Questions for Chapter 3
True/False
1. Entrepreneurship is all about opportunity. (pg. 71)
2. Entrepreneurs need to conduct a series of tests called family-first tests to identify interesting
ideas and then see whether they are viable opportunities by testing them on family members.
(pg. 71)
3. Most successful ideas are driven by the entrepreneur’s personal experience. (pg. 71)
4. Starting a company in a sphere of business that you really enjoy is not the best idea, in terms of
the chance of success. (pg. 71)
5. No one knows about your strengths better than you do. (pg. 72)
6. You will likely fail if you start a business in an area you have no experience in. (pg. 72)
7. For a successful idea multiplication and launching a venture, one should focus on becoming a
“cocktail-party entrepreneur.” (pg. 73)
8. Cocktail-party entrepreneurs can provide you with invaluable advice about how to run a venture
(pg. 73)
9. New, entrepreneurial ideas frequently sprout from an entrepreneur’s desire for a product that he
or she cannot currently find in the market. (pg. 75)
10. According to IDEO, the first step in the creation of a product is to make a set of assumptions.
(pg. 75)
11. Asking leading questions is the best method of discovering the appeal of a potential product or
concept. (pg. 75)
12. During the “gathering stimuli” phase, one should just observe. (pg. 75)
13. The key to success in comedy improvisation is to always say, “Yes, but…” (pg. 75)
14. Saying, “That will not work because…” is important at later stages of business development.
(pg. 75)
15. Playing the role of devil’s advocate is important at the “optimize practicality” stage of concept
development. (pg. 76)
16. Playing the role of devil’s advocate refers to building a simple mock-up of what the product will
look like. (pg. 76)
17. An entrepreneur should try to broaden his or her customer base definition at the early stages of
20. In aggregate, baby boomers create powerful trends for US businesses. (pg. 79)
21. The first domain name on the Web was assigned in 1986. (pg. 80)
22. To target goods and services specifically to Hispanic populations in the US is to focus one’s
market too narrowly. (pg. 77)
23. Customer and market trends change too rapidly to be of any predictive use for an entrepreneur.
(pgs. 79-80)
24. The S-curve is a forecasting tool designed to measure the power of competition. (pg. 82)
25. The market enters a fast growth phase when customer awareness and demand exceed supply.
(pg. 82)
26. A penetration pricing strategy is one of the most simple and successful initial approaches for a
new venture. (pg. 83)
Zacharakis, A., Corbett, A. & Bygrave (2020) Entrepreneurship, 5th Edition. Hoboken, NJ: Wiley.
27. A highly priced product will usually be perceived as better quality by the customer. (pg. 77)
28. The cost-plus pricing technique is the most reliable one as it sets the price equal to the product’s
value. (pg. 84)
29. It is important to lower your gross margins early in the venture’s life (pg. 84)
30. It typically takes 1-2 years for a firm to reach stability and for operating costs to stabilize.
(pg. 85)
31. It is important to evaluate the value chain you are competing in and the different options there
are to distribute your product.
(pg. 86)
32. Customers can assist you to determine direct competitors, indirect competitors, and substitutes.
(pg. 87)
33. There is no need to worry about competitors in emerging markets, since they are recently
emerging. (pgs. 87-88)
34. A venture whose vendors are primarily commodity suppliers, will retain a large portion of the
value chains gross margin. (pg. 90)
35. Stringent government approval processes may not signal a poor opportunity if potential margins
are still relatively high. (pg. 90)
36. A startup will likely fail if the entrepreneur ignores feedback from his or her customers.
(pg. 91)
37. Pre-launch analysis will determine the required variables of your business model and should be
(False)
Multiple Choice
1. According to the chapter, into what type of opportunity should a business idea translate? (pg.71)
a. Realistic
2. What does moving a seed of an idea to a more concrete possibility require? (pg. 73)
e. Possesses a predilection for cocktails
4. Which of the following is not a part of IDEO’s product design steps? (pg. 75)
5. What is the only action that the “gather stimuli” stage requires of the entrepreneur? (pg. 75)
e. “Nice!”
7. What is the name of the process that is the equivalent of brainstorming, but with a focus on
writing rather than verbal communication? (pg. 75)
8. In which stage is it important to play devil’s advocate? (pg. 76)
e. Create stimuli
e. ATA, BTA, and CTA
10. On what category of customers should a startup business focus most of its attention? (pg. 77)
11. An understanding of your STA helps you to: (pg. 78)
12. When analyzing an opportunity which trends should you focus on? (pg. 79)
13. Which of the following is NOT one of the five areas you need to fully understand prior to your
launch as enumerated in chapter 3? (pg. 76)
14. What is the approximate number of baby boomers in the US? (pg. 79)
a. 55-60 million
15. According to the chapter, people of Hispanic descent will comprise 30% of the US population
by what year? (pg. 80)
16. To replace $70,000 of forgone salary and benefits, an entrepreneur will need the new venture to
generate approximately how much in annual revenue? (pg. 80)
e. J-Curve
18. When starting web business, which measure of effectiveness matters most? (pg. 84)
19. What is an example of a relatively inelastic product? (pg. 83)
20. What is the short-sighted thinking behind the penetration-pricing strategy? (pg. 83)
e. Prices should match the value of products.
21. Research suggests that a gross margin of what percent is a good benchmark for distinguishing
more attractive opportunities from less attractive ones? (pg. 84)
22. Based on existing research, how long in the life of a startup do operating costs take to stabilize?
(pg. 85)
23. The weak link in Gourmet Stew’s business model was? (pg. 86)
24. When markets are emerging, which factor matters most long term? (pgs. 87-88)
25. What markets are characterized by “stealth” competition? (pg. 88)
26. How does the US Government support entrepreneurship? (pg. 90)
27. Which of the following is NOT related to competitive profiling? (pg. 89)
a. Net income margins
b. Revenues
Zacharakis, A., Corbett, A. & Bygrave (2020) Entrepreneurship, 5th Edition. Hoboken, NJ: Wiley.
28. Which of the following is an example of a perfect business? (pg. 91)
29. Better Opportunities tend to exist when: (pg. 92)
30. When pre-launch analysis predicts unfavorable outcomes you should: (pg. 91)
1. How does one turn a seed of idea into an actual idea? (pg. 73)
2. Why is it important to be passionate about your venture? (pg. 71)
3. Describe the process IDEO suggests an entrepreneur needs to go through to design a
product. (pgs. 74 – 76)
4. What categories of customers exist? How do you prioritize and address them? (pg. 77-78)
• Primary Target Audience (PTA) – Focus on this group
• Secondary Target Audience (STA) – Use this segment to generate additional revenues.
5. Give examples of some of the biggest trends in the recent history that have shaped business
in the US. How did they influence business in general? (pgs. 79 – 81)
6. How can one best predict the acceptance of the product by the customer? (pg. 82)
7. What are the ways of pricing a new product and what mistakes should entrepreneurs
avoid? (pgs. 83 – 84)
8. Why is the statement, “My startup has no competition,” always wrong? How can you find
out about your competitors? (pg. 87)
9. What can an entrepreneur do when there are no business opportunities at all?
10. Give a brief checklist of information that an entrepreneur should investigate. (pg. 92)
• Customer, Market Size, Trends, Market growth Rate, Price/Frequency/Value, Distribution,
Competition, Key Success Factors, Vendors.
11. Why can’t companies raise prices after using penetration pricing strategy? (pg. 83)
• First, attractive ventures are often launched in emerging markets where demand exceeds
supply.
12. Describe the importance of understanding the entire value chain for the industry you are
competing in. (pgs. 85-86)
13. Give two examples showing vendor power, both strong and weak. (pg. 90)
• Referring back to the value chain we created for Gourmet Stew, we notice that suppliers are
providing commodity goods such as beef, vegetables and other food products. These types of
vendors usually have limited power, which means that more of the ultimate gross margin in
14. What other value chains, besides those of direct competitors, should be analyzed
(pgs. 89-90)
15. What is the function of the government in the process of enterprise creation? (pg. 90)
• For the most part, the U.S. government is supportive of entrepreneurship. Taxes are lower
than in most nations in the world, the time required to registrar a new business is shorter, and
the level of regulations is generally lower.
• However, in certain industries, government regulation and involvement are significantly
higher, such as in pharmaceuticals and medical devices.
16. How can a business separate its target customers into categories of importance?
(pgs. 77 – 78)