Deck 3: Starting a Small Business

Question 1

A computer technician recognizing a need for more aesthetically pleasing computers would be said to have entrepreneurial

A) technology.
B) alertness.
C) strategy.
D) rivalry.

Answer 1

B

Question 2

Janis wants to open a restaurant. She is not interested in a franchise; she wants to build her business literally from the ground up. When she does, her business will be classified as a(n)

A) entrepreneurial opportunity.
B) startup.
C) new market idea.
D) serendipity.

Answer 2

B

Question 3

_____ refers to the identification of new products or services that may lead to promising businesses.

A) Focus-based decision making
B) Elasticity
C) Opportunity recognition
D) Cost-benefit analysis

Answer 3

C

Question 4

Only cost-based strategies should be used when focusing on a market niche.

Question 5

The general environment includes rival companies and products.

Question 6

Many businesses are formed because an entrepreneur saw possibilities for improving or modifying an existing product or service as a result of prior work experience.

Question 7

When Jeff Bezos launched Amazon, his idea of selling items he did not own from a website was unique. Which type of idea was Amazon based on?

A) New market idea
B) New technology idea
C) New benefit idea
D) New product idea

Question 8

Using a cost-based strategy, a company would take steps to increase efficiency and hold down costs.

Question 9

Consuela noticed significant growth in the Hispanic population in her mid-size town. The local grocery carried mostly traditional American products. She knew her neighbors would want familiar foods, so she decided to open a food market catering to their preferences. Consuela's startup is based on a new _____ idea.

A) market
B) technology
C) benefit
D) product

Question 10

According to a study by the National Federation of Independent Business (NFIB), the most common source of new ideas for small business startups is

A) prior work experience.
B) hobbies and personal interests.
C) a chance happening.
D) existing records of a business.

Question 11

Research has revealed that startups based on a personal pastime are less likely than others to generate early sales and reach profitability.

Question 12

Serendipity describes a new product idea resulting from deliberate search activities.

Question 13

The best business ideas will meet a definite market need and have no fatal flaws.

Question 14

Jeff Bezos' original business plan for Amazon involved taking orders for books and having the items shipped directly from the publisher to the customer. He modified the plan to include other products such as toys and decided to buy the toys from the producers and ship them from his own warehouse. This modification of the original plan is called a

A) change of plan.
B) pivot.
C) serendipity.
D) competitive move.

Question 15

Fads can lead to serious, though sometimes short-lived, money-making opportunities, but trends provide a much stronger foundation for businesses because they are connected to a larger change in society.

Question 16

When screening new business ideas, the entrepreneur need not focus on the size of the targeted market.

Question 17

Katarina has founded three different businesses in the past eight years, all of which have become so successful she has sold them at large profits. We can say Katarina is good at

A) innovative ideas.
B) entrepreneurial alertness.
C) new market ideas.
D) opportunity recognition.

Question 18

An inside-out analysis identifies a company's strengths and the competition's weaknesses.

Question 19

Isabella listens whenever someone says "Someone ought to make a ...." She expects one of these ideas to develop into a profitable business. Isabella possesses

A) market awareness.
B) entrepreneurial alertness.
C) opportunity recognition.
D) innovative thinking.

Question 20

Economist Israel Kirzner proposed that entrepreneurs have a unique capability, which he called _____, to recognize existing opportunities for businesses.

A) innovative thinking
B) market awareness
C) entrepreneurial alertness
D) opportunity recognition

Question 21

Which of the following statements is an example of a technological trend?

A) The Federal Reserve announces that it will decrease the interest rate charged to banks.
B) Congress passes legislation that increases the tax rates on corporations.
C) A new computer chip is developed that will allow for miniaturization of many electronic devices.
D) The European Union announces an increase in tariffs on all agricultural goods.

Question 22

Julie, owner of a bed and breakfast inn, had been asked repeatedly to cater events. Once she realized her kitchen was not being used during the latter part of the day, she started the company. This change is an example of

A) recognizing a popular trend, and riding the wave.
B) combining two businesses into one to create a market opening.
C) beginning with a problem in mind.
D) cashing in on the sharing economy.

Question 23

Laura discovered to her amazement that the skin oil she sold seemed to repel mosquitos. She relabeled the product and began selling it as alternative to brands such as Cutter and Off. Laura's startup is based on a new _____ idea.

A) market
B) technology
C) benefit
D) product

Question 24

Richard could see the demand for towable recreational vehicles declining, so beginning in the early 1970s he used his equipment, employees, and professional network to design and build utility trucks-a more recession-resistant industry. This is an example of

A) serendipity.
B) diversification.
C) innovative thinking
D) pivoting.

Question 25

Drs. James and Janet Baker saw that many people experienced difficulty and frustration when typing, particularly from physical disabilities, so they invented a voice recognition software to allow users to talk to the computer. Their idea resulted in Dragon NaturallySpeaking, a popular talk-to-type software application. Which of the following suggestions for generating business ideas describes how the Bakers conceived their startup?

A) Borrow from existing product and service ideas.
B) Combine two businesses to create a market opening.
C) Begin with a problem in mind.
D) Recognize a popular trend, and ride the wave.

Question 26

Which of the following statements is an example of an economic trend?

A) The Federal Reserve announces that it will decrease the interest rate charged to banks.
B) Congress passes legislation that increases the tax rate on corporations.
C) A new computer chip is developed that will allow for miniaturization of many electronic devices.
D) The European Union declares an increase in tariffs on all agricultural goods.

Question 27

Wilma needed wine glasses, but all she had were candlestick holders and 8-ounce canning jars. Gluing the two together, she created what she called "mountain crystal" which became a big hit. The local crafters' association asked her to make enough for them to sell, and her business took off. This is an example of building a business from

A) work experience.
B) a hobby.
C) a personal interest.
D) accidental discovery.

Question 28

Which of the following is an example of an idea for a new startup coming from a hobby?

A) A coin collector, who bought and sold coins for years to build a personal collection, decides to become a coin dealer.
B) A furniture salesperson sees the possibility of opening a new furniture store in a different area of the city.
C) A sharpshooter, who shot holes in a pair of her boyfriend's jeans during an argument, hears him get complimented on the way the jeans look.
D) A local restaurant owner, noticing the success of food trucks selling crepes with unique toppings, incorporates the items into his menu.

Question 29

Carol enjoyed yarn crafts, but there were no yarn shops in her small town. She reasoned that there were many others nearby who might appreciate being able to purchase yarns and supplies without a long drive. Within a year her shop was profitable and expanding into larger space. Which of the following statements best describes this situation?

A) Carol grew a business out of her personal experience.
B) Carol turned her hobby into a thriving business.
C) Carol accidentally stumbled upon a gold mine.
D) Carol used her work experience as a source of startup ideas.

Question 30

Because many commuters grab a cup of coffee and drink it during their ride to work, someone invented specially shaped cups that don't tip and lids with sip openings that close and don't spill. Which of the following innovative ways of thinking best fits this situation?

A) Combine two businesses to create a market opening.
B) Offer a "green" product or service alternative.
C) Recognize a popular trend, and ride the wave.
D) Improve the function of an existing product or service.

Question 31

Alyson and Andrea, country artists, realized that their love of classic rock was also popular with their fans. Their change to their show to incorporate more rock songs with a country flavor is an example of

A) recognizing a popular trend, and riding the wave.
B) combining two businesses to create a market opening.
C) beginning with a problem in mind.
D) adapting a product or service to meet customer needs in a different way.

Question 32

The quote "Good artists borrow; great artists steal" is the principle that launched which of the following companies?

A) Tesla, Inc.
B) Apple Computer
C) Amazon
D) Xerox

Question 33

Which of the following is an example of an idea for a new startup coming from an accidental discovery?

A) A coin collector, who bought and sold coins for years to build a personal collection, decides to become a coin dealer.
B) A furniture salesperson sees the possibility of opening a new furniture store in a different area of the city.
C) A sharpshooter, who shot holes in a pair of her boyfriend's jeans during an argument, hears him get complimented on the way the jeans look.
D) A local restaurant owner, noticing the success of food trucks selling crepes with unique toppings, incorporates the items into his menu.

Question 34

Two general approaches that can help identify business ideas are _____ and _____ analyses.

A) outside-in; inside-out
B) industry; competitive
C) upside-down; inside-out
D) upward; downward

Question 35

Which of the following statements is an example of a political/legal trend?

A) The Federal Reserve announces that it will decrease the interest rate charged to banks.
B) Congress passes legislation that increases the tax rates on corporations.
C) A new computer chip is developed that will allow for miniaturization of many electronic devices.
D) The European Union declares an increase in tariffs on all agricultural goods.

Question 36

All of the following are trends in the general environment EXCEPT

A) demographic trends.
B) strategic trends.
C) global trends.
D) sociocultural trends.

Question 37

Verlin worked in a cabinet shop until he became frustrated that his ideas for improving efficiency were falling on deaf ears. So he left and started his own cabinet shop where he could implement those ideas. From which of the following sources did his ideas for his startup come?

A) Hobbies and personal interests
B) A chance happening
C) Accidental discovery
D) Work experience

Question 38

For the past several years, the borrowing interest rates have been very low in the United States. This is an example of a(n) _____ trend.

A) economic
B) sociocultural
C) political/legal
D) demographic

Question 39

When Sally realized her vintage clothing pieces were being bought by the local college students and not just their parents, she started adding more vintage pieces to her inventory. Sally is

A) recognizing a popular trend, and riding the wave.
B) combining two businesses to create a market opening.
C) beginning with a problem in mind.
D) adapting a product or service to meet customer needs in a different way.

Question 40

Angela noticed an interest among her friends and colleagues in wearing high-end watches and other jewelry for special occasions, so she started a company where customers could rent high-end jewelry. Angela is

A) adapting a product or service to meet customer needs in a different way.
B) offering products through a subscription service.
C) cashing in on the sharing economy.
D) beginning with a problem in mind.

Question 41

An inside-out analysis is one that

A) considers the general environment and industry setting.
B) catalogs the startup's sources of potential strengths.
C) considers the strengths of buyers and suppliers.
D) catalogs the possible responses of rivals in the industry.

Question 42

Entrepreneurs who want to start or build a business based on inside-out analysis will first need to

A) have an in-depth understanding of the general environment.
B) select and implement a focus strategy.
C) determine the strength, position, and likely responses of rival businesses.
D) have a solid grasp of the resources and capabilities that are available to them.

Question 43

Demographic trends include all of the following EXCEPT

A) ethnic mix.
B) wage distribution.
C) social status.
D) age structure.

Question 44

Which of the following statements is an example of a global trend?

A) The Federal Reserve announces that it will decrease the interest rate charged to banks.
B) Congress passes legislation that increases the tax rates on corporations.
C) A new computer chip is developed that will allow for miniaturization of many electronic devices.
D) The European Union declares an increase in tariffs on all agricultural goods.

Question 45

Which of the following does an outside-in analysis consider?

A) The general environment
B) The competitive environment
C) The industry environment
D) All of these are correct.

Question 46

As China's production of exportable goods increases, Chinese workers have more money to spend on consumer items. Other developing countries are experiencing the same growth. Which of the following types of trends does this represent?

A) Economic
B) Sociocultural
C) Global
D) Demographic

Question 47

The diamond market is monopolized by the DeBeers organization, from mining to cutting and polishing to wholesaling. Jewelers can do little to negotiate prices. This situation typifies

A) powerful buyers.
B) availability of substitutes.
C) intense rivalry.
D) powerful suppliers.

Question 48

An increase in the bargaining power of suppliers _____ of a target industry.

A) increases both the attractiveness and the profitability
B) decreases both the attractiveness and the profitability
C) decreases the attractiveness and increases the profitability
D) increases the attractiveness and decreases the profitability

Question 49

The business idea screening process takes which of the following merits of an idea into account?

A) Customer diversity
B) Capital requirements and venture performance
C) Uniqueness of strategy
D) Demographics of proposed market

Question 50

Substitute products

A) reduce the potential attractiveness and profitability of a target industry.
B) represent those items manufactured by direct rivals within a target industry.
C) are usually cheaper than the products they can replace.
D) are always a serious threat to rivals in a target industry.

Question 51

If a startup budget is tight, a business idea's promise is likely to be determined by the entrepreneur's ability to

A) hire competent employees.
B) grow quickly.
C) test market reactions to gauge its odds for success.
D) capitalize on the availability of cutting-edge technology.

Question 52

The increased trade between the United States and Mexico since the enactment of the North American Free Trade Agreement (NAFTA) is an example of a(n) _____ trend in the general environment.

A) technological
B) global
C) ecological
D) sociocultural

Question 53

Resources are best described as

A) those inputs that an entrepreneur can use to operate a business.
B) only those features that are visible and easy to measure.
C) the firm's lending capacity.
D) capabilities that can be exploited.

Question 54

Miles' startup company began well, but within a couple months he found he was unable to pay invoices from suppliers. He didn't understand how he could have this problem. He hired experts; his business idea was sound; and he had many new customers. What went wrong?

A) Miles lacked critical technologies.
B) Miles lacked patents or copyrights.
C) Miles lacked raw materials.
D) Miles lacked cash resources.

Question 55

Farmers who wish to sell grain cannot negotiate a price; they either accept the price offered or decline to sell their crop. This is an example of

A) low barriers to entry.
B) availability of substitutes.
C) intense rivalry.
D) powerful buyers.

Question 56

Which of the following factors did Michael Porter identify as determining the nature and degree of competition in an industry?

A) The interest of small businesses
B) Bargaining power of competitors
C) Threat of substitute products or services
D) The macroeconomic level of the industry

Question 57

An evaluation of the general environment

A) is done before the feasibility analysis.
B) can benefit small businesses as well as large firms.
C) will clarify the unique value of the startup idea.
D) is appropriate only for large firms that have corporate staffs to manage the process.

Question 58

Today's smartphones bear little resemblance to the original analog cell phones of the early 1990s. Smartphone capabilities exceed those of the early desktop computers. It seems nearly every adult carries at least one smartphone. Which of the following types of trends does this represent?

A) Sociocultural
B) Demographic
C) Technological
D) Global

Question 59

TV commercials promote reverse mortgages. Other ads promote medications for high blood pressure, allergies immune system disorders, and high cholesterol. Which of the following types of trends do these represent?

A) Sociocultural
B) Global
C) Technological
D) Demographic

Question 60

Considering Michael Porter's five factors that determine the nature and degree of competition in an industry, we can say that the fast-food hamburger industry is characterized by

A) intense rivalry.
B) strong suppliers.
C) strong buyers.
D) ease of entry into the industry.

Question 61

Tangible resources include

A) cash reserves, manufacturing equipment, and an office building.
B) cash reserves, management expertise, and a favorable reputation.
C) management expertise, a favorable reputation, and manufacturing equipment.
D) intellectual property rights, manufacturing equipment, and an entrepreneur's personal network of contacts and relationships.

Question 62

A SWOT analysis can be described best as a(n)

A) means of assessing a firm's industry situation.
B) assessment of the internal strengths and weaknesses of a firm.
C) dynamic analysis of a firm's current situation.
D) assessment that provides a concise overview of a firm's strategic situation.

Question 63

The entrepreneur's "_____" is found at the point of overlap of emerging potentials in the external environment and the unique strengths and capabilities of the entrepreneur and the venture.

A) opportunity sweet spot
B) paradox of attraction
C) opportunity recognition
D) fatal flaw

Question 64

Kitty-Kat Korner fabric shop caters to the quilters in the region. Nowhere else can a quilter find everything she needs: fabrics, notions, pattern books, even quilting machines and quilting classes. This is not your typical fabric store by any means. Which of the following best describes Kitty-Kat's strategy?

A) Innovation
B) Differentiation-based
C) Cost-based
D) Strategic alliances

Question 65

A focus strategy is best described as

A) an attempt to compete directly with industry giants.
B) a domestic marketing strategy.
C) a plan of action that isolates an enterprise from market forces.
D) targeting the high end of a market.

Question 66

Containers Etc. manufactures household containers. In contrast to traditional market designs, all of the products are microwaveable, child-proof, and come in an assortment of 35 colors. Accordingly, Containers Etc. is pursuing a _____ strategy.

A) product-based
B) differentiation-based
C) concept-based
D) efficiency-based

Question 67

Rumpelstiltskin, an imp in a Brothers Grimm fairy tale, could spin straw into gold. We would call this a(n)

A) useful skill.
B) tangible resource.
C) intangible resource
D) capability.

Question 68

Which of the following statements about resources and capabilities is true?

A) Resources technically are the same as capabilities.
B) A startup or small business can have both tangible and intangible capabilities.
C) Resources can do nothing on their own.
D) Capabilities are inputs to the work of a business.

Question 69

Marketplace Farms is a regional cooperative of fig and orange growers. In order to compete against larger regional growers, the company relies on inexpensive packaging processes and lower-cost labor instead of machines. Marketplace Farms is relying on what type of strategy?

A) Price-based
B) Marketing-based
C) Efficiency-based
D) Cost-based

Question 70

The two broad-based strategies for capturing opportunities are the _____ and _____ strategies.

A) cost-based; differentiation-based
B) price-based; cost-based
C) marketing-based; price-based
D) focus-based; efficiency-based

Question 71

A differentiation-based strategy requires that a firm

A) be the lowest-cost provider in an industry.
B) emphasize the uniqueness of its product or service.
C) achieve the highest resource efficiency in an industry.
D) be the lowest-priced competitor in an industry.

Question 72

Which of the following would be classified as an opportunity when conducting a SWOT analysis?

A) Positive reputation in the marketplace
B) Slowed market growth
C) Emerging technologies
D) Strong network of personal contacts

Question 73

Which of the following is a disadvantage of using a cost-based strategy?

A) It requires a geographically limited market.
B) The business may become too specialized, resulting in two few customers to be viable.
C) It attracts intense competition.
D) It is difficult to generate customer loyalty.

Question 74

Mark is the owner of Delectable Delights, a specialty store offering chocolates, candies, and fruit baskets. After a recent analysis of the competitive environment, Mark concluded that three distinct consumer segments exist for his products: A, B, and C consumers. In an effort to maximize the effectiveness of his strategy, Mark has decided to limit his efforts to fulfilling the needs of A consumers. He is employing a _____ strategy.

A) multisegmentation
B) selective
C) focus
D) concentration

Question 75

Intellectual property rights are an example of a(n)

A) tangible resource.
B) intangible resource.
C) capability.
D) competitive advantage.

Question 76

Generally speaking, a strategy is

A) a set of actions that coordinates the resources and commitments of a business to boost its performance.
B) a formal statement of what the firm intends to do.
C) an expanded description of the firm's mission statement.
D) most effective when it is designed to reflect the tactics that are common within an industry.

Question 77

Which of the following is a drawback of a SWOT analysis?

A) It is very time-consuming.
B) A professional consultant must perform it.
C) It focuses on present conditions.
D) It requires information about competitors not readily available to outsiders.

Question 78

Which of the following could be considered a core competency?

A) Zappos' 365-day return policy
B) NutriSystem's claim that users lose weight by eating
C) McDonald's ability to fry hamburgers quickly
D) Southwest Airlines' ability to make flying fun

Question 79

Morris built a thriving business by selling tailor-made clothing at off-the-rack prices. All other custom-clothing stores charge much higher prices. We can say that Morris has

A) a core competency.
B) a competitive advantage.
C) a serendipity.
D) opportunity alertness.

Question 80

Milton's Auto Service is a small auto maintenance and repair shop located in a small town in a garage behind Milton's house. Milton doesn't charge as much as auto dealerships, so he has a steady stream of local customers. Which of the following best describes Milton's strategy?

A) Innovation
B) Strategic alliances
C) Cost-based
D) Differentiation-based