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Chapter 4—The Marketing Environment TRUE/FALSE 1. Champion Lyte is a sugar-free sports drink designed to replenish electrolytes lost during activity or illness. Since the product was designed primarily for diabetics, healthcare professionals who treat diabetics are its primary target market. Answer: False Rationale: The target market consists of the diabetics for whom the product was designed. 2. Marketers can control the external environment in which their organizations operate. Answer: False Rationale: Although marketers can control the marketing mix and perhaps influence the external environment, they cannot control the external environment in which their organizations operate. 3. Companies use environmental management when they implement strategies that attempt to shape the external environment within which they operate. Answer: True Rationale: Environmental management involves strategies aimed at influencing or adapting to the external environmental factors that affect a company's operations, including regulatory, economic, and social aspects. 4. Social change is perhaps the most difficult external variable for marketing managers to forecast, influence, or integrate into marketing plans. Answer: True Rationale: Social change presents unpredictable challenges for marketing managers, as it involves shifts in societal values, attitudes, and behaviors that can significantly impact consumer preferences and market dynamics, necessitating agile and adaptable marketing strategies. 5. The practice of choosing goods and services that meet one’s diverse needs and interests rather than conforming to a single, traditional lifestyle is known as aggregate lifestyles. Answer: False Rationale: This is the definition of component lifestyles. 6. The Natural Marketing Institute predicts that American consumers will become less environmentally oriented over the next decade as economic concerns become dominant in most people’s lives. Answer: False Rationale: The opposite is predicted. 7. The increase in social media usage has dramatically changed marketing strategies and how companies interact with target markets. Answer: True Rationale: The proliferation of social media has revolutionized marketing by offering new channels for direct engagement with consumers, enabling real-time feedback, personalized communication, and targeted advertising, thereby reshaping traditional marketing strategies to be more interactive, responsive, and consumer-centric. 8. Demography is the study of people’s vital statistics such as age and location. Answer: True Rationale: Demography focuses on analyzing and understanding population characteristics like age, gender, income, education, and geographic location, providing valuable insights for marketers to segment and target specific consumer groups effectively. 9. The average teen earns about $45.00 per week. Answer: True Rationale: The average earnings of teens can vary widely depending on location, job type, and other factors, making it difficult to generalize, but $45.00 per week is not typically representative. 10. Generation Y was the hardest hit by the Great Recession. Answer: True Rationale: Generation Y, also known as Millennials, were significantly affected by the Great Recession of 2007-2009, experiencing high unemployment rates and financial challenges early in their careers. 11. Generation Y was the first generation of latchkey children––products of dual-career and/or divorced households. Answer: False Rationale: Generation X was the first generation of latchkey children. 12. A baby boomer’s average life expectancy is at an all-time high of 79.2 years. Answer: False Rationale: Baby boomers average life expectancy is at an all-time high of 77.4 years. 13. The Hispanic population is driving minority growth in the United States. Answer: True Rationale: The Hispanic population has been a significant driver of minority growth in the United States due to higher birth rates and immigration, contributing substantially to demographic shifts and cultural diversity. 14. On average, African Americans are nearly eight years older than all other American consumers. Answer: False Rationale: African Americans are nearly six years younger than all consumers. 47 percent are between 18 and 49 years old, which is considered the top-spending age demographic by marketers. 15. Rising incomes mean a higher standard of living. Answer: False Rationale: Not necessarily. Increased standards of living are a function of purchasing power, which is measured by comparing income to the relative cost of a set standard of goods and services in different geographic areas. 16. Inflation is a measure of the decrease in the value of money, expressed as the percentage reduction in value since the previous year. Answer: True Rationale: Inflation is a measure of the increase in the general price level of goods and services over a period of time, typically expressed as a percentage, not a decrease in the value of money. 17. An economic recession increases demand for products and services. Answer: False Rationale: A recession is a period of economic activity characterized by negative growth, which reduces demand for goods and services. 18. Basic research attempts to develop new or improved products. Answer: False Rationale: This is applied research. Basic research attempts to expand the frontiers of knowledge but is not aimed at a specific, pragmatic problem. 19. Champion Lyte is a sugar-free sports drink. In developing the product, its manufacturer thoroughly studied the legal restrictions on the drink’s ingredients, packaging, manufacturing, and labeling and has abided by all such restrictions. In this way, the manufacturer of Champion Lyte drinks conducted its examination of all political and legal factors that might affect the product’s marketing. Answer: False Rationale: Legal restrictions govern decisions in ALL areas of the marketing mix, not just in the areas the manufacturer checked. 20. Marketers need a thorough understanding of the laws established by the federal government, state governments, and regulatory agencies. Answer: True Rationale: Marketers must comply with various laws and regulations at the federal, state, and local levels to ensure ethical practices, avoid legal liabilities, and maintain consumer trust and satisfaction. 21. The Sherman Act of 1890 establishes protection for trademarks. Answer: False Rationale: The Lanham Act of 1946 establishes protection of trademarks. See also Exhibit 4.1. 22. After Hal Li purchased and installed a wood-burning stove to heat his family home, the stove caught fire and damaged much of the house. He believes the stove had inadequate insulation. Li should voice his concerns to the Federal Trade Commission. Answer: False Rationale: The Consumer Product Safety Commission is designed to protect the health and safety of consumers in and around their homes. See also Exhibit 4.1. 23. The competitive environment of a business encompasses the number of competitors the firm must face, the relative size of these competitors, regulatory agencies, and the degree of interdependence within the industry. Answer: False Rationale: Regulatory agencies are political and legal factors. MULTIPLE CHOICE 1. A(n) _____ is a defined group that managers feel is most likely to buy a firm’s product. A. target market B. buying center C. aggregated unit D. consumer cluster E. demographic sample Answer: A Rationale: This is the definition of a target market. 2. Which of the following statements best describes the typical target market? A. A target market will remain stable over time, including the same group of consumers. B. Target markets change over time as consumers drop in or out of the market, and as tastes change. C. Target markets are not strongly affected by changes in the external environment. D. Target markets only change when the features and benefits of the product offering change. E. Target markets cannot be specifically defined according to age, income, or location, because these factors are continually changing. Answer: B Rationale: Target markets are defined and described, but they are always changing in response to the environment. 3. Colorific recently began competing with Crayola coloring products. At the beginning of the school year, the _____ for Colorific products consists of back-to-school shoppers. A. target market B. buying center C. mass market D. consumer sample E. aggregated demography Answer: A Rationale: A target market is a defined group that managers feel is most likely to buy its products. 4. The publisher of Ebony magazine has forged an alliance with Dan River, Inc. to create luxury bed and bath products for the newly developed Ebony Home brand. Ebony Home will use the publisher’s long history and expertise to market to the African American market. The African American market is the _____ for the Ebony Home brand. A. target market B. buying center C. aggregated unit D. consumer cluster E. demographic sample Answer: A Rationale: A target market is a defined group that managers feel is most likely to buy a firm’s product. 5. The external environment: A. can be controlled in much the same manner as the internal marketing mix B. cannot be influenced by marketing managers C. does not change over time D. does not have an impact on Fortune 500 companies E. must be continually monitored by marketing managers Answer: E Rationale: The goal in gathering the environmental data is to identify future market opportunities and threats. 6. All of the following are factors in the external environment affecting marketing EXCEPT: A. the marketing mix B. economic conditions C. technology D. political and legal factors E. the competition Answer: A Rationale: The marketing mix is created by the company. 7. Marketing managers cannot control _____, but they can sometimes influence it. A. where advertising is placed B. the external environment C. the sales force D. the distribution strategy E. product pricing Answer: B Rationale: The external environment is basically uncontrollable, but the other four answers are part of the marketing mix. 8. When a company engages in _____, it is implementing strategies that attempt to shape the external environment within which it operates. A. synergistic control B. environmental management C. environmental control D. market control E. reactive management Answer: B Rationale: Environmental management means attempting to influence external environmental factors. 9. _____ factors are environmental factors that include our attitudes, values, and lifestyles. A. Social B. Economic C. Political D. Competitive E. Demographic Answer: A Rationale: Social factors, such as attitudes, values, and lifestyles, influence consumers’ behavior. 10. Which of the following is the most difficult for marketing managers to forecast, influence, or integrate into marketing plans? A. Technology B. Social change C. Demography D. Competition E. Economic conditions Answer: B Rationale: Social factors and changes are difficult to foresee, because they are usually slow and/or small changes. 11. The Michigan State Legislature tried to pass a bill requiring concert promoters and venue operators to print parental warnings on tickets and advertisements for concerts and shows by performers whose recordings had content advisory labels. Promoters and venue operators prevented the passage of this bill, arguing that it would require them to make value judgments for which they were ill equipped. The promoters and operators engaged in: A. internal marketing B. illegal practices C. environmental management D. reengineering E. corporate espionage Answer: C Rationale: Environmental management means attempting to influence external environmental factors. 12. Many people in the United States choose to drink light beer because they value thin and fit bodies. In Europe, light beers have had little success because flavor is valued more highly. For international beer manufacturers, this difference illustrates how _____ influence(s) marketing. A. demography B. competition C. social factors D. economic conditions E. technology Answer: C Rationale: Values are an example of social factors and influence the products that people buy. 13. In many African nations, people live on less than $5.00 per day. To grow here, Procter & Gamble (P&G) must persuade these people to purchase items they have lived without forever. As a result, P&G sells one-ounce packages of Ariel laundry soap for as little as 10 cents in this market. P&G responded to _____ factors when it developed these small packages. A. demographic B. competitive C. technological D. social E. component lifestyle Answer: D Rationale: Social factors influence the products people buy. 14. Consumers’ concern for health issues affects the way food is marketed. For example, marketers must now list the number of grams of transfat on a product’s nutrition label because it has recently come to light that this type of fat is harmful. Consumers’ concern for health issues is a(n) _____ factor. A. economic B. political and legal C. technological D. demographic E. social Answer: E Rationale: Social factors include our attitudes, values, and lifestyles. 15. Quaker Oats and other cereal manufacturers have developed what they call “breakfast-with-one-hand” products—no-mess breakfast bars and drinks that can be consumed while commuting. The popularity of on-the-go food is largely the result of changes in _____ factors. A. natural environmental B. demographic C. technological D. social E. political Answer: D Rationale: Social factors include our attitudes, values, and lifestyles. 16. If you were to ask Americans what they most desire to make their lives easier, most will want more time. This feeling that there are not enough hours in a day is an example of a(n) _____ factor that has strongly influenced the marketing environment. A. social B. economic C. legal D. demographic E. component lifestyle Answer: A Rationale: Social factors include our attitudes, values, and lifestyles. Lack of time is due to consumers’ lifestyles. 17. Shark fin soup is a favorite Thai food. When a San Francisco–based organization claimed that the leading producer’s soup contained mercury poison, its sales plummeted. The popularity of this soup in Thailand represents a(n) _____ factor, while Thailand’s lax enforcement of environmental protection and consumer protection regulations are a(n) _____ factor. A. economic; technological B. social; technological C. social; political and legal D. competitive; economic E. social; technological Answer: C Rationale: Food preferences are a cultural issue, and the lax enforcement of environmental protection laws is a political and legal factor. 18. What do self-sufficiency, upward mobility, work ethic, and conformity have in common? A. These are no longer valued attitudes B. They are attitudes that can easily be changed C. These are three perceptions that Americans have of the Asian lifestyle D. These are three of the core values that influence lifestyles in the United States E. They are the determinants of a component lifestyle Answer: D Rationale: These are the four basic values that have strongly influenced American attitudes and lifestyles. 19. A(n) _____ is the practice of choosing goods and services that meet one’s diverse needs and interests rather than conforming to a single, traditional lifestyle. A. aggregated lifestyle B. component lifestyle C. psychographic mode of living D. demographically defined lifestyle E. targeted lifestyle Answer: B Rationale: This is the definition of component lifestyles. 20. Lance is a 30-year-old, single professional who enjoys hiking, college sports, and poetry. He lives with his girlfriend but does not have plans to get married in the near future. He leads a life much different from his father, who married right after high school, had children, and worked for the same company his entire career. More and more in the U.S. consumers like Lance are enjoying _____, piecing together a variety of interests, products, and services instead of conforming to traditional stereotypes. A. well-defined segments B. component lifestyles C. simple multipurpose products D. conformity and cohesiveness E. modular market mixes Answer: B Rationale: Component lifestyles are the practice of choosing goods and services that meet one’s diverse needs and interests rather than conforming to a single, traditional lifestyle. 21. According to the Natural Marketing Institute, all of the following are likely consumer trends over the next ten years EXCEPT: A. an increased focus on the acquisition of luxury items and “status symbols” B. taking greater steps toward proactive health care C. making “meaningful green” initiatives that affect environmental, social, and economic dimensions D. getting off the grid E. All of the above are likely trends Answer: A Rationale: The Natural Marketing Institute predicts that consumers will demonstrate an increasing orientation toward environmentalism. 22. Martina has begun a small garden in her backyard. She has also installed a water purification in her home, as well as a means to collect and store rainwater for future use in her garden. Martina’s actions best represent which “core American value”? A. conformity B. social justice C. materialism D. upward mobility E. self-sufficiency Answer: E Rationale: A new spirit of self-reliance or self-sufficiency is driving many consumers’ desire to “get off the grid.” 23. Kendra teaches high school science. She is also a wine expert, a PTA president, and an accomplished sculptor. Her other interests include scrapbooking, gourmet cooking, and NASCAR. Marketers would categorize Kendra as: A. fitting into a caregiver segment B. a member of the typical education-based target segment C. not belonging to any target market D. having a component lifestyle E. having a conforming lifestyle Answer: D Rationale: A component lifestyle pieces together products and services that fit a variety of interests and needs and does not conform to any particular stereotype. 24. Lee Siracca owns two horses, brews his own beer, participates in the civic arts commission, enjoys talk radio, hikes on wilderness trails, and competes in rodeos. All of these diverse needs and interests influence his choices of the goods and services he buys. Lee has a: A. component lifestyle B. demographically oriented lifestyle C. multicultural demographic position D. fragmented market orientation E. segmented buying strategy Answer: A Rationale: A component lifestyle pieces together products and services that fit a variety of interests and needs and does not conform to any particular stereotype. 25. The growth of social media use has resulted in: A. decreased connection to each other B. Facebook losing viewers C. decreased discretionary income D. more component lifestyles E. increased exchange of information Answer: E Rationale: Social media allows the creation and exchange of user-generated content, which facilitates greater exchange of information among consumers. 26. Which of the following events has had the greatest effect on marketing? A. The growing number of one-child families B. The increasing number of immigrants from northern Europe C. The growing number of people on the Internet D. The increased use of social media by people and businesses E. The growing number of people of retirement age who are continuing work Answer: D Rationale: The increased use of social media has had dramatic effect on marketing. 27. The study of people’s vital statistics, such as age, race and ethnicity, and location, is called: A. cultural sociology B. psychometrics C. ecology D. ethnography E. demography Answer: E Rationale: This is the definition of demography. 28. Zimmer-Centerpulse is the world’s largest producer of replacement hips and knees for orthopedic surgery. They are particularly interested in marketing in the southwestern United States, where a large aging population lives. Which external environmental element most directly explains its continued growth? A. Economic conditions B. Political conditions C. Culture D. Demography E. Social forces Answer: D Rationale: Demography considers the age of the target market. 29. Which of the following is NOT a demographic characteristic of a population? A. Income level B. Age C. Values D. Education E. Birthrate Answer: C Rationale: Values are a social factor. 30. Riot Media is a media and toy company that capitalizes on the “gross-out” humor enjoyed by boys ages 8 through 12. In other words, it targets: A. members of Generation X. B. a cohort generation. C. Tweens. D. baby boomers. E. the baby bridging generation. Answer: C Rationale: Tweens are described as pre- and early adolescents. 31. One of the fastest growing tween markets is: A. Technology B. Home décor C. Energy drinks D. entertainment E. Athletic apparel Answer: B Rationale: One of the fastest growing tween markets is home décor. Boys and girls want their rooms to be more than just rooms. 32. Which of the following statements about American teenagers is correct? A. They spend about 40 hours per week tuned in electronically. B. About 25 percent go to the mall at least once a week. C. More than 50 percent have a personal, online blog. D. They prefer online friends to “real” friends. E. They would rather shop in a store than online. Answer: E Rationale: American teenagers generally prefer shopping in physical stores rather than online, reflecting their preference for in-person social interactions and the tactile experience of shopping. 33. Girls between the ages of 8 and 12 are one of the growing markets for high-end shoe manufacturers. These girls want styles that are both youthful and grown-up looking. They are: A. members of Generation X. B. a cohort generation. C. tweens. D. baby boomers. E. the baby bridging generation. Answer: C Rationale: Tweens are described as pre- and early adolescents. 34. Merissa Champlain designs and sells clothes for young working women. Her marketing managers recently told her that she’ll be in financial trouble unless she starts designing clothes suited to Gen Yers. Why is this? A. Gen Yers are picky. B. Gen Yers are more multicultural. C. Baby boomers provide all of the disposable income for Gen Y members. D. Demographically, Gen Yers are an extremely large group of consumers. E. Gen Yers are easily swayed by traditional promotion media. Answer: D Rationale: The size of this group makes them especially important to all marketers. 35. Which of the following represents the largest group of consumers in the United States? A. Tweens B. Gen Y C. Gen X D. Baby boomers E. Boomerangs Answer: B Rationale: Gen Y passed the boomer’s numbers in 2010. Baby boomers comprise approximately 75 million people, Gen X 40 million, and tweens 25 million. 36. Which of the following statements about Generation Y is true? A. Its members were born between 1965 and 1978. B. Members are tech-savvy and expect brands to be on social media. C. The members of Generation Y are pressed for time and spend more on personal services than any other age group. D. Members of Generation Y are the first generation of latchkey kids. E. All of these statements are true. Answer: B Rationale: The other descriptions are of Generation X. 37. Consumers born between 1965 and 1978 form a group called: A. Tweens. B. Yuppies. C. cohort markets. D. America’s mass market. E. Generation X. Answer: E Rationale: This is the definition of Generation X. 38. The group of people in the United States who were born between 1946 and 1964 are known as: A. Gen Xers. B. gray markets. C. synergistic cohorts. D. the baby bust generation. E. baby boomers. Answer: E Rationale: This is the definition of baby boomers. 39. Consider a small southern town where more than half the residents are African American and the rest are white. A successful marketing campaign for this community would include: A. internet advertising. B. radio advertising. C. billboards. D. newspaper advertising. E. none of these. Answer: B Rationale: African Americans spend an average 4 hours a day with radio, whereas other groups average 2.8 hours. 40. In general, Hispanic Americans: A. prefer to buy American products rather than brands found in their homelands, because they want to be “real Americans”. B. are much older than the general U.S. population. C. tend to be very brand loyal. D. respond unfavorably to advertising targeted directly at them. E. are highly aware of most mainstream U.S. brands. Answer: C Rationale: Hispanic Americans are very brand loyal, but they often are not aware of many mainstream U.S. brands. 41. According to the text, the 45-year-old magazine, Essence Magazine, reaches _____ of all black females aged 18 to 49. A. 50 percent B. roughly one-quarter C. almost one-third D. one third E. over 75 percent Answer: D Rationale: One third of all black females aged 18 to 49 subscribe to Essence Magazine. 42. The majority of Hispanic Americans are of _____ descent. A. Mexican B. Puerto Rican C. Spanish D. South American E. Cuban Answer: A Rationale: Nearly 60 percent of Hispanic Americans are of Mexican descent. The next largest group, Puerto Ricans, make up slightly less than 10 percent of Hispanics. All others each account for less than 5 percent of all Hispanics. 43. Which ethnic group prefers products from their native country? A. Hispanic Americans B. African Americans C. Asian Americans D. South Americans E. Cuban Americans Answer: A Rationale: Hispanic Americans are a difficult market to target, as they often prefer products from their native country. 44. A company that specializes in planning and organizing large family reunions has hired you to identify a target ethnic market. Which market would be ideal? A. African American B. Korean Americans C. Chinese immigrants D. Caucasians E. Hispanics Answer: E Rationale: Hispanics tend to have larger families. 45. Which demographic category represents the lowest percentage of the U.S. population, but has the highest average family income? A. Asian Americans B. African Americans C. Caucasians D. Hispanic Americans E. get their news from newspapers rather than television or the radio. Answer: A Rationale: Asian Americans represent only 5 percent of the U.S. population, but have the highest average family income. 46. Which of the following ethnic demographic categories are early adopters of new technology? A. Caucasians B. Asian Americans C. African Americans D. Hispanic Americans E. Latinos Answer: B Rationale: Asian Americans, a marketer’s dream, are early adopters of the latest digital gadgets. 47. _____ is the primary determinant of a person’s earning potential. A. Race B. Education C. Social class D. Gender E. Marital status Answer: B Rationale: Only 1 percent of those with a high school education earn over $100,000 annually; by comparison, 13 percent of college-educated workers earn six figures or more. 48. Recession, inflation, and consumers’ incomes are the _____ factors of greatest concern to most marketers. A. economic B. socio-demographic C. political D. government E. consumption Answer: A Rationale: The three economic areas of greatest concern to most marketers are consumers’ incomes, inflation, and recession. 49. After-tax income is referred to as: A. gross income B. marginal income C. purchasing income D. unencumbered income E. disposable income Answer: E Rationale: Disposable income is what consumers have left after paying taxes. 50. China’s new 5 percent tax on disposable wooden chopsticks, reflecting concerns about deforestation, has been praised by environmentalists. The move is hitting hard at the Japanese, who consume 25 billion sets of wooden chopsticks annually. Almost all of the chopsticks used in Japan come from China. The price of wooden chopsticks in Japan has increased by almost 50 percent. The price increase influences which factor of the external environment of restaurant owners in Japan? A. Economic B. Technological C. Demographic D. Social E. Ethnicity Answer: A Rationale: Purchasing power may be diminished, especially for restaurants. 51. _____ is measured by comparing income to the relative cost of a set standard of goods and services in different geographic areas. A. Gross individual profit B. Purchasing power C. Net profit D. Relative pricing E. Price escalation Answer: B Rationale: This is the definition of purchasing power. Another way to think of purchasing power is income minus the cost of living (i.e., expenses). 52. The higher your _____, the higher your purchasing power: A. gross income B. social class C. disposable income D. cost of living E. inflation index Answer: C Rationale: Purchasing power is measured by comparing income to the relative cost of a set standard of goods and services in different geographic areas. It is aligned with income minus a standard set of expenses. Assuming a constant income, the higher the cost of living (the expenses), the lower the purchasing power is. 53. All of the following are taken into account in a cost of living index EXCEPT: A. income B. housing C. food and groceries D. health care E. entertainment Answer: A Rationale: In general, a cost of living index takes into account housing, food and groceries, transportation, utilities, health care, and miscellaneous expenses such as clothing, services, and entertainment. 54. _____ is a measure of the decrease in the value of money, expressed as the percentage reduction in value since the previous year. A. Inflation B. Recession C. Depression D. Consumer break-even E. Price escalation Answer: A Rationale: This is the definition of inflation. 55. A period of economic activity characterized by negative growth, which reduces demand for goods and services, is called a(n): A. stagnation B. inflation C. recession D. price escalation E. parity Answer: C Rationale: This is the definition of a recession. 56. The main product for Zamperla Industries is gondola cars for amusement park rides and ski lifts. Its marketing department constantly monitors trends in the external environment that might affect the firm. Which economic factor may pose a major threat to this company? A. Few competitors in this industry B. Technological improvements that are automating production of cars C. A recession D. Increasing interest in the environment and recycling E. Existing legislation requiring licensing of all amusement park rides Answer: C Rationale: A recession is a period of economic activity characterized by negative growth, which reduces demand for goods and services. 57. Shabby Chic fashion boutique has responded to economic trends by placing an emphasis on improving the quality of merchandise it offers, improving customer service, and reducing its cost of goods sold because consumers are not shopping as much as they used to due to lower purchasing power. Shabby Chic is apparently dealing with which level of economic activity? A. Stagflation B. Recession C. Inflation D. Stagnation E. Distension Answer: B Rationale: Recession is a period of economic activity characterized by negative growth. 58. Juan is a marketing professor researching consumer decision-making processes. Specifically, he is examining if including a picture in a print advertisement is more effective than not including a picture in influencing readers’ attitude toward the advertisement and brand advertised. He is not researching any specific brand, but rather he is interested in testing Dual Coding theory that predicts that pictures will have a more positive impact on attitudes. Juan is conducting _____ research. A. secondary B. basic C. applied D. complex E. synergistic Answer: B Rationale: Basic research aims to expand the frontiers of knowledge but is not aimed at a specific, pragmatic problem. 59. Which type of research attempts to develop new or improved products? A. Basic B. Synergistic C. Secondary D. Primary E. Applied Answer: E Rationale: This is the definition of applied research. 60. A marketing researcher is conducting a focus group interview with working mothers to learn how Kraft can better meet their needs for convenience foods. What type of research does this represent? A. Basic B. Applied C. Secondary D. Synergistic E. Idiosyncratic Answer: B Rationale: Applied research attempts to develop new or improved products. 61. When mechanical gas pumps first appeared in the United States in the 1930s, their spinning dials couldn’t register sales beyond $99.99. Today, some stations still use the retro pumps, but the limited dials cannot register the sales of higher-priced gas, which often mount about $100 for SUVs. The pumps can be modernized for about $650, but the company that provides this service has a huge backlog. This is an example of how _____ factors affect small convenience stores and service stations. A. technological and cultural B. competitive and natural C. technological and economic D. cultural and economic E. demographic and marketing mix Answer: C Rationale: The retro-fittings for the pumps are a technological factor, and the increasing price of gas is an economic factor. 62. In the future, electrical power may come from quantum nucleonics, a form of nuclear power that produces no residual radiation. The ability to use this form of power will require equipment adaptations, but it will solve the world’s need for clean and efficient power. When quantum nucleonics is developed, it will be an example of how _____ factors can affect an organization. A. technological B. competitive C. economic D. cultural E. demographic Answer: A Rationale: Quantum nucleonics is part of the technological environment. 63. Commercial truck drivers have suffered financially as a result of increasing diesel fuel prices. As they look for ways to make their trucks perform more efficiently, manufacturers have created truck body designs that are more aerodynamically sound. This is an example of how _____ factors can help during recessionary periods. A. technological B. competitive C. economic D. cultural E. demographic Answer: A Rationale: Technology enables more efficient product designs. 64. The two types of research are: A. basic and applied. B. primary and secondary. C. profit and not-for-profit. D. domestic and global. E. basic and advanced. Answer: A Rationale: Basic research attempts to expand the frontiers of knowledge but is not aimed at a specific, pragmatic problem. Applied research, in contrast, attempts to develop new or improved products. 65. Which type of research is also called pure research and attempts to expand the frontiers of knowledge but is not aimed at a specific, pragmatic problem? A. Applied B. Basic C. Primary D. Secondary E. Synergistic Answer: B Rationale: Basic research aims to confirm an existing theory or to learn more about a concept or phenomenon. 66. Almost any product in India, from tap water to milk, has traces of toxins due to the overuse and misuse of insecticides by Indian farmers, but the government expects multinational corporations (MNCs) operating in India to produce food that is toxin free. In this way, both _____ factors influence the operating environment for foreign firms. A. social and technological B. technological and legal C. economic and legal D. economic and social E. technological and demographic Answer: B Rationale: It is technological in that the insecticides are a product of technology. The expectations for MNCs are a product of the legal environment. 67. Laws and regulations of various governments and their ongoing development and change are an example of _____ factors that are part of the external environment of all organizations. A. economic investment B. political and legal C. research and development D. competitive E. demographic Answer: B Rationale: Every aspect of the marketing mix is subject to laws and restrictions, which are part of the political and legal environment. 68. When Universal Studios Japan opened, health inspectors discovered the theme park had piped industrial-use water not suitable for drinking into its drinking fountains. The problem was unanticipated and costly to repair. This is primarily an example of how _____ factors can cause a business to incur unexpected costs. A. social B. economic C. competitive D. cultural E. political and legal Answer: E Rationale: The drinking water is subject to laws and restrictions, which are elements of the political and legal environment. 69. Every night, Universal Studios Japan hosts a fireworks display. The theme park recently came under government investigation when allegations were made that the park was detonating more than 50 pounds of explosives in its nightly fireworks displays. In the small nation, the use of explosives is stringently controlled. This is an example of how _____ factors can influence a business. A. competitive B. legal and political C. economic D. technological E. cultural Answer: B Rationale: Laws and/or regulations regarding the amount of explosives allowed are part of the political and legal environment. 70. China’s new 5 percent tax on disposable wooden chopsticks, reflecting concerns about deforestation, has been praised by environmentalists. The move is hitting hard at the Japanese, who consume 25 billion sets of wooden chopsticks annually. Almost all of the chopsticks used in Japan come from China. The requirement for Chinese manufacturers of wooden chopsticks to pay the 5 percent tax is a _____ factor in their external environment. A. competitive B. social C. demographic D. technological E. legal Answer: E Rationale: The tax is an example of government regulation. 71. The _____ Act strengthened the Clayton Act to prevent corporate acquisitions that reduce competition. A. Hart-Scott-Rodino B. Lanham-Scott C. Celler-Kefauver Antimerger D. Robinson-Patman E. Sherman Answer: C Rationale: See Exhibit 4.1. The Celler-Kefauver Antimerger Act of 1950 bolstered the Clayton Act’s provision dealing with interlocking directorates and closed another loophole that had allowed corporate takeovers. 72. A cold medicine manufacturer offers a promotion allowance to retailers for setting up displays featuring its products. Retailers are also offered promotional allowances on purchases of the products. Which legislation requires the manufacturer to make these promotion allowances available to all retailers on a proportionately equal basis? A. Hart-Scott-Rodino Act B. Sherman Act C. Celler-Kefauver Antimerger Act D. Robinson-Patman Act E. Lanham Act Answer: D Rationale: See Exhibit 4.1 The Robinson-Patman Act requires manufacturers to offer promotional allowances and discounts on a proportionately equal basis to all retailers, preventing unfair price discrimination that could harm competition among retailers. 73. The _____ is a governmental body that has the power to prescribe mandatory safety standards for almost all products consumers use. A. Health and Welfare Agency B. Federal Trade Commission C. Food and Drug Administration D. Federal Communications Commission E. Consumer Product Safety Commission Answer: E Rationale: The sole purpose of the Consumer Product Safety Commission is to protect the health and safety of consumers in and around their homes. It has the power to prescribe mandatory safety standards for almost all products consumers use. 74. Alex purchased a battery-operated drill, and the first time he used the drill, the battery pack overheated and exploded. After Alex’s trip to the emergency room, it was determined that the explosion was due to a problem with how the drill was manufactured. Alex would like to lodge a complaint about the poor quality of the drill’s construction. To which federal agency should he complain? A. Labor Department B. Food and Drug Administration C. Federal Trade Commission D. Department of Trade E. Consumer Product Safety Commission Answer: E Rationale: The sole purpose of the Consumer Product Safety Commission is to protect the health and safety of consumers in and around their homes. It has the power to prescribe mandatory safety standards for almost all products consumers use. 75. The _____ is the federal government agency charged with enforcing regulations against selling and distributing adulterated, misbranded, or hazardous food and drug products of a specific type. A. Federal Trade Commission B. Consumer Product Protection Commission C. U.S. Justice Department D. Food and Drug Administration E. American Safety League Answer: D Rationale: This is the definition of the Food and Drug Administration, which focuses on the safety of food and drugs. 76. People who are concerned about potential hazards surrounding “natural” dietary supplements should take their concerns to the _____. A. Federal Trade Commission B. Consumer Product Protection Commission C. U.S. Justice Department D. Food and Drug Administration E. American Safety League Answer: D Rationale: The Food and Drug Administration focused on the safety of food and drugs. See also Exhibit 4.2. 77. The CAN-SPAM Act: A. prohibits commercial e-mailers from using false addresses and presenting false or misleading information B. requires meat manufacturers to open their facilities to health inspection at least once per quarter C. requires verifiable parental consent before a Web site can collect information from children D. allows commercial e-mailers to charge consumers a fee to “opt out” of receiving further e-mail from the sender E. prohibits the online practice of “behavioral targeting” Answer: A Rationale: This is one of the requirements of the CAN-SPAM Act. See also Exhibit 4.2. 78. Many people drink bottled water today, but one national brand of bottled water was not “spring-fresh” as advertised. The water actually came from a well located in the middle of an industrial warehouse facility and next to an industrial waste site. To which organization should the consumers who thought the advertising for the bottled water was misleading complain? A. Consumer Product Safety Commission B. Food and Drug Administration C. Federal Trade Commission D. Federal Communications Commission E. Consumer Protection Agency Answer: C Rationale: The Federal Trade Commission is charged with preventing corporations from using deceptive advertising and unfair methods of competition in commerce. 79. The _____ is an agency that prevents the use of unfair methods of competition in commerce. A. Federal Communications Commission B. Commerce Department C. Commission for Fair Trade D. Federal Trade Commission E. Sherman Antitrust Agency Answer: D Rationale: The Federal Trade Commission is authorized to investigate the practices of business combinations and to conduct hearings on antitrust matters and deceptive advertising. 80. The number of firms a company must face, the relative size of these firms, and the degree of interdependence within the industry are all part of its _____ environment. A. demographic B. economic C. political D. competitive E. social Answer: D Rationale: Management has little control over the competitive environment confronting a firm. 81. Frito-Lay is considered the king of the salty snack industry with its distribution network of 42 plants, 12,800 delivery people, and more than 900 tractor trailers formed into a retail delivery powerhouse. Smaller manufacturers of salty snacks find that monitoring the activities of Frito-Lay is an effective way to monitor the _____ factors within their external environments. A. bureaucratic B. marketing mix C. competitive D. social E. demographic Answer: C Rationale: The competitive environment encompasses the number of competitors, the relative size of competitors, and the degree of interdependence within the industry. 82. Abetta, Royal King, Kincade, EquiRoyal, and Amadeus are all manufacturers and marketers of Western-style saddles for horses. Thus, the manufacturers are _____ factors in each other’s external environments. A. component lifestyle B. competitive C. economic D. social E. legal and regulatory Answer: B Rationale: The competitive environment encompasses the competition a firm must face. 83. When many consumers think of adhesives, they think of 3M because it makes so many kinds of adhesives used in the home. However, the world’s largest adhesive producer is Henkel Consumer Adhesives, maker of Loctite and Duck brand duct tape. 3M and Henkel are part of each other’s _____ environment. A. competitive B. economic C. social D. marketing mix E. legal and political Answer: A Rationale: The competitive environment encompasses the number of competitors a firm must face, the relative size of the competitors, and the degree of interdependence within the industry. E-cigarettes Smoking inflames nonsmokers and claims the lives of more than 400,000 smokers each year, so the electronic cigarette is a welcomed alternative. Electronic cigarettes, called e-cigarettes, are battery-powered devices that emit a vapor from nicotine, flavorings, and other chemicals. It looks like a cigarette and allows smokers to inhale the nicotine vapor in places where smoking is not allowed. The product has been touted as a means to quit smoking as well. However, critics, especially the Food and Drug Administration (FDA), claim that “vaping” poses risks. In fact, the FDA claims its tests revealed a toxic chemical that is found in antifreeze as well as other carcinogens. The FDA blocked a shipment of the product from China and banned the sale of this product in the United States. In addition to the safety issue, the FDA is concerned that children might be attracted to this product because it comes in flavors other than traditional menthol, such as bubble gum, chocolate, and strawberry. The FDA wants this product to go through the same rigorous testing that drugs must go through before being marketed. However, the FDA’s authority over this product is questioned. While Congress has recently given the FDA authority over tobacco products, this is not a tobacco product and the Electronic Cigarette Association is fighting the ban. 84. Refer to E-cigarettes. E-cigarette manufacturers claim they are not trying to sell this product to children. Rather, they are offering an alternative to combustible tobacco for committed smokers. These smokers comprise the manufacturers’: A. target market B. buying center C. consumer cluster D. demographic sample E. mass market Answer: A Rationale: A target market is a defined group that managers feel is most likely to buy a firm’s product. 85. Refer to E-cigarettes. In 1964, 42 percent of Americans smoked, but now that rate has dropped below 20 percent. Which environmental factor has had the greatest impact on this trend? A. Technological B. Economic C. Competitive D. Demographic E. Social Answer: E Rationale: Social factors include our attitudes, values, and lifestyles. Many of the smoking bans have resulted from social pressure to limit smoking. 86. Refer to E-cigarettes. Marketers of the e-cigarette claim that they are not marketing the product to children, particularly because a starter kit costs over $100. Which economic factor are the marketers claiming will likely keep this product out of the hands of children? A. Income B. Inflation C. Recession D. Purchasing power E. Interest rates Answer: A Rationale: The purchaser of this product must have a large enough income to purchase this relatively expensive product. 87. Refer to E-cigarettes. The e-cigarette has been heralded as an innovative product that serves a need for smokers by helping them quit the habit. This innovative product was developed from changes in which environment? A. Demographic B. Technological C. Economic D. Social E. Competitive Answer: B Rationale: Innovation is part of the technological environment. 88. Refer to E-cigarettes. The Food and Drug Administration is part of which environmental factor affecting the marketing of this product? A. Demographic B. Technological C. Political and legal D. Competitive E. Economic Answer: C Rationale: The Food and Drug Administration is federal regulatory agency. Dog Spa Kelly Tumlin wants to open a dog grooming salon that will offer healthy, natural pet care and holistic pet products. All of the products sold at the salon will be of the highest quality and made of all-natural ingredients. Tumlin wants to pamper pets just like a spa pampers its owners. To determine the feasibility of the grooming salon, Tumlin hired a marketing researcher who studied all the market information available and determined that single, white-collar workers between the ages of 30 and 60 were the most likely people to use the services proposed by Tumlin. The researcher also determined that the West side of the city offers the best location for the enterprise even though zoning regulations are much stricter in that area. 89. Refer to Dog Spa. The group of consumers identified by the researcher as most likely to avail themselves of the services offered by Tumlin’s grooming salon is called a: A. target market B. buying center C. mass market D. consumer cluster E. demography Answer: A Rationale: A defined group of consumers that is most likely to buy a firm’s product is a target market. 90. Refer to Dog Spa. The fact that people would actually treat their dogs to a luxurious spa treatment reflects a change in _____ factors within the external environment. A. demographic B. social C. technological D. geographic E. political Answer: B Rationale: Social factors include our attitudes, values, and lifestyles. 91. Refer to Dog Spa. Describing the market for Tumlin’s grooming salon in terms of age and marital status reflects the use of _____ characteristics. A. psychographic B. demographic C. anthropological D. geographic E. sociological Answer: B Rationale: Vital statistics such as age, race, income, and marital status are demographic characteristics. 92. Refer to Dog Spa. Tumlin is developing a strategic marketing plan to cover the first five years of the salon’s business. She must be sure to consider which of the following uncontrollable factors in her plan? A. Place or distribution factors B. Media buying factors C. Demographic factors D. Dining area layout factors E. Pricing for services Answer: C Rationale: All but demographic factors are controllable marketing mix factors. 93. Refer to Dog Spa. What type of research did the marketing consultant perform for Tumlin? A. Basic B. Preliminary C. Applied D. Causal E. Factorial Answer: C Rationale: Applied research attempts to develop new or improved products. The research conducted by the consultant provided information to Tumlin to better develop the service. 94. Refer to Dog Spa. The uncontrollable environmental factors Tumlin faces in terms of zoning restrictions for the new dog salon represent _____ factors. A. economic B. political and legal C. research and development D. cultural E. demographic Answer: B Rationale: Every aspect of the marketing mix is subject to laws and restrictions. The laws and regulations of various governments represent uncontrollable political and legal factors. ESSAY 1. While managers can control the marketing mix, they cannot control the elements in the external environment that continually mold and reshape the target market. List six variables of the external environment that are not directly under the control of marketing managers. Answer: (1) Social change (2) Demographics (3) Economics (4) Technology (5) Political and legal factors (6) Competition 2. An organization is not completely at the mercy of the external environment. Explain environmental management and give an example how a motorcycle helmet manufacturer might use it. Answer: When a company implements strategies that attempt to shape the external environment within which it operates, it is engaging in environmental management. For example, extensive political lobbying may influence laws requiring helmet use or international competition. Working together in trade associations would allow the company to influence the competitive environment. Educating riders on the benefits of wearing helmets might modify its social environment. Students’ answers will vary. 3. List and describe the four basic values that have strongly influenced American attitudes and lifestyles. Answer: SELF-SUFFICIENCY. Every person should stand on his or her own two feet. UPWARD MOBILITY. Success would come to anyone who got an education, worked hard, and played by the rules. WORK ETHIC. Hard work, dedication to family, and frugality were moral and right. CONFORMITY. No one should expect to be treated differently from everybody else. 4. What is a component lifestyle? Describe how a college student follows a component lifestyle. Use specific examples. Answer: Component lifestyles mean that U.S. citizens are choosing products and services that meet diverse needs and interests rather than conforming to traditional stereotypes. Component lifestyles increase the complexity of consumers’ buying habits. Although the stereotypical student adopts a “student lifestyle” and makes purchases related to this lifestyle (textbooks, school supplies, pizzas, and so on), each student may also purchase according to alternative lifestyles. These may include hobbies, outside jobs, a family situation, or other interests. The student may also be a gourmet cook, fitness enthusiast, skier, or computer buff. 5. Compare and contrast Generation Y and Generation X. Which generation is of more interest to marketers? Why? Answer: Generation Y was born between 1979 and 1994 and is the largest group. Most Gen Yers are the children of baby boomers and are highly connected. Social media has exploded with this tech savvy group, and they expect brands to be active on Facebook and other social networks. Generation X includes people born between 1965 and 1978 and consists of 40 million consumers. It was the first generation of latchkey children. They have been bombarded by multiple media since they were babies, so they are savvy and cynical consumers. They are older than Gen Yers and are reaching the age where they are sending their kids off to college. Gen Xers have been largely ignored due to the larger baby boomers and Gen Yers getting marketers’ attention. Both generations are important to marketers, but the size of Gen Y makes them attractive. However, Gen Xers are avid buyers of the latest clothes, technology, and recreational products. 6. Who are the baby boomers and why are they important to marketers? Answer: Baby boomers are defined as people born between 1946 and 1964. They are the second largest demographic segment in the population today, recently passed by Gen Y due in part to the aging boomer segment, but their influence varies depending upon further segmentation within the baby boomer segment. 7. Describe some basic characteristics of the African American market. Answer: The African American market is youthful and increasingly more affluent. African Americans are nearly six years younger than all consumers. Black households making more than $75,000 annually have increased 47 percent in the last five years—1.5 times after than the general population. And although their population is smaller, there are more African American households in the U.S. than Hispanic households, because the latter tend to have larger families. 8. One component of the external environment marketing managers must understand and react to is the economic environment. Briefly describe the three economic areas of greatest concern to U.S. marketers and the marketing implications of trends in these three areas. Answer: RISING INCOMES. Incomes are rising in the United States, primarily due to dual-income families. Increases in disposable and discretionary income allow families and individuals to afford the “good life.” Marketers can now concentrate efforts on higher-quality, higher-priced goods and services. INFLATION. In recent years, the United States has not experienced high inflation; instead, prices do not rise quickly, employment levels are high, and purchasing power is up. Again, this allows marketers to concentrate efforts on higher-priced goods and services. During periods of inflation, marketers should be aware that brand loyalty decreases and consumers stock up on bargain products; consequently, pricing strategies should be monitored carefully. RECESSION. This period of economic activity is when income, production, and employment fall, which reduces demand. Marketers can counter these effects with value-improved products, customer service, replacement parts, and price freezes. 9. Name and describe at least five approaches companies are now using to keep innovation strong. Answer: Students can name and describe any five of the following: BUILD SCENARIOS. Some firms use teams of writers with diverse perspectives to create complex scenarios of what future markets may look like. ENLIST THE WEB. Some companies have created Web sites that act as literal marketplaces of ideas. Posters of challenges sometimes offer cash rewards for solutions. TALK TO EARLY ADOPTERS: Early adopters tend to be innovators themselves. They are risk-takers and look for new things. USE MARKETING RESEARCH: Find out what customers like and dislike about your product—and your competitors’ products. Find out what would make their lives and jobs easier if they had …your product. CREATE AN INNOVATIVE ENVIRONMENT. Let employees know that they have the “freedom to fail.” Without risk, there is no innovation. Create intranets so people can share knowledge and skills within the organization. Management should lead by example by creating an environment where innovation is encouraged and rewarded. CATER TO ENTREPRENEURS. Clear policies that reserve blocks of time for scientists or engineers to explore their own ideas have worked well at some companies, which allow employees to schedule a certain percentage of their time to “play,” pursuing their own ideas and projects. Open Innovation: Collaborating with external partners, including customers, suppliers, and startups, to co-create and share knowledge. Agile Development: Emphasizing iterative, flexible processes that allow for rapid testing, learning, and adaptation in product development. 10. There are several federal laws that affect marketing regarding the competitive environment, pricing practices, and false advertising. Name and briefly describe three of these federal laws. Answer: Exhibit 4.1 describes the primary U.S. laws that affect marketing, and students can discuss any three of them. The Sherman Act (1890) makes trusts and conspiracies in restraint illegal and makes monopolies and attempt to monopolize a misdemeanor. The Clayton Act (1914) outlaws price discrimination and tying contracts. The Federal Trade Commission Act (1914) created the Federal Trade Commission (FTC) to deal with antitrust matters and outlaws unfair methods of competition. The Robinson-Patman Act (1936) prohibits charging different prices to different competing buyers and requires sellers to make supplementary services or allowances available to all purchasers on a proportionately equal basis. The Wheeler-Lea Amendments to the FTC Act (1938) broadens FTC powers and outlaws false and deceptive advertising. The Lanham Act (1946) establishes protection for trademarks. The Celler-Kefauver Antimerger Act (1950) strengthens the Clayton Act to prevent corporate acquisitions that reduce competition. The Hart-Scott-Rodino Act (1976) requires large companies to notify the government of their intent to merge. 11. What is the CPSC? How does it affect marketing? Answer: The Consumer Product Safety Commission (CPSC) is a federal regulatory agency that directly affects the marketing environment. The sole purpose of the CPSC is to protect the health and safety of consumers in and around their homes. It has the power to prescribe mandatory safety standards for almost all products consumers use. The CPSC has the power to ban dangerous products from the marketplace and levy heavy fines on offending firms. Marketers should be aware of the health and safety needs of consumers when making and distributing products. 12. Describe the competitive environment for a locally owned coffeehouse in your college community. Answer: The competitive environment encompasses the number of competitors a firm must face, the relative size of the competitors, and the degree of interdependence within the industry. To answer this question, students will need to take a broad look at the competition for the consumers’ coffee dollars, including but not limited to fast-food franchises, vending machines, and convenience stores. The competition is large but is fragmented into many small units that all operate independently from each other while still trying to attract similar target markets. Test Bank for MKTG Charles W. Lamb, Jr. Hair, Joseph F., Carl McDaniel 9781285091860

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