Quick Learning Guide
Chapter 15
Business in Action, 5th Edition
Distribution and Marketing Logistics
LEARNING OBJECTIVE 1: Explain the role of marketing intermediaries in contemporary business, and list the eight primary functions that intermediaries can perform. LEARNING OBJECTIVE 2: Identify the major types of wholesalers, and summarize four trends shaping the future of wholesaling. Summary: Intermediaries can be responsible for any and all aspects of distribution, one of the key elements in any firm’s marketing mix. The two major categories are wholesalers, which buy from producers and sell to retailers, to other wholesalers, and to organizational customers such as businesses, government agencies, and institutions; and retailers, which buy from producers or wholesalers and sell the products to the final consumers. These marketing intermediaries bring products to market and help ensure that the goods and services are available in the right time, place, and amount. Depending on their position in the channel, intermediaries can perform the eight key functions of matching buyers and sellers; providing market information; providing promotional and sales support; sorting, standardizing, and dividing merchandise; transporting and storing products; assuming risks; providing financing; and completing production solutions. Summary: Most wholesalers can be classified as merchant wholesalers, agents, or brokers. Merchant wholesalers are independently owned businesses that buy from producers, take legal title to the goods, and then resell them to retailers or to organizational buyers. Merchant wholesalers can be distinguished by level of service (full‐
service versus limited‐service) and target customers (wholesalers that sell goods to retailers for the purpose of then reselling them to consumers and distributors that sell goods to organizations for internal operation use or to make other products). In contrast to merchant wholesalers, agents and brokers do not assume ownership but focus on bringing buyers and sellers together. Four trends shaping wholesaling are integrated logistics management, the threat of disintermediation, the unbundling of services, and industry consolidation. Critical thinking: (1) Why wouldn’t Apple develop the expertise to create professional video studios and other solutions that its channel partners now develop? (2) How can Costco be both a wholesaler and a retailer at the same time? It’s your business: (1) If you had the choice of buying a product directly from the manufacturer or from a local retailer, which would you choose? Why? (2) Have you ever had to work with more than one retailer to get a complete product solution (such as getting car parts or home improvement supplies from multiple stores)? Was the experience satisfactory? Key terms to know: distribution strategy, marketing intermediaries, wholesalers, retailers Copyright 2011 Bovée and Thill LLC Critical thinking: (1) Why does McKesson promote itself as a health care services company, rather than as a logistics company? (2) Why might a manufacturer choose to hire a third‐party logistics firm rather than a conventional wholesaler or distributor? It’s your business: (1) Considering the forces shaping wholesaling, would you consider a career in this sector? Why or why not? (2) If your family ran a small industrial products wholesaler that was facing the threat of disintermediation, how would you respond? LEARNING OBJECTIVE 3: Identify the major retailing formats, and summarize six trends shaping the future of retailing. Summary: Retailers come in many shapes and sizes, but the significant store formats include department stores, specialty stores, category killers, discount stores, and off‐price retailers. The two most widely known nonstore retailers are online retailers and mail‐
order firms. The future of retailing is being shaped by such forces as overcapacity, continued growth in online retailing, the growth of multichannel retailing, format innovations such as hybrid stores, the use of retail theater, and the threat of intermediation. Critical thinking: (1) Would it ever make sense for Amazon to open retail stores? Why or why not? (2) Moving into the future, what effect is online retailing likely to have on the oversupply of retail store space in the United States? It’s your business: (1) How have your shopping patterns changed in the past five years, in terms of how you research purchases and where you make those purchases? (2) Roughly what percentage of all your purchases do you make online? What could store‐based retailers do to attract a greater portion of your business? Key terms to know: wheel of retailing, department stores, specialty stores, discount stores, off‐price retailers, online retailers, e‐commerce, multichannel retailing, retail theater Key terms to know: merchant wholesalers, full‐service merchant wholesalers, distributors, agents and brokers, disintermediation Click here to get the latest information on
Chapter 15 topics at http://real-timeupdates.com
LEARNING OBJECTIVE 4: Explain the strategic decisions that manufac‐
turers must make when choosing distribution channels. LEARNING OBJECTIVE 5: Identify five key attributes of distribution channel design and management. LEARNING OBJECTIVE 6: Highlight the major components of physical distribution and logistics. Summary: Defining a distribution strategy requires consideration of such issues as customer needs and expectations; product support requirements; segmentation, targeting, and positioning objectives; competitors’ distribution channels; and established distribution patterns and requirements. Summary: Five key attributes of channel design and management are channel length (the number of layers between producers and target customers), market coverage needs (intense, selective, or exclusive distribution), distribution costs (all the costs involved in using a particular channel), channel conflict (disagreement and tension between channel partners), and channel organization and control (attempts to coordinate the activities of a channel into a cohesive marketing system). Summary: The major components of a firm’s distribution process are order processing, inventory control, warehousing, materials handling, and outbound transportation. When choosing the best method of outbound transportation, such as truck, rail, ship, airplane, and pipeline, you should consider cost, storage, sales, inventory size, speed, product perishability, dependability, flexibility, and convenience. Critical thinking: (1) Would two manufactures trying to reach the same customer segment with similar products use identical distribution mixes? Why or why not? (2) Is channel conflict necessarily always bad for everyone involved? Explain your answer. It’s your business: (1) You’ve probably seen television commercials advertising products that are “not available in stores.”How does that lack of availability in stores affect your perception of those products? (2) Would knowing that a manufacturer had to pay a retailer to gain shelf space for a particular product change your perception of that product? Why or why not? Key terms to know: distribution mix Critical thinking: (1) Does exclusive distribution limit the potential size of a manufacturer’s market? Why or why not? (2) Is it ethical for one participant in a channel to have power over the marketing system through sheer economic power alone? Why or why not? It’s your business: (1) Does knowing that a product is available only in selected retail outlets affect your assessment of its quality? (2) Have you ever been skeptical of “shipping and handling” charges added to products you’ve ordered? Did these charges affect your buying decisions? Key terms to know: intensive distribution, selective distribution, exclusive distribution, channel conflict, marketing systems Critical thinking: (1) Given the huge volume of small packages that Amazon ships every year, should it consider starting its own transportation company instead of giving all that business to FedEx and other shippers? Why or why not? (2) If another high‐tech company approached Dell with a partnership proposal to build and operate several distribution centers that would ship both companies’ products to customers, what would you advise Dell to do? Why? It’s your business: (1) Online retailers sometimes use free shipping as a promotional appeal. Do you think most consumers really believe the shipping is “free” and not just factored into the product’s price? (2) Have you ever paid extra for expedited shipping for an order placed on a website? Was it worth the extra expense? Key terms to know: physical distribution, logistics, order processing, warehouse, distribution centers, materials handling, intermodal transportation