Strategic Management Creating Competitive Advantages Global Edition Gregory Dess 7e

Strategic Management Creating Competitive Advantages Global Edition Gregory Dess 7e

Chapter 08

Entrepreneurial Strategy and Competitive Dynamics

True / False Questions

1.

Small businesses create the majority of new jobs in the U. S. economy.

True False

2.

Entrepreneurship refers to new value creation and can include activities in major corporations.

True False

3.

Opportunity recognition is the process of identifying, selecting, and developing entrepreneurial opportunities.

True False

4.

Opportunity recognition involves two phases of activity: discovery and execution.

True False

5.

The evaluation phase of opportunity recognition occurs when an entrepreneur has an insight about a new business venture, often based on prior knowledge.

True False

6.

The majority of entrepreneurial start-ups are financed with personal savings and the contributions of family and friends.

True False

7.

The majority of entrepreneurial firms are started with financing from venture capitalists and banks.

True False

8.

Angel investors are private individuals who provide equity investments for seed capital during the later stages of a new venture.

True False

9.

As investors, venture capitalists rarely provide any help or services to entrepreneurial firms other than financing.

True False

10.

Venture capital funding for entrepreneurial ventures is usually available only after the start-up has become a going concern and established a track record.

True False

11.

The term, angel investors, refers to private individuals who provide seed capital to young ventures.

True False

12.

Venture capital is a form of public equity financing used to help young firms grow rapidly.

True False

13.

To obtain venture capital financing, business founders often have to give up some ownership and control of their business.

True False

14.

Venture capitalists and angel investors regard the management team as the most important asset of an entrepreneurial venture.

True False

15.

Because of the Small Business Administration and government regulations, small businesses are rarely allowed to bid on government contracts.

True False

16.

An entry wedge, according to the text, is a type of entrepreneurial strategy firms can use to enter into business.

True False

17.

Founders using a pioneering new entry strategy look for opportunities to capitalize on proven market successes.

True False

18.

Adaptive new entry involves offering a radical new product or highly innovative service.

True False

19.

Choosing which new entry strategy is best depends on competitive financial and marketplace considerations with the greatest opportunities most likely to be in existing markets, rather than in new markets.

True False

20.

Spandex, founded in 2000, created footless pantyhose and other undergarments for women. This is an example of an imitative new entry strategy.

True False

21.

Smell-O-Vision created an invention that would pump odors into movie theatres. It did not make it to market. This was an attempt to be an adaptive entry strategy.

True False

22.

Pandora, launched in 2000, radically changes the radio business with its Music Genome Project system that analyzes music for its underlying traits. This is an example of a pioneering new entry strategy.

True False

23.

The success of an adaptive new entrant can be limited, if the value proposition is perceived as being unique.

True False

24.

Once an adaptive entrant has achieved initial success, the company is safe from copycat competition.

True False

25.

Because new ventures typically are small, they usually do not have high economies of scale relative to competitors.

True False

26.

Entrepreneurial firms are often in a strong position to use combination strategies, because they have the flexibility to approach situations uniquely.

True False

27.

Entrepreneurial competitive dynamics refers to a cycle of actions and responses between firms competing for the same customers.

True False

28.

Warby Parker makes eyeglasses. It keeps costs low through several means and has a social mission. This is an example of a firm that uses a combination strategy.

True False

29.

A focus strategy must not include elements of differentiation and overall cost leadership in order to be successful.

True False

30.

Running Press created a line of palm-sized mini books that were sold as point-of-sale impulse items. The company grew rapidly, even though it had a small fraction of the sales in the publishing industry. They used a pure overall cost leadership strategy to capture market share.

True False

31.

Entrepreneurial new entry is often perceived as a competitive threat because most market needs are being met, either directly or indirectly, by an existing firm.

True False

32.

Market commonality is the extent to which rivals draw from the same types of resources.

True False

33.

Market commonality refers to the extent to which competitors are vying for the same customers in the same markets.

True False

34.

When attacked, older and larger firms tend to respond more quickly, but their responses are often more predictable.

True False

35.

Cutting prices or increasing marketing efforts are examples of tactical competitive actions.

True False

36.

In the context of competitive dynamics, tactical actions involve major commitments of distinctive and specific resources to strategic initiatives.

True False

37.

Refinements or extensions of existing strategies are often referred to as tactical actions.

True False

38.

Forbearance is a particularly aggressive type of competitive attack.

True False

39.

Co-opetition, where competitors work together behind the scenes, is a form of illegal tacit collusion.

True False

Multiple Choice Questions

40.

According to the text, for an entrepreneurial start-up to be successful, three ingredients are critical. What are they?

A.

good ideas, a team of investors, and a business plan

B.

a viable opportunity, available resources, and a qualified and motivated founding team

C.

an opportunity, a marketing plan, and office space

D.

management, marketing, and money

41.

Which of the following is not a common source of new business opportunities?

A.

current or past work experiences

B.

suggestions by family or friends

C.

chance event

D.

future work

42.

The process of identifying, selecting, and developing new venture opportunities is known as _____________.

A.

innovativeness

B.

bootstrapping

C.

opportunity recognition

D.

brainstorming

43.

Generally speaking, the opportunity recognition process consists of two phases of activity. They are ______________ and _____________.

A.

global search; recycling profits

B.

value creation; affordability

C.

discovery; evaluation

D.

global search; valuation

44.

Which of the following is NOT one of the characteristics of an entrepreneurial opportunity?

A.

attractive

B.

affordable

C.

achievable

D.

value creating

45.

When an opportunity is attractive long enough for it to be successfully developed and deployed, it is said to be _____________.

A.

value creating

B.

affordable

C.

achievable

D.

durable

46.

Which of the following terms is used to refer to opportunities that are practical and physically possible?

A.

durable

B.

valuable

C.

achievable

D.

sustainable

47.

Which of the following is not a primary source of financing for entrepreneurial start-ups?

A.

investments by family and friends

B.

personal savings

C.

private investors

D.

public equity

48.

According to a study by the Kaufmann Foundation, which of the following is the largest source of funding for businesses that have been operating at least five years?

A.

loans

B.

venture capital

C.

public financing

D.

angel financing

49.

The majority of entrepreneurial start-ups are financed through monies from _____________.

A.

bank financing

B.

SBA loans

C.

venture-capital financing

D.

personal savings and the contributions of family and friends

50.

Private individuals who provide seed capital to young ventures are known as _____________.

A.

angels

B.

gazelles

C.

cash cows

D.

rising stars

51.

Which of the following statements about venture capital is not true?

A.

Entrepreneurs raise venture capital by selling shares of ownership in their business.

B.

Venture capital is a form of public equity financing.

C.

Venture capital is used to finance rapid growth or large capital expenditures.

D.

Venture capital groups can often provide helpful management advice.

52.

Based on statistics reported in the text, which of the following statements is not true?

A.

Firms that obtain venture-capital funding receive an average of over $1 million each.

B.

Total investment in start-up firms averages about $80,000 in the first year of the activity of the firm.

C.

Among the 100 fastest-growing new businesses identified by Entrepreneur magazine, 61 percent obtained start-up funding from personal savings.

D.

Ninety percent of the companies financed with venture capital funds fail.

53.

According to the text, new ventures launched by entrepreneurial teams are more likely to be successful than ventures launched by _____________.

A.

established corporations

B.

bootstrappers

C.

lone wolf entrepreneurs

D.

individual investors

54.

Which of the following is the most important resource for a start-up activity?

A.

social recognition

B.

land

C.

personnel

D.

money

55.

______________ provide(s) a key avenue for growth for many young and small firms through partnering to obtain resources and/or expand into new markets.

A.

Strategic alliances

B.

Bootstrappers

C.

Lone wolf entrepreneurs

D.

Research & development

56.

The U.S. Small Business Administration supports small business through all of the following EXCEPT

A.

government contracting.

B.

underwriting loans.

C.

investing venture capital.

D.

training and counseling.

57.

Which of the following is NOT one of the three characteristics of entrepreneurial leadership mentioned by the text?

A.

vision

B.

dedication and drive

C.

commitment to excellence

D.

clarifying job responsibilities

58.

Vision is an important element of entrepreneurial leadership because _____________.

A.

the entrepreneur has to envision realities that do not yet exist

B.

a vision statement must be part of the documentation used to obtain venture financing

C.

organizations cannot function without a detailed and operational vision

D.

banking institutions require it

59.

Which of the following is NOT a common new entry strategy according to the text?

A.

imitative new entry

B.

adaptive new entry

C.

proactive new entry

D.

pioneering new entry

60.

Seeking products or services that have been successful in one market and introducing the same basic product or service in another segment of the market is referred to as _____________.

A.

imitative new entry

B.

adaptive new entry

C.

proactive new entry

D.

pioneering new entry

61.

When launching a new venture, finding a way to begin doing business must ______________ generate cash flow, build credibility, attract good employees, and overcome the liability of newness.

A.

slowly

B.

quickly

C.

steadily

D.

painlessly

62.

Pandora entered the radio business in 2000 using the Music Genome Project system that analyzes music for its underlying traits as a means to distinguish itself. It was using ______________ entry strategy.

A.

a pioneering

B.

an imitative

C.

an adaptive

D.

a creative

63.

The new entry strategy that a firm choses is dependent upon the ______________ and the ______________ of the new business concept.

A.

riskiness; cost

B.

riskiness; potential sales

C.

idea; innovativeness

D.

riskiness; innovativeness

64.

Smell-O-Vision designed an invention to pump odors into movie theatres. It flopped, in spite of its innovativeness. What kind of new entry strategy was the company using to penetrate the market?

A.

imitative

B.

pioneering

C.

adaptive

D.

differentiated

65.

Square provides a means for small businesses to process credit and debit card sales without signing up for a traditional credit card arrangement of monthly fees and minimum charges. It used which new entry strategy to enter the market initially?

A.

imitative

B.

pioneering

C.

adaptive

D.

differentiated

66.

Tom Monahan, a business creativity coach, says that every new idea is merely a spin of an old idea. A company that enters the market by offering a product or service that is somewhat new and sufficiently different in order to create value for customers by capitalizing on current trends is using which new entry strategy?

A.

imitative

B.

pioneering

C.

adaptive

D.

differentiated