Concept and importance of channels of distribution
Easy
A.A plan used to train sales employees
B.A system used to calculate product costs
C.A path used to move products to customers
D.A method used to design products
Correct Answer: A path used to move products to customers
Explanation:
A channel of distribution is the route through which goods move from the producer to the final customer.
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2What is the main purpose of a distribution channel?
Concept and importance of channels of distribution
Easy
A.To replace the production department
B.To create new product designs
C.To determine employee salaries
D.To connect producers with customers
Correct Answer: To connect producers with customers
Explanation:
Distribution channels connect producers with customers and help products reach the intended market.
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3Which activity is commonly performed by a distribution channel?
Concept and importance of channels of distribution
Easy
A.Preparing employee attendance records
B.Moving goods from sellers to buyers
C.Writing company employment policies
D.Developing the firm's logo
Correct Answer: Moving goods from sellers to buyers
Explanation:
A distribution channel helps transfer products from sellers to buyers.
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4A direct distribution channel sells products:
Concept and importance of channels of distribution
Easy
A.From consumer directly to producer
B.From retailer directly to wholesaler
C.From producer directly to consumer
D.From wholesaler directly to retailer
Correct Answer: From producer directly to consumer
Explanation:
In a direct channel, the producer sells to the final consumer without using intermediaries.
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5Why are distribution channels important to producers?
Concept and importance of channels of distribution
Easy
A.They remove the need for customer service
B.They eliminate the need for product quality
C.They guarantee that every product will sell
D.They help products reach target markets
Correct Answer: They help products reach target markets
Explanation:
Distribution channels make products available to customers in selected markets.
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6Who purchases goods in large quantities and sells them to retailers?
Different types of distribution middlemen and their functions
Easy
A.Consumer
B.Wholesaler
C.Producer
D.Sales trainee
Correct Answer: Wholesaler
Explanation:
A wholesaler buys products in bulk and resells them, often to retailers.
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7What is the main function of a retailer?
Different types of distribution middlemen and their functions
Easy
A.To approve company investment plans
B.To transport raw materials to factories
C.To sell products to final consumers
D.To manufacture products for producers
Correct Answer: To sell products to final consumers
Explanation:
Retailers sell goods and services directly to the final users.
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8Which middleman usually brings buyers and sellers together without owning the goods?
Different types of distribution middlemen and their functions
Easy
A.Retailer
B.Final consumer
C.Wholesaler
D.Agent
Correct Answer: Agent
Explanation:
An agent acts on behalf of a buyer or seller and commonly does not take ownership of the products.
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9Which middleman generally takes ownership of the products it purchases?
Different types of distribution middlemen and their functions
Easy
A.Sales representative
B.Merchant middleman
C.Transport broker
D.Commission agent
Correct Answer: Merchant middleman
Explanation:
Merchant middlemen, such as wholesalers and retailers, usually buy and own the products before reselling them.
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10Which function involves keeping products until they are needed by customers?
Different types of distribution middlemen and their functions
Easy
A.Storage
B.Promotion
C.Negotiation
D.Financing
Correct Answer: Storage
Explanation:
Storage keeps products available until they are required for sale or use.
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11Which factor should a producer consider when selecting a distribution middleman?
Selection of distribution middlemen
Easy
A.The middleman's personal hobby
B.The middleman's favorite color
C.The middleman's office decoration
D.The middleman's market coverage
Correct Answer: The middleman's market coverage
Explanation:
Market coverage shows how effectively a middleman can make products available in the desired market.
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12Why is the financial strength of a middleman important?
Selection of distribution middlemen
Easy
A.It decides the product's basic design
B.It replaces the producer's quality controls
C.It indicates the ability to support distribution activities
D.It determines the product's brand name
Correct Answer: It indicates the ability to support distribution activities
Explanation:
A financially strong middleman is more likely to manage inventory, promotion, transport, and credit requirements.
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13A producer may examine a middleman's past sales record to assess its:
Selection of distribution middlemen
Easy
A.Packaging preference
B.Office location style
C.Employee dress code
D.Business performance
Correct Answer: Business performance
Explanation:
Past sales records help the producer judge the middleman's experience and effectiveness.
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14What does the reputation of a distribution middleman indicate?
Selection of distribution middlemen
Easy
A.How much tax a customer must pay
B.How the middleman is viewed in the market
C.How quickly a factory can make goods
D.How many products the producer can design
Correct Answer: How the middleman is viewed in the market
Explanation:
A middleman's reputation reflects its standing and reliability among customers and business partners.
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15Why do producers motivate distribution middlemen?
Motivation of distribution middlemen
Easy
A.To eliminate market information
B.To stop all product promotion
C.To encourage better distribution performance
D.To reduce the number of customers
Correct Answer: To encourage better distribution performance
Explanation:
Motivation encourages middlemen to sell more effectively and provide stronger market support.
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16Which of the following is a financial method of motivating middlemen?
Motivation of distribution middlemen
Easy
A.Giving product information
B.Offering a sales bonus
C.Sharing a market report
D.Providing a product manual
Correct Answer: Offering a sales bonus
Explanation:
A sales bonus is a financial reward linked to sales performance.
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17What is a trade discount?
Motivation of distribution middlemen
Easy
A.A fee paid for product transportation
B.A price reduction offered to channel members
C.A salary paid to factory workers
D.A tax charged to final consumers
Correct Answer: A price reduction offered to channel members
Explanation:
A trade discount reduces the price paid by eligible distribution middlemen.
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18Which support can motivate a middleman through improved selling ability?
Motivation of distribution middlemen
Easy
A.Reduced product information
B.Longer delivery delays
C.Fewer customer contacts
D.Sales training
Correct Answer: Sales training
Explanation:
Sales training gives middlemen knowledge and skills that can improve their selling performance.
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19What is the purpose of appraising distribution middlemen?
Performance appraisal of distribution middlemen
Easy
A.To select the product's package color
B.To determine the factory's working hours
C.To write the firm's advertising slogan
D.To measure their distribution performance
Correct Answer: To measure their distribution performance
Explanation:
Performance appraisal evaluates how well middlemen are carrying out their distribution responsibilities.
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20Which measure can be used to evaluate a middleman's performance?
Performance appraisal of distribution middlemen
Easy
A.Employee birthplace
B.Manager's clothing style
C.Office wall color
D.Sales volume
Correct Answer: Sales volume
Explanation:
Sales volume shows the quantity or value of products sold by the middleman.
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21A manufacturer of organic snacks wants its products to reach customers in small towns without opening company-owned stores. Which channel decision would best support this objective?
Concept and importance of channels of distribution
Medium
A.Limit distribution to urban supermarkets
B.Sell only through the company website
C.Use wholesalers serving regional retailers
D.Replace retailers with direct sales agents
Correct Answer: Use wholesalers serving regional retailers
Explanation:
Regional wholesalers can extend market coverage by supplying smaller retailers that the manufacturer may not be able to serve directly.
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22A company sells expensive industrial machinery that requires installation and technical support. Which distribution channel is most appropriate?
Concept and importance of channels of distribution
Medium
A.Manufacturer to wholesaler to household buyer
B.Manufacturer to supermarket to consumer
C.Manufacturer to industrial user directly
D.Manufacturer to broker to convenience store
Correct Answer: Manufacturer to industrial user directly
Explanation:
Direct distribution gives the manufacturer greater control over technical explanations, installation, service, and customer relationships.
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23A producer adds an intermediary to its channel but notices that the final price has increased while delivery has become more reliable. Which channel function most likely explains the benefit?
Concept and importance of channels of distribution
Medium
A.Reducing product quality inspections
B.Transferring production decisions to retailers
C.Eliminating all promotional activities
D.Breaking bulk and holding inventory
Correct Answer: Breaking bulk and holding inventory
Explanation:
Intermediaries often buy in large quantities, store products, and supply smaller quantities when needed, improving availability and delivery efficiency.
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24A beverage producer wants intensive availability for a frequently purchased soft drink. Which distribution approach is most suitable?
Concept and importance of channels of distribution
Medium
A.Direct distribution through one sales team
B.Exclusive distribution through one outlet
C.Intensive distribution through many outlets
D.Selective distribution through luxury stores
Correct Answer: Intensive distribution through many outlets
Explanation:
Frequently purchased convenience products benefit from being available in as many convenient locations as possible.
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25A wholesaler purchases large quantities from several manufacturers, stores the products, and resells them to retailers. Which function is being performed most directly?
Different types of distribution middlemen and their functions
Medium
A.Manufacturing goods for final consumers
B.Assorting products for retailer needs
C.Setting government standards for products
D.Providing personal income to retail customers
Correct Answer: Assorting products for retailer needs
Explanation:
Wholesalers collect products from different producers and create an assortment that is convenient for retailers to purchase.
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26A broker introduces a textile manufacturer to several clothing retailers and receives payment only when a transaction occurs. What distinguishes the broker from a merchant wholesaler?
Different types of distribution middlemen and their functions
Medium
A.The broker always stores the products
B.The broker purchases goods for resale
C.The broker determines the final retail price
D.The broker usually does not take title
Correct Answer: The broker usually does not take title
Explanation:
Brokers facilitate negotiations between buyers and sellers but generally do not own, store, or take title to the goods.
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27A manufacturer appoints an agent to negotiate sales with retailers, but the agent never owns the products. Which role does the agent primarily perform?
Different types of distribution middlemen and their functions
Medium
A.Providing storage to competing retailers
B.Financing consumers through retail credit
C.Facilitating exchange between channel members
D.Producing finished goods for the market
Correct Answer: Facilitating exchange between channel members
Explanation:
Agents support buying and selling activities on behalf of a principal without normally taking ownership of the products.
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28A retailer buys products from a producer, displays them, and sells them in small quantities to household customers. Which channel function is most evident?
Different types of distribution middlemen and their functions
Medium
A.Aggregating raw materials for manufacturers
B.Designing production equipment for suppliers
C.Providing product availability to final users
D.Negotiating international trade regulations
Correct Answer: Providing product availability to final users
Explanation:
Retailers make products accessible to final consumers by displaying and selling them in convenient quantities and locations.
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29A firm is choosing between two distributors. Distributor A has wider market coverage, while Distributor B has stronger technical service capabilities. For a complex medical device, which factor should receive greater weight?
Selection of distribution middlemen
Medium
A.Distributor's preference for mass advertising
B.Number of unrelated products handled
C.Technical service and product expertise
D.Distance from the manufacturer's office
Correct Answer: Technical service and product expertise
Explanation:
Complex medical devices require knowledgeable intermediaries that can explain, install, and service the product effectively.
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30Before appointing a distributor, a manufacturer reviews audited accounts, credit history, and payment records. Which selection criterion is being assessed?
Selection of distribution middlemen
Medium
A.Financial strength and reliability
B.Retail packaging and product color
C.Geographic climate and seasonality
D.Promotional creativity and design
Correct Answer: Financial strength and reliability
Explanation:
Financial records and payment history help determine whether the distributor can fund inventory and meet its obligations.
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31A manufacturer wants to enter a new region quickly but lacks knowledge of local retailers and customer practices. Which middleman attribute is most valuable?
Selection of distribution middlemen
Medium
A.A policy of avoiding retailer contact
B.A large warehouse in another region
C.A low-cost product unrelated to the line
D.Established local market relationships
Correct Answer: Established local market relationships
Explanation:
Existing relationships with local retailers and customers can accelerate market entry and reduce uncertainty.
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32A company wants its premium cosmetics to be sold only in stores that provide expert advice and maintain an upscale image. Which criterion is most important when selecting intermediaries?
Selection of distribution middlemen
Medium
A.Ability to offer the lowest possible discount
B.Willingness to avoid service-related activities
C.Compatibility with the desired brand image
D.Preference for selling every product category
Correct Answer: Compatibility with the desired brand image
Explanation:
Premium products should be represented by intermediaries whose service quality and store image match the brand positioning.
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33A producer expects sales to grow significantly but finds that a distributor already represents several competing brands. What should the producer examine most carefully?
Selection of distribution middlemen
Medium
A.The distributor's selling effort and competing commitments
B.The distributor's preference for local holidays
C.The distributor's office decoration and signage
D.The distributor's ownership of consumer appliances
Correct Answer: The distributor's selling effort and competing commitments
Explanation:
Competing brands may reduce the distributor's attention, sales effort, and willingness to prioritize the producer's products.
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34A manufacturer offers retailers an additional discount when they exceed quarterly sales targets. What type of motivation is this?
Motivation of distribution middlemen
Medium
A.A mandatory channel restriction
B.An incentive-based financial reward
C.A consumer complaint procedure
D.A product-quality certification
Correct Answer: An incentive-based financial reward
Explanation:
The additional discount rewards retailers for achieving specified performance and is therefore a financial sales incentive.
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35Retailers are not actively promoting a new product because they do not understand its benefits. Which motivational action is most appropriate?
Motivation of distribution middlemen
Medium
A.Provide product training and selling support
B.Increase delivery time for every order
C.Reduce all retailer communication immediately
D.Remove the product from promotional materials
Correct Answer: Provide product training and selling support
Explanation:
Training improves retailer confidence and enables sales staff to communicate the product's benefits to customers.
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36A manufacturer invites high-performing distributors to an annual recognition event and publishes their achievements. Which motivational need is primarily addressed?
Motivation of distribution middlemen
Medium
A.Production capacity and automation
B.Inventory ownership and legal title
C.Recognition and channel status
D.Customer returns and warranty claims
Correct Answer: Recognition and channel status
Explanation:
Recognition programs strengthen status, pride, and commitment among distribution partners.
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37A supplier and retailer jointly plan local advertising, store displays, and sales targets for a product launch. Why is this approach likely to motivate the retailer?
Motivation of distribution middlemen
Medium
A.It transfers all market risk to customers
B.It removes the retailer's need to stock products
C.It creates participation and shared objectives
D.It prevents the retailer from setting sales goals
Correct Answer: It creates participation and shared objectives
Explanation:
Joint planning gives the retailer influence in decisions and links both parties to common performance goals.
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38A distributor complains that the manufacturer's sales representatives promise delivery dates without consulting the distributor. Which response would best improve channel motivation?
Motivation of distribution middlemen
Medium
A.Increase targets without changing support
B.Stop sharing information about inventory
C.Allow each department to set conflicting policies
D.Improve communication and coordinate commitments
Correct Answer: Improve communication and coordinate commitments
Explanation:
Reliable communication reduces conflict and helps channel members plan inventory, staffing, and customer commitments.
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39A manufacturer compares each distributor's actual sales with its assigned sales target. Which performance measure is being used?
Performance appraisal of distribution middlemen
Medium
A.Customer demographic profile
B.Sales quota achievement
C.Average product life cycle
D.Production defect percentage
Correct Answer: Sales quota achievement
Explanation:
Quota achievement measures how closely a distributor's actual sales match the target assigned by the manufacturer.
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40A distributor has strong sales but frequently delivers late and carries insufficient inventory. Which appraisal approach gives the fairest assessment?
Performance appraisal of distribution middlemen
Medium
A.Measure only the distributor's advertising spending
B.Ignore service problems during peak seasons
C.Evaluate sales, delivery, and inventory together
D.Judge performance only by total sales
Correct Answer: Evaluate sales, delivery, and inventory together
Explanation:
A balanced appraisal considers both sales results and service responsibilities that affect customer satisfaction and channel effectiveness.
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41A manufacturer can sell directly to 600 retailers, requiring 600 transaction relationships. Alternatively, it can use 12 wholesalers, each serving 50 retailers. If every manufacturer-wholesaler and wholesaler-retailer link is counted, how many relationships does the intermediary structure require, and what channel principle does this illustrate?
Concept and importance of channels of distribution
Hard
A.612 relationships; transfer of product ownership
B.612 relationships; reduction in contact complexity
C.600 relationships; elimination of demand uncertainty
D.50 relationships; creation of assortment utility
Correct Answer: 612 relationships; reduction in contact complexity
Explanation:
The structure requires links. Although the raw link count is slightly higher here, each manufacturer manages only 12 downstream contacts, illustrating how intermediaries reduce the focal firm's contact complexity.
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42Customers want to buy industrial fasteners in small quantities, immediately, and from a single supplier offering many brands. The manufacturers produce large lots, operate periodically, and offer narrow product lines. Which channel contribution most directly resolves all three mismatches?
Concept and importance of channels of distribution
Hard
A.Market promotion, title transfer, and price maintenance
B.Exclusive dealing, order processing, and reverse logistics
C.Product standardization, financing, and risk elimination
D.Bulk breaking, inventory holding, and assortment creation
Correct Answer: Bulk breaking, inventory holding, and assortment creation
Explanation:
Bulk breaking resolves quantity mismatch, inventory holding resolves timing mismatch, and assortment creation resolves the mismatch between narrow producer lines and broad customer requirements.
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43A premium appliance producer replaces specialist dealers with an online-only channel. Distribution cost per unit falls, but returns rise and customers delay purchases because installation advice and demonstrations are unavailable. Which conclusion best explains the outcome?
Concept and importance of channels of distribution
Hard
A.Lower transaction cost guarantees superior customer value
B.Direct channels invariably reduce overall distribution efficiency
C.Product availability matters more than presale assistance
D.Channel efficiency must include demanded service outputs
Correct Answer: Channel efficiency must include demanded service outputs
Explanation:
A channel is effective only if it supplies the service outputs customers value. Lower operating cost can be offset by lost sales, higher returns, or greater customer search and installation costs.
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44A direct channel has annual fixed distribution cost of $900,000 and variable cost of $6 per order. A distributor channel has annual fixed cost of $120,000 and variable cost of $24 per order. Ignoring qualitative differences, above approximately what annual order volume is the direct channel less costly?
Concept and importance of channels of distribution
Hard
A.33,333 orders
B.43,333 orders
C.50,000 orders
D.56,667 orders
Correct Answer: 43,333 orders
Explanation:
Set the costs equal: . Thus, . Above this volume, the direct channel has lower total cost.
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45An intermediary negotiates orders for several noncompeting manufacturers, receives commission, carries no inventory, and does not take title to the goods. How should it be classified?
Different types of distribution middlemen and their functions
Hard
A.Manufacturers' agent
B.Merchant wholesaler
C.Industrial distributor
D.Limited-service retailer
Correct Answer: Manufacturers' agent
Explanation:
A manufacturers' agent represents multiple producers, earns commission, and generally neither owns inventory nor takes title. Merchant wholesalers and industrial distributors normally take title.
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46A wholesaler purchases coal from producers and sells it to industrial users, but the coal is shipped directly from the mine to each buyer. The wholesaler takes title and bears commercial risk without physically handling the product. Which middleman is this?
Different types of distribution middlemen and their functions
Hard
A.Drop shipper
B.Rack jobber
C.Commission merchant
D.Cash-and-carry wholesaler
Correct Answer: Drop shipper
Explanation:
A drop shipper takes title and arranges direct shipment from producer to customer without physically stocking or handling the merchandise.
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47Independent retailers jointly establish and own a wholesale organization that centralizes purchasing and promotion while the stores retain their individual ownership. Which channel arrangement is present?
Different types of distribution middlemen and their functions
Hard
A.Retailer cooperative
B.Administered vertical system
C.Wholesaler-sponsored voluntary chain
D.Manufacturer-sponsored franchise
Correct Answer: Retailer cooperative
Explanation:
In a retailer cooperative, independent retailers own and operate the central wholesale organization. A voluntary chain is organized by a wholesaler rather than owned collectively by retailers.
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48A grocery supplier retains ownership of packaged goods until they are sold, regularly replenishes store displays, removes stale items, and bills the retailer only for units sold. Which intermediary function is most characteristic of this arrangement?
Different types of distribution middlemen and their functions
Hard
A.Cash-and-carry wholesaling with retailer transportation
B.Rack-jobbing with inventory and merchandising responsibility
C.Drop shipping with direct producer-to-buyer delivery
D.Brokerage with negotiation and no physical distribution
Correct Answer: Rack-jobbing with inventory and merchandising responsibility
Explanation:
Rack jobbers commonly manage shelf space, replenish stock, maintain displays, and may retain ownership until sale. The arrangement combines inventory management with in-store merchandising.
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49A producer weights intermediary criteria as follows: market reach , technical capability , control compatibility , and financial strength . Candidate A scores and Candidate B scores on these criteria. Both have the same weighted score, but control compatibility must be at least 7. Which decision is valid?
Selection of distribution middlemen
Hard
A.Select both because their weighted totals are equal
B.Select B because technical capability has priority
C.Select A because B fails the control threshold
D.Reject both because neither dominates every criterion
Correct Answer: Select A because B fails the control threshold
Explanation:
Both candidates score , but weighted totals do not override a mandatory threshold. Candidate B's control score is 6, so only Candidate A remains feasible.
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50Three distributors would handle 40,000 units annually. Their fixed fees, per-unit charges, and expected return rates are: A: $60,000, $2.00, 4%; B: $90,000, $1.50, 2%; C: $40,000, $2.40, 1%. Each returned unit costs the manufacturer $20. Which distributor has the lowest expected annual cost?
Selection of distribution middlemen
Hard
A.Distributor A at $172,000
B.Distributor B at $166,000
C.Distributor C at $144,000
D.Distributors B and C at $160,000
Correct Answer: Distributor C at $144,000
Explanation:
C costs , which is below A's and B's .
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51A medical-device manufacturer needs nationwide access quickly, but the product requires certification, installation, and continuing technical support. One candidate has maximum outlet coverage but weak technical staff; another has moderate coverage and certified service teams. Which selection principle is strongest?
Selection of distribution middlemen
Hard
A.Choose the lowest-margin candidate to preserve producer profit
B.Choose both candidates without defining territorial responsibility
C.Choose maximum coverage because reach dominates service
D.Choose certified support because service is a critical constraint
Correct Answer: Choose certified support because service is a critical constraint
Explanation:
When technical support is essential to safe use and customer value, it should be treated as a qualifying constraint. Broad reach cannot compensate for failure to deliver a critical service output.
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52A producer considers appointing a powerful distributor that carries the market-leading rival, owns scarce retail access, and refuses brand-specific sales targets. Which factor creates the greatest long-term selection risk?
Selection of distribution middlemen
Hard
A.The distributor's high current market coverage
B.The distributor's established logistics infrastructure
C.The distributor's bargaining power with retailers
D.The distributor's potential conflict of interest
Correct Answer: The distributor's potential conflict of interest
Explanation:
Carrying a dominant rival while refusing brand-specific commitments creates a risk that the distributor will allocate attention, information, and selling effort away from the producer's brand.
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53A manufacturer repeatedly threatens to withdraw supply unless dealers accept unwanted inventory. Dealers comply initially, but later conceal market information and prioritize competing brands. Which explanation best fits this result?
Motivation of distribution middlemen
Hard
A.Referent power improved identification but reduced incentives
B.Reward power raised satisfaction but encouraged free riding
C.Coercive power created compliance but damaged commitment
D.Expert power increased trust but weakened dealer autonomy
Correct Answer: Coercive power created compliance but damaged commitment
Explanation:
Coercive power can produce short-term compliance, but repeated threats often create resentment, reduce information sharing, and weaken long-term channel commitment.
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54A producer offers every distributor a higher margin regardless of effort. Sales do not improve because distributors use the extra margin to discount existing orders. Which redesign most directly links motivation to incremental performance?
Motivation of distribution middlemen
Hard
A.Expand territories without measuring distributor selling activity
B.Increase base margins equally across all sales territories
C.Pay bonuses for verified growth above territory-adjusted baselines
D.Shorten contracts while preserving unconditional discount levels
Correct Answer: Pay bonuses for verified growth above territory-adjusted baselines
Explanation:
A contingent bonus ties rewards to incremental, measurable performance. Territory-adjusted baselines help prevent distributors from being rewarded merely for favorable market conditions.
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55Dealers believe that additional selling effort will raise sales, and that higher sales will earn a bonus. However, they value the bonus less than the training time they must sacrifice. Under expectancy theory, which component is primarily weak?
Motivation of distribution middlemen
Hard
A.Valence
B.Instrumentality
C.Role clarity
D.Expectancy
Correct Answer: Valence
Explanation:
Valence is the value assigned to the reward. The dealers expect effort to improve performance and performance to produce the bonus, but the reward itself is not sufficiently attractive.
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56A manufacturer wants distributors to invest in showrooms, but distributors fear that the manufacturer will later add competing outlets nearby and appropriate the resulting demand. Which policy would best motivate the investment?
Motivation of distribution middlemen
Hard
A.Uniform wholesale prices without territorial commitments
B.Frequent territory changes based on quarterly shipment volume
C.Unconditional exclusivity with no performance requirements
D.Protected territories tied to measurable service obligations
Correct Answer: Protected territories tied to measurable service obligations
Explanation:
Conditional territorial protection reduces the distributor's fear of opportunistic encroachment while preserving accountability through explicit service and performance obligations.
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57Distributor A sells $1.2 million in a territory with $1.5 million potential, while Distributor B sells $1.0 million in a territory with $1.1 million potential. If sales performance is judged solely by territory-potential attainment, which conclusion is correct?
Performance appraisal of distribution middlemen
Hard
A.B performs better because its attainment ratio is higher
B.Both perform equally because each exceeds $1 million
C.A performs better because its absolute sales are higher
D.A performs better because its unserved potential is lower
Correct Answer: B performs better because its attainment ratio is higher
Explanation:
A attains of potential, while B attains . Potential-adjusted appraisal therefore favors B.
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58A distributor reports 98% order fill, but achieves it by holding excessive inventory that causes high obsolescence and working-capital costs. Which appraisal design best prevents this metric from being gamed?
Performance appraisal of distribution middlemen
Hard
A.Replace fill rate with total inventory value alone
B.Evaluate fill rate together with turnover and obsolescence
C.Measure shipment volume instead of customer service quality
D.Reward fill rate without considering inventory investment
Correct Answer: Evaluate fill rate together with turnover and obsolescence
Explanation:
A balanced set of service and efficiency measures captures the trade-off. Fill rate alone encourages excess stock, while turnover and obsolescence expose the cost of achieving that service level.
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59A manufacturer compares dealer sales before and after a promotion. Participating dealers grew 15%, nonparticipating comparable dealers grew 9%, and the total market grew 10%. Which estimate best isolates the promotion's incremental effect using a difference-in-differences approach?
Performance appraisal of distribution middlemen
Hard
A.Approximately 6 percentage points
B.Approximately 5 percentage points
C.Approximately 15 percentage points
D.Approximately 9 percentage points
Correct Answer: Approximately 6 percentage points
Explanation:
Difference-in-differences compares participating dealers with the comparable control group: percentage points. General market growth is already reflected more directly in the control dealers.
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60A distributor misses its sales quota after a major customer in its territory closes, yet it gains share among the remaining customers, improves service levels, and follows all agreed programs. What is the most defensible appraisal?
Performance appraisal of distribution middlemen
Hard
A.Terminate the distributor because the absolute quota was missed
B.Rate performance using adjusted potential and controllable measures
C.Lower every distributor's quota by the same percentage
D.Ignore sales outcomes and evaluate relationship quality alone
Correct Answer: Rate performance using adjusted potential and controllable measures
Explanation:
Fair appraisal separates distributor effort from uncontrollable territory shocks. Adjusted market potential, share gains, service performance, and program compliance provide a more valid assessment.
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