Use the Following Information to Answer Questions That Refer to the Jewel

question 200

Multiple Choice

Use the following information to answer questions that refer to the Jewel Craft case. Jewel Craft, Inc. is a leading producer in the United States women's costume jewelry and accessories market. Its brands are well known and are sold by department stores and better women's stores. Several stores in a city may carry Jewel Craft's brands because most of Jewel Craft's customers will not consider any other brand.
Jewel Craft's sales force calls on one wholesaler in each state. Gemco, Inc., of Boston, Massachusetts, is the Jewel Craft distributor in that state. Gemco stocks and sells women's accessories (noncompeting lines) for several manufacturers like Jewel Craft. Wholesalers are allowed a 20 percent markup by Jewel Craft--but pay the freight charges to their warehouses. Jewel Craft's policy of using one wholesaler per state comes from its desire to control its distribution. Jewel Craft uses national magazine advertising and also supports a cooperative ad program with retailers.
Jewel Craft's prices allow for a 40 percent retail markup--an attractive percent when one considers that Jewel Craft's products require little in-store selling because of their well-established reputation.
Recently, Jewel Craft was approached by a watch producer with the idea of expanding to watches under the Jewel Craft name. It was argued that although national watch sales have leveled off, Jewel Craft could enjoy growing sales for several years because of the fine reputation the company has achieved. If watches are added, Jewel Craft will use its present policies regarding distribution, pricing, and advertising. Further, it will offer the wholesalers and retailers an attractive "package" deal as an incentive to carry Jewel Craft watches. Intermediaries will be required to carry the watches if they wish to handle the jewelry and accessories.
Jewel Craft's distribution policy--at the retail level--seems to be:

• A) direct distribution.
• B) exclusive distribution.
• C) intensive distribution.
• D) selective distribution.

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Definitions:

Systematic Risk

Market-wide or market segment-specific dangers that cannot be eliminated by diversifying one's investment portfolio.

Beta

Beta is a measure of a stock's volatility in relation to the overall market, indicating the stock's risk level compared to the market average.

Non-diversifiable Risk

A type of risk that is inherent to the entire market or market segment and cannot be eliminated through diversification.

Diversified Investor

An investor who spreads their investment across various assets to minimize risk.