ENTREPRENEURSHIP The Art, Science, and Process for Success 3Rd Edition By Charles Bamford - Test Bank Instant Download - Complete Test Bank With Answers Sample Questions Are Posted Below Entrepreneurship, 3e (Bamford) Chapter 5 Business Mission and Strategy 1) A mission statement is a long narrative used to summarize a …
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ENTREPRENEURSHIP The Art, Science, and Process for Success 3Rd Edition By Charles Bamford – Test Bank
Instant Download – Complete Test Bank With Answers
Sample Questions Are Posted Below
Entrepreneurship, 3e (Bamford)
Chapter 5 Business Mission and Strategy
1) A mission statement is a long narrative used to summarize a business.
Answer: FALSE
Explanation: A mission statement should be short and able to fit on a coffee mug.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
2) A mission must have direct applicability to even the most entry-level employee for it to be utilized effectively by every member of the company.
Answer: TRUE
Explanation: It takes extraordinary care to develop a mission that guides the entire organization, and yet, for the mission to be utilized effectively by every member of the company, it must have direct applicability to even the most entry-level employee. The mission statement needs to help the employees to make active decisions in the moment, without having to refer everything to the founder(s) of the firm.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
3) Unlike large companies, new businesses can afford to have people who just follow procedures rather than use all of their skills and creative abilities.
Answer: FALSE
Explanation: Although large companies can afford to have people who just follow procedures rather than use all of their skills and creative abilities, new businesses cannot afford to limit their employees. The entrepreneurial business needs to align employees in a consistent direction and allows them to use their creativity and skills.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
4) As a business grows, it gets progressively more difficult to change its direction.
Answer: TRUE
Explanation: As a business grows, it gets progressively more difficult to change its direction.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
5) A mission statement can keep a small business away from areas that sound promising and profitable.
Answer: TRUE
Explanation: A mission statement helps a small business stay away from things that opportunistically sound promising, but which take the business away from its principal focus.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
6) It is critical for a new business to conserve its resources and focus on areas that have the potential to maximize the firm’s success.
Answer: TRUE
Explanation: It is critical for a new business to conserve its resources and focus on areas that have the potential to maximize the firm’s success.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
7) To be most effective, a mission statement should be complex and universal.
Answer: FALSE
Explanation: An effective mission statement is short, simple, applicable, and specific.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
8) A mission statement should be specific and establish measurable goals for the business to accomplish.
Answer: TRUE
Explanation: A mission statement should be specific and establish measurable goals for the business to accomplish.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
9) A mission statement of a firm that states “to make money” would be very effective.
Answer: FALSE
Explanation: The mission of a firm is not “to make money”; this is a by-product of a good direction.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
10) A mission statement needs to be known to all the employees, not just the top management.
Answer: TRUE
Explanation: A mission statement should be able to guide every individual in the company each and every day.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
11) The mission of a business needs to be actionable, that is, it should provide employees with the information they need to make decisions.
Answer: TRUE
Explanation: The mission of a business needs to be actionable; it should help employees to make decisions on the spot.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
12) An orthodox scale is a measure to evaluate whether a person or firm is meeting stated goals.
Answer: FALSE
Explanation: A metric is a measure to evaluate whether a firm is meeting stated goals.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
13) A metric is a type of measurement used to evaluate whether a person or firm is meeting its goals.
Answer: TRUE
Explanation: A metric is a measure to evaluate whether a firm is meeting stated goals.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
14) A quantitative measure is the corporate culture of an organization.
Answer: FALSE
Explanation: Quantitative measures are tied to the financial or strategic goals of an organization and are easily measured.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
15) An example of a quantitative measure could be the financial goals of an organization.
Answer: TRUE
Explanation: Quantitative measures are tied to the financial or strategic goals of an organization and are easily measured.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
16) An example of a qualitative measure could be customer service reviews.
Answer: TRUE
Explanation: Qualitative measures are tied to the strategic goals of an organization but have more to do with the “feel” of the organization.
Difficulty: 2 Medium
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
17) The key to the ability to communicate a mission easily is that the statement be simple, direct, and appropriate.
Answer: TRUE
Explanation: The key to the ability to communicate a mission easily is that the statement be simple, direct, and appropriate. A new-business owner must ensure that every employee can understand the statement and how it can be applied to day-to-day decision making.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
18) An advantage of a well-developed mission statement is that it is able to guide everyone in the organization toward the goals that the owners have set.
Answer: TRUE
Explanation: An advantage of a well-developed mission statement is that it is able to guide everyone in the organization toward the goals that the owners have set. A well-developed mission statement helps ensure that everyone in the organization is heading in the same relative direction. Although there will be some variance, there will not be decisions that are counter to what the founder(s) of the new business would choose.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
19) All individual competitive advantages eventually disappear as industries change and competitors adapt.
Answer: TRUE
Explanation: All individual competitive advantages eventually disappear as industries change and competitors adapt. However, businesses should seek to maintain an advantage for as long as possible by continually refining their business model.
Difficulty: 1 Easy
Topic: Sustainable Competitive Advantage
Learning Objective: 05-02 Explain what constitutes a sustainable competitive advantage.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
20) A sustainable competitive advantage is an advantage that other firms cannot immediately copy.
Answer: TRUE
Explanation: A sustainable competitive advantage is an advantage that other firms cannot immediately copy.
Difficulty: 1 Easy
Topic: Sustainable Competitive Advantage
Learning Objective: 05-02 Explain what constitutes a sustainable competitive advantage.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
21) The cornerstone of building a competitive advantage is a deep understanding of your customer’s needs.
Answer: TRUE
Explanation: A key part of building a competitive advantage is having a deep understanding of your customer’s needs.
Difficulty: 1 Easy
Topic: Sustainable Competitive Advantage
Learning Objective: 05-02 Explain what constitutes a sustainable competitive advantage.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
22) It is easy for large organizations to develop a compelling personal relationship with customers.
Answer: FALSE
Explanation: The development of a compelling personal relationship is something that large organizations find quite difficult. Building a relationship with a customer for a new firm may be as simple as acknowledging the customer when the business owner sees him, or as complex as knowing what the customer buys and contacting him or her when a new shipment arrives.
Difficulty: 1 Easy
Topic: Sustainable Competitive Advantage
Learning Objective: 05-02 Explain what constitutes a sustainable competitive advantage.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
23) A firm’s first step in identifying a sustainable competitive advantage is to evaluate its unique resources or capabilities.
Answer: FALSE
Explanation: A firm’s first step in identifying a sustainable competitive advantage is to develop a list of its assets and capabilities (either existing or proposed). The second step is to break that list into two groups: standard and unique.
Difficulty: 1 Easy
Topic: Step 1: Develop a List of Your Business’s Assets and Capabilities
Learning Objective: 05-03 Identify a new business’s assets and capabilities.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
24) The time lag between the introduction of the competitive advantage and the point where competitors can match an entrepreneur’s advantage is the window where the new business can earn unique returns.
Answer: TRUE
Explanation: The time lag between the introduction of the competitive advantage and the point where competitors can match an entrepreneur’s advantage is the window where the new business can earn unique returns. In some industries, a competitive advantage will last only a few months, whereas in other industries, an advantage might last a long time as competitors are slow to adapt.
Difficulty: 1 Easy
Topic: Step 3: Evaluate Competitiveness of Unique Resources or Capabilities
Learning Objective: 05-05 Apply a resource-based analysis approach to arrive at a list of competitive advantages.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
25) The computers in a company are an example of tangible assets.
Answer: TRUE
Explanation: Tangible assets are hard assets such as equipment or a location.
Difficulty: 1 Easy
Topic: Step 1: Develop a List of Your Business’s Assets and Capabilities
Learning Objective: 05-03 Identify a new business’s assets and capabilities.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
26) Intangible assets are the capabilities and skills of the founder(s) and employees.
Answer: TRUE
Explanation: Intangible assets are things that are not physical but are just as critical to success, such as a relationship with a key supplier.
Difficulty: 1 Easy
Topic: Step 1: Develop a List of Your Business’s Assets and Capabilities
Learning Objective: 05-03 Identify a new business’s assets and capabilities.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
27) One example of a key tangible asset is a strong working relationship with a vendor.
Answer: FALSE
Explanation: Intangible assets are things that are not physical but are just as critical to success, such as a relationship with a key supplier.
Difficulty: 1 Easy
Topic: Step 1: Develop a List of Your Business’s Assets and Capabilities
Learning Objective: 05-03 Identify a new business’s assets and capabilities.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
28) Christina started a business that created a new lemon-peppermint shampoo that was so popular the customers became loyal to the product. This is considered a first-mover advantage.
Answer: TRUE
Explanation: First-mover advantage is the benefit of gaining customer loyalty by being the first firm to the market.
Difficulty: 3 Hard
Topic: Step 2: Split the List into Standard and Unique Assets
Learning Objective: 05-04 Distinguish which of those assets and capabilities are standard and which are unique.
Bloom’s: Apply
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
29) Patents are considered to be intangible assets.
Answer: FALSE
Explanation: Patents are tangible assets. Tangible assets are hard assets such as equipment or a location.
Difficulty: 1 Easy
Topic: Step 2: Split the List into Standard and Unique Assets
Learning Objective: 05-04 Distinguish which of those assets and capabilities are standard and which are unique.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
30) Gators is a business that created a shoe that is a knock-off of the famous Crocks shoes. Gators is called a follower.
Answer: TRUE
Explanation: Those firms that enter a market after the first mover are called followers.
Difficulty: 3 Hard
Topic: Step 2: Split the List into Standard and Unique Assets
Learning Objective: 05-04 Distinguish which of those assets and capabilities are standard and which are unique.
Bloom’s: Apply
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
31) One way of having a competitive advantage is to have a close working relationship with your vendors.
Answer: TRUE
Explanation: A new business can build a competitive advantage by having a special relationship with suppliers.
Difficulty: 1 Easy
Topic: Step 2: Split the List into Standard and Unique Assets
Learning Objective: 05-04 Distinguish which of those assets and capabilities are standard and which are unique.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
32) Economic rents exist when a company matches the industry average in ordinary returns.
Answer: FALSE
Explanation: Economic rents are the financial gains garnered from an asset or a capability that are in excess of the ordinary returns in that particular industry.
Difficulty: 1 Easy
Topic: Step 3: Evaluate Competitiveness of Unique Resources or Capabilities
Learning Objective: 05-05 Apply a resource-based analysis approach to arrive at a list of competitive advantages.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
33) Economic rents refer to the financial gains made from an asset that is in excess of the ordinary returns in a particular industry.
Answer: TRUE
Explanation: Economic rents are the financial gains garnered from an asset or a capability that are in excess of the ordinary returns in that particular industry.
Difficulty: 1 Easy
Topic: Step 3: Evaluate Competitiveness of Unique Resources or Capabilities
Learning Objective: 05-05 Apply a resource-based analysis approach to arrive at a list of competitive advantages.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
34) If a business’s resource or capability is matched by one of its competitors, it becomes the standard expectation in the industry.
Answer: FALSE
Explanation: If a business’s resource or capability is matched by one of its competitors, it can still be considered rare. However, if it is matched by more than one competitor, then it is not rare. Therefore, it is simply the standard expectation in the industry.
Difficulty: 1 Easy
Topic: Step 3: Evaluate Competitiveness of Unique Resources or Capabilities
Learning Objective: 05-05 Apply a resource-based analysis approach to arrive at a list of competitive advantages.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
35) A small business owner must understand what the customer values and how much money the customer is willing to pay to obtain the firm’s product or service.
Answer: TRUE
Explanation: A key decision is which resource or capability the customer will pay the most for.
Difficulty: 1 Easy
Topic: Step 3: Evaluate Competitiveness of Unique Resources or Capabilities
Learning Objective: 05-05 Apply a resource-based analysis approach to arrive at a list of competitive advantages.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
36) The time lag between the introduction of a competitive advantage and the point where competitors can match an entrepreneur’s advantage is the window where a new business can earn unique returns.
Answer: TRUE
Explanation: The time lag between the introduction of a competitive advantage and the point where competitors can match an entrepreneur’s advantage is the window where a new business can earn unique returns. In some industries, a competitive advantage will last only a few months, whereas in other industries, an advantage might last a long time as competitors are slow to adapt.
Difficulty: 1 Easy
Topic: Step 3: Evaluate Competitiveness of Unique Resources or Capabilities
Learning Objective: 05-05 Apply a resource-based analysis approach to arrive at a list of competitive advantages.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
37) Michael Porter describes a differentiation approach as one where a firm seeks to be the lowest-cost competitor in the industry.
Answer: FALSE
Explanation: A differentiation approach is one where a firm finds a unique position in the market through products, service, location, and so on.
Difficulty: 1 Easy
Topic: Strategy
Learning Objective: 05-06 Determine a strategy to match the new business mission.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
38) Michael Porter describes a low-cost strategy as a company seeking to be the lowest-cost firm in the industry.
Answer: TRUE
Explanation: A low-cost strategy is one where the firm seeks to be the lowest-cost competitor in the industry.
Difficulty: 1 Easy
Topic: Strategy
Learning Objective: 05-06 Determine a strategy to match the new business mission.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
39) A strategy is a broad approach used by a small business to accomplish its mission.
Answer: TRUE
Explanation: A strategy is a broad approach a small business will use to accomplish its mission.
Difficulty: 1 Easy
Topic: Strategy
Learning Objective: 05-06 Determine a strategy to match the new business mission.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
40) The mission is the foundation on which a firm’s strategy is built.
Answer: TRUE
Explanation: A firm’s strategy is how the firm plans to use the competitive advantages of the business to accomplish its mission. Thus, the mission is the foundation on which a firm’s strategy is built.
Difficulty: 1 Easy
Topic: Strategy
Learning Objective: 05-06 Determine a strategy to match the new business mission.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
41) A business owner should never change the mission statement or strategy of the business.
Answer: FALSE
Explanation: Firms sometimes find that they have to change their mission statement and strategy.
Difficulty: 2 Medium
Topic: Strategy
Learning Objective: 05-06 Determine a strategy to match the new business mission.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
42) ________ summarize how and where the firm will compete in the industry.
Answer: B
Explanation: A mission statement is a brief statement that summarizes how and where a firm will compete.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
43) A mission statement can also be described as ________.
Answer: D
Explanation: A mission statement can be described as an overall strategy, goals, and simple rules.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
44) A firm’s mission statement
Answer: D
Explanation: A firm’s mission statement helps the business by targeting its efforts in specific areas, specifying what the business does best, and staying away from things that sound promising but away from its focus.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
45) ________ are resources that combine to allow a firm to do things better than its competitors.
Answer: D
Explanation: Capabilities are resources that combine to allow a firm to do things better than its competitors.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
46) The mission of any business needs to be ________.
Answer: B
Explanation: The mission of a business needs to be actionable; it helps the employees to make decisions on the spot.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
47) Which of the following is a characteristic of a mission statement?
Answer: A
Explanation: A mission statement must be understandable and memorable for all those who come in contact with it. While it is principally written to guide the employees of the company, it must also speak to customers, suppliers, and others.
Difficulty: 2 Medium
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
48) What are the two measures used to evaluate whether a person or firm is meeting its goals?
Answer: B
Explanation: Quantitative and qualitative measures are used to evaluate whether a person or firm is meeting its goals.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
49) The book mentions that organizations should develop quantitative measures of success. Which of the following are characteristic of quantitative measures?
Answer: A
Explanation: Quantitative measures are tied to the strategic and financial goals of an organization.
Difficulty: 2 Medium
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
50) Which of the following is NOT a characteristic of a sustainable competitive advantage?
Answer: A
Explanation: A sustainable competitive advantage is an advantage that other firms cannot immediately copy. A key part of building a competitive advantage is having a deep understanding of customers’ needs. The greatest source of a sustainable advantage is founded in personal relationships with customers.
Difficulty: 2 Medium
Topic: Sustainable Competitive Advantage
Learning Objective: 05-02 Explain what constitutes a sustainable competitive advantage.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
51) ________ provide(s) you with the opportunity to make money when other businesses cannot easily copy your advantages.
Answer: C
Explanation: Sustainable competitive advantage provides you with the opportunity to make money when other businesses cannot easily copy your advantages.
Difficulty: 1 Easy
Topic: Sustainable Competitive Advantage
Learning Objective: 05-02 Explain what constitutes a sustainable competitive advantage.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
52) Larry is the owner of an instant noodle manufacturing company. His company has created a special combination of ingredients that makes his product tastier than the ones currently existing in the market. Larry knows that this combination of ingredients cannot be easily copied. This is an example of ________.
Answer: B
Explanation: Sustainable competitive advantage is defined as an advantage that others cannot immediately copy. Larry’s company is able to come up with a combination of ingredients that gives his company a sustainable competitive advantage.
Difficulty: 3 Hard
Topic: Sustainable Competitive Advantage
Learning Objective: 05-02 Explain what constitutes a sustainable competitive advantage.
Bloom’s: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
53) Acme Corporation has introduced a new probiotic product in the market. It has the benefit of being the first to introduce a probiotic product in the market and has gained tremendous customer loyalty. This is an example of ________.
Answer: C
Explanation: There are a wide range of potential resources and capabilities that can be the source of a competitive advantage. For example, customer loyalty can be obtained if customers are driven principally by something other than cost and the firm is the first to market with a differentiating approach. Acme Corporation is able to achieve competitive advantage because it has the first-mover advantage.
Difficulty: 3 Hard
Topic: Sustainable Competitive Advantage
Learning Objective: 05-02 Explain what constitutes a sustainable competitive advantage.
Bloom’s: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
54) Denny is the owner of a popular ice-cream parlor. He also has a retail distribution network in the form of ice-cream vans that go around the city. With the help of this distribution network, Denny is able to efficiently manage the movement of goods and keep the costs lower than other ice-cream shops. This is an example of ________.
Answer: D
Explanation: Sustainable competitive advantage is defined as an advantage that others cannot immediately copy. Denny’s retail distribution network helps him efficiently manage the movement of goods and keep the costs lower than other ice-cream shops. His retail distribution network serves as a sustainable competitive advantage.
Difficulty: 3 Hard
Topic: Sustainable Competitive Advantage
Learning Objective: 05-02 Explain what constitutes a sustainable competitive advantage.
Bloom’s: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
55) Globex Corporation is considered to be a pioneer in robotics engineering. Products developed by their R & D division are used for a variety of purposes, ranging from defense to infrastructure development. It is the only organization in the country that simultaneously generates revenue and contributes to society with its business. This is an example of ________.
Answer: A
Explanation: Sustainable competitive advantage is a set of advantages that provides an entrepreneur with the opportunity to make more money where other businesses cannot easily copy the entrepreneur’s advantages. Globex Corporation is the only organization in the country that simultaneously generates revenue and contributes to society with its business.
Difficulty: 3 Hard
Topic: Sustainable Competitive Advantage
Learning Objective: 05-02 Explain what constitutes a sustainable competitive advantage.
Bloom’s: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
56) Sterling Corporation is a market leader in producing cancer medicines. Its produces top-quality products that are popular in markets around the world. Due to its brand image, it is able to manipulate prices and gain huge profits while maintaining market share. In addition, it has a highly skilled innovations team that produces unique products. This is an example of ________.
Answer: B
Explanation: Sustainable competitive advantage is defined as an advantage that others cannot immediately copy. Sterling Corporation is a market leader and is able to manipulate prices and gain huge profits while maintaining market share. Its brand image serves as a sustainable competitive advantage.
Difficulty: 3 Hard
Topic: Sustainable Competitive Advantage
Learning Objective: 05-02 Explain what constitutes a sustainable competitive advantage.
Bloom’s: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
57) Jane has developed a special Italian sauce for pizza. The sauce cannot be easily copied. This is a(n) ________.
Answer: C
Explanation: A sustainable competitive advantage is an advantage that other firms cannot immediately copy.
Difficulty: 3 Hard
Topic: Sustainable Competitive Advantage
Learning Objective: 05-02 Explain what constitutes a sustainable competitive advantage.
Bloom’s: Apply
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
58) According to the book, the greatest source of sustainable advantage is ________.
Answer: A
Explanation: The greatest source of sustainable competitive advantage is founded in personal relationships with customers.
Difficulty: 1 Easy
Topic: Sustainable Competitive Advantage
Learning Objective: 05-02 Explain what constitutes a sustainable competitive advantage.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
59) All of these are steps in identifying a sustainable competitive advantage EXCEPT
Answer: B
Explanation: The steps in identifying a sustainable competitive advantage are as follows:
Step 1: Develop a list of your business’s assets and capabilities (either existing or proposed).
Step 2: Break that list into two groups: standard and unique.
Step 3: Evaluate the unique resources or capabilities.
Difficulty: 1 Easy
Topic: Sustainable Competitive Advantage
Learning Objective: 05-02 Explain what constitutes a sustainable competitive advantage.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
60) ________ are items that include equipment or location.
Answer: C
Explanation: Tangible assets are items that include equipment or location.
Difficulty: 1 Easy
Topic: Step 1: Develop a List of Your Business’s Assets and Capabilities
Learning Objective: 05-03 Identify a new business’s assets and capabilities.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
61) ________ are the capabilities and skills of the founder(s) or employees.
Answer: D
Explanation: Intangible assets are the capabilities and skills of the founder(s) or employees.
Difficulty: 1 Easy
Topic: Step 1: Develop a List of Your Business’s Assets and Capabilities
Learning Objective: 05-03 Identify a new business’s assets and capabilities.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
62) All of these are tangible assets EXCEPT
Answer: B
Explanation: Tangible assets are hard assets such as equipment or a location. Intangible assets are those things that are not physical but are just as critical to success, such as relationships with key suppliers.
Difficulty: 1 Easy
Topic: Step 1: Develop a List of Your Business’s Assets and Capabilities
Learning Objective: 05-03 Identify a new business’s assets and capabilities.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
63) All of these are intangible items EXCEPT
Answer: C
Explanation: Tangible assets are hard assets such as equipment or a location. Intangible assets are those things that are not physical but are just as critical to success, such as relationships with key suppliers.
Difficulty: 1 Easy
Topic: Step 1: Develop a List of Your Business’s Assets and Capabilities
Learning Objective: 05-03 Identify a new business’s assets and capabilities.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
64) Which of the following is an example of tangible assets?
Answer: D
Explanation: Tangible assets include the following: industry experience, contacts, previous start-up experience, education, unique knowledge of the industry, skill set of founder(s), and name branding.
Difficulty: 1 Easy
Topic: Step 1: Develop a List of Your Business’s Assets and Capabilities
Learning Objective: 05-03 Identify a new business’s assets and capabilities.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
65) Which of the following is an example of intangible assets?
Answer: D
Explanation: Intangible assets include the following: industry experience, contacts, previous start-up experience, education, unique knowledge of the industry, skill set of founder(s), and name branding.
Difficulty: 2 Medium
Topic: Step 1: Develop a List of Your Business’s Assets and Capabilities
Learning Objective: 05-03 Identify a new business’s assets and capabilities.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
66) James has the benefit of gaining customer loyalty by being the first company to bring out a new gourmet burger. This is a form of ________.
Answer: B
Explanation: First-mover advantage is the benefit of gaining customer loyalty by being the first firm to the market.
Difficulty: 3 Hard
Topic: Step 2: Split the List into Standard and Unique Assets
Learning Objective: 05-04 Distinguish which of those assets and capabilities are standard and which are unique.
Bloom’s: Apply
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
67) ________ are firms that enter a market after the first mover.
Answer: B
Explanation: Followers are firms that enter a market after the first mover.
Difficulty: 1 Easy
Topic: Step 2: Split the List into Standard and Unique Assets
Learning Objective: 05-04 Distinguish which of those assets and capabilities are standard and which are unique.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
68) Sally copies Jamie’s hamburger restaurant by starting her own hamburger restaurant on the other side of town. This is an example of a ________.
Answer: B
Explanation: Followers are firms that enter a market after the first mover.
Difficulty: 3 Hard
Topic: Step 2: Split the List into Standard and Unique Assets
Learning Objective: 05-04 Distinguish which of those assets and capabilities are standard and which are unique.
Bloom’s: Apply
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
69) Which of the following is an example of intangible assets?
Answer: B
Explanation: Name branding is an example of intangible assets. Intangible assets are those things that are not physical but are just as critical to success, such as relationships with key suppliers.
Difficulty: 1 Easy
Topic: Step 2: Split the List into Standard and Unique Assets
Learning Objective: 05-04 Distinguish which of those assets and capabilities are standard and which are unique.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
70) Which of the following is an example of tangible assets?
Answer: C
Explanation: Software and systems for business is an example of tangible assets. Tangible assets are hard assets such as equipment or a location.
Difficulty: 1 Easy
Topic: Step 2: Split the List into Standard and Unique Assets
Learning Objective: 05-04 Distinguish which of those assets and capabilities are standard and which are unique.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
71) Which of the following is NOT a characteristic of firms that are followers?
Answer: D
Explanation: Characteristics of firms that are followers include the benefit they get by learning from the mistakes of the first movers, but it is harder to obtain the loyalty of customers if there is any to be had.
Difficulty: 2 Medium
Topic: Step 2: Split the List into Standard and Unique Assets
Learning Objective: 05-04 Distinguish which of those assets and capabilities are standard and which are unique.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
72) Identify a true statement about competitive advantage.
Answer: D
Explanation: There are several means to analyze the overall resources of a new business and develop a small list of resources and capabilities that truly provide the new business with the potential to obtain a sustainable competitive advantage. The predominant approach by strategists is the resource-based perspective.
Difficulty: 2 Medium
Topic: Step 3: Evaluate Competitiveness of Unique Resources or Capabilities
Learning Objective: 05-05 Apply a resource-based analysis approach to arrive at a list of competitive advantages.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
73) Keith is setting up a new bar in his locality. He knows that there are only a handful of bars in the area where he wishes to conduct business. He locates his bar at one of the four corners at a busy intersection. The other three corners are occupied by a clothing outlet, a restaurant, and a library, respectively. Keith knows that his bar’s location gives him a competitive advantage. In the context of the components of resource-based analysis, Keith is able to achieve competitive advantage because his product or service is ________.
Answer: A
Explanation: In the context of the components of resource-based analysis, Keith is able to achieve competitive advantage because his product or service is rare. Keith’s resource or capability is relatively unique for his industry.
Difficulty: 3 Hard
Topic: Step 3: Evaluate Competitiveness of Unique Resources or Capabilities
Learning Objective: 05-05 Apply a resource-based analysis approach to arrive at a list of competitive advantages.
Bloom’s: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
74) In the context of the components of resource-based analysis, if a firm’s resource or capability cannot be replaced easily by something else then it is said to be ________.
Answer: B
Explanation: In the context of the components of resource-based analysis, if a firm’s resource or capability cannot be replaced easily by something else then it is said to be nonsubstitutable. A substitute is not provided by a direct competitor, but it is something that satisfies the same basic need that is satisfied by the business owner’s product or service.
Difficulty: 1 Easy
Topic: Step 3: Evaluate Competitiveness of Unique Resources or Capabilities
Learning Objective: 05-05 Apply a resource-based analysis approach to arrive at a list of competitive advantages.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
75) Richard is the owner of a very popular burger joint in his locality. He knows that his burger joint’s location and excellent customer service give him a competitive advantage over other burger joints. He is conducting a research to understand if there are other burger joints that provide the same sort of services that his joint does. He also intends to know if his competitors have the financial means to do so and if they seem to care about what his joint offers. In the context of the components of resource-based analysis, Richard is trying to understand if his product or service is ________.
Answer: C
Explanation: In the context of the components of resource-based analysis, Richard is trying to understand if his product or service is durable. The time lag between the introduction of the competitive advantage and the point where competitors can match an entrepreneur’s advantage is the window where the new business can earn unique returns.
Difficulty: 3 Hard
Topic: Step 3: Evaluate Competitiveness of Unique Resources or Capabilities
Learning Objective: 05-05 Apply a resource-based analysis approach to arrive at a list of competitive advantages.
Bloom’s: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
76) Gareth is the owner of a popular car wash facility. He has a small cafe set up beside the facility where customers can have a quick snack while waiting for their vehicles. Also, he ensures that each and every customer gets the best service in town. Customers do not mind paying extra because of these reasons. In fact, Gareth noticed that in the last 6 months, he has received several new customers who were previously engaged with his competitors. In the context of the components of resource-based analysis, Gareth’s product or service is ________.
Answer: D
Explanation: In the context of the components of resource-based analysis, Gareth’s product or service is valuable. In order for a resource or capability to be a competitive advantage, the customer must be willing to pay extra because of these unique resources or capabilities.
Difficulty: 3 Hard
Topic: Step 3: Evaluate Competitiveness of Unique Resources or Capabilities
Learning Objective: 05-05 Apply a resource-based analysis approach to arrive at a list of competitive advantages.
Bloom’s: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
77) Jamie’s hamburger restaurant had financial gains from an asset or capability that are in excess of the ordinary returns in that industry. This is called a(n) ________.
Answer: D
Explanation: Economic rents are financial gains made from an asset or capability that are in excess of the ordinary returns in that particular industry.
Difficulty: 2 Medium
Topic: Step 3: Evaluate Competitiveness of Unique Resources or Capabilities
Learning Objective: 05-05 Apply a resource-based analysis approach to arrive at a list of competitive advantages.
Bloom’s: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
78) All of these are criteria in deciding extraordinary resources in a company EXCEPT:
Answer: A
Explanation: Extraordinary resources and capabilities that meet all four criteria are truly the keys to a new business’s strategy: rare, not easily substitutable, durable, and valuable.
Difficulty: 1 Easy
Topic: Step 3: Evaluate Competitiveness of Unique Resources or Capabilities
Learning Objective: 05-05 Apply a resource-based analysis approach to arrive at a list of competitive advantages.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
79) All of these are ways to establish value EXCEPT:
Answer: A
Explanation: Ways to establish value for a business include charging more to generate profit, obtaining more customers, and reducing costs relative to the competition.
Difficulty: 1 Easy
Topic: Step 3: Evaluate Competitiveness of Unique Resources or Capabilities
Learning Objective: 05-05 Apply a resource-based analysis approach to arrive at a list of competitive advantages.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
80) Strategy is a ________ field of study.
Answer: B
Explanation: A firm’s strategy is how the firm plans to use the competitive advantage of the business to accomplish its mission. Thus, the mission is the foundation on which the firm’s strategy is built. Strategy is a complex field of study.
Difficulty: 1 Easy
Topic: Strategy
Learning Objective: 05-06 Determine a strategy to match the new business mission.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
81) What are the three means to view business strategy developed by Michael Porter?
Answer: D
Explanation: Michael Porter suggests that there are fundamentally three broad means to view a business’s strategy: low cost, differentiation, and focus.
Difficulty: 1 Easy
Topic: Strategy
Learning Objective: 05-06 Determine a strategy to match the new business mission.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
82) A ________ exists when a firm finds a unique position in the market through a product or service.
Answer: A
Explanation: A differentiation approach exists when a firm finds a unique position in the market through a product, service, location, and so on.
Difficulty: 1 Easy
Topic: Strategy
Learning Objective: 05-06 Determine a strategy to match the new business mission.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
83) A ________ occurs when a firm seeks to be the lowest-cost competitor in the industry.
Answer: B
Explanation: A low-cost strategy is one where a firm seeks to be the lowest-cost competitor in the industry.
Difficulty: 1 Easy
Topic: Strategy
Learning Objective: 05-06 Determine a strategy to match the new business mission.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
84) A focus differentiation strategy revolves around
Answer: B
Explanation: A focus approach seeks to craft a business around a small set of customers, specialty products, or a small geographic approach.
Difficulty: 2 Medium
Topic: Strategy
Learning Objective: 05-06 Determine a strategy to match the new business mission.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
85) Which of the following is the first logical step in developing a firm’s strategy?
Answer: A
Explanation: There are four logical steps in developing the firm’s strategy which build on the earlier discussion of the firm’s mission statement and understanding of its capabilities. The first step is to employ the firm’s mission statement to specify where the firm is to compete and how.
Difficulty: 2 Medium
Topic: Strategy
Learning Objective: 05-06 Determine a strategy to match the new business mission.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
86) ________ are resources that combine to allow a firm to do things better than its competitors.
Answer: Capabilities
Explanation: Capabilities are resources that combine to allow a firm to do things better than its competitors.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
87) A ________ is a measure to evaluate whether a person or firm is meeting stated goals.
Answer: metric
Explanation: A metric is a measure to evaluate whether a person or firm is meeting stated goals.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
88) ________ measures are tied to financial or strategic goals of a company.
Answer: Quantitative
Explanation: Quantitative measures are tied to financial or strategic goals of a company.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
89) ________ measures deal with the “feel” of an organization.
Answer: Qualitative
Explanation: Qualitative measures deal with the “feel” of an organization.
Difficulty: 1 Easy
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Remember
AACSB: Analytical Thinking
90) ________ is where a company has an advantage that other firms cannot immediately copy.
Answer: Sustainable competitive advantage
Explanation: A sustainable competitive advantage is where a company has an advantage that other firms cannot immediately copy.
Difficulty: 1 Easy
Topic: Sustainable Competitive Advantage
Learning Objective: 05-02 Explain what constitutes a sustainable competitive advantage.
Bloom’s: Remember
AACSB: Analytical Thinking
91) ________ assets are the capabilities and skills of the founder(s) or employees.
Answer: Intangible
Explanation: Intangible assets are the capabilities and skills of the founder(s) or employees.
Difficulty: 1 Easy
Topic: Step 1: Develop a List of Your Business’s Assets and Capabilities
Learning Objective: 05-03 Identify a new business’s assets and capabilities.
Bloom’s: Remember
AACSB: Analytical Thinking
92) ________ is the benefit of gaining customer loyalty by being the first firm to provide a new product or service in the market.
Answer: First-mover advantage
Explanation: First-mover advantage is the benefit of gaining customer loyalty by being the first firm to provide a new product or service in the market.
Difficulty: 1 Easy
Topic: Step 2: Split the List into Standard and Unique Assets
Learning Objective: 05-04 Distinguish which of those assets and capabilities are standard and which are unique.
Bloom’s: Remember
AACSB: Analytical Thinking
93) ________ are the financial gains gathered from an asset or capability that are in excess of the ordinary returns in that particular industry.
Answer: Economic rents
Explanation: Economic rents are the financial gains gathered from an asset or capability that are in excess of the ordinary returns in that particular industry.
Difficulty: 1 Easy
Topic: Step 3: Evaluate Competitiveness of Unique Resources or Capabilities
Learning Objective: 05-05 Apply a resource-based analysis approach to arrive at a list of competitive advantages.
Bloom’s: Remember
AACSB: Analytical Thinking
94) A ________ is a broad approach that a small business will use to accomplish its mission.
Answer: strategy
Explanation: A strategy is a broad approach that a small business will use to accomplish its mission.
Difficulty: 1 Easy
Topic: Strategy
Learning Objective: 05-06 Determine a strategy to match the new business mission.
Bloom’s: Remember
AACSB: Analytical Thinking
95) Describe how a mission statement and strategy assist in the success of a business.
Answer: The mission statement and strategy guide a business through its crucial stage. Companies need to review and change their mission statement and strategy if there are problems. The mission statement keeps the firm targeted on specific areas and opportunities. The mission statement helps a new business specify what the company does best.
Difficulty: 2 Medium
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Understand
AACSB: Analytical Thinking
96) List and describe the elements of designing a mission statement.
Answer: The five elements to keep in mind while crafting a mission statement are as follows:
Difficulty: 2 Medium
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Understand
AACSB: Analytical Thinking
97) Explain and give examples of the two metrics in establishing measurable goals.
Answer: It is recommended that each organization develop between five and eight measures of success for its venture. These are broken up into two categories: (1) quantitative measures—those that are tied to the financial or strategic goals of the organization and are easily measured—and (2) qualitative measures—those that are tied to the strategic goals of the organization but have more to do with the “feel” of the organization.
Difficulty: 2 Medium
Topic: Mission Statements
Learning Objective: 05-01 Recognize how mission statements guide a new business.
Bloom’s: Understand
AACSB: Analytical Thinking
98) Explain the three steps for identifying a sustainable competitive advantage.
Answer: The three steps for identifying a sustainable competitive advantage for a business are as follows:
Step 1: Developing a list of the business’s assets and capabilities (either existing or proposed).
Step 2: Breaking that list into two groups: standard and unique.
Step 3: Evaluating the unique resources or capabilities.
Difficulty: 2 Medium
Topic: Sustainable Competitive Advantage
Learning Objective: 05-02 Explain what constitutes a sustainable competitive advantage.
Bloom’s: Understand
AACSB: Analytical Thinking
99) Why is it critical for owners of apps to build strong personal relationships with customers?
Answer: For products like apps, it is difficult to determine what the competitive advantage for the business will be. It is typically impossible to prevent someone from developing a similar application. Many entrepreneurial businesses find that their greatest source of sustainable advantage is founded in personal relationships with their customers. The development of a compelling personal relationship is something that large organizations find quite difficult. Building the relationship with a customer for the new firm may be as simple as acknowledging the customer when the business owner sees him or her, or as complex as knowing what a customer buys and contacting her when a new shipment arrives. The long-term difficulty for a new-business owner comes from setting expectations now that he or she will be able to maintain in the future. For an app, customer relationships are critical. An entrepreneur may not be able to prevent other entrants, but if he or she has a loyal customer, the other app will have to be dramatically better or cheaper to have someone switch. Building that customer loyalty before others enter the market is critical.
Difficulty: 2 Medium
Topic: Sustainable Competitive Advantage
Learning Objective: 05-02 Explain what constitutes a sustainable competitive advantage.
Bloom’s: Understand
AACSB: Analytical Thinking
100) What is the difference between a tangible and an intangible asset? Provide examples.
Answer: The owner, or founding team, needs to develop a complete list of all the tangible and intangible assets that the company will have at its founding. Tangible assets are hard assets such as equipment or a location. Intangible assets are those things that are not physical but are just as critical to success, such as relationships with key suppliers. A key part of intangible assets are the capabilities and skills of the founder(s) or employees.
Difficulty: 2 Medium
Topic: Step 1: Develop a List of Your Business’s Assets and Capabilities
Learning Objective: 05-03 Identify a new business’s assets and capabilities.
Bloom’s: Understand
AACSB: Analytical Thinking
101) List the four criteria for developing an unorthodox capability.
Answer: The four criteria for developing an unorthodox capability are as follows: rare, nonsubstitutable, durable, and valuable.
Difficulty: 1 Easy
Topic: Step 3: Evaluate Competitiveness of Unique Resources or Capabilities
Learning Objective: 05-05 Apply a resource-based analysis approach to arrive at a list of competitive advantages.
Bloom’s: Remember
AACSB: Analytical Thinking
102) Describe the four logical steps in developing a firm’s strategy.
Answer: The four logical steps in developing a firm’s strategy are as follows:
Step 1: Specify where the firm is to compete and how.
Step 2: Specify a series of items that will be used to meet each part of the mission statement or strategy.
Step 3: Ensure that the strategy meets the criteria of being defendable for a length of time and generates economic returns above the industry average.
Step 4: Ensure that the strategy is constantly reevaluated.
Difficulty: 2 Medium
Topic: Strategy
Learning Objective: 05-06 Determine a strategy to match the new business mission.
Bloom’s: Understand
AACSB: Analytical Thinking
103) According to Michael Porter, what are the three broad means to view a business’s strategy? Why do firms use a combination of these strategies?
Answer: Michael Porter suggests that there are three broad means to view a business’s strategy: low cost, differentiation, or focus. A low-cost strategy is one where the firm seeks to be the lowest-cost competitor in the industry. A differentiation approach is one where the firm finds a unique position in the market through product, service, location, and the like. A focus approach seeks to craft a business around a small set of customers, specialty products, or a small geographic approach. Porter goes on to argue that firms can combine their focus approach with one of the other strategies; thus, there could be a focus differentiation or a focus low-cost strategy. As a practical matter, most new firms pursue a combination of these broad categories. The result is a value strategy in which some combination of cost and differentiation is employed as the firm seeks to serve a focus population of some type. A key reason for this combined strategy is that a new business is only rarely the absolute lowest-cost competitor in an industry (especially in an industry that is well established). Similarly the new business will also find it difficult to be differentiated along all dimensions of a product or service (and actually may not really wish to be). A value strategy that mixes cost and differentiation can also help a firm evolve its strategy as its industry changes.
Difficulty: 2 Medium
Topic: Strategy
Learning Objective: 05-06 Determine a strategy to match the new business mission.
Bloom’s: Understand
AACSB: Analytical Thinking
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
