Chapter 17—Planning for Growth
TRUE/FALSE
1. Expansion is a natural by-product of a successful startup.
2. According to Inc. magazine’s annual survey for 2010, the highest rates of growth were sustained in
environmental services and technology products.
3. Simply changing the definition of the business unit so that it more closely represents the value
customers want can be enough to make a significant difference in a business.
4. Studies have found that among all the factors affecting growth, the most critical in a slowdown or
failure appears to be the inability to understand and respond to the business’s environment.
5. Intensive growth strategies focus on exploiting a niche market fully⎯that is, expanding the market
share to the greatest extent possible.
6. Market penetration is a common growth strategy for new ventures because it allows entrepreneurs to
work in familiar territory and grow while they are getting their systems and controls firmly in place.
7. Franchises generally come in three types: dealerships, service franchises, and product franchises.
8. A franchise agreement is a grant to someone else to use the company’s intellectual property and exploit
it in the marketplace by manufacturing, distributing, or using it to create a new product.
9. Horizontal integration is a way to grow a business within the current industry by buying up
competitors or starting a competing business by selling the same product under another label.
10. When entrepreneurs expand their businesses by investing in or acquiring products or businesses
outside their core competencies and industries, they are employing a network growth strategy.
MULTIPLE CHOICE
1. Rates and stages of growth in a new venture vary by ____.
a.
industry and business type
b.
market strategy
c.
consumer demographics.
d.
experience of the founding team
e.
None of these choices
2. In the four stages of growth, the ____ stage is characterized by concerns about cash flow and
marketing.
a.
startup
b.
initial growth
c.
rapid growth
d.
stable growth
e.
None of these choices
3. During startup, the entrepreneur’s main concerns are to ensure sufficient startup capital, ____, and
design a way to deliver the product or service.
a.
add human resources
b.
market the product
c.
manage cash flow
d.
seek customers
e.
innovate
4. A firm entering a ____ market in an established industry with an innovative product can experience
rapid rates of growth.
a.
technology
b.
slow growth
c.
niche
d.
diversified
e.
local
5. Studies have found that among all the factors affecting growth, the most critical in a slowdown or
failure appears to be inability to understand and respond to ____.
a.
the business’s environment
b.
customer demands
c.
technological innovations
d.
market trends
e.
demographic shifts
6. Involving everyone in the organization in the growth plan and rewarding achievement of interim goals
are two ways to ____.
a.
plan the growth stage
b.
hire for growth
c.
assess growth opportunities
d.
encourage innovation
e.
create a growth culture
7. Franchising and licensing are examples of ____.
a.
integrative growth strategies
b.
intensive growth strategies
c.
diversification
d.
global expansion
e.
innovation
8. ____ strategies may be synergistic or conglomerate.
a.
Integrative
b.
Intensive
c.
Global
d.
Diversification
e.
Innovation
9. A license agreement is a grant to someone else to use the company’s ____ and exploit it in the
marketplace by manufacturing, distributing, or using it to create a new product.
a.
supplier
b.
distribution channel
c.
marketing plan
d.
customer base
e.
intellectual property
10. With a/an ____ strategy, either the company gains control of some or all of its suppliers or it becomes
its own supplier by starting another business from scratch or acquiring an existing supplier that has a
successful operation.
a.
modular
b.
forward
c.
backward
d.
expansion
e.
diversification
11. Handling all aspects of delivering the product to the customer is the responsibility of the ____.
a.
freight forwarder
b.
agent middleman
c.
industrial distributor
d.
ETC
e.
broker
12. ____ purchase a product at a discount off list, sell it and handle collections, solving the problem of
cultural differences in transactions.
a.
Brokers
b.
Agents
c.
ETCs
d.
Intermediaries
e.
Freight forwarders
13. When an entrepreneur attempts to locate new products or businesses that are technologically
complementary to the business, she or he is diversifying with a/an ____.
a.
licensing strategy
b.
innovation strategy
c.
market strategy
d.
synergistic strategy
e.
unrelated strategy
14. By focusing on what the entrepreneur does best and letting others do the rest, the ____ strategy helps
the business grow more rapidly, keep unit costs down, and turn out products more quickly.
a.
vertical integration
b.
modular or network
c.
horizontal integration
d.
diagonal leverage
e.
circular integration
15. A growth mode that may be appropriate for a company that does not wish to invest large amounts of
capital in plant, equipment, and employees is ____.
a.
licensing
b.
global growth
c.
innovation
d.
market diversification
e.
franchising
16. Franchises generally come in all the following types except ____.
a.
dealerships
b.
governmental agencies
c.
service franchises
d.
product franchises
e.
for-profit enterprises
17. What the franchisee may receive for a fee from the franchiser includes all of the following except
____.
a.
an accounting and financial control system
b.
a marketing plan
c.
a patented design process or formula
d.
the equity invested by the franchiser
e.
the use of trade names and/or trademarks
18. In ____, the entrepreneur attempts to increase sales by using more effective marketing strategies
within the current target market.
a.
demographic segmentation
b.
research and development
c.
market penetration
d.
production prototypes
e.
franchising
19. Strategies that take the business into the international arena are ____ strategies.
a.
global
b.
diversification
c.
intensive growth
d.
integrative growth
e.
conglomerate
20. Strategies that exploit opportunities outside the current market or industry are ____ strategies.
a.
diversification
b.
global
c.
intensive growth
d.
integrative growth
e.
conglomerate
21. Strategies that involve growth within the industry as a whole are ____ strategies.
a.
global
b.
intensive growth
c.
diversification
d.
integrative growth
e.
conglomerate
22. Strategies that exploit opportunity in the current market are ____ strategies.
a.
integrative growth
b.
intensive growth
c.
global
d.
diversification
e.
conglomerate
23. Once the business has successfully passed through the rapid growth phase and is able to effectively
manage the financial gains of growth, it will have reached ____.
a.
a break-even state of revenues
b.
stable growth and maintenance of market share
c.
the cost of goods sold
d.
its maximum retained earnings and net income
e.
global growth
24. Failure at the rapid growth stage for an entrepreneur may be due to all of the following except ____.
a.
uncontrolled growth
b.
lack of cash
c.
insufficient management expertise
d.
public offering of the company
e.
lack of delegation of control and accountability
25. Problems during the rapid growth stage are often solved by ____.
a.
delegating control and accountability
b.
increasing sale revenues
c.
decreasing retained earnings
d.
increasing inventory turnover
e.
licensing technology
26. At the first stage of startup success, the main concerns for the entrepreneur include all of the following
except ____.
a.
hiring management expertise
b.
ensuring startup capital
c.
seeking customers
d.
designing a way to deliver the product or service
e.
securing suppliers
27. With ____, entrepreneurs create a unique and sustainable competitive advantage by doing things
differently for a different purpose.
a.
diversification
b.
strategic innovation
c.
global expansion
d.
intensive growth
e.
market penetration
28. The market factors that affect a firm’s ability to grow include all of the following except ____.
a.
the size, characteristics, and buying power of the target market
b.
the nature of the competition
c.
the status of the intellectual-property rights
d.
the entrepreneur’s ability to delegate authority and responsibility
e.
the degree of volatility of the industry
29. High-growth companies display all of the following characteristics except ____.
a.
being first into their niche market
b.
being loyal to the founding team
c.
being leaner in their operations
d.
offering something unique
e.
being better at what they do than their competitors
30. ____ consists of taking the product or service to a broader geographic area.
a.
Product development
b.
Market development
c.
Franchising
d.
Licensing
e.
An integrative growth strategy
SHORT ANSWER
1. List the four stages of growth in a new venture.
2. List the steps involved in choosing an intermediary.
3. What are the benefits of using a modular strategy or network strategy?
4. Briefly discuss vertical integration strategies.
5. What are the steps that licensors should take to ensure a successful transition?
6. What characteristics do successful global companies usually exhibit?
7. List some of the things that a franchisee may get for the franchise fee.
8. List the eight profit driver strategies outlined by McGrath and MacMillan.
9. Describe steps an entrepreneur must take when he or she decides to pursue a growth strategy.
10. What are the characteristics of high-growth companies?
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