MKTG Management Chapter 16 (FINAL) – Flashcards
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1) ________ includes all the activities in selling goods or services directly to final consumers for personal, nonbusiness use. A) Wholesaling B) Retailing C) Procurement D) Promoting E) Warehousing
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B
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2) Which of the following is true for retailing? A) Manufacturers are not considered to be retailers as they are engaged in producing the product. B) Vending machines are considered to be retailing only if they are located within stores. C) Retailing deals only with goods; it does not include services. D) Selling from a consumer's home is direct selling, but not retailing. E) Wholesalers are only considered to be retailers if they are selling to final consumers.
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E
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3) Which of the following is an example of retailing? A) Dylan's sends catalogs to retail, industrial, and institutional customers. B) SEZ U Inc. sells a limited line of fast-moving goods to small retailers for cash. C) BEL Inc. sells FMCG goods to merchant wholesalers and distributors. D) Praxis International sells products to consumers directly through the Internet. E) Hub Styles procures its raw materials directly from farmers in the region.
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D
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4) Discount stores that try to keep prices as low as possible are more likely to function using ________ operations. A) limited service B) self-selection C) full-service D) self-service E) limited-selection
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D
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5) Reynold's is a grocery chain that has always catered to mid-market customers. However, the owner, Mal, has noticed that an influx of new residents are buying mostly the lower-cost products and products on discount. To attract customers, Mal decides to make a gradual switch to the discount store format, but to do this, he will have to cut costs wherever possible. Which of the following types of service should Mal avoid in order to lower costs? A) limited service B) self-selection C) full-service D) self-service E) limited-selection
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C
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6) A large staff, along with a higher proportion of specialty goods and slower-moving items and many services, are usually features of ________ retailing. A) self-service B) self-selection C) limited service D) full-service E) limited-selection
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D
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7) In ________ retailing, salespeople are ready to assist in every phase of the "locate-compare-select" process. A) self-service B) self-selection C) full-service D) limited service E) limited-selection
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C
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8) In the ________ type of retailing, customers usually find their own goods, although they can ask salespeople for assistance. A) self-service B) self-selection C) full-service D) limited service E) limited-selection
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B
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9) Which of the following is true for self-service retailing? A) These retailers carry more shopping goods and services such as credit and merchandise-return privileges. B) This service model is favored by discount stores and customers who want to save money. C) It results in high staffing costs compared to other forms of retailing. D) Salespeople are ready to assist in every phase of the "locate-compare-select" process. E) Customers need more information and assistance than in other forms of retailing.
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B
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10) Which of the following types of retailing generally entails the highest costs? A) full-service B) self-service C) limited-selection D) limited service E) self-selection
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A
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11) Which of the following is an example of a limited-service retailer? A) Customers at TAB pick out the products they want and pay at the checkout counter. B) Salespeople at Eli are always on hand to offer shoppers advice and assistance in choosing products. C) Mina's allows customers to checkout their own purchases in order to reduce the staff count. D) As CLO's offers a number of merchandise-return privileges, customers need information and assistance while shopping. E) Alison's stocks a number of specialty products and the store's salespeople generally help shoppers with all their needs.
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D
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12) Bill and Josh are considering opening a retail store. They have identified their target market and location and are finalizing the details of the merchandise they will carry. Since the neighborhood is rundown and the customers in the area are very price-conscious, Bill and Josh want to offer goods from well-known brands, but at lower rates than the full retail prices of the products. They choose to stock excess production from manufacturers or goods that have remained unsold at other retailers. This is a description of a(n) ________ retailer. A) off-price B) specialty C) discount D) department E) catalog
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A
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13) H&A is a retail chain that specializes in selling goods at very low prices. To achieve this, it stocks a very narrow assortment of basic necessities and offers customers a "no-frills" shopping experience. H&A is an example of a(n) ________ store. A) off-price B) specialty C) hard-discount D) superstore E) convenience
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C
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14) E&OE produces and markets its own brand of skincare products using herbal remedies and natural ingredients through standalone stores as well as an online portal. E&OE is a(n) ________ retailer. A) off-price B) specialty C) discount D) department E) extreme value
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B
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15) A factory outlet is an example of a(n) ________ retailer. A) off-price B) specialty C) discount D) department E) catalog
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A
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16) Companies who sell products door-to-door or at home sales parties are engaging in ________. A) franchising B) network marketing C) direct-response marketing D) corporate selling E) direct marketing
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B
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17) Which of the following is an example of direct selling? A) E&OE sells its herbal skincare products exclusively through its stand-alone stores. B) TCJ is a telemarketing firm that sells products from a number of different suppliers. C) Jayne's sells most of its products to customers through home sales parties. D) J3 is an online shopping portal where customers can buy directly from manufacturers. E) Reynold's tries to minimize its staff costs by installing vending machines in its stores.
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C
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18) Which of the following is an example of direct marketing? A) E&OE sells its herbal skincare products exclusively through its stand-alone stores. B) TCJ is a telemarketing firm that sells products from a number of different suppliers. C) Jayne's sells most of its products to customers through home sales parties. D) J3 is a storeless retailer that organizes the retail activity of the employees of four firms. E) Reynold's tries to minimize its staff costs by installing vending machines in its stores.
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B
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19) The ________ marketing sales system works by recruiting independent businesspeople who act as distributors. A) catalog B) multilevel C) direct-response D) corporate E) direct
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B
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20) In ________, a salesperson goes to the home of a host who has invited friends, demonstrates the products and takes orders. A) catalog marketing B) franchising C) direct-response selling D) network marketing E) direct marketing
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D
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21) Telemarketing is a type of ________. A) direct selling B) network marketing C) multilevel selling D) close-range marketing E) direct marketing
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E
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22) Electronic shopping is a type of ________. A) direct selling B) network marketing C) multilevel selling D) corporate selling E) direct marketing
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E
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23) Which of the following is true of store retailers? A) A hard-discount store offers a wider merchandise mix than discount stores at higher prices. B) A discount store offers leftover goods, overruns, and irregular merchandise sold at less than retail. C) A specialty store generally stocks a very narrow product line. D) An extreme value store generally has a broad selection of high-markup, brand-name goods. E) A catalog showroom is a large, low-cost, low-margin, high-volume, self-service store.
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C
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24) A ________ is a storeless retailer serving a specific clientele—usually employees of large organizations—who are authorized to buy from a list of retailers that have agreed to give discounts in return for inclusion on the list. A) direct-selling vendor B) direct marketing vendor C) buying service D) automatic vendor E) corporate retailer
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C
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25) An independent retailer using a central buying organization and joint promotion efforts with other retailers is part of a ________. A) corporate chain store B) voluntary chain C) retailer cooperative D) merchandising conglomerate E) franchise organization
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C
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26) A ________ is a retail firm owned by its customers. Members contribute money to open their own store, vote on its policies, elect a group to manage it, and receive dividends. A) retailer cooperative B) voluntary chain C) consumer cooperative D) merchandising conglomerate E) franchise organization
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C
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27) A ________ is wholesaler-sponsored group of independent retailers engaged in bulk buying and common merchandising. A) retailer cooperative B) voluntary chain C) consumer cooperative D) merchandising conglomerate E) franchise organization
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B
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28) Which of the following is true for franchisors? A) The franchisor has to pay the franchisee to be part of the franchise system. B) The franchisor licenses the trade mark from the franchisee. C) The franchisor must change its operations to suit those of the franchisee's. D) The franchisor collects royalty payments from the franchisee. E) The franchisor pays start-up costs for the franchisee.
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D
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29) Which of the following is true for franchisees? A) The franchisee is paid by the franchisor to be part of the franchise system. B) The franchisee licenses a trade mark to the franchisor. C) The franchisee must change its operations to suit those of the franchisor's. D) The franchisee collects royalty payments from the franchisor. E) The franchisee owns the trade or service mark.
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C
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30) Which of the following is a benefit of franchising for franchisees? A) The franchisee finds it easier to borrow money from financial institutions. B) The franchisee receives ownership of the franchisor's trade mark. C) The franchisee must change its operations to suit those of the franchisor's. D) The franchisee collects royalty payments from the franchisor. E) The franchisee is paid by the franchisor for being part of the system.
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A
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31) Jake wants to open a Subway franchise in his small town. To do this, he must pay the company a ________ fee. A) slotting B) title C) royalty D) merchandising E) residual
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C
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32) Which of the following is true for the retail industry? A) Discount stores and catalog showrooms are competing for the same customers. B) Upscale retailers see a decline in sales as middle-market retailers thrive. C) Small, specialized retailers are crowding out larger, more diverse retailers. D) Store retailing sees no competition from non-store retailing. E) Discount stores are not doing as well as middle-market retailers.
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A
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33) Electronic shelf labeling allows retailers to ________. A) check inventory levels instantaneously B) order electronically from suppliers C) run continual promotional messages D) advertise sales and special offers E) change price levels instantaneously
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E
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34) Staples is a giant retailer that concentrates on selling office supplies. Staples is an example of a(n) ________. A) ambush marketer B) supercenter C) megamarketer D) category killer E) guerilla marketer
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D
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35) In the corporate headquarters of a supermarket chain, ________ are responsible for developing brand assortments and listening to salespersons' presentations. A) central buyers B) brokers C) specialist buyers D) agents E) specialized wholesalers
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C
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36) In supermarkets and other retail outlets, RFID is used to ________. A) change prices instantaneously B) check for spoilage or damage to goods C) advertise special offers and discounts D) run continual promotional messages E) monitor inventory and track goods
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E
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37) Which of the following is true for direct product profitability analysis? A) It is highly correlated with the gross margin on a product. B) It is negligible compared to the gross margin on a product. C) It bears little relation to the gross margin on a product. D) It is significantly lower than the gross margin on a product. E) It is exactly the same as the gross margin on a product.
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C
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38) Mass merchandisers and discount stores typically fall into the ________ group with respect to margins and volume. A) mixed markup, high-volume B) low-volume, mixed markup C) low-volume, low-markup D) high-volume, low-markup E) high-markup, lower-volume
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D
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39) A store selling expensive artwork and luxury goods typically falls into the ________ group with respect to margins and volume. A) mixed markup, high-volume B) low-volume, mixed markup C) low-volume, low-markup D) high-volume, low-markup E) high-markup, low-volume
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E
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40) Most retailers will put low prices on some items in order to increase traffic to the store. These low-priced products are known as ________. A) loss leaders B) price ceilings C) price skimmers D) price floors E) cold calls
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A
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41) American businessman King Gillette pioneered the sales model in which razor handles were given away for free or sold at a loss, but sales of disposable razor blades were very profitable. This is known as the _______ model. A) two-tiered pricing B) predatory pricing C) cross selling D) loss leading E) product churning
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D
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42) Which of the following is a prepurchase service offered by retailers? A) accepting orders over the telephone B) shipping the product C) delivery to the customer's doorstep D) general information E) interior decoration of the retail outlet
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A
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43) Which of the following is a postpurchase service offered by retailers? A) accepting orders over the telephone B) advertising and window displays C) delivery to the customer's doorstep D) general information E) interior decoration of the retail outlet
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C
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44) Which of the following is an ancillary service offered by retailers? A) accepting orders over the telephone B) advertising and window displays C) delivery to the customer's doorstep D) general information E) alterations and tailoring
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D
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45) In your neighborhood there is a small men's store that has a limited selection of clothing, but the selection that is carried is of very high quality and price. Services include free alterations and tailoring, personalized record keeping, and free dry cleaning. The inside of the store has deep leather chairs and couches and thick pile carpet. Upon entering the store, a customer feels "special and rich." In terms of differentiation, what is this retailer trying to communicate by its decorations and service level? A) differentiation based on services mix and atmosphere B) differentiation based on prepurchase services C) differentiation based on postpurchase services and atmosphere D) differentiation based on ancillary services and atmosphere E) differentiation based on prepurchase and postpurchase services
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A
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46) Which of the following is the strongest differentiator for brick-and-mortar stores who want to emphasize their superiority over online retailers? A) product quality B) the shopping experience C) product range D) pricing E) the retailer's reputation
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B
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47) A brand developed by a retailer and/or wholesaler that is available only in selected retail outlets is called a ________ brand. A) generic B) franchisee C) marque D) national E) private-label
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E
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48) Though it is sold only in Wal-Mart stores, Wal-Mart's Ol'Roy dog food has surpassed Nestlé's Purina brand as the top-selling dog food. Ol'Roy is an example of a ________. A) generic product B) national brand C) franchise D) copy-cat brand E) private label
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E
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49) Which of the following is true for distributor brands? A) They sell at higher volumes than national brands and are also known as generics. B) They are usually sold at higher prices than national brands because production costs are higher. C) They are always of better quality than national brands as production is strictly monitored. D) Distributor brands can be sold at lower prices yet generate a higher profit margin because of their lower cost structure. E) Advertising and sales promotion costs for distributor brands are much higher than those for national brands.
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D
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50) ________ are unbranded, plainly packaged, less expensive versions of common products such as spaghetti, paper towels, and canned peaches. A) Common carriers B) Shills C) Generics D) Private labels E) Marques
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C
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51) In addition to its store brands and nationally well-known brands of detergents, Reynold's also carries much cheaper varieties of detergents that are not advertised and have little-known names. They are often manufactured from lower-quality ingredients and save on packaging and advertising costs. These are known as ________. A) common carriers B) shills C) generics D) private labels E) marques
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C
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52) Because shelf space is scarce, many supermarkets now charge a ________ for accepting a new brand, to cover the cost of listing and stocking it. A) retainer B) slotting fee C) residual fee D) contingent fee E) royalty
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B
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53) ________ includes all the activities in selling goods or services to those who buy for resale or business use. A) Retailing B) Wholesaling C) Procurement D) Promoting E) Warehousing
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B
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54) Which of the following is considered a wholesaler? A) retailers B) brokers C) producers D) manufacturers E) farmers
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B
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55) ________ are independently owned businesses that take title to the merchandise they handle. They are full-service and limited-service jobbers, distributors, and mill supply houses. A) Brokers B) Agents C) Merchant wholesalers D) Specialized wholesalers E) Retailers' branches
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C
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56) ________ serve bulk industries such as coal, lumber, and heavy equipment, assuming title and risk from the time an order is accepted to its delivery. A) Producers' cooperatives B) Cash and carry wholesalers C) Truck wholesalers D) Drop shippers E) Rack jobbers
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D
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57) ________ sell and deliver a limited line of semiperishable goods to supermarkets, grocery stores, hospitals, restaurants, and hotels. A) Producers' cooperatives B) Cash and carry wholesalers C) Truck wholesalers D) Drop shippers E) Rack jobbers
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C
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58) The owner of supermarket chain Reynold's has realized that customers want a wider variety of goods than is currently available. However, Reynold's cannot afford the costs of storing excess inventory. Additionally, the owner is not willing to take the risk that the new products will remain unsold. Which of the following types of wholesalers can help Reynold's meet customer demand while minimizing costs? A) Producers' cooperatives B) Cash and carry wholesalers C) Truck wholesalers D) Drop shippers E) Rack jobbers
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E
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59) Agricultural assemblers, petroleum bulk plants and terminals, and auction companies are examples of ________. A) full-service wholesalers B) specialized wholesalers C) limited-service wholesalers D) merchant wholesalers E) brokers
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B
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60) Which of the following is true of brokers? A) Brokers represent buyers or sellers on a semipermanent basis. B) Most brokers are small businesses with a few skilled salespeople. C) Brokers bring buyers and sellers together and assist in negotiation. D) Selling brokers have contractual authority to sell a manufacturer's entire output. E) Purchasing brokers make purchases for buyers and often receive, inspect, warehouse, and ship merchandise.
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C
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61) ________ refers to buying large carload lots and dividing them into smaller units before shipping them out to consumers. A) Bulk breaking B) Containerization C) Wholesaling D) Warehousing E) Broking
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A
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62) ________ encompass sales forecasting, production planning, and inbound materials transportation. A) Market logistics B) Containerization C) Transportation D) Nonstore retailing E) Wholesaling
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A
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63) The elapsed time between an order's receipt, delivery, and payment is called the ________. A) variable-costs-to-payment cycle B) product-to-payment cycle C) inventory-to-sale cycle D) order-to-inventory cycle E) order-to-payment cycle
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E
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64) ________ costs for a manufacturer consist of setup costs and running costs. A) Inventory-carrying B) Containerization C) Wholesaling D) Order-processing E) Transportation
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D
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65) As inventory draws down, management must know at what stock level to request additional stock. This stock level is called the ________. A) reorder point B) least fixed point C) point of divergence D) inflection point E) critical point
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A
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66) A stock order point of 10 means ordering the product ________. A) every 10 days B) when stock falls to 10 units C) every 10 units D) when stock falls to 9 units E) in batches of 10 items
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B
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67) Optimal order quantities exist when the curves for the order-processing cost per unit and inventory-carrying cost per unit ________. A) are collinear B) are diagonal to each other C) intersect D) are parallel to each other E) equal zero
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C
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68) E&OE is trying to minimize its inventory costs, which are extremely high. The company has realized that it can achieve this by maintaining a near-zero inventory and producing more only once a product is ordered. Which of the following is true for E&OE? A) Inventory costs are lower than order-processing costs. B) Running costs are higher than inventory-carrying costs. C) Setup costs for the products are low. D) Order-processing costs are high. E) Order-processing costs are lower than setup costs.
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C
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69) E&OE is trying to minimize its inventory costs, which are extremely high. The company has realized that it can achieve this by maintaining a near-zero inventory and producing only once a product is ordered. Which of the following will be true for E&OE? A) Short production runs will be more expensive than longer ones. B) Setup and order-processing costs will be high. C) The order point will be high. D) Order-processing costs will be lower than the inventory-carrying costs. E) E&OE can reduce the average cost per unit by producing a long run.
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D
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70) Beyond the optimal order quantity, total cost per unit increases because ________. A) inventory-carrying cost per unit increases B) inventory-carrying cost per unit decreases C) order-processing cost per unit increases D) order-processing cost per unit increases though inventory cost decreases E) inventory-processing cost per unit falls slowly
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A
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71) Companies are reducing their inventory costs by treating inventory items differently, positioning them according to risk and opportunity. High-risk, low-opportunity items are known as ________. A) nuisance items B) bottleneck items C) variable items D) critical items E) commodities
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B
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72) HCN recently introduced a product that the distributor considers a "bottleneck" item. What is the risk/opportunity relationship for bottleneck items? A) low risk, mediocre opportunity B) low risk, high opportunity C) low risk, low opportunity D) high risk, mediocre opportunity E) high risk, low opportunity
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E
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73) An item described as low-risk and low-opportunity is a ________. A) nuisance item B) bottleneck item C) variable item D) critical item E) commodity
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A
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74) ________ consists of putting goods in boxes or trailers that are easy to transfer between two transportation modes. A) Containerization B) Haulage C) Inventory carrying D) Order processing E) Warehousing
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A
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75) Which of the following is an example of a private carrier? A) MET is a transporter that operates only in the Chicago area and charges fixed prices. B) BCL is a family firm that owns only three trucks, but takes small orders for transport. C) VTV owns a fleet of trucks and transports goods for any client for a fee. D) COM is a shipping firm that transports goods by road and rail across the U.S. E) BEL Inc. manufactures parts for automobiles and transports its products to customers itself.
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E
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76) The trucking firm hired by your transportation manager provides a trucking service between the city of Sacramento and the surrounding towns on a regular schedule and at fixed prices. The trucking firm saves transportation costs by transporting the goods using trains as well as trucks, instead of trucks alone. Your transportation manager has hired a(n) ________. A) airship carrier B) airtruck carrier C) trainship carrier D) fishyback carrier E) piggyback carrier
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E
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77) If the shipper owns its own truck or air fleet, it becomes a ________. A) containerized carrier B) private carrier C) contract carrier D) common carrier E) diversified carrier
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B
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78) Retailing includes all the activities involved in selling goods or services directly to final consumers.
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true
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79) Full-service retailers generally have the lowest costs of all retail types
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false
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80) Discount stores usually stock leftover goods, overruns, and irregular merchandise, sold at less than retail.
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false
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81) The network marketing sales system works by recruiting independent businesspeople who act as distributors.
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true
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82) Electronic shopping is a form of direct marketing.
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true
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83) A superstore is a storeless retailer serving a specific clientele who are entitled to buy from a list of retailers that have agreed to give discounts in return for membership.
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false
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84) A retailer cooperative is a retail firm that is owned by its customers.
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false
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85) A franchise organization is a corporate retail organization.
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true
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86) The franchisor owns a trade or service mark and licenses it to franchisees in return for royalty payments.
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true
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87) "Pop-up" stores let retailers promote brands to seasonal shoppers for a limited time.
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true
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88) Department stores only face competition from other department stores as other retailing forms are not a threat to their sales and profitability.
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false
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89) Consumers now receive sales offers through direct-mail letters and catalogs, television, cell phones, and the Internet. The nonstore-based retailers are taking business away from store-based retailers.
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true
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90) Supercenters retail grocery items as well as a huge selection of nonfood merchandise.
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true
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91) Growth in the retail market is centered firmly in the middle market, leaving luxury retailers and discounting specialists struggling.
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false
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92) As discount retailers improve their quality and image, consumers have been willing to trade down.
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true
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93) Electronic shelf labeling allows retailers to check inventory levels instantaneously.
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false
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94) Firms are increasingly recognizing the importance of influencing consumers at the point of purchase.
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true
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95) Retailers can target their customers more effectively by using only a single channel to reach them.
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false
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96) Featuring exclusive national brands that are not available at competing retailers is a way of generating consumer interest in a retailer.
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true
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97) In order to clearly differentiate themselves from competitors, retailers must keep merchandise and prices always consistent.
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false
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98) The gross margin on a product bears a direct relation to the direct product profit.
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false
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99) Some high-volume products may have such high handling costs that they are less profitable and deserve less shelf space than low-volume products.
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true
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100) Mass merchandisers are usually high-markup, lower-volume stores.
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false
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101) Low prices on some items serve as traffic builders or loss leaders for retailers.
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true
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102) EDLP can lead to lower advertising costs and higher retail profits.
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true
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103) Accepting telephone and mail orders is an example of the ancillary services that a retailer offers.
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false
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104) Postpurchase services include shipping and delivery, gift wrapping, adjustments and returns.
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true
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105) Private label or store brands are also known as generics.
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false
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106) The lower price of generics is made possible by lower-cost labeling and packaging and minimal advertising, and sometimes lower-quality ingredients.
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true
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107) Wholesaling includes all the activities in selling goods or services to those who buy for resale or business use.
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true
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108) Wholesalers exclude manufacturers and farmers because they are engaged primarily in production, but include retailers, as they are selling to the end consumer.
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false
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109) Merchant wholesalers are independently owned businesses that take title to the merchandise they handle
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true
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110) Most companies today are trying to increase the order-to-payment cycle.
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false
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111) More stocking locations mean goods can be delivered to customers more quickly, and warehousing and inventory costs are lower.
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false
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112) Inventory cost increases at an accelerating rate as the customer-service level approaches 100 percent.
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true
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113) If setup costs are high, the manufacturer can produce the item often, and the average cost per item is stable and equal to the running costs.
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false
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114) Order-processing costs must be compared with inventory-carrying costs because the larger the average stock carried, the higher the inventory-carrying costs.
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true
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115) As inventory draws down, management must know at what stock level to place a new order. This stock level is called the order point.
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true
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116) The order-processing cost per unit increases with the number of units ordered because the order costs are spread over more units.
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false
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117) Companies who want to carry near-zero inventory should build for order, not for stock.
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true
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118) List and explain the four service levels offered by retailers.
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Answer: Retailers meet widely different consumer preferences for service levels and specific services. The four levels of service usually offered by retailers are: (1) self-service, (2) self-selection, (3) limited service, and (4) full service. Self-service: Self-service is the cornerstone of all discount operations. Many customers are willing to carry out their own "locate-compare-select" process to save money. Self-selection: Customers find their own goods, although they can ask for assistance. Limited service: These retailers carry more shopping goods and services such as credit and merchandise-return privileges. Customers need more information and assistance. Full-service: Salespeople are ready to assist in every phase of the "locate-compare-select" process. Customers who like to be waited on prefer this type of store. The high staffing cost, along with the higher proportion of specialty goods and slower-moving items and the many services, result in high-cost retailing.
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119) List the four categories of non-store retailing and briefly explain each.
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Answer: Although the overwhelming bulk of goods and services are sold through stores, nonstore retailing has been growing much faster than store retailing. Nonstore retailing falls into four major categories: Direct selling, also called multilevel selling and network marketing, is a multibillion-dollar industry, with hundreds of companies selling door-to-door or at home sales parties. A salesperson goes to the home of a host who has invited friends; the salesperson demonstrates the products and takes orders. Pioneered by Amway, the multilevel (network) marketing sales system works by recruiting independent businesspeople who act as distributors. The distributor's compensation includes a percentage of sales made by those he or she recruits, as well as earnings on direct sales to customers. These direct-selling firms, now finding fewer consumers at home, are developing multidistribution strategies. Direct marketing has roots in direct-mail and catalog marketing. It includes telemarketing, television direct-response marketing, and electronic shopping. As people become more accustomed to shopping on the Internet, they are ordering a greater variety of goods and services from a wider range of web sites. Automatic vending offers a variety of merchandise, including impulse goods such as soft drinks, coffee, candy, newspapers, magazines, and other products such as hosiery, cosmetics, hot food, and paperbacks. Vending machines are found in factories, offices, large retail stores, gasoline stations, hotels, restaurants, and many other places. They offer 24-hour selling, self-service, and merchandise that is stocked to be fresh. Buying service is a storeless retailer serving a specific clientele, usually employees of large organizations, who are entitled to buy from a list of retailers that have agreed to give discounts in return for membership.
question
120) In what ways does franchising benefit the franchisor? In what ways does it benefit the franchisee?
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Answer: Franchising benefits both the franchisor and the franchisee. Franchisors gain the motivation and hard work of employees who are entrepreneurs rather than "hired hands," the franchisees' familiarity with local communities and conditions, and the enormous purchasing power of being a franchisor. Franchisees benefit from buying into a business with a well-known and accepted brand name. They find it easier to borrow money for their business from financial institutions, and they receive support in areas ranging from marketing and advertising to site selection and staffing.
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121) List some recent trends in retailing.
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Answer: The recent trends in retail include the following: New retail forms and combinations Growth of intertype competition Competition between store-based and nonstore-based retailing Growth of giant retailers Decline of middle-market retailers Growing investment in technology Global profile of major retailers Growth of shopper marketing
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122) List some differentiation strategies retailers can use to compete successfully in the market.
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Answer: To better differentiate themselves and generate consumer interest, retailers can use the following strategies: (1) Feature exclusive national brands that are not available at competing retailers; (2) feature mostly private-label merchandise; (3) feature blockbuster distinctive merchandise events; (4) feature surprise or ever-changing merchandise; (5) feature the latest or newest merchandise first; (6) offer merchandise-customizing services; and (7) offer a highly targeted assortment.
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123) The growth of "house brands" has skyrocketed in recent years. What benefits do intermediaries receive from sponsoring their own brands?
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Answer: A private label brand (also called a reseller, store, house, or distributor brand) is a brand that retailers and wholesalers develop. These brands can be more profitable. Intermediaries search for manufacturers with excess capacity that will produce private label goods at low cost. Other costs, such as research and development, advertising, sales promotion, and physical distribution, are also much lower, so private labels can generate a higher profit margin. Retailers also develop exclusive store brands to differentiate themselves from competitors. Many price-sensitive consumers prefer store brands in certain categories. These preferences give retailers increased bargaining power with marketers of national brands.
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124) List the major types of limited-service wholesalers and explain how each type functions.
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Answer: Cash and carry wholesalers sell a limited line of fast-moving goods to small retailers for cash. Truck wholesalers sell and deliver a limited line of semiperishable goods to supermarkets, grocery stores, hospitals, restaurants, and hotels. Drop shippers serve bulk industries such as coal, lumber, and heavy equipment. They assume title and risk from the time an order is accepted to its delivery. Rack jobbers serve grocery retailers in nonfood items. Delivery people set up displays, price goods, and keep inventory records; they retain title to goods and bill retailers only for goods sold to the end of the year. Producers' cooperatives assemble farm produce to sell in local markets. Mail-order wholesalers send catalogs to retail, industrial, and institutional customers; orders are filled and sent by mail, rail, plane, or truck.
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125) Why do retailers prefer to deal with wholesalers rather than directly with manufacturers?
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Answer: In general, retailers prefer to deal with wholesalers rather than directly with manufacturers (and vice versa) as wholesalers are better at performing the following functions: Selling and promoting: Wholesalers' sales forces help manufacturers reach many small business customers at a relatively low cost. They have more contacts, and buyers often trust them more than they trust a distant manufacturer. Buying and assortment building: Wholesalers are able to select items and build the assortments their customers need, saving them considerable work. Bulk breaking: Wholesalers achieve savings for their customers by buying large carload lots and breaking the bulk into smaller units. Warehousing: Wholesalers hold inventories, thereby reducing inventory costs and risks to suppliers and customers. Transportation: Wholesalers can often provide quicker delivery to buyers because they are closer to the buyers. Financing: Wholesalers finance customers by granting credit, and finance suppliers by ordering early and paying bills on time. Risk bearing: Wholesalers absorb some risk by taking title and bearing the cost of theft, damage, spoilage, and obsolescence. Market information: Wholesalers supply information to suppliers and customers regarding competitors' activities, new products, price developments, and so on. Management services and counseling: Wholesalers often help retailers improve their operations by training sales clerks, helping with store layouts and displays, and setting up accounting and inventory-control systems. They may help industrial customers by offering training and technical services.
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126) Describe the four steps in market logistics planning.
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Answer: Market logistics includes planning the infrastructure to meet demand, then implementing and controlling the physical flows of materials and final goods from points of origin to points of use, to meet customer requirements at a profit. Market logistics planning has four steps: Deciding on the company's value proposition to its customers. (What on-time delivery standard should we offer? What levels should we attain in ordering and billing accuracy?). Selecting the best channel design and network strategy for reaching the customers. (Should the company serve customers directly or through intermediaries? What products should we source from which manufacturing facilities? How many warehouses should we maintain and where should we locate them?). Developing operational excellence in sales forecasting, warehouse management, transportation management, and materials management. Implementing the solution with the best information systems, equipment, policies, and procedures.
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127) Differentiate between brokers and agents.
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Answer: Brokers and agents both perform wholesaling functions. They facilitate buying and selling, on commission of 2 percent to 6 percent of the selling price and generally specialize by product line or customer type. Brokers bring buyers and sellers together and assist in negotiation; they are paid by the party hiring them—food brokers, real estate brokers, insurance brokers. Agents represent buyers or sellers on a more permanent basis. Most manufacturers' agents are small businesses with a few skilled salespeople: Selling agents have contractual authority to sell a manufacturer's entire output; purchasing agents make purchases for buyers and often receive, inspect, warehouse, and ship merchandise; commission merchants take physical possession of products and negotiate sales.
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128) Sandy's Stores is a small chain of grocery stores located in a few neighboring towns. The stores have always been largely self-service, but the company is considering making a switch to full-service stores. Offer reasons why Sandy's should stick with its current system.
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Answer: Student answers may vary. As Sandy's is primarily a grocery chain, it is unlikely that customers will need much help in locating products. The high staffing cost of full-service retailing will only increase operational costs for Sandy's, without conferring any benefit
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129) Sandy's Stores is a small chain of grocery stores located in a few neighboring towns. The stores have always been largely self-service, but the company is considering making a switch to full-service stores. What can Sandy's do to justify this move?
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Answer: Student answers may vary. To justify the increased staff costs of full-service retailing, Sandy's can add higher-value products to its line-up. The company can begin carrying a higher proportion of specialty goods.
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130) Sandy's Stores is a small chain of grocery stores located in a few neighboring towns. The stores have always been largely self-service, but the company is considering making a switch to full-service stores. Offer one possible reason why this move is justified.
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Answer: Student answers may vary. Full-service retailing is preferred by customers who like to be waited upon. If most of Sandy's customers show a preference for being waited upon, this can justify the costs of full-service retailing. If Sandy's has a number of products or services for which customers need information or guidance, or stocks high-value or specialized product, full-service retailing will be justified.
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131) Skincare company E&OE has realized that its customers are very loyal to the brand and play a large part in popularizing it by word of mouth. E&OE wants to leverage this customer loyalty by using it to generate sales outside its store format. How can E&OE achieve this?
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Answer: Student answers may vary. E&OE can opt for the direct selling method, using multilevel or network marketing. A salesperson can go to the home of a loyal customer who has invited friends; the salesperson demonstrates the products and takes orders. The company can also recruit independent customers who act as distributors. The distributor's compensation includes a percentage of sales made by those he or she recruits, as well as earnings on direct sales to customers.
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132) Mal's father and grandfather ran Reynold's, a general store in the town of Bayswater. When Mal inherited the store, the town was expanding rapidly and a number of multinational franchisors showed interest in entering the town. Mal wants to turn Reynold's into a franchise of Blue Sun, a fast-food chain. What benefits can Mal gain from this move?
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Answer: Student answers may vary. As the franchisor's brand is usually well-known, Mal obtains the benefit of a brand name that has already been accepted by customers. He could find it easier to get loans and financial help from banks on the basis of the well-known brand name. As the franchisor will provide everything from operational processes to marketing assistance, Mal need not spend time and effort beginning the process from scratch.
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133) Mal's father and grandfather ran Reynold's, a general store in the town of Bayswater. When Mal inherited the store, the town was expanding rapidly and a number of multinational franchisors showed interest in entering the town. Mal wants to turn Reynold's into a franchise of Blue Sun, a fast-food chain. Why shouldn't Mal go the franchise route?
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Answer: Student answers may vary. Most franchises offer franchisees limits or negligible independence in the questions of staffing, pricing, store decor, sourcing and processes. Mal may have to make changes that he does not agree with. He may not have the freedom to run the business as he thinks best.
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134) Skincare company E&OE retails its products through standalone stores or through its own stores within malls. The management uses this method so that customers are sure of finding only E&OE products at the stores and the brand image remains strong. In this scenario, what can E&OE do to generate consumer interest while retaining its exclusivity?
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Answer: Student answers may vary. E&OE can do any or all of the following: Feature blockbuster distinctive merchandise events. Feature surprise or ever-changing merchandise. Feature the latest or newest merchandise first. Offer merchandise-customizing services. Offer a highly targeted assortment.
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135) Over the past three years, skincare products retailer E&OE has realized that it is losing sales to competitors who sell products online. E&OE has always cultivated an exclusive upscale image, and the management feels that shifting to the online route will only harm the brand image and sales in the long run. How can E&OE encourage customers to frequent its stores?
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Answer: Student answers may vary. E&OE can offer more in-store services for its customers. It can offer information about the products, consultation and advice about the kinds of products to choose and allow customers to test or experience the products themselves. The retailer can also revamp the store atmosphere to be more inviting to customers, using music and fragrances and store design to create a pleasurable experience. E&OE can also increase the number of activities and experiences that customers can participate in.
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136) Imagine that you are in charge of creating a distinctive store atmosphere at a clothing retailer. What can you do to make your store stand out in the customer experience?
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Answer: Student answers may vary. Answers can include the use of fragrances, music, store design and layout, and activities.
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137) Give one example of a retailer that uses stand-alone stores as opposed to stores located in malls. Why do you think retailers opt for this channel?
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Answer: Student answers may vary. Retailers may opt for standalone stores so that they are not associated with other retailers. It can avoid competition from conflicting attractions in a mall. Customers will be less motivated to check other options available at other retailers. Stand-alone stores may give a retailer an upscale image and prevent dilution of the brand identity.
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138) Supermarket chain Reynold's is considering making a switch to stocking almost exclusively private-label products in order to offer customers the lowest prices. Offer reasons why Reynold's should think twice before opting to stock exclusively private-label products.
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Answer: Student answers may vary. Reynold's should think twice about opting for private-label products because consumers prefer certain national brands, and many product categories are not feasible or attractive on a private-label basis.
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139) Supermarket chain Reynold's is considering stocking a number of private-label products in order to offer customers the lowest possible prices. Explain how this strategy could benefit the company.
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Answer: Student answers may vary. Private brands can be more profitable for Reynold's if it searches for manufacturers with excess capacity that will produce private label goods at low cost. Other costs, such as research and development, advertising, sales promotion, and physical distribution, are also much lower, so private labels can generate a higher profit margin. Exclusive store brands can also help Reynold's differentiate itself from competitors. Many price-sensitive consumers prefer store brands in certain categories. These preferences could give Reynold's increased bargaining power with marketers of national brands.
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140) JGB manufactures the K-Nine brand of dog food that is carried in supermarkets across the country. The company has always used wholesalers instead of selling directly to the retailers. However, recently, the sales team at JGB has noticed that wholesalers don't aggressively promote JGB's product line. They often don't carry enough inventory and therefore don't fill customers' orders fast enough. However, the marketing team insists that the wholesaling route is the best. What reasons can the marketing team offer to justify this?
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Answer: Student answers may vary. Wholesalers' sales forces help JGB reach many small business customers at a relatively low cost. They have more contacts, and the buyers often trust them more than they trust JGB. Wholesalers can often provide quicker delivery to buyers because they are closer to the buyers. Wholesalers absorb some risk by taking title and bearing the cost of theft, damage, spoilage, and obsolescence. Wholesalers supply information regarding competitors' activities, new products, price developments, and so on.
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141) Reynold's, a supermarket chain, carries the K-Nine range of dog food manufactured by JGB. However, the chain does not interact directly with JGB, but obtains stocks from wholesalers. It has been suggested that Reynold's save costs by sourcing products directly from JGB. However, Mal, the CEO of the Reynold's, insists that wholesalers are the most hassle-free option for Reynold's. What can Mal say to justify this?
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Answer: Student answers may vary. Mal can justify this using any or all of the following reasons: Wholesalers are able to select items and build the assortments Reynold's needs, saving Reynold's considerable work. Wholesalers achieve savings for Reynold's by buying large carload lots and breaking the bulk into smaller units. Wholesalers hold inventories, thereby reducing inventory costs and risks for Reynold's, who needn't hold the inventory for itself. Wholesalers finance Reynold's by granting credit. Wholesalers supply information regarding competitors' activities, new products, price developments, and so on.
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142) How would merchant wholesaler HCN operate?
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Answer: Merchant wholesalers are independently owned businesses that take title to the merchandise they handle. They are full-service and limited-service jobbers, distributors, and mill supply houses.
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143) Jayne runs a small grocery store in a small town. As there are only few customers, the store does not require to stock goods in large quantities. Explain why sourcing products from a wholesaler will be beneficial for Jayne.
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Answer: Student answers may vary. Wholesalers are able to select items and build the assortments Jayne needs, saving considerable work. Wholesalers achieve savings for Jayne by buying large carload lots and breaking the bulk into smaller units. Thus, Jayne can benefit from lower bulk prices while buying only as much as the store can sell. Wholesalers also hold inventories, thereby reducing inventory costs and risks for Jayne.
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144) HCN is a wholesaler that supplies consumer goods products to a number of retailers. HCN has witnessed the worrying trend of its competitors losing out on suppliers, who approach retailers directly. How can HCN strengthen its relationship with manufacturers and prevent this?
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Answer: Student answers may vary. HCN can work to reach a clear agreement with their manufacturers about their expected functions in the marketing channel. It can gain insight into the manufacturers' requirements by visiting their plants and attending manufacturer association conventions and trade shows. HCN must also fulfill its commitments to the manufacturer by meeting the volume targets, paying bills promptly, and feeding back customer information to the manufacturers. It can also identify and offer value-added services, such as financing, on-site inventory management, parts-tracking software, and chip programming, to help its suppliers.
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145) ShoeZone is a shoe retailer with outlets across the country. The company is trying to reduce its inventory and warehousing costs, but needs to keep delivery speeds as short as possible. What can ShoeZone do to achieve this?
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Answer: More stocking locations mean goods can be delivered to customers more quickly, but warehousing and inventory costs are higher. To reduce these costs, ShoeZone might centralize its inventory in one place and use fast transportation to fill orders.
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146) E&OE is looking to reduce its inventory costs for all its products. The company realizes that its inventory depends on the setup costs of its various products. How do setup costs affect E&OE's inventory costs?
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Answer: As inventory draws down, management must know at what stock level to place a new order. The company needs to balance order-processing costs and inventory-carrying costs. Order-processing costs for E&OE consist of setup costs and running costs (operating costs when production is running) for the item. If setup costs are low, E&OE can produce the item often, and the average cost per item is stable and equal to the running costs. If setup costs are high, E&OE can reduce the average cost per unit by producing a long run and carrying more inventory. The larger the average stock carried, the higher the inventory-carrying costs.
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147) E&OE wants to minimize inventory costs as far as possible. Explain one way by which it can achieve a near-zero inventory.
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Answer: Student answers may vary. Manufacturers can achieve a near-zero inventory by building for order, not for stock, i.e., manufacturing a product only when it receives an order. However, this system will work only when the customers do not need a product immediately.
