Unit 7: Developing and Managing the Value Chain

Question 1

The connected chain of all the business entities, both internal
and external to the company, that perform or support the
logistics function (aka Supply Chain)

Answer 1

Value Chain

Question 2

A set of interdependent organizations that facilitate
the transfer of ownership as products move from producer
to business user or consumer.

Answer 2

Marketing Channels

Question 3

% Margin =

Answer 3

$ Margin/Selling Price

Question 4

$ Margin =

Answer 4

Selling Price - Unit Cost (COGS)

Question 5

Unit Cost =

Answer 5

(for manufacturer/supplier, Cost of Good Sold)

Question 6

Distribution/Wholesaler, Jobber/Broker, and Retailer are referred to as _________ options, because they rely on an additional entity (also known as an __________) to help the supplier reach the end customer more effectively and/or efficiently.

Answer 6

indirect channel, “intermediary”

Question 7

Supplier’s Own Sales and Distribution is referred to as a ___________ option, because the supplier does not use an intermediary to reach the end customer and, therefore, must own and manage all of the functions and costs associated with distributing products and/or services.

Answer 7

direct channel

Question 8

In fact, more and more organizations in more and more marketplaces are choosing a _____________ (more than one channel alternative) or even an _____________ (all available channel alternatives) as their approach to distribution.

Answer 8

multi-channel strategy, omni-channel strategy

Question 9

Types of intermediaries:

Answer 9

retailer
distributor/wholesaler
jobber/brokers

Question 10

The intentional efforts of a company to design, manage, and evolve its channel strategy in light of changes that arise in the competitive and customer environments is referred to as:

Answer 10

channel stewardship

Question 11

The piece of the value chain that looks back toward the sourcing of raw materials is referred to as the ___________________

Answer 11

“supplier network.”

Question 12

The piece of the value chain that looks forward toward the end customer is referred to as the ___________

Answer 12

“marketing channel.”

Question 13

three disciplines of channel stewardship:

Answer 13

(1) mapping the industry channels to get an overall view of the external forces at play
(2) building and updating the company’s value chain at the field level
(3) aligning and influencing the roles of the various partners in the channel system and altering their behavior when necessary to promote a high level of system performance.

Question 14

The channel steward should first map the status of each of four essential forces influencing channel strategy and then research how the forces came to their current positions:

Answer 14

customer wants and needs, channel capabilities and costs, channel power and influence, and competitive posture and actions.

Question 15

______ within the marketing channel can provide efficiencies and economies of scale as channel members take on tasks that best utilize their expertise or strategic relationships.

Answer 15

Specialization or Division of labor

Question 16

One configuration of a marketing channel entails producers selling to consumers without any intermediaries in the channel. This is called a(n):

Answer 16

direct channel

Question 17

six conditions that most often affect the direct versus indirect decision-making:

Answer 17

1. The size and distribution of the end customers.
2. The nature of the product or service
3. The role and position of the product in the end customer’s purchasing basket
4. The nature of the producer firm.
5. The relative size of the producer firm.
6. The business strategy of the producer firm.

Question 18

As part of the construction of the channel value chain, channel stewards must also make decisions about how available we want the products to be across the marketplace, which we call the intensity of market coverage or intensity of _____________.

Answer 18

channel coverage

Question 19

Degrees of vertical integrations of channel structures

Answer 19

Integrated Distribution Network: Supplier, company-owned distribution center, company-owned retail outlets

Franchised Distribution Network: Supplier, distributor (exclusive to company), independently-owned but franchised retail outlet

Arms Length Distribution Network: Supplier, multibrand distributor, and multibrand retailer

Question 20

________ is a form of distribution aimed at having a product available in every outlet where target customers might want to buy it.

Answer 20

Intensive

Question 21

In deciding between an integrated versus an arm’s length approach to channel structure, trade-off considerations are important. Which trade-off is NOT part of these considerations?

Answer 21

High competition versus low competition

Question 22

Burger King’s restaurants are independently owned, yet their managers adhere strictly to the policies laid out by the brand owner. This channel structure is called a(n):

Answer 22

franchised distribution network.

Question 23

Hard Power comes in two forms:

Answer 23

having a unique product/technology or brand, which is typically more under the control of the supplier/producer
having market access and intelligence, which is typically more under the control of the distributors/wholesalers, and retailers

Question 24

Soft Power is also often thought of in two forms:

Answer 24

Trust - the act of relying on the other person’s or entity’s words or actions as being the most likely to promote favorable outcomes for oneself
Commitment - the pledge of continuity and adoption of a long-term view, with a willingness to make investments and sacrifices to achieve a goal

Question 25

___________ emerge between entities at different levels of the channel (e.g., between a supplier and a retailer).

Answer 25

Vertical Conflicts

Question 26

When Black and Decker sells the drill directly, they could undercut the pricing of the retailers, since they would no longer have to give up that extra margin to them when selling directly to customers

Answer 26

vertical conflict

Question 27

_____________ emerge between entities at the same level of the channel (e.g., between two or more retailers)

Answer 27

Horizontal Conflicts

Question 28

a local hardware store might have more and more challenges competing against the big box stores (such as Home Depot and Lowe’s) in terms of breadth and depth of offerings and, critically, in terms of pricing.

Answer 28

horizontal conflict

Question 29

What steps can you take to change the nature of the social structure within the channel to create a more even footing in negotiations?

Answer 29

Find ways to increase brand loyalty among shoppers.
Create, market, and grow a set of private-label branded products.
Find ways to improve the business of the national vendor (e.g., create special events or promotions, product tie-ins) that other retailers may be unable or unwilling to do.
Develop partnerships with other brands and celebrities to create uniqueness in the marketplace and attract fans of those brands.

Question 30

Horizontal channel conflict can arise for a variety of reasons. An example would be a toy manufacturer selling its toys through toy stores, discount stores, department stores, and even drugstores. Which factor cited below contributes to horizontal channel conflict?

Answer 30

Undifferentiated products and variable prices in the various channels

Question 31

A channel steward uses power to influence, motivate, and manage channel partners. An example of a channel steward’s use of hard power is a:

Answer 31

brand’s unique product design.

Question 32

Sells products to end customers, usually individuals
through a variety of formats, including department
stores, mass merchandisers, supercenters, convenience
stores, discount stores, online, catalog, warehouse
clubs, & drug stores.

Answer 32

Retailer

Question 33

Sells products to retailers or business end-users. They
own & take physical control of inventory; they also
promote the products or services, and arrange for
financing, ordering & payment with their customers.

Answer 33

Distributor/Wholesaler

Question 34

Specialized sales agents hired by the supplier or
manufacturer that focus on a particular customer
segment. They typically do not take physical control of
the products or services they sell and are compensated
through commissions or fees

Answer 34

Jobber/Brokers

Question 35

Do NOT Take Title to Goods

Answer 35

Jobbers/Brokers

Question 36

A form of distribution achieved by screening dealers to eliminate all but a few in any single area

Answer 36

Selective

Question 37

A form of distribution that established one or a few
dealers within a given area

Answer 37

Exclusive

Question 38

Achieve mass market selling.
Convenience goods
Many intermediaries

Answer 38

Intensive

Question 39

Work with selected intermediaries.
Shopping and some specialty goods.
Several intermediaries

Answer 39

Selective

Question 40

Work with single intermediary. Specialty
goods and industrial equipment.

Answer 40

Exclusive level of distribution intensity

Question 41

A clash of goals and methods between distribution channel
members

Answer 41

Channel Conflict

Question 42

The joint effort of all channel members to create a supply chain
that serves customers and creates a competitive advantage

Answer 42

Channel Partnering

Question 43

Dual Distribution (e.g. _________________)
can cause channel conflict

Answer 43

both indirect and direct

Question 44

________________ lead to one company using
another’s marketing channel

Answer 44

Strategic Channel Alliances

Question 45

The difference between the amount of product produced
and the amount an end user wants to buy

Answer 45

Discrepancy of Quantity

Question 46

The lack of all the items a customer needs to receive full
satisfaction from a product or products.

Answer 46

Discrepancy of Assortment

Question 47

A situation that occurs when a product is produced but a
customer is not ready to buy it.

Answer 47

Temporal Discrepancy

Question 48

The difference between the location of a producer and the location of widely scattered markets

Answer 48

Spatial Discrepancy

Question 49

Marketing Channel Benefits

Answer 49

Specialization and division of labor
Overcoming discrepancies
Providing contact efficiency

Question 50

Channel Functions Performed by Intermediaries

Answer 50

Transactional Functions: Contacting/Promotion, Negotiating, and Risk Taking

Logistical Functions: Physically Distributing, Storing, Sorting

Facilitating Functions: Researching and Financing