Page 398 - Introduction to Business

372 PART 3 Marketing

16. Besides the opportunity to store their products, months. Profits dropped significantly, well below the $1
why are bonded warehouses used by companies? billion it took 30 years to reach. Debt jumped to $3.4
17. What advantages do companies obtain from using billion and was downgraded to junk status.
freight forwarders for their international ship- Paul Pressler, formerly the director of theme parks
ments? at Disney, was hired as Gap’s new CEO. After visiting
one of the company’s distribution centers in Fishkill,
New York, he and Old Navy’s president, Jenny Ming,
Interpreting Business News dropped in on the 34th and Broadway Gap and Old
Navy stores at 11:00 P.M. While watching boxes of cloth-
Some significant changes in the ways companies are ing arrive from the Fishkill distribution center, Pressler
allocating advertising dollars are discussed in an article expressed concern that a lot of unopened boxes were
written by Anthony Bianco, “The Vanishing Mass left sitting around. Mr. Pressler asked the stores’ night
Market,” Business Week, July 12, 2004, pp. 61–67. A managers why they didn’t move merchandise directly
major shift in marketing strategies and in the roles from trucks to the stores’ sales floors. According to him,
played by various media are causing the allocation shifts. “Every product that is not sitting in front of the cus-
Firms are moving away from a mass-market strat- tomer is a bad use of capital. Some people see boxes.
egy to a more targeted effort. That is, they are develop- I see dollar bills.”
ing products and services and the accompanying pro- 1. What major principles of logistics management are
motional programs for specific segments of mass emphasized?
markets. Some firms are even narrowing the focus to 2. Will Mr. Pressler’s background at Disney be helpful
individual customers. The media shifts include a signif- in forming logistics strategies for Gap?
icant increase in the importance of cable television
channels, a decreasing audience share for the major
networks (down 48%), a surge in the number of special
interest consumer magazines, and the increasing
importance of such advertising venues as telemarket- Web Assignments
ing, direct mail, e-mail, in-store displays, and product Go to the website of Sony. Study carefully any mention
placement. of this company’s promotion and distribution mixes.
The result of these changes is that many companies
are spending less on advertising, increasing instead the 1. Notice to what extent Sony is dependent on adver-
tising to generate revenues. Can you determine
level allocated to cable TV and the Internet, and less to the percentage of revenues Sony devotes to
network TV, and pumping more funds into in-store dis- advertising?
plays, telemarketing, direct mail, e-mail, and product 2. How reliant on sales promotion is Sony? What kind
placement. of sales promotion options does it appear to
1. Do you believe the trends indicated above justify emphasize?
the significant shifts in advertising expenditures? 3. What kinds of channels of distribution are
Why or why not?
2. What factors besides those indicated should com- employed? What kinds of wholesalers does Sony
use? Or, are its products distributed directly to
panies have considered before deciding to shift retail stores? What types of retail stores carry
their promotional dollars?
3. What is meant by product placement? Sony’s products?
4. How important is logistics to Sony? Can you deter-
Fortune (April 14, 2003) carried an article about mine if Sony uses its own warehouses or public
Gap, one of America’s top clothing retailers, with 2002 warehouses, or does it try to avoid having to carry
revenues of $14.5 billion. inventory by moving products directly to retailers?
In the 1990s, this company started to experience Can you determine what percentage of Sony’s rev-
problems. Per-store sales declined every month for 29 enues are accounted for by its logistics activities?

Copyright 2010 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.