d.
strong buyers.
46. Careful analysis of the competitive environment can result in:
a.
failure of a new business.
b.
unexpected response from a rival.
c.
loss of the startup’s supplier base.
d.
greater financial success of the startup.
47. Based on William A. Sahlman’s suggestions, which question about competitors should be answered by
the business plan?
a.
Are there ways to co-opt potential or actual competitors by forming alliances?
b.
How easily can new competitors enter the industry?
c.
Do small businesses have special advantages when competing in the industry?
d.
What is the average size of competitors?
48. An inside-out analysis is one that:
a.
considers the general environment and industry setting.
b.
catalogs the startup’s sources of potential strengths.
c.
considers the strengths of buyers and suppliers.
d.
catalogs the possible responses of rivals in theindustry.
49. Miles’ startup company began well but within a couple months he found he was unable to pay invoices
from suppliers. He didn’t understand how he could have this problem. He hired experts; his
business idea was sound; and he had many new customers. What went wrong?
a.
Miles lacked critical technologies.
b.
Miles lacked patents or copyrights.
c.
Miles lacked raw materials.
d.
Miles lacked cash resources.
50. Resources are best described as
a.
those basic inputs that a firm uses to conduct its business.
b.
only those features that are visible and easy to quantify.
c.
the firm’s lending capacity.
d.
capabilities that can be exploited.
51. Tangible resources include:
a.
cash, technology, and raw materials.
b.
cash, management expertise, and a good reputation
c.
management expertise, a good reputation, and technology.
d.
intellectual property rights, equipment, and a skilled workforce.
52. Intangible resources include:
a.
a good location, cash, and capable business partners.
b.
a good reputation, a respected brand name, and an extensive personal network.
c.
intellectual property rights, equipment, and technology.
d.
capable business partners, intellectual property rights, and equipment.
53. Rumpelstiltskin, an imp in a Grimm Brothers fairy tale, could spin straw into gold. We would call
this a(n)
a.
useful skill.
b.
tangible resource.
c.
intangible resource
d.
capability.
54. A(n) _____ exists when multiple resources are integrated and then deployed to the firm’s advantage.
a.
networked resource
b.
common intangible
c.
capability
d.
industry edge
55. Which of the following could be considered a core competency?
a.
Zappos’ 365 day return policy
b.
NutriSystem’s claim that users lose weight by eating
c.
McDonald’s ability to fry hamburgers quickly
d.
Southwest Airlines’ ability to make flying fun
56. Morris built a thriving business by selling tailor-made clothing at off-the-rack prices. All other
custom-clothing stores charge much higher prices. We can say that Morris has a(n)
a.
core competency.
b.
competitive advantage.
c.
serendipity.
d.
opportunity alertness.
57. A SWOT analysis can be described best as
a.
a means of assessing the firm’s industry situation.
b.
an assessment of the internal strengths and weakness of the firm.
c.
a dynamic analysis of the firm’s current situation.
d.
a concise overview of the firm’s strategic situation.
58. Observations about the external environment and organizational potentials can be brought together by
means of
a.
an alignment strategy.
b.
the in-and-out assessment.
c.
a SWOT analysis.
d.
common sense critique.
59. One of the drawbacks of SWOT analysis is:
a.
it is very time consuming.
b.
a professional consultant must perform it.
c.
its focus on present conditions.
d.
it requires information about competitors not readily available to outsiders.
60. Noland has identified an underserved market for his product. Competitors are not likely to notice his
efforts to attract his target market, and his product fills a need for these customers. Noland has found:
a.
an opportunity sweet spot.
b.
a core competency.
c.
a competitive advantage.
d.
a capability.
61. Generally speaking, a strategy is
a.
an action plan that guides resource investments.
b.
a formal statement of what the firm intends to do.
c.
an expanded description of the firm’s mission statement.
d.
most effective when it is designed to reflect the tactics that are common within an
industry.
62. The two broad strategies for building a competitive advantage are the _____ strategies.
a.
cost-based and differentiation-based
b.
price-advantage and cost-advantage
c.
marketing-advantage and price-advantage
d.
focus-advantage and marketing-advantage
63. A company that is the lowest-cost producer within the market will have what type of strategy?
a.
Price-based
b.
Marketing-based
c.
Efficiency-based
d.
Cost-based
64. Milton’s Auto Service is a small auto maintenance and repair shop located in a small town in a garage
behind Milton’s house. Milton doesn’t charge as much as auto dealerships so he has a steady stream
of local customers. Which of the following best describes Milton’s strategy?
a.
innovation
b.
strategic alliances
c.
cost-based
d.
differentiation
65. Marketplace Farms is a regional cooperative of apple and orange growers. In order to compete against
larger regional growers, the company relies on inexpensive packaging processes and lower cost labor
instead of machines. Marketplace Farms is relying on what type of strategy?
a.
price-based
b.
marketing-based
c.
efficiency-based
d.
cost-based
66. A differentiation-based strategy requires that a firm
a.
be the lowest-cost provider in an industry.
b.
emphasize the uniqueness of its product or services.
c.
achieve the highest resource efficiency in an industry.
d.
be the lowest-priced competitor in an industry.
67. Kitty-Kat Korner fabric shop caters to the quilters in the region. Nowhere else can a quilter find
everything she needs: fabrics, notions, pattern books, even quilting machines and quilting classes.
This is not your typical fabric store by any means. Which of the following best describes Kitty-Kat’s
strategy?
a.
innovation
b.
differentiation
c.
cost-based
d.
strategic alliances
68. Containers Etc. manufactures household containers. In contrast to traditional market designs, all of the
products are microwaveable, child-proof and come in an assortment of 35 colors. Accordingly,
Containers Etc. is pursuing a _____ strategy.
a.
product-based
b.
differentiation-based
c.
concept-based
d.
efficiency-based
69. A focus strategy is best described as
a.
an attempt to compete directly with industry giants.
b.
a domestic marketing strategy.
c.
a strategy that isolates the firm from market forces.
d.
targeting the high end of a market.
70. Mark is the owner of Delectable Delights, a specialty store offering chocolates, candies, and fruit
baskets. After a recent analysis of the competitive environment, Mark concluded that three distinct
consumer segments exist for his products – A, B, and C consumers. In an effort to maximize the
effectiveness of its strategy, Mark has decided to limit his efforts to fulfilling the needs of A
consumers. He is employing a _____ strategy.
a.
multisegmentation
b.
selective
c.
focus
d.
concentration
71. Kitty-Kat Korner fabric shop caters to the quilters in the region. Other fabric shops carry fabrics for
all types of clothing along with floral, yarn, and other craft supplies. Kitty-Kat carries only items
related to quilting. Which of the following best describes Kitty–Kat’s strategy?
a.
focus
b.
cost-based
c.
quality
d.
innovation
72. Arlene runs Technographics, a company that designs greeting cards for computer users. What type of
strategy would be expected?
a.
a focus strategy.
b.
an unsegmented strategy.
c.
a multisegmentation strategy.
d.
a marketing mix strategy.
73. According to Michael Porter, a focus strategy can erode when
a.
the strategy is protected.
b.
the target segment’s differences from other segments narrow.
c.
new firms reconstruct the industry.
d.
demand for the product grows and thus attracts new competitors.
74. Which action is a cause for erosion of a small firm’s focus strategy?
a.
Consumer demand grows.
b.
New firms reconstruct the industry.
c.
Differences between segments grow larger.
d.
The focus strategy is imitated.
75. As the success of the athletic teams at O-MY-U skyrocketed, so did attendance at the games. Out-of-
town visitors found all the hotels fully booked. So Bob and Shirley opened their home to guests on
weekends, operating as a bed-and-breakfast. Soon many of their neighbors did the same and Bob and
Shirley found they could no longer fill all their rooms every game weekend. How would Michael
Porter explain this?
a.
The focus strategy was imitated.
b.
Demand disappeared.
c.
The target segment lost its uniqueness.
d.
The industry became further segmented.
76. O–MY-U once had a winning team in every college sport. But athletes graduate and fortunes change.
Attendance at the games dropped when the team had a losing season. Bob and Shirley found it
difficult to attract enough guests to their bed-and-breakfast to cover their costs. How would Michael
Porter explain this?
a.
The focus strategy was imitated.
b.
Demand disappeared.
c.
The target segment lost its uniqueness.
d.
New firms subsegmented the industry.
77. Many direct sales organizations suggest that the new “member” begin selling the product part-time
while continuing to work at his/her regular job. Which explanation best fits this recommendation?
a.
The business meets a definite market need.
b.
The target market is sizable.
c.
There are few competitors.
d.
The business can be tested cheaply and expanded incrementally.
78. According to the feasibility analysis framework, an entrepreneur who has a vision of a multi-unit
company will
a.
be satisfied with an attractive niche so the company can gain market share.
b.
check to see if the health of the micro-market is strong enough for future macro-market
growth.
c.
desire a healthier micro-market potential growth over the health of the macro-market.
d.
be satisfied with an attractive niche if it would serve as a point of entry for long-term
potential.
79. Miriam opened a yarn craft store in her small town based on her personal interests and hobbies. There
were no competitors locally; the merchandise was readily available; and she had the initial capital to
open the store. Yet her business failed. Too few customers visited her store. What was Miriam’s
fatal flaw?
a.
The merchandise was patent-protected.
b.
Miriam could not raise enough capital.
c.
Miriam lacked industry knowledge.
d.
Miriam ignored the market limitations.
80. Jesse would like to start a landscaping company that concentrates on using native plants. The
feasibility study showed a need for $100,000 to start the company (she has $10,000), competition of
three other companies (one concentrated on using native plants), and buyers who were predominantly
60 years or older (who loved yard work). Which statement is true?
a.
This plan shows fatal flaws with financing, competition, and market as none of these flaws
could be fixed.
b.
The plan has a fatal flaw with financing and competition as the market might have an
interest in her speciality.
c.
The plan has a fatal flaw with financing but competition might not be as much of an issue
if the native plant landscaping is growing with the buyers.
d.
The plan could be fixed if an investor went into business with her.
81. Peggy would like to open a dog grooming business in her home. Which of the following, if true,
would indicate this is a good idea?
a.
More households now own dogs but the owners don’t want to give them regular baths.
b.
Fewer households now own dogs but the owners don’t want to give them regular baths.
c.
Fewer households now own dogs but the owners give them regular baths.
d.
More households own dogs but the owners give them regular baths.
82. Mike and Jane opened a franchise sporting goods store. Neither was athletic; neither had ever
managed a retail store; and the business failed within one year. Which statement best explains these
results?
a.
The venture did not fit with their mission or aspirations.
b.
They had no connections with suppliers, customers, or investors.
c.
They lacked factors critical to the success of the enterprise.
d.
They failed to complete a feasibility study.
ESSAY
1. Compare and contrast personal experience, hobbies and personal interests, and accidental discovery as
a source of startup ideas. Use examples to strengthen the discussion.
2. Select one of the ways of innovative thinking, explain it, and give an example of a business idea this
type of thinking might generate.
3. List the five factors that determine the nature and degree of competition in an industry, as presented by
Michael Porter in his book Competitive Advantage. Why is the proper identification of these factors
important for a new venture?
4. Describe the differences and relationships between resources, capabilities and core competencies. How
do these items relate to inside-out analysis?
5. Name and describe the two broad-based strategy options that a firm can select when pursuing a
competitive advantage in the marketplace.
6. What marketing activities suggest that a small firm is following a focus strategy?
7. Which of Michael Porter’s four conditions for segmented market erosion occurred with Minnetonka,
the small firm that is widely recognized as the first to introduce liquid hand soap?
8. Identify and discuss the five factors entrepreneurs should consider when screening new business ideas.
9. Briefly state the difference between a market and an industry. How are these two items related to small
business success?
TRUE/FALSE
1. Many businesses are formed because an entrepreneur saw ways to improve or modify a product as a
result of previous work experience.
2. It is nearly impossible to make a business out of a hobby.
3. Serendipity describes a new product idea resulting from deliberate search activities.
4. By observing trends in the use of leisure time, technology, or other areas, an entrepreneur can discover
potential business ideas.
5. The general environment includes rival companies and products.
6. An inside-out analysis identifies a company’s strengths and the competition’s weaknesses.
7. Using a cost-based strategy, a company would take steps to increase efficiency and hold down costs.
8. Using a focus strategy, a company would focus its attention on producing one product that satisfied the
greatest number of customers.
9. When screening new business ideas, the entrepreneur need not focus on the size of the targeted market.
10. During a feasibility analysis, an entrepreneur may discover a fatal flaw in the idea.