Deck 10: The Financial Plan

Question 1

As discussed in the Opening Profile to Chapter 10, Justin Parer's first experience as an entrepreneur was so successful that he left university when the business starting taking up too much of his time.

Answer 1

False

Question 2

As discussed in the text, the newness of a new entry is always an advantage.

Answer 2

False

Question 3

A product is only considered a new entry when it is first offered to the market.

Answer 3

False

Question 4

Entrepreneurial strategy can be defined as the set of decisions, actions, and reactions that first generate, and then exploit over time, a new entry.

Question 5

Which of the following is an asset of newness?

A) established routines, systems, and processes
B) a heightened ability to learn new knowledge
C) informal communications systems
D) overlap in roles and responsibilities
E) All of the answers are correct.

Question 6

There are advantages to a "me-too imitation strategy", but a "me too imitation strategy"might be more difficult to successfully implement than first expected. Why?

Question 7

Discuss the merits of using imitation strategies as a way of reducing the risk of downside loss to the entrepreneur.

Question 8

Discuss how an entrepreneur might create and use barriers to market entry as part of a first mover strategy for a new market. Is eliminating all competition a wise objective for a new entry?

Question 9

Knowledge gained as a result of experience is idiosyncratic, meaning unique to the life of the individual.

Question 10

Discuss the potential disadvantages to an entrepreneur of being first to exploit a new market opportunity.

Question 11

Discuss the advantages that being first to exploit a new market opportunity provides an entrepreneur.

Question 12

As discussed in the text, marketing research will provide insight into an entrepreneurial opportunity because it helps the customer to articulate their underlying problems with current goods and services.

Question 13

History has shown that technological knowledge is relatively useless without market applicability.

Question 14

When it comes to looking for information to assess an opportunity, the more knowledge the entrepreneur has, the more efficient the search process.

Question 15

Discuss the factors that influence an entrepreneur's decision to exploit or not to exploit a new entry opportunity.

Question 16

Discuss what is meant by a "window of opportunity"and what relationship this might have to the search for market information.

Question 17

When assessing an opportunity, a cost associated with searching for more market information is the potential closing of the window of opportunity.

Question 18

Discuss the role of the firm's resources in achieving sustainable competitive advantage.

Question 19

When assessing an opportunity, an entrepreneur with an action-oriented, risk taker personality is more likely to make an error of omission than commission.

Question 20

Which of the following is a liability of newness?

A) costs associated with learning new tasks are high
B) rigidly defined roles and responsibilities discourage innovation and creativity
C) too much dependence on informal communication networks
D) All of the answers are correct.
E) None of the answers apply.

Question 21

As discussed in the Opening Profile to Chapter 10, Justin Parer's first experience as an entrepreneur__________.

A) was so successful, he left university to concentrate on his business.
B) motivated him to start other businesses at the same time
C) was a failure, which motivated him to get more education
D) did not teach him anything as it failed too quickly
E) None of the answers apply.

Question 22

As discussed in the Opening Profile to Chapter 10, Justin Parer chose to study accounting in his second attempt at university for which of the following reasons?

A) Working with numbers reflected the entrepreneurial decision-making process.
B) It provided valuable knowledge about the inner workings of a business.
C) He felt that the subject enhanced his credibility with others in the business community.
D) The position provided outstanding networking opportunities with the business community.
E) All of the answers are correct.

Question 23

From an entrepreneurial perspective, "new entry"refers to __________.

A) offering a new product to an established market
B) offering an established product to a new market
C) creating a new organization
D) offering a new product to a new market
E) All of the answers are correct.

Question 24

Overall, an imitation strategy has the potential to

A) reduce the entrepreneur's costs associated with research
B) reduce the entrepreneur's costs associated with development
C) reduce customer uncertainty over the firm
D) make the new entry look legitimate from day one
E) All of the answers are correct.

Question 25

Whether associated with a new product, market, or organization, newness can be like a double-edged sword to an entrepreneur because __________.

A) being new is something rare and it can be used to differentiate the firm from its competition
B) less resources are required for successful exploitation of the opportunity
C) newness creates a number of serious challenges such as uncertainty over the value of the product to the customer
D) being new is something rare and it can be used to differentiate the firm from its competition and less resources are required for successful exploitation of the opportunity
E) being new is something rare and it can be used to differentiate the firm from its competition and newness creates a number of serious challenges such as uncertainty over the value of the product to the customer

Question 26

If a new entry is sufficiently attractive that it warrants exploitation, then firm performance is dependent upon __________.

A) the entry strategy
B) the risk reduction strategy
C) the way the firm is organized
D) the competence of the entrepreneur, management team, and the firm
E) All of the answers are correct.

Question 27

As discussed in the text, stage 3 of entrepreneurial strategy: the generation and exploitation of new entry opportunities is very important for which of the following reasons?

A) It is difficult to achieve competitive advantage without knowledge and resources.
B) The assessment of a new entry opportunity is critical to the exploitation of that opportunity.
C) An entry strategy is not worth very much without an appropriate risk reduction strategy.
D) Long-run performance is dependent upon the ability to generate and exploit numerous new entries.
E) None of the answers apply.

Question 28

Ice cream shops are an example of a ____________________________ strategy.

A) me-too imitation
B) underscored
C) niche
D) successful
E) None of the answers are correct.

Question 29

Franchising is not the only imitation strategy. Some entrepreneurs will attempt to _________.

A) deliver valuable
B) imitation
C) find an underserved niche of the market
D) Copy successful businesses
E) None of the answers are correct.

Question 30

Franchising is an example of a new entry that focuses on ________________ to reduce the risk of downside loss for the franchisee.

A) delivering value that is valuable
B) imitation
C) finding an underserved niche of the market
D) competitive advantage
E) All of the answers are correct.

Question 31

As discussed in the text, the ability to obtain, then recombine resources into a bundle that is valuable, rare, and inimitable is known as __________.

A) iterative synthesis
B) the entrepreneurial process
C) sustainable competitive advantage
D) an entrepreneurial resource
E) None of the answers apply.

Question 32

Which of the following statements is(are) true?

A) Knowledge is a valuable entrepreneurial resource that is built up over time through experience.
B) Experience is idiosyncratic-unique to the life of the individual.
C) Knowledge based on experience is unlikely to be learned in a classroom.
D) Knowledge based on experience can be difficult to communicate with others.
E) All of the answers are correct.

Question 33

The early development of the mountain bike was used in the text as an example of __________.

A) how knowledge based on experience enabled bike enthusiasts to think "outside of the box"
B) how market knowledge can hinder innovation rather than help it
C) how technological knowledge enabled bike company engineers to create a better bike
D) how a number of large, established bicycle manufacturers created an error of commission
E) None of the answers apply.

Question 34

In pursuing an imitation strategy for a new entry, the entrepreneur should focus on __________.

A) delivering value that is valuable, rare, and inimitable
B) imitating those elements of the business that are not central to the firm's competitive advantage
C) finding an underserved niche of the market
D) imitating those elements of the business that are central to the firm's competitive advantage
E) All of the answers are correct.

Question 35

Successful implementation of a me-too imitation strategy may be hindered by __________.

A) intellectual property rights
B) difficulty in achieving the same performance outcomes as the firm being copied
C) customer indifference
D) intellectual property rights and difficulty in achieving the same performance outcomes as the firm being copied
E) All of the answers are correct.

Question 36

As discussed in the text, market research can have limited effectiveness in providing insight into a market and its customers due to which of the following?

A) To an entrepreneur, what customers do is more important than why they do it.
B) Most people who take part in market research have difficulty in thinking "outside of the box."
C) It is often difficult for customers to articulate the underlying problems they have with a product or service.
D) The entrepreneur's market knowledge is based on personal experience, which is more representative of the target market.
E) None of the answers apply.

Question 37

As an example of an imitation strategy, franchising __________.

A) reduces the risk of downside loss for the entrepreneur
B) would be considered a narrow-scope market strategy
C) increases the risk of downside loss for the entrepreneur
D) increases the risk of making an error of commission
E) All of the answers are correct.

Question 38

Possession of information, technology, know-how, and skills that provide insight into ways to create new knowledge is known as __________.

A) iterative synthesis
B) dynamically continuous innovation
C) technological knowledge
D) market knowledge
E) None of the answers apply.

Question 39

Technological knowledge is important to the entrepreneurship process for which of the following reasons?

A) Market applicability is the primary criteria for most research and development funding.
B) Technological developments often create new markets in addition to satisfying existing ones.
C) Research and development depends more on technology than creative thinking.
D) The customer is always right, even when they are wrong.
E) None of the answers apply.

Question 40

An imitation strategy __________.

A) can act as a substitute for individual learning
B) can provide organizational legitimacy
C) can help the entrepreneur to quickly identify the key success factors for the industry
D) can act as a substitute for individual learning and can provide organizational legitimacy
E) All of the answers are correct.

Question 41

The amount of information search conducted when assessing the attractiveness of a new entry opportunity depends on __________.

A) the amount of prior market and technological knowledge
B) the estimated probability of making a type 2 error of disposition
C) the entrepreneur's comfort level with decision-making under conditions of less than perfect information
D) the amount of prior market and technological knowledge and the entrepreneur's comfort level with decision-making under conditions of less than perfect information
E) All of the answers are correct.

Question 42

When assessing the attractiveness of a new entry opportunity, the cost(s) of information search include which of the following?

A) money
B) time
C) closed window of opportunity
D) All of the answers are correct.
E) None of the answers apply.

Question 43

Knowledge can be increased by searching for information that will shed some light on the attractiveness of this new entry opportunity. Interestingly, the more knowledge the entrepreneur has, __________.

A) market introduction stage
B) window of opportunity
C) The smaller the technological gap
D) the more efficient the search process.
E) None of the answers apply.

Question 44

The period of time when the environment is favorable for entrepreneurs to exploit a particular new entry is known as the __________.

A) market introduction stage
B) window of opportunity
C) technological gap
D) economic up cycle
E) None of the answers apply.

Question 45

The dynamic nature of the viability of a particular new entry can be described in terms of a__________.

A) market introduction stage
B) window of opportunity
C) technological gap
D) economic up cycle
E) None of the answers apply.

Question 46

A window of opportunity for a new entry may close when __________.

A) another entrepreneur seizes the opportunity and enters the market
B) barriers to entry or imitation appear
C) consumer needs change and move on to something else
D) All of the answers are correct.
E) None of the answers apply.

Question 47

An imitation strategy __________.

A) consists of copying the practice of other firms
B) is a way of minimizing risk of downside loss associated with new entry
C) can enhance the firm performance because a successful new entry does not need to be valuable, rare, and inimitable in every aspect
D) All of the answers are correct.
E) None of the answers apply.

Question 48

A broad-scope market strategy offers a way of reducing risks associated with market uncertainties but__________.

A) it sacrifices flexibility in production
B) faces increased exposure to competition
C) at the cost of too much concentration on one line of products
D) increases the risk of being seen as an imitator
E) None of the answers apply.

Question 49

In practical terms, the assessment of a new entry's attractiveness is __________.

A) a decision made using one part logic and three parts luck
B) really about the entrepreneur's belief that he or she can make it work
C) not a rational decision but an emotional one
D) best left to professionals such as accountants and venture capitalists
E) None of the answers apply.

Question 50

A broad-scope market strategy __________.

A) offers a range of products across many different market segments
B) focuses on dealing only with mass market segments
C) favours small companies with limited resources
D) is best suited to markets for customized products
E) None of the answers apply.

Question 51

A narrow-scope market strategy is vulnerable to __________.

A) competition from larger companies if the market becomes too attractive
B) the risk that market demand does not materialize as expected
C) changing market conditions over time
D) All of the answers are correct.
E) None of the answers apply.

Question 52

With regards to market entry, a disadvantage of being a first mover is __________.

A) environmental instability
B) cost disadvantages
C) long lead time to gain knowledge
D) access to suppliers
E) All of the answers are correct.

Question 53

With regards to market entry, the decision to be first into the market would be based on which of the following factors?

A) the stability of the environment surrounding the entry
B) the ability of the entrepreneur to educate customers
C) the ability of the entrepreneur to erect barriers to market entry and imitation
D) All of the answers are correct.
E) None of the answers apply.

Question 54

First movers have the opportunity to select and develop strong relationships with the most important suppliers and distribution channels. This may represent a barrier to those considering entry and may force those who do eventually enter to _________________________.

A) use inferior suppliers and distribution outlets.
B) to educate customers
C) to erect barriers to market entry and imitation
D) All of the answers are correct.
E) None of the answers apply.

Question 55

First movers gain expertise through participation. First movers have the opportunity to_________________________.

A) learn from the first generation of products and improve.
B) monitor changes in the market that might be difficult
C) monitor changes in the market that might be impossible to detect for those firms not participating in the market
D) build up their networks, which can provide early information about attractive opportunities.
E) All of the answers are correct.

Question 56

A narrow-scope market strategy __________.

A) allows the entrepreneur to build up specialized knowledge and expertise
B) helps the firm to compete against much larger competitors
C) allows the firm to focus on a specific group of customers
D) focuses the firm on producing customized products, localized business operations, and high levels of craftsmanship
E) All of the answers are correct.

Question 57

As defined in the text, the requirements that any firm must meet in order to successfully compete in a particular industry are known as __________.

A) barriers to entry
B) risk parameters
C) performance criteria
D) key success factors
E) None of the answers apply.

Question 58

For a first mover into a new market, the key success factors __________.

A) are known with certainty if the entrepreneur has done their research correctly
B) are determined by the actions of competitors
C) are not known with certainty but are based on intuition and research
D) are less important than moving quickly
E) None of the answers apply.

Question 59

In emerging industries, __________.

A) adaptation is easier because so much of the environment is uncertain
B) entrepreneurs confront demand certainty
C) environmental changes are highly likely
D) there is less freedom in which the entrepreneur can achieve success
E) All of the answers are correct.

Question 60

First movers face __________.

A) environmental instability
B) demand uncertainty
C) technological uncertainty
D) uncertainty for customers
E) All of the answers are correct.

Question 61

Considerable difficulty in accurately estimating the potential size of the market, how fast it will grow, and the key dimensions along which it will grow is known as __________.

A) technological uncertainty
B) demand uncertainty
C) market uncertainty
D) uncertainty for customers
E) None of the answers apply.

Question 62

An entrepreneur's risk of downside loss is derived from __________.

A) uncertainties over market demand
B) technological development
C) actions of competitors
D) All of the answers are correct.
E) None of the answers apply.

Question 63

When customer demand for a new market entry is expected to be unstable and unpredictable,__________.

A) first mover advantages may be outweighed by first mover disadvantages
B) entrepreneurs may choose not to forego conducting market research to help make the entry decision
C) first mover disadvantages may be outweighed by first mover advantages
D) a first mover strategy becomes the more conservative choice
E) None of the answers apply.

Question 64

With regards to a new market entry, technological uncertainty __________.

A) is a result of uncertainty about customer demand
B) occurs because an alternative technology could be introduced by competitors
C) only occurs in emerging markets
D) can be addressed by following a first mover strategy
E) All of the answers are correct.

Question 65

Protecting product uniqueness. If the uniqueness of the product is a source of advantage over potential competitors, then first movers need to take actions to maintain that uniqueness. Intellectual property protection can take the form of _______________________.

A) Patents
B) Copyrights
C) Trademarks
D) Trade Secrets
E) All of the answers are correct.

Question 66

Introducing a new product is risky because __________.

A) customers may be uncertain about how to use the product
B) most customers are uncertainty averse
C) customers may lack a frame of reference for understanding the new product
D) customers may know how the new product differs from their current product
E) All of the answers are correct.

Question 67

Customers having considerable difficulty in accurately assessing whether the new product or service provides value for them is known as __________.

A) demand uncertainty
B) technology uncertainty
C) cognitive dissonance
D) uncertainty for customers
E) None of the answers apply.

Question 68

To address the problem of uncertainty for customers, a firm may __________.

A) use informational advertising to educate customers
B) have to first create the frame of reference for the customer to help them understand the product
C) use comparison marketing to highlight the product's benefits relative to other products
D) All of the answers are correct.
E) None of the answers apply.

Question 69

Barriers to market entry may include which of the following?

A) customer loyalty
B) switching costs
C) protecting product uniqueness
D) access to suppliers and distributors
E) All of the answers are correct.

Question 70

An entrepreneur facing a market characterized by uncertainty for customers may still want to be a first mover if __________.

A) the firm can educate customers to believe that their product is the industry standard
B) there is value to being seen as being a founder in the industry, thus encouraging customer loyalty
C) barriers to entry or imitation can be erected
D) All of the answers are correct.
E) None of the answers apply.

Question 71

The grace period in which the first mover operates in the industry under conditions of limited competition is known as __________.

A) the introduction stage
B) the lead time
C) the break-in period
D) delayed entry phase
E) None of the answers apply.

Question 72

When entering a new market, an entrepreneur should use the lead time period __________.

A) to finish their business plan
B) to secure financing
C) to influence the direction in which the market develops to their advantage
D) to break down any barriers to market entry that currently exist
E) None of the answers apply.

Question 73

Important barriers to market entry are __________.

A) a problem only when dealing with international trade
B) derived from relationships with key stakeholders such as customers, suppliers, and distributors
C) difficult to establish during the lead time period
D) quick to disappear once a market is penetrated
E) All of the answers are correct.

Question 74

By being first to market a product, the venture __________.

A) can build customer loyalties
B) can build switching costs
C) secure access to important sources of supply
D) can enjoy limited competition for a short period of time
E) All of the answers are correct.