Chapter 3

Question 1

5 External Environment Factors

Answer 1

Consists of all external uncontrollable factors within which marketing channels exist

1. Economic
2. Sociocultural
3. Competitive
4. Technological
5. Legal

Question 2

Major Economic Forces

Answer 2

• Recession
• Inflation
• Deflation

Question 3

Channel Strategy during a recession

Answer 3

Manufacturers provide channel member support by financing high inventory costs.
Spending is down= reduced sales/profits & firms caught with high inventories

Question 4

Channel Strategy during Inflation

Answer 4

1. Reduce manufacturer’s product mix from higher-price to lower-price products
2. Reduce inventory burden on members with:
   - Streamlined product line
   - Faster order processing & delivery
   - Higher inventory turnover through stronger promotional support
   * *Drop-offs in spending, fuel recessions**

Question 5

Channel Strategy during Deflation

Answer 5

Pass cost-induced price increases through channel
when built-in cost pressures from labor contracts
were negotiated several years earlier
Prices decrease

Question 6

Types of competition

Answer 6

• Horizontal
• Vertical
• Intertype
• Channel System

Question 7

The Sociocultural Environment

Answer 7

• Pervades all aspects of a society
• Influences both national and international marketing channels
• Influences wide variations among channel structures worldwide

Question 8

Sociocultural Developments

Answer 8

• Population Age Patterns
• Ethnic Mix
• Educational Trends
• Family or Household Structure
• Role of Women

Question 9

The Technological Environment

Answer 9

Scanners & EDI (electronic data interchange), Computerized inventory management & Portable computers
*Helping retailers & wholesalers closely monitor success or failure of products they handle

Question 10

The Legal Environment

Answer 10

The set of laws that impact marketing channels
• Continually evolving
• Affected by changing values, norms, politics, & precedents
• Knowledge of basics helps channel manager avoid serious & costly legal problems

Question 11

Sherman Antitrust Act

Answer 11

1890; Fundamental antimonopoly law Public welfare best served through competition

Question 12

Clayton Act

Answer 12

1914; Strengthen Sherman Antitrust Act; Prohibits specific practices among competing firms

Question 13

Federal Trade Commission Act

Answer 13

1914; Established FTC

Power to investigate & enforce

Question 14

Robinson-Patman Act

Answer 14

1936; Amendment to Clayton Act
Prohibits price discrimination
Allows price differentials to different customers under specific circumstances

Question 15

Celler-Kefauver Act

Answer 15

1950; Amendment to Clayton Act

Prohibits vertical mergers & acquisitions

Question 16

Dual Distribution, or multi-channel distribution

Answer 16

Producer or manufacturer uses 2 or more different channel structures for distributing the same product

Question 17

Exclusive Dealing

Answer 17

Supplier requires its channel members to sell only its products or to refrain from selling directly to competitive suppliers

Question 18

Full-line forcing

Answer 18

Supplier requires channel members to carry a full-line of its products in order to sell any particular products in supplier’s line

Question 19

Price Discrimination

Answer 19

Supplier sells at different prices to the same class of channel members

Question 20

Price Maintenance

Answer 20

Supplier dictates prices charged by channel members to their customers

Question 21

Refusal to Deal

Answer 21

Supplier has right to refuse to deal with whomever they want as channel members

Question 22

Resale Restrictions

Answer 22

Manufacturer attempts to stipulate to whom and in what geographical market channel members may resell the manufacturer’s products

Question 23

Tying Agreements

Answer 23

Supplier sells a product to a channel member on condition that the channel member also purchase another product

Question 24

Vertical Integration

Answer 24

Firm owns and operates organizations at other levels of the distribution channel