57) According to the book, a clear understanding of the business’s customers is important because
it
A) aids in keeping a strategic distance between itself and its competitors.
B) helps in focusing on the core customers.
C) provides a way to control expenses.
D) all of these.
58) Mary has established a reasonable geographic radius for her flower shop. As a result, she
should be able to
A) examine potential customers.
B) predict her price point.
C) define normal or ordinary competitive factors.
D) predict sale price.
59) The benefits of ________ and ________ are the insights to provide the owner that performs the
activities with a greater chance of success.
A) analyzing; researching
B) planning; analyzing
C) researching; planning
D) coordinating; planning
60) Hiring a consultant is expensive, but it also ________ the insights that could be obtained.
A) increases
B) makes no difference to
C) limits
D) distracts
61) Fragmented markets have
A) few potential competitors.
B) many potential customers.
C) no clear dominant competitors.
D) clear dominant competitors.
62) When small businesses compete with large firms, a main disadvantage is
A) analyzing unusual or unique competitive factors.
B) operating at a cost level.
C) lacking flexibility.
D) reaching break-even point quicker.
63) A tool to better understand competitors and their capabilities is
A) competitive map.
B) deficit analysis.
C) benchmarking.
D) resource-based analysis.
64) Mark is setting up his new business. He has defined the industry in which he is competing and
has also defined his customers. In the context of conducting an external analysis, which of the
following should be Mark’s next step?
A) Mark should examine and develop insights about substitutes.
B) Mark should draw a set of competitive maps.
C) Mark should research the industry.
D) Mark should develop an understanding of his competitive advantage.
65) Which of the following is likely to occur if entrepreneurs fail to define a radius from which
they believe their business will draw a majority of its customers?
A) It will distort the entrepreneur’s advertising efforts.
B) It will dramatically reduce the entrepreneur’s costs.
C) It will be easier for the entrepreneur to identify direct and indirect competition.
D) It will force the entrepreneur to forego business unnecessarily.
66) Larry has set up a new burger joint in his hometown. He has obtained information about who
will most likely be customers at his joint. Because his joint is located near a college, he knows that
a majority of his customers are going to be students. In the context of the critical steps involved in
conducting an external analysis, which of the following should be Larry’s next step?
A) Larry should start developing an understanding of his competitive advantage.
B) Larry should gain thorough information about the elasticity of demand for his product.
C) Larry should develop insights about benchmarking.
D) Larry should conduct research to know his exact competitors.
67) When completing a conceptual map, an entrepreneur needs to visit ________ of the potential
competitors.
A) 50 percent
B) 60 percent
C) 75 percent
D) 100 percent
68) A(n) ________ is an analytical tool to organize information about direct competitors on all
points of competition.
A) analysis gap
B) competitive map
C) completion map
D) deficient map
69) A(n) ________ is an analytical tool to organize information about direct competitors on all
points of competition.
A) It is less expensive.
B) It helps in developing insights regarding pricing.
C) It provides knowledge about each competitor and allows the entrepreneur to better position the
new business.
D) All of these.
70) In developing a competitive map, an owner should review
A) population of the area.
B) household income.
C) average number of customers per hour.
D) all of these.
71) In the context of conducting an external analysis, which of the following steps should an
entrepreneur take next after identifying and researching competitors within an industry?
A) Develop an understanding of one’s own competitive edge.
B) Examine and develop insights about benchmarking.
C) Examine and develop insights about elasticity of demand.
D) Draw a set of competitive maps.
72) Which of the following is an example of the list of items that an entrepreneur should include
while visiting and making comparisons to his/her potential competitors?
A) Access from road
B) Size of the facility
C) Nearby attraction for customers
D) All of these
73) According to the book, which of the following is an example of an economic issue that a new
business should consider?
A) Industry trends
B) Case of entry/exit
C) Elasticity of demand
D) All of these
74) A(n) ________ exists if the service or product performs a similar function.
A) trade-in
B) substitute
C) elasticity of demand
D) product/service flexibility
75) A substitute can assist in forming a(n) ________ on the price that can be charged for product or
service.
A) elastic demand
B) schedule
C) competitive map
D) ceiling
76) An entrepreneur cannot leave his or her business because of the amount of money that was
invested. This is called a(n) ________.
A) harvest plan
B) exit strategy
C) benchmarking
D) exit barrier
77) ________ keeps an entrepreneur from leaving the business.
A) Exit barrier
B) Exit strategy
C) Exit restrictions
D) None of these
78) Competitors will often ________ their knowledge if your business is not a potential direct
competitor.
A) share
B) not share
C) hide
D) distort
79) _____ is working with and learning from a company outside of your industry that has a skill
that is critical to the firm’s operation.
A) Fragmenting
B) Substitute-based
C) Benchmarking
D) Tag lines
80) The ability to exit a business relatively easily
A) tends to limit the intensity of competition in the industry.
B) increases the threat posed by a new entry.
C) makes it difficult for an entrepreneur to recoup the initial investment.
D) encourages entrepreneurs to use predatory pricing in order to survive.
81) Which of the following products is likely to have an inelastic demand?
A) Cancer medicine
B) Rounds of golf
C) A Rolex watch
D) A luxury car
82) Which of the following products is likely to have an elastic demand?
A) Gasoline
B) Diamond
C) Food
D) Water