One of the most important means of sharing business risks is
a. preventive maintenance.
b. insurance.
c. a system of internal checks or control.
d. good management.
Though it is sometimes expensive to make socially responsible choices,
a. small businesses should be exempt from environmental regulations.
b. manufacturing concerns always have lower profits.
c. long-term and short-term profits are invariably reduced.
d. businesses must recognize that profits are not the only important factor.
Prospective entrepreneurs will usually acquire their initial financing from
a. venture capitalists.
b. personal savings.
c. wealthy individuals.
d. the securities market.
A firm’s marketing mix consists of _____ activities.
a. pricing, promotion, and distribution
b. product, pricing, and promotion
c. product, promotion, and distribution
d. product, pricing, promotion, and distribution
The most rudimentary form of business organization among small businesses is the
a. corporation.
b. general partnership.
c. sole proprietorship.
d. limited partnership.
Fundamental requirements of a good investment opportunity include all but which of
the following?
a. The timing must be right.
b. The business must be able to achieve a sustainable competitive advantage.
c. There must be a good fit between the entrepreneur and the opportunity.
d. There can be no more than one fatal flaw.
Problems typically associated with the use of secondary data include all of the
following except
a. outdated material.
b. inconsistent units of measure.
c. lack of credibility.
d. limited number of data sources.
In comparison to the general population, entrepreneurs have a
a. higher internal locus of control.
b. lower internal locus of control.
c. higher external locus of control.
d. similar locus of control.
Which of the following is a true statement about location decisions?
a. Franchisers never assist entrepreneurs with location decisions.
b. Location decisions have an enduring effect on business operations.
c. Location decisions should be made independently of consumer needs.
d. The location decision is equally critical to all types of businesses.
Which of the following is not one of the suggestions for developing extraordinary
customer service?
a. Naming names
b. Customer care
c. Keeping in touch
d. “Bamboo research”
Harvesting is the method entrepreneurs and investors use to grow their firms.
Following the completion of the market and competitor analysis, the entrepreneur is
ready to write the formal marketing plan.
The early growth stages of a new business involve significantly less change than that
which occurs during the growth of a relative mature business.
Bank credit cards are widely accepted by retailers who desire to offer credit but do not
have their own credit cards.
The cash method of accounting is generally selected by the very small firm that wants
to help its cash flow by avoiding the payment of taxes on income not yet received.
Sellers using a practice called dynamic pricing set prices based on those of market
leaders.
The majority of small business advertising is institutional advertising.
Transferring risk to someone else by carrying insurance is always the best way to
manage business risks.
The purpose of a Better Business Bureau is to promote ethical conduct by businesses in
a community.
The entrepreneur has great control over a new venture, making it easier to estimate
capital requirements.
You Make the CallSituation 2
Estate Administrators and Liquidators is based in Sacramento, California, and is owned
and operated by entrepreneur Sally Wheeler-Valine. Since 1990, the firm has served
people seeking to sell the household goods of deceased friends or relatives.
The business auctions items at the deceased person’s home, splitting the proceeds with
the family. Any unsold items are taken back to the firm’s store and sold, generating a
commission based on the selling price.
To accommodate the large volume of merchandise she sells, Wheeler-Valine operates
out of a new 13,000-squarefoot store. Business revenues climbed for several years,
peaking in 1997. However, in 1999, revenues slumped drastically.
Source: Based on a story by Susan Hanson, “Store’s Demise Blamed on Web Auctions,”
Inc., July 2000, p. 41.
Question 1 What impact, if any, do you think that Internet-based businesses have had
on Wheeler-Valine’s business?
Question 2 In what way(s) could she use e-commerce to grow her business?
Question 3 How much presence on the Web, if any, do you think she should consider?
Question 4 What do you think will happen to this firm if it ignores the Internet?
You Make the CallSituation 5
Sam Doster is struggling to make ends meet or at least get them closer together. After
retiring from a military career, he completed his business degree at a local college and,
with the encouragement and support of his parents, started a travel agency.
Deregulation of the airline industry and the events of 9/11 have severely reduced his
agency’s cash flows. Sam is considering closing the agency’s office to reduce overhead
costs and moving entirely to an internet-based business that he could operate from his
home.
Question 1 What are the advantages for Sam in moving to an internet-based business at
home?
Question 2 How will moving to an internet-based business affect the level of customer
service for the type of business that Sam is operating?
You Make the CallSituation 4
A college professor opened a furniture shop in Maine and has watched it grow to $5
million in annual sales volume and 85 employees. The firm produces high-quality
chairs, tables, and other items for the contract furniture market. Each piece is sanded
and polished, sealed with linseed oil, and finished with paste wax. No stain, color, or
varnish is added, and the furniture never needs refinishing.
As the firm has grown larger, it has begun to use the equivalent of mass production.
Many of the original craftspeople have moved on and have been replaced by production
workers. The founder is seeking to maintain quality through employee participation at
all levels. He believes that quality can be maintained indefinitely if the company
doesn”t get too greedy. He has expressed his philosophy as follows:
We”re still not driven by profit but by meaningful relationships [among] employees and
between the producer and the user. It’s a way of life. We throw out a lot of good stuff. If
we had to produce something just to make a buck, I”d go back to teaching school.
Source: Christopher Hyde, “The Evolution of Thomas Moser,” In Business, Vol. 10,
No. 4, pp. 34-37.
Question 1 How has this firm’s growth made quality management easier or more
difficult?
Question 2 The founder recognizes that people and relationships have a bearing on
quality. What can he do to persuade or enable production employees to have the right
attitude toward quality?
Question 3 The founder’s comments suggest that profits and quality may be
incompatible. When does making a profit lead to lower quality? Can or should this firm
use financial incentives?
Few of those responding to a recent survey believe it would be seriously unethical for
an employer to monitor its employees’ e-mail.
According to the textbook’s three-stage model of the life cycle of a competitive
advantage, firms can exploit a competitive advantage during the “develop” stage.
The process of preparing a family member to take over a family business typically takes
about one year.
Discuss the use of employee empowerment and self-managed work teams as leadership
approaches.
The goals of a CRM program for most small firms are the complete customization of
products and/or services to fit individual customer needs.