Question 1

Constrained decision making is used by ________.

Accepted Answer

Constrained decision making is often associated with franchises and leased departments, where the decisions are typically guided or limited by the terms set by the franchisor or the owner of the leased space, respectively. This contrasts with independents, retail cooperatives, and chains, which generally have more autonomy in their decision-making processes.

Question 2

A major firm recently converted from a fully integrated vertical marketing system to business format franchising.In setting price,store hours,and personnel policies,it is important that the franchisor recognize that ________.

Accepted Answer

In business format franchising, franchisees are considered as owners rather than employees, and they have considerable freedom in setting their retail strategies, store hours, personnel policies, and pricing. The franchisor provides the brand and the systems, but franchisees are expected to operate their businesses independently. Therefore, treating franchisees as owners rather than employees is crucial for the success of the franchising model.

Question 3

The job titles of cooperative advertising director,channel member customer service director,real estate negotiator,and vendor inspection specialist are most likely to be found in what type of retail institution?

Accepted Answer

These job titles are associated with a business format franchise, where the franchisor provides the franchisee not just with the product, but also an entire system for operating the business, including advertising, customer service, and quality control processes.

Question 4

A major competitive advantage of chains in contrast to independents is ________.

Accepted Answer

Chains have the advantage of being able to afford and use specialists in buying, selling, and store operations. This helps them to improve efficiency and competitiveness compared to independent stores, which may not have the same level of resources or expertise. The other options (freedom from unionization, freedom from antitrust legislation, and less concern for overlapping locations) are not necessarily major competitive advantages of chains.

Question 5

Independents can compete with chain organizations (in terms of image,ability to use regional and national media,and specialized personnel)through ________.

Accepted Answer

Franchising allows independents to leverage the brand image, marketing resources, and specialized personnel of a larger chain, enabling them to compete more effectively.

Question 6

Fair practice laws have been designed to protect franchisees from unreasonable ________ from franchisors.

Accepted Answer

Fair practice laws aim to prevent franchisors from using their power over the franchisees unfairly. This power can come from the franchisor's position in the market, which is known as channel power. Therefore, choice B, "channel power," is the correct answer.

Question 7

Constrained decision making is desirable by both franchisees and franchisors in that it generates ________.

Accepted Answer

Constrained decision making refers to the limitation of choices made by franchisees to ensure consistency and uniformity across all chain units. This is desirable for both franchisees and franchisors as it helps maintain the brand image and reputation.

Question 8

The high bargaining power of chains can be directly constrained by independents through ________.

Accepted Answer

Threatening Robinson-Patman Act violations to suppliers can directly constrain the high bargaining power of chains by independents. This act prohibits price discrimination by suppliers that could harm competition, and leveraging it can help independents negotiate better terms.

Question 9

Which form of retail institution most closely resembles a partially integrated system?

Accepted Answer

Business format franchises most closely resemble a partially integrated system because they provide a mix of centralization in branding and product offerings while allowing for individual ownership and operation of each franchise location.

Question 10

The major difference in the role of a franchisee between a product/trademark and a business format franchise is that in a product/trademark franchise,the franchisee has ________.

Accepted Answer

In a product/trademark franchise, the franchisee typically buys the right to sell the franchisor's product but operates more independently compared to a business format franchise. In a business format franchise, the franchisor provides a full business model, including brand, products, and detailed operational procedures, leading to less autonomy for the franchisee.

Question 11

Centralized decision making is a major characteristic of which form of retail institution?

Accepted Answer

Chains are characterized by a centralized decision-making structure where major decisions, such as product selection and pricing, are made by the corporate headquarters rather than individual store managers. Independent retailers, retail cooperatives, and vertical marketing systems may have decentralized decision-making structures where individual members or store managers have more autonomy in decision-making.

Question 12

The major difference between a voluntary wholesaler and a cooperative wholesaler is based upon ________.

Accepted Answer

The major difference between a voluntary wholesaler and a cooperative wholesaler is based upon ownership. A voluntary wholesaler is owned by an individual or group of individuals, while a cooperative wholesaler is owned and operated by its members. The other options are not relevant to the difference between these two types of wholesalers.

Question 13

Chain store efficiency in multiple-store operations can be significantly reduced by ________.

Accepted Answer

Centralized buying that does not reflect regional and local preferences can lead to reduced efficiency in multiple-store operations because customers' needs and preferences may vary by region, and not catering to these differences could lead to lower sales and customer satisfaction.

Question 14

A group of independent retailers seeks to establish a common identity and to generate increased bargaining power through centralized purchasing.Which of the following institutional arrangement should they consider?

Accepted Answer

A cooperative is a type of institution in which businesses work together to pool resources and increase bargaining power. This arrangement would allow the independent retailers to maintain their autonomy while still benefiting from the advantages of larger-scale purchasing. Independent vertical marketing systems and fully integrated vertical marketing systems involve a greater degree of coordination and shared decision-making, which may be undesirable for the retailers. A business format franchise involves a more hierarchical relationship between the franchisor and franchisee, which may also be undesirable.

Question 15

The use of ________,________,and ________ enable franchises to achieve a level of coordination similar to that found in retail chain organizations.

Accepted Answer

Franchises achieve coordination through prototype stores, standardized merchandise lines, and cooperative advertising, which align operations and marketing across locations.

Question 16

FTC rulings,fair practice laws,and franchise-member organizations have the effect of ________.

Accepted Answer

FTC rulings, fair practice laws, and franchise-member organizations aim to increase the level of protection and support for franchisees, which, in turn, empowers them and enhances their bargaining and negotiating power with franchisors. Therefore, option B, increasing the channel power to franchisees, is the correct choice. The other options are incorrect as they do not reflect the possible effects of the aforementioned regulations and organizations.

Question 17

In contrast to business format franchising,in product/trademark franchising,franchisees ________.

Accepted Answer

In product/trademark franchising, franchisees often operate more autonomously from their suppliers compared to business format franchising. This means they have more independence in their operations and are not as closely tied to the franchisor's systems and controls.

Question 18

Constrained decision making is most commonly found in ________.

Accepted Answer

Constrained decision making is a characteristic of business format franchising, where the franchisee is required to follow strict guidelines and procedures set by the franchisor. This ensures consistency across all franchise locations and protects the franchisor's brand image. Independent vertical marketing systems and manufacturer-retailer licensing agreements do not necessarily involve constrained decision making, and product/trademark franchising is a less common type of franchising where the franchisor only provides the product or trademark, rather than a complete business system.

Question 19

A channel member is most likely to be involved in developing a turn-key operation (that includes equipment,a prototype building,training,and troubleshooting advice)in ________.

Accepted Answer

The answer of A channel member is most likely to...

Question 20

Both franchisees and leased department operators typically pay rent on the basis of a ________.

Accepted Answer

Both franchisees and leased department operators typically pay rent based on a percentage of sales, which allows for variable payments based on business performance.

Quiz 4: Retail Institutions by Ownership