Marketing Management, 14e (Kotler/Keller) Chapter Analyzing Business Markets 1) refers to the decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers A) Marketing channels B) Organizational buying C) Corporate retailing D) Brand auditing E) Inventory control Answer: B Page Ref: 183 Objective: Difficulty: Easy 2) The consists of all the organizations that acquire goods and services used in the production of other products or services that are sold, rented, or supplied to others A) business market B) consumer market C) e-commerce market D) global market E) domestic market Answer: A Page Ref: 183 Objective: Difficulty: Easy 3) How can a marketer overcome the negative effects of commoditization? A) convince target consumers that the firm's products are as good as those of competitors B) convince target consumers that price is irrelevant in determining quality C) convince target consumers that the firm's products are different from those of competitors D) convince target customers that buying the highest-priced product is no guarantee of quality E) convince target customers that all the products in the market are equivalent Answer: C Page Ref: 184 Objective: Difficulty: Easy Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 4) Which of the following is true for business marketers? A) They deal with more and larger buyers than consumer marketers B) They deal with more and smaller buyers than consumer marketers C) They deal with fewer and larger buyers than consumer marketers D) They deal with fewer and smaller buyers than consumer marketers E) They deal with the same kind of buyers as consumer marketers Answer: C Page Ref: 184 Objective: Difficulty: Easy 5) Which of the following is a challenge in which business marketers differ from the consumer marketers? A) understanding deep customer needs in new ways B) identifying new opportunities for organic business growth C) geographically concentrated buyers D) calculating better marketing performance and accountability metrics E) competing and growing in global markets, particularly China Answer: C Page Ref: 184-185 Objective: AACSB: Analytic skills Difficulty: Moderate 6) Ultimately, the amount of steel sold to General Motors depends on the consumers' demand for GM cars and trucks From the standpoint of the steel manufacturer, which of the following demand forms is most pertinent? A) derived demand B) inelastic demand C) geographic demand D) relational demand E) static demand Answer: A Page Ref: 185 Objective: AACSB: Analytic skills Difficulty: Moderate Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 7) The demand for business goods is ultimately derived from the demand for A) raw materials B) consumer goods C) services D) business solutions E) e-commerce Answer: B Page Ref: 185 Objective: Difficulty: Easy 8) A given percentage increase in consumer demand can lead to a much larger percentage increase in the demand for plant and equipment necessary to produce the additional output Economists refer to this as A) derived demand B) inelastic demand C) the acceleration effect D) a straight rebuy E) the sales cycle Answer: C Page Ref: 185 Objective: Difficulty: Moderate 9) The total demand for many business goods and services is not much affected by price changes Thus, this demand is A) derived B) fluctuating C) accelerated D) multiple E) inelastic Answer: E Page Ref: 185 Objective: Difficulty: Moderate 10) The purchasing department buys office supplies on a routine basis from a pre-approved list of suppliers This type of purchase is classified as a A) straight rebuy B) modified rebuy C) new task D) secondary purchase E) procure-to-pay Answer: A Page Ref: 185 Objective: Difficulty: Moderate Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 11) Sometimes a rise of only 10% in consumer demand can cause as much as a 200% rise in business demand for products for the next period This is an example of A) inelastic demand B) direct purchasing C) fluctuating demand D) derived demand E) a straight rebuy Answer: C Page Ref: 185 Objective: Difficulty: Easy 12) Shoe manufacturers are not going to buy much more leather if the price of leather falls, nor will they buy much less leather if the price rises, unless they can find satisfactory substitutes This is an example of A) inelastic demand B) direct purchasing C) the acceleration effect D) a modified rebuy E) a straight rebuy Answer: A Page Ref: 185 Objective: AACSB: Analytic skills Difficulty: Moderate 13) Kenilworth Inc is shifting from its rented four-room office to a standalone office building owned by the company itself This can be classified as a A) modified rebuy B) regular buy C) straight rebuy D) new rebuy E) new task Answer: E Page Ref: 186 Objective: Difficulty: Moderate Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 14) In a purchasing situation, the buyer wants to make some change to existing product specifications, prices, delivery requirements, or other terms A) new rebuy B) regular buy C) straight rebuy D) modified rebuy E) new task Answer: D Page Ref: 186 Objective: Difficulty: Moderate 15) The business buyer has to make the fewest decisions when involved in a A) modified rebuy B) regular buy C) straight rebuy D) new rebuy E) new task Answer: C Page Ref: 186 Objective: Difficulty: Moderate 16) Jason Riggs' company is considered to be an in-supplier for a lawn mower manufacturer However, recently the lawn mower company has put out a memo to in- and out-suppliers indicating that it would like to change product specifications and delivery schedules Which of the following buying situations is most likely to be in operation given this data? A) straight rebuy B) single rebuy C) rakeback rebuy D) system buy E) modified rebuy Answer: E Page Ref: 186 Objective: AACSB: Analytic skills Difficulty: Moderate Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 17) Orica Inc competes in the market for commercial explosives The company recently changed its business model from just selling explosives to managing an entire blast in a quarry This customer-solution-based approach to the sale of explosives is an example of A) systems selling B) straight rebuying C) customer referencing D) derived demand E) channel consolidation Answer: A Page Ref: 187 Objective: AACSB: Analytic skills Difficulty: Moderate 18) If you decided to go into the systems contracting business, which of the following categories would constitute your main area of expertise, the service you provide for customers? A) computer applications B) database management C) manufacturing D) promotion management E) MRO (maintenance, repair, operating) supplies Answer: E Page Ref: 187 Objective: AACSB: Analytic skills Difficulty: Moderate 19) Many business buyers prefer to buy a total solution to a problem from one seller This process is also known as A) channel consolidation B) systems buying C) vertical buying D) horizontal buying E) supply buying Answer: B Page Ref: 187 Objective: Difficulty: Moderate Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 20) Xerox offers a approach to prospective clients when it offers a complete turnkey solution, including the operation and management of the client's information and communication need A) guided selling B) fair trading C) systems buying D) cross-selling E) local purchasing Answer: C Page Ref: 187 Objective: AACSB: Analytic skills Difficulty: Moderate 21) If Ampex Support Systems is the single supplier for a local manufacturing company's MRO (maintenance, repair, operating) supplies and needs, Ampex Support Systems is considered as providing for the manufacturer A) guided selling B) purchasing support C) turnkey logistics D) decision support E) systems contracting Answer: E Page Ref: 187 Objective: AACSB: Analytic skills Difficulty: Difficult 22) is a key industrial marketing strategy in bidding to build large-scale industrial products such as dams, pipelines, etc A) Systems contracting B) Systems buying C) Systems selling D) Solutions buying E) Turnkey logistics Answer: C Page Ref: 187 Objective: Difficulty: Moderate Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 23) is composed of all parties who participate in the purchasing decision-making process and share common goals and risks associated with their decisions A) The buying center B) The marketing sales team C) Strategic management D) Engineering support E) The logistics center Answer: A Page Ref: 188 Objective: Difficulty: Easy 24) In the purchasing decision process, the are those who request that something be purchased They may be users or others in the organization A) users B) initiators C) influencers D) deciders E) approvers Answer: B Page Ref: 188 Objective: Difficulty: Easy 25) In the purchasing decision process, the are those who have the power to prevent sellers or information from reaching members of the buying center A) approvers B) buyers C) initiators D) gatekeepers E) deciders Answer: D Page Ref: 188 Objective: Difficulty: Easy 26) In the purchasing decision process, the major role of is in selecting vendors and negotiating A) gatekeepers B) buyers C) initiators D) approvers E) deciders Answer: B Page Ref: 188 Objective: Difficulty: Easy Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 27) If you performed the role of the in a buying center, you would be the person that has the power to prevent sellers or information from reaching other members of the buying center A) initiator B) influencer C) decider D) gatekeeper E) approver Answer: D Page Ref: 188 Objective: AACSB: Analytic skills Difficulty: Moderate 28) When purchasing disposable surgical gowns, Mercy Hospital's vice president of purchasing analyzes whether the hospital should buy disposable gowns or reusable gowns If the findings favor disposable gowns, then the operating-room administrator compares various competitors' products and prices and makes a choice Surgeons influence the decision retroactively by reporting their satisfaction with the particular brand In this situation, the operating-room administrator performs the role of the A) gatekeeper B) initiator C) user D) decider E) influencer Answer: D Page Ref: 188 Objective: AACSB: Analytic skills Difficulty: Moderate 29) When purchasing disposable surgical gowns, Mercy Hospital's vice president of purchasing analyzes whether the hospital should buy disposable gowns or reusable gowns If the findings favor disposable gowns, then the operating-room administrator compares various competitors' products and prices and makes a choice Surgeons influence the decision retroactively by reporting their satisfaction with the particular brand In this situation, the surgeons perform the role of the A) decider B) initiator C) user D) gatekeeper E) buyer Answer: C Page Ref: 188 Objective: AACSB: Analytic skills Difficulty: Moderate Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 30) In which of the following is a person performing the role of an influencer? A) Dan decides on the product requirements and makes the final choice of suppliers B) Luke has the authority to pick out the supplier and negotiate the terms of purchase C) Liam heads the Tech team at LKG and provides information for evaluating the possible alternatives D) LKG gets many calls from potential suppliers, and it is Leah's job to weed out the good prospects and refer them to others in LKG E) Dana authorizes the actions of the deciders and buyers in LKG Answer: C Page Ref: 188 Objective: AACSB: Analytic skills Difficulty: Moderate 31) In which of the following is a person performing the role of an approver? A) Dan decides on the product requirements and makes the final choice of suppliers B) Luke has the authority to pick out the supplier and negotiate the terms of purchase C) Liam heads the Tech team at LKG and provides information for evaluating the possible alternatives D) LKG gets many calls from potential suppliers, and it is Leah's job to weed out the good prospects and refer them to others in LKG E) Dana authorizes the actions of the deciders and buyers in LKG Answer: E Page Ref: 188 Objective: AACSB: Analytic skills Difficulty: Moderate 32) In which of the following is a person performing the role of a gatekeeper? A) Dan decides on the product requirements and makes the final choice of suppliers B) Luke has the authority to pick out the supplier and negotiate the terms of purchase C) Liam heads the Tech team at LKG and provides information for evaluating the possible alternatives D) LKG gets many calls from potential suppliers, and it is Leah's job to weed out the good prospects and refer them to others in LKG E) Dana authorizes the actions of the deciders and buyers in LKG Answer: D Page Ref: 188 Objective: AACSB: Analytic skills Difficulty: Moderate 10 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 78) An increase in the demand for plant and equipment can lead to a much larger increase in consumer demand This is known as the acceleration effect Answer: FALSE Page Ref: 185 Objective: Difficulty: Easy 79) The demand for business goods is ultimately derived from the demand for raw materials Answer: FALSE Page Ref: 185 Objective: AACSB: Reflective thinking Difficulty: Easy 80) The total demand for many business goods and services is inelastic that is, not much affected by price changes Answer: TRUE Page Ref: 185 Objective: Difficulty: Easy 81) In the straight rebuy, "out-suppliers" try to get a small order and then enlarge their purchase share over time Answer: TRUE Page Ref: 185 Objective: AACSB: Analytic skills Difficulty: Moderate 82) The buyer in a straight rebuy usually changes product specifications, prices, delivery requirements, or other terms Answer: FALSE Page Ref: 186 Objective: AACSB: Reflective thinking Difficulty: Moderate 83) The business buyer makes the fewest decisions in the straight rebuy situation and the most in the new-task situation Answer: TRUE Page Ref: 186 Objective: AACSB: Reflective thinking Difficulty: Moderate 24 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 84) Most business buyers reject what is called systems buying from one seller Answer: FALSE Page Ref: 187 Objective: AACSB: Reflective thinking Difficulty: Easy 85) Systems selling is a key industrial marketing strategy in bidding to build large-scale industrial projects such as dams or pipelines Answer: TRUE Page Ref: 187 Objective: AACSB: Analytic skills Difficulty: Easy 86) Sellers benefit from systems contracting through lower operating costs as a result of steady demand and reduced paperwork Answer: TRUE Page Ref: 187 Objective: AACSB: Reflective thinking Difficulty: Easy 87) The buying center is where consumers go to purchase their goods and services Answer: FALSE Page Ref: 188 Objective: AACSB: Analytic skills Difficulty: Easy 88) With respect to the buying center, approvers are people who have the power to prevent sellers or information from reaching members of the buying center Answer: FALSE Page Ref: 188 Objective: AACSB: Reflective thinking Difficulty: Easy 89) Initiators are those who authorize the proposed action of deciders or buyers Answer: FALSE Page Ref: 188 Objective: AACSB: Analytic skills Difficulty: Easy 25 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 90) Influencers influence the buying decision by helping define specifications and providing information for evaluating alternatives Answer: TRUE Page Ref: 188 Objective: AACSB: Analytic skills Difficulty: Easy 91) In the buying center, several people can occupy a given role such as user or influencer, and one person may play multiple roles Answer: TRUE Page Ref: 188 Objective: AACSB: Reflective thinking Difficulty: Easy 92) Small sellers concentrate on multilevel in-depth selling instead of reaching the key buying influencers Answer: FALSE Page Ref: 193 Objective: AACSB: Reflective thinking Difficulty: Easy 93) In the business market, small sellers concentrate on reaching as many participants as possible because their chances of success are slim Answer: FALSE Page Ref: 193 Objective: AACSB: Reflective thinking Difficulty: Easy 94) Framing occurs when customers are given a perspective or point of view that allows the firm to "put its best foot forward." Answer: TRUE Page Ref: 194 Objective: AACSB: Reflective thinking Difficulty: Easy 95) A performance review is the first step in the buygrid framework Answer: FALSE Page Ref: 195 Objective: Difficulty: Moderate 26 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 96) The buying process begins when someone places an order with a sales representative Answer: FALSE Page Ref: 196 Objective: AACSB: Analytic skills Difficulty: Easy 97) Product value analysis is an approach to efficiency that studies whether components can be redesigned or made by more efficient methods of production without adversely impacting product performance Answer: FALSE Page Ref: 196 Objective: AACSB: Analytic skills Difficulty: Moderate 98) On spot electronic markets, prices of products or commodities change by the minute Answer: TRUE Page Ref: 197 Objective: AACSB: Analytic skills Difficulty: Moderate 99) In buying alliances, participants offer to trade goods or services Answer: FALSE Page Ref: 197 Objective: AACSB: Analytic skills Difficulty: Moderate 100) With respect to assessing customer value, in conjoint analysis customers are asked to rank their preference for alternative market offerings or concepts Answer: TRUE Page Ref: 199 Objective: AACSB: Analytic skills Difficulty: Difficult 101) One of the forms of solution selling is to provide solutions to enhance customer revenues Answer: TRUE Page Ref: 200 Objective: AACSB: Analytic skills Difficulty: Easy 27 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 102) Risk and gain sharing can offset price reductions that customers request Answer: TRUE Page Ref: 200 Objective: AACSB: Analytic skills Difficulty: Easy 103) Companies are increasingly reducing the number of suppliers they utilize, and there is a trend toward single sourcing Answer: TRUE Page Ref: 201 Objective: Difficulty: Moderate 104) Most performance reviews are conducted by outside auditing agencies to avoid bias and internal discrepancies Answer: FALSE Page Ref: 201 Objective: AACSB: Reflective thinking Difficulty: Moderate 105) In buyer-seller relationships, the contractual transaction generally shows low levels of trust, cooperation, and interaction Answer: TRUE Page Ref: 202 Objective: AACSB: Reflective thinking Difficulty: Moderate 106) Corporate credibility depends on corporate expertise, corporate trustworthiness, and corporate likability Answer: TRUE Page Ref: 203 Objective: AACSB: Analytic skills Difficulty: Moderate 107) One of the problems facing B2B on the Web is that many firms often impose more stringent requirements on their online business partners than they on non-online partners Answer: TRUE Page Ref: 203 Objective: Difficulty: Moderate 28 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 108) The "customer is king" category of buyer-seller relationship is relatively simple, and one in which routine exchanges with moderately high levels of cooperation and information exchange occur Answer: FALSE Page Ref: 203 Objective: AACSB: Analytic skills Difficulty: Moderate 109) Contracts are always sufficient to govern supplier transactions and prevent supplier opportunism Answer: FALSE Page Ref: 204 Objective: AACSB: Reflective thinking Difficulty: Moderate 110) A good illustration of a member of the institutional market would be Boeing because it is a member of the aviation institution structure Answer: FALSE Page Ref: 205 Objective: AACSB: Analytic skills Difficulty: Easy 111) The U.S government is the largest customer in the world Answer: TRUE Page Ref: 206 Objective: Difficulty: Moderate 112) Business markets have several characteristics that contrast sharply with those of consumer markets Name and briefly characterize five of those characteristics Answer: The characteristics of business markets as compared to consumer markets are: (1) fewer, larger buyers, (2) close supplier-customer relationship, (3) professional purchasing, (4) multiple buying influences, (5) multiple sales calls, (6) derived demand, (7) inelastic demand, (8) fluctuating demand, (9) geographically concentrated buyers, and (10) direct purchasing See chapter section for brief characterizations Page Ref: 183-185 Objective: AACSB: Reflective thinking Difficulty: Easy 29 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 113) Explain how fluctuating demand impacts business markets differently from consumer markets Answer: The demand for business goods and services tends to be more volatile than the demand for consumer goods and services A given percentage increase in consumer demand can lead to a much larger percentage increase in the demand for plant and equipment necessary to produce additional output Economists refer to this as the acceleration effect Page Ref: 185 Objective: Difficulty: Moderate 114) Illustrate the differences between a straight rebuy, modified rebuy, and a new-task purchase Answer: In a straight rebuy, the purchasing department reorders on a routine basis and choose from suppliers on an approved list In a modified rebuy, the buyer wants to modify product specifications, prices, delivery requirements, or other terms Lastly, in the new-task purchase, a purchaser buys a product or service for the first time Page Ref: 185-186 Objective: AACSB: Analytic skills Difficulty: Moderate 115) What are the three different types of buying situations faced by a typical business buyer? Answer: The business buyer faces many decisions in making a purchase Three types of buying situations are the straight rebuy, modified rebuy, and new task Straight rebuy- In a straight rebuy, the purchasing department reorders supplies such as office supplies and bulk chemicals on a routine basis and chooses from suppliers on an approved list The suppliers make an effort to maintain product and service quality and often propose automatic reordering systems to save time "Out-suppliers" attempt to offer something new or exploit dissatisfaction with a current supplier Their goal is to get a small order and then enlarge their purchase share over time Modified rebuy- The buyer in a modified rebuy wants to change product specifications, prices, delivery requirements, or other terms This usually requires additional participants on both sides The in-suppliers become nervous and want to protect the account The out-suppliers see an opportunity to propose a better offer to gain some business New task- A new-task purchaser buys a product or service for the first time (an office building, a new security system) The greater the cost or risk, the larger the number of participants, and the greater their information gathering, the longer the time to a decision Page Ref: 185-186 Objective: AACSB: Communications Difficulty: Moderate 30 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 116) Describe the practices of systems buying and systems contracting Answer: Systems buying involves buying a total solution to a problem from one seller Systems contracting is a variant of systems selling in which a single supplier provides the buyer with his entire requirement for maintenance, repair, and operating supplies During the contract period, the supplier manages the customer's inventory Page Ref: 187 Objective: Difficulty: Moderate 117) What is the composition of the buying center? Answer: A buying center is composed of "all those individuals and groups who participate in the purchasing decision-making process, who share some common goals and the risks arising from the decisions." The buying center includes all members of the organization who play any of seven roles in the purchase decision process: initiators, users, influencers, deciders, approvers, buyers, gatekeepers Buying centers usually include several participants with differing interests, authority, status, and persuasiveness Each member of the buying center is likely to give priority to very different decision criteria Page Ref: 188 Objective: AACSB: Analytic skills Difficulty: Moderate 118) List the seven roles of people in a buying center Answer: Initiators—Users or others in the organization who request that something be purchased Users—Those who will use the product or service In many cases, the users initiate the buying proposal and help define the product requirements Influencers—People who influence the buying decision, often by helping define specifications and providing information for evaluating alternatives Technical personnel are particularly important influencers Deciders—People who decide on product requirements or on suppliers Approvers—People who authorize the proposed actions of deciders or buyers Buyers—People who have formal authority to select the supplier and arrange the purchase terms Buyers may help shape product specifications, but they play their major role in selecting vendors and negotiating In more complex purchases, buyers might include high-level managers Gatekeepers—People who have the power to prevent sellers or information from reaching members of the buying center For example, purchasing agents, receptionists, and telephone operators may prevent salespersons from contacting users or deciders Page Ref: 188 Objective: AACSB: Reflective thinking Difficulty: Moderate 31 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 119) Explain with examples, the concept of solution selling Answer: Student answers may vary Solution selling approaches buyers from a solutions-to-problems approach rather than a productpurchase approach Three forms include: (1) solutions to enhance customer revenues, e.g., Hendrix UTD has used its sales consultants to help farmers deliver an incremental animal weight gain of percent to 10 percent over competitors, (2) solutions to decrease customer risks, e.g., ICI Explosives formulated a safer way to ship explosives for quarries, and (3) solutions to reduce customer costs, e.g., W.W Grainger employees work at large customer facilities to reduce materials-management costs Page Ref: 200 Objective: AACSB: Reflective thinking Difficulty: Moderate 120) What are the methods available to the buyer to review the performance of the chosen supplier? What advantage does performance review offer to the buyer? Answer: The buyer periodically reviews the performance of the chosen supplier(s) using one of three methods The buyer may contact end users and ask for their evaluations, rate the supplier on several criteria using a weighted-score method, or aggregate the cost of poor performance to come up with adjusted costs of purchase, including price The performance review may lead the buyer to continue, modify, or end a supplier relationship Many companies have set up incentive systems to reward purchasing managers for good buying performance, in much the same way sales personnel receive bonuses for good selling performance These systems lead purchasing managers to increase pressure on sellers for the best terms Page Ref: 201 Objective: AACSB: Analytic skills Difficulty: Moderate 121) Vertical coordination can facilitate stronger customer-seller ties but at the same time may increase the risk to the customer's and supplier's specific investments What are specific investments and why are they risky? Answer: Specific investments are those expenditures tailored to a particular company and value chain partner These might include investments in company-specific training, equipment, and operating procedures or systems Because these investments are partially sunk, they lock the firm that makes them into a particular relationship A buyer may be vulnerable to holdup because of switching costs; a supplier may be more vulnerable to holdup in future contracts because of dedicated assets and/or expropriation of technology/knowledge Page Ref: 203-204 Objective: AACSB: Ethical understanding and reasoning abilities Difficulty: Moderate 32 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 122) The business market consists of all the organizations that acquire goods and services used in the production of other products or services that are sold, rented, or supplied to others List the major industries that make up the business market Answer: The major industries making up the business market are agriculture, forestry, and fisheries; mining; manufacturing; construction; transportation; communication; public utilities; banking, finance, and insurance; distribution; and services Page Ref: 183 Objective: Difficulty: Easy 123) Define organizational buying Answer: Organizational buying is the decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers Page Ref: 183 Objective: AACSB: Analytic skills Difficulty: Easy 124) Explain the concept of derived demand Answer: The demand for business goods is ultimately derived from the demand for consumer goods Consumer demand for business' end products drives their production Production of those end products drives business demand for the inputs to those production processes Page Ref: 185 Objective: AACSB: Reflective thinking Difficulty: Moderate 125) If you were a purchasing agent facing a modified rebuy situation, how would you describe that situation? Answer: The buyer wants to modify product specifications, prices, delivery requirements, or other items The modified rebuy usually involves additional participants on both sides Page Ref: 186 Objective: AACSB: Reflective thinking Difficulty: Moderate 126) Which type of buying situation would be preferred if the management wants to minimize decision-making time and effort Answer: The business buyer makes the fewest decisions in the straight rebuy situation and the most in the new-task situation Hence, a straight rebuy situation would be preferable Page Ref: 186 Objective: AACSB: Reflective thinking Difficulty: Moderate 33 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 127) In systems buying, the U.S government often solicits bids from prime contractors What prime contractors do? Answer: The government solicits bids from prime contractors who assemble the package or system The contractor who was awarded the contract would be responsible for bidding out and assembling the system's subcomponents from second-tier contractors Thus, the prime contractor provides a turnkey solution Page Ref: 187 Objective: AACSB: Analytic skills Difficulty: Moderate 128) Systems selling is a key industrial marketing strategy in bidding to build large-scale industrial projects Competition for these projects is fierce What are the main areas of competition for these project engineering firms? Answer: Primary competitive areas include: price, quality, reliability, and other attributes to win contracts Page Ref: 187 Objective: AACSB: Analytic skills Difficulty: Moderate 129) List the seven roles played by members of a buying center Answer: The roles are: (1) initiators, (2) users, (3) influencers, (4) deciders, (5) approvers, (6) buyers, and (7) gatekeepers Page Ref: 188 Objective: Difficulty: Easy 130) Mason's is a supplier of specialty chemicals to a number of companies The company previously supplied just three big clients, but the CEO is considering targeting the small business market Selling to small businesses presents a huge opportunity, he says, but some board members disagree, saying it also presents huge challenges Explain the challenges the firm might face in targeting small businesses Answer: The small business market is large and fragmented by industry, size, and number of years of operation Additionally, small business owners are notably averse to long-range planning and have an "I'll buy it when I need it" decision-making style Page Ref: 192 Objective: Difficulty: Moderate 34 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 131) BEL is a small seller of specialized auto parts, while MES is a large seller of auto parts Both firms want to approach the same car company with a view to supplying parts to it How will their approaches differ? Answer: Small sellers like BEL concentrate on reaching the key buying influencers in order to make the most effective use of their small sales force Large sellers like MES go for multilevel in-depth selling to reach as many participants as possible to increase sales volumes and strengthen relationships Page Ref: 193 Objective: AACSB: Analytic skills Difficulty: Moderate 132) With reference to online buying, what are vertical markets? Give an example of a vertical market Answer: Student answers may vary Companies buying industrial products such as plastics, steel, or chemicals or services such as logistics or media can go to specialized Web sites (called e-hubs) Plastics.com allows plastics buyers to search the best prices among thousands of plastics sellers Page Ref: 196 Objective: AACSB: Analytic skills Difficulty: Moderate 133) E-procurement Web sites are organized around two types of e-hubs If you were in the advertising business and were seeking to take advantage of e-procurement, what type of e-hub should be constructed by your company? Answer: The two types of hubs are vertical hubs (centered on industries such as plastics) and functional hubs (centered on functions such as advertising) Therefore, you would construct a functional hub Page Ref: 197 Objective: AACSB: Analytic skills Difficulty: Moderate 134) KEK is a supplier of paper and paper products to several businesses Name some contract restrictions that KEK can use to protect its margins when dealing with price-oriented buyers Answer: KEK can handle price-oriented buyers by setting a lower price but establishing restrictive conditions, such as: (1) limited quantities, (2) no refunds, (3) no adjustments, and (4) no services Page Ref: 200 Objective: AACSB: Analytic skills Difficulty: Moderate 35 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 135) Explain risk and gain sharing with the help of an example Answer: Student answers may vary Risk and gain sharing can offset price reductions that customers request Suppose Medline, a hospital supplier, signs an agreement with Highland Park Hospital promising $350,000 in savings over the first 18 months in exchange for getting a tenfold increase in the hospital's share of supplies If Medline achieves less than this promised savings, it will make up the difference If Medline achieves substantially more than promised, it participates in the extra savings Page Ref: 200 Objective: AACSB: Analytic skills Difficulty: Moderate 136) What you understand by vendor-managed inventory (VMI)? Answer: Some companies go further and shift the ordering responsibility to their suppliers in systems called vendor-managed inventory (VMI) These suppliers are privy to the customer's inventory levels and take responsibility for replenishing automatically through continuous replenishment programs Page Ref: 201 Objective: AACSB: Analytic skills Difficulty: Moderate 137) As part of the buyer selection process, buying centers must decide how many suppliers to use What might motivate a buyer to use multiple sources? Answer: Companies that use multiple sources often cite the threat of a labor strike as the biggest deterrent to single sourcing Another reason companies may be reluctant to use a single source is that they fear they'll become too comfortable with the relationship and lose their competitive edge Page Ref: 201 Objective: AACSB: Analytic skills Difficulty: Moderate 138) In the buygrid framework model, where the major stages of the industrial buying process are listed and characterized, supplier selection is an important process What follows supplier selection and what occurs in this phase? Answer: The step that follows supplier selection is order-routine specification After selecting suppliers, the buyer negotiates the final order, listing the technical specifications, the quantity needed, the expected time of delivery, return policies, warranties, and so on Page Ref: 201 Objective: AACSB: Analytic skills Difficulty: Moderate 36 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 139) Researchers have found that buyer-supplier relationships differed according to four factors: availability of alternatives; importance of supply; complexity of supply; and supply market dynamism Based on these four factors, they classified buyer-supplier relationships into eight different categories What are those categories? Answer: The categories are: (1) basic buying and selling, (2) bare bones, (3) contractual transaction, (4) customer supply, (5) cooperative systems, (6) collaborative, (7) mutually adaptive, and (8) customer is king For additional information, see the specific chapter section Page Ref: 202-203 Objective: AACSB: Analytic skills Difficulty: Moderate 140) As a seller in the business market, you have promised your customers that you have corporate credibility as one of your corporate goals What three factors will have some bearing on whether you will be able to meet your goal and promise? Answer: The three factors are: (1) corporate expertise, (2) corporate trustworthiness, and (3) corporate likability In other words, a credible firm is seen as being good at what it does, it keeps its customers' best interests in mind, and it is enjoyable to work with Page Ref: 203 Objective: AACSB: Ethical understanding and reasoning abilities Difficulty: Moderate 141) Researchers have found that buyer-supplier relationships could be classified into eight different categories What category would be appropriate for a relationship where, although bonded by a close, cooperative relationship, the seller adapts to meet the customer's needs without expecting much adaptation or change on the part of the customer in exchange? Answer: The appropriate category would be the "customer is king" category Page Ref: 203 Objective: AACSB: Analytic skills Difficulty: Easy 142) Explain the term opportunism with respect to business relationships Answer: When buyers cannot easily monitor supplier performance, the supplier might shirk or cheat and not deliver the expected value Opportunism is "some form of cheating or undersupply relative to an implicit or explicit contract." It may entail blatant self-serving and deliberate misrepresentation that violates contractual agreements Page Ref: 204 Objective: AACSB: Reflective thinking Difficulty: Moderate 37 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 143) Your organization is considering selling its products to the institutional market What type of customers will you be making your appeals to? Answer: The institutional market consists of schools, hospitals, nursing homes, prisons, and other institutions that must provide goods and services to people in their care Page Ref: 205 Objective: AACSB: Reflective thinking Difficulty: Easy 38 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall ... 45) Business marketers can stimulate problem recognition by A) ensuring a presence in trade directories B) direct mail, telemarketing, and calling on prospects C) encouraging the Better Business. .. Easy 74 ) Commoditization strengthens customer loyalty Answer: FALSE Page Ref: 184 Objective: AACSB: Reflective thinking Difficulty: Easy 75 ) The business market is essentially the same market. .. Answer: TRUE Page Ref: 184 Objective: Difficulty: Easy 77 ) The business marketer normally deals with far fewer, much larger buyers than the consumer marketer does Answer: TRUE Page Ref: 184 Objective: