Chapter 08 Entrepreneurial Strategy and Competitive Dynamics Answer Key
True / False Questions
1.
Small businesses create the majority of new jobs in the U.S. economy.
2.
Entrepreneurship refers to new value creation and can include activities in major corporations.
3.
Opportunity recognition is the process of identifying and selecting Entrepreneurial opportunities. It does
not involve the development of those ideas.
4.
Opportunity recognition involves two phases of activity: discovery and execution.
5.
The evaluation phase of opportunity recognition occurs when an entrepreneur has an insight about a
new business venture, often based on prior knowledge.
6.
The majority of entrepreneurial start-ups are financed with angel financing.
7.
Most entrepreneurial firms first seek financing from venture capitalists in order to begin activity.
8.
Angel investors are private individuals who provide equity investments for seed capital during the later
stages of a new venture.
9.
As investors, venture capitalists rarely provide any help or services to entrepreneurial firms other than
financing.
10.
Venture capital funding for entrepreneurial ventures is usually available only after the start-up has
become a going concern and established a track record.
11.
Angel investors are always public institutions which provide seed capital to young ventures.
12.
Venture capital is a form of public equity financing used to help young firms grow rapidly.
13.
To obtain venture capital financing, business founders rarely have to give up some ownership and
control of their business.
14.
Venture capitalists and angel investors regard the management team as the most important asset of an
entrepreneurial venture.
15.
Small Business Administration and government regulations prohibit small businesses from bidding on
government contracts.
16.
An entry wedge, according to the text, is a type of entrepreneurial strategy firms can use to enter into
business.
17.
Founders using a pioneering new entry strategy look for opportunities to capitalize on proven market
successes.
18.
Adaptive new entry involves offering a radical new product or highly innovative service.
19.
Choosing which new entry strategy is best depends on competitive financial and marketplace
considerations. The greatest opportunities most likely will be in existing markets, rather than in new
markets.
20.
Rocket Internet, founded in 2007, funds start-ups. One of its successful investments was in Lamoda, a
retailing fashion site in Russia that is modeled after Zappos. This is an example of a pioneering new
entry strategy.
21.
Smell-O-Vision created an invention that would pump odors into movie theatres. It did not make it to
market. This was an attempt to be an adaptive entry strategy.
22.
Developed in 1993, WorldWideWeb, later named Nexus, was the first web browser. It radically
changed how users access information on the Internet. This is an example of a pioneering new entry
strategy.
23.
The success of an adaptive new entrant can be limited, if the value proposition is perceived as being
unique.
24.
Once an adaptive entrant has achieved initial success, the company is safe from copycat competition.
25.
Under Armour Inc., founded in 1995, makes undershirts and other athletic gear using moisture–wicking
fabric. This is an example of a pioneering new entry.
26.
Square, founded in 2010, provides a means for small businesses to process credit and debit card sales
without signing up for a traditional credit card arrangement. This is an example of a pioneering new
entry.
27.
One of the most important considerations for a new entrant is the type of strategic positioning to choose
that will help the business move forward.
28.
Because new ventures typically are small, they usually do not have high economies of scale relative to
competitors.
29.
Entrepreneurial firms are often in a strong position to use combination strategies, because they have the
flexibility to approach situations uniquely.
30.
Entrepreneurial competitive dynamics refers to a cycle of actions and responses between firms
competing for the same customers.
31.
The Amazon approach to selling books, using the Internet and offering superior customer service, gave
it a strong entry strategy. This is an example of a focus strategy.
32.
A focus strategy must not include elements of differentiation and overall cost leadership in order to be
successful.
33.
Running Press created a line of palm-sized mini books that were sold as point-of-sale impulse items.
The company grew rapidly, even though it had a small fraction of the sales in the publishing industry.
They used a pure overall cost leadership strategy to capture market share.
34.
Several arena factors make it more difficult for new ventures to be successful as differentiators.
Examples include innovation, technology, customer service, and distinctive branding.
35.
Tuft and Needle is a low-cost bed mattress manufacturer that finds it difficult to overcome competition
using an overall cost leadership strategy.
36.
Few start-ups enter industries that are mature.
37.
To be successful within a market niche, the key strategic requirement is to have a good differentiation
strategy.
38.
If a start-up enters a market with a broad or aggressive strategy, it is likely to evoke little retaliation
from a more powerful competitor.
39.
The most threatening competitor to new entrants are close competitors, because they have similar
structural features that help them adjust quickly and be flexible in decision making.
40.
Entrepreneurial new entry is often perceived as a competitive threat because most market needs are
being met, either directly or indirectly, by an existing firm.
41.
New entry is among the most common reasons why a cycle of competitive actions and reactions gets
started among similar competitors.
42.
New entry into markets, whether by start-ups or by incumbent firms, rarely threatens existing
competitors.
43.
Competitive dynamics of the rivalry among similar competitors can alter company strategy.
44.
New entry into markets, whether by start-ups or by incumbent firms, nearly always threatens existing
If similar competitors vie for the same customers in a marketplace, they are likely to escalate their
competitive strategy through a reactive series of actions and responses.
45.
Market commonality is the extent to which rivals draw from the same types of resources.
46.
In the Model of Competitive Dynamics, Exhibit 8.4 in the textbook, motivation and capability to
respond is one of the reasons companies launch competitive challenges. The Toyota Prius offer set off
the competitive dynamic cycle for more fuel-efficient automobiles.
47.
When attacked, older and larger firms tend to respond more quickly, but their responses are often more
predictable.
48.
Cutting prices or increasing marketing efforts are examples of tactical competitive actions.
49.
In the context of competitive dynamics, tactical actions involve major commitments of distinctive and
specific resources to strategic initiatives.
50.
Refinements or extensions of existing strategies are often referred to as tactical actions.
51.
Forbearance is a particularly aggressive type of competitive attack.
52.
Co-opetition, where competitors work together behind the scenes, is a form of illegal tacit collusion.
53.
Colgate-Palmolive, Unilever, Proctor and Gamble, and Henkel cooperated legally when they agreed to
prearranged prices at which they would sell to retailers.
54.
The cycle of actions and reactions that occur in daily business leads to new value creation and ongoing
advancement of economic well-being.
55.
Swedish breweries cooperate in recycling used bottles and therefore have no way to differentiate their
offers in the minds of the customer.
56.
Hollywood cooperation is responsible for saving some of the Kodak film manufacturing business,
because the studios agreed to cooperate on buying movie film.
Multiple Choice Questions
57.
According to the text, for an entrepreneurial start-up to be successful, three ingredients are critical.
What are they?
58.
Which of the following is not a common source of new business opportunities?
59.
The process of identifying, selecting, and developing new venture opportunities is known as
60.
Generally speaking, the opportunity recognition process consists of two phases of activity. They are
______________ and _____________.
61.
Which of the following is NOT one of the characteristics of an entrepreneurial opportunity?
62.
When an opportunity is attractive long enough for it to be successfully developed and deployed, it is
said to be
63.
Which of the following terms is used to refer to opportunities that are practical and physically possible?
64.
Which of the following is not a primary source of financing for entrepreneurial start-ups?