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by: Sarah Silberg


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These notes cover chapters 5, 13, 14, and 15. They are a bundle so you can get them all for real cheap :)
Foundations of Business I
Susan Daley
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This 21 page Study Guide was uploaded by Sarah Silberg on Thursday October 13, 2016. The Study Guide belongs to BUSN 101 at Drexel University taught by Susan Daley in Winter 2016. Since its upload, it has received 19 views. For similar materials see Foundations of Business I in Business at Drexel University.




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Date Created: 10/13/16
Sarah Silberg Rios, BUSN 101 9/19/16 Chapter 5: How to Form a Business Basic Forms of Business Ownership ­Three major forms of business ownership ­Sole proprietorship: a business owned and managed by one person ­Partnerships: when two or more people legally agree to become co­ owners of a business ­Corporations: a legal entity with authority to act and have liability apart  from its owners. ­Businesses can change forms of ownership anytime Sole Proprietorships (In detail) ­Advantages ­Being your own boss ­Ease of starting and ending the business ­Pride of ownership ­Leaving a legacy ­Retention of company profits­ the business owner will keep the profits  earned but will reap the rewards of the value of the business growing also. ­No special taxes­ sole proprietors are taxed as personal income therefore the owner pays a normal income tax on that money. ­Disadvantages ­Unlimited liability­ everything falls on the owner of the company ­Limited financial resources­ since it is one person’s personal money  being put to work there is a limit of funds which limits the quantity, quality,  and many other aspects of the products ­Management difficulties­ it is difficult to find employees due to the  company’s inability to compete with salary and benefits of big companies. ­Overwhelming time and commitment ­Few fringe benefits­ no paid health insurance, pension, sick leave, etc. ­Limited growth ­Limited lifespan­ if owner dies so does company Partnerships ­Three types of partnerships ­General partnership­ all owners share in operating the business and  assuming liability for the business’s debts. Owner who has unlimited  liability and manages the business. ­Limited partnership­ has one or more general partners and one or more  limited partners. Owner invests money but doesn’t do management or  liability for losses beyond their own investment. ­Master limited partnership­ Looks like a corporation because it is traded  through the stock exchange but it is taxed like partnership. ­Mostly happens in oil companies. ­Limited liability partnership (LLP)­ limits the partner’s rick of losing their personal assets to the outcome of their own acts and omissions and those under their  supervision. ­All states except for Louisiana adopted the Uniform Partnership Act (UPA) which has 3 main elements ­Common ownership, shared profits and losses, and the right to  participate in managing the operations of the business. ­Advantages of partnership: ­More financial resources ­Shared management and pooled/complementary skills and knowledge ­Longer survival ­No special taxes ­Disadvantages of partnerships: ­Unlimited liability ­Division of profits ­Disagreement among partners ­Difficulty of termination Corporations ­Conventional(C) corporation: state­chartered legal entity with authority to act  and have liability separate from its owners (stockholders) ­Stockholders don’t have to worry about losing more than the money they  put into the stock. ­Advantages of corporations: ­Limited liability ­Ability to raise more money for investment ­Corporations can borrow money (loans and bonds) ­Size: corporations can keep up with demand such as factories or  equipment needed. ­Perpetual life­ many owners so if one dies company can still exist ­Ease of ownership change ­Ease of attracting talented employees ­Separation of ownership from management ­Disadvantages of corporations: ­Initial cost ­Extensive paperwork ­Double taxation­ corporate income is taxed twice ­Two tax returns­ individual must file for both corporate tax and individual  tax returns. ­Size­ less flexible to change in demand or market ­Difficulty of termination­ hard to end a corporation ­Possible conflict with stockholders and board of directors ­Individuals can incorporate ­Mostly if individuals incorporate they do not open up to stockholders ­S Corporation­ a corporation that is run by the government that is taxed as a  sole proprietorship and a partnership ­To be considered a S Corporation: ­Company may not have more than 100 shareholders ­Have shareholders that are individuals or estates, and are  individually citizens or permanent residents of the US ­Have only one class of stock ­Take more than 25% of income from passive resources ­Limited Liability Companies­ like an S corporation with no special eligibility  requirements. ­Advantages of LLCs: ­Limited liability ­Choice of taxation­ either as partnerships or corporations ­Flexible ownership rules ­Flexible distribution of profits and losses ­Operating flexibility ­Disadvantages of LLCs ­No stock ­Limited lifespan ­Fewer incentives ­Taxes­ must pay self­employment tax ­Paperwork Corporate expansion: mergers and acquisitions ­Merger­ result of two firms joining to form one company ­Horizontal merger­ joins two firms in the same industry that help diversify  and expand the product ­Vertical merger­ joins two firms operating in different stages of related  business ­Conglomerate merger­ brings together two completely different  companies to diversify their products ­Acquisition­ one company’s purchase the ownings of another company­ Not  limited to just the US ­Not all companies merge some buy their company back from stockholders, to  help the firm internally ­Leveraged buyout (LBO)­ an attempt by one group from within a company to  buy out the stockholders of a company ­This is done so the people within that group can become the owners of  that firm Franchises ­Franchise agreement­ a company with a good idea sells the rights to use the  business name and to sell a product or service ­McDonald’s ­Senior care ­Advantages of Franchises: ­Management and marketing assistance ­Personal ownership ­Nationally recognized name ­Financial advice and assistance ­Lower Failure Rate ­Disadvantages of franchises: ­Large startup costs ­Shared profit ­Management regulations ­Coattail effects­ When a fellow franchise fails their actions have an  impact on your future growth and profitability ­Restrictions on selling ­Fraudulent franchisors ­Diversity in franchises ­Women own about 21% of franchises in US ­45% of franchises are co­owned by male and female partners which the  21% does not account for ­Minority­owned businesses are growing 6x’s the national rate ­DiversityFran is run by the International Franchise Association to  help awareness for franchising opportunities in minority  communities. ­20%< are owned by African Americans, Latinos, Asians, and Native  Americans. ­Homebased franchises ­Advantages­ no commute, extra time, cheaper ­Disadvantage­ isolated ­E­Commerce in Franchising ­Many franchisors do not allow for websites for their franchisee in case  they decide to make a website ­Much cheaper ­Use of technology in franchising ­Social media is huge ­Candy Bouquet International Inc. ­Franchising in Global Markets ­Canada is most popular target for US based franchises ­Build­a­bear, auntie Anne’s, subway, etc. Sarah Silberg Finnin, BUSN 101 9/23/16 Chapter 13: Helping buyers buy What is marketing?  Marking is the activity buyers and seller perform to facilitate perform to facilitate mutually satisfying exchanges.  Marketing is helping buyers buy  The easier a marketer makes the purchase decision process, the more they will sell  Helping buyers buy also helps sellers sell  For the traveling market- the role of marketing is to make sure that a company’s products or services are easily found online, and that the company responds effectively to potential customers.  Good marketers provide a wealth of info online and make relationships through social media o Online communities provide a window into the product buyers and can help them see feedback  Companies that use traditional advertising are missing out on new ways of marketing The Evolution of Marketing  What marketers do at any particular time depends on what they need to do to fill the customers’ needs and wants- always changing.  Four different Era’s o Production Era- “produce as much as you can, because there is a limitless market for it.”- mostly a time of farmers, carpenters, and trade workers o The selling era- 1920’s- philosophy turned from producing to selling. Most companies emphasized selling and advertising to persuade consumers to buy products. o Marketing concept era  Three parts to era:  Customer orientation- find out what consumers want and provide it for them- consumer needs over sales  Service orientation- everyone has same objective- Customer service  Profit orientation- focus on goods/service that will earn the most o Customer relationship era  Customer relationship management- processes of learning as much about the customer and doing everything over time to satisfy them  This enhances customer satisfaction and customer loyalty o Emerging mobile/on-demand marketing era  People want answers and help asap  As digital tech grows consumer demands will rise in  Now. Consumers want to interact anywhere, anytime  Can I? They want to do new things with different kinds of information in ways that create value for them  For me. Consumers expect data stored about them to be personalized  Simple. Consumers expect all interactions to be easy.  Companies want employees that will improve their social media, big data and customer experiences. Nonprofit Organizations and Marketing o Charities, Environmental groups, states, crime prevention- all use marketing o Market to donors o Nonprofit marketing strategies include  Determine the firm’s goals and objectives  Focus on long-term marketing  Find a competent board of directors  Exercise strategic planning  Train and develop long-term volunteers  Carefully segment the target market Marketing Mix- business blend them together in a well-designed marketing program o Talk about benefits not features o Marketing process that is controllable  Designing a want-satisfying product  Setting a price for a product  Putting the product in a place where people will buy it  Promoting the product o Four P’s of marketing  Product  Price  Place  Promotion o Price has to be consistent with the value Apply the Marketing process  The full marketing process o Find opportunities  Conduct research  Identify a target market  Design a product to meet the need based on research  determine a brand name, design a package, and set a price  select a distribution  build a relationship with customers o Target market- when you have a group of people interested in your product Designing a product to meet consumer needs  After you research consumer needs and find a target market you begin to use the 4 P’s  Product- any physical good, service, or idea that satisfies a want or need.  After you come up with a product you should do a concept test- you develop an accurate description of your product and ask people, in person or online of whether your product appeals to them or not  Test marketing- process of testing products among potential users.  If consumers like the products and agree they would buy them, you have a promising business  Brand name- the name of a service or good that will differentiate that company from the rest  To set a price you have to consider the cost of producing, distributing, and promoting the product Getting the product to the right place  How you market a product will vary on the area where you are selling. o Developing an effective promotional strategy o Promotion- consists of all the techniques sellers use to inform people about the motivate them to buy their products or services.  Includes but is not limited to advertising, personal selling, public relations, publicity, word of mouth…etc.  Building relationships with customers  Listening to customers and responding to their needs*** Providing Marketers with information  Marketing research- marketers analyze markets to determine opportunities and challenges, and to find the information they need to make good decisions.  Marketing research helps identify the past purchases of a customer and help companies determine products they would purchase in the future.  Businesses need to conduct research on business trends, ecological impact of their decisions, global trends.  Information is mandatory for a successful business o Gathered online o Gathered through customers, employees, shareholders, dealers, consumer advocates, media representatives, and other stakeholders The Marketing Research Process  Defining the question (problem or opportunity) and determining the present situation o Marketing researches have to determine the information they are looking to analyze  Collecting research data o Existing data- secondary data o Secondary data is what marketers should gather first to avoid incurring unnecessary expensive. o Primary data- a marketers own research  Conducting a survey  Telephone  Online  Mail  Personal interviews o Focus group- a group of people who meet under the direction of a discussion leader to communicate their opinions about an organization, its products, or other given issues  Analyzing the research data o Marketers must turn the data they collect into useful information o Produce information the company can use  Choosing the best solution and implementing it. o The company can now determine alternative strategies and make recommendations which may be better Marketing Environment  Environmental scanning- the process of identifying factors that can affect marketing success  Including global technological, sociocultural competitive, and economic influences Global factor  Using internet can globalize the process Technological factors  Firms produce customized goods for almost the same price as bulk  Flexible manufacturers/max customization  By using a consumer database, blogs, social networking companies can match the customers’ needs Sociocultural Factors  Marketers must monitor social trends to maintain their close relationship with customers  People 65+ population has been the fastest-growing segments of the US  The increase in number of older adults creates growing demand for retirement communities, health care, prescription drugs, recreation, continuing education, et. Competitive Factors  Marketers must pay attention to the dynamic competitive environment  Brick-and-mortar companies should be aware of new competition from the internet, including firms that sell automobiles, insurance, music, and clothes. Economic Factors  Marketers must pay close attention to economic environment Two different markets: consumer and business to business  A market consists of people with unsatisfied wants and needs who have both the resources and willingness to buy  Two major markets in business o Consumer market- consists of all the individuals or households that want goods and services for personal consumption or use and have the resources to buy them o Business to business (B2B) market- all the individuals and organizations that want goods and services to use in producing other goods and services or to sell rent or supply them to others  Industrial goods and services  Remember buyer’s reason for buying- the end use of product- determines whether a product is a B2B or a consumer product Sarah Silberg Rios, BUSN 101 September 28, 2016 Chapter 14: Developing and Pricing Goods and Services Product Development and the total product offer  The best way to compete is to design and promote better products from other brands  American Market Association defines value as ‘a set of processes for creating, communicating, and delivering value to customers’.  Consumers use the benefits they seek and the services they get as a measure of value for products they buy  Adapting products to new competition and markets is an ongoing need o McDonalds and Burger King constantly try new ideas o McD’s became a competitor to Starbucks and dunkin for the coffee market  Offering may be different depending on the location of the communities o Carl’s Jr in Mexico sells burritos o Shakey’s pizza in the Philippines sells beer  When products lose appeal it is eventually taken away o Zippo lighters because E-cigs have become popular o Coke and soda stream Distributed Product Development  The increase of outsourcing and alliance building has resulted in innovation efforts that often require using multiple organizations separated by culture, geographic, and legal boundaries  Distributed product development- term used to describe handling off various parts of your innovation process- often in foreign countries  Developing a total product offer o Total product offer- everything consumers evaluate when deciding whether to buy something or not o Can include value enhancers o When consumers buy a product they evaluate and compare the total product offers from different angles  Can be tangible (product or packaging) some intangible (producer’s reputation and advertising image)  Low prices can attract people to buy products  Outlet stores  Product Line and the product mix o Product line- a group of products that are physically similar or intended to be sold in a similar market  Diet coke, diet vanilla coke, Splenda, diet cherry coke, etc.  Pepsi and Coke have both added water and sports drinks to their lines  Procter & Gamble (P&G)- Detergents- Tide, Era, Downy, Bold  Product mix- combination of all product lines offered by a manufacturer o Service providers have product lines and product mixes  AT&T combines communication (service) and phones (goods)  Banks and credit unions offer services Product Differentiation  Product differentiation- the creation of real or perceived product differences. o Product differences can be small so marketers must use value enhancers (branding, pricing, and promotion) to make their products unique  Samsung  Google  YouTube  Water bottles o Small businesses win market share with creative product differentiation  Marketing Different classes of consumer goods and services o Convenience goods and services- the products the consumer wants to purchase frequently and with a minimum effort  Candy, gum, milk, snacks, banking services  Location, brand awareness, and image are important for convenience goods and services marketers o Shopping goods and services- products the consumer buys only after comparing value, quality, price, and style from a variety of sellers  Target o Specialty goods and services- consumer products with unique characteristics and brand identity  Consumers buy because they see no reasonable substitute.  Fine watches, wine, fur coats, jewelry, chocolates, medical services  Marketed in specialty magazines o Unsought goods and services- products consumers are unaware of, haven’t necessarily thought of buying, or suddenly find they need to solve an unexpected problem  Emergency car-towing, burial, insurance services. o Each type of good/service is marketed differently o Not all customers like the same thing  Coffee flavor o Marketers must carefully monitor their customer base to determine how consumers perceive their products  Marketing industrial goods and services o The classification of a good (consumer or industrial) is based on their uses  Personal computer at home is a consumer good at the office is an industrial good  Industrial good- (Business good or B2B good)- products used in the production of other products  Sold in B2B market  Products can be industrial and consumer goods  Computers as consumer good might be sold through an online electrics store but for industrial use- promotion would be advertising.  Computers sold industrially would be more likely sold through a salesperson or the internet- less advertising  Installations- major capital equipment  New factories or machinery  Capital items- expensive products that last a long time  New building is both a capital and an installation item  Accessory equipment- capital items that are not quite as long lasting or expensive as installations o Computers and copy machines Packaging changes, the product  Many companies have used packaging to change and improve their base product o Squeezable ketchup bottles that stand upside-down, plastic bottles for motor oil o Aroma packaging- Arizona iced tea  Packaging must perform these functions according to Michigan State School of Packaging o Attract the buyer’s attention o Protect the goods inside, stand up under handling and storage, be tamperproof, and deter theft o Be easy to open and use o Describe and give information about the contents o Explain the benefits of the good inside o Provide information on warranties, warnings and other consumer matters o Give some indication of price, value, uses  Universal Product Codes (UPCs) – on many products help stores keep inventory  Radio frequency identification (RFID) chip- the chip sends out a signal telling a company where the product is at all times  Growing importance of packaging o It carries large promotional burden o Fair packaging and labeling act- passed to give consumer much more quality and value information on the product packaging o Bundling- combining goods or services for a single price  Virginia airlines- bundled flying and limousine services  Marketers need to work with customers to develop value enhancers that meet their individual needs Branding and brand equity  Brand- name, symbol or design that identifies the goods or services of one seller or group of sellers and distinguishes them from their competitors o Give more distinction to a product o Perceived quality o Trademark- a brand that has exclusive legal protection for both its brand name and design  McDonalds golden arches o People are often impressed by certain brand names, even though there is no difference between the brand name and the generic o The brand name ensures quality, reduces search time, and adds prestige to the purchase for the buyer o For the seller brand names facilitate new-product introductions, help promotional efforts, add to repeat purchases, and differentiate products so prices can be higher  Brand categories o Manufacturer brands- manufacturers that distribute nationally  Xerox, Sony, dell o Dealer (private label) brands- products that carry a retailer or distributor name  House brands/distributor brands  Sears o Generic goods- no branded products that cost much less than dealer or manufacturer brands  Little or no advertising o Knockoff brands- illegal copies of national brand name goods  Generating brand equity o Brand equity- the value of the brand name and associated symbols  High equity brands- Reynolds wrap aluminum foil, Ziploc food bags, Apple o Brand loyalty- the degree to which customers like the brand and are committed to future purchases  They offer coupons o Done through many means but many use reducing carbon footprint o Loyal group of customers are substantial to a firm and can be calculated o Brand awareness- how quickly or easily a given brand name comes to mind when someone mentions a product category o Sponsoring events  Creating Brand associations o Brand association- the linking of a brand to other favorable images  Famous product users, popular celebrities, particular geographic area o Brand Management o Brand/product manager- has direct responsibility for one brand or product line and manages all the elements of its marketing mix o 4 p’s o President of a one product firm The new product development process  Odds a product will rail are high  Not delivering what is promised is a leading cause of new-product failure  6 parts of product development o Idea generation o Product screening o Product analysis o Development o Testing o Commercialization  Generating New-Product Ideas o It takes about 7 ideas to generate one commercial product o Research and development help with new products  Product Analysis- making cost estimates and sales forecasts to get a feeling for the profitability of new-product ideas  Product development and testing  Concept testing- takes a product idea to consumers to test their reactions  Commercialization o Promoting the product to distributors and retailers to get wide distribution o Developing strong advertising and sales campaigns to generate and maintain interest in the product among distributors and consumers The product life cycle  Four stages: introduction, growth, maturity, and decline  Example of the product life cycle  Example: instant coffee o Introduced as “regular” coffee, took years to turn to instant coffee (intro stage) o Instant coffee grew rapidly and many brands were produced (growth stage) o People became attached and then eventually sales leveled off (maturity stage) o Sales went slightly down when freeze dried coffee hit the market (decline stage)  Using the product life cycle o Different stages in the life cycle mean different marketing strategies o Knowing what stage in the cycle a product has reached helps marketing managers decide which tragedy to use Competitive Prices  Pricing Objectives o Achieving a target return on investment or profit o Building traffic o Achieving greater market share o Creating an image o Furthering social objectives both short-run and long-run  Pricing Strategies o Cost-based pricing measures cost of producing a product including materials, labor, and overhead. o Target Costing - Designing a product that satisfies customers and meets the firm’s targeted profit margins. o Competition-Based Pricing - A strategy based on what the competition is charging for its products.  Using Break-even analysis o Break-Even Analysis -- The process used to determine profitability at various levels of sales. The break-even point is where revenues equals cost. o Total Fixed Costs -- All costs that remain the same no matter how much is produced or sold. o Variable Costs -- Costs that change according to the level of production.  How to find the breakeven point? o The break-even point equals the total fixed costs (FC) divided by the price of one unit (P) minus the variable cost of one unit (VC). o BEP = FC/P - VC o If you have a fixed cost of $200,000, a variable cost of $2 per item, and you sell your product for $4 each, what would be your BEP?  Pricing alternatives o Skimming Price Strategy -- Pricing new products high to recover costs and make high profits while competition is limited. o Penetration Price Strategy -- Pricing products low with the hope of attracting more buyers and discouraging other companies from competing in the market. o Everyday Low Pricing (EDLP) -- Setting prices lower than competitors with no special sales.  Pricing strategies of retailers o High-Low Pricing - Using regular prices that are higher than EDLP stores except during special sales when they are lower. o Psychological Pricing - Pricing products at price points that make a product seem less expensive than it is. Sarah Silberg Prof. Rios BUSN 101 10/13/16 Chapter 15: Distributing products The emergence of marketing intermediaries  Basic definitions o Marketing Intermediaries- organizations that assist in moving goods and services from producers to businesses (B2B) and from businesses to consumers (B2C)  Called intermediaries because they are in the middle of a series of organizations that join together to help distribute goods from producers to customers o Channel of distribution- whole set of marketing intermediaries (agents, brokers, wholesalers, retailers) that join together to transport and store goods in their channel (path) form producers to consumers  Ensure communication flows and the flow of money and title to goods  They ensure the right amount and assortment of goods are available when they are needed o Agents/brokers- marketing intermediaries whole bring buyers and sellers together and assist in negotiating and exchange but they don’t take title to the goods  Ex. Real estate agent o Wholesaler- marketing intermediary that sells to other organizations such as retailers, manufacturers, and hospitals  Part of B2B system o Retailer- organization that sells to ultimate consumer  Why marketing needs intermediaries o They perform certain marketing tasks faster and more cheaply than most manufacturers can.  Transporting, storing, selling, advising, relationship building  How intermediaries create exchange of efficiency o Having a wholesaler in the channel of distribution cuts contacts needed to make an exchange o It is more efficient o Economists says intermediaries are too expensive and should be eliminated o Marketers cay intermediaries add value to a company that greatly exceeds the cost  The value versus the cost of intermediaries o Cereal and Michigan example o Intermediaries are needed to get what we want when we want it with less cost o Three points about intermediaries  Marketing intermediaries can be eliminated but their activities can’t- At the end of the day someone has to do their job  Ringling and Barnum and Bailey Circus example  Intermediary organizations have survived because they perform marketing functions faster and more cheaply than others can  intermediaries add costs to products but they usually are more than offset by the values they create  not having them would be more expensive than the extra cost we have to pay to have them  The Utilities created by intermediaries o Utility- the want-satisfying ability or value that organizations add to goods or services by making them more useful or accessible to consumers than they were beforehand o Form Utility  producers changing raw materials into useful products  Farmer who separates wheat from the chaff o Time Utility  Intermediaries making a product available to the consumer when they need it  Stores open 24/7 o Place Utility  Intermediaries placing products where people want them  7-eleven, Wawa o Possession Utility  Intermediaries doing whatever is necessary to transfer ownership from one party to another, including providing credit  Activities such as delivery, installation, guarantees, follow-up services o Information Utility  Intermediaries opening two-way flows of information between marketing participants  Newspapers, sales people, libraries, websites, government publications o Service Utility  Intermediaries provide fast friendly service during and after the sale and by teaching customers how to best use products over time o Apple  Wholesale intermediaries o Some producers only deal w whole sale and likewise for retailers o Some wholesalers sell to both retailers and consumers o Staples, Costco, Sam’s Club o The difference between retail and wholesale o Retail sale- sale of good/services for their personal use o Wholesale- Sale of goods/services to business institutions for resale o Wholesalers use B2B sales  Merchant wholesalers o Independently owned firms that take title to the goods they handle o Roughly 80% of wholesalers o Full-service wholesalers- do all the distribution functions o Limited function wholesalers- perform only selected functions but try to do them really well  Rack jobbers- furnish or shelves full of merchandise to retailers  Cash-and-carry wholesalers- serve mostly to smaller retailers with a limited assortment of products  Drop shippers- solicit orders from retailers and other wholesalers and have the merchandise shipped directly from a producer to a buyer  Agents and Brokers o Both bring buyers and sellers together and assist in negotiating an exchange. o They never own the products they distribute o They get paid in commission o Agents- maintain long-term relationships w people they represent o Brokers- hired on a temporary basis  Retail intermediaries o Retail distribution strategy  Intensive distribution- puts products into as many retail outlets as possible  Candy, gum, magazines  Selective distribution- uses only a preferred group of the available retailers in the area  Furniture, clothing, appliances  Exclusive distribution- Use of only one retail outlet in a given geographic area.  Luxury car manufacturers  Nonstory retailing o Electronic retailing- selling goods and services to ultimate consumer online o Social Commerce- form of electronic commerce that involves using social media, online media that supports social interaction, and user contribution to assist in online buying and selling of products and services o Telemarketing- sale of goods and services by telephone o Vending machines- offer convenience goods when consumers deposit sufficient money o Carts and Kiosks- have lower overhead costs than stores so they can offer lower prices on items  T-shirts, purses, watches, cellphones o Direct selling- Reaches consumers in their homes or workplaces  Cosmetics, household goods, lingerie, candles o Multilevel marketing- MLM  Avon, Amway, Herbalife  Sale people get paid commission on what they sell, create commissions for the “up liners” who recruited them, and receive commission from any “downlines” the recruit to sell o Direct marketing- any activity that directly links manufacturers or intermediaries with the ultimate consumer  Direct mail, catalog sales, telemarketing  L.L. Bean and lands’ end  People who can’t go out to shop  Building cooperation in channel systems o Corporate distribution systems- one firm owns all the organization in the channel of distribution  Sherwin Williams o Contractual systems- members are bound to cooperate though contractual agreements  Franchise systems- franchisee agrees to all rules, procedures, and regs established by franchisor.  KFC, McDonalds  Wholesaler-sponsored chains- Each store signs an agreement to use the same name, participate in the chain promotions, and cooperate as a unified system of stores even though they are independently owning and managed  Ace Hardware, IGA food stores  Retail cooperatives- Same as wholesaler-sponsored chain except it is initiated by the retailers  Associated Grocers o Administered distribution systems  Administered distribution system- A system where producers manage all the marketing functions at the retail level o Supply chains- all the linked activities various organizations must perform to move goods and services from the source of raw materials to ultimate consumers  Supply Chain Management - The process of managing the movement of raw materials, parts, work in progress, finished goods, and related information through all the organizations in the supply chain.  Weak parts of chain  Natural disasters can cause billions of dollars in damage.  Managing the integrity of products throughout the whole chain is difficult  Logistics: Getting goods to consumers efficiently o Logistics- The planning, implementing and controlling of the physical flow of material, final goods and related information from points of origin to points of consumption. o Firms outsource to others specializing in trade compliance to determine what is needed to market products to global customers. o Inbound Logistics- Brings raw materials, packaging, other goods and services and information from suppliers to producers. o Materials Handling- Movement of goods within a warehouse, from warehouse to the factory floor and from the factory floor to workstations. o Outbound Logistics- Manages the flow of finished products and information to business buyers and consumers. o Reverse Logistics- Brings goods back to the manufacturer because of defects or for recycling. o Freight Forwarder- Puts many small shipments together to create a single large shipment that can be transported cost-effectively by truck or train. o Intermodal Shipping -Uses multiple modes of transportation to complete a single long-distance movement of freight.  Piggybacking: Truck trailers placed on trains  Fishy backing: Truck trailers placed on ships  Birdy backing: Truck trailers placed on planes o Storage warehouses  Storage warehouses hold products for a relatively long period of time.  Distribution warehouses are used to gather and redistribute products such as:  Beer and soft drinks  Package deliveries


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