Quiz 9 | Chapter 8
Q: The majority of new firms are launched with:
→personal savings or contributions from family and friends.
peer-to-peer lending via the Internet.
bank or public financing.
venture capital or "angel" investors.
Learning Objective: 08-02
The funding available to young and small firms tends to be quite limited. In fact, the majority of new firms are low-budget start-ups launched with personal savings and the contributions of family and friends. Among firms included in the Entrepreneur list of the 100 fastest-growing new businesses in a recent year, 61 percent reported that their start-up funds came from personal savings.
Q: When a venture is new, social capital provides which benefits?
offering contracts and providing training
→gaining exposure and building legitimacy faster
providing a base of experience and loan guarantees
underwriting loans and providing counseling
Learning Objective: 08-02
New ventures founded by entrepreneurs who have extensive social contacts are more likely to succeed than are ventures started without the support of a social network. Even though a venture may be new, if the founders have contacts who will vouch for them, they gain exposure and build legitimacy faster.
Q: Which of the following is NOT one of the three characteristics of leadership for entrepreneurs defined by the text?
→relevant experience
vision
dedication and drive
commitment to excellence
Learning Objective: 08-02
Entrepreneurs put themselves to the test and get their satisfaction from acting independently, overcoming obstacles, and thriving financially. To do so, they must embody three characteristics of leadership, vision, dedication and drive, and commitment to excellence, and pass these on to all those who work with them.
Q: Tesla began to design and manufacture electric cars in 2003, while more recently major automakers have introduced electric vehicles like the Chevy Volt and the Nissan Leaf. These latter entrants into the category would be considered part of which type of entry strategy?
pioneering
→imitative
prospective
comparative
Learning Objective: 08-03
An imitative new entry strategy is used by entrepreneurs who see products or business concepts that have been successful in one market niche or physical locale and introduce the same basic product or service in another segment of the market. Tesla's car is a high performance vehicle, while the latter entrants are mainstream offerings using electric technology.
Q: ______strategies are often associated with entrepreneurial ventures because there is a natural fit between the scope of the strategy and the size of the firm.
Cost leadership
Differentiation
→Focus
Combination
Learning Objective: 08-04
Focus strategies are often associated with small businesses because there is a natural fit between the narrow scope of the strategy and the small size of the firm. Young firms can often succeed best by finding a market niche where they can get a foothold and make small advances that erode the position of existing competitors. From this position, they can build a name for themselves and grow.
Q: Entrepreneurial firms are often in a strong position to use combination strategies because they have the flexibility to approach situations uniquely.
→True
False
Learning Objective: 08-04
Entrepreneurial firms are often in a strong position to offer a combination strategy because they have the flexibility to approach situations uniquely. For example, holding down expenses can be difficult for big firms because each layer of bureaucracy adds to the cost of doing business across the boundaries of a large organization.
Q: Which of the following is NOT a reason that companies launch new competitive actions?
to improve market position
to capitalize on growing demand
to obtain first mover advantages
→to insulate themselves from environmental forces
Learning Objective: 08-06
Companies launch new competitive actions for several reasons: to improve market position, to capitalize on growing demand, to expand production capacity, to provide an innovative new solution, or to obtain first mover advantages.
Q: Cirrus Aircraft, a leading manufacturer of small airplanes, sees a market opportunity and has decided to double its plant capacity over the next two years. What type of competitive action does this represent?
A tactical action because the move is an attempt to fill a gap in service.→ / A strategic action because such a large plant expansion will require a major commitment of resources.
A strategic action because the firm can easily reverse the action at any time, thus giving Cirrus more strategic flexibility.
A guerilla offensive because it is fast and will surprise its rivals.
Learning Objective: 08-06
This is a strategic action because it represents a major commitments of distinctive and specific resources. Such actions require significant planning and resources and, once initiated, are difficult to reverse.
Q: A firm is considering a large price cut on its leading product as a way to gain market share. One executive strongly disagrees with the price cut and states, "We are in the same marketplace as our rivals, and we do not have any competitive advantages in our cost structure. If we cut prices, our competitors will likely do the same. The end result is that we will all make less money." These arguments are an example of
→ / a strategy of forbearance.a strategy of co-opetition.
a hardball strategy whereby competitive actions are not undertaken without a clear advantage.
a weakness strategy that leads a company into constant decline.
Learning Objective: 08-06
There may be many circumstances (such as this potential price war) in which the best reaction is no reaction at all. This is known as forbearance, refraining from reacting at all as well as holding back from initiating an attack.
Q: When attacked, older and larger firms tend to respond more quickly, but their responses are often more predictable.
True
→False
Learning Objective: 08-06
Older and larger firms may have more resources and a repertoire of competitive techniques they can use in a counterattack. Large firms, however, tend to be slower to respond. Older firms tend to be predictable in their responses because they often lose touch with the competitive environment and rely on strategies and actions that have worked in the past.