Question 1

Maureen Kimble owns a firm that sells products to the auto, aerospace, and defense industries. Maureen is currently evaluating a set of opportunities that he feels his firm is capable of pursuing. According to the textbook, Maureen is evaluating his firm's:
A) prolific potential
B) dynamic opportunity options
C) productive opportunity set
D) passionate opportunity set
E) creative field of potential

Accepted Answer

Maureen is evaluating a set of opportunities, which indicates that he is assessing his firm's productive opportunity set. This refers to the range of opportunities that are available to a firm based on its expertise, resources, and capabilities.

Question 2

Emily Wills owns a commercial printing company. Emily has more business than she wants, in fact, she is presently turning away exciting new business opportunities because it is expensive to hire new employees, and she knows that if she did hire new employees it would take time for the new employees to be trained and to be socialized into the culture of her firm. Emily's inability to take advantage of the new business opportunities that are coming her way is due largely to the:
A) business aptitude problem
B) entrepreneurial aptitude problem
C) commercial opportunity problem
D) business capacity problem
E) managerial capacity problem

Accepted Answer

The answer of Emily Wills owns a commercial printing company....

Question 3

According to the textbook, a well-managed business that finds its products and services are mature often:
A) replaces its board of directors to breathe new life into the firm
B) looks for licensing opportunities
C) looks for partnering or acquisition opportunities to breathe new life into the firm
D) looks for new managerial talent to breathe new life into the firm
E) looks for international business opportunities

Accepted Answer

When a business finds its products and services are mature, it means that they have reached their peak and are no longer growing. Therefore, the best choice is to look for partnering or acquisition opportunities to breathe new life into the firm by expanding the business, offering new products, and finding new markets. This can help the company to stay competitive and sustain growth. Looking for licensing opportunities, replacing the board of directors, and finding new managerial talent may not necessarily create substantial growth or revitalization. International business opportunities may be a viable option but may not be the best choice since it may require significant investments and resources, and success may not be guaranteed.

Question 4

According to Penrose, ________ generate new market, product and service ideas, while ________ administer the routine functions of the firm and facilitate the profitable execution of new opportunities.
A) managerial services, entrepreneurial services
B) administrative services, business services
C) entrepreneurial services, managerial services
D) business services, commercial services
E) commercial services, administrative services

Accepted Answer

Penrose identifies two types of services: entrepreneurial services, which generate new market, product, and service ideas, and managerial services, which administer routine functions of the firm and facilitate the profitable execution of new opportunities. Therefore, the best choice is C, which matches these two types of services to their respective functions.

Question 5

When a firm's managerial resources are insufficient to take advantage of its new product and service opportunities, the subsequent bottleneck is referred to as the:
A) commercial capacity problem
B) entrepreneurial aptitude problem
C) managerial capacity problem
D) business capacity problem
E) business aptitude problem

Accepted Answer

The question specifically mentions "managerial resources" and "new product and service opportunities," indicating a need for capable management to handle these opportunities. Choice C refers directly to a "managerial capacity problem," which fits the scenario presented in the question. A, B, D, and E do not accurately describe the situation presented.

Question 6

Megan owns a company that makes specialized components for the auto industry. Her most important customer is a company that is growing at a rate of 25% per year. Megan is working hard to grow her firm, because she knows that unless her company continually grows it will not be able to keep pace with the growth of its most important customer. This examples illustrates the reason for growth referred to as:
A) capturing economies of scope
B) executing a scalable business model
C) market leadership
D) influence, power, and survivability
E) need to accommodate the growth of key customer

Accepted Answer

The reason for growth referred to in the example is the need to accommodate the growth of a key customer. Megan's company needs to grow in order to keep up with the demand from their most important customer, which is growing at a rate of 25% per year. This is an example of the importance of growth for the purposes of meeting customer demand and maintaining customer relationships.

Question 7

The ________ stage of the organizational life cycle is the start-up phase, where a business determines what its core strengths and capabilities are and starts selling its initial product or service.
A) introduction
B) launch
C) ramp-up
D) early growth
E) continuous growth

Accepted Answer

The introduction stage of the organizational life cycle is the startup phase, where a business identifies its core strengths and capabilities and begins selling its initial product or service.

Question 8

The Savvy Entrepreneurial Firm feature in Chapter 13 focuses on Timbuk2, a company that makes urban shoulder bags. The lesson provided by the feature is:
A) its better to have mostly variable costs rather than fixed costs
B) its more important to bag the right customer rather than the biggest one
C) market leadership is the key to a successful growth strategy
D) its important to have a scalable business model
E) continually growing profits is very challenging

Accepted Answer

Its more important to bag the right customer rather than the biggest one

Question 9

Some firms feel that they can better appeal to their customer if they can advertise that they are "the Number 1 firm" in their industry. This sentiment is motivated by the reason for growth labeled:
A) economies of scope
B) need to accommodate the growth of key customer
C) economies of scale
D) market leadership
E) influence, power, and survivability

Accepted Answer

The sentiment of wanting to advertise as "Number 1" in the industry is driven by the need for market leadership, which implies dominance and superiority over competitors. This can give a firm a competitive advantage and attract more customers. It does not necessarily relate to economies of scale or scope, accommodating key customers, or influence or power.

Question 10

The main challenges for a business in the introduction stage of the organizational life cycle is to:
A) beginning the process of transitioning the owner from a hands-on supervisor to a more managerial role and developing business partnerships
B) developing business partnerships and making sure the initial product or service is right
C) determining whether the owner of the business and the current management team is capable of taking the business further and developing systems and procedures
D) developing systems and procedures and beginning the process of transitioning the owner from a hands-on supervisor to a more managerial role
E) make sure the initial product or service is right and start laying the groundwork for building a larger organization

Accepted Answer

In the introduction stage, the focus is on ensuring the initial product or service meets market needs and starting to establish a foundation for future growth.

Question 11

According to Penrose, the set of opportunities a firm feels it is capable of pursuing is referred to as the:
A) creative field of potential
B) productive opportunity set
C) prolific potential
D) passionate opportunity set
E) dynamic opportunity options

Accepted Answer

Penrose refers to the set of opportunities a firm feels it is capable of pursuing as the productive opportunity set.

Question 12

According to the textbook, the toughest decisions regarding business growth are made in the ________ stage of the organizational life cycle.
A) introduction
B) early growth
C) continuous growth
D) maturity
E) decline

Accepted Answer

The answer of According to the textbook, the toughest decisions...

Question 13

The majority of businesses go through a discernable set of stages of growth referred to as the:
A) business rotation cycle
B) business existence cycle
C) organizational sequence
D) business life cycle
E) organizational life cycle

Accepted Answer

The answer of The majority of businesses go through a...

Question 14

The author of the book titled "The Theory of the Growth of the Firm," which is referred to in Chapter 13, is:
A) Gary Hammel
B) Joseph Schumpeter
C) Edith Penrose
D) Michael Porter
E) Tom Peters

Accepted Answer

"The Theory of the Growth of the Firm" was written by Edith Penrose.

Question 15

Which of the following is not one of the five stages in the organizational life cycle?
A) maturity
B) scale
C) decline
D) early growth
E) introduction

Accepted Answer

The five stages in the organizational life cycle are introduction, early growth, maturity, decline, and death/renewal. "Scale" is not a stage in the organizational life cycle.

Question 16

Market leadership occurs when:
A) a firm is the number one or the number two firm in an industry or niche market in terms of net profits
B) a firm is one of the top five firms in an industry or market niche in terms of sales volume
C) a firm earns twice as much as its closest competitor
D) a firm sells twice as much as its closest competitor
E) a firm is the number one or the number two firm in an industry or niche market in terms of sales volume

Accepted Answer

Market leadership is typically defined as being the number one or number two firm in an industry or niche market in terms of sales volume. Option E correctly reflects this definition. Option A is incorrect because net profits are not a reliable indicator of market leadership. Option B is incorrect because being in the top five does not necessarily equate to market leadership. Option C and D are incorrect because being twice as profitable or selling twice as much as a competitor does not necessarily mean a firm is a market leader.

Question 17

According to the textbook, it is:
A) not inevitable that a business enter the decline stage of the organizational life cycle
B) inevitable that a business enter the decline stage of the organizational life cycle
C) not inevitable that service firms enter the decline stage of the organizational life cycle but is inevitable for manufacturing firms
D) not inevitable that manufacturing firms enter the decline stage of the organizational life cycle but is inevitable for service firms
E) not inevitable that international firms enter the decline stage of the organizational life cycle but is inevitable for strictly domestic firms

Accepted Answer

The textbook states that it is not inevitable that a business enter the decline stage of the organizational life cycle. This is because businesses can take proactive measures to prevent decline, such as adapting to changes in the environment and innovating new products or services.

Question 18

________ are similar to economies of scale, except the advantage comes through the scope (or range) of a firm's operations rather than from its scale of production.
A) Economies of reach
B) Economies of span
C) Economies of capacity
D) Economies of range
E) Economies of scope

Accepted Answer

Economies of scope refer to the advantage gained by a firm from the range of its operations. This can be through diversification of products or services, sharing of resources, or cross-selling to existing customers. It results in lower costs and increased efficiency, similar to economies of scale.

Question 19

For a business to be successful in the early growth stage of the organizational life cycle, two important things must happen:
A) the founder or owner of the business must start transitioning from his or her role as the hands-on supervisor to a more managerial role and increased formalization must take place
B) a decision must be made whether the owner-manager and the current management team is capable of taking the business further and the organization must start laying the groundwork for future growth
C) increased formalization must take place and the business must achieve price-stability
D) a decision must be made whether the owner-manager or the current management team is capable of taking the business further and business partnerships must be established
E) the founder or owner of the business must start transitioning from his or her role as the hands-on supervisor to a more managerial role and the business must be cash flow positive

Accepted Answer

The transition from hands-on supervisor to a more managerial role is necessary for the growth of the business, allowing the founder/owner to focus on strategic planning and decision making rather than day-to-day operations. Increased formalization, such as implementing standard operating procedures and job descriptions, also helps to improve efficiency and scalability. The other options are also important considerations, but do not address the necessary steps for success in the early growth stage.

Question 20

________ means that as the number of employees a firm need increases, it becomes increasingly difficult for it to find the right employees, place them in appropriate positions, and provide adequate supervision.
A) Difficult hazard
B) Adverse hazard
C) Adverse selection
D) Moral selection
E) Moral hazard

Accepted Answer

Adverse selection refers to the situation where one party in a transaction has information that the other party lacks, resulting in an unfair advantage for the informed party. In the context of the given statement, it means that as a firm needs more employees, it becomes harder to find qualified and suitable candidates, and the firm may have to settle for less skilled or appropriate candidates. This can lead to a decrease in the quality of work performed and an increase in the cost of supervision and training, making it an adverse selection hazard.

Quiz 13: Preparing for and Evaluating the Challenges of Growth

Maureen Kimble owns a firm that sells products to the auto, aerospace, and defense industries. Maureen is currently evaluating a set of opportunities that he feels his firm is capable of pursuing. According to the textbook, Maureen is evaluating his firm's:

According to the textbook, a well-managed business that finds its products and services are mature often:

According to Penrose, generate new market, product and service ideas, while administer the routine functions of the firm and facilitate the profitable execution of new opportunities.

When a firm's managerial resources are insufficient to take advantage of its new product and service opportunities, the subsequent bottleneck is referred to as the:

The ________ stage of the organizational life cycle is the start-up phase, where a business determines what its core strengths and capabilities are and starts selling its initial product or service.

The Savvy Entrepreneurial Firm feature in Chapter 13 focuses on Timbuk2, a company that makes urban shoulder bags. The lesson provided by the feature is:

Some firms feel that they can better appeal to their customer if they can advertise that they are "the Number 1 firm" in their industry. This sentiment is motivated by the reason for growth labeled:

The main challenges for a business in the introduction stage of the organizational life cycle is to:

According to Penrose, the set of opportunities a firm feels it is capable of pursuing is referred to as the:

According to the textbook, the toughest decisions regarding business growth are made in the ________ stage of the organizational life cycle.

The majority of businesses go through a discernable set of stages of growth referred to as the:

The author of the book titled "The Theory of the Growth of the Firm," which is referred to in Chapter 13, is:

Which of the following is not one of the five stages in the organizational life cycle?

Market leadership occurs when:

According to the textbook, it is:

________ are similar to economies of scale, except the advantage comes through the scope (or range) of a firm's operations rather than from its scale of production.

For a business to be successful in the early growth stage of the organizational life cycle, two important things must happen:

________ means that as the number of employees a firm need increases, it becomes increasingly difficult for it to find the right employees, place them in appropriate positions, and provide adequate supervision.