Essentials of Entrepreneurship and Small Business Management, 9e (Scarborough)
Chapter 4 Conducting a Feasibility Analysis and Designing a Business Model
1) A(n) ________ is the process of examining a need in the market, developing a solution for
that need, and determining the entrepreneur’s ability to successfully turn the idea into a business.
A) business plan
B) strategic analysis
C) idea assessment
D) feasibility analysis
2) The business plan helps an entrepreneur assess ideas in a relatively short period of time.
3) What are some of the most important questions a feasibility analysis answers and what model
may be of value in this process?
4) What are the parameters used in an idea sketch pad?
5) An effective tool used to help assess ideas is the ________.
A) idea toolkit
B) idea dashboard
C) idea sketch pad
D) idea metric
6) The process of determining whether an entrepreneur’s idea is a viable foundation for creating a
successful business is known as a(n) ________.
A) business plan
B) strategic analysis
C) industry analysis
D) feasibility analysis
7) A feasibility analysis is the process of determining whether an entrepreneur’s idea is a viable
foundation for creating a successful business.
8) A product or service feasibility analysis determines the degree to which a product or service
idea appeals to potential customers and identifies the necessary resources.
9) Capital requirements, estimate earnings, and return on investment are three aspects of the
financial feasibility analysis.
10) An idea assessment is the process of examining a need in the market, developing a solution
for that need, and determining the entrepreneur’s ability to successfully turn that idea into a
business.
11) Entrepreneurs typically identify just one business idea for any given market need.
12) The purpose of a feasibility study is to determine whether a business idea is worth pursuing.
13) An idea assessment answers the question, “Should we proceed with this business idea?”
14) An effective tool used to help assess ideas is the idea sketch pad.
15) First comes idea assessment, then comes feasibility analysis.
16) A feasibility analysis consists of four interrelated components: an industry and market
feasibility analysis, a product or service feasibility analysis, a financial feasibility analysis, and
an entrepreneur feasibility analysis.
17) Which of the following is not a macro force that creates change in industries?
A) Sociocultural
B) Economic
C) Technological
D) Entry barriers
18) More women entering the workforce is an example of a(n) ________ change.
A) economic
B) demographic
C) technological
D) sociocultural
19) The Internet is an example of a(n) ________ force.
A) economic
B) demographic
C) technological
D) sociocultural
20) Generation Y and Generation Z are examples of ________ changes.
A) economic
B) demographic
C) technological
D) sociocultural
21) In a survey of members of Generation Z, ________ percent said they would rather save
money than spend it.
A) 57
B) 25
C) 31
D) 44
22) The enactment of the Affordable Health Care Act in 2010 is an example of a(n) ________
change.
A) economic
B) demographic
C) technological
D) political and legal
23) Which of the following is not a question to ask to evaluate an industry?
A) How sparse is the industry?
B) How large is the industry?
C) How fast is it growing?
D) What threats does the industry face?
24) The first step in assessing industry attractiveness is to paint a picture of the industry in broad
strokes, assessing it from a “macro” level.
25) The growth in the number of women entering the workforce is an example of a sociocultural
change.
26) Changing demographics create opportunities for entrepreneurs.
27) What are sociocultural changes and why are they important?
28) Porter’s five forces model assesses industry attractiveness by surveying these five factors
________.
A) potential entrants, suppliers, buyers, substitutes, and rivalry among existing firms
B) potential entrants, suppliers, buyers, similar products, and rivalry among existing firms
C) potential entrants, suppliers, raw materials, substitutes, and rivalry among existing firms
D) potential entrants, competitors, buyers, substitutes, and rivalry among existing firms
29) The strongest of the five forces in most industries is ________.
A) rivalry among companies competing in the industry
B) bargaining power of buyers
C) threat of new entrants to the industry
D) threat of substitute products or services
30) Switching costs, the number of buyers, and if the items represent a relatively small portion of
the cost of finished products are key considerations regarding the ________.
A) threat of new entrants to the industry
B) rivalry among companies competing in the industry
C) bargaining power of suppliers
D) bargaining power of buyers
31) Low capital requirements, cost advantages that are not related to company size, and the lack
of brand loyalty are considerations regarding the ________.
A) threat of new entrants to the industry
B) threat of substitute products
C) bargaining power of buyers
D) rivalry among companies competing in the industry
32) Products or services that may be sought as alternative solutions (e.g., purchasing tax
planning software rather than paying a CPA to assist with preparing your taxes) are referred to as
________.
A) buyers products
B) rivalry products
C) substitute products
D) competitive alternatives
33) The force from the five forces model that considers economies of scale, initial capital
requirements, cost advantages relevant to company size, and lack of brand loyalty is the
________.
A) bargaining power of suppliers
B) threat of new entrants
C) threat of substitute products or services
D) rivalry among companies competing
34) The primary purpose of the five forces matrix is to ________.
A) assign values to each of the five elements
B) provide a graphic
C) list the five forces in rank order
D) assess the five forces as compared to a standard value
35) Generally, an industry is more attractive when ________.
A) the number of competitors is large
B) competitors are similar in size
C) the industry is growing at a fast pace
D) the opportunity to sell a differentiated product or service is present
36) The ________ the leverage suppliers of key raw materials or components have, the
________ attractive is the industry.
A) greater; more
B) more; more
C) greater; less
D) less; less
37) Generally, an industry is more attractive when companies in the industry have ________
switching costs to go from one supplier to another.
A) high
B) moderate
C) significant
D) low
38) For Under Armour, its top 10 suppliers manufacture less than half of its products. To Under
Armour, supplier power is likely to be ________.
A) high
B) moderate
C) significant
D) low
39) When bargaining power of buyers is ________, the industry is ________ attractive.
A) moderate; less
B) low; more
C) high; more
D) low; less
40) Capital required to compete in an industry determines ________.
A) bargaining power of buyers
B) bargaining power of suppliers
C) threat of substitutes
D) threat of new entrants
41) Which of the following is not a barrier to entry?
A) Capital requirements
B) Large number of buyers
C) Specialized knowledge
D) Access to distribution channels
42) Economies of scale relate to which of Porter’s 5-forces?
A) Bargaining power of buyers
B) Threat of new entrants
C) Bargaining power of suppliers
D) Threat of substitutes
43) According to Porter’s 5-forces model, a substitute for Coca-Cola, the carbonated cola drink,
would be ________.
A) Pepsi
B) Mountain Dew
C) Dr. Pepper
D) bottled water
44) Printed newspapers have seen their readership rates decline as new generations of potential
readers turn to their iPads and smartphones for sources of news. This is an example of ________.
A) threat of substitutes
B) bargaining power of buyers
C) bargaining power of suppliers
D) rivalry among existing firms
45) Which of the following is a danger of using a niche strategy?
A) Niches change.
B) Niches can go away.
C) Entering a niche requires adaptability in your initial plan.
D) All of the above
46) Porter’s five forces model only considers direct competitors within a single industry.
47) The Five Forces Model would assess economies of scale factors in the “threat of new
entrants” portion of the model.
48) Generally, an industry is more attractive when quality substitute products are not readily
available, the prices of substitute products are higher, and buyers’ costs of switching products is
high.
49) The strongest of the five forces in most industries is the rivalry that exists among the
businesses competing in a particular market.
50) New entrants to an industry can erode existing companies’ market share and profits.
51) The weakest of the five forces in most industries is the rivalry that exists among the
businesses competing in a particular market.
52) Generally, an industry is more attractive when competitors are not similar in size or
capability.
53) Generally, an industry is more attractive when the opportunity to sell a differentiated product
or service is absent.
54) The greater the leverage suppliers of key raw materials or components have, the less
attractive is the industry.
55) Generally, an industry is more attractive when substitute products are available for the items
suppliers provide.
56) Generally, an industry is more attractive when the items suppliers provide the industry
account for a relatively high portion of the cost of the industry’s finished product.
57) Generally, an industry is less attractive when the number of buyers in the industry is large.
58) Specialized knowledge is an example of a barrier to entry.
59) Generally, an industry is more attractive to new entrants when the advantages of economies
of scale are present.
60) According to the five forces model, Delta Airlines is a substitute for United Airlines.
61) Generally, an industry is more attractive when buyers’ cost of switching to substitute
products is low.
62) Many small businesses prosper by sticking to niches in a market that are too small to attract
the attention of large competitors.
63) One of the cautions with a niche strategy is that niches change.
64) When niches grow, they can attract more competitors.
65) A product feasibility analysis answers the question, “Are customers willing to purchase our
goods and services?”
66) How does Porter’s Five Forces Model help analyze an industry?