63) The ideal strategic planning procedure for a small company should be formal and highly
structured.
64) The most effective way to communicate the values of a company to everyone it touches is to
formulate an effective mission statement.
65) The mission statement addresses the first question of any business venture: “What business
am I in?”
66) A company’s mission statement defines what it stands for, why it exists, and its reason for
being.
67) As business and competitive conditions change, so should a small company’s mission
statement.
68) A company’s mission statement should be lengthy and use fancy jargon to impress outsiders.
69) Conducting a SWOT analysis for her own business and for her key competitors allows an
entrepreneur to gain a competitive edge by matching her company’s strengths against her
competitors’ weaknesses.
70) Strengths are positive internal factors that contribute towards accomplishing the company’s
mission, goals, and objectives.
71) Weaknesses are negative external forces that inhibit the firm’s ability to achieve its mission,
goals, and objectives.
72) After a company’s strengths and weaknesses are assessed, the strategic planning process
should identify opportunities and threats facing the company and should isolate the key factors
for success in business.
73) Threats are negative external forces that inhibit a company’s ability to achieve its mission,
goals, and objectives.
74) “Big box retailers” present an opportunity for many small business owners.
75) To be effective, the small business owner should limit strategic analysis to only the two or
three most significant opportunities facing the firm.
76) A firm’s strategy must focus on establishing for the firm the key success factors the
entrepreneur has identified for the industry.
77) A small business owner can collect a great deal of information about competitors through a
number of low-cost competitive intelligence methods.
78) Experts estimate that 70 to 90 percent of the competitive information a company needs
already resides with employees who collect it in their daily dealings with suppliers, customers,
and other industry contacts.
79) A competitor analysis should include an analysis of direct competitors as well as significant
and indirect competitors.
80) Significant competitors are those that offer the same products and services your company
offers, and customers often compare prices, features, and deals from these competitors as they
shop.
81) Conducting successful competitive intelligence on rivals’ strategies and actions may include
researching their Web sites, buying their products to assess their quality, and watching for
employment ads to determine the type of employees they are hiring.
82) Performing competitive intelligence on rivals’ strategies and actions does not mean that
entrepreneurs must engage in unethical or illegal espionage activities.
83) It is unwise for entrepreneurs to monitor competitors’ strategies and actions because such
activities require them to engage in illegal or unethical behavior.
84) One of the goals of competitive analysis is to improve a firm’s reaction time to competitor’s
actions.
85) A competitive profile matrix analyzes how well a company and its rivals match the key
success factors in the industry.
86) Goals are the broad, long-range attributes that a business seeks to accomplish; objectives are
more specific targets of performance.
87) Before an entrepreneur can build a successful strategy, she must establish a clear mission,
goals, and objectives in order to have appropriate targets at which to aim her strategy.
88) Goals and objectives provide targets to aim for and a basis for evaluating a company’s
performance.
89) “Improving the company’s cash flow” is a good example of an effective objective.
90) A company’s strategy spells out the ends the business wants to achieve, and its mission,
goals, and objectives define the means for reaching them.
91) Setting seemingly impossible objectives, those outside of the likely reach of employees,
helps managers to create and maintain a high motivation level.
92) “Increasing our market share from 8 percent to 10 percent by the end of the current fiscal
year” is a good example of an effective objective.
93) Objectives should be as general as possible to permit flexibility in the business.
94) The strategic planning process works best when employees are actively involved with
managers in setting company goals and objectives.
95) A strategy is a road map of action for fulfilling a firm’s mission, goals, and objectives.
96) A company pursuing a cost-leadership strategy strives to be the lowest-cost producer relative
to its competitors in the industry.
97) A danger of cost-leadership is that a company may misunderstand what processes actually
drive its true costs.
98) Small firms pursuing a cost-leadership strategy have an advantage in reaching customers
whose primary purchase criterion is high quality.
99) The best way to build a cost-leadership competitive advantage is to focus entirely on
manufacturing costs.
100) One key to building a successful differentiation strategy is to be better than competitors at
some characteristic that customers value.
101) To be successful, a differentiation strategy must create the perception of value in the
customer’s eyes.
102) The key to a successful differentiation strategy is to build it on a core competency,
something the company is uniquely good at doing in comparison to its competitors.
103) A differentiation strategy frequently allows the company the opportunity to charge a higher
price for its products or services.
104) One danger in choosing a differentiation strategy is trying to differentiate based on
something that the customer does not perceive as valuable.
105) A small business following a focus strategy attempts to serve its narrow target markets
more effectively and efficiently than competitors trying to appeal to the broad market.
106) A focus strategy recognizes that not all markets are homogeneous.
107) Focus strategies build on differences among market segments.
108) The secret to good control is identifying and tracking key performance indicators.
109) To evaluate the effectiveness of their strategies, some companies are developing balanced
scorecards, a set of measurements unique to a company that includes both financial and
operational measures and gives managers a quick, comprehensive picture of the company’s total
performance.
110) When creating a balanced scorecard for his or her company, an entrepreneur should
establish goals for each critical indicator of company performance and create meaningful
measures for each one.
111) The focal point of the entire strategic plan and the competitive strategy chosen should be
the customer.
112) A balanced scorecard looks at a business from four important perspectives: competitor,
internal, innovation and learning, and financial.
113) Ideally, strategic planning is not an outcome but an ongoing process.
114) What advice would you offer an entrepreneur on how to create a mission statement for his
or her company?
115) Define each of the following terms and give an example of each: strengths, weaknesses,
opportunities, and threats.
116) Assume that you are a consultant to a small independent hardware store in a town where a
retail giant such as Wal-Mart, Kmart, or Target is about to open. The large retailer sells many of
the same items the small hardware store sells, but at lower prices. What advice would you offer
the owner concerning the hardware store’s strategy? Explain.
117) What is strategic management? What role does a strategic plan play in a small company?
118) Assume you own a small print shop. Who are your competitors and why is it important for
you to monitor your competitors’ activities? Describe at least five techniques you might use to
monitor competitors’ strategies and actions ethically and inexpensively.
119) Assume you own a small shoe store. Discuss the three different types of competition you
might face and give examples of each.
120) What is strategy? Describe the three basic strategies small companies can choose from:
cost-leadership, differentiation, and focus. Explain the conditions under which each works, its
benefits, and its pitfalls.
121) Assume you own a small camera shop that sells and repairs cameras and equipment.
Discuss some of the methods you might select to allow you to successfully compete against the
many large retailers that are nearby.
Mini-Case 3-1: Finding a Competitive Advantage
Copreneurs Ed and Yolanda recently opened a vintage used car lot called Cherry Lane. They sell
antique and collectible cars on consignment for the owners at a fee of 30 percent of the selling
price. The price is further reduced by 10 percent if a particular car is not sold within the first 30
days. One of the first customers convinced Yolanda that this was the only fair thing to do, and in
an effort to provide something for “the cost conscious buyer,” she provided what she thought was
excellent customer service and implemented the idea.
Ed and Yolanda feel Cherry Lane has an ideal location. It is located adjacent to the city’s baseball
stadium, alongside the freeway in the center of all the other car dealerships. Although Cherry
Lane has significant foot traffic, most people never make offers to buy.
In an effort to increase sales, Ed and Yolanda are working on a new marketing strategy that they
believe should be quite different from the “shotgun” approach they had been using over the last
few months.
122) What is a competitive advantage? Does Cherry Lane have one? If so, what is it?
123) As Ed and Yolanda begin the strategic planning process, what steps should they take?
124) Considering the three basic small business strategies identified in your textbook, which one
would work best for Cherry Lane? Why might that strategy be successful?