. True or False (Judge every statement with a ‘T’ or ‘F’)

( ) 1. It appears that the power in marketing channels is shifting increasingly toward retailers.

( ) 2. The use of private branding has resulted in greater power for the retailer in the channel of distribution.

( ) 3. From a channel-management perspective, it appears that the use of coercive power should generally produce better results in helping forge long-term working relationships.

( ) 4. Wholesalers include merchant wholesalers, manufacturers’ representatives, agents, and brokers. Brokers make their profit by buying at a wholesale price and selling at a marked-up price to their downstream customers.

( ) 5. Multi-channel structures do not work well in reaching customers in consumer markets.

( ) 6. The core of distribution channel success lies in identifying and meeting target consumer or customer segments’ demands for service outputs.

( ) 7.Exclusive distribution is the requirement by a manufacturer that its channel intermediaries sell only its products or brands, no competitors’ products or brands.

( ) 8.One of the major challenges facing retailers is the vertical integration forward into retailing by manufacturers.

( ) 9.In general, a firm is more likely to use of intermediaries when its market is small.

( ) 10. For a manufacturer, using direct distribution means to open up its own brand stores.

II. Multiple choice(Select one best answer from the given choices for each of the questions, 20 points)

( ) 1. Regarding Intensive Distribution, which statement is not true?

A Sales would be great in the long run.

B Some members would “free ride ” on the efforts of others.

C Retailing prices would drop.

D Service would deteriorate gradually.

( )2. In franchising systems, what kind of conflicts often occurs?

A goal divergence

B domain dissensus

C differing perceptions of reality

D None of the above

( ) 3. The use of multiple sales agents in one market area can generate significant domain conflict, as all agents will be competing for sales across the same base of customers. This kind of domain conflict can be managed best through the use of

A reward power

B legitimate power

C coercive power

D referent power

E expert power

( ) 4. Which channel conflict is quite different from the others?

A. P & G has opened a website to sell its products on-line, its channel partners were unhappy.

B. Coca Cola would like to increase its sales by offering a discount on its cans. However, the retailer knows that overall soda sales will not go up much when Coke is put on sale—consumers who bought other brands will just switch, for the most part. Therefore, the retailer might like to "pocket" any discount that Coke offers.

C. McDonald's placed new stores in California which took business from existing locations.

D. Ford dealers in Chicago might complain the other dealers in the city steal sales from them by pricing too low or by selling outside their assigned territories.

( ) 5. Short channels are not preferred for:

A Products with short shelf life

B Convenient products.

C special goods with high value

D firms that desire a high level of channel control.

( )6. Other things being equal, the greater the distance between a producer (manufacturer) and his markets, a channel using intermediaries will be:

A less expensive

B more expensive

C short in structure

D intensively covered by intermediaries

( ) 7. six producers of garden tools all sell through one wholesaler to five retailers. The total number of contacts needed for all of the manufacturers to contact all of the retailers is ___. If the wholesaler were eliminated from the channel, the number of contacts needed would be:

A 6; 5

B 16; 15

C 11; 5

D 11; 30

( ) 8. FBB company sells products and services to some industry buyers around the world. It has been acquiring some of its distributors and integrating forward to sell directly to end-users, while simultaneously keeping its network of independent value-added resellers. The channel of FBB is

A exclusive distribution

B a single channel

C a dual distribution

D a vertical marketing system

( ) 9.In order to get retailers to display its product, a manufacturer has to have its salespeople go to the retailers’ stores, set up the displays, and instruct them in how to utilize the displays. The retailer views this sales force as a nuisance that interferes with customer service. There seems to be a problem of:

A goal incompatibilities

B perceptual differences.

C role incongruencies

D resource scarcities

( ) 10. Product characteristics affecting channel structure include all of the following except:

A availability of inputs/supplies

B perishability.

C degree of standardization

D unit value

III．Answer the following questions briefly. (20 points)

1. Give three examples of retailers exerting reward power and coercive power. ( 12 points )

2. What are the advantages and disadvantages of manufacturers using intermediaries? (8 points)

IV. Channel design (15 points)

Sapple is a fruit-based beverage company which founded in the early 2016. Though it is a small company, its brand get well-known in the market because of heavy promotion. At the beginning, it sale products almost exclusively to several chain stores in big cities. But because chain stores ask a lot of money for slotting 3 allowances (money paid to put products on store shelves). It cost a lot. And Sapple can not afford it for long. Now the company tries to change its channel strategy in order to reduce high cost in the channel.

Questions: What channel strategy should be appropriate for Sapple? Use four-steps method to design channel for Sapple. (draw the channel structure)

Four-step method:

a. What is the target market?

b. Understanding target consumers’ channel preference

c. Segment the market according channel preference

d. Design a well-working channel for each segment

V. Case analysis (25 points)

Challenge the middlemen

Accor is a leading global hotel operator with a portfolio of 14 hospitality brands (including Sofitel, Novotel, and ibis) in 92 countries. Recently the firm is thinking about expanding its online travel reservations via a new distribution channel---- Room Key.

At present, 35% of Acers sales were generated online. Of this, the company maintained a nearly 60/40 relationship between direct (obtained via its own websites and earned through its digital efforts) and indirect bookings (those obtain via parternerships with online travel agents).

In fact, OTAs (online travel agents) were both a blessing and a curse to hoteliers. Hotels provided the largest revenue stream for OTAs and thus were important partners. Accor benefit from this partnership. OTAs help Accor to tap into new customer bases in certain parts of the world where Accor does not have such a prominent presence, The cost of their services is quite high and Accor tend to use them for new customer acquisition, after which Accor then tries to keep Customers within the Accor ecosystem for subsequent bookings. Online travel agencies have gained huge power because they have bought a lot of key words, they have invested in building a large catalogue, and they continue to spend a significant part of their revenue on key words. They are very dynamic and are growing very fast. And they are an expensive channel.

Though Accor attempted to use OTAS strategically as new customer acquisition engines. It abhorred having to pay OTAs commissions on existing Accor customers who were booking new stays at Accor hotels on sites like Expedia or Travelocity. It’s that balance Accor was trying to achieve, rather than [working in] opposition with the OTAS , As such, the company was increasing its efforts to sign up customers for its loyalty Program Le Club Accor hotels, which currently had 18 million members, 4 million of whom joined in 2014. Only 24% of loyalty program participants booked directly through Accor, which is as a huge opportunity to tip the balance of direct to indirect sales further in favor of the company. When participants booked through a third party such as an OTA, they did not earn loyalty points that earned them room upgrades and complimentary services during their stay, so booking direct improved the value proposition for consumers.

What Accor was really trying to do is make sure loyal customers think of it first. And that works--it's not just a pipe dream. In Accor’s view, OTAS eat too much, but Accor is growing and is in a position to recalculate the value it can provide against that of the OTAS.

Room Key had been founded by a consortium of six major hotel brands in January 2012 with the objective of offering hotels and their guests an alternative to third-party booking services such as the major online travel agencies(OTAs). These equity owners sought to lower the cost of booking commissions paid to OTAS, such as Expedia, Priceline and Booking.com. Customers could search for room options on the Roomkey. com portal and, when finding a suitable choice, be taken directly to the brand or property website to make their booking.

Unlike traditional OTAS that spent heavily on marketing to drive traffic to their sites, Room Key targeted travel shoppers who abandoned their search without booking a room. Via a pop-under ad that redirected them to the Room Key site, the company tried to reengage prospective customers as they were departing from the six founders’ websites. 4 Customers were offered the opportunity to conveniently search and shop hotel rooms from a curated list of trusted brands and then book a room directly with them.

Accor faced two options: becoming an equity partner in Room Key, which required a large upfront investment likely to be in the range of €10 million, but provided the opportunity to share in Room Keys profits, or signing on as a commercial partner, which would require the company to pay Room Key a 15 commission on each booking than the 10% that equity partners paid. With the choice of either option, Accor would incur costs to develop new online infrastructure, to communicate with individual properties, and to change its marketing messages to consumers. Would the savings in fees that Room Key promised when compared with fees charged by OTAS cover these costs and generate additional revenue by attracting new customers to its hotels?

The Room Key opportunity needed to be assessed as part of Aeor's larger digital distribution ecosystem that included the company's central corporate Portal Accorhotels. com, its 14 individual branded websites, such as Novotel com; its mobile applications; and its indirect online distribution agreements with TAS.

1. Please draw the channel structure of Accor according to the case. (5 points)

2. What types conflicts (Horizontal or Vertical conflicts）may occur in such a channel? What are the two parties involved in the conflicts? ( 10 points )

3. Why do these conflicts occur? (10 points)