Question 1

Which of the following firms is most likely to have an edge over a local entrepreneur in terms of economies of scale?
A) Porky's Pizza: open for 9 months.
B) Kim's Hair and Salon: open for 3 years.
C) Domino's Pizza: open for 15 years.
D) Corn Krib: open for 10 months.
E) Mike's Sports Bar and grill: open for 6 months.

Accepted Answer

Domino's Pizza has been open for 15 years and is a large chain, indicating that they likely have significant economies of scale in terms of purchasing power and distribution. The other options are either relatively new or small businesses, which are less likely to have such advantages.

Question 2

"Scalable business model" refers to the idea that new increased revenues cost less to deliver than current revenues.

Accepted Answer

A scalable business model enables a company to increase its revenues without incurring significant additional costs. This can happen through various means such as automation, digitalization, or leveraging existing resources to reach a wider audience. As a result, incremental increases in revenue can be achieved at a lower cost, making the business more scalable and profitable in the long run.

Question 3

Acquisition is defined as one company purchasing another.

Accepted Answer

Acquisition means acquiring ownership of another company or business by buying its assets or shares. Therefore, the statement is true.

Question 4

Which of the following statements is most logical?
A) A new product always results in being profitable.
B) A new product always results in a loss for the inventing company.
C) If an entrepreneur cannot protect his or her intellectual property related to a new product, then the entrepreneurial firm does not have an advantage in being better than established firms in product development.
D) Entrepreneurial firms are generally more efficient than are established firms.
E) Entrepreneurial firms are generally better at marketing than are established firms.

Accepted Answer

This statement is logical because if an entrepreneur cannot protect their intellectual property, then they may not have a competitive advantage over established firms. This could lead to difficulties in developing and marketing the new product, potentially resulting in a lack of profitability. The other statements are too extreme and do not always hold true in practice.

Question 5

One reason that a new business might not grow is because of limited managerial capacity.

Accepted Answer

Limited managerial capacity can hinder a business's growth because there may not be enough resources or skills to effectively manage and expand the business. This can result in missed opportunities, ineffective decision making, and a lack of strategic planning.

Question 6

One reason for growing a business is that as it grows,average cost per product can go down.

Accepted Answer

It is generally true that as a business grows, it can benefit from economies of scale, which can lower the average cost per product. For example, a larger business may be able to negotiate better prices for raw materials, spread fixed costs over a larger number of products, and achieve greater operational efficiencies. However, this is not always the case, as there are many factors that can affect cost structure and profitability, such as competition, technology, and customer demand.

Question 7

The term "gazelles" refers to companies that are not growing.

Accepted Answer

The term "gazelles" actually refers to fast-growing companies, particularly those with a growth rate of 20% or more annually.

Question 8

Research shows that growth of a new business is always related to long-term financial success.

Accepted Answer

Growth of a new business is not always related to long-term financial success. Many factors, including market conditions, management, product/service relevance, and financial management, contribute to long-term success. Rapid growth can sometimes lead to challenges that harm a business if not managed properly.

Question 9

Growth of a new business might distract it from its original intention.

Accepted Answer

As a business grows and attracts new customers, there may be a tendency to shift focus from the initial purpose or mission in order to cater to these new customers. This can lead to a loss of identity and direction for the business.

Question 10

A larger company might have more financial resources than a smaller one.

Accepted Answer

A larger company typically has more revenue and assets, which gives them more financial resources to invest in growth, research and development, and other initiatives.

Question 11

Founders of new high growth companies tend to be low on self-efficacy.

Accepted Answer

Research has shown that founders of new high growth companies tend to have high levels of self-efficacy, or belief in their ability to succeed. This confidence helps them overcome obstacles and persist through challenges to achieve success.

Question 12

High-growth companies are more likely to get involved in relationships with other companies than are low-growth companies.

Accepted Answer

High-growth companies are more likely to collaborate with other companies to expand their market presence, access new technologies or resources, and accelerate growth. Conversely, low-growth companies may have limited resources and be less inclined to pursue such partnerships.

Question 13

An acquisition occurs when two companies join together by mutual agreement.

Accepted Answer

An acquisition occurs when one company purchases another company, not necessarily by mutual agreement.

Question 14

A merger is a form of an internal strategy.

Accepted Answer

A merger is considered an external strategy because it involves combining with another company, rather than focusing on internal growth or improvements.

Question 15

Normally,founders of high growth companies show a high passion for their work and their companies.

Accepted Answer

Founders of high growth companies are often driven by a strong passion for their work and their companies, as they are typically the driving force behind the company's success and growth.

Question 16

High growth companies tend to not set specific goals for growth;growth tends to just happen.

Accepted Answer

High growth companies often have very specific goals and strategies in place to facilitate their growth. They may use metrics to measure progress towards their goals and adjust their strategies as needed to achieve their desired level of growth.

Question 17

Because of economies of scale,established firms can produce products at lower per unit costs than can new firms.

Accepted Answer

Established firms have already invested in infrastructure, equipment, and have developed efficient production and distribution systems. This allows them to produce products at a larger scale and therefore benefit from lower per-unit costs. New firms will have to invest in these areas and may not be able to achieve the same level of efficiency initially.

Question 18

High-growth companies have been shown to be more associated with practices that meet customers' needs than low-growth companies.

Accepted Answer

Research has found that high-growth companies tend to have a stronger customer focus and are more innovative in meeting customer needs, which contributes to their success.

Question 19

Given a certain level of fixed costs,if more sales are made,the average fixed cost per product will decrease.

Accepted Answer

Fixed costs are spread out over a larger number of units when more sales are made, which lowers the average fixed cost per product.

Question 20

High-growth companies probably are more selective in hiring than are low-growth companies.

Accepted Answer

High-growth companies usually have higher standards for their employees because they need top talent to keep up with their rapid growth and succeed in the competitive market. They prioritize hiring individuals with a proven track record of success, relevant experience, and a strong work ethic. Low-growth companies may not have the same urgency to hire only the best candidates.

Quiz 11: Preparing For And Attaining Growth: Strategies For Building Lasting Success

Which of the following firms is most likely to have an edge over a local entrepreneur in terms of economies of scale?