five Answer: E 29. Eliminating a wholesaler from a marketing channel will: A. cut costs and lower prices. B. not eliminate the functions performed by that wholesaler. C. eliminate the functions performed by that wholesaler. D. lead to lower costs but higher prices. E. reduce channel conflict. Answer: B 30. When three buyers purchase the products of three producers, nine transactions are required. If one intermediary serves both producers and buyers, the number of possible transactions is: A. fifteen. B. five. C. eighteen. D. six. E. twenty. Answer: D 31. Without wholesalers and other intermediaries: A. most products would be much less expensive because fewer companies would be handling the product. B. products would be cheaper because the functions of intermediaries would be eliminated. C. products would likely be more expensive due to the use of less efficient channel members. D. products would never be able to make it to the ultimate consumer at any price without passing through intermediaries. E. many products would be more expensive because retailers would expect more profit. Answer: C 32. Select Comfort, a producer of adjustable air mattresses, sells most of its products through direct mail sales and on its website. This channel would be classified as: A. direct distribution. B. producer, retailer, consumer. C. telemarketing. D. direct-marketing. E. indirect marketing. Answer: D 33. Netflix sells its movie services using its website, while Red Box sells its movie services using vending machines. From a customer’s point of view, which of the following is true about Netflix and Red Box? A. Netflix is using a direct-marketing channel and Red Box is using a type of a slightly shorter channel. B. Netflix is using a direct-marketing channel and Red Box is using a type of an agent. C. Netflix is using an Internet wholesaler and Red Box is using a type of retailer. D. Netflix is using an Internet wholesaler and Red Box is using a slightly longer channel. E. Netflix is using a direct-marketing channel and Red Box is using a type of retailer. Answer: E 34. When Sophie buys organic produce for her household using a channel with only one intermediary, that intermediary is classified as a: A. retailer. B. wholesaler. C. broker. D. functional middleman. E. producer. Answer: A 35. Manufacturers of convenience products such as chewing gum reach customers through thousands of retailers. Which of the following marketing channels do these manufacturers most likely to use? A. Producer, consumer B. Producer, wholesaler, retailer, consumer C. Producer, wholesaler, agent, retailer, consumer D. Producer, retailer, consumer E. Retailer, consumer Answer: B 36. Caruthers Paint Manufacturing Company buys the chemicals it needs for producing its products from a chemical producer, Roth Chemicals. In this instance, through which of the following types of channels are the chemicals being distributed to Caruthers? A. Industrial distributor B. Direct distribution C. Retail D. Wholesaler-sponsored E. Producer Answer: B 37. River City, Inc. is an independent business that takes title to products and carries inventories. River City, Inc. is most likely a(n): A. industrial distributor. B. intermediary. C. agency. D. wholesaler. E. producer. Answer: A 38. Jeff Wood's company buys machine tools from large producers and sells them to several Midwestern manufacturing companies. The company Jeff works for carries inventories of the tools, which reduces capital requirements for the producers. Jeff's company is an example of a(n) ____________ in a distribution channel. A. direct distributor B. manufacturers' agent C. industrial distributor D. producers' agent E. wholesalers' agent Answer: C 39. Which of the following is most likely to be a product stocked solely by an industrial distributor? A. Tires B. Wind turbines C. Roofing nails D. Kitchen countertops E. Office supplies Answer: B 40. Which of the following describes a disadvantage of using industrial distributors? A. Industrial distributors possess considerable market information. B. Their marketing exchange relationships are much focused. C. They are unlikely to handle bulky items or items that are slow sellers. D. Industrial distributors sell specific brands aggressively. E. Industrial distributors acquire title to the products and take possession. Answer: C 41. Which of the following is an advantage of using an industrial distributor? A. These firms are easy to control because they work directly for the producers. B. Inventory holding costs are minimized because they can store inventory very cheaply. C. They are closer geographically to all of the producers' customers. D. They possess a high level of technical knowledge about their products. E. They help reduce a producer's financial burdens by extending credit to customers. Answer: E 42. A producer is not likely to receive ____________ from an industrial distributor. A. selling activities in local markets B. market information about consumers C. aggressive promotion of its brand D. reduced capital requirements E. a reduced financial burden from customers Answer: C 43. A channel that includes both a manufacturer’s agent and an industrial distributor is appropriate when: A. the firm wants specialized personnel to follow up the work of the sales force and expand the business. B. the marketer wishes to enter a new geographic market but does not wish to expand the existing sales force. C. only one or two channels of distribution are available for the products. D. the sales force is large and the marketer is thinking of cutting it down to reduce the costs of production. E. customers are highly concentrated in one geographic area. Answer: B 44. Rob Stevens is the head of a company that produces computer software for production scheduling. The firm is small and presently does not generate enough volume to justify hiring a sales force. The firm is probably using ____________ to maintain contact with the firms using its products. A. Wholesalers B. Brokers C. Agents D. Merchants E. Retailers Answer: C 45. An independent businessperson who is paid a commission to sell complementary products of different producers in an assigned territory without actually taking title of the merchandise is a(n): A. sole intermediary. B. manufacturers' agent. C. producers' broker. D. industrial distributor. E. channel facilitator. Answer: B 46. What is a primary difference between an industrial distributor and a manufacturers' agent? A. A manufacturers' agent does not acquire title nor usually takes possession of the products whereas an industrial distributor does. B. A manufacturers' agent is employed by the manufacturers while an industrial distributor is independent. C. An industrial distributor is employed by the manufacturers while a manufacturers' agent is independent. D. A manufacturers' agent rarely adds any value to the marketing channel while an industrial distributor reduces costs significantly. E. An industrial distributor does not form relationships with customers for repeat business whereas a key asset of a manufacturers' agent is his knowledge of his customers. Answer: A 47. Del Monte markets ketchup for household use to supermarkets through grocery wholesalers. It markets ketchup for institutional use through industrial distributors and food brokers. Del Monte is using: A. dual distribution. B. industrial distribution. C. strategic channel alliance. D. supply-chain management. E. an unethical marketing channel. Answer: A 48. Many companies use more than one marketing channel to distribute their products to the same target market, a tactic known as: A. multiple channeling. B. strategic channel alliance. C. intensive distribution. D. dual distribution. E. market splitting. Answer: D 49. Apple makes its computers available through its own stores, its website, and some major retailers. This is an example of: A. dual distribution. B. vertical integration. C. horizontal integration. D. tying agreements. E. exclusive dealing. Answer: A 50. Starbucks has an agreement with Pepsi Co. through which Pepsi distributes Starbucks' coffee drink, Frappucino, to grocery stores and other retail outlets. This is an example of a(n): A. strategic channel alliance. B. exclusive distribution. C. dual distribution. D. horizontal channel integration. E. channel leadership. Answer: A 51. Which of the following is least likely to be a factor affecting the selection of marketing channels? A. Customer characteristics B. Product attributes C. Product packaging D. Competition E. Environmental forces Answer: C 52. Fragile products that require special handling are more likely to be distributed through: A. longer channels. B. shorter channels. C. direct channels. D. strategic alliances. E. exclusive outlets. Answer: B 53. When considering the best channel to use, all of the following are true with regard to larger firms except they: A. can use an extensive product mix as a competitive tool. B. may be better able to negotiate better deals with vendors or other channel members. C. may have more distribution centers. D. may have the resources to develop their own sales force. E. may be better suited to serve customers in a particular region. Answer: E 54. The major levels of intensity at which a company can choose to distribute its products are ________ distribution. A. vertical and horizontal B. cooperative, conflicting, and integrated C. strategic, extensive, and exclusive D. selective, cooperative, and conflicting E. exclusive, selective, and intensive Answer: E 55. When Busch Light Beer was introduced as part of the Anheuser-Busch product line, the company most likely used ____________ distribution. A. horizontal B. intensive C. selective D. agent E. exclusive Answer: B 56. When Amazon.com introduced its Kindle FireHD, it was available through Amazon.com, Staples office supplies store, and a few other retailers. The Kindle FireHD was most likely distributed through the ____________ of distribution. A. selective level B. extensive level C. intensive level D. exclusive level E. agent form Answer: A 57. Paper towels and trash-can bags are most likely to be distributed through: A. selective distribution and multiple channels. B. intensive and dual distribution. C. intensive and strategic channel alliances. D. exclusive and a single channel. E. dual distribution and convenience channels. Answer: B 58. Sales are most likely to have a direct relationship to product availability for products that use ____________ distribution. A. selective B. dual C. intensive D. extensive E. exclusive Answer: C 59. Toys Palace Inc. produces toys and baby-related products. For the introduction of its line of nursery furniture for infants and small children, Toys Palace will most likely use ____________ distribution for the products. A. intensive B. exclusive C. horizontal D. priority E. selective Answer: E 60. Using only some of the available outlets to distribute a product is known as: A. selective distribution. B. intensive distribution. C. channel conflict. D. vertical channel integration. E. exclusive distribution. Answer: A 61. Product and target market characteristics usually determine the type of coverage a product receives. For which of the following products is selective distribution most appropriate? A. Gasoline B. Jaguar automobiles C. Skippy peanut butter D. Laundry detergent E. Organic foods Answer: E 62. Honey Farms is a maker of fine chocolates. The company's latest product, Fudge-Dipped Strawberries, is the premier product in its Fudge-Dipped line. The product is very expensive and targeted to upscale consumers. Which of the following forms of distribution would Honey Farms be likely to use for its new product? A. Intensive distribution B. Selective distribution C. Targeted distribution D. Exclusive distribution E. Premier distribution Answer: D 63. Expensive, high-quality products that are purchased infrequently often reach consumers through: A. selective distribution. B. highly-selective distribution. C. sole-source retailers. D. complex marketing channels. E. exclusive distribution. Answer: E 64. For which of the following products would exclusive distribution be most appropriate? A. Gasoline B. Rolls Royce automobile C. Ray-Ban sunglasses D. Louis Vuitton luggage E. Harley-Davidson motorcycle Answer: B 65. The iPhone is such a popular product and the company is so powerful that Apple Inc. is in a position to exert considerable control over channel structures and the way iPhone is marketed. This is an illustration of channel ____________ in the distribution channel. A. conflict B. leadership C. dominance D. cooperation E. negotiation Answer: B 66. A single leader who controls and organizes a marketing channel is known as a: A. channel champion. B. distribution leader. C. marketing maverick. D. channel captain. E. lead distributor. Answer: D 67. Nike maintains a good deal of control over how its products are promoted, displayed, and sold. Because of this control, Nike would be appropriately described as the channel ____________ A. intermediary B. captain C. allocator D. terminator E. price leader Answer: B 68. Few supermarkets would try to replace a national brand of baby food with their own brand. Assuming that this is true, we have a good example of channel leadership by: A. wholesalers. B. producers. C. retailers. D. agents. E. brokers. Answer: B 69. When one company in a marketing channel has the ability to influence another member's goal achievement, the company has: A. channel control. B. channel power. C. marketing leadership. D. a channel captain. E. distributive influence. Answer: B 70. If Ralston Purina forced Kroger's grocery chain to place all of its products in the stores' most favourable locations, it would be: A. demonstrating sound channel leadership. B. insisting on exclusive exposure. C. exercising channel power. D. minimizing channel conflict. E. creating a coordinate system. Answer: C 71. Overall channel goals and individual channel member goals cannot be achieved together without: A. conflict. B. captains. C. leadership. D. cooperation. E. tying agreements. Answer: D 72. Marketing channel members are likely to experience misunderstandings, frustration, and poorly coordinated strategies as a result of: A. channel conflict caused by inefficient communication between channel members. B. open communication among the channel members. C. methods of channel coordination designed to reduce ambiguity. D. negotiating territorial issues among regional distributors of a product. E. allowing one member of the channel to take the role of channel captain. Answer: A 73. When produce companies such as Dole Bananas bypass wholesalers and sell directly to retailers, it is likely to: A. create channel conflict between Dole and these wholesalers. B. increase cooperation between Dole and the wholesalers. C. show that Dole is integrating its channel intermediaries. D. create horizontal integration between channel members. E. increase the vertical integration of the channel intermediaries. Answer: A 74. Goodyear allows companies like Sears and Discount Tire to distribute and discount its tires. This action significantly increases the possibility of channel ____________ with independent Goodyear dealers. A. understanding B. power C. leadership D. communication E. conflict Answer: E 75. IMA Wholesalers is a distributor of car repair parts and supplies, selling to both retailers and auto repair service businesses. If IMA has been promoting the Pennzoil brand of oil over the Quaker State brand of oil by offering larger discounts to the channel members, and it continues to do this, ____________ is likely to result. A. channel disintegration B. vertical channel integration C. horizontal channel integration D. channel conflict E. a tying arrangement Answer: D 76. Vertical channel integration: A. results in two or more different management teams for each member of the channel. B. is made possible when a large corporation divests itself of smaller subsidiaries. C. is a shift back to the conventional channel of distribution. D. combines institutions at the same level of operation. E. is made possible by purchasing the operations of a link in the channel. Answer: E 77. When a single channel member manages an integrated marketing channel to achieve low-cost, efficient distribution for satisfying target markets, ____________ exists. A. a vertical marketing system B. horizontal channel integration C. channel power D. channel cooperation E. extensive distribution Answer: A 78. Warner Bros. sells cookie jars, puzzles, photo albums, and other items featuring its popular cartoon characters directly through its own retail outlets. This is an example of: A. channel leadership. B. channel cooperation. C. channel conflict. D. horizontal channel integration. E. vertical channel integration. Answer: E 79. The reasons a vertically integrated channel can be more effective against competition is because of all of the following except: A. the consolidation of power. B. tightly controlled and bureaucratic management style. C. the ability to inhibit competitors. D. the sharing of responsibilities and information. E. increased bargaining power. Answer: B 80. United Clothes, a leading manufacturer of knitwear in Italy, expanded its operations to include retail outlets in the United States and South America. This type of channel is called: A. horizontal integration. B. vertical integration. C. multilevel integration. D. retail integration. E. merchandising integration. Answer: B 81. When Coach, the producer of fine leather handbags and accessories, decided to open its own specialty shops to sell its merchandise, and its own retail outlet stores, the firm was engaging in: A. multiple channel repetition. B. vertical channel integration. C. dual channel integration. D. horizontal channel integration. E. channel expansion. Answer: B 82. The Limited, which produces and retails clothing products in a coordinated channel, is an example of a(n): A. administered vertical marketing system. B. conventional marketing channel. C. channel network. D. contractual marketing channel. E. corporate vertical marketing system. Answer: E 83. When channel members are linked by legal agreements that specify each member's rights and responsibilities, ____________ exists. A. horizontal channel integration B. an administered VMS C. a corporate VMS D. a channel captain E. a contractual VMS Answer: E 84. In an administered vertical marketing system (VMS), inter-organizational relationships are: A. achieved by informal coordination. B. formalized through contracts. C. combined under the ownership of a single organization. D. guided by legal agreements. E. achieved by clearly defining the obligations and rights of all channel members. Answer: A 85. In an administered VMS, informal coordination brings about a high level of interorganizational management. Nonetheless, ____________ A. decision making does not take into account the goals of the system B. the channel members do not remain autonomous C. the decision making is not coordinated D. the channel members remain autonomous E. the goals of the individual firms are not congruent with the goals of the system Answer: D 86. In the distribution channel for Domino's Pizza, channel members are linked by legal agreements that spell out the obligations and rights of each member. This is an example of a(n) ____________ vertical marketing system. A. contractual B. administered C. corporate D. negotiated E. institutional Answer: A 87. Yankee Candle, a candle and gift marketing organization has a(n) ____________ vertical marketing system arrangement with its franchised retail store operations. A. corporate B. administered C. negotiated D. contractual E. horizontal Answer: D 88. Which of the following is true of horizontal channel integration? A. The flexibility of the channel is increased. B. The markets are more homogeneous. C. The expanded number of units is coordinated. D. Efficiencies in advertising, marketing research, and purchasing are increased. E. Planning and research are increased to cope with decreased competition. Answer: D 89. To expand the number of its retail outlets in the Washington, D.C. area, Whole Foods bought out a small chain of organic food stores in northern Virginia. This type of integration is known as ____________ channel integration. A. vertical B. retail C. horizontal D. backward E. forward Answer: C 90. Order processing, inventory management, materials handling, warehousing, and transportation are the activities that define: A. wholesaling. B. retailing. C. physical distribution. D. channel management. E. drop shipping. Answer: C 91. When Zappos Inc., an online marketer of shoes, accessories, and clothing, contracts out the physical distribution task to third parties such as UPS, this arrangement is known as ________________ This is due to the fact that UPS does not have managerial authority within the Zappos marketing channel. A. illegal B. logistics C. warehousing D. wholesaling E. outsourcing Answer: E 92. If a firm decides to contract its physical distribution functions to third parties that have no managerial authority within the marketing channel, it is using: A. outsourcing. B. sole-sourcing. C. logistics. D. wholesaling. E. distribution services. Answer: A 93. As her Internet quilt and bed linen business grew, Danielle could no longer perform all the distribution activities, so she hired a shipper and an information technology firm to assist with these functions. Danielle is using ____________ for physical distribution for her business. A. producers B. wholesalers C. retailers D. selling agents E. outsourcing Answer: E 94. The main objective of physical distribution should be to: A. decrease costs while increasing market coverage. B. increase service and market coverage. C. decrease costs while increasing service. D. increase market coverage and channel power. E. balance costs and market coverage. Answer: C 95. The best way to reduce overall distribution costs is to: A. use a total-cost approach to analyze and evaluate the entire system. B. minimize the costs associated with materials handling and transportation. C. reduce the number of distribution functions that are necessary. D. find the cheapest price for each function and use them to create the system. E. lower the service standards that the company has. Answer: A 96. An important goal of physical distribution is reducing the: A. inventory management. B. outsourcing evaluation. C. electronic data interchange. D. order processing. E. cycle time. Answer: E 97. The United States Postal Service works hard to get priority mail from the sender to the recipient as quickly as possible in order to compete with companies such as UPS and FedEx. The postal service is competing with UPS and FedEx in terms of ________ A. cycle time B. order processing C. turn-around time D. shipping time E. transportation Answer: A 98. A goal of ____________ is to reduce cycle time or how long it takes to complete a process. A. time standards B. processing time C. production D. throughput measure E. physical distribution Answer: E 99. Order processing is defined as: A. the receipt and transmission of sales order information. B. the second stage in a physical distribution system. C. the four main tasks. D. the same as order handling. E. electronic processing of order data. Answer: A 100. Which of the following are the three primary tasks of order processing? A. Order receipt, order delivery, order follow-up B. Order handling, inventory management, order delivery C. Materials handling, warehousing, order delivery D. Order handling, order entry, order delivery E. Order receipt, order checking, order delivery Answer: D 101. Walgreen’s drug stores prefer to receive refills of prescriptions through a phone based system where customers can directly key in the information about the drug. By receiving orders in this manner rather than through a paper based system or by a phone conversation with a pharmacy employee, Walgreen’s has been able to save time and money on: A. electronic data interchange. B. order entry. C. inventory management. D. order delivery. E. materials handling. Answer: B 102. The order-processing task that involves verifying product availability, checking prices and customer credit ratings, and filling orders is: A. warehousing. B. order handling. C. information processing. D. materials handling. E. order entry. Answer: B 103. Order handling involves all of the following activities except that the: A. credit department approves the purchase. B. order is transmitted to the warehouse. C. availability of product is verified. D. warehouse is instructed to fill the order. E. customer places a purchase order. Answer: E 104. A commonly used computerized means of integrating order processing with production, inventory, accounting, and transportation is: A. web-based inventory management. B. just-in-time production. C. electronic data interchange. D. universal product codes. E. activity based management. Answer: C 105. Nathan is trying to decide which shipping company to use to transport his custom-made furniture to customers. Nathan is facing a decision about: A. order entry. B. order completion. C. just-in-time. D. order handling. E. order delivery. Answer: E 106. ____________ involves developing and maintaining adequate assortments of products to meet customers’ needs. A. Just-in-time B. Order processing C. Inventory management D. Merchandise stocking E. Logistical management Answer: C 107. Greg is a physical distribution manager. He is currently developing and maintaining assortments of products that are adequate for customer demand. In which of the following stages of the physical distribution system is Greg currently involved? A. Order processing B. Materials handling C. Inventory management D. Transportation E. Warehousing Answer: C 108. The result of an inventory stockout usually results in a(n)________ A. increase in inventory costs. B. increase in lost sales. C. increase in net profit. D. increase in loyal customers. E. decrease in prices. Answer: B 109. Anya, a sales manager for Pacific Lumber, tells Ricardo, the firm's inventory manager, that the firm's failure to have adequate supplies of pressure-treated lumber on hand has cost the firm $175,000 in lost sales. Which of the following inventory management costs does this figure represent? A. Carrying B. Replenishment C. Stockout D. Safety stock E. Reorder Answer: C 110. A manufacturer has decided to improve its inventory management by maintaining low inventory levels and waiting to purchase materials until right before they are needed in production. This inventory management technique is called: A. just-in-time. B. time management. C. inventory minimization. D. economic order quantity. E. reorder point maximization. Answer: A 111. Eric is concerned about not having enough air conditioning units in inventory during June, July, and August so he keeps extra inventory to guard against stockouts during this critical period. Eric is keeping: A. short order lead times. B. just-in-time inventory. C. a controlled usage rate. D. safety stock. E. excessive inventory. Answer: D 112. What is the primary determinant in deciding how materials will be handled? A. Unit loading B. Containerization C. Customer preference D. Cost reduction E. Product characteristics Answer: E 113. Johnson Controls hires a consultant to assess its materials handling procedures. The consultant recommends the implementation of ____________ if they want easier movement of items between internal destinations in the warehouse. A. unit loading B. piggybacking C. containerization D. inventory management E. priority transportation Answer: A 114. Fansteel manufactures parts used in jet engines, which it sells to companies such as Boeing. When shipping products to Boeing, Fansteel seals the parts in 8' × 8' × 40' boxes for shipping to decrease loss and damage. This method of materials handling is: A. unit loading. B. containerization. C. freight forwarding. D. unitized shipping. E. bonded packaging. Answer: B 115. Managers and consultants at Greenscapes Corp. are meeting to discuss better ways to package its products to reduce damage and make loading more efficient. The primary function they are trying to improve is: A. warehousing. B. inventory management. C. materials handling. D. cycle time. E. containerization. Answer: C 116. Which of the following physical distribution functions involves design and operation of facilities for storing goods? A. Order processing B. Materials handling C. Transportation D. Warehousing E. Inventory management Answer: D 117. What function of physical distribution enables companies to compensate for dissimilar production and consumption rates and stabilize prices and availability of seasonal items? A. Materials handling B. Warehousing C. Transportation D. Inventory management E. Order processing Answer: B 118. Morgan Steel Company leases a warehouse in Jacksonville, Alabama to serve Deep South markets that were large enough and stable enough to make a long-term commitment to fixed facilities. This is an example of a: A. flexible warehouse. B. dispatching center. C. distribution center. D. private warehouse. E. public warehouse. Answer: D 119. ClearChem is a producer of chemicals used in car detailing and painting. Because of the volatility of their chemical products when exposed to dirt and heat, ClearChem operates its own facilities for storing and shipping its products. ClearChem’s facilities are most likely known as: A. distribution centers. B. product storehouses. C. public warehouses. D. mega warehouses. E. private warehouses. Answer: E 120. Air-Tech management learns that last month's production run of heaters at its Newark plant is defective and announces a recall of the specific models produced. To handle the large number of products it expects to receive for replacement of the defective thermostats, Air-Tech will probably need to add a ____________ to its distribution network. A. distribution center B. private warehouse C. dispatching shipment system D. public warehouse E. materials handling system Answer: D 121. A public warehouse is a: A. business that leases storage space and related facilities for distribution to other firms. B. large, centralized warehouse that focuses on moving rather than storing goods. C. company that provides a complete array of logistical services for businesses. D. company-operated facility for storing and shipping products. E. warehouse used to store the personal property of many different customers. Answer: A 122. Garcia Wholesale Plumbing has seen its sales in the Southeast triple in the past two years. Materials handling director Barb Peterson announces plans to the board for an Atlanta facility that will combine shipments received from Garcia's 25 suppliers for nearly immediate shipment to plumbing stores and contractors in the region. This new facility would be best classified as a ____________ A. sales office B. public warehouse C. field public warehouse D. distribution center E. bonded warehouse Answer: D 123. ________ adds time and place utility to a product by moving it from where it is made to where it is purchased and used. A. Warehousing B. Containerization C. Distribution D. Materials handling E. Transportation Answer: E 124. Madison is responsible for the freight transportation of products sold by Richland Tech, a producer of cooking oils sold to large institutions. Since Madison needs to schedule freight transportation with the mode that provides the most flexible schedules and routes, which of the following should she use? A. Trucks B. Waterways C. Warehousing D. Pipelines E. Railroads Answer: A 125. Which of the following modes of transportation hauls more freight than any other? A. Railroads B. Waterways C. Pipelines D. Trucks E. Airways Answer: A 126. Magnetic Springs wants to ship its bottled water with the most flexible schedules and routes of all transportation modes. Magnetic Springs should use ____________ as its transportation mode. A. railroads B. waterways C. pipelines D. trucks E. airways Answer: D 127. If a microchip in a computer at the Pentagon failed, which method of transportation would be most appropriate to use to replace the chip immediately if one could get the new chip only from New York City? A. Government vehicle B. Airway C. Waterway D. Truck E. Railroad Answer: B 128. The Diamond Salt Company needs to transport 20 tons of salt from Baton Rouge, Louisiana, to Cincinnati. Which of the following methods would be the cheapest for transporting this cargo? A. Pipelines B. Waterways C. Trucks D. Airways E. Railroads Answer: B 129. Assuming everything else equal, the most cost-efficient way for British Petroleum to transport crude oil from remote oil drilling sites in central Alaska to shipping terminals on the Alaskan coast would be: A. waterways. B. intermodal transportation. C. tanker trucks. D. railroads. E. pipelines. Answer: E 130. Luke is a transportation coordinator for Volkswagen of North America. In order to move a large order of vehicles from a plant in Germany to Chicago, he is planning to use both waterways and railroads. The combining and coordinating of these two modes of transportation in order to take advantage of benefits offered by each of the different types of carriers is known as: A. intermodal transportation. B. transportation piggybacking. C. containerized movement. D. efficiency transportation E. freight forwarding. Answer: A 131. Piggyback, fishyback, and birdyback are terms usually associated with gaining efficiency in shipping through: A. transit time. B. warehousing. C. packaging. D. containerization. E. lot sizes. Answer: D 132. Which of the following modes of transportation are used when containers are shipped by piggyback? A. Railroads and airways B. Trucks and airways C. Pipelines and trucks D. Waterways and railroads E. Railroads and trucks Answer: E 133. Logistics Plus is an organization that consolidates shipments from several industrial firms into more efficient lot sizes so that they can be more efficiently transported. Logistics Plus is an example of a(n) ____________ A. freight forwarder B. forwarding agency C. transport consolidator D. specialty transportation company E. intermodal shipping company Answer: A 134. Freight transportation companies that offer several different shipment methods are called: A. megacarriers. B. intermodal transporters. C. freight forwarders. D. shipping experts. E. superfreighters. Answer: A 135. Dual distribution is characterized as: A. illegal under the Robinson-Patman Act. B. distribution channels that typically carry exclusive products, such as Rolex watches. C. marketing environments that are highly competitive. D. manufacturers that forbid an intermediary to carry products of competing producers. E. distribution of a manufacturer's product through two or more different channel structures. Answer: E 136. In which of the following situations is dual distribution likely to be determined illegal? A. A manufacturer sells its product through independent and company-owned retail outlets. B. A manufacturer opens its own retail outlets across the country and sells its entire line of products. C. A producer uses company outlets to dominate independent retailers that carry its products. D. A producer sells its products both to wholesalers who deal with small and medium-sized retailers and directly to retailers. E. A producer charges higher prices at its company-owned retail outlets than independent retailers charge for the same products. Answer: C 137. The main reason a manufacturer will prohibit intermediaries from selling its products outside designated sales territories is to: A. tighten its control over distribution of its products. B. discourage competition from other manufacturers. C. incorporate selective distribution. D. contain distribution costs. E. punish intermediaries for past behavior. Answer: A 138. Tying agreements occur when a: A. producer distributes the same product through two or more different channels and insisting that the distribution be equal. B. manufacturer forbids an intermediary to carry products of competing manufacturers and forcing the intermediary in dealing exclusively with it. C. supplier furnishes a product to a channel member with the stipulation that the channel member must purchase other products as well. D. producer refuses to deal to channel members that seem unethical or illegitimate. E. manufacturer prohibits intermediaries from selling its products outside designated sales territories. Answer: C 139. An arrangement where a producer forbids an intermediary to carry products made by competing manufacturers is known as: A. exclusive distribution. B. a tying agreement. C. refusal to deal. D. contractual VMS. E. exclusive dealing. Answer: E 140. Dell Computers is a nationally recognized manufacturer of computers for the small business and home markets. If Dell were to order one of its wholesalers not to carry any computer products other than those made by Dell, this arrangement would be known as: A. a tying contract. B. refusal to deal. C. a restricted sales territory. D. a restricted channel. E. an exclusive dealing. Answer: E Scenario 13.1 Use the following to answer the questions. Liz Claiborne Inc. markets several different brands, under their own Claiborne name label, as well as others. Their primary brands, such as Liz Claiborne, Liz & Co, and DKNY, are sold to wholesalers. These brands are then available through retail department stores such as Kohl's and Macy's. Their wholesale-based brands division is positioned as customer-focused and cost-efficient. Their premium brands division includes labels such as Kate Spade, Juicy Couture, and Mexx. These premium brands are sold through stores that are owned by Claiborne. 141. Refer to Scenario 13.1. If Liz Claiborne were to distribute their Kate Spade brand through its company-owned stores and through wholesalers, to major department stores, then Liz Claiborne would be using ________ distribution. A. intensive B. vertical C. horizontal D. dual E. exclusive Answer: D 142. Refer to Scenario 13.1. Which of the following is most likely the primary factor Liz Claiborne Inc. used when selecting the marketing channel for its Juicy Couture brand? A. Characteristics of the intermediaries B. Product attributes C. Type of organization D. Marketing environmental forces E. Competition Answer: B 143. Refer to Scenario 13.1. The Liz & Co brand is sold only at J.C. Penney. This is an example of ____________ distribution. A. selective B. routine C. horizontal D. intensive E. exclusive Answer: E Scenario 13.2 Use the following to answer the questions. Star Supplies Inc. manufactures commercial-grade floor cleaners, such as vacuums and floor polishers. The firm has recently begun manufacturing other janitorial-related product lines, such as paper products and chemical cleaners. Star Supplies distributes its products in two ways. It sells its vacuum, floor polisher, and janitorial supply products to an independent business that takes title to the products and then sells them to various small businesses throughout the region. Also, Star has a list of large businesses that it distributes to directly, on an as-needed basis. These businesses keep very little inventory and purchase janitorial supplies in small quantities. Recently, Star has decided to add two new service product lines paper shredding and a uniform rental service. Clint Rodriguez, the marketing manager, is conducting a meeting to discuss the ways in which Star can strategically manage these new businesses. Star has the choice of marketing the paper shredding service to their large business clients, by picking up the paper as they drop off the other janitorial supplies, or they can buy a small paper shredding business and market to both large and small business customers. With regard to the uniform rental service, Star can either pick up and deliver the uniforms to the small businesses themselves, or contract that out to a third party. 144. Refer to Scenario 13.2. Which of the following is Star Supplies Inc. most likely using to market its vacuum, floor polisher, and janitorial supplies to its small business customers? A. Wholesalers B. Retailers C. Merchants D. Industrial distributors E. Manufacturers' agents Answer: D 145. Refer to Scenario 13.2. Currently, Star is using the ________ approach to distribute its janitorial supplies to its large customers. A. intensive B. just-in-time C. segmented D. outsourcing E. exclusive Answer: B 146. A distribution system involves firms that are “upstream” and “mainstream.” A. True B. False Answer: False 147. Supply management involves planning, implementing, and controlling the efficient and effective flow and storage of products and information from the point of origin to consumption in order to meet customers’ needs and wants. A. True B. False Answer: False 148. Information is a crucial component in operating supply chains efficiently and effectively. A. True B. False Answer: True 149. Supply-chain management is one of the industries poised for strong future growth. A. True B. False Answer: True 150. The least important role of marketing channels is to make products available at the right time at the right place in the right quantities. A. True B. False Answer: False 151. Providing customer satisfaction should be the driving force behind marketing channel decisions. A. True B. False Answer: True 152. Manufacturers’ needs and behaviors are important concerns of channel members. A. True B. False Answer: False 153. Manufacturers and retailers are examples of intermediaries. A. True B. False Answer: False 154. The supply-chain members do not require information from other channel members. A. True B. False Answer: False 155. Without marketing channel operations that reach the right customers at the right time, even the best goods and services will not be successful. A. True B. False Answer: True 156. To achieve the desired intensity of market coverage, distribution must correspond to behavior patterns of buyers. A. True B. False Answer: True 157. The three major levels of market coverage are intensive, selective, and exclusive distribution. A. True B. False Answer: True 158. Sales and product availability of low-cost convenience products may be directly related to product cost. A. True B. False Answer: False 159. Intensive distribution uses only some available outlets in an area to distribute a product. A. True B. False Answer: False 160. Building the most effective and efficient supply chain can sustain a business and help it to use resources effectively and be more efficient. A. True B. False Answer: True 161. Supply chains driven by firm­established goals focus on the “operative priorities” of speed, quality, cost, or flexibility as the performance objective. A. True B. False Answer: False 162. Channel captains may establish channel policies and coordinate development of the marketing mix. A. True B. False Answer: True 163. If self-interest creates misunderstanding about role expectations, the end result is frustration and conflict for the whole channel. A. True B. False Answer: True 164. Physical distribution systems must meet the needs of both the supply chain and ultimate consumers. A. True B. False Answer: True 165. In the context of distribution, outsourcing is contracting physical distribution tasks to third parties. A. True B. False Answer: True 166. A manufacturer can also legally open its own retail outlets. A. True B. False Answer: True Test Bank for Foundations of Marketing William M. Pride, O. C. Ferrell 9781285429779, 9781439039441