MTG 393 Exam 1 Ch 1-4

_____ is the anticipation and organization of what needs to be done to reach an objective.
Planning
Strategic planning:
involves adapting the resources of the firm to the opportunities and threats of an ever-changing retail environment
Which of the following is not a step in the strategic planning process
a. develop action plans.
b. perform a SWOT analysis.
c. define specific goals and objectives.
d. a well defined mission statement.
e. strategy development.

The correct answer is A.

The beginning of a retailer’s strategic planning process is the formulation of the retailer’s:
mission statement.
For a mission statement to be effective, it should:
provide a basic description of the fundamental nature, rationale, and direction of the firm.
Consider this mission statement: “Dad’s Tasty Dogs will utilize the friendly, proven expertise of its employees and the finest ingredients to provide customers with great tasting hot dogs at a fair price.” What element of a good mission statement is missing?
a. How the retailer uses or intends to use its resources
b. A market share goal
c. How it expects to relate to the ever-changing environment
d. The kinds of value it intends to provide in order to serve the needs and wants of the customer
e. A SWOT analysis

The answer is C.

Which of the following is NOT an aspect of a good mission statement?
Changes with every new fad
When a retailer sets goals and objectives based on a comparison of its actions against its competitors, it is establishing:
market performance objectives.
A retail firm that is setting goals based on the analysis of its ability to provide a profit level adequate to continue in business is setting _____ objectives
financial performance
The four basic types of objectives that a retailer can formulate are:
societal, market performance, personal, and financial performance.
Financial performance goals and objectives does which of the following:
a. Helps the firm’s employees to fulfill dome of their own personal needs.
b. Compares a firm’s actions to its competition.
c. Helps society to fulfill some of its needs.
d. Analyzes the firm’s ability to provide a profit level adequate to continue and grow in business.
e. Helps stabilize the global financial market.

The correct answer is D.

Sales volume and market share are the most popular measures of:
a. financial productivity.
B. market performance.
c. merchandise productivity.
d. consumer choice.
e. human resource allocation.
Which of the following would be an example of a market performance objective for Record World?
A. Open or acquire five to ten stores over the next year.
b. Increase this year’s net profit margin by 3 percent over last year.
c. Improve public relations with customers by holding two major in-store events per six-month season.
d. Increase labor productivity by 12 percent over the next six months.
e. Increase return on assets from 12 percent to 15 percent over the next 12 months.
If a retailer has set its primary objective as gaining 5 percent of market share, it is focusing on a _____ objective.
a. productivity performance
b. consumer choice
c. merchandise productivity
d. market performance
e. competition-oriented

D.

Financial performance objectives can be broken into two categories
a. marketing objectives and operating objectives.
b. profitability objectives and productivity objectives.
c. administrative objectives and financial strategy objectives.
d. human performance objectives and information objectives.
e. seasonal objectives and general operating objectives.

B.

Which of the following elements is NOT a part of the strategic profit model (SPM)?
a. Net profit margin
b. Stockouts
c. Asset turnover
d. Financial leverage
e. Return on assets

B.

The Card Shoppe had a gross margin last year of $2,000,000 and a net profit of $300,000, while net sales were $2,500,000. What was The Card Shoppe’s net profit margin for last year?
a. 12.0 percent
b. 15.0 percent
c. 20.0 percent
d. 68.0 percent
e. 80.0 percent

A.

If a retailer has a return on assets of 15 percent and a net profit margin of 3 percent, then its rate of asset turnover is:
a. .20 times.
b. 5.0 times.
c. 15.0 times.
d. 30.0 times.
e. 60.0 times.

B.

Cameron Brody wants 15 percent of an average dollar invested in the assets of his bookstore to be returned in profit. Cameron is setting a(n) _____ financial objective
a. gross margin return on sales
b. return on inventory
c. return on net worth
d. operating profit margin
e. return on assets

E.

If net profit margin is 2.0 percent, the rate of asset turnover is 6.0x, and the financial leverage is 2.1, what is the return on assets?
a. 0.333 percent
b. 8.0 percent
c. 12.0 percent
d. 25.2 percent
e. 33.0 percent

C.

Which of the following is NOT an example of a financial performance goal?
a. Increase return on assets from 8 percent to 9 percent.
b. Increase asset turnover from 2.5 to 2.8.
c. Increase market share by 20 percent.
d. Increase space productivity by 5 percent.
e. Reduce financial leverage from 2.1 to 2.0.

C.

A retailer has a net profit of $1,000,000, total assets of $12,000,000, a 2.5 asset turnover ratio, and a net worth of $5,000,000. What is its financial leverage ratio?
a. .083 times
b. .500 times
c. 2.00 times
d. 2.40 times
e. 4.80 times

D.

A retailer has total assets of $6,000,000 and a net worth of $3,000,000. What is the retailer’s financial leverage ratio?
a. .5 times
b. 2.0 times
c. 50 percent
d. 75 percent
e. 100 percent

B.

If net profit margin is 5.0 percent, rate of asset turnover is 4.0x, and financial leverage is 2.0x, then return on net worth is:
a. 8.0 percent.
b. 10.0 percent.
c. 20.0 percent.
d. 40.0 percent.
e. 80.0 percent.

D.

If a retailer has a net profit margin of 3 percent, asset turnover of 4.0x, and financial leverage of 2.0x, then its return on net worth is:
a. 6 percent.
b. 8 percent.
c. 12 percent.
d. 24 percent.
e. 48 percent.

D.

If a retailer has an ROA of 10 percent and a financial leverage of 4.0, then its RONW would be
a. 0.4 percent.
b. 6 percent.
c. 14 percent.
d. 26 percent.
e. 40 percent.

E.

If a retailer with an ROA of 7.0 percent decides to increase its financial leverage ratio from 1.5 times to 2.0 times, which of the following results will occur?
a. The retailer’s ROA will increase by 33 percent.
b. The retailer’s RONW will decrease by 33 percent.
c. The retailer’s RONW will go from 10.5 percent to 14.0 percent.
d. The retailer’s RONW will increase by .5 percent.
e. The retailer’s RONW will increase by 10.5 percent.

C.

Specialty stores typically have a _____ than discounters
a. lower asset turnover
b. lower profit margin
c. lower return on net worth
d. lower market share
e. lower return on net worth and lower market share

A.

When a retailer uses productivity objectives, it is referring to the productivity of which resources?
a. Market comparison, profitability, productivity
b. Net worth, financial leverage, and asset turnover
c. Sales, merchandise, and owner’s equity
d. Space, labor, and merchandise
e. space, owner’s equity, and merchandise

D.

Merchandise productivity:
a. is net sales divided by the total square feet of retail floor space.
b. states how many dollars in sales the retailer wants to generate for each square foot of store space.
c. is net sales divided by the number of full-time-equivalent employees.
d. reflects how many dollars in sales the retailer desires to generate for each full-time-equivalent employee.
e. is net sales divided by the average dollar investment in inventory.

E.

A retail firm that is setting goals based on its desire to help society fulfill some of its needs is developing _____ objectives.
a. personal
b. self-respect
c. financial benefit
d. self-esteem
e. societal

E.

You have recently been hired by a small retailer in your area. During a discussion with the owner, you notice that the owner’s primary objective for being in business is to provide the customer with a real alternative. The owner is primarily using a _____ objective to focus the business.
a. market performance
b. financial performance
c. societal
d. personal
e. self-esteem

C.

The manager of a department store chose to use a percentage of the year’s profits to help fund the Salvation Army’s Thanksgiving Dinner for the Homeless. In reference to this sponsorship, the manager appears to have set what kind of objective?
a. Benefactor objective
b. Self-gratification objective
c. Financial performance objective
d. Status and respect objective
e. Personal objective

A.

Chandler Markus is the store manager for a large discount drugstore. Chandler allows his department managers to arrange the fixtures and schedule their employees as they see fit. According to Chandler’s actions, the drugstore has set what kind of objective?
a. Benefactor objective
b. Power and authority objective
c. Space productivity objective
d. Employee-centered objective
e. Employee empowerment

B.

Which of the following refers to a retailer’s “traffic strategy”?
a. Having the right merchandise, using the right layout and display, and having the right sales force
b. Providing the appropriate level of service that the customers expect
c. Getting shoppers and converting them into customers at the lowest operating cost possible
d. Converting shoppers into customers by having them purchase merchandise
e. Getting shoppers into the store

E.

Closure strategy is:
a. often referred to as a “retailer’s cost management” strategy.
b. just getting shoppers into the store.
c. getting shoppers in the store and converting them into customers at the lowest operating cost possible.
d. often referred to as a retailer’s traffic strategy.
e. having the right merchandise, using the right layout and display, and having the right sales force.

E.

A “retailer’s cost management” strategy refers to:
a. getting shoppers into the store.
b. having the right merchandise, using the right layout and display, and having the right sales force.
c. the small size of the retailers’ stores which gives these advantages in negotiating leases in an industry with a surplus of stores, thus reducing their operating costs.
d. having a low marginal cost, where the cost of selling one more unit does not significantly impact total costs, thus making them want to maximize revenue.
e. getting shoppers and converting them into customers at the lowest operating cost possible that is consistent with the level of service that customers expect.

E.

The analysis that provides management with a critical view of the organization’s position relative to its internal and external environment is known as:
a. SWOT analysis.
b. strategic window analysis.
c. leverage analysis.
d. retail audit.
e. opportunities awareness.

A.

When a retailer is attempting to determine its major advantage(s) over competitors, it is analyzing its:
a. strengths.
b. weaknesses.
c. opportunities.
d. threats.
e. operations.

A.

If a retailer is assessing the remodeling needs of its stores, as well as evaluating the effect that the lack of a formal training program is having on the management of its establishments, the retailer is reviewing the firm’s:

a. strengths.
b. weaknesses.
c. opportunities.
d. threats.
e. operations.

B.
If a retailer is attempting to determine which of the closely related areas of business are underdeveloped in its market, it is assessing its:
a. strengths.
b. weaknesses.
c. opportunities.
d. threats.
e. operations.
C.
If a retail firm is attempting to determine the potential negative effects of a new competitor entering the market, it is assessing its:
a. strengths.
b. weaknesses.
c. opportunities.
d. threats.
e. operations.
D.
_____ signify what the retailer wants to accomplish, while _____ indicate how the retailer will attempt to achieve them.
a. Objectives; mission statements
b. Mission statements; plans
c. Strategies; plans
d. Objectives; strategies
e. Action plans; strategies
D.
A fully-developed retail marketing strategy specifies the:
a. level of financial performance sought and mix of financial statement components.
b. specific target market sought, location, the specific retail mix to be used, and the retailer’s value proposition.
c. consumer and channel member behavior.
d. prices of goods to be sold.
e. retail mix to be used, specific target market sought, and budget available.
B.
A retailer’s retail mix consists of all of the following EXCEPT:
a. location.
b. price.
c. customer service and selling.
d. traffic strategy.
e. merchandise.
D.
The retailer’s _____ is a clear statement of the tangible and intangible results a customer receives from using the retailer’s products or services.
a. mission statement
b. customer interaction tracker
c. value proposition
d. customer type indicator
e. vision statement
C.
Which of the following is an incorrect statement regarding strategic planning?
a. A short-term commitment of resources is required by strategic planning.
b. The strategic planning process is started by assessing the external environment.
c. Effective strategic planning can aid a retailer in contending with competitors.
d. Strategic planning takes into consideration how a retailer responds to the environment.
e. Ineffective strategic planning can lead to a decrease in a retailer’s level of profitability.
A.
Most smaller retailers have more control over this important factor for successes than larger retailers:
a. promotional strategy.
b. location.
c. personnel.
d. service levels.
e. credit policies.
B.
The aim of operations management is to:
a. heighten customer service.
b. advance the merchandise mix.
c. maximize the performance of current operations.
d. develop more effective long-term plans.
e. increase a product’s perceived value to the customer.
C.
It is necessary for retail firms to strive for high-profit performance results:
a. so that average operating results can be obtained even if planned results cannot be accomplished.
b. as a means of achieving the largest profit possible.
c. a retailer need not strive for high profit performance results.
d. so that new retailer entrepreneurs cannot enter the market.
e. so that the managers can be allocated larger year-end bonuses.
A.
As a general rule, retailers should strive for a net profit margin of:
a. .05 to 1.5 percent.
b. 1.5 to 2.5 percent.
c. 2.5 to 3.5 percent.
d. 3.5 to 4.5 percent.
e. 4.5 to 5.5 percent.
C.
As a general rule, retailers should strive for an asset turnover of:
a. 1.0 to 1.5 times.
b. 1.5 to 2.0 times.
c. 2.0 to 2.5 times.
d. 2.5 to 3.0 times.
e. 3.0 to 3.5 times.
D.
As a general rule, retailers should strive for a financial leverage of:
a. 1.0 to 2.0 times.
b. 2.0 to 3.0 times.
c. 3.0 to 4.0 times.
d. 4.0 to 5.0 times.
e. 5.0 to 6.0 times.
B.
Superior planning can enable retailers to offset some of the advantages their competition may have, such as a better location.
True
Success for all retailers, large and small, is generally a matter of good planning and the implementation of the plan.
True
Less than 60 percent of all retailers have a written mission statement.
True
Essentially, a retailer’s mission statement describes the fundamental nature, rationale, and direction of the firm.
True
A good mission statement states how the retailer intends to use its resources, how it expects to relate to the ever-changing environment, and how it expresses the values it intends to offer the consumer.
True
Just having a written mission statement is enough for success in today’s environment; after all, with all the changes taking place it would be foolish to expect a retailer to always adhere to its original mission statement.
False
A firm’s specific goals and objectives should not be identified within its mission statement.
True
A retailer’s goals and objectives should give precision and direction to the retailer’s mission statement.
True
Goal statements should specify “how” a retailer intends to achieve a specific level of performance, as well as the “time period” allowed for achievement of the results.
False
Market performance objectives compare a retailer’s actions against those of competitors.
True
Financial performance objectives analyze the retailer’s ability to provide a profit level adequate to continue in business.
True
Market share is equal to the retailer’s total sales divided by total market sales.
True
The strategic profit model (SPM) assesses a retailer’s performance and is based on the retailer’s net profit margin, rate of asset turnover, financial leverage, and return on net worth.
True
Net profit margin shows how much profit a retailer makes on each dollar of sales.
True
Net profit margin is calculated by dividing the retailer’s net profits by markup in dollars.
False
A retailer operating with a profit margin of 20 percent is making $20 on each $100 of sales.
True
Return on assets is net profit divided by owner’s equity.
False
If a retailer has a net profit margin of 2.0 percent and an asset turnover of 3.0, then its ROA will be 6.0 percent.
True
Most retailers like to operate with a financial leverage ratio of 1.0 or greater so as to minimize debt.
False
If a retailer has a financial leverage rate of 2.3 and an asset turnover of 2, then its RONW is 4.6 percent.
False
Managers are usually evaluated on financial leverage since return on assets is beyond their control.
False
Paying taxes is the retailer’s role in helping finance societal needs that the government deems appropriate, from welfare programs to national parks.
True
An equity objective reflects the retailer’s desire to treat the consumer and suppliers fairly and not endanger their living conditions.
True
When a retailer donates money to charity, this is considered a personal objective.
False
Personal objectives relate to how a retail owner wishes to help individuals employed by the firm fulfill some of their needs.
True
Self-gratification focuses on the needs and desires of the owners, managers, or employees of the firm and their pursuit of what they truly want out of life.
True
All retail objectives, of whatever type, must be consistent with and reinforce the retailer’s overall mission.
True
A strategy is a carefully designed plan for achieving the retailer’s goals and objectives.
True
Many retailers think getting people to visit your website or your store is one of the easiest tasks in retailing.
False
A “retailer’s conversion” refers to getting shoppers in your store and converting them into customers, at the lowest operating cost possible that is consistent with the level of service that your customers expect.
False
Good strategies that reduce operating costs while providing the appropriate level of service present significant opportunities for retailers.
True
If the customer will never be profitable because of size, location, or other demands, then that customer must be dropped.
True
Price promotions usually attract, and subsequently hold, customers.
False
A retailer only needs to consider its strengths and environmental opportunities when formulating a strategic plan.
False
A SWOT analysis is actually the retail industry’s term for an accounting audit.
False
“Do competitors do a better job of selecting merchandise and anticipating demand?” is an example of a “weakness?”
True
“Are new firms entering or are existing firms leaving? What is the impact on us?” is an example of a “opportunity.”
True
Strategies indicate how the retailer will attempt to accomplish its goals with the resources available.
True
Target market refers to the group of consumers that a retailer is seeking to serve.
True
The retail mix is a combination of merchandise, price, advertising and promotion, location, customer service and selling, and store layout and design that best serves the segments targeted by the retailer.
True
Value proposition is the difference between the benefits offered by one retailer versus those of the competition.
True
The first step in strategic planning is to determine the firm’s retail marketing strategy.
False
Retail store managers often determine the location of their stores.
False
By assessing changing environmental forces, strategic planning opportunities can be found.
True
The actions of supply chain members typically do not impact a retailer’s strategy.
False
Retailers typically can not control the environmental factors that may impact them.
True
If a retailer makes efficient use of available resources, then the retailer is said to be operations effective.
True
Operations management involves managing the buying and handling of merchandise, pricing, advertising and promotion, customer services, selling and facilities.
True
Poorly managed operations can positively affect a retailer’s profitability.
False
As a general rule, a retailer should strive to have a net profit margin of 1.5 to 2.5 percent.
False
As a general rule, a retailer should strive to have an asset turnover rate between 1.5 to 2.0 times.
False
As a general rule, a retailer should strive to have its financial leverage between 3.0 and 4.0 times.
False
1. As a rule, most retailers do not try to serve all possible customer types. With one possible exception, retailers seek to segment the total market into smaller, more homogeneous segments. What type of retailer is this possible exception?
a. Discounters
b. Convenience stores
c. Supermarkets
d. High fashion apparel stores
e. Fast-food restaurants
C
1

2. The easiest way for a retailer to differentiate itself in the eyes of consumers is to:
a. satisfy the customer’s needs and wants better than the competition.
b. use a unique name.
c. use market segmentation to break up America’s homogeneous markets into more heterogeneous population bases.
d. offer no “transaction” services.
e. sell below cost.

A
1

3. Customer satisfaction is important to retailers for the following reason:
a. Customer satisfaction is an integral part of the retailers mission statement and must be constantly assessed.
b. It costs the average retailer five times as much money to get a new customer into the store as it does to make a sale to current customers.
c. Customer satisfaction has a direct impact on customer segments.
d. Population, social and economic trends are crucial to a customers overall shopping experience.
e. Satisfied customers will positively affect market segmentation.

B
1

4. _____ include(s) the activities the retailer performs that influence (1) the ease with which a potential customer can shop or learn about the store’s offering, (2) the ease with which a transaction can be completed once the customer attempts to make a purchase, and (3) the customer’s satisfaction with the purchase.
a. Customer services
b. Customer satisfaction
c. Segmentation analysis
d. Transaction verification
e. Posttransaction satisfaction

A
1

5. _____ is the dividing of a heterogeneous consumer population into smaller, more homogeneous groups based on their characteristics.
a. Target marketing
b. Customer satisfaction
c. Market segmentation
d. Customer services
e. Operations management

C
1

6. Walmart’s Supercenters that serve people with low incomes who are obsessed with names such as KitchenAid, belong to which general market segment?
a. Price-sensitive affluents
b. Brand aspirationals
c. Value-price shoppers
d. One-stop shoppers
e. Conscientious objectors

B
1

7. Walmart’s Supercenters that serve wealthier shoppers who love deals belong to which of the following general market segments?
a. Conscientious objectors
b. Value-price shoppers
c. Trendy quality seekers
d. One-stop shoppers
e. Price-sensitive affluents

E
1

8. Shoppers who like low prices and cannot afford much more belong to which general market segment as classified by Walmart?
a. Conscientious objectors
b. Price-sensitive affluents
c. Brand aspirationals
d. Value-price shoppers
e. One-stop shoppers

D
1

9. _____ include(s) age distributions, geographic trends, and ethnic makeup.
a. Population variables
b. Demographics
c. Target marketing
d. Micromarketing
e. Grey marketing

A
1

10. Which of the following statements regarding current U.S. population trends is correct?
a. The average age of the U.S. population is decreasing.
b. The nation’s overall growth rate has been decreasing over the past three decades.
c. Americans life expectancy is decreasing.
d. The majority of population growth in the U.S. is projected to come from the baby boomers.
e. The overall population is decreasing.

B
1

11. Baby busters were born between the years:
a. 1922-1945.
b. 1946-1964.
c. 1965-1977.
d. 1978-1994.
e. 1995-2002.

C
1

12. Gen Y consumers were born between the years:
a. 1922-1945.
b. 1946-1964.
c. 1965-1977.
d. 1978-1994.
e. 1995-2002.

D
1

13. Identify the correct statement about “echo boomers.”
a. They tend to rely on others for their success.
b. They want a family and home but place a higher priority on their professional career.
c. This age group is a declining percentage of the population.
d. Their behavior is the result of their growing up during the years leading up to and following the end of the Cold War.
e. They were the first to grow up with the Internet in its developed form.

E
1

14. An important characteristic of the “millennium generation” that retailers need to remember is:
a. they have an annual spending power of nearly $500 billion.
b. they were born between 1965 and 1977 and thus are called the “Children of the ’80s.”
c. they number less than 50 million.
d. they tend to be more traditional and have a conservative lifestyle.
e. they are a relatively homogeneous group.

D
1

15. Retailers should remember that Baby Busters:
a. have an annual spending power of over $800 billion.
b. generally have similar buying behavior as boomers.
c. feel alienated and angry at the baby boomers’ culture and lifestyle which they believe has placed the economy in such poor shape.
d. have buying behavior patterns that make it easy for retailers to reach them.
e. usually behave as the boomers did 20 years ago.

A
1

16. Which age group, by its very nature, is acquisition oriented?
a. Young children
b. Young adults
c. Middle-aged adults
d. Older adults
e. Adolescents

B
1

17. Retail experts are finding that it is difficult to sell to older Americans because this segment:
a. is shrinking as a percentage of the total population.
b. is skeptical and uninterested in shopping.
c. barely has enough money to support its current standard of living.
d. is too busy paying off mortgages and car loans.
e. is behaving just like its parents did 20 years before.

B
1

18. Which of the following statements about Gen Yers is false?
a. They are concerned with how the product makes them appear and less concerned about the shopping process.
b. These antifashion and antiestablishment consumers do not want entertainment or events when they shop.
c. Gen Yers seem to be turned off by promotions that do not take them seriously.
d. Some banks have lured Gen Yers with online user friendliness whereby they can drag money from one account to another all on the same screen.
e. Realizing the Yers’ interests, many banks are allowing their customers to set their own rules for transferring funds into savings accounts.

B
1

19. Consumers who are between the age of 8 to 14 are known as:
a. Gen Xers
b. Boomers.
c. Gen Yers.
d. Teen- agers.
e. Tweeners

E
1

20. Which of the following statements regarding current U.S. population trends is correct?
a. The baby boomers are now moving into their 30s and 40s.
b. The country’s total population is expected to grow at a faster rate in the next 10 years than in the previous 20 years.
c. Americans change their residences about a four times in their lifetime.
d. Most of the U.S. population resides in secondary markets, areas with populations less than 50,000.
e. Between 2000 and 2007 the eight fastest-growing states were all in the West and the South.

E
1

21. _____ involves tailoring merchandise in each store to the preferences of its neighborhood.
a. Neighborhood targeting
b. Micromarketing
c. Target marketing
d. Benefit analysis
e. Customer targeting

B
1

22. Which of the following statements about metropolitan statistical areas (MSAs) is true?
a. In the past, the migration to MSAs was directed more toward central city areas than suburban areas.
b. They are urban areas based around a core city with a population of 10,000 to 49,999.
c. The proportion of the population residing in these cities has increased dramatically, from 54 percent in 1950 to 90 percent today.
d. They are freestanding urban areas with populations in excess of 50,000.
e. The urban or metropolitan population does not vary considerably by state.

D
1

23. Secondary markets can be described as:
a. metropolitan areas with a population of 50,000 or more.
b. concentrated ethnic population spots in urban areas.
c. communities with populations of less than 50,000.
d. bedroom communities outside of major cities.
e. inner-city areas with populations between 30,000 and 70,000.

C
1

24. Which of the following statements about the implications for retailers of urban centers is false?
a. During the past decade, retail activity has grown rapidly in secondary markets.
b. Recent shifts in consumer population patterns have resulted in an increase for downtown retail activity.
c. Secondary markets are attractive because of the low level of retail competition.
d. Sales increases in freestanding suburban locations have more than offset any decline in retail activity.
e. As MSAs have begun to stabilize, secondary markets have become more attractive.

B
1

25. Which of the following statements about the mobility of U.S. consumers is true?
a. As a rule, consumers are born, raised, married, widowed, and die in the same city or immediate geographic area.
b. Consumers change their residence 2-4 times in a lifetime.
c. American consumers’ rate of mobility is more than that of the British or French.
d. A major factor for consumers’ heightened mobility is the country’s marriage rate.
e. Retailers should plan on the fact that the country’s mobility will begin to decrease.

C
1

26. Mobile consumers, after moving:
a. must locate new sources for food, clothing, household goods, and recreation.
b. are not an attractive market opportunity for retailers since they move every few years.
c. tend to continue to make major purchases at their old location.
d. generally have moved outside of their current county but within their state.
e. have little impact on local retail conditions.

A
1

27. Which of the following categories, who were between ages 30 and 42 in 2007, has been the most educated generation ever?
a. Baby Boomers
b. The Millennium Generation
c. Gen Xers
d. The Silent Generation
e. Gen Yers

C
1

28. Which of the following is the single most reliable indicator of a person’s income potential, attitudes, and spending habits?
a. Race
b. Location
c. Educational attainment
d. One’s own efforts and abilities
e. Family status

C
1

29. Which of the following statements applies to members of the college-educated market?
a. They are especially watchful of price, quality, and advertised claims.
b. The size of this group is expected to undergo a substantial decrease in the next decade.
c. They are less sophisticated, discriminating and more dependent than other consumers of their age and income level, when making retail purchases.
d. With the advent of the Internet, they will have no need for in-store salespeople.
e. Their buying behaviors do not differ from those of other consumers of their same age who are not college educated.

A
1

30. Which of the following statements about divorce is FALSE?
a. Retail purchases may be stimulated as a new household is created.
b. Time may become an even more critical factor in shopping decisions for the individuals involved.
c. Since 1960, the divorce rate in the U.S. has increased by 250 percent.
d. As women’s wages rose, it became more profitable for them to enter the labor force; as a result, spouses have become less dependent on each other, and the divorce rate has increased.
e. Divorce, while creating new households, does not actually stimulate any new retail purchasing.

E
1

31. Which of the following statements about the makeup of the American household is FALSE?
a. Household growth and consumer demand go together.
b. The number of households without children has decreased in recent years.
c. The retailer, like the social scientist, has little knowledge of how joint decision making occurs or does not occur in households of unmarried adults.
d. The number of unmarried couples has increased in recent years.
e. Seventy-five percent of American households are not directly concerned about back-to-school sales and other family-oriented retail activities.

B
1

32. The trend of people living alone, which has increased by 35 percent between 1990 and 2007, is due to all of the following EXCEPT:
a. an increased desire for privacy.
b. an increase in young adults delaying marriage.
c. an increase in never marrieds.
d. an increase in the number of dinks.
e. a large increase in the number of people who live alone after the death of a spouse.

D
1

33. Unmarried couples are also referred to as:
a. home-aloners.
b. mingles.
c. singles.
d. dinks.
e. empty nesters.

B
1

34. The _____ is a relatively new phenomenon that describes the recent trend of children returning to live with their parents after having already moved out for what they thought was a permanent move.
a. nesting effect
b. return effect
c. multi generational effect
d. sandwich generational effect
e. boomerang effect

E
1

35. When all three generations (parents, grandparents, and children) of a family are under the same roof, it is often referred to as a:
a. sandwich generational family.
b. nuclear family.
c. bigenerational family.
d. intentional community family.
e. grandfamily.

A
1

36. _____ refers to American households that are made up of married couples, with each partner earning an income, and who do not have children.
a. Yuppies
b. Minks
c. Dinks
d. Mingles
e. Yawns

C
1

37. Which of the following statements about the changing nature of work impacting retailers is false?
a. For entry-level personnel in retailing, turnover approaches 75 percent or more per year.
b. One major opportunity for retailers is employing home-based workers.
c. Because people are finding more meaning in their work, they are more loyal to their employers.
d. Disabled workers may represent a previously untapped pool of talent for the retailer.
e. Retailers need to find ways to enrich job experiences and lower turnover.

C
1

38. Disposable income is:
a. all personal income after taxes and retirement savings.
b. all personal income after savings.
c. all personal income minus the money needed for necessities food, clothing, housing, etc.
d. all personal income after taxes minus the money needed for necessities.
e. all personal income after taxes.

E
1

39. The disposable income minus the money needed for necessities to sustain life, such as minimal housing, minimal food, and minimal clothing is:
a. discretionary income.
b. comprehensive income.
c. aggregate income.
d. passive income.
e. basic income.

A
1

40. The “wealth effect” claims that for every $100 of additional wealth generated in an individual’s stock market holdings, the individual will spend:
a. $4.
b. $8.
c. $10.
d. $12.
e. $15.

A
1

41. Regarding women in the labor force, retailers should:
a. realize that full-time, working women tend to do more in-home shopping than any other group.
b. remember that special services are more important than price in capturing the time-pressed shopper’s store loyalty.
c. realize that price is the most important factor in determining store selection.
d. remember that this segment works hard during the week and wants to enjoy the weekend; thus, retailers should avoid having weekend sales.
e. realize that household incomes for dual wage earner-couples are falling in comparison to other households; thus, retailers should ignore this market.

B
1

42. The consumer shopping/purchasing model presented in the text:
a. always begins with active information gathering.
b. ends with the buying decision.
c. suggests that consumer behavior is a process, with a series of stages occurring against a backdrop of factors.
d. always begins with passive information gathering.
e. usually begins with a buy trigger event.

C
1

43. A _____ refers to a cue that is external to the individual or a drive that is internal to the individual.
a. demand
b. need
c. stimulus
d. want
e. necessity

C
1

44. A _____ is any object or phenomenon in the environment that is capable of eliciting a response.
a. stimulus
b. drive
c. cue
d. need
e. want

C
1

45. The physiologically-based stimulus to stay warm in the cold is an example of a:
a. cue.
b. drive.
c. goal.
d. want.
e. demand.

B
1

46. While driving across town, you notice that your car’s gas tank is almost empty. The situation in which your desired state departs sufficiently from your actual state is termed:
a. need recognition.
b. problem recognition.
c. habitual problem solving.
d. want.
e. extended problem solving.

B
1

47. When a consumer has a strong retailer preference and strong brand preference, he/she will engage in:
a. decelerated problem solving.
b. habitual problem solving.
c. limited problem solving.
d. extended problem solving.
e. tertiary problem solving.

B
1

48. Identify the correct statement about habitual problem solving.
a. It typically involves frequently purchased expensive products of low risk.
b. The consumer has a strong preference for the brand to buy and the retailer from which to purchase it.
c. It occurs when the consumer has a strong preference for either the brand or the store, but not both.
d. The consumer may not have a store choice in mind but may have a strong preference for the brand to purchase.
e. It occurs when the consumer relies on past experience and learning to convert the problem into a situation requiring less thought.

E
1

49. When a consumer has a strong preference for either the brand or the store but not both he/she will engage in:
a. decelerated problem solving.
b. habitual problem solving.
c. limited problem solving.
d. extended problem solving.
e. tertiary problem solving.

C
1

50. Identify the correct statement about extended problem solving.
a. It occurs when the consumer recognizes that a problem exists yet does not have a strong preference for either the brand or the store.
b. The consumer has a strong preference for the brand to buy and the retailer from which to purchase it.
c. It typically involves infrequently purchased expensive products of high risk.
d. The consumer may not have a store choice in mind but may have a strong preference for the brand to purchase.
e. The consumer relies on past experience and learning to convert the problem into a situation requiring less thought.

A
1

51. The set of _____ refer to the characteristics of the store and its products and services.
a. attributes
b. cues
c. drives
d. needs
e. wants

A
1

52. Which stage of the consumer shopping and purchasing model is often seen by retailers as an opportunity to use suggestion selling to sell add-on or related purchases, and impulse merchandise?
a. Stimulus
b. Purchase
c. Problem recognition
d. Search
e. Evaluation of alternatives

B
1

53. Post-purchase resentment:
a. usually only has short-term negative consequences for the retailer.
b. cannot be fixed.
c. is easily detected.
d. is often transferred from the product to the retailer where it was purchased.
e. only occurs after the evaluation stage.

D
1

1. The easiest way for a retailer to differentiate itself in the eyes of consumers is to use market segmentation to break up America’s homogeneous markets into more heterogeneous population bases.

F
1

2. If the customer’s total shopping experience has met or exceeded their expectations, the customer is said to be satisfied.

T
1

3. Customer satisfaction leads to repeat business and increased purchases.

T
1

4. It costs the average retailer two times as much money to get a new customer into its store as it does to retain a current customer.

F
1

5. As long as there is a lack of spending power, the ability of ACSI alone to predict consumer spending will be limited.

T
1

6. The transaction services offered by a retailer influence the ease with which a transaction can be completed once the customer attempts to make a purchase.

T
1

7. Common services provided by retailers, such as alterations, free delivery, bridal registries, check cashing, credit, short check-out lines, and gift wrapping, are not actually the merchandise or service offered for sale.

T
1

8. The process of dividing the total market into smaller, more heterogeneous segments is called market segmentation.

F
1

9. Brand aspirationals are wealthier shoppers who love deals.

F
1

10. Retailers find it useful to group consumers according to population variables because such data is often linked to marketplace needs.

T
1

11. U.S. families today are having more children than they have had historically.

F
1

12. The majority of the U.S. population growth is expected to be the result of immigration.

T
1

13. The age distribution of the U.S. population is changing.

T
1

14. The fact that seniors are the most homogeneous group in the marketplace makes targeting stores and retail services to them easier.

F
1

15. A useful way for retailers to categorize seniors is in terms of their wealth and health.

T
1

16. Generation Xers is a term used to refer to those born between 1965 and 1977.

T
1

17. Gen Y consumers, who are also called echo boomers, are those born between the years 1978-1994.

T
1

18. Generation Yers were the first to grow up with the Internet in its developed form.

T
1

19. In terms of their attitudes, baby boomers tend to be more pessimistic, while Gen Xers tend to be more optimistic, and Gen Yers more realistic.

F
1

20. Although older consumers tend to be more skeptical and less interested in shopping, retailers who ignore boomers are limiting their success.

T
1

21. The “graying of America” phenomenon refers to the fact that consumers’ ethnicities are becoming blurred as immigration to the United States continues to increase.

F
1

22. In addition to altering the types of products offered to these aging segments of the population, retailers will also need to shift the types of services provided if they are to gain the consumers’ dollar.

T
1

23. Gen Xers and Gen Yers are different in age but significantly similar in their buying behavior.

F
1

24. Gen Yers are sometimes also called “Generation P.”

T
1

25. With annual spending of $40 billion and influence on another $450 billion, tweeners (consumers aged 8 to 14) should not be overlooked by retailers.

T
1

26. The term “minority” (minority population) is likely to have a very different meaning in the next few decades.

T
1

27. Second-generation Hispanic Americans, who have been immersed in American culture, are very similar in their shopping behavior to foreign-born Hispanics.

F
1

28. Growth opportunities for domestic retailers in the coming years should be the greatest in the West and South, since these regions of the country have experienced the largest growth over the past 200 years.

T
1

29. Micromarketing is the tailoring of merchandise in each store to the preference of its neighborhood.

T
1

30. Markets with a population of less than 50,000 do not present many opportunities for retailers and hence should be avoided.

F
1

31. Secondary markets have become attractive to retailers because, among other factors, they have lower labor costs.

T
1

32. The average American is more likely to move than someone in England or France.

T
1

33. Chain stores have an advantage over locally owned, non-chain retailers in that as Americans move more often, and they are more likely to shop at the national chains with whose names they are familiar.

T
1

34. College-educated consumers are more alert to price, quality and advertised claims than other workers of the same age and income level.

T
1

35. When retailers use education to segment the marketplace, they often over look millions of Americans over age 25 who have some college experience but no degree.

T
1

36. The increasing divorce rate is bad for retailers as singles stimulate lower retail sales, especially for durable, household goods.

F
1

37. Married couples are one of the slowest-growing household types not only in this country but also worldwide.

T
1

38. A big problem for retailers is that people are finding less meaning in their work and are less loyal to their employers.

T
1

39. Disposable income is discretionary income minus the money needed for necessities to sustain life, such as minimal housing, minimal food, and minimal clothing.

F
1

40. The “wealth effect” claims that for every $100 of additional wealth generated in an individual’s stock market holdings, the individual will spend $10 (10 percent).

F
1

41. Retailers have enjoyed continued sales growth over the past decade due to the spending rather than saving mindset of the consumer.

T
1

42. It is important for retailers to realize that working women are often more concerned with convenience than with price.

T
1

43. Twenty-five percent of households rarely pay off their credit card balance.

T
1

44. Stimulus refers to a cue that is external to the individual or a drive that is internal to the individual.

T
1

45. A cue refers to a motivating force that directs an individual’s shopping behavior.

F
1

46. Problem recognition occurs when the consumer’s desired state converges with their actual state.

F
1

47. The level of one’s desire to resolve a particular problem depends on the magnitude of the gap between the consumer’s desired and actual states, and the importance of the problem.

T
1

48. When a consumer has a strong retailer preference and a strong brand preference he/she typically engages in habitual problem solving.

T
1

49. When a consumer has a strong retailer preference and a weak brand preference he/she typically engages in limited problem solving.

T
1

50. When a consumer has a weak retailer preference and a strong brand preference he/she typically engages in extended problem solving.

F
1

51. Active information gathering occurs only when a consumer defines a specific attribute set of a store and product characteristics.

F
1

52. If post-purchase resentment is not identified and rectified by the retailer, it may produce a short-term negative image problem for the retailer, but never a long-term problem.

F
1
1. To be successful in retailing today, given the slower population growth rate, retailers will grow by:
a. taking away sales from competitors.
b. reducing the number of stores they have.
c. having their industry legislated as a monopoly.
d. accusing their competitors of unfair competition.
e. reducing customer services.
A
1

2. High-profit performance retailers must always be on the offensive in their study of the changing competitive environment, especially its _____ competition.
a. local
b. statewide
c. nationwide
d. worldwide
e. industry

A
1

3. A retailer who has already done a great job of developing a strategy:
a. should also be aware of changes on the national retailing scene, but need not concern itself with local changes.
b. need not worry what competitors are doing.
c. should never be seen visiting a competitor’s store.
d. must make sure that its fixed costs exceed its variable costs.
e. must always remember that no retailer can ever design a strategy that will totally insulate it from the actions of competitors.

E
1

4. Retailers compete for customers on five major fronts or factors. Which of the following is NOT one of the major fronts retailers compete for target customers?
a. The price for the value offered
b. Service level
c. Product selection
d. Customer experience
e. Employee compensation

E
1

5. A market offers rows of exotic produce, fresh prime meats, seafood flown in fresh, a bakery filled with artisan breads and over 220 cheeses. This market is competing for customers on which major front?
a. The price for the value offered
b. Service level
c. Product selection
d. Location or access
e. Employee compensation

C
1

6. What type of competitive environment is characterized by a horizontal demand curve, where the retailer must sell all of its merchandise at the going “market” or equilibrium price?
a. Perfect competition
b. Oligopolistic competition
c. Pure competition
d. Pure monopoly
e. Monopolistic competition

C
1

7. Which of the following factors is NOT characteristic of a market experiencing pure competition?
a. Ease of entry into the market
b. Many buyers
c. Many sellers
d. Similar products
e. Differentiated products

E
1

8. When the seller is the only one selling a particular product, it is known as:
a. Pure competition
b. Pure monopoly
c. Monopolistic competition
d. Oligopolistic competition
e. Perfect competition

B
1

9. When Gap Stores get an exclusive contract to sell uniforms to your old high school, it is an example of:
a. monopolistic competition.
b. oligopolistic competition.
c. pure monopoly.
d. pure competition.
e. perfect competition.

C
1

10. _____ describes a situation where consumers already have one unit of an item and as a result place a lower value on an additional unit.
a. Decreasing marginal revenue
b. Leveling product usage
c. Monopolistic decline
d. Declining marginal utility
e. The law of diminishing markets

D
1

11. Customers can “self-inflict” this type of competition when a brand name is perceived as unique and highly valued, and a retailer controls its sale.
a. Pure competition
b. Pure monopoly
c. Monopolistic competition
d. Oligopolistic competition
e. Perfect competition

B
1

12. Which of the following is a key characteristic of monopolistic competition?
a. Few sellers
b. Substitutable products
c. Horizontal demand curve
d. One seller
e. Lack of government regulation

B
1

13. The competition between American Airlines and Delta Airlines is an example of:
a. monopolistic competition.
b. oligopolistic competition.
c. pure monopoly.
d. pure competition.
e. perfect competition.

B
1

14. Retailing is often characterized as:
a. monopolistic competition.
b. vertical competition.
c. pure monopoly.
d. pure competition.
e. perfect competition.

A
1

15. If the top four firms of an industry account for more than 60 percent to 80 percent of the market, which of the following occurs?
a. Monopolistic competition
b. Oligopoly
c. Pure monopoly
d. Pure competition
e. Perfect competition

B
1

16. If prices become too high, merchandise selection too limited, or services too poor, residents of these communities will travel to larger communities to shop. This is known as:
a. Outsourcing.
b. Store positioning.
c. Outshopping.
d. Internet shopping.
e. Transport shopping.

C
1

17. Because many retailers have access to the same merchandise, high-profit performing retailers have sought to use _____ in order to develop a protected niche in the marketplace so that they cannot be easily copied by the competition.
a. revenue management
b. yield management
c. asset management
d. store positioning
e. category killers

D
1

18. Which of the following is NOT an example of a nonprice demand strategy that a retailer could employ as a means of increasing its demand?
a. Increasing the width of the store’s aisles, so the customer can freely move around in the store.
b. Providing “out-of-town” customers with free gasoline.
c. Offering a 30-day guarantee to customers if they find the same product for a cheaper price.
d. Providing customers using public transportation with complimentary “ride and shop” coupons.
e. Developing an advertising campaign aimed at persuading consumers to make more of their purchases at its stores.

C
1

19. Retail experts would agree that a certain marketplace is _____ if the number of stores in relation to the number of households is so large that to engage in retailing is unprofitable or marginally profitable.
a. understored
b. saturated
c. overstored
d. overmarketed
e. over-spaced

C
1

20. Retailers would like to compete in _____ since many retailers in such markets achieve an above-average return on investment due to the low level of competition in the marketplace.
a. intratype markets
b. overstored markets
c. understored markets
d. pure monopolies
e. divertive markets

C
1

21. When two discount department stores such as Sears and JCPenney compete for the same customer, what type of competition is occurring?
a. Intertype
b. Conceptual
c. Divertive
d. Intercept
e. Intratype

E
1

22. Albertson’s Supermarkets recently began offering DVD rentals to compete with Blockbuster. What type of competition is this?
a. Intertype
b. Intratype
c. Scrambled
d. Mixed share
e. Mixed location

A
1

23. Divertive competition occurs when:
a. retailer A sends its customer to retailer B to purchase any products that A had “out-of-stock.”
b. the customer buys product A rather than product B, which was the one he/she was shopping for.
c. a retailer intercepts and makes a sale to a customer that normally would have purchased the product at another retail store.
d. the retailer tries to entice the customer to buy a more expensive model or brand than wanted.
e. the customer buys a private label instead of his/her usual brand.

C
1

24. Dawn needed to drop off a few garments at the dry cleaners. On her way to work, she stopped at the local SuperCenter to pick up pastries for her staff at work. While at the SuperCenter, Dawn noticed that they now offer dry cleaning services. So, instead of going to the dry cleaner’s on the corner, Dawn dropped off her garments at the SuperCenter. By offering dry cleaning, SuperCenter successfully engaged in what form of competition?
a. Perfect monopoly
b. Mixed-share
c. Divertive
d. Intratype
e. Interactive

C
1

25. The _____ is the point where total revenues equal total expanses.
a. break-even point
b. matched point
c. stabilization point
d. profit maximization point
e. point of highest revenue

A
1

26. The theory of retail competition that states that new retail institutions enter the marketplace as low-price, low-margin operations and eventually begin to offer more services and charge higher prices is the:
a. retail accordion theory.
b. high/low theory.
c. natural selection theory.
d. retail life cycle theory.
e. wheel of retailing theory.

E
1

27. In 2000, Samantha Toller started a small fast-food restaurant. In order to gain a competitive foothold, Samantha offered low prices with very few extras. As her business grew, Samantha started adding services and gradually had to increase prices to cover the costs of these services. Today, Samantha is vulnerable to new, low-price competitors. This is an example of what theory of retail evolution?
a. High price jinx
b. High/low
c. Retail life cycle
d. Wheel of retailing
e. Retail accordion

D
1

28. According to the wheel of retailing theory, _____ currently appear to be in the vulnerability phase of their evolution.
a. outlet malls
b. warehouse clubs
c. health spas
d. The Internet
e. discount department stores

A
1

29. The _____ theory of retail evolution describes retail institutions as evolving from outlets that offer wide assortments to specialized stores that offer narrow assortments, and then return to the wide assortment stores, continuing this pattern again and again.
a. wheel of retailing
b. retail life cycle
c. retail accordion
d. dominant competitive
e. turnover

C
1

30. Retail historians have observed that, in the United States, retail trade was dominated by _____ until 1860; this type of store carried a broad assortment of merchandise ranging from farm implements to textiles to food.
a. mail order
b. general stores
c. door-to-door sales
d. corner stores
e. family owned business

B
1

31. The first stage of the retail life cycle is:
a. entry.
b. realignment.
c. introduction.
d. growth.
e. decline.

C
1

32. The retail life cycle suggests that firms move from the _____ stage to the _____ stage to the _____ to _____ stage.
a. introduction; growth; maturity; decline
b. introduction; development; maturity; decline
c. entry; development; maturity; decline
d. entry; trading-up; vulnerability; decline
e. innovation; growth; development; decline

A
1

33. Which stage of the retail life cycle is characterized by the entrance of many new competitors and tremendous growth in sales and profits?
a. Vulnerability
b. Maturity
c. Growth
d. Entry
e. Introduction

C
1

34. As a warehouse club manager, you have noticed that this format’s market share has stabilized. As such, you fear severe profit declines as warehouse clubs are now in the _____ stage of the retail life cycle.
a. introduction
b. growth
c. maturity
d. decline
e. vulnerability

C
1

35. The _____ theory suggests that all firms seek superior financial performance in an ever-changing environment, and as a result, firms are forced to change the elements of their retail mix to match changing consumer preferences.
a. wheel of retailing
b. retail accordion
c. retail life cycle
d. resource-advantage
e. monopolistic competitive

D
1

36. Which of the following is NOT a trend shaping the retail landscape today?
a. Decrease in competition from nonstore retailers
b. The advent of new retailing formats
c. Heightened global competition
d. The integration of technology into current operations
e. The increasing use of private labels

A
1

37. According to most retail analysts, as a result of several key forces at work today, which of the following forms of nonstore retailing will experience significant growth over the next decade while the other forms will remain steady or decline?
a. Telemarketing
b. Vending machines
c. Catalog sales
d. Direct selling
e. Internet shopping

E
1

38. The growth of nonstore retailing growth can be attributed to:
a. Accerelerated communication technology and changing consumer lifestyles.
b. Heightened global competition and increasing use of private labels.
c. The development of off price retailers and supercenters.
d. The rapid growth of qualified sales help in bricks-and-mortar stores and more convenient retail locations.
e. The development of recycled merchandise retailers and liquidators.

A
1

39. _____ sell products at a discount but do not carry certain brands on a continuous basis and carry those brands they can buy from manufacturers at closeout or deep one-time discount prices.
a. Full-price stores
b. Department stores
c. Specialty retailers
d. Discounters
e. Off-price retailers

E
1

40. According to the text, what is the one important difference between off-price retailers and discounters?
a. Discounters carry only brands that they are able to get on special deals from the manufacturer.
b. Off-price retailers offer better prices
c. Discounters offer greater selection
d. Off-price retailers offer more convenient locations
e. Discounters offer continuity of brands

E
1

41. Which of the following is an off-price retailer that is owned and operated by the manufacturer, and stocks the manufacturers’ surplus, discontinued, or irregular products?
a. Warehouse club
b. Factory outlet
c. Supermarket
d. Supercenter
e. Independent carrier

B
1

42. Identify the incorrect statement about warehouse clubs.
a. They charge patrons an annual membership fee.
b. They sell a limited selection of brand-name grocery items, appliances, and clothing.
c. These mature-stage retailers operate out of enormous, low-cost facilities.
d. They sell a vast, unlimited selection of miscellaneous items at a deep discount.
e. Warehouse stores, which have low costs because they buy products at huge quantity discounts and use limited labor, usually have low gross margins.

D
1

43. This retail format combines a discount store and grocery store to carry 80,000 to 100,000 products in order to offer one-stop shopping.
a. Warehouse club
b. Off-price retailer
c. Supercenter
d. Recycled merchandise retailer
e. Liquidator

C
1

44. Most retail experts agree that _____ will NOT be one of the four new retail formats to be successful in the near future.
a. liquidators
b. recyclers
c. off-pricers
d. supercenters
e. rental operations

C
1

45. What do the formats of stores such as those that recycle usable merchandise in good condition, liquidators, and rental operations have in common?
a. They offer convenient locations
b. They offer the consumer value in an untraditional manner
c. They offer the customer one-stop shopping
d. They carry an ever-changing assortment of higher-quality merchandise
e. The growth for these formats appears to be limited

B
1

46. Which of the following statements about liquidators is false?
a. Liquidators do more than $15 billion in sales annually and earn between 3 percent and 7 percent of the sales.
b. Liquidators have a talent for pricing merchandise and estimating the expense of everything from ad budgets and payrolls to utility bills.
c. They are often called retailing’s undertakers or vultures.
d. Most liquidators pay through credit for the merchandise—a plus for the strapped retailer—and then take all the risks and gain the rewards.
e. They assume responsibility for a retailer’s leases, payroll, and other costs and agree either to take a percentage of what they sell or agree in advance to purchase the existing inventory.

D
1

47. The rate of change in retailing around the world appears to be directly related to:
a. the internationalization of U.S. franchises such as McDonald’s.
b. the internationalization of Walmart.
c. the use of discount stores as a retail format.
d. the stage and speed of economic development in the countries concerned.
e. the development of warehouse clubs.

D
1

48. The late Michael O’Connor, former president of the Super Market Institute, suggested that the failure of many U.S. retailers to succeed in international markets was due to:
a. retailers from larger countries having operated in successful economies and therefore tending to be less involved in the small details when going international.
b. customers from other countries not understanding how retailers should operate.
c. the competitive intensity in international markets being too high.
d. increased distribution costs making U.S. retailers uncompetitive when they expanded internationally.
e. executives being sure of themselves, and not seeking more counsel or listening to more opinions before developing strategic plans.

A
1

49. Technological innovations in retailing can best be viewed under three main areas:
a. Internet, order processing, and order taking.
b. Internet, supply chain management, and order processing.
c. Internet, customer management, and order processing.
d. supply chain management, customer management, and order processing.
e. supply chain management, customer management, and customer satisfaction.

E
1

50. _____ is a term used to refer to brands that are owned by the retailer.
a. Name brand
b. Retail brand
c. House brand
d. Private label brand
e. Manufacturer brand

D
1

51. Today, retailers typically view private label brands as:
a. secondary to national brands.
b. leading brands that serve as a destination draw.
c. too high cost to maintain effectively.
d. lower margin offerings of the retailer when compared to national brands.
e. throwaway brands.

B
1

52. Target has recently introduced Archer Farms Market as a separate department in its stores. This is an example of:
a. two different independently owned retailers operating within one retail store.
b. Target allowing a national food manufacturer to set up its operations within Target’s store.
c. leveraging of a famous national brand from France to operate in the U.S.
d. a private label branding strategy extended to a department.
e. reintroducing products that have strong name recognition but that have fallen from the retail scene.

D
1

1. Competition at the local level is often more complex than at the national or regional level.

T
1

2. Retailers today can achieve an above-average growth rate by maintaining their market share, since the country’s population is growing so fast.

F
1

3. Strategic plans that provide a differential advantage lead to high profit only if competitors need large amounts of time or money to overcome them.

T
1

4. Local retailers can expect to compete with large discount stores such as Walmart and Target.

T
1

5. Market structures characterized as pure competition have heterogeneous products, many buyers and few sellers, and ease of entry for both buyers and sellers.

T
1

6. In pure competition, each retailer faces a horizontal demand curve and must sell its products at the going “market” or equilibrium price.

T
1

7. The law of diminishing returns suggests that consumer demand for a specific product will increase once a consumer has already purchased one unit of that product.

F
1

8. While a chocolate-covered donut would taste great right now, the second, third, or tenth one, purchased and consumed today, would be less desirable. This is an example of declining marginal utility.

T
1

9. Situations of near monopoly do exist.

T
1

10. The distinction between monopolistic competition and oligopolistic competition is that in monopolistic competition there are fewer sellers than in oligopolistic competition.

F
1

11. Outshopping occurs when customers go “out” and patronize the retailer’s store rather than using other methods of shopping such as telephone and mail order.

F
1

12. Increased state and city tobacco taxes is an example of outshopping caused by lawmakers.

T
1

13. In a monopolistically competitive market, the retailer will be confronted with a negatively sloping demand curve.

T
1

14. Retailers must always match or be lower than the competitor’s price.

F
1

15. Nonprice variables are directed at enlarging the retailer’s demand by offering customers benefits beyond simply the lowest price.

T
1

16. Private label branding is an example of using nonprice competition to achieve a protected niche.

T
1

17. While most price decisions are directed at influencing demand, the retailer’s use of nonprice strategies seldom seeks to increase demand.

F
1

18. A market is considered “understored” when the number of stores is less than the current demand of the market.

T
1

19. Competition is most intense in understored markets since many retailers are operating in stores too small to carry all the merchandise demanded by customers.

F
1

20. The early exit of many e-tailers was the result of the Internet being overstored given the demand at the time, as well as many e-tailers’ inability to control back-office costs.

T
1

21. Intratype competition is the most common type of retail competition.

T
1

22. Family Dollar competing with Dollar General is an example of intratype competition.

T
1

23. Intertype competition is increasingly seen as many retailers compete using a scrambled merchandising strategy.

T
1

24. Every time different types of retail outlets sell the same lines of merchandise and compete for the same limited amount of consumer dollars available, intertype competition occurs.

T
1

25. Divertive competition can be intratype, but not intertype.

F
1

26. The break-even point is where total revenues equal total expenses.

T
1

27. The wheel of retailing theory is an attempt to explain how retailers have reacted to the demands of consumers in this “wheeling and dealing” competitive economic system.

F
1

28. According to the wheel of retailing theory, new types of retailers enter a trading up phase which allows retailers to compete effectively and take market share away from the more traditional retailers.

F
1

29. Today specialization in merchandise categories has once again become a dominant competitive strategy.

T
1

30. The retail accordion theory is vague about the competitive importance of providing wide assortments for various target customer groups.

T
1

31. The retail life cycle has five stages: idea generation, introduction, growth, maturity, and death.

F
1

32. During the maturity stage of the retail life cycle, retailers will achieve the highest level of profits.

F
1

33. Superior performance at any point in time is the result of achieving a competitive advantage in the marketplace as a result of some tangible or intangible entity.

T
1

34. The resource-advantage theory teaches that all retailers cannot achieve superior results at the same time.

T
1

35. The resource advantage theory explains why Dollar General stores can survive in the same markets with larger discounters.

T
1

36. Retailers today can expect an increase in competition from both nonstore retailers and the introduction of new retailing formats that will change the way retailing currently occurs.

T
1

37. Retail analysts predict that only catalog sales will experience significant growth over the next decade, while other forms of nonstore retailing will remain steady or decline.

F
1

38. The only prerequisite needed for the Internet’s success is having enough consumers with access.

T
1

39. Experts predict that e-tailing will soon make up 75 percent of total retail sales.

F
1

40. Bricks-and-click strategies that integrate a single message and seamless operations will be more powerful than a pure e-tailing strategy.

T
1

41. E-tailers must pay better attention to customer service.

T
1

42. The most successful new retailing format introduced in the United States during the last decade was the hypermarket.

F
1

43. The major advantage held by off-price retailers over discounters is that they provide consumers with a consistent selection of top brands at reduced prices, whereas discounters’ selections are more volatile.

F
1

44. The closure of more than 300,000 retail stores between 2008 and 2009 as a result of bankruptcy provided a new retail growth format: recycled merchandise retailers.

F
1

45. The rate of change in retailing around the world appears to be directly related to the stage and speed of economic development in the countries concerned.

T
1

46. Retailing in other countries exhibits greater diversity in its structure than retailing in the United States.

T
1

47. Retailers from large countries are often better suited to expand internationally than retailers from smaller countries.

F
1

48. Germany remains the world’s largest consumer market.

F
1

49. Technological integration in retailing can be viewed under the areas of supply chain management, customer management, and customer satisfaction.

T
1

50. Retailers who continue to use technology in innovative ways within the supply chain will achieve greater efficiency in their operations.

T
1

51. Activity-based costing analyses demonstrate that, in categories with mixed distribution, products just going through the warehouse consistently outperform DSD products.

F
1

52. Retailers must remember that most department store shoppers value a product’s brand name more than the product’s style.

F
1

53. Retailers have found private label branding strategies so successful that they are using private label brands for entire departments.

T
1