Deck 8: Entrepreneurial Strategy and Competitive Dynamics

Question 1

As investors, venture capitalists rarely provide any help or services to entrepreneurial firms other than financing.

Answer 1

False
Explanation: Venture capitalists nearly always have high performance expectations from the companies they invest in, but they also provide important managerial advice and links to key contacts in an industry.

Question 2

To obtain venture capital financing, business founders rarely have to give up some ownership and control of their business.

Answer 2

False
Explanation: Venture capital is a form of private equity financing through which entrepreneurs raise money by selling shares in the new venture.

Question 3

Founders using a pioneering new entry strategy look for opportunities to capitalize on proven market successes.

Answer 3

False
Explanation: An imitative new entry strategy is used by entrepreneurs when they look for opportunities to capitalize on proven market successes. New entrants with a radical new product or highly innovative service may change the way business is conducted in an industry. This kind of breakthrough, creating new ways to solve old problems or meeting customer needs in a unique new way, is referred to as a pioneering new entry.

Question 4

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.

Question 5

The evaluation phase of opportunity recognition occurs when an entrepreneur has an insight about a new business venture, often based on prior knowledge.

Question 6

Angel investors are always public institutions which provide seed capital to young ventures.

Question 7

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.

Question 8

Venture capital is a form of public equity financing used to help young firms grow rapidly.

Question 9

Adaptive new entry involves offering a radical new product or highly innovative service.

Question 10

Opportunity recognition involves two phases of activity: discovery and execution.

Question 11

Most entrepreneurial firms first seek financing from venture capitalists in order to begin activity.

Question 12

An entry wedge, according to the text, is a type of entrepreneurial strategy firms can use to enter into business.

Question 13

Angel investors are private individuals who provide equity investments for seed capital during the later stages of a new venture.

Question 14

The majority of entrepreneurial start-ups are financed with angel financing.

Question 15

Venture capitalists and angel investors regard the management team as the most important asset of an entrepreneurial venture.

Question 16

Entrepreneurship refers to new value creation and can include activities in major corporations.

Question 17

Venture capital funding for entrepreneurial ventures is usually available only after the start-up has become a going concern and established a track record.

Question 18

Small Business Administration and government regulations prohibit small businesses from bidding on government contracts.

Question 19

Opportunity recognition is the process of identifying and selecting Entrepreneurial opportunities. It does not involve the development of those ideas.

Question 20

Small businesses create the majority of new jobs in the U.S. economy.

Question 21

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.

Question 22

The success of an adaptive new entrant can be limited, if the value proposition is perceived as being unique.

Question 23

Entrepreneurial firms are often in a strong position to use combination strategies, because they have the flexibility to approach situations uniquely.

Question 24

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.

Question 25

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.

Question 26

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.

Question 27

Because new ventures typically are small, they usually do not have high economies of scale relative to competitors.

Question 28

Several arena factors make it more difficult for new ventures to be successful as differentiators. Examples include innovation, technology, customer service, and distinctive branding.

Question 29

A focus strategy must not include elements of differentiation and overall cost leadership in order to be successful.

Question 30

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.

Question 31

Tuft and Needle is a low-cost bed mattress manufacturer that finds it difficult to overcome competition using an overall cost leadership strategy.

Question 32

Once an adaptive entrant has achieved initial success, the company is safe from copycat competition.

Question 33

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.

Question 34

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.

Question 35

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.

Question 36

To be successful within a market niche, the key strategic requirement is to have a good differentiation strategy.

Question 37

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.

Question 38

Entrepreneurial competitive dynamics refers to a cycle of actions and responses between firms competing for the same customers.

Question 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.

Question 40

Few start-ups enter industries that are mature.

Question 41

New entry is among the most common reasons why a cycle of competitive actions and reactions gets started among similar competitors.

Question 42

Forbearance is a particularly aggressive type of competitive attack.

Question 43

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.

Question 44

Refinements or extensions of existing strategies are often referred to as tactical actions.

Question 45

Competitive dynamics of the rivalry among similar competitors can alter company strategy.

Question 46

When attacked, older and larger firms tend to respond more quickly, but their responses are often more predictable.

Question 47

The cycle of actions and reactions that occur in daily business leads to new value creation and ongoing advancement of economic well-being.

Question 48

Cutting prices or increasing marketing efforts are examples of tactical competitive actions.

Question 49

According to the text, for an entrepreneurial start-up to be successful, three ingredients are critical. What are they?

A)good ideas, a team of investors, and a business plan
B)a viable opportunity, available resources, and a qualified and motivated founding team
C)an opportunity, a marketing plan, and office space
D)management, marketing, and money

Question 50

New entry into markets, whether by start-ups or by incumbent firms, rarely threatens existing competitors.

Question 51

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.

Question 52

Generally speaking, the opportunity recognition process consists of two phases of activity. They are ______________ and _____________.

A)global search; recycling profits
B)value creation; affordability
C)global search; valuation
D)discovery; evaluation

Question 53

Which of the following is not a common source of new business opportunities?

A)current or past work experiences
B)suggestions by family or friends
C)chance event
D)future work

Question 54

Hollywood cooperation is responsible for saving some of the Kodak film manufacturing business, because the studios agreed to cooperate on buying movie film.

Question 55

Colgate-Palmolive, Unilever, Proctor and Gamble, and Henkel cooperated legally when they agreed to prearranged prices at which they would sell to retailers.

Question 56

Market commonality is the extent to which rivals draw from the same types of resources.

Question 57

Swedish breweries cooperate in recycling used bottles and therefore have no way to differentiate their offers in the minds of the customer.

Question 58

Co-opetition, where competitors work together behind the scenes, is a form of illegal tacit collusion.

Question 59

In the context of competitive dynamics, tactical actions involve major commitments of distinctive and specific resources to strategic initiatives.

Question 60

The process of identifying, selecting, and developing new venture opportunities is known as

A)innovativeness.
B)bootstrapping.
C)opportunity recognition.
D)brainstorming.

Question 61

Which of the following is the most important resource for a start-up activity?

A)social recognition
B)land
C)personnel
D)money

Question 62

The U.S. Small Business Administration supports small business through all of the following except

A)government contracting.
B)investing venture capital.
C)underwriting loans.
D)training and counseling.

Question 63

According to a study by the Kaufmann Foundation, which of the following is the largest source of funding for businesses that have been operating at least five years?

A)public financing
B)venture capital
C)loans
D)angel financing

Question 64

Opportunities can be found through a structured search process. The example of Ancient Ales with their innovative line of craft beers demonstrates which of the following types of structured search?

A)Identify frustrations with current products or processes.
B)Talk to people who know including suppliers, customers, frontline employees.
C)Borrow ideas from other markets.
D)Find historical ideas and re-purpose them.

Question 65

When launching a new venture, finding a way to begin doing business must ___________ generate cash flow, build credibility, attract good employees, and overcome the liability of newness.

A)slowly
B)quickly
C)steadily
D)painlessly

Question 66

The first personal computer revolutionized computing and how business is conducted. It was using a(n) ______________ entry strategy.

A)imitative
B)pioneering
C)adaptive
D)creative

Question 67

Seeking products or services that have been successful in one market and introducing the same basic product or service in another segment of the market is referred to as _____________ new entry.

A)adaptive
B)imitative
C)proactive
D)pioneering

Question 68

Which of the following terms is used to refer to opportunities that are practical and physically possible?

A)durable
B)valuable
C)sustainable
D)achievable

Question 69

Which of the following statements about venture capital is not true?

A)Entrepreneurs raise venture capital by selling shares of ownership in their business.
B)Venture capital groups can often provide helpful management advice.
C)Venture capital is used to finance rapid growth or large capital expenditures.
D)Venture capital is a form of public equity financing.

Question 70

The new entry strategy that a firm chooses is dependent upon the ______________ and the ______________ of the new business concept.

A)riskiness; cost
B)riskiness; potential sales
C)riskiness; innovativeness
D)idea; innovativeness

Question 71

The majority of entrepreneurial start-ups are financed through monies from

A)bank financing.
B)SBA loans.
C)personal savings and the contributions of family and friends.
D)venture-capital financing.

Question 72

Which of the following is not a primary source of financing for entrepreneurial start-ups?

A)investments by family and friends
B)public equity
C)private investors
D)personal savings

Question 73

Which of the following is NOT one of the three characteristics of entrepreneurial leadership mentioned by the text?

A)clarifying job responsibilities
B)dedication and drive
C)commitment to excellence
D)vision

Question 74

Private individuals who provide seed capital to young ventures are known as

A)gazelles.
B)angels.
C)cash cows.
D)rising stars.

Question 75

Vision is an important element of entrepreneurial leadership because

A)a vision statement is part of the documentation used to obtain venture financing.
B)the entrepreneur has to envision realities that do not yet exist.
C)organizations cannot function without a detailed and operational vision.
D)banking institutions require it.

Question 76

______________ provide(s) a key avenue for growth for many young and small firms through partnering to obtain resources and to expand into new markets.

A)Strategic alliances
B)Funding
C)Banking
D)Research and development

Question 77

According to the text, new ventures launched by entrepreneurial teams are more likely to be successful than ventures launched by

A)established corporations.
B)lone wolf entrepreneurs.
C)bootstraps.
D)individual investors.

Question 78

Which of the following is NOT one of the characteristics of an entrepreneurial opportunity?

A)affordable
B)attractive
C)achievable
D)value creating

Question 79

According to the textbook, which of the following is NOT a common new entry strategy?

A)imitative new entry
B)adaptive new entry
C)pioneering new entry
D)proactive new entry

Question 80

When an opportunity is attractive long enough for it to be successfully developed and deployed, it is said to be

A)value creating.
B)durable.
C)achievable.
D)affordable.