Test Bank for Patterns of Entrepreneurship Management, 4th Edition

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Chapter 1: The Entrepreneurial ProcessTrue/False1.Entrepreneurship is the process of planning, organizing, operating, and assumingthe risk of a business venture.Ans: TruePage: 42.The word entreprendre refers to the individuals who “undertook” the risk of newenterprise.Ans: TruePage: 53.Fortunately, entrepreneurs do not communicate with external “stakeholders” suchas investors and bankers.Ans: FalsePage: 54.Aspiring entrepreneurs hope for the chance to be their own bosses and have madethe leap from their current employment into the uncertainty of a start-up.Ans: FalsePage: 75.One negative aspect of entrepreneurs, according to research, is that they are notopen to change and they hang on to old plans even when they are not workingcontributing to escalation of commitment.Ans: FalsePage: 86.Many companies fail because the founders do not confront their managementlimitations.Ans: TruePage: 97.Fortunately, the skills needed to run a small company are not different from thoserequired to run a larger firm.Ans: FalsePage: 108.If an entrepreneur has limited experience and limited internal resources, outsidehelp is not necessary.Ans: FalsePage: 109.Looking at the historical trend, it is safe to say that most businesses start smalland grow to be a large corporation.Ans: FalsePage: 1710.The failure rate of new businesses is very high, about 80-90 percent within thefirst two years.Ans: FalsePage: 18

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Short Answer / Fill in the Blank11._____________ have developed an enterprise that fits their individualcircumstances and style of life, and their basic intention is to earn an income forthemselves and their families.Ans: Lifestyle entrepreneursPage: 712._______________ often seem to be possessed by their ideas, committing theirlives to changing the direction of their field.Ans: Social entrepreneursPage: 713.The first decision that an entrepreneur should make is whether personal lifestyleand control are more important than ____________ and eventual wealth creation.Ans: growthPage: 814.The basic objective of Stage ________________ of the entrepreneurial process isto define the criteria that would make a business opportunity worthwhile.Ans: 1Page: 1315.Setting goals and objectives, starting to write the plan, determining pricing, andpreparing a full business plan are part of Stage _______________ of theentrepreneurial process.Ans: 2Page: 1416.A full ____________ is a vital yet dynamic document for a company.Ans: business planPage: 1517.Stage 5 of the entrepreneurial process is called ____________________.Ans: Scaling and Harvesting the VenturePage: 1618.A(n) _________________ is one that grows large enough to influence theenvironment and, thus, becomes a pacesetter.Ans: entrepreneurial firmPage: 1719.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 thatpropel the economy forward.Ans: 700,000Page: 1720.The failure rate of new companies is ________ percent within the first two years.Ans: 24Page: 18

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Multiple Choice21.Which of the following is not a characteristic of entrepreneurs:a.Self-startersb.Lethargicc.Optimistsd.PerseverantAns: BPage: 522.An entrepreneur is driven mainly by:a.The control of resourcesb.Changing technologyc.The perception of opportunityd.Planning systemsAns: CPage: 623.Ray Smilor identified all of these entrepreneurs types except:a.Growth entrepreneursb.Aspiring entrepreneursc.Lifestyle entrepreneursd.Technology entrepreneursAns: DPage: 724.The type of entrepreneur that have the desire and the ability to grow as fast and aslarge as possible is:a.Growth entrepreneursb.Aspiring entrepreneursc.Lifestyle entrepreneursd.Technology entrepreneursAns: APage: 725.Individuals with innovative solutions to society’s most social problems areclassified as:a.Lifestyle entrepreneursb.Aspiring entrepreneursc.Growth entrepreneursd.Social entrepreneursAns: DPage: 726.Technology entrepreneurs have ideas triggered by developments in:a.math and sociologyb.science and historyc.social studies and businessd.science and engineeringAns: DPage: 7

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27.Building ventures around new technology requires specialist knowledge in all ofthe following except:a.social scienceb.language artsc.economicsd.marketsAns: BPage: 728.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: DPage: 1029.To relieve stress you should:a.Work over the weekend if necessaryb.Plan non-work personal timec.Work more intenselyd.Work lessAns: BPage: 1330.Which of the following is not a characteristic of relieving stress:a.Get advice on time-management techniquesb.Try to live at least twenty minutes from workc.Do not delegated.Build in some slack timeAns: CPage: 1331.In what stage of the entrepreneurial process do you evaluate the competition?a.Stage 1b.Stage 2c.Stage 4d.Stage 5Ans: APage: 1432.In what stage of the entrepreneurial process would managing the finances takeplace?a.Stage 2b.Stage 3c.Stage 4d.Stage 5Ans: CPage: 1433.Forming a strategic alliance and discussing options and alternatives are part ofwhat stage of the entrepreneurial process?

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a.Stage 2b.Stage 3c.Stage 4d.Stage 5Ans: DPage: 1434.Which of the following is not a stage of the entrepreneurial process?a.Developing the plan and setting up the companyb.Buying an existing companyc.Scaling and harvesting the ventured.Conducting opportunity analysisAns: BPage: 1435.All of the following are early-stage funding sources except:a.family and friendsb.banksc.government sourcesd.IPOAns: DPage: 1536.Stage 4 is:a.Scaling and Harvesting the Ventureb.Determining the Resources Required and Implementing the Planc.Developing the Plan and Setting up the Companyd.Acquiring Financial Partners/Sources of FundingAns: BPage: 1637.Entrepreneurship includes all of the following except:a.small businessesb.family-owned businessesc.large businessesd.high-technology start-upsAns: CPage: 1738.What percent of all U.S. businesses employ twenty or fewer people?a.Approximately 98b.Approximately 87c.Approximately 65d.Approximately 50Ans: BPage: 1739.The past ______ years have been years of tremendous growth for entrepreneurialcompanies and for the individuals who make them thrive.a.50b.2c.15

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d.7Ans: CPage: 1740.How many new businesses are started in the United States each year?Approximatelya.700,000b.1.5 millionc.450,000d.100,000Ans: APage: 1741.Most businesses do this:a.Start big, stay bigb.Start small, become bigc.Start small, stay smalld.Start big, become smallAns: CPage: 1742.All of the following are reasons people become entrepreneurs except:a.working with othersb.make your own decisionsc.flexibilityd.financial rewardsAns: APage: 1843.The failure rate of new companies is this percent in the first ten years:a.85-95b.80-90c.70-80d.75-85Ans: BPage: 1844.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: BPage: 1845.Most companies fail because of:a.having too much moneyb.focusing on a bad ideac.confronting complex management decisions without experienced.not having enough employeesAns: CPage: 18

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Chapter 2: The Art of InnovationTrue/False1.The frameworks in which a sustainable, high-profit company is constructed arecalled business models.Ans: TruePage: 262.Unfortunately, North America has one of the lowest percentages of people withInternet access.Ans: FalsePage: 273.Geographical location no longer provides any significant advantage for access tomajor sources of capital.Ans: TruePage: 294.A product life cycle is the time that a product is able to command a high profitmargin in the market before it becomes obsolete or develops intense competition.Ans: TruePage: 295.Product development times have increased from 200 days three years ago to anaverage of 225 days now.Ans: FalsePage: 296.Fortunately, it is becoming easier for a company to build around a single productidea without strong patent protection.Ans: FalsePage: 307.The first step for any entrepreneur is to generate an idea for a new business.Ans: TruePage: 398.Asking the right questions and preparing the business plan are components ofphase 3 in the five phases to success.Ans: TruePage: 419.To eliminate receiving questionable data, you should train and monitor surveyrecorders and telephone interviews to ensure consistent results.Ans: TruePage: 4410.The final phase of the five step model of success is “Develop the Plan.”Ans: FalsePage: 46

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Short Answer / Fill in the Blank11.Successful ____________ is the use of new technological knowledge, and/or newmarket knowledge, employed within a business model that can deliver a newproduct and/or service to customers who will purchase at a price that will provideprofits.Ans: innovationPage: 3112.The ___________ is often used to illustrate the difference in which theperformance achieved by new innovation is plotted against time.Ans: S-curvePage: 3213.Usually, improvements can be made with ____________ innovations, pushing theoriginal curve higher.Ans: incrementalPage: 3214.The term _______________ is often used to describe innovations that disrupt thestatus quo.Ans: disruptive innovationPage: 3315.___________ are sources of ideas.Ans: PatentsPage: 3916.Many new companies are built around a radical or ____________ technology.Ans: breakthroughPage: 4017.A window of opportunity is a __________________ during which opportunitiesexist before something else happens to eliminate them.Ans: time horizonPage: 4218.________________ are the value of benefits lost when one decision or ideaalternative is selected over another.Ans: Opportunity costsPage: 4219.A(n) _______________ charts the current and future components of the businessin about thirty to forty pages.Ans: business planPage: 4520.Sufficient ___________ is required to sustain the company for a specific length oftime, possibly a one- or two-year period.Ans: capitalPage: 46

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Multiple Choice21.More than ___________ new web pages are being added daily to the Internet.a.18 millionb.500,000c.50 milliond.7 millionAns: DPage: 2722.___________ funds are a very small part of total growth capital.a.Technologyb.Tradec.Venture capitald.InternationalAns: CPage: 2923.A product life cycle is continually:a.increasingb.decliningc.increasing in a step ladder patternd.fluctuatingAns: BPage: 2924.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: BPage: 3125.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: CPage: 3226.Which of the following is not on the list of some important innovations by U.S.small firms in the last century:a.GPAb.Airplanec.Zipperd.Heat sensorAns: APage: 34

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27.All of the following are ways to build upon already existing material and stillprovide 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: APage: 3928.There are more than ___________ patents issued in the United States.a.31 millionb.17 millionc.8 milliond.60 millionAns: CPage: 3929.Only about ________ percent of existing patents have actually beencommercialized.a.20b.10c.2d.32Ans: BPage: 4030.Of the five phases of success, which one is where the opportunity would beseized:a.Phase 1b.Phase 2c.Phase 3d.Phase 4Ans: APage: 4131.Which of the following is not a technology factor:a.Industry standardsb.Niche market applicationsc.Infrastructure replacementd.Technology generationAns: DPage: 4132.Which of the following is not an economic factor?a.Better serviceb.Productivity gainsc.Market changesd.Government and privacy issuesAns: CPage: 42

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33.Of the five phases of success, which one is Phase 2?a.Develop the Planb.Manage the Businessc.Determine the Resources Neededd.Investigate the Need through Market ResearchAns: DPage: 4234.Of the five phases of success, Phase 3 is:a.Develop the Planb.Manage the Businessc.Determine the Resources Neededd.Investigate the Need through Market ResearchAns: APage: 4535.Which of the following area of research help answer the question: “Can theproduct/service be patented or copyrighted?”a.Salesb.Proprietaryc.Niche/competitiond.Cost and manufactureAns: BPage: 4336.To eliminate receiving questionable data, all of these pitfalls must be avoidedexcept:a.Train and monitor survey recorders.b.Make certain that the answers are accurate by maintaining an objectivemethod of questioning.c.Ensure that all of the participants are asked the same questions.d.Eliminate telephone interviews.Ans: DPage: 4437.All of the following are cost-cutting recommendations except:a.Use search engines and web pagesb.Use social media methods to access potential customersc.Test only one product at a timed.Use the telephone instead of mail surveyAns: CPage: 4538.______ is(are) the backbone of the business.a.Employeesb.Business planc.Phases of Successd.Data BaseAns: BPage: 4539.Of the five phases of success, which one is Phase 4?

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a.Determine the Resources Neededb.Develop the Planc.Investigate the Need through Market Researchd.Seize the OpportunityAns: APage: 4640.Of the five phases of success, which one is Phase 5?a.Seize the Opportunityb.Develop the Planc.Investigate the Need through Market Researchd.Manage the BusinessAns: DPage: 4641.Which of the following criteria is least important when evaluating an opportunity?a.Size of the marketb.Competitorsc.Value provided to the targeted customersd.Having the resources in place to execute on the planAns: DPage: 47-4842.Which of the following criteria would most lead you to question the viability ofan 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: APage: 47-4843.The evaluation screening for patent protection includes all of the followingexcept: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 thecompetition?c.Is the field changing so slowly that the innovation will be valuable for atleast 5 years?d.Has an attorney discussed the options and recommended that a patent bepursued?Ans: CPage: 48

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Chapter 3: Designing Business ModelsTrue/False1.A business model provides a framework in which entrepreneurs can examine theirbusiness plans and explore alternative ways for their companies to function and growprofitably while building barriers to ward off competitors.Ans: TruePage: 572.The Five Component Model has nine key topics to consider when exploring differentbusiness models.Ans: FalsePage: 583.Capturing data on customer requirements and using it to create unique services orproducts can be a powerful way of adding value and keeping out competitors.Ans: TruePage: 614.A business model based on information sharing can provide low barriers againstcompetitors because the costs involved in integrating incompatible data and computersystems can be prohibitive.Ans: FalsePage: 625.Unfortunately, licensing and franchising are not valuable components of a businessmodel.Ans: FalsePage: 636.Interestingly, some companies base their business models entirely on licensing and haveno intention of producing or selling any product.Ans: TruePage: 647.An entrepreneur should not seek to be a franchisee or build a business as a franchisorwithout seeking competent legal advice.Ans: TruePage: 658.The key advantage of outsourcing is that it enables you to invest your resources in moreprofitable activities.Ans: TruePage: 699.Large companies are nearly always stretched for resources, however, use of outsourcingshould not be part of their business models.Ans: FalsePage: 6910.Outsourcing functions range from use of individual specialist consultants and focusedservice providers to full manufacturing facilities and large software program developers.Ans: TruePage: 69

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11.Short Answer / Fill in the Blank12.A(n) ________ provides a framework in which entrepreneurs can examine their businessplans and explore alternative ways for their companies to function and grow profitablywhile building barriers to ward off competitors.Ans: business modelPage: 5713._____________ is the value created for the user of the product or service.Ans: Value propositionPage: 5814.Suppliers, customers, and other stakeholders operate more and more in ______________.Ans: value networksPage: 5815.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 themarket and convince your customers to switch.Ans: first-movers’ advantagePage: 6116.Licensing ________ and refer to types of contracts between an issuing entity and areceiving entity.Ans: franchisingPage: 6317.A(n) _________ license provides just one licensee the rights stated in the agreement.Ans: exclusivePage: 6418.____________ are paid as a percentage of net sales of products or services.Ans: Running royaltiesPage: 6419.___________ may prevent a licensee from just sitting on the rights and not trying togenerate sales.Ans: MinimumsPage: 6420.A(n) ____________ is a legal and commercial relationship between the owner of atrademark, service mark, trade name, or advertising symbol and an individual or groupwishing to use that identification in a business.Ans: franchisePage: 6521.The _________ allows a franchisee to participate in building a business together withother franchisees, under the rules stipulated by the franchisor and under certainconditions spelled out in the agreement.Ans: franchise agreementPage: 65-66

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Multiple Choice22.Which of the following factors are not important when designing a business model?a.Understanding customers’ valuesb.Having Venture Capital Investmentc.Analyzing current and potential customersd.Clearly identifying the markets that you will enter.Ans: BPage: 5823.Which of the following is the term for users to whom the product or service is useful andfor what purpose?a.Cost structureb.Market segmentc.Profit potentiald.Value propositionAns: BPage: 5824.Formulating which of these allows the innovating firm to gain and hold advantage overrivals?a.Competitive strategyb.Value networksc.Market segmentd.Value discountsAns: APage: 5825.It is recommended that the Business Model Canvas be used in _________ sessions.a.Individualb.Teamc.Smalld.LargeAns: BPage: 5826.Data lock-ins inhibiting a move to a competitor can be found in which of the following?a.E-mail servicesb.Bankingc.Health care servicesd.All of these.Ans: DPage: 6227.The authors recommend that a small company restrict the number of licenses it issues tohow many competitors?a.Three or fourb.Five or sixc.Two or threed.One or twoAns: CPage: 64

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