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Chapter 7: Analyzing Business Markets

GENERAL CONCEPT QUESTIONS

Multiple Choice

1. To create and capture value, sellers need to understand business organizations’ needs, resources, policies, and ________.a. demandsb. protocolsc. strategiesd. buying procedurese. personnel policies

Answer: d Page: 209 Level of difficulty: Easy

2. Webster and Wind define ________ as the decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers.a. marketing channelsb. organizational buyingc. demand-oriented buyingd. purchasinge. inventory control

Answer: b Page: 210 Level of difficulty: Medium

3. The ________ consists of all the organizations that acquire goods and services used in the production of other products or services that are sold, rented, or supplied to others.a. business marketb. consumer marketc. e-commerce marketd. global markete. supplier market

Answer: a Page: 210 Level of difficulty: Medium

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Part 3: Connecting with Customers

4. Business markets have several characteristics that contrast sharply with those of consumer markets. All of the following would be among those characteristics EXCEPT ________. a. fewer, larger buyersb. close supplier-customer relationshipc. professional purchasingd. inverted demande. multiple sales calls

Answer: d Pages: 210–211 Level of difficulty: Hard

5. All of the following would be among the major industries that make up the business market EXCEPT ________. a. agriculture, forestry, and fisheriesb. manufacturingc. constructiond. banking, finance, and insurancee. the Internet

Answer: e Page: 210 Level of difficulty: hard

6. Trained purchasing agents, who must follow their organization’s ________, often purchase business goods.a. cultureb. past purchasing historyc. purchasing policies, constraints, and requirementsd. needse. financial budgets

Answer: c Page: 211 Level of difficulty: Medium

7. Ultimately, the amount of steel sold to General Motors depends on the consumer’s demand for GM cars and trucks. From the standpoint of the steel manufacturer, which of the following demand forms is most pertinent? a. Derived demandb. Inelastic demandc. Geographic demandd. Relational demande. Static demand

Answer: a Page: 211 Level of difficulty: Hard

8. The demand for business goods is ultimately derived from the demand for ________.a. raw materialsb. consumer goodsc. electronicsd. business solutionse. e-commerce

Answer: b Page: 211 Level of difficulty: Easy

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9. The business buyer faces many decisions in making a purchase. The number of decisions depends on the buying situation. All of the following examples are appropriate to the preceding EXCEPT ________. a. complexity of the problem being solvedb. newness of the buying requirementc. number of people involvedd. applicability of situation to mission statemente. time required

Answer: d Page: 212 Level of difficulty: Hard

10. The purchasing department buys office supplies on a routine basis. This type of purchase is classified as a ________. a. straight rebuyb. modified rebuyc. new taskd. secondary purchasee. preordained purchase

Answer: a Page: 212 Level of difficulty: Easy

11. There are a series of guidelines for selling to small businesses. Which of the following should not be among those guidelines? a. Don’t waste their time.b. Do keep it simple.c. Do use the Internet.d. Don’t forget about direct contact.e. Do lump small and midsize businesses together for efficiency sake.

Answer: e Page: 212 Level of difficulty: Medium

12. The business buyer makes the fewest decisions in the ________. a. modified rebuyb. regular buyc. straight rebuyd. new rebuye. new task buy


13. Many business buyers prefer to buy a total solution to a problem from one seller. ________ is the correct term for this process. a. Channel consolidationb. Systems buyingc. Vertical buyingd. Horizontal buyinge. Supply buying


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14. Xerox offers a ________ approach to prospective clients when it offers a complete turnkey procedure, operation, and management of the client’s information and communication need. a. supply buyingb. primary buyingc. systems buyingd. co-op buying systeme. direct buying


15. If Ampex Support Systems is the single supplier for a local manufacturing company’s MRO (maintenance, repair, operating) supplies and needs, Ampex Support Systems would then be considered as providing ________ for the manufacturer. a. systems buying b. purchasing supportc. turnkey logisticsd. decision supporte. systems contracting

Answer: e Page: 214 Level of difficulty: Hard

16. ________ is a key industrial marketing strategy in bidding to build large-scale industrial products (e.g., dams, pipelines, et cetera). a. Systems contractingb. Systems buyingc. Systems sellingd. Solutions buyinge. Turnkey logistics

Answer: c Page: 214 Level of difficulty: Hard

17. ________ is composed of all those individuals and groups who participate in the purchasing decision-making process, who share some common goals and the risks arising from their decisions.a. The buying centerb. The marketing sales teamc. Strategic managementd. Engineering supporte. The logistics center


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18. In the purchasing decision process, the ________ are those who request that something be purchased. They may be users or others in the organization.a. usersb. initiatorsc. influencers d. deciderse. approvers


19. In the purchasing decision process, the ________ are those who have the power to prevent sellers or information from reaching members of the buying center. a. gatekeepersb. buyersc. initiatorsd. approverse. deciders


20. The typical buying center has a minimum of ________ members. a. 2–3b. 3–4c. 4–5d. 5–6e. 10


21. Webster cautions that ultimately, ________ make purchasing decisions. a. only senior managers b. individuals, not organizationsc. organizations, not individualsd. third partiese. systems contractors


22. Small sellers concentrate their marketing efforts on reaching ________. a. approversb. initiatorsc. key buying influencersd. userse. the purchasing staff


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23. To the ________ price is everything and transactional selling is used. a. solution-oriented customersb. income-oriented customersc. gold-standard customersd. strategic-value customerse. price-oriented customers

Answer: e Page: 216 Level of difficulty: Easy

24. The strategic-value customers want a fairly permanent sole-supplier relationship with your company. Which of the following would be the best selling format to use with the strategic-value customer? a. Transactional sellingb. Consultative sellingc. Quality sellingd. Enterprise sellinge. Indirect demand selling


25. Some customers are willing to handle price-oriented buyers by setting a lower price, but establishing restrictive conditions. All of the following would be among those conditions EXCEPT ________. a. limiting the quantity that can be purchasedb. no refundsc. no adjustmentsd. no servicese. no customer advertising


26. If a supplier signs an agreement with a customer that states $350,000 in savings will be earned by the customer over the next 18 months in an exchange for a ten-fold increase in the customer’s share of supplies ordered by the customer, the two parties will have participated in what is called ________. a. solution selling b. consultative selling c. risk and gain sharingd. strategic alignment e. demand shifting


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27. W.W. Grainger employees work at large customer facilities to reduce materials-management costs. Which of the following forms of solution selling is W.W. Grainger using? a. Solutions to partnerships. b. Solutions to alter corporate culture. c. Solutions to enhance customer revenues.d. Solutions to decrease customer risks.e. Solutions to reduce customer costs.


28. In principle, business buyers seek to ________ in relation a market offering’s costs. a. spread risks b. obtain the highest benefit package c. maintain everyday-low-pricesd. outsource as much as is possible e. eliminate partners’ shares in profits as much as possible

Answer: b Page: 217 Level of difficulty: Hard

29. In the past, what position did purchasing departments hold in the management hierarchy of most organizations? a. A high level because of their role in managing the company’s costs.b. A moderate level because of their spotty record on controlling costs.c. A low level despite the fact that they manage more than half of the company’s

costs.d. A secretive position. e. There has been no determination of this position.


30. The new, more strategically-oriented purchasing departments have a mission. Which of the following most accurately describes that mission? a. Make the most profit possible and remain independent of entanglements. b. Approach every purchasing opportunity as means to create interdependency.c. Seek the best value from fewer and better suppliers.d. Outsource the supply function.e. Abandon all strategies except for systems selling and buying.


31. When the purchaser’s focus is short term and tactical and they are rewarded on their ability to obtain the lowest price from suppliers for the given level of quality and availability, this is referred to as ________.a. procurement orientationb. supply chain management orientationc. buying orientationd. sellers orientatione. market orientation


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32. When buyers simultaneously seek quality improvements and cost reductions and they develop collaborative relationships with major suppliers and seek savings through better management of acquisition, conversion, and disposal costs, this is referred to as ________.a. sellers orientationb. supply chain management orientationc. market orientationd. procurement orientatione. buying orientation


33. When the purchasing role is further broadened to become a more strategic, value-adding operation, this is referred to as ________.a. supply chain management orientationb. buying orientationc. sellers orientationd. procurement orientatione. routine orientation


34. Peter Kraljic distinguished four product-related purchasing processes. Which of the following matches to products that have high value and cost to the customer but involve little risk of supply because many companies make them? a. Strategic productsb. Bottleneck productsc. Leverage productsd. Routine productse. Commodity products


35. The products that have high value and cost to the customer and also involve high risk (e.g., mainframe computers) are called ________.a. strategic productsb. bottleneck productsc. leverage productsd. routine productse. commodity products


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36. Most purchasing professionals describe their jobs as more ________, technical, team-oriented, and involving more responsibility than ever before. a. riskyb. strategicc. ethically difficultd. Web-basede. human-based


37. Robinson and Associates have identified eight stages and called them buyphases. This model is called the ________ framework. a. buygridb. buying/selling c. seller-centeredd. commerciale. buy-analysis


38. The first step (buyphase) in the straight rebuy buyclass is ________. a. problem recognitionb. general need descriptionc. product specificationd. supplier searche. proposal solicitation


39. A new task buyclass decision begins with which of the following buyphases? a. Problem recognitionb. General need descriptionc. Product specificationd. Supplier searche. Proposal solicitation


40. Business marketers can stimulate problem recognition by ________. a. trade directoriesb. direct mail, telemarketing, and calling on prospectsc. encouraging the Better Business Bureau to release statisticsd. consumer advertisinge. requesting testimonials from existing customers


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41. When Hewlett-Packard sells such complex products as a network computer system, it is engaging in what it calls the ________ concept because it offers information and specific solutions to unique problems. a. “product specification”b. “price de-escalation” c. “systems selling”d. “trusted advisor” e. “strategic alliance”

Answer: d Page: 221 Level of difficulty: Medium

42. U.S. businesses spent about ________ on online transactions with other businesses in 2002 as compared to consumer online purchases of $71 billion during the same time period. a. $650 billionb. $500 billionc. $482 billiond. $225 billione. $53 billion


43. With respect to e-procurement, Web sites are organized around two types of e-hubs: ________. a. vertical and horizontal hubsb. vertical and functional hubsc. functional hubs and organizational hubsd. supplier and user hubse. manufacturer and supplier hubs

Answer: b Page: 222 Level of difficulty: Hard 44. With respect to e-procurement, Coca-Cola, Sara Lee, Kraft, PepsiCo, Gillette, P&G,

and several other companies joined forces to form a ________ called Transora to use their combined leverage to obtain lower prices for raw materials. a. manufacturer’s co-opb. supplier’s co-opc. middleman groupd. buying alliancee. cabal


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45. Business-to-business cyberbuying is flourishing on the Internet. So far, most of the products that businesses are buying electronically are ________, and travel and entertainment services. a. promotion services such as advertisingb. HR services (e.g., employee recruitment)c. MRO materials (maintenance, repair, and operations)d. food servicese. marketing research services


46. Moving into e-procurement has many benefits. Which of the following would not be among those benefits? a. Aggregating purchasing across multiple departments gains larger volume

discounts.b. Aggregating purchasing across multiple departments gains centrally negotiated

volume discounts.c. There is less buying of substandard goods from outside the approved list of

suppliers.d. A smaller purchasing staff is required.e. Purchasing gains a significant leverage with top management because of its

management team.Answer: e Page: 224 Level of difficulty: Hard

47. With respect to e-procurement commitment, in 2003 ________ was named number one in BtoB magazine’s annual ranking of the top B-to-B Web sites because of its ability to generate sales (about 55 percent of the company’s total sales) and commitment to the process. a. Coca-Colab. Dell Computersc. Hewlett-Packardd. Cadillace. Boeing


48. In the proposal solicitation process, ________ should be marketing documents that describe value and benefits in customer terms. a. written proposalsb. oral proposalsc. e-proposalsd. alliance proposalse. global proposals


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49. Xerox qualifies only suppliers who meet the ISO 9000 quality standards, but to win the company’s top award—certification status—a supplier must first complete ________. a. government certificationb. an extensive ethics statement evaluationc. the Xerox Multinational Supplier Quality Surveyd. a company training and indoctrination periode. a Malcolm Baldridge National Quality Award entry form and then enter


50. All of the following are considered to be methods of assessing customer value EXCEPT ________. a. direct survey questionsb. exit interviewing c. focus-group value assessmentd. conjoint analysise. benchmarks


51. According to purchasing professionals, which of the following is considered to be the major responsibility of the purchasing agent in supplier negotiations? a. Forming networks for future business.b. Assuring quality conformance.c. Being fair with all parties.d. To use a team approach in negotiations.e. Negotiating price.


52. If an industrial buyer leases heavy equipment like machinery and trucks rather than purchasing them, the lessee gains several advantages. Which of the following would NOT be among those advantages? a. Higher quality products.b. Conserving capital.c. Getting the latest products.d. Receiving better service.e. Some tax advantages.


53. “OTIFNE” is a term that summarizes three desirable outcomes of a B-to-B transaction: OT—deliver on time; IF—in full; and, NE—________. a. no errorb. no emergenciesc. non-experimentald. new entrepreneurse. need equipment


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54. Corporate credibility depends on three factors: corporate expertise, corporate trustworthiness, and ________. a. corporate manpowerb. corporate mission statementc. corporate likeabilityd. corporate governancee. corporate management structure


55. Cannon and Perreault found that buyer-suppler relationships differed according to four factors. Which of the following would NOT be among those factors? a. Importance of supply.b. Complexity of supply.c. Availability of alternatives.d. Supply market dynamism.e. Demand market conservatism.


56. According to Cannon and Perreault, buyer-supplier relationships fall into eight different categories. Which of the following relationships is characterized as being one that has much trust and commitment leading to a true partnership? a. Mutually adaptiveb. Collaborativec. Basic buying and sellingd. Customer supplye. Cooperative systems


57. In the ________ category of Cannon and Perreault’s buyer-supplier relationship categorization, although bonded by a close, cooperative relationship, the seller adapts to meet the customer’s needs without expecting much adaptation or change on the part of the customer in exchange. a. contractual transactionb. cooperative systemc. collaboratived. mutually adaptivee. customer is king


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58. Vertical coordination can facilitate stronger customer-seller ties but at the same time may increase the risk to consumer’s and supplier’s ________ (e.g., those expenditures tailored to a particular company and value chain partner). a. logistics channelb. independent operationsc. specific investmentsd. leverage abilitye. liquidity situation


59. The ________ market consists of schools, hospitals, nursing homes, prisons, and other institutions that must provide goods and services to people in their care. a. verticalb. nonprofitc. spotd. secondary businesse. institutional


60. With purchases of $200 billion annually in goods and services, ________ is the largest customer in the world. a. Wal-Martb. Graingerc. the State of Californiad. the U.S. governmente. Latin America


True/False

61. Webster and Wind define organizational buying as the decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers.

Answer: True Page: 210 Level of difficulty: Easy

62. The business market is essentially the same thing as the consumer market. Answer: False Page: 210 Level of difficulty: Easy

63. The demand for business goods is ultimately derived from the demand for raw materials.

Answer: False Page: 211 Level of difficulty: Medium

64. The total demand for many business goods and services is inelastic—that is, not much is affected by price changes.


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65. In the straight rebuy, “out-suppliers” try to get a small order and then enlarge their purchase share over time.


66. Over time, new-buy situations become straight rebuys and routine purchase behavior. Answer: True Page: 213 Level of difficulty: Medium

67. Most business buyers, preferring to spread their risk, reject what is called systems buying from one seller.


68. Systems selling is a key industrial marketing strategy in bidding to build large-scale industrial projects such as dams or pipelines.

Answer: True Page: 214 Level of difficulty: Medium

69. The buying center is where consumers go to purchase their goods and services. Answer: False Page: 214 Level of difficulty: Easy

70. Initiators are those who authorize the proposed action of deciders or buyers. Answer: False Page: 214 Level of difficulty: Medium

71. Users perform all seven roles in the buying center because of their direct tie to the product and what it is supposed to do.


72. The typical buying center has a minimum of two to three people even though large companies may have more performing this function.

Answer: False Page: 215 Level of difficulty: Hard

73. Webster cautions that ultimately, organizations not individuals make purchasing decisions.


74. In the business market, small sellers concentrate on reaching as many participants as possible because their chances of success are slim.


75. To gold-standard customers, a seller is wise to use what is called quality selling. Answer: True Page: 216 Level of difficulty: Medium

76. To effectively sell to price-oriented customers, a company is wise to use transactional selling.


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77. One of the forms of solution selling is to provide solutions to enhance customer revenues.


78. Today, purchasing departments occupy a relatively low position in the management hierarchy and answer primarily to the vice-president of marketing.


79. If a company’s purchasing department focus is short term and tactical, it is said to have a buying orientation.


80. When business buyers work simultaneously to seek quality improvements and cost reductions, the business buyers are said to have a demand orientation.


81. Office supplies are good examples of what are called bottleneck products. Answer: False Page: 219 Level of difficulty: Easy

82. Strategic products have high value and cost to the customer and also involve high risk.


83. According to the buygrid framework described in the text, a performance review completes the buygrid as a last step.


84. The buying process begins when someone places an order with a sales representative. Answer: False Page: 220 Level of difficulty: Easy

85. Product value analysis (PVA) is an approach to cost reduction in which components are studied to determine if they can be redesigned or standardized or made by cheaper methods of production.


86. A buying alliance attempts to use their combined leverage to obtain lower prices for raw materials.


87. In the business-to-business market on the Internet, the majority of purchases fall under the category of services (e.g., advertising, financial needs, et cetera).


88. With respect to proposal solicitation in B2B, sellers begin the process by requesting permission to make a proposal rather than waiting for the buyer to request one.


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89. In general, buyers review the product and its price rather than any other considerations about the seller as a buying decision is made.

Answer: False Page: 225 Level of difficulty: Easy

90. With respect to assessing customer value, in conjoint analysis customers are asked to rank their preference for alternative market offerings or concepts.


91. The buying center has many responsibilities; however, it does not negotiate with suppliers in order to avoid a conflict of interest.


92. “OTIFNE” is the term that summarizes three desirable outcomes of a B-to-B transaction, stands for: on time, in full, no error.

Answer: True Page: 227 Level of difficulty: Medium93. Most performance reviews are conducted by outside auditing agencies to avoid bias

and internal discrepancies. Answer: False Page: 227 Level of difficulty: Medium

94. Corporate credibility depends on: corporate expertise, corporate trustworthiness, and corporate likeability.


95. One of the problems facing B2B on the Web is that many firms often impose more stringent requirements on their online business partners than they do on non-online partners.


96. One of the eight categories of buyer-seller relationships is the contractual transaction that generally shows low levels of trust, cooperation, and interaction; exchange is defined by formal contract.

Answer: True Page: 229 Level of difficulty: Hard

97. In the “customer is king” category of buyer-seller relationship, the category is characterized as being one that it relatively simple where routine exchanges with moderately high levels of cooperation and information exchange occurs.


98. A good illustration of a member of the institutional market would Boeing because it is a member of the aviation institution structure.


99. The United States government is the largest customer in the world. Answer: True Page: 232 Level of difficulty: Easy

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100.Today, almost all companies that sell to the U.S. government use a marketing orientation because of the special relationship required.


Essay

101. Business markets have several characteristics that contrast sharply with those of consumer markets. Name and briefly characterize five of those contrasts.

Suggested Answer: The characteristics are: (1) fewer, larger buyers, (2) close supplier-customer relationship, (3) professional purchasing, (4) several buying influences, (5) multiple sales calls, (6) derived demand, (7) inelastic demand, (8) fluctuating demand, (9) geographically concentrated buyers, and (10) direct purchasing. See chapter section for brief characterizations. Pages: 210–212 Level of difficulty: Medium

102. Illustrate the differences between a straight rebuy, modified rebuy, and a new task purchase.

Suggested Answer: In a straight rebuy, the purchasing department reorders on a routine basis and choose from suppliers on an “approved list.” In a modified rebuy, the buyer wants to modify product specifications, prices, delivery requirements, or other terms. Lastly, in the new task purchase, a purchaser buys a product or service for the first time. For additional differences, see chapter section. Page: 212 Level of difficulty: Easy

103. List and briefly describe the seven roles played by members of a buying center.

Suggested Answer: The roles are: (1) initiators, (2) users, (3) influencers, (4) deciders, (5) approvers, (6) buyers, and (7) gatekeepers. For descriptions, see chapter section. Pages: 214–215 Level of difficulty: Hard

104. In defining target market segments, four types of business customers can often be identified with corresponding marketing implications. List and briefly describe each of these business customers.

Suggested Answer: The types are: (1) price-oriented customers—transactional selling—price is everything; (2) solution-oriented customers—consultative selling—they want low prices but will respond to arguments about lower total cost or more dependable supply or service; (3) gold-standard customers—quality selling—they want the best performance in terms of product quality, assistance, reliable delivery, and so on; and, (4) strategic-value customers—enterprise

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selling—they want a fairly permanent sole-supplier relationship with your company. Page: 216 Level of difficulty: Hard

105. Explain the concept of solution selling. Give one example of this approach.

Suggested Answer: Solution selling approaches buyers from a solutions-to-problems approach rather than a product-purchase approach. Three forms include: (1) solutions to enhance customer revenues, (2) solutions to decrease customer risks, and (3) solutions to reduce customer costs. Students may expound on any of the above. For additional information, see chapter section. Page: 217 Level of difficulty: Medium

106. The upgrading of purchasing means that business marketers must upgrade their sales personnel to match the higher caliber of the business buyers. List and briefly describe the three company purchasing orientations that buyers select from.

Suggested Answer: The three orientations are: (1) buying orientation—the purchaser’s focus is short term and tactical; (2) procurement orientation—the buyers simultaneously seek quality improvements and cost reductions; and, (3) supply chain management orientation—purchasing’s role is broadened to become a more strategic, value-adding operation. For additional details, see the chapter section. Page: 218 Level of difficulty: Hard

107. Peter Kraljic distinguished four product-related purchasing processes. List and briefly describe each of these four product groups.

Suggested Answer: The groups are: (1) routine products—these products have low value and cost to the customer and involve little risk; (2) leverage products—these products have high value and cost to the customer but involve little risk of supply because many companies make them; (3) strategic products—these products have high value and cost to the customer and also involve high risk; and, (4) bottleneck products—these products have low value and cost to the customer but they involve some risk. For additional details, see chapter section. Page: 219 Level of difficulty: Hard

108. List the stages (buyphases) of the industrial buying process.

Suggested Answer: The major stages in the industrial buying process include: (1) problem recognition, (2) general need description, (3) product specification, (4) supplier search, (5) proposal solicitation, (6) supplier selection, (7) order-routine specification, and (8) performance review. Page: 220 Level of difficulty: Medium

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109. List and briefly characterize five methods of assessing customer value.

Suggested Answer: There are eight suggested methods for assessing customer value. The students may list and describe any five of the following: (1) internal engineering assessment, (2) field value-in use assessment, (3) focus-group value assessment, (4) direct survey questions, (5) conjoint analysis, (6) benchmarks, (7) compositional approach, and (8) importance ratings. See chapter section for descriptions of each assessment method. Page: 226 Level of difficulty: Hard

110. Cannon and Perreault found that buyer-supplier relationships differed according to four factors: availability of alternatives; importance of supply; complexity of supply; and supply market dynamism. Based on these four factors, they classified buyer-supplier relationships into eight different categories. What are those categories?

Suggested Answer: The categories are: (1) basic buying and selling, (2) bare bones, (3) contractual transaction, (4) customer supply, (5) cooperative systems, (6) collaborative, (7) mutually adaptive, and (8) customer is king. For additional information, see the specific chapter section. Page: 229 Level of difficulty: Hard

APPLICATION QUESTIONS

Multiple Choice

111. German software company SAP has become a leading seller to the business market by specializing in software to automate business functions. SAP’s ________ strategy is to focus carefully on what customers want, and shows them how SAP’s software applications can improve profits, raise revenue, or reduce costs. a. productb. servicec. leadershipd. concentratede. simplistic


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112. The ________ market consists of all the organizations that acquire goods and services used in the production of other products or services that are sold, rented, or supplied to others.a. non-profitb. businessc. hardwared. softwaree. government


113. IBM counts small to midsize businesses as 20 percent of its business and has launched ________, a line of hardware, software services, and financing, for this market. a. Impresariob. Expressc. Datacountd. Smallbize. TaxMan


114. More than half of U.S. business buyers are concentrated in seven states. Which of the following states WOULD NOT be among those favored by business buyers? a. Texasb. New Yorkc. Californiad. Pennsylvaniae. Ohio


115. Jason Riggs’ company is considered to be an in-supplier for a lawn mower manufacturer. However, recently the lawn mower company has put out a memo to in- and out-suppliers indicating that it would like to modify product specifications and delivery schedules. Which of the following buying situations is most likely to be in operation given the data above? a. Straight rebuyb. Elastic rebuyc. Fluctuating rebuyd. Flatten rebuye. Modified rebuy


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116. All of the following are considered to be guidelines for selling to small businesses EXCEPT ________. a. do not use the Internetb. do keep it simplec. don’t lump small and midsize businesses togetherd. don’t forget about direct contacte. do provide after the sale support


117. Ford Motor Co. has forged supplier and manufacturing relationships around the world. Today, an accurate description of this automotive giant is one where it is characterized as being mainly a car ________. a. designerb. manufacturerc. assemblerd. distributore. promoter


118. If you decided to go into the systems contracting business, which of the following categories would constitute your main area of expertise in that this area would be what service you provide for customers. a. Computer applicationsb. Database managementc. Manufacturingd. Promotion managemente. MRO (maintenance, repair, operating) supplies


119. Think about what you have learned about a buying center. If you performed the role of the ________, you would be the person that has the power to prevent sellers or information from them in reaching other members of the buying center. a. initiatorb. influencerc. deciderd. gatekeepere. approver


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120. According to Webster, with respect to buying center influences, senior managers should remember that people are ________. a. not buying products—they are buying solutions to problemsb. buying products that they personally will not usec. buying surrogates that must appreciate that roled. are human shopping botse. limited in their scope of overall business operations


121. Consider yourself as an upper-level marketing executive a large seller of fleet trucks. Which of the following strategies would be most appropriate in reaching buying center targets? a. Concentrate on key buying influencers.b. Use multilevel in-depth selling.c. Use trade-based promotions.d. Begin all sales efforts with the secretarial support staff.e. Move all operations to the Net.


122. Billijean Monk tells her supplier, “Price is everything! I mean if it’s not priced right, I am out of here fast.” To succeed in selling to Ms. Monk, which of the following strategies would be most appropriate? a. Consultative selling b. Quality sellingc. Enterprise selling d. Transactional sellinge. High pressure, high risk selling


123. The Tuxax Company has decided that handling price-oriented buyers can be profitable under certain conditions. Conditions that would make good sense for Tuxax Company would be all of the following EXCEPT ________. a. limiting the quantity that can be purchasedb. no servicesc. no adjustmentsd. no refundse. no packaging or crating

Answer: e Page: 216 Level of difficulty: Easy

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124. The new, more strategically oriented purchasing departments have a mission to ________. a. always make a profitb. always take the lowest bidc. seek the best value from fewer and better suppliers d. continue to seek outsourcing as their primary strategye. use consultants whenever possible


125. If a buyer is using the buying tactic of commoditization, he or she has a ________ as their purchasing orientation. a. buying orientationb. procurement orientation c. supply chain management orientationd. raw materials orientatione. simultaneous orientation


126. Spare parts are considered to be an example of a ________ product in that they have a low value and cost to the customer but they involve some risk with respect to reliability. a. routineb. leveragec. strategicd. bottlenecke. strangle-hold


127. Which of the following buyclasses uses the least number of buyphases (stages) in the industrial buying process? a. Straight rebuyb. Modified rebuyc. New taskd. Global taske. Relational rebuy


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128. Japan has an extremely well organized organizational buying process; however, because of its strategic bottleneck position, the ________ is critical to the success of any venture. a. marketing departmentb. production departmentc. delivery departmentd. accounting departmente. inventory control department


129. Which of the following methods for assessing customer value would you consider to be appropriate if you asked your customers to attach a monetary value to each of three alternative levels of a given attribute? Those values would then be added together for any offer configuration. a. Direct survey questionsb. Importance ratingsc. Compositional approachd. Benchmarkse. Conjoint analysis


130. With respect to buyer-seller relationships, which of the following categories would you believe to be the most appropriate description of a situation where there was a traditional custom supply situation where competition rather than cooperation was the dominant form of governance? a. Bare bonesb. Contractual transactionc. Collaboratived. Customer supplye. Customer is king


Short Answer

131. The business market consists of all the organizations that acquire goods and services used in the production of other products or services that are sold, rented, or supplied to others. What are the major industries that make up the business market?

Suggested Answer: The major industries making up the business market are agriculture, forestry, and fisheries; mining; manufacturing; construction; transportation; communication; public utilities; banking, finance, and insurance; distribution; and services. Page: 210 Level of difficulty: Medium

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132. Define organizational buying.

Suggested Answer: Organizational buying is the decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers. Page: 210 Level of difficulty: Easy

133. Explain how fluctuating demand impacts business markets differently than consumer markets.

Suggested Answer: The demand for business goods and services tends to be more volatile than the demand for consumer goods and services. A given percentage increase in consumer demand can lead to a much larger percentage increase in the demand for plant and equipment necessary to produce additional output. Economists refer to this as the acceleration effect. Page: 211 Level of difficulty: Medium

134. If you were a purchasing agent facing a modified rebuy situation, how would you describe that situation?

Suggested Answer: The buyer wants to modify product specifications, prices, delivery requirements, or other items. The modified rebuy usually involves additional participants on both sides. Page: 212 Level of difficulty: Easy

135. In systems buying, the U.S. government often solicits bids from primary contractors. What do primary contractors do?

Suggested Answer: The government solicits bids from primary contractors who assemble the package or system. The contractor who was awarded the contract would be responsible for bidding out and assembling the system’s subcomponents from second-tier contractors. Thus, the primary contractor would provide a turnkey solution. Page: 213 Level of difficulty: Medium

136. Systems selling is a key industrial marketing strategy in bidding to build large-scale industrial projects. Competition for these projects is fierce. What are the main areas of competition for these project engineering firms?

Suggested Answer: Primary competitive areas include: price, quality, reliability, and other attributes to win contracts. Page: 214 Level of difficulty: Easy

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137. Webster and Wind call the decision-making unit of a buying organization the buying center. What is the composition of the buying center?

Suggested Answer: It is composed of “all those individuals and groups who participate in the purchasing decision-making process, who share some common goals and the risks arising from the decisions.” The buying center includes all members of the organization who play any of seven roles in the purchase decision process. Buying centers usually include several participants with differing interests, authority, status, and persuasiveness. Each member of the buying center is likely to give priority to very different decision criteria. Page: 214 Level of difficulty: Medium

138. Assume that you are buying center manager who has decided to pursue a market segment called the “gold-standard customers.” What would be the best strategy to reach these customers?

Suggested Answer: According to information found in the text, the manager should use “quality selling” to reach the gold-standard customer (e.g., these customers want the best performance in terms of product quality, assistance, reliable delivery, and so on). Page: 216 Level of difficulty: Medium

139. Assume that you are a purchasing manager that has adopted a “buying orientation” in making this year’s purchases. What two tactics are often used by purchasing managers with this orientation?

Suggested Answer: The two basic tactics are commoditization and multi- sourcing. Page: 218 Level of difficulty: Hard

140. Peter Kraljic distinguished four product-related purchasing processes. Which of

these processes would be most appropriate for a buyer of mainframe computers?

Suggested Answer: The most appropriate process would be one where the product is considered to be a “strategic product” (e.g., these products have high value and cost to the customer and also involve high risk. Page: 219 Level of difficulty: Medium

141. E-procurement Web sites are organized around two types of e-hubs. If you were in the advertising business and were seeking to take advantage of e-procurement, what type of e-hub should be constructed by your company?

Suggested Answer: The two types of hubs are vertical hubs (centered on industries such as plastics) and functional hubs (centered on functions such as advertising). Therefore, you would construct a functional hub. Page: 222 Level of difficulty: Medium

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142. Business-to-business (B2B) cyberbuying has become increasingly popular between purchasing agents and buying centers. How could “pure play” auction sites be used to conduct cyberbuying?

Suggested Answer: The most popular “pure play” auction sites are eBay and Freemarkets.com. On these sites, buyers and sellers of industrial parts, raw materials, commodities, and services can participate in auctions in many categories. These sites have accounted for over $40 billion worth of commerce since 1995. Page: 223 Level of difficulty: Easy

143. In 2003, Hewlett-Packard was named number one in BtoB magazine’s annual ranking of the top B-to-B Web sites. What does this Web site allow companies to do that makes it worthy of the distinction mentioned?

Suggested Answer: The site allows companies to create customized catalogs for frequently purchased products, set up automatic approval routing for orders, and conduct the end-to-end transaction processing. For additional information see the chapter story on HP. Page: 224 Level of difficulty: Hard

144. Assume that you have been given the task of assessing customer value at your organization. Further, you have been instructed to use the “compositional approach” to make this assessment. Describe what you would do if you used the compositional approach in assessing customer value.

Suggested Answer: In the compositional approach, customers are asked to attach a monetary value to each of three alternative levels of a given attribute. This is repeated for other attributes. The values are then added together for any offer configuration.Page: 226 Level of difficulty: Hard

145. In the buygrid framework model where the major stages of the industrial buying process are listed and characterized, supplier selection is an important process. What follows supplier selection and what occurs in this phase?

Suggested Answer: The step that follows supplier selection is order-routine specification. After selecting suppliers, the buyer negotiates the final order, listing the technical specifications, the quantity needed, the expected time of delivery, return policies, warranties, and so on. Pages: 220–227 Level of difficulty: Medium

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146. A customer tells a supplier that he or she would like “OTIFNE” as a desired outcome of upcoming purchase transaction. What has the customer indicated that he or she wants by using this acronym?

Suggested Answer: OTIFNE is a term that summarizes three desirable outcomes to a B-to-B transaction: OT = deliver on time; IF = in full; and NE = no error. Page: 227 Level of difficulty: Medium

147. As a seller in the business market, you have promised your customers that you have, as a corporate goal, corporate credibility. What three factors will have some bearing on whether you will be able to meet your goal and promise?

Suggested Answer: The three factors are: (1) corporate expertise, (2) corporate trustworthiness, and (3) corporate likeability. In other words, a credible firm is seen as being good at what it does, it keeps its customers’ best interests in mind, and it is enjoyable to work with. Page: 228 Level of difficulty: Hard

148. Cannon and Perreault found that buyer-supplier relationships could be classified into eight different categories. What category would be appropriate for a relationship where, although bonded by a close, cooperative relationship, the seller adapts to meet the customer’s needs without expecting much adaptation or change on the part of the customer in exchange?

Suggested Answer: The appropriate category would be the “customer is king” category. Page: 229 Level of difficulty: Hard

149. Your organization is considering selling its products to the institutional market. What type of customers will you be making your appeals to? Give specific examples.

Suggested Answer: The institutional market consists of schools, hospitals, nursing homes, prisons, and other institutions that must provide goods and services to people in their care. Page: 230 Level of difficulty: Easy

150. As a purchasing manager, you have just completed a large contract with the U.S. government where your company sold the government several “tech-oriented” products and services. What three tips would be appropriate to pass along to those that would also like to tap into this large market?

Suggested Answer: According to the Marketing Memo found in the text, tips would include: (1) get in the Government IT Catalog; (2) work your way in (make

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sure contractors can find you, stay on top of key contracts, and work the angles), and (3) network actively. Page: 233 Level of difficulty: Hard

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static demand answer

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