Question 1

________ keeps an entrepreneur from leaving the business.
A)Exit barrier
B)Exit strategy
C)Exit restrictions
D)None of these

Accepted Answer

Exit barrier refers to any obstacle or cost that prevents an entrepreneur from leaving their business. Examples of exit barriers include high debt obligations, contracts that prohibit transferring ownership, and personal guarantees. By making it difficult to exit the business, these barriers can make entrepreneurs feel locked in and committed to the success of the business.

Question 2

A tool to better understand competitors and their capabilities is
A)competitive map.
B)deficit analysis.
C)benchmarking.
D)resource-based analysis.

Accepted Answer

A competitive map is a visual representation of a company's competitive environment that plots the position of competitors based on their capabilities and offerings. It helps in identifying strengths and weaknesses of competitors, and also helps in comparing a company's products or services with those of its competitors. Therefore, it is an effective tool to better understand competitors and their capabilities. The other options (deficit analysis, benchmarking and resource-based analysis) are also useful in analyzing competitors, but they are not specifically designed for this purpose.

Question 3

A(n)________ is an analytical tool to organize information about direct competitors on all points of competition.
A)analysis gap
B)competitive map
C)completion map
D)deficient map

Accepted Answer

Competitive map is a tool used to analyze and organize information about direct competitors on all points of competition such as price, quality, features, and customer service. It helps businesses to identify their strengths and weaknesses compared to their competitors and to develop effective strategies to improve their market position. Options A, C, and D are not relevant to the context.

Question 4

In the context of conducting an external analysis, which of the following steps should an entrepreneur take next after identifying and researching competitors within an industry?
A)Develop an understanding of one's own competitive edge.
B)Examine and develop insights about benchmarking.
C)Examine and develop insights about elasticity of demand.
D)Draw a set of competitive maps.

Accepted Answer

Drawing a set of competitive maps is a logical next step after identifying and researching competitors within an industry. This helps in visualizing the competitive landscape, understanding where one's business stands in comparison to others, and identifying strategic opportunities or threats.

Question 5

A(n)________ exists if the service or product performs a similar function.
A)trade-in
B)substitute
C)elasticity of demand
D)product/service flexibility

Accepted Answer

A substitute is a product or service that can serve as a viable alternative to another product or service in meeting the same consumer need.

Question 6

A(n)________ is an analytical tool to organize information about direct competitors on all points of competition.
A)It is less expensive.
B)It helps in developing insights regarding pricing.
C)It provides knowledge about each competitor and allows the entrepreneur to better position the new business.
D)All of these.

Accepted Answer

A competitive analysis is a tool used by entrepreneurs to organize information about direct competitors on all points of competition. It is less expensive than conducting expensive research and also helps in developing insights regarding pricing. It provides knowledge about each competitor and allows the entrepreneur to better position the new business. Therefore, all of these options are true.

Question 7

A substitute can assist in forming a(n)________ on the price that can be charged for product or service.
A)elastic demand
B)schedule
C)competitive map
D)ceiling

Accepted Answer

A substitute can create a limit or "ceiling" on the price that can be charged for a product or service because consumers can opt for the substitute if the price of the original product becomes too high.

Question 8

Mark is setting up his new business.He has defined the industry in which he is competing and has also defined his customers.In the context of conducting an external analysis, which of the following should be Mark's next step?
A)Mark should examine and develop insights about substitutes.
B)Mark should draw a set of competitive maps.
C)Mark should research the industry.
D)Mark should develop an understanding of his competitive advantage.

Accepted Answer

The next step for Mark should be to research the industry he is competing in. This would involve understanding the market size, growth potential, major players, trends and drivers in the industry. This information would then assist him in identifying the opportunities and challenges in the industry and developing a strategy accordingly. Examining substitutes, drawing competitive maps, and developing an understanding of competitive advantage are steps that would come later in the analysis process.

Question 9

An entrepreneur cannot leave his or her business because of the amount of money that was invested.This is called a(n)________.
A)harvest plan
B)exit strategy
C)benchmarking
D)exit barrier

Accepted Answer

An exit barrier is a factor that prevents an entrepreneur from leaving their business, such as the amount of money that was invested. Harvest plan refers to a strategy for ending a business or project and realizing its value, benchmarking is a process of comparing one's business practices to industry best practices, and exit strategy refers to a plan for leaving a business, which may or may not involve selling the business or passing it on to a successor. While exit strategy might be related to leaving the business, it is not specific enough to describe the scenario of an entrepreneur being unable to leave because of financial investment.

Question 10

When completing a conceptual map, an entrepreneur needs to visit ________ of the potential competitors.
A)50 percent
B)60 percent
C)75 percent
D)100 percent

Accepted Answer

When completing a conceptual map, an entrepreneur needs to visit 100 percent of the potential competitors to gain a comprehensive understanding of the market and identify any gaps or opportunities for their business. Visiting less than 100 percent may result in missing out on important information or potential competitors.

Question 11

In developing a competitive map, an owner should review
A)population of the area.
B)household income.
C)average number of customers per hour.
D)all of these.

Accepted Answer

In order to develop a comprehensive competitive map, it is important to review all factors that could impact the success of the business. This includes the population of the area, household income, and average number of customers per hour. By analyzing these factors, an owner can gain insight into the potential demand for their product or service and identify any potential competitors in the area.

Question 12

When small businesses compete with large firms, a main disadvantage is
A)analyzing unusual or unique competitive factors.
B)operating at a cost level.
C)lacking flexibility.
D)reaching break-even point quicker.

Accepted Answer

Small businesses often struggle to compete with large firms on cost levels due to economies of scale that larger companies benefit from, making it more challenging for small businesses to offer competitive pricing or absorb lower profit margins.

Question 13

The ability to exit a business relatively easily
A)tends to limit the intensity of competition in the industry.
B)increases the threat posed by a new entry.
C)makes it difficult for an entrepreneur to recoup the initial investment.
D)encourages entrepreneurs to use predatory pricing in order to survive.

Accepted Answer

The ability to exit a business relatively easily reduces the barriers to exit, which tends to limit the intensity of competition in the industry. This is because businesses that are struggling or not making a profit can easily exit the market, removing excess capacity and reducing competition.

Question 14

Larry has set up a new burger joint in his hometown.He has obtained information about who will most likely be customers at his joint.Because his joint is located near a college, he knows that a majority of his customers are going to be students.In the context of the critical steps involved in conducting an external analysis, which of the following should be Larry's next step?
A)Larry should start developing an understanding of his competitive advantage.
B)Larry should gain thorough information about the elasticity of demand for his product.
C)Larry should develop insights about benchmarking.
D)Larry should conduct research to know his exact competitors.

Accepted Answer

Conducting research to know his exact competitors should be Larry's next step. This information will help Larry to understand the market and competitive landscape in which he will operate. With this information, Larry can adjust his strategy to better understand how he can differentiate himself from his competitors and gain market share.

Question 15

Fragmented markets have
A)few potential competitors.
B)many potential customers.
C)no clear dominant competitors.
D)clear dominant competitors.

Accepted Answer

Fragmented markets have no clear dominant competitors, meaning that the market is divided among many smaller players without one dominant company controlling a majority of the market share. While there may still be many potential customers and potential competitors, the lack of a clear dominant player is the defining characteristic of a fragmented market.

Question 16

Which of the following is likely to occur if entrepreneurs fail to define a radius from which they believe their business will draw a majority of its customers?
A)It will distort the entrepreneur's advertising efforts.
B)It will dramatically reduce the entrepreneur's costs.
C)It will be easier for the entrepreneur to identify direct and indirect competition.
D)It will force the entrepreneur to forego business unnecessarily.

Accepted Answer

If entrepreneurs fail to define a radius from which they believe their business will draw a majority of its customers, it will distort the entrepreneur's advertising efforts. Without a defined radius, the entrepreneur may overspend on advertising to an audience that will never become customers or underspend on advertising to those within the target radius. This can result in wasted resources and ineffective advertising campaigns.

Question 17

Competitors will often ________ their knowledge if your business is not a potential direct competitor.
A)share
B)not share
C)hide
D)distort

Accepted Answer

Competitors are more likely to share their knowledge if they do not see your business as a potential direct threat. This can lead to mutually beneficial relationships and collaborations.

Question 18

Which of the following is an example of the list of items that an entrepreneur should include while visiting and making comparisons to his-her potential competitors?
A)Access from road
B)Size of the facility
C)Nearby attraction for customers
D)All of these

Accepted Answer

All of the listed items (access from road, size of facility, nearby attraction for customers) are important factors for an entrepreneur to consider when visiting and making comparisons to potential competitors. Access from road affects visibility and ease of customer access, the size of the facility affects available resources and customer capacity, and nearby attractions can impact customer traffic and potential appeal. Therefore, all of these items should be included in the entrepreneur's list of considerations.

Question 19

_____ is working with and learning from a company outside of your industry that has a skill that is critical to the firm's operation.
A)Fragmenting
B)Substitute-based
C)Benchmarking
D)Tag lines

Accepted Answer

Benchmarking is the process of comparing one's business processes and performance metrics to a similar type of business or industry leader. It helps in identifying best practices and opportunities for improvement. Therefore, learning from a company outside of your industry that has a critical skill can be seen as a form of benchmarking.

Question 20

According to the book, which of the following is an example of an economic issue that a new business should consider?
A)Industry trends
B)Case of entry/exit
C)Elasticity of demand
D)All of these

Accepted Answer

All of these options are economic issues that a new business should consider. Industry trends can help a business identify potential opportunities or threats in the market, case of entry/exit can help a business understand the level of competition in the industry, and elasticity of demand can help a business determine the optimal pricing strategy for its products or services.

Quiz 4: External Analysis

________ keeps an entrepreneur from leaving the business.

A tool to better understand competitors and their capabilities is

A(n) ________ is an analytical tool to organize information about direct competitors on all points of competition.

In the context of conducting an external analysis, which of the following steps should an entrepreneur take next after identifying and researching competitors within an industry?

A(n) ________ exists if the service or product performs a similar function.

A(n) ________ is an analytical tool to organize information about direct competitors on all points of competition.

A substitute can assist in forming a(n) ________ on the price that can be charged for product or service.

Mark is setting up his new business.He has defined the industry in which he is competing and has also defined his customers.In the context of conducting an external analysis, which of the following should be Mark's next step?

An entrepreneur cannot leave his or her business because of the amount of money that was invested.This is called a(n) ________.

When completing a conceptual map, an entrepreneur needs to visit ________ of the potential competitors.

In developing a competitive map, an owner should review

When small businesses compete with large firms, a main disadvantage is

The ability to exit a business relatively easily

Fragmented markets have

Which of the following is likely to occur if entrepreneurs fail to define a radius from which they believe their business will draw a majority of its customers?

Competitors will often ________ their knowledge if your business is not a potential direct competitor.

Which of the following is an example of the list of items that an entrepreneur should include while visiting and making comparisons to his-her potential competitors?

_____ is working with and learning from a company outside of your industry that has a skill that is critical to the firm's operation.

According to the book, which of the following is an example of an economic issue that a new business should consider?