Download Retail Management: A Strategic Approach, 11e

Chapter 3
1) An overall framework of action that guides a retailer is its ________.
A) mission statement
B) corporate philosophy
C) retail tactics
D) retail strategy
Answer: D
Diff: 1
Page Ref: 58
Skill: Terminology/Concept
2) A major advantage of a firm's developing a retail plan is that it ________.
A) focuses on short-run tactics
B) anticipates and may avoid a crisis
C) balances sales forecasts with inventory requirements
D) shows likely competitor reactions
Answer: B
Diff: 2
Page Ref: 58
Skill: Terminology/Concept
3) Each of the steps in a retail strategy is ________.
A) interdependent with other steps
B) independent of each other
C) organized on the basis of strategy and tactics
D) organized by company, geographic region, and store units
Answer: A
Diff: 1
Page Ref: 58
Skill: Terminology/Concept
4) The candid evaluation of the opportunities and potential problems facing a prospective or
existing retailer is referred to as ________.
A) situation analysis
B) implementation and analysis
C) philosophy of business
D) strategy determination
Answer: A
Diff: 1
Page Ref: 58
Skill: Terminology/Concept
1
5) A retailer's commitment to a type of business and to a distinctive role in the marketplace is its
________.
A) overall retail strategy
B) organizational mission
C) long-term plan
D) competitive advantage
Answer: B
Diff: 1
Page Ref: 59
Skill: Terminology/Concept
6) Which ownership and management alternative is fully controlled by the owner, operationally
flexible, and subject to single taxation by the government?
A) franchising
B) sole proprietorship
C) corporation
D) partnership
Answer: B
Diff: 1
Page Ref: 61
Skill: Terminology/Concept
7) In which ownership and management alternative is the owner personally liable with regard to
legal claims from suppliers, creditors, and others?
A) franchising
B) sole proprietorship
C) corporation
D) partnership
Answer: B
Diff: 1
Page Ref: 61
Skill: Terminology/Concept
8) Benefits, profits, risks, and costs are shared in which retail ownership and management
alternative?
A) franchising
B) sole proprietorship
C) corporation
D) partnership
Answer: D
Diff: 2
Page Ref: 61
Skill: Terminology/Concept
2
9) Which statement concerning the partnership form of ownership is not correct?
A) Partnerships are subject to double taxation.
B) Partnerships are simpler to form than a corporation.
C) A partnership binds all partners to actions made by any individual partner acting on behalf of
the company.
D) Responsibility and expertise may be divided among partners.
Answer: A
Diff: 2
Page Ref: 61
Skill: Terminology/Concept
10) Which form of ownership is a legal entity apart from its individual officers or stockholders?
A) independent ownership
B) sole proprietorship
C) corporation
D) partnership
Answer: C
Diff: 1
Page Ref: 61
Skill: Terminology/Concept
11) Which retail ownership form has the greatest capacity for long-term existence?
A) sole proprietorship
B) partnership
C) corporation
D) franchise
Answer: C
Diff: 2
Page Ref: 61
Skill: Terminology/Concept
12) Ownership may be separated from management in which retail ownership form?
A) sole proprietorship
B) partnership
C) government stores
D) corporation
Answer: D
Diff: 2
Page Ref: 61
Skill: Terminology/Concept
13) A major advantage of buying an established business versus starting a new business is
________.
A) flexibility in location
B) the generation of ongoing sales and profits
C) beginning with an unknown name and image
D) having to establish supplier relationships
Answer: B
Diff: 2
Page Ref: 62
Skill: Terminology/Concept
3
14) A major disadvantage of buying an established business versus starting a new business is
________.
A) less flexibility in enacting a strategy tailored to the new owner
B) having a time lag until the business is ready to open
C) developing an inventory of goods
D) the existence of financing from the seller
Answer: A
Diff: 2
Page Ref: 62
Skill: Terminology/Concept
15) A retail ownership form which combines independent ownership and managerial assistance
is ________.
A) a corporation
B) a partnership
C) franchising
D) a sole proprietorship
Answer: C
Diff: 1
Page Ref: 62
Skill: Terminology/Concept
16) Rigid operations' standards and a limitation on the product lines sold characterize ________.
A) the owner-manager system
B) partnerships
C) franchising
D) chain ownership
Answer: C
Diff: 1
Page Ref: 62
Skill: Terminology/Concept
17) In which management format does planning tend to be more formal and systematic?
A) centralized structure
B) corporate
C) professional manager system
D) owner-manager system
Answer: C
Diff: 1
Page Ref: 63
Skill: Terminology/Concept
18) Planning authority is limited to top management or ownership in a(n) ________.
A) professional manager system
B) owner-manager system
C) centralized system
D) decentralized system
Answer: C
Diff: 1
Page Ref: 63
Skill: Terminology/Concept
4
19) Managers in individual departments have major input into decision making in a(n)
________.
A) centralized structure
B) decentralized structure
C) franchise system
D) owner-manager system
Answer: B
Diff: 2
Page Ref: 63
Skill: Terminology/Concept
20) In planning his or her family's financial needs during the unprofitable stage of a newly
started business, a retailer should utilize ________.
A) a home-equity mortgage loan
B) a personal drawing account
C) withdrawal of monies from personal savings' accounts
D) loans made with life insurance policies as collateral
Answer: B
Diff: 1
Page Ref: 65
Skill: Terminology/Concept
21) Sales objectives are generally in the form of ________.
A) return on investment, efficiency, and level
B) satisfaction of stockholders and customers
C) maintenance of status quo
D) growth, stability, and/or market share
Answer: D
Diff: 1
Page Ref: 67
Skill: Terminology/Concept
22) Market share sales' objectives are generally ________.
A) pursued by only larger retailers or retail chains
B) pursued by small, local independent retail businesses
C) based on existing store sales, not new store sales
D) used to determine store awareness
Answer: A
Diff: 1
Page Ref: 67
Skill: Terminology/Concept
23) Return on investment objectives are generally used by retailers that ________.
A) have large capital expenditures
B) are vertically integrated
C) are labor intensive
D) have high efficiency
Answer: A
Diff: 2
Page Ref: 67
Skill: Terminology/Concept
5
24) A retailer with sales of $10 million and operating expenses of $2 million has an efficiency
rating of ________.
A) 25 percent
B) 40 percent
C) 80 percent
D) 400 percent
Answer: C
Diff: 1
Page Ref: 67-68
Skill: Terminology/Concept
25) Objectives that seek to satisfy stockholders, customers, suppliers, employees, and
government are called ________.
A) social marketing
B) satisfaction of publics' objectives
C) macromarketing
D) consumerism-based
Answer: B
Diff: 1
Page Ref: 68
Skill: Terminology/Concept
26) A retailer can determine how consumers and others perceive its company through use of
________.
A) control analysis
B) situation analysis
C) target market assessment
D) positioning
Answer: D
Diff: 2
Page Ref: 68
Skill: Terminology/Concept
27) The growth of specialty stores and boutiques illustrates the popularity of ________.
A) bifurcated retailing
B) niche retailing
C) mass merchandising
D) dual channels of distribution
Answer: B
Diff: 2
Page Ref: 6
Skill: Terminology/Concept
28) A firm's target market best represents the ________.
A) consumer group sought by a retailer
B) image that a retailer desires to project
C) product quality that a retailer sells
D) number of retail stores a retailer has in any one area
Answer: A
Diff: 1
Page Ref: 61
Skill: Terminology/Concept
6
29) A retailer sells its goods and services to a broad spectrum of consumers in ________.
A) market segmentation
B) mass marketing
C) target marketing
D) multiple segmentation
Answer: B
Diff: 1
Page Ref: 71
Skill: Terminology/Concept
30) A retailer aims efforts at two or more distinct consumer groups, with different retailing
approaches for each group, in ________.
A) market segmentation
B) concentrated marketing
C) mass marketing
D) differentiated marketing
Answer: D
Diff: 1
Page Ref: 71
Skill: Terminology/Concept
31) The distinct competencies of a retailer relative to competitors is referred to as its ________.
A) competitive advantages
B) cost advantages
C) economies of scale
D) focused strategy
Answer: A
Diff: 1
Page Ref: 71
Skill: Terminology/Concept
32) Those aspects of business that a retailer can directly affect (such as store hours and location)
are referred to as ________.
A) controllable variables
B) uncontrollable variables
C) strategy
D) tactics
Answer: A
Diff: 1
Page Ref: 73
Skill: Terminology/Concept
33) Which of the following is not a controllable variable?
A) store location
B) pricing
C) merchandise management
D) technology
Answer: D
Diff: 1
Page Ref: 73
Skill: Terminology/Concept
7
34) Decision making relating to a retailer's daily and short-term operations involve ________.
A) tactics
B) target market determination
C) competitive advantage determination
D) strategies
Answer: A
Diff: 1
Page Ref: 77
Skill: Terminology/Concept
35) Sales revenues and employee turnover represent forms of ________.
A) retail audits
B) tactics
C) feedback
D) adaptation
Answer: C
Diff: 2
Page Ref: 78
Skill: Terminology/Concept
36) A discount camera retailer specializes in Web-based sales of popular models of major brands
of digital cameras. The retailer seeks to beat prices by traditional camera dealers. This illustrates
the retailer's ________.
A) competitive advantage
B) organizational mission
C) satisfaction of publics
D) store positioning
Answer: B
Diff: 2
Page Ref: 59
Skill: Applied/Comprehensive/Integrative
37) An off-price retailer stocks first-quality, in-season, name-brand apparel, accessories, and
footwear for the entire family with savings at 20 percent to 60 percent from regular department
and specialty store prices. This constitutes its ________.
A) goods/service category
B) organizational mission
C) target market
D) competitive advantage
Answer: B
Diff: 2
Page Ref: 59
Skill: Applied/Comprehensive/Integrative
8
38) Which retail ownership and management alternative is most likely to have limited capital and
expertise?
A) open corporation
B) closed corporation
C) sole proprietorship
D) partnership
Answer: C
Diff: 1
Page Ref: 61
Skill: Applied/Comprehensive/Integrative
39) Which characteristic is shared by both sole proprietorships and partnerships?
A) depersonalization
B) management succession
C) single taxation
D) complexity and costs in setting up
Answer: B
Diff: 2
Page Ref: 61
Skill: Applied/Comprehensive/Integrative
40) An advantage of starting a new business (versus buying an existing business or becoming a
franchisee) is the ________.
A) established customer following
B) management assistance and training
C) time lag before opening
D) nonpayment for goodwill
Answer: D
Diff: 2
Page Ref: 62
Skill: Applied/Comprehensive/Integrative
41) An advantage of buying an existing business versus starting a new business is ________.
A) no cost for goodwill
B) no time lag before opening
C) favorable lease terms
D) flexibility in developing and changing a retail strategy
Answer: B
Diff: 1
Page Ref: 52
Skill: Applied/Comprehensive/Integrative
42) The most important limitation to consider in purchasing an existing business is ________.
A) a $40,000 payment for goodwill for a successful retail store that was established 10 years ago
B) a storefront that was renovated 10 years ago
C) the reason why the existing retailer is seeking to sell the business
D) a short-term lease on rented property
Answer: D
Diff: 2
Page Ref: 62
Skill: Applied/Comprehensive/Integrative
9
43) A retailer seeking to purchase an existing retail business needs to verify the seller's statement
of income. The prospective buyer should ________.
A) ask the seller for audited income tax statements on the business
B) accept the seller's "word"
C) sample sales during a representative two-week time period
D) judge sales on the basis of average industry benchmarks for usage, price, and additional
services purchased
Answer: A
Diff: 2
Page Ref: 62
Skill: Applied/Comprehensive/Integrative
44) A uniform image is important for chain units and ________.
A) corporate-owned units
B) independently owned units
C) franchises
D) partnership-owned units
Answer: C
Diff: 2
Page Ref: 62
Skill: Applied/Comprehensive/Integrative
45) A major advantage of franchising from the perspective of the franchisor is ________.
A) franchisor management assistance and troubleshooting
B) lower operating costs due to shared purchases and advertising
C) rigid operations standards may limit franchisees from taking advantage of trends
D) the ability to develop a nationwide distribution system with minimum capital investment
Answer: D
Diff: 2
Page Ref: 62
Skill: Applied/Comprehensive/Integrative
46) Which management alternative is a sole proprietorship most likely to use?
A) professional manager system
B) centralized structure
C) decentralized structure
D) owner-manager system
Answer: D
Diff: 1
Page Ref: 63
Skill: Applied/Comprehensive/Integrative
10
47) Which management format best assures a low-cost provider retail strategy on the basis of
quantity discounts, buyer negotiating ability, and the ability to easily switch merchandise among
store units?
A) centralized structure
B) decentralized structure
C) professional manager system
D) owner-manager system
Answer: A
Diff: 2
Page Ref: 63
Skill: Applied/Comprehensive/Integrative
48) Which management format best assures that individual retail store units have an overall retail
strategy (store hours, merchandise selection, and price levels) that are most acceptable to
community residents?
A) centralized structure
B) decentralized structure
C) professional manager system
D) owner-manager system
Answer: B
Diff: 2
Page Ref: 63
Skill: Applied/Comprehensive/Integrative
49) Intensive owner participation in a business is most likely to occur when ________.
A) a firm has strong financial controls
B) store hours are long
C) a business cannot be easily automated or mechanized
D) a retailer is well capitalized
Answer: C
Diff: 2
Page Ref: 65
Skill: Applied/Comprehensive/Integrative
50) Profitability objectives are most likely to be used when a retailer ________.
A) has a strong regional market presence
B) has high debt service
C) is privately held
D) is publicly held
Answer: B
Diff: 2
Page Ref: 67
Skill: Applied/Comprehensive/Integrative
11
51) A retailer attempting to improve its efficiency from 40 to 50 percent reduced its operating
expense budget from $600,000 to $500,000. However, its new efficiency remained at 40 percent.
What happened?
A) Sales decreased from $1,000,000 to $800,000.
B) Sales decreased from $1,000,000 to $833,333.
C) Sales decreased from $1,000,000 to $900,000.
D) Sales increased from $1,000,000 to $1,200,000.
Answer: B
Diff: 2
Page Ref: 67-68
Skill: Applied/Comprehensive/Integrative
52) A retailer with sales of $1 million wants to increase its efficiency rating from 40 percent to
60 percent. To what must it reduce operating expenses?
A) $200,000
B) $400,000
C) $500,000
D) $600,000
Answer: B
Diff: 2
Page Ref: 67-68
Skill: Applied/Comprehensive/Integrative
53) A retailer has a sales efficiency rating of 20 percent. This means that ________.
A) 20 percent of every sales dollar is comprised of operating costs
B) 20 percent of every sales dollar contributes to nonoperating costs and profits
C) 80 percent of every sales dollar contributes to nonoperating costs and profits
D) its operating expense ratio has improved by 20 percent over the previous year
Answer: B
Diff: 2
Page Ref: 67-68
Skill: Applied/Comprehensive/Integrative
54) Which objective is the most difficult to quantify?
A) sales
B) profit
C) satisfaction of publics
D) market share
Answer: C
Diff: 2
Page Ref: 68
Skill: Applied/Comprehensive/Integrative
12
55) The satisfaction-of-publics objective is most important for a retailer that is ________.
A) organized and managed as a sole proprietorship
B) organized and managed as a partnership
C) socially conscious
D) foreign-owned
Answer: C
Diff: 2
Page Ref: 68
Skill: Applied/Comprehensive/Integrative
56) A major retailer studied the image of two of its units, a discount specialty store chain and an
upscale specialty store chain, using a store positioning map technique. Each chain's images were
clustered in separate quadrants. Which statement best explains this phenomenon?
A) Each chain has a distinct image.
B) Both chains appeal to the mass market.
C) Both chains appeal to the same target market.
D) Both chains are perceived as being upscale.
Answer: A
Diff: 2
Page Ref: 68-70
Skill: Applied/Comprehensive/Integrative
57) A store positioning map of clothing retailers uses fashion (with high fashion at the top and
low fashion at the bottom) and value (with high-value price at the right and low-value price at
the left) as its key dimensions. In what quadrant would you expect to find a full-service, fashionbased specialty store?
A) top right
B) top left
C) bottom right
D) bottom left
Answer: B
Diff: 2
Page Ref: 78-70
Skill: Applied/Comprehensive/Integrative
58) A major potential disadvantage associated with the use of a differentiated marketing versus a
mass marketing approach is that ________.
A) a major market segment may be saturated with retail offerings
B) an unchosen segment may have more opportunities
C) differences in each segment may be small relative to the costs of reaching each segment
D) competition is increased in each segment
Answer: C
Diff: 2
Page Ref: 71
Skill: Applied/Comprehensive/Integrative
13
59) A mass market strategy should be used by a retailer when ________.
A) important differences exist among consumers in terms of their needs
B) consumer needs in terms of goods and services are homogeneous
C) consumer needs in terms of goods and services are so diverse that they cannot be accurately
characterized
D) many small niche markets exist
Answer: B
Diff: 2
Page Ref: 71
Skill: Applied/Comprehensive/Integrative
60) Which target market strategy is most complex in terms of planning and implementation?
A) mass marketing
B) concentrated marketing
C) differentiated marketing
D) market niche
Answer: C
Diff: 2
Page Ref: 71
Skill: Applied/Comprehensive/Integrative
61) A long-term lease for an excellent retail location at a below market rental is an example of a
retailer's ________.
A) competitive advantage
B) goodwill
C) store positioning
D) uncontrollable variables
Answer: A
Diff: 2
Page Ref: 71
Skill: Applied/Comprehensive/Integrative
62) Which retail strategy component is the most difficult to change?
A) promotion
B) pricing
C) merchandise management
D) store location
Answer: D
Diff: 2
Page Ref: 73
Skill: Applied/Comprehensive/Integrative
63) Which retail strategy controllable variable deals with asset management, budgeting, and
resource allocation?
A) operations management
B) human resource management
C) merchandise management
D) pricing
Answer: A
Diff: 2
Page Ref: 73
Skill: Applied/Comprehensive/Integrative
14
64) Which of the following retail formats has a broad width and narrow depth?
A) vending machine
B) department store
C) supermarket
D) variety store
Answer: D
Diff: 2
Page Ref: 73
Skill: Applied/Comprehensive/Integrative
65) Which of the following retail formats has a narrow width and high depth?
A) variety store
B) specialty store
C) supermarket
D) vending machine
Answer: B
Diff: 2
Page Ref: 73
Skill: Applied/Comprehensive/Integrative
66) An advantage to a retailer's having a high depth is ________.
A) the appeal to consumers seeking a broad selection within a merchandise category
B) less likelihood of being out of stock
C) high inventory turnover
D) the appeal to one-stop shopping for a variety of goods and services
Answer: A
Diff: 2
Page Ref: 73
Skill: Applied/Comprehensive/Integrative
67) Which of the following is an example of a controllable variable to an independent stationery
and greeting card store?
A) high seasonality, especially during the first two weeks of school, and holiday periods
B) consumer acceptance of the store's new free delivery policy
C) stocking a broad selection of computer-based supplies for neighborhood residents that have
computers and printers
D) competition from a new supermarket that stocks greeting cards and stationery
Answer: C
Diff: 2
Page Ref: 73
Skill: Applied/Comprehensive/Integrative
68) An example of an uncontrollable variable to a franchisee is ________.
A) employee compensation above the minimum wage
B) zoning restrictions that limit the number of parking spaces
C) hiring of a store manager
D) retail prices of coffee
Answer: B
Diff: 2
Page Ref: 75
Skill: Applied/Comprehensive/Integrative
15
69) An example of a tactical promotional decision is ________.
A) the development and implementation of a long-term image
B) the decision to use standardized promotions for all retail units
C) the decision that 75 percent of all promotional expenditures will be image-related
D) changing the advertising media mix on the basis of unfavorable publicity from a specific
newspaper
Answer: D
Diff: 1
Page Ref: 77
Skill: Applied/Comprehensive/Integrative
70) An appliance repair firm wishes to determine the degree of customer satisfaction with its
repair services. A survey is sent to each customer to determine whether their appliance was
repaired properly, whether the workman arrived at the promised time, and whether the repair
charge was within the original estimate. Other questions dealt with the conduct of the
repairperson in terms of dress and customer relations skills. This survey is an example of which
stage of the retail strategy?
A) feedback
B) adaptation
C) tactics
D) positioning
Answer: A
Diff: 2
Page Ref: 78
Skill: Applied/Comprehensive/Integrative
71) Situation analysis seeks to answer two general questions: What is the retailer's current status?
In which direction should it be heading?
Answer: TRUE
Diff: 1
Page Ref: 58
Skill: Terminology/Concept
72) Buying an existing business allows a retailer to fully tailor a retail strategy to the owner's
desires and strengths.
Answer: FALSE
Diff: 2
Page Ref: 62
Skill: Terminology/Concept
73) The cost of a business above its tangible asset value is considered goodwill.
Answer: TRUE
Diff: 1
Page Ref: 62
Skill: Terminology/Concept
74) Retail franchisees generally have a large degree of latitude in the operation of their
businesses.
Answer: FALSE
Diff: 1
Page Ref: 62-63
Skill: Terminology/Concept
16
75) With a professional manager system, planning tends to be less formal and more intuitive than
with an owner-manager system.
Answer: FALSE
Diff: 2
Page Ref: 63
Skill: Terminology/Concept
76) In computing a retailer's financial requirements, personal savings, manufacturer and
wholesaler credit, bank credit plans, bank loans, and commercial finance companies should be
listed as a source of funds.
Answer: TRUE
Diff: 2
Page Ref: 65
Skill: Terminology/Concept
77) A retailer's time demand requirements can be reduced through use of a partnership
organization, self-service formats, and automation/industrialization.
Answer: TRUE
Diff: 2
Page Ref: 65-66
Skill: Terminology/Concept
78) A person running a retail business works only when the business is open.
Answer: FALSE
Diff: 1
Page Ref: 66
Skill: Terminology/Concept
79) In retailing, market share is usually an objective for only small retailers or independents.
Answer: FALSE
Diff: 1
Page Ref: 67
Skill: Terminology/Concept
80) Retailers investing large capital expenditures in land, buildings, and equipment often have
sales objectives as a company goal.
Answer: FALSE
Diff: 2
Page Ref: 67
Skill: Terminology/Concept
81) The larger the efficiency rating figure, the more efficient the retail firm.
Answer: TRUE
Diff: 1
Page Ref: 67
Skill: Terminology/Concept
82) A retailer with annual sales of $5 million and operating expenses of $2 million has an
efficiency rating of 40 percent.
Answer: FALSE
Diff: 1
Page Ref: 67
Skill: Terminology/Concept
17
83) Satisfaction of publics includes stockholders, suppliers, employees, and governments, but not
consumers.
Answer: FALSE
Diff: 2
Page Ref: 68
Skill: Terminology/Concept
84) Consumers' perceived store images for a retailer and its competitors can be visualized
through use of a positioning map.
Answer: TRUE
Diff: 2
Page Ref: 68-70
Skill: Terminology/Concept
85) Consumers, competition, technology, economic conditions, seasonality, and legal restrictions
are all uncontrollable variables to a retailer.
Answer: TRUE
Diff: 1
Page Ref: 75
Skill: Terminology/Concept
86) A retailer can anticipate and avoid crises through strategic retail planning.
Answer: TRUE
Diff: 1
Page Ref: 58
Skill: Applied/Comprehensive/Integrative
87) Owners are personally liable for claims in a corporation form of ownership.
Answer: FALSE
Diff: 2
Page Ref: 61
Skill: Applied/Comprehensive/Integrative
88) In considering the purchase of a business, a very high inventory turnover may indicate that a
large proportion of stock is not saleable.
Answer: FALSE
Diff: 2
Page Ref: 62
Skill: Applied/Comprehensive/Integrative
89) A retailer should be hesistant to purchase a business that has less than five years remaining
on its lease. The retailer should seek to obtain a longer lease or a renewal option before
purchasing the business.
Answer: TRUE
Diff: 2
Page Ref: 62
Skill: Applied/Comprehensive/Integrative
90) While a franchise offers a franchisee a well-known company name and a loyal customer
following, it also typically specifies rigid operations standards and restricts the choice of
suppliers.
Answer: TRUE
Diff: 1
Page Ref: 62-63
Skill: Applied/Comprehensive/Integrative
18
91) A retailer is interested in increasing its operating efficiency from 30 to 40 percent. If its sales
revenues are $500,000, it must seek to reduce its operating expenses by $100,000.
Answer: FALSE
Diff: 2
Page Ref: 67
Skill: Applied/Comprehensive/Integrative
92) A retailer concerned with social responsibility often seeks satisfaction of publics as an
objective.
Answer: TRUE
Diff: 2
Page Ref: 68
Skill: Applied/Comprehensive/Integrative
93) A product positioning analysis shows the three different retail operations of a conglomerate
retailer to be clustered in three different sectors. The retailer is perceived to be undertaking a
mass marketing retail strategy.
Answer: FALSE
Diff: 2
Page Ref: 68-70
Skill: Applied/Comprehensive/Integrative
94) A major risk with a differentiated retail strategy is that consumers will purchase goods in the
retail operation with the lowest profit margin and forego the more costly retail facilities.
Answer: TRUE
Diff: 2
Page Ref: 71
Skill: Applied/Comprehensive/Integrative
95) Decision making is likely to be centralized for a retailer with a differentiated marketing
strategy.
Answer: FALSE
Diff: 2
Page Ref: 71
Skill: Applied/Comprehensive/Integrative
96) Diversified retailers generally appeal to one market segment.
Answer: FALSE
Diff: 2
Page Ref: 71
Skill: Applied/Comprehensive/Integrative
97) A retailer with a differentiated marketing strategy can have retail units with different
locations on a positioning map.
Answer: TRUE
Diff: 2
Page Ref: 71
Skill: Applied/Comprehensive/Integrative
98) A retailer's ability to understand and predict the effects of controllable and uncontrollable
variables is enhanced by the use of marketing research and marketing information systems.
Answer: TRUE
Diff: 1
Page Ref: 73
Skill: Applied/Comprehensive/Integrative
19
99) If a firm's strategic pricing decision is to be the price leader in a marketplace, a tactical
decision is to match a competitor's low prices in its current ad.
Answer: TRUE
Diff: 2
Page Ref: 77
Skill: Applied/Comprehensive/Integrative
100) Examples of negative feedback include consumer complaints, chronic out-of-stock
situations, and declining sales.
Answer: TRUE
Diff: 2
Page Ref: 78
Skill: Applied/Comprehensive/Integrative
101) Why should the identification of consumers precede the overall strategy stage in the
elements of a retail strategy? Explain your answer.
Diff: 2
Page Ref: 58
102) a.
Contrast the advantages and disadvantages of starting a new business versus
buying an existing retail business.
b. Explain how a prospective purchaser should assess the value of goodwill.
Diff: 1
Page Ref: 62, 65
103) a.
Prepare a checklist for purchasing an existing retail business.
b. Prepare a list of possible pitfalls in purchasing an existing business.
Diff: 1
Page Ref: 62
104) Describe the matching process among personal abilities, financial resources, and time
availability for a fast-food franchise.
Diff: 2
Page Ref: 64-66
105) a.
List possible sources of funds for a new retail venture. Assume the venture
requires $1,000,000 and that the prospective purchaser has $200,000 in cash.
b. Evaluate the advantages and disadvantages of each source.
Diff: 2
Page Ref: 65
106) a.
Prepare a store positioning map depicting four major department stores in your
area. Explain the use of the dimensions on the positioning chart as well as the positioning of each
retailer.
b. What are the strategic implications of store placement in your positioning map? Explain your
answer.
Diff: 2
Page Ref: 68-70
107) a.
Differentiate among a mass marketing, concentrated marketing, and differentiated
marketing approach to the identification of consumer characteristics and needs.
b. Under what circumstances should a retailer use each approach? Explain your answer.
Diff: 1
Page Ref: 71
20
108) a.
Discuss the concept of competitive advantage as applied to retailing.
b. List three common competitive advantages for a chain retailer versus an independent retailer.
Diff: 1
Page Ref: 71
109) a.
Outline the types of decisions a retailer needs to make in terms of its merchandise
management strategy.
b. Outline the types of decisions a retailer needs to make in terms of its pricing strategy.
Diff: 2
Page Ref: 73
110) Describe the impact of the consumer as an uncontrollable variable on retailing strategy.
Diff: 1
Page Ref: 75
111) Describe the impact of the legal environment on retailing regarding store location and
communicating with the customer.
Diff: 2
Page Ref: 76
112) List and describe five forms of retail feedback.
Diff: 1
Page Ref: 78
21
Chapter 4
1) The basic format or structure of a business is referred to as ________.
A) a retail store
B) a franchise
C) vertical integration
D) a retail institution
Answer: D
Diff: 1
Page Ref: 102
Skill: Terminology/Concept
2) What percent of all retail store sales are made by independent retailers?
A) 20
B) 35
C) 60
D) 80
Answer: B
Diff: 1
Page Ref: 102
Skill: Terminology/Concept
3) There are so many independent retailers in the United States because of ________.
A) ease of entry into the marketplace
B) widespread use of the franchise form of distribution
C) vertical integration by manufacturers
D) high investment per worker in retailing
Answer: A
Diff: 1
Page Ref: 102
Skill: Terminology/Concept
4) Competition for new and existing retailers is high due to the ________.
A) high failure rates in retailing
B) high ease of entry into retailing
C) high investment per worker in retailing
D) complex licensing provisions for many kinds of retailers
Answer: B
Diff: 2
Page Ref: 102
Skill: Terminology/Concept
22
5) A major competitive advantage of independent retailers is ________.
A) specialization of retail functions
B) quantity discounts in purchasing
C) entrepreneurial drive
D) a good fit with other owned units
Answer: C
Diff: 2
Page Ref: 105
Skill: Terminology/Concept
6) A major disadvantage of independent retailing is ________.
A) latitude in selecting customer markets
B) low bargaining power with suppliers
C) inflexibility in developing strategy
D) high investment requirements
Answer: B
Diff: 1
Page Ref: 105
Skill: Terminology/Concept
7) An independent can increase its bargaining power with a supplier by ________.
A) buying substantially larger quantities than needed to take advantage of all discounts
B) insisting on quantity discounts from vendors
C) belonging to buying groups with other independents
D) focusing increased attention on closeouts, irregulars, and the purchase of merchandise offseason
Answer: C
Diff: 2
Page Ref: 105
Skill: Terminology/Concept
8) A unique disadvantage for independent retailers is ________.
A) a lack of competitive advantages
B) a lack of independence
C) a lack of control over strategy
D) overdependence on the owner
Answer: D
Diff: 2
Page Ref: 105
Skill: Terminology/Concept
9) Retail chains account for ________ percent of total retail sales.
A) 30
B) 40
C) 65
D) 80
Answer: C
Diff: 1
Page Ref: 106
Skill: Terminology/Concept
23
10) A chain retailer can achieve wholesale cost efficiencies by ________.
A) stressing the sale of private label brands
B) buying goods directly from suppliers in large quantities
C) using computer-based inventory management systems
D) having suppliers list suggested selling prices on labels
Answer: B
Diff: 2
Page Ref: 106
Skill: Terminology/Concept
11) A chain retailer can gain efficiency in multiple-store operations through ________.
A) purchasing standardized store fixtures
B) receiving new items as soon as they are introduced
C) decentralizing operations
D) using all forms of advertising media
Answer: A
Diff: 2
Page Ref: 107
Skill: Terminology/Concept
12) A major disadvantage of centralized purchasing to a chain retailer is ________.
A) overdependence on the boss
B) lack of quantity discounts
C) absence of bargaining power
D) complex managerial control
Answer: D
Diff: 2
Page Ref: 108
Skill: Terminology/Concept
13) An example of a product/trademark franchise is a(n) ________.
A) real-estate brokerage franchise
B) auto dealer
C) fast-food franchise
D) auto-rental service franchise
Answer: B
Diff: 2
Page Ref: 108
Skill: Terminology/Concept
14) Business format franchising is characterized by ________.
A) an interactive relationship between a franchisor and a franchisee
B) dealers operating relatively autonomously from suppliers
C) dealers having considerable freedom in developing and implementing their overall retail
strategy
D) the absence of royalty fees to franchisors
Answer: A
Diff: 2
Page Ref: 108
Skill: Terminology/Concept
24
15) A dealer receives assistance on site location, start-up practices, accounting systems, and
management training in ________.
A) a leased department
B) business format franchising
C) independent channel ownership
D) a chain
Answer: B
Diff: 1
Page Ref: 108
Skill: Terminology/Concept
16) The type of retailer with the largest percent of total retail franchise sales is ________.
A) restaurants (all types)
B) convenience stores
C) auto and truck dealers
D) general merchandise stores
Answer: C
Diff: 1
Page Ref: 108
Skill: Terminology/Concept
17) Hotel and motel franchises represent what type of structural arrangement?
A) voluntary wholesaler-retailer
B) cooperative wholesaler-retailer
C) service sponsor-retailer
D) manufacturer-retailer
Answer: C
Diff: 2
Page Ref: 109
Skill: Terminology/Concept
18) Franchisors yield considerable power in their relationship with franchisees due to their
ability to ________.
A) overstate the income potential of franchisees
B) teach procedures and management skills to franchisees
C) cancel a franchise if any major provision of the franchise agreement is not met
D) develop a cooperative marketing program
Answer: C
Diff: 2
Page Ref: 110
Skill: Terminology/Concept
19) Cancellation provisions, requirements that purchases be made from approved vendors, and
standard operating procedures contribute to ________ for franchisees.
A) private labeling
B) constrained decision making
C) fair trade legislation
D) vertical integration
Answer: B
Diff: 2
Page Ref: 110
Skill: Terminology/Concept
25
20) The Federal Trade Commission (FTC's) disclosure requirements and business opportunities
rule is intended to ________.
A) provide potential franchisees with adequate information prior to their making an investment
B) make it difficult for franchisors to terminate, cancel, or fail to renew franchisees without
sufficient cause
C) allow franchisees to purchase goods and services on a more competitive basis
D) grant exclusive territories to franchisees
Answer: A
Diff: 2
Page Ref: 110
Skill: Terminology/Concept
21) A benefit of franchising to a franchisor is ________.
A) intrafranchise competition
B) the ease of establishing a uniform image
C) a national or global presence is developed more quickly and with less franchisor investment
D) the effect of an ineffective unit on resale values of other units
Answer: C
Diff: 1
Page Ref: 110
Skill: Terminology/Concept
22) In most situations, leased departments have been used by existing retailers to ________.
A) improve the store's overall image by emphasizing fashion
B) deepen the merchandise assortment in selected merchandise categories
C) broaden their offerings into product categories that are on the fringe of the store's major
product lines
D) generate rental income from "dead" space
Answer: C
Diff: 2
Page Ref: 111
Skill: Terminology/Concept
23) A major advantage of a leased department to the leased department operator is ________.
A) the conformity of the leased department to the overall store's operating procedure
B) some costs are reduced through shared facilities
C) the security of lease renewals
D) inflexibility of hours of operation and operating style
Answer: B
Diff: 1
Page Ref: 111
Skill: Terminology/Concept
24) The leading form of vertical marketing system is ________.
A) partially integrated marketing system
B) independent vertical marketing system
C) fully integrated marketing system
D) a retail cooperative
Answer: B
Diff: 1
Page Ref: 112
Skill: Terminology/Concept
26
25) Two independently owned businesses along a channel perform all production and
distribution functions in a(n) ________.
A) partially integrated system
B) independent vertical marketing system
C) fully integrated system
D) retail cooperative
Answer: A
Diff: 1
Page Ref: 112-113
Skill: Terminology/Concept
26) A benefit to the use of a fully integrated system is ________.
A) greater use of specialized expertise in production and marketing
B) lower investment requirements
C) increased sales due to more intensive distribution
D) total control over its retail strategy
Answer: D
Diff: 1
Page Ref: 113
Skill: Terminology/Concept
27) A fully integrated system represents ________.
A) vertical integration
B) partial vertical integration
C) horizontal integration
D) interbrand competition
Answer: A
Diff: 2
Page Ref: 113
Skill: Terminology/Concept
28) A firm desiring the maximum degree of channel control should utilize ________.
A) an independent vertical marketing system
B) a fully integrated system
C) a partially integrated system
D) franchising
Answer: B
Diff: 2
Page Ref: 113
Skill: Terminology/Concept
29) Which vertical marketing system allows a firm to utilize different wholesale and retail
channels of distribution?
A) dual marketing
B) independent vertical marketing system
C) partially integrated system
D) fully integrated vertical marketing system
Answer: A
Diff: 2
Page Ref: 113
Skill: Terminology/Concept
27
30) The overall process whereby one member of a channel dominates the decisions made in the
channel due to the power it possesses is referred to as ________.
A) vertical integration
B) vertical marketing systems
C) bargaining power
D) channel control
Answer: D
Diff: 1
Page Ref: 113-114
Skill: Terminology/Concept
31) A manufacturer can exert channel control through ________.
A) pre-ticketing merchandise
B) private branding
C) cooperative advertising
D) intensive distribution
Answer: A
Diff: 2
Page Ref: 114
Skill: Terminology/Concept
32) Pre-ticketing merchandise and exclusive distribution are channel control strategies of
________.
A) retailers
B) consumer cooperatives
C) manufacturers
D) wholesalers
Answer: C
Diff: 1
Page Ref: 114
Skill: Terminology/Concept
33) Wholesalers can possess channel control through ________.
A) franchising
B) private brands
C) fair trade legislation
D) tying contracts
Answer: B
Diff: 1
Page Ref: 114
Skill: Terminology/Concept
34) A retail firm owned by its customer members is a(n) ________.
A) consumer cooperative
B) franchise
C) independent vertical marketing system
D) fully integrated vertical marketing system
Answer: A
Diff: 1
Page Ref: 114
Skill: Terminology/Concept
28
35) The growth of consumer cooperatives has been limited due to ________.
A) competitive actions by full-service retailers
B) fair practice legislation
C) wholesaler use of full-time forcing
D) the high degree of required customer initiative and drive
Answer: D
Diff: 1
Page Ref: 114
Skill: Terminology/Concept
36) Which statement concerning ease of entry into retailing is correct?
A) Investment per worker in retailing is significantly greater than that of manufacturing
establishments.
B) Ease of entry contributes to the high failure rate among newer retailers.
C) Ease of entry into retailing contributes to the low number of new firms entering retailing in
any given year.
D) Ease of entry is reflected in high market shares (as a percent of total category sales) for the
leading firms.
Answer: B
Diff: 2
Page Ref: 103
Skill: Applied/Comprehensive/Integrative
37) Decision making is usually centralized and the levels of management personnel are
minimized in which retail institution?
A) variety store
B) department store
C) independent
D) chain
Answer: C
Diff: 1
Page Ref: 105
Skill: Applied/Comprehensive/Integrative
38) The "overdependence on the owner" problem for independent retailers can be overcome
through ________.
A) taking in an active partner
B) centralizing decision making in the firm
C) life insurance policies
D) limiting time demands on the owner
Answer: A
Diff: 2
Page Ref: 105
Skill: Applied/Comprehensive/Integrative
29
39) Uniform location standards are most likely to be present in which retail institution?
A) independent retailer
B) chain retailer
C) leased department
D) consumer cooperative
Answer: B
Diff: 1
Page Ref: 106
Skill: Applied/Comprehensive/Integrative
40) Specialization of personnel by functional area and/or geographic region is most likely to
occur in what type of retail institution?
A) independent
B) chain
C) leased department
D) consumer cooperative
Answer: B
Diff: 2
Page Ref: 106
Skill: Applied/Comprehensive/Integrative
41) A major competitive advantage of chains in contrast to independents is ________.
A) freedom from unionization
B) use of specialists in buying, selling, and store operations
C) freedom from antitrust legislation
D) less concern for overlapping locations
Answer: B
Diff: 2
Page Ref: 106-107
Skill: Applied/Comprehensive/Integrative
42) The high bargaining power of chains can be directly constrained by independents through
________.
A) using decentralized purchasing
B) refusing to purchase popular brands purchased by chains
C) threatening Robinson-Patman Act violations to suppliers
D) developing manufacturer brands
Answer: C
Diff: 2
Page Ref: 106-108
Skill: Applied/Comprehensive/Integrative
43) Centralized decision making is a major characteristic of which form of retail institution?
A) independents
B) vertical marketing systems
C) retail cooperatives
D) chains
Answer: D
Diff: 1
Page Ref: 108
Skill: Applied/Comprehensive/Integrative
30
44) Chain store efficiency in multiple-store operations can be significantly reduced by ________.
A) centralized buying that does not reflect regional and local preferences
B) a chain's performing wholesale functions
C) the use of computerized ordering and inventory management
D) use of national and regional media
Answer: A
Diff: 2
Page Ref: 108
Skill: Applied/Comprehensive/Integrative
45) Independents can compete with chain organizations (in terms of image, ability to use
regional and national media, and specialized personnel) through ________.
A) a leased department
B) an independent vertical marketing system
C) franchising
D) factory outlets
Answer: C
Diff: 2
Page Ref: 108
Skill: Applied/Comprehensive/Integrative
46) In contrast to business format franchising, in product/trademark franchising, franchisees
________.
A) utilize prototype stores
B) receive assistance from franchisors on site location and start-up practices
C) operate relatively autonomously from suppliers
D) have an active relationship with the franchisor
Answer: C
Diff: 2
Page Ref: 108
Skill: Applied/Comprehensive/Integrative
47) The major difference in the role of a franchisee between a product/trademark and a business
format franchise is that in a product/trademark franchise, the franchisee has ________.
A) less autonomy
B) greater autonomy
C) greater training
D) a greater chance of success
Answer: B
Diff: 2
Page Ref: 108
Skill: Applied/Comprehensive/Integrative
31
48) The use of ________, ________, and ________ enable franchises to achieve a level of
coordination similar to that found in retail chain organizations.
A) prototype stores; standardized merchandise lines; cooperative advertising
B) royalty-based rental agreements; exclusive territories; franchisee training
C) franchisee training; prototype stores; independence in setting store hours
D) cooperative advertising; merchandise lines that are related to regional and local preferences;
product/trademark franchising
Answer: A
Diff: 2
Page Ref: 108
Skill: Applied/Comprehensive/Integrative
49) The job titles of cooperative advertising director, channel member customer service director,
real estate negotiator, and vendor inspection specialist are most likely to be found in what type of
retail institution?
A) business format franchise
B) product/trademark franchise
C) leased department
D) independent vertical marketing system
Answer: A
Diff: 2
Page Ref: 108
Skill: Applied/Comprehensive/Integrative
50) A channel member is most likely to be involved in developing a turn-key operation (that
includes equipment, a prototype building, training, and troubleshooting advice) in ________.
A) product/trademark franchising
B) business format franchising
C) a leased department
D) a membership warehouse club
Answer: A
Diff: 2
Page Ref: 108
Skill: Applied/Comprehensive/Integrative
51) Which form of retail institution most closely resembles a partially integrated system?
A) business format franchise
B) product/trademark franchise
C) retail chain
D) independent
Answer: A
Diff: 2
Page Ref: 108, 112-113
Skill: Applied/Comprehensive/Integrative
32
52) A major firm recently converted from a fully integrated vertical marketing system to
business format franchising. In setting price, store hours, and personnel policies, it is important
that the franchisor recognize that ________.
A) it can control franchisees through constrained decision making to receive higher profits from
the sale of all goods and services
B) it can control franchises through threatening franchise termination due to fair practice laws
C) franchisees have total freedom to set and implement all retail strategies as they see fit
D) in general, franchisees should be treated as owners and not as employees
Answer: D
Diff: 2
Page Ref: 108, 113
Skill: Applied/Comprehensive/Integrative
53) The major difference between a voluntary wholesaler and a cooperative wholesaler is based
upon ________.
A) functions performed by retailers
B) size in number of units
C) ownership
D) basis for payment (straight cash payment versus royalty)
Answer: C
Diff: 2
Page Ref: 109
Skill: Applied/Comprehensive/Integrative
54) A group of independent retailers seeks to establish a common identity and to generate
increased bargaining power through centralized purchasing. Which of the following institutional
arrangement should they consider?
A) independent vertical marketing system
B) fully integrated vertical marketing system
C) business format franchise
D) cooperative
Answer: D
Diff: 1
Page Ref: 109
Skill: Applied/Comprehensive/Integrative
55) Constrained decision making is most commonly found in ________.
A) independent vertical marketing systems
B) manufacturer-retailer licensing agreements
C) business format franchising
D) product/trademark franchising
Answer: C
Diff: 2
Page Ref: 110
Skill: Applied/Comprehensive/Integrative
33
56) Constrained decision making is desirable by both franchisees and franchisors in that it
generates ________.
A) lower royalty and rental costs
B) independence from franchisor rules and regulations
C) intrafranchise competition
D) uniformity across all chain units
Answer: D
Diff: 2
Page Ref: 110
Skill: Applied/Comprehensive/Integrative
57) FTC rulings, fair practice laws, and franchise-member organizations have the effect of
________.
A) promoting service sponsor versus manufacturer franchises
B) increasing the channel power to franchisees
C) limiting franchisor "right to purchase" laws
D) further constraining decision making relative to franchisees
Answer: B
Diff: 2
Page Ref: 110
Skill: Applied/Comprehensive/Integrative
58) Fair practice laws have been designed to protect franchisees from unreasonable ________
from franchisors.
A) channel cooperation
B) channel power
C) bargaining power
D) price protection programs
Answer: B
Diff: 2
Page Ref: 110
Skill: Applied/Comprehensive/Integrative
59) Both franchisees and leased department operators typically pay rent on the basis of a
________.
A) percent of sales
B) long-term lease with flat payments
C) long-term lease with graduated payments
D) month-to-month agreement
Answer: A
Diff: 2
Page Ref: 110, 111
Skill: Applied/Comprehensive/Integrative
34
60) Constrained decision making is used by ________.
A) independents and retail cooperatives
B) independents and chains
C) independents and leased departments
D) franchises and leased departments
Answer: D
Diff: 2
Page Ref: 110, 111
Skill: Applied/Comprehensive/Integrative
61) An advantage of a leased department form of organization to a lessee is ________.
A) management assistance
B) financial support provided by the leasor
C) high traffic potential
D) protection from FTC regulations
Answer: C
Diff: 1
Page Ref: 112
Skill: Applied/Comprehensive/Integrative
62) Which of these is not a major disadvantage of a leased department to a lessee?
A) the use of shared facilities and equipment with the leasor
B) restrictions on days open
C) restrictions on goods/services offered
D) leasor refusal to renew the lease
Answer: A
Diff: 2
Page Ref: 112
Skill: Applied/Comprehensive/Integrative
63) The potential for channel conflict is greatest in which vertical marketing system?
A) independent vertical marketing system
B) partially integrated system
C) dual marketing
D) fully integrated system
Answer: A
Diff: 2
Page Ref: 112
Skill: Applied/Comprehensive/Integrative
64) A manufacturer with low company resources which seeks intensive distribution should
utilize which vertical marketing system?
A) a retail cooperative
B) independent vertical marketing system
C) partially integrated system
D) fully integrated system
Answer: B
Diff: 2
Page Ref: 112
Skill: Applied/Comprehensive/Integrative
35
65) The potential for channel conflict is minimized in which vertical marketing system?
A) independent vertical marketing system
B) partially integrated system
C) dual marketing
D) fully integrated system
Answer: D
Diff: 2
Page Ref: 113
Skill: Applied/Comprehensive/Integrative
66) A manufacturer of a specialty good understands that its maximum chance of sales success
occurs when it can control a product's final selling price as well as its retail advertising and
personal selling strategy. In the past, the manufacturer was dissatisfied with both the level of
sales support and the high level of discounting on its products. Which vertical marketing system
should the manufacturer utilize?
A) independent vertical marketing system
B) partially integrated system
C) dual marketing
D) fully integrated vertical marketing system
Answer: D
Diff: 2
Page Ref: 113
Skill: Applied/Comprehensive/Integrative
67) A cosmetics manufacturer is using a differentiated marketing strategy. While some of its
brands are sold through its direct selling organization, other brands are sold through department
and specialty stores. The manufacturer uses ________.
A) an independent vertical marketing system
B) a partially integrated system
C) dual marketing
D) a fully integrated vertical marketing system
Answer: C
Diff: 2
Page Ref: 113
Skill: Applied/Comprehensive/Integrative
68) Manufacturers/service sponsors can exert channel control through ________.
A) franchising
B) private branding
C) fair practice legislation
D) store loyalty
Answer: A
Diff: 1
Page Ref: 114
Skill: Applied/Comprehensive/Integrative
36
69) Retailers use private labeling to generate channel control because ________.
A) greater channel communication is fostered
B) a large proportion of a manufacturer's output is sold to one retailer
C) retailers can more easily obtain bank financing
D) store loyalty accrues to the retailer from positive experiences with the brand
Answer: D
Diff: 2
Page Ref: 114
Skill: Applied/Comprehensive/Integrative
70) Which of the following has developed because existing retail institutions were perceived by
consumers as inadequately fulfilling market needs?
A) independent channel ownership
B) consumer cooperatives
C) leased departments
D) total vertical integration
Answer: B
Diff: 1
Page Ref: 114
Skill: Applied/Comprehensive/Integrative
71) Data for the Census of Retail Trade is collected and published twice in each decade.
Answer: TRUE
Diff: 1
Page Ref: 103
Skill: Terminology/Concept
72) Approximately 70 percent of all retail stores are operated by independents.
Answer: TRUE
Diff: 1
Page Ref: 103
Skill: Terminology/Concept
73) In general, when compared with manufacturing activities, retailing is characterized by
relative difficulty of entry.
Answer: FALSE
Diff: 1
Page Ref: 103
Skill: Terminology/Concept
74) Orderly managerial succession is an advantage of an independent retailer form of
organization.
Answer: FALSE
Diff: 1
Page Ref: 105
Skill: Terminology/Concept
75) An important problem for small, family-run independent retail businesses is the limited time
and resources devoted to long-run planning.
Answer: TRUE
Diff: 2
Page Ref: 105
Skill: Terminology/Concept
37
76) Chain retailers are characterized by multiple outlets under common ownership with
decentralized purchasing and decision making.
Answer: FALSE
Diff: 1
Page Ref: 106
Skill: Terminology/Concept
77) A chain retailer can achieve cost efficiencies by performing wholesaling functions such as
buying directly from manufacturers.
Answer: TRUE
Diff: 1
Page Ref: 106-107
Skill: Terminology/Concept
78) Product/trademark franchisees operate in a relatively autonomous manner from their
suppliers.
Answer: TRUE
Diff: 1
Page Ref: 108
Skill: Terminology/Concept
79) All types of restaurants, including fast-food franchises, account for the majority of retail
franchise sales.
Answer: FALSE
Diff: 1
Page Ref: 108
Skill: Terminology/Concept
80) Three types of structural arrangements involving retail franchises exist: manufacturerretailer, wholesaler-retailer, and service sponsor-retailer.
Answer: TRUE
Diff: 1
Page Ref: 109
Skill: Terminology/Concept
81) Under constrained decision making, a franchisor can exclude franchisees from or limit their
involvement in the strategic planning process.
Answer: TRUE
Diff: 1
Page Ref: 110
Skill: Terminology/Concept
82) Leased departments generally occur in product categories involving substantial retailer
investments.
Answer: FALSE
Diff: 1
Page Ref: 111
Skill: Terminology/Concept
83) Maximum channel control occurs in an independent vertical marketing system.
Answer: FALSE
Diff: 2
Page Ref: 112
Skill: Terminology/Concept
38
84) In dual marketing, manufacturers can cater to multiple target markets with different
distribution systems.
Answer: TRUE
Diff: 2
Page Ref: 113
Skill: Terminology/Concept
85) Consumer food cooperative sales have grown to a substantial share of total supermarket
sales, due to the ease of planning and implementing a consumer cooperative.
Answer: FALSE
Diff: 1
Page Ref: 114
Skill: Terminology/Concept
86) A franchisee operating at two retail locations can be classified as either a chain or as a
franchise, but not both.
Answer: FALSE
Diff: 2
Page Ref: 102
Skill: Applied/Comprehensive/Integrative
87) High investment per worker and many state-based licensing restrictions contribute to the
difficulty of entry in retailing.
Answer: FALSE
Diff: 2
Page Ref: 103
Skill: Applied/Comprehensive/Integrative
88) Due to the Robinson-Patman Act and other antitrust forms of legislation, large retail chains
cannot enjoy significant advantages as a result of their high bargaining power.
Answer: FALSE
Diff: 2
Page Ref: 106-107
Skill: Applied/Comprehensive/Integrative
89) While centralized buying enables chain retailers to receive the benefits of bargaining power
and quantity discounts, it may result in a poor fit with regional and local consumer needs.
Answer: TRUE
Diff: 2
Page Ref: 108
Skill: Applied/Comprehensive/Integrative
90) Product/trademark franchising involves less constrained decision making for a franchisee
than business format franchising.
Answer: FALSE
Diff: 2
Page Ref: 108
Skill: Applied/Comprehensive/Integrative
91) Cooperative retail franchises enable independent retailers to receive the bargaining power,
single image, and access to mass media that is customary with traditional retail franchises.
Answer: TRUE
Diff: 2
Page Ref: 109
Skill: Applied/Comprehensive/Integrative
39
92) Hotels, carpet cleaning, and fast-food franchises are examples of a service sponsor-retailer
franchise structural arrangement.
Answer: TRUE
Diff: 1
Page Ref: 109
Skill: Applied/Comprehensive/Integrative
93) State-based fair practice laws seek to equalize the channel power of franchisees relative to
franchisors.
Answer: TRUE
Diff: 2
Page Ref: 110
Skill: Applied/Comprehensive/Integrative
94) While franchisors defend restrictive contract provisions regarding purchases of goods and
services as being essential for a common image, franchisees argue that such restrictions may
constitute antitrust.
Answer: TRUE
Diff: 2
Page Ref: 110
Skill: Applied/Comprehensive/Integrative
95) Leased department operators often lease space to other retailers as a means of generating
rental income, using "dead" retail space and providing additional in-store customer traffic.
Answer: TRUE
Diff: 2
Page Ref: 111
Skill: Applied/Comprehensive/Integrative
96) In general, independent vertical marketing systems are most appropriate for specialty goods.
Answer: FALSE
Diff: 2
Page Ref: 112
Skill: Applied/Comprehensive/Integrative
97) When a chain retailer bypasses a wholesaler by performing several wholesale functions, an
independent vertical marketing system is utilized.
Answer: FALSE
Diff: 2
Page Ref: 112
Skill: Applied/Comprehensive/Integrative
98) A manufacturer seeking to control retail selling prices and the in-store competitive
environment should utilize an independent vertical marketing system.
Answer: FALSE
Diff: 2
Page Ref: 113
Skill: Applied/Comprehensive/Integrative
99) Exclusive distribution, fully integrated vertical marketing systems, and franchising are used
by manufacturers to increase their channel control.
Answer: TRUE
Diff: 2
Page Ref: 113-114
Skill: Applied/Comprehensive/Integrative
40
100) Both retail franchise cooperatives and consumer cooperatives are owned by their members.
Answer: TRUE
Diff: 1
Page Ref: 114, 109
Skill: Applied/Comprehensive/Integrative
101) While retailing is dominated by independents in terms of percent of retail units, it is
dominated by chains in terms of retail sales dollars. Explain this statement through the concepts
of ease of entry and the competitive advantages and disadvantages of chains versus
independents.
Diff: 2
Page Ref: 103-108
102) How can an independent retailer compete against chains? Specifically address the following
advantages of chains: high bargaining power, efficiency in multiple store operations, the use of
computers, and access to media.
Diff: 2
Page Ref: 103-108
103) a.
Distinguish between business format and product/trademark franchising. Provide
an example of each.
b. Under what conditions would you recommend that a potential franchisee consider
product/trademark franchising? ...business format franchising?
Diff: 1
Page Ref: 108
104) a.
Distinguish among the three types of structural arrangements that dominate retail
franchising.
b. Provide an example of each type.
Diff: 1
Page Ref: 109
105) Describe the competitive advantages and disadvantages of franchising from the perspective
of the franchisee.
Diff: 1
Page Ref: 110
106) Develop a detailed checklist for a prospective franchisee in evaluating a franchise.
Diff: 2
Page Ref: 110-111
107) a.
Discuss the concept of constrained decision making as applied to franchising.
b. Describe how a franchisor can legally limit the discretion of franchisees.
c. Why is constrained decision making so important to franchisors and franchisees?
Diff: 2
Page Ref: 110
108) Describe the competitive advantages and disadvantages of franchising from the perspective
of the franchisor.
Diff: 1
Page Ref: 111
109) a.
Under what conditions would you recommend that a department store lease space
to a leased department operator such as a photography studio?
b. How can the department store safeguard its interests? Explain your answer.
Diff: 2
Page Ref: 111
41
110) a.
Under what conditions would you recommend that a manufacturer utilize an
independent vertical marketing system?
b. Under what conditions would you recommend that a manufacturer utilize dual marketing?
Diff: 1
Page Ref: 112, 113
111) a.
Discuss three strategies by which a retailer can maximize its channel control.
b. Discuss three strategies by which a manufacturer can maximize its channel control.
Diff: 2
Page Ref: 113-114
112) a.
Develop a series of steps to organize a consumer cooperative.
b. What factors account for the lack of consumer cooperatives?
Diff: 2
Page Ref: 114
42