Eastern Michigan University

MKT 510A

Chapter 6-Analyzing Business Markets

true/false Questions

1)SAP is a German software company that helps businesses automate their finance and management systems.  

2. Organizational buying is the decision-process by which organizations establish and satisfy their needs for goods and services.  

3. Mining, manufacturing, banking, and distribution services are all considered part of the business market.  

4. Schools and prisons are considered institutional buying organizations and they tend to have captive clienteles and limited budgets.  

5. Characteristics of business markets include that there are more buyers and larger buyers.  

6. When compared to the consumer market, the demand for goods and services in the business market is derived.  

7. In selling to the government, the contract is always awarded to the lowest bidder.

8. A new supplier is least likely to make a sale to a prospect involved in the straight- rebuy situation.  

9. A new supplier is least likely to make a sale to a prospect involved in the straight- rebuy situation.  

10. A “straight rebuy” is a more complex process than a “new task” because the firm is limited to an approved list of vendors.  

11. One key thing to keep in mind when marketing across cultural boundaries is that all people are NOT basically alike.  

12. A secretary who prevents salespersons from contacting users or deciders is playing a gatekeeper role.  

13. Interpersonal factors have almost no influence in business purchasing decisions.  

14. The business buying process is influenced by environmental, organizational, and individual factors.  

15. Reading an advertisement about a new business service in a trade magazine to which the purchasing agent subscribes would be an example of how a problem might be recognized in an organizational setting.  

16. Even if a supplier firm has the capacity to deliver a business product or service, that supplier might NOT be allowed to submit a proposal in the buying process.

17. When responding to a request for a written proposal, a business marketer should remember the document is primarily a technical document explaining the features of the product.  

18. Product value analysis can involve determining which components can be made cheaper through redesign or standardization, while keeping the same performance level of those components.  

19. In the negotiation process, if the potential supplier is faced with the lower price of a competitor, he or she should always lower his/her price.  

20. A blanket contract or stockless purchase plan establishes a long-term relationship in which the buyer promises to buy all the stock of a particular seller at agreed-upon prices.  

Multiple Choice Questions

21. The                consists of all of the organizations that acquire goods and services used in the production of other products or services that are sold, rented, or supplied to other customers.

1. business market
2. institutional market
3. consumer market
4. government market
5. specialized market

22. The institutional market is best described as having                                  .

1. low budgets and a captive clientele
2. demand elasticity and geographically concentrated suppliers
3. contract negotiations and fluctuating demand
4. derived demand, geographically concentrated suppliers, and budgetary constraints
5. demand that is elastic, derived, and fluctuating

23. All of the following are major industries making up the business market EXCEPT:

1. agriculture, forestry, fisheries.
2. manufacturing, mining.
3. construction, transportation.
4. banking, finance.
5. governments, institutions.

24. Business buying behavior differs from consumer buying behavior in that

                           .

1. the buyers for the business market are typically more geographically dispersed than those for the consumer market and the demand for products and services in the consumer market is unaffected by price fluctuations
2. fewer people typically participate in or influence business buying decisions than in the consumer market
3. businesses buy products to accomplish a single goal, which varies by industry and business
4. the demand for business goods and services is derived from consumers’ final demand
5. businesses buy through longer channels with more intermediaries

25. When compared to the consumer market, the demand for goods and services in the business market is .

1. far more elastic
2. significantly more constant
3. derived
4. more likely to be affected by changes in price
5. all of the above

26. 3M has developed a new type of plastic film used for shipping security. It is more durable than any other form of film on the market. The first year after the product was introduced its sales totaled $435 million. Analysts have predicted an annual growth of 30 percent as businesses like transportation companies discover how well the film protects their products. Because the demand for the new 3M film is dependent on the demand for the products transported within it, the demand for the film is                         .

1. derived
2. inelastic
3. routine
4. elastic
5. constant

27. The buying department for a nursing home is informed the price of the ibuprofen used for patient medication has increased by 15 percent. He orders a new supply anyway because he knows he can pass the increase on to the clients. This is an example of business products having                                                demand.

A. routine

2. inelastic
3. volatile
4. accelerated
5. elastic

28. Which of the following is  of the U.S government as a market?

1. The U.S. government is the largest customer in the world.
2. Most purchases by the U.S. government are in the billions of dollars, usually for technology.
3. The U.S. government will always award the contract to the lowest bidder.
4. A comprehensive bid proposal might take as much as a few days to prepare and “weigh in” at a few dozen pages.
5. Cost minimization is the driving force behind buying decisions made by the U.S. government.

29.   organizations typically require suppliers to submit bids. Normally, they award the contract to the lowest bidder, although they sometimes take into account a supplier’s superior quality or reputation for completing contracts on time.

1. Business
2. Institutional
3. Consumer
4. Government
5. Specialized

30. A new supplier is least likely to make a preliminary sale to a prospect involved in which of the following buying situations?

1. new task
2. modified rebuy
3. functional rebuy
4. straight rebuy
5. direct purchase

31. Ping Leung is a produce buyer for Hongxing, a large food supplier. He is buying apples, banana, pears and so on for producing soft drinks. He orders the same number and quality of these fruits as before but notices that his supplier’s prices have increased slightly. Ping is conducting a                                                .

1. straight rebuy
2. direct purchase
3. modified rebuy
4. new task buy
5. reciprocal buy

32. Ping Leung is a produce buyer for Hongxing, a large food supplier. He is buying apples, banana, pears and so on for producing soft drinks. He orders the same number and quality of these fruits as before but notices that his supplier’s prices have increased slightly. If prices from his usual produce supplier continue to rise, you can expect Ping to engage in a         .

1. straight rebuy
2. direct purchase
3. modified rebuy
4. new task buy
5. functional rebuy

33. Purchasing department personnel for a corporate farm would have the most influence when the organization is                .

1. buying marketing materials for its booth at a national agricultural trade show
2. purchasing farm equipment for the firm’s agricultural business unit
3. negotiating the performance specifications for new grain storage facilities
4. renewing its subscriptions to several trade journals
5. switching to a new vendor for satellite moisture reporting

34. The                is a buying situation in which a purchaser buys a product or service for the first time.

1. straight rebuy
2. direct purchase
3. modified rebuy
4. new task buy
5. functional rebuy

35. The Chens Corp. is a ground beef processing plant. Owners Dawei and Dashan Chen attended a trade show and saw a meat grinding machine that operates at a capacity of 9,000 pounds per hour and requires only one employee. Until the show, the brothers had no idea such a product existed. As far as they have learned only one company is manufacturing such a machine. They have calculated that such a machine could save

them up to ¥250 a day in labor costs. They have contacted the company to learn more

about the ¥100,000 grinder. The Chen brothers are engaged in a                                   .

1. straight rebuy
2. direct purchase

3. modified rebuy
4. new task buy
5. functional rebuy

36. Advertising usually has its greatest impact at the                                                                                             stage of new-task buying.

1. awareness
2. interest
3. trial
4. evaluation
5. adoption

37. Salespeople usually have their greatest impact at the                                                                                     stage of new-task buying.

1. awareness
2. interest
3. trial
4. evaluation
5. adoption

38.   is(are) where a single supplier provides the buyer with all required maintenance, repair, and operating supplies, resulting in lower costs to the buyer.

1. Missionary sales
2. A turnkey solution
3. Project engineering
4. Systems contracting
5. Prime contracting

39. The   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.”

1. buying center
2. initiating team
3. purchasing division
4. engineering division
5. influencing center

40. In the buying center,          are people who request that something be purchased, including users or others.

1. initiators
2. influencers
3. deciders
4. approvers
5. gatekeepers

41. Office manager Billie has signatory authority for organizational purchases under

$2,500. She delegates the task of finding five new acceptable fax machines to a trusted subordinate, Jules. If Billie does not involve herself further in the buying process, other than to sign off on what Jules presents to her, her role is limited to that of                                                                                               .

1. gatekeeper
2. decider
3. influencer
4. approver
5. user

42. Erin’s secretary developed a file of visiting salespeople, but only allowed a few to actually have time on Erin’s calendar. Erin is frequently charged with buying expensive office equipment as part of her job. Erin’s secretary is playing what role in the business buying process?

1. Initiator.
2. User.
3. Decider.
4. Approver.
5. Gatekeeper.

43. Which of the following best describes the buying center role in which people have the power to prevent sellers or information from reaching members of the buying center?

1. Initiators.
2. Influencers.
3. Deciders.
4. Approvers.
5. Gatekeepers.

44. Which of the following is LEAST likely to be a useful question to ask when considering selling to industrial customers who are of a culture other than one’s own?

1. What is their preferred mode of business communication?
2. How do they perceive time?
3. In what time zone is their headquarters?
4. How do they make decisions?
5. Do they value consensus?

45. Because Dante is new at her job as company buyer, she is very cautious in her buying decisions even when engaged in straight rebuys.     influences have the greatest effect on Dante as she performs her job.

1. Environmental
2. Interpersonal
3. Organizational
4. Individual
5. Cultural

46. For the     type of business customer, low prices are desired, but they will respond to arguments about lower cost or more dependable supply and/or service.

1. price-oriented
2. solution-oriented
3. silver-standard
4. gold standard
5. strategic-value

47. The gardener in charge of maintaining the beautiful grounds at an amusement park was strolling through the park looking at the flowers and bushes from a guest’s perspective when he noticed some Japanese beetles flying around. He made a mental note to himself that he had to order some Japanese beetle traps when he got back to the office. This is an example of which of the steps in the purchase/procurement process?

1. problem recognition
2. general need description
3. product specification

4. supplier selection
5. supplier search

48. Which of the following is NOT a major part of the product specification process?

1. Determining the item’s general characteristics.
2. Setting desired quantities.
3. Mandating terms for delivery.
4. Defining quality levels.
5. Defining pricing.

49. Which of the following buy phases would definitely be included in a modified rebuy situation?

1. Problem recognition.
2. General need description.
3. Supplier selection.
4. Supplier search.
5. Product specification.

50. The routine placing of the twice-weekly order to restock a commercial kitchen’s freezer with meats, poultry, frozen juices, and fresh-frozen “pre-mades” like dumplings, definitely includes which of the following stages in the business buying process?

1. Problem recognition.
2. General need description.
3. Order-routine specification.
4. Supplier search.
5. Product specification.

51.   is an approach to cost reduction in which components are carefully studied to determine if they can be redesigned or standardized or made by cheaper methods of production.

1. Product value analysis
2. Customer cost analysis
3. Total quality management
4. Product reengineering
5. Marketing research

52. A product value analysis is conducted at the                                                                                              step of the procurement process.

1. problem recognition
2. general need description
3. product specification
4. supplier search
5. proposal solicitation

53. An online retailer of outdoor equipment was looking for some help with its Web site maintenance so as to be more user-friendly and convenient. The owner consulted to a

name list of computer service providers and asked several of her colleagues for recommendations. She is in the                                phase of business buying.

1. problem recognition
2. general need description
3. product specification
4. supplier search
5. order-routine specification

54. The Guangming Textile Manufacturing Company is evaluating potential suppliers of zippers to be used in production of a line of children’s outerwear. The company is concerned about the delivery reliability, price, and supplier reputation. Guangming is in the                      phase of the business buying process.

1. supplier selection
2. proposal solicitation
3. product specification
4. performance review
5. order-routine specification

55. Happy Gifts store sells birthday cards and gifts year-round. The primary source for its domestic and foreign gifts is Festival Supply, but Happy Gifts also buys some ornaments from Aobao Global and from Xinghui Distributors. Both of the distributors continue to try to price their merchandise at prices lower than those of Festival Supply because Aobao and Xinghui Distributors are both:

1. outsuppliers.
2. outsourcing agents.
3. second-tier suppliers.
4. value-added suppliers.
5. subordinate suppliers.

56. As Rikka and the salesperson talked, they agreed Rikka would buy six pallets of world flags, four 12-foot sections of display shelving, and two gross of super-hero, bobble-head dolls for Rikka’s arts and crafts supply store. In addition, the salesperson agreed to have the items delivered in ten working days and give Rikka an 8-percent discount. Rikka and the salesperson are engaged in which phase of the procurement process?

1. Supplier selection.
2. Proposal solicitation.
3. Product specification.
4. Performance review.
5. Order-routine specification.

57. A(n)             establishes a long-term relationship in which the supplier promises to resupply the buyer as needed at agreed-upon prices over a specified period.

1. blanket contract
2. specialized contract
3. over-run contract
4. purchase order contract
5. superior order contract

Essay Questions

58. Two sales associates, Diz Miller and Nestor Marlbrough, enter a room outside the purchasing agent’s office. The purchasing agent works for a fiberglass manufacturer. Miller has sold to the company several times in the past. He has stopped by to see if the purchasing agent needs to restock any of his company’s machine lubricants. Marlbrough will try to convince the purchasing agent to buy a machine for extracting and trimming glass fibers that will reduce waste by 13 percent and costs $44,000. The furniture company currently does this by employing skilled laborers who use hand tools. Classify the products being sold in terms of buyclass. What buy phases are associated with each buyclass? In what buy phase do you think the purchasing agent is now?

59. Rhet and Julie Raymond had a larger-than-average crop of mangos last year. They decided to make some extra jars of Julie’s mother’s mango chutney to see if they could sell it at a local crafts fair. Response was very promising and demand was strong. Now Julie and Rhet own a company that produces gourmet chutneys under the brand name Exoti-Sauce. Working at the company now are Rhet, Julie, her mother Mandalee, and Rhet and Julie’s nephew Bert who makes deliveries and does the heavy lifting and

cleaning. Rhet is in charge of marketing and helps out in the kitchen. There are also a number of part-time workers. A salesperson wants to sell them a bottle-labeling system that will speed up production by 200 percent. It costs about $12,500. In a short essay, discuss how each of the company’s full-time employees might assume various roles in the buying center.

60. Imagine you are a salesperson for a company that sells office supplies to buyers in different buying situations. In a short essay, develop three scenarios that illustrate each of the three situations.

61. In a brief essay, explain how an organizational buyer might decide whether a potential supplier is qualified and whether a proposal should be solicited and/or accepted

from that supplier. How can the supplier improve their odds in the process?

62. Explain how the governmental procurement process differs from the business market purchase process.

Mini-Cases Mini-Case 6-1

Dr. Therese Turek’s Minnesota ear, nose, and throat practice is booming and she needs more office space to accommodate the growth. She asks her office manager James to help decide the attributes that will assure that a new space will be adequate for the practice now and in the future. James asks all the employees for their input as to what is needed in a new office. After much research, James recommends that the office move to a new medical complex, where office space is priced 30 percent higher. The new space has an on-site, out-patient surgery center, better wiring for more sophisticated machinery, and covered parking. James does not include information about more affordably-priced and available office space in the same complex because he would like a shorter commute to work. Dr. Turek is impressed with James’ recommendations and announces to staff and patients that the practice will be relocating in 60 days.

63. Refer to Mini-Case 6-1. Dr. Turek played what roles in the decision to move her practice?

1. Initiator, user, and gatekeeper.
2. Initiator, user, and approver.
3. Only initiator.
4. Only approver.
5. Only influencer.

64. Refer to Mini-Case 6-1. When James withheld information about the closer office possibilities, this was an example of which type of influence on the buying process?

1. Environmental.
2. Organizational.
3. Interpersonal.
4. Individual.
5. Macro.

Mini-Case 6-2

Billionaire investor Warren Buffet once called his jet “The Indefensible,” referring to its high price tag. Later, however, he named it “The Indispensable.” Others share this sentiment because many corporations today own corporate jets to support efficient schedules and to reach remote locations. Given the increasingly global nature of business, corporate aircraft makes sense. The GulfStream V, one of the top of the line executive jets cost Buffet $38 million. Its speed is nearly 600 miles per hour. A nonstop flight between New York and Tokyo takes about 13 hours and 40 minutes on the Gulfstream V and about an hour and ten minutes longer on a commercial jet. Major manufacturers of corporate jets are Gulfstream, Cessna, the Beech Division of Raytheon Co., and Dessault Aviation of France. The largest manufacturer in terms of sales is Bombardier, which makes the Learjet.

65. Refer to Mini-Case 6-2. Most executives, including Warren Buffet, would describe the demand for corporate jets as .

1. inelastic
2. routine
3. low-involvement
4. elastic
5. accelerated

66. Refer to Mini-Case 6-2. Considering how shareholders have felt about the ownership

of corporate jets in general, now when a company considers buying a corporate jet, they will engage in a(n)                                                         .

1. functional buy
2. modified rebuy
3. indirect purchase
4. new task buy
5. systems buy