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Class Agenda
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Administrative Items
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Newswatch assignments
Discuss concepts and theories relating to
classifying retail institutions
Explore trends in mergers and acquisitions in
retail through a short case
Chapters 4
Retail Institutions by Ownership and Strategy Mix
RETAIL
MANAGEMENT:
A STRATEGIC
APPROACH
Q1
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
Q2
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
Ownership Forms
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Independent – Less than four outlets
Chain – Four or more outlets
Franchise
Leased department
Vertical marketing system
Consumer cooperative
Q3
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
Q4
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
Q5
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
Competitive State of Independents
Advantages
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Flexibility in formats,
locations, and strategy
Control over investment
costs and personnel
functions, strategies
Personal image
Consistency and
independence
Strong entrepreneurial
leadership
Disadvantages
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Lack of bargaining
power
Lack of economies of
scale
Labor intensive
operations
Over-dependence on
owner
Limited long-run
planning
Competitive State of Chains
Advantages
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Bargaining power
Cost efficiencies
Efficiency from
computerization,
sharing warehouse and
other functions
Defined management
philosophy
Considerable efforts in
long-run planning
Disadvantages
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Limited flexibility
Higher investment
costs
Complex managerial
control
Limited independence
among personnel
Q6
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
Competitive State of Leased Departments
Benefits
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provides one-stop
shopping to
customers
lessees handle
management
reduces store costs
provides a stream
of revenue
Potential Pitfalls
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lessees may negate
store image
procedures may
conflict with
department store
problems may be
blamed on
department store
rather than lessee
Q7
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
Vertical Marketing Systems
Independent
Partially Integrated
Fully Integrated
Manufacturer
Manufacturer
Manufacturer
Wholesaler
Wholesaler
Wholesaler
Retailer
Retailer
Retailer
Q8
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
Figure 4.9 Sherwin-Williams’ Dual Vertical
Marketing System
Also consider:
•Sony
•Roots
Retailer Strategy Mix
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A strategy mix is the firm’s particular
combination of:
Product
The 4 Ps
Price
Location
Communication
PLUS…
Operations Management
Q9
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
Q10
A retailer can become a _____ through low
prices, specialized products, a large selection,
and superb customer service.
a. destination retailer
b. relationship retailer
What is a parasite store?
c. parasite store
d. value-based retailer
Earning Destination Retailer Status
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Be price oriented and cost efficient
Be upscale
Be convenient
Offer a dominant assortment
Offer superior customer service
Be innovative or exclusive
Q14
A narrow, deep product mix characterizes
which retail institution?
a. department store
b. off-price chain
c. variety store
d. specialty store
Q15
Manufacturers often prefer to sell their closeouts,
canceled orders, and out-of-season merchandise to
factory outlets rather than to off-price chains
because _____.
a. factory outlets generate cash flow for use in
manufacturing
b. manufacturer-owned outlets can generate high
profit margins
c. manufacturers can control where branded
products are ultimately sold
d. off-price chains have too much bargaining power
How Retail Institutions are Evolving
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Mergers, Diversification, Downsizing
Cost-Containment and Value-Driven Retailing