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18
29) Accel, Greylock Partners, Sequoia Capital, Benchmark, and Andreessen Horowitz are all in
the business of providing funds to new businesses in exchange for an ownership share in the
company. These companies are all seeking a high return on their investment, and they tend to be
drawn to technology and biotechnology companies. Accel, Greylock, Sequoia, Benchmark, and
Andreessen are all
A) business incubators.
B) for-profit arms of the SBA.
C) commercial banking organizations.
D) C corporations.
E) venture capital firms.
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30) Sequoia Capital is a venture capital firm that invests in promising new start-ups that have a
high potential for strong profitability over a fairly short period of time. In one day, Sequoia's
management team hears presentations from five businesspeople who are looking for a $5 million
investment for their new firm. Based on Dr. Lakshmi Balachandra's research, ________ is
mostly likely to receive the $5 million funding from Sequoia.
A) Amy, who is a very genuine person who demonstrates great sensitivity and warmth as she
makes her presentation,
B) Balki, whose two fraternity brothers, Biff and Chip, are on the board of directors at Sequoia
Capital,
C) Craig, who wants to start a clown college, who dresses up in an elaborate costume and sprays
seltzer in the faces of Sequoia's management team during his presentation,
D) Danielle, who has run a successful business in the past but who has been called out on social
media for possible ethical breaches,
E) Eriq, who makes a solid presentation but whom the management team finds lacking in humor,
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31) How does organizational culture and design develop in a start-up company?
A) The founders of start-up companies typically spell out a plan for their organizational culture
and design in their initial business plan.
B) Once a start-up has received funding, its investors typically dictate the type of organizational
culture and design that they require.
C) In the early days of the business, the owners hire people they like and trust, but as the
business grows, they hire outside people and need to develop a more explicit organizational
culture and design.
D) Because most start-up companies are sole proprietorships and partnerships, most new
companies have no need to identify a mission or to create an organizational culture because the
owners are synonymous with the company's goals and mission.
E) Most new companies begin operations with a strong sense of their organizational culture and
design, but as the company grows, these guiding principles are no longer needed and are
therefore abandoned in the quest for profit.
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32) Think about a company or a business that you might like to start. You need not have a grand
idea for a multinational corporation; you might decide, for example, that you want to start a
company in which you mow people's lawns in the summer and shovel their sidewalks after
snowstorms. Or you might decide to learn how to be a tattoo artist and then become a "mobile"
tattoo artist who goes to people's homes to give them tattoos. For your chosen business, explain
how you would follow the advice given by the authors:
1. Identify your motives.
2. Build clients.
3. Practice humility. (This is more about self-development. Explain how you would practice
humility).
4. Surround yourself with the right people.
5. Learn the basics of accounting.
If you cannot think of a business you would like to start, use the lawn mowing/snow shoveling
business to answer this question.
Answer:
22
Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Difficulty: 2 Medium
Topic: Entrepreneurship
Learning Objective: LM 1-1 Define entrepreneurship and discuss its importance across the
world.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
33) Explain the difference between an entrepreneur and an intrapreneur. Name at least one
successful entrepreneur and the company he or she founded.
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34) Identify and explain at least three ways in which self-employment differs from
entrepreneurship. How might self-employment be the first step on the road to entrepreneurship?
35) What are the "Big Five" personality dimensions? In general, how do entrepreneurs rate on
each of these dimensions? That is, what does research show to be the personality characteristics
of successful entrepreneurs?
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36) This question has two parts; be sure to answer both. First, list the nine characteristics that
researchers find most important to successful entrepreneurs, providing a brief description of
each. Then perform a self-analysis in which you rate yourself on each characteristic in terms of a
business that you might like to start. (If you cannot think of a business idea, choose from one of
the following: a landscaping service, a food delivery service, an elder care service—all of these
options are open to you as a college student.) To save time, you may place your self-assessment
immediately after your summary of each characteristic.
26
Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Proactivity. Proactivity is a forward-looking perspective in which an individual is looking for
opportunities to provide value beyond what others expect. This characteristic is desired by all
organizations, but it is critical for entrepreneurs. You can't be entrepreneurial without being
proactive. Proactivity consists of introducing new products and services ahead of the competition
and acting in anticipation of future demand to create change and shape environment, thereby
creating a first-mover advantage.
Internal locus of control. Those with an internal locus of control believe "I am the master of my
fate: I am the captain of my soul" ("Invictus" Henley); that is, they believe that they control their
own destiny and that external forces will have little influence. Although both entrepreneurs and
managers like to think they have personal control over their lives, entrepreneurs typically have
higher levels of internal locus than managers do.
Innovative/creative ability. Innovation leads to the creation of something new that makes money,
while creativity produces new ideas about products, services, processes, and procedures. These
definitions highlight that both innovation and creativity are fundamental to entrepreneurship.
Entrepreneurs are generally more innovative and creative than others.
Part 2: Answers will vary depending on students' individual self-assessments.
Difficulty: 3 Hard
Topic: Entrepreneurship; Intrapreneur
Learning Objective: LM 1-1 Define entrepreneurship and discuss its importance across the
world.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
27
37) List at least four positive effects of entrepreneurship (including small firms and start-ups) on
society. For each positive effect, choose a company that illustrates that effect. You do not have to
give specific numbers; a discussion of the general effects will suffice. (You may use the same
company more than once; you may even choose to use that company for all four effects. Choose
the examples that best make your point.)
38) To answer this question, you must put yourself in the position of an aspiring entrepreneur.
Below are the four steps required in uncovering a business idea. Work your way through each of
these steps to identify and build on an idea for a business you would like to start. If you have not
thought about starting a business, imagine that your dream is to own a "doggie daycare" service
in which you take care of people's dogs during the day while they are at work, and at night and
on weekends when they are away on business or on vacation. Be sure to answer each of the
following questions:
1. Identify your passions, skills, and talents.
2. Identify a problem or frustration.
3. Identify an opportunity or need.
4. Brainstorm, suggest, or identify customer complaints.
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39) Briefly explain each of the seven key components of a business plan and what you should
include in each.
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40) Explain the similarities and differences among the types of legal structures: sole
proprietorships, general and limited partnerships, C and S corporations, and limited liability
companies. Identifies the benefits and drawbacks of each.
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AACSB: Knowledge Application
Accessibility: Keyboard Navigation
41) List and explain at least four possible sources of funding for start-ups.
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42) The following are three excerpts from a business plan for The Beautiful Dog, a food truck
that serves gourmet hot dogs (including vegetarian options) on a public thoroughfare near a
high-enrollment college campus. Identify which section of the business plan each excerpt comes
from, and explain your reasoning.
Excerpt #1:
The Beautiful Dog will be a welcome addition to the College Avenue community, which already
sees 8 to 10 food trucks lined up on a typical day, include Bodacious Burgers, Terrific Tacos,
Very Vegetarian, Tantalizing Thai, Perfect Pizza, and Champ's Chunkalicious Chicken. The
Beautiful Dog will have a strong market position as the only food truck that serves hot dogs,
which national market research has shown is the third most popular fast food in the United
States. Our ideal customers are students, faculty members, and other members of the college
community who need a quick bite to eat in between classes and on their way to their other
responsibilities. Because our hot dogs are boiled, we will be able to serve people much more
quickly than our competitors who cook their food to order, such as Bodacious Burgers and
Tantalizing Thai.
Excerpt #2:
The Beautiful Dog has a very strong position with regard to pricing. The fast-food market
expects to pay higher prices for hamburgers and chicken; moderate prices for pizza; and low
prices for tacos and hot dogs. We will therefore be priced at the low end of the scale, making our
products more affordable to college students, who are often on tight budgets. We have already
begun tweeting at @TheBeautifulDog, and our Facebook page is up and running. We are gaining
hundreds of new followers per day, and we will use the Facebook page not only to advertise our
special "Dog of the Day" but also to reward our followers with special deals that they can get by
saying the "Magic Dog Word of the Day."
Excerpt #3:
We expect that The Beautiful Dog will have an operating loss for the first three months as we
purchase equipment and get the food truck up and running. In months three to six, we expect to
break even as we pay off some of our start-up costs. By month seven, we expect to turn a profit
of $8,000 per month. Thereafter, we expect profits as follows: $9,000 per month during the
months that school in session full time (January through May, September through November);
$5,000 per month during the summer, when there are fewer students on campus (June through
August); and $2,000 in December, when the cold weather and the holiday break combine to
greatly lower foot traffic past the food truck.
33
Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Answer:
Excerpt #1 comes from the Market Analysis section of the business plan. It talks about the
market that The Beautiful Dog is trying to enter, its competitors, and where it fits in the market.
It also talks about the likely customers and relevant market research.
Excerpt #2 comes from the Sales Strategies section of the business plan. It talks about The
Beautiful Dog's pricing strategy as well as its strategies for using the Web and social media to
promote the business.
Excerpt #3 comes from the Financial Projections section of the business plan. It talks about profit
projections for the coming year and expected profitability in the future, taking into account the
changing seasons and the different number of people on campus at different times of the year.
Difficulty: 3 Hard
Topic: Business Plan
Learning Objective: LM 1-2 Identify how entrepreneurs get started.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
34
43) The following is an excerpt from a business plan:
Cake Walk is an upscale new bakery whose baked goods reflect what's happening in the news
today. For example, during Oscar week, our windows will show cakes of the nominees for Best
Actor and Best Actress. During Super Bowl week, we'll offer baked football-oriented treats, such
as football-shaped cookies and cupcakes, and we'll offer edible cake jerseys of the competing
teams. The principals of Cake Walk will be Francesca Miller, who has run a successful New
York City bakery for more than ten years, and her business partner Daryce Livingston, a
Wharton-educated MBA who has worked at a major Manhattan investment firm since 2004. The
firm is organized as a partnership between Miller and Livingston.
Strengths
• Excellent location
• Superb product by a well-known
baker
• Strong media presence by the
principals
Weaknesses
• Product prices will be higher than
those of similar products sold at
supermarkets.
• High rent required for downtown
location creates large overhead.
Opportunities
• There is no other bakery within a
five-mile radius.
• National market trends show a
consistent 10% increase yearly in
consumers choosing to purchase from a
bakery rather than a mass producer such
as a supermarket.
Threats
• Cakes and other confections are a
luxury good; possible downturns in the
economy mean that consumers may give
up freshly baked cakes before they give
up other items.
• The success of Cake Walk may
quickly cause other competitors to open
up shops in the same vicinity.
In which section of Cake Walk's business plan would this information be found? Explain.
