chapter 8

Question 1

In the opening case, iSold It, a firm that helped others sell products on eBay, went from one of the fastest growing franchise businesses to a firm that saw a number of its franchises close and declining sales in a matter of months. What was a major challenge iSold It faced that led to these problems?
A. It did not have the financial resources to maintain the rapidly growing firm.
B. The company lacked knowledgeable executives in key positions.
C. Its concept was rapidly imitated by others.
D. It had weak operational systems and could not maintain control of the growing network of stores.

Answer 1

Its concept was rapidly imitated by others.

Question 2

According to the text, for an entrepreneurial start-up to be successful, three ingredients are critical. What are they?
A. good ideas, a team of investors, and a business plan
B. a viable opportunity, available resources, and a qualified and motivated founding team
C. an opportunity, a marketing plan, and office space
D. management, marketing, and money

Answer 2

a viable opportunity, available resources, and a qualified and motivated founding team

Question 3

Which of the following is a common source of new business opportunities? 
A. current or past work experiences
B. suggestions by family or friends
C. chance event
D. all of these

Answer 3

all of these

Question 4

The process of identifying, selecting, and developing new venture opportunities is known as 
A. innovativeness.
B. bootstrapping.
C. opportunity recognition.
D. brainstorming.

Answer 4

opportunity recognition.

Question 5

Generally speaking, the opportunity recognition process consists of two phases of activity. They are 
A. Global Search and Recycling Profits.
B. Value Creation and Affordability.
C. Discovery and Evaluation.
D. none of these.

Answer 5

Discovery and Evaluation.

Question 6

Which of the following is NOT one of the characteristics of an entrepreneurial opportunity? 
A. attractive
B. affordable
C. achievable
D. value creating

Answer 6

affordable

Question 7

When an opportunity is attractive long enough for it to be successfully developed and deployed, it is said to be 
A. value creating.
B. affordable.
C. achievable.
D. durable.

Answer 7

durable.

Question 8

Which of the following terms is used to refer to opportunities that are practical and physically possible? 
A. durable
B. valuable
C. achievable
D. sustainable

Answer 8

achievable

Question 9

Financing for entrepreneurial start-ups includes which of the following? 
A. investments by family and friends
B. personal savings
C. private investors
D. all of these

Answer 9

all of these

Question 10

Which of the following sources of entrepreneurial financing are available to ventures that have already started to conduct business and generate sales? 
A. bank financing
B. venture capital
C. public financing
D. all of these

Answer 10

all of these

Question 11

The majority of entrepreneurial start-ups are financed with
A. bank financing.
B. public financing (e.g., SBA loans).
C. venture-capital financing.
D. personal savings and the contributions of family and friends.

Answer 11

D. personal savings and the contributions of family and friends.

Question 12

Private individuals who provide seed capital to young ventures are known as 
A. angels.
B. gazelles.
C. cash cows.
D. rising stars.

Answer 12

A. angels.

Question 13

All of the following statements about venture capital are true EXCEPT
A. entrepreneurs raise venture capital by selling shares of ownership in their business.
B. venture capital is a form of public equity financing.
C. venture capital is used to finance rapid growth or large capital expenditures.
D. venture capital groups can often provide helpful management advice.

Answer 13

B. venture capital is a form of public equity financing.

Question 14

Based on statistics reported in the text, which of the following statements is FALSE?
A. Firms that obtain venture-capital funding receive an average of over $1 million each.
B. Total investment in start-up firms averages about $80,000 in the firm’s first year.
C. Among the 100 fastest-growing new businesses identified by Entrepreneur magazine, 61 percent obtained start-up funding from personal savings.
D. Ninety percent of the companies financed with venture capital funds fail.

Answer 14

D. Ninety percent of the companies financed with venture capital funds fail.

Question 15

According to the text, new ventures launched by entrepreneurial teams are more likely to be successful than ventures launched by 
A. established corporations.
B. bootstrappers.
C. "lone wolf" entrepreneurs.
D. all of these.

Answer 15

C. “lone wolf” entrepreneurs.

Question 16

Which of the following types of resources contribute to the success of entrepreneurial firms?
A. social capital
B. financial resources
C. human resources
D. All of these contribute to the success of entrepreneurial firms.

Answer 16

D. All of these contribute to the success of entrepreneurial firms.

Question 17

\_\_\_\_\_\_\_\_\_\_ provide(s) a key avenue for growth for many young and small firms through partnering to obtain resources and/or expand into new markets. 
A. Strategic alliances
B. Bootstrappers
C. "Lone wolf" entrepreneurs
D. Research & development

Answer 17

A. Strategic alliances

Question 18

The U.S. Small Business Administration supports small business through all of the following EXCEPT 
A. government contracting.
B. underwriting loans.
C. investing venture capital.
D. training and counseling.

Answer 18

C. investing venture capital.

Question 19

Which of the following is NOT one of the three characteristics of entrepreneurial leadership mentioned by the text? 
A. vision
B. dedication and drive
C. commitment to excellence
D. clarifying job responsibilities

Answer 19

D. clarifying job responsibilities

Question 20

Why is vision such an important element of entrepreneurial leadership?
A. Because the entrepreneur has to envision realities that do not yet exist.
B. Because a vision statement must be part of the documentation used to obtain venture financing.
C. Because organizations cannot function without a detailed and operational vision.
D. All of these

Answer 20

A. Because the entrepreneur has to envision realities that do not yet exist.

Question 21

Which of the following is NOT a common new entry strategy according to the text? 
A. imitative new entry
B. adaptive new entry
C. proactive new entry
D. pioneering new entry

Answer 21

C. proactive new entry

Question 22

Seeking products or services that have been successful in one market and introducing the same basic product or service in another segment of the market is referred to as 
A. imitative new entry.
B. adaptive new entry.
C. proactive new entry.
D. pioneering new entry.

Answer 22

A. imitative new entry.

Question 23

Which of the following is NOT a key element of a blue ocean strategy?
A. Pursue low cost and differentiation advantages simultaneously.
B. Make the competition irrelevant.
C. Highlight incremental improvements to capture market share.
D. Create new demand in uncharted territory.

Answer 23

C. Highlight incremental improvements to capture market share

Question 24

Cirque du Soleil is an example of a firm that successfully enacted a “blue ocean” strategy. Which of the following is a feature of the strategy it enacted?
A. It developed its own musical scores for its circus performances.
B. It discontinued traditional parts of the circus, such as animal acts.
C. It researched customers to learn what circus features are more in demand.
D. All of these.

Answer 24

D. All of these.

Question 25

"Doing more with less", by holding down costs or making more efficient use of resources is one of the ways entrepreneurs achieve success. This is an example of how entrepreneurs use 
A. an imitative strategy.
B. a low-cost leader strategy.
C. a differentiation strategy.
D. a combination strategy.

Answer 25

B. a low-cost leader strategy.

Question 26

Entrepreneurial firms that pursue a low-cost leadership strategy use which of the following to achieve lower costs?
A. cost-saving technology such as the Internet
B. simple organizational structures
C. rapid decision making
D. all of these

Answer 26

D. all of these

Question 27

When an industry is mature, a \_\_\_\_\_\_\_\_\_\_ strategy is considered to be one of the most effective approaches for a new entrant. 
A. focus
B. differentiation
C. overall low-cost
D. small business

Answer 27

A. focus

Question 28

According to the text, all of the following might make it difficult for entrepreneurial firms to effectively pursue a strategy of differentiation EXCEPT
A. incumbent firms are constantly seeking opportunities to specialize in market niches.
B. differentiation strategies are often expensive to enact.
C. it may be difficult for a young firm to establish a strong brand identity.
D. implementing superior new technologies may be challenging for entrepreneurial firms.

Answer 28

A. incumbent firms are constantly seeking opportunities to specialize in market niches.

Question 29

Intense rivalry involving actions and responses among similar competitors vying for the same customers in a marketplace is known as 
A. competitive dynamics.
B. resource similarity.
C. threat of substitutes.
D. pioneering new entry.

Answer 29

A. competitive dynamics.

Question 30

Which of the following is NOT one of the reasons a company might launch new competitive actions? 
A. to obtain first mover advantages
B. to improve market position
C. to capitalize on growing demand
D. to find new sources of raw materials

Answer 30

D. to find new sources of raw materials

Question 31

Netflix CEO Reed Hastings made this important observation about dealing with rivals:
A. “In a highly competitive marketplace, firms must be paranoid about the multitude of potential rivals.”
B. “You can afford to ignore rivals in small markets, but you can never ignore rivals in large markets, such as online video companies like YouTube.”
C. “There are tens and maybe hundreds of start-ups who think that they are going to eat Netflix’s lunch. The challenge for a management team is to figure out which are real threats and which aren’t.”
D. “Netflix’s position is so strong that I don’t worry about new entrants.”

Answer 31

C. “There are tens and maybe hundreds of start-ups who think that they are going to eat Netflix’s lunch. The challenge for a management team is to figure out which are real threats and which aren’t.”

Question 32

Aircraft makers Boeing and Airbus have a high degree of \_\_\_\_\_\_\_\_\_\_ because they make very similar products and have many buyers in common. 
A. dynamic capabilities
B. market commonality
C. first mover advantages
D. equity funding

Answer 32

B. market commonality

Question 33

The Wall Street Journal and the New York Times have seen the intensity of their rivalry increase. One factor driving this is that the Wall Street Journal has moved from financial news reporting to general national and global news reporting and finally, to adding local New York news. The rivalry of these two news providers has increased due to
A. increased dynamic capabilities.
B. increased market commonality.
C. erosion of first mover advantages.
D. the choice of tactical over strategic actions.

Answer 33

B. increased market commonality.

Question 34

Which of the following questions should a firm ask itself before responding to a competitive attack?
A. How serious is the impact of the attack?
B. What is our competitive intent—do we want to blunt the attack or enhance our competitive position with our response?
C. What resources do we have available for a response?
D. All of these.

Answer 34

D. All of these.

Question 35

Which of the below best describes the competitive tendencies of small firms?
A. Because they lack legitimacy in the marketplace, small firms tend to signal their competitive actions long before they launch those actions.
B. Small firms typically have more resources available as they undertake competitive attacks than do large firms.
C. Small firms are more nimble and can respond quickly to competitive attacks.
D. All of these.

Answer 35

C. Small firms are more nimble and can respond quickly to competitive attacks.

Question 36

Cirrus Aircraft, a leading manufacturer of small airplanes, sees a market opportunity and has decided to double its plant capacity over the next two years. What type of competitive action does this represent?
A. A tactical action because the move is an attempt to fill a gap in service.
B. A strategic action because such a large plant expansion will require a major commitment of resources.
C. A strategic action because the firm can easily reverse the action at any time, thus giving Cirrus more strategic flexibility.
D. A guerilla offensive because it is fast and will surprise its rivals.

Answer 36

B. A strategic action because such a large plant expansion will require a major commitment of resources.

Question 37

All of the following are examples of strategic actions a firm might take EXCEPT
A. acquire with competitors to reduce competition.
B. expand into neglected markets.
C. change product packaging.
D. tie up raw materials sources.

Answer 37

C. change product packaging.

Question 38

The best example of a tactical action that a company might use in response to a competitive attack is to 
A. acquire the competitor.
B. target the rival's markets.
C. expand into new geographical areas.
D. offer price discounts and rebates.

Answer 38

D. offer price discounts and rebates

Question 39

All of the below are factors that affect how a competitor will respond to a competitive attack EXCEPT
A. how dependent the competitor is on that industry or particular market segment.
B. the degree of market power and reputation of the company that initiated the attack.
C. the resources which are available for a firm to respond.
D. the stock market reaction to the initial competitive attack.

Answer 39

D. the stock market reaction to the initial competitive attack.

Question 40

Which of the following refers to a situation where a company has a high concentration of its business in a particular industry's market? 
A. competitor's resources
B. market dependence
C. resource similarity
D. actor's reputation

Answer 40

B. market dependence

Question 41

A firm is considering a large price cut on its leading product as a way to gain market share. One executive strongly disagrees with the price cut and states, “We are in the same marketplace as our rivals, and we do not have any competitive advantages in our cost structure. If we cut prices, our competitors will likely do the same. The end result is that we will all make less money.” These arguments are an example of
A. a strategy of forbearance.
B. a strategy of co-opetition.
C. a hardball strategy whereby competitive actions are not undertaken without a clear advantage.
D. a weakness strategy that leads a company into constant decline

Answer 41

A. a strategy of forbearance.