ENTREPRENEURSHIP The Art, Science, and Process for Success 3Rd Edition By Charles Bamford - Test Bank

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.

1. A) Core values
2. B) Mission statements
3. C) Strategies
4. D) Goal statements

 

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 ________.

1. A) the overall strategy
2. B) goals
3. C) simple rules
4. D) All of these

 

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

1. A) helps the business by targeting its efforts in specific areas.
2. B) helps the business specify what the business does best.
3. C) helps the business stay away from things that sound promising but away from its focus.
4. D) all of these.

 

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.

1. A) Trade-outs
2. B) Measurable goals
3. C) Analytical tools
4. D) Capabilities

 

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 ________.

1. A) measurable
2. B) actionable
3. C) dynamic
4. D) stagnant

 

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?

1. A) The statement must be understandable and memorable for all those who come in contact with it.
2. B) The statement must be worded in a complex fashion in order to have the maximum impact.
3. C) The statement must include lots of adjectives and descriptive language about how the company will accomplish its mission.
4. D) The statement must be like a tome that describes everything that the founder has done and might do.

 

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?

1. A) Orthodox and unorthodox
2. B) Quantitative and qualitative
3. C) Actionable and nonactionable
4. D) Tangible and intangible

 

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?

1. A) They are tied to the strategic or financial goals of an organization.
2. B) They are not easy to develop.
3. C) They can be difficult to implement.
4. D) They are specific in nature.

 

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?

1. A) It does not impact the implementation of the mission statement.
2. B) It requires a deep understanding of customers’ needs.
3. C) It should be maintained in the business as long as possible.
4. D) It cannot be copied immediately by others.

 

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.

1. A) Orthodox practices
2. B) Unorthodox practices
3. C) Sustainable competitive advantage
4. D) Tangible assets

 

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 ________.

1. A) entrepreneurial breakeven
2. B) sustainable competitive advantage
3. C) benchmarking
4. D) bootstrap marketing

 

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 ________.

1. A) a harvest plan
2. B) entrepreneurial breakeven
3. C) sustainable competitive advantage
4. D) bootstrap marketing

 

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 ________.

1. A) bounded rationality
2. B) organizational slack
3. C) entrepreneurial breakeven
4. D) sustainable competitive advantage

 

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 ________.

1. A) sustainable competitive advantage
2. B) benchmarking
3. C) bounded rationality
4. D) organizational slack

 

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 ________.

1. A) benchmarking
2. B) sustainable competitive advantage
3. C) bootstrap marketing
4. D) organizational slack

 

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) ________.

1. A) orthodox practice
2. B) unorthodox practice
3. C) sustainable competitive advantage
4. D) tangible asset

 

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 ________.

1. A) personal relationships with customers
2. B) location
3. C) staffing
4. D) relationships with vendors

 

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

1. A) develop a list of the business assets and capabilities.
2. B) develop a list of all potential customers.
3. C) break the list of capabilities into standard and unique.
4. D) evaluate the unique resources.

 

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.

1. A) Critical assets
2. B) System assets
3. C) Tangible assets
4. D) Intangible assets

 

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.

1. A) System assets
2. B) Critical assets
3. C) Tangible assets
4. D) Intangible assets

 

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

1. A) location.
2. B) industry experience.
3. C) computer systems.
4. D) business license.

 

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

1. A) industry experience.
2. B) education.
3. C) initial financing.
4. D) name branding.

 

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?

1. A) Industry experience
2. B) Contacts
3. C) Education
4. D) All of these

 

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?

1. A) Previous start-up experience
2. B) Unique knowledge of the industry
3. C) Skill set of founder(s)
4. D) All of these

 

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 ________.

1. A) sustainable competitive advantage
2. B) first-mover advantage
3. C) leader advantage
4. D) tangible assets advantage

 

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.

1. A) Second movers
2. B) Followers
3. C) Nonleaders
4. D) Market movers

 

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 ________.

1. A) second mover
2. B) follower
3. C) nonleader
4. D) market mover

 

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?

1. A) Inventory
2. B) Name branding
3. C) Building location
4. D) Initial financing

 

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?

1. A) Education
2. B) Previous start-up experience
3. C) Software and systems for business
4. D) Unique knowledge of the industry

 

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?

1. A) They do not get the loyalty of customers.
2. B) They can benefit by learning from the first movers.
3. C) They are the firms that enter the market after the first mover.
4. D) They are often more successful than the first-mover firms because they do not repeat their predecessor’s mistakes.

 

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.

1. A) Successful businesses generally have only one source of competitive advantage.
2. B) Businesses must develop an effective mission statement before developing a list of what might constitute its competitive advantage.
3. C) An effective mission statement and sustainable advantage are mutually independent of each other.
4. D) The predominant approach used by strategists to gain competitive advantage is the resource-based perspective.

 

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 ________.

1. A) rare
2. B) nonsubstitutable
3. C) durable
4. D) valuable

 

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 ________.

1. A) valuable
2. B) nonsubstitutable
3. C) durable
4. D) rare

 

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 ________.

1. A) valuable
2. B) rare
3. C) durable
4. D) nonsubstitutable

 

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 ________.

1. A) rare
2. B) nonsubstitutable
3. C) durable
4. D) valuable

 

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) ________.

1. A) extraordinary asset
2. B) venture capability
3. C) good business decision
4. D) economic rent

 

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:

1. A) elastic.
2. B) rare.
3. C) valuable.
4. D) durable.

 

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:

1. A) developing rapport with the customer.
2. B) charging more.
3. C) obtaining more customers.
4. D) reducing costs to the customer.

 

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.

1. A) simple
2. B) complex
3. C) varied
4. D) convoluted

 

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?

1. A) High cost, unsuitable, and focus
2. B) Low cost, unsuitable, and focus
3. C) High cost, differentiation, and focus
4. D) Low cost, differentiation, and focus

 

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.

1. A) differentiation approach
2. B) low-cost approach
3. C) first-mover approach
4. D) sustainable competitive advantage approach

 

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.

1. A) differentiation approach
2. B) low-cost approach
3. C) first-mover approach
4. D) sustainable competitive advantage approach

 

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

1. A) knowing all your potential customers.
2. B) crafting a business with small geographic approach.
3. C) establishing measurable goals.
4. D) making the capability valuable.

 

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?

1. A) Employing a firm’s mission statement to specify where the firm is to compete and how
2. B) Laying out a detailed strategic plan to specify a series of resources that will be used to meet each part of the mission and strategy
3. C) Ensuring that the strategy meets the criterion of being defendable for some length of time
4. D) Evaluating the strategy constantly to ensure that the competitive advantage relative to the firm’s competitors is still relevant

 

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:

 

1. Keep it short

 

2. Keep it simple

 

3. Make it applicable

 

4. Be specific

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