Marketing Management Topic 7 – Flashcards
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1) ________ refers to the decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers. A) Marketing channels B) Organizational buying C) Corporate retailing D) Brand auditing E) Inventory control
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B Page Ref: 183 Objective: 1 Difficulty: Easy
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2) The ________ consists of all the organizations that acquire goods and services used in the production of other products or services that are sold, rented, or supplied to others. A) business market B) consumer market C) e-commerce market D) global market E) domestic market
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A Page Ref: 183 Objective: 1 Difficulty: Easy
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3) How can a marketer overcome the negative effects of commoditization? A) convince target consumers that the firm's products are as good as those of competitors B) convince target consumers that price is irrelevant in determining quality C) convince target consumers that the firm's products are different from those of competitors D) convince target customers that buying the highest-priced product is no guarantee of quality E) convince target customers that all the products in the market are equivalent
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C Page Ref: 184 Objective: 1 Difficulty: Easy
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4) Which of the following is true for business marketers? A) They deal with more and larger buyers than consumer marketers. B) They deal with more and smaller buyers than consumer marketers. C) They deal with fewer and larger buyers than consumer marketers. D) They deal with fewer and smaller buyers than consumer marketers. E) They deal with the same kind of buyers as consumer marketers.
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C Page Ref: 184 Objective: 1 Difficulty: Easy
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5) Which of the following is a challenge in which business marketers differ from the consumer marketers? A) understanding deep customer needs in new ways B) identifying new opportunities for organic business growth C) geographically concentrated buyers D) calculating better marketing performance and accountability metrics E) competing and growing in global markets, particularly China
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C Page Ref: 184-185 Objective: 1 AACSB: Analytic skills Difficulty: Moderate
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6) Ultimately, the amount of steel sold to General Motors depends on the consumers' demand for GM cars and trucks. From the standpoint of the steel manufacturer, which of the following demand forms is most pertinent? A) derived demand B) inelastic demand C) geographic demand D) relational demand E) static demand
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A Page Ref: 185 Objective: 2 AACSB: Analytic skills Difficulty: Moderate
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7) The demand for business goods is ultimately derived from the demand for ________. A) raw materials B) consumer goods C) services D) business solutions E) e-commerce
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B Page Ref: 185 Objective: 2 Difficulty: Easy
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8) A given percentage increase in consumer demand can lead to a much larger percentage increase in the demand for plant and equipment necessary to produce the additional output. Economists refer to this as ________. A) derived demand B) inelastic demand C) the acceleration effect D) a straight rebuy E) the sales cycle
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C Page Ref: 185 Objective: 2 Difficulty: Moderate
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9) The total demand for many business goods and services is not much affected by price changes. Thus, this demand is ________. A) derived B) fluctuating C) accelerated D) multiple E) inelastic
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E Page Ref: 185 Objective: 2 Difficulty: Moderate
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10) The purchasing department buys office supplies on a routine basis from a pre-approved list of suppliers. This type of purchase is classified as a ________. A) straight rebuy B) modified rebuy C) new task D) secondary purchase E) procure-to-pay
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A Page Ref: 185 Objective: 2 Difficulty: Moderate
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11) Sometimes a rise of only 10% in consumer demand can cause as much as a 200% rise in business demand for products for the next period. This is an example of ________. A) inelastic demand B) direct purchasing C) fluctuating demand D) derived demand E) a straight rebuy
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C Page Ref: 185 Objective: 1 Difficulty: Easy
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12) Shoe manufacturers are not going to buy much more leather if the price of leather falls, nor will they buy much less leather if the price rises, unless they can find satisfactory substitutes. This is an example of ________. A) inelastic demand B) direct purchasing C) the acceleration effect D) a modified rebuy E) a straight rebuy
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A Page Ref: 185 Objective: 1 AACSB: Analytic skills Difficulty: Moderate
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13) Kenilworth Inc. is shifting from its rented four-room office to a standalone office building owned by the company itself. This can be classified as a ________. A) modified rebuy B) regular buy C) straight rebuy D) new rebuy E) new task
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E Page Ref: 186 Objective: 2 Difficulty: Moderate
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14) In a ________ purchasing situation, the buyer wants to make some change to existing product specifications, prices, delivery requirements, or other terms. A) new rebuy B) regular buy C) straight rebuy D) modified rebuy E) new task
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D Page Ref: 186 Objective: 2 Difficulty: Moderate
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15) The business buyer has to make the fewest decisions when involved in a ________. A) modified rebuy B) regular buy C) straight rebuy D) new rebuy E) new task
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C Page Ref: 186 Objective: 2 Difficulty: Moderate
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16) Jason Riggs' company is considered to be an in-supplier for a lawn mower manufacturer. However, recently the lawn mower company has put out a memo to in- and out-suppliers indicating that it would like to change product specifications and delivery schedules. Which of the following buying situations is most likely to be in operation given this data? A) straight rebuy B) single rebuy C) rakeback rebuy D) system buy E) modified rebuy
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E Page Ref: 186 Objective: 2 AACSB: Analytic skills Difficulty: Moderate
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17) Orica Inc. competes in the market for commercial explosives. The company recently changed its business model from just selling explosives to managing an entire blast in a quarry. This customer-solution-based approach to the sale of explosives is an example of ________. A) systems selling B) straight rebuying C) customer referencing D) derived demand E) channel consolidation
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A Page Ref: 187 Objective: 2 AACSB: Analytic skills Difficulty: Moderate
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18) If you decided to go into the systems contracting business, which of the following categories would constitute your main area of expertise, the service you provide for customers? A) computer applications B) database management C) manufacturing D) promotion management E) MRO (maintenance, repair, operating) supplies
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E Page Ref: 187 Objective: 2 AACSB: Analytic skills Difficulty: Moderate
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19) Many business buyers prefer to buy a total solution to a problem from one seller. This process is also known as ________. A) channel consolidation B) systems buying C) vertical buying D) horizontal buying E) supply buying
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B Page Ref: 187 Objective: 2 Difficulty: Moderate
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20) Xerox offers a ________ approach to prospective clients when it offers a complete turnkey solution, including the operation and management of the client's information and communication need. A) guided selling B) fair trading C) systems buying D) cross-selling E) local purchasing
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C Page Ref: 187 Objective: 2 AACSB: Analytic skills Difficulty: Moderate
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21) If Ampex Support Systems is the single supplier for a local manufacturing company's MRO (maintenance, repair, operating) supplies and needs, Ampex Support Systems is considered as providing ________ for the manufacturer. A) guided selling B) purchasing support C) turnkey logistics D) decision support E) systems contracting
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E Page Ref: 187 Objective: 2 AACSB: Analytic skills Difficulty: Difficult
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22) ________ is a key industrial marketing strategy in bidding to build large-scale industrial products such as dams, pipelines, etc. A) Systems contracting B) Systems buying C) Systems selling D) Solutions buying E) Turnkey logistics
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C Page Ref: 187 Objective: 2 Difficulty: Moderate
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23) ________ is composed of all parties who participate in the purchasing decision-making process and share common goals and risks associated with their decisions. A) The buying center B) The marketing sales team C) Strategic management D) Engineering support E) The logistics center
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A Page Ref: 188 Objective: 3 Difficulty: Easy
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24) In the purchasing decision process, the ________ are those who request that something be purchased. They may be users or others in the organization. A) users B) initiators C) influencers D) deciders E) approvers
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B Page Ref: 188 Objective: 3 Difficulty: Easy
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25) In the purchasing decision process, the ________ are those who have the power to prevent sellers or information from reaching members of the buying center. A) approvers B) buyers C) initiators D) gatekeepers E) deciders
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D Page Ref: 188 Objective: 3 Difficulty: Easy
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26) In the purchasing decision process, the major role of ________ is in selecting vendors and negotiating. A) gatekeepers B) buyers C) initiators D) approvers E) deciders
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B Page Ref: 188 Objective: 3 Difficulty: Easy
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27) If you performed the role of the ________ in a buying center, you would be the person that has the power to prevent sellers or information from reaching other members of the buying center. A) initiator B) influencer C) decider D) gatekeeper E) approver
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D Page Ref: 188 Objective: 3 AACSB: Analytic skills Difficulty: Moderate
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28) When purchasing disposable surgical gowns, Mercy Hospital's vice president of purchasing analyzes whether the hospital should buy disposable gowns or reusable gowns. If the findings favor disposable gowns, then the operating-room administrator compares various competitors' products and prices and makes a choice. Surgeons influence the decision retroactively by reporting their satisfaction with the particular brand. In this situation, the operating-room administrator performs the role of the ________. A) gatekeeper B) initiator C) user D) decider E) influencer
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D Page Ref: 188 Objective: 3 AACSB: Analytic skills Difficulty: Moderate
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29) When purchasing disposable surgical gowns, Mercy Hospital's vice president of purchasing analyzes whether the hospital should buy disposable gowns or reusable gowns. If the findings favor disposable gowns, then the operating-room administrator compares various competitors' products and prices and makes a choice. Surgeons influence the decision retroactively by reporting their satisfaction with the particular brand. In this situation, the surgeons perform the role of the ________. A) decider B) initiator C) user D) gatekeeper E) buyer
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C Page Ref: 188 Objective: 3 AACSB: Analytic skills Difficulty: Moderate
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30) In which of the following is a person performing the role of an influencer? A) Dan decides on the product requirements and makes the final choice of suppliers. B) Luke has the authority to pick out the supplier and negotiate the terms of purchase. C) Liam heads the Tech team at LKG and provides information for evaluating the possible alternatives. D) LKG gets many calls from potential suppliers, and it is Leah's job to weed out the good prospects and refer them to others in LKG. E) Dana authorizes the actions of the deciders and buyers in LKG.
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C Page Ref: 188 Objective: 3 AACSB: Analytic skills Difficulty: Moderate
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31) In which of the following is a person performing the role of an approver? A) Dan decides on the product requirements and makes the final choice of suppliers. B) Luke has the authority to pick out the supplier and negotiate the terms of purchase. C) Liam heads the Tech team at LKG and provides information for evaluating the possible alternatives. D) LKG gets many calls from potential suppliers, and it is Leah's job to weed out the good prospects and refer them to others in LKG. E) Dana authorizes the actions of the deciders and buyers in LKG.
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E Page Ref: 188 Objective: 3 AACSB: Analytic skills Difficulty: Moderate
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32) In which of the following is a person performing the role of a gatekeeper? A) Dan decides on the product requirements and makes the final choice of suppliers. B) Luke has the authority to pick out the supplier and negotiate the terms of purchase. C) Liam heads the Tech team at LKG and provides information for evaluating the possible alternatives. D) LKG gets many calls from potential suppliers, and it is Leah's job to weed out the good prospects and refer them to others in LKG. E) Dana authorizes the actions of the deciders and buyers in LKG.
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D Page Ref: 188 Objective: 3 AACSB: Analytic skills Difficulty: Moderate
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33) Which of the following is true about the buying center? A) In a buying center, one person cannot play more than one role. B) A typical buying center has a maximum of five or six members. C) A buying center consists of only mid-level managers and below. D) It is the decision-making unit of a buying organization. E) Gatekeepers in a buying center are people who authorize the proposed actions of deciders or buyers.
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D Page Ref: 188-189 Objective: 3 Difficulty: Moderate
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34) Small sellers should first concentrate their marketing efforts on reaching ________. A) approvers B) initiators C) influencers D) users E) initiators
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C Page Ref: 193 Objective: 4 Difficulty: Easy
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35) If you were an upper-level marketing executive of a large seller of trucks, which of the following strategies would be most appropriate in reaching buying center targets? A) Concentrate on key buying influencers. B) Use multilevel in-depth selling. C) Use trade-based promotions. D) Concentrate sales efforts on the support staff. E) Move all operations to the Internet.
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B Page Ref: 193 Objective: 4 AACSB: Analytic skills Difficulty: Difficult
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36) ________ occurs when customers are given a perspective or point of view that allows the firm to "put its best foot forward." A) Gatekeeping B) Commoditization C) Framing D) Rebuying E) Bartering
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C Page Ref: 194 Objective: 4 Difficulty: Moderate
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37) The new, more strategically oriented purchasing departments have a mission. Which of the following most accurately describes that mission? A) Make the most profit possible and remain independent of entanglements. B) Approach every purchasing opportunity as means to create interdependency. C) Seek the best value from fewer and better suppliers. D) Outsource the supply function. E) Abandon all strategies except for systems selling and buying.
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C Page Ref: 194 Objective: 4 Difficulty: Moderate
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38) Patrick J. Robinson and his associates have identified eight stages in the business buying-decision process. This model is called the ________ framework. A) buygrid B) buying/selling C) seller-centered D) commercial E) buy-analysis
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A Page Ref: 195 Objective: 4 Difficulty: Moderate
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39) According to Patrick J. Robinson, the eight stages in the business buying-decision process are known as ________. A) buyphases B) buybacks C) buyouts D) buyables E) buyoffs
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A Page Ref: 195 Objective: 4 Difficulty: Moderate
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40) Which of the following is a step in the straight rebuy buyclass? A) problem recognition B) general need description C) product specification D) supplier search E) proposal solicitation
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C Page Ref: 195 Objective: 4 Difficulty: Moderate
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41) A new-task buyclass decision begins with which of the following steps? A) supplier search B) general need description C) product specification D) problem recognition E) proposal solicitation
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D Page Ref: 195 Objective: 4 Difficulty: Moderate
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42) In reordering office supplies, the only stages that the buyer passes through are the product specification stage and the ________ stage. A) problem recognition B) general need description C) order-routine specification D) supplier search E) performance review
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E Page Ref: 195 Objective: 4 Difficulty: Moderate
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43) The approach to cost reduction that studies whether components can be redesigned or standardized or made by cheaper methods of production without adversely impacting product performance is termed as ________. A) maintenance, repair, and operating (MRO) B) product value analysis (PVA) C) vendor managed inventories (VMI) D) supplier performance management (SPM) E) supplier added value effort (SAVE)
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B Page Ref: 196 Objective: 4 AACSB: Reflective thinking Difficulty: Moderate
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44) Business buyers may get new ideas at a trade show, see an ad, or receive a call from a sales representative who offers a better product or a lower price compared to the current in-supplier. These situations spur the ________ stage. A) problem recognition B) general need description C) order-routine specification D) supplier search E) performance review
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A Page Ref: 196 Objective: 4 Difficulty: Moderate
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45) Business marketers can stimulate problem recognition by ________. A) ensuring a presence in trade directories B) direct mail, telemarketing, and calling on prospects C) encouraging the Better Business Bureau to release statistics D) using consumer advertising E) conducting surveys of existing customers
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B Page Ref: 196 Objective: 4 Difficulty: Moderate
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46) With respect to e-procurement, Coca-Cola, Sara Lee, Kraft, PepsiCo, P, and several other companies joined forces to form a ________ called Transora to use their combined leverage to obtain lower prices for raw materials. A) manufacturer's co-op B) supplier's co-op C) middleman group D) buying alliance E) buying cabal
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D Page Ref: 197 Objective: 4 AACSB: Analytic skills Difficulty: Moderate
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47) Plastics.com allows plastics buyers to search the best prices among thousands of plastics sellers. Plastics.com is an example of a(n) ________. A) buying alliance B) barter market C) systems seller D) vertical market E) auction site
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D Page Ref: 197 Objective: 4 Difficulty: Moderate
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48) On an online ________ , prices change by the minute. A) buying alliance B) barter market C) systems seller D) spot market E) catalog site
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D Page Ref: 197 Objective: 4 Difficulty: Easy
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49) With respect to e-procurement, which of the two types of e-hubs are Web sites organized around? A) vertical and horizontal hubs B) vertical and functional hubs C) functional hubs and organizational hubs D) supplier and user hubs E) manufacturer and supplier hubs
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B Page Ref: 197 Objective: 4 Difficulty: Moderate
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50) Which of the following is an example of a functional hub? A) Plastics.com allows plastics buyers to search the best prices among thousands of plastics sellers. B) ChemConnect.com is an online exchange for buyers and sellers of bulk chemicals. C) SteelMart.com concentrates on steel buyers from the United States. D) SupplyLink.com offers manufacturers information on ensuring workplace safety. E) PaperTiger.com offers paper buyers a comprehensive look at the prices and quality in the paper market.
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D Page Ref: 197 Objective: 4 AACSB: Analytic skills Difficulty: Moderate
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51) The ________ approach to consumer research asks customers to attach a monetary value to alternative levels of a given attribute. The value of a given configuration is determined by adding the average values of each of the given attributes. A) benchmarking B) compositional C) importance rating D) focus-group E) conjoint analysis
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B Page Ref: 199 Objective: 4 Difficulty: Moderate
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52) In the ________ method for assessing customer value, customers are asked how costs of using a new product compare to those of using an incumbent. A) direct survey B) importance ratings C) field value-in-use assessment D) benchmarking E) conjoint analysis
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C Page Ref: 199 Objective: 4 Difficulty: Moderate
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53) Robert Jennings consultants help farmers deliver an incremental animal weight gain of 8% to 12% over competitors. This is an example of ________. A) solutions selling to enhance customer revenues B) solutions selling to reduce customer costs C) solutions selling to decrease customer risks D) solutions selling to simplify customer purchasing E) solutions to provide better partnership
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A Page Ref: 200 Objective: 4 AACSB: Analytic skills Difficulty: Moderate
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54) A supplier signs an agreement with a customer that states that $350,000 in savings will be earned by the customer over the next 18 months in exchange for a tenfold increase in the customer's share of supplies ordered by the customer. If the supplier achieves less than this promised savings, it will make up the difference. If the supplier achieves substantially more than promised, it participates in the extra savings. This is an example of ________. A) solution selling B) price fixing C) demand shifting D) systems buying E) risk and gain sharing
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E Page Ref: 200 Objective: 4 AACSB: Analytic skills Difficulty: Moderate
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55) GM employees work at large customer facilities to reduce materials-management spending. This is an example of the ________ form of solution selling. A) solutions to encourage partnerships B) solutions to alter corporate culture C) solutions to enhance customer revenues D) solutions to decrease customer risks E) solutions to reduce customer costs
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E Page Ref: 200 Objective: 4 AACSB: Analytic skills Difficulty: Moderate
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56) Through its dedicated research team, CISCO Systems Inc. has developed new value-added business solutions which enable its variant class-II capacitors to provide incremental productivity of 10 to 20 percent over its competitors. This is an example of the ________ form of solution selling. A) solutions to reduce customer costs B) solutions to decrease customer risks C) solutions to alter corporate culture D) solutions to enhance customer revenues E) solutions to partnerships
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D Page Ref: 200 Objective: 4 AACSB: Analytic skills Difficulty: Moderate
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57) Praxair Limited is a supplier of synthetic graphite to a number of electrode manufacturers in the U.S. Its customers have shifted their ordering responsibilities to Praxair and the company regularly monitors its customer's inventory levels and has taken responsibility for replenishing the supplies automatically through continuous replenishment programs. Which of the following systems do Praxair and its customers follow with respect to order-routine specification? A) Supplier Added Value Effort ($AVE) B) Vendor Managed Inventory (VMI) C) Direct Concentrated Buying (DCB) D) Supplier Performance Management (SPM) E) Product Value Analysis (PVA)
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B Page Ref: 201 Objective: 4 AACSB: Analytic skills Difficulty: Difficult
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58) Which of the following methods is most likely to be used by buyers to review the performance of chosen suppliers? A) the buyer may contact different suppliers and ask for their evaluations B) the buyers may rate the end-users on several criteria using a weighted-score method C) the buyer might aggregate the cost of poor performance to come up with adjusted costs of purchase, including price D) the buyers may aggregate the opinions of various competitors and come up with the adjusted cost of supply E) the buyers might adopt the Supplier Added Value Effort technique to calculate supplier efficiency
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C Page Ref: 201 Objective: 4 Difficulty: Difficult
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59) A ________ establishes a long-term relationship in which the supplier promises to resupply the buyer as needed, at agreed-upon prices, over a specified period of time. A) stockless purchase plan B) direct stock purchase plan C) defined contribution plan D) stock purchase plan E) share purchase plan
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A Page Ref: 201 Objective: 4 AACSB: Reflective thinking Difficulty: Moderate
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60) In the ________ category of buyer-supplier relationships, competition rather than cooperation is the dominant form of governance. A) basic buying and selling B) bare bones C) contractual transaction D) customer supply E) collaborative
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D Page Ref: 202 Objective: 5 Difficulty: Moderate
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61) Which of the following relationships is characterized by much trust and commitment leading to a true partnership? A) mutually adaptive B) collaborative C) basic buying and selling D) customer supply E) cooperative systems
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B Page Ref: 202 Objective: 5 Difficulty: Moderate
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62) The partners in ________ systems are united in operational ways, but neither demonstrates structural commitment through legal means or adaptation. A) mutually adaptive B) collaborative C) basic buying and selling D) customer supply E) cooperative
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B Page Ref: 202 Objective: 5 Difficulty: Moderate
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63) Value Central has a partnership of high trust and commitment with certain suppliers and gives them access to its sophisticated and detailed daily, individual store-based sales data. In exchange, those suppliers are responsible for managing Value Central's inventory of their products. This relationship is best described as ________. A) basic buying and selling B) contractual transaction C) collaborative D) customer supply E) customer is king
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C Page Ref: 202 Objective: 5 AACSB: Analytic skills Difficulty: Moderate
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64) The relationship between a company and its office supplies vendor where competition rather than cooperation is the dominant form of governance is probably best described as ________. A) basic buying and selling B) contractual transaction C) collaborative D) customer supply E) customer is king
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D Page Ref: 202 Objective: 5 AACSB: Analytic skills Difficulty: Moderate
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65) In the ________ category of buyer-supplier relationship, although bonded by a close, cooperative relationship, the seller adapts to meet the customer's needs without expecting much adaptation or change on the part of the customer in exchange. A) contractual transaction B) cooperative system C) collaborative D) mutually adaptive E) customer is king
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E Page Ref: 203 Objective: 5 Difficulty: Moderate
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66) According to research studies, the closest relationships between customers and suppliers arise when ________. A) supply is important to the customer and there were procurement obstacles B) procurement is simple C) there are many undifferentiated vendors in the marketplace D) the customer is highly price sensitive E) the suppliers charge a premium for their products
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A Page Ref: 203 Objective: 5 AACSB: Reflective thinking Difficulty: Moderate
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67) The type of buyer-supplier relationship in which buyers and sellers make many relationship-specific adaptations, but without necessarily achieving strong trust or cooperation is termed as ________. A) customer is king B) mutually adaptive C) collaborative D) contractual transaction E) customer supply
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B Page Ref: 203 Objective: 5 AACSB: Reflective thinking Difficulty: Moderate
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68) ________ investments are those expenditures tailored to a particular company and value chain partner. A) Diversified B) Pooled C) Specific D) Umbrella E) General
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C Page Ref: 203-204 Objective: 5 Difficulty: Moderate
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69) Which of the following is a form of cheating or undersupply relative to an implicit or explicit contract which usually takes place when buyers cannot easily monitor supplier performance? A) Institutional sale B) Business buying C) Opportunism D) Vertical integration E) Contractual transactionism
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C Page Ref: 204 Objective: 5 Difficulty: Moderate
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70) The ________ market consists of schools, hospitals, nursing homes, prisons, and other institutions that must provide goods and services to people in their care. A) vertical B) nonprofit C) spot D) secondary business E) institutional
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E Page Ref: 205 Objective: 6 Difficulty: Easy
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71) In most countries, ________ are the major buyers of goods and services. They typically require suppliers to submit bids and often award the contract to the lowest bidder. A) consumer packaged-goods companies B) government organizations C) health services vendors D) educational institutions E) households
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B Page Ref: 206 Objective: 6 Difficulty: Easy
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72) Organizational buying is the decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers.
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TRUE Page Ref: 183 Objective: 1 Difficulty: Easy
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73) The business market consists of all the organizations that acquire goods and services used in the production of other products or services that are sold, rented, or supplied to others.
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TRUE Page Ref: 183 Objective: 1 Difficulty: Easy
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74) Commoditization strengthens customer loyalty.
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FALSE Page Ref: 184 Objective: 1 AACSB: Reflective thinking Difficulty: Easy
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75) The business market is essentially the same market as the consumer market.
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FALSE Page Ref: 184 Objective: 1 AACSB: Reflective thinking Difficulty: Easy
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76) Business buyers often select suppliers who also buy from them.
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TRUE Page Ref: 184 Objective: 1 Difficulty: Easy
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77) The business marketer normally deals with far fewer, much larger buyers than the consumer marketer does.
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TRUE Page Ref: 184 Objective: 1 Difficulty: Easy
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78) An increase in the demand for plant and equipment can lead to a much larger increase in consumer demand. This is known as the acceleration effect.
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FALSE Page Ref: 185 Objective: 1 Difficulty: Easy
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79) The demand for business goods is ultimately derived from the demand for raw materials.
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FALSE Page Ref: 185 Objective: 1 AACSB: Reflective thinking Difficulty: Easy
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80) The total demand for many business goods and services is inelasticthat is, not much affected by price changes.
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TRUE Page Ref: 185 Objective: 1 Difficulty: Easy
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81) In the straight rebuy, "out-suppliers" try to get a small order and then enlarge their purchase share over time.
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TRUE Page Ref: 185 Objective: 2 AACSB: Analytic skills Difficulty: Moderate
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82) The buyer in a straight rebuy usually changes product specifications, prices, delivery requirements, or other terms.
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FALSE Page Ref: 186 Objective: 2 AACSB: Reflective thinking Difficulty: Moderate
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83) The business buyer makes the fewest decisions in the straight rebuy situation and the most in the new-task situation.
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TRUE Page Ref: 186 Objective: 2 AACSB: Reflective thinking Difficulty: Moderate
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84) Most business buyers reject what is called systems buying from one seller.
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FALSE Page Ref: 187 Objective: 2 AACSB: Reflective thinking Difficulty: Easy
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85) Systems selling is a key industrial marketing strategy in bidding to build large-scale industrial projects such as dams or pipelines.
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TRUE Page Ref: 187 Objective: 2 AACSB: Analytic skills Difficulty: Easy
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86) Sellers benefit from systems contracting through lower operating costs as a result of steady demand and reduced paperwork.
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TRUE Page Ref: 187 Objective: 2 AACSB: Reflective thinking Difficulty: Easy
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87) The buying center is where consumers go to purchase their goods and services.
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FALSE Page Ref: 188 Objective: 3 AACSB: Analytic skills Difficulty: Easy
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88) With respect to the buying center, approvers are people who have the power to prevent sellers or information from reaching members of the buying center.
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FALSE Page Ref: 188 Objective: 3 AACSB: Reflective thinking Difficulty: Easy
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89) Initiators are those who authorize the proposed action of deciders or buyers.
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FALSE Page Ref: 188 Objective: 3 AACSB: Analytic skills Difficulty: Easy
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90) Influencers influence the buying decision by helping define specifications and providing information for evaluating alternatives.
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TRUE Page Ref: 188 Objective: 3 AACSB: Analytic skills Difficulty: Easy
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91) In the buying center, several people can occupy a given role such as user or influencer, and one person may play multiple roles.
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TRUE Page Ref: 188 Objective: 3 AACSB: Reflective thinking Difficulty: Easy
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92) Small sellers concentrate on multilevel in-depth selling instead of reaching the key buying influencers.
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FALSE Page Ref: 193 Objective: 3 AACSB: Reflective thinking Difficulty: Easy
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93) In the business market, small sellers concentrate on reaching as many participants as possible because their chances of success are slim.
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FALSE Page Ref: 193 Objective: 4 AACSB: Reflective thinking Difficulty: Easy
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94) Framing occurs when customers are given a perspective or point of view that allows the firm to "put its best foot forward."
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TRUE Page Ref: 194 Objective: 4 AACSB: Reflective thinking Difficulty: Easy
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95) A performance review is the first step in the buygrid framework.
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FALSE Page Ref: 195 Objective: 4 Difficulty: Moderate
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96) The buying process begins when someone places an order with a sales representative.
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FALSE Page Ref: 196 Objective: 4 AACSB: Analytic skills Difficulty: Easy
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97) Product value analysis is an approach to efficiency that studies whether components can be redesigned or made by more efficient methods of production without adversely impacting product performance.
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FALSE Page Ref: 196 Objective: 4 AACSB: Analytic skills Difficulty: Moderate
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98) On spot electronic markets, prices of products or commodities change by the minute.
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TRUE Page Ref: 197 Objective: 4 AACSB: Analytic skills Difficulty: Moderate
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99) In buying alliances, participants offer to trade goods or services.
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FALSE Page Ref: 197 Objective: 4 AACSB: Analytic skills Difficulty: Moderate
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100) With respect to assessing customer value, in conjoint analysis customers are asked to rank their preference for alternative market offerings or concepts.
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TRUE Page Ref: 199 Objective: 4 AACSB: Analytic skills Difficulty: Difficult
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101) One of the forms of solution selling is to provide solutions to enhance customer revenues.
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TRUE Page Ref: 200 Objective: 4 AACSB: Analytic skills Difficulty: Easy
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102) Risk and gain sharing can offset price reductions that customers request.
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TRUE Page Ref: 200 Objective: 4 AACSB: Analytic skills Difficulty: Easy
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103) Companies are increasingly reducing the number of suppliers they utilize, and there is a trend toward single sourcing.
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TRUE Page Ref: 201 Objective: 4 Difficulty: Moderate
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104) Most performance reviews are conducted by outside auditing agencies to avoid bias and internal discrepancies.
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FALSE Page Ref: 201 Objective: 4 AACSB: Reflective thinking Difficulty: Moderate
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105) In buyer-seller relationships, the contractual transaction generally shows low levels of trust, cooperation, and interaction.
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TRUE Page Ref: 202 Objective: 5 AACSB: Reflective thinking Difficulty: Moderate
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106) Corporate credibility depends on corporate expertise, corporate trustworthiness, and corporate likability.
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TRUE Page Ref: 203 Objective: 5 AACSB: Analytic skills Difficulty: Moderate
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107) One of the problems facing B2B on the Web is that many firms often impose more stringent requirements on their online business partners than they do on non-online partners.
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TRUE Page Ref: 203 Objective: 5 Difficulty: Moderate
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108) The "customer is king" category of buyer-seller relationship is relatively simple, and one in which routine exchanges with moderately high levels of cooperation and information exchange occur.
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FALSE Page Ref: 203 Objective: 5 AACSB: Analytic skills Difficulty: Moderate
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109) Contracts are always sufficient to govern supplier transactions and prevent supplier opportunism.
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FALSE Page Ref: 204 Objective: 5 AACSB: Reflective thinking Difficulty: Moderate
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110) A good illustration of a member of the institutional market would be Boeing because it is a member of the aviation institution structure.
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FALSE Page Ref: 205 Objective: 6 AACSB: Analytic skills Difficulty: Easy
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111) The U.S. government is the largest customer in the world.
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TRUE Page Ref: 206 Objective: 6 Difficulty: Moderate
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112) Business markets have several characteristics that contrast sharply with those of consumer markets. Name and briefly characterize five of those characteristics.
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The characteristics of business markets as compared to consumer markets are: (1) fewer, larger buyers, (2) close supplier-customer relationship, (3) professional purchasing, (4) multiple buying influences, (5) multiple sales calls, (6) derived demand, (7) inelastic demand, (8) fluctuating demand, (9) geographically concentrated buyers, and (10) direct purchasing. See chapter section for brief characterizations. Page Ref: 183-185 Objective: 1 AACSB: Reflective thinking Difficulty: Easy
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113) Explain how fluctuating demand impacts business markets differently from consumer markets.
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The demand for business goods and services tends to be more volatile than the demand for consumer goods and services. A given percentage increase in consumer demand can lead to a much larger percentage increase in the demand for plant and equipment necessary to produce additional output. Economists refer to this as the acceleration effect. Page Ref: 185 Objective: 1 Difficulty: Moderate
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114) Illustrate the differences between a straight rebuy, modified rebuy, and a new-task purchase.
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In a straight rebuy, the purchasing department reorders on a routine basis and choose from suppliers on an approved list. In a modified rebuy, the buyer wants to modify product specifications, prices, delivery requirements, or other terms. Lastly, in the new-task purchase, a purchaser buys a product or service for the first time. Page Ref: 185-186 Objective: 2 AACSB: Analytic skills Difficulty: Moderate
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115) What are the three different types of buying situations faced by a typical business buyer?
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The business buyer faces many decisions in making a purchase. Three types of buying situations are the straight rebuy, modified rebuy, and new task. Straight rebuy- In a straight rebuy, the purchasing department reorders supplies such as office supplies and bulk chemicals on a routine basis and chooses from suppliers on an approved list. The suppliers make an effort to maintain product and service quality and often propose automatic reordering systems to save time. "Out-suppliers" attempt to offer something new or exploit dissatisfaction with a current supplier. Their goal is to get a small order and then enlarge their purchase share over time. Modified rebuy- The buyer in a modified rebuy wants to change product specifications, prices, delivery requirements, or other terms. This usually requires additional participants on both sides. The in-suppliers become nervous and want to protect the account. The out-suppliers see an opportunity to propose a better offer to gain some business. New task- A new-task purchaser buys a product or service for the first time (an office building, a new security system). The greater the cost or risk, the larger the number of participants, and the greater their information gathering, the longer the time to a decision. Page Ref: 185-186 Objective: 2 AACSB: Communications Difficulty: Moderate
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116) Describe the practices of systems buying and systems contracting.
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Systems buying involves buying a total solution to a problem from one seller. Systems contracting is a variant of systems selling in which a single supplier provides the buyer with his entire requirement for maintenance, repair, and operating supplies. During the contract period, the supplier manages the customer's inventory. Page Ref: 187 Objective: 2 Difficulty: Moderate
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117) What is the composition of the buying center?
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A buying center is composed of "all those individuals and groups who participate in the purchasing decision-making process, who share some common goals and the risks arising from the decisions." The buying center includes all members of the organization who play any of seven roles in the purchase decision process: initiators, users, influencers, deciders, approvers, buyers, gatekeepers. Buying centers usually include several participants with differing interests, authority, status, and persuasiveness. Each member of the buying center is likely to give priority to very different decision criteria. Page Ref: 188 Objective: 3 AACSB: Analytic skills Difficulty: Moderate
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118) List the seven roles of people in a buying center.
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1. Initiators—Users or others in the organization who request that something be purchased. 2. Users—Those who will use the product or service. In many cases, the users initiate the buying proposal and help define the product requirements. 3. Influencers—People who influence the buying decision, often by helping define specifications and providing information for evaluating alternatives. Technical personnel are particularly important influencers. 4. Deciders—People who decide on product requirements or on suppliers. 5. Approvers—People who authorize the proposed actions of deciders or buyers. 6. Buyers—People who have formal authority to select the supplier and arrange the purchase terms. Buyers may help shape product specifications, but they play their major role in selecting vendors and negotiating. In more complex purchases, buyers might include high-level managers. 7. Gatekeepers—People who have the power to prevent sellers or information from reaching members of the buying center. For example, purchasing agents, receptionists, and telephone operators may prevent salespersons from contacting users or deciders. Page Ref: 188 Objective: 3 AACSB: Reflective thinking Difficulty: Moderate
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119) Explain with examples, the concept of solution selling.
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Student answers may vary. Solution selling approaches buyers from a solutions-to-problems approach rather than a product-purchase approach. Three forms include: (1) solutions to enhance customer revenues, e.g., Hendrix UTD has used its sales consultants to help farmers deliver an incremental animal weight gain of 5 percent to 10 percent over competitors, (2) solutions to decrease customer risks, e.g., ICI Explosives formulated a safer way to ship explosives for quarries, and (3) solutions to reduce customer costs, e.g., W.W. Grainger employees work at large customer facilities to reduce materials-management costs. Page Ref: 200 Objective: 4 AACSB: Reflective thinking Difficulty: Moderate
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120) What are the methods available to the buyer to review the performance of the chosen supplier? What advantage does performance review offer to the buyer?
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The buyer periodically reviews the performance of the chosen supplier(s) using one of three methods. The buyer may contact end users and ask for their evaluations, rate the supplier on several criteria using a weighted-score method, or aggregate the cost of poor performance to come up with adjusted costs of purchase, including price. The performance review may lead the buyer to continue, modify, or end a supplier relationship. Many companies have set up incentive systems to reward purchasing managers for good buying performance, in much the same way sales personnel receive bonuses for good selling performance. These systems lead purchasing managers to increase pressure on sellers for the best terms. Page Ref: 201 Objective: 4 AACSB: Analytic skills Difficulty: Moderate
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121) Vertical coordination can facilitate stronger customer-seller ties but at the same time may increase the risk to the customer's and supplier's specific investments. What are specific investments and why are they risky?
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Specific investments are those expenditures tailored to a particular company and value chain partner. These might include investments in company-specific training, equipment, and operating procedures or systems. Because these investments are partially sunk, they lock the firm that makes them into a particular relationship. A buyer may be vulnerable to holdup because of switching costs; a supplier may be more vulnerable to holdup in future contracts because of dedicated assets and/or expropriation of technology/knowledge. Page Ref: 203-204 Objective: 5 AACSB: Ethical understanding and reasoning abilities Difficulty: Moderate
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122) The business market consists of all the organizations that acquire goods and services used in the production of other products or services that are sold, rented, or supplied to others. List the major industries that make up the business market.
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The major industries making up the business market are agriculture, forestry, and fisheries; mining; manufacturing; construction; transportation; communication; public utilities; banking, finance, and insurance; distribution; and services. Page Ref: 183 Objective: 1 Difficulty: Easy
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123) Define organizational buying.
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Organizational buying is the decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers. Page Ref: 183 Objective: 1 AACSB: Analytic skills Difficulty: Easy
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124) Explain the concept of derived demand.
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The demand for business goods is ultimately derived from the demand for consumer goods. Consumer demand for business' end products drives their production. Production of those end products drives business demand for the inputs to those production processes. Page Ref: 185 Objective: 1 AACSB: Reflective thinking Difficulty: Moderate
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125) If you were a purchasing agent facing a modified rebuy situation, how would you describe that situation?
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The buyer wants to modify product specifications, prices, delivery requirements, or other items. The modified rebuy usually involves additional participants on both sides. Page Ref: 186 Objective: 2 AACSB: Reflective thinking Difficulty: Moderate
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126) Which type of buying situation would be preferred if the management wants to minimize decision-making time and effort.
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The business buyer makes the fewest decisions in the straight rebuy situation and the most in the new-task situation. Hence, a straight rebuy situation would be preferable. Page Ref: 186 Objective: 2 AACSB: Reflective thinking Difficulty: Moderate
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127) In systems buying, the U.S. government often solicits bids from prime contractors. What do prime contractors do?
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The government solicits bids from prime contractors who assemble the package or system. The contractor who was awarded the contract would be responsible for bidding out and assembling the system's subcomponents from second-tier contractors. Thus, the prime contractor provides a turnkey solution. Page Ref: 187 Objective: 2 AACSB: Analytic skills Difficulty: Moderate
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128) Systems selling is a key industrial marketing strategy in bidding to build large-scale industrial projects. Competition for these projects is fierce. What are the main areas of competition for these project engineering firms?
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Primary competitive areas include: price, quality, reliability, and other attributes to win contracts. Page Ref: 187 Objective: 2 AACSB: Analytic skills Difficulty: Moderate
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129) List the seven roles played by members of a buying center.
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The roles are: (1) initiators, (2) users, (3) influencers, (4) deciders, (5) approvers, (6) buyers, and (7) gatekeepers. Page Ref: 188 Objective: 3 Difficulty: Easy
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130) Mason's is a supplier of specialty chemicals to a number of companies. The company previously supplied just three big clients, but the CEO is considering targeting the small business market. Selling to small businesses presents a huge opportunity, he says, but some board members disagree, saying it also presents huge challenges. Explain the challenges the firm might face in targeting small businesses.
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The small business market is large and fragmented by industry, size, and number of years of operation. Additionally, small business owners are notably averse to long-range planning and have an "I'll buy it when I need it" decision-making style. Page Ref: 192 Objective: 4 Difficulty: Moderate
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131) BEL is a small seller of specialized auto parts, while MES is a large seller of auto parts. Both firms want to approach the same car company with a view to supplying parts to it. How will their approaches differ?
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Small sellers like BEL concentrate on reaching the key buying influencers in order to make the most effective use of their small sales force. Large sellers like MES go for multilevel in-depth selling to reach as many participants as possible to increase sales volumes and strengthen relationships. Page Ref: 193 Objective: 4 AACSB: Analytic skills Difficulty: Moderate
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132) With reference to online buying, what are vertical markets? Give an example of a vertical market.
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Student answers may vary. Companies buying industrial products such as plastics, steel, or chemicals or services such as logistics or media can go to specialized Web sites (called e-hubs). Plastics.com allows plastics buyers to search the best prices among thousands of plastics sellers. Page Ref: 196 Objective: 4 AACSB: Analytic skills Difficulty: Moderate
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133) E-procurement Web sites are organized around two types of e-hubs. If you were in the advertising business and were seeking to take advantage of e-procurement, what type of e-hub should be constructed by your company?
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The two types of hubs are vertical hubs (centered on industries such as plastics) and functional hubs (centered on functions such as advertising). Therefore, you would construct a functional hub. Page Ref: 197 Objective: 4 AACSB: Analytic skills Difficulty: Moderate
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134) KEK is a supplier of paper and paper products to several businesses. Name some contract restrictions that KEK can use to protect its margins when dealing with price-oriented buyers.
answer
KEK can handle price-oriented buyers by setting a lower price but establishing restrictive conditions, such as: (1) limited quantities, (2) no refunds, (3) no adjustments, and (4) no services. Page Ref: 200 Objective: 4 AACSB: Analytic skills Difficulty: Moderate
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135) Explain risk and gain sharing with the help of an example.
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Student answers may vary. Risk and gain sharing can offset price reductions that customers request. Suppose Medline, a hospital supplier, signs an agreement with Highland Park Hospital promising $350,000 in savings over the first 18 months in exchange for getting a tenfold increase in the hospital's share of supplies. If Medline achieves less than this promised savings, it will make up the difference. If Medline achieves substantially more than promised, it participates in the extra savings. Page Ref: 200 Objective: 4 AACSB: Analytic skills Difficulty: Moderate
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136) What do you understand by vendor-managed inventory (VMI)?
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Some companies go further and shift the ordering responsibility to their suppliers in systems called vendor-managed inventory (VMI). These suppliers are privy to the customer's inventory levels and take responsibility for replenishing automatically through continuous replenishment programs. Page Ref: 201 Objective: 4 AACSB: Analytic skills Difficulty: Moderate
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137) As part of the buyer selection process, buying centers must decide how many suppliers to use. What might motivate a buyer to use multiple sources?
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Companies that use multiple sources often cite the threat of a labor strike as the biggest deterrent to single sourcing. Another reason companies may be reluctant to use a single source is that they fear they'll become too comfortable with the relationship and lose their competitive edge. Page Ref: 201 Objective: 4 AACSB: Analytic skills Difficulty: Moderate
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138) In the buygrid framework model, where the major stages of the industrial buying process are listed and characterized, supplier selection is an important process. What follows supplier selection and what occurs in this phase?
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The step that follows supplier selection is order-routine specification. After selecting suppliers, the buyer negotiates the final order, listing the technical specifications, the quantity needed, the expected time of delivery, return policies, warranties, and so on. Page Ref: 201 Objective: 4 AACSB: Analytic skills Difficulty: Moderate
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139) Researchers have found that buyer-supplier relationships differed according to four factors: availability of alternatives; importance of supply; complexity of supply; and supply market dynamism. Based on these four factors, they classified buyer-supplier relationships into eight different categories. What are those categories?
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The categories are: (1) basic buying and selling, (2) bare bones, (3) contractual transaction, (4) customer supply, (5) cooperative systems, (6) collaborative, (7) mutually adaptive, and (8) customer is king. For additional information, see the specific chapter section. Page Ref: 202-203 Objective: 5 AACSB: Analytic skills Difficulty: Moderate
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140) As a seller in the business market, you have promised your customers that you have corporate credibility as one of your corporate goals. What three factors will have some bearing on whether you will be able to meet your goal and promise?
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The three factors are: (1) corporate expertise, (2) corporate trustworthiness, and (3) corporate likability. In other words, a credible firm is seen as being good at what it does, it keeps its customers' best interests in mind, and it is enjoyable to work with. Page Ref: 203 Objective: 5 AACSB: Ethical understanding and reasoning abilities Difficulty: Moderate
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141) Researchers have found that buyer-supplier relationships could be classified into eight different categories. What category would be appropriate for a relationship where, although bonded by a close, cooperative relationship, the seller adapts to meet the customer's needs without expecting much adaptation or change on the part of the customer in exchange?
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The appropriate category would be the "customer is king" category. Page Ref: 203 Objective: 5 AACSB: Analytic skills Difficulty: Easy
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142) Explain the term opportunism with respect to business relationships.
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When buyers cannot easily monitor supplier performance, the supplier might shirk or cheat and not deliver the expected value. Opportunism is "some form of cheating or undersupply relative to an implicit or explicit contract." It may entail blatant self-serving and deliberate misrepresentation that violates contractual agreements. Page Ref: 204 Objective: 5 AACSB: Reflective thinking Difficulty: Moderate
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143) Your organization is considering selling its products to the institutional market. What type of customers will you be making your appeals to?
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The institutional market consists of schools, hospitals, nursing homes, prisons, and other institutions that must provide goods and services to people in their care. Page Ref: 205 Objective: 6 AACSB: Reflective thinking Difficulty: Easy
