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Test Bank for Patterns of Entrepreneurship Management, 4th Edition

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    Chapter 1: The Entrepreneurial Process True/False 1. Entrepreneurship is the process of planning, organizing, operating, and assuming the risk of a business venture. Ans: True Page: 4 2. The word entreprendre refers to the individuals who “undertook” the risk of new enterprise. Ans: True Page: 5 3. Fortunately, entrepreneurs do not communicate with external “stakeholders” such as investors and bankers. Ans: False Page: 5 4. Aspiring entrepreneurs hope for the chance to be their own bosses and have made the leap from their current employment into the uncertainty of a start-up. Ans: False Page: 7 5. One negative aspect of entrepreneurs, according to research, is that they are not open to change and they hang on to old plans even when they are not working contributing to escalation of commitment. Ans: False Page: 8 6. Many companies fail because the founders do not confront their management limitations. Ans: True Page: 9 7. Fortunately, the skills needed to run a small company are not different from those required to run a larger firm. Ans: False Page: 10 8. If an entrepreneur has limited experience and limited internal resources, outside help is not necessary. Ans: False Page: 10 9. Looking at the historical trend, it is safe to say that most businesses start small and grow to be a large corporation. Ans: False Page: 17 10. The failure rate of new businesses is very high, about 80-90 percent within the first two years. Ans: False Page: 18

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    Short Answer / Fill in the Blank 11. _____________ have developed an enterprise that fits their individual circumstances and style of life, and their basic intention is to earn an income for themselves and their families. Ans: Lifestyle entrepreneurs Page: 7 12. _______________ often seem to be possessed by their ideas, committing their lives to changing the direction of their field. Ans: Social entrepreneurs Page: 7 13. The first decision that an entrepreneur should make is whether personal lifestyle and control are more important than ____________ and eventual wealth creation. Ans: growth Page: 8 14. The basic objective of Stage ________________ of the entrepreneurial process is to define the criteria that would make a business opportunity worthwhile. Ans: 1 Page: 13 15. Setting goals and objectives, starting to write the plan, determining pricing, and preparing a full business plan are part of Stage _______________ of the entrepreneurial process. Ans: 2 Page: 14 16. A full ____________ is a vital yet dynamic document for a company. Ans: business plan Page: 15 17. Stage 5 of the entrepreneurial process is called ____________________. Ans: Scaling and Harvesting the Venture Page: 16 18. A(n) _________________ is one that grows large enough to influence the environment and, thus, becomes a pacesetter. Ans: entrepreneurial firm Page: 17 19. Each year at least ____________ new businesses are started in the United States, and of these, a small proportion turn out to be the fast-growth companies that propel the economy forward. Ans: 700,000 Page: 17 20. The failure rate of new companies is ________ percent within the first two years. Ans: 24 Page: 18

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    Multiple Choice 21. Which of the following is not a characteristic of entrepreneurs: a. Self-starters b. Lethargic c. Optimists d. Perseverant Ans: B Page: 5 22. An entrepreneur is driven mainly by: a. The control of resources b. Changing technology c. The perception of opportunity d. Planning systems Ans: C Page: 6 23. Ray Smilor identified all of these entrepreneurs types except: a. Growth entrepreneurs b. Aspiring entrepreneurs c. Lifestyle entrepreneurs d. Technology entrepreneurs Ans: D Page: 7 24. The type of entrepreneur that have the desire and the ability to grow as fast and as large as possible is: a. Growth entrepreneurs b. Aspiring entrepreneurs c. Lifestyle entrepreneurs d. Technology entrepreneurs Ans: A Page: 7 25. Individuals with innovative solutions to society’s most social problems are classified as: a. Lifestyle entrepreneurs b. Aspiring entrepreneurs c. Growth entrepreneurs d. Social entrepreneurs Ans: D Page: 7 26. Technology entrepreneurs have ideas triggered by developments in: a. math and sociology b. science and history c. social studies and business d. science and engineering Ans: D Page: 7

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    27. Building ventures around new technology requires specialist knowledge in all of the following except: a. social science b. language arts c. economics d. markets Ans: B Page: 7 28. A spider-web provides an analogy to a small company because: a. It is continually under attack from outside. b. It has both radial and circumferential axes. c. It has multiple points for support on the outside. d. It is fragile. Ans: D Page: 10 29. To relieve stress you should: a. Work over the weekend if necessary b. Plan non-work personal time c. Work more intensely d. Work less Ans: B Page: 13 30. Which of the following is not a characteristic of relieving stress: a. Get advice on time-management techniques b. Try to live at least twenty minutes from work c. Do not delegate d. Build in some slack time Ans: C Page: 13 31. In what stage of the entrepreneurial process do you evaluate the competition? a. Stage 1 b. Stage 2 c. Stage 4 d. Stage 5 Ans: A Page: 14 32. In what stage of the entrepreneurial process would managing the finances take place? a. Stage 2 b. Stage 3 c. Stage 4 d. Stage 5 Ans: C Page: 14 33. Forming a strategic alliance and discussing options and alternatives are part of what stage of the entrepreneurial process?

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    a. Stage 2 b. Stage 3 c. Stage 4 d. Stage 5 Ans: D Page: 14 34. Which of the following is not a stage of the entrepreneurial process? a. Developing the plan and setting up the company b. Buying an existing company c. Scaling and harvesting the venture d. Conducting opportunity analysis Ans: B Page: 14 35. All of the following are early-stage funding sources except: a. family and friends b. banks c. government sources d. IPO Ans: D Page: 15 36. Stage 4 is: a. Scaling and Harvesting the Venture b. Determining the Resources Required and Implementing the Plan c. Developing the Plan and Setting up the Company d. Acquiring Financial Partners/Sources of Funding Ans: B Page: 16 37. Entrepreneurship includes all of the following except: a. small businesses b. family-owned businesses c. large businesses d. high-technology start-ups Ans: C Page: 17 38. What percent of all U.S. businesses employ twenty or fewer people? a. Approximately 98 b. Approximately 87 c. Approximately 65 d. Approximately 50 Ans: B Page: 17 39. The past ______ years have been years of tremendous growth for entrepreneurial companies and for the individuals who make them thrive. a. 50 b. 2 c. 15

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    d. 7 Ans: C Page: 17 40. How many new businesses are started in the United States each year? Approximately a. 700,000 b. 1.5 million c. 450,000 d. 100,000 Ans: A Page: 17 41. Most businesses do this: a. Start big, stay big b. Start small, become big c. Start small, stay small d. Start big, become small Ans: C Page: 17 42. All of the following are reasons people become entrepreneurs except: a. working with others b. make your own decisions c. flexibility d. financial rewards Ans: A Page: 18 43. The failure rate of new companies is this percent in the first ten years: a. 85-95 b. 80-90 c. 70-80 d. 75-85 Ans: B Page: 18 44. Most business ventures that fail are: a. More than five years old. b. Less than ten years old. c. Less than one year old. d. More than ten years old. Ans: B Page: 18 45. Most companies fail because of: a. having too much money b. focusing on a bad idea c. confronting complex management decisions without experience d. not having enough employees Ans: C Page: 18

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    Chapter 2: The Art of Innovation True/False 1. The frameworks in which a sustainable, high-profit company is constructed are called business models. Ans: True Page: 26 2. Unfortunately, North America has one of the lowest percentages of people with Internet access. Ans: False Page: 27 3. Geographical location no longer provides any significant advantage for access to major sources of capital. Ans: True Page: 29 4. A product life cycle is the time that a product is able to command a high profit margin in the market before it becomes obsolete or develops intense competition. Ans: True Page: 29 5. Product development times have increased from 200 days three years ago to an average of 225 days now. Ans: False Page: 29 6. Fortunately, it is becoming easier for a company to build around a single product idea without strong patent protection. Ans: False Page: 30 7. The first step for any entrepreneur is to generate an idea for a new business. Ans: True Page: 39 8. Asking the right questions and preparing the business plan are components of phase 3 in the five phases to success. Ans: True Page: 41 9. To eliminate receiving questionable data, you should train and monitor survey recorders and telephone interviews to ensure consistent results. Ans: True Page: 44 10. The final phase of the five step model of success is “Develop the Plan.” Ans: False Page: 46

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    Short Answer / Fill in the Blank 11. Successful ____________ is the use of new technological knowledge, and/or new market knowledge, employed within a business model that can deliver a new product and/or service to customers who will purchase at a price that will provide profits. Ans: innovation Page: 31 12. The ___________ is often used to illustrate the difference in which the performance achieved by new innovation is plotted against time. Ans: S-curve Page: 32 13. Usually, improvements can be made with ____________ innovations, pushing the original curve higher. Ans: incremental Page: 32 14. The term _______________ is often used to describe innovations that disrupt the status quo. Ans: disruptive innovation Page: 33 15. ___________ are sources of ideas. Ans: Patents Page: 39 16. Many new companies are built around a radical or ____________ technology. Ans: breakthrough Page: 40 17. A window of opportunity is a __________________ during which opportunities exist before something else happens to eliminate them. Ans: time horizon Page: 42 18. ________________ are the value of benefits lost when one decision or idea alternative is selected over another. Ans: Opportunity costs Page: 42 19. A(n) _______________ charts the current and future components of the business in about thirty to forty pages. Ans: business plan Page: 45 20. Sufficient ___________ is required to sustain the company for a specific length of time, possibly a one- or two-year period. Ans: capital Page: 46

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    Multiple Choice 21. More than ___________ new web pages are being added daily to the Internet. a. 18 million b. 500,000 c. 50 million d. 7 million Ans: D Page: 27 22. ___________ funds are a very small part of total growth capital. a. Technology b. Trade c. Venture capital d. International Ans: C Page: 29 23. A product life cycle is continually: a. increasing b. declining c. increasing in a step ladder pattern d. fluctuating Ans: B Page: 29 24. Incremental innovation means that: a. A start-up company grows slowly. b. Improvements are made on existing products and services. c. Innovation is only applied to the way that things are made. d. It is the safest strategy for a start-up to follow. Ans: B Page: 31 25. Radical innovation means that: a. Nothing from the past is retained. b. It applies only to products. c. It changes the rules of competition. d. It is too risky for a start-up to follow. Ans: C Page: 32 26. Which of the following is not on the list of some important innovations by U.S. small firms in the last century: a. GPA b. Airplane c. Zipper d. Heat sensor Ans: A Page: 34

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    27. All of the following are ways to build upon already existing material and still provide a profit-driven concept except: a. Market the product at a higher price. b. Add value to an existing product or service. c. Develop or redesign a new version of an existing product. d. Develop ideas as an extension or redesign an existing service. Ans: A Page: 39 28. There are more than ___________ patents issued in the United States. a. 31 million b. 17 million c. 8 million d. 60 million Ans: C Page: 39 29. Only about ________ percent of existing patents have actually been commercialized. a. 20 b. 10 c. 2 d. 32 Ans: B Page: 40 30. Of the five phases of success, which one is where the opportunity would be seized: a. Phase 1 b. Phase 2 c. Phase 3 d. Phase 4 Ans: A Page: 41 31. Which of the following is not a technology factor: a. Industry standards b. Niche market applications c. Infrastructure replacement d. Technology generation Ans: D Page: 41 32. Which of the following is not an economic factor? a. Better service b. Productivity gains c. Market changes d. Government and privacy issues Ans: C Page: 42

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    33. Of the five phases of success, which one is Phase 2? a. Develop the Plan b. Manage the Business c. Determine the Resources Needed d. Investigate the Need through Market Research Ans: D Page: 42 34. Of the five phases of success, Phase 3 is: a. Develop the Plan b. Manage the Business c. Determine the Resources Needed d. Investigate the Need through Market Research Ans: A Page: 45 35. Which of the following area of research help answer the question: “Can the product/service be patented or copyrighted?” a. Sales b. Proprietary c. Niche/competition d. Cost and manufacture Ans: B Page: 43 36. To eliminate receiving questionable data, all of these pitfalls must be avoided except: a. Train and monitor survey recorders. b. Make certain that the answers are accurate by maintaining an objective method of questioning. c. Ensure that all of the participants are asked the same questions. d. Eliminate telephone interviews. Ans: D Page: 44 37. All of the following are cost-cutting recommendations except: a. Use search engines and web pages b. Use social media methods to access potential customers c. Test only one product at a time d. Use the telephone instead of mail survey Ans: C Page: 45 38. ______ is(are) the backbone of the business. a. Employees b. Business plan c. Phases of Success d. Data Base Ans: B Page: 45 39. Of the five phases of success, which one is Phase 4?

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    a. Determine the Resources Needed b. Develop the Plan c. Investigate the Need through Market Research d. Seize the Opportunity Ans: A Page: 46 40. Of the five phases of success, which one is Phase 5? a. Seize the Opportunity b. Develop the Plan c. Investigate the Need through Market Research d. Manage the Business Ans: D Page: 46 41. Which of the following criteria is least important when evaluating an opportunity? a. Size of the market b. Competitors c. Value provided to the targeted customers d. Having the resources in place to execute on the plan Ans: D Page: 47-48 42. Which of the following criteria would most lead you to question the viability of an opportunity? a. Gross margin on sales after three years is 25%. b. Total available domestic market is$80MM. c. The market is growing at 60% per annum. d. You only have two customers willing to buy your product currently. Ans: A Page: 47-48 43. The evaluation screening for patent protection includes all of the following except: a. If the fee for a patent search and application affordable? b. Is the service, product, or idea unique to get a head start on the competition? c. Is the field changing so slowly that the innovation will be valuable for at least 5 years? d. Has an attorney discussed the options and recommended that a patent be pursued? Ans: C Page: 48

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    Chapter 3: Designing Business Models True/False 1. A business model provides a framework in which entrepreneurs can examine their business plans and explore alternative ways for their companies to function and grow profitably while building barriers to ward off competitors. Ans: True Page: 57 2. The Five Component Model has nine key topics to consider when exploring different business models. Ans: False Page: 58 3. Capturing data on customer requirements and using it to create unique services or products can be a powerful way of adding value and keeping out competitors. Ans: True Page: 61 4. A business model based on information sharing can provide low barriers against competitors because the costs involved in integrating incompatible data and computer systems can be prohibitive. Ans: False Page: 62 5. Unfortunately, licensing and franchising are not valuable components of a business model. Ans: False Page: 63 6. Interestingly, some companies base their business models entirely on licensing and have no intention of producing or selling any product. Ans: True Page: 64 7. An entrepreneur should not seek to be a franchisee or build a business as a franchisor without seeking competent legal advice. Ans: True Page: 65 8. The key advantage of outsourcing is that it enables you to invest your resources in more profitable activities. Ans: True Page: 69 9. Large companies are nearly always stretched for resources, however, use of outsourcing should not be part of their business models. Ans: False Page: 69 10. Outsourcing functions range from use of individual specialist consultants and focused service providers to full manufacturing facilities and large software program developers. Ans: True Page: 69

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    11. Short Answer / Fill in the Blank 12. A(n) ________ provides a framework in which entrepreneurs can examine their business plans and explore alternative ways for their companies to function and grow profitably while building barriers to ward off competitors. Ans: business model Page: 57 13. _____________ is the value created for the user of the product or service. Ans: Value proposition Page: 58 14. Suppliers, customers, and other stakeholders operate more and more in ______________. Ans: value networks Page: 58 15. If you can enter the market and build your customer base before anyone else, you achieve ____________ in which it becomes harder and harder for competitors to get into the market and convince your customers to switch. Ans: first-movers’ advantage Page: 61 16. Licensing ________ and refer to types of contracts between an issuing entity and a receiving entity. Ans: franchising Page: 63 17. A(n) _________ license provides just one licensee the rights stated in the agreement. Ans: exclusive Page: 64 18. ____________ are paid as a percentage of net sales of products or services. Ans: Running royalties Page: 64 19. ___________ may prevent a licensee from just sitting on the rights and not trying to generate sales. Ans: Minimums Page: 64 20. A(n) ____________ is a legal and commercial relationship between the owner of a trademark, service mark, trade name, or advertising symbol and an individual or group wishing to use that identification in a business. Ans: franchise Page: 65 21. The _________ allows a franchisee to participate in building a business together with other franchisees, under the rules stipulated by the franchisor and under certain conditions spelled out in the agreement. Ans: franchise agreement Page: 65-66

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    Multiple Choice 22. Which of the following factors are not important when designing a business model? a. Understanding customers’ values b. Having Venture Capital Investment c. Analyzing current and potential customers d. Clearly identifying the markets that you will enter. Ans: B Page: 58 23. Which of the following is the term for users to whom the product or service is useful and for what purpose? a. Cost structure b. Market segment c. Profit potential d. Value proposition Ans: B Page: 58 24. Formulating which of these allows the innovating firm to gain and hold advantage over rivals? a. Competitive strategy b. Value networks c. Market segment d. Value discounts Ans: A Page: 58 25. It is recommended that the Business Model Canvas be used in _________ sessions. a. Individual b. Team c. Small d. Large Ans: B Page: 58 26. Data lock-ins inhibiting a move to a competitor can be found in which of the following? a. E-mail services b. Banking c. Health care services d. All of these. Ans: D Page: 62 27. The authors recommend that a small company restrict the number of licenses it issues to how many competitors? a. Three or four b. Five or six c. Two or three d. One or two Ans: C Page: 64

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