Examination 1 Key
MAR 3231 Introduction to Retail Systems and Management
Spring 2008 Section 2324 10:40-12:35pm
This exam is open notes. There are 80 points on the exam – 3 points at the end are extra
credit
(50 points) Answer all 25 questions. Your score for these questions is two point for
each correct answer. Circle the best answer for each question. If you feel there are two
best answers to a question, write a note in the margin explaining why.
1. How can a retailer shorten the information search stage of the buying process for
customers in its store?
(a) use everyday low pricing – charge the same prices everyday without special sales
(b) provide a deep and broad assortment of merchandise
(c) offer money-back guarantees
(d) have well-trained employees
(e) all of the above
2. Providing a deep assortment is a benefit provided by retailers and valued by consumers
because it:
(a) allows the retailer to create a more informational and entertaining environment which
would promote more sales
(b) allows the company to reinvest for the future of the business.
(c) allows the customer to choose from a wide selection of brands, designs, sizes and
prices all in one store
(d) allows enables the customer to evaluate products in a lot of categories
(e) allows the customer to stock up on the assortments because of bulk availability
3 .Which of the following is TRUE about selling branded products through an the Internet
channel? Two answers are correct
(a) National brands, compared to store, are more likely to be purchased over the Internet
(b) Consumer are more likely to buy store brands versus national brands over the Internet
(c) Price competition among retailers selling national brands over the Internet is likely to
be greater than price competition selling store brands
(d) Price competition among retailers selling national brands over the Internet is likely to
be less than price competition when selling store brands
(e) there really is little difference resulting from the nature of the brand
4. Why are store-based retailers evolving into multi-channel retailers using both their
stores and the Internet to sell products?
(a) Internet sales are more profitable than sales made in stores
(b) projections are that more sales will be made over the Internet than in store in the next
few years
(c) the Internet and store channels can complement each other to build overall sales
(d) the cost of operating stores are increasing dramatically
(e) all of above
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5. Which of the following is a competitive advantage that independent, single-store
retailers can establish over large national chains?
(a) develop economies of scale
(b) have lower costs
(c) provide assortments tailored to local customers needs
(d) have lower advertising costs
(e) none of the above
6. What advantage does a manufacturer of branded consumer goods (such as Levi or
Proctor & Gamble) have compared to a catalog retailer in selling merchandise directly to
consumers?
(a) lower cost for distributing merchandise to individual consumers
(b) information about the purchase patterns to tailor offerings to individual customers
(c) a broad assortment of merchandise to customers
(d) lower cost to fulfill individual orders
(e) none of the above
7. In which of the following areas is Proctor & Gamble focusing increasing its marketing
efforts?
(a) developing better products
(b) increasing advertising to develop stronger brand loyalty for its products
(c) using packaging and in-store location to affect purchase decision
(d) reducing the price of its products
(e) developing more generic products
8. The retail mix is:
(a) a new drink with cranberry juice and Sprit
(b) the steps retailers use to develop a marketing program
(c) the methods that retailers use to communicate with their customers
(d) the decision variable retailers use to implement their strategy
(e) the different types of retailers in a trading area
9. Which of the following is not an effective approach for a retailer to use to influence
consumers to select its store?
(a) getting into their consideration set
(b) modifying the organization’s mission statement
(c) adding a new benefit
(d) changing performance beliefs
(e) changing importance weights
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10. Which of the following is a benefit to customers when buying merchandise over the
Internet that is not available when buying merchandise through catalogs?
(a) convenience of ordering merchandise from home
(b) personalization of merchandise presentation and information based on the customer’s
preferences
(c) opportunity to touch and feel merchandise before buying it
(d) convenience of having merchandise delivered to your home
(e) all of the above are available when buying merchandise through the Internet or
catalogs
11. A strategic competitive advantage:
(a) is difficult for competitors to duplicate
(b) does not require much investment
(c) has no effect on the retailer’s profits
(d) increases the firm’s flexibility
(e) all of the above
12. Which of the following is a threat facing traditional supermarkets:
(a) inter-type competition from convenience stores and discount stores
(b) decreasing population growth of minorities
(c) declining disposable income
(d) entry by foreign competitor
(e) lack of a lack national supermarket chain
13. Merchandise assortment is:
(a) the number merchandise categories offered to customers
(b) the total number of SKUs offered to customers
(c) the services offered to customers
(d) the number of SKUs in merchandise category offered to customers
(e) none of the above
14. Which of the following actions can a retailer use to move customer through the
information search stages of the buying process:
(a) provide a limited number of alternatives for customers to consider
(b) have sales associates available to answer questions
(c) have the store open 24 hours a day
(d) have sales associates follow up by telephoning customers after they buy something
(e) have sales associates attempt to change the customer’s importance weights
15. Which of the following types of retail formats would most appeal to a time-poor
single parent who works 60 hours a week and still had to care for a family?
(a) supercenter
(b) conventional supermarket
(c) department store
(d) category specialist
(e) specialty store
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16. Which of the following is not an element of a retail strategy?
(a) the retailer’s pricing strategy
(b) the retailer’s target market
(a) the format (retail mix and resources) the retailer will use
(d) the competitive advantage the retailer will establish
(e) all of the above are aspects of the retailer’s strategy
17. Typically there are empty seats at the afternoon showing of movies and no empty
seats at the 7 p.m. showing. Why do movie theaters sell tickets for an afternoon showing
of a movie at a lower price than the 7 p.m. showing of the same movie?
(a) to deal with the incompatibility characteristic of services
(b) to make sure the service offered is consistent
(c) to deal with the intangible characteristic of services
(d) to deal with the perishability of services
(e) to minimize inventory losses
18. Which of the following is not an element in the retail mix:
(a) location
(b) competitive advantage
(c) merchandise assortment
(d) customer service
(e) price
19. Elvis wants to sell women’s clothing on the Internet but has not decided what type of
apparel to sell. Which of the following types would you suggest he offer ot maximize his
long-term profits?
(a) selling replicas of the latest loose fitting fashions from European unknown designers
who he thinks have potential
(b) selling tailored (form fitting) fashionable apparel by well known designer
(c) selling production over runs and year’s styles of loose fitting national brands
(d) selling national name-brand clothing offered by department stores
(e)selling low cost, low quality national brands sold by discount stores
20. Which of the following is not a basis for developing a strategic competitive
advantage:
(a) customer loyalty
(b) lower prices
(c) lower costs
(d) location
(e) vendor relationships
21. Which of the following types of retail formats would most appeal to a 30-year old
who wants to go shopping because she has nothing to do on the weekend?
(a) supercenter
(b) conventional supermarket
(c) department store
(d) convenience store
(e) general merchandise discount store
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22. Which of the following statements about the retail industry is true?
(a) retailing is one of the largest industries in the U.S.
(b) retailing and other firms in the channel of distribution add little to the value of
products they sell
(c) retail mangers do not earn high salaries
(d) retailing does not offer many opportunities for entrepreneurs
(e) all of the statement are true
23. Which of the following statements about retailers holding inventory is false?
(a) By having inventory held in the store, consumers can hold less merchandise at home.
(b) By holding inventory, retailers offer products at lower costs
(c) Retailers keep inventory so products are available when consumers want them.
(d) Holding inventory reduces consumer's cost of storing products.
(e) all are true
24. Of the five approaches of entering a non-domestic market, which of the following
offers the lowest risk and requires the least investment?
(a)direct investments
(b)joint ventures
(c)franchises
(d)strategic alliances
(e)strategic implementation
25. Which of the following is an approach that retailers can use to stimulate need
recognition?
(a) offer a money back guaranty for merchandise at bought
(b) have an attractive window display
(c) reduce the assortment of brands in a merchandise category
(d) use a store layout that makes it easier for customers to find what they want to buy
(e) all of the above
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Grading of Essay Questions (30 points)
When answering the following essay questions, you should focus on the key points.
There is no need to make complete sentences. Your grade will be based on covering the
key points, not the length of your answer. Incorrect and irrelevant comments will count
against you.
(10 points)The same brand and model of an MP3 player is sold by a specialty consumer
electronics store like Radio Shack, discount store like Wal-Mart, and category specialists
like Best Buy. In each of these stores, the same MP3 player is sold at a different price.
Why do these different retailers sell for the same MP3 player for different prices? Won’t
most consumers just buy the MP3 player at the store with the lowest price?
The primary reason is that the different retailers are providing a different offering – the
offering the retailers are providing to customers is not just the basic product but the
services and shopping experience wrapped around the product. For example, the specialty
store provides more information and the opportunity to speak with knowledgeable people
about the different MP3 plays and the category specialist provides the opportunity to
review a large number of different models and easily compare them. Each of these
retailers provides a different set of benefits to customers in addition to the basic product.
Another way of saying this is that the different retailers appeals to different customers
needs and thus serve different market segments. Consumers will not gravitate to the
retailer offering the lowest low product because they value the benefits offered by the
different retailer types.
Need to indicate that different retailers have different offerings appealing to different
segments/needs
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(5 points) You are talking about what a great course MAR 3231 is with a friend. Your
friend responds by saying that there is no need for retailers. In this age of the Internet,
manufacturers should and will sell directly to consumers and cut out the middle man – the
retailer. He says that cutting out the middle man will reduce costs and enable
manufacturers to sell products are a lower price. Do you agree with his assessment? Why
of why not?
The manufacturer might reduce costs by cutting out the middleman, but the value of the
products to the customer would also be less. The manufacturer selling direct would not
be able to provide the value-add benefits offered by retailers such as availability at a
convenient location, opportunity to see the merchandise before it is bought, and
assistance from salespeople. If customers want these benefits, the manufacturer would
have to provide them and, due to lack of expertise in these areas, would probably incur
higher costs in providing these benefits than retailers would.
Need to indicate that retailers provide value added functions that consumers desire and
some one need to provide these benefits and incur the cost of providing them.
(5 points) The lack of touch-and-feel information would suggest that clothing will not be
sold effectively through the electronic channel, but apparel is one of the best selling
product categories in the Internet. Why is so much apparel sold over the Internet?
1. While the Internet channel does not give customers an opportunity to collect touch and
feel information, it offers other benefits like a broader and deeper assortment, more
information about the construction of the apparel, etc.
2. Consumers might get the touch and feel information from seeing and buying the
apparel in a store. Then, with branded merchandise, they know that the apparel offered
over the Internet will be the same as they previously bought in the store.
3. Apparel might be given as a gift and thus touch and fell information might not be as
important.
4. Risk can be minimized by the retailer using an electronic channel offering free returns.
(10 points) Smith & Hawkins is a catalog retailer that selling high quality, expensive
gardening tools to Baby Boomers who are interested in home gardening. All of the tools
sold in the catalog have the Smith & Hawkins brand name -- a brand name that is well
known and highly regarded by customers in its target market. The company is looking for
new opportunities for increasing its sales. Give an example of each of the following
growth opportunities Smith and Hawkins might pursue.
Need to give specific examples, not just define each opportunity
(1) point) Market Penetration Growth Opportunity Stimulate more sales to customer
reviewing the catalogs – send out more catalogs to present customers, stimulate add-on
selling of merchandise such as a telephone operator suggesting complementary items
when taking order.
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This opportunity is getting more revenue from present target market and present way of
doing business (same format)
(1 point) Market Expansion Growth Opportunity – sell the same gardening tools to a new
segment such as the professional garden or gardeners in other countries new market,
same way of doing business
(1 point) Retail Format Development Growth Opportunity – open up stores to sell
gardening tools to sell the tools over the Internet. Same market, new way doing businesss
(1 point) Diversification Growth Strategy – new format in new market – opening up
flower shops. New market and new way of doing businesss
(3) Which of these opportunities outlined above do you feel would be most successful?
Why? Most promising opportunity is market penetration followed by market expansion or
formation development because these alternatives exploit advantages that the company
has with either knowledge and loyalty with its market or skills in operating a format.
(3) Which of these opportunities outlined above do you feel would be least successful?
Why? Diversification. Doesn’t exploit resources of the company that can be used to
build a competitive advantage.
(3 points extra credit) What is an SKU? Give an example
Lowest level of inventory that a retailer keeps track of specific – specific example is a
brand, size, color. 32 ounces Tide or Van Huesen dress shirt, 16” collar, 32” sleeve, blue,
button down needs to be spccific
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