Entrepreneurship: Successfully Launching New Ventures, 6e (Barringer/Ireland)
Chapter 13 Preparing for and Evaluating the Challenges of Growth
1) MATI Energy, the company profiled in the opening feature of Chapter 13, sells energy drinks
based on guayusa, a Latin American plant. With respect to growth, ________ is the hallmark of
MATI.
A) circumspection
B) aggression
C) self-imposed limitation
D) externally imposed limitation
E) tenacity
2) Jeremy Westbrook owns an organic food company which has increased both its profits and
revenues over an extended period of time. Jeremy’s firm is experiencing ________ growth.
A) persistent
B) unremitting
C) sustained
D) unbroken
E) moderate
3) In regard to firm growth, evidence shows that ________.
A) relatively few firms generate sustained growth
B) the majority of firms generate sustained growth
C) about 50 percent of firms generate sustained growth
D) manufacturing firms tend to generate sustained growth while service firms do not
E) service firms tend to generate sustained growth while manufacturing firms do not
4) Which of the following statements regarding firm growth is incorrect?
A) Most entrepreneurial firms want to grow.
B) Growth in sales revenue is a poor indicator of an entrepreneurial firm’s potential to survive
today and be successful tomorrow.
C) Firm growth is exciting.
D) Many entrepreneurial firms have grown quickly, producing impressive results for their
employees and owners.
E) Growing a business successfully requires preparation, good management, and an appreciation
of the issues involved.
5) According to the textbook, most entrepreneurial firms ________.
A) are ambivalent about growth
B) want to grow
C) do not want to grow
D) want to grow if the economy is strong but do not want to grow if the economy is weak
E) want to grow if they are a service firm but do not want to grow if they are a manufacturing
firm
6) According to the textbook, the three important things that a business can do to prepare for
growth are ________.
A) plan for growth, adopt a growth-oriented business model, and stay committed to a core
strategy
B) appreciate the nature of business growth, stay committed to a core strategy, and plan for
growth
C) develop a viral marketing campaign, stay committed to a core strategy, and adopt a growth-
oriented business model
D) develop business partnerships, diversify beyond the company’s core strategy, and appreciate
the nature of business growth
E) retain or hire one or more business growth consultants, diversify beyond the company’s core
strategy, and plan for growth
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7) According to the textbook, the businesses that have the potential to grow the fastest over a
sustained period of time are ones that ________.
A) solve a significant problem or have a major impact on their customers’ productivity or lives
B) are cost leaders and promote themselves aggressively
C) have a major impact on their customers’ lives and sell high quality products
D) take advantage of environmental trends and are cost leaders
E) solve a significant problem or sell high quality products
8) According to the textbook, there are three issues about business growth that entrepreneurs
should appreciate. These issues are ________.
A) not all businesses have the potential to be aggressive growth firms, business success scales,
and business growth is a top priority of most entrepreneurial firms
B) business growth is a top priority of most entrepreneurial firms, a business can’t grow too fast,
and businesses that price their products aggressively grow the fastest
C) a business’s valuation increases with its growth, a business can grow too fast, and business
growth is a top priority of most entrepreneurial firms
D) the majority of businesses have the potential to be aggressive growth firms, a business can’t
grow too fast, and business success scales
E) not all businesses have the potential to be aggressive growth firms, a business can grow too
fast, and business success doesn’t always scale
9) Which of the following is NOT one of the 10 warning signs that a business is growing too
fast?
A) Borrowing money to pay for routine expenses.
B) Comfortable operating margins.
C) Customer complaints are up.
D) Those working with the business’s financial structure are starting to worry.
E) E-mail and text messages start going unanswered.
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10) Growth in both revenues and profits over a length of time is called ________ growth.
A) limited
B) normal
C) abnormal
D) sustained
11) Sustained growth is defined as growth in both revenues and profits over an extended period
of time.
12) Most entrepreneurial firms are reluctant to try to grow.
13) All businesses have the potential to be aggressive growth firms.
14) Business success doesn’t always scale.
15) A firm’s core strategy is largely determined by its core competencies, or what it does
particularly well.
16) Do most firms want to grow or are they reluctant to grow? What are the advantages of
growth?
17) According to Chapter 13, business success doesn’t always scale. What is meant by this
statement?
18) A firm’s pace of growth is the rate it is growing ________.
A) compared to industry norms
B) compared to a national index of all firms
C) on an annual basis
D) compared to the national economy
E) compared to its closest competitor
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19) Which of the following options was NOT identified in the textbook as an appropriate reason
for growth?
A) Need to accommodate the growth of key customers
B) Influence, power, and survivability
C) Economies of scale
D) Market leadership
E) Maintain the appearance that the firm is successful
20) Which of the following is NOT an appropriate reason for firm growth?
A) Increasing the compensation of the top managers of the firm
B) Ability to attract and retain talented employees
C) Need to accommodate the growth of key customers
D) Market leadership
E) Economies of scale
21) ________ are(is) generated when increasing production lowers the average cost of each unit
produced.
A) Business scalability
B) Economies of scale
C) Reaching for scale
D) Market leadership
E) Economies of scope
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22) Economies of scale occur when ________.
A) increasing production lowers the average cost of each unit produced
B) increasing production increases the average cost of each unit produced
C) decreasing production lowers the average cost of each unit produced
D) decreasing production increases the average cost of each unit
E) increasing production increases the fixed cost of doing business
23) London Simpson owns a company that makes smartphone accessories. She is trying to
increase her sales, primarily because she knows that increasing production lowers the average
cost of each unit produced. The reason for growth illustrated in this example is ________.
A) economies of scope
B) market leadership
C) influence, power, and survivability
D) need to accommodate the growth of key customers
E) economies of scale
24) ________ costs are costs that a company incurs whether it sells something or not. ________
costs are the costs a company incurs as it generates sales.
A) Preset; Marginal
B) Variable; Fixed
C) Set; Marginal
D) Fixed; Variable
E) Marginal; Set
25) ________ costs are costs that a company incurs whether it sells something or not.
A) Fixed
B) Consistent
C) Steady
D) Variable
E) Regular
26) ________ costs are the costs a company incurs as it makes sales.
A) Static
B) Irregular
C) Balanced
D) Variable
E) Flexible
27) Zack Shields leases a manufacturing facility that produces computer monitors. Zack tries to
keep production high, because his lease payments are $10,500 a month, regardless of whether he
produces one computer monitor a month or 10,000. Zach’s lease payment is a ________ cost.
A) variable
B) secondary
C) fixed
D) marginal
E) tangible
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28) Karen West owns a barbecue restaurant. One expense that Karen watches closely is the cost
of propane, which she uses to heat her ovens. The more barbecue food Karen sells, the more it
costs her for propane on a monthly basis. For Karen, the cost of propane is a(n) ________ cost.
A) variable
B) secondary
C) resultant
D) fixed
E) irregular
29) Paul Mason’s firm sells medical equipment to heart surgeons. The company fields a direct
sales force that travels the country demonstrating its equipment to heart surgeons and hospital
administrators. Recently, Paul’s company started producing equipment for eye surgeons, partly to
maximize the value of his sales force, which can now call on both heart surgeons and eye
surgeons when it makes hospital visits. Paul’s firm is attempting to capture economies of
________ through this strategy.
A) reach
B) scope
C) capacity
D) range
30) Market leadership occurs when a firm ________.
A) is the number one or number two firm in an industry or niche market in terms of net profits
B) is one of the top five firms in an industry or market niche in terms of sales volume
C) earns twice as much as its closest competitor
D) sells twice as much as its closest competitor
E) is the number one or the number two firm in an industry or niche market in terms of sales
volume
31) Some firms feel that they can better appeal to their customers if they can advertise that they
are the “Number 1 firm” in their industry. This sentiment is motivated by the reason for growth
labeled ________.
A) economies of scope
B) need to accommodate the growth of key customer
C) economies of scale
D) market leadership
E) influence, power, and survivability
32) Katlyn Williams owns a company that makes specialized components for the aerospace
industry. Her most important customer is a company that is growing at a rate of 33% per year.
Katlyn is working hard to grow her firm, because she knows that unless her company continually
grows it will not be able to keep pace with the growth of its most important customer. This
example illustrates the reason for growth referred to as ________.
A) capturing economies of scope
B) executing a scalable business model
C) market leadership
D) influence, power, and survivability
E) need to accommodate the growth of a key customer
33) A firm’s pace of growth is the rate at which it is growing compared to its main competitors.
34) Fixed costs are the costs a company incurs as it generates sales.
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35) Market leadership occurs when a firm holds the number one or number two position in an
industry or niche market in terms of sales volume.
36) Sometimes firms are compelled to grow to accommodate the growth of a key customer.
37) Define the term “market leadership.” Why do firms work hard to obtain market leadership?
38) The majority of businesses go through a discernable set of stages of growth referred to as the
________.
A) business rotation cycle
B) business existence cycle
C) organizational sequence
D) business life cycle
E) organizational life cycle
39) Which of the following is NOT one of the five stages in the organizational life cycle?
A) Introduction
B) Early growth
C) Scale
D) Maturity
E) Decline
40) The ________ stage of the organizational life cycle is the startup phase, where a business
determines what its core strengths and capabilities are and starts selling its initial product or
service.
A) introduction
B) launch
C) ramp-up
D) early growth
E) continuous growth
41) The main challenges for a business in the introduction stage of the organizational life cycle is
________.
A) beginning the process of transitioning the owner from a hands-on supervisor to a more
managerial role and developing business partnerships
B) developing business partnerships and making sure the initial product or service is right
C) determining whether the owner of the business and the current management team is capable
of taking the business further and developing systems and procedures
D) developing systems and procedures and beginning the process of transitioning the owner from
a hands-on supervisor to a more managerial role
E) making sure the initial product or service is right and starting to lay the groundwork for
building a larger organization