Chapter 15—Product Development and Supply Chain Management
TRUE/FALSE
1. All small firms want to grow.
2. If inventory needs grow with higher sales, the increase in accounts receivables will cover this cost.
3. A growth trap occurs when more cash is needed for a company faster than can be generated in profits.
4. Because growth in sales is perceived as good for business, no changes will be needed in personnel,
operations, or management style.
5. It is important that small firms gain a competitive advantage which cannot be quickly imitated.
6. Small firms develop significantly more innovations than small companies.
7. During the competitive advantage life cycle, firms can exploit a competitive advantage during the
develop stage.
8. The product life cycle and competitive advantage life cycle differ in that the product life cycle reflects
trends for a specific product or service, whereas the competitive advantage life cycle is based on
multiple products or services.
9. Because they have limited resources, small business need not formalize the product development
process.
10. In the physical development stage of the product development process, new products are analyzed
resulting in ideas failing to show possible profitability being discarded.
11. Product testing is the last step in the product development process.
12. Celestina Pugliese, creator of Ready Check Glo, felt her product served an overlooked market.
13. A brand includes the verbal identification of a product, as well as symbols or other means of
identifying a product.
14. A small firm’s “special signature” is called a logo.
15. Trademarks and service marks are legal terms indicating the exclusive right to use a brand.
16. Packaging has very little to do with increasing the value of the total product by creating a distinctive
impression.
17. Innovative packaging is frequently a deciding factor for consumers.
18. Labeling information can be limited to the minimum legal requirements as the warranty will cover the
information.
19. Strategies for goods marketing and services marketing are essentially identical.
20. A bed and breakfast inn that adds a restaurant that is open to the public is an example of unrelated
product offerings.
21. If a firm extends a janitorial cleanser from the industrial market to reach the home market, it is
following a one product/multiple markets strategy.
22. A garden center selling two types of mint has one product item in two product lines.
23. According to the Food and Drug Administration regulations, food products must have a standard
nutrition label listing the amount of calories, fat, salt, and nutrients in the product.
24. A utility patent covers the appearance of a product and everything that is an inseparable part of the
product.
25. Trade dress describes those elements of a firm’s distinctive operating image that are specifically
protected under a trademark, patent, or copyright.
26. Given the complexity of the task, entrepreneurs must use an attorney to conduct a trademark search.
27. Channel management is synonymous with the term logistics.
28. Distribution includes only the physical movement of products.
29. Distribution is essential for tangible goods, but not for intangible goods.
30. Shippers that own their own means of transport are called private carriers.
31. Delivery terms specify which party pays the freight costs, selects carriers, bears the risk of damage,
and selects the modes of transport.
32. F.O.B. origin, freight collect, is a delivery term that shifts all responsibility for freight costs to the
buyer.
33. 3PLs are considered more cost effective by many small businesses because it allows the company to
focus on the primary operations and outsource the accounting challenges to another company.
34. A direct channel of distribution is one that involves only one intermediary.
35. The three main considerations in structuring a channel of distribution are cost, coverage, and customer
service.
36. Physical distribution of products includes only transportation.
MULTIPLE CHOICE
1. Growing quickly
a.
is expected for most businesses.
b.
can be stressful if the company is not prepared.
c.
should be easy if the owner has the correct management style.
d.
will keep most business functions the same, just larger in scope.
2. Thanks to national press, Wonderful Gifts has had 100% more orders placed than last quarter. The
company could be caught in a ______ if proper planning does not occur.
a.
growth net
b.
growth trap
c.
profit net
d.
profit trap
3. Which statement is true about company growth?
a.
Successful growth occurs on it own.
b.
A high-growth firm’s need for additional financing may exceed its available resources, even
though the venture is profitable.
c.
Inventory needs will increase while account receivables will decrease with growth.
d.
While rapid growth may stress personnel, the increase in pay will be sufficient.
4. Which statement is correct concerning the role of innovation for small businesses?
a.
Inc. magazine reports that 13 of 30 company founders reported that their business turned
out to be nothing like their original venture concept.
b.
Studies have shown that small entrepreneurial firms produce 95% as many innovations per
employee as large firms.
c.
According to Clayton Christensen, 60% of all new products end up failing or performing
well below expectations.
d.
According to Clayton Christensen, 93 % of all innovations that eventually became
successful started out in the wrong direction.
5. Annabelle’s company makes pottery. She would like to expand her business and is looking for ideas.
What advice would you give her?
a.
Think outside the box; go into a completely different line of products.
b.
Pursue innovation that customers will perceive as adding excitement to their lives.
c.
Base innovative efforts on her experience.
d.
Focus on products or services offered by her largest competitors.
6. A sustainable competitive advantage is
a.
rarely appreciated by the firm’s owners.
b.
of little consequence to profitability.
c.
an idealized position that is unachievable in reality.
d.
a value-creating industry position that is likely to endure over time.
7. Joe has redesigned an app that helps businesses organize their taxes after a rival gained market share.
The IRS and the Society of Certified Public Accountants have said the app meets tax standards. The
app would be considered a(n)
a.
sustainable competitive advantage.
b.
strategic alliance.
c.
competitive adjustment.
d.
business process reengineering.
8. Before a company’s competitive advantage moves into the decline stage, it should
a.
invest resources to develop a competitive advantage.
b.
continue deploying the competitive advantage as long as it can.
c.
slow the decline as much as possible.
d.
implement previously developed plans for the hidden curves.
9. If a small firm is to maintain its performance over time, it is essential to
a.
continue to reinvent themselves.
b.
extend the competitive advantage of the firm.
c.
replicate the strategies that have led to success in the past.
d.
retain the personnel who made the firm successful in the first place.
10. To maintain performance, a small business must launch a new competitive advantage
a.
and keep that competitive advantage alive.
b.
and make adjustments to that competitive advantage over time.
c.
that causes rival firms to respond.
d.
before the current strategy has run its course.
11. High performing companies
a.
adjust strategies for changing customer needs before rivals.
b.
downgrade capabilities as competitive advantages move into the decline stage.
c.
hire people to drive new growth once the growth is identified.
d.
All of the above are completed by high performing firms.
12. The product life cycle, as opposed to the competitive advantage life cycle,
a.
helps an entrepreneur visualize the sales and profits of a product from the time it is
introduced until it is no longer on the market.
b.
details when a strength can be used in the market and when not to attack a rival.
c.
reflects sales trends for the company’s multiple products or services.
d.
is based on the overall sales of the total product or service line.
13. The profit curve is the highest in which stage of the product life cycle?
a.
Decline
b.
Growth
c.
Introduction
d.
Maturity
14. Products must be carefully analyzed in terms of financial considerations in the _____ stage of the
product development process.
a.
business analysis
b.
idea accumulation
c.
product testing
d.
physical product development
15. The business analysis stage of new product development is critical since
a.
one to three years may pass before profits are realized.
b.
it is hard to attract the 10 percent of the total market that is needed for a new product
success.
c.
products often fail in laboratory and marketing testing.
d.
All of the above support the importance of the business analysis stage.
16. Arden has designed an artistic design to complement his product’s name to assist customers in
identifying his product. These are commonly as referred to as a:
a.
brand.
b.
trademark.
c.
service mark.
d.
trade dress.
17. iPad is a
a.
brand.
b.
label.
c.
logo.
d.
trademark.
18. Beatrice is contemplating whether to offer a warranty on her product. She should remember that
warranties are important for products:
a.
that are relatively inexpensive.
b.
that are frequently purchased.
c.
that are relatively complex to repair.
d.
regardless of how they are positioned in the market.
19. Judy is opening a small business producing high-quality paper products and has decided to place a
green pine tree on all product boxes and on the sign outside the facilities to symbolize the business. At
this point, the symbol is an example of a
a.
brandmark.
b.
brand name.
c.
service mark.
d.
trademark.
20. A legal term indicating the exclusive right of a firm to use a brand to identify a product is a
a.
copy mark.
b.
trademark.
c.
service mark.
d.
trade dress.
21. Coca-Cola produces and distributes products under the brand names Coke, Minute Made, Dasani, and
many others. This collection of product lines within a Coca-Cola’s ownership and control is referred
to as the:
a.
product depth.
b.
product accumulation.
c.
product line consistency.
d.
product mix.
22. When a product line has more items, it is has greater
a.
breath.
b.
consistency.
c.
depth.
d.
lines.
23. Carrigan has just launched his new business. He has great plans for expansion later but for now, the
most appropriate and effective product strategy to use in this stage of his small business is the _____
product strategy.
a.
one product/one market
b.
one product/multiple markets
c.
multiple products/one market
d.
The strategy depends on the product or service.
24. Furniture Shine is introducing an improved version of its existing wax targeted to owners of antiques.
The firm has decided to leave the original wax in the mix aimed towards residential owners. Furniture
Shine is employing a _____ product strategy.
a.
multiple products/one market
b.
multiple products/multiple markets
c.
modified product/one market
d.
modified product/multiple markets
25. Bagels Bagels Bagels, a small breakfast bagel bakery, has expanded into sandwiches for lunch using
bagels. They are now employing a _____ product strategy.
a.
one product/one market
b.
one product/multiple markets
c.
modified product/one market
d.
modified product/multiple markets
26. Love Languages is introducing an improved version of its tutoring targeted to students wanting more
in-depth assistance using a CD format. The company has decided to continue to offer their original
tutoring package and aim the new product at the original target market; therefore they are employing a
____ product strategy.
a.
multiple products/one market
b.
multiple products/multiple markets
c.
modified product/one market
d.
modified product/multiple markets
27. A product strategy that includes a new product that is quite different from existing products
a.
can be more challenging to manage.
b.
is often used by small businesses.
c.
will likely determine the future direction of the firm.
d.
is encouraged, as long as it represents no more than half of the firm’s product offerings.
28. Devon has registered protection for 14 years that covers his product’s inseparable parts. Devon owns
a:
a.
design patent.
b.
plant patent.
c.
utility patent.
d.
Two of the above are correct.
29. A copyright provides protection for the duration of the creator‘s life, plus
a.
25 years.
b.
70 years.
c.
75 years.
d.
100 years.
30. The distinctive operating image of a product, including features such as size, shape, color or color
combinations, texture, graphics, or even particular sales techniques, can be protected
a.
by copyright.
b.
by patent.
c.
as trade dress.
d.
as a registered concept.
31. Euginie has written a poem that she plans to print inside the greeting cards she will publish. Her work
is automatically protected but Euginie should include on the back of her greeting cards
a.
the symbol ©.
b.
the date the work was published.
c.
the name of the copyright owner‘s company.
d.
a listing of all other copyrights held by the owner.
32. The intermediary relationship that involves the transfer of ownership is
a.
agents.
b.
brokers.