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75) The most effective way for a small business to establish a competitive advantage is by
offering lower prices.
76) Small companies' core competencies are often the result of benefits such as agility, speed,
closeness to customers, superior service, and innovative ability — all of which are size
advantages that allow them to do things that their larger competitors cannot.
77) Large companies have a natural advantage over small firms when it comes to preparing a
strategic plan.
78) Although developing a strategic plan is important for large companies, it is not essential to
managing a small company successfully because of its limited resources.
Mini-Case 5-1: 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.
79) What is a competitive advantage? Does Cherry Lane have one? If so, what is it?
80) A strategic plan serves as a blueprint to help a company to ________.
A) match their company's strengths and weaknesses to the environment's opportunities and
threats
B) accomplish its mission, goals, and objectives
C) identify a company's competitive advantage and set it apart from its competition with a
unique position in the market
D) All of the above
81) Which of the following is not a characteristic of the strategic management procedure for a
small company?
A) It should use a relatively short planning horizon (i.e., two years or less, typically).
B) It should begin with an extensive objective-setting session.
C) It should encourage the participation of employees and even outsiders to improve the
reliability and creativity of the resulting plan.
D) It should allow for flexibility and not be overly structured.
82) A clearly defined vision helps a company in which of the following ways?
A) Provides direction
B) Determines decisions
C) Motivates people
D) All of the above
83) A small company's mission statement ________.
A) establishes its purpose in writing
B) gives the business and everyone in it a sense of direction
C) defines what the company is, why it exists, and its reason for being
D) All of the above
84) When developing a company's mission statement, an entrepreneur should remember to
________.
A) write the statement alone without anyone else's interference
B) omit statements about her/his values because they may turn some stakeholders off
C) keep it short and simple
D) All of the above
85) Strengths and weaknesses are ________ to the organization.
A) internal factors
B) external factors
C) internal and/or external factors
D) factors not belonging
86) ________ are positive internal factors that contribute toward accomplishing the company's
mission, goals, and objectives, while ________ are negative internal factors that inhibit the
accomplishment of a firm's mission, goals, and objectives.
A) Strengths; weaknesses
B) Weaknesses; strengths
C) Opportunities; threats
D) Threats; opportunities
87) Kevin Abt noticed that people were cooking meals in their homes less often but wanted to
avoid the hassle of going out to eat. They wanted to "eat in" without cooking. Abt launched a
company, Takeout Taxi, that delivers restaurant-prepared food to his customers' homes and
businesses. Takeout Taxi is the result of a(n) ________.
A) strength
B) weakness
C) opportunity
D) threat
88) Maria Sanchez is the owner of the Main Street Café and a new restaurant opens a few blocks
away. From Maria's perspective, this new restaurant constitutes a(n) ________.
A) strength
B) weakness
C) threat
D) opportunity
89) Every business is characterized by a set of controllable variables that determines the relative
success (or lack of it) of market participants called ________.
A) distinctive competencies
B) key success factors
C) opportunities and threats
D) competitive edge
90) Gathering competitive intelligence, such as "dumpster diving" in a competitors' trash, may
raise questions regarding ________.
A) the integrity of the data
B) the competitive profile matrix
C) a cost benefit analysis
D) ethical standards
91) Your ________ competitors offer the same products and services, and customers often
compare prices, features, and deals from these competitors as they shop.
A) significant
B) direct
C) indirect
D) All of the above
92) A(n) ________ competitor offers the same or similar products or services only in a small
number of areas, and their target customers seldom overlap yours.
A) indirect competitor
B) direct
C) parallel
D) divergent
93) Which of the following is true about the information-gathering process in competitive
analysis?
A) It is an expensive process that only large companies can afford.
B) It can be relatively inexpensive and easy for the small business owner to conduct.
C) It is a process closely regulated by various federal laws that prohibit doing things like
purchasing competitive products and analyzing them.
D) It is a process that requires expert help and is relatively expensive.
94) Which of the following is an effective method of collecting information about competitors?
A) Ask customers and suppliers what competitors are doing.
B) Talk to employees, especially sales representatives and purchasing agents, about competitors.
C) Attend trade shows and collect competitors' sales literature.
D) All of the above
95) Which of the following is not a recommended method of collecting competitive intelligence?
A) Attend trade shows and collect competitors' sales literature.
B) Buy competitors' products or services and assess their quality and features, benchmarking
their products and services against yours.
C) Pay competitors' employees to become informants about their companies' strategies, markets,
and trade secrets.
D) Watch for employment ads from competitors to determine the types of workers they are hiring.
96) Which of the following statements is true?
A) Overall, Competitor 2 is the strongest of these three companies.
B) Your company's most serious weakness is its poor quality.
C) Your company's most vulnerable point against these two competitors is in the area of on-time
delivery.
D) The most important of the key success factors is location.
97) Which company has the strongest competitive position?
A) Your company
B) Competitor 1
C) Competitor 2
D) Impossible to tell from the information given.
98) Which of the following statements is true?
A) Overall, Competitor 2 is the strongest of these three companies.
B) Your company's most serious weakness is its poor quality.
C) Your company's most vulnerable point against these two competitors is in the area of on-time
delivery.
D) The most important of the key success factors is location.
99) Which company has the worst location?
A) Your company
B) Competitor 1
C) Competitor 2
D) Impossible to tell from the information given.
100) In terms of quality, which company has the weakest competitive position?
A) Your company
B) Competitor 1
C) Competitor 2
D) Impossible to tell from the information given.
101) Which key success factor does the entrepreneur who built this table believe is most
important?
A) Quality
B) Service and on-time delivery
C) Convenience
D) Location
102) A competitive profile matrix ________.
A) identifies a firm's core competencies
B) permits the small business owner to divide a mass market into smaller, more manageable
segments
C) allows the small business owner to evaluate her/his firm against competitors on the key
success factors for the industry
D) creates a road map of action for the entrepreneur to fulfill her/his company's mission, goals,
and objectives
103) ________ are the broad, long-range attributes the small business seeks to accomplish;
________ are the more specific targets for performance.
A) Goals; objectives
B) Goals; strategies
C) Objectives; goals
D) Strategies; goals
104) Which of the following is not a characteristic of a well-written objective?
A) Realistic, yet challenging
B) Measurable
C) General
D) Timely
105) The ideal strategic planning process for a small company should start with setting
objectives.
106) The ideal strategic planning procedure for a small company should be formal and highly
structured.
107) The most effective way to communicate the values of a company to everyone it touches is
to formulate an effective mission statement.
108) The mission statement addresses the first question of any business venture: "What business
am I in?"
109) A company's mission statement defines what it stands for, why it exists, and its reason for
being.
110) As business and competitive conditions change, so should a small company's mission
statement.
111) A company's mission statement should be lengthy and use fancy jargon to impress
outsiders.
112) Conducting a SWOT analysis for her/his own business and for her/his key competitors
allows an entrepreneur to gain a competitive edge by matching her/his company's strengths
against her/his competitors' weaknesses.
113) Strengths are positive internal factors that contribute toward accomplishing the company's
mission, goals, and objectives.
114) Weaknesses are negative external forces that inhibit the firm's ability to achieve its mission,
goals, and objectives.
115) 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.
116) Threats are negative external forces that inhibit a company's ability to achieve its mission,
goals, and objectives.
117) "Big box retailers" present an opportunity for many small business owners.
118) To be effective, the small business owner should limit strategic analysis to only the two or
three most significant opportunities facing the firm.
119) A firm's strategy must focus on establishing for the firm the key success factors the
entrepreneur has identified for the industry.
120) A small business owner can collect a great deal of information about competitors through a
number of low-cost competitive intelligence methods.
121) What advice would you offer an entrepreneur on how to create a mission statement for
her/his company?
122) Define each of the following terms and give an example of each: strengths, weaknesses,
opportunities, and threats.
123) 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.
124) 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.
125) Assume you own a small shoe store. Discuss the three different types of competition you
might face and give examples of each.
126) 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.
127) 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 5-1: 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.
128) As Ed and Yolanda begin the strategic planning process, what steps should they take?
129) 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?
