Chapter 15 – Managing Marketing Channels and Supply Chains
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2. What systems did Amazon develop to improve the flow of products from suppliers to
Amazon distribution centers? What systems improved the flow of orders from
distribution centers to customers?
Answers:
a. Flow of products from suppliers to distribution centers. The center of the
e-business supply chain is an information hub, where incoming information is quickly
processed and then sent out to other chain-members. Amazon uses programs that
3. Why will logistics and supply chain management play an important role in the future
success of Amazon.com?
Answer:
There are many internal tasks within an e-commerce company like Amazon, which begin
when a customer places an order. Placing an order begins a series of transactions
Chapter 15 – Managing Marketing Channels and Supply Chains
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Epilogue
Amazon continues to develop new and innovative approaches to logistics and supply
chain management. CEO Jeff Bezos recently announced that in the next few years Amazon
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TEACHING NOTE FOR APPENDIX D CASE D-15
Shiseido: Channeling Cosmetics in China1
Synopsis
Shiseido is the largest cosmetic manufacturer in Japan. It employs the use of a
voluntary chain store system for distribution. This system helps Shiseido remain competitive
against Western cosmetic companies and acts as an information medium to transmit the latest
beauty information to Japanese women throughout the country.
Shiseido first entered China in 1981, selling its products at tax-free department stores
and hotels in the city that were accessible only to expatriates, foreigners, and the local elite.
They further penetrated the market by forming two joint venture companies, Shiseido Liyuan
Cosmetic Company (SLC) and Shanghai Zotos CITIC Cosmetic Company (SZC). These
companies distribute their products through department stores and cosmetic specialty stores
through wholesalers. In 2003, Shiseido started selling its high-end toiletries by importing them
directly from Japan through its Japan-based subsidiary FT Shiseido Company Limited.
Shiseido has also replicated its voluntary chain store concept in China and engages
privately managed cosmetic stores to sell its products under the Chinese joint venture SLC. In
2003, it opened a directly managed store in Shanghai to serve as the model for other privately
owned stores that would be engaged to sell Shiseido’s products.
Teaching Suggestions
This case gives students an opportunity to assess Shiseido’s marketing channel(s) in
China using the concepts discussed in Chapter 15. Therefore, an instructor might couch the
student discussion from a “best practices” point of view. By doing so, students should come to
understand and appreciate the rationale behind a company’s choice of marketing channels.
Answers to Questions
1. What are the functions performed by the distribution channels in cosmetic products?
How are some of these functions performed in Shiseido’s operation in China?
Answer:
Distribution channels assist in the flow of cosmetics from producers to buyers by
performing three basic functions: transactional, logistical, and facilitating functions
Chapter 15 – Managing Marketing Channels and Supply Chains
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2. What are the advantages and disadvantages of selling cosmetic products through
door-to-door selling, specialty stores, department store counters, and supermarkets
and hypermarkets? How will the use of these channels vary with target market
segments and brand strategies?
Answers:
Chapter 15 – Managing Marketing Channels and Supply Chains
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Chapter 15 – Managing Marketing Channels and Supply Chains
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3. Why is Shiseido using voluntary specialty chain stores besides their counters at
department stores? What are the advantages and disadvantages for each retail
channel? Which area should the company emphasize?
Answers:
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ICA 15-1: IN-CLASS ACTIVITY
Marketing Channels for Apple1
Learning Objective. To have students learn about the marketing channels Apple
currently uses to sell its computers, digital devices, and software products to consumers.
Nature of the Activity. To have students identify those channel members that sell Apple
products and classify the channel strategies used by Apple, and in one case, Microsoft.
Estimated Class Time and Teaching Suggestions. About 10 minutes.
Steps to Teach this ICA.
1. OPTIONAL: Bookmark the following websites on your classroom computer:
2. To determine how familiar students are with Apple’s marketing channel structure, ask
them the following question:
• Question 1: Within the last year, have any of you purchased a product (iMac,
iPad, iPhone, iPod, software, etc.) marketed or sold by Apple? If yes, where
did they purchase it?
3. Ask students the following questions regarding Apple’s marketing channel structure:
• Question 2: Consumers can buy Apple products online through its Apple
Online Store. If you were to purchase an Apple product from the Apple
Online Store (http://store.apple.com/us), (a) identify the channels members
as a producer, wholesaler, and/or retailer and (b) classify the channel
strategy used by Apple and its channel members as direct or indirect.
Chapter 15 – Managing Marketing Channels and Supply Chains
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• Question 3: Apple has over 400 Apple Retail Stores, including many in
foreign countries. If you were to purchase an Apple product from an Apple
Retail Store (www.apple.com/retail), (a) identify the channels members as a
producer, wholesaler, and/or retailer and (b) classify the channel strategy
used by Apple and its channel members as direct or indirect.
Answers:
• Question 4: Under its Authorized Apple Reseller program, Apple has also
established a relationship with Best Buy, the #1 retail electronics chain in the
U.S. Each store’s layout is organized into departments. The computer
department contains Apple hardware and software products and is staffed
by Best Buy employees. Assume that Best Buy obtains its entire inventory
from Ingram Micro, the nation’s largest technology product distributor.
If you were to purchase an Apple product from Best Buy
(www.bestbuy.com/site/Brands/Apple), (a) identify the channels members as
a producer, wholesaler, and/or retailer and (b) classify the channel strategy
used by Apple and its channel members as direct or indirect.
Answers:
• Question 5: Under its Authorized Apple Reseller program, Apple has also
established a relationship with MacMall, which sells Apple products online,
by telephone, through its catalog, and a retail store. If you were to purchase
an Apple product from MacMall (www.macmall.com), (a) identify the
channels members as a producer, wholesaler, and/or retailer and (b) classify
the channel strategy used by Apple and its channel members as direct or
indirect.
Chapter 15 – Managing Marketing Channels and Supply Chains
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Answers:
Chapter 15 – Managing Marketing Channels and Supply Chains
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ICA 15-2: IN-CLASS ACTIVITY
Marketing Channels for Fastenal1
Learning Objectives. To have students identify: (1) the points of difference, (2) target
market segments, and (3) marketing channels that might be used for a category of unique
threaded fasteners distributed by Fastenal Company.
Nature of the Activity. To help students understand the unique nature of the threaded
fastener products (points of difference) and their applications and target markets so students can
suggest the appropriate marketing channel(s).
Estimated Class Time and Teaching Suggestions. About 10 minutes.
Steps to Teach this ICA.
Chapter 15 – Managing Marketing Channels and Supply Chains
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4. Next ask students the following questions about fasteners:
• Question 1: What is the main point of difference for these fasteners?
• Question 2: Where are these fasteners most likely to be needed?
• Question 3: What kinds of organizations are most likely to buy them?
• Question 4: Where would industrial customers purchase these fasteners?
Answer: These fasteners can rarely be purchased at conventional hardware stores
• Question 5: What are the problems or challenges facing the company who
wants to reach these special customers? What will it take to reach these
customers and why should Fastenal do it?
5. Customers that use these special threaded fasteners look to two common marketing
channels for business products, as shown in Figure 15-4:
Marketing Lesson. Offering fasteners for security applications with a unique point of
difference can provide genuine value to industrial customers and significant profit to an
industrial distributor in a marketing channel that succeeds in meeting customer needs.
Chapter 15 – Managing Marketing Channels and Supply Chains
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Connect Application Exercises
Application Exercise 1: Vertical Marketing Systems at Starbucks
Activity Summary: In this case analysis, students learn how Starbucks Coffee uses different
types of vertical marketing systems for domestic and international growth. After reading the
mini-case, students answer five questions related to vertical marketing systems.
Tagging (Topic, Learning Objectives, AACSB, Bloom’s, Difficulty)
Topics: Marketing Channels, Vertical Marketing Systems
Learning Objective: LO 15-02 Distinguish among traditional marketing channels, electronic
marketing channels, and different types of vertical marketing systems.
AACSB: Knowledge Application
Blooms: Remember
Difficulty Level: 1 Easy
Follow-Up Activity: Instructors could have students compare and contrast the three major types
Application Exercise 2: Marketing Channel Functions at Home Depot
Activity Summary: In this click and drag activity, students evaluate the functions performed by
intermediaries. Students are provided with the major activities related to the intermediary
functions (buying, risk taking, sorting, storing assorting, transporting, financing, and
information/research) as the drop areas. The eight draggable items (Toro lawn mowers, Loss for
Home Depot, 70 centers, Inventory above floor, Free delivery, “One–stop” shopping, 0%
financing, Real-time loss) provide students with a hint as they mouse over them.
Tagging (Topic, Learning Objectives, AACSB, Bloom’s, Difficulty)
Topic: Channel Management
Learning Objective: LO 12-01 Explain what is meant by a marketing channel of distribution
and why intermediaries are needed.
AACSB: Knowledge Application
Blooms: Apply
Difficulty Level: 2 Medium
Follow-Up Activity: Instructors could ask students to describe how each of the activities
Application Exercise 3: Total Logistics Cost Factors
Activity Summary: In this click and drag activity, students learn about the logistics cost factors
(transportation, warehousing & materials handling, order processing, stockouts, inventory, and
return products handling). The logistics cost factors are given as the drop areas and twelve firms
are the draggable items (Hyundai, Ford, Walgreens, Coca-Cola, Chrysler, SC Johnson, Kmart,
Chapter 15 – Managing Marketing Channels and Supply Chains
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Safeway, Toyota, Frito Lay, Phillips, Costco). As students mouse over the firm, they are
provided with a hint describing a cost factor.
Tagging (Topic, Learning Objectives, AACSB, Bloom’s, Difficulty)
Topic: Logistics
Learning Objective: LO 15-04 Explain what supply chain and logistics management are and
how they relate to marketing strategy.
AACSB: Knowledge Application
Blooms: Apply
Difficulty Level: 2 Medium
Follow-Up Activity: Instructors could follow up this activity by having students evaluate the
Application Exercise 4: Amazon: Delivering the Goods… Millions of Times
Activity Summary: In this 8-minute news-documentary style video case, students learn about
Amazon’s history and function as an intermediary. After watching the video, students answer
seven questions related to logistics, supply chain management, and online retailing.
Tagging (Topic, Learning Objectives, AACSB, Bloom’s, Difficulty)
Topics: Electronic Marketing Channels, Logistics, Consumer Needs and Wants, Marketing
Channels
Learning Objectives: LO 15-01 Explain what is meant by a marketing channel of distribution
and why intermediaries are needed.
LO 15-02 Distinguish among traditional marketing channels, electronic
marketing channels, and different types of vertical marketing systems.
LO 15-03 Describe factors that marketing executives consider when
selecting and managing a marketing channel, including legal restrictions.
LO 15-04 Explain what supply chain and logistics management are and
how they relate to marketing strategy.
AACSB: Knowledge Application
Blooms: Apply
Difficulty Level: 2 Medium
Follow-Up Activity: After discussing students’ use of Amazon and Amazon Prime, instructors
Application Exercise 5: iSeeit! Video Case: Supply Chain
Activity Summary: In this straightforward whiteboard animation video, students learn about
supply chain management and the intermediary functions for Hope Springs. After watching the
Chapter 15 – Managing Marketing Channels and Supply Chains
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3-minute video, students are asked four follow-up questions related to the intermediary functions
and customer service factors.
Tagging (Topic, Learning Objectives, AACSB, Bloom’s, Difficulty)
Topics: Logistics, Wholesaling, Supply Chain Management
Learning Objectives: LO 15-01 Explain what is meant by a marketing channel of distribution
and why intermediaries are needed.
LO 15-04 Explain what supply chain and logistics management are and
how they relate to marketing strategy.
AACSB: Knowledge Application
Blooms: Apply
Difficulty Level: 2 Medium
Follow-Up Activity: Instructors could ask students to construct (draw) the supply chain for
Application Exercise 6: Target Market Coverage: Distribution Density
Activity Summary: In this click and drag activity, students learn about distribution density. The
three levels of distribution density (intensive, selective, and exclusive) are the drop areas for the
activity. Six business examples are then classified as intensive, selective, or exclusive
distribution (snack time, clean up, iDistribution, handbag heaven, British invasion, luxury ride).
Students are given a description of the distribution strategy when they mouse over the draggable
item.
Tagging (Topic, Learning Objectives, AACSB, Bloom’s, Difficulty)
Topic: Levels of Distribution Density
Learning Objectives: LO 15-03 Describe factors that marketing executives consider when
selecting and managing a marketing channel, including legal restrictions.
AACSB: Analytical Thinking
Blooms: Analyze
Difficulty Level: 2 Medium
Follow-Up Activity: Instructors could ask students to analyze buyer requirements and
Analytics Exercise 7: Marketing Analytics: Channel Sales and Profits
Activity Summary: In this analytics exercise, students analyze the distribution strategy for a
company that manufactures a digital personal assistant similar to the Amazon Echo. Currently,
the firm splits its cooperative marketing support equally between four channels, but the brand
manager is evaluating whether reallocating the expenses could increase the firm’s sales and
profit. Students utilize the interactive spreadsheet to manipulate price, quantity, and expense data
as they analyze various distribution scenarios.
Chapter 15 – Managing Marketing Channels and Supply Chains
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Tagging (Topic, Learning Objectives, AACSB, Bloom’s, Difficulty)
Topic: Marketing Analytics
Learning Objectives: LO 15-03 Describe factors that marketing executives consider when
selecting and managing a marketing channel, including legal restrictions.
AACSB: Analytical Thinking
Blooms: Analyze
Difficulty Level: 2 Medium
Follow-Up Activity: Instructors could use the spreadsheet as a launching point for a discussion
about the importance and value of intermediaries. The goal of the discussion would be to have