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Marketing Channels, 8e (Palmatier)
Chapter 07 Wholesaling Structures and Strategies
1) A firm that sells physical inputs and products to other businesses is best described as a(n)
________.
A) contractor
B) wholesaler
C) merchant
D) marketer
E) retailer
Answer: B
Difficulty: Easy
Objective: LO1
3) According to the author, what has been a significant factor in the large number of
consolidations in the wholesale distributor industry?
A) globalization of retailers
B) shifting channel power
C) federal regulations
D) investments in IT
E) end user demands
Answer: D
Difficulty: Moderate
Objective: LO5
AACSB: Information technology
6) Which of the following activities would LEAST likely be handled by a master distributor?
A) delivering products to other distributors
B) consolidating orders from manufacturers
C) providing marketing and advertising support
D) monitoring employee recruitment and training
E) helping manufacturers expand into new channels
Answer: D
Difficulty: Moderate
Objective: LO2
7) A wholesaling operation that is owned and run by a manufacturer and that performs selling
and marketing functions is best known as a(n) ________.
A) retailer
B) service broker
C) master distributor
D) supply chain manager
E) manufacturers’ sales branch
Answer: E
Difficulty: Easy
Objective: LO2
10) A wholesaler adds value by performing all of the following channel functions EXCEPT
________.
A) promoting products to prospects
B) granting credit to suppliers
C) manufacturing new products
D) processing orders and payments
E) negotiating transactions
Answer: C
Difficulty: Moderate
Objective: LO2
12) According to the text, what was the primary reason for the consolidation of pharmaceutical
wholesalers?
A) closure of small pharmacies
B) automation of picking tasks
C) research into new medications
D) deregulation by the government
E) investments by global organizations
Answer: B
Difficulty: Moderate
Objective: LO2
13) An independent firm located in the exporter’s country that performs channel functions for
multiple manufacturers in noncompeting product categories is most likely a(n) ________.
A) licensed exporter
B) export franchisor
C) wholesale agency
D) master-distributor
E) export trading company
Answer: E
Difficulty: Easy
Objective: LO2
15) Pittsfield Fabric, a U.S. manufacturer, is considering the idea of selling fabrics to European
consumers. Which type of intermediary would most likely assist Pittsfield with this plan?
16) What is the primary reason that the onion industry has failed to be successful in Niger?
A) high amount of local sourcing
B) poor reputation of wholesalers
C) formation of wholesaler co-ops
D) involvement of retailer-sponsored alliances
E) deregulation of food industry by the government
Answer: B
Difficulty: Moderate
Objective: LO2
AACSB: Diverse and multicultural work environment
22) Which of the following is most likely a true statement about Ace Hardware?
A) Ace dealers pay membership fees and receive stock to ensure a profitable system.
B) The primary competition for independent Ace stores is other dealer cooperatives.
C) Ace eliminated its private-label merchandise because of poor retail sales.
D) Ace focuses on independent dealers rather than operating its own stores.
E) Independent Ace stores are homogeneous, which simplifies distribution.
Answer: A
Difficulty: Difficult
24) What is the primary benefit of Ace managing the wholesale side of the business?
A) providing better customer service
B) offering a heterogeneous inventory
C) ensuring that dealers are successful
D) keeping procurement costs down
E) customizing store offerings
Answer: D
Difficulty: Moderate
Objective: LO4
26) Land O’Lakes, Sunkist, and Ocean Spray are examples of ________.
A) wholesalers
B) consumer groups
C) farm cooperatives
D) master distributors
E) independent franchisors
Answer: C
27) Which statement best explains the success of consumer co-ops in the French food sector?
A) Grocery chains in France have historically supported direct selling and local food sourcing.
B) French consumers want intermediaries to conduct more safety inspections of food and wine.
C) Many French shoppers demand regional, organic foods and oppose conventional farming.
D) French shoppers appreciate the lower prices of food purchased directly from farmers.
E) Many French consumers support the government and its food standardization tactics.
Answer: C
Difficulty: Difficult
Objective: LO4
AACSB: Diverse and multicultural work environments
28) What is the LEAST likely reason that some French farmers have stopped direct selling and
started using intermediaries again?
A) being expected to provide credit to buyers
B) having to promote products to build clientele
C) needing to locate where customers want to buy
D) matching crops to product assortment demands
E) complying with significant certification procedures
Answer: E
Difficulty: Moderate
Objective: LO4
AACSB: Diverse and multicultural work environments
29) What is a key reason for the fast pace of wholesaler consolidation in the U.S.?
A) improvements in information technology
B) shifts in channel power and sources
C) increased use of master distributors
D) growth of consumer co-ops
E) opportunities to globalize
Answer: A
Difficulty: Moderate
Objective: LO5
AACSB: Information technology
30) Which term refers to a large, full-line, versatile wholesaler that is able to serve many
environments well?
A) progressive firm
31) A manufacturer that invests in fragmentation when faced with wholesale consolidation is
most likely ________.
A) focusing on forward vertical integration
B) creating partnerships with large distributors
C) increasing its attractiveness to channel members
D) forming alliances with small wholesaler-distributors
E) developing additional channel power through outsourcing
Answer: D
Difficulty: Moderate
Objective: LO5
32) According to the text, why will most wholesalers never be truly global?
A) Increasing trade barriers discourage wholesalers from globalizing.
B) Cross-border shipping costs for wholesalers are expected to rise.
C) Wholesaling involves meeting the varied needs of local markets.
D) Global wholesaling channels are too standardized to be profitable.
E) Wholesaler consolidation prevents manufacturers from outsourcing.
Answer: C
Difficulty: Difficult
Objective: LO2
35) What was the most likely reason for the failure of B2B online exchanges?
A) Buyers were unable to purchase similar products from one site.
B) Exchanges overlooked the value provided by wholesalers.
C) Wholesaler consolidation eliminated most e-distributors.
D) Exchanges added an unnecessary and costly intermediary.
E) Grey market pricing was unexpected by the exchanges.
Answer: B
Difficulty: Difficult
Objective: LO6
AACSB: Information technology
36) Buyers attracted to online reverse auctions most likely want to ________.
A) analyze a product’s lifetime cost of ownership
B) form relationships with major wholesalers
C) evaluate overall procurement costs
D) focus on low product prices
E) eliminate buying risks
Answer: D
Difficulty: Moderate
Objective: LO6
AACSB: Information technology
37) Watson Wholesalers typically charges customers slightly higher product prices with the
explanation that the services the firm provides are free. Which term best describes the strategy of
Watson Wholesalers?
A) activity-based costing
B) value-added pricing
C) fragmentation
41) Wholesalers are business establishments that sell products primarily to end-users but also to
other businesses.
Answer: FALSE
Difficulty: Easy
Objective: LO1
42) Agents, brokers, and commission agents buy or sell products, earn commissions or fees, and
take ownership of the products they represent.
Answer: FALSE
Difficulty: Easy
Objective: LO7
43) Collaborative filtering software enables wholesalers to use customer information to identify
and suggest appropriate products for prospects.
Answer: TRUE
Difficulty: Easy
Objective: LO3
AACSB: Information technology
44) Cooperatives are increasingly popular among small and medium-sized Japanese wholesalers
that want to gain economies of scale and compete more effectively with large wholesalers.
Answer: TRUE
Difficulty: Easy
Objective: LO4
AACSB: Diverse and multicultural work environment
45) Independent electronic exchanges rely on specialized software that allows bidders to submit
progressively declining bids to win a customer’s business.
Answer: FALSE
Difficulty: Easy
Objective: LO6
AACSB: Information technology
46) What have been the causes and effects of consolidation in the wholesale sector?
Answer: The wholesale sector has been subject to a massive, decades-long wave of
consolidation. Consolidation strengthens wholesaler-distributors even as it reduces their
number—and some inefficiencies in the industry. Consolidation was largely sparked by IT. That
is, actors performing the distribution function experience intense pressures to invest in IT. The
49) What have been the positive and negative effects of e-commerce on wholesalers? How might
online reverse auctions impact wholesalers?
Answer: E-commerce has changed but will not likely replace wholesalers. Wholesalers thrive by
gaining customer knowledge and combining it with their knowledge of producers to solve the
problems of both ends. The Internet creates new problems (e.g., heightened risk of defective
goods, fraudulent “merchants,” credit card theft, release of private information). It also creates
50) How do wholesaler voluntary groups differ from cooperative groups? What are the benefits
of cooperative groups?
Answer: In both wholesaler voluntary groups and cooperative groups, members agree to do a
certain amount of business with the consortium and follow some of its procedures. In a
cooperative group, the members must buy shares in the co-op, such that they are owners as well
as members. And as owners, they receive shares of the profits generated by their co-op (as stock
dividends) and end-of-year rebates on their purchases. Thus, the goals of the co-op and the
interests of its members align closely. Unlike wholesaler voluntary groups, retailer co-ops thus
have a more formalized structure, run by dedicated professional managers whose jobs have fairly
elaborate role descriptions. They also are better able to influence the marketing efforts of their
owner/members, who must adhere to the co-op’s advertising, signage, and brands if they hope to
stay. In short, their marketing coordination is stronger.
Difficulty: Difficult
Objective: LO4
AACSB: Analytical thinking
July 6—Received our first mail at Wells River, Vt., and as all was
well at home, we began to plan our journey. For a week we had
simply faced north day after day. If we kept right on we would come
to Newport and Lake Memphremagog, which to us means the
Barrows camp, but we need a month for that trip. A bright idea
solved the problem. We drove north until we reached St. Johnsbury,
left our horse there and took a morning train for Newport, where we
connect with the Lady of the Lake for Georgeville, P. Q.
At the boat landing at Newport we met Mr. and Mrs. Barrows just
starting for Europe. They insisted that we must go on to Cedar
Lodge for the night, and make a wedding call on their daughter,
recently married in camp, and forthwith put us in the charge of camp
friends, who were there to see them off. The sail to Georgeville was
very delightful. We were then driven two miles to the camp in the
forest of cedars, and presented to the hostess, a niece of Mrs.
Barrows, who gave us a friendly welcome.
The attractions of Cedar Lodge are bewildering. The one small log
cabin we reveled in a few years ago is supplanted by a cabin which
must be sixty or seventy feet in length, with a broad piazza still
wearing the wedding decorations of cedar. Near the center is a wide
entrance to a hallway, with a fireplace, bookcase, and hand loom,
the fruits of which are on the floors, tables, couches, and in the
doorways. At the right is the camp parlor, called the Flag room,
draped with colors of all nations. It is spacious, with a fireplace,
center reading table, book shelves, pictures, writing desk, typewriter,
comfortable chairs, and a seat with cushions, the entire length of the
glass front facing the piazza and lake.
On the left is the Blue China or dining room. Here is a very large
round table, the center of which revolves for convenience in serving,
a fireplace with cranes and kettles, and a hospitable inscription on a
large wooden panel above. The telephone, too, has found its way to
camp since we were there.
Not least in interest, by any means, is the culinary department.
Instead of a cooking tent, where Mrs. Barrows used to read Greek or
Spanish while preparing the cereal for breakfast, and a brook
running through the camp for a refrigerator, there is a piazza partially
enclosed back of the Blue China room, with tables, shelves,
kerosene stoves, and three large tanks filled with cold spring water,
continually running, one of which served as refrigerator, tin pails
being suspended in it. The waste water is conveyed in a rustic
trough some distance from the cabin and drips twenty feet or more
into a mossy dell, where forget-me-nots grow in abundance.
Just outside the end door of the Flag room are flights of stairs to the
Lookout on the roof. This stairway separates the main cabin from a
row of smaller cabins, designated Faith, Hope, and Charity, in rustic
letters. (We were assigned to Hope, and hope we can go again
some time.)
These cabins are connected by piazzas with several others, one
being Mrs. Barrows’ Wee-bit-housie. A winding path through the
woods leads to Mr. Barrows’ Hermitage, or study, close by the lake,
and another path up the slope back of the cabins leads to a group of
tents called The Elfin Circle.
We went to the bath wharf, followed the brook walk through the
cedars, strolled to the hill-top cabin to see the friends who escorted
us from Newport, and then we all met at supper, on the broad
piazza, seventeen of us. The last of the wedding guests had left that
morning. After supper we descended the steps to the boat landing,
and our hostess and the best man rowed us to Birchbay for the
wedding call. Though unexpected we were most cordially received,
served with ice cream, and shown the many improvements in the
camp we first visited years ago. We walked to the tennis court and
garden, where the college professor and manager of Greek plays
were working when no response came from the repeated telephone
calls to tell them we were coming. We rowed back by moonlight.
We cannot half tell you of the charms of Cedar Lodge, but when we
were driven from Georgeville a bundle of papers was tucked under
the seat, which proved to be Boston Transcripts, containing an
account of the wedding. A copy was given us and it is such an
exquisite pen picture we pass it along to you:
_From the Transcript, July 6, 1905._
A CAMP WEDDING.
On the last Wednesday of June Miss Mabel Hay Barrows, the
daughter of Hon. Samuel J. Barrows and Mrs. Isabel C. Barrows,
two very well-known figures in the intellectual life of Boston and New
York, was married to Mr. Henry Raymond Mussey, a young professor
at Bryn Mawr. And the ceremony, which took place at Cedar Lodge,
her mother’s summer camp, was one of the most original and
picturesque which it is possible to imagine. Miss Barrows herself is a
girl with a refreshingly individual outlook upon life, and with a great
variety of interests, as well as a strong dramatic instinct, and every
one who knew her well looked forward to this wedding as promising
to be an occasion at once unique and beautiful. And they were not
disappointed, those eighty odd guests, who traveled so far, from
east, west, north and south, to the little camp snuggled away among
the sympathetic trees bordering the Indian Lake, beyond the
Canadian border.
Cedar Lodge, the Barrows’ camp, crowns a beautiful wooded slope
above the lake, a steep climb by a winding path bringing one to the
log cabin, with its broad piazza facing the sunset and overlooking the
lake, through misty tree tops which still wear the tender freshness of
hymeneal June. At either end of this ample balcony the guests were