Small Business Management Entrepreneurship and Beyond 5th Edition by Timothy S. Hatten - Test Bank

Small Business Management Entrepreneurship and Beyond 5th Edition by Timothy S. Hatten – Test Bank

 

Instant Download – Complete Test Bank With Answers

 

 

Sample Questions Are Posted Below

 

chapter 7

Starting a New Business

 

True/False Questions

1. T F    According to the chapter opening case, Derek Johnson had success in starting his own business while still in college.

Ans:  True      LO:  1       Page:  157                   AACSB:  Analytic

2. T F    During times of economic hardship and near double-digit unemployment, people are less likely to start their own businesses.

Ans:  False     LO:  1       Page:  157                   AACSB:  Analytic

3. T F    Beginning a new business is easier than buying an existing business or franchise because you can do everything right the first time.

Ans:  False       LO:  1       Page:  157                  AACSB: Analytic

4. T F    A desire for total independence may mean a person is ready to start their own business.

Ans:  True       LO:  1       Page:  158                   AACSB: Analytic

5. T F    The biggest disadvantage of beginning an e-business is that compared to a traditional business, you need a higher amount of overhead to become established and successful.

Ans:  False       LO:  2       Page:  159                 AACSB:  Technology

6. T F    E-business has made all other business models obsolete.

Ans:  False       LO:  1       Page:  159                  AACSB: Technology

7. T F    To run a successful Web business, logistics are huge.

Ans:  True     LO:  2       Page:  160                    AACSB:  Analytic

8. T F    About 50 percent of home-based businesses deal with financial and service-related businesses.

Ans:  False       LO:  2       Page:  160                  AACSB: Analytic

9. T F    The fastest growing segment of business startups are home-based businesses.

Ans:  True       LO:  2       Page:  160                   AACSB: Analytic

10. T F    Most people quit their current jobs when starting their new business.

Ans:  False       LO:  2       Page:  161                  AACSB: Analytic

11. T F    Most fast-growth companies are started by partnerships.

Ans:  True       LO:  2       Page:  162                   AACSB: Analytic

12. T F    A majority of high-growth CEOs had at least 10 years of experience in the industry before beginning a new business.

Ans:  True       LO:  2       Page:  162                   AACSB: Analytic

13. T F    There is no difference between an idea and an opportunity.

Ans:  False       LO:  3       Page:  162                     AACSB: Analytic

14. T F    Fast-growth start-ups tend to be headed by people who have started other businesses.

Ans:  True     LO:  2       Page:  162                    AACSB:  Analytic

15. T F   The first thing you need to start a new business is a business plan.

Ans:  False    LO:  3      Page:  162                     AACSB:  Analytic

16. T F    Figure 7.1 in the text on Inc. 500 companies shows that most Inc. 500 companies are started by partners.

Ans:  True       LO:  2       Page:  163                   AACSB: Analytic

17. T F    Figure 7.1 in the text on Inc. 500 companies shows that few of the CEOs take a salary over $100,000.

Ans:  False       LO:  2       Page:  163                  AACSB: Analytic

18. T F    Windows of opportunity seldom open and close since the markets for products and services seldom change.

Ans:  False       LO:  3       Page:  165                  AACSB: Analytic

19. T F    Figure 7.2 shows that windows of opportunity don’t close.

Ans:  False       LO:  3       Page:  165                  AACSB: Analytic

20. T F    As a product progresses through the product life cycle, the window of opportunity for the product concept widens.

Ans:  False      LO:  3       Page:  165  AACSB:  Analytic

21. T F    In the idea stage, what a small business owner needs is people who can be objective about the new business idea and point out shortcomings.

Ans:  True       LO:  3       Page:  165                   AACSB: Analytic

22. T F    The most common source of ideas for new businesses comes from education courses taken by potential new business owners.

Ans:  False       LO:  3       Page:  166                  AACSB: Analytic

23. T F    When deciding whether an idea represents an opportunity that should be pursued, it is important to trust research and ignore intuition.

Ans:  False      LO:  3       Page:  166                  AACSB:  Analytic

24. T F    The corridor principle describes how business opportunities can be projected far into the future.

Ans:  False       LO:  3       Page:  166                  AACSB: Analytic

25. T F    Turning a hobby into a business is a viable route to self-employment.

Ans:  True       LO:  3       Page:  167                   AACSB: Analytic

26. T F    New ideas occur to small business owners three times as often after the business is running than before it began.

Ans:  False       LO:  3       Page:  167                  AACSB: Analytic

27. T F    Sometimes business opportunities come unexpectedly, and the small business owner must then take advantage of that opportunity presented.

Ans:  True       LO:  3       Page:  167                   AACSB: Analytic

28. T F    The most critical concern in getting a business off the ground is the feasibility of the idea.

Ans:  True       LO:  3       Page:  168                   AACSB: Analytic

29. T F    In addition to a business plan, a market analysis, competitive analysis, and startup costs are important to success.

Ans:  True       LO:  4       Page:  169                   AACSB: Analytic

30. T F    Companies that pursue operational excellence know that their customers value low price.

Ans:  True      LO:  4      Page:  171                    AACSB:  Analytic

31. T F    Thomas Edison is the most prolific inventor of all time, with 1,093 patents.

Ans:  True       LO:  3       Page:  172                   AACSB: Analytic

32. T F    Focusing on one-time sales with individual customers is the premise behind the customer intimacy model.

Ans:  False       LO:  4       Page:  172                 AACSB:  Analytic

33. T F    Customer service could be the competitive advantage for a business.

Ans:  True       LO:  4       Page:  173                   AACSB: Analytic

 

34. T F    The name of the business must be filed with the secretary of state in the state where the business is being formed.

Ans:  True       LO:  4       Page:  173                   AACSB: Analytic

35. T F    When a business begins operations, advance payments of estimated federal and possibly state income taxes must be paid.

Ans:  True       LO:  4       Page:  173                   AACSB: Analytic

36. T F    If a person provides services to a business but is not an employee of the business, they are considered dependent contractors.

Ans:  False       LO:  4       Page:  174                  AACSB: Analytic

37. T F    Withholding for Social Security taxes is 9.25 percent, which the employer must match.

Ans:  False       LO:  4       Page:  174                  AACSB: Analytic

 

Multiple Choice Questions

38. While still in his 20s, according to the chapter opening case, Derek Johnson founded all of the following technology-related companies except
39. a) Short Message Service
40. b) com
41. c) Derek Media
42. d) Twitter

Ans:  d       LO:  1       Page:  157                        AACSB:  Analytic

39. Which of the following increases when beginning a new business rather than buying an existing business?
40. a) Frustration
41. b) Income
42. c) Risk
43. d) Profit potential

Ans:  c       LO:  1       Page:  157                          AACSB: Analytic

40. Starting a business because other job opportunities have evaporated during times of economic hardship is referred to as
41. a) Frugal business advantage
42. b) Necessary entrepreneurship
43. c) Fiscal entrepreneurship
44. d) Economic advantage

Ans:  b       LO:  1       Page:  157                         AACSB:  Analytic

41. As a result of the recent economic recession, Bart was laid off from his corporate finance job indefinitely. With little planning, he eventually started his own business as a financial management consultant, helping small business owners keep afloat financially during tough economic times.  This is a classic example of
42. a) Frugal business advantage
43. b) Necessary entrepreneurship
44. c) Fiscal entrepreneurship
45. d) Economic advantage

Ans:  b       LO:  1       Page:  157                        AACSB:  Reflective Thinking

42. No matter what type of business a person is starting, the most important resource is
43. a) Capital
44. b) Assets
45. c) Experience
46. d) Time

Ans:  d       LO:  1       Page:  158                         AACSB: Analytic

43. In the beginning of a new business, the only thing the new business person has is
44. a) Vision
45. b) Capital
46. c) Assets
47. d) A customer base

Ans:  a       LO:  1       Page:  158                         AACSB: Analytic

44. According to data from the Small Business Success Index, which of the following is true?
45. a) The median age for a U.S. small business owner is 49.5 years
46. b) 44 percent of U.S. small business owners are female
47. c) 75 percent of U.S. small business owners have a college degree
48. d) 16 percent of U.S. small business owners started the business

Ans:  a       LO:  1       Page:  158                        AACSB:  Analytic

45. Wanda has dreams of opening her own pet shop called “Wanda’s Aquarium”. Aside from think of a name and how her store will look, she has done very little planning at this very early stage.  All she currently has is
46. a) A strategy
47. b) Financial means
48. c) An objective
49. d) A vision

Ans:  d       LO:  2       Page:  158                        AACSB:  Reflective Thinking

46. Which of the following is not an advantage of new business startups?
47. a) Freedom to create
48. b) Ability to create a distinctive competitive advantage
49. c) No negative image due to someone else’s mistake
50. d) Well-established clientele

Ans:  d       LO:  1       Page:  158                         AACSB: Analytic

47. The risk of failure is greater with
48. a) Existing businesses
49. b) Franchises
50. c) Startups
51. d) Existing family-owned businesses

Ans:  c       LO:  1       Page:  158                          AACSB: Analytic

48. Which of the following is not a disadvantage to new business startups?
49. a) Problems in identifying area market needs
50. b) Finding motivated employees
51. c) Vendor issues
52. d) Customer relationship problems

Ans:  d       LO:  1       Page:  158                         AACSB: Analytic

49. A business that is more dependent on the services of people than on money and equipment is known as
50. a) A labor-intensive business
51. b) A capital-intensive business
52. c) A service-intensive business
53. d) An asset-intensive business

Ans:  a       LO:  2       Page:  159                         AACSB: Analytic

50. A business that depends greatly on equipment and capital for its operations is known as
51. a) A labor-intensive business
52. b) A capital-intensive business
53. c) A service-intensive business
54. d) An asset-intensive business

Ans:  b       LO:  2       Page:  159                         AACSB: Analytic

51. Service businesses are more
52. a) Labor intensive
53. b) Capital intensive
54. c) Service intensive
55. d) Asset intensive

Ans:  a       LO:  2       Page:  159                         AACSB: Analytic

52. Manufacturing businesses are more
53. a) Labor intensive
54. b) Capital intensive
55. c) Service intensive
56. d) Asset intensive

Ans:  b       LO:  2       Page:  159                          AACSB: Analytic

53. Which of the following is likely to be the most capital intensive?
54. a) A Four Seasons Hotel
55. b) A Ford manufacturing facility
56. c) A Burger King Restaurant
57. d) A medium-sized university

Ans:  b       LO:  2       Page:  159                        AACSB:  Reflective Thinking

54. E-commerce accounts for approximately what percentage of total retail sales?
55. a) Less than 1 percent
56. b) 2 percent
57. c) 6 percent
58. d) 4 percent

Ans:  c       LO:  2       Page:  159                         AACSB:  Technology

55. Which of the following is not a basic characteristic of a successful web business?
56. a) Continuously spending more on new equipment than you take in revenue
57. b) Having a secure method of payment
58. c) Having a good strategic reason for being online
59. d) Designing an attractive, functional web site

Ans:  a       LO:  2       Page:  159-160                 AACSB: Technology

56. The fastest growing segment of business startups are
57. a) Home-based businesses
58. b) Capital-intensive businesses
59. c) Service-intensive businesses
60. d) Manufacturing businesses

Ans:  a       LO:  2       Page:  160                          AACSB: Analytic

57. E-business can be boiled down to all of the following ideas except
58. a) Slow down the speed of business
59. b) Reduce costs
60. c) Enhance customer service
61. d) Improve the business process

Ans:  a       LO:  2       Page:  160                        AACSB:  Analytic

58. The primary advantages of operating a home-based business are which of the following?
59. a) Schedule flexibility and lack of commuting problems
60. b) Low overhead and an increase in creativity
61. c) Lack of commuting problems and less office expense
62. d) Schedule flexibility and low overhead

Ans:  d       LO:  2       Page:  161                          AACSB: Analytic

59. Many people start businesses while keeping their regular jobs. Before doing this, they should check on their company’s _____________ policy and avoid doing anything that might resemble a conflict of interest.
60. a) Sidelines
61. b) Moonlighting
62. c) Extra jobs
63. d) Sidelighting

Ans:  b       LO:  2       Page:  161                          AACSB: Analytic

60. According to the Bureau of Labor Statistics, __________ Americans start businesses while keeping their regular jobs each year.
61. a) 200,000
62. b) 8 million
63. c) 2 million
64. d) 98 million

Ans:  c       LO:  2       Page:  161                         AACSB:  Analytic

61. Most fast-growth companies are started by
62. a) Sole proprietorships
63. b) Partnerships
64. c) Corporations
65. d) Home-based businesses

Ans:  b       LO:  2       Page:  162                          AACSB: Analytic

62. Just under 40 percent of Inc. 500 CEOs began their businesses with startup capital of
63. a) Between $500 and $1,000
64. b) Less than $10,000
65. c) Over $100,000
66. d) $1.5 million

Ans:  b       LO:  2       Page:  162                          AACSB: Analytic

63. A majority of high-growth CEOs had at least ______ years of experience in the industry.
64. a) Two
65. b) Five
66. c) Seven
67. d) Ten

Ans:  d       LO:  2       Page:  162                          AACSB: Analytic

64. The majority of high-growth firms are headed by
65. a) Men
66. b) Women
67. c) Minorities
68. d) Minority women

Ans:  a       LO:  2       Page:  162                          AACSB: Analytic

65. Most high-growth firms are in which industry?
66. a) High-tech
67. b) Utilities
68. c) Health care
69. d) Entertainment

Ans:  a       LO:  2       Page:  162                          AACSB: Technology

66. Which of the following has the qualities of being attractive, durable, and timely and is anchored in a product or service that creates or adds value for its buyer?
67. a) An idea
68. b) A business opportunity
69. c) A new product
70. d) An improved product

Ans:  b       LO:  3       Page:  162                          AACSB: Analytic

67. Many ideas for new products or businesses do not add value for the customer or user and consequently are not
68. a) Profitable
69. b) Business opportunities
70. c) Economically viable in the long run
71. d) Worthwhile investments

Ans:  b       LO:  3       Page:  162          AACSB: Analytic

68. The most common exit strategy for fast-growth businesses is
69. a) Passing on to family owners
70. b) Selling to outside investors
71. c) Selling to employees
72. d) Ending in bankruptcy

Ans:  b       LO:  2       Page:  162        AACSB:  Analytic

69. Go Computers is an example of
70. a) A business that was very profitable
71. b) A business that would make a good investment
72. c) An idea that was ahead of its market
73. d) An idea that was behind its market

Ans:  c       LO:  3       Page:  164          AACSB: Technology

70. Years before the regular use of iPads and tablet computers, the concept of portable, pen-based computers was introduced. However, Go Computers sold only 20,000 units and lasted only three years.  This is an example of an idea that
71. a) Has a long product life cycle
72. b) Has passed its window of opportunity
73. c) Is in demand by consumers
74. d) Is too far ahead of the market

Ans:  d       LO:  3       Page:  164        AACSB:  Reflective Thinking

71. During the _________ stage in the product life cycle, the window of opportunity is wide open because little or no competition exists.
72. a) Introduction
73. b) Growth
74. c) Maturity
75. d) Decline

Ans:  a      LO:  3       Page:  165          AACSB:  Analytic

72. A period of time in which an opportunity is available is known as
73. a) A window of opportunity
74. b) An idea
75. c) The right time for a product
76. d) The introductory stage

Ans:  a       LO:  3       Page:  165          AACSB: Analytic

73. The stages that products in the marketplace go through are known as
74. a) The product life cycle
75. b) The product growth stages
76. c) The product timeline
77. d) The product opportunity stages

Ans:  a       LO:  3       Page:  165          AACSB: Analytic

74. Which of the following questions can give a potential business owner insight on future and current demand?
75. a) Does the idea solve a consumer’s want or need?
76. b) How much competition exists?
77. c) Can the idea be turned into a profitable business?
78. d) Does the business owner have the appropriate skills needed in order to be successful?

Ans:  a       LO:  3       Page:  165          AACSB: Analytic

75. The final answer to whether an idea is an opportunity that should be followed will come from a combination of
76. a) Research and a consultant’s advice
77. b) Intuition and experience
78. c) Research and intuition
79. d) The banker and the accountant

Ans:  c       LO:  3       Page:  166          AACSB: Analytic

76. Which of the following is a source for business ideas that results in avoiding many errors and establishing competitive advantages early on?
77. a) Hobbies
78. b) Personal interests
79. c) Prior work experience
80. d) Education

Ans:  c       LO:  3       Page:  166          AACSB: Analytic

77. Opportunities that become available to an entrepreneur only after the entrepreneur has started a business are known as
78. a) Windows of opportunity
79. b) An idea whose time has come
80. c) The corridor principle
81. d) Secondary opportunities

Ans:  c       LO:  3       Page:  166          AACSB: Analytic

78. After running a small restaurant for two years, Pam and Jim realized that a greater opportunity existed in food distribution. They hired family members to run the restaurant while they focused their energy on starting a food distribution company.  This is an example of the
79. a) Distributive responsibility principle
80. b) Corridor principle
81. c) Experience curve
82. d) Bell curve

Ans:  b      LO:  3       Page:  166          AACSB:  Reflective Thinking

79. Which of the following provides the greatest percentage of business ideas to prospective business owners?
80. a) Consultants
81. b) Conferences
82. c) Competitors
83. d) Social-networking sites

Ans:  c       LO:  3       Page:  166         AACSB:  Analytic

80. Jeff, an avid angler, decided to retire early to pursue a career of making and selling custom hand-made fishing flies and lures. This is an example of identifying business ideas from
81. a) Prior work experience
82. b) Hobbies and avocations
83. c) Serendipity
84. d) Ambition

Ans:  b       LO:  3       Page:  167        AACSB:  Analytic

81. Ideas occur to small business owners almost _______ as often after the business is running than before the business began.
82. a) Twice
83. b) Three times
84. c) Four times
85. d) Ten times

Ans:  a       LO:  3       Page:  167          AACSB: Analytic

82. A possibility that a person should consider when deciding upon an idea for a business is to focus on an idea provided through
83. a) Research
84. b) Education
85. c) Hobbies
86. d) A local banker

Ans:  c       LO:  3       Page:  167          AACSB: Analytic

83. Finding something valuable that was not looked for is known as
84. a) Accidental discovery
85. b) Stumbling upon a treasure
86. c) Serendipity
87. d) Surreptitiousness

Ans:  c       LO:  3       Page:  167          AACSB: Analytic

84. Which of the following questions addresses the most critical concern in beginning a new business?
85. a) Can I find skilled employees to hire?
86. b) Will I make a profit?
87. c) Who is my target market?
88. d) Is there a need for this business?

Ans:  d       LO:  4       Page:  168          AACSB: Analytic

85. According to the Creating Competitive Advantage “Creative Release” which of the following is not a way to spark creativity?
86. a) Visit competitors often
87. b) Set aside time to deliberately evoke creativity
88. c) Clearly articulate creativity as a core value of your company
89. d) Study creativity

Ans:  a       LO:  3       Page:  168          AACSB: Analytic

86. When considering startup costs, there will be many expenses that are not expected. It is wise to add an additional _______ to help cover those unexpected expenses.
87. a) 2 percent
88. b) 4 percent
89. c) 6 percent
90. d) 10 percent

Ans:  d       LO:  4       Page:  170          AACSB: Analytic

87. Computers, office equipment, and furniture are all examples of ____________________ that have a life of more than one year.
88. a) Current assets
89. b) Current liabilities
90. c) Capital equipment assets
91. d) Investments

Ans:  c       LO:  4       Page:  170          AACSB: Analytic

88. Before a new businessperson can develop a competitive edge, it must determine its own uniqueness by evaluating
89. a) The competition
90. b) Start-up costs
91. c) Its market
92. d) Assets

Ans:  a       LO:  4       Page:  171          AACSB: Analytic

89. Creating a competitive advantage by holding down costs to provide customers the lowest priced products is known as
90. a) Operational impasse
91. b) Product leadership
92. c) Customer intimacy
93. d) Least cost pricing method

Ans:  a       LO:  4       Page:  171          AACSB: Analytic

90. Creating a competitive advantage based on providing the highest quality products possible is known as
91. a) Operational excellence
92. b) Product leadership
93. c) Customer intimacy
94. d) Total quality management (TQM)

Ans:  b       LO:  4       Page:  171          AACSB: Analytic

91. Business can compete on all of the following grounds except
92. a) Operational excellence
93. b) Product leadership
94. c) Customer intimacy
95. d) Inventory capacity

Ans:  d       LO:  4       Page:  171        AACSB:  Analytic

92. New Balance athletic shoes are known for their high quality and technical excellence rather than for low price or other factors. New Balance uses which method for obtaining competitive advantage?
93. a) Operational excellence
94. b) Product leadership
95. c) Customer intimacy
96. d) Inventory capacity

Ans:  b      LO:  4      Page:  171           AACSB:  Reflective Thinking

93. A company that strives to offer good products at the lowest prices possible is operating with which competitive advantage?
94. a) Operational excellence
95. b) Product leadership
96. c) Customer intimacy
97. d) Best service method

Ans:  a       LO:  4       Page:  171          AACSB: Analytic

94. As seen in the Profile in Entrepreneurship “Über Inventor—Old School” how many patents did Thomas Edison receive?
95. a) 175
96. b) 523
97. c) 801
98. d) 1,093

Ans:  d       LO:  3       Page:  172          AACSB: Analytic

95. As seen in Figure 7.5, which of the following is not a possible mountain on which you might compete?
96. a) Operational excellence
97. b) Product leadership
98. c) Customer intimacy
99. d) Word of mouth

Ans:  d       LO:  4       Page:  172          AACSB: Analytic

96. Creating a competitive advantage by maintaining a long-term relationship with customers through superior service is known as
97. a) Operational excellence
98. b) Product leadership
99. c) Customer intimacy
100. d) Best service method

Ans:  c       LO:  4       Page:  172          AACSB: Analytic

97. The business relationship with customers ___________ with the sale of the product or service.
98. a) Begins
99. b) Ends
100. c) Ends unless there is a problem with the product/service
101. d) Begins and ends

Ans:  a       LO:  4       Page:  173          AACSB: Analytic

98. Most states collect sales taxes on _____________ sold.
99. a) Everything
100. b) Tangible property
101. c) Intangible property
102. d) Goodwill property

Ans:  b       LO:  4       Page:  173          AACSB: Analytic

99. Taxes on business income generally are due
100. a) In four annual installments
101. b) Twice per year
102. c) Every 30 days
103. d) Every 2 years

Ans:  a       LO:  4       Page:  173        AACSB:  Analytic

100. A person who provides services to a business but is not employed by that business is called a/an
101. a) Dependent contractor
102. b) Independent contractor
103. c) Outcast
104. d) Insourcer

Ans:  b       LO:  4       Page:  174        AACSB:  Analytic

101. For the last 30 years, Mac has been mowing lawns for the Greenside County School System. Despite the close working relationship he has with the school system, Mac is not officially on the school system’s payroll.  Mac can best be described as a/n
102. a) Dependent contractor
103. b) Independent contractor
104. c) Outcast
105. d) Insourcer

Ans:  b       LO:  4      Page:  174          AACSB:  Reflective Thinking

 

 

 

 

 

 

 

 

 

 

 

 

 

Scenario Questions

 

Use the following to answer questions 102-106:

 

Scenario 7-1. Kelli is starting her new business in the mall in the coming weeks. She has finished her business plan and is now looking at planning her startup. Her business consists of a clothing store for young women who purchase medium-quality fashionable school and work clothes. She sees customer service as her strong point because she is currently in the same age group and is very clothes conscious herself. Her competitors, also located in the mall, are all older women who cater to older women who purchase fashion-conscious clothes. Kelli has no business experience, yet is willing to invest her entire inheritance in her new business venture. She is single, 21, and has no current debts. She has an opportunity to rent a space in the local mall if she signs the agreement next week. Kelli is excited about being able to pick the clothes on her racks herself and then sell those clothes to young women who would look fashionable in them.

102. In Scenario 7-1, one of the overriding questions Kelli still has is exactly who is it that will be buying her clothes and what do these people have in common? Kelli needs to further look at
103. a) Her competitive advantage
104. b) A market analysis
105. c) A marketing plan
106. d) Her location

Ans:  b       LO:  3       Page:  169          AACSB: Reflective Thinking

103. In Scenario 7-1 above, Kelli is estimating her startup costs. She has figured all of her expenses, her capital equipment purchases, deposits, insurance, etc.  What amount should she now add to this total to cover expenses she did not plan on?
104. a) 2 percent
105. b) 7 percent
106. c) 10 percent
107. d) 15 percent

Ans:  c       LO:  4       Page:  170          AACSB: Reflective Thinking

104. In Scenario 7-1 above, Kelli’s competitive advantage would be which of the following?
105. a) Lower prices
106. b) Her location
107. c) Her customer service
108. d) The fashionable clothes in her inventory

Ans:  c       LO:  3       Page:  172          AACSB: Reflective Thinking

105. In Scenario 7-1 above, which of the following is the area in which Kelli should compete as she pursues her new business venture?
106. a) Operational excellence
107. b) Product leadership
108. c) Customer intimacy
109. d) Quality leadership

Ans:  c       LO:  4       Page:  172          AACSB: Reflective Thinking

106. In Scenario 7-1 above, which of the following legal forms of businesses should Kelli choose if she wants to use the IRS Form 1040 C for income tax reporting?
107. a) Sole proprietorship
108. b) Partnership
109. c) Corporation
110. d) Franchise

Ans:  a       LO:  4       Page:  173          AACSB: Reflective Thinking

 

 

 

 

 

Use the following to answer questions 107-111:

 

Scenario 7-2. Jack loves computers and has since he was a child.  He spends every waking hour programming, rebuilding, and tinkering with any computer he can find. He has just graduated with a Bachelor’s Degree in Computer Science and is trying to decide what to do with the rest of his life. The computer stores in the town in which he lives are not places he would want to work. They are known for slow service, lack of quality computers, and inability to service the computers they sell. He is contemplating opening his own small business; however, lack of funds is his major problem. To deal with his lack of funds, initially he would concentrate on repair and service of existing computer systems and then expand into selling new computers as his capital base grew. He knows he could do a better job with customer service than what his competitors currently are doing.

107. In Scenario 7-2 above, which of the following types of business should Jack begin?
108. a) Purchase an existing business
109. b) Start his own business
110. c) Purchase a computer franchise
111. d) Wait and inherit his father’s construction business

Ans:  b       LO:  1       Page:  158          AACSB: Reflective Thinking

108. In Scenario 7-2 above, Jack’s Computer Service/Repair Shop would be which of the following types of business?
109. a) Labor intensive
110. b) Capital intensive
111. c) Trade intensive
112. d) Customer intensive

Ans:  a       LO:  2       Page:  159          AACSB: Reflective Thinking

109. In Scenario 7-2 above, Jack could begin his business as one of the fastest growing segments of new business startups. This would address his problem of lack of funds by obtaining very low overhead.  Which segment of business startups would this be?
110. a) Home-based businesses
111. b) Franchises
112. c) Corporations
113. d) Partnerships

Ans:  a       LO:  2       Page:  160          AACSB: Reflective Thinking

110. In Scenario 7-2 above, one of the major advantages that Jack would possess in his new business venture would be which of the following?
111. a) His education
112. b) His experience with computers over the last several years and his knowledge of the industry
113. c) His source of funding
114. d) His enthusiasm

Ans:  b       LO:  1       Page:  171          AACSB: Reflective Thinking

111. In Scenario 7-2 above, Jack’s competitive advantage would be which of the following?
112. a) His emphasis on customer service
113. b) Lower prices
114. c) Established customer base
115. d) His education

Ans:  a       LO:  4       Page:  172          AACSB: Reflective Thinking

 

 

 

 

 

Short Answer Questions

112. Analyze two advantages and two disadvantages of starting a business from scratch.

Ans:  Advantages       • Freedom to establish a distinct competitive advantage       • No prior negative business image       • Pride of ownership       • New location and customer base       • New employees       Disadvantages       • Risk of failure is higher       • Trouble with market identification       • Must inform customers that the business exists       • Thousands of small, minor details       LO:  1       Page:  158 AACSB: Analytic

113. List at least four basic characteristics that a successful Web business must possess.

Ans:  It’s not just retail (business-to-business transactions account for the bulk of e-commerce).                                • Have a sound business strategy.         • Have a clear market analysis and create traffic coverage.                           • Logistics are huge.                     • Use the Internet to save money.     • Build your competitive advantage       LO:  2       Page:  160 AACSB:  Technology

114. Describe home-based businesses and explain why and how home-based businesses have become the fastest growing segment of business startups.

Ans:  30 percent of home-based businesses deal with financial and computer-related services       • Popular due to schedule flexibility and low overhead       • Made possible through technology such as notebook computers, wireless modems, fax, cellular phones, and laser printers      •  Taking advantage of corporate outsourcing       LO:  2       Page:  160-161            AACSB: Analytic

115. Describe three characteristics of fast growth companies.

Ans:  Rely on team efforts       • Headed by people who know the line of work       • Headed by people who have previously started other businesses       • Making substantial rewards – 40% take home more than $500k annually       • 41 percent are high-tech        • Better financed       • Markets are not just local markets       LO:  2       Page:  162                       AACSB: Analytic

116. Describe three ways people develop ideas for new businesses.

Ans:  Prior work experience       • The corridor principle      •  Hobbies and avocations       • Chance happenings and/or serendipity      •  Special talents they possess       LO:  3       Page:  166-167               AACSB: Analytic

117. Besides writing a business plan, list and describe three other steps that are important in the startup of a new business.

Ans:  Market analysis       • Competitive analysis      •  Startup costs      •  Legal form for the business                   • Location      •  Marketing plan       LO:  4       Page:  169-170               AACSB: Analytic

118. Discuss the three grounds on which companies compete.

Ans:  Operational excellence                • Product leadership           • Customer intimacy           LO:  4       Page:  171-172     AACSB:  Analytic