Question 1

Maintaining trade secrets is one way to protect a company's competitive advantage.

Accepted Answer

Trade secrets consist of information that is not known to the public and that a company takes steps to protect in order to maintain its competitive advantage, such as recipes, processes, and methods.

Question 2

Franchising speeds growth, but lowers a company's revenue overall.

Accepted Answer

Franchising can speed up growth and expand a company's market presence without the need for the company to invest its own capital for expansion, potentially increasing overall revenue through franchise fees and ongoing royalties.

Question 3

Outsourcing is a powerful tool that can reduce a venture's upfront fixed costs.

Accepted Answer

Outsourcing allows a venture to pay for services and functions on an as-needed basis rather than investing in the infrastructure and personnel to perform those functions in-house, thereby reducing upfront fixed costs.

Question 4

In a Freemium business model, your COGS for free offerings can be viewed as a marketing expense.

Accepted Answer

In a Freemium business model, the cost of goods sold (COGS) for free offerings is often considered a marketing expense because it is the cost incurred to attract and engage potential paying customers.

Question 5

Developing a market test schedule can not only guide your learning, but it can also help you better understand when, how and how much it will cost to meet the next milestone.

Accepted Answer

Developing a market test schedule allows for the planning and organization of testing phases, helping to outline the timing, methods, and budget required to achieve each milestone in the product development or market entry process. This structured approach facilitates a deeper understanding of the necessary steps and resources needed to progress.

Question 6

By merging different revenue sources into as few categories as possible, you make your business model more comprehensive.

Accepted Answer

Merging different revenue sources into as few categories as possible can oversimplify your business model, potentially obscuring important distinctions between revenue streams and hindering effective analysis and decision-making.

Question 7

Non-profit organizations do not need revenue to operate.

Accepted Answer

Non-profit organizations still need revenue to cover their operational costs, such as salaries, rent, and utilities, even though they do not seek to make a profit for shareholders.

Question 8

Hiring a corporate lifer who is used to working in one functional area and has experience with comprehensive administrative support is always the right strategy for a startup firm.

Accepted Answer

Startups often require employees to wear multiple hats and adapt quickly to changing roles and responsibilities, which might not align with the skill set and experience of someone who has worked in a single functional area with a focus on administrative support.

Question 9

Companies should not outsource an activity if it is critical to its competitive advantage.

Accepted Answer

Outsourcing activities critical to a company's competitive advantage can risk diluting that advantage, as it involves sharing sensitive information and relying on external parties for core competencies.

Question 10

Certain stages of the "initial market test" can be cheap or even free.

Accepted Answer

Initial market tests can include low-cost or free methods such as surveys, focus groups, and social media polls to gauge consumer interest and feedback before a full-scale launch.

Question 11

Entrepreneurs who claim that they "do not have competition" do not truly understand the nature of their business.

Accepted Answer

Even if a product or service appears unique, there is always competition in the broader sense, including alternative solutions that customers might consider. Understanding this is crucial for accurately assessing market dynamics and strategic positioning.

Question 12

The more products you sell through your distribution channels, the greater your negotiating power.

Accepted Answer

Selling more products through your distribution channels typically increases your volume, making you a more valuable partner to distributors. This increased value can give you greater leverage in negotiations, potentially leading to better terms, pricing, or priority over competitors.

Question 13

Today's most successful companies identified a viable business model before they developed their product.

Accepted Answer

Many of today's most successful companies iterated on their business models after developing their initial product, often pivoting based on market feedback or technological opportunities.

Question 14

The primary purpose of outsourcing is to increase net margins.

Accepted Answer

The primary purpose of outsourcing is to reduce costs, improve efficiency, and allow companies to focus on core activities, which may indirectly lead to increased net margins.

Question 15

A strategy that attempts to capture the first-mover's advantage is usually the most inexpensive.

Accepted Answer

Attempting to capture the first-mover advantage often involves significant investment in research and development, marketing, and infrastructure setup, making it not necessarily the most inexpensive strategy.

Question 16

COGS is a cost measure that applies to companies that manufacture tangible products; COGS cannot be computed for firms that deal exclusively in a service-based revenue model.

Accepted Answer

COGS, or Cost of Goods Sold, primarily applies to companies that manufacture or sell tangible products, but service-based companies can also have COGS, which in their case might include direct costs related to delivering a service, such as labor, materials, and overhead directly tied to service provision.

Question 17

Amazon uses a "long-tail" business model.

Accepted Answer

Amazon's business model capitalizes on the long-tail concept by offering a vast selection of products, including niche items not widely available elsewhere, thus catering to a wide range of customer interests and demands.

Question 18

If you do not fully understand your revenue drivers, you cannot achieve the highest success.

Accepted Answer

Understanding your revenue drivers is crucial for identifying the most effective ways to increase income, optimize operations, and ultimately achieve the highest level of success in any business.

Question 19

Entrepreneurs benefit from developing and following a coherent geographic expansion strategy.

Accepted Answer

A coherent geographic expansion strategy helps entrepreneurs to systematically enter new markets, manage risks, and allocate resources efficiently, leading to sustainable growth and competitive advantage.

Question 20

It is better to formulate the organizational culture after your company begins to grow, rather than at the company's inception.

Accepted Answer

Organizational culture is fundamental from the inception of a company as it guides behaviors, decisions, and practices from the start, influencing the company's growth trajectory and success. Establishing a strong culture early helps in attracting the right talent, maintaining consistency, and shaping the company's identity and values.

Quiz 5: Understanding Your Business Model and Developing Your Strategy