6 Chapter ORGANIZATIONAL MARKETS AND BUYER BEHAVIOR Test Item Table
Major Section of the Chapter Level 1: Definition (Knows Basic Terms & Facts) Buying Paper is Serious Business at JCPenney (pp. 121-122) The Nature and Size of Organizational Markets (pp. 122-123) Measuring Industrial, Reseller, and Government Markets (p. 123-124) Characteristics of Organizational Buying (pp. 124-128) 1 Level of Learning Level 2: Conceptual (Understands Concepts & Principles) Level 3: Application (Applies Principles) 2, 3, 4
5, 6, 7, 12, 13
8, 9, 11, 142
10
19, 20, 24, 26, 27, 143
14, 15, 28, 29, 30, 31, 32, 34, 144
16, 17, 18, 21, 22, 23, 25, 33
35, 36, 55, 56, 61, 62, 67, 70
42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 57, 60, 65, 68, 69, 145, 146
37, 38, 39, 40, 41, 53, 54, 58, 59, 63, 64, 66, 71
The Organizational Buying Process and the Buying Center (pp. 129-131) Online Buying in Organizational Markets (pp. 131-134) Video Case: Lands End: Where Buyers Rule (pp. 135-137)
72, 73, 74, 76, 79, 80, 83, 85, 87, 97, 98, 99, 100, 102, 105, 107, 108, 110, 112, 115, 118, 120, 148, 149 125, 128, 133, 136, 153
75, 77, 78, 81, 82, 84, 88, 95, 106, 109, 121, 122, 147, 151
86, 89, 90, 91, 92, 93, 94, 96, 101, 103, 104, 111, 113, 114, 116, 117, 119, 150 126, 134, 138
123, 124, 127, 129, 130, 131, 132, 135, 137, 152
139
140, 141
Note: Bold numbers indicate short essay questions.
319
CHAPTER 6 ORGANIZATIONAL MARKETS AND BUYER BEHAVIOR MULTIPLE CHOICE QUESTIONS 6-1 CHAPTER OPENING EXAMPLE: JCPMEDIA JCPMedia: a. b. c. d. e. buys the fashions that are sold in JCPenney stores. is an advertising agency for industrial companies that want brand recognition. is the print and paper purchasing subsidiary of JCPenney. is a marketing research company that monitors e-commerce activities. buys and sells media space for newspapers. DEFINITION
Answer: c Page: 121 Rationale: As described in the chapter opening example, JCPMedia is the print and paper purchasing arm of JCPenney, the fifth largest retailer in the United States. 6-2 CHAPTER OPENING EXAMPLE: JCPMEDIA APPLICATION
When JCPMedia buys paper, it considers the supplier's forest management practices and its antipollution performance. How the supplier assumes its __________ is important in the selection of a paper supplier for JCPMedia. a. b. c. d. e. profit responsibility societal responsibility ecological accountability environmental autonomy stakeholder responsibility
Answer: b Page: 89 Rationale: Students will need to remember the definition of societal responsibility in chapter 4 to answer this question. Societal responsibility is the view that organizations have obligations to the general public and to the preservation of the ecological environment. The general public will benefit from the forest management practices and antipollution performance of JCPMedia suppliers.
320
6-3 CHAPTER OPENING EXAMPLE: JCPMEDIA
APPLICATION
To select a paper supplier, JCPMedia looks at the supplier's capacity to deliver selected grades of paper, the availability of specific types of paper as well as quality. This examination would be done during JCPMedia's: a. b. c. d. e. business correlation analysis. break-even analysis. buying decision process database search. social audit.
Answer: c Page: 121; Figure 6-4 Rationale: During the alternative evaluation part of the buying decision process, the buyer assesses facilities, capacity, quality control and financial status, as shown in Figure 6-4. 6-4 CHAPTER OPENING EXAMPLE: JCPMEDIA APPLICATION
The size and number of JCPenney catalogs designed and mailed to consumers would determine how much paper JCPMedia would need to buy. This is an example of: a. b. c. d. e. derived demand. reciprocity. a tying agreement. a transactional sale. elastic supply.
Answer: a Page: 121 Rationale: Derived demand means the demand for industrial products and services (the paper) is driven by the demand for consumer products and services (the demand for the catalog). 6-5 BUSINESS MARKETING DEFINITION
__________ is the marketing of products to companies, governments, or not-for-profit organizations for use in the creation of goods and services that they then produce and market to others. a. b. c. d. e. A relational enterprise Institutional marketing Business marketing Reseller marketing Agricultural marketing
Answer: c Page: 122 Other Location: web Rationale: Key term definitionbusiness marketing
321
6-6 BUSINESS MARKETING Business marketing is: a. b. c. d. e.
DEFINITION
the marketing of products to consumers. the ultimate market whereby goods and services are traded. the marketing of products to companies, governments, or not-for-profit organizations for use in the creation of goods and services that they then produce and market to others. entrepreneurship. the way all goods, services and ideas are bought and sold.
Answer: c Page: 122 Rationale: Key term definitionbusiness marketing 6-7 ORGANIZATIONAL BUYERS DEFINITION
Manufacturers, wholesalers, retailers, and government agencies that buy goods and services for their own use or for resale are examples of: a. b. c. d. e. multinationals. cooperatives. organizational buyers. ultimate consumers. multiculturals.
Answer: c Page: 122 Rationale: Key term definitionorganizational buyers 6-8 ORGANIZATIONAL BUYERS Organizational buyers include all of the following EXCEPT: a. b. c. d. e. retailers. government. manufacturers. wholesalers. ultimate consumers. CONCEPTUAL
Answer: e Page: 122 Other Location: web Rationale: Organizational buyers are those manufacturers, wholesalers and retailers, and government agencies that buy goods and services for their own use or for resale.
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6-9 ORGANIZATIONAL BUYERS Organizational buyers can be divided into three different markets. They are: a. b. c. d. e. industrial, wholesaler, and retailer. industrial, retailer, and government. retailer, manufacturer, and government agencies. industrial, government, and ultimate consumer. industrial, reseller, and government.
CONCEPTUAL
Answer: e Page: 122; Figure 6-1 Rationale: Figure 6-1 shows that organizational buyers come from three different markets: industrial business markets, reseller markets, and government markets. 6-10 ORGANIZATIONAL BUYERS APPLICATION
Which of the following statements represents an organizational buying decision? a. b. c. d. e. Mr. Crowe buys a Toyota minivan to commute to work. A dentist buys a new VCR for her den. Mr. Langley hires a housecleaning service to clean his apartment. The owner of a fried chicken restaurant hires a snow removal service to keep the parking lot clear. A physician takes her sick child to the doctor.
Answer: d Page: 122 Other Location: web Rationale: Organizations buy products and services for their own use or for resale. The restaurant owner hires a service for the use of the restaurant to make sure customers (ultimate consumers) can easily and safely reach the restaurant. 6-11 ORGANIZATIONAL BUYERS Organizational buyers: a. b. c. d. e. purchase and lease smaller amounts of supplies than ultimate consumers. purchase only business services for their firm. purchase, in total, far more in a year than ultimate consumers. purchase only raw materials for their firm. are most likely to be located in the eastern U.S., and operate out of what is called a factory. CONCEPTUAL
Answer: c Page: 122 Rationale: Organizational buyers purchase and lease large volumes of equipment, raw materials, manufactured parts, supplies, and business services. Because they often buy raw materials and parts, process them, and sell the upgraded product several times before it is purchased by the final organizational buyer or ultimate consumer, the total purchases of organizational buyers in a year are far greater than those of ultimate consumers.
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6-12 INDUSTRIAL FIRMS An industrial firm is a firm that: a. b. c. d. e.
DEFINITION
is distinguished by the amount of energy it uses and potential for pollution to the environment. employs more than 500 people, who are paid minimum wage with few or no benefits. deals exclusively with federal, state, and local governments, and often mediates governmental agency disputes. in some way reprocesses a product or service it buys before selling it again to the next buyer. is most likely to be located in the eastern U.S., and operates out of what is called a factory.
Answer: d Page: 122 Rationale: Text term definitionindustrial firms 6-13 INDUSTRIAL FIRMS DEFINITION
__________ reprocess a product or service they buy before selling it again to the next buyer. a. b. c. d. e. Industrial firms Reseller firms Government agencies Wholesalers Retail firms
Answer: a Page: 122 Rationale: Text term definitionindustrial firms 6-14 INDUSTRIAL MARKET SEGMENTS CONCEPTUAL
The largest segment of the industrial market, in terms of the number of organizational customers, is the __________ segment. a. b. c. d. e. construction transportation and public utilities manufacturer services retail
Answer: d Page: 123 Rationale: Figure 6-1 from the Department of Commerce shows alternative d to be correct. (Alternative e is a segment of the reseller market.)
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6-15 BUSINESS MARKETS
CONCEPTUAL
The services market sells diverse services such as legal advice, auto repair, and dry cleaning. Along with finance, insurance, and __________; transportation, communication and public utility firms; and not-for-profit associations, these service firms represent about 73 percent of all industrial firms, or about 8.2 million. a. b. c. d. e. real estate businesses wholesalers retailers government units manufacturing firms
Answer: a Page: 123 Rationale: The importance of services in the United States today is emphasized by the composition of industrial markets shown in Figure 6-1 and the services component described in this question. 6-16 INDUSTRIAL MARKETS APPLICATION
Archer Daniels Midland (ADM) Co. is the world's largest cocoa-bean processor. It buys cocoa beans and converts the beans into cocoa powder and cocoa butter, which it sells to companies that manufacture consumer products that contain chocolate. The cocoa-bean processor is operating in a(n) __________ market. a. b. c. d. e. reseller governmental psychographic product-intensive industrial
Answer: e Page: 122-123 Rationale: Marketing organizations operating in an industrial market buy a good or service, reprocess that good or service, and then sell the product or service to another buyer. In this instance, the cocoa-bean processor buys cocoa beans, reprocesses them, and then resells them to consumer food manufacturers.
325
6-17 INDUSTRIAL MARKETS
APPLICATION
A manufacturer of consumer food products for the Chinese market in the U.S. buys several thousand tons of camellia nuts annually. It converts those nuts into a cooking oil that is popular among the Chinese population because it has a milder taste than olive oil and a higher burning point. The oil is sold to supermarkets. The pulp from which the oil is extracted is sold to beef cattle farmers who use it to fatten their cattle. These transactions occur in the __________ market. a. b. c. d. e. reseller government institutional psychographic industrial
Answer: e Page: 122-123 Rationale: Marketing organizations operating in an industrial market buy a good or service, reprocess that good or service, and then sell the product to another buyer. In this case, the company buys camellia nuts, reprocesses them and then resells a finished product to Chinese supermarkets. The pulp is sold to beef cattle farmers for feed. 6-18 INDUSTRIAL MARKETS APPLICATION
Pride Mobility makes specialty chairs and wheelchairs from component parts and materials it buys. It sells its products to hospitals, nursing homes, and retailers of health care products. Pride Mobility operates in a(n) __________ market. a. b. c. d. e. consumer psychographic industrial reseller institutional
Answer: c Page: 122-123 Rationale: Industrial firms in some way reprocess a good or service they buy before selling it again to the next buyer. The firm buys the mattresses, wheels, metal component parts, etc. and makes wheelchairs and specialty chairs before selling them to hospitals, nursing homes, and resellers of health care products.
326
6-19 RESELLER MARKETS
DEFINITION
Wholesalers and retailers that buy physical products and resell them again without any reprocessing are: a. b. c. d. e. industrial firms. resellers. nonintermediaries. facilitators. facilitating markets.
Answer: b Page: 123 Rationale: Text term definitionresellers 6-20 RESELLER MARKETS The reseller market includes: a. b. c. d. e. manufacturers and service providers. transportation providers and other facilitators. government agencies and service providers. agricultural markets and the mining industry. retailers and wholesalers. DEFINITION
Answer: e Page: 123 Rationale: Text term definitionresellers 6-21 RESELLERS APPLICATION
The Scotts Company manufacturers and sells packaged lawn fertilizers to the Home Depot. The Home Depot sells the product to the ultimate consumerthe homeowner. The Home Depot is a: a. b. c. d. e. service provider. monopoly. reseller. industrialist. capitalist.
Answer: c Page: 123 Rationale: Resellers are wholesalers and retailers who buy physical products and resell them again without any reprocessing.
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6-22 RESELLERS
APPLICATION
Bloomingdales Department store buys a variety of kitchen products, such as mixers and blenders, which it then sells to amateur cooks. Bloomingdales is a: a. b. c. d. e. change agent. monopoly. reseller. industrialist. capitalist.
Answer: c Page: 123 Rationale: Resellers are wholesalers and retailers who buy physical products and resell them again without any reprocessing. 6-23 RESELLERS APPLICATION
In terms of organizational buyers, Amazon.com, Lands' End, and JCPenney would all be classified as: a. b. c. d. e. capitalists. resellers. monopolies. facilitating agents. industrialists.
Answer: b Page: 123 Other Location: web Rationale: Resellers are retailers who buy physical products and resell them again without any reprocessing. 6-24 GOVERNMENT UNITS DEFINITION
___________ are the federal, state, and local agencies that buy goods and services for the constituents they serve. a. b. c. d. e. Industrial firms Resellers Cooperatives Government units Facilitating agents
Answer: d Page: 123 Rationale: Text term definitiongovernment units
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6-25 GOVERNMENT UNITS
APPLICATION
When Louisiana State University buys new computers, monitors, and printers for its student computer labs, it is operating as a(n): a. b. c. d. e. industrial market. business market. government unit. facilitating agent. service provider.
Answer: c Page: 123 Rationale: Government units are federal, state (such as a state university), and local agencies that buy goods and services for the constituents they serve. 6-26 NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM DEFINITION
The system that provides common industry definitions for Canada, Mexico, and the United States, which make easier the measurement of economic activity in the three member countries of the North American Free Trade Agreement (NAFTA) is called: a. b. c. d. e. Strategic International Classification (SIC). Federated Domestic and International Classification (FDIC). Federated Trade Codification (FTC). the North American Industry Classification System (NAICS). Federated System of Listing International Corporations (FSLIC).
Answer: d Page: 123 Rationale: Key term definitionNorth American Industry Classification System (NAICS) 6-27 NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM DEFINITION
The North American Industry Classification System (NAICS) provides common industry definitions, which make easier the measurement of economic activity for: a. b. c. d. e. European Economic Community (EEC). Fiscal Development International Coalition (FDIC). North American Free Trade Agreement (NAFTA). North Atlantic Treaty Organization (NATO). USCAMEX.
Answer: c Page: 123 Rationale: Key term definitionNorth American Industry Classification System (NAICS)
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6-28 NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM
CONCEPTUAL
Which of the following statements about the North American Industry Classification System (NAICS) is true? a. b. c. d. e. After being used more than 50 years, NAICS was replaced by the Standard Industrial Classification (SIC system). NAICS neither permits comparability across countries nor accurately measures new or emerging industries. NAICS is inconsistent with the International Standard Industrial Classification of All Economic Activities published by the UN. NAICS groups economic activity to permit studies of market share, demand for goods and services, competition from imports in domestic markets, and similar studies. All of the above statements about the North American Industry Classification System (NAICS) are true.
Answer: d Page: 123 Rationale: NAICS replaced the SIC system, a version of which had been in place for more than 50 years. SIC neither permitted comparability across countries nor accurately measured new or emerging industries. NAICS is consistent with the International Standard Industrial Classification of All Economic Activities, published by the UN. NAICS groups economic activity to permit studies of market share, demand for goods and services, and similar studies. 6-29 INTL STANDARD INDUSTRIAL CLASSIFICATION SYSTEM CONCEPTUAL
The International Standard Industrial Classification of All Economic Activities, published by the __________ to facilitate global economic activity, is similar in form to the North American Industry Classification System (NAICS). a. b. c. d. e. European Economic Community (EEC). Fiscal Development International Coalition (FDIC). North American Free Trade Agreement (NAFTA). North Atlantic Treaty Organization (NATO). United Nations (UN).
Answer: e Page: 123 Rationale: The NAICS is consistent with the International Standard Industrial Classification, published by the United Nations, to help measure global economic activity.
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6-30 NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM
CONCEPTUAL
The North American Industry Classification System (NAICS) permits a firm to: a. b. c. d. e. find the NAICS codes of its present customers and then obtain NAICS-coded lists for similar firms. learn the names of the purchasing agents of all prospective customers. sell to any company within North America as long as it is not a monopoly. engage in benchmarking with companies manufacturing and/or marketing similar products. conduct an industry-wide SWOT analysis to determine internal strengths and weaknesses of current and prospective competitors.
Answer: a Page: 123 Rationale: The North American Industry Classification System (NAICS) permits a firm to find the NAICS codes of its present customers and then obtain NAICS-coded lists for similar firms. 6-31 NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM CONCEPTUAL
A disadvantage of the North American Industry Classification System (NAICS) systems is that: a. b. c. d. e. it only lists the top ten firms in any particular industry. it is too difficult and confusing to read. it assigns one code to each organization based on its major economic activity, so large firms that engage in many different activities are given only one code. it only covers organizations with sales in excess of (US) $1 million. it makes it possible to find how the firm's customers are coded.
Answer: c Page: 123 Rationale: A limitation of the NAICS is that it assigns only one code to each organization based on its major economic activity. 6-32 NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM CONCEPTUAL
How might a marketing manager for a manufacturer of turboprop engines used in private jet planes use the North American Industry Classification (NAICS) system to help with his marketing planning? a. b. c. d. e. He could record the NAICS numbers for each of his firm's best customers, and then obtain lists of companies with the same NAICS numbers. He could go to a library to find the NAICS numbers for all government units, federal, state, and local. He could identify all NAICS numbers that do not reflect the classifications of his firm's customers. He could poll his field sales organization to see if his company's sales representatives know what NAICS numbers mean. He could not use the NAICS system because it is a dated concept that has no current usefulness.
Answer: a Page: 123 Rationale: Although the NAICS will have its limitations, it will be extremely useful for analyzing and segmenting business markets as described in alternative a.
331
6-33 NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM
APPLICATION
You are the research director of a major marketing research consulting firm. You need to select an NAICS (North American Industry Classification System) code that gives you the most detail about the competitors in a client's industry. Which of the following levels of classification would provide the greatest detail? a. b. c. d. e. Code 260 Code 423531 Code 91 Code 6575 Any of the above since each code designation provides an equal amount of detailed information about competitors.
Answer: b Page: 124; Figure 6-2 Rationale: A six-digit NAICS classification would give the most detail about numbers, locations, and sizes of the client's competitors, as shown in Figure 6-2. 6-34 NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM CONCEPTUAL
The NAICS system will allow marketing managers to gather and study of all of the following information EXCEPT: a. b. c. d. e. market share. demand for goods and services. import competition in domestic markets. every industry in which a very large firm engages in business. All of the above are items of information that can be gathered using the NAICS system.
Answer: d Page: 124 Rationale: A major drawback of the system (like the old SIC) is that NAICS assigns one code to each organization based on its major economic activity, so large firms that engage in many different activities are still given only one NAICS code, therefore alternative d is incorrect. 6-35 DERIVED DEMAND DEFINITION
The demand for industrial products and services that is driven by, or derived from, demand for consumer products and services is called: a. b. c. d. e. Gross National Product. derived demand. the Consumer Price Index. break-even demand. high-risk demand.
Answer: b Page: 124 Rationale: Key term definitionderived demand
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6-36 DERIVED DEMAND
DEFINITION
Derived demand means the demand for industrial products and services is driven by, or derived, from: a. b. c. d. e. mathematical formulas and statistical models. the Gross National Product. demand for consumer products and services. demand for industrial goods. profit margins and ratios.
Answer: c Page: 124 Rationale: Key term definitionderived demand 6-37 DERIVED DEMAND APPLICATION
Archer Daniels Midland (ADM) Company processes wheat into flour, which it sells to bakeries and pasta makers. What kind of demand is there for ADM's flour? a. b. c. d. e. unitized derived consumer applied horizontal
Answer: b Page: 124 Other Location: web Rationale: The demand for flour is driven by consumer demand for pasta and baked goods, so in this case the demand for flour is a derived demand. 6-38 DERIVED DEMAND APPLICATION
CHEP is the global leader in pallet and container pooling services. Pallets are used for transporting and storing new appliances such as stoves, freezers, and refrigerators, for example. What kind of demand is there for CHEP pallets? a. b. c. d. e. There is creative demand, which is tied to the sales of appliances, not the sale of the pallets. There is derived demand, which is tied to the sales of appliances, but independent of the sales of pallets. There is derived demand for the pallets because demand for the pallets is tied to demand for the appliances. There is inelastic demand tied to the cost of the components of the pallets. There is elastic demand tied to the cost of the components of the pallets.
Answer: c Page: 125 Rationale: The demand for the pallets is driven by the sales of (demand for) appliances.
333
6-39 DERIVED DEMAND
APPLICATION
Concert Staging Company provides the stage, the roof system, and lighting and sound for outdoor concerts and theaters. It is typically hired by the organization sponsoring the event. When the economy slows down, consumers are more likely to save their money for a rainy day than buy a concert or theater ticket. The number of concert and theater events determines how many times the company gets to provide its services. Demand for the services provided by Concert Staging Company is __________ demand. a. b. c. d. e. derived unitized holistic applied consumer
Answer: a Page: 125 Rationale: The demand for Concert Staging Company services is driven by the sales of tickets to concert/theater attendees so it is a derived demand. 6-40 DERIVED DEMAND APPLICATION
Purchases by Procter & Gamble of sodium fluoride for use in Crest toothpaste would be an example of __________demand. a. b. c. d. e. derived unitized binary applied consumer
Answer: a Page: 125 Rationale: Demand for the sodium fluoride would be directly related to the demand for Crest toothpaste.
334
6-41 DERIVED DEMAND
APPLICATION
Andersen Windows is a manufacturer of high-quality, energy-efficient windows for homes and offices. The number of windows sold is directly linked to the number of new homes being built. When the economy is strong and many homes are being built, Andersen sells lots of windows; when few homes are being built, few windows are sold. This is an example of: a. b. c. d. e. derived demand. the price-quality relationship. the acceleration principle. price-elasticity. price-inelasticity.
Answer: a Page: 125 Other Location: web Rationale: Derived demand means that demand for industrial goods and services is driven by, or derived from, the demand for consumer products. In this case, the demand for windows is driven by the consumer demand for new houses. 6-42 CHARACTERISTICS OF ORGANIZATIONAL BUYING CONCEPTUAL
Which of the following is a characteristic of products and services purchased within an organizational context? a. b. c. d. e. The focus is on delivery time and post-sale service. Raw and semi-finished goods are predominantly purchased. Financial assistance with the purchase is important. Goods and services are purchased on the basis of specifications that are technical in nature. All of the above are characteristics of purchases within an organizational context.
Answer: e Page: 125; Figure 6-3 Rationale: As shown in Figure 6-3, all of the characteristics shown in alternatives a-d are part of organizational buying behavior and refer to products and services 6-43 CHARACTERISTICS OF ORGANIZATIONAL BUYING CONCEPTUAL
Because orders in organizational buying are typically much larger than in consumer buying, buyers must often __________ when the order is above a specific amount, such as $5,000. a. b. c. d. e. get competitive bids from at least three prospective suppliers lie to their superiors about how much things really cost carry personal insurance to cover possible losses pay taxes out of their own pockets do all of the above
Answer: a Page: 125 Rationale: With so much money at stake, most organizations place constraints on their buyers in the form of purchasing policies or procedures such as obtaining competitive bids.
335
6-44 CHARACTERISTICS OF ORGANIZATIONAL BUYING
CONCEPTUAL
Which of the following statements accurately characterizes the organizational buying process? a. b. c. d. e. Multiple buying influences exist because many people may be involved in the purchase decision process. Buying objectives, procedures, and criteria are well-established. Negotiations between buyers and sellers regarding price is common. The purchase of goods or services is usually handled by expert buyers. All of the above statements accurately characterize the organizational buying process.
Answer: e Page: 125; Figure 6-3 Rationale: Figure 6-3 shows the key characteristics of organizational buying behavior. Alternatives a-d are suggested in Figure 6-3. 6-45 CHARACTERISTICS OF ORGANIZATIONAL BUYING CONCEPTUAL
Which of the following is characteristic of the organizational buying process? a. b. c. d. e. Multiple parties participate in purchase decisions. Negotiation between buyers and sellers is commonplace. Online buying over the Internet is widespread. Buying objectives and criteria are typically spelled out. All of the above statements accurately characterize the organizational buying process.
Answer: e Page: 125; Figure 6-3 Rationale: Figure 6-3 shows the key characteristics of organizational buying behavior. Alternatives a-d are suggested in Figure 6-3. 6-46 CHARACTERISTICS OF ORGANIZATIONAL BUYING CONCEPTUAL
Which of the following statements accurately characterizes buying behavior in organizational markets? a. b. c. d. e. Organizational buying behavior is similar to consumer buying behavior since individuals are involved in both processes. Demand for industrial products is elastic instead of inelastic or derived because companies, not ultimate consumers, determine the quantity of goods produced. Fewer customers typically exist in organizational markets than in consumer markets. Purchase orders are usually small. Forecasting is not as important in organizational buying as in consumer buying.
Answer: c Page: 125 Rationale: Firms selling to organizations are always restricted to far fewer buyers than firms selling consumer products to ultimate users.
336
6-47 CHARACTERISTICS OF ORGANIZATIONAL BUYING
CONCEPTUAL
When compared to consumer marketing, industrial marketing is simpler because: a. b. c. d. e. firms have buying centers. it is easy to forecast derived demand. the buying objectives of industrial buyers are easily identifiable. industrial orders are smaller. industrial products involve fewer services and types of customer assistance.
Answer: c Page: 125 Rationale: Alternatives a and b make the process more complex, and Alternatives d and e are untrue. The main objective of industrial buyers is improved profit; consumers have more varied wants and needs. 6-48 CHARACTERISTICS OF ORGANIZATIONAL BUYING CONCEPTUAL
Which of the following relationships will generally be true regarding organizational versus consumer buying decisions? a. b. c. d. e. The size of the order is almost always larger for a consumer order than for an organizational order. The number of potential buyers is much larger for a firm selling ultimate consumers than for a firm selling to another organization. More organizational buying decisions are lower in involvement. Organizational buyers are more influenced by lifestyle factors. Derived demand is more important in consumer buying.
Answer: b Page: 124-126 Rationale: There are many more ultimate consumers than there are organizations so a firm selling to consumers has many more potential buyers than a firm selling to another organization. 6-49 SIZE OF THE ORDER OR PURCHASE CONCEPTUAL
Because so much money is at stake with an organizational purchase, most organizations place __________ on their buyers in the form of purchasing policies or procedures. a. b. c. d. e. additional duties fewer bonuses educational restrictions constraints no requirements
Answer: d Page: 125 Rationale: Organizations place constraints on their buyers such as getting competitive bids from at least three prospective suppliers when the order is above a specific amount and/or requiring the review and approval of a senior member of the company.
337
6-50 NUMBER OF POTENTIAL BUYERS
CONCEPTUAL
Firms selling consumer goods or services often try to reach thousands or millions of individuals or households. Firms selling to organizations are often: a. b. c. d. e. inclined to try to reach tens of millions. restricted to far fewer buyers. hoping to obtain similar numbers of nonconsumer customers. restricted by government regulations to only a few industrial categories. confused by the effect of duties and tariffs.
Answer: b Page: 126 Rationale: The number of potential buyers is much smaller in organizational buying situations. 6-51 CHARACTERISTICS OF ORGANIZATIONAL BUYING CONCEPTUAL
Which of the following possible aspects of consumer buying decisions is LEAST likely to enter into an organizational buying decision? a. b. c. d. e. comparison of product performance with expectations decision based on highest overall evaluation alternatives evaluated on important criteria information gathered from internal and external searches problem recognition triggered by self-actualization motives
Answer: e Page: 126 Other Location: web Rationale: Generally, organizations buy products and services for one main reason: to help them achieve their objectives. Usually the buying objective is to increase profits through reducing costs or increasing sales. Alternatives a-d could be used to achieve that objective. Alternative e is not applicable to organization objectives. 6-52 ORGANIZATIONAL BUYING OBJECTIVES The primary buying objective for business firms is usually to: a. b. c. d. e. increase profits through increasing costs and increasing sales. increase profits through reducing costs and decreasing sales. increase profits through reducing costs or increasing sales. maintain profits through reducing costs and increasing sales. reduce profits through reducing costs and reducing sales. CONCEPTUAL
Answer: c Page: 126 Other Location: web Rationale: For business firms, the buying objective is usually to increase profits through reducing costs or increasing revenues.
338
6-53 MARKETING NEWSNET
APPLICATION
Changes in which of the following environmental influences is most likely to have a positive effect on the success on the Airbus A380 superjumbo jet? a. b. c. d. e. sociocultural economic competitive technological regulatory
Answer: a Page: 126 Rationale: Students will need to remember the definitions of environmental influences from Chapter 3 in addition to recalling that rapidly expanding demand for intercontinental passenger air traffic and the growth of the global air freight industry is a good sign for aircraft manufacturers. Both of these external events will have a positive effect on sales of the Airbus A380. Both of these factors mentioned in the Newsnet reflect an increase in demand or a sociocultural influence. 6-54 ORGANIZATIONAL BUYING CRITERIA APPLICATION
A company that runs its trucks on a mixture of petroleum and ethanol buys its ethanol from the Archer Daniels Midland (ADM) Company because it is the only large supplier of ethanol that has an ethanol manufacturing facility in Illinois and is able to meet the trucking company's delivery schedules. The selection of ADM to provide the ethanol was based on: a. b. c. d. e. supplier value dimensions. derived demand factors. evaluative criteria. performance measures. organizational buying criteria.
Answer: e Page: 127 Rationale: The location of ADM in IL and its ability to meet required delivery schedules are examples of organizational buying criteria. 6-55 ORGANIZATIONAL BUYING CRITERIA DEFINITION
The objective attributes of the supplier's products and services and the capabilities of the supplier itself are collectively called: a. b. c. d. e. supplier evaluative dimensions. derived demand factors. evaluative criteria. performance measures. organizational buying criteria.
Answer: e Page: 127 Rationale: Text term definitionorganizational buying criteria
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6-56 ORGANIZATIONAL BUYING CRITERIA
DEFINITION
Seven of the most commonly used organizational buying criteria are (1) __________, (2) ability to meet the quality specifications required for the item, (3) ability to meet required delivery schedules, (4) technical capability, (5) warranties and claim policies in the event of poor performance, (6) past performance on previous contracts, and (7) production facilities and capacity. a. b. c. d. e. taste of the buyer personal friendship with sales representative price current mood of the buyer whim of the firm's senior management
Answer: c Page: 127 Rationale: Text term definitionorganizational buying criteria 6-57 ORGANIZATIONAL BUYING CRITERIA CONCEPTUAL
All of the following are commonly used organizational buying criteria EXCEPT: a. b. c. d. e. past performance on previous purchases. price and other financing assistance. the number and distribution of retail outlets likely to carry the product. the technical expertise of the salespeople. the ability to meet delivery dates.
Answer: c Page: 127 Rationale: Alternative c is neither relevant nor an organizational buying criterion. While important in marketing strategy, this criterion applies to the distribution of consumer products, not to the purchase of organizational products. 6-58 ORGANIZATIONAL BUYING CRITERIA APPLICATION
Many industrial buyers for manufacturing firms place great importance on delivery time because they often rely on a just-in-time inventory system. This system has increased the importance of which organizational buying criterion? a. b. c. d. e. low prices high quality on-time delivery customer service and follow-up cheap labor
Answer: c Page: 127 Rationale: With a just-in-time system, late deliveries can shut down an entire production line, so on-time deliveries are crucial.
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6-59 ORG. BUYING OBJECTIVES/MARKETING NEWSNET
APPLICATION
The primary reason organizations buy products and services is to help them achieve their objectives. Which of the following statements illustrates a typical organizational buying objective? a. b. c. d. e. Southland Corporation buys automated inventory systems to increase the number of products sold in its 7-Eleven outlets and to keep them fresh. Sears launches the Anthony Mark Hankins Signature Collection of clothing for women, forging a link with minority- and women-owned suppliers and vendors. Mercy Hospital buys a high-technology diagnostic device to help serve its patients better. Nissan Motor Company switches its ad agency because it expects the new agency to develop a more effective ad campaign to sell more cars and increase revenues. All of the above may be organizational buying objectives.
Answer: e Page: 127 Rationale: For business firms the buying objective is usually to increase profits through reducing costs or increasing revenues, as in alternatives a, c, and d. Many companies have broadened their buying objectives to include an emphasis on buying from minority- and womenowned suppliers and vendors, as is the case for Sears in alternative b. 6-60 MARKETING NEWSNET Sears regards ethnic customers as: a. b. c. d. e. inconsequential to their primary business. decreasing in importance. no different from other customers. markets that should be targeted. a group they may want to target in the future, but not until it makes up a larger percentage of the population. CONCEPTUAL
Answer: d Page: 127 Rationale: Sears knows how important the ethnic customer is. Sears is developing product lines and marketing approaches that welcome ethnic customers. 6-61 REVERSE MARKETING DEFINITION
__________ involves the deliberate effort by organizational buyers to build relationships that shape suppliers' products, services, and capabilities to fit a buyer's needs and those of its customers. a. b. c. d. e. Relationship marketing Reverse marketing Cooperative marketing Vertical integration Reciprocity
Answer: b Page: 127 Rationale: Text term definitionreverse marketing
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6-62 REVERSE MARKETING
DEFINITION
Many organizational buyers today are transforming their buying criteria into specific requirements that are communicated to prospective suppliers. Called __________, this practice involves the deliberate effort by organizational buyers to build relationships that shape suppliers' products, services, and capabilities to fit a buyer's needs and those of its customers. a. b. c. d. e. demarketing inverse marketing reverse marketing inside-out marketing upside-down marketing
Answer: c Page: 127 Rationale: Text term definitionreverse marketing 6-63 REVERSE MARKETING APPLICATION
The Danish Carsten Maersk is an ocean-going container ship that is longer and only a bit narrower than three football fields laid out end zone to end zone. If you were to set the ship's load of containers end to end, they would stretch 27 miles. To handle this ship and her sister ships, Los Angeles built a completely new facility for Maersk at a cost that topped $800 million. The terminal is in the middle of the harbor on dredged material and ten million tons of rock that form a 685-acre island connected to the rest of California by rail line and highway. When the initial phase opened in 2002, Maersk, which has an exclusive 25-year lease, had room to dock three of these huge ships. Every city on the West Coast wanted to be selected by Maersk as a terminal city, but only the Port Authority of Los Angeles was able to build the relationships needed to convince Maersk it could handle the increased container traffic that Maersk ships would bring to the port. This is an example of: a. b. c. d. e. demarketing. inverse marketing. reverse marketing. inside-out marketing. upside-down marketing.
Answer: c Page: 127 Rationale: Reverse marketing is the deliberate effort by organizational buyers to build relationships that shape suppliers' goods, services, and capabilities to fit a buyer's needs and those of its customers. In this case Maersk, as the organizational buyer, specified what they required from the Port Authority of Los Angeles (the supplier) to use the port.
342
6-64 BUYER-SELLER RELATIONSHIPS
APPLICATION
Scandinavian Airlines System recently announced the purchase of 35 Boeing 737-600 airliners, with the option to buy another 35 for a total of $2.4 billion. SAS called Boeing a professional and solid supplier. Deliveries began in late 1998 and will continue for some years to come. This arrangement between Boeing and SAS is an example of: a. b. c. d. e. reciprocity. exclusive dealing. review marketing. a long-term buyer-seller relationship. a tying arrangement.
Answer: d Page: 127 Other Location: web Rationale: A distinction between organizational and consumer buying behavior lies in the nature of the relationship between organizational buyers and suppliers. Specifically, organizational buying is more likely to involve complex and lengthy negotiation concerning delivery schedules, price, technical specifications, warranties, and claim policies. Long-term relationships are also prevalent. 6-65 BUYER-SELLER RELATIONSHIPS CONCEPTUAL
Which of the following does NOT characterize organizational buyer-seller relationships? a. b. c. d. e. Purchases are often made after lengthy negotiations. Purchases are usually of large dollar values. Long-term relationships are often prevalent. Reciprocal arrangements can exist. Delivery schedules are largely irrelevant.
Answer: e Page: 127 Rationale: Each of the responses described in a, b, c, and d are characteristics of buyer-seller relationships. The delivery schedules mentioned in alternative e are very relevant, not irrelevant.
343
6-66 RECIPROCITY
APPLICATION
Communications service provider Equant primarily is a worldwide long-distance carrier. Focal Communications is headquartered in Chicago and provides telecommunications services to businesses in the United States. Focal Communications has agreed to buy international longdistance capabilities from Equant, and Equant will buy its Internet connections from Focal. Their relationship is an example of: a. b. c. d. e. reciprocity. exclusive dealing. review marketing. a transactional relationship. a tying arrangement.
Answer: a Page: 128 Rationale: Reciprocity is an industrial buying practice in which two organizations agree to purchase each other's products and services. In this case, Equant buys Internet connections from Focal, while Focal buys international long-distance from Equant. 6-67 RECIPROCITY DEFINITION
__________ is an industrial buying practice in which two organizations agree to purchase each other's products and services. a. b. c. d. e. A tying arrangement Exclusive dealing Reciprocity Transactional marketing Noncompetitive bidding
Answer: c Page: 128 Other Location: web Rationale: Text term definitionreciprocity 6-68 RECIPROCITY CONCEPTUAL
When General Motors (GM) purchases Borg-Warner transmissions, and Borg-Warner buys trucks and cars from GM, they are demonstrating which type of buyer-seller interaction? a. b. c. d. e. exclusive dealing relationship marketing reciprocity tying arrangements noncompetitive bidding
Answer: c Page: 128 Rationale: Reciprocity is an industrial buying practice in which two organizations agree to purchase each other's products and services.
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6-69 RECIPROCITY
CONCEPTUAL
Although the U.S. Justice Department frowns on __________ because it restricts the normal operation of a free market, it is still legal for two companies to buy one another's products as long as no coercion is involved. a. b. c. d. e. the buddy system just-in-time management quid pro quo a transactional benefit reciprocity
Answer: e Page: 128 Rationale: Reciprocity is an industrial buying practice in which two organizations agree to purchase each others products and services. 6-70 SUPPLY PARTNERSHIP DEFINITION
A relationship called a __________ exists when a buyer and its supplier adopt mutually beneficial objectives, policies, and procedures for the purpose of lowering the cost or increasing the value of products and services delivered to the ultimate customer. a. b. c. d. e. double-deal conflict of interest restricted access supply partnership quid pro quo situation
Answer: d Page: 128 Rationale: Key term definitionsupply partnership 6-71 SUPPLY PARTNERSHIP APPLICATION
Sun Microelectronics custom-orders processors, chips, and circuit boards for Sun's desktop, server, and storage products. Sun doesn't actually make any of its microelectronic parts itself. Sun contracts the work to outside manufacturers, who in turn rely on components from their own subcontracted suppliers. The 150 suppliers involved in making and delivering Sun products have adopted mutually beneficial objectives and strategies that give Sun's customers value for their money. Sun's method of doing business is an example of a: a. b. c. d. e. double-deal. conflict of interest. restricted access. supply partnership. quid pro quo situation.
Answer: d Page: 128 Rationale: A supply partnership exists when a buyer and its supplier adopt mutually beneficial objectives, policies, and procedures for the purpose of lowering the cost of or increasing the value of goods and services delivered to the ultimate customer.
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6-72 ORGANIZATIONAL BUYING BEHAVIOR
DEFINITION
The decision-making process that organizations use to establish the need for products and services and identify, evaluate, and choose among alternative brands and suppliers is called: a. b. c. d. e. the consumer purchase decision process. organizational buying behavior. the industrial purchase procedure. facilitating behavior. the reseller procurement process.
Answer: b Page: 129 Rationale: Key term definitionorganizational buying behavior 6-73 PROBLEM RECOGNITION The first stage in the organizational buying decision process is: a. b. c. d. e. information search. postpurchase behavior. alternative evaluation. purchase decision. problem recognition. DEFINITION
Answer: e Page: 129: Figure 6-4 Rationale: The stages of the organizational buying decision process are the same as the stages of the consumer buying decision process. The first stage is problem recognition, shown in Figure 64. 6-74 INFORMATION SEARCH DEFINITION
Once an organization making a purchase decision passes through the problem recognition stage of the process, it reaches the __________ stage. a. b. c. d. e. information search postpurchase behavior alternative evaluation purchase decision behavioral learning
Answer: a Page: 129: Figure 6-4 Rationale: The second stage of the organizational buying decision process is information search, shown in Figure 6-4.
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6-75 INFORMATION SEARCH
CONCEPTUAL
At which stage in the buying decision process would a firm ask its vendors' in help designing product specifications? a. b. c. d. e. problem recognition information search alternative evaluation purchase decision postpurchase behavior
Answer: b Page: 129; Figure 6-4 Rationale: The information search for industrial purchases, unlike consumer purchases, cannot always rely on past experience. Therefore, a firm often seeks to find out from vendors if what the firm needs is actually available, shown in Figure 6-4. 6-76 ALTERNATIVE EVALUATION DEFINITION
During the third stage of the organizational purchase decision process, the organization engages in: a. b. c. d. e. information search. postpurchase behavior. alternative evaluation. purchase decision. problem recognition.
Answer: c Page: 129; Figure 6-4 Rationale: The third stage of the organizational buying decision process is alternative evaluation, shown in Figure 6-4. 6-77 ALTERNATIVE EVALUATION CONCEPTUAL
At which stage in the buying decision process would a firm visit potential suppliers to assess their facilities? a. b. c. d. e. problem recognition information search alternative evaluation purchase decision postpurchase behavior
Answer: c Page: 129; Figure 6-4 Rationale: At the alternative evaluation stage, a firm must assess suppliers in terms of facilities, production capabilities, financial stability, etc. in order to select which supplier can best satisfy the firm's current needs. This is shown in Figure 6-4.
347
6-78 PURCHASE DECISION
CONCEPTUAL
At which stage in the buying decision process would a firm clarify its organizational buying criteria and select a supplier? a. b. c. d. e. problem recognition information search purchase decision postpurchase behavior alternative evaluation
Answer: c Page: 129; Figure 6-4 Rationale: At the purchase decision stage of the firm's buying decision process, the firm selects its organizational buying criteria such as price, quality, delivery time, etc., and then selects a supplier, negotiates terms, and awards a contract. This is shown in Figure 6-4. 6-79 PURCHASE DECISION DEFINITION
During the next-to-the-last stage of the organizational purchase decision process, the organization engages in: a. b. c. d. e. information search. postpurchase behavior. the alternative evaluation. the purchase decision. problem recognition.
Answer: d Page: 129; Figure 6-4 Rationale: The fourth stage of the organizational buying decision process is the purchase decision, shown in Figure 6-4. 6-80 POSTPURCHASE BEHAVIOR What is the last stage of the organizational purchase decision process? a. b. c. d. e. information search postpurchase behavior alternative evaluation purchase decision problem recognition DEFINITION
Answer: b Page: 129; Figure 6-4 Rationale: The final stage of the organizational buying decision process is postpurchase behavior, shown in Figure 6-4.
348
6-81 POSTPURCHASE BEHAVIOR
CONCEPTUAL
At which point in the buying decision process would a firm use a formal vendor rating system to evaluate the quality of the vendor's product and customer service? a. b. c. d. e. problem recognition unformation search purchase decision postpurchase behavior all of the above
Answer: d Page: 129; Figure 6-4 Rationale: At the postpurchase behavior stage a firm would evaluate suppliers using a formal vendor rating system and notify suppliers if satisfactory standards are not met. Suppliers who do not maintain a satisfactory level or performance are dropped and not asked to bid on future products. This is shown in Figure 6-4. 6-82 POSTPURCHASE BEHAVIOR CONCEPTUAL
As in the consumer decision process, evaluation occurs in the organizational decision process, but it is more formalized and often more sophisticated. The performance of the vendor is evaluated in a formal vendor rating system and notified if the purchased product does not meet the quality standard. This evaluation is described as: a. b. c. d. e. problem recognition. information search. purchase decision. postpurchase behavior. All of the above.
Answer: d Page: 129; Figure 6-4 Rationale: At the postpurchase behavior stage, the performance of the vendor is evaluated in a formal vendor rating system and notified if the purchased product does not meet the quality standard. This is shown in Figure 6-4. 6-83 BUYING CENTER DEFINITION
The __________ is a group of persons within an organization who participate in the buying process and share common goals, risks, and knowledge important to purchase decisions. a. b. c. d. e. status quo committee purchasing agency buying center gatekeeper group industrial purchasing cohort
Answer: c Page: 130 Rationale: Key term definitionbuying center
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6-84 BUYING CENTER
CONCEPTUAL
Marketers need to understand the buying centers with which they deal. A series of questions can be used to facilitate this process. Which of the following questions would be the LEAST useful when trying to understand the operations of a buying center? a. b. c. d. e. Which individuals are in the buying center for the product or service? What is the relative influence of each member of the group? What are the buying criteria of each member? How does each member of the group perceive our firm, our products and services, and our salespeople? What selection process was used to confirm each individuals membership in the buying center?
Answer: e Page: 130 Rationale: The importance of the buying center requires that a firm marketing to many industrial firms and government units understand the structure, technical and business functions represented, and behavior of these groups. One researcher has suggested the four questions in a, b, c, and d. 6-85 BUYING CENTER DEFINITION
Several people often participate in the organizational buying process. Called __________, these people share common goals, risks, and knowledge important to purchase decisions. a. b. c. d. e. a committee a feasibility study group corporate obstructionists a buying center a cohort
Answer: d Page: 130 Other Location: web Rationale: Key term definitionbuying center
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6-86 BUYING CENTER
APPLICATION
In an effort to make better and more efficient purchase decisions, the Ford Motor Company forms loosely organized groups of people who work together on purchase decisions. The people included in these groups change depending on the purchase situation and may include key personnel from various departments, including research and development, finance, marketing, shipping, and sales. Such a loosely organized group of people within an organization who are involved in the purchase decision is correctly called an organizational: a. b. c. d. e. selling committee. functional unit. purchasing unit. buying center. decision-making unit.
Answer: d Page: 130 Other Location: web Rationale: Organizations face a variety of purchase decisions -- some routine, some complex. For those purchase decisions that are complex, many organizations include a variety of people from various departments within the organization in the buying decision. The members of the group change depending on the purchase situation, and so the buying center is loosely organized and very dynamic. Members of the buying center share common goals, risks, and knowledge or experiences relevant to the purchase decision. 6-87 BUYING COMMITTEE DEFINITION
Large multistore chain resellers such as Wal-Mart, Safeway, or Target use a very formal buying center called a(n): a. b. c. d. e. ad hoc committee. buying committee. central control unit. purchasing agency. purchasing control system.
Answer: b Page: 130 Rationale: Text term definitionbuying committee
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6-88 BUYING CENTER
CONCEPTUAL
Which of the following statements accurately describes the people in the buying center of a medium-sized manufacturing plant? a. b. c. d. e. The composition of the buying center never changes. The buying center never contains cross-functional teams. The organizational buyer or purchasing agent is seldom a member of the buying center. The composition of the buying center depends on the specific item being purchased. None of the above statements accurately describes the people in the buying center of a medium-sized manufacturing plant.
Answer: d Page: 130 Rationale: The composition of the buying center changes as the item that is to be purchased changes. Cross-functional teams are used in buying centers, especially if the purchased item is to become part of the manufactured product. The only consistency within the buying center is the inclusion of the organizational buyer or purchasing agent. 6-89 BUYING CENTER APPLICATION
To lower costs and reduce manufacturing time, Michelin has people work together on important purchases, including individuals from research and development, purchasing, and various business functions. This kind of cross-functional group is known as a(n): a. b. c. d. e. status quo committee. negotiating arm. buying center. supply partnership. strategic agency.
Answer: c Page: 130 Rationale: Members of Michelin's buying center share common goals, risks, and knowledge important to the decision.
352
6-90 BUYING CENTER: DECIDER
APPLICATION
Cards of Wood, Inc. is a company that makes and markets micro-thin wood veneer business cards primarily to people in different facets of the woodworking business. A salesperson for Cards of Wood who calls on a company that makes cabinets would have the highest probability of making a sale if he is able to determine who is the __________ in the company's buying center. a. b. c. d. e. influencer buyer decider user gatekeeper
Answer: c Page: 130 Other Location: web Rationale: To make a sale, the salesperson must ultimately get the decider to say "yes." All others are merely influential. 6-91 BUYING CENTER: USER APPLICATION
As the salesperson for West Plains band saw talked to a group from Conner Industries, he overheard one of the men saying, "This band saw has a 36-inch wheel that could really save us time, and with its adjustable height, it can be operated by someone tall like me and by some of our shorter workers. I bet this will speed up production time by 30 percent. Why don't we order this band saw?" The person the salesperson heard giving input has which buying center role? a. b. c. d. e. purchasing agent decider buyer motivator user
Answer: e Page: 130 Rationale: Users are the people in the organization who would actually use the band saw and can appreciate its features.
353
6-92 BUYING CENTER: INFLUENCERS
APPLICATION
A mini-computer company salesperson invites the information systems managers of its top ten customers (in terms of dollar sales) to view a demonstration of the firm's new product line so she can obtain their opinions regarding various options and configurations that could be offered. These information system managers are most likely to be the __________ of their organizations' buying centers. a. b. c. d. e. gatekeepers reciprocity managers buyers influencers users
Answer: d Page: 130 Rationale: Influencers affect the buying decision, usually by helping define the specifications for what is to be bought. 6-93 BUYING CENTER: INFLUENCER APPLICATION
The publisher of the Redwood Falls Gazette, a weekly newspaper, decided the production department would be more efficient if a new computerized advertising layout system was purchased. In an effort to ensure a high quality, functional system was purchased, the publisher asked the newspaper's production manager for advice on specific features, components, and capabilities of the system. The production manager played the role of __________ in the newspaper's buying center. a. b. c. d. e. user gatekeeper influencer buyer decider
Answer: c Page: 130 Rationale: The organizational buying center consists of people who will initiate, influence, and ultimately make the buying decision. Influencers are people who serve as advisors or consultants and help define the specifications for the products or services to be purchased. In this case the production manager played the role of influencer.
354
6-94 BUYING CENTER: BUYER
APPLICATION
The person who assumed the __________ role in the buying center shook the salesperson's hand and said, "Mrs. Michaels, we've accepted your bid. I'll expect 48 boxes of ring shank nails to be delivered by January 16th , and we will pay the agreed-upon price of $21.74 per box." a. b. c. d. e. gatekeeper decider buyer influencer user
Answer: c Page: 130 Rationale: Buyers have the formal authority and responsibility to select the supplier and negotiate the terms of the contract. 6-95 BUYING CENTER: DECIDER CONCEPTUAL
An information technology specialist specifies the type of plug-in (software programs that extend the capabilities of Web browsers to give customers the opportunity to watch a video or hear audio) to be used on her company's new website. She also chooses the supplier who receives the contract to provide the software. In the buying center, this person is the: a. b. c. d. e. gatekeeper. decider. broker. influencer. user.
Answer: b Page: 130 Rationale: Deciders have the formal or informal power to select or approve the supplier who receives the contract. Whereas in routine orders, the decider is usually the buyer or purchasing manager, in important technical purchases it is more likely to be someone from research and development, engineering, or quality control.
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6-96 BUYING CENTER
APPLICATION
Mark manages a small family-owned amusement park. He believes the park can increase its profits if its owners will buy three food concession trailers. He has contacted three dealers of such fully customized trailers and has determined Century Industries has the best price. He will present his research to the family tomorrow. In which buying center roles is Mark acting? a. b. c. d. e. gatekeeper and buyer decider and gatekeeper buyer and decider influencer and buyer influencer, gatekeeper, and decider
Answer: e Page: 130 Rationale: The family is the buyer or else Mark would not need to present his research to them. This is not a routine buying decision so Mark has chosen the supplier (decider) as well as trying to convince (influence) the family to see his side. In that he is presenting information from no other companies, Mark is also assuming the role of gatekeeper. 6-97 BUYING CENTER: BUYERS DEFINITION
In a buying center, __________ have formal authority and responsibility to select the supplier and negotiate the terms of a contract. a. b. c. d. e. gatekeepers deciders buyers influencers users
Answer: c Page: 130 Rationale: Text term definitionbuyers 6-98 BUYING CENTER: INFLUENCERS Within the buying center, influencers are people who: a. b. c. d. e. have the formal authority and responsibility to select the supplier and negotiate the terms of the contract. control the flow of information in the buying center. have the formal or informal power to select or approve the supplier that receives the contract. affect the buying decision usually by helping define the specifications for what is bought. actually use and evaluate the product or service. DEFINITION
Answer: d Page: 130 Rationale: Text term definitioninfluencers
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6-99 BUYING CENTER: USERS
DEFINITION
The people in the organization who actually use the product or service are called: a. b. c. d. e. gatekeepers. deciders. buyers. influencers. users.
Answer: e Page: 130 Rationale: Text term definitionusers 6-100 BUYING CENTER: DECIDERS Within the buying center, deciders are people who: a. b. c. d. e. have the formal authority and responsibility to select the supplier and negotiate the terms of the contract. control the flow of information in the buying center. have the formal or informal power to select or approve the supplier that receives the contract. affect the buying decision usually by helping define the specifications for what is bought. actually use and evaluate the product or service. DEFINITION
Answer: c Page: 130 Rationale: Text term definitiondeciders 6-101 BUYING CENTER: GATEKEEPER APPLICATION
A talent promoter for the House of Blues wants to book one of the acts it represents into the Odeon Theater. The talent promoter offers to buy lunch for the receptionist of the manager of the Odeon. The talent promoter is probably trying to develop a friendly relationship with a(n): a. b. c. d. e. user. influencer. buyer. decider. gatekeeper.
Answer: e Page: 130 Rationale: The receptionist could facilitate or hinder the flow of information to and from members of the buying center and would not otherwise be involved in selecting acts for the theater, thus she is a gatekeeper.
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6-102 BUYING CENTER: GATEKEEPERS
DEFINITION
In terms of the buying center, people who control the flow of information in the buying center, such as purchasing personnel, technical experts and secretaries, can help or prevent sales people (or information) from reaching others in the buying center are called: a. b. c. d. e. busybodies. obstructionists. gatekeepers. power-brokers. apple-polishers.
Answer: c Page: 130 Rationale: Text term definitiongatekeepers 6-103 BUYING CENTER: GATEKEEPERS APPLICATION
Gulfstream Aerospace Corp. recently sold three Gulfstream V business jets to a government buyer for use as Special Electronic Mission Aircraft. One of the hardest jobs the Gulfstream sales team had to perform during the negotiations was to convince the __________ they should be allowed to present the information about Gulfstream planes to the other people in the buying center who were taking the role of buyers, users, deciders, and influencers. a. b. c. d. e. gatekeepers busybodies whistleblowers obstructionists power-brokers
Answer: a Page: 130 Other Location: web Rationale: Gatekeepers control the flow of information to others in the buying center. Purchasing personnel, technical experts, and secretaries can all keep salespeople or information from reaching people performing the other four roles.
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6-104 BUYING CENTER: GATEKEEPER
APPLICATION
The screenwriter walked into the production company office expecting to talk to an executive of the company about producing the writer's idea for a new television situation comedy. As he entered the office, the receptionist said, "I'm sorry, you can't see my boss. Please leave your manuscript and I'll read it. If it's any good, I'll show it to Ms. Friedman who will then get back to you." The receptionist was assuming which buying center role? a. b. c. d. e. gatekeeper decider buyer influencer user
Answer: a Page: 130 Other Locations: web Rationale: Gatekeepers control the flow of information to others in the buying center. Purchasing personnel, technical experts, and secretaries can all keep salespeople or information from reaching people performing the other four roles. 6-105 BUY CLASSES The three types of organizational buy classes are: a. b. c. d. e. industrial, reseller, and government. consumer goods, industrial goods, and services. users, influencers, and deciders. new buy, make-buy, and modified rebuy. straight rebuy, new buy, and modified rebuy. DEFINITION
Answer: e Page: 131; Figure 6-5 Rationale: Key term definitionbuy classes 6-106 BUY CLASSES CONCEPTUAL
A straight rebuy is a (n) __________ while a modified rebuy is a (n) __________. a. b. c. d. e. exchange; resale reorder; exchange first-time order; reorder change; first-time order reorder; change
Answer: e Page: 131 Rationale: A straight rebuy involves a buyer or purchasing manager reordering an existing product or service. A modified rebuy involves the users, influencers, or deciders in the buying center changing the product specifications, price, delivery schedule, or supplier.
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6-107 BUY CLASSES
DEFINITION
Organizations face three kinds of specific buying situations. They are new buy, straight rebuy, and modified rebuy. Collectively, these situations are called: a. b. c. d. e. industrial buying behavior. reseller buying behavior. buy classes. purchasing classes. none of the above.
Answer: c Page: 131 Rationale: Key term definitionbuy classes 6-108 BUY CLASSES DEFINITION
Researchers who have studied organizational buying identify three types of buying situations called: a. b. c. d. e. purchase criteria. buy classes. buying alternatives. cognitive dissonance. buying centers.
Answer: b Page: 131 Rationale: Key term definitionbuy classes 6-109 BUY CLASSES CONCEPTUAL
A buy class situation affects buying center tendencies in different ways. If there are few people involved, the problem definition is well defined, and the time required for a decision is short, the buy class situation which is most likely is a: a. b. c. d. e. new buy. straight or modified rebuy. conditional rebuy. make-buy. standard buy.
Answer: b Page: 131 Rationale: A straight or modified rebuy is characterized by the few people involved, the welldefined problem definition, and the short time required for a decision.
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6-110 MODIFIED REBUY
DEFINITION
In the ___________, users, influencers, or deciders in the buying center want to change product specifications, price, delivery schedule, or supplier. a. b. c. d. e. new buy straight rebuy modified rebuy buy class make-buy
Answer: c Page: 131 Rationale: Text term definitionmodified rebuy 6-111 STRAIGHT REBUY APPLICATION
The assistant heard her supervisor in the supply room yell, Call Crate & Barrelwe need another case of their coffee mugs for the conference next week. The supervisor was asking her assistant to make a: a. b. c. d. e. new buy. straight rebuy. modified rebuy. make-buy. standard buy.
Answer: b Page: 131 Rationale: In a straight rebuy situation, the buyer or purchasing manager reorders an existing product or service from the list of acceptable suppliers. Office supplies and maintenance services are often straight rebuys. 6-112 STRAIGHT REBUY DEFINITION
A reorder of an existing product or service from a list of acceptable suppliers is called a: a. b. c. d. e. new buy. straight rebuy. modified rebuy. standard buy. make-buy.
Answer: b Page: 131 Rationale: Text term definitionstraight rebuy
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6-113 STRAIGHT REBUY
APPLICATION
The maintenance crew chief told the head of the hotel housekeeping staff, "Call Ralph at Bright Ideaswe need another case of his light bulbs." This would be an example of a: a. b. c. d. e. new buy. straight rebuy. modified rebuy. make-buy. standard buy.
Answer: b Page: 131 Rationale: In a straight rebuy situation, the buyer or purchasing manager reorders an existing product or service from the list of acceptable suppliers. Office supplies and maintenance services are often straight rebuys. 6-114 MODIFIED REBUY APPLICATION
The office of SFX Entertainment, a talent promoter, needs a new fax machine that will print at three seconds a page instead of five seconds per page (like the one it is using now) and that has both local and network printing capabilities. Its purchase of a replacement fax machine would be an example of a: a. b. c. d. e. new buy. straight rebuy. modified rebuy. make-buy. standard buy.
Answer: c Page: 131 Rationale: In a modified rebuy situation the users, influencers, or deciders want to change the product specifications, price, delivery schedule, or supplier. 6-115 MODIFIED REBUY DEFINITION
The buying situation where users, influencers, or deciders want to change product specifications, price, delivery schedule, or supplier is called a: a. b. c. d. e. new buy. straight rebuy. modified rebuy. buy class. make-buy.
Answer: c Page: 131 Rationale: Text term definitionmodified rebuy
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6-116 MODIFIED REBUY
APPLICATION
The Cleveland Cavaliers need new basketball uniforms for the upcoming NBA season. The team wants a new design and new colors for its road uniforms; many think the current design needs redefining. The purchase of new uniforms would be an example of a: a. b. c. d. e. modified rebuy. straight rebuy. new buy. standard buy. class buy.
Answer: a Page: 130 Rationale: This would be a modified rebuy because the team is replacing existing uniforms that in some ways will have a different design. 6-117 MODIFIED REBUY APPLICATION
Russ Ross, the owner of a construction company specializing in single family homes, was faced with a problem. His workers relied on Black & Decker brand air-powered hammers to reduce construction time. Recently, the workers informed him several of the hammers were worn out and needed to be replaced. After talking with other members of the buying center, Mr. Ross decided to purchase Dewalt brand air hammers because of their reduced weight and the longer warranties offered by Dewalt. Ross and the other members of the organizational buying center were engaged in what type of organizational buying decision? a. b. c. d. e. straight-rebuy new task buy modified new task buy modified rebuy straight new buy
Answer: d Page: 131 Other Location: web Rationale: In the modified rebuy situation, members of the organization's buying center seek to change some element of the purchaseproduct, the price, delivery schedule, or supplier. While the purchase may resemble a straight rebuy, the changes in the purchase are usually sufficient to require additional people be included in the buying center. 6-118 NEW BUY DEFINITION
The buying situation where an organization is a first-time buyer of the product or service is called a: a. b. c. d. e. new buy. straight rebuy. modified rebuy. buy class. make-buy.
Answer: a Page: 131 Rationale: Text term definitionnew buy
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6-119 NEW BUY
APPLICATION
At the weekly meeting for Choice Hotels (the company that owns Clarion Hotel, Quality Inn, Comfort Inn, Comfort Suites, Sleep Inn, and Mainstay Inn), the marketing manager said, Since September 11th there has been a noticeable increase in highway traffic as travelers have abandoned the airlines and taken to the highways. We need an inexpensive creative way to reach these people and make them aware of our hotels. I want to find some new media that the other hotel chains are not using. The purchase of this new media for the hotel chains' advertising would be an example of a: a. new buy. b. straight rebuy. c. converted rebuy. d. make-buy. e. standard rebuy. Answer: a Page: 131 Rationale: In a new buy situation the organization is a first time buyer of the good or service in this case, a new and different advertising medium. This involves greater potential risk in purchase. 6-120 NEW BUY DEFINITION
A buy class situation affects buying center tendencies in different ways. If there are many people involved, the problem definition is uncertain, and the decision time is long, the buy class situation which is most likely is a: a. b. c. d. e. new buy. modified rebuy. straight rebuy. make-buy. standard buy.
Answer: a Page: 131; Figure 6-5 Rationale: These characteristics of a new buy are shown in Figure 6-5. 6-121 NEW BUY CONCEPTUAL
If a purchase is a new buy for a manufacturer, the seller should be prepared to act as a consultant to the buyer, work with technical personnel, and: a. b. c. d. e. expect a long time for a buying decision to be reached. expect a lot of conflict. expect specifications to be changed many times before the buy is completed. expect to have to do some favors for the decision-makers. entertain lavishly.
Answer: a Page: 131 Other Location: web Rationale: If a purchase is a new buy the seller should also expect a long time for a buying decision to be reached.
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6-122 ORGANIZATIONAL BUYING BEHAVIOR Organizational buying behavior: a. b. c. d. e.
CONCEPTUAL
is similar to consumer buying behavior. is the decision-making process organizations use to establish the need for products and identify, evaluate, and choose among alternative brands and suppliers. involves five different stages of activities. will require organizational members to formulate a make-buy decision. is accurately described by all of the above.
Answer: e Page: 129-131; Figure 6-4 Rationale: Each of the statements in a, b, c, and d is true and described in Figure 6-4. 6-123 ONLINE BUYING IN ORGANIZATIONAL MARKETS Business-to-business electronic commerce over the Internet: a. b. c. d. e. is not nearly as prevalent as consumer electronic commerce when measured by the total dollar value of all Internet transactions. is approximately four times greater than consumer electronic commerce when measured by the total dollar value of all Internet transactions. has dramatically decreased since face-to-face time is so important. is impossible to estimate since companies will not share information. has decreased since timely information is unavailable. CONCEPTUAL
Answer: b Page: 132 Other Location: web Rationale: Organizational buyers account for 80 percent of the total dollar value of all Internet transactions. The popularity is growing since information describing product availability, users, price etc. can be conveyed quickly over the Internet. Additionally, Internet technology has been found to reduce costs. 6-124 ONLINE BUYING IN ORGANIZATIONAL MARKETS CONCEPTUAL
Online buying in organizational markets is prominent because Internet/Web technology: a. b. c. d. e. increases marketing costs. reduces the need for timely information. substantially reduces buyer order processing costs. narrows the potential customer base for many products. is accurately described by all of the above.
Answer: c Page: 132 Rationale: Internet/Web technology actually decreases marketing costs. Organizations depend heavily on timely information, and Internet/Web technology increases their ability to receive it. Internet/Web technology broadens the potential customer base for many products.
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6-125 E-MARKETPLACES
DEFINITION
Online trading communities that bring together buyers and supplier organizations are called: a. b. c. d. e. storefronts. Web stock exchanges. Web commerce rooms. consortiums. e-marketplaces.
Answer: e Page: 132 Rationale: Key term definitione-marketplaces 6-126 E-MARKETPLACE APPLICATION
In the construction industry, independent trading communities such as Buzzsaw.com or Cephren.com enable a general contractor to manage and coordinate the many suppliers, subcontractors, architects, and engineers necessary to complete a project. Buzzsaw.com and Cephren.com are examples of: a. b. c. d. e. storefronts. Web stock exchanges. Web commerce rooms. consortiums. e-marketplaces.
Answer: e Page: 132 Rationale: Buzzsaw.com and Cephren.com bring together buyers and suppliers online, the definition of an e-marketplace. 6-127 E-MARKETPLACE CONCEPTUAL
Which one of the following conditions must be present for the existence of an independent emarketplace? a. b. c. d. e. thousands of geographically dispersed buyers and sellers volatile prices caused by demand and supply fluctuations time sensitivity due to perishable offerings and changing technologies easily comparable offerings between a variety of suppliers All of the above are examples of a condition that must be present for the existence of an independent e-marketplace.
Answer: e Page: 132 Other Location: web Rationale: At lease one of the conditions described in a, b, c, and d must be present for the existence of an e-marketplace.
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6-128 E-MARKETPLACES E-marketplaces can take two different formats. They are: a. b. c. d. e.
DEFINITION
bricks-and-mortar exchanges and clicks-and-mortar exchanges. privately-owned trading communities and open-to-the-public trading communities. networked exchanges and public trading communities. independent trading communities and private exchanges. public exchanges and networked exchanges.
Answer: d Page: 132 Rationale: Key term definitione-marketplaces 6-129 E-MARKETPLACES E-marketplace is another name for: a. b. c. d. e. exchanges. e-hubs. online private exchanges. online independent trading communities. All of the above are other names for e-marketplaces. CONCEPTUAL
Answer: e Page: 132 Rationale: E-marketplaces go by a variety of names including exchanges, e-hubs, online independent trading communities and online private exchanges 6-130 E-MARKETPLACES E-marketplaces make possible the real-time exchange of: a. b. c. d. e. information. money. products. services. all of the above. CONCEPTUAL
Answer: e Page: 132 Rationale: These online communities go by a variety of names including exchanges and e-hubs, and make possible the real-time exchange of information, money, products, and services.
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6-131 E-MARKETPLACES Which of the following is true about e-marketplaces? a. b. c. d. e.
CONCEPTUAL
They focus on many industries. They are open-to-the-public trading communities. They act as a neutral third-party enabling exchanges between buyers and sellers. They are free to use. All of the above are true.
Answer: c Page: 132 Rationale: E-marketplaces focus on one industry, not many. They are not open-to-the-public; rather they are only used in organizational buying. They charge a fee. Only alternative c is accurate. 6-132 E-MARKETPLACES Which of the following services are provided by e-marketplaces? a. b. c. d. e. They allow small business buyers and sellers an economical way to reduce their customer base. They offer small business buyers a reduced cost of purchased products and services. They link large companies with all possible suppliers and customers. They provide a decentralized market for buyer-seller transactions. All of the above are true. CONCEPTUAL
Answer: b Page: 132 Rationale: E-marketplaces allow small business buyers and sellers an economical way to increase, not reduce, their customer base. They link large companies with qualified, not all possible, suppliers and customers. They provide a central, not decentralized market for buyerseller transactions. Only alternative b is accurate. 6-133 TRADITIONAL AUCTION Traditional auctions: a. b. c. d. e. are buyer-initiated. benefit the buyers significantly more than the sellers. have an increasing number of bidders as the auction progresses. have sequential bidding. have many sellers. DEFINITION
Answer: d Page: 133 Rationale: Key term definitiontraditional auction
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6-134 TRADITIONAL AUCTION
APPLICATION
If a company wanted to get rid of excess wooden pallets by attracting the greatest number of potential buyers online, it could use a(n) __________ to locate the company that was willing to pay the highest amount for the used pallets. a. b. c. d. e. storefront operation traditional auction Japanese auction English auction reverse auction
Answer: b Page: 133 Other Location: web Rationale: In a traditional auction, a seller (the organization wanting to sell the pallets) puts an item up for sale and would-be buyers are invited to bid in competition with each other. Presumably the seller would accept the highest bid. 6-135 TRADITIONAL AUCTION Which of the following is true of a traditional auction? a. b. c. d. e. Would-be sellers are invited to bid in competition with each other. As the auction progresses, less would-be buyers become involved. It only occurs in Japan. The bidding is sequentialit occurs in order, one at a time. The auction ends when a single bidder wins the item with the lowest price. CONCEPTUAL
Answer: d Page: 133 Rationale: In a traditional auction, a seller puts an item up for sale; sellers dont bid in competition with each other. Would-be buyers bid in competition with each other with more, not less buyers involved as the auction progresses. These auctions occur worldwide, not just in Japan. Presumably the seller would accept the highest bid. Only alternative d is accurate. 6-136 REVERSE AUCTION Reverse auctions: a. b. c. d. e. are seller-initiated. benefit the sellers significantly more than the buyers. have a decreasing number of bidders as the auction progresses. have sequential bidding. have many buyers. DEFINITION
Answer: d Page: 133 Rationale: Key term definitionreverse auction
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6-137 REVERSE AUCTION Which of the following is true of a reverse auction? a. b. c. d. e.
CONCEPTUAL
Would-be buyers are invited to bid in competition with each other. As the auction progresses, more would-be sellers become involved. It only occurs in the United States. The bidding is sequentialit occurs in order, one at a time. The auction ends when a single bidder wins the business with the highest price.
Answer: d Page: 133 Rationale: In a reverse auction, a buyer communicates a need for a product or service; buyers dont bid in competition with each other. Would-be sellers bid in competition with each other with less, not more sellers involved as the auction progresses. These auctions occur worldwide, not just in the United States. Presumably the buyer would accept the lowest bid. Only alternative d is accurate. 6-138 REVERSE AUCTION APPLICATION
PowerChain Solutions is an e-commerce marketplace serving companies and organizations world-wide. It helps buyers of parts and services to purchase these items for the lowest price, using bids from prospective sellers. In this example, what type of auction would PowerChain Solutions facilitate? a. b. c. d. e. Reverse Traditional Thematic Consumer Individual
Answer: a Page: 133 Rationale: In a reverse auction, a buyer communicates a need for a product or service; would-be sellers bid in competition with each other with less sellers involved as the auction progresses. Presumably the buyer would accept the lowest bid. 6-139 VIDEO CASE: LANDS END CONCEPTUAL
Which of the following statements BEST describes the relationship Lands' End has with its many suppliers? a. b. c. d. e. Disintermediation best describes the relationship. They experience persistent conflicts of interest. Lands End restricts information flow. Lands End enters into supply partnerships. Lands End relationships exemplify quid pro quo situations.
Answer: d Page: 136 Rationale: A supply partnership exists when a buyer and its supplier adopt mutually beneficial objectives, policies, and procedures for the purpose of lowering the cost of or increasing the value of products and services delivered to the ultimate customer.
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6-140 VIDEO CASE: LANDS END
APPLICATION
When Lands' End reorders linen blend blazers in new larger womens sizes, that it has been selling for the last 20 years in misses sizes, this would more than likely be an example of a: a. b. c. d. e. new buy. modified rebuy. conditional rebuy. make-buy. standard buy.
Answer: b Page: 131 Rationale: In a modified rebuy, users, influencers, or deciders in the buying center want to change product specifications. 6-141 VIDEO CASE: LANDS END APPLICATION
In terms of the buying center, Lands' End quality assurance personnel would assume the role of: a. b. c. d. e. gatekeepers deciders buyers influencers users
Answer: d Page: 130 Rationale: Influencers affect the buying decision, usually by helping define the specifications for what is bought, which is the role played by the quality assurance personnel.
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CHAPTER 6 ORGANIZATIONAL MARKETS AND BUYER BEHAVIOR SHORT ESSAY QUESTIONS
6-142 ORGANIZATIONAL MARKETS CONCEPTUAL
Describe the three types of organizational markets and give examples of each. Answer: There are three types of organizational markets: 1) An industrial market is a market in which a business reprocesses a good or service it buys before selling it again to the buyer. (Examples: mining, construction, insurance companies, public utility firms) 2) A reseller market is composed of wholesalers and retailers who buy physical products and resell them again without reprocessing. (Examples: Sears, Wal-Mart, Target) 3) A government market is comprised of federal, state and local agencies that buy goods and services for the constituents they serve. (Examples: NASA, City of San Francisco, New York City Police Department) Page: 122-123 6-143 NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM What is the North American Industry Classification System (NAICS) system? Answer: NAICS is a replacement for the earlier Standard Industrial Classification (SIC) system. The North American Industry Classification System (NAICS) designates industries with a numerical code in a defined structure. The first digit of the NAICS code designates a sector of the economy followed by a two-digit code signifying a subsector. Subsectors are further divided into threedigit industry groups, four-digit industries, and five-digit country-specific industries. The system became effective January 1, 1997, to provide common industry definitions for Canada, Mexico, and the United States to facilitate the measurement of economic activity in the three member countries of the North American Free Trade Agreement (NAFTA). Page: 123 DEFINITION
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6-144 NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM What are the two limitations of NAICS codes?
CONCEPTUAL
Answer: The two major limitations of NAICS codes are: 1) Because only one code is assigned to each organization based on its primary activity or product, large firms that engage in many different businesses or offer several different goods or services still receive only one code number 2) The codes may not be available for all industries in every geographic area because governments may not report data when there are too few organizations in a category. Page: 124 6-145 ORGANIZATIONAL BUYING BEHAVIOR What are the characteristics of the organizational buying process? Answer: Technically qualified and professional buyers exist and follow established purchasing policies and procedures to purchase large orders. There are only a few buyers. Buying objectives and criteria are typically spelled out, as are procedures for evaluating sellers and goods and services. Multiple buying influences exist, and multiple parties participate in purchase decisions. Reciprocal arrangements exist, and negotiation between buyers and sellers is commonplace. Buyer-seller relationships may develop into supply partnerships. Online buying over the Internet is widespread. Page: 124-128 6-146 ORGANIZATIONAL BUYING CRITERIA CONCEPTUAL CONCEPTUAL
Name four key organizational buying criteria. Give example of a type of product for which that criterion would be a very important factor in the choice of a vendor. Answer: Key organizational buying criteria and an example of each include: 1) price: standardized items, such as desks. 2) quality specifications: technically more complex items, such as computers. 3) delivery schedule: parts used in a "just-in-time" inventory system for manufacturing automobiles. 4) technical capability: seals for space capsules. 5) warranties and claim policies: Sears Craftsman tools. 6) past performance: a trucking firm's services. 7) production facilities and capacity: An F-16 Air Force jet fighter. Page: 127
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6-147 ORGANIZATIONAL BUYING PROCESS What are the five stages of the organizational buying process?
CONCEPTUAL
Answer: The five stages of the organizational buying process, like those for the consumer buying process, are: 1) problem recognition 2) information search 3) alternative evaluation 4) purchase decision 5) postpurchase behavior. Page: 129; Figure 6-4 6-148 BUYING CENTER DEFINITION
What is the buying center and in what type of business would a person expect to find one operating? Answer: A buying center is a group of individuals within an organization who participate in the buying process. They share common goals, risks, and knowledge important to a purchase decision. One would see a buying center in most larger, multistore resellers such as Sears, 7-Eleven, K Mart, Safeway, and Target. In addition, most industrial firms or government units use groups to arrive at buying decisions. Page: 130 6-149 BUYING CENTER Identify and describe the five roles an individual can play in a buying center: Answer: There are five roles an individual can play in a buying center and that are mentioned in the text: 1) Users, who actually use the product or service 2) Influencers, who help define the specifications for what is bought 3) Buyers, who have the formal authority and responsibility to select the supplier and negotiate the terms of the contract 4) Deciders, who have the formal or informal power to select or approve the supplier 5) Gatekeepers, who control the flow of information in the buying center. Page: 130 DEFINITION
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6-150 FAMILY DECISION MAKING; BUYING CENTER
APPLICATION
Just as there are different inputs into an organization's decision to make a major buy, so there is a similar situation that occurs within a family. Various members of an organization and of a family will take different roles depending upon the product being purchased. What are the two major differences between how organizations and families make purchase decisions? (These differences are based on the roles members play.) Answer: The family has an information gatherer because it is assumed it will not have ready access to the information it needs to make a decision. The organization is much more likely to have that information readily available. The organization has a gatekeeper, which controls the flow of information. The existence of information flow control is due the existence of organizational hierarchy that limits the free flow of information. The informality of most family structures makes the gatekeeper's role unnecessary. Students may also discuss the fact that most organizational buying decisions are made by a cross-functional group. Page: 130 6-151 BUY CLASSES CONCEPTUAL
What are the three types of organizational buying situations? Give an example of each. Answer: There are three types of buying situations: 1) Straight rebuy: simply reordering an existing product of service from the list of acceptable suppliers (e.g., printer ink cartridges for an office. 2) Modified rebuy: when the users, influencers, or deciders in the buying center want to change the product's specifications, price, delivery, schedule, or supplier (e.g., Ford wants a smaller steering wheel for their new cars). 3) New buy: when the organization is a first time buyer of the product of service (e.g., a computer company must purchase new types of chips for its new line of computers). Page: 131
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6-152 E-MARKETPLACE
CONCEPTUAL
According to a Web-research company just 7 percent of online business-to-business transactions occurred in independent trading communities, and 93 percent occurred at private exchanges in 2001. What are the differences between independent trading communities and private exchanges? Can you suggest a reason for this disparity in usage? Answer: Both are forms of e-marketplaces. Independent trading communities offer thousands of geographically dispersed buyers and sellers, volatile prices caused by demand and supply fluctuations, time sensitivity due to perishable offerings and changing technologies, and easily comparable offerings between a variety of suppliers. Independent e-marketplaces typically focus on a product or serve a particular industry. Independent e-marketplaces offer small business buyers and sellers an economical way to expand their customer base and reduce the cost of purchased products. Private exchanges focus on streamlining a company's purchase transactions with its suppliers and customers. Like independent marketplaces, private exchanges provide a technology trading platform and central market for buyer-seller interactions. They are not a neutral third party, however, but represent the interests of the company that owns the exchange. The reason for the disparity in usage is largely explained by the fact that large companies favor the private exchangesthe size and number of their transactions are much greater than those of small businesses. Page: 132 6-153 ONLINE AUCTIONS Differentiate between traditional and reverse auctions. Answer: With a traditional auction, there is one seller and many prospective buyers. Prospective buyers observe the bidding process and decide whether to increase the bid price. The auction ends when a single buyer who is willing to pay the highest price remains. With a reverse auction, there is one buyer and many sellers. A buyer communicates a need for a product and invites potential suppliers to bid in competition with each other. As more prospective suppliers become involved, there is a downward pressure on price. The auction ends when a single supplier willing to offer the lowest price remains. Page: 133 DEFINITION
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