Chap12 GM6e TIF

Global Marketing, 6e (Keegan/Green)
Chapter 12 Global Marketing Channels and Physical Distribution

1) Supermarkets and convenience stores comprise just two of the many elements that make up
distribution channels around the globe.
Answer: TRUE
Diff: 1
Page Ref: 365
2) The first channel alternative for manufacturers is to market directly to buyers via the Internet.
Answer: TRUE
Diff: 2
Page Ref: 366
AACSB: Analytic Skills
3) E-bay pioneered a form of online commerce known as p-to-p or peer-to-peer marketing
whereby individual consumers market products to another individual.
Answer: TRUE
Diff: 2
Page Ref: 366
AACSB: Reflective Thinking
4) E-bay assists large companies such as Disney and IBM in setting up online "storefronts" to
sell items for fixed prices in addition to conducing b-to-c auctions.
Answer: TRUE
Diff: 2
Page Ref: 367
5) Nestl is using an innovative approach to distribution in Brazil with a program of door-to-door
selling in high-income neighborhoods.
Answer: FALSE
Diff: 2
Page Ref: 367
6) In Japan, the biggest barrier facing U.S. auto manufacturers is that half the cars that are sold
each year are sold door-to-door.
Answer: TRUE
Diff: 2
Page Ref: 367
7) Distribution channels for automobiles in Japan and the United States are similar in that most
car buyers in both countries visit dealerships before making a purchase.
Answer: FALSE
Diff: 2
Page Ref: 367
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8) The close long-term relationships between auto salespersons and the Japanese people can be
considered as a consumer version of the keiretsu system.
Answer: TRUE
Diff: 2
Page Ref: 368
9) Singer was one of the first successful U.S. based international companies to establish a
worldwide chain of company-owned and company-operated outlets to sell and service sewing
machines.
Answer: TRUE
Diff: 2
Page Ref: 368
10) Avon was the first company permitted to sell door-to-door in China.
Answer: TRUE
Diff: 2
Page Ref: 368
11) In Mexico, Proctor & Gamble operates stores serving single-use quantities at a relatively
high per-use cost, which are known as "high-frequency" stores.
Answer: TRUE
Diff: 2
Page Ref: 369
12) In Asia, Western luxury goods marketers have long relied on independent distributors such as
Hong Kong-based Fairton, whose local market knowledge and networks of stores are keys to
success.
Answer: TRUE
Diff: 2
Page Ref: 371
13) Dell Computer has reached more than $61 billion in annual global sales in 2009 by forging
close relationships with wholesalers and retailers in individual country markets.
Answer: FALSE
Diff: 2
Page Ref: 371
14) Kodak adopted a direct involvement approach in Japan by utilizing independent agents,
distributors and retailers.
Answer: FALSE
Diff: 2
Page Ref: 371
15) Channel strategy in a global marketing program must fit the company's competitive position
and overall marketing objectives in each national market.
Answer: TRUE
Diff: 2
Page Ref: 372
2
16) When utilizing the services of a local independent distributor, management is well advised to
treat the distributor as a temporary market-entry vehicle.
Answer: FALSE
Diff: 2
Page Ref: 372-373
17) When utilizing the services of a local independent distributor, management is well advised to
yield control of marketing strategy to the distributor.
Answer: FALSE
Diff: 2
Page Ref: 372-373
18) An exporter that is new to a particular market would do well to choose a middleman with a
reputation for "cherry picking" products.
Answer: TRUE
Diff: 2
Page Ref: 372-373
19) Global retailing is any retailing activity that crosses national boundaries.
Answer: TRUE
Diff: 1
Page Ref: 374
20) Based on sales figures, Carrefour is the largest hypermarket in France.
Answer: TRUE
Diff: 2
Page Ref: 374
21) Organized retail is a term that is used to describe the modern, branded chain stores.
Answer: TRUE
Diff: 2
Page Ref: 374
22) Nakumatt is a local supermarket chain in Kenya which provides an aspirational space that
appeals to everyone.
Answer: TRUE
Diff: 2
Page Ref: 374
23) When Carrefour, Tesco, and Wal-Mart set up shop in developing countries, they provide
customers with access to more products but higher prices than were available previously.
Answer: FALSE
Diff: 2
Page Ref: 374
3
24) Laura Ashley, The Body Shop, Victoria's Secret and Gap are examples of global retail
operators that can be classified as specialty retailers since they offer less variety than department
stores.
Answer: TRUE
Diff: 2
Page Ref: 375
25) Hypermarkets are a hybrid retailing format combining the discounter, supermarket, and
warehouse club approaches under a single roof.
Answer: TRUE
Diff: 2
Page Ref: 377
26) Toys "R" Us, Home Depot, and IKEA are referred to as "category killers" in the retailing
industry.
Answer: TRUE
Diff: 2
Page Ref: 377
27) British retailer Marks & Spencer is a good example of a category killer.
Answer: FALSE
Diff: 2
Page Ref: 377
28) Three of the world's five largest malls are in Asia.
Answer: TRUE
Diff: 2
Page Ref: 377-378
29) In economic downturn, hard discounters thrive as cash-strapped consumers seek ways to
stretch household budgets.
Answer: TRUE
Diff: 2
Page Ref: 377
30) Outlet stores are retail operations that allow companies with well-known consumer brands to
dispose of excess inventory, out-of-date merchandise, or factory seconds.
Answer: TRUE
Diff: 2
Page Ref: 378
31) Organic growth occurs when a company uses its own resources to open a store on a
greenfield site, or to acquire one or more existing retail facilities from another company.
Answer: TRUE
Diff: 2
Page Ref: 383
4
32) If a global retailer seeks to expand in a country that is both culturally close to the home
country and easy to enter, the retailer is well advised to use a joint venture strategy.
Answer: FALSE
Diff: 2
Page Ref: 383
33) A global retailer seeks to expand in a country that, in the opinion of management, is both
culturally distant and difficult to enter. The retailer would be well advised to use a joint venture
strategy.
Answer: TRUE
Diff: 1
Page Ref: 383
34) When Carrefour entered the Japanese market, it did so independently (i.e., without seeking a
Japanese joint-venture partner). This represents an appropriate market-entry approach for a
global retailer.
Answer: FALSE
Diff: 2
Page Ref: 383
35) When British entrepreneur Richard Branson opened the first Virgin Megastore in Japan, he
did so by establishing a joint venture with the Marui retailing chain. This represents an
appropriate market-entry approach for a global retailer.
Answer: TRUE
Diff: 3
Page Ref: 383
36) The distribution P of the marketing mix plays a central role in a given firm's value chain as
seen by Coca-Cola, IKEA, Nokia and Toyota creating value by making sure their products are
available where and when customers want to buy them.
Answer: TRUE
Diff: 2
Page Ref: 384
37) By definition, a retailer that caters to the general public would be "downstream" in an
industry's supply chain.
Answer: FALSE
Diff: 2
Page Ref: 384
38) A new tool for inventory management is RFID which utilizes small tags that are attached to
pallets, containers, or individual inventory items.
Answer: TRUE
Diff: 2
Page Ref: 385-386
AACSB: Use of IT
5
39) China is the world's second-largest domestic air-cargo market which is served by FedEx
Express, the world's leading express delivery provider.
Answer: TRUE
Diff: 2
Page Ref: 388
40) The term logistics management describes the integration of activities necessary to ensure the
efficient flow of raw materials, in-process inventory, and finished goods from producers to
customers.
Answer: TRUE
Diff: 2
Page Ref: 391
41) Marketing channels exist to create utility for customers. The major categories of channel
utility include all of the following except:
A) place utility.
B) price utility.
C) information utility.
D) form utility.
E) time utility.
Answer: B
Diff: 2
Page Ref: 365
42) Marketing channels have the potential to create which of the following types of utility?
A) place utility
B) time utility
C) form utility
D) information utility
E) all of the above
Answer: E
Diff: 1
Page Ref: 365
43) Some wine importers insist on shipping their wines in refrigerated containers ("reefers") to
protect the wines from being damaged by high temperatures. Such importers are creating which
kind of utility?
A) place utility
B) time utility
C) form utility
D) information utility
E) worker utility
Answer: C
Diff: 2
Page Ref: 365
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44) Peer-to-peer (p-to-p) marketing uses distribution channels through:

A) business-to-consumers.
B) electronic commerce.
C) business-to-business.
D) door-to-door.
E) manufacturer-to-wholesalers.
Answer: B
Diff: 2
Page Ref: 366-367
AACSB: Use of IT
45) eBay was a pioneer in a form of online marketing known as:
A) b-to-c.
B) b-to-b.
C) p-to-p.
D) d-to-d.
E) c-to-b.
Answer: C
Diff: 2
Page Ref: 366-367
AACSB: Use of IT
46) Which country has proven to be the most successful market in Avon's history among the
following?
A) Romania
B) Ukraine
C) China
D) Russia
E) India
Answer: D
Diff: 2
Page Ref: 368
47) What solution did Andersen Consulting provide to the Moscow Bread Company to solve the
problem of stale bread?
A) Deliver the bread frozen.
B) Package the bread in plastic bags.
C) MBC should convert a paperless office to cut red tape.
D) Deliver the bread sliced rather than in whole loaf form.
E) Use paper packaging for bread.
Answer: B
Diff: 2
Page Ref: 369
7
48) Nestl is using an innovative approach to distribution in Brazil with a program which
consists of selling its products via:
A) upscale supermarkets.
B) hypermarkets.
C) pulperias.
D) convenience stores in low-income neighborhoods.
E) door-to door selling in low-income neighborhoods.
Answer: E
Diff: 3
Page Ref: 367
49) Which of the following most accurately describes the relative length of consumer and
industrial distribution channels?
A) Consumer channels tend to be longer (consist of more intermediaries) than industrial
channels.
B) Industrial channels tend to be longer (consist of more intermediaries) than consumer channels.
C) Both consumer and industrial channels tend to be long (consist of several intermediaries).
D) Both consumer and industrial channels tend to be short (consist of few intermediaries).
E) Consumer channels tend to be shorter (consist of few intermediaries) than the industrial
channels.
Answer: A
Diff: 2
Page Ref: 371-373
50) Sales representatives in which Japanese industry cultivate close, long-term relations with
customers by selling door-to-door?
A) consumer electronics
B) pharmaceuticals
C) automobiles
D) soft drinks
E) groceries
Answer: C
Diff: 2
Page Ref: 367-368
51) The retail environment in developing countries presents challenges for marketing
nonperishable items. In Mexico, Proctor & Gamble, Unilever, Colgate-Palmolive, and other
global consumer product companies use ________ for their products:
A) door-to-door selling
B) buy-in-bulk selling
C) mom-and-pop stores
D) franchised stores
E) manufacturer-owned stores
Answer: C
Diff: 2
Page Ref: 369
8
52) Dell rang up $ 61 billion in direct sales of their PC systems in 2006 using:
A) door-to-door sales.
B) franchise marketing.
C) web-site sales.
D) business-to-business sales.
E) hypermarket sales.
Answer: C
Diff: 2
Page Ref: 371
AACSB: Use of IT
53) Which personal computer company focuses on business-to-business marketing using a
direct-sales approach?
A) Hewlett-Packard
B) Compaq
C) Dell
D) Acer
E) Sony
Answer: A
Diff: 2
Page Ref: 370
54) Which of the following is an appropriate guideline for companies selecting independent
distributors in international markets?
A) Select distributorsdon't let them select you.
B) Look for distributors capable of developing markets.
C) Treat local distributors as long-term partners.
D) Maintain control over marketing strategy from day one.
E) All of the above are appropriate guidelines.
Answer: E
Diff: 2
Page Ref: 372-373
55) Which of the following is not an appropriate guideline for companies selecting independent
distributors in international markets?
A) Select distributorsdon't let them select you.
B) Look for distributors capable of developing markets.
C) Give local distributors control over marketing strategy.
D) Treat local distributors as long-term partners.
E) All of the above are appropriate guidelines.
Answer: C
Diff: 2
Page Ref: 372-373
9
56) Which of the following is the largest retailer in the world in terms of annual sales?
A) Sears
B) Metro
C) Kmart
D) Carrefour
E) Wal-Mart
Answer: E
Diff: 1
Page Ref: 374
57) By definition, ________ feature a narrow but deep merchandise mix and high levels of
service.
A) department stores
B) specialty retailers
C) super markets
D) convenience stores
E) discount stores
Answer: B
Diff: 2
Page Ref: 375
58) Which of the following does NOT qualify as a "category killer?"
A) Victoria's Secret
B) IKEA
C) Home Depot
D) Circuit City
E) Toys "R" Us
Answer: A
Diff: 2
Page Ref: 377
59) Which European retailer proved unsuccessful in its cross-border initiatives on New York's
fashionable Fifth Avenue?
A) Virgin Group
B) Marks & Spencer
C) Carrefour
D) Galeries Lafayette
E) Louis Vuitton
Answer: D
Diff: 3
Page Ref: 378
10
60) Which of the following correctly characterizes the retailing strategy shared by Toys "R" Us
and Virgin Megastores?
A) few product categories, own-label focus
B) few product categories, manufacturer brand focus
C) many product categories, own-label focus
D) many product categories, manufacturer brand focus
E) none of the above
Answer: B
Diff: 2
Page Ref: 380-381
61) Which of the following categories best describes the approach of Britain's Marks & Spencer
to global retailing?
Answer: C
Diff: 2
Page Ref: 380-381
62) Which approach to global retail expansion involves "greenfield" investment using a
company's own financial resources to build a new store from the ground up?
A) chain acquisition
B) organic growth
C) franchise
D) joint venture
E) own-label focus
Answer: D
Diff: 2
Page Ref: 382-383
63) Which approach to retail expansion is most appropriate when targeting a country that
management considers both culturally close and easy to enter?
A) organic growth
B) chain acquisition
C) franchise
D) joint venture
E) own label focus
Answer: C
Diff: 2
Page Ref: 383
11
64) When British entrepreneur Richard Branson established the first Virgin Megastore in France,
he invested a great deal of money to develop a retail space on the famous Champs-Elyses.
Judging by the approach Branson used, he and his management team must have viewed France
as:
A) culturally close and easy to enter.
B) culturally distant and easy to enter.
C) culturally close and difficult to enter.
D) culturally distant and difficult to enter.
E) culturally difficult and easy to enter.
Answer: A
Diff: 2
Page Ref: 382-383
65) When British entrepreneur Richard Branson established the first Virgin Megastore in Japan,
he established a joint venture with the Marui retailing chain. Judging by the approach Branson
used, he and his management team must have viewed Japan as:
Answer: D
Diff: 2
Page Ref: 382-383
66) Which of the following correctly characterizes the retailing strategy of Benetton, IKEA, and
Gap?
Answer: A
Diff: 2
Page Ref: 382-383
67) When Wal-Mart Stores first expanded into Mexico, management established a joint venture
with the country's largest retailer. Judging by the approach Wal-Mart used, management must
have viewed Mexico as:
Answer: D
Diff: 1
Page Ref: 382-383
12
68) When single brand-retailers such as Benetton, Nike, Pizza Hut, Reebok, and Subway first
entered Indian retail market they were required to use:
A) mom-and-pop type stores.
B) cramped stores.
C) local vendor operated stores.
D) franchised stores.
E) departmental stores.
Answer: D
Diff: 3
Page Ref: 379
69) Physical distribution and logistics are concerned with all but one the following.
A) order processing
B) warehousing
C) inventory management
D) transportation
E) designing in-store displays
Answer: E
Diff: 2
Page Ref: 384
70) Order processing, warehousing, and inventory management are all functions pertaining to:
A) a polycentric orientation.
B) physical distribution and logistics.
C) sales promotion.
D) personal selling.
E) chain acquisition.
Answer: B
Diff: 2
Page Ref: 384-391
71) If a commodity raw material comes from Africa; gets refined in Asia; then shipped to South
America for finishing; and finally transported to the Middle East and then sold around the world
represents a similar process used for products marketed by:
A) Exxon.
B) McDonald's.
C) Caterpillar.
D) IKEA.
E) Sears.
Answer: D
Diff: 2
Page Ref: 384-385
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72) "Containerization" refers to a company's:

A) designing attractive product packaging that will help a product "sell itself."
B) the use of computer technology to keep a lid on ("contain") distribution costs.
C) using refrigerated warehouses for perishable products.
D) use of standard-sized shipping boxes that can be transported in various ways.
E) a method of shipment by using oval size steel containers to fit different commodities.
Answer: A
Diff: 2
Page Ref: 390-391
73) When a company uses intermodal or multimodal transportation it is:
A) using multiple channels.
B) using land and water shipping.
C) shipping via more than one railroad line.
D) using the services of both UPS and FedEx.
E) using different size containers for shipment.
Answer: B
Diff: 2
Page Ref: 390-391
74) A French winery packs its wine in a 40-foot container that is trucked to a port and then
loaded onto an ocean-going vessel. This is an example of:
A) intermodal transportation.
B) inventory control.
C) hypermarketing.
D) "cherry picking" a product.
E) containerization.
Answer: A
Diff: 2
Page Ref: 390-391
75) A freighter loaded with 40-foot shipping containers leaves a port in Europe and sails to New
York, where the containers are transferred to railroad cars and transported to the West coast. At
the port of San Francisco, the containers are loaded onto another freighter bound for Japan. The
term that best describes this situation is:
A) intermodal transportation.
B) inventory management.
C) greenfield investment.
D) hypermarketing.
E) containerization.
Answer: A
Diff: 2
Page Ref: 390-391
14
76) Inventory management is:

A) determining what type of warehouse to manage.
B) establishing an inventory channel.
C) managing physical distribution of products.
D) purchasing products.
E) ensuring cost control.
Answer: E
Diff: 2
Page Ref: 386
77) Which of the following transportation modes ranks lowest in capability?
A) truck
B) railroad
C) Internet
D) air
E) water
Answer: D
Diff: 2
Page Ref: 390
78) Which of the following transportation modes offers the most flexible routing and scheduling:
A) railroad
B) truck
C) pipeline
D) air
E) water
Answer: B
Diff: 2
Page Ref: 389-390
79) Which global retailer has reconfigured its supply chain and now permits a Taiwanese
supplier to ship clothing from the point of manufacture directly to retail stores?
A) Marks & Spencer
B) Brooks Brothers
C) Laura Ashley
D) Calvin Klein
E) J.C. Penney
Answer: E
Diff: 2
Page Ref: 391
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80) JCPenney's North American stores carry virtually no extra inventory of house-brand shirts.
When a shirt is sold, scanner data is directly transmitted to Hong Kong. The private-label
supplier TAL Apparel Ltd. in Hong Kong replenishes the stock based on usage, sometimes
shipping shirts by air. These logistics have all but one of the following advantages:
A) JCPenny can reduce the inventory by almost 50%.
B) JCPenny can lower the inventory costs.
C) JCPenny can respond more quickly to changing consumer tastes.
D) JCPenny can ship the shirts directly by air to consumers.
E) JCPenny can reduce the quantity of goods that have to be marked down.
Answer: D
Diff: 2
Page Ref: 391
AACSB: Use of IT
81) Nestl in Brazil is using door-to-door selling to reach low-income neighborhoods, Dell
computers provide home delivery for its products; Avon is using sales representatives and other
companies are using different methods to reach consumers. Describe different channels that can
be used for reaching the customers.
Answer: Marketing channels exist in order to create utility for customers. These utilities can be
place utility, time utility, form utility, or information utility. Thus, the selection of a marketing
channel depends on the target market which a manufacturer is planning to reach. Various
companies have used innovative channel distribution methods. Distribution channels are systems
that link manufacturers to customers. Although channels for consumer products and industrial
products are similar, there are also some distinct differences. In business-to-consumer marketing
(B2C) consumer channels are designed to put products in the hands of consumers. In the case of
business-to-business (B2B), industrial channels deliver products to manufacturers or other types
of organizations that use them as inputs in the production process or in other types of operations.
Agents and distributors are commonly used as intermediaries. With the increased use of
technology, peer-to-peer (p-to-p) marketing is becoming popular, whereby individual consumers
marketed products to other individuals. EBay pioneered a form of online commerce which has
gained popularity and many companies are using it as a channel for distribution. Door-to-door
selling has been a traditional channel which is also currently in use. For example, in Japan auto
manufacturers use door-to-door selling. Another direct selling alternative is the manufacturerowned store or independent franchise store. In many countries where manufacturers cannot own
stores, franchising is a very popular method. Other channel structure alternatives for consumer
products include various combinations of a manufacturer's sales force and wholesalers calling on
independent retail outlets. Piggyback marketing is another channel innovation whereby one
manufacturer obtains product distribution by utilizing another company's distribution channels.
Diff: 2
Page Ref: 365-370
16
82) Dell's rise to a leading position in the global PC industry was based on Michael Dell's
decision to bypass conventional channels by selling direct and by customizing computers.
Discuss the importance of channel innovation, giving examples of piggyback marketing in
emerging markets.
Answer: Channel innovation can be an essential element of a successful marketing strategy. As
noted in the case of Dell computers which began as a b-to-b marketer. The business model
proved to be very successful, that the company began marketing direct to the home PC market.
This strategy may not work for other products, particularly where a complicated system or
mechanism is involved. Before deciding which system to use, marketers must study each country
individually. In general, if the market is large it is more feasible to use a manufacturer's own
sales force. Piggyback marketing is a good example of another channel innovation that has
grown in popularity. In this marketing one manufacturer obtains product distribution by utilizing
another company's distribution. Both parties can benefit by increasing the total revenue
generated by the channel members. Successful piggyback marketing requires that the combined
product lines be complementary. They must appeal to the same customer and must not compete
with each other. Several companies have taken advantage of the opportunity to piggyback with
Avon, which has a network of direct sales representatives in over 100 countries. Several of
Mattel's toy lines are being marketed in China by local Avon representatives. In Australia, New
Zealand, Brazil, Canada, and France, Avon representatives offer Reader's Digest subscriptions
along with Avon's health and beauty products. In emerging markets, Avon offers a second catalog
featuring products from Timex, Duracell, Time-Life, and others. Thus, piggyback products
already account for 15 percent of sales in some emerging markets.
Diff: 2
Page Ref: 365-370
83) Companies entering emerging markets for the first time must exercise particular care in
choosing a channel intermediary. Generally, a local distributor is required. What are some of the
guidelines that should be considered in selecting a distributor in order to avoid any problems?
Answer: Care should be taken in selecting distributors particularly when entering a new market
in a foreign country. Prof. Arnold provided seven specific guidelines to help prevent problems.
These guidelines are: (1) select distributors and do not let the distributors select you; (2) look for
distributors capable of developing markets, rather than those with a few good customer contacts;
(3) treat local distributors as long-term partners, not temporary market-entry vehicles; (4) support
market entry by committing money, managers, and proven marketing ideas; (5) from the start,
maintain control over marketing strategy; (6) make sure distributors provide you with detailed
market and financial performance data; and (7) build links among national distributors at the
earliest opportunity. When devising a channel strategy, it is necessary to be realistic about the
motives of the typical channel intermediary. If distributors are not properly selected it can prove
to be a nightmare.
Diff: 2
Page Ref: 372-373
17
84) How does 'specialty retailers' differ from 'hypermarkets,' 'supercenters', and 'convenience
stores?' Why are some businesses called "category killers?"
Answer: The 'specialty retailers' offer less variety than department stores. They are very
narrowly focused and offer a relatively narrow merchandise mix aimed at a particular target
market. Specialty stores offer a great deal of merchandise depth such as styles, colors and sizes.
Whereas 'hypermarkets' are a hybrid retailing format combining the discounter, supermarket, and
warehouse club approaches under a single roof. On the other hand, 'supercenters' offer a wide
range of aggressively priced grocery items plus general merchandise in a space that occupies
about half the size of a hypermarket. Supercenters are an important aspect of Wal-Mart's growth
strategy, both at home and abroad. Convenience stores offer some of the same products as
supermarkets, but the merchandise mix is limited to high-turnover convenience and impulse
products. Prices are generally higher compared to supermarket prices. 'Category killers' is the
label many in the industry use when talking about stores such as Toys'R'Us, Home Depot, and
IKEA. It refers to the fact that such sores specialize in a particular product category such as toys
or furniture, and offer a vast selection at low prices. These stores represent a very influential
business which can demolish smaller, more traditional competitors and prompt department stores
to scale down merchandise sections that are not competitive.
Diff: 2
Page Ref: 375-378
85) The Indian economy is growing rapidly and many global businesses are looking toward
moving into India. What types of challenges would global retailers be confronted with if they
plan on going to India?
Answer: Global retailers who would like to go to India will face a variety of challenges. The
term organized retailing is used to describe the activity by large multi-store chains such as
Woolworths, Tesco, and Wal-Mart. Such stores account for only about 3 percent of India's $200250 billion annual retail sales. The vast majority of Indian retail activity is confined to stalls
which have very limited space. There have been several calls for regulatory reform, and some
observers believe organized retailing will grow at the rate of 30 to 35 percent per year. Many
politicians are concerned about the impact of organized retailing on the millions of small-scale
stores. Modernization of the sector is inevitable, although it may be slow in coming. Global
retailers are barred from participating directly in the Indian market. For this reason many
businesses are not planning to go to India. Pizza Hut, Subway, and Benetton are present, with
stores run by franchisees. Wal-Mart stores will also be run by franchisees. Anticipating the
arrival of the global retailers, local operators in India are investing for the future. Large business
groups such as Reliance Industries and Birla Group are also planning to enter the retail sector.
Also, Hindustan Lever, the Indian unit of packaged goods giant Unilever, has launched a
consultancy service to help the "mom and pop" operators become more competitive.
Diff: 2
Page Ref: 379
18
86) What are global retail categories? Describe these categories giving examples.
Answer: The categories for global retailing can be visualized in the form of a matrix. One axis
of the matrix represents private or own-label focus versus a manufacturer brands focus. The other
axis differentiates between retailers specializing in relatively few product categories and retailers
that offer a wide product assortment. IKEA, Benetton and Gap fall under quadrant A, which
contains global retailers with a niche focus as well as an own-label focus. In quadrant B, the
private-label focus is retained, but many more product categories are offered. This is the strategy
of Marks & Spencer whose strategy, Michael private label, is found on a broad range of clothing,
food, home furnishings, jewelry, and other items. Retailers in the upper right quadrant offer
many well-known brands in a relatively tightly defined merchandise range. Such businesses
include Toys 'R' Us, Virgin, and others. These types of stores tend to quickly dominate smaller
established retailers by out-merchandizing local competition and offering customers superior
value. Carrefour, Wal-Mart, and Promodes and similar businesses fall in the fourth quadrant.
They offer the same type of merchandise available from established local retailers. Thus, there
are different strategies that can be followed based on different criteria.
Diff: 2
Page Ref: 380-381
87) What are the market entry expansion strategies which are available to retailers that wish to
cross borders? Describe these strategies in detail.
Answer: There are four market entry expansion strategies available to retailers that wish to cross
borders. These strategies can be visualized by a matrix that differentiates between (a) markets
that are easy to enter versus those that are difficult to enter; and (b) culturally close markets
versus culturally distant ones. The upper half of the matrix encompasses quadrants A and D and
represents markets in which shopping patterns and retail structures are similar to those in the
home country. In the lower half of the matrix, quadrants C and B represent markets that are
significantly different from the home country market in terms of one or more cultural
characteristics. The right side of the matrix, quadrants A and B, represents markets that are
difficult to enter because of the presence of strong competitors, location restrictions, excessively
high rent or real estate costs, or other factors. In quadrants C and D, any barriers that exist are
relatively easy to overcome. The four entry strategies indicated by the matrix are organic,
franchise, chain acquisition, and joint venture. Organic growth occurs when a company uses its
own resources to open a store on a greenfield site or to acquire one or more existing retail
facilities from another company. Franchising is the appropriate entry strategy when barriers to
entry are low yet the market is culturally distant in terms of consumer behavior or retailing
structures. In global retailing, acquisition is a market-entry strategy that entails purchasing a
company with multiple retail locations in a foreign country. This strategy can provide the buyer
with quick growth as well as access to existing brand suppliers, distributors, and customers. Joint
ventures, the final entry strategy, are advisable when culturally distant, difficult-to-enter markets
are targeted. The strategy is to collaborate with some local company as a joint venture.
Diff: 3
Page Ref: 381-382
19
88) Distribution channels around the world are highly differentiated. However these differences
cannot be explained just by culture and income level of the existing market. What is the different
between Organic Growth and Franchising?
Answer: Organic growth occurs when a company uses its resources to open a store on a
greenfield site or to acquire one or more existing retail facilities from another company. For
example, Marks & Spencer's announced in 1997 plans to expand from one store to four in
Germany via the purchase of three stores operated by Cramer and Meerman. Franchising is the
appropriate entry strategy when barriers to entry are low yet the market is culturally distant in
terms of consumer behavior or retailing structures. It is a contractual relationship between two
companies. The parent company-franchisor authorizes a franchise to operate a business
development by the franchisor in return for a fee and adherence to franchise-wide policies and
practices. The key to a successful franchise operation is the ability to transfer company knowhow to new markets. Benetton, IKEA, and other focused, private-label retailers often use
franchising as a market entry strategy.
Diff: 2
Page Ref: 383
89) An export administrator, Beth Dorrell notes, "A commodity raw material from Africa can be
refined in Asia, then shipped to South America to be incorporated into a component of a final
product that is produced in the Middle East and then sold around the world. In light of this
statement, describe supply chain, value chain, and logistics. List and briefly describe the most
important distribution activities.
Answer: As the statement describes, it has become very easy to have raw product in one country
which can be transported to several countries for processing or finishing, and then sold all over
the world. IKEA, the global furniture manufacturer, purchases wood and other raw material
inputs from a network of suppliers located in several countries. The wood is then transported to
the factories, which add value to the inputs by transforming them into furniture kits that are then
shipped on to IKEA's store. The stores are downstream in IKEA's value chain. Thus, there is a
continuous global involvement from raw materials, to factories, retail distribution and finally to
consumers. The most important distribution activities are order processing, warehousing,
inventory management, and transportation. Order processing includes order entry, handling, and
delivery. Proper inventory management ensures that a company neither runs out of
manufacturing components or finished goods nor incurs the expense and risk of carrying
excessive stocks at any time. Warehouses are used to store goods until they are sold. Finally,
transportation plays a big role in the movement of products. The transportation can be by rail,
trucks, air, or ships.
Diff: 2
Page Ref: 384
20
90) In 2006, there was a big controversy in the United States after a British company; Peninsular
& Oriental Steam Navigation was acquired by Dubai Ports World. This controversy clearly
outlined some of the challenges in the global marketplace. Using this as an example, discuss the
challenges that confront a global marketplace.
Answer: Peninsular & Oriental Steam Navigation (P&O) is a seaport operator with a strong
global presence including the use of seaports in the U.S. market. Dubai Ports World (DP World),
by acquiring P&O, could have access to container ports in six U.S. cities. In essence, these ports
would be operated by a unit of a Middle Eastern company. The ensuing media uproar and
backlash were part of a broader concern that U.S. officials were not being sufficiently vigilant
about globalization's potential negative aspects. This becomes more serious in light of the
September 11, 2001 tragedy. Dubai is one of seven semiautonomous regions that comprise the
United Arab Emirates (UAE). Thus, national security took priority over sanctioning a business
deal. The fear was that the Middle East connection would allow different groups to gather
information about U.S.port procedures and may infiltrate the workforce. Some observers were
quick to point out that companies based in China, Taiwan, Japan, Denmark, and other countries
already manage some 30 percent of America's container ports. Also, the operators are often
subsidiaries of foreign shipping companies. Before the controversy developed, DP World's
proposed acquisition of P&O had already been approved by the Committee on Foreign
Investment in the United States. Units of the U.S. Homeland Security Department would control
security at the ports in questions, and DP World would be required to comply with all security
policies and protocols. In early march 2006, a House panel voted overwhelmingly to block the
deal. President Bush vowed to veto any such attempt by Congress. However, as the controversy
reached its peak, DP World announced that it would divest itself of holdings that were associated
with U.S. ports. Thus, this shows how political situations can change the way businesses will be
dealt with in the global marketplace. Also, the security of a country becomes one of the
important consideration factors in doing business in the global marketplace.
Diff: 2
Page Ref: 389
21

Chap12 GM6e TIF

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Global Marketing, 6e (Keegan/Green)

Chapter 12 Global Marketing Channels and Physical Distribution

44) Peer-to-peer (p-to-p) marketing uses distribution channels through:

72) "Containerization" refers to a company's:

76) Inventory management is:

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