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DISCUSSION STARTERS
Discussion Starter 1: Panasonic Greens its Supply Chain
Many companies have begun to incorporated sustainability into their business models. However, one area
that is particularly difficult for companies to tackle is greening their supply chains. This is in part due to
the long value chain that most products travel through before reaching their final destination. This makes
it difficult for businesses to track how their products are created, assembled, produced, and transported—
and even harder to ensure that the entire process is sustainable.
However, one company that has seen success in this area is Japanese company Panasonic. Panasonic has
launched its Green Plan 2018 with the goal to become the world’s top green electronics business, tackling
both its operations and the daily lives of its customers. Panasonic has implemented a recycling-based
manufacturing process by which products are manufactured in a way that minimizes waste, reduces
resource consumption, and maximizes materials to be reused. This approach allows materials from
previously used electronics to be reused to create new products. Panasonic has also set up a special
recycling facility to help in the implementation of its recycling-based manufacturing process—allowing
the company to have more control over its supply chain. In addition, engineers at this facility have
designed new methods of creating products that are easier to disassemble, ultimately saving time, money,
and energy.
ASK:
Why is it difficult to monitor the sustainability of an organization’s supply chain?
What are some of the ways Panasonic has been able to “green” its supply chain?
Why do you think companies are trying to increase the sustainability of their operations and
supply chains?
Discussion Starter 2: Outlet Store—Good Deal or Not?
ASK: Is it ethical for outlet stores to sell different product lines than those in conventional stores?
Originally, manufacturers and retailers used outlet stores (usually bare-bones stores in out-of-the-way
locations) to sell excess or irregular merchandise. In recent years, however, outlet stores have become big
draws for crowds of price-conscious shoppers looking for brand names at bargain prices.
ASK: Are outlet shoppers really getting big bargains on brand merchandise?
Discussion Starter 3: Etsy
Etsy is an online marketplace where makers of handcrafted items can distribute their works. Under Esty’s
rules, all items must be handmade by the seller, except for vintage goods. There are 30 million users
registered on the site shopping, buying, or selling. Esty provides apps for buyers who want to browse or
search offerings via cell phone as well as support services like payment processing and accounting
services. The company tries to encourage a sense of community between buyers and sellers.
ASK:
Chapter 14: Marketing Channels and Supply-Chain Management 278
Describe Etsy’s marketing channel from buyer to seller.
Why might artists choose to sell through Etsy rather than selling their creations themselves?
Describe the services Etsy provides as an intermediary.
Discussion Starter 4: Choose the Shipping Method
Read the following examples. For each example, determine what would be the most appropriate shipping
method.
1. A grocery chain needs to ship in a new order of seafood quickly and is looking for the fastest
mode of transportation.
ASK: Which should it choose?
2. A firm wants to ship a large shipment of coal to southern Mexico. It needs a mode of
transportation that is highly accessible but which can carry many loads.
ASK: Which mode of transportation is most suitable?
3. ExxonMobil needs an inexpensive method of transporting oil from Alaskan oil fields.
ASK: Which method would fit its needs?
4. A bookseller wants to distribute a couple thousand copies of a best-selling novel to a bookstore in
Canada. The organization is willing to pay a higher cost to get them there quickly. The bookstore
is in a more remote part of the region.
ASK: Which transportation mode would be most appropriate?
CLASS EXERCISES
Class Exercise 1: Channel Conflict
The objective of this class exercise is to aid student understanding of the dimensions of channel selection
and their possible relationships with channel conflict.
Prompt for students:
Many manufacturers sell products in outlet stores at 25 to 70 percent off retail prices. Retailers do not like
the added competition from their own suppliers despite manufacturers’ claims that they are only selling
last season’s merchandise.
1. How could business objectives, buyer behavior, product attributes, or environmental forces affect a
manufacturer’s decision to distribute through outlet stores?
2. By selling in outlet stores, how have these manufacturers changed their intensity of market coverage?
How is customer service different at an outlet store?
3. Which of the following may be responsible for the conflict between manufacturers and retailers?
a. Lack of clear communication
Chapter 14: Marketing Channels and Supply-Chain Management 279
b. Deviation from role expectations
c. Diversification into product lines traditionally handled by other intermediaries
4. Should retailers develop store brands, refuse to stock certain items, or focus their buying power on one
supplier or group of suppliers? How should the conflict be resolved?
Answers:
1. These manufacturers have the resources to control their own channels and apparently have altered
objectives to include increased coverage in new segments. Many manufacturers suggest that because
2. If market coverage is seen as a continuum, then these manufacturers have moved from a selective or
3. Retailers expect manufacturers to supply relatively exclusive rights to distribute their branded goods.
In the case of outlet stores, manufacturers have deviated from their role as producer to the role of
4. If retailers try to use coercive power, they will most likely hurt themselves by eliminating some of
Class Exercise 2: Intensity of Market Coverage
Read through the following products. For each product, identify whether intensive, selective, or exclusive
distribution would be used.
1. Piper Aircraft jets
2. Dulcet and Cabana products
3. Cigarettes
4. Rolls-Royce
5. Red Bull
6. Chanel perfume
7. Gillette razor blades
8. Apple iPads
9. Pate Philippe watch
Answers:
Chapter 14: Marketing Channels and Supply-Chain Management 280
1. Exclusive
2. Selective
Class Exercise 3: Finding the Best Distribution Channels
In this chapter, you learned about the complexity of choosing the appropriate channel for distributing
goods and creating value for the organization and the consumers. In this exercise, you will explore the
issues of matching goods to the best suited supply chain—delivering goods to the appropriate consumers.
For each of the following products list the key considerations in selecting a supply chain and the
appropriate level of distribution intensity.
1. A new brand of bubble gum
2. An innovative new home appliance
3. An orthopedic dog bed
4. A regional pasta brand which is expanding nationally
Class Exercise 4: Legal Issues in Marketing Channels
Read the examples. Determine whether the legal issue involves dual distribution, restricted sales
territories, tying agreements, exclusive dealing, or refusal to deal.
1. McLane Inc., a manufacturer of iron pipe fillings, got in trouble with the FTC for forcing
distributors to buy domestic fittings from it and not from its competitors.
2. Mariposa distributes its kitchen products through stores and direct marketing channels. The firm
is using low pricing and multiple channels in an attempt to dominate the market and drive
competitors out of business.
3. Legal action was taken against Microsoft when it required licensors to adopt Internet Explorer
when they licensed the Microsoft operating system for PCs.
Answers:
Chapter 14: Marketing Channels and Supply-Chain Management 281
SEMESTER PROJECT
In this chapter, you learned the importance of having your product in the right place for consumers to
access it. In this exercise, you will determine the appropriate channels for you to distribute your product,
you. Since it would be impossible to personally visit every potential employer, in this exercise you will
focus on how to get your resume in a position to be viewed by potential employers.
Step 1: Identify any parameters you want to apply to your product, you. For example, do you want to stay
in the town you currently live in? Another parameter might be the industry you want to work in.
Step 2: Identify distribution channels that meet the needs of your product taking into consideration the
identified parameters. Remember to think through both electronic and non-electronic means, such as a
career resource center.
http://www.forwardyourresume.com
Step 3: Discuss how the parameters you placed on your product impact your distribution choices. How
would your distribution strategy change if you changed your parameters?
.
ANSWERS TO DEVELOPING YOUR MARKETING PLAN
The information obtained from these questions should assist you in developing various aspects of your
1. Marketing intermediaries perform many activities. Using Table 14.2 as a guide, discuss the
types of activities where a channel member could provide needed assistance.
2. Using Figure 14.2 (or 14.3 if your product is a business product), determine which of the
channel distribution paths is most appropriate for your product. Given the nature of your
product, could it be distributed through more than one of these paths?
3. Determine the level of distribution intensity that is appropriate for your product. Consider the
characteristics of your target market(s), the product attributes, and environmental factors in
your deliberation.
4. Discuss the physical functions that will be required for distributing your product, focusing on
materials handling, warehousing, and transportation.
ANSWERS TO DISCUSSION AND REVIEW QUESTIONS
1. Describe supply-chain management. Why is it important?
Chapter 14: Marketing Channels and Supply-Chain Management 282
Supply-chain management encapsulates all entities that facilitate product distribution. It is a set of
2. Describe the major functions of marketing channels. Why are these functions better
accomplished through combined efforts of channel members?
The major functions of marketing channels include creating utility and facilitating exchange
efficiencies. Marketing channels create time utility by making products available when customers
3. List several reasons consumers often blame intermediaries for distribution inefficiencies.
To consumers, intermediaries are not always visible in the distribution system and therefore are not
worth what they cost. Throughout history, form utility has been perceived as having more value for
understand the role and function of intermediaries.
4. Compare and contrast the four major types of marketing channels for consumer products.
Through which type of channel is each of the following products most likely to be distributed:
a) new automobiles, b) saltine crackers, c) cut-your-own Christmas trees, d) new textbooks, e)
sofas, and f) soft drinks?
The first type of consumer product channel is from producer directly to consumer. Although this type
of channel is the simplest, it is not always the cheapest or most efficient. The second type of channel
is producer to retailer to consumer and is efficient when retailers can buy in large quantities from
The specified products are most likely to be distributed as follows:
a. New automobiles—producer to retailer to consumer
b. Saltine crackers—producer to food broker to wholesaler to retailer to consumer (In some
cases, the producer may sell to a wholesaler, without using a broker. Also, when a very large
retailer like Walmart is involved, producer to retailer to consumer channel is employed.)
5. Outline the four most common channels for business products. Describe the products or
situations that lead marketers to choose each channel.
Chapter 14: Marketing Channels and Supply-Chain Management 283
The first type of channel for business products is direct from producer to organizational customer.
Expensive and technically complex products, such as computers and aircraft, are often sold through
6. Describe an industrial distributor. What types of products are marketed through an industrial
distributor?
An industrial distributor is an independent business that takes title to products and carries inventories.
7. Under what conditions is a producer most likely to use more than one marketing channel?
A producer uses more than one marketing channel to reach diverse target markets, such as when the
8. Identify and describe the factors that may influence marketing channel selection decisions.
Channel selection decisions usually are significantly affected by one or more of the following factors:
customer characteristics, product attributes, type of organization, competition, marketing
environmental forces, and characteristics of intermediaries. Business customers generally prefer
9. Explain the differences among intensive, selective, and exclusive methods of distribution.
In intensive distribution, the product is distributed through many outlets for the convenience of
customers; examples of products likely to be distributed intensively include candy, gum, and soft
10. Comment on this statement. “Channel cooperation requires that members support the overall
channel goals to achieve individual goals.”
Chapter 14: Marketing Channels and Supply-Chain Management 284
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed
with a certain product or service or otherwise on a password-protected website for classroom use.
Cooperation is required of all channel members to provide an integrated system which will deliver the
products that customers desire. Failure of one link in the channel could cause customer dissatisfaction
and therefore channel failure.
11. Explain the major characteristics of each of the three types of vertical marketing systems
(VMS): corporate, administered, and contractual.
A vertical marketing system (VMS) is coordinated or managed by a single channel member to
achieve efficient, low-cost distribution aimed at satisfying target market customers. A corporate VMS
12. Discuss the cost and service trade-offs involved in developing a physical distribution system.
As with many marketing decisions, the type of physical distribution system chosen involves a series
13. What are the main tasks involved in order processing?
There are three main tasks involved in order processing: order entry, order handling, and order
delivery. Order entry begins when customers or salespeople place purchase orders via telephone, snail
14. Explain the trade-offs that inventory managers face when reordering products or supplies. How
is the reorder point computed?
Inventory managers must balance the threat of losses due to stock outs against the threat of inventory
15. Explain the major differences between private and public warehouses. How do they differ from
a distribution center?
The primary difference between a public and private warehouse is ownership. Private warehouses are
owned by firms for the storage and shipping of their own products. A public warehouse is a space
16. Compare and contrast the five major transportation modes in terms of cost, speed, and
dependability.
Chapter 14: Marketing Channels and Supply-Chain Management 285
Railroads
Trucks
Pipelines
Waterways
Airplanes
Selection criteria
Cost
Moderate
High
Low
Very low
Very high
Speed
Average
Fast
Slow
Very slow
Very fast
Dependability
Average
High
High
Average
High
Load flexibility
High
Average
Very low
Very high
Low
Accessibility
High
Very high
Very limited
Limited
Average
Frequency
Low
High
Very high
Very low
Average
% Ton-miles
transported
38.2
28.5
19.9
13.0
0.3
Products carried
Coal, grain,
lumber, heavy
equipment,
paper and pulp
products,
chemicals
Clothing,
computers,
books,
groceries
and
produce,
livestock
Oil,
processed
coal, natural
gas
Chemicals,
bauxite,
grain, motor
vehicles,
agricultural
implements
Flowers, food
(highly
perishable),
technical
instruments,
emergency parts
and equipment,
overnight mail
17. Under what conditions are tying agreements, exclusive dealing, and dual distribution judged
illegal?
Tying agreements exist when a supplier furnishes a product to a channel member with the stipulation
that the channel member purchase other products as well. Most tying agreements are illegal unless the
COMMENTS ON THE CASES
VIDEO CASE 14.1: TAZA CULTIVATES CHANNEL RELATIONSHIPS
WITH CHOCOLATE
Summary
Taza Chocolate is a small manufacturer of stone-ground organic chocolate made in the classic Mexican
tradition. The company markets most of its products through U.S. retailers, wholesalers, and distributors.
Individual customers around the world can also buy Taza chocolate directly from the Taza website, and
local customers can visit the company’s food truck or factory. The case presents the different marketing
challenges that come with each form of distribution. Taza also seeks to build positive relationships across
Chapter 14: Marketing Channels and Supply-Chain Management 286
Questions for Discussion
1. Which distribution channels does Taza use, and why are they appropriate for this company?
Taza markets most of its products through U.S. retailers, wholesalers, and distributors. Individual
customers around the world can also buy Taza chocolate bars, baking squares, chocolate-covered
2. In what ways does Taza benefit from selling directly to some consumers? What are some
potential problems of selling directly to consumers?
Students should think creatively about this one. Selling directly to consumers helps the company to
3. In what ways are Taza’s distribution efforts influenced by the fact that its products are
organic?
Taza seeks to make personal connections with all the certified organic growers who supply its
CASE 14.2: PROCTER & GAMBLE TUNES UP CHANNELS AND
TRANSPORTATION
Summary
The distribution strategy of Procter & Gamble, a multinational consumer goods company, is discussed in
this case. Procter & Gamble uses intensive distribution market coverage to get its products on the shelves
of many different stores. This company is constantly looking for a distribution edge that will make them
more efficient and cost effective. Proctor & Gamble is also testing new Internet and mobile channels for
some of its everyday products. For example, Proctor & Gamble partnered with Walmart Canada to create
virtual stores at bus shelters. At these locations, consumers have the opportunity to use their smartphones
to scan QR codes for different products and set up a delivery time. By finding new and innovative ways to
distribute their products, Procter & Gamble is excelling at both satisfying consumers and maintaining
market share.
Questions for Discussion
1. Do you think Procter & Gamble should use a direct channel to sell to consumers? Identify one
or more arguments for and against using a direct channel for disposable diapers and paper
towels.
Students should think creatively about this question. Selling directly to consumers helps the company
to reach people who aren’t near a retailer or who want a specific product that isn’t always stocked
locally. Selling directly to consumers also helps to forge relationships and allows Procter & Gamble
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed
with a certain product or service or otherwise on a password-protected website for classroom use.
2. What issues in channel conflict might arise from Procter & Gamble’s special arrangements
with Amazon.com?
Both Procter & Gamble have a great deal of channel power and both may be considered channel
captains. Therefore, some stores that buy from Procter & Gamble but don’t sell online might resent
Procter & Gamble’s special arrangement with Amazon.com. This resentment might cause the retailers
3. Would you recommend that Procter & Gamble use any mode of transportation other than
trucks to transport cartons to retailers? Explain your answer.
Students who recommend adding rail transportation may say that this is a lower-cost mode of
transportation than trucking and the load flexibility is high. Especially for bulky products like
