MKTG 4790 Practice Problems – Flashcards

A. Channel design, channel management

C. place

D. Vertical, horizontal

E. A, B, and C

D. Facilitating agencies

B. The impact of conflict can be negative, positive, or neutral.

D. economic, competitive, technological, legal, and sociocultural

B. Disintermediation

D. All of these engage in channel design

C. Conflict can have either a positive effect, negative effect or no effect at all.

a set of practices or activities necessary to transfer the ownership of goods, from the point of production to the point of consumption. It is the way products and services get to the end-user, the consumer; also known as a distribution channel.

direct selling; selling through intermediaries; dual distribution; and reverse channels

the marketing and selling of products directly to consumers away from a fixed retail location.

a third party that offers intermediation services between two trading parties.

describes a wide variety of marketing arrangements by which the manufacturer or wholesalers use more than one channel simultaneously to reach the end user.

it may go from consumer to intermediary to beneficiary.

Anyone in a firm or organization who is involved in marketing channel decision making

The explosion of information technology and E-commerce A greater difficulty in gaining a sustainable competitive advantage The growing power of distributors, especially retailers in marketing channels The need to reduce distribution costs

The reduction of number of intermediaries

Product, Price, Promotion, Place

Place (Distribution)

Concerned with entire process of starting and operating contactual organization Formulated before logistics management

Focused specifically on providing product availability at appropriate time & place

- Member participants are a contactual organization; whereas nonmember participants are facilitating agencies. - Member participants consist of producers and manufacturers, intermediaries, and final users. Nonmember participants consist of various firms and agencies (transportation, storage, advertising, etc.).

- Retail intermediaries help reduce the cost of distribution by making transactions a routine. - They bridge the gap between the assortment of goods and services generated by producers and those in demand from consumers.

- Wholesaling provides an expanded consumer market potential in terms of geographical locations and consumer purchasing power while at the same time providing a cash flow for the manufacturer. - Wholesalers act as distribution channels and interface with markets and producers within markets.

- By properly allocating distribution tasks to facilitating agencies, the channel manager will have an ancillary structure that is an efficient mechanism for carrying out the firm's distribution objectives.

- Horizontal Competition is between firms of the same type (Food Lion vs. Harris Teeter). - Vertical Competition refers to the competition of channel members who are at different levels in the channel (Harris Teeter Brand cereal vs. General Mills brand cereal).

o Economic factors are a critical determinant of the channel member behavior and performance. The channel manager must therefore be aware of the influence of economic variables on the participants in the channels of distribution. • Recession - Two consecutive quarters of decline in the GDP.

o Competition is always a critical factor to consider for all members of the marketing channel. The terms global marketplace, global arena, and global competition are not just international business jargon, but realistic descriptions of the competitive environment as it exists today in an increasing number of industries. • Types of Competition • Horizontal Competition - competition between firms of the same type. • Intertype Competition - Competition between different types of firms at the same channel level (off-price store vs. department store). • Vertical Competition - Competition between channel members at different levels of the channel (retailer vs. wholesaler). • Channel System Competition - Complete channels competing with other complete channels.

o Pervades virtually all aspects of society. Marketing channels are therefore influenced by the sociocultural environment within which they exist. • Sociocultural Forces • Globalization - Describes the interconnectedness and interdependencies of countries around the world. • Consumer Mobility and Connectedness - Today's highly mobile generation expects not only to cover a great deal of territory on a frequent basis, but to also be completely in touch with colleagues, friends and family in the process. • Social Networking - Refers to the interaction in networks comprised of individuals or organizations that are linked together based on some type of common interest, such as friendships, beliefs, hobbies, professional pursuits, special knowledge, and many others. • The Green Movement - A focus on preserving the environment and human health.

o Technology is the most continuously and rapidly changing aspect of the environment. The widespread use of laptop computers, smartphones, GOS navigation systems, and electronic books are some of the most obvious examples. When dealing with rapidly accelerating technology, the channel manager has to sort out those developments that are relevant to his or her own firm as well as the participants in the marketing channel and determine how these changes might affect the channel participants.

o The set of laws that impact marketing channels. The legal structure resulting from these laws is not a static code. Rather, it is a continually evolving structure affected by changing values, norms, politics and precedents established through court cases. • Legislation Affecting Marketing Channels • The Sherman Anti-Trust Act - Passed in 1890, this is the fundamental antimonopoly law. It argues that the public welfare is best served through competition, and prohibiting monopolistic practices in the marketplace. • The Clayton Act - Passed in 1914, this was to strengthen the Sherman Anti-Trust Act. It specifically prohibits the practices of price discrimination, tying clauses, exclusive dealing, intercorporate stockholding and interlocking corporate directories among competing firms if these practices tend to substantially lessen competition or tend to create monopolies in any line of trade. • The Federal Trade Commission Act - Passed in 1914, this establiseshed the Federal Trade Commission (FTC). The FTC was granted the power to investigate and enforce, by use of injunction, unfair methods of competition in interstate commerce. • The Robinson-Patman Act - Passed in 1936, was an amendment to the Clayton Act. It aimed at prohibiting a variety of forms of price discrimination that tended to lessen competition but which was inadequately covered by the Clayton Act. • The Celler-Kefauver Act - Passed in 1950, was an amendment to Section 7 of the Clayton Anti-Trust Act. It prohibited acquisitions or mergers that tended to lessen the competition or create monopolies.

- Conflict may exist when two or more components of any given system of action, e.g., a channel of distribution, become objects of each other's frustration. o Example: Toyota is linked with Toyota of Greenville. Toyota records revenue and profit when shipping inventory to Toyota of Greenville. Toyota continues to push Toyota of Greenville to continue ordering large inventories. As sales slowdown at the dealership this becomes burdensome to Toyota of Greenville. This creates a conflict between Toyota (Mfg.) and Toyota of Greenville (Dealer).

- Tervis Tumblers want Bed Bath ; Beyond to carry 60% of their product line. However, BB;B believes they are already carrying too many of the Tervis products. In response Tervis has its salespeople put in extra input (time and effort). The added input to achieve the distribution objective could be measured in extra costs. o Negative Effect (Reduced Efficiency) - The most commonly-held belief about the effect of conflict on channel efficiency. It shows a negative relationship indicating that, as the level of conflict increases, channel efficiency declines. o No Effect (Efficiency Remains Constant) - The existence of conflict has caused no change in channel efficiency. Hence, the effect of conflict on input levels necessary to achieve distribution objectives is insignificant. o Positive Effect (Efficiency Increased) - Conflict is shown to cause an increase in channel efficiency.

- The parties to the conflict, consciously or unconsciously, are aware of the necessary nature of their relationship to one another. They feel their need for each other to achieve their respective distribution objectives is so great that the conflict has no more than a superficial effect on their efficiency in operating the channel to achieve these objectives.

- A well-positioned channel also means that the channel manager will have the confidence and support of the channel members in his or her attempt to gain a differential advantage. A channel that is well-positioned with channel members should increase the manufacturer's chances of being well-positioned with final customers.

- A slotting allowance would be paid to Google from Coca-Cola for when someone searches "Soda" they see Coca-Cola before they see Pepsi.

- Producers, manufacturers, wholesalers, and retailers all face channel design decisions. For retailers, however, channel design is viewed from a perspective opposite that of producers and manufacturers. Retailers look "up the channel" in an attempt to secure suppliers, rather than "down the channel" toward the market. Wholesale intermediaries will face channel design decisions from both perspectives.

If the existing channels for other products are not suitable for the new product line, a new channel may have to be set up or the existing channels modified in some fashion.

A common example of this situation is a firm's introduction of a product in the consumer market after it has sold in the industrial market.

As many outlets as possible are used at each level of the channel.

Not all possible intermediaries at a particular level are used, but rather that those included are in the channel are carefully chosen.

A way of referring to a very highly-selective pattern of distribution. Only one intermediary in a particular market is used.

Arrangements between the manufacturer and the channel members at the wholesale and retail levels have traditionally been used as the most common means of motivating channel members in conventional, loosely aligned channels. These types of cooperative arrangements are limited only by the creativity of the manufacturer, distributor, or retailer.

A continually and mutually supportive relationship between the manufacturer and its channel members in an effort to provide a more highly motivated team, network, or alliance of channel partners.

Goes beyond the typical partnership or strategic alliance because it deals with virtually all aspects of the channel relationship.

- Four factors affect the scope and frequency of the channel member evaluations: (1) degree of the manufacturer's control over the channel members; (2) relative importance of the channel members; (3) nature of the product and (4) number of channel members. o Degree of Control - The degree of control a producer, manufacturer, or franchisor has over its channel members plays a major role in determining the scope and frequency of its evaluations. If control is based on strong contractual agreements with channel members, the channel manager is in a position to demand a great deal of information on channel member performance on virtually every aspect of the channel members' operations. o Importance of Channel Members - For the manufacturer who sells all of its output through intermediaries, the evaluation of channel members is likely to be much more comprehensive than for manufacturers who rely less on intermediaries. This is because the firm's success in the market is so directly dependent on the channel members' performance. o Nature of the Product - Generally, the more complex the product is, the broader the scope of the evaluation and vice versa. Example: A manufacturer of high-volume products of low unit value requiring little after-sale servicing may settle for routine sales data as a basis for an evaluation of channel members. o Number of Channel Members - For the manufacturer using intensive distribution, channel member evaluation may be little more than a cursory "once over lightly" look at the current sales figures. Some manufacturers find it necessary to use an "evaluation by exception" process whereby a more thorough evaluation is reserved only for those channel members who show sale figures that are usually out of line.