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Studies comparing large companies to small ones have found that large companies'
inability to react quickly is a major barrier to their growth.
By using bootstrap marketing strategies (unconventional, low-cost, creative techniques)
small companies can get as much "bang" for their marketing bucks as their larger rivals.
Small business owners should take the time to check every candidate's references.
Testing with prototypes is known as beta tests.
Threats are negative external forces that inhibit a company's ability to achieve its
mission, goals, and objectives.
The primary problem with cash management tools is that they are too complex and
time-consuming for small business owners to use practically.
Stockholders in the corporation have the same kind of liability as general partners in a
partnership.
Entrepreneurs are most likely to give up more equity in their businesses in the startup
phase than in any other.
Companies desiring to improve their recruitment efforts are finding that the Internet
offers tremendous reach at a relatively low cost and is very effective.
Revising business plans annually forces owners to focus on managing the business
more effectively.
Small companies' core competencies are often the result of benefits such as agility,
speed, closeness to customers, superior service, and innovative ability € all of which are
size advantages that allow them to do things that their larger competitors cannot.
Which of the following statements is not true regarding the diversity of entrepreneurs?
A) Minority-owned businesses have come a long way in the past decade, and their
success rate is climbing.
B) Minority-owned businesses now account for approximately 22 percent of all
businesses in the U.S.
C) Immigrants with more education and experience than those of the past are coming to
the U.S. and succeeding in entrepreneurial ventures.
D) The numbers of part-time and home-based entrepreneurs are rising.
Which of the following is not a potential disadvantage of a franchise?
A) Unsatisfactory training program.
B) Limited product line.
C) Less freedom.
D) All of the above are potential disadvantages of a franchise.
Term loans impose restrictions called ________.
A) conditions
B) limits
C) rules
D) covenants
Printed newspapers have seen their readership rates decline as new generations of
potential readers turn to their iPads and smartphones for sources of news. This is an
example of ________.
A) threat of substitutes
B) bargaining power of buyers
C) bargaining power of suppliers
D) rivalry among existing firms
________ can be an effective part of a guerrilla marketing strategy, enabling an
entrepreneur to economically communicate with large numbers of customers.
A) Frequent emails
B) Brand awareness
C) Direct mail
D) Blogging
Refer to the following break-even chart to answer the question(s) below:
The area labeled ________ represents the firm's fixed expenses, while ________
represents its variable expenses.
A) Z; W
B) X; Y
C) Y; X
D) W; Z
A contract in which a business selling an asset on credit gets a security interest in that
asset (the collateral), protecting its legal rights in case the buyer fails to pay, is a
________.
A) lockbox
B) classic collection blunder
C) way to protect the buyer
D) security agreement
________ loans are typically unsecured.
A) Equity
B) Capital
C) Asset-based
D) Term
The net profit to asset ratio measures ________.
A) the owner's rate of return on investment
B) how much profit a company generates for each dollar of assets that it owns
C) a company's profit per dollar of sales
D) a company's ability to generate sales in relation to its asset base
A marketing strategy that relies on three principles to speed products to market, shorten
customer response times in manufacturing, and deliver and reduce the administrative
time required to fill an order is ________.
A) total quality management (TQM)
B) time compression management (TCM)
C) customer experience management (CEM)
D) bootstrap marketing
Visitors begin to evaluate the credibility of a Web site as soon as they arrive. Which of
the following does not help develop a site's credibility?
A) Posting a privacy policy.
B) Citing reference sources.
C) Presenting fair and objective information.
D) Avoiding the promotion of brand names.
In job enrichment, ________ is the degree to which a job gives a worker the freedom,
independence, and discretion in planning and performing tasks.
A) task identity
B) task significance
C) autonomy
D) feedback
Mini-Case 16-2: Passing the Baton
Carol Wingard started a small jewelry manufacturing company when she was in her late
20s, and has worked hard to build it into a highly successful family business. Now, 40
years later, she was "ready to sit down and enjoy life." Seven family members,
including her two sons, Ralph and Cooper, work in the business. Ralph, with 30 years
of experience, and Cooper, with 22 years of experience, are both vice presidents of the
company.
Carol has always intended to pass the business on to her sons, who together own 20
percent of the company's stock. However, she has always been too busy running the
business to put together a formal management succession plan. For the past decade,
many of the employees have whispered among themselves about who would be named
president if Mrs. Wingard stepped down and exactly what would happen to the
business.
Now that she has decided to retire, Carol wants to begin developing a management
succession plan.
Carol calls you and announces her plans to retire within a year. What advice would you
offer her about a management succession plan?
List and briefly explain the seven steps in the creative process and discuss the step that
you consider to be the most critical.
Mini Case 1-1: Hudson's Dilemma
Bill Hudson was a real craftsman when it came to being a machinist. Bill had learned
almost all that he knew from Hugo Huffman, his first and only employer. Bill Hudson
was married and had three young children. He was 33 years old and had worked for
Hugo ever since he finished his tour in the Army. In 12 years, Bill had polished his
skills under the watchful and critical eye of Hugo Huffman. Hugo was quick to
recognize Bill's talent for the trade. Bill had a positive attitude about learning and
displayed a drive for perfection that Hugo admired.
Hugo's Machine Shop was a successful small business. Its success was based mostly on
the reputation for quality that had been established over its 42 years in operation. Hugo
had come to this country with his new wife, Hilda, when he was in his late twenties.
Now the business was a success, but Hugo remembered the early years when he and
Hilda had to struggle. Hugo wanted the business to continue to produce the highest
quality craftsman products possible. On a Friday evening, he called Bill into his office
at closing time, poured him a cup of half-day-old coffee, and began to talk with him
about the future.
"Bill, Hilda and I are getting old and I want to retire. It has been 42 years of fun but
these old hands need a rest. In short, Hilda and I would like you to buy the business. We
both feel that your heart is in this craft and that you would always retain the quality that
we have stood for." Bill was taken back by the offer. He, of course, knew Hugo was
getting older, but had no idea Hugo would retire. Bill and his wife, Anna, had only
$4,200 in the bank. Most of Bill's salary went for the normal costs of rearing three
children. Hugo knew Bill did not have the money to buy the business in cash, but he
was willing to take a portion of the profits for the next 15 years and a modest initial
investment from Bill.
Bill had, for the past four years, made most of the technical decisions in the shop. Bill
knew the customers and was well respected by the employees. He had never been
involved in the business side of the operation. He was a high school graduate but had
never taken business courses. Bill was told by Hugo that even after deducting the
percentage of the profits he would owe under the sales agreement, he would be able to
almost double his annual earnings. Bill would have to take on all the business functions
himself because Anna had no business training either.
Which entrepreneurial characteristics does Bill have that may be important to his
success? Which characteristic could lead to his failure?
What advice would you offer an entrepreneur on how to create a mission statement for
her/his company?
Describe the small business failure rate. What are the primary causes of business
failures, and what steps can an entrepreneur take to avoid becoming a business failure
statistic?
Mini-Case 12-1: The Golden Company
This is a summary of the monthly cash budget for the next quarter (October through
December) for the Golden Company.
From the information provided, prepare a monthly cash budget for the next quarter
(October-December) for the Golden Company.
Mini-Case 13-1: "Where do I go now ...?
Christine Hernandez is in the process of launching a restaurant. Christine has never
owned her own restaurant before, but she has worked for two of the best restaurants in
town. Starting out as a hostess, Christine developed a special knack for the business and
quickly worked her way up to the job of manager. Her 18 years of experience have
given her a solid foundation for running her own restaurant.
Christine has worked with a counselor at a nearby Small Business Development Center
and a counselor from the Service Corps of Retired Executives to prepare a business
plan. She asked two other consultants and an accountant to review the plan and
incorporated their suggestions into the finished product. When Christine took her plan
to her bank however, the bank turned down her loan request of $165,000 citing the
venture as "too risky, given the failure rate of restaurants." The bank acknowledged her
experience as "a major asset," but said that it "could not expose itself to such risks in its
portfolio." Christine heard the same story from three other banks.
Christine is confident in her ability to manage her own restaurant successfully, and she
is determined to get the financing she needs to launch it.
What might Christine do to convince a bank to lend her the money she needs to launch
her company?
