A Preface to Marketing Management 14th Edition Test Bank

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A Preface to Marketing Management 14th Edition Test Bank

Chapter 01
Appendix Portfolio Models

Multiple Choice Questions

1. The number of labor hours it takes to produce one unit of a particular product declines in a predictable manner as the number of units produced increases. Which of the following terms best expresses this idea?

A. Perceptual maps

B. Economies of scope

C. Learning curves

D. Vector analysis
2. On what assumption is the BCG Portfolio Model based?

A. Profitability and cash flow will be closely related to sales volume.

B. Return on investment (ROI) will be directly related to sales volume.

C. Cash flow is equal to investment.

D. Investment + Cash flow = Profitability.
3. In the early 1990s, Dean & Summers Inc. marketed three brands of car fresheners, Coral, White Springs, and Autumn Breeze. The car freshener industry is typically described as a low-growth industry. In 1993, Dean & Summers spent $5.1 million to advertise Coral and was rewarded with sales of over $112 million. In the same year, it spent nearly $5 million marketing White Springs, but the car freshener had disappointing sales of less than $23 million. Autumn Breeze, with hardly any promotion at all, had $1.2 million in sales. According to the BCG Portfolio Model, which of the following statements about these three products best describes them?

A. Coral is a star, White Springs is a cash cow, and Autumn Breeze is a dog.

B. Coral is a cash cow while White Springs and Autumn Breeze are both question marks.

C. Coral and White Springs are cash cows and Autumn Breeze is a dog.

D. Coral is a cash cow while White Springs and Autumn Breeze are both dogs.
4. The cell phone market is experiencing rapid growth, but the cell phones made by Broadwing Inc. have such a small market share that Broadwing is looking to sell its cell phone division. According to the BCG Portfolio Model, the cell phone division of Broadwing Inc. is an example of a _____.

A. dog

B. cash cow

C. question mark

D. star
5. According to the BCG matrix, _____ are often market leaders, but the market they are in is not growing rapidly.

A. stars

B. question marks

C. cash cows

D. dogs
6. The BCG matrix identifies _____ as strategic business units (SBUs) that have a low share of a low-growth market.

A. cash cows

B. question marks

C. stars

D. dogs
7. The biotechnology industry has experienced rapid growth in recent years. One of the companies at the forefront of research on diseases and insect-resistant seeds is Biocore’s biotech division. The success of this division has led to many economists calling it one of the leading firms in the market. In terms of the BCG Portfolio Model, Biocore’s biotech division is a _____.

A. dog

B. cash cow

C. question mark

D. star
8. In 1997, Apex Medicals Inc. sold its chemical products division because the division was showing slow growth in a market that was rapidly expanding. Apex Medicals most likely used a _____ objective with its chemical products division.

A. hold share

B. build share

C. divest

D. harvest
9. Which of the following objectives seeks to increase a product’s short-term cash flow without concern for the long-run impact?

A. Hold share

B. Harvest

C. Divest

D. Build share
10. Which of the following observations is true of the build share objective for a strategic business unit (SBU)?

A. It sacrifices immediate earnings to improve market share and is the appropriate strategy for question marks.

B. It increases a product’s short-term cash flow without concern for the long-run impact.

C. It involves selling or divesting the SBU because better investment opportunities exist elsewhere.

D. It is very appropriate for dogs and those question marks the firm cannot afford to finance for growth.
11. Which objective allows market share to decline in order to maximize earnings and cash flow and is appropriate for weak cash cows, weak question marks, and dogs?

A. Hold share

B. Harvest

C. Divest

D. Build share
12. According to the General Electric Portfolio Model, strategic business units (SBUs) that are high in both industry attractiveness and business strength are included in the _____.

A. yellow zone

B. blue zone

C. green zone

D. red zone
13. According to the General Electric Portfolio Model, what should an organization do with its strategic business units (SBUs) that fall into the red zone?

A. Hold share and build share

B. Harvest or divest

C. Produce and divest

D. Build share and harvest
14. Hecter & Gable Inc. marketed three brands of fabric softeners called Charms, White Cloud, and Lavender Days in the early 1990s. The industry for fabric softeners and allied products was typically described as a low-growth industry. In 1993, Hecter & Gable spent $3.1 million to advertise Charms and was rewarded with sales of over $312 million. In that same year, it spent nearly $6 million marketing White Cloud, but the product had disappointing sales of less than $63 million. Lavender Days, with hardly any promotion at all, had $4.6 million in sales. According to the General Electric Portfolio Model, which of the following statements about these three products best describes them?

A. Charms was in the red zone, while White Cloud and Lavender Days were in the green zone.

B. In spite of the difference in sales, both White Cloud and Charms were in the yellow zone.

C. Due to the low market growth in the toilet paper industry, Charms was low in business strength.

D. White Cloud and Lavender Days were low in industry attractiveness and in business strength and were in the red zone.
15. According to the General Electric Portfolio Model, what should an organization do with its strategic business units (SBUs) that fall into the yellow zone?

A. Hold share

B. Harvest

C. Divert

D. Divest
16. A company has to take a decision on what should be done with one of its strategic business units (SBUs). The business strength of the SBU is medium and the industry attractiveness is medium. According to the General Electric Portfolio Model, it would be ideal for the company to _____.

A. hold share

B. harvest

C. build share

D. divest
Chapter 01 Appendix Portfolio Models Answer Key

Multiple Choice Questions

1.
(p. 27) The number of labor hours it takes to produce one unit of a particular product declines in a predictable manner as the number of units produced increases. Which of the following terms best expresses this idea?

A. Perceptual maps

B. Economies of scope

C. Learning curves

D. Vector analysis
Learning curves were developed to express the idea that the number of labor hours it takes to produce one unit of a particular product declines in a predictable manner as the number of units produced increases.

AACSB: Analytic
Blooms: Remember
Level of Difficulty: 1 Easy
Topic: A Review of Portfolio Theory

2.
(p. 28) On what assumption is the BCG Portfolio Model based?

A. Profitability and cash flow will be closely related to sales volume.

B. Return on investment (ROI) will be directly related to sales volume.

C. Cash flow is equal to investment.

D. Investment + Cash flow = Profitability.
The BCG model is based on the assumption that profitability and cash flow will be closely related to sales volume.

AACSB: Analytic
Blooms: Understand
Level of Difficulty: 2 Medium
Topic: The BCG Model

3.
(p. 28) In the early 1990s, Dean & Summers Inc. marketed three brands of car fresheners, Coral, White Springs, and Autumn Breeze. The car freshener industry is typically described as a low-growth industry. In 1993, Dean & Summers spent $5.1 million to advertise Coral and was rewarded with sales of over $112 million. In the same year, it spent nearly $5 million marketing White Springs, but the car freshener had disappointing sales of less than $23 million. Autumn Breeze, with hardly any promotion at all, had $1.2 million in sales. According to the BCG Portfolio Model, which of the following statements about these three products best describes them?

A. Coral is a star, White Springs is a cash cow, and Autumn Breeze is a dog.

B. Coral is a cash cow while White Springs and Autumn Breeze are both question marks.

C. Coral and White Springs are cash cows and Autumn Breeze is a dog.

D. Coral is a cash cow while White Springs and Autumn Breeze are both dogs.
The BCG is based on the assumption that profitability and cash flow will be closely related to sales volume. Strategic business units (SBUs) functioning in a low-growth market are either cash cows or dogs. Coral is a cash cow since it has a high share of the market while White Springs and Autumn Breeze are dogs since they have a low share of the market.

AACSB: Reflective Thinking
Blooms: Apply
Level of Difficulty: 3 Hard
Topic: The BCG Model

4.
(p. 28) The cell phone market is experiencing rapid growth, but the cell phones made by Broadwing Inc. have such a small market share that Broadwing is looking to sell its cell phone division. According to the BCG Portfolio Model, the cell phone division of Broadwing Inc. is an example of a _____.

A. dog

B. cash cow

C. question mark

D. star
Question marks are strategic business units (SBUs) with a low share of a high growth market. The cell phone division of Broadwing Inc. has a low market share in the rapid growth market of cell phones.

AACSB: Reflective Thinking
Blooms: Apply
Level of Difficulty: 2 Medium
Topic: The BCG Model

5.
(p. 28) According to the BCG matrix, _____ are often market leaders, but the market they are in is not growing rapidly.

A. stars

B. question marks

C. cash cows

D. dogs
According to the BCG matrix cash cows are often market leaders, but the market they are in is not growing rapidly.

AACSB: Analytic
Blooms: Remember
Level of Difficulty: 1 Easy
Topic: The BCG Model

6.
(p. 28) The BCG matrix identifies _____ as strategic business units (SBUs) that have a low share of a low-growth market.

A. cash cows

B. question marks

C. stars

D. dogs
Dogs are SBUs that have a low share of a low-growth market. If the SBU has a very loyal group of customers, it may be a source of profits and cash. Usually, dogs are not large sources of cash.

AACSB: Analytic
Blooms: Remember
Level of Difficulty: 1 Easy
Topic: The BCG Model

7.
(p. 28) The biotechnology industry has experienced rapid growth in recent years. One of the companies at the forefront of research on diseases and insect-resistant seeds is Biocore’s biotech division. The success of this division has led to many economists calling it one of the leading firms in the market. In terms of the BCG Portfolio Model, Biocore’s biotech division is a _____.

A. dog

B. cash cow

C. question mark

D. star
In terms of the BCG Portfolio Model, Biocore’s biotech division is a star. In the BCG model, strategic business units (SBUs) are classified according to their relative market share and the growth rate of the market the SBU is in. Stars are SBUs with a high share of a high-growth market.

AACSB: Reflective Thinking
Blooms: Apply
Level of Difficulty: 2 Medium
Topic: The BCG Model

8.
(p. 29) In 1997, Apex Medicals Inc. sold its chemical products division because the division was showing slow growth in a market that was rapidly expanding. Apex Medicals most likely used a _____ objective with its chemical products division.

A. hold share

B. build share

C. divest

D. harvest
Apex Medicals most likely used a divest objective with its chemical products division. The divest objective involves selling or divesting the strategic business unit (SBU) because better investment opportunities exist elsewhere. It is very appropriate for dogs and those question marks the firm cannot afford to finance for growth.

AACSB: Reflective Thinking
Blooms: Apply
Level of Difficulty: 3 Hard
Topic: The BCG Model

9.
(p. 29) Which of the following objectives seeks to increase a product’s short-term cash flow without concern for the long-run impact?

A. Hold share

B. Harvest

C. Divest

D. Build share
A harvest strategy seeks to increase the product’s short-term cash flow without concern for the long-run impact.

AACSB: Analytic
Blooms: Remember
Level of Difficulty: 1 Easy
Topic: The BCG Model

10.
(p. 29) Which of the following observations is true of the build share objective for a strategic business unit (SBU)?

A. It sacrifices immediate earnings to improve market share and is the appropriate strategy for question marks.

B. It increases a product’s short-term cash flow without concern for the long-run impact.

C. It involves selling or divesting the SBU because better investment opportunities exist elsewhere.

D. It is very appropriate for dogs and those question marks the firm cannot afford to finance for growth.
Build share objective sacrifices immediate earnings to improve market share. This strategy is appropriate for question marks which have a low market share in a rapidly growing market.

AACSB: Analytic
Blooms: Understand
Level of Difficulty: 2 Medium
Topic: The BCG Model

11.
(p. 29) Which objective allows market share to decline in order to maximize earnings and cash flow and is appropriate for weak cash cows, weak question marks, and dogs?

A. Hold share

B. Harvest

C. Divest

D. Build share
A harvest strategy allows market share to decline in order to maximize earnings and cash flow. It is an appropriate objective for weak cash cows, weak question marks, and dogs.

AACSB: Analytic
Blooms: Remember
Level of Difficulty: 1 Easy
Topic: The BCG Model

12.
(p. 30) According to the General Electric Portfolio Model, strategic business units (SBUs) that are high in both industry attractiveness and business strength are included in the _____.

A. yellow zone

B. blue zone

C. green zone

D. red zone
According to the General Electric Portfolio Model, SBUs that are high in both industry attractiveness and average in business strength fall under the green zone. Priority “A” SBUs (often called the green zone) are those in the three cells at the upper left of the portfolio model. These SBUs are high in both industry attractiveness and business strength or high in either industry attractive or business strength and average in the other.

AACSB: Analytic
Blooms: Remember
Level of Difficulty: 2 Medium
Topic: The General Electric Model

13.
(p. 30) According to the General Electric Portfolio Model, what should an organization do with its strategic business units (SBUs) that fall into the red zone?

A. Hold share and build share

B. Harvest or divest

C. Produce and divest

D. Build share and harvest
SBUs in the red zone are low in both industry attractiveness and business strength. The firm will usually decide to harvest or divest these SBUs.

AACSB: Analytic
Blooms: Understand
Level of Difficulty: 2 Medium
Topic: The General Electric Model

14.
(p. 30) Hecter & Gable Inc. marketed three brands of fabric softeners called Charms, White Cloud, and Lavender Days in the early 1990s. The industry for fabric softeners and allied products was typically described as a low-growth industry. In 1993, Hecter & Gable spent $3.1 million to advertise Charms and was rewarded with sales of over $312 million. In that same year, it spent nearly $6 million marketing White Cloud, but the product had disappointing sales of less than $63 million. Lavender Days, with hardly any promotion at all, had $4.6 million in sales. According to the General Electric Portfolio Model, which of the following statements about these three products best describes them?

A. Charms was in the red zone, while White Cloud and Lavender Days were in the green zone.

B. In spite of the difference in sales, both White Cloud and Charms were in the yellow zone.

C. Due to the low market growth in the toilet paper industry, Charms was low in business strength.

D. White Cloud and Lavender Days were low in industry attractiveness and in business strength and were in the red zone.
White Cloud and Lavender Days were low in industry attractiveness and in business strength and were in the red zone. Strategic business units (SBUs) that are low in industry attractiveness and in business strength are in the red zone. The firm will usually decide to harvest or divest these SBUs.

AACSB: Reflective Thinking
Blooms: Apply
Level of Difficulty: 3 Hard
Topic: The General Electric Model

15.
(p. 30) According to the General Electric Portfolio Model, what should an organization do with its strategic business units (SBUs) that fall into the yellow zone?

A. Hold share

B. Harvest

C. Divert

D. Divest
SBUs in the yellow zone are medium in both industry attractiveness and business strength. The firm will usually decide to hold share on these SBUs.

AACSB: Analytic
Blooms: Understand
Level of Difficulty: 2 Medium
Topic: The General Electric Model

16.
(p. 30) A company has to take a decision on what should be done with one of its strategic business units (SBUs). The business strength of the SBU is medium and the industry attractiveness is medium. According to the General Electric Portfolio Model, it would be ideal for the company to _____.

A. hold share

B. harvest

C. build share

D. divest
It would be ideal for the company to hold share on the SBU. Priority “B” SBUs (often called the yellow zone) are those medium in both industry attractiveness and business strength. The firm will usually decide to hold share on these SBUs.

AACSB: Reflective Thinking
Blooms: Apply
Level of Difficulty: 3 Hard
Topic: The General Electric Model

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