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Ch 13 Busi 110

distribution strategy
A plan for delivering the right product to the right person at the right place at the right time.
channel of distribution
The network of organizations and processes that links producers to consumers.
physical distribution
The actual, physical movement of products along the distribution pathway.
direct channel
A distribution process that links the producer and the customer with n o intermediaries.
channel intermediaries
Distribution organizations—informally called “middlemen”—that facilitate the movement of products from the producer to the consumer.
retailers
Distributors that sell products directly to the ultimate users, typically in small quantities, that are stored and merchandized on the premises.
wholesalers
Distributors that buy products form producers and sell them to other businesses or nonfinal users such as hospitals, nonprofits, and the government.
independent wholesaling businesses
Independent distributors that buy products from a range of different businesses and sell those products to a range of different customers.
merchant wholesalers
Independent distributors who take legal possession, or title, of the goods they distribute.
agents/brokers
Independent distributors who do not take title of the goods they distribute (even though they may take physical possession on a temporary basis before distribution).
multichannel retailing
Providing multiple distribution channels for consumers to buy a product.
wheel of retailing
A classic distribution theory that suggests that retail firms and retail categories become more upscale as they go through their life cycles.
supply chain
All organizations, processes, and activities involved in the flow of goods from the raw materials to the final consumer.
supply chain management (SCM)
Planning and coordinating the movement of products along the supply chain, from the raw materials to the final consumers.
logistics
A subset of supply chain management that focuses largely on the tactics involved in moving products along the supply chain.
modes of transportation
The various transportation options—such as planes, trains, and railroads—for moving products through the supply chain.
penetration pricing
A new product pricing strategy that aims to capture as much of the market as possible through rock-bottom prices.
everday-low-pricing (EDLP)
Long-term discount pricing, designed to achieve profitability through high sales volume.
high/low pricing
A pricing strategy designed to drive traffic to retail stores by special sales on a limited number of products, and higher everyday prices on others
loss-leader pricing
Closely related to high/low pricing, loss-leader pricing means pricing a handful of items—or loss leaders—temporarily below cost to drive traffic.
skimming pricing
A new product aims to maximize profitability by offering new products at a premium price.
breakeven analysis
The process of determining the number of units a firm must sell to cover al costs.
profit margin
The gap between the cost and the price of an item on a per-product basis.
odd pricing
The practice of ending prices in numbers below even dollars and cents in order to crate a perception of greater value.
________ are wholesalers who take legal title of merchandise, but never physically possess it.
a. Truck jobbers
.B. Drop shippers
c. Agents
d. Brokers
_______ do not take legal ownership of the goods they distribute and facilitate transactions in exchange for commissions.
.A. Agents
b. Drop shippers
c. Truck jobbers
d. Retailers
________ involves placing a firm’s products in as many stores as possible.
a. Exclusive distribution
b. Exponential distribution
.C. Intensive distribution
d. Selective distribution
The wheel of retailing suggests that:
.A. retail firms become more upscale as they go through their life cycles.
b. the growth of a retail firm is directly proportional to the number of products it sells.
c. retail firms that operate as deep discounters cannot transition to high-end products.
d. retailers who enter at the higher end of the market decline much sooner than retailers who begin at the lower end of the market.
Which of the following is a nonstore type of retailer?
a. A warehouse club
b. A category killer
c. A supermarket
.D. A vending machine
________ refers to the practice of pricing a handful of items temporarily below cost to drive traffic.
a. Price skimming
.B. Loss leader pricing
c. Prestige pricing
d. Sustained discount pricing
________ is a product pricing strategy that offers new products at a premium price to entice price-insensitive consumers to buy high when a product first enters the market.
a. High/low pricing
b. Penetration pricing
.C. Skimming pricing
d. Loss leader pricing
The ________ approach to pricing begins by determining what price consumers would be willing to pay for a particular product.
a. cost-based pricing
.B. demand-based pricing
c. competition-based pricing
d. value-based pricing
T/F. Breakeven analysis is a process that determines the number of units a firm must sell to cover all costs.
True
T/F. Sales above the breakeven point will lead to a loss.
False
What is the difference between retailers and wholesalers?
a. Retailers use the cost-based pricing approach, while wholesalers use the demand-based pricing approach.
b. Retailers deal with the B2B products of a firm, while wholesalers deal with the B2C products of a firm.
c. Retailers use two or three additional channels to distribute their products, while wholesalers use the direct channel approach.
.D. Retailers sell products directly to final consumers, while wholesalers buy products from the producer and sell them to businesses.
Which of the following differentiates a merchant wholesaler from a broker?
a. A merchant wholesaler connects buyers and sellers but does not transport the products to buyers, while a broker both owns and distributes products to buyers.
b. A merchant wholesaler sells only to consumers, while a broker sells to retailers as well as consumers.
c. A merchant wholesaler cannot set the price of the goods it sells, while brokers can decide on the price of goods without consulting the producer.
.D. A merchant wholesaler takes title of the goods he distributes, while a broker does not take title of the goods he distributes.
What is the difference between intensive distribution and selective distribution?
a. Intensive distribution is used to market a firm’s brand line expansion, while selective distribution is used to market a firm’s product line extension.
.B. Intensive distribution means placing the products in as many stores as possible, while selective distribution means placing the products with preferred retailers.
c. Intensive distribution is suited for high-priced or luxury products, while selective distribution is suited for low-priced products.
d. Intensive distribution is used for B2B products, while selective distribution is used to distribute B2C products.
Which of the following is an example of a supermarket?
a. Ruggers, a textile company, sells its textiles to the public directly at steep discounts through its own store.
.B. Sammy’s, a company that specializes in food retailing, offers a wide range of food products and a limited range of nonfood items.
c. Pattersons, a company that manufactures sports goods, sells discounted products to club members in a large warehouse format.
d. Pro-one, a shoe company, offers a wide selection of shoes for casual wear, sports wear, and formal wear under a single roof.
Which of the following is a direct response retailer?
.A. a catalog retailer
b. a warehouse retailer
c. an outlet store
d. a specialty store
What is the difference between loss leader pricing and price skimming?
a. Price skimming involves pricing products below their cost price, while loss leader pricing prices products at a premium price.
b. Price skimming is a strategy that relates to a firm’s high?low pricing strategy, while loss leader pricing is a prestige pricing strategy.
.C. Price skimming is a strategy used to entice price-insensitive consumers, while loss leader pricing is a strategy used to entice price-sensitive consumers.
d. Price skimming is a strategy that boosts the sales volume of a firm, while loss leader pricing boosts the long-term profitability of a firm.
You run a shop that sells coffee and pastries. Your fixed cost is $900,000 per year. Your variable cost per pastry—the cost of the ingredients and the cost of wages—is $5 per pastry. If your customers pay $10 per pastry, you need to sell a total of ________ pastries for your sales to equal your total expenses.
Total fixed cost/ (price-variable cost) = 900,000/ (10-5) = 180,000
The fixed cost for a shop selling specialty ice cream sodas cost is $450,000 per year. The specific fixed cost includes the mortgage, payment on equipment, advertising, insurance, and taxes. The variable cost per ice cream soda—the cost of the ingredients and labor—is $10. If customers pay $20 per ice cream soda, the breakeven quantity is 45,000. Which of the following, if true, would result in an increase in the quantity required to break even?
a. Decreasing the variable cost from $10 to $5.
b. Decreasing the fixed cost from $450,000 to $400,000.
c. Increasing the price for customers from $20 to $25.
.A. Increasing the variable cost from $10 to $15.
What is the difference between cost-based pricing and demand-based pricing?
.A. Cost-based pricing approach begins by establishing the product’s cost, while the demand-based pricing approach begins by establishing the price consumers are willing to pay.
b. Cost-based pricing takes the firm’s macro-environment factors into consideration while determining the cost per product, while demand-based pricing takes the firm’s micro-environment factors into consideration.
c. Cost-based pricing is more market-focused than demand-based pricing, while demand-based pricing focuses on the firm’s capabilities rather than customers.
d. Cost-based pricing does not take the margin per product into account, while demand-based pricing considers the product’s margin.
Which of the following is the best example of odd pricing?
a. One apple costs $2, but a box of six apples costs $10.
b. A pair of jeans costs $50 to produce, but is priced at $400.
c. Disposable razor blades are sold at a higher price than the razor handles.
.D. A micro stereo system at Kent Inc. is priced at $189.99.

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