Part I: Short Answers (Please answer ANY 6 of the following 8 questions. If you answer more than six, only the first six questions will count toward your grade. If you start on an answer and decide to abandon it, please make sure that your answer is crossed out). [20 points per question for a total of 6*20=120 points. Suggested time allocation: 7 minutes per question for a total of 42 minutes for Part I].
1. Sow’s Ear’s Accessories makes purses and other accessories from the ears of pink farm animals. (Despite the old adage, the company insists that it makes good products). Currently, SEA’s products are sold at farmers’ markets, Old McDonald’s Farm, and in numerous specialty stores. However, SEA products are not available in most accessory and upscale department stores. Please discuss how SEA might go about engaging in reciprocal piggy-backing and what the other party would gain from this.
2. Please discuss how well balanced you perceive the U.S. retail market for gasoline to be.
3. Traitor Joe used to sell Cuban cigars, Libyan figs, Iraqi dates, and Afghan “Tali Sand.” However, based on the excellent efforts made in a “sting” operation by some people on the midterm in this class, Joe is scheduled to reside in a maximum security prison for the foreseeable future. Seeking to get on the good side of the warden, Joe, while working in the prison shop, has suggested that the prison non-violently “eliminate” the middleman by selling the license plate holders manufactured by inmates directly to consumers through direct marketing. The warden has asked you to consult on economic merits of this approach. (Currently, the prison receives $2.00 for each holder that is sold for $6.50 at retail).
4. Although Microsoft is mostly in the business of writing software, the company uses a great deal of CD ROMs and diskettes to distribute its software. Please discuss, in this context, the merits of vertical integration.
5. The Chief Execution Officer (CEO) of Avenging Ammo is intrigued over the rapidly growing phenomenon of “category killer” retailers. Please discuss to her how these stores can be successful and the positive and negative aspects of supplying such stores.
6. According to the text, what are some issues in deciding whether intermediaries should be used at all?
7. According to the text, what are some reasons why retailers have become relatively more powerful, how does this power manifest itself, and what is its significance?
8. Please discuss sources of channel “gaps.”
PLEASE BE SURE THAT YOU HAVE EITHER
COMPLETELY SKIPPED OR CROSSED OUT ANSWERS TO YOUR TWO LEAST PREFERRED SHORT
ANSWER QUESTIONS!
·
the significance to the firm of the issues
that you identify (you must decide which issues are applicable and are genuinely
important for the specific firm);
·
how well you relate
the ideas to the specific situation of
the firm in question (merely regurgitating class notes in the abstract will
yield no credit);
·
the extent to which
in-depth knowledge of the ideas applied is expressed (note that your reasoning
must be evident and explicit); and
·
the extent to which
the answer is well organized.
There will be no credit
for:
·
“No brainer” observations, such as the
need for the firm to take culture into consideration (you must discuss likely
cultural influences in context of the
firm situation) or the need to do research (you must justify the issues and
methods that you explicitly indicate);
·
Outside knowledge (what you happen to know about this
particular firm, beyond what was covered in class, readings, or in the case);
·
Ideas which are too vague to be meaningful;
· Ideas not
related to issues discussed in this course (e.g., issues that do not
significantly relate to distribution);
·
“Buzz” words whose meaning is not
discussed; or
·
General ideas not tailored to the needs of the specific firm.
A.
Dell Computer is a
leading manufacturer and direct-to-customer seller of microcomputers and
accessories. There is generally a great
deal of price competition in the microcomputer market, but some customers—particularly
businesses and professionals—are willing to pay a higher price for high
quality, extra service, and support.
One option that Dell offers is a plan for “on your site” service and
support within 24 hours of the customer’s call. This plan typically sells for about $250.00 per year. An obvious problem, however, is that
customers are spread out through the United States and those other countries in
which the plan is offered, so having close-by dispatch facilities would entail
a large investment. More recently, a
number of businesses have expressed an interest in a plan with a guarantee of
service within two hours.
Traditionally, Dell has bought most of its parts from others and has
focused on the assembly and marketing of the computers. Now, however, some board members have asked
about the possibility of Dell manufacturing its own hard drives and other
components.
B.
Decibeletics is a
manufacturer of premium quality car stereo systems. While Decibeletics’ systems are among the very best in the
business—and are recognized among many audiophiles as such—they are also
extremely expensive, with a radio-CD unit starting at around $1,200
retail. Since only a small segment of
consumers will pay such high prices, Decibeletics’ products are available in
only a small number of outlets. Much of
the costs of the products go into research and development, so the variable
cost of production for a $1,200 unit is only about $350. Therefore, Decibeletics’ management has
thought about offering some units at a lower price through Costco. It has also been felt that many buyers of
new luxury cars might want to have a Decibeletics installed at the time of
purchase, but even though customers here might be willing to pay full retail
price, Decibeletics’ current distribution system does not reach the dealers and
selling directly to the dealerships would add a great deal of cost due to small
volumes.