1. (p. 4) Ewing Kauffman took a risk when he started his company Marion Labs
in 1950.
TRUE
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Difficulty: Medium
2. (p. 5) How Ewing Kauffman ran his business illustrates corporate
entrepreneurship.
TRUE
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Difficulty: Medium
3. (p. 6) Entrepreneurial opportunities are those situations in which new goods,
services, raw materials and organizing methods can be sold at greater than
their production cost.
TRUE
Accessibility: Keyboard Navigation
Difficulty: Medium
4. (p. 6) Entrepreneurial action can be defined as those situations in which new
goods, services, raw materials and organizing methods can be sold at greater
than their production cost.
FALSE
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Difficulty: Medium
5. (p. 6) The McMullen-Shepherd Model helps identify the common traits of
successful entrepreneurs.
FALSE
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Difficulty: Easy
6. (p. 6) The McMullen-Shepherd Model explains how knowledge and
motivation influence two stages of entrepreneurial action.
TRUE
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Difficulty: Medium
7. (p. 6) In the McMullen-Shepherd Model first person opportunity beliefs come
before third person opportunity beliefs.
FALSE
Accessibility: Keyboard Navigation
Difficulty: Hard
8. (p. 6) In the McMullen-Shepherd Model the first stage is the evaluation
stage.
FALSE
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Difficulty: Medium
9. (p. 7) Superficial similarities exist when the underlying mechanisms of the
technology resemble, or match, the underlying mechanisms of the market.
FALSE
Accessibility: Keyboard Navigation
Difficulty: Medium
10. (p. 7) Structural similarities exist when the underlying mechanisms of the
technology resemble, or match, the underlying mechanisms of the market.
TRUE
Accessibility: Keyboard Navigation
Difficulty: Medium
11. (p. 8) Bricolage is entrepreneurs making do by applying combinations of the
resources at hand to new problems and opportunities.
TRUE
Accessibility: Keyboard Navigation
Difficulty: Medium
12. (p. 9) The effectuation process starts with what one has and selects among
possible outcomes.
TRUE
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Difficulty: Medium
13. (p. 9) Is the example "Curry in a Hurry" is an example of the effectuation
process?
TRUE
Accessibility: Keyboard Navigation
Difficulty: Easy
14. (p. 9) The casual process of thinking starts with what one has and selects
among possible outcomes.
FALSE
Accessibility: Keyboard Navigation
Difficulty: Medium
15. (p. 10) Demographics, ethnic origin, and marital status are examples of
segmentation variables.
TRUE
Accessibility: Keyboard Navigation
Difficulty: Easy
16. (p. 16) The question "What is this technology all about?" is a
comprehension question.
TRUE
Accessibility: Keyboard Navigation
Difficulty: Easy
17. (p. 16) Comprehension questions are designed to stimulate entrepreneurs
to think about their own understanding.
FALSE
Accessibility: Keyboard Navigation
Difficulty: Medium
18. (p. 16) Asking "How is this problem similar to problems I've already solved"?
is an example of a connection task.
TRUE
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Difficulty: Medium
19. (p. 16) A reflection task would involve thinking about what strategies should
be used to solve a problem.
FALSE
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Difficulty: Medium
20. (p. 17) Entrepreneurs have stronger intentions to act when taking action is
perceived to be impossible and risky.
FALSE
Accessibility: Keyboard Navigation
Difficulty: Easy
21. (p. 17) Entrepreneurs' intentions are based on their perception of feasibility
rather than someone else's impression of whether it is feasible.
TRUE
Accessibility: Keyboard Navigation
Difficulty: Easy
22. (p. 17) Perceived desirability refers to the degree to which an individual has
a favorable or unfavorable evaluation of the potential entrepreneurial
outcomes.
TRUE
Accessibility: Keyboard Navigation
Difficulty: Easy
23. (p. 18) An entrepreneur is rarely able to start a new business without some
form of formal education.
FALSE
Accessibility: Keyboard Navigation
Difficulty: Medium
24. (p. 18) Research indicates that male entrepreneurs tend to start their first
significant venture in their middle 30s, while women entrepreneurs tend to do so
in their early 30s.
FALSE
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Difficulty: Medium
25. (p. 19) Previous start-up experience is a good predictor of starting
subsequent businesses.
TRUE
Accessibility: Keyboard Navigation
Difficulty: Medium
26. (p. 19) Dissatisfaction with various aspects of one's job often motivates the
launching of a new venture.
TRUE
Accessibility: Keyboard Navigation
Difficulty: Easy
27. (p. 19) Most entrepreneurs indicate that their most significant venture was
not their first one.
TRUE
Accessibility: Keyboard Navigation
Difficulty: Easy
28. (p. 19) Role models are individuals who give psychological support to the
entrepreneur especially during the start-up phase.
FALSE
Accessibility: Keyboard Navigation
Difficulty: Hard
29. (p. 19-20) Role models can include family members as well as industry
professionals.
TRUE
Accessibility: Keyboard Navigation
Difficulty: Easy
30. (p. 19) In a social network there are two major properties, density and
centrality.
TRUE
Accessibility: Keyboard Navigation
Difficulty: Medium
Multiple Choice Questions
31. (p. 6) Entrepreneurial Opportunities are defined as:
A. new market entry through entrepreneur action.
B. the entrepreneur's mental processes in deciding whether or not to act on a
potential opportunity.
C. a feasibility assessment.
D. situations in which new goods, services, raw materials and organizing
methods can be sold at greater than their production cost.
Accessibility: Keyboard Navigation
Difficulty: Medium
32. (p. 6-7) In Stage One of the McMullen-Shepherd Model:
A. the entrepreneur decides whether or not there is an opportunity for someone.
B. the entrepreneur consults experts in the market area of interest.
C. the entrepreneur decides whether the opportunity that exists is a match with
their own knowledge and motivation.
D. the entrepreneur engages in bricolage.
Accessibility: Keyboard Navigation
Difficulty: Medium
33. (p. 6-7) In Stage Two of the McMullen-Shepherd Model:
A. the entrepreneur deals with the business failure through counseling.
B. the entrepreneur decides whether or not there is an opportunity for him or
her personally.
C. the entrepreneur goes through the causal process of thinking structurally.
D. the entrepreneur consults colleagues from previous jobs.
Accessibility: Keyboard Navigation
Difficulty: Medium
34. (p. 7) In regards to thinking structurally, superficial similarities:
A. exist when the underlying mechanisms of the technology resemble (or
match) the underlying mechanisms of the market.
B. exist when supply is less than demand.
C. exist when entrepreneurs engage in bricolage.
D. exist when the basic (relatively easy to observe) elements of the technology
resemble the basic elements of the market.
Accessibility: Keyboard Navigation
Difficulty: Hard
35. (p. 9) The causal process of thinking:
A. starts with a desired outcome and focuses on the possible means to
generate that outcome.
B. starts with what one has and selects among possible outcomes.
C. involves bricolage.
D. starts with brainstorming by meeting with industry professionals.
Accessibility: Keyboard Navigation
Difficulty: Medium
36. (p. 9) Which of the following is NOT a stage in Kolter's procedure in bringing
a product/service to market?
A. Select target market segments
B. Analyze long run opportunities in the market
C. Design market strategies
D. File for patent protection
Accessibility: Keyboard Navigation
Difficulty: Medium
37. (p. 16) Questions designed to increase an entrepreneurs' understanding of
the nature of the environment are known as:
A. Strategic questions
B. Connection tasks
C. Reflection tasks
D. Comprehension questions
Accessibility: Keyboard Navigation
Difficulty: Easy
38. (p. 16) An entrepreneur considering if what they are doing makes sense is
an example of:
A. A strategic question
B. A connection task
C. A reflection task
D. A comprehension question
Accessibility: Keyboard Navigation
Difficulty: Medium
39. (p. 16) __________ are designed to stimulate thought about entrepreneurs'
understanding and feelings as they progress through the entrepreneurial
process.
A. Strategic questions
B. Connection tasks
C. Reflection tasks
D. Comprehension questions
Accessibility: Keyboard Navigation
Difficulty: Medium
40. (p. 17) Individuals have stronger intentions to act when taking action is
perceived to be _____ and desirable.
A. elusive
B. feasible
C. flexible
D. risky
Accessibility: Keyboard Navigation
Difficulty: Easy
41. (p. 17) Which among the following aspects affects an entrepreneur's
perception of feasibility?
A. Locus of control
B. Learning style
C. Perceived desirability
D. Self-efficacy
Accessibility: Keyboard Navigation
Difficulty: Medium
42. (p. 18) On the education background, entrepreneurs:
A. are less educated than the general population.
B. cite an educational need in the areas of finance, strategic planning,
marketing, and management.
C. who lack a formal education, fail to create new businesses and exploit
discovered opportunities.
D. cite formal education to be indispensible in starting a new business.
Accessibility: Keyboard Navigation
Difficulty: Medium
43. (p. 19) Motivation to launch a new venture can arise from all of the
following except:
A. lack of prior experience.
B. boredom.
C. a lack of challenge.
D. frustration.
Accessibility: Keyboard Navigation
Difficulty: Easy
44. (p. 19) Density, in regards to a social network, refers to:
A. the extensiveness of ties between two individuals.
B. the total number of individuals in the network.
C. the distance of connection between the entrepreneur and contact.
D. the fact that most networks are informal and not well organized.
Accessibility: Keyboard Navigation
Difficulty: Hard
45. (p. 20) The moral support network is different from the professional support
network in that:
A. a professional support network includes finding a mentor.
B. moral support is less important than professional support.
C. only the "cheering squad" provides moral support.
D. a moral support network comprises only of personal contacts.
Accessibility: Keyboard Navigation
Difficulty: Hard
46. (p. 20) Within the moral-support network, most entrepreneurs indicate that
their _____ are their biggest supporters.
A. mentors
B. friends
C. parents
D. spouses
Accessibility: Keyboard Navigation
Difficulty: Medium
47. (p. 20) Which group in a professional network helps keep a new venture
competitive?
A. Clients or buyers
B. Mentors
C. Trade associations
D. Suppliers
True / False Questions
1.
A new entry can be either offering a new product to a new market or creating a
new organization.
TRUE
Difficulty: Medium
p.58
2.
Newness of a new entry is always an advantage.
FALSE
Difficulty: Medium
p.58
3.
The long-run performance of a firm is dependent upon the ability to generate and
exploit numerous new entries.
TRUE
Difficulty: Medium
p.59
4.
In order to be the basis for a firm’s superior performance, a bundle of resources
must be valuable, rare, and imitable.
FALSE
Difficulty: Medium
p.60
5.
A franchise is the instrument used to protect the owner of the technology from
people imitating the technology.
FALSE
Difficulty: Hard
p.60
6.
Knowledge is the basis of the entrepreneurial resource.
TRUE
Difficulty: Medium
p.60
7.
Experience is idiosyncratic—unique to the life of the individual.
TRUE
Difficulty: Easy
p.61
8.The knowledge needed to generate innovation cannot be easily learned from a
textbook.
TRUE
Difficulty: Medium
p.61
9.
The entrepreneur’s market knowledge is deeper than the knowledge that could be
gained through market research.
TRUE
Difficulty: Medium
p.61
10.
Technological knowledge refers to the entrepreneur’s possession of information,
technology, know-how, and skills that provide insight into a market and its customers.
FALSE
Difficulty: Medium
p.61
11.
Market research, such as surveys, has limited effectiveness because it is often
difficult for customers to articulate the underlying problems they have with a product
or service.
TRUE
Difficulty: Hard
p.61
12.
The period of time when the environment is favorable for entrepreneurs to exploit
a particular new entry is called the window of opportunity.
TRUE
Difficulty: Easy
p.63
13.
The longer the entrepreneur takes to research a new entry, the less accurate
customer demand estimates are.
FALSE
Difficulty: Medium
p.63
14.
When the window of opportunity is open, the environment is unfavorable for
entrepreneurs to exploit a new product or enter a new market with an existing
product.
FALSE
Difficulty: Medium
p.63-64
15.
An error of omission occurs from the decision not to act of a new entry opportunity
when in hindsight they should have.
TRUE
Difficulty: Medium
p.64
16.
An error of commission occurs from the decision not to act on a new entry
opportunity.
FALSE
Difficulty: Hard
p.64
17.The assessment of a new entry attractiveness is less about whether this opportunity
“really” exists or not and more about whether the entrepreneur believes he or she can
make it work.
TRUE
Difficulty: Medium
p.65
18.
First movers suffer a cost disadvantage as they are not able to move down the
experience curve.
FALSE
Difficulty: Medium
p.65
19.
First movers can monitor changes in the market that might be difficult or
impossible to detect for those firms not participating in the market.
TRUE
Difficulty: Easy
p.65
20.
If there is a poor fit between its resources and the external environment, then the
firm will not enjoy superior performance.
TRUE
Difficulty: Medium
p.66
21.
Key success factors are the requirements that any firm must meet to successfully
compete in a particular industry.
TRUE
Difficulty: Medium
p.66
22.
Emerging industries are industries that have been around for years but are just
starting to experience explosive growth.
FALSE
Difficulty: Medium
p.67
23.
Environmental changes are highly unlikely in emerging industries.
FALSE
Difficulty: Easy
p.67
24.
By overestimating demand, the entrepreneur will suffer the costs of under
capacity.
FALSE
Difficulty: Hard
p.67
25.
Entrepreneurs that delay entry have the advantage of more information about
market demand.
TRUE
Difficulty: Medium
p.67
26.
Technological uncertainty is eliminated by a superior technology.
FALSE
Difficulty: Medium
p.68
27.
Adaptations necessary to meet changes in market demand are difficult because
an organization resists change.
TRUE
Difficulty: Medium
p.68
28.
Customers always embrace change in products and services.
FALSE
Difficulty: Easy
p.69
29.
To overcome customer uncertainty, the venture should educate customer through
demonstration and documentation on how to use the product.
TRUE
Difficulty: Medium
p.69
30.
The late mover is able to operate in the industry for a grace period under
conditions of limited competition.
FALSE
Difficulty: Medium
p.70
31.
Building customers’ switching costs decreases barriers to entry for other firms.
FALSE
Difficulty: Easy
p.71
32.
Competition within an industry always has a negative effect on industry growth.
FALSE
Difficulty: Medium
p.71
33.
A narrow scope strategy offers a small product range to a small number of
customer groups.
TRUE
Difficulty: Medium
p.73
34.
Using a broad scope strategy helps to reduce the risk of market uncertainty.
TRUE
Difficulty: Medium
p.74
35.
If a company has a superior product, customers will always be willing to pay a
higher price for higher value.
FALSE
Difficulty: Medium
p.73
36.
A narrow scope strategy reduces the risks associated with competition.
TRUE
Difficulty: Medium
p.73
37.
Imitation of other products increases the downside loss associated with new entry.
FALSE
Difficulty: Medium
p.74
38.
Franchising is an example of a new entry strategy that increases the risk of
downside loss for the franchises.
FALSE
Difficulty: Medium
p.75
39.
A “me-too” strategy consists of copying products that already exist and attempting
to build an advantage through minor variations.
TRUE
Difficulty: Easy
p.75
40.
The three major risk reduction strategies discussed in the text are narrow scope,
broad scope and imitation.
FALSE
Difficulty: Medium
1.
73-75
2.
Lack of informal communication systems is one of the assets of newness.
FALSE
Difficulty: Medium
p.76
Multiple Choice Questions
42.
A new entry includes all of the following except:
A.Offering a new product to a new market
B. Offering an established product to an new market
C. Creating a new product development process for your company
D. Creating a new organization
Difficulty: Easy
p.58
43.
The set of decisions, actions, and reactions that first generate, and then exploit
over time, a new entry is:
A.entrepreneurial financing.
B. entrepreneurial strategy.
C. bootstrapping.
D. informal organization.
Difficulty: Medium
p.59
44.
Which among the following is not a key stage of the entrepreneurial strategy?
A.Market research to identify a new entry opportunity.
B. Generation of a new entry opportunity.
C. Exploitation of a new entry opportunity.
D. A feedback loop from the culmination of a new entry generation and exploitation
back to generation of a new opportunity.
Difficulty: Medium
p.59
45.
Which item is not part of the new entry generation stage in the entrepreneurial
strategy process?
A.Technical knowledge
B. Risk reduction strategies
C. Rare resources
D. Market Knowledge
Difficulty: Easy
p.59
46.
The basic building blocks to a firm, or the inputs into the production process, are:
A.competition.
B. strategy.
C. liabilities.
D. resources.
Difficulty: Medium
p.60
47.
To be the basis of a firm’s superior performance over competitors for an extended
period of time, resources need to be:
A.valuable.
B. fully utilized.
C. patented.
D. shared.
Difficulty: Medium
p.60
48.
_________ are used to protect the owner of the technology from people imitating
the technology.
A. Franchises
B. Switching costs
C. Patents
D. Distributors
Difficulty: Medium
p.60
49.
Which of the following statements is(are) true?
A.Knowledge is a valuable entrepreneurial resource that is gained through formal
education.
B. Knowledge can be gained through highly experienced managers and/or firms.
C. Knowledge based on experience is unlikely to be learned in a classroom.
D. Research, more than knowledge, leads to the generation of new entries in markets
and technologies.
Difficulty: Medium
p.61
50.
______________ knowledge refers to the entrepreneur’s possession of
information, technology, know-how, and skills that provide insight into the industry
and customers.
A. Technological
B. Resource
C. Opportunity
D. Market
Difficulty: Medium
p.61
51.
Which is the best way to gain knowledge about a potential new entry?
A.Marketing research
B. Internet research
C. Entrepreneur’s market experience and knowledge.
D. Surveys
Difficulty: Hard
p.61
52.
Technological knowledge:
A.is gained through market research.
B. can lead to a technology that is the basis for a new entry.
C. does not help unless the market applicability is obvious.
D. does not help if the market is limited.
Difficulty: Hard
p.62
53.
When conducting research on a new entry:
A.the more information the entrepreneur has, the more difficult it is to focus on the
consumer.
B. the entrepreneur must rely upon surveys more that market knowledge.
C. extensive research is expensive in terms of time and money.
D. lesser prior knowledge is advantageous since it minimizes the risk of
entrepreneurial bias.
Difficulty: Medium
p.63
54.
The window of opportunity is part of:
A.assessing the attractiveness of a new entry opportunity.
B. creating a resource bundle.
C. choosing an entry strategy.
D. choosing a risk reduction strategy.
Difficulty: Medium
p.63-64
55.
The period of time when the environment is favorable for entrepreneurs to exploit
a particular new entry is the:
A.market research phase.
B. window of opportunity.
C. technology window.
D. narrow-scope strategy.
56.
When an entrepreneur pursues a new entry opportunity only to find out later that he
or she had overestimated his or her ability to create customer demand it is a(n):
A.technological error.
B. window of opportunity.
C. error of omission.
D. error of commission.
Difficulty: Medium
p.64
57.
An error of omission occurs when an entrepreneur:
A.enters a market but overestimates the customer demand.
B. develops a product for a market that is too narrow.
C. decides not to enter a market that is, in fact, desirable.
D. fails to understand the limitations of a market.
Difficulty: Hard
p.64
58.
Regarding entry into a new market, which of the following is(are) true?
A.First movers gain expertise through participation.
B. First movers are not able to detect changes in the market.
C. First movers suffer a cost disadvantage.
D. First movers face more competitive rivalry.
Difficulty: Easy
p.65
59.
First movers:
A.are not able to gain from moving down the experience curve.
B. are better positioned to satisfy customers.
C. face more competition than late movers.
D. fail to secure important channels.
Difficulty: Medium
p.65
60.
Which of the following is not a reason that first movers are better positioned to
satisfy their customers?
A.They have a chance to select and secure the most attractive segments of the
market
B. They have the chance to position themselves at the center of the market
C. They have a chance to face less competitive rivalry
D. They have a chance to establish their product as the industry standard
Difficulty: Hard
p.65
61.
A disadvantage of being a first mover is:
A.environmental instability.
B. cost disadvantages.
C. long lead time to gain knowledge.
D. a limited market.
Difficulty: Hard
p.66
62.
If there is a good fit between the venture’s bundle of resources and the external
environment:
A.the firm will be rewarded with superior performance.
B. the entrepreneur will be unable to compete in the market segment.
C. environmental variables will be irrelevant.
D. demand uncertainty will be irrelevant.
Difficulty: Medium
p.66
63.
In emerging industries:
A.environmental factors do not affect customer demand.
B. entrepreneurs confront demand certainty.
C. environmental changes are highly likely.
D. it is easier to respond effectively to sudden changes.
Difficulty: Medium
p.67
64.
First movers face:
A.market rigidities.
B. high entry barriers.
C. cost disadvantages.
D. demand uncertainty.
Difficulty: Easy
p.67
65.
By delaying entry, late movers:
A.can learn from the actions of first movers without incurring the same costs.
B. have less information about market demand.
C. secure the window of opportunity.
D. can avoid high entry barriers.
Difficulty: Medium
p.67
66.Technological uncertainty:
A. is a result of uncertainty about customer demand.
B. occurs because an alternative technology could be introduced by competitors.
C. only occurs in emerging markets.
D. can be avoided by early entrants with superior technology.
Difficulty: Hard
p.68
67.
Changes needed to adapt to environmental changes:
A. are easier in established organizations because of inertia.
B. can be avoided by late entry.
C. are more difficult because of the entrepreneur’s tendency to escalate commitment.
D. don’t affect smaller organizations.
Difficulty: Medium
p.68
68.
The entrepreneurial attributes of persistence and determination, which are so
beneficial when the new venture is on the “right course,”:
A. can make the entrepreneur more suitable to work in volatile markets.
B. can hasten the process of adapting to sudden changes.
C. can aid the entrepreneur in recognizing, and implementing changes.
D. can inhibit the ability of the entrepreneur to detect, and implement, change.
Difficulty: Medium
p.68
69.
By entering a market later,
A.customer uncertainties have already been substantially reduced.
B. the venture can build a reputation as a “founder.”
C. the company can erect barriers to entry and imitation.
D. the player gets to operate only for a grace period.
Difficulty: Medium
p.69
70.
Customer uncertainty can take all of the following forms except:
A.not understanding how to use the product
B. not knowing whether the product will perform as expected
C. not knowing where to buy the product
D. being uncertainty adverse in general and resistant to change
Difficulty: Medium
p.69
71.
By being first to market a product, the venture:
A.can tends to lose customer loyalties to late entrants.
B. loses out to switching costs.
C. secures access to important sources of supply.
D. can sell its products and services at a higher price.
Difficulty: Easy
p.71
72.
The costs that must be borne by customers if they are to stop purchasing from the
current supplier and begin purchasing from another is (are):
A.customer switching costs.
B. lead time.
C. resource costs.
D. resource bundle errors.
Difficulty: Medium
p.71
73.
Lead time is:
A.the time from production to market delivery
B. the time in which the first mover operates in the market under conditions of limited
competition
C. the time it takes for an entrepreneur to go from the concept stage to the delivery
stage
D. the time between product introduction and customer acceptance
Difficulty: Medium
p.70-71
74.
Barriers to entry include all of the following except:
A.patents
B. switching costs
C. environmental instability
D. building customer loyalties
Difficulty: Hard
p.71
75.
Frequent flier miles would be an example of which barrier to entry?
A.Building customer loyalties
B. Securing access to supply of key resources
C. Creating product uniqueness
D. Building in switching costs
Difficulty: Hard
p.71
76.
_____ refers to the probability, and magnitude, of downside loss.
A. Reward
B. Risk
C. Liability of newness
D. Technology error
Difficulty: Easy
p.73
77.
Offering a small product range to a small number of customer groups is:
A. a narrow-scope strategy.
B. an imitation strategy.
C. a broad-scope strategy.
D. a way of reducing market uncertainties.
Difficulty: Medium
p.73
78.
A narrow-scope market strategy:
A.does not provide the entrepreneur an opportunity to build up specialized knowledge
and expertise.
B. provides substantial protection against competitors.
C. is like putting all your eggs in one basket.
D. can be thought of as taking a “portfolio” approach to dealing with uncertainties.
Difficulty: Medium
p.73
79.
A broad-scope market strategy:
A.focuses on producing customized products.
B. provides substantial protection against competitors.
C. is used to reduce market uncertainty.
D. is based primarily on product quality.
Difficulty: Medium
p.74
80.
A broad-scope strategy:
A.is vulnerable to the risk that market demand does not materialize as expected
and/or changes over time.
B. opens the firm up to many different “fronts” of competition.
C. focuses the firm on producing customized products, localized business operations,
and high levels of craftsmanship.
D. offers a way of reducing some competition-related risks.
Difficulty: Medium
p.74
81.
Imitation strategies:
A.require expensive and extensive research.
B. are rare and inimitable.
C. does not provide organizational legitimacy.
D. can enhance a firm’s performance.
Difficulty: Medium
p.74
82.
A ______ strategy that copies products that already exist and attempts to build an
advantage through minor variations.
A.technological
B. narrow scope
C. me-too
D. broad scope
Difficulty: Easy
p.75
83.
Which of the following is a liability of newness?
A.Costs associated with learning new tasks are high.
B. Lack of established routines and processes give the venture a new slate.
C. Communication in informal systems is increased.
D. Market for potential consumers is limited.
Difficulty: Hard
p.76
84.
Franchising:
A.is the only imitation strategy discussed in the text.
B. reduces risk of downside loss.
C. is the same as the me-too strategy.
D. reduces the amount of competition an entrepreneur will face.
Difficulty: Medium
p.75
Short Answer/Essay Questions
85.
Identify and briefly describe the major stages of entrepreneurial strategy.
Three major stages:
Stage 1 New entry generation – The generation of a new entry is the result of
a combination of knowledge and other resources into a bundle that its creators hope
will be valuable, rare, and difficult for others to imitate . Depending on how in-depth
the instructor wants the answer items like market and technological knowledge,
window of opportunity and error of omission/commission may be required/discussed.
Stage 2 New entry exploitation – comprised of choosing an entry strategy, a risk
reduction strategy. Depending on how in-depth the instruction wants the answer items
like first mover advantages/disadvantages, demand and technological uncertainty,
adaptation, lead time, and narrow/broad scope strategies may be discussed.
Stage 3 Feedback loop of resources – a brief description is appropriate since not
much time is spent on this stage. Answer may include items from the following
excerpt obtained from the textbook, ” we should not underestimate the importance of
the feedback loop of stage 3 because an entrepreneur cannot rely on the generation
and exploitation of only one new entry; rather, long-run performance is dependent
upon the ability to generate and exploit numerous new entries. If the firm does rely on
only one new entry, then as the life cycle for the product enters maturity and declines,
so goes the life cycle of the organization.”
Answer will vary.
Difficulty: Medium-Hard
p.58-59
86.
Explain what constitutes a new entry.
New entry refers to (1) offering a new product to an established or new market, (2)
offering an established product to a new market, or (3) creating a new organization
(regardless of whether the product or the market is new to competitors or customers).
Difficulty: Easy
1.
58-59
2.
Explain the difference between errors of omission and commission.
An error of commission occurs from the decision to
pursue this new entry opportunity, only to find out later that the entrepreneur had
overestimated
his or her ability to create customer demand and/or to protect the technology from
imitation by competitors. The costs to the entrepreneur were derived from acting on the
perceived opportunity.
An error of omission occurs from the decision not to act on the new entry opportunity,
only to find out later that the entrepreneur had underestimated his or her ability to create
customer demand and/or to protect the technology from imitation by competitors. In this
case, the entrepreneur must live with the knowledge that he let an attractive opportunity
slip through his fingers.
Difficulty: Medium
p.64
88.
List the 5 main first-mover advantages discussed in the text.
Cost advantages
Less competition
Secure important channels
Prime position for customers
Expertise from participation
Difficulty: Medium (to increase ask for more detailed explanation of advantages)
p.65-66
89.
Identify the main disadvantages of being a first-mover.
Environmental instability
Customer Uncertainty
Short lead time
Difficulty: Easy (increase to medium by asking for explanation of each)
p.66
90.
Identify and briefly explain the 4 ways that lead time can be extended by creating
barriers to entry. Give examples where appropriate.
Building customer loyalties by trying to get the customer to associate the industry with the
“first-movers” product. Establish and build customer loyalty to be brand of choice.
Build switching costs to try and lock in existing customers by making it “costly” for them to
switch through mechanisms like loyalty programs.
Protecting product uniqueness through patents, trademarks, trade secrets or other IP
protections.
Securing access to important sources of supply and distribution by developing exclusive
relationships with key sources. This forces competitors to use lesser quality sources or
can bar them from entering if supply is limited.
Difficulty: Medium
p.71
91.
Identify and describe the three major risk reduction strategies.
A. Narrow scope – A narrow-scope strategy offers a small product range to a small
number of customer groups to satisfy a particular need. The narrow scope
can reduce the risk that the firm will face competition with larger, more established
firms in a number of ways. A narrow-scope strategy focuses the firm on producing
customized products, localized business operations, and high levels of product
quality. By focusing on a specific group of customers, the entrepreneur can build up
specialized expertise and knowledge that provide an advantage over companies that
are competing more broadly. The high end of the market typically represents a highly
profitable niche.
B. Broad scope – broad-scope strategy can be thought of as taking a “portfolio”
approach to dealing with uncertainties about the attractiveness of different market
segments. By offering a range of products across many different market segments,
the entrepreneur can gain an understanding of the whole market by determining
which products are the most profitable. Unsuccessful products (and market
segments) can then be dropped and resources concentrated on those product
markets that show the greatest promise. In essence, the entrepreneur can cope with
market uncertainty by using a broad-scope strategy to learn about the market through
a process of trial and error.
C. Imitation strategies – Imitation is another strategy for minimizing the risk of
downside loss associated with new entry. Imitation involves copying the practices of
other firms, whether those other firms are in the industry being entered or from
related industries. Entrepreneurs may simply find it easier to imitate the practices of a
successful firm than to go through the process of a systematic and expensive search
that still requires a decision based on imperfect information. In essence, imitation
represents a substitute for individual learning. Imitating some of the practices of
established successful firms can help the entrepreneur develop the skills necessary
to be successful in the industry, rather than attempting to work out which skills are
required and develop these skills from scratch. Imitation also provides organizational
legitimacy. If the entrepreneur acts like a well established firm, it is likely to be
perceived by customers as well established. Imitation is a means of gaining status
and prestige. Customers feel more comfortable doing business with firms that they
perceive to be established and prestigious.
Answer will vary.
Difficulty: Medium-Hard depending on detailed required by instructor
p.73-75
92.
Explain why an entrepreneur might adopt an imitation strategy.
Reduces the risk by:
-reducing research and development costs
-reducing customer uncertainty about the firm/established reputation
-established market demand
-protected name and products (IP)
-access to help with financial, marketing and managerial issues
Difficulty: Medium
1.
75-76
93.
Explain the three major causes of “liabilities of newness.”

New organizations face costs in learning new tasks. It may take some time and
training to customize employees’ skills to the new tasks they are asked to perform.

As people are assigned to the roles of the new organization, there will be some
overlap
or gaps in responsibilities. This will often cause conflict until the boundaries around
particular roles are more formally set (once management has gained sufficient
knowledge to do so) and/or until they have been informally negotiated by the parties
to the conflict.

Communication within the organization occurs through both formal and informal
channels. A new organization has not yet had the opportunity to develop informal
structures, such as friendships and organizational culture. It takes time for a new firm
to establish these informal structures.
Difficulty: Medium
1.
76Chapter 05 Identifying and Analyzing Domestic and International Opportunities
Answer Key
True / False Questions
1.
The key to successful entrepreneurship is to develop an idea that has a
market with a need for the product or service idea conceived.
TRUE
Difficulty: Medium
p.121
1.
An opportunity assessment plan is basically the same thing as a business
plan.
FALSE
Difficulty: Medium
p.121
1.
SCORE is a for-profit organization that provides online and in-person
assistance in about 100 locations throughout the United States.
FALSE
Difficulty: Medium
p.122
1.
The U.S. Chamber of Commerce and Small Business Development
Centers are good places to get information and assistance in starting a new
business.
TRUE
Difficulty: Easy
p.122
1.
Gartner provides information on technology markets.
TRUE
Difficulty: Hard
p.123
1.
The Kaufmann foundation Provides resources for entrepreneurship
education and research and lists the angel (private investor) groups throughout
the United States.
TRUE
Difficulty: Medium
p.123
1.
The Euromonitor provides very industry specific information on companies
in the European Union.
FALSE
Difficulty: Medium
p.123
1.
Useful government sources of information include Business Source
Complete and Mergent.
FALSE
Difficulty: Medium
p.124
1.
International entrepreneurship is the process of an entrepreneur
conducting business activities across national boundaries.
TRUE
Difficulty: Easy
p.125
1.
International entrepreneurial decisions are more complex than domestic
decisions due to uncontrollable factors such as economic development and stage
of economic development.
TRUE
Difficulty: Medium
p.126
1.
Entrepreneurs doing business in the former U.S.S.R. should be aware that
barter, or third-party arrangements, are commonplace.
TRUE
Difficulty: Medium
p.127
1.
The laws governing business arrangements have been standardized over
150 international legal systems.
FALSE
Difficulty: Medium
p.127
1.
Only the pricing element in the business strategy of an international
entrepreneur has the potential to be affected by the multiplicity of legal
environments.
FALSE
Difficulty: Medium
p.127
1.
Transfer risk is the risk in attempting to shift assets or other funds out of
the country.
TRUE
Difficulty: Easy
p.128
1.
Three major types of political risks that might be present are operating
risk, transfer risk, and ownership risk.
TRUE
Difficulty: Hard
p.128
1.
Contract law varies significantly from country to country, in part reflecting
the two types of legal tradition—commercial law and civil law.
FALSE
Difficulty: Medium
p.128
1.
If the legal system of the country the global entrepreneur is dealing with
does not have a good track record, it is not possible for the contract to contain
any agreement that contract disputes will be heard in the courts of a different
country or home country.
FALSE
Difficulty: Hard
p.128-129
1.
For a global entrepreneur, technological environment variations are
minimal since firms produce mostly standardized, relatively uniform products that
can be sorted to meet industry standards.
FALSE
Difficulty: Hard
p.129
1.
Culture encompasses a wide variety of elements, including language,
social structure,
religion, political philosophy, economic philosophy, education, and manners and
customs.
TRUE
Difficulty: Medium
p.130
1.
Nonverbal or hidden language of the culture can be thought of in terms of
several components – time, intangible value, and business relationships.
FALSE
Difficulty: Medium
p.131
1.
Reference groups in any culture provide values and attitudes that
influence behavior.
TRUE
Difficulty: Medium
p.132
1.
Gifts related to business proceedings are illegal in most other countries
and should not be offered to foreign business partners.
FALSE
Difficulty: Easy
p.133
1.
Profits and tax benefits are common motivations for going global.
TRUE
Difficulty: Medium
p.134
1.
For a U.S.-based entrepreneurial firm, the 75 percent of the world’s
population living outside the United States offers a very large market opportunity.
FALSE
Difficulty: Medium
p.134
1.
In selecting a foreign market the selection decision should be based on
both past sales and competitive positioning as well as an assessment of each
foreign market alternative.
TRUE
Difficulty: Medium
p.136
1.
When researching foreign markets, the entrepreneur will usually want data
such as population, GDP, per capita income, inflation rate, literacy rate,
unemployment, and education levels.
TRUE
Difficulty: Medium
p.137
1.
There are three general classifications for exporting; direct, indirect and
third-party.
FALSE
Difficulty: Medium
p.139
1.
A disadvantage of using licensing as an entry strategy for a foreign market
is the high amount of risk involved.
FALSE
Difficulty: Medium
p.140
1.
A nonequity arrangement is a method by which an entrepreneur can enter
a market and obtain sales and profits without direct equity investment in the
foreign market.
TRUE
Difficulty: Medium
p.140
1.
Nonequity arrangements discussed by the text include licensing,
management projects and exporting.
FALSE
Difficulty: Medium
p.140
1.
A vertical merger is the combination of two firms that produce one or more
of the same or closely related products in the same geographical area.
FALSE
Difficulty: Medium
p.142
1.
32. A product extension merger occurs when acquiring and acquired
companies have related
production and/or distribution activities but do not have products that compete directly
with each other.
TRUE
Difficulty: Medium
p.143
1.
33.The General Agreement on Tariffs and Trade is an attempt to impose
significant tariffs on business between nations.
FALSE
Difficulty: Medium
p.144
1.
The objectives of the General Agreement on Tariffs and Trade was to
liberalize trade by eliminating or reducing tariffs.
TRUE
Difficulty: Medium
p.144
1.
The North American Free Trade Agreement (NAFTA) increases trade
barriers and quotas among the U.S., Canada, and Mexico.
FALSE
Difficulty: Easy
p.145
Multiple Choice Questions
1.
An opportunity assessment plan:
A.is the same thing as a business plan.
B. is longer than a business plan.
C. has a lot of computer-based spreadsheets.
D. focuses on the opportunity, not the venture.
Difficulty: Medium
p.121
1.
All of the following are questions an opportunity assessment plan might
answer except:
A.How much capital do I need?
B. What market need does it fill?
C. What business skills do I have?
D. Can a patent be obtained?
Difficulty: Hard
p.121-122
1.
______ is a nonprofit organization that provides free online and in-person
assistance to entreprenuers in the form of training, consulting and mentoring
provided mainly by retired executives and entreprenuers.
A. CSBC
B. NAICS
C. SCORE
D. SIC
Difficulty: Medium
p.122
1.
____ and _____ are both government sources of information that might be
helpful in gathering the information needed to start a business.
A.Mergent and The Industrial monitor
B. NAICS and SIC codes
C. Business Source Complete and Small Business News
D. The Euromonitor and Business Source Complete
Difficulty: Medium
p.123-124
1.
______ provides information on industries such as aerospace, energy,
healthcare and defense.
A. Mergent
B. Plunkett
C. Frost and Sullivan
D. Business Source Complete
Difficulty: Hard
p.123
1.
2.
3.
4.
5.
All of the following are government sources of information except:
Census reports
Export/Import Authority
NAICS and SIC
Hoovers
Difficulty: Easy
p.123
1.
_____________ is the process of an entrepreneur conducting business
activities across national borders.
A. Intrapreneurship
B. International entrepreneurship
C. Domestic entrepreneurship
D. Direct importing
Difficulty: Medium
p.125
1.
Concerns regarding roads, electricity, banking facilities, communication,
and educational systems have to do with a country’s:
A.infrastructure.
B. balance of payments.
C. political climate.
D. economics.
Difficulty: Medium
p.127
1.
A country’s _______________ is the difference between the value of a
country’s imports and exports over time.
A.gross national product
B. purchasing power parity
C. current account
D. foreign exchange reserve
Difficulty: Easy
p.127
1.
What term describes the practice of paying for goods indirectly through
another source?
A.Licensing
B. Barter
C. Promotion
D. Exporting
Difficulty: Easy
p.127
1.
Which among the following political risks is considered the biggest risk of
all?
A.Transfer risk
B. Ownership risk
C. Investment risk
D. Operating risk
Difficulty: Hard
p.128
1.
______ is defined as the risk of interference with the operations of the
venture.
A. Transfer risk
B.Ownership risk
C. Investment risk
D. Operating risk
Difficulty: Medium
p.128
1.
Which of the following statement is (are) true?
A.Most countries have laws and court procedures protecting intellectual property
such as those in the United States.
B. Civil laws tend to be relatively nonspecific.
C. Laws of a country regulate the manner in which business transactions are
executed.
D. Global entrepreneurs cannot specify in the contract that any contract disputes
will be heard in the courts of another country.
Difficulty: Medium
p.128
1.
Which of the following is not an aspect of nonverbal or hidden language?
A.Energy
B. Business relationships
C. Space
D. Time
Difficulty: Easy
p.131
1.
It is a practice in some cultures to hug and even kiss when greeting a
known business partner. What aspect of nonverbal language is being referred to
in the above example?
A.Time
B. Business relationship
C. Space
D. Customs
Difficulty: Easy
p.131
1.
Which of the following statements is not true?
A.Religion in a culture defines the ideas for life, reflected in the values and
attitudes of individuals and the overall society.
B. The tenets of nonreligious or secularist societies do not affect behavior.
C. The impact of religion varies depending on the strength of the dominant
religious tenets and their impact on the values and attitudes of the culture.
D. Religion provides the basis for some degree of transcultural similarity under
shared beliefs and attitude.
Difficulty: Medium
p.132-133
1.
Which among the following influences whether customers are able to use
the good or service properly and whether they are able to understand the firm’s
advertising or other promotional messages?
A.Political philosophy
B. Religion
C. Manners and customs
D. Education
Difficulty: Easy
p.133
1.
Motivations for going global, discussed in the text, include all the following
except:
A.cheap shipping costs
B. excess production capacity
C. technological advantage
D. competitive pressures
Difficulty: Medium
p.134
1.
Primary data is:
A.data that has been collected by the private sector.
B. data collected by the government.
C. original information collected by the entrepreneur.
D. data that is hard to find.
Difficulty: Medium
p.137
1.
Exporting:
A.is the least popular method for going global.
B. results in a lack of control over quality.
C. results in an inability to realize location economies.
D. can be direct or indirect.
Difficulty: Medium
p.139
1.
_____ is not considered a nonequity arrangement.
A. Turn-key projects
B. Exporting
C. Licensing
D. Management contracts
Difficulty: Medium
p.140
1.
_____ has the main disadvantages of high transportation costs, trade
barriers, and problems with local marketing agents.
A.Exporting
B. Turn-key projects
C. Licensing
D. Franchising
Difficulty: Medium
p.140
1.
Licensing is best described as:
A. a nonequity method of international business in which an entrepreneur
contracts his or her
management techniques and skills to a (foreign) purchasing company.
1.
a method of doing international business whereby a foreign entrepreneur
supplies the manufacturing technology or infrastructure for a business and then
turns it over to local owners.
2.
a method that involves giving a foreign manufacturer the right to use a
patent, technology, production process, or product in return for the payment of a
royalty.
3.
an equity partnership that involves selling patents to foreign governments.
Difficulty: Easy
p.140-141
1.
A turn-key project is best defined as:
A.a method of doing business whereby a foreign entrepreneur supplies the
manufacturing technology or infrastructure for a business and then turns it over to
local owners
B. giving a foreign manufacturer the right to use a patent in return for the
payment of a royalty
C. a method in which an entrepreneur contracts his or her management
techniques and skills to a (foreign) purchasing company
D. a form of direct foreign investment in which the investing entrepreneur holds a
minority ownership position in the foreign venture
Difficulty: Medium
p.141
1.
A _____ is the joining of two firms in order to form a third company in
which the equity is shared.
A.majority interest
B. joint venture
C. product extension merger
D. minority interest
Difficulty: Medium
p.141
1.
_____ is a type of merger in which acquiring and acquired companies
have related production and/or distribution activities but do not have products that
compete directly with each other.
A.Market extension merger
B. Horizontal merger
C. Product extension merger
D. Vertical merger
Difficulty: Medium
p.143
1.
McDonald’s acquiring its store franchises is an example of what type of
merger?
A.Market extension merger
B. Horizontal merger
C. Product extension merger
D. Vertical merger
Difficulty: Medium
p.143
1.
According to the text, the most prevalent reason for mergers is:
A.taxation.
B. economies of scale.
C. currency fluctuations.
D. to combine complementary resources.
Difficulty: Hard
p.143
1.
Philip Morris acquiring Miller Brewing is an example of what type of
merger?
A.Market extension merger
B. Horizontal merger
C. Product extension merger
D. Vertical merger
Difficulty: Hard
p.143
1.
All of the following is true of the General Agreement on Tariffs and
Trade except:
A.it includes over 100 nations.
B. it reduces tariffs, subsidies, and import quotas.
C. it has extensive authority to enforce trade practices due to its voluntary
membership.
D. it is one of the longest-lasting agreements on trade.
Difficulty: Medium
p.144
1.
The North American Free Trade Agreement (NAFTA) is between which of
the following countries?
A.United States, Brazil, and Canada
B. United States, Mexico, and Brazil
C. United States, Argentina, and Brazil
D. United States, Canada, and Mexico
Difficulty: Medium
p.145
Short Answer/Essay Questions
1.
Explain what the differences are between a business plan and an
opportunity assessment plan.
2.
Shorter
3.
Focuses on the opportunity rather than the venture
4.
No computer-based spreadsheets
5.
Is the basis for whether to act upon an opportunity or wait until another,
better opportunity comes along.
Difficulty: Medium
p.121
1.
Identify and briefly describe the four sections of an opportunity
assessment plan.
The first major section develops the product/service idea, analyzes the competitive
products and companies, and identifies the uniqueness of the idea in terms of its
unique selling propositions.
The second major section of the opportunity assessment plan focuses on the market
—
its size, trends, characteristics, and growth rate.
The third section focuses on the entrepreneur and the management team in terms of
their background, education, skills, and experience.
The final section of the opportunity assessment plan develops a time line indicating
what steps need to be taken to successfully launch the venture and translate the idea
into a
viable business entity.
Difficulty: Medium/Hard depending on detail required by instructor.
p.121-122
1.
Define political risk analysis, and identify and briefly describe the three
major types of political risk.
Political risk analysis – Prior to entering into business in another country, an
assessment of that country’s political policies and its stability
A. Operating risk – risk of interference with the operations of the venture
B. Transfer risk – risk in attempting to shift assets or other funds out of the
country
C. Ownership risk – the largest potential risk, where the country takes over the
venture’s property and employees
Answer will vary.
Difficulty: Medium
p.128
1.
List the seven various aspects of culture.
Social Structure
Religion
Political Philosophy
Economics and Economic Philosophy
Education
Manners and Customs
Language
Difficulty: Hard (ask for less for a medium level of difficulty)
p.132 figure 5.1
1.
Explain the major factors an entrepreneur needs to consider in choosing
the best distribution channel in a foreign country.
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
the overall sales potential
the amount and type of competition,
the cost of the product
the geographical size and density of the country
the investment policies of the country
exchange rates and any controls
the level of political risk
the overall marketing plan
Difficulty: Hard
p.134
1.
What are the major reasons why an entrepreneur would go global?
o
o
o
o
o
o
o
o
o
Profits
Competitive pressures
Unique product(s) or service(s)
Excess production capacity
Declining home country sales
Unique market opportunity
Economies of scale
Technological advantage
Tax benefits
Difficulty: Medium (depending of number of reasons instructor requires)
p.134 table 5.3
73.
(p. 147-149)What is a nonequity arrangement? Define the two major types
of nonequity arrangements: licensing and turn-key projects, and give at least one
advantage and disadvantage for each.
Nonequity arrangement – a method by which an entrepreneur can enter a market
and obtain sales and profits without direct equity investment in the foreign
market.
A. Licensing – involves an entrepreneur who is a manufacturer (licensee) giving a
foreign manufacturer (licensor) the right to use a patent, trademark, technology,
production process, or product in return for the payment of a royalty.
Benefit: Low development costs and risks.
Disadvantages: Lack of control over technology, inability to realize location and
experience curve economies, inability to engage in global strategic coordination.
B. Turn-key projects – A method of doing international business whereby a
foreign entrepreneur supplies the manufacturing technology or infrastructure for a
business and then turns it over to local owners.
Benefits: relatively low risk, ability to earn returns from process technology skills
in countries where FDI is restricted.
Disadvantages: Creation of efficient competitors, lack of long-term market
presence.