Launching New Ventures An Entrepreneurial Approach 6th Edition By Kathleen R. Allen - Test Bank

Launching New Ventures An Entrepreneurial Approach 6th Edition By Kathleen R. Allen – Test Bank

 

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Sample Questions Are Posted Below

 

Chapter 5—Analyzing the Industry and Market

 

TRUE/FALSE

 

1. Entrepreneurs identify their primary customers by recognizing a need, or pain, in the market.

 

ANS:  T                    PTS:   1                    REF:   p.94

 

2. The North American Industry Classification System (NAICS) is the classification system that was developed by the United States, Canada, and Mexico to identify industries and to allow for common standards and statistics across North America.

 

ANS:  T                    PTS:   1                    REF:   p. 97

 

3. Industries remain static or stable over time, so it is easy for the entrepreneur to research and understand the industry.

 

ANS:  F                    PTS:   1                    REF:   p. 99

 

4. There are seven stages in the industry life cycle.

 

ANS:  F                    PTS:   1                    REF:   p. 100

 

5. For every industry, the life cycle stages occur at different times and vary in duration.

 

ANS:  T                    PTS:   1                    REF:   p. 101

 

6. Radical change occurs in industries when an innovation results in the obsolescence of previous technology and drives old-line companies out of business.

 

ANS:  T                    PTS:   1                    REF:   p. 102

 

7. The government can limit entry to an industry or market through strict licensing requirements and by limiting access to raw materials via laws or high taxes and to certain locations by means of zoning restrictions.

 

ANS:  T                    PTS:   1                    REF:   p. 105

 

8. Target market research provides some of the least important data needed to decide who the first customer will be.

 

ANS:  F                    PTS:   1                    REF:   p. 111

 

9. The market research process consists of seven steps.

 

ANS:  F                    PTS:   1                    REF:   p. 112

 

10. The most important data that entrepreneurs can collect on potential customers are primary data derived from observation, online or in-person surveys, phone surveys, interviews, and informal focus groups.

 

ANS:  T                    PTS:   1                    REF:   p. 113

 

MULTIPLE CHOICE

 

1. A/An ____ is a grouping of competitors that an entrepreneur targets.

a.	industry
b.	external environment
c.	target market
d.	market
e.	None of these choices

 

 

ANS:  D                    PTS:   1                    REF:   p. 94

 

2. A/An ____ analysis includes the political, sociocultural, economic, and technological environments in which the new venture will operate.

a.	market
b.	industry
c.	PEST
d.	anthropological
e.	demographic

 

 

ANS:  C                    PTS:   1                    REF:   p. 109

 

3. The industry in which a new venture will operate is the business’s ____.

a.	external environment
b.	target demographic
c.	target market
d.	first customer
e.	None of these choices

 

 

ANS:  A                    PTS:   1                    REF:   p. 95

 

4. Google, Wikipedia, journals, and trade magazines are examples of ____.

a.	industry analysis
b.	market research
c.	primary sources
d.	secondary sources
e.	None of these choices

 

 

ANS:  D                    PTS:   1                    REF:   p. 97

 

5. To access the timeliest information, it is important to gather ____ on an industry.

a.	secondary data
b.	primary data
c.	blogs and social networking
d.	trade associations
e.	None of these choices

 

 

ANS:  B                    PTS:   1                    REF:   p. 113

 

6. As more firms enter an industry, intense ____ occurs.

a.	growth
b.	adaptation
c.	differentiation
d.	shakeout
e.	decline

 

 

ANS:  C                    PTS:   1                    REF:   p. 100

 

7. The ____ period moves the industry from many companies and high product costs, to a more stable industry with only a few efficient firms.

a.	growth
b.	adaptation
c.	differentiation
d.	shakeout
e.	maturity

 

 

ANS:  D                    PTS:   1                    REF:   p. 101

 

8. ____ change is found in industries where resources turn over frequently and must continually be replaced.

a.	Progressive
b.	Intermediating
c.	Radical
d.	Creative
e.	None of these choices

 

 

ANS:  D                    PTS:   1                    REF:   p. 102

 

9. ____ has provided a way of effectively looking at the structure of an industry and at a company’s competitive strength and positioning relative to that industry and to the markets it serves.

a.	Porter’s Five Forces
b.	PEST
c.	Market research
d.	Industry analysis
e.	None of these choices

 

 

ANS:  A                    PTS:   1                    REF:   p. 103

 

10. Brand equity, advertising expense, and the rate of industry growth are part of which of Porter’s forces?

a.	Threat of substitute products
b.	Customer bargaining power
c.	Supplier bargaining power
d.	Threat of new market entrants
e.	Intensity of competitive rivalry

 

 

ANS:  E                    PTS:   1                    REF:   p. 104

 

11. The “first customer” is the customer who pays for the product or service and is the customer with the most ____.

a.	money
b.	time
c.	pain
d.	All of these choices
e.	None of these choices

 

 

ANS:  C                    PTS:   1                    REF:   p. 111

 

12. “How is the industry described?,” “Is the industry growing?,” and “Where are the opportunities?” are all examples of the questions that should be answered when conducting the ____.

a.	industry trajectories
b.	industry analysis
c.	PEST analysis
d.	target market analysis
e.	first customer analysis

 

 

ANS:  B                    PTS:   1                    REF:   p. 95

 

13. It is best to begin researching the industry by using ____ information about the industry.

a.	primary
b.	secondary
c.	market life cycle
d.	customer bargaining power
e.	None of these choices

 

 

ANS:  B                    PTS:   1                    REF:   p. 97

 

14. Birth, growth and adaptation, and shakeout are stages of the ____ life cycle.

a.	product
b.	market
c.	industry
d.	company
e.	All of these choices

 

 

ANS:  C                    PTS:   1                    REF:   p. 99

 

15. A new industry goes through volatile and rapid changes as companies and their respective technologies jockey for position and the right to determine industry standards. This is what stage of the industry life cycle?

a.	Birth
b.	Shakeout
c.	Differentiation and competition
d.	Growth and adaptation
e.	Maturity and decline

 

 

ANS:  D                    PTS:   1                    REF:   p. 101

 

16. ____ change takes place as companies in the industry grow geographically and increase profits through innovations in operations, processes, distribution, and technology.

a.	Radical
b.	Creative
c.	Progressive
d.	Intermediating
e.	Internet

 

 

ANS:  C                    PTS:   1                    REF:   p. 102

 

17. The model most commonly used to help an entrepreneur analyze an industry is ____.

a.	Porter’s Four Forces Model
b.	Porter’s Five Forces Model
c.	the PEST Model
d.	the SWOT Analysis Model
e.	None of these choices

 

 

ANS:  B                    PTS:   1                    REF:   p. 102

 

18. What is the phrase that is associated with the costs to produce a product when those costs have declined relative to the price of industry’s goods and services?

a.	Threat of new entrants
b.	Price and quality of alternatives
c.	Switching costs
d.	Economies of scale
e.	Costs of inputs

 

 

ANS:  D                    PTS:   1                    REF:   p. 103

 

19. To analyze specific aspects of the macro-environment, an entrepreneur should use ____.

a.	a SWOT analysis
b.	a PEST analysis
c.	Five Forces analysis
d.	All of these choices
e.	None of these choices

 

 

ANS:  B                    PTS:   1                    REF:   p. 109

 

20. Analyzing the government, demographics, cost of capital, and rate of change are all part of the ____.

a.	PEST analysis
b.	Five Forces Analysis
c.	“rivalry among existing firms” analysis
d.	“suppliers’ bargaining power” analysis
e.	All of these choices

 

 

ANS:  A                    PTS:   1                    REF:   p. 109

 

21. Identifying and profiling the first customer, estimating potential demand from that customer, and identifying subsequent customer segments and needs to grow the company are goals of market research for ____.

a.	a new company
b.	a mature company
c.	all companies, large and small
d.	companies in decline
e.	All of these choices

 

 

ANS:  A                    PTS:   1                    REF:   p. 111

 

22. The ____ is an unserved niche that enables the entrepreneur to enter a market with no direct competition for a time.

a.	general customer base
b.	first customer
c.	supplier
d.	industry
e.	None of these choices

 

 

ANS:  B                    PTS:   1                    REF:   p. 111

 

23. A good starting point for gathering secondary market data is ____.

a.	the library
b.	other companies
c.	the Internet
d.	the buying habits of potential customers
e.	All of these choices

 

 

ANS:  C                    PTS:   1                    REF:   p. 111

 

24. The market research process has ____ steps.

a.	seven
b.	five
c.	four
d.	nine
e.	two

 

 

ANS:  C                    PTS:   1                    REF:   p. 112

 

25. The second step in the market research process is ____.

a.	assessing information needs
b.	measuring the target market with primary research
c.	determining what methods of analysis will be used
d.	researching secondary data
e.	forecasting demand for the product or service

 

 

ANS:  D                    PTS:   1                    REF:   p. 112

 

26. Observation, online or in-person surveys, phone surveys, interviews, and informal focus group are all ways to collect ____ data.

a.	secondary
b.	primary
c.	third-party
d.	sample
e.	All of these choices

 

 

ANS:  B                    PTS:   1                    REF:   p. 113

 

27. ____ is the first step in an anthropological approach to customer observation.

a.	Induction
b.	Abduction
c.	Deduction
d.	Testing
e.	Interviewing

 

 

ANS:  A                    PTS:   1                    REF:   p. 114

 

28. Providing more opportunity for clarification and discussion, the observation of nonverbal communication, and the high response rate are all examples of the advantages of ____.

a.	in-person surveys
b.	structured interviews
c.	informal focus groups
d.	phone surveys
e.	anthropological observation

 

 

ANS:  B                    PTS:   1                    REF:   p. 115

 

29. Age, income level, education, and buying habits are all components of the ____.

a.	competitor profile
b.	customer profile
c.	supplier profile
d.	industry profile
e.	SurveyMonkey profile

 

 

ANS:  B                    PTS:   1                    REF:   pp. 118-119

 

30. A/An ____ lays out the benefits, distribution channel, product/service, and potential competition for each identified customer segment.

a.	customer matrix
b.	market matrix
c.	customer profile
d.	industry profile
e.	None of these choices

 

 

ANS:  A                    PTS:   1                    REF:   pp. 117-118

 

SHORT ANSWER

 

1. Briefly discuss how an entrepreneur would collect competitor data.

 

ANS:

Visit competitors’ websites or the outlets where their products are sold. Buy competitors’ products to understand the differences in features and benefits. Use Internet search engines to read what customers are saying about competitors. Find information on public companies to serve as benchmarks for the industry.

 

PTS:   1                    REF:   pp. 122-123

 

2. Cite five of the issues that should be addressed in the industry analysis.

 

ANS:

Examples of some issues are as follows. How is the industry described? Is the industry growing? Where are the opportunities? What is the status of any new technology? How much do industry companies spend on research and development? Who are the opinion leaders in the industry? Are there young, successful firms in the industry? What does the future look like? Are there any threats to the industry? What are the typical margins in the industry?

 

PTS:   1                    REF:   pp. 95-96

 

3. Discuss the purpose of the North American Industry Classification System (NAICS), and indicate what countries are part of the system.

 

ANS:

The purpose of the NAICS is to identify industries and allow for common standards and statistics across North America. It covers 350 new industries that have never been coded before. With the NAICS code, one can find statistics about size of the industry, sales, number of employees, and so forth. The United States, Canada, and Mexico are the countries that use the NAICS.

 

PTS:   1                    REF:   PP. 97-98

 

4. Briefly discuss the six sources of primary industry data.

 

ANS:

Sources include: industry observers, suppliers and distributors, customers, employees of key firms in the industry, professionals from service organizations, and trade shows.

 

PTS:   1                    REF:   P. 99

 

5. Briefly discuss the components/elements of the industry life cycle.

 

ANS:

Birth – the emergence of a new industry. Growth and adaptation – the new industry goes through volatile and rapid growth as companies jockey for position to determine industry standards. Differentiation and competition – intense product differentiation occurs because the industry’s standards and proprietary rights no longer provide the exclusivity they once did. Shakeout – when competition is the most intense, those companies that are unable to compete leave. Maturity and decline – the industry reaches a mature state in which several major players dominate. Earnings and sales growth slow and decline.

 

PTS:   1                    REF:   99-102

 

6. Discuss the four major industry trajectories that signal how fast change occurs in a particular industry.

 

ANS:

Progressive – incremental innovation. Intermediating – value chain innovation. Radical – disruptive innovation. Creative – resource intense.

 

PTS:   1                    REF:   p. 102

 

7. Briefly discuss Porter’s Five Forces Framework that is used to analyze an industry.

 

ANS:

Threat of New Market Entrants, Supplier Bargaining Power, Intensity of Competitive Rivalry, Threat of Substitute Products, and Customer Bargaining Power.

 

PTS:   1                    REF:   pp. 103-107

 

8. Briefly discuss the elements of a PEST analysis.

 

ANS:

Political – government, regulatory, and legal. Economic – cost of capital, inflation, customer purchasing power, and employment rate. Sociocultural – demographics and culture. Technological – R&D and rate of change. The bottom line is that for any new business, a thorough understanding of the context in which the business will operate is essential to success and long-term survivability.

 

PTS:   1                    REF:   p. 109

 

9. Briefly discuss the Four-Step Market Research Process.

 

ANS:

Assess your information needs. How will the data be used, and what data need to be collected? Research secondary sources first. Determine the demographics and psychographics of the customer. Measure the target market with primary research. What are the demographics of the customers? Would they purchase your product? How much would they purchase? Forecast demand for the product. What do substitute products/services tell you about demand? What do customers predict demand will be? Can you do a limited production or test market?

 

PTS:   1                    REF:   p. 112

 

10. Discuss some of the things that should be taken into account when constructing a questionnaire.

 

ANS:

Keep the questionnaire short, with lots of white space, so that the respondent is not intimidated by the task; be careful not to ask leading or biased questions; ask easy, simple questions first, progressing gradually to the more complex ones; and ask demographic question last.

 

PTS:   1                    REF:   p. 116