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    Explain why firms minimize losses when marginal revenue prod

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    Explain why firms minimize losses when marginal revenue product is equal to marginal resource cost.

    101. After conducting STP analysis for her custom auto parts store and developing strategies
    for each of the 4 Ps, Brenda now has to make _____________ decisions.
    A. competitive response
    B. resource allocation
    C. product line
    D. market growth
    E. mission statement
    2-24
    Chapter 02 - Developing Marketing Strategies and a Marketing Plan
    102. Lamar owns four dry cleaning stores in the suburbs of Orlando. He updates his STP
    analysis annually, and adjusts his marketing mix based on the STP results. His next strategic
    marketing decision will likely involve:
    A. how Disney World crowds will impact his business.
    B. which employees to promote or fire.
    C. how to allocate resources among his four stores.
    D. what new government regulations to implement.
    E. when to shift from a concentrated to an undifferentiated strategy.
    103. In most companies, marketing resource allocation decisions are made at the SBU or
    ___________ level of the firm.
    A. corporate
    B. product line
    C. customer care
    D. sales representative
    E. accounting
    104. A ___________ is a group of products that consumers may use together or perceive as
    similar in some way.
    A. SBU
    B. STP
    C. product line
    D. market segment
    E. promotional service
    105. Heather has been assessing a number of her firm's products using the Boston Consulting
    Group approach to portfolio analysis. She has been trying to assess the strength in a particular
    market and is looking at the sales of the product and the overall market as well as the sales of
    competitors. Heather is working on determining _________________.
    A. relative market share.
    B. market growth rate
    C. competitive advantage
    D. statistical census analysis
    E. cash generation equivalents
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    Chapter 02 - Developing Marketing Strategies and a Marketing Plan
    106. To determine how attractive a particular market is in using the BCG portfolio analysis,
    __________________ is established as one axis.
    A. competitive intensity
    B. relative market share
    C. ideal market distribution
    D. market growth rate
    E. profit potential
    107. Based on the BCG portfolio analysis, products in low-growth markets that have received
    heavy investments and now have excess resources to spin off are:
    A. stars.
    B. cash cows.
    C. question marks.
    D. dogs.
    E. None of the above
    108. Fernando was thrilled to find out that his company had just decided to invest a great deal
    of money in the product he was managing. He knows that even with its recent high rate of
    growth and the fact that it was dominating the market, he would need more money to establish
    it firmly. Using the BCG portfolio analysis, his product shares characteristics with other:
    A. stars.
    B. cash cows.
    C. question marks.
    D. dogs.
    E. None of the above
    109. Using the BCG portfolio analysis, dogs should be phased out unless:
    A. the CEO of the firm is a champion of the product.
    B. additional resources could convert the product into a star.
    C. it complements or boosts the sales of another product.
    D. the market might rebound.
    E. None of the above. Dogs should be phased out.
    2-26
    Chapter 02 - Developing Marketing Strategies and a Marketing Plan
    110. Portfolio analysis is a useful and powerful tool, but firms often need to take a more
    balanced approach because:
    A. measures are difficult to obtain and project
    B. classifications can become self-fulfilling prophesies and strengths and weaknesses are
    distorted.
    C. substitute approaches can offer different insights.
    D. All of the above.
    E. None of the above
    111. Starbucks has developed a number of metrics beyond purely financial metrics. Knowing
    the importance of perceptions and knowing the importance of developing ways to
    demonstrate its activity, Starbucks tries to find clear ways to:
    A. build brand equity.
    B. demonstrate its sense of corporate social responsibility.
    C. address concerns of opponents at local, regional, national and global levels.
    D. help consumers feel better about their purchases.
    E. All of the above
    112. The strategic marketing planning process:
    A. is a five-step process that should always be used in order.
    B. can be used in reverse if desired.
    C. begins with setting appropriate, measurable: outcomes.
    D. is not always sequential.
    E. forces marketing managers to think rationally.
    113. During the implementation phase, Jonathon finds he does not have sufficient resources to
    accomplish the objectives that were previously established. Jonathon will likely:
    A. ask for more resources.
    B. change the planning objectives.
    C. consider abandoning the plan.
    D. any of the above.
    E. all of the above.
    2-27
    Chapter 02 - Developing Marketing Strategies and a Marketing Plan
    114. Which of the following is NOT one of the four major growth strategies marketers
    typically utilize?
    A. market penetration
    B. market development
    C. product proliferation
    D. diversification
    E. product development
    115. For many years, because of the size of the U.S. economy, domestic companies ignored
    international markets, preferring to expand their marketing efforts toward existing customers.
    These companies were pursuing a ________________ strategy.
    A. market penetration
    B. market development
    C. product proliferation
    D. diversification
    E. product development
    116. In many market situations, word-of-mouth referrals are a very effective source of new
    customers. Marketers often encourage referrals as a _______________ growth strategy.
    A. product proliferation
    B. market development
    C. market penetration
    D. diversification
    E. product development
    117. The marketing faculty at one university suggested the recruiting office offer a $50 gift
    certificate at the campus bookstore to students who referred new students to the university.
    This is a _______________ growth strategy.
    A. product proliferation
    B. market development
    C. market penetration
    D. diversification
    E. product development
    2-28
    Chapter 02 - Developing Marketing Strategies and a Marketing Plan
    118. Adrienne decides to add new sales representatives and increase advertising in her
    existing market for her line of security systems. Adrienne is pursuing a __________ growth
    strategy.
    A. product proliferation
    B. market development
    C. market penetration
    D. diversification
    E. product development
    119. Sarah has decided to pursue a market penetration strategy for her French cookware
    product line. She will likely increase advertising, sales promotion, and sales personnel. She
    may also consider:
    A. intensifying distribution efforts.
    B. investing in a travel agency.
    C. shift resources into marketing a line of footwear.
    D. expand into new territories.
    E. all of the above
    120. A ________________ growth strategy employs the existing marketing offering to reach
    new market segments.
    A. product proliferation
    B. market development
    C. market penetration
    D. diversification
    E. product development
    121. Quitman sells his business language dictionary to college students throughout the United
    States. He wants to sell the book to international students abroad. Quitman wants to pursue a
    __________________ growth strategy.
    A. product proliferation
    B. market development
    C. market penetration
    D. diversification
    E. product development
    2-29
    Chapter 02 - Developing Marketing Strategies and a Marketing Plan
    122. When pursuing a market development strategy, expanding into international markets is
    generally:
    A. more risky than expansion in domestic markets.
    B. impossible due to negative attitudes about American products.
    C. executed through international trade relief subsidies.
    D. simplified by creating new products for export markets.
    E. all of the above
    123. H&R is a small, local heating and air conditioning business. They know the area military
    base is potentially a profitable source of growth but also know it is difficult to get established
    as a certified contractor with the government. H&R is considering a ____________ growth
    strategy.
    A. product proliferation
    B. market development
    C. market penetration
    D. diversification
    E. product development
    124. Many states create licensing requirements for a variety of professionals designed to
    restrict entry into their market by professionals from other states. This strategy limits
    ____________ growth strategies.
    A. product proliferation
    B. market development
    C. market penetration
    D. diversification
    E. product development
    125. Marketers who design and offer new products and services to their existing customers
    are pursuing a ____________________ growth strategy.
    A. product proliferation
    B. market development
    C. market penetration
    D. diversification
    E. product development
    2-30
    Chapter 02 - Developing Marketing Strategies and a Marketing Plan
    126. Most banks now have customer relationship software which, when a customer contacts
    the bank, tells the service representative what types of accounts, loans, and credit cards the
    customer currently has. Service representatives use this information to sell additional banking
    services. This is a ___________________ growth strategy.
    A. product proliferation
    B. market development
    C. market penetration
    D. diversification
    E. product development
    127. Whenever Arnold calls his insurance agent, the agent tells Arnold about new types of
    insurance available. The agent is pursuing a ________________ growth strategy.
    A. product development
    B. market development
    C. market penetration
    D. diversification
    E. product proliferation
    128. In 2007, When Apple Computer Company introduced its new iPhone, adding cellular
    telephone and Internet access to its iPod, the company was engaged in a _________________
    strategy.
    A. mission creep
    B. antitrust
    C. power positioning
    D. customer excellence enhancement
    E. product development
    129. Introducing new products or services to a market segment the company is not currently
    serving is called:
    A. product development
    B. market development
    C. market penetration
    D. diversification
    E. product proliferation
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    Chapter 02 - Developing Marketing Strategies and a Marketing Plan
    130. Researchers at Lobeco Chemical Company, a manufacturer of pigments for paint
    companies, found one of their pigment compounds has incredible adhesive qualities and could
    be used as glue in consumer markets. If Lobeco Chemicals pursues this opportunity it would
    be pursuing a _____________ growth strategy.
    A. product development
    B. market development
    C. market penetration
    D. diversification
    E. product proliferation
    131. To develop winning value-based strategies by anticipating and interpreting change and
    leveraging resources to address those changes, firms use:
    A. macro strategies.
    B. overarching strategies.
    C. scenario planning.
    D. change management.
    E. effective mission statements.
    132. The marketing department at Stuart's firm has assessed the strengths and weakness, and
    opportunities and threats. Now the department with input from senior management will
    identify different scenarios. Which of the following will NOT be one of their efforts?
    A. Identify alternatives the firm might want to pursue
    B. Match the firm's competencies with the opportunities' attractiveness
    C. Reflect on the risks, benefits and costs in each alternative
    D. Make sure they have correctly identified the competitors
    E. Project what might happen two to five years into the future
    133. Twyla has been asked to lead the effort in her firm's scenario planning effort. She knows
    she'll have to look at strengths and weaknesses, and opportunities and threats. Twyla will
    NOT have to look at which of the following factors?
    A. Cultural
    B. Demographic
    C. Economic
    D. Technological
    E. Twyla will have to look at all of the above.
    2-32
    Chapter 02 - Developing Marketing Strategies and a Marketing Plan
    134. The final step in scenario planning includes:
    A. determining the marketing mix for the alternatives.
    B. positioning all the likely alternatives.
    C. embedding the macro strategies into the alternatives.
    D. establishing breakeven points for the alternatives.
    E. determining the profitability of the alternatives.
    135. In developing an actionable marketing strategy, a firm will do all of the following
    except:
    A. create a marketing plan.
    B. analyze and evaluate its marketing situation.
    C. develop a segmentation, targeting and position strategy.
    D. use scenario planning to integrate information and assess the viability of corporate
    strategies.
    E. poll key stakeholders, particularly employees and shareholders, about their preferred
    options to ensure "buy-in."

    136. Of what use is a sustainable competitive advantage to a firm?
    137. The text states, "Viewing customers with a life-time value perspective, rather than on a
    transaction-to-transaction basis, is the key to modern customer retention programs." Create an
    example demonstrating a life-time value perspective. Why is customer retention almost
    always a profitable marketing strategy?
    2-33
    Chapter 02 - Developing Marketing Strategies and a Marketing Plan
    138. Although most people do not have a personal marketing plan, when would one be
    appropriate?
    139. One of the benefits of taking marketing courses is the opportunity to apply marketing
    concepts to marketing yourself. When selling yourself, you are a product including all the
    skills, aptitudes, and attitudes you bring to the market. What is a sustainable competitive
    advantage? What can you do to give yourself a sustainable competitive advantage in the
    marketplace?
    140. Your marketing professor, Dr. Marketing, has been asked to participate in the
    university's strategic marketing planning process. During the planning phase of the process,
    what questions Dr. Marketing likely ask? Be specific, this is the university's strategic
    marketing planning process.
    2-34
    Chapter 02 - Developing Marketing Strategies and a Marketing Plan
    141. The text describes the case of Splenda, a product introduced into a market dominated by
    two other products but successfully differentiated from the competition both in formula and
    image. This gives Splenda a sustainable competitive advantage. What is a sustainable
    competitive advantage? Describe an example of a product or business you have encountered
    that has developed sustainable competitive advantage. Why is that product or firm advantage
    sustainable?
    142. Your marketing professor, Dr. Marketing, has been asked to participate in the
    university's strategic marketing planning process. After completing the planning phase of the
    process, Dr. Marketer has been asked to assist with the STP analysis. What questions will Dr.
    Marketing ask? Be specific, this is the university's strategic marketing planning process.
    143. As the text states, "Firms typically are most successful when they focus on those
    opportunities that build on their strengths relative to those of its competition." Using the
    automobile industry in the United States, describe an example of this type of positioning
    strategy.
    2-35
    Chapter 02 - Developing Marketing Strategies and a Marketing Plan
    144. Your marketing professor, Dr. Marketing, has been asked to participate in the
    university's strategic marketing planning process. After completing the planning and STP
    phases of the process, Dr. Marketer has been asked to assist with the implementing marketing
    mix and allocating resources. What questions will Dr. Marketing ask? Be specific, this is the
    university's strategic marketing planning process.
    145. Jami, a sales manager for an industrial materials company, reviews each sales
    representative's performance quarterly. He knows business has been good but is surprised to
    see some reps are selling much more than their goals while others have not meeting their
    goals. What should Jami do?
    146. You and your friend Alison work in different parts of a large firm. In a recent analysis,
    your area was labeled a "cash cow" and hers was labeled a "question mark." What things
    would you do differently in your area than Alison would do in hers?
    2-36
    Chapter 02 - Developing Marketing Strategies and a Marketing Plan
    147. Boston Consulting Group's Portfolio Analysis classifies a company's products or product
    lines into a two-by-two matrix. What are the bases of classification and what are products or
    product lines in each of the four quadrants called? What marketing strategies are usually
    considered for each of the four classifications?
    148. Your new sales manager, who previously worked for Boston Consulting Group, directs
    each sales rep to "toss out the dogs," "exploit the stars," and "milk the cows." What should
    you do?
    149. After finishing his marketing degree, Ryan inherited the family shrimp shack restaurant.
    The restaurant is a small, local institution that beach visitors have been coming to for decades.
    Ryan wants to make his business grow and is considering either a market penetration or
    market development strategy. Describe what Ryan will likely do if he pursues either strategy.
    2-37
    Chapter 02 - Developing Marketing Strategies and a Marketing Plan
    150. Garden Gate is a one location nursery business, selling plants and flowers for home
    gardeners. The new owners want to grow through either a product development or
    diversification strategy. What will the owners likely do if they pursue either strategy?
    151. Tyler is eager to demonstrate what he learned in his marketing course, and he suggested
    to his supervisor that the firm should add scenario planning to its overall marketing planning
    efforts. His supervisor was not exactly excited about the idea but he asked Tyler to draft a
    very short memo explain the value. What should Tyler include?
    152. Why is a good strategy necessary for a firm?
    153. Why is it important to have a structured approach to planning and developing a
    marketing plan?
    2-38
    Chapter 02 - Developing Marketing Strategies and a Marketing Plan
    154. Southwest Airlines is known for being the low-cost provider in the U.S. airline industry.
    What type of macro strategy has Southwest pursued?
    155. What is the goal of product, operational, and customer excellence?
    156. Every summer university administrators attempt to estimate how many students will
    show up in the fall. When August arrives, they hire part-time instructors and re-assign faculty
    to teach the courses students want. In the spring, administrators often go on a retreat to
    consider how to do things differently next year. What three phases of the strategic planning
    process do they engage in?
    157. Through contacts with local realtors and architects, ABC Construction Company
    consistently finds out who is considering having a home built before the larger, regional
    building companies find out. What marketing situation does ABC Construction have?
    158. Firms periodically conduct SWOT analyses. Why?
    159. When using STP, what types of opportunities provide the greatest potential success?
    160. Every time the cost of oil goes up, gasoline stations raise their prices. What type of
    pricing strategy are they using?
    161. Cosmetic companies spend significant sums advertising the benefits of their products.
    The prices of their products often significantly exceed the cost of producing them. What type
    of pricing strategy are these cosmetic companies using?
    2-40
    Chapter 02 - Developing Marketing Strategies and a Marketing Plan
    162. Alex knows the pricing is the only part of his veterinarian business that brings in money.
    Thinking strategically, how should Alex price his services?
    163. When catalog companies send sale catalogs to their customers, which type of growth
    strategy are they pursuing?
    164. Why have many U.S.-based companies pursued market development strategies in
    countries like Mexico, China, and Japan?
    165. When musicians and their concert promoters began offering CDs of a live concert,
    immediately after the concert ended, what type of growth strategy were they pursuing?
    2-41

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    Solution Preview

    Firms minimize losses or maximize profits when marginal revenue product is equal to marginal resource cost because when marginal revenue product (MVP) is greater than marginal resource cost (MRC), the marginal profit is positive, and if MVP is less than MRC, it will lead to a negative marginal profit. Therefore, when MRC is equal to MVP, the marginal profit is 0. The reason why we want this number to be 0, is because if total profits increase marginal profit will increase, and if total profits decrease, marginal profit will be negative.

    101. B
    C
    B
    C
    A

    106. D
    B
    A
    C
    D

    111. E
    D
    D
    C
    A

    116. C
    B
    C
    A
    B

    121. B
    A
    B
    B
    E

    126. E
    A
    E
    D
    D

    131. C
    D
    E
    E
    E

    136. (p. 33) Of what use is a sustainable competitive advantage to a firm?
    Establishing a sustainable competitive advantage makes it hard for competitors to enter a
    market or attract a firm's customers. It should difficult to copy and something that can be
    maintained over time.
    AACSB: outcome 3
    Bloom's Taxonomy: Comprehension
    Learning Objective: 5
    Level: moderate
    Topic: Marketing Strategy
    2-92
    Chapter 02 - Developing Marketing Strategies and a Marketing Plan
    137. (p. 34) The text states, "Viewing customers with a life-time value perspective, rather than
    on a transaction-to-transaction basis, is the key to modern customer retention programs."
    Create an example demonstrating a life-time value perspective. Why is customer retention
    almost always a profitable marketing strategy?
    Answers to the first part will vary but should demonstrate how much business a customer
    brings in over a life time. For example, $4.00 at Starbucks, five days per week, for 20 years
    equals $20,800. Customer retention is profitable because it costs more to get new customers
    than to retain existing ones
    AACSB: outcome 3
    Bloom's Taxonomy: Application
    Learning Objective: 5
    Level: hard
    Topic: Marketing Strategy
    138. (p. 38) Although most people do not have a personal marketing plan, when would one be
    appropriate?
    Students might reflect on their own personal circumstances, but three plausible responses
    include the choice and process they used to select the college or university, a potential
    marriage and pursuing a job.
    AACSB: outcome 3
    Bloom's Taxonomy: Synthesis
    Learning Objective: 1
    Level: hard
    Topic: Marketing Strategy
    2-93
    Chapter 02 - Developing Marketing Strategies and a Marketing Plan
    139. (p. 40) One of the benefits of taking marketing courses is the opportunity to apply
    marketing concepts to marketing yourself. When selling yourself, you are a product including
    all the skills, aptitudes, and attitudes you bring to the market. What is a sustainable
    competitive advantage? What can you do to give yourself a sustainable competitive advantage
    in the marketplace?
    A sustainable competitive advantage is something you can persistently do better than the
    competition. Skills including statistical analysis, ability to use technology, communication,
    and accounting etc, are all important and valuable. Aptitudes including rational thinking and
    problem-solving are life-long abilities that can benefit any organization. Attitudes such as
    persistence, a sense of humor, team work, are valuable in any business environment. But, as
    best-selling author Steven Covey suggests, we must always "sharpen the saw," meaning
    continually grow and learn in order to be successful and maintain a sustainable competitive
    advantage.
    AACSB: outcome 3
    Bloom's Taxonomy: Application
    Learning Objective: 1
    Level: hard
    Topic: Marketing Strategy
    140. (p. 40-42) Your marketing professor, Dr. Marketing, has been asked to participate in the
    university's strategic marketing planning process. During the planning phase of the process,
    what questions Dr. Marketing likely ask? Be specific, this is the university's strategic
    marketing planning process.
    Answers will vary but should begin with discussion of creating or revising the university's
    mission statement, leading to questions of what type of university are we, and what does the
    university need to accomplish its goals and objectives?
    Additionally, discussion of the mission statement will likely lead to questions concerning
    what and how can the university build a sustainable competitive advantage?
    Dr. Marketer will also assist with the situation analysis. This will include internal examination
    of the current status of the university including questions concerning, what are the university's
    strengths and weaknesses? Questions about external forces, threats and opportunities will also
    be asked during the SWOT analysis.
    AACSB: outcome 3
    Bloom's Taxonomy: Application
    Learning Objective: 1
    Level: hard
    Topic: Marketing Strategy
    2-94
    Chapter 02 - Developing Marketing Strategies and a Marketing Plan
    141. (p. 40) The text describes the case of Splenda, a product introduced into a market
    dominated by two other products but successfully differentiated from the competition both in
    formula and image. This gives Splenda a sustainable competitive advantage. What is a
    sustainable competitive advantage? Describe an example of a product or business you have
    encountered that has developed sustainable competitive advantage. Why is that product or
    firm advantage sustainable?
    A ...

    $2.19