Bainestb2e ch02

Baines, Fill, and Page: Marketing 2e, Chapter 2
Correct answers are marked with an asterisk (*).
Type: multiple choice question

Title: Chapter 02 - Question 01
01) In order to make sense of the external environment we use a framework known as
PESTLE. PESTLE stands for the:
a. Production, Economic, Social, Technological, Legal, and Ecological environments.
Feedback: Incorrect. To make sense of the external environment, we use the well-known
acronym, PESTLE. This is by far the easiest and one of the most popular frameworks with
which to examine the external environment. PESTLE stands for the Political, Economic,
Social, Technological, Legal, and Ecological environments.
Page reference: 44
*b. Political, Economic, Social, Technological, Legal, and Ecological environments.
Feedback: Correct. To make sense of the external environment, we use the well-known
Page reference: 44
c. Political, Economic, Systematic, Territorial, Legal, and Ecological environments.
Page reference: 44
d. Psychological, Economic, Sociological, Technological, Lifestyle, and Ecological
environments.
Page reference: 44
02) Sometimes organizations hire special industry lobbyists that have a good understanding
and specialist knowledge of political and legal affairs. These specialists are often hired for
which of the following reasons?
a. To represent the organization to government decision-makers.
Feedback: Incorrect. Because legislation is such a technical area, and often written in
technical legal language, few firms have the capability to understand and influence legislation
without employing specialists. In such circumstances, special industry lobbyists are hired for
the following reasons:
To represent the organization to government decision-makers;
To provide strategic advice to clients on how to design their campaigns;
To provide administrative support for the organizations on the changing political and
legal environment.
Page reference: 44-45
b. To provide strategic advice to the organization on how to design their campaigns.
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legal environment.
c. To provide administrative support for the organizations on the changing political and legal
environment.
legal environment.
*d. All of the above options are correct.
Feedback: Correct. Because legislation is such a technical area, and often written in
legal environment.
03) Marketers can conduct business-government relations in various countries through a
number of ways. This might include:
a. A PR assistant may be invited to give a series of seminars to the organization on past
government marketing campaigns.
Feedback: Incorrect. There are six key ways in which marketers might conduct business
government relations in various countries as shown below:
Lobbyist firms, with key industry knowledge, can be engaged either permanently or as
needed.
Public relations consultancies can be commissioned for their political services.
A politician may be paid a fee to give political advice on matters of importance to an

organization.
An in-house public relations manager might handle government relations directly.
An industry association might be contacted to lobby on behalf of members.
A politician may be invited directly to join the board of directors, board of trustees, or
board of advisers of an organization.
Page reference: 46
b. Employing a statistician who worked for the governments National Office for Statistics.
needed.
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organization.
Page reference: 46
*c. A politician may be paid a fee to give political advice on matters of importance to an
organization.
Feedback: Correct. There are six key ways in which marketers might conduct business
needed.

organization.
Page reference: 46
d. Both inviting a PR assistant to give a series of seminars to the organization on past
government marketing campaigns and employing a statistician who worked for the
governments National Office for Statistics.
needed.

organization.
Page reference: 46
04) ______ is the combined output of goods and services in a particular nation and is a useful
measure for determining relative wealth between countries when comparisons are calculated
per member of the population.
a. Price inflation
Feedback: Incorrect. Gross domestic product per capita is the combined output of goods and
services in a particular nation and is a useful measure for determining relative wealth between
countries when comparisons are calculated per member of the population (GDP per capita at
purchasing power parity).
Page reference: 47
correct
b. Gross Domestic Product (GDP)
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Feedback: Correct. Gross domestic product per capita is the combined output of goods and
Page reference: 47
c. Wage inflation
Page reference: 47
d. Export quota controls and duties
Page reference: 47
05) Peoples lifestyles are increasingly changing. A number of key trends in Europe include
the trend towards marrying later and a greater tendency to divorce than in previous
generations. This has resulted in an increase in single-person households. This is an example
of which factor in the external environment?
a. Legal environment.
Feedback: Incorrect. This is an example of an important changing trend in the social-cultural
environment.
Page reference: 49
b. Political environment.
environment.
Page reference: 49
*c. Socio-cultural environment.
Feedback: Correct. This is an example of an important changing trend in the social-cultural
environment.
Page reference: 49
d. Ecological environment.
environment.
Page reference: 49
06) Companies are particularly concerned about the impact of technological changes on their
product and service lifecycles. In order to stay ahead of the competition ____________
becomes inevitable for both high-technology and less technology-intensive firms.
a. reverse engineering
Feedback: Incorrect.
Companies are particularly concerned about the impact of
technological changes on their product and service lifecycles. However, innovation becomes
a necessary condition in the strategic marketing decision-making of high-technology firms.
For less technology-intensive firms, innovation of some form, whether it is process or
product/service focused or at least rapid adoption of new product/service variants based on
competitors offerings, is still usually necessary to stay ahead of the competition.
Page reference: 52
b. me-too marketing strategy
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Page reference: 52
c. web-based marketing
Page reference: 52
*d. innovation
Feedback: Correct. Companies are particularly concerned about the impact of technological
changes on their product and service lifecycles. However, innovation becomes a necessary
condition in the strategic marketing decision-making of high-technology firms. For less
technology-intensive firms, innovation of some form, whether it is process or product/service
focused or at least rapid adoption of new product/service variants based on competitors
offerings, is still usually necessary to stay ahead of the competition.
Page reference: 52
07) Most countries place restrictions on the prices that pharmaceutical companies can charge
for drugs. In Japan, price regulations are stipulated for individual products, while in the UK,
strict controls are placed on the overall profitability of products supplied by a specific company
to the National Health Service. These are examples of:
a. ecological environment.
Feedback: Incorrect. The legal environment covers every aspect of an organizations
business. Laws and regulation are enacted in most countries ranging from the transparency
of pricing, the prevention of restrictive trade practices, product safety, good practice in
packaging and labelling, and the abuse of a dominant market position, to codes of practice in
advertising, to take just a small selection.
Page reference: 53
b. economic environment.
advertising, to take just a small selection.
Page reference: 53
c. political environment.
advertising, to take just a small selection..
Page reference: 53
*d. legal environment.
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Feedback: Correct. The legal environment covers every aspect of an organizations business.
Laws and regulation are enacted in most countries ranging from the transparency of pricing,
the prevention of restrictive trade practices, product safety, good practice in packaging and
labelling, and the abuse of a dominant market position, to codes of practice in advertising, to
take just a small selection.
Page reference: 53
08) In the UK, advertising is regulated by the ____________, which has a mission to apply
codes of practice in advertising and uphold advertising standards for consumers, business
and society in general.
a. Office of National Statistics (ONS)
Feedback: Incorrect. In the UK, advertising is regulated by the Advertising Standards
Authority (ASA), which has a mission to apply codes of practice in advertising and uphold
advertising standards for consumers, business and society in general.
Page reference: 53
*b. Advertising Standards Authority (ASA)
Feedback: Correct. In the UK, advertising is regulated by the Advertising Standards Authority
(ASA), which has a mission to apply codes of practice in advertising and uphold advertising
standards for consumers, business and society in general.
Page reference: 53
c. Marketing Research Society (MRS)
Page reference: 53
d. Direct Marketing Association (DMA)
Page reference: 53
09) Consumers are demanding more organic food, which incorporates the principles of better
welfare for the animals which they consume as food products and less interference with the
natural processes of growing fruit and vegetables (e.g. the use of pesticides and chemical
fertilizers). This is an example of a __________ trend.
a. social
Feedback: Incorrect. This is a factor of the ecological environment. Increasingly, consumers
are worried about the impact of companies on their ecological environments. They are
demanding more organic food, which incorporates the principles of better welfare for the
animals which they consume as food products and less interference with the natural
processes of growing fruit and vegetables (e.g. the use of pesticides and chemical fertilizers).
Page reference: 55
b. technological
Page reference: 55
*c. ecological
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Feedback: Correct. This is a factor of the ecological environment. Increasingly, consumers

Page reference: 55
d. production
Page reference: 55
10) Porters Five Forces of Competitive Industry Analysis comprises the analysis of the
interplay of the following five factors:
a. Suppliers, buyers, technologies, competitors, and systems.
Feedback: Incorrect. Porters Five Forces is the most common technique used to analyse the
performance environment. Porter suggests that competition in an industry is a composite of
five main competitive forces. These are the level of threat that new competitors will enter the
market, the threat posed by substitute products, and the bargaining power of both buyers
and suppliers. These in turn affect the fifth force, the intensity of rivalry between the current
competitors. Porter called these variables the Five Forces of Competitive Industry Analysis.
Page reference: 63
*b. Suppliers, buyers, new entrants, competitors, and substitutes.
Feedback: Correct. Porters Five Forces is the most common technique used to analyse the
Page reference: 63
c. Systems, buyers, new entrants, products, and substitutes.
Page reference: 63
d. Systems, products, buyers, substitutes and new markets.
Page reference: 63
Type: true-false
11) Marketers can control the external environment in which their organizations operate.
a. T
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Feedback: Incorrect. The external environment is characterized in two main ways. In the first,
the elements do not have an immediate impact on the performance of an organization,
although they might do in the longer term. In the second, although the elements can influence
an organization, it is not possible to control them. The external environment is basically
uncontrollable.
*b. F
Feedback: Correct. The external environment is characterized in two main ways. In the first,
the elements do not have an immediate impact on the performance of an organization,
although they might do in the longer term. In the second, although the elements can influence
an organization, it is not possible to control them. The external environment is basically
uncontrollable.
Type: true-false
12) The process through which companies scan the marketing environment typically involves
two stages.
a. T
Feedback: Incorrect. The process through which companies scan the marketing environment
typically involves three stages. In Stage 1, the focus is principally, but not exclusively, on data
gathering. In Stage 2, the focus is principally, but not exclusively, on interpreting the data
gathered in a process of environmental interpretation/analysis. In Stage 3, the focus is
principally, but not exclusively, on strategy formulation.
*b. F
Feedback: Correct. The process through which companies scan the marketing environment
typically involves three stages. In Stage 1, the focus is principally, but not exclusively, on data
gathering. In Stage 2, the focus is principally, but not exclusively, on interpreting the data
gathered in a process of environmental interpretation/analysis. In Stage 3, the focus is
principally, but not exclusively, on strategy formulation.
Type: true-false
13) The quantity of people within a population matters more to marketers than how the ages
of those different people are constituted.
a. T
Feedback: Incorrect. It isnt just the absolute quantity of people within a population that
matters to the marketer, it is also how the ages of those different people are constituted. The
changes and relative differences in age structure in different countries correspond with
different size markets for brand propositions relevant to these particular communities of
citizens (e.g. developing appropriate pension schemes for pension groups in Europe).
Page reference: 49
*b. F
Feedback: Correct. It isnt just the absolute quantity of people within a population that matters
to the marketer; it is also how the ages of those different people are constituted. The changes
and relative differences in age structure in different countries correspond with different size
markets for brand propositions relevant to these particular communities of citizens (e.g.
developing appropriate pension schemes for pension groups in Europe).
Page reference: 49
Type: true-false
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14) Organizations can out-perform other organizations over time if they can manage their
relationships with government and regulatory bodies better than their competitors.
*a. T
Feedback: Correct. There are circumstances when an organization, or an industry coalition,
can affect legislation in its own favour, or at the very least respond more flexibly to changes in
legislation than its competitors. There is increasingly an understanding that business
government relations, properly undertaken, can be a source of sustainable competitive
advantage.
Page reference: 44
b. F
Feedback: Incorrect. There are circumstances when an organization, or an industry coalition,
can affect legislation in its own favour, or at the very least respond more flexibly to changes in
legislation than its competitors. There is increasingly an understanding that business
government relations, properly undertaken, can be a source of sustainable competitive
advantage.
Page reference: 44
Type: true-false
15) With price inflation, where there is a scarcity of supply, there is usually an increase in the
price of that consumer good or service.
*a. T
Feedback: Correct. The external environment of a firm is affected by price inflation. How
much consumers pay for goods and services is dependent on the rate of supply of those
goods and services. Where there is a scarcity of supply, there is usually an increase in the
Page reference: 47
b. F
Feedback: Incorrect. The external environment of a firm is affected by price inflation. How
much consumers pay for goods and services is dependent on the rate of supply of those
goods and services. Where there is a scarcity of supply, there is usually an increase in the
Page reference: 47
Type: true-false
16) Buyers may also decide to increase their bargaining power through backward
integration, when a company moves into manufacturing the products or services it previously
bought from its suppliers.
*a. T
Feedback: Correct. Buyers may also decide to increase their bargaining power through
backward integration. For instance, a company is said to have backward integrated when it
moves into manufacturing the products or services it previously bought from its suppliers.
Tesco, the British multiple retail grocer operating in fourteen markets outside the UK in 2009,
also sells financial services including debt and credit services to its customers, which it
previously would have purchased from Visa and MasterCard merchant operators. Since
customers have tended to pay for many years now using credit/debit cards rather than cash,
Tesco has lowered its transaction costs by setting up its own credit/debit services.
Page reference: 65
b. F
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Feedback: Incorrect. Buyers may also decide to increase their bargaining power through
backward integration. For instance, a company is said to have backward integrated when it
moves into manufacturing the products or services it previously bought from its suppliers.
Tesco, the British multiple retail grocer operating in fourteen markets outside the UK in 2009,
also sells financial services including debt and credit services to its customers, which it
previously would have purchased from Visa and MasterCard merchant operators. Since
customers have tended to pay for many years now using credit/debit cards rather than cash,
Tesco has lowered its transaction costs by setting up its own credit/debit services.
Page reference: 65
Type: true-false
17) Codes of practice exist for both radio and TV typically with specific regulations for alcohol
advertising, specifying that claims can only be made in relation to sexual prowess, fitness or
health, courage or strength benefits of alcohol consumption.
a. T
Feedback: Incorrect. Codes of practice exist for both radio and TV typically with specific
regulations for alcohol advertising, specifying that claims cannot be made in relation to
sexual prowess, fitness or health, courage or strength.
Page reference: 54
*b. F
Feedback: Correct. Codes of practice exist for both radio and TV typically with specific
regulations for alcohol advertising, specifying that claims cannot be made in relation to
sexual prowess, fitness or health, courage or strength.
Page reference: 54
Type: true-false
18) An important ecological trend is the rise in consumer concern for the environment and the
demand for more organic food.
*a. T
Feedback: Correct. Increasingly, consumers are worried about the impact of companies on
their ecological environments. They are demanding more organic food, which incorporates
the principles of better welfare for the animals which they consume as food products and less
interference with the natural processes of growing fruit and vegetables (e.g. the use of
pesticides and chemical fertilizers).
Page reference: 55
b. F
Feedback: Incorrect. Increasingly, consumers are worried about the impact of companies on
their ecological environments. They are demanding more organic food, which incorporates
the principles of better welfare for the animals which they consume as food products and less
interference with the natural processes of growing fruit and vegetables (e.g. the use of
pesticides and chemical fertilizers).
Page reference: 55
Type: true-false
19) Porters Five Forces is the most common technique used to conduct a product portfolio
analysis.
a. T
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Page reference: 63
*b. F
Feedback: Correct. Porters Five Forces is the most common technique used to analyse the
competitors. Porter called these variables the Five Forces of Competitive Industry Analysis
Page reference: 63
Type: true-false
20) One of the popular methods for assessing the variety of businesses/products that an
organization has involves the creation of a two-dimensional graphical picture of the
comparative strategic positions. This technique is referred to as the Boston Consulting Group
(BCG) matrix.
*a. T
Feedback: Correct. The Boston Consulting Group (BCG) matrix, the Boston Box, is based on
two key variables: market growth and relative market share (i.e. market share as a
percentage of the share of the products largest competitor, expressed as a fraction). This is a
popular method for assessing the variety of businesses/products that an organization has.
Page reference: 67
*b. F
Feedback: Correct. The Boston Consulting Group (BCG) matrix, the Boston Box, is based on
two key variables: market growth and relative market share (i.e. market share as a
percentage of the share of the products largest competitor, expressed as a fraction). This is a
popular method for assessing the variety of businesses/products that an organization has.
Page reference: 67
21) _____ factors are the environmental factors concerned with the changes in people's
values, lifestyles, and family roles.
*a. Socio-cultural
Feedback: Correct. Lifestyles are constantly changing and consumers are constantly shifting
their preferences over time. Organizations that fail to recognize changes in the socio-cultural
environment, and change their goods/service mix accordingly, typically fail.
Page reference: 49
b. Economic
Feedback: Incorrect. Lifestyles are constantly changing and consumers are constantly
shifting their preferences over time. Organizations that fail to recognize changes in the sociocultural environment, and change their goods/service mix accordingly, typically fail.
Page reference: 49
c. Demographic
Page reference: 49
d. Political
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Page reference: 49
22) In the BCG matrix, products that exist in growing markets but have low market share are
referred as:
a. dog
Feedback: Incorrect. The Boston Consulting Group (BCG) developed the original idea and
their matrix is based on two key variables; market growth and relative market share (i.e.
market share as a percentage of the share of the products largest competitor, expressed as a
fraction). Question marks (also known as problem children) are products that exist in
growing markets but have low market share. As a result there is negative cash flow and they
are unprofitable. Stars are most probably market leaders but their growth has to be financed
through fairly heavy levels of investment. Cash cows on the other hand exist in fairly stable,
low-growth markets and require little ongoing investment. Their very high market share draws
both positive cash flows and high levels of profitability. Dogs experience low growth, low
market share, and generate negative cash flows.
b. star
*c. question marks
Feedback: Correct. The Boston Consulting Group (BCG) developed the original idea and
d. cash cows
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23) When comparing prices from one country to another, economists tend to calculate prices
for a particular basket of goods, a fixed list of common items, and compare the two. This is
known as the _____________.
a. rate of price or wage inflation
Feedback: Incorrect. When comparing prices from one country to another, should we just
compare costs (what you pay for a good or service) and prices of goods (what you sell a good
at, or what you pay as a consumer) through the exchange rate at any one particular time?
Apparently not, since this is itself subject to political and other pressures. What economists
tend to do is calculate prices for a particular basket of goods, a fixed list of common items,
and compare the two. This is known as the purchasing power parity exchange rate. This
rate then allows us to compare directly the relative costs between two countries for a given
item.
Page reference: 48
b. gross domestic product
item.
Page reference: 48
c. inflation
item.
Page reference: 48
*d. purchasing power parity exchange rate
Feedback: Correct. When comparing prices from one country to another, should we just
item.
Page reference: 48
24) The_____________ consists of those organizations that either directly or indirectly
influence an organizations operational performance.
a. external environment
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Feedback: Incorrect. The performance environment, often called the microenvironment,

consists of those organizations that either directly or indirectly influence an organizations
operational performance. There are three main types:
1.) Those companies that compete against the organization in the pursuit of its objectives.
2.) Those companies that supply raw materials, goods, and services and those that add
value as distributors, dealers, and retailers, further down the marketing channel. These
organizations have the potential to directly influence the performance of the organization
by adding value through production, assembly, and distribution of products prior to
reaching the end user.
3.) Those companies that have the potential to indirectly influence the performance of the
organization.
Page reference: 62
*b. performance environment
Feedback: Correct. The performance environment, often called the microenvironment,
consists of those organizations that either directly or indirectly influence an organizations
operational performance. There are three main types:
2.) Those companies that supply raw materials, goods, and services and those that add value
as distributors, dealers, and retailers, further down the marketing channel. These
by adding value through production, assembly, and distribution of products prior to reaching
the end user.
organization.
Page reference: 62
c. internal environment
consists of those organizations that either directly or indirectly
influence an organizations operational performance. There are three main types:
organization
Page reference: 62
d. environmental scanning
consists of those organizations that either directly or indirectly
influence an organizations operational performance. There are three main types:
organization.
Page reference: 62
25) 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.
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a. economic
Feedback: Incorrect. Analysis of the performance environment is undertaken so
organizations can adapt to better positions, relative to those of their stakeholders and
competitors. These adjustments are made as circumstances develop and/or in anticipation of
environmental and performance conditions. The performance environment encompasses not
just competitors but suppliers and other organizations such as distributors, who all contribute
to the industry value chain.
Page reference: 62
b. political
Page reference: 62
*c. performance
Feedback: Correct. Analysis of the performance environment is undertaken so organizations
can adapt to better positions, relative to those of their stakeholders and competitors. These
adjustments are made as circumstances develop and/or in anticipation of environmental and
performance conditions. The performance environment encompasses not just competitors but
suppliers and other organizations such as distributors, who all contribute to the industry value
chain.
Page reference: 62
d. social
Page reference: 62
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Baines, Fill, and Page: Marketing 2e, Chapter 2

Correct answers are marked with an asterisk (*).

Type: multiple choice question

To provide strategic advice to clients on how to design their campaigns;

Baines, Fill, and Page: Marketing 2e, Chapter 2

To provide strategic advice to clients on how to design their campaigns;

To provide strategic advice to clients on how to design their campaigns;

To provide strategic advice to clients on how to design their campaigns;

A politician may be paid a fee to give political advice on matters of importance to an

Baines, Fill, and Page: Marketing 2e, Chapter 2

A politician may be paid a fee to give political advice on matters of importance to an

A politician may be paid a fee to give political advice on matters of importance to an

A politician may be paid a fee to give political advice on matters of importance to an

Baines, Fill, and Page: Marketing 2e, Chapter 2

Baines, Fill, and Page: Marketing 2e, Chapter 2

Baines, Fill, and Page: Marketing 2e, Chapter 2

Baines, Fill, and Page: Marketing 2e, Chapter 2

Feedback: Correct. This is a factor of the ecological environment. Increasingly, consumers

Baines, Fill, and Page: Marketing 2e, Chapter 2

Baines, Fill, and Page: Marketing 2e, Chapter 2

Title: Chapter 02 - Question 14

Baines, Fill, and Page: Marketing 2e, Chapter 2

Baines, Fill, and Page: Marketing 2e, Chapter 2

Baines, Fill, and Page: Marketing 2e, Chapter 2

Baines, Fill, and Page: Marketing 2e, Chapter 2

Page reference: 67-69

Baines, Fill, and Page: Marketing 2e, Chapter 2

Feedback: Incorrect. The performance environment, often called the microenvironment,

Baines, Fill, and Page: Marketing 2e, Chapter 2

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