Final Exam

Question 1

Pitfalls in selecting new ventures (6)

Answer 1

Lack of objective evaluation, no real insight into the market, inadequate understanding of technical requirements, poor financial understanding, lack of venture uniqueness, ignorance of legal issues

Question 2

Pre-start-up phase

Answer 2

Begins with an idea for the venture and ends when the doors are open for business

Question 3

Start-up phase

Answer 3

Begins with the initiation of sales activity and delivery of products and services and ends when the business is firmly established beyond short-term threats to survival

Question 4

Post-start-up phase

Answer 4

Lasts until the venture is terminated or the surviving organizational entity is no longer controlled by an entrepreneur

Question 5

Critical factors for new venture development (5)

Answer 5

Uniqueness of venture, investment size, sales growth expectations, product availability, customer availability

Question 6

What are the 3 major categories of causes for new venture failure?

Answer 6

Product/market problems, financial difficulties, managerial problems

Question 7

Name the reasons why new ventures fail in terms of product/market problems. (5)

Answer 7

Poor timing, product design problems, inappropriate distribution strategy, unclear business definition, over-reliance on one customer

Question 8

Name the reasons why new ventures fail in terms of financial difficulties. (3)

Answer 8

Initial undercapitalization, assuming debt too early, venture capital relationship problems

Question 9

Name the reasons why new ventures fail in terms of managerial problems. (2)

Answer 9

Concept of a team approach, human resource problems

Question 10

What are the questions to ask within the Feasibility Criteria Approach to assessing entrepreneurial ventures? (11)

Answer 10

Is it proprietary? Are the initial production costs realistic? Are the initial marketing costs realistic? Does the product have potential for very high margins? Is the time required to get to market and to reach the break-even point realistic? Is the potential market large? Is the product the first of a growing family? Does an initial customer exist? Are the development costs and calendar times realistic? Is this a growing industry? Can the product and the need for it be understood by the community?

Question 11

Strategic planning

Answer 11

The formulation of long-range plans for the effective management of environmental opportunities and threats in light of a venture’s strengths and weaknesses; includes defining the venture’s mission, specifying achievable objectives, developing strategies, and setting policy guidelines

Question 12

What are some of the benefits of strategic planning? (8)

Answer 12

Cost savings, more efficient resource allocation, improved competitive position, more timely information, more accurate forecasts, reduced feelings of uncertainty, faster decision making, fewer cash flow problems

Question 13

Be able to describe the mistakes or fatal visions that entrepreneurs fall prey to in their attempt to implement a strategy. (5)

Answer 13

Misunderstanding industry attractiveness, no real competitive advantage, pursuing an unattainable competitive position, compromising strategy for growth, failure to explicitly communicate venture’s strategy to employees

Question 14

Strategic positioning

Answer 14

Unique positions that have been available but overlooked by competitors, often not obvious, can help entrepreneurial ventures prosper

Question 15

What are the four squares of the Entrepreneurial Strategy Matrix model?

Answer 15

I-r (high innovation, low risk); I-R (high innovation, high risk); i-r (low innovation, low risk); i-R (low innovation, high risk)

Question 16

What is necessary for an I-r to survive? (3)

Answer 16

Move quickly, protect innovation, lock in investment and operating costs via control systems, contracts, and other measures

Question 17

What is necessary for an I-R to survive? (4)

Answer 17

Reduce risk by lowering investment and operating costs, maintain innovation, outsource high-investment operations, joint venture options

Question 18

What is necessary for an i-r to survive? (3)

Answer 18

Defend present position, accept limited payback, accept limited growth potential

Question 19

What is necessary for an i-R to survive? (7)

Answer 19

Increase innovation/develop a competitive advantage, reduce risk, use business plan and object analysis, minimize investment, reduce financing costs, franchise option, abandon venture

Question 20

What are the four venture life-cycle stages?

Answer 20

Initial expansion and accumulation of resources, rationalization of the use of resources, expansion into new markets to assure the continued use of resources, development of new structures to ensure continuing mobilization of resources

Question 21

What is the path of a venture’s typical life cycle? (according to graph in slides)

Answer 21

New-venture development, start-up activities, venture growth (or failure), business stabilization, innovation or decline

Question 22

Activities that take place in new-venture development

Answer 22

Activities associated with the initial formulation of the new venture’s general philosophy, mission, scope, and direction

Question 23

Activities that take place in start-up activities

Answer 23

Creating a formal business plan, searching for capital, carrying marketing activities, and developing the entrepreneurial team

Question 24

Activities that take place in growth

Answer 24

Leadership transitions from an entrepreneurial one-person focus to a managerial team-orientation to cope with growth of the venture

Question 25

Activities that take place during business stabilization

Answer 25

A “swing” stage that precedes the period when the firm either swings toward greater profitability or toward decline and failure

Question 26

Activities that take place during innovation or decline

Answer 26

The firm either continues its success by acquiring other innovative firms and develops new products/services or it goes into decline

Question 27

Entrepreneurial leadership

Answer 27

Arises when an entrepreneur attempts to manage the fast-paced, growth-oriented company

Question 28

How can entrepreneurs build an adaptive firm? (4)

Answer 28

Share the entrepreneur’s vision, increase the perception of opportunity, institutionalize change as the venture’s goal, instill the desire to be innovative

Question 29

Identify five unique managerial concerns of growing businesses.

Answer 29

Distinctiveness of small size, continuous learning, community pressures, one-person-band syndrome, time management

Question 30

Components of entrepreneurial leadership (6)

Answer 30

Determining the firm’s purpose or vision, exploiting and maintaining the core competencies, developing human capital, sustaining an effective organizational culture, emphasizing ethical practices, establishing balanced organizational controls

Question 31

What are the five C’s of credit?

Answer 31

Capacity (making sure you can repay), capital, collateral (what you are going to buy), conditions (what is going on), and character

Question 32

What are different types of loans? (6)

Answer 32

Working capital, equipment, inventory, real estate, factoring, leasing