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Copyright © 2019 Pearson Education, Inc.
Entrepreneurship: Successfully Launching New Ventures, 6e (Barringer/Ireland)
Chapter 14 Strategies for Firm Growth
1) Filtereasy, the company profiled in the opening feature of Chapter 14, provides a monthly
subscription service for ________.
A) water filters
B) air filters
C) any household filters
D) coffee filters
E) oil filters
2) Shelby Collins owns a firm that designs and sells women’s clothing. She is currently trying to
grow her firm by developing new product lines. Shelby is pursuing a(n) ________ growth
strategy.
A) in-house
B) center
C) domestic
D) external
E) internal
3) New product development, other product-related strategies, and international expansion are
examples of ________ growth strategies.
A) external
B) domestic
C) primary
D) internal
E) in-house
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4) Internally generated growth is often called organic growth because it does not rely on
________.
A) outside intervention
B) its own skills and capabilities
C) external funding
D) internal leadership
E) internal design expertise
5) Which of the following is an example of an external growth strategy?
A) Geographic expansion
B) Improving an existing product or service
C) Increasing the market penetration of an existing product or service
D) Extending product lines
6) Nest Labs, Zappos and Sir Kensington’s are examples of firms that are growing via ________
growth strategies.
A) in-house
B) external
C) internal
D) central
E) derivative
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7) Which mechanism for firm growth involves the creation and sale of new products or services?
A) Strategic alliances
B) New product development
C) Licensing
D) Franchising
E) Joint ventures
8) Which of the following is an advantage of internal growth strategies?
A) Need to develop new resources
B) Get quality and pricing right
C) Investment in a failed internal effort can be difficult to recoup
D) Provides maximum control
E) Adds to industry capacity
9) Which of the following statements is NOT true regarding new product development?
A) New product development involves designing, producing, and selling new products as a
means of increasing firm revenues and profits.
B) When new product development is properly executed, there is tremendous upside potential.
C) The key to successful new product development strategy is to develop products that aren’t
simply “me-too” products.
D) In general, developing new products is a low-risk strategy.
E) In many fast-paced industries, new product development is a competitive necessity.
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10) Internally generated growth is often called ________ growth.
A) artificial
B) natural
C) acquisitive
D) organic
E) inorganic
11) Which of the following was NOT identified in the textbook as a key to effective new product
development?
A) Develop products that add value.
B) Get quality and pricing right.
C) Find a need and fill it.
D) Conduct ongoing feasibility analysis.
E) Focus on broad target markets.
12) Which of the following was NOT identified in Chapter 14 as one of the top five reasons new
products fail?
A) The potential market was overestimated.
B) Customers saw the product as too expensive.
C) Lack of passion for the product.
D) The product was no different than the competition’s.
E) The costs of developing the product line were too high.
13) External growth strategies involve efforts taken within the firm itself, such as new product
development, other product-related strategies, and international expansion.
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14) Internally generated growth is often-called organic growth because it does not rely on outside
intervention.
15) In many fast-paced industries, new product development is a competitive necessity.
16) An advantage of internal growth is that it is a rapid form of growth.
17) New product development is a low-risk growth strategy.
18) Explain the difference between internal and external growth strategies. Provide examples of
each.
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19) Describe the internal growth strategy of new product development. Why is it a competitive
necessity in some industries that entrepreneurial firms focus on this form of growth?
20) If a business enhances the quality of a product, makes it more convenient to use, improves its
durability, or makes it more up-to-date, any one of those initiatives fall under the category of
________.
A) increasing the market penetration of an existing product or service
B) extending product lines
C) geographic expansion
D) licensing
E) improving an existing product or service
21) A ________ strategy seeks to increase the sales of a product or service through greater
marketing efforts or through increased production capacity and efficiency.
A) product line extension
B) product line sharpening
C) product line widening
D) market penetration
E) market expansion
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22) Pam Ryan owns a store that sells running shoes and related products. Pam is currently trying
to increase sales through endorsements by famous runners and former Olympic athletes. Pam is
pursuing a(n) ________ strategy.
A) strategic alliance
B) licensing
C) market penetration
D) geographic expansion
E) improving an existing product or service
23) Work that is done for a company by people other than the company’s full-time employees is
referred to as ________.
A) insourcing
B) farming-out
C) personnel extension
D) outsourcing
E) capacity enhancement
24) A(n) ________ strategy involves making additional versions of a product so that it will
appeal to different clientele.
A) market penetration
B) geographic expansion
C) improving an existing product or service
D) strategic alliance
E) product line extension
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25) Chris Smith owns a store that sells all-terrain vehicles (ATVs). In the past, Chris just sold
one version of each of the ATVs he sold in his showroom, but to increase sales, Chris now sells a
low-end, a medium-priced, and a high-end version of each of the ATVs he sells. Chris’s new
strategy is called a(n) ________ strategy.
A) improving an existing product or service
B) market penetration
C) product line extension
D) geographic expansion
26) Entrepreneurial businesses that grow by expanding from their original location to additional
geographic sites are pursuing a ________ strategy.
A) common expansion
B) market penetration
C) universal networking
D) geographic expansion
E) product line extension
27) Shelly Watters owns a chain of fashion boutiques that started in Washington, DC and has
expanded into Maryland, Virginia, and West Virginia. Shelly is growing her company via a
strategy of ________.
A) geographic expansion
B) market penetration
C) product line extension
D) outsourcing
E) licensing
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28) A market penetration strategy involves actions taken to increase the sales of a product or
service through greater marketing efforts or through increased product capacity and efficiency.
29) A product line extension strategy involves making additional versions of a product so that it
will appeal to a different clientele or making related products to sell to the same clientele.
30) Geographic expansion is most common in manufacturing settings.
31) Describe what a product line extension strategy is. What are the advantages of this strategy?
Describe a company you are familiar with that utilizes a product line extension growth strategy.
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32) According to a survey of rapid growth firms conducted by the Small Business &
Entrepreneurship Council and the Financial Services Roundtable, ________ percent of all U.S.
exports are accounted for by small businesses.
A) 78
B) 97
C) 41
D) 53
E) 66
33) International new ventures are ________.
A) businesses that have employees located in two or more countries
B) businesses that sell products in two or more countries
C) businesses that, from inception, seek to derive significant competitive advantage by using
their resources to sell products or services in multiple countries
D) businesses that are headquartered in a foreign country and export their products to the United
States
E) new ventures that export at least one-third of their products to foreign countries
34) The What Went Wrong feature in Chapter 14 focuses on the failure of Crumbs Bake Shop, a
specialty-restaurant chain that sold gourmet cupcakes. According to the feature, Crumbs failed
due to ________.
A) lack of funding to facilitate expansion, high real estate costs, management turnover, poor
operating margins
B) no pivot or change in strategy, lack of international expansion, trademark dispute with a
competitor, failure to franchise
C) increasingly crowded market, consumers started losing interest in cupcakes, high real estate
costs, and no pivot or change in strategy
D) lack of funding to facilitate expansion, management turnover, increasingly crowded market,
and high fixed costs
E) high operating costs, trademark dispute with a competitor, consumers started losing interest in
cupcakes, and failure to franchise
35) Which of the following is the primary advantage of exporting as a foreign market entry
strategy?
A) Provides a firm total control over its foreign operations
B) Ability to generate revenue
C) Exporting is a relatively inexpensive way for a firm to become involved in foreign markets.
D) The exporting company’s customers put up most of the capital needed to establish the export
operation.
E) Exporting involves very little effort on the part of a firm.
36) Which of the following is the primary disadvantage of licensing as a foreign market entry
strategy?
A) A firm in effect “teaches” a foreign company how to produce its proprietary products.
B) High transportation costs
C) It is usually a one-time activity.
D) A firm loses partial control of its business operations.
E) Quality control
37) Which of the following is the primary advantage of a wholly owned subsidiary as a foreign
market entry strategy?
A) Provides a firm total control over its operations
B) Easier to raise capital to implement than other foreign market entry strategies
C) Gaining an appreciation of local customs and market preferences
D) Low transportation costs
E) The ability to give employees foreign market experience
38) The majority of entrepreneurial firms first enter foreign markets as exporters.