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Chapter Twelve: Establishing Operations
Review Questions – p. 241
1. Why is a critical path chart useful to potential investors? A critical path chart
2. Are all locations equal? No. A retail store that cannot be easily accessed, that
3. What elements should be considered when leasing a new business location?
4. What would you recommend that a new business do to improve its acceptance
and legitimacy in the market? The new business needs to have a business checking
5. Why is a detailed chart of how business operations are conducted important to
the new business? It will help the business run smoothly and avoid bottlenecks.
6. How can quality be built into any product or service? Quality can be built into the
7. Should all new companies open as soon as they are physically ready? Why or
why not? No. The new company needs to consider the timing of when the business
8. Explain some key time management techniques that will benefit any new
entrepreneur. The following are key techniques:
a. Write down what has to be accomplished.
IM 12-1
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Chapter Twelve: Establishing Operations
Class Activities and Sample Assignments
1. Discuss the distinct actions that must be taken in order for a new business to begin
operations. Ask students to discuss each of the ten categories and explain why they
are important to the new small business owner. (LO 12-1, 12-2, 12-3, 12-4, 12-5,
2. In groups, ask students to discuss the purpose of the critical path chart. Then ask
students to explain why a new small business owner needs to update the critical
path analysis as the planning process continues. Ask for specific examples and list
them on a flip chart or the blackboard. (LO 12-1)
3. Divide the students into groups of three or four teams. Ask each group to choose a
hypothetical new business. Each group should choose a different type of business.
Next, ask each team to write down the ideal location for their new small business.
Specifically, will the new small business be in a strip shopping center, a mall, or a
different location. Ask students to present their business to the class and describe
the ideal location for their new small business. (LO 12-2)
4. Discuss the types of initial payments that students will need to make for their new
small business. Evaluate each item and explain why each is pertinent to the new
small business owner. List each items on a blackboard or a flip chart. (LO 12-3)
5. In groups, ask students to develop a hypothetical new small business. Next, ask
each group to discuss what they will do to enhance the legitimacy for their new small
business. Ask each group to explain why. Also, make sure that they discuss the
twelve classic items as listed in the text. Ask the students if they can think of other
items. List the items on a blackboard or flip chart (LO 12-4)
6. Divide the students into teams. Ask the students to develop a hypothetical business
and discuss why production charts are important to the new small business owner.
In groups, have students discuss how a production chart might vary between the
following types of businesses: (LO 12-6)
a. Restaurant business
b. Retail Store
c. Manufacturing firm
IM 12-2
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Chapter Twelve: Establishing Operations
7. Ask students why time management is important for the new small business owner.
Next, ask students to discuss the various methods that they can implement to
assure they acquire effective time management skills. List each item of a blackboard
or flip chart. (LO 12-10)
Discussion Questions for Online/Hybrid classes
1. List the ten actions that new small business owners implement prior to the
establishment of their new small business. Explain why each is important. (LO
2. Summarize why firms create strategic alliances. Why are they beneficial? (LO
12-7)
3. Explain why firms invest in quality. Why do they design quality into their products or
services? (LO 12-7)
4. What is a production chart? Discuss the similarities and differences between a
production chart and a critical path chart. (LO 12-6)
5. What is a production management system? What are the two most important
elements to production management as they relate to small businesses? (LO
12-.5)
6. Define the term legitimacy. Why do new small business owners seek it? List the
items that new small business owners can implement to establish legitimacy for
their new small business. (LO 12-4)
7. Why is financing critical to the success of a new small business? Summarize the
items that new small business owners must pay in order to initiate their new
businesses. (LO 12-3)
8. Discuss why location is one of the most important steps in the critical path chart.
Why is location critical to the success of the new small business? (LO 12-2)
9. Compare and contrast a strip shopping center and an anchor store. (LO 12-2)
IM 12-3
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Chapter Twelve: Establishing Operations
10.What is time management? Why is it important to the new small business owner?
List the five steps that business owners implement to assure they utilize their time
in an effective and efficient manner. (LO 12-10)
Discussion Questions for Online/Hybrid classes - Responses
1. List the ten actions that new small business owners implement prior to the
establishment of their new small business. Explain why each is important.
2. Summarize why firms create strategic alliances. Why are they beneficial?
3. Explain why firms invest in quality. Why do they design quality into their
products or services? (LO 12-7) Quality is now an assumed standard and is
4. What is a production chart? Discuss the similarities and differences
between a production chart and a critical path chart. (LO 12-6) A production
5. What is a production management system? What are the two most
important elements to production management as they relate to small
IM 12-4
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Chapter Twelve: Establishing Operations
6. Define the term legitimacy. Why do new small business owners seek it?
List the items that new small business owners can implement to establish
legitimacy for their new small business. (LO 12-4) Legitimacy means the
7. Why is financing critical to the success of the new small business?
Summarize the items that a new small business owner must pay in order to
initiate a new business. (LO 12-3) One of the leading causes of business
8. Discuss why location is one of the most important steps in the critical path
chart. Why is location critical to the success of the new small business?
9. Compare and contrast a strip shopping center and an anchor store. (LO
10.What is time management? Why is it important to the new small business
owner? List the five steps that business owners implement to assure they
utilize their time in an effective and efficient manner. (LO 12-10) Efficient
IM 12-5
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Chapter Twelve: Establishing Operations
Lecture Links
Lecture Link 12.1: The Federal Reserve System (Fed) (LO 12-3, 12-4) – Notes
The consumer information section includes information about credit reports and credit
scores, identity theft, frauds and scams, and personal finance. All of these topics are
important to the small business owner.
Lecture Link 12.2: Federal Deposit Insurance Corporation (FDIC)
(LO 12-3)
The Federal Deposit Insurance Corporation (FDIC) (FDIC: Federal Deposit Insurance
Corporation, 2015)i provides insurance to depositors at many bank and thrift institutions.
Review their website at http://www.fdic.gov .
1. Summarize the amount of insurance that is provided to each depositor at each
lending institution. Why is this information important to a new small business
owner?
2. How does a new small business owner discover if the bank has FDIC insurance
coverage for their depositors?
3. Why is it important for new small business owners to evaluate the insurance
coverage at a bank before they choose their primary bank to establish a new
small business?
Lecture Link 12.2: Federal Deposit Insurance Corporation (FDIC)
(LO 12-3) - Notes
The Federal Deposit Insurance Corporation (FDIC) (FDIC: Federal Deposit Insurance
Corporation, 2015)ii provides insurance to depositors at many banks and thrift
institutions. Review their website at http://www.fdic.gov .
1. Summarize the amount of insurance that is provided to each depositor at
each lending institution. Why is this information important to a new small
business owner? Each depositor is insured to at least $250,000 per insured
IM 12-6
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Chapter Twelve: Establishing Operations
How does a new small business owner discover if the bank has FDIC
insurance coverage for their depositors? The bank is required to post a sign
2. Why is it important for new small business owners to evaluate the
insurance coverage at a bank before they choose their primary bank to
establish the new small business? Any business owner wants the bank to be
Lecture Link 12.3: Time Management and Stress Reduction Techniques
(LO 12-10)
The authors in the text revealed that time management is critical to the success of the
start-up operations of a new business. Consider the amount of time and work that is
involved in the planning process of the new business start-up. Frequently, entrepreneurs
perform work at other jobs, they attend classes, or they have family and other life
obligations that result in an increased level of stress. How will a new entrepreneur
reduce stress and meet the time obligations affiliated with the new small business?
Consider the techniques listed by the Mayo Clinic Staff to manage time and reduce
stress at http://www.mayoclinic.com and enter “time management” in the search box.
How will you manage your time and reduce stress as a new small business owner?
IM 12-7
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
i FDIC: Federal Deposit Insurance Corporation. (2009). http://www.fdic.gov. Retrieved on
February 18, 2015
ii FDIC: Federal Deposit Insurance Corporation. (2009). http://www.fdic.gov. Retrieved on
February 18, 2015
