Deck 4: Retail Institutions by Ownership

Question 1

A chain retailer can gain efficiency in multiple-store operations through ________.

A) purchasing standardized store fixtures
B) receiving new items as soon as they are introduced
C) decentralizing operations
D) using all forms of advertising media

Answer 1

A

Question 2

A major disadvantage of independent retailing is ________.

A) latitude in selecting customer markets
B) low bargaining power with suppliers
C) inflexibility in developing strategy
D) high investment requirements

Answer 2

B

Question 3

The Federal Trade Commission (FTC's)disclosure requirements and business opportunities rule is intended to ________.

A) provide potential franchisees with adequate information prior to their making an investment
B) make it difficult for franchisors to terminate, cancel, or fail to renew franchisees without sufficient cause
C) allow franchisees to purchase goods and services on a more competitive basis
D) grant exclusive territories to franchisees

Answer 3

A

Question 4

The basic format or structure of a business is referred to as ________.

A) a retail store
B) a franchise
C) vertical integration
D) a retail institution

Question 5

A major disadvantage of centralized purchasing to a chain retailer is ________.

A) overdependence on the boss
B) lack of quantity discounts
C) absence of bargaining power
D) complex managerial control

Question 6

An independent can increase its bargaining power with a supplier by ________.

A) buying substantially larger quantities than needed to take advantage of all discounts
B) insisting on quantity discounts from vendors
C) belonging to buying groups with other independents
D) focusing increased attention on closeouts, irregulars, and the purchase of merchandise off-season

Question 7

A unique disadvantage for independent retailers is ________.

A) a lack of competitive advantages
B) a lack of independence
C) a lack of control over strategy
D) overdependence on the owner

Question 8

In which of the following does a dealer receives assistance on site location,start-up practices,accounting systems,and management training in ________.

A) a leased department
B) business format franchising
C) independent channel ownership
D) a chain

Question 9

A chain retailer can achieve wholesale cost efficiencies by ________.

A) stressing the sale of private label brands
B) buying goods directly from suppliers in large quantities
C) using computer-based inventory management systems
D) having suppliers list suggested selling prices on labels

Question 10

There are so many independent retailers in the United States because of ________.

A) ease of entry into the marketplace
B) widespread use of the franchise form of distribution
C) vertical integration by manufacturers
D) high investment per worker in retailing

Question 11

Business format franchising is characterized by ________.

A) an interactive relationship between a franchisor and a franchisee
B) dealers operating relatively autonomously from suppliers
C) dealers having considerable freedom in developing and implementing their overall retail strategy
D) the absence of royalty fees to franchisors

Question 12

Hotel and motel franchises represent what type of structural arrangement?

A) voluntary wholesaler-retailer
B) cooperative wholesaler-retailer
C) service sponsor-retailer
D) manufacturer-retailer

Question 13

Franchisors yield considerable power in their relationship with franchisees due to their ability to ________.

A) overstate the income potential of franchisees
B) teach procedures and management skills to franchisees
C) cancel a franchise if any major provision of the franchise agreement is not met
D) develop a cooperative marketing program

Question 14

A major competitive advantage of independent retailers is ________.

A) specialization of retail functions
B) quantity discounts in purchasing
C) entrepreneurial drive
D) a good fit with other owned units

Question 15

Competition for new and existing retailers is high due to the ________.

A) high failure rates in retailing
B) high ease of entry into retailing
C) high investment per worker in retailing
D) complex licensing provisions for many kinds of retailers

Question 16

The type of retailer with the largest percent of total retail franchise sales is ________.

A) restaurants (all types)
B) convenience stores
C) auto and truck dealers
D) general merchandise stores

Question 17

Cancellation provisions,requirements that purchases be made from approved vendors,and standard operating procedures contribute to ________ for franchisees.

A) private labeling
B) constrained decision making
C) fair trade legislation
D) vertical integration

Question 18

Retail chains account for ________ percent of total retail sales.

A) 30
B) 40
C) 75
D) 90

Question 19

What percent of all retail store sales are made by independent retailers?

A) 10
B) 25
C) 60
D) 80

Question 20

An example of a product/trademark franchise is a(n)________.

A) real-estate brokerage franchise
B) auto dealer
C) fast-food franchise
D) auto-rental service franchise

Question 21

Pre-ticketing merchandise and exclusive distribution are channel control strategies of ________.

A) retailers
B) consumer cooperatives
C) manufacturers
D) wholesalers

Question 22

Wholesalers can possess channel control through ________.

A) franchising
B) private brands
C) fair trade legislation
D) tying contracts

Question 23

A major advantage of a leased department to the leased department operator is ________.

A) the conformity of the leased department to the overall store's operating procedure
B) some costs are reduced through shared facilities
C) the security of lease renewals
D) inflexibility of hours of operation and operating style

Question 24

Specialization of personnel by functional area and/or geographic region is most likely to occur in what type of retail institution?

A) independent
B) chain
C) leased department
D) consumer cooperative

Question 25

A manufacturer can exert channel control through ________.

A) pre-ticketing merchandise
B) private branding
C) cooperative advertising
D) intensive distribution

Question 26

The growth of consumer cooperatives has been limited due to ________.

A) competitive actions by full-service retailers
B) fair practice legislation
C) wholesaler use of full-time forcing
D) the high degree of required customer initiative and drive

Question 27

Decision making is usually centralized and the levels of management personnel are minimized in which retail institution?

A) variety store
B) department store
C) independent
D) chain

Question 28

A benefit of franchising to a franchisor is ________.

A) intrafranchise competition
B) the ease of establishing a uniform image
C) a national or global presence is developed more quickly and with less franchisor investment
D) the effect of an ineffective unit on resale values of other units

Question 29

The overall process whereby one member of a channel dominates the decisions made in the channel due to the power it possesses is referred to as ________.

A) vertical integration
B) vertical marketing systems
C) bargaining power
D) channel control

Question 30

A firm desiring the maximum degree of channel control should utilize ________.

A) an independent vertical marketing system
B) a fully integrated system
C) a partially integrated system
D) franchising

Question 31

A benefit to the use of a fully integrated system is ________.

A) greater use of specialized expertise in production and marketing
B) lower investment requirements
C) increased sales due to more intensive distribution
D) total control over its retail strategy

Question 32

The leading form of vertical marketing system is ________.

A) partially integrated marketing system
B) independent vertical marketing system
C) fully integrated marketing system
D) a retail cooperative

Question 33

A fully integrated system represents ________.

A) vertical integration
B) partial vertical integration
C) horizontal integration
D) interbrand competition

Question 34

A retail firm owned by its customer members is a(n)________.

A) consumer cooperative
B) franchise
C) independent vertical marketing system
D) fully integrated vertical marketing system

Question 35

In most situations,leased departments have been used by existing retailers to ________.

A) improve the store's overall image by emphasizing fashion
B) deepen the merchandise assortment in selected merchandise categories
C) broaden their offerings into product categories that are on the fringe of the store's major product lines
D) generate rental income from "dead" space

Question 36

Which vertical marketing system allows a firm to utilize different wholesale and retail channels of distribution?

A) dual marketing
B) independent vertical marketing system
C) partially integrated system
D) fully integrated vertical marketing system

Question 37

The "overdependence on the owner" problem for independent retailers can be overcome through ________.

A) taking in an active partner
B) centralizing decision making in the firm
C) life insurance policies
D) limiting time demands on the owner

Question 38

Uniform location standards are most likely to be present in which retail institution?

A) independent retailer
B) chain retailer
C) leased department
D) consumer cooperative

Question 39

Two independently owned businesses along a channel perform all production and distribution functions in a(n)________.

A) partially integrated system
B) independent vertical marketing system
C) fully integrated system
D) retail cooperative

Question 40

Which statement concerning ease of entry into retailing is correct?

A) Investment per worker in retailing is significantly greater than that of manufacturing establishments.
B) Ease of entry contributes to the high failure rate among newer retailers.
C) Ease of entry into retailing contributes to the low number of new firms entering retailing in any given year.
D) Ease of entry is reflected in high market shares (as a percent of total category sales) for the leading firms.

Question 41

Constrained decision making is used by ________.

A) independents and retail cooperatives
B) independents and chains
C) independents and leased departments
D) franchises and leased departments

Question 42

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 ________.

A) it can control franchisees through constrained decision making to receive higher profits from the sale of all goods and services
B) it can control franchises through threatening franchise termination due to fair practice laws
C) franchisees have total freedom to set and implement all retail strategies as they see fit
D) in general, franchisees should be treated as owners and not as employees

Question 43

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?

A) business format franchise
B) product/trademark franchise
C) leased department
D) independent vertical marketing system

Question 44

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

A) freedom from unionization
B) use of specialists in buying, selling, and store operations
C) freedom from antitrust legislation
D) less concern for overlapping locations

Question 45

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

A) a leased department
B) an independent vertical marketing system
C) franchising
D) factory outlets

Question 46

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

A) channel cooperation
B) channel power
C) bargaining power
D) price protection programs

Question 47

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

A) lower royalty and rental costs
B) independence from franchisor rules and regulations
C) intrafranchise competition
D) uniformity across all chain units

Question 48

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

A) using decentralized purchasing
B) refusing to purchase popular brands purchased by chains
C) threatening Robinson-Patman Act violations to suppliers
D) developing manufacturer brands

Question 49

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

A) business format franchise
B) product/trademark franchise
C) retail chain
D) independent

Question 50

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 ________.

A) less autonomy
B) greater autonomy
C) greater training
D) a greater chance of success

Question 51

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

A) independents
B) vertical marketing systems
C) retail cooperatives
D) chains

Question 52

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

A) functions performed by retailers
B) size in number of units
C) ownership
D) basis for payment (straight cash payment versus royalty)

Question 53

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

A) centralized buying that does not reflect regional and local preferences
B) a chain's performing wholesale functions
C) the use of computerized ordering and inventory management
D) use of national and regional media

Question 54

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?

A) independent vertical marketing system
B) fully integrated vertical marketing system
C) business format franchise
D) cooperative

Question 55

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

A) prototype stores; standardized merchandise lines; cooperative advertising
B) royalty-based rental agreements; exclusive territories; franchisee training
C) franchisee training; prototype stores; independence in setting store hours
D) cooperative advertising; merchandise lines that are related to regional and local preferences; product/trademark franchising

Question 56

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

A) promoting service sponsor versus manufacturer franchises
B) increasing the channel power to franchisees
C) limiting franchisor "right to purchase" laws
D) further constraining decision making relative to franchisees

Question 57

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

A) utilize prototype stores
B) receive assistance from franchisors on site location and start-up practices
C) operate relatively autonomously from suppliers
D) have an active relationship with the franchisor

Question 58

Constrained decision making is most commonly found in ________.

A) independent vertical marketing systems
B) manufacturer-retailer licensing agreements
C) business format franchising
D) product/trademark franchising

Question 59

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 ________.

A) product/trademark franchising
B) business format franchising
C) a leased department
D) a membership warehouse club

Question 60

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

A) percent of sales
B) long-term lease with flat payments
C) long-term lease with graduated payments
D) month-to-month agreement

Question 61

An important problem for small,family-run independent retail businesses is the limited time and resources devoted to long-run planning.

Question 62

The potential for channel conflict is minimized in which vertical marketing system?

A) independent vertical marketing system
B) partially integrated system
C) dual marketing
D) fully integrated system

Question 63

All types of restaurants,including fast-food franchises,account for the majority of retail franchise sales.

Question 64

Manufacturers/service sponsors can exert channel control through ________.

A) franchising
B) private branding
C) fair practice legislation
D) store loyalty

Question 65

Orderly managerial succession is an advantage of an independent retailer form of organization.

Question 66

A manufacturer of a specialty good understands that its maximum chance of sales success occurs when it can control a product's final selling price as well as its retail advertising and personal selling strategy.In the past,the manufacturer was dissatisfied with both the level of sales support and the high level of discounting on its products.Which vertical marketing system should the manufacturer utilize?

A) independent vertical marketing system
B) partially integrated system
C) dual marketing
D) fully integrated vertical marketing system

Question 67

The potential for channel conflict is greatest in which vertical marketing system?

A) independent vertical marketing system
B) partially integrated system
C) dual marketing
D) fully integrated system

Question 68

Which of the following has developed because existing retail institutions were perceived by consumers as inadequately fulfilling market needs?

A) independent channel ownership
B) consumer cooperatives
C) leased departments
D) total vertical integration

Question 69

A cosmetics manufacturer is using a differentiated marketing strategy.While some of its brands are sold through its direct selling organization,other brands are sold through department and specialty stores.The manufacturer uses ________.

A) an independent vertical marketing system
B) a partially integrated system
C) dual marketing
D) a fully integrated vertical marketing system

Question 70

A manufacturer with low company resources which seeks intensive distribution should utilize which vertical marketing system?

A) a retail cooperative
B) independent vertical marketing system
C) partially integrated system
D) fully integrated system

Question 71

Three types of structural arrangements involving retail franchises exist: manufacturer-retailer,wholesaler-retailer,and service sponsor-retailer.

Question 72

Approximately 70 percent of all retail stores are operated by independents.

Question 73

Retailers use private labeling to generate channel control because ________.

A) greater channel communication is fostered
B) a large proportion of a manufacturer's output is sold to one retailer
C) retailers can more easily obtain bank financing
D) store loyalty accrues to the retailer from positive experiences with the brand

Question 74

Product/trademark franchisees operate in a relatively autonomous manner from their suppliers.

Question 75

Which of these is not a major disadvantage of a leased department to a lessee?

A) the use of shared facilities and equipment with the leasor
B) restrictions on days open
C) restrictions on goods/services offered
D) leasor refusal to renew the lease

Question 76

An advantage of a leased department form of organization to a lessee is ________.

A) management assistance
B) financial support provided by the leasor
C) high traffic potential
D) protection from FTC regulations

Question 77

In general,when compared with manufacturing activities,retailing is characterized by relative difficulty of entry.

Question 78

A chain retailer can achieve cost efficiencies by performing wholesaling functions such as buying directly from manufacturers.

Question 79

Chain retailers are characterized by multiple outlets under common ownership with decentralized purchasing and decision making.

Question 80

Data for the Census of Retail Trade is collected and published twice in each decade.