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Global MarketingChapter 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
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2) The first channel alternative for manufacturers is to market directly to buyers via the Internet.Answer: TRUE
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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
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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
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5) Nestlé is using an innovative approach to distribution in Brazil with a program of door-to-door selling in high-income neighborhoods.Answer: FALSE
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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
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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
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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
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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
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10) Avon was the first company permitted to sell door-to-door in China.Answer: TRUE
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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
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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
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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
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14) Kodak adopted a direct involvement approach in Japan by utilizing independent agents, distributors and retailers.Answer: FALSE
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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
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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
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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
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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
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19) Global retailing is any retailing activity that crosses national boundaries.Answer: TRUE
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20) Based on sales figures, Carrefour is the largest hypermarket in France.Answer: TRUE
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21) Organized retail is a term that is used to describe the modern, branded chain stores.Answer: TRUE
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22) Nakumatt is a local supermarket chain in Kenya which provides an aspirational space that appeals to everyone.Answer: TRUE
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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
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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
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25) Hypermarkets are a hybrid retailing format combining the discounter, supermarket, and warehouse club approaches under a single roof.Answer: TRUE
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26) Toys "R" Us, Home Depot, and IKEA are referred to as "category killers" in the retailing industry.Answer: TRUE
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27) British retailer Marks & Spencer is a good example of a category killer.Answer: FALSE
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28) Three of the world's five largest malls are in Asia.Answer: TRUE
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29) In economic downturn, hard discounters thrive as cash-strapped consumers seek ways to stretch household budgets.Answer: TRUE
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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
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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
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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
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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
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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
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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
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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
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37) By definition, a retailer that caters to the general public would be "downstream" in an industry's supply chain.Answer: FALSE
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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
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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
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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
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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
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42) Marketing channels have the potential to create which of the following types of utility?A) place utilityB) time utilityC) form utilityD) information utilityE) all of the aboveAnswer: E
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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 utilityB) time utilityC) form utilityD) information utilityE) worker utilityAnswer: C
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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
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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
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46) Which country has proven to be the most successful market in Avon's history among the following?A) RomaniaB) UkraineC) ChinaD) RussiaE) IndiaAnswer: D
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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
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48) Nestlé 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
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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
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50) Sales representatives in which Japanese industry cultivate close, long-term relations with customers by selling door-to-door?A) consumer electronicsB) pharmaceuticalsC) automobilesD) soft drinksE) groceriesAnswer: C
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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 sellingB) buy-in-bulk sellingC) mom-and-pop storesD) franchised storesE) manufacturer-owned storesAnswer: C
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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
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53) Which personal computer company focuses on business-to-business marketing using a direct-sales approach?A) Hewlett-PackardB) CompaqC) DellD) AcerE) SonyAnswer: A
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54) Which of the following is an appropriate guideline for companies selecting independent distributors in international markets?A) Select distributors–don'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
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55) Which of the following is not an appropriate guideline for companies selecting independent distributors in international markets?A) Select distributors–don'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
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56) Which of the following is the largest retailer in the world in terms of annual sales?A) SearsB) MetroC) KmartD) CarrefourE) Wal-MartAnswer: E
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57) By definition, ________ feature a narrow but deep merchandise mix and high levels of service.A) department storesB) specialty retailersC) super marketsD) convenience storesE) discount storesAnswer: B
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58) Which of the following does NOT qualify as a "category killer?"A) Victoria's SecretB) IKEAC) Home DepotD) Circuit CityE) Toys "R" UsAnswer: A
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59) Which European retailer proved unsuccessful in its cross-border initiatives on New York's fashionable Fifth Avenue?A) Virgin GroupB) Marks & SpencerC) CarrefourD) Galeries LafayetteE) Louis VuittonAnswer: D
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60) Which of the following correctly characterizes the retailing strategy shared by Toys "R" Us and Virgin Megastores?A) few product categories, own-label focusB) few product categories, manufacturer brand focusC) many product categories, own-label focusD) many product categories, manufacturer brand focusE) none of the aboveAnswer: B
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61) Which of the following categories best describes the approach of Britain's Marks & Spencer to global retailing?A) few product categories, own-label focusB) few product categories, manufacturer brand focusC) many product categories, own-label focusD) many product categories, manufacturer brand focusE) none of the aboveAnswer: C
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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 acquisitionB) organic growthC) franchiseD) joint ventureE) own-label focusAnswer: D
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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 growthB) chain acquisitionC) franchiseD) joint ventureE) own label focusAnswer: C
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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-Elysées. 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
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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: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: D
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66) Which of the following correctly characterizes the retailing strategy of Benetton, IKEA, and Gap?A) few product categories, own-label focusB) few product categories, manufacturer brand focusC) many product categories, own-label focusD) many product categories, manufacturer brand focusE) none of the aboveAnswer: A
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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: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: D
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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
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69) Physical distribution and logistics are concerned with all but one the following.A) order processingB) warehousingC) inventory managementD) transportationE) designing in-store displaysAnswer: E
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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
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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
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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
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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
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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
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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
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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
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77) Which of the following transportation modes ranks lowest in capability?A) truckB) railroadC) InternetD) airE) waterAnswer: D
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78) Which of the following transportation modes offers the most flexible routing and scheduling:A) railroadB) truckC) pipelineD) airE) waterAnswer: B
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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 & SpencerB) Brooks BrothersC) Laura AshleyD) Calvin KleinE) J.C. PenneyAnswer: E
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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
Page Ref: 39181) Nestlé 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 manufacturer-owned 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.
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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.
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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.
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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.
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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 $200-250 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.
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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.
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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.
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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 know-how to new markets. Benetton, IKEA, and other focused, private-label retailers often use franchising as a market entry strategy.
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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.
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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.
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