Chap003
67 Pages

Chap003

Course Number: MKTG 351, Fall 2010

College/University: CSU Fullerton

Word Count: 15136

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CHAPTER 3 THE CHANGING MARKETING ENVIRONMENT MULTIPLE CHOICE QUESTIONS 3-1 CHAPTER OPENING EXAMPLE: NAPSTER CONCEPTUAL Changes in _____ forces led to the creation and rapid growth of Internet-based music filesharing services. a. technological and economic b. social and technological c. competitive and economic d. regulatory and technology e. regulatory and economic Answer: b Page: 73 Rationale: Consumers' ideas...

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3 CHAPTER THE CHANGING MARKETING ENVIRONMENT MULTIPLE CHOICE QUESTIONS 3-1 CHAPTER OPENING EXAMPLE: NAPSTER CONCEPTUAL Changes in _____ forces led to the creation and rapid growth of Internet-based music filesharing services. a. technological and economic b. social and technological c. competitive and economic d. regulatory and technology e. regulatory and economic Register to View AnswerPage: 73 Rationale: Consumers' ideas about shopping changed. As described in the opening vignette, technology changed to make ripping possible. Discretionary income was plentiful and was not an issue at the inception of music-swapping services. 3-2 CHAPTER OPENING EXAMPLE: NAPSTER APPLICATION The joint development of MusicNet, a pay-for-play services, founded by RealNetworks Inc. and three major recording labels (Warner Music, Bertelsmann and EMI) was one way the music industry countered the revenue loss as a result of Internet-based music file-sharing services. This strategic alliance indicates how _____ forces can change the marketplace. a. economic b. regulatory c. competitive d. cultural e. ecological Register to View AnswerPage: 73-74 Rationale: Such consortia were considered impossible before the Internet. Today it is common for competitors to work together to deal with the different types of competition created by the Internet. 131 3-3 ENVIRONMENTAL SCANNING DEFINITION _____ is the process of continually acquiring information on events occurring outside the organization in order to identify and interpret potential trends. a. Outsourcing b. Competitive intelligence gathering c. Company protection d. Business modeling e. Environmental scanning Register to View AnswerPage: 74 Other Locations: W Rationale: Trends typically arise from five source included in an environmental scan: social, economic, technological, competitive, and regulatory forces. 3-4 ENVIRONMENTAL SCANNING DEFINITION A company engaged in environmental scanning is: a. taking into account the effect its marketing activities can have on plants and animals in our environment. b. continually acquiring information on events occurring outside the organization to identify and interpret potential trends. c. maintaining a time constant horizon in its strategic planning process. d. maintaining retail customer databases. e. requiring all employees to spend time outside the office to avoid the "ivory tower" syndrome. Register to View AnswerPage: 74 Rationale: Key term definition--environmental scanning 3-5 ENVIRONMENTAL SCANNING APPLICATION A marketing manager for United Way reads in a business journal that despite the Internet and television, Americans are actively engaged in their communities. Fifty-four percent have performed volunteer work and 78 percent have donated money to charities. She asks research and development personnel to identify possible new ad campaigns that will encourage this high levels of community-connectedness to continue. This ad campaign change is the result of the managerial activity: a. ecological/technological forecasting. b. environmental scanning. c. macroeconomic analysis. d. strategic planning. e. futuristic marketing. Register to View AnswerPage: 74 Rationale: The process of continually acquiring information on events outside the organization in order to identify and interpret potential trends is called environmental scanning. 132 3-6 ENVIRONMENTAL SCANNING APPLICATION In a recent survey, consumers indicated that they plan to do more volunteering. This type of information is the result of: a. social needs forecasting. b. environmental scanning. c. macroeconomic analysis. d. transactional exchange. e. futuristic marketing. Register to View AnswerPage: 74 Other Locations: SG Rationale: Learning how to keep the volunteers focused will require ongoing study of all aspects of the marketing environment. 3-7 ENVIRONMENTAL SCANNING/SOCIAL FORCES APPLICATION You are the Director of Marketing for Littleton Hospital. You are doing an environmental scan to help you create a five-year marketing plan for the hospital. Which of the following environmental trends should you consider the MOST important? a. The number of people in your geographic area who are 50 years or older will increase by 23 percent during the next five years. b. By the year 2007, baby boomers will control more than 50 percent of all consumer expenditures. c. The community has seen a rise in dual-income couples who bring with them larger disposable incomes. d. By the year 2010, robotics will play a major role in American society. e. By 2005, Latinos will be the largest U.S. minority. Register to View AnswerPage: 74 Rationale: The mature market, those households headed by persons 50 years of age and over, represents the fastest growing segment in America. They are concerned with personal health. In addition, the need for healthcare services among this group is likely to grow in years to come. 133 3-8 ENVIRONMENTAL SCANNING APPLICATION You are in charge of the marketing program for a consumer electronics company. You have been asked to think about developing a plan that will allow the firm to grow sales by at least 10 percent each year for the next five years. Prior to developing these plans you should consider which of the following forces in your planning process? a. economic environment b. technological environment c. competitive environment d. social environment e. all of the above Register to View AnswerPage: 74 Rationale: Each of these forces has an impact on the development of marketing plans and should be examined as part of environmental scanning. 3-9 ENVIRONMENTAL SCANNING DEFINITION Which of the following statements about environmental scanning is true? a. Environmental scanning changes the marketing environment. b. Environmental scanning identifies and explains potential trends. c. Environmental scanning is an annual event. d. Environmental scanning focuses primarily on geographical and meteorological factors. e. All of the above statements about environmental scanning are true. Register to View AnswerPage: 74-75 Rationale: Environmental scanning is the process of acquiring information to identify and interpret potential trends. 3-10 TRACKING ENVIRONMENTAL TRENDS APPLICATION According to one of the world's largest publishers, it was unprepared for recent increases in the demand for books about security. If the publisher had _____, it would have been prepared for the shift in demand. a. created an operational plan b. noticed changing demographics c. noticed changes in ethnic composition d. shifted funds from its product development department e. tracked environmental trends as a part of its ongoing operation Register to View AnswerPage: 75 Rationale: If it had determined through previous experiences and research that concerns about security were increasing, then it would have prepared for increased demand. 134 3-11 ENVIRONMENTAL SCAN CONCEPTUAL A manufacturer of major appliances uses environmental scanning and identifies the following trends as relevant to its success. Which of the following trends does describes the current U.S. environment? a. There is a growing number of older Americans. b. Per capita income in the U.S. has increased. c. There is a growing focus in the U.S. on the Internet. d. U.S. business is experiencing more international competition from emerging countries. e. All of the above trends describe the current U.S. environment. Register to View AnswerPage: 74-75 Rationale: See Figure 3-2. 3-12 TRACKING ENVIRONMENTAL TRENDS APPLICATION On September 25, 2001, AOL posted a record 280 million e-mails--nearly double that of the same day a year before. According to an environmental scan of the United States, this growth in wireless messaging reflects a change in _____ forces. a. economic b. competitive c. technological d. social e. regulatory Register to View AnswerPage: 74-75 Rationale: See Figure 3-2. 3-13 ENVIRONMENTAL FORCES APPLICATION The Lemon Tree is a high-fashion boutique selling top-of-the-line women's clothing and accessories. The keys to The Lemon Tree's success include knowing the customers' changing tastes and providing something different from other retailers. In addition, because of the high value of the merchandise, The Lemon Tree's management is searching for information on available computerized inventory controls and sales order processing. From this description, one can infer that the environmental category of least importance to The Lemon Tree is: a. economic. b. regulatory. c. technological. d. social. e. competitive. Register to View AnswerPage: 7 Other Locations: SG Rationale: Only regulatory issues are not mentioned in the question. 135 3-14 SOCIAL FORCES DEFINITION The demographic characteristics of the population and its values in a particular environment are known as: a. ecology. b. macroeconomic conditions. c. regulatory forces. d. social forces. e. psychographics. Register to View AnswerPage: 76 Rationale: Key term definition--social forces 3-15 SOCIAL FORCES DEFINITION The social forces of the environment include the demographic characteristics of the population, and its _____. Changes in these can have a dramatic impact on marketing strategy. a. living standards b. social class c. values d. dialect e. taste in music Register to View AnswerPage: 76 Rationale: Key term definition--social forces 3-16 SOCIAL FORCES APPLICATION More magazine is a new publication designed to appeal to women over the age of 40. Demand for such magazines is an example of how _____ forces impact the marketing environment. a. economic b. competitive c. technology d. social e. regulatory Register to View AnswerPage: 76 Rationale: Social forces include changing demographics--in this case an aging female population. 136 3-17 DEMOGRAPHICS APPLICATION More magazine is a new publication designed to appeal to women over the age of 40. Demand for such magazines is an example of how changing _____ characteristics impact the marketing environment. a. cultural b. behavioral c. occupational d. demographic e. psychographic Register to View AnswerPage: 76 Rationale: Age and gender are demographic characteristics. 3-18 SOCIAL FORCES Social forces: a. include demographics and values. b. usually have little impact on marketing strategy. c. include reduced emphasis on trade regulation. d. empower workers to improve their performances. e. encourage international trade. Register to View AnswerPage: 76 Other Locations: SG Rationale: Empowerment is a competitive issue as is international trade. Trade regulations are a part of regulatory environment. 3-19 DEMOGRAPHICS DEFINITION DEFINITION Anya has been instructed to prepare a short paper on her ancestors' demographics. She has asked some friends to explain her topic to her. Which of the following statements offers the BEST explanation? a. She is supposed to write about her family's customs. b. She is supposed to describe the personalities in her family. c. She is supposed to write about the ethnic composition of her family. d. She is supposed to write about any geographical shifts her family has made and how it changed them. e. She is supposed to write about her family's attitude toward life in the United States. Register to View AnswerPage: 76 Other Locations: W Rationale: Demographics are measurable characteristics collected by the U.S. Census. Values and attitudes cannot be measured; age and ethnicity can be. 137 3-20 DEMOGRAPHICS APPLICATION An ad on the back of a women's magazine for Cover Girl cosmetics shows both AfricanAmerican Queen Latifah and blonde Faith Hill endorsing its products as good for their skin. This is an example of an ad with a _____ focus because it shows product users of different ethnic backgrounds. a. cultural b. behavioral c. occupational d. demographic e. psychographic Register to View AnswerPage: 76 Other Locations: W Rationale: Ethnicity is reflected in Cover Girl showing that both African-Americans and Caucasians would benefit from the use of this makeup. 3-21 DEMOGRAPHICS DEFINITION The term _____ is used to describe the distribution of a population their age, sex, ethnicity, income, and occupation. a. cultural census b. psychographics c. territorial statistics d. demographics e. social audit Register to View AnswerPage: 76 Rationale: Key term definition--demographics 3-22 DEMOGRAPHICS APPLICATION Environmental scans have shown that the population of the United States is undergoing dramatic change. For example, the number of people in this country who are between the ages of 20 and 34 has declined since 1990. On the other hand, the number of people who are 65 years of age or older has increased. These changes in the U.S. population are examples of _____ changes to which marketers must respond. a. cyclical population b. psychographic c. demographic d. situational segment e. target market Register to View AnswerPage: 76 Rationale: The fastest growing age segment in the U.S. consists of the consumers who are over 50 years of age. The study of the characteristics of a population's age, sex, income, occupation, and ethnic background are all examples of demographics. 138 3-23 AGE SEGMENTS IN THE U.S. The fastest growing age segment in America is composed of: a. infants. b. people over 50 years of age. c. children of baby boomers. d. teens. e. people in their early 30s. DEFINITION Register to View AnswerPage: 76 Other Locations: SG Rationale: In recent years, greater marketing attention has been focused on the mature household. These are households headed by people over 50 years old, and they represent the fastest growing age segment in the population. 3-24 MATURE HOUSEHOLD The mature household is headed by people who: a. are members of the echo-boom. b. are over 50 years of age. c. are children of baby boomers. d. are empty nesters. e. are in their early 30s. Register to View AnswerPage: 76 Rationale: In recent years, greater marketing attention has been focused on the mature household. These are households headed by people over 50 years old. These households represent the fastest growing age segment in the population. 3-25 BABY BOOMERS DEFINITION DEFINITION Beginning with the end of World War II and continuing until 1964, a generation of Americans called _____ were born. a. baby busters b. me-firsters c. rock 'n' rollers d. baby boomers e. Generation X Register to View AnswerPage: 77 Rationale: The text defines baby boomers, and this question puts the information in an historical perspective. 139 3-26 BABY BOOMERS CONCEPTUAL Baby boomers are an important target market because they: a. include most of the important business leaders in the United States. b. represent a small proportion of the population but have large disposable incomes. c. have the longest life expectancies, and therefore, they will remain active in the market place for the longest period of time. d. represent a large proportion of the population. e. have the lowest income level. Register to View AnswerPage: 77 Rationale: Baby boomers account for 11 percent of the U.S. population. 3-27 BABY BOOMERS APPLICATION An ad for State Farm Annuities advises readers that, "the company has helped you enjoy your time with the kids, and it can now help you enjoy your time without them." The ad is most likely aimed at: a. Generation X. b. baby busters. c. Generation Y. d. consumers born between 1976 and 1996. e. baby boomers. Register to View AnswerPage: 77 Rationale: In the future, boomers' interests will reflect concern for their children's future, their own health, and their own retirement. 3-28 BABY BOOMERS CONCEPTUAL Which of the following statements about baby boomers is true? a. Baby boomers are becoming more fiscally conservative. b. Baby boomers will account for over half of all consumer expenditures. c. Baby boomers will change their buying behavior to reflect concern about their children and future retirement issues. d. Baby boomers are those people who were born between 1946 and 1965. e. All of the above statements about baby boomers are true. Register to View AnswerPage: 77 Rationale: Key term definition--baby boomers 140 3-29 BABY BOOMERS APPLICATION Eucerin's promotions for its anti-wrinkle cream are attempts to lure which market? a. echo-boom members b. baby boomers c. members of Generation Y d. Generation Xers e. urbanites Register to View AnswerPage: 77 Rationale: See L'Oreal example in text. 3-30 BABY BOOMERS/GENERATION X CONCEPTUAL Survivors: The Series has been a very popular show. It shows a group of sixteen strangers being placed in two competitive teams of eight. Each team must survive in a natural environment that is harsh and demanding. A reviewer described one of the teams in Survivor Africa as being baby boomers versus Generation X. What do you infer from this statement? a. The reviewer was surprised that baby boomers and members of Generation X were not cooperating because they usually do. b. That people over the age of 50 will more than likely conflict with people born after 1980. c. Baby boomers want the same things as Generation X members; this caused the conflict between them. d. This behavior was to be expected because baby boomers and members of Generation X are typically very different from each other. e. There is not enough information to make any inference from this statement. Register to View AnswerPage: 76 Rationale: Alternative B refers to Generation Y members. Generation X members are likely to pursue lifestyles and prefer products that are very different from baby boomers. 3-31 GENERATION X Generation X consumers can best be characterized as: a. people that like to rely on others. b. somewhat prone to extravagance. c. poorly educated. d. self-reliant and entrepreneurial. e. not generally supportive of racial and sexual diversity. Register to View AnswerPage: 77 Rationale: Generation X includes the 17 percent of the U.S. population born between 1965 and 1976. They are generally self-reliant, entrepreneurial, supportive of racial and sexual diversity, and better educated than any previous generation. They are not prone to extravagance. DEFINITION 141 3-32 GENERATION X APPLICATION The Sierra Club is environmentalism's oldest continuously operating organization. In 2001, the growth of the organization had plateaued when its members elected a new 23-old president who promised to use MTV artists to create public service announcements about the organization to rekindle interest among his peers--members of: a. Generation X. b. baby busters. c. Generation Y. d. the hippie generation. e. baby boomers. Register to View AnswerPage: 77 Rationale: Generation Y members were born after 1976 and are generally MTV fans. 3-33 GENERATION X Generation X is the label often given to: a. persons 65 years old and older. b. hip, urban teenagers. c. persons born between 1965 and 1976. d. the generation born between baby-boomers and their parents. e. fans of Dixieland jazz music. Register to View AnswerPage: 77 Rationale: Key term definition--Generation X 3-34 GENERATION X DEFINITION DEFINITION _____ is the name for the group of consumers who are self-reliant, entrepreneurial, supportive of racial and sexual diversity and not prone to extravagance. a. Generation X b. Generation Y c. Baby boomer d. A liberal cohort e. A postwar cohort Register to View AnswerPage: 77 Rationale: Key term definition--Generation X 142 3-35 GENERATION X CONCEPTUAL When compared to baby boomers, members of Generation X are more likely to invest their money in: a. entertainment. b. non-durables. c. discretionary spending. d. diamonds. e. retirement plans. Register to View AnswerPage: 77 Rationale: According to the text, Generation X is planning for retirement much earlier than the baby boom generation members did. 3-36 GENERATION Y Americans born after 1976 are described as: a. members of Generation X. b. baby boomers. c. the echo-boom. d. members of the baby buster generation. e. members of Generation Z. Register to View AnswerPage: 77 Rationale: Key term definition--Generation Y 3-37 GENERATION Y How are Generation Y members differentiated from other generations? a. They are born to single parents. b. They are currently in college. c. They are parents of the baby boomers. d. They were born after 1976. e. They are in their late 20s. Register to View AnswerPage: 77 Rationale: Key term definition--Generation Y DEFINITION DEFINITION 143 3-38 AMERICAN FAMILY CONCEPTUAL Which of the following statements accurately describes a recent trend in the American family? a. There is a decrease in households headed by single parents. b. There is an increase in traditional families. c. Nearly one-half of all households now consist of people who live alone. d. About 20 percent of all marriages end in divorce. e. None of the above statements describes recent trends in the American family. Register to View AnswerPage: 77-78 Other Locations: W Rationale: There is an increase in households headed by single parents and a decrease in traditional families. About one-fourth of all households now consist of people who live alone, and about 40 percent of first marriages end in divorce. 3-39 AMERICAN FAMILY CONCEPTUAL Which major demographic factor most likely accounts for an increasing of apartments being built with two master bedrooms? a. changes in the American family structure b. the baby boom c. geographic shift d. population trends e. more discretionary income Register to View AnswerPage: 78 Rationale: Due to changes in traditional American families, more houses and apartments have two master bedrooms for unmarried, unrelated people sharing space. 3-40 BLENDED FAMILY DEFINITION A _____ is formed by the merging of two previously separated units into a single household. a. mature household b. shifting family unit c. merging household d. blended family e. traditional household Register to View AnswerPage: 78 Rationale: Key term definition--blended family 144 3-41 BLENDED FAMILY DEFINITION About 40 percent of American marriages now end in divorce. What do marketers call the social unit that is created when a divorced woman and a divorced man marry one each other, whether or not either or both have children? a. a mature household b. a shifting family unit c. a merging household d. a blended family e. a traditional household Register to View AnswerPage: 78 Rationale: Key term definition--blended family 3-42 BLENDED FAMILY APPLICATION The family portrayed on the television show The Brady Bunch is a perfect example of a: a. mature household. b. shifting family unit. c. merging household. d. blended family. e. traditional household. Register to View AnswerPage: 78 Rationale: A blended family is the social unit that is created when a previously married woman and a previously married man marry one another, whether or not either or both have children. 3-43 MARKETING NEWSNET: TALKING ABOUT YOUR... CONCEPTUAL Businesses have discovered that they can grow bigger by targeting smaller groups of consumers. These groups are increasingly defined as a generation related to important life experiences. The reason is that events occurring when people _____ affect their lifelong attitudes and values. a. first become economic adults b. are born c. retire d. are in elementary school e. get married Register to View AnswerPage: 78 Rationale: Events occurring when people first become economic adults (usually between the ages of 17 and 21) affect their lifelong attitudes and values. 145 3-44 POPULATION SHIFTS In the 1990s, the major geographical shift in the U.S. population was to: a. eastern urban areas. b. the west coast. c. western and sunbelt states. d. midwestern states. e. the northeast seaboard. CONCEPTUAL Register to View AnswerPage: 78 Rationale: During the period 1990 to 2000, the states of Nevada, Arizona, Colorado, Utah, and Idaho grew at the fastest rates. 3-45 POPULATION SHIFTS APPLICATION Members of the legislature in the state of North Dakota have seriously debated changing the name of the state to a name that is more appealing. The feeling that the state needs a new name to help it improve its image is due to: a. a need to reduce the industrialization of the state. b. a population shift. c. the absence of regional marketing in the state. d. an absence of certain demographic categories within the state. e. all of the above. Register to View AnswerPage: 76 Rationale: North Dakota is one of the states listed as a slow-growing state. 3-46 EXURBS DEFINITION From the 1930s through the 1980s, Americans moved to the suburbs. During the 1990s, the population began to shift again, from the suburbs to: a. the exurbs. b. working farms. c. states like North Dakota and West Virginia. d. Canada. e. a metropolitan statistical area (MSA.). Register to View AnswerPage: 78 Other Locations: SG Rationale: A move to North Dakota and West Virginia would have reversed the population trends these states have been experiencing. 146 3-47 PENTURBIA APPLICATION When people living in Atlanta, Georgia, became tired of life in the city's suburban areas, they moved to Woodstock, Cartersville, Roswell, and other small cities within an hour's drive of the metropolitan areas. These small towns would be categorized as: a. the exurbs. b. more secure areas (MSAs). c. penturbia. d. metropolitan statistical areas (MSAs). e. ringing communities. Register to View AnswerPage: 78 Rationale: Penturbia are smaller towns that are experiencing an influx of new residents. 3-48 CONSOLIDATED METROPOLITAN STATISTICAL... DEFINITION The U.S. Census Bureau has developed a three-level classification system that reflects the varying locations of the population. The largest of these classifications is called the: a. consolidated metropolitan statistical area (CMSA). b. secondary marketing statistical area (SMSA). c. combined marketing statistical area (CMSA). d. primary marketing statistical area (PMSA). e. metropolitan statistical area (MSA). Register to View AnswerPage: 79 Rationale: Text term definition--consolidated metropolitan statistical area (CMSA). 3-49 PRIMARY METROPOLITAN STATISTICAL AREA DEFINITION A primary statistical metropolitan area: a. is part of a larger CSMA. b. contains counties with a total population of more than 100,000. c. contains counties in which fewer than 50 percent of the resident workers commute to jobs outside the county. d. is larger than a metropolitan statistical area. e. is accurately described by all of the above. Register to View AnswerPage: 79 Rationale: Text term definition--primary metropolitan statistical area (PMSA). 147 3-50 RACIAL AND ETHNIC DIVERSITY APPLICATION The 2000 census indicates that the American population is growing older, becoming more ethnically diverse, and increasingly living in nontraditional families. Marketers must observe how _____ forces are affecting the marketing environment. a. competitive b. regulatory c. geographical d. social e. economic Register to View AnswerPage: 76 Rationale: Demographic variables are social forces. 3-51 RACIAL AND ETHNIC DIVERSITY APPLICATION HSBC Bank (formerly the Hong Kong Bank of Canada) selected its advertising agency because that agency was "always sensitive to the possibility that something might not translate well or may offend superstitions about colours or numbers." Its advertising agency was responsive to: a. psychographic differences. b. population shifts. c. racial and ethnic diversity. d. a value consciousness. e. macroeconomics. Register to View AnswerPage: 76 Rationale: Racial and ethnic diversity is an important social force in the marketing environment. 3-52 RACIAL AND ETHNIC DIVERSITY APPLICATION The Mutual Bank of Hong Kong selected its advertising agency because that agency was "always sensitive to the possibility that something might not translate well or may offend superstitions about colours or numbers." This is an example of how _____ forces affect marketing. a. social b. technological c. economic d. competitive e. regulatory Register to View AnswerPage: 76 Other Locations: SG Rationale: The social forces include racial and ethnic diversity. 148 3-53 REGIONAL MARKETING The development of regional marketing plans was the result of: a. cutbacks in advertising budgets. b. decentralization of corporate decision making. c. recognition of geographic differences in product preferences. d. the influence of international marketers. e. reductions in interstate business mergers. CONCEPTUAL Register to View AnswerPage: 80 Rationale: The focus of regional marketing lies not only on the shifting of consumers geographically, but upon the differences in their product preferences based on where the customer lives. Thus, marketing plans are developed to reflect specific area differences in taste preferences, perceived needs, or interests. 3-54 REGIONAL MARKETING DEFINITION _____ is the development of marketing plans to reflect specific area differences in taste preferences, perceived needs or interests. a. Regional marketing b. Functional marketing c. Psychographic marketing d. Cultural segmentation e. Value segmentation Register to View AnswerPage: 80 Rationale: Key term definition--regional marketing 3-55 REGIONAL MARKETING Regional marketing is also called: a. functional marketing. b. demographic segmentation. c. hierarchical marketing. d. value segmentation. e. geographic segmentation. Register to View AnswerPage: 80 Rationale: Text term definition - geographical segmentation DEFINITION 149 3-56 REGIONAL MARKETING APPLICATION A campaign launched in 2001 to promote Bell Mobility in Western Canada depicted people mountain biking, hiking and snowboarding amid recognizably western landscapes. The accompanying copy features the word, "go" alongside the alternate taglines: "Life without a leash;" and "Cities have limits. You don't." The radio copy honed in on a strong independent streak found in western Canada. This is an example of: a. relational marketing. b. functional marketing. c. psychographic marketing. d. cultural segmentation. e. geographic segmentation. Register to View AnswerPage: 80 Rationale: Regional marketing is used in Canada just as it is used in the U.S. There is a definite difference between the markets in eastern and western Canada. 3-57 REGIONAL MARKETING APPLICATION McDonald's has tried unsuccessfully to introduce a barbecue sandwich to its menu. The sweet barbecue sauce used nationwide does not appeal to southeastern barbecue eaters who prefer a much more tart sauce. In this instance, McDonald's might have been more successful if it had used: a. functional marketing. b. demographic segmentation. c. hierarchical marketing. d. value segmentation. e. regional marketing. Register to View AnswerPage: 80 Other Locations: W Rationale: Regional marketing is the development of marketing plans to reflect specific area differences in taste preferences, perceived needs or interests. 3-58 SOCIAL FORCES APPLICATION You are the marketing director for a large potato chip and snack food company. You have learned that a major portion of your current market has been switching from salty snacks to healthier snack foods. Which environmental force most likely has contributed to this change in dietary habits? a. economic b. regulatory c. competitive d. social e. ecological Register to View AnswerPage: 81 Other Locations: W Rationale: One of the main cultural attitude shifts over the past few years has been an ever greater concern with health and well-being, which has led to diet-conscious interests. 150 3-59 SOCIAL FORCES APPLICATION There is a greater concern for health and well being in the United States. This is evidenced by: a. increased sales of Cigar Aficionado magazine. b. the revamping of the format for Parents magazine. c. the increased number of women in management positions. d. the opening of more Starbucks coffee houses. e. more advertising for exercise equipment. Register to View AnswerPage: 81 Rationale: Weight is the source of the biggest health problems faced by Americans. 3-60 CULTURE DEFINITION The set of values, ideas, and attitudes of a homogeneous group of people that are transmitted from one generation to the next is called: a. social class. b. morals. c. culture. d. reference groups. e. ethics. Register to View AnswerPage: 80 Rationale: Key term definition culture. 3-61 CULTURE/SOCIAL FORCES APPLICATION In 2000, the most popular recording of holiday music was for an album recorded by Steve and Eydie Gorme. The recording was only available in vinyl and retailed for about $50 if you could find it. Purchasers of the recording ranged in age from 75 to 30 years old. People who owned the recording claimed that it brought back memories of wonderful holidays when they were young. Due to popular demand, the recording was re-released on CD for Christmas 2001, and the singers are once again appearing on stage. This nostalgia for past times is indicative of how _____ forces affect marketing. a. technological b. social c. economic d. ecological e. competitive Register to View AnswerPage: 76 Rationale: Nostalgia is a culturally driven a social force. 151 3-62 CULTURE DEFINITION Which of the following statements about culture is true? a. Culture consists of a series of current trends. b. Culture is an example of an economic force within the marketing environment. c. Because the U.S. is considered a "melting pot," cultural trends are typically not monitored by businesses. d. Culture is only considered an important facet of marketing in international marketing. e. Culture includes attitudes and values. Register to View AnswerPage: 80 Other Locations: W Rationale: Culture incorporates the set of values, ideas, and attitudes of a homogenous group of people that are transmitted from one generation to the next. 3-63 CULTURE CONCEPTUAL The change in attitudes about work, from "I live to work" to "I work to live," helps explain which of the following? a. population shift to urban areas b. stable gross income c. Safeway Stores advertising in Newsweek magazines d. growth in sales of videocassette recorders, sports equipment, and easily prepared meals e. regional marketing campaigns Register to View AnswerPage: 80 Rationale: Many consumers now see work as a means to an end--leisure, and entertainment. Product categories described in alternative D are growing as consumers' attitudes toward work influence their purchases. 152 3-64 CHANGING ROLES OF MEN AND WOMEN APPLICATION The roles of men and women in American society have changed dramatically during the past decades. For instance, more women are actively and successfully pursuing careers in both the public and private business sectors. Women across the nation have established successful managerial and professional positions as doctors, lawyers, and astronauts. Such changes in the role of women in society have necessitated that marketers adjust their marketing activities. Which of the following are examples of marketing changes due to changing roles of women in the workforce? a. 24-hour grocery stores b. extended banking hours c. automatic teller machines d. changes in how women are portrayed in advertisements e. all of the above Register to View AnswerPage: 80-81 Rationale: In response to changes in the roles and consumption patterns of women, marketers have adapted, adjusted and modified many of their marketing efforts. The traditional role of women would suggest that women were home with the children and as such, were free to shop during regular business hours (i.e., 9 am - 5 pm). With an increase in dual-income families, marketers have had to become more flexible to accommodate the changing needs of the consumer. 3-65 CHANGING ROLES OF MEN AND WOMEN CONCEPTUAL Which of the following factors can be used to help explain why Generation Y women no longer feel the need to be feminists? a. The television industry eliminated all shows where the woman was a stay-at-home mother. b. The movie industry stopped making films about dependent women. c. They were able to shop freely on the Internet. d. Their mothers worked and gave them a reference point for lifestyle choices. e. All of the above are factors that can be used to help explain why Generation Y women no longer feel the need to be feminists. Register to View AnswerPage: 77 Other Locations: SG Rationale: Neither the television nor the movie industry has abandoned the use of stereotypically dependent women. 153 3-66 VALUE CONSCIOUSNESS APPLICATION Many car manufacturers compete by appealing to consumers' _____. They advertise that they offer the highest quality of vehicle available with all of the most desirable features at the lowest possible price. a. value consciousness b. perceived value desires c. focused shopping habits d. price targeting e. conspicuous consumption. Register to View AnswerPage: 82 Rationale: Value consciousness is the concern for obtaining the best quality, features, and performance of a product or service for a given price. 3-67 VALUE CONSCIOUSNESS DEFINITION Today, and for the foreseeable future, _____--or the concern for obtaining the best quality, features, and performance of a product or service for a given price--will drive consumption behavior. a. price consciousness b. stinginess c. frugality d. value consciousness e. quality shopping Register to View AnswerPage: 82 Rationale: Key term definition - value consciousness. 3-68 VALUE CONSCIOUSNESS APPLICATION Kmart's ad campaign introduced in November of 2001 emphasized the retail chain's new orientation toward lower prices on everyday products. This ad campaign was intended to appeal to: a. an ethnically diverse market. b. value conscious consumers. c. population age shifts. d. geographic shifts. e. the growth of dual-income households. Register to View AnswerPage: 82 Rationale: Value consciousness is the concern of obtaining the best quality, features, and performance of a product or service for a given price. 154 3-69 CHANGING VALUES APPLICATION Concern for health and fitness is one reason 51 million people in the United States report that they are trying to control their weight. This concern represents: a. changing values. b. change in population composition. c. demographic change. d. increase in value consciousness. e. changing ethnic composition. Register to View AnswerPage: 81 Rationale: Culture includes values. 3-70 VALUE CONSCIOUSNESS CONCEPTUAL Marriott Hotels has provided consumers with Fairfield Inns and Courtyard by Marriott, two less expensive offerings of Marriott customer service. This is an example of how marketers respond to consumers': a. value consciousness. b. perceived value. c. focused shopping. d. value-point shopping. e. conspicuous consumption. Register to View AnswerPage: 82 Other Locations: W Rationale: See Holiday Inn example. Value consciousness is the concern for obtaining the best quality, features, and performance of a product or service for a given price. 3-71 ECONOMIC FORCES DEFINITION _____ is a component of the marketing environment. It pertains to the income, expenditures, and resources that affect the cost of running a business or household. a. Ecology b. The economy c. Technology d. Culture e. Competition Register to View AnswerPage: 82 Rationale: Key term definition--economy 155 3-72 ECONOMIC FORCES APPLICATION While "new economy" investments have in declined in recent years, many businesses continue to invest in technology. In this way _____ forces can affect our environment. a. economic b. regulatory c. competitive d. psychographic e. ecological Register to View AnswerPage: 82 Other Locations: SG Rationale: Economic forces such as macroeconomic changes in the economy affect our environment. From 1998 through early 2000, the U.S. economy grew rapidly as businesses invested in "new economy" technology. Following this growth, the economy entered a recessionary period. 3-73 ECONOMIC FORCES APPLICATION In a 2001 survey conducted immediately after the World Trade Center attack, 47 percent of the women who responded to the survey said they were not going to treat themselves to small luxuries like manicures, and 54 percent said they would not be buying any expensive clothes. These results of this survey most directly relates to the _____ forces within the marketing environment. a. economic b. regulatory c. competitive d. social e. ecological Register to View AnswerPage: 82 Rationale: Buying intentions are part of the microeconomic environment. 3-74 RECESSION DEFINITION _____ is a time of slow economic activity when businesses decrease production, unemployment rises, and many consumers have less money to spend. a. A panic b. Inflation c. An escalation d. A recession e. A depression Register to View AnswerPage: 82 Rationale: Recession is a time of slow economic activity. 156 3-75 MACROECONOMIC CONDITIONS APPLICATION Merchants at the beginning of the 2001 Christmas season were worried consumers would not be willing to buy as much as they had in years previously. As a result, these retailers purchased fewer items for their inventories. Manufacturers sold less because the retailers did not want to have as large an inventory as usual. Manufacturers had to lay people off because their production was down, and many consumers actually did have less money to spend. This is an example of how _____ forces directly affect marketing. a. economic b. social c. regulatory d. technological e. competitive Register to View AnswerPage: 82 Rationale: The result of not buying was recessionary-like conditions. 3-76 CONSUMER INCOME Components of a consumer's income include: a. inflation, recession, and recovery. b. salary, wages, commissions, and fees. c. gross, disposable, and discretionary incomes. d. taxes, perquisites, and salary. e. liquidity items, liabilities, and assets. Register to View AnswerPage: 83-84 Rationale: A consumer's ability to buy is related to actual income, which consists of gross, disposable, and discretionary components. 3-77 GROSS INCOME DEFINITION DEFINITION _____ income is the total amount of money made in one year by a person, household, or family unit. a. Inflationary b. Discretionary c. Disposable d. Gross e. Expendable Register to View AnswerPage: 83 Rationale: Key term definition--gross income 157 3-78 GROSS INCOME APPLICATION Tracy Smith has a disposable income of $1,600. Her disposable income represents 80 percent of her gross income. What is her gross income? a. $5,400 b. $3,200 c. $2,000 d. $1,600 e. $1,280 Register to View AnswerPage: 83 Rationale: Since disposable income is 80 percent of Ms. Smith's gross income: 0.8X = $1,600, X = $2,000. 3-79 DISPOSABLE INCOME DEFINITION _____ income is the money a consumer has left after paying taxes to use for food, clothing, and shelter. a. Net b. Discretionary c. Disposable d. Household e. Gross Register to View AnswerPage: 83 Rationale: Key term definition--disposable income 3-80 WEBLINK: HOW TYPICAL IS YOUR HOME TOWN? CACI Marketing System's website provides _____ data. a. economic b. governmental c. technological d. international e. human psychology Register to View AnswerPage: 84 Rationale: CACI Marketing Systems provides a comparison of your zip code's population with the averages for the Nation. DEFINITION 158 3-81 DISCRETIONARY INCOME DEFINITION The money that remains after paying for taxes and necessities is called _____ income. a. inflationary b. discretionary c. disposable d. gross e. expendable Register to View AnswerPage: 83-84 Rationale: Key term definition--discretionary income 3-82 DISCRETIONARY INCOME DEFINITION The Census Bureau defines a household as having discretionary income if: a. its spendable income exceeds that of an average, similarly sized family by 30 percent or more. b. its spendable income is less than that of a similarly sized family by 50 percent or more. c. there is no spendable income after taxes. d. the gross income is greater than $25,000 but less than $125,000. e. the gross income is greater than $150,000. Register to View AnswerPage: 83-84 Rationale: The Department of Labor has calculated a budget for a household of four persons. Using these budget amounts, the Census Bureau defines a household as having discretionary income if its spendable income exceeds that of an average, similarly sized family by 30 percent or more. 3-83 DISCRETIONARY INCOME APPLICATION Emily had an excellent year as a saleswoman in 2001. She earned $97,000. She paid $17,000 for "necessities" such as mortgage, food, and clothing. She was given a six-week all expenses paid vacation by the company for her sales performance that had a value of $9,000. Her state and federal income taxes totaled $24,000. What was her discretionary income? a. $56,000 b. $73,000 c. $80,000 d. $88,000 e. There is not enough data provided to calculate her discretionary income. Register to View AnswerPage: 83-84 Other Locations: SG Rationale: Discretionary income is the money that remains after paying for taxes and necessities. Therefore, $97,000=gross income less 17,000 for necessities less 24,000 for taxes equals $56,000 for discretionary income. 159 3-84 DISCRETIONARY INCOME APPLICATION Frank has a gross income of $24,000. He pays $4,000 in taxes. His yearly expenditures for food, shelter, and clothes total $17,250. What is his discretionary income? a. $2,750 b. $6,750 c. $13,250 d. $20,000 e. Frank has no discretionary income. Register to View AnswerPage: 83-84 Rationale: Since discretionary income is the money that remains after paying taxes and necessities from gross income: Therefore, $24,000 = gross income less $4,000 for taxes and less $17,250 for food, clothing, and shelter equals $2,750 for discretionary income. 3-85 DISCRETIONARY INCOME APPLICATION The owner of your local KFC franchise has had a good year with rising revenues and reduced operating costs that resulted in a personal income of roughly $100,000. Approximately onethird of that was taken for local, state, and federal income taxes, and another third went to pay for mortgage, car payments, food, clothing, and other necessities. What is the remaining third called? a. windfall b. bonus c. discretionary income d. disposable income e. franchiser fee Register to View AnswerPage: 83-84 Rationale: Key term definition--discretionary income 160 3-86 DISCRETIONARY INCOME APPLICATION Carl and Nancy Johnson prepared a household budget in an attempt to better manage their money. As part of the budgeting process, Carl and Nancy prepared the following list: Monthly Income: Monthly Expenses Rent: Auto Loan: Student Loan: Savings: Food: Entertainment: Total Expenses: $4500.00 (Necessities) $ 550.00 $ 235.00 $ 280.00 $ 500.00 $ 200.00 $ 200.00 $1965.00 After totaling their necessary expenses, Carl and Nancy subtracted that figure ($1965) from their monthly income of $4500. The Johnsons were happy to realize that after paying bills each month, they had $2535 left over. That money that was left after paying expenses is an example of their _____ income. a. gross b. disposable c. proprietary d. discretionary e. planned Register to View AnswerPage: 83 Rationale: The three components of consume income are gross, disposable, and discretionary incomes. 3-87 DISCRETIONARY INCOME APPLICATION In 2001, the number of people who attended music concerts, plays, and other live entertainment declined significantly because many people did not believe they had the _____ income to enjoy such events. a. gross b. disposable c. proprietary d. discretionary e. flexible Register to View AnswerPage: 83-84 Rationale: Discretionary income is used for luxury items like theater and concert tickets. 161 3-88 TECHNOLOGY DEFINITION _____ refers to inventions or innovations from applied science or engineering research. a. Science b. Innovative theory c. Technology d. Cybernetics e. Engineered change Register to View AnswerPage: 85 Rationale: Key term definition--technology 3-89 TECHNOLOGY APPLICATION As a result of fears about bioterrorism in general and anthrax in particular, envelope manufacturers have designed an envelope with a window at the bottom edge so that a recipient can examine the contents of the letter without having to open the envelope. This envelope is expected to have a high level of popularity. It is an example of how _____ forces can improve the quality of life through marketing. a. technological b. political c. economic d. ecological e. competitive Register to View AnswerPage: 84 Rationale: The new envelope design is an example of simple, yet potentially profitable, technology. 3-90 TECHNOLOGICAL FORCES APPLICATION One reason some people don't like to buy clothing from Internet retailers is the inability to know if the clothes will fit once they have arrive at your house. ImageTwin has developed a scanning system with which it has gathered the measurements of individuals of all different sizes. All of the information has been fed into a database. Now, when you buy something at LandsEnd.com, you can see a 3D image of what the item should look like on your body. If ImageTwin is successful promoting this product, it could have its strongest influence on the _____ forces of the marketing environment. a. economic b. regulatory c. competitive d. social e. technological Register to View AnswerPage: 85 Rationale: This is an example of an innovation developed through engineering. 162 3-91 TECHNOLOGICAL FORCES CONCEPTUAL Which of the following statements concerning technological forces is true? a. A new wave of technological innovation will not replace existing products and companies. b. Because technological change is the result of research, it is highly predictable. c. An advantage of technology is that advances can in no way harm an industry's growth. d. The cost of technology is increasing. e. Advances in technology are having important effects on marketing because they allow marketers to better understand and serve consumers. Register to View AnswerPage: 85 Other Locations: SG Rationale: Each new wave of technological innovation can and often does replace existing products and companies. An example is the slide rule, which was replaced by calculators, which in turn are being replaced by personal computers. Technological change is the result of research, so it is difficult to predict. Advances in technology tend to affect the growth of many industries--to their harm, as when the microfilm information storage and retrieval industry was leapfrogged by electronic data storage. 3-92 TECHNOLOGICAL FORCES APPLICATION One-way satellite transmission has been used widely throughout the United States via systems like WebTV. Soon consumers will have access to two-way satellite transmission, which is significantly faster and will not require a dial-up connection. The introduction of two-way satellite transmission will make systems like WebTV obsolete. This would be an example of how _____ forces affect the marketing environment. a. economic b. ecological c. technological d. social e. regulatory Register to View AnswerPage: 85 Rationale: Two-way satellite transmission is an innovative technology. 163 3-93 RECYCLING APPLICATION Roughly 500 million computers will become obsolete between 1997 and 2007 in the U.S. alone. These computers contain more than 2 billion pounds of what will become lead waste that is harmful to the environment. As a result, computer manufacturers are being pressured to accept used computers for the safety of our communities. This environmental issue reflects a problem with _____, a technological force. a. green marketing b. the green initiative c. recycling d. pre-recycling e. precycling Register to View AnswerPage: 85 Other Locations: W Rationale: The fast-paced change of technology in the computer industry highlights the need for recycling programs. 3-94 RECYCLING APPLICATION With the rise of electronic music keyboards and the decline of waltzes played in the family parlor, the United States is overrun with unwanted pianos. A craftsman decided that old pianos were the perfect height for computer desks. You could place the keyboard where the piano keys once were. He sells his converted pianos for about $1,500. Go to PianoDesk.com if you are interested in this unusual _____ effort. a. green marketing b. the green initiative c. recycling d. pre-recycling e. precycling Register to View AnswerPage: 86 Rationale: Recycling defined is as the changing of existing products that have lost their usefulness into products that have new usefulness. 3-95 PRECYCLING DEFINITION Efforts by manufacturers to reduce waste by decreasing the amount of packaging they use is termed: a. green marketing. b. the green initiative. c. recycling. d. pre-recycling. e. precycling. Register to View AnswerPage: 86 Rationale: Text term definition--precycling 164 3-96 PRECYCLING APPLICATION Some cereal manufacturers are selling cereals in plastic bags rather than cardboard boxes with cellophane inserts. Cereal packed in bags requires less packing material than cereal packaged in traditional boxes. This example reflects the use of: a. green marketing. b. the green initiative. c. recycling. d. pre-recycling. e. precycling. Register to View AnswerPage: 86 Other Locations: SG Rationale: Precycling is an effort by the manufacturer to reduce waste by decreasing the amount of packaging using. 3-97 ELECTRONIC BUSINESS TECHNOLOGIES DEFINITION The _____ is an information and communication-based electronic exchange environment mostly occupied by sophisticated computer and telecommunication technologies and digitized offerings. a. electronic communications channel b. transactional Internet c. marketspace d. marketing Internet e. information superhighway Register to View AnswerPage: 86 Rationale: Key term definition--marketspace 3-98 ELECTRONIC BUSINESS TECHNOLOGIES CONCEPTUAL Without the existence of the _____, market researchers would not be predicting that creditcard transactions on the Internet will exceed $508 billion by 2008. a. electronic communications channel b. transactional Internet c. marketspace d. marketing Internet e. information superhighway Register to View AnswerPage: 86 Rationale: The marketspace is an information- and communication-based electronic exchange environment mostly occupied by sophisticated computer and telecommunication technologies and digitized offerings. 165 3-99 ELECTRONIC BUSINESS TECHNOLOGIES APPLICATION Buying a book at www.amazon.com to give as a birthday present is an example of a(n) _____ transaction. a. electronic commerce b. Internet relationship c. bricks-and-mortar d. electronic partnering e. extranet Register to View AnswerPage: 86 Rationale: Any activity that uses electronic communications is called electronic commerce. A relationship requires more than one transaction, and nothing on-going is suggested by this question. 3-100 ELECTRONIC BUSINESS TECHNOLOGIES CONCEPTUAL Which of the following statements about electronic business technologies is true? a. The Internet and the World Wide Web are synonyms. b. The World Wide Web is part of the Internet. c. Intranets permit communication between a company and its suppliers and distributors. d. Users access the Internet through the use of commercial online servers. e. All of the above statements about electronic business technologies are true. Register to View AnswerPage: 86 Other Locations: W Rationale: Commercial online services such as America Online offer electronic information and marketing services to subscribers who are charged a monthly fee. 3-101 ELECTRONIC BUSINESS TECHNOLOGIES DEFINITION Cisco Systems, the computer networking equipment giant, uses its _____ to communicate with its distributors, resellers, and customers. a. intranet b. partnering software c. extranets d. Internet servers e. Web presence Register to View AnswerPage: 87 Rationale: Key term definition--extranets 166 3-102 ELECTRONIC BUSINESS TECHNOLOGIES APPLICATION Office Depot has developed wireless, handheld computers for its staff. When customers inquire about a product, a computer equipped sales associate can pull detailed information on products right out of the corporate database. Employees at one store can contact employees at another store for advice or information. This is an example of how _____ can be used to enhance marketing. a. intranets b. partnering software c. extranets d. Internet servers e. electronic data interchangeable browsers Register to View AnswerPage: 87 Other Locations: SG Rationale: Intranets are a form of private Internet. 3-103 TECHNOLOGICAL FORCES/COMPETITIVE FORCES APPLICATION In October of 2001, there were approximately 65 million cell-phone subscribers in the United States. That number increases by 46,000 daily. There are 2.3 million payphones that receive little or no usage. Pay-phone providers are hoping to find some way to make use of these idle phones. This is one way that ____ forces have jointly influenced marketers. a. economic and technological b. regulatory and competitive c. competitive and social d. social and technological e. technological and competitive Register to View AnswerPage: 87 Rationale: This is an example of an innovation that harmed an industry. The cell phones are in direct competition with the pay phones. 3-104 TECHNOLOGICAL FORCES/REGULATORY FORCES APPLICATION The Electronic Signatures in Global and National Commerce Act makes digital signatures every bit as valid as nondigital pen-and-ink signatures. This act created a demand for software and hardware that would collect, transmit, and receive digital signatures. This example indicates how _____ forces can work together in the marketing environment. a. technological and regulatory b. technology and competitive c. social and competitive d. technology and social e. regulatory and economic Register to View AnswerPage: 87 Rationale: The software to collect and transmit the signature is an example of technology. The law itself is part of the regulatory environment. 167 3-105 COMPETITION DEFINITION Alternative firms that could provide a product to satisfy a specific market's needs are called: a. substitute markets. b. target markets. c. mixed marketing. d. cross product marketing. e. competition. Register to View AnswerPage: 87 Rationale: Key term definition--competition 3-106 COMPETITIVE FORCES APPLICATION The Internet has forced the U.S. Postal Service (USPS) to rethink its marketing strategy. Email has replaced short mailed letters, and advertising e-mail has replaced advertising mail. As a result, the USPS has used creative strategy, such as teaming up with FedEx, to cope with new ______ forces in the marketplace. a. economic b. competitive c. ecological d. social e. regulatory Register to View AnswerPage: 87 Rationale: The USPS is targeting many of the same customers as the Internet. 3-107 MARKETING NEWSNET THE NET WORKED! DEFINITION Which electronic business technology is making it possible for new product ideas to spread among employees? a. intranets b. partnering software c. extranets d. Internet servers e. electronic data interchangeable browsers Register to View AnswerPage: 87 Rationale: An intranet is a private Internet. 168 3-108 PURE COMPETITION _____ is a form of competition in which every company has a similar product. a. Pure competition b. Cross-market competition c. Oligopoly d. Monopolistic competition e. Monopoly Register to View AnswerPage: 87 Rationale: Text term definition--pure competition 3-109 PURE COMPETITION DEFINITION APPLICATION Which of the following products would most likely be sold through pure competition? a. vacation cruises b. wheat c. musical instruments d. electricity e. magazines Register to View AnswerPage: 87 Other Locations: SG Rationale: Pure competition is a form of competition in which every company has a similar product. 3-110 PURE COMPETITION CONCEPTUAL Distribution (in the sense of shipping products) is particularly important to which form of competition? a. cross-market competition b. pure competition c. oligopoly d. monopolistic competition e. monopoly Register to View AnswerPage: 87 Other Locations: W Rationale: Most companies in a pure competition environment have almost identical products. The distribution (in the sense of shipping products) is most important element of the marketing mix. 169 3-111 MONOPOLISTIC COMPETITION APPLICATION Paul Avery is a salesperson at the only Ford automobile dealership in Wausau, Wisconsin. However, there are several other auto dealerships in town, offering both domestic and foreign cars and trucks. Paul works hard to keep his customers satisfied because he knows that if his customers are unhappy, they can simply buy a car from one of the many other comparable dealers in Wausau. This is an example of: a. pure competition. b. monopolistic competition. c. an oligopoly. d. a monopoly. e. incremental competition. Register to View AnswerPage: 87 Rationale: Monopolistic competition means there are many sellers who compete with product substitutes. 3-112 MONOPOLISTIC COMPETITION DEFINITION The form of competition in which many sellers compete with their products on a substitutable basis is called: a. pure competition. b. cross-market competition. c. oligopoly. d. monopolistic competition. e. monopoly. Register to View AnswerPage: 87 Rationale: Text term definition--monopolistic competition 3-113 MONOPOLISTIC COMPETITION CONCEPTUAL Coupons and sales are frequently used marketing tactics in which form of competition? a. pure competition b. cross-market competition c. oligopoly d. monopolistic competition e. monopoly Register to View AnswerPage: 87 Other Locations: SG Rationale: In monopolistic competition the many sellers compete with their products on a substitutable basis. For example, if the price of Post raisin bran rises too much, consumers may switch to Kellogg's raisin bran. Coupons and sales are frequently used to reduce customer switching. 170 3-114 MONOPOLISTIC COMPETITION APPLICATION Most of the catalog retailers during the 2001 Christmas season offered buyers price reductions, coupons, two-for-one buying opportunities and/or free delivery. This is because these catalog retailers operate in: a. pure competition. b. cross-market competition. c. an oligopoly. d. monopolistic competition. e. a monopoly. Register to View AnswerPage: 87 Rationale: In monopolistic competition the many sellers compete with their products on a substitutable basis. 3-115 OLIGOPOLY APPLICATION The competitive situation where AT&T, MCI, and Sprint control approximately 80 percent of the international long-distance telephone market is called a(n): a. monopoly. b. unfair trade practice. c. collusion. d. monopolistic competition. e. oligopoly. Register to View AnswerPage: 87 Rationale: Text term definition--oligopoly 3-116 OLIGOPOLY DEFINITION _____ is the form of competition where a few companies control the majority of industry sales. a. Pure competition b. Cross-market competition c. Oligopoly d. Monopolistic competition e. Monopoly Register to View AnswerPage: 87 Rationale: Text term definition--oligopoly 171 3-117 OLIGOPOLY CONCEPTUAL Because there are few sellers, price competition among firms is not desirable in which form of competition? a. pure competition b. cross-market competition c. monopolistic competition d. monopoly e. oligopoly Register to View AnswerPage: 87 Other Locations: W Rationale: Since there are few sellers in an oligopoly, price competition among firms is not desirable because it leads to reduced revenues for all producers. 3-118 OLIGOPOLY APPLICATION Ralph Moore enjoys soft drinks. He prefers the Seven-Up lemon and lime beverage. He has heard rumors that the Seven-Up Company will be bought out by one of the industry's two leading and market dominant competitors. Further, he has heard that if that happens, the Seven-Up brand soft drink will be eliminated since it competes with the competitor's main lemon and lime offering. What Ralph is experiencing are developments that are most likely to take place within which type of competitive environment? a. monopoly b. oligopoly c. pure competition d. monopolistic competition e. any of the above Register to View AnswerPage: 87-88 Rationale: An industry characterized as an oligopoly is one which has a few companies controlling the majority of industry sales. The situation described in this question is most likely to occur in that type of competitive environment. 3-119 OLIGOPOLY APPLICATION Kodak, Fuji, and Agfa control the majority of sales for amateur photographic film. This exemplifies the competitive situation called: a. an oligopoly. b. a trilateral monopoly. c. unfair trade practice. d. collusion. e. monopolistic competition. Register to View AnswerPage: 87 Rationale: Text term definition--oligopoly 172 3-120 MONOPOLY _____ is the form of competition where there is only one firm selling a product. a. Pure competition b. Cross-market competition c. Oligopoly d. Monopolistic competition e. Monopoly Register to View AnswerPage: 87-88 Rationale: Text term definition--monopoly 3-121 MONOPOLY DEFINITION CONCEPTUAL Since ______ is regulated by the state or federal government, marketing plays a small role in this setting. a. pure competition b. cross-market competition c. an oligopoly d. monopolistic competition e. a monopoly Register to View AnswerPage: 87-88 Other Locations: SG Rationale: A monopoly occurs when only one firm sells the product. Typically, marketing plays a small role in this setting because the state or federal government regulates it. 3-122 COMPONENTS OF COMPETITION Which of the following is a component or force that drives competition? a. ease of entry b. the bargaining power of buyers and suppliers c. existing rivalries d. the possibility of product substitution e. all of the above Register to View AnswerPage: 88 Rationale: Factors that drive competition include: entry, bargaining power of buyers and suppliers, existing rivalries, and substitution possibilities. CONCEPTUAL 173 3-123 BARRIERS TO ENTRY DEFINITION Barriers to entry are: a. "smart" security devices designed for office buildings. b. a set of rules and procedures that firms in an industry present to news firms in the industry. c. business practices or conditions that make it difficult for new firms to enter a market. d. a set of security devices used primarily in automobiles. e. security devices such as firewalls used by computer networks. Register to View AnswerPage: 88 Rationale: Key term definition--barriers to entry 3-124 BARRIERS TO ENTRY CONCEPTUAL In considering its competition, a firm must assess the likelihood of new entrants. Additional producers in the marketplace typically: a. reduce industry capacity and lower prices. b. reduce industry capacity and raise prices. c. increase industry capacity and raise prices. d. increase industry capacity and lower prices. e. maintain industry capacity and stabilize prices. Register to View AnswerPage: 88 Rationale: Key term definition--barriers to entry 3-125 BARRIERS TO ENTRY APPLICATION A new brewery that wants to market beer nationally must deal with the fact that AnheuserBusch spends over $225 million a year on marketing. This statement is an example of _____ for the new national brewery. a. a barrier to entry b. the power of buyers c. the power of suppliers d. social responsibility e. product substitutability Register to View AnswerPage: 88 Rationale: The greater the capital required to enter the industry or the greater the advertising expenditures in the industry, the higher the barrier to entry. When Anheuser-Busch spends $225 million on marketing, it makes it very difficult for new smaller competitors to enter the industry. 174 3-126 BARRIERS TO ENTRY CONCEPTUAL Barriers to entry are business practices or conditions that make it difficult for new firms to enter the market. Which of the following is an example of a barrier to entry? a. capital requirements b. advertising expenditures c. distribution access d. product identity e. all of the above Register to View AnswerPage: 88 Rationale: All of the examples and switching costs are potential barriers to entry. 3-127 BARRIERS TO ENTRY APPLICATION Although in the United States reasonable efforts are made to provide a "level playing field" in business, it would be difficult for a new American automobile company to be established today, primarily because of: a. barriers to entry. b. corporate prejudices. c. government regulations of competitive practices. d. lower standards of living. e. consumer apathy and ignorance. Register to View AnswerPage: 88 Other Locations: SG Rationale: Barriers to entry include business practices or conditions that make it difficult for new firms to enter the market. Barriers to entry can be in the form of capital requirements, advertising expenditures, product identity, distribution access, or switching costs. The higher the expense of the barrier, the more likely it will deter new entrants. 3-128 SWITCHING COSTS APPLICATION John wants to buy WWF Raw, a new video game marketed for the Xbox, a Microsoft and WWF joint venture. The game costs $50 and will only play on an Xbox, which will cost him about $300. If he commits to buying the Xbox, it is unlikely he will buy anything but Xbox games due to: a. capital requirements. b. access to distributors. c. switching costs. d. product differentiation. e. tying arrangements. Register to View AnswerPage: 88 Rationale: The manufacturer of the video game enjoys high switching costs. Because the game only plays game cartridges made by its company, customers would have to purchase an entirely new machine (hence, the switching cost) to play games manufactured for other video game players. 175 3-129 POWER OF BUYERS The power of buyers will increase when: a. the number of buyers is high. b. the number of buyers is low. c. there are high switching costs. d. the product represents a small share of the buyer's total cost. e. any or all of the above conditions occur. CONCEPTUAL Register to View AnswerPage: 89 Rationale: Buyers are particularly powerful when they are few in number, there are low switching costs, or the product represents significant share of the buyer's total costs. 3-130 POWER OF SUPPLIERS A supplier gains power when the product is: a. critical to the buyer, and switching costs are high. b. relatively unimportant to the seller, and switching costs are low. c. relatively unimportant to the seller, and switching costs are high. d. critical to the buyer, and switching costs are low. e. critical to the buyer, but there are many substitutes. Register to View AnswerPage: 89 Rationale: A supplier gains power when the product is critical to the buyer and when it has built up the switching costs. 3-131 THE NEW LOOK IN AMERICAN CORPORATIONS CONCEPTUAL CONCEPTUAL Which of the following terms BEST describes the new business model organizations that want to be successful today are adopting? a. self-sufficiency b. partnerships and alliances c. stable environments d. management hierarchies e. less empowerment Register to View AnswerPage: 89 Rationale: Self-sufficiency has been replaced with partnerships and alliances. 176 3-132 REGULATION DEFINITION _____ are restrictions state and federal laws place on businesses with regard to the conduct of their activities. a. Jurisprudence b. Regulations c. Competitive restraints d. Legal formalizations e. Lobbying amendments Register to View AnswerPage: 90 Rationale: Key term definition--regulation 3-133 REGULATORY FORCES APPLICATION In 1998, F. Hoffman-LaRoche Ltd. and BASF AG, two international pharmaceutical companies, were ordered to pay $725 million in fines for plotting to raise and fix prices of vitamins used in virtually every home in the U.S. This is an example of how _____ forces affect the marketing environment. a. economic b. ecological c. technological d. social e. regulatory Register to View AnswerPage: 90 Other Locations: W Rationale: The fines and other punishments were levied as a result of price-related legislation. 3-134 REGULATORY ENVIRONMENT APPLICATION A car collector, Mr. F. Hansen, who said his 1975 Chevrolet Corvette was certified as the last Corvette convertible to be produced, sued General Motors to stop it from manufacturing any more of the convertible sports cars. The suit also requested $1.5 million in damages. Hansen claimed he bought the car for its collector's value. It came with a letter from GM dated Aug. 25, 1975, that said the car was "the last Corvette convertible that General Motors Corp. would ever manufacture." But GM and Hansen said the value of his car has been decreasing ever since GM resumed manufacturing convertibles. If the court ruled in favor of Mr. Hansen, what general type of regulation would such a ruling represent? a. protecting companies from one another b. protecting people from unfair business practices c. protecting the future interests of society from dangerous business practices d. protecting consumers from one another e. protecting businesses from unfair consumer practices Register to View AnswerPage: 92 Other Locations: SG Rationale: GM advertised the "last convertible" in 1975 to help sell cars then. By resuming production in 1985, GM deceived consumers. 177 3-135 REGULATORY FORCES APPLICATION Forrester Research estimates marketers in 1999 lost about $3 billion in potential sales because consumers were worried about privacy. Although there are several laws being considered that would protect consumers' rights to privacy, none has yet made been made into a law. This is one way _____ forces have not helped the growth of electronic commerce. a. economic b. competitive c. ecological d. social e. regulatory Register to View AnswerPage: 90 Rationale: Federal laws or lack thereof are part of the regulatory environment. 3-136 SHERMAN ANTITRUST ACT DEFINITION The first major federal legislation passed to encourage free competition in the United States was the: a. Sherman Antitrust Act. b. Hart-Scott-Rodino Act. c. Miller-Tydings Act. d. Celler-Kefauver Antimerger Act. e. Clayton Act. Register to View AnswerPage: 90 Rationale: Text term definition--Sherman Antitrust Act 3-137 CLAYTON ACT DEFINITION Whereas the Sherman Antitrust Act is a punitive law, the purpose of the Clayton Act is to: a. provide incentives for interstate mergers. b. encourage pure competition. c. exact retribution and compensation from violators. d. repeal the Sherman Antitrust Act. e. forbid actions that lessen competition. Register to View AnswerPage: 90 Rationale: Text term definition--Clayton Act 178 3-138 ETHICS AND SOCIAL RESPONSIBILITY ALERT CONCEPTUAL In 1998, President Clinton signed the Digital Millennium Copyright Act, which prohibits the circumvention of copyright laws. Those who want to continue to trade copyrighted songs argue against the merit of the law because it: a. applies to all organizations--no matter where they are located. b. infringes on the right to free speech guaranteed by the U.S. Constitution. c. also infringes on copyright laws. d. only applies to music and does not apply to other copyrighted material. e. infringes on consumers' rights to privacy. Register to View AnswerPage: 90 Rationale: The law only applies to companies in the U.S. and can be applied to all intellectual properties. 3-139 ROBINSON-PATMAN ACT DEFINITION The _____ makes it unlawful to discriminate in prices charged to different purchasers of the same product, where the effect may substantially lessen competition or help to create a monopoly. a. Fair Packaging and Labeling Act b. Sherman Antitrust Act c. Telephone Consumer Protection Act d. Robinson-Patman Act e. Clayton Act Register to View AnswerPage: 90 Rationale: Robinson-Patman Act 3-140 PATENT LAW DEFINITION A company can protect its competitive position under the _____, which gives inventors the right to exclude others from making, using, or selling the product. a. copyright law b. patent law c. criminal law d. commercial law e. anti-trust law Register to View AnswerPage: 91 Rationale: Patent laws give inventors the right to exclude others from making, using, or selling products that infringe on the patented invention. 179 3-141 CONSUMERISM DEFINITION _____ is the grassroots movement started in the 1960s to increase the influence, power, and rights of consumers in dealing with institutions. a. Protectionism b. Environmental scanning c. Consumerism d. Ethnocentrism e. Environmental regionalism Register to View AnswerPage: 91 Rationale: Key term definition--consumerism 3-142 CONSUMERISM APPLICATION In the 1960s, President Kennedy developed what is known as the Consumer Bill of Rights. This legislation was developed to protect consumers from unscrupulous marketers and guaranteed consumers to four fundamental rights, including the right to be informed, the right to choose, the right to be protected and the right to be heard. More recently, the Children's Online Privacy Protection Act (1998) Act has been legislated. Many laws such as these are the results of: a. consumerism. b. marketing ethnicity. c. government intervention. d. constructive marketing. e. Naderism. Register to View AnswerPage: 91 Rationale: Many laws and regulations developed to increase the power, influence, and rights of consumers dealing with marketers and organizations in general are a result of consumerism. 3-143 CONSUMERISM APPLICATION Each year the U.S. Army shoots an estimated 200 million rounds of lead bullets at target practice areas across the U.S. Pentagon officials in response to environmentalists' concerns over lead poisoning in the soil have invested over $12 million to develop an environmentallysafe tungsten bullet. This is an example of one of the effects of: a. consumerism. b. marketing ethnicity. c. government intervention. d. constructive marketing. e. Naderism. Register to View AnswerPage: 91 Rationale: Environmental abuse is a hotly debated consumerist issue. 180 3-144 CHILDREN'S ONLINE PRIVACY PROTECTION ACT DEFINITION The Children's Online Privacy Protection Act (1998): a. restricts child pornography on the Internet. b. requires parental permission before collecting personal information from minors. c. requires adult supervision for a child younger than 12 who is using the Internet. d. prohibits sales to minors on the Internet. e. restricts minors from entering chat rooms on the Internet. Register to View AnswerPage: 91 Rationale: Text term definition--Children's Online Privacy Protection Act 3-145 LANHAM ACT DEFINITION The _____ provides for registration of a company's trademark such as the Nike swoosh and the Coca-Cola dynamic ribbon device. a. Patent Act b. Lanham Act c. Sherman Antitrust Act d. Hart-Scott-Rodino Act e. Miller-Tydings Act Register to View AnswerPage: 91 Rationale: Text term definition--Lanham Act 3-146 LANHAM ACT The Lanham Act cannot protect the rights to a trademark if: a. the company is accused of violating the Sherman Antitrust Act. b. the product patent is less than 17 years old. c. the name or symbol has become generic. d. the statute of limitations has run out. e. the government refuses to enforce violations. Register to View AnswerPage: 91-92 Rationale: A company can lose its trademark if it becomes generic, which means that it has become merely a commonly used descriptive word for the product. DEFINITION 181 3-147 TRADEMARK INFRINGEMENT APPLICATION Coca-Cola hired brand cops to make sure that the Coca-Cola brand name and logo are not used without written permission. Why is Coca-Cola so rigorous in protecting its trademark? a. Coke risks losing its generic status. b. The government will file charges for trademark infringement only if the owner of the trademark has documented proof of wrongdoing. c. The Lanham Act conferred ownership of the Coke name and other trademarked property to the Coca-Cola Company. d. In order to maintain the use of its widely recognizable trademark, Coca-Cola must prevent the name from becoming generic. e. By protecting its trademark, Coca-Cola is protecting the entire soft drink industry from indirect competition. Register to View AnswerPage: 92 Other Locations: SG Rationale: A company can lose its trademark if it becomes generic, which means that it has primarily come to be merely a common descriptive word for a product. The Lanham Act does not confer ownership. 3-148 TRADEMARK LAW REVISION ACT DEFINITION In 1988 the Trademark Law Revision Act resulted in a major change to the Lanham Act. The change allows: a. a company to secure rights to a name before actual use by declaring an intent to use the name. b. products to use generic terms as trademarks. c. investors to apply for use of Internet domain names. d. a company to declare trademark ownership in foreign markets. e. products to use more than one trademark. Register to View AnswerPage: 92 Rationale: Text term definition--Trademark Law Revision Act 3-149 PER SE ILLEGALITY "Per se illegal" implies that a practice is illegal: a. only if it involves interstate commerce. b. if the contract was not written but oral. c. only if it can be proven that there was intent to defraud. d. through or of itself. e. only if it violates price fixing agreements. Register to View AnswerPage: 92 Rationale: Text term definition--per se illegality DEFINITION 182 3-150 EXCLUSIVE DEALING APPLICATION If a major food company offered supermarket chains special prices and incentives to carry its brand of frozen vegetables and not the brands of its competitors, it could be accused of _____, and would be subject to prosecution under the Clayton Act. a. requirement contracting b. tying arrangements c. territorial infringement d. monopolistic practice e. exclusive dealing Register to View AnswerPage: 92-93 Rationale: Exclusive dealing is an arrangement with an intermediary to handle only the products of one manufacturer and not those of the competition. 3-151 REQUIREMENT CONTRACTS DEFINITION Contracts that demand buyers purchase all or part of their needs for a product from a particular seller for a period of time are called: a. exclusive deals. b. tying arrangements. c. requirement contracts. d. territorial dealership contracts. e. preferential promotions contracts. Register to View AnswerPage: 93 Rationale: Text term definition--requirement contracts 3-152 EXCLUSIVE TERRITORIAL DISTRIBUTORSHIP DEFINITION A situation in which a manufacturer grants a distributor the sole right to sell a product in a specific geographic area is called: a. exclusive dealing. b. a geographic shift. c. a preferential promotions contract. d. an exclusive territorial distributorship. e. monopolistic competition. Register to View AnswerPage: 93 Rationale: Text term definition--exclusive territorial distributorship 183 3-153 EXCLUSIVE TERRITORIAL DEALERSHIP APPLICATION The agent for John Grisham's new novel has sold the rights to a British publisher for sales in the United Kingdom and Ireland, to a U.S. publisher for the United States and Canada, and to an Australian publisher for Australia and New Zealand. This is an example of: a. exclusive dealing. b. a geographical shift. c. requirement contracts. d. exclusive territorial distributorships. e. tying arrangements. Register to View AnswerPage: 92 Rationale: Copyright law gives Grisham, the author, the exclusive right to print his book. His agent has granted distributors (publishers in three countries) the sole rights to sell the book in specific geographical areas. 3-154 TYING ARRANGEMENT APPLICATION If a software manufacturer will only sell its popular line of Harry Potter software games provided its retailers will also carry its less successful Star Wars: The Prequel software games, it would be an example of: a. exclusive dealing. b. a requirement contract. c. an exclusive territorial distributorship. d. a tying arrangement. e. a preferential promotions contract. Register to View AnswerPage: 92-93 Rationale: In tying arrangements, a seller requires the purchasers of one product to also buy another product in the line. 3-155 TYING ARRANGEMENT DEFINITION A seller's requirement that the purchaser of one product also buy another item in the line is called a(n): a. exclusive deal. b. requirement contract. c. exclusive territorial distributorship. d. tying arrangement. e. preferential promotions contract. Register to View AnswerPage: 93 Rationale: Text term definition--tying arrangement 184 3-156 TYING ARRANGEMENT APPLICATION If a paint manufacturer will sell a retail paint outlet its paint only if the retailer also buys the manufacturer's line of brushes and accessories, then it would be an example of: a. an exclusive dealing. b. a requirement contract. c. an exclusive territorial distributorship. d. a tying arrangement. e. a preferential promotions contract. Register to View AnswerPage: 93 Rationale: In tying arrangements, a seller requires the purchaser of one product to also buy another product in the line. 3-157 TYING ARRANGEMENT APPLICATION Until federal laws and regulations were clarified to cover such cases, audio electronic component manufacturers required that retailers who wanted to carry their amplifiers must also carry their speakers, and sell their customers a "system" of same-brand components. This distribution strategy, called a _____, is now illegal. a. bait and switch b. caveat emptor c. double deal d. tying arrangement e. trial close Register to View AnswerPage: 93 Rationale: Tying arrangement is defined in the text as a distribution strategy whereby a seller requires the purchaser of one product to also buy another item in the line. This is the basis of systems selling described in the question. 3-158 ADVERTISING AND PROMOTION-RELATED LEGISLATION DEFINITION Which of the following is an example of advertising and promotion-related legislation? a. the Robinson-Patman Act b. the Consumer Product Safety Act c. the Lanham Act d. the FTC Act of 1914 e. the Fair Packaging and Labeling Act Register to View AnswerPage: 93 Rationale: The FTC Act of 1914 established the Federal Trade Commission, which closely monitors promotion and advertising. 185 3-159 PROMOTION CONTROL DEFINITION _____ is an action by the FTC whereby a company is ordered to stop unfair practices. a. Corrective advertising b. A cease and desist order c. A private ruling d. A consent degree e. Damage notification Register to View AnswerPage: 93 Rationale: Text term definition--cease and desist order 3-160 CORRECTIVE ADVERTISING DEFINITION _____ is an FTC action that requires a company to spend money on advertising to correct previous misleading ads. a. Comparative advertisement b. Corrective advertising c. Competitive advertising d. Truth in advertising e. Promotional monitoring Register to View AnswerPage: 93 Rationale: Text term definition--corrective advertising 3-161 CORRECTIVE ADVERTISING APPLICATION There are many diet aids on the market. They promise immediate weight loss without exercise or a change in diet. Each is accompanied by a testimonial from a satisfied user. If you pay close attention, you will notice that each ad also contains the statement, "Results may vary." More than likely, this statement is included to prevent the FTC from requiring the dietary aid distributor from having to: a. run corrective advertising. b. engage in competitive advertising. c. guarantee truth-in-advertising. d. prevent comparative advertising. e. engage in self-regulation. Register to View AnswerPage: 93 Rationale: Corrective advertising is an FTC action that requires a company to spend money on advertising to correct previous misleading ads. The ads as they are written do not promise that everyone will have the same results; thus, reducing the likelihood they will be found to be misleading. 186 3-162 CORRECTIVE ADVERTISING DEFINITION The _____ can require a company to spend money on corrective advertising to correct previous misleading ads. a. Food and Drug Administration b. U.S. Department of Justice c. U.S. Department of Agriculture d. Federal Trade Commission e. Environmental Protection Agency Register to View AnswerPage: 93 Rationale: Text term definition--corrective advertising 3-163 CORRECTIVE ADVERTISING APPLICATION For 18 months, Warner-Lambert Co. was required to include the following statement in all television advertisements for Listerine: "Listerine will not help prevent colds or sore throats or lessen their severity." This requirement was imposed by the FTC because previous advertising had caused consumers to believe Listerine was effective against colds and is an example of: a. deceptive advertising. b. unethical advertising. c. follow-up advertising. d. over-regulation in the industry. e. corrective advertising. Register to View AnswerPage: 93 Rationale: This is an example of corrective advertising. The FTC found that Listerine had been deceptively advertised as a cold remedy. 3-164 SELF-REGULATION DEFINITION When an industry attempts to police itself, rather than relying on government controls, such action is called: a. industry growth regulation. b. consumerism. c. consumer protection. d. self-regulation. e. voluntary noncompliance. Register to View AnswerPage: 93 Rationale: Key term definition--self-regulation 187 3-165 SELF-REGULATION The best known self-regulatory group for competitive businesses is the: a. U.S. Department of Justice. b. Chamber of Commerce. c. Better Business Bureau. d. Federal Trade Commission. e. Environmental Protective Agency. DEFINITION Register to View AnswerPage: 93 Rationale: The best-known self-regulatory group is the Better Business Bureau. 3-166 SELF-REGULATION CONCEPTUAL The Better Business Bureau: a. is the best-known federal agency involved in monitoring self-regulation of competing businesses. b. has a great deal of legal power to force a company to comply with regulations. c. is not involved with Internet commerce. d. is a voluntary alliance of companies whose goal is to help maintain fair practices. e. oversees the content of television shows and advertising that runs on those programs. Register to View AnswerPage: 93 Other Locations: SG Rationale: The BBB is best known self-regulatory group for competitive businesses. It has no legal power, and it has recently established guidelines for Internet selling. The television industry has its own self-regulating board. 3-167 SELF-REGULATION One of the problems associated with self-regulation is: a. the lack of a code of ethics. b. information overload. c. corporate espionage opportunities. d. the absence of a mechanistic structure. e. noncompliance by members. Register to View AnswerPage: 93 Rationale: The problems associated with self-regulation include noncompliance by members and enforcement. CONCEPTUAL 188 3-168 VIDEO CASE: FLYTE TYME APPLICATION Which element of the external environment is most directly related to the success of Flyte Tyme Productions, Inc.? a. economic factors b. regulatory factors c. technological factors d. social factors e. competitive factors Register to View AnswerPage: 96 Rationale: No matter how efficient the organization or how talented its musicians, if it did not produce music that consumers liked it would not succeed. Music tastes are a part of the social environment. 3-169 VIDEO CASE: FLYTE TYME APPLICATION In terms of the marketing mix, Janet Jackson would be an example of Flyte Tyme's: a. competitive strength. b. promotional mix. c. distribution strategy. d. product. e. distinctive advantage. Register to View AnswerPage: 96 Rationale: Alternatives A and E do describe Jackson's relationship with the company, but they are not part of the marketing mix. 3-170 VIDEO CASE: FLYTE TYME APPLICATION Which of the following would be a part of Flyte Tyme's external environment? a. the ability of its owners to avoid being ego-involved with their work b. Napster, MTV, and VH1 c. Janet Jackson, Mary J. Blige, and TLC d. the company's service orientation e. all of the above Register to View AnswerPage: 96-97 Rationale: Alternative b describes part of its distribution system, and Alternative C describes some of its products. 189 CHAPTER 3 THE CHANGING MARKETING ENVIRONMENT SHORT ESSAY QUESTIONS 3-171 CHAPTER OPENING EXAMPLE: NAPSTER APPLICATION Give examples of how the five environmental forces have affected the marketing environment. Answer: Students' answers to this question will vary. Some suggested answers include: 1) ECONOMIC--income loss to Napster and other file-sharing services. 2) SOCIAL--the proliferation of chat rooms and instant messaging has changed how people communicate and the availability of e-commerce retailers has changed how people shop, particularly for music. 3) COMPETITIVE--the retailers that only operate on the Internet are competing with retailers that only operate offline who are competing with retailers that have both an offline and an online presence as well concern about new forms of competition. 4) REGULATORY--concerns about privacy, and protecting intellectual property. 5) TECHNOLOGICAL--universities are requiring students to have their own PCs, instant communication with anyone in the world, and the ready access of music. Page: 76 3-172 ENVIRONMENTAL SCANNING What is environmental scanning? How is it used in marketing? Answer: Environmental scanning is a process of acquiring information about events occurring outside an organization to identify and interpret potential trends. The objective is to determine if these trends will pose specific opportunities or threats to the firm. This understanding leads to marketing action. Page: 74-75 DEFINITION 190 3-173 ENVIRONMENTAL FORCES CONCEPTUAL What environmental forces have an impact on organizations? What factors might be examined as part of environmental scanning for each of those forces? Answer: The following environmental forces have an impact on the organization: social: demographic shifts, cultural changes economic: macroeconomic conditions, consumer income technological: changing technology, ecological impact of technology competitive: alternative forms of competition, components of competition, increasing foreign competition regulatory: laws protecting competition, laws affecting marketing mix actions, self-regulation, and consumerism. Page: 74-75 3-174 ENVIRONMENTAL SCANNING CONCEPTUAL What are the major considerations for conducting environmental scanning for a new model of automobile? Answer: Environmental scanning involves the acquisition of information about events occurring outside an organization to identify and interpret potential trends that might present opportunities or threats to the firm. In the case of a new model automobile forces can include the following: Social: an aging American population, more money in the hands of younger people, women making more auto-buying decisions. Economic: corporate downsizing, higher wages for laborers, inflation, and recessions. Technological: more advanced engineering driving up the selling prices of cars, alternatives to personal-car driving. Competitive: new models by other manufacturers, European prestige, Japanese engineering, lower prices made possible by cheaper foreign labor. Regulatory: government controls of imports, laws affecting highway safety, and consumerism. Page: 74-75 191 3-175 ENVIRONMENTAL SCAN APPLICATION How would the following environmental trends influence the success of a manufacturer of televisions, video and DVD players, and related equipment: (1) growing number of older Americans, (2) population shifts to remote suburbs and small towns, (3) increase in per-capita income and standard of living, and (4) increased use of communication technology (for example, growing numbers of households have cable connections). Answer: All four trends are relevant to growing sales of these home entertainment products. Older Americans will have more leisure time in retirement to spend at home, some of which would be spent watching more television. People of all ages living far from centers where they can attend live sports, music, and other events are likely to watch such entertainment on television. Increased incomes and communication technology will make it possible for these consumers to buy high-quality equipment to enjoy better reception. All four trends favor producers of home entertainment. Page: 75, Fig. 3-2 3-176 BABY BOOMERS Why are marketers interested in baby boomers? Answer: These are people who were born between 1946 and 1964. Many are now past 50, but not yet retired or in the category of senior citizens. There are some 78 million boomers in the U.S., whose earnings have increased, making them an important consumer market. It has been estimated that this group accounts for 56 to 58 percent of the purchases in most consumer product and service categories. In the future, their buying behavior will change to reflect greater concern for their children's future and their own retirement. Page: 77 3-177 GENERATION X Define Generation X, and explain why it is important to marketers. Answer: Generation X is composed of the U.S. population born between 1965 and 1976. Because they are likely to become a key influence on popular culture, marketers are now tracking this generation to identify its dominant consumption values. Page: 77 DEFINITION DEFINITION 192 3-178 THE AMERICAN FAMILY CONCEPTUAL What changes have occurred in the last twenty-five years in the structure of the American family? Answer: As the population profile has changed, so has the structure of the American family. Twentyfive years ago 40 percent of all households consisted of married couples with children. Today, that type of household is just 26 percent of the population. Nearly one-fourth of all households now consist of people who live alone, while another 29 percent are married without children. The three fastest growing types of households are those with single parents, other family members, and unrelated persons. Page: 77-78 3-179 CHANGING ROLES OF WOMEN AND MEN CONCEPTUAL What are some examples of the changing roles of men and women? What are their implications for marketers? Answer: Some of the most notable changes in the roles of women include: a growing number of women in the workforce, and a growing number of women in managerial positions. The implications for marketers include changes in consumer roles and purchase decision-making. For example, women now purchase 50 percent of all new cars sold in the United States and men are increasing their involvement in parenting-related purchases. Page: 81 3-180 REGIONAL MARKETING DEFINITION What is regional marketing? Give an example of product modification that illustrates regional preferences. Answer: Regional marketing involves developing marketing plans to reflect specific area differences in taste preferences, perceived needs, or interests. Procter & Gamble is mentioned in the text as an example of a marketer that observed vacuum brick-packs of coffee were more popular than cans in the South. The company repackaged their Folgers brand coffee for those markets and developed a new advertising campaign. Sales for Folgers coffee increased 32 percent in the targeted markets. Page: 80 193 3-181 ECONOMIC FORCES How does the economy affect marketing? CONCEPTUAL Answer: The economy pertains to the income, expenditures, and resources that affect the cost of running a business. Consumers' expectations and their ability to buy affect their buying behavior. Inflation and recession affect the prices marketers must and can charge for their products, which in turn affects demand for those products. Consumers' disposable incomes and discretionary incomes are related to overall economic factors, and critically affect their responsiveness to marketing activities. Page: 82-84 3-182 TECHNOLOGICAL FORCES How does technology affect marketing? Answer: Technological forces affect marketing because each new wave of innovation can displace existing products and companies. Advancing technology such as the continuing development of computers has a dramatic impact on marketing. For example, computerized checkout lanes allow supermarkets to monitor daily consumer demand for products. Similarly, new technology has allowed the development of satellite television transmission and home satellite dishes, CDs and CD-ROM, the emergence of the Internet or "cyberspace," the power of microprocessors doubling every 18 months, and greater use of electric cars and alternative forms of transportation. All the new products related to these technologies will change our lives and affect the marketing of both old and new products. The challenge for marketers in this decade will be to keep pace with the possibilities of new technology. Students may have other examples of changing technology. Page: 84-86 CONCEPTUAL 194 3-183 ALTERNATE FORMS OF COMPETITION APPLICATION There are only five major recording labels in the world--Bertelsmann AG's BMG Entertainment, EMI Recorded Music, Sony Music Entertainment, Time-Warner's Warner Music Group, and Seagram's Universal Music Group. They are responsible for the large majority of music recordings that are made. Harry says that the five music companies operate in an oligopoly. Maryanne says that the five companies operate in monopolistic competition. Explain how each came to his or her conclusion. Who is correct? Answer: In a monopolistic competition, many sellers compete with their products on a substitutable basis. Whether five can be viewed as many is certainly debatable, but there is some argument about substitutability (particularly if you are not particularly interested in music). The Back Street Boys and 'N Sync appear to many to be interchangeable boy bands. Maryanne is correct because oligopolies occur when a few businesses control the majority of sales. Page: 84-86 3-184 BARRIERS TO ENTRY What are barriers to entry? Define and give examples. Answer: Barriers to entry are business practices or conditions that make it difficult for new firms to enter a market. Barriers to entry may be in the form of capital requirements, advertising expenditures, product identity, distribution access, or switching costs. The higher the expense of the barrier, the more likely it will deter new entrants. For example, IBM once created a switching cost barrier for companies that considered Apple computer equipment because IBM had a different programming language for its machines. Page: 88 3-185 POWER OF BUYERS What conditions exist when a competitive analysis reveals powerful buyers? Register to View Answercompetitive analysis must consider the power of buyers. Powerful buyers exist when they are few in number, there are low switching costs, or the product represents a significant share of the buyer's total costs. This last factor leads the buyer to exert significant pressure for price competition. Page: 89 CONCEPTUAL DEFINITION 195 3-186 NEW LOOK IN AMERICAN CORPORATIONS CONCEPTUAL Practitioners recognized the need to differentiate businesses before and after the Internet became an integral part of marketing. They have coined the term new-economy business to describe one that uses the Internet in its day-to-operation. List three ways that a new-economy business differs from the more traditional, pre-Internet business. Answer: Today's businesses require: 1) constant change rather than stability 2) networks rather than hierarchies 3) partnerships and alliances rather than self-sufficiency. Page: 89-90 3-187 PROMOTION CONTROLS CONCEPTUAL What actions does the Federal Trade Commission have the power to implement in dealing with deceptive or misleading advertising and unfair business products? Answer: The FTC has the power to: 1) issue cease and desist orders 2) order corrective advertising. In issuing a cease and desist order, the FTC orders a company to stop practices it considers unfair. With corrective advertising, the FTC can require a company to spend money on advertising to correct previous misleading ads. Page: 93-94 3-188 SELF-REGULATION CONCEPTUAL Some industries have opted for self-regulation of their members to ensure that each acts fairly. Discuss potential problems associated with self-regulation. Answer: With self-regulation, there is always a problem with noncompliance. The alliance created to institute self-regulation typically has no authority to enforce its regulations. Also, if the attempts at self-regulation are too rigorous, the members of the industry alliance may violate the Robinson-Patman Act. Page: 93-94 196 TEST ITEM TABLE FOR CHAPTER 4 GOES HERE 197
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