Question 1

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 called

Accepted Answer

The integration in question is horizontal, as it involves Whole Foods acquiring a competitor operating in the same industry and market. Vertical integration would involve the acquisition of a supplier or distributor, while forward integration would involve expanding into a new market or industry. Backward integration would involve acquiring a supplier or raw material source. Retail integration is not a commonly used term in describing different types of integration.

Question 2

Select the greatest advantage of horizontal channel integration.

Accepted Answer

Horizontal channel integration helps to increase efficiencies in advertising, marketing research, and purchasing. This is because the integration allows for coordination and sharing of resources among different units, resulting in cost savings and improved productivity.

Question 3

The reasons a vertically integrated channel can be more effective against competition is because of all of the following except

Accepted Answer

A tightly controlled and bureaucratic management style is not necessarily an advantage of a vertically integrated channel, as it can hinder flexibility and innovation. The other options - consolidation of power, ability to inhibit competitors, sharing of responsibilities and information, and increased bargaining power - are all potential advantages of a vertically integrated channel against competition.

Question 4

In an administered VMS, informal coordination brings about a high level of inter-organizational management. Nonetheless,

Accepted Answer

In an administered VMS, channel members remain autonomous but are coordinated through informal means, such as influence or leadership by a dominant member, rather than through formal contracts or ownership.

Question 5

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

Accepted Answer

When a firm contracts out its physical distribution functions to third parties that have no managerial authority within the marketing channel, it is known as outsourcing. This allows the firm to focus on its core business activities while leaving the distribution functions to specialized logistics companies. This approach can be cost-effective and efficient for many firms. Sole-sourcing refers to the practice of procuring goods or services from a single supplier, while logistics refers to the management of the flow of goods and services from the point of origin to the point of consumption. Wholesaling refers to the sale of goods or services to retailers, while distribution services may encompass a range of activities related to the transportation, storage, and delivery of products.

Question 6

In an administered vertical marketing system (VMS), inter-organizational relationships are

Accepted Answer

In an administered VMS, coordination is achieved through the informal influence and leadership of one dominant channel member, rather than through contracts or ownership.

Question 7

When a single channel member manages an integrated marketing channel to achieve low-cost, efficient distribution for satisfying target markets, ____ exists.

Accepted Answer

When a single channel member manages an integrated marketing channel, it is referred to as a vertical marketing system. This type of system involves a single member taking control of the distribution process in order to achieve low cost and efficiency in satisfying target markets.

Question 8

The best way to reduce overall distribution costs is to

Accepted Answer

Using a total-cost approach to analyze and evaluate the entire system is the best way to reduce overall distribution costs because it allows for a comprehensive view of all costs associated with the distribution process, including materials handling, transportation, and any other necessary functions. By analyzing the entire system, companies can identify areas where costs can be reduced and implement changes that will result in greater efficiency and lower overall costs. Minimizing costs associated with materials handling and transportation or reducing the number of distribution functions may only address part of the problem and may not result in the most effective overall cost reduction strategy. Finding the cheapest price for each function may also not result in the most efficient or effective system. Lowering service standards may reduce costs in the short term, but may ultimately result in a loss of customers and revenue.

Question 9

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.

Accepted Answer

A contractual vertical marketing system involves the use of legal agreements among channel members to coordinate activities and govern their relationships. This description fits with the distribution channel for Domino's Pizza described in the question.

Question 10

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 called ____. This is due to the fact that UPS does not have managerial authority within the Zappos marketing channel.

Accepted Answer

The arrangement described here is known as outsourcing, which involves contracting out certain tasks or functions to third-party providers. In this case, Zappos has outsourced its physical distribution task to UPS. This allows Zappos to focus on its core business of marketing shoes, accessories, and clothing, while UPS handles the logistics of delivering these products to customers. It is important to note that this does not give UPS managerial authority within the Zappos marketing channel.

Question 11

The Limited, which produces and retails clothing products in a coordinated channel, is an example of a(n)

Accepted Answer

The Limited operates through a coordinated channel of production and retail, which is typical of a corporate vertical marketing system (VMS). In this type of system, a single entity controls multiple stages of the supply chain, such as production, distribution, and retail, to achieve greater efficiency and profitability.

Question 12

Vertical channel integration

Accepted Answer

Vertical channel integration occurs when a company expands its operations into areas that are at different points on the same production path, such as when a retailer purchases a wholesaler or a manufacturer. This is often achieved by purchasing the operations of a link in the channel, thereby integrating different stages of production and distribution under a single management.

Question 13

Order processing, inventory management, materials handling, warehousing, and transportation are the activities that define

Accepted Answer

These activities all fall under the umbrella of physical distribution, which refers to the process of delivering products from the manufacturer to the end consumer. Wholesaling and retailing are specific types of businesses within physical distribution, while channel management pertains to coordinating the different entities involved in distribution (e.g. manufacturers, wholesalers, retailers). Drop shipping is a method of fulfilling orders where the retailer does not physically handle the inventory, but instead relies on a supplier to ship directly to the customer.

Question 14

When channel members are linked by legal agreements that specify each member's rights and responsibilities, ____ exists.

Accepted Answer

When channel members are linked by legal agreements that specify each member's rights and responsibilities, a contractual VMS (Vertical Marketing System) exists. In a contractual VMS, independent firms at different levels of the supply chain join together by a contract to coordinate their activities. The contract specifies each member's rights and responsibilities, and can either be a simple agreement or a formal legal document like a franchise agreement.

Question 15

The main objective of physical distribution should be to

Accepted Answer

The main objective of physical distribution should be to decrease costs while increasing service, as this approach ensures efficiency and customer satisfaction without unnecessary expenditure.

Question 16

The notion of physical distribution is

Accepted Answer

Physical distribution is the process of moving products from producers to end users, which includes activities such as transportation, warehousing, and inventory management. It involves the coordination of all the activities that are required to physically move goods from the point of production to the point of consumption.

Question 17

Physical distribution activities may be performed by a producer, wholesaler, retailer or

Accepted Answer

Physical distribution activities can be outsourced to third-party logistics providers or transportation companies. This allows a company to focus on its core competencies while relying on experts to handle the logistics of delivering products to customers.

Question 18

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

Accepted Answer

This is an example of vertical channel integration as Warner Bros. is selling its products directly through its own retail outlets, which means that they are controlling the entire distribution chain from manufacturing to retailing.

Question 19

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.

Accepted Answer

Allowing multiple distributors to sell the same product can lead to competition among channels, potentially causing disagreements or disputes, hence channel conflict.

Question 20

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.

Accepted Answer

Danielle is using outsourcing, which means she is contracting with outside companies to handle certain aspects of her business, specifically physical distribution in this case. The shipper and information technology firm are not producers, wholesalers, retailers, or selling agents.

Quiz 14: Marketing Channels and Supply Chain Management