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Chapter 5
The correct answer for each question is indicated by a
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What does a retail strategy identify?
the retail trade areas

A)
the advertising campaign
B)
output measures
C)
the target market
D)
partnerships
E)
Feedback:
Learning Objective: 05-1
Difficulty: Easy
Bloom's: Knowledge
AACSB: Reflective Thinking
Topic: What is a Retail Strategy?
Page: 112
A retail strategy identifies the target market, but also the format the retailers plans to
use to satisfy the target market's needs and the basis upon which the retailer plans to
build a sustainable competitive advantage.
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A flower shop can develop a sustainable competitive advantage by BUT:
providing customized plant care services

A)
developing a customer database to offer special promotions
B)
developing a coupon offering with some of the local gift stores
C)
securing a good location
D)
lowering prices
E)
Feedback:
Difficulty: Hard
Bloom's: Application
Topic: Building a Sustainable Competitive Advantage
Page: 114-115
All of the choices describe ways to develop a long-term relationship with the customer
that could be difficult for competitors to initially copy EXCEPT for lowering prices.
Matching those lowered prices would be easy for a competitor to copy so it would not be
a way to develop a sustainable competitive advantage.
3 CORRECT
Which of the following does NOT describe a sustainable competitive advantage?
Chico's delivers high-quality customer service and devotes considerable time and effort
to training its sales associates to establish personal relationships with each of its
A) customers.
Macy's offering a "Gift with Purchase" with each Lancme cosmetic purchase.
B)
Curves develops fitness programs tailored to aging baby boomers.
C)
D)
Zara, a Spanish fashion retailer, offers quality fashion apparel at low prices with
vertically integration, shorter-time-to-market, and no advertising.
Magazine Luiza, Brazil's third-largest nonfood retailer, targets low-income consumers

by selling consumer electronics and appliances on installment payment plans and
E) offering affordable credit.
Feedback:
Difficulty: Hard
Page: 114-121
Since other department stores can also offer a GWP for higher end cosmetics, this would
not support a sustainable competitive advantage.
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Which of the following does NOT describe the ways that retailers build customer loyalty?
developing a strong brand for the store or store brands

A)
providing good customer service
B)
creating an emotional attachment with customers through loyalty programs
C)
offering frequent promotions
D)
developing clear and precise positioning strategies
E)
Feedback:
Difficulty: Hard
Page: 115-116
Frequent promotions do not build customer loyalty because customers are oriented
toward deals provided by the retailer instead of developing an emotional attachment
with the retailer.
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Which of the following is an example of a private label brand?
Kenmore dishwasher
A)
Samsung plasma TV
B)
Nike athletic shoes
C)
Levi's jeans
D)
Kellogg's cornflake cereals
E)
Feedback:
Difficulty: Hard
Page: 116-117
Kenmore is one of private label brands by Sears. Whereas all of the other examples are
national brands found at many different retailers that compete against each other.
6 CORRECT
A Best Buy sales associate who has just sold a computer to a customer will take the
customer over to the area that sells printers. This selling approach is called:
up-selling
A)
cross-selling
B)
merchandise diversification
C)
incentive-selling
D)
accessory promotion
E)
Feedback:
Difficulty: Easy
Bloom's: Knowledge
Topic: Growth Strategies
Page: 122
Cross-selling means that sales associates in one department attempt to sell
complementary merchandise from other departments to their customers.
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Which of the following DOES NOT describe growth opportunities that retailers pursue?
A)
B)
Retailers realize growth by directing efforts toward existing customers using the
retailer's present retailing format.
Retailers open more stores in the target market and keep existing stores open for
longer hours to penetrate markets.
Retailers use the existing retail format in new market segments.

C)
Retailers develop a new retail format for the same target market.
D)
E)
Retailers shop their competitors and develop marketing to tell their customers why not
to patronize their competitors
Feedback:
Difficulty: Medium
Bloom's: Comprehension
Page: 122
All are growth strategies except for creating marketing against their competition is not
a growth strategy.
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Abercrombie & Fitch's (A & F) primary target market is college students. A & F opened a
new, lower-priced chain called Hollister. What growth strategy did A & F use?
market penetration
A)
related diversification
B)
unrelated diversification
C)
retail format development
D)
market expansion
E)
Feedback:
Difficulty: Easy
Bloom's: Knowledge
Page: 123
Abercrombie & Fitch's (A & F) primary target market is college students, not highschoolers. Because college-aged people don't particularly like to hangout with teens, A
& F opened a new, lower-priced chain called Hollister Co. Although the merchandise and
ambiance are slightly different than A & F, the retail format is essentially the same.
Opening Hollister stores is an example of market expansion that used the existing retail
format in a new market segment.
Difficulty: Hard
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Some retailers, such as Wal-Mart, Carrefour, Starbucks, Zara, and IKEA, have been
successful in international markets. Key characteristics of these retailers that have
successfully exploited international growth opportunities include EXCEPT:
a globally sustainable competitive advantage
A)
global culture
B)
financial resources
C)
strong marketing strategies
D)
adaptability
E)
Feedback:
Difficulty: Easy
Bloom's: Knowledge
Topic: Global Growth Opportunities
Page: 122
Four characteristics of retailers that have successfully exploited international growth
opportunities are (1) a globally sustainable competitive advantage, (2) adaptability, (3)
global culture, and (4) financial resources.
Chapter 7
1 CORRECT
Sam's Club requires a huge amount of operating space. Therefore, you are most likely to
find them located:
in discount-anchored centers
A)
in a neighborhood center
B)
at freestanding sites
C)
in central business districts
D)
in off-price centers
E)
Feedback:
Difficulty: Medium
Bloom's: Knowledge
Topic: Types of Locations
Page: 169
Freestanding sites are likely to be locations for retailers that require easy access and
parking for their customers, high vehicular traffic, and modest occupancy costs.
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Which of the following does NOT describe neighbor centers?
A)
These centers are often referred to as "open air centers" because the common areas
are not enclosed.
Smaller neighbor centers are typically anchored by a supermarket or drugstore.

B)
C)
D)
Larger centers are typically anchored by a discount department store such as Wal-Mart
or Target.
The primary advantages of these centers are that they offer customers convenient
locations and easy parking.
Smaller centers have an unlimited trade area due to open air space.
E)
Feedback:
Difficulty: Medium
Bloom's: Knowledge
Page: 173-174
The primary disadvantage is that smaller centers have a limited area due to their size,
and they lack entertainment and restaurants.
3 CORRECT
Shopping centers consist primarily of collections of big box retail stores, such as Target,
Marshall's, Costco, Lowe's, Barnes & Noble, and Best Buy, are called:
community centers
A)
neighborhood centers
B)
power centers
C)
lifestyle centers
D)
theme centers
E)
Feedback:
Difficulty: Medium
Bloom's: Knowledge
Page: 174
Shopping centers consist primarily of collections of big box retail stores are called
power centers.
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Which of the following does NOT describe shopping malls' advantages over alternative
locations?
A)
B)
They attract many shoppers because of the many different types of stores and the
merchandise assortments available within these stores.
They have a large trade area because the opportunity to combine shopping with
entertainment.
Malls offer retailers a strong level of homogeneous operations with the other stores.
C)
Competition within shopping centers is not intense.
D)
E)
They generate significant pedestrian traffic inside the mall and provide an inexpensive
form of entertainment.
Feedback:
Difficulty: Hard
Page: 175
The intense competition within shopping centers is one of disadvantages that shopping
malls have over alternative locations.
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John is opening a small specialty T-shirts store in an inner city location in Los Angeles. He
will feature the locally produced fashionable T-shirts as well as imported T-shirts from China.
More than likely, John will experience _________ conducting business in a low-income area
as opposed to the suburbs.
higher leases
A)
little shoplifting
B)
little customer loyalty
C)
more competition
D)
higher profits
E)
Feedback:
Difficulty: Medium
Page: 171
Although income levels are lower in inner cities than in other neighborhoods, most inner
city retailers achieve a higher sales volume and often higher margins, resulting in
higher profits.
6 CORRECT
Where are life-style centers usually found?
in small towns
A)
in middle-class neighborhoods
B)
in high-income neighborhoods
C)
at interstate interchanges
D)
near discount store malls
E)
Feedback:
Difficulty: Hard
Page: 177
Lifestyle centers are shopping centers composed mainly of upscale apparel shops,
boutiques, and gift shops carrying selected fashions or unique merchandise of higher
quality and price. Therefore, they usually are found in trade areas with high income
levels.
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______ combine several different uses into one complex, including shopping centers, office
towers, hotels, residential complexes, civic centers, and convention centers.
Omnicenters
A)
Mixed use developments
B)
Multiformat developments
C)
Theme/festival centers
D)
Super regional malls
E)
Feedback:
Difficulty: Easy
Bloom's: Knowledge
Page: 178
Mixed use developments combine several different uses into one complex.
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A critical factor affecting the location that consumers select to visit is the shopping situation
in which they are involved. Which of the following retail stores does NOT cater to shoppers
who are engaged in convenient shopping situations?
convenience stores
A)
drugstores
B)
fast-food restaurants
C)
supermarkets
D)
furniture stores
E)
Feedback:
Difficulty: Medium
Page: 183
Consumers engage in comparison shopping for purchasing large ticket items such as
furniture.
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When the management of a shopping center maintains the common facilities and provides
security, advertising and special events to attract consumers, lease agreements require the
retailers to pay a portion of the __________ costs.
common area maintenance
A)
community coverage
B)
location revival
C)
uniform code
D)
development preservation
E)
Feedback:
Difficulty: Easy
Bloom's: Knowledge
Page: 173
Common area maintenance fees are expected at shopping centers to pay for the mall
management and benefits of being in a mall.
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A community in the southwest requires all places of business to have stucco outside walls of
neutral color with clay roofing tiles in orange. This would be an example of a
____________.
building code
A)
blue law
B)
licensing requirement
C)
trading area code
D)
common maintenance code
E)
Feedback:
Difficulty: Medium
Topic: Legal Considerations
Page: 185
Some communities have building codes that specify the required "look" of businesses in
order to have a cohesive theme or image
Chapter 8
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Rachael is meeting with the mall management of a neighborhood shopping mall to negotiate
a lease for her apparel store. What type of lease will most likely be proposed to her?
Percentage lease
A)
Pro bono lease
B)
Claused lease
C)
Fixed-rate lease
D)
Variable-rate lease
E)
Feedback:
Difficulty: Medium
Bloom's: Knowledge
Topic: Negotiating a Lease
Page: 214
Explanation: Fixed-rate leases are most commonly found at smaller shopping centers
where the rent is the same regardless of the sales volume generated.
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John is evaluating street congestion, parking space availability and access for deliveries of a
potential building to lease for his antique shop. It can be said that John is considering:
traffic flow
A)
accessibility
B)
potential sales for the site
C)
characteristics of the trading zone
D)
site characteristics
E)
Feedback:
Difficulty: Medium
Topic: Evaluating a Site for Locating a Retail Store
Page: 195
Explanation: The higher the accessibility of the site the more likely customers will get
into and out of the site, equating to higher foot traffic and more sales.
3 CORRECT
What retailer type would consider traffic count particularly important?
department stores
A)
convenience store
B)
specialty stores
C)
price clubs
D)
discount stores
E)
Feedback:

Difficulty: Medium
Page: 195
Explanation: Traffic counts are particularly important for retailers offering merchandise
and services bought on impulse or on frequent trips. Good traffic flow is important for
convenience stores than for destination stores like specialty stores and discount stores.
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When retailers gain scale economies from opening multiple locations in an area, they must
consider the potential __________ that can cause diminishing returns associated with
locating too many additional stores in an area.
channel competition
A)
economies of scope
B)
sales cannibalization
C)
channel integration
D)
channel competition
E)
Feedback:
Difficulty: Hard
Topic: Number of Stores in an Area
Page: 193
Explanation: Although retailers gain scale economies from opening multiple locations in
an area, they also suffer sales cannibalization caused by diminishing returns associated
with locating too many additional stores in an area.
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Traffic count is less important for:
Shopping malls
A)
Destination retailers
B)
Rural communities
C)
Convenience stores
D)
Specialty retailers
E)
Feedback:
Difficulty: Medium
Page: 195
Explanation: Traffic count is less important for destination stores.
6 CORRECT
___________ states that a cluster of similar and complementary retailing activities will
generally have greater drawing power than isolated stores that engage in the same retailing
activities.
Adjacent tenants
A)
Analog approach
B)
The principle of cumulative attraction
C)
Consumer spotting
D)
Diminishing adjacent
E)
Feedback:
Difficulty: Medium
Page: 197
Explanation: The principle of cumulative attraction states that a cluster of similar and
complementary retailing activities will generally have greater drawing power than
isolated stores that engage in the same retailing activities.
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In terms of trade areas, the owner of John's Bar & Grill defines his ___________ as the
geographic area in which 70% percent of his customers live.
primary trade area
A)
fundamental market
B)
geographic market
C)
secondary trade area

D)
tertiary trade area
E)
Feedback:
Difficulty: Medium
Topic: Trade Area Characteristics
Page: 199
Explanation: The primary trading area is the geographic area from which the shopping
center or store site derives 50-70% percent of its customers.
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John needed pans for his baking needs during the upcoming holidays. The only baking
supply store in town that carried them required a trip of two trains followed by a ten block
walk. To John, that baking supply store is a:
drawing store
A)
discount retailer
B)
magnet store
C)
destination store
D)
primary trade zone store
E)
Feedback:
Difficulty: Medium
Topic: Trade Area Characteristics
Page: 201
Explanation: A destination store is one in which a unique feature acts as a magnet to
draw customers, regardless of how far they travel.
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What is the objective of Huff's Gravity Model?
to create a comparative model that allows the retailer to determine the ideal location
A)
B)
to determine the hierarchy of retailing activities according to the assortment of

merchandise available
C)
D)
E)
to define the relative ability of two cities to attract customers from the area between
them
to determine the probability that a customer residing in a particular area will shop at a
particular shopping center
to define the relationship between the size of a shopping area and the area's income
levels
Feedback:
Difficulty: Medium
Bloom's: Knowledge
Topic: Estimating Potential Sales for a Store Site
Page: 207
Explanation: The Huff Gravity Model is for estimating the sales of a retail store. In this
model, the attraction is based on the size of store (larger stores have more pulling
power) and the time it takes to travel to the store (stores that take more time to get to
have less pulling power).
10
CORRECT
When using this approach, the retailer simply describes the site and trade area
characteristics for its most successful stores and attempts to find a site with similar
characteristics. This approach is called the ____________.
Huff Gravity Model
A)
regression model
B)
analog model
C)
location model
D)
cumulative attraction model
E)
Feedback:
Difficulty: Medium
Bloom's: Knowledge
Topic: Estimating Potential Sales for a Store Site
Page: 210
Explanation: The analog approach or model is often used by small chain stores that
don't have the means to use the regression approach. The analog approach is more
subjective, but still relevant in planning sales for new store sites.
Pearson
Which statement is not a benefit of formulating a retail strategy?
1.
Your Answer:
A retailer is shown how it can differentiate itself from

competitors.
Sales maximization is stressed.

Correct
Answer:
Review section on retail strategy overview.

Review section on retail strategy overview.
Which of the following is not part of situation analysis?
2.
evaluating ownership and management alternatives

Your Answer:
developing sales-based objectives
Correct
Answer:
Review section on situation analysis.

Review section on situation analysis.
3.
A retailer's commitment to a type of business and to a distinctive role in the

marketplace is its:
retailing concept
Your Answer:
organizational mission
Correct
Answer:
Review section on organization mission.

Review section on organization mission.
Which form of organization is subject to double taxation?
4.
corporation
Your
Answer:
This is the correct answer.
5.
Which form of retail organization comprises the largest percentage of Canadian retail
store sales?
corporation
Your
Answer:
Planning authority ability is limited to top management or ownership in a(n):
6.
centralized structure
Your
Answer:
7.
Which statement concerning the impact of time demands on a retailer is not

correct?
Your Answer:
Independent stores often have more intensive participation by

the owner than chain operations.
Most retailers work only when the store is open.

Correct
Answer:
Review section on time demands.

Review section on time demands.
Which of the following businesses requires the most involvement by the owner?
8.
Your (blank)
Answer:
After situation analysis, a firm:
9.
selects a target market

Your Answer:
sets its objectives
Correct
Answer:
Review section on objectives.

Which of the following is not a sales objective?
10
.
stability
Your Answer:
return on investment
Correct
Answer:

Operating efficiency is expressed as:
11
.
(operating expenses/company sales) - 1

Your Answer:
1 - (operating expenses/company sales)
Correct
Answer:
Review section on profit objectives.

Review section on profit objectives.
12
.
A retailer with sales of $1,000,000 and operating expenses of $450,000 has an

operating efficiency rate of:
0.55
Your
Answer:
Stockholders, consumers, suppliers, employees, and government are examples of:
13
.
the uncontrollable variables facing a retailer

Your Answer:
a retailer's publics
Correct
Answer:
Review section on satisfaction of publics.

Review section on satisfaction of publics.
14
.
When retailers identify customer segments and develop unique strategies to meet
the desires of these segments, they are using:
bifurcated retailing
Your Answer:
niche retailing
Correct
Answer:
Review section on image (positioning).

Review section on image (positioning).
15
.
A department store attempting to sell its goods and services to a broad spectrum of
consumers is employing a strategy of:
target marketing
Your Answer:
mass marketing
Correct
Answer:
Review section on identification of consumer characteristics and needs.

Review section on identification of consumer characteristics and needs.
16
.
Those aspects of business that a retailer can directly affect, such as store hours and
merchandise lines carried, are referred to as:
controllable variables
Your
Answer:
17
.
Which is not considered one of the elements of "managing a business" in a retail

strategy?
the retail organization
Your Answer:
merchandise management and pricing
Correct
Answer:
Review section on managing a business.

Review section on managing a business.
Which of these is not an uncontrollable variable?
18
.
store location
Your
Answer:
A systematic procedure for analyzing the performance of a retailer is called:
19
.
feedback
Your Answer:
a retail audit
Correct
Answer:
Review section on control.

Review section on control.
During each stage in the development of a retail strategy, retail managers should:
20
refrain from "fine tuning" the strategy
Your Answer:
look for both positive and negative feedback
Correct
Answer:
Review section on feedback.

Review section on feedback.

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Chapter 5

The correct answer for each question is indicated by a

What does a retail strategy identify?

the retail trade areas

A flower shop can develop a sustainable competitive advantage by BUT:

providing customized plant care services

Magazine Luiza, Brazil's third-largest nonfood retailer, targets low-income consumers

developing a strong brand for the store or store brands

Which of the following is an example of a private label brand?

Retailers use the existing retail format in new market segments.

Which of the following does NOT describe neighbor centers?

Smaller neighbor centers are typically anchored by a supermarket or drugstore.

Learning Objective: 08-3

Traffic count is less important for:

secondary trade area

What is the objective of Huff's Gravity Model?

to determine the hierarchy of retailing activities according to the assortment of

A retailer is shown how it can differentiate itself from

Sales maximization is stressed.

Review section on retail strategy overview.

Which of the following is not part of situation analysis?

evaluating ownership and management alternatives

Review section on situation analysis.

A retailer's commitment to a type of business and to a distinctive role in the

Review section on organization mission.

Which form of organization is subject to double taxation?

This is the correct answer.

This is the correct answer.

Planning authority ability is limited to top management or ownership in a(n):

This is the correct answer.

Which statement concerning the impact of time demands on a retailer is not

Independent stores often have more intensive participation by

Most retailers work only when the store is open.

Review section on time demands.

After situation analysis, a firm:

selects a target market

Review section on objectives.

Which of the following is not a sales objective?

Review section on objectives.

Operating efficiency is expressed as:

(operating expenses/company sales) - 1

Review section on profit objectives.

A retailer with sales of $1,000,000 and operating expenses of $450,000 has an

This is the correct answer.

Stockholders, consumers, suppliers, employees, and government are examples of:

the uncontrollable variables facing a retailer

Review section on satisfaction of publics.

Review section on image (positioning).

Review section on identification of consumer characteristics and needs.

This is the correct answer.

Which is not considered one of the elements of "managing a business" in a retail

Review section on managing a business.

Which of these is not an uncontrollable variable?

This is the correct answer.

A systematic procedure for analyzing the performance of a retailer is called:

Review section on control.

refrain from "fine tuning" the strategy

Review section on feedback.

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