Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
Chapter 8: Building Business Models
Test Bank
Multiple Choice
1. A conceptual framework that describes how a company creates,
delivers, and extracts value is called a _____________.
a. business model
b. business plan
c. mission
d. vision
2. What would be the best definition of a business model?
a. a small pilot of the business as it will be practiced
b. a series of hypotheses that suggest business practices
c. a plan for expansion
d. a framework that describes how a company creates, delivers, and extracts value
3. The formal document that provides background and financial information about the
company, outlines your goals for the business, and describes how you intend to reach
them is called the ____________.
a. business model
b. business plan
c. mission
d. vision
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
4. How will the business model create value?
a. unmet needs will be met in an existing market
b. profits will be made
c. the stock will be valued
d. customers will be differentiated
5. Which of the following is a way that a business model will lend value?
a. by explaining how revenue will be obtained
b. by explaining how profits will be made
c. by explaining how the company will serve customers in new markets
d. by describing the elements of the financial forecast
6. On what does the business model focus in terms of a business’s service or product?
a. durability
b. quality
c. differentiation
d. viability
7. What is the relationship between the business plan and the business model?
a. The business model will not be possible without a business plan.
b. The business model will support the business plan, explaining how to attain the plan’s
goals.
c. They are the same thing.
d. A business plan supports the business model, explaining how to attain the model’s
goals.
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
8. A ______ is a formal document that provides, among other things, background and
financial information about the company.
a. business model
b. business plan
c. business strategy
d. investor plan
9. According to the text, it is typically easier for new businesses to change their
business model because new businesses ______.
a. have the capital to fund business model changes
b. have more changeable business models
c. tend to be more open to change
d. tend to be smaller and more agile
10. BlackBerry, which gained significant market share in the early 2000s in the
business, government, and consumer markets, lost market share because ______.
a. demand for smartphones declined
b. competitors offered phones with better designs and more features
c. competitors lowered prices to undercut BlackBerry
d. all of these
11. While startups can be flexible in their model, what should be the general guide for
existing models?
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
a. Existing models should not be changed.
b. Existing models should be replaced frequently.
c. Organizations should be prepared to adjust their existing model as markets change.
d. Existing models require annual updating.
12. What are the four parts of a business model?
a. target customers, employees, founders, investors
b. financing, infrastructure, employees, customers
c. the offering, customers, infrastructure, financial viability
d. financing, customers, product, service
13. The offering addresses ______.
a. the value generated for customers
b. the amount given to investors in return for capital
c. the features of the product or service
d. the people in your target market
14. The offering includes which of the following?
a. the investment
b. the customer value proposition
c. the product or service
d. the return on investment
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
15. Within a business model, customers refer to ______.
a. people who express loyalty to your brand
b. people who have purchased your product or service
c. the segments of the market your offering intends to serve
d. people in the geographic reach of the business
16. Infrastructure can be thought of as ______.
a. all the resources that are needed to deliver the CVP
b. only technological resources that are needed to deliver the CVP
c. only financial resources that are needed to deliver the CVP
d. only human resources that are needed to deliver the CVP
17. Which of the following would be included when describing the infrastructure?
a. financial viability
b. customers
c. facilities
d. the offering
18. The revenue and the cost structures would be included in which part of the business
model?
a. revenue structures
b. cost structures
c. financial viability
d. financial statement
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
19. How is the section on financial viability more than a financial model?
a. It carries less detail.
b. It carries more detail.
c. It explains why customers would give you money.
d. It explains the size of the market.
20. Which of the following is necessary for an effective customer value proposition
(CVP)?
a. It must not have any direct competitors.
b. It must offer better value than the competitors.
c. It must cost less than the competitors.
d. It must offer the exact same value as the competitors.
21. Which of the following is necessary for an effective CVP?
a. It must be lower in cost than that offered by competitors.
b. It must offer a giveaway or something extra.
c. It must be measureable in monetary terms.
d. It must offer discounts and rewards for loyal customers.
22. Which of the following is necessary for an effective CVP?
a. It must include various pricing options.
b. It must have the ability to perform over a considerable length of time.
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
c. It must delivered with greater speed than the competitors.
d. It must be delivered with more sophisticated technology than the competitors.
23. A CVP requires that you think about your business from the perspective of what
group?
a. the employees
b. the investors
c. the customers
d. the operations team
24. What is required to create a successful CVP?
a. an understanding of customers’ financial situation
b. an understanding of how customers consume media
c. an understanding of what customers want and need
d. an understanding of what customers have already
25. The first step in creating your CVP is ______.
a. persuading customers to purchase your product or service
b. persuading customers to sign up for your marketing emails
c. uncovering your customers’ contact information
d. uncovering what your customer really needs
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
26. What problem did IKEA solve for customers in its CVP?
a. lack of attractive low-cost furniture
b. lack of do-it-yourself furniture
c. lack of European designs
d. lack of antique furniture
27. What problem did FedEx solve for customers in its CVP?
a. the lack of easy, door-to-door, overnight delivery of packages
b. the lack of customer signatures of received goods
c. the lack of alternatives to the USPS
d. the lack of prepackaged envelopes
28. To develop a good CVP, products must not only fulfill a need but also ______.
a. include a technological component
b. fit into customers’ lifestyles
c. fill a large market
d. appeal to affluent customers
29. Which of the following allowed Tata cars to be successful?
a. their low-cost cars
b. their small cars
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
c. their self-parking capabilities
d. their line of scooters
30. What elements of car design did Tata change in order to produce their CVP?
a. product design
b. manufacturing process
c. service model
d. all of these
31. What are the four major categories of problems experienced by customers?
a. lack of time, lack of money, lack of skill, lack of access
b. lack of money, lack of contacts, lack of interest, lack of time
c. lack of skill, lack of knowledge, lack of support, lack of money
d. lack of access, lack of support, lack of money, lack of friends
32. What major customer problem did MinuteClinic solve in their CVP?
a. lack of time
b. lack of access
c. lack of skill
d. lack of money
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
33. Andrew owns a popular but expensive Chinese restaurant. In order to introduce
more people to his brand, he offers a series of one-time “taste fairs” in which he brings
his recipes to a locally sponsored event. Customers are able to pay modest amounts for
small servings of his creations while not paying for the ambiance of the famous
restaurant. What need is Andrew addressing?
a. the restaurant’s lack of customers
b. customers’ lack of money
c. the owner’s lack of infrastructure
d. the customers’ lack of access
34. Genetic testing services like 23andMe offer DNA analysis based on a saliva sample
submitted by mail. What need is 23andMe addressing in their CVP?
a. a lack of time
b. a lack of skill
c. a lack of access
d. a lack of money
35. Food Flight offers unique food options that are flown in fresh from key cities.
Customers can order smoked salmon from Alaska, shrimp creole from Louisiana, and
Texas ribs from Dallas. What problem does Food Flight address?
a. lack of skill
b. lack of money
c. lack of access
d. lack of time
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
36. Which approach to CVP involves listing all the advantages of your product or
service without comparing it to others?
a. the list approach
b. the all-benefits approach
c. the pro and con listing
d. the pitch approach
37. Christine has obtained a job pitching a product at a local state fair. Her job is to
demonstrate cookware, highlighting its features and demonstrating its use as she
prepares food for visitors who can watch her cook and try samples. Christine will be
selling the cookware based on which of the following CVPs?
a. hard-sell approach
b. points of difference approach
c. all-benefits approach
d. customer engagement approach
38. A package of Supreme Security Software compares the software’s features against
its competitors’ features. The result is a matrix with check marks and Supreme Security
Software has more checks than its competitors. This approach to CVP demonstrates
which of the following?
a. all-benefits approach
b. points-of-difference approach
c. point-summary approach
d. competitive assessment approach
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
39. What is the key feature of the resonating-focus approach to CVP?
a. It focuses on why people like your product.
b. It describes all of the features of the product relative to competitors.
c. It tells customers why they should buy your product.
d. It describes all the positive features of your product.
40. Which of the following is considered the “gold standard” of a CVP?
a. all-benefits approach
b. points-of-difference approach
c. resonating-focus approach
d. low-cost advantage
41. What type of target market do toilet paper manufacturers target?
a. niche
b. segmented
c. multisided
d. mass
42. Which of the following best defines the term mass market?
a. a generic group outside the target market
b. a large crowd of nondiscriminating consumers
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
c. a large group of customers with similar needs or problems
d. a global market
43. A ______ market is a small market segment comprised of customers with specific
needs and requirements.
a. micro
b. niche
c. multisided
d. target
44. Gift Prescriptions is a company that offers small gifts that can be left behind in
doctors’ offices. Gift Prescriptions sells their gifts to pharmaceutical companies,
therapists, and medical supply stores who want to leave doctors a small gift in
appreciation for their time. Gift Prescriptions’ market segment would be described as a
______.
a. mass market
b. niche market
c. segmented market
d. diversified market
45. Breaking up your customer segments into groups of common needs and problems
would create which of the following markets?
a. segmented market
b. market niche
c. mass market
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
d. diversified market
46. Which of the following offers a variety of products to two or more customer
segments with different needs, even if the resulting markets are unrelated to one
another?
a. segmented market
b. market niche
c. mass market
d. diversified market
47. This market describes two or more customer segments that are linked but
independent of each other.
a. mass market
b. diversified market
c. matching markets
d. multisided markets
48. The Perfect Grind offers drive-through coffee and snacks to commuters coming to
and from work. They also cater to college students who attend a community college a
block away. What would describe the Perfect Grinds’ target market?
a. mass market
b. multisided market
c. diversified market
d. niche market