Deck 4: External Analysis

Question 1

A small business owner must understand when an opportunity for a new business is truly an opportunity.

Answer 1

True

Question 2

An industry is defined as a group of companies within a specified radius that will be in direct competition for the same customers.

Answer 2

True

Question 3

An NAICS (North American Industry Classification System)code is a code that is standard 15-digit in length.

Answer 3

False

Question 4

Basic industry information can be obtained only by participating in focus groups.

Question 5

The North American Industry Classification System (NAICS)is a code generated by the U.S.government to gather, track, and publish data on specific industries.

Question 6

An owner, when researching a new business, needs to be aware of, and be able to describe, all potential customers.

Question 7

The greatest factor that spreads the use of an application is how customers and potential customers communicate with each other on the application.

Question 8

Industry associations have extensive data on their industry and usually are quite willing to share that with the public.

Question 9

Defining the firm's industry is something that can be taken lightly; the small business owner really needs to learn only about the local market.Industry information can be learned later.

Question 10

When starting a new business, an owner needs to take into account how far a customer will travel for the product or service to be sold.

Question 11

One way to obtain the NAICS (North American Industry Classification System)code is to locate a direct competitor and research it through Dunn and Bradstreet, Lexis Nexis, etc.

Question 12

The greatest barrier to the spread of an application is the social media that promotes the application.

Question 13

The easiest way to locate the NAICS (North American Industry Classification System)code is to use the Internet.

Question 14

The key to recognizing an opportunity is completing a detailed analysis of the internal environment.

Question 15

In an external analysis, the first step is to determine where the business is expected to compete.

Question 16

In an external environment analysis, the first step is to research your customers.

Question 17

Starting an entrepreneurial business should be based on the observance of an opportunity.

Question 18

Most of the NAICS (North American Industry Classification System)data is based on the local market area.

Question 19

In defining the industry, an application should be conceptualized not in its use but as a physical item.

Question 20

In determining the industry within which a new business will compete, an entrepreneur should seek to be as generalist in his or her approach as possible.

Question 21

Once an entrepreneur has established a reasonable radius from which he or she would draw his or her primary customers, the next step is to examine each potential competitor.

Question 22

James has invested a large amount of money in his business; he is reluctant to just give up this investment, which he would have to do if he closed his business.This is an example of an exit barrier.

Question 23

A small business can compete on a cost basis with a larger firm.

Question 24

New business owners do not need to identify customers because they have already been identified by their competitors.All you have to do is copy your competitors.

Question 25

A new small business owner does not have to be aware of substitutes or the impact they could have.

Question 26

An exit barrier keeps an entrepreneur from leaving the business he or she has invested in.

Question 27

If the expenses incurred in operating a business are such that an entrepreneur cannot easily recoup the investment, then the level of competition will be more intense.

Question 28

Elasticity of demand is the ease that exists when a customer can switch to a substitute.

Question 29

One possible result of the development of a competitive map is the conclusion that the initial concept was not feasible.

Question 30

In the context of external analysis of competitors, if new business owners are very clear regarding their customers' needs, then the ability to identify direct competitors becomes significantly challenging.

Question 31

Once entrepreneurs have defined the industry that interests them, determined who their potential customers might be and why they might want to buy from the business, the next step is to start understanding the competitive advantage of the business.

Question 32

A substitute exists if the service or product performs a similar function.

Question 33

Fragmented markets are markets where no one competitor has a majority share of the market.

Question 34

A competitive map is an analytical tool to organize information about direct competitors.

Question 35

James is opening up a gourmet hamburger shop.To define his customer base, the first step is to draw a geographical radius around the proposed location.

Question 36

The egalitarian approach helps the small business owner clearly focus on their core customers.

Question 37

The first step in defining your customer base is to draw a geographical radius around your location; inside this radius is where you will find the majority of your potential customers.

Question 38

A product-service for which customers are willing to pay any price has an elastic demand.

Question 39

A trade-in is a product that performs a similar function or achieves the same result as the original product.

Question 40

A competitive map does not require a visit to all potential customers.

Question 41

A(n)________ is defined as those companies within a specified geographic radius that will be in direct competition for the same customers and sales as that of the new business.

A)industry
B)competitor's files
C)tracking system
D)U)S.Government Blue Book

Question 42

A major cause for failure of a new business is lack of focus on the competitive advantage.

Question 43

Hiring a consultant is expensive, but it also ________ the insights that could be obtained.

A)increases
B)makes no difference to
C)limits
D)distracts

Question 44

Resource-based analysis is ineffective because it fails to define a business's competitive advantages and differentiate these from their competitors.

Question 45

Unusual or unique competitive factors are the means by which a business can differentiate itself from competitors.

Question 46

A normal or ordinary competitive factor is some kind of standard practice in the industry, and it is necessary for the business to succeed.

Question 47

Once a business is broadly defined, the next step is to

A)visit all competitors.
B)define the fragment markets.
C)define a narrow group of customers.
D)define a larger group of customers.

Question 48

Orthodox and unusual or unique competitive factors do not vary by industry.

Question 49

According to the book, a clear understanding of the business's customers is important because it

A)aids in keeping a strategic distance between itself and its competitors.
B)helps in focusing on the core customers.
C)provides a way to control expenses.
D)all of these.

Question 50

What are the two things that a new business owner should keep in mind when defining a customer base?

A)Efficiency and accuracy
B)Accuracy and diligence
C)Thoroughness and efficiency
D)Intelligence and diligence

Question 51

To have a competitive advantage, the unusual products or services of a business need to meet these four criteria: rare, durable, valuable, and nonsubstitutable.

Question 52

The benefits of ________ and ________ are the insights to provide the owner that performs the activities with a greater chance of success.

A)analyzing; researching
B)planning; analyzing
C)researching; planning
D)coordinating; planning

Question 53

If a business owner cannot easily exit an industry, then that owner is more likely to use predatory pricing in an effort to generate cash flow and survive.

Question 54

The information from the North American Industry Classification System (NAICS)can be found from

A)the government.
B)the library.
C)the Internet.
D)all of these.

Question 55

Identify a true statement about the North American Industry Classification System (NAICS).

A)It is generally used by entrepreneurs to get detailed information about local competitive environment.
B)It provides potential entrepreneurs with data related to industry categorization.
C)It provides an entrepreneur with a standard 15-digit industry code.
D)It is unable to provide any information about national trends of specific industries.

Question 56

When defining potential customers, an owner must

A)visit all competitors.
B)use NAICS data.
C)define a specified radius around the business.
D)analyze normal or ordinary competitive factors.

Question 57

Gerald is planning on setting up a burger joint in his hometown.He finds out the NAICS (North American Industry Classification System)code for his business.From this information, he is able to understand that his immediate area contains virtually no competitors and has the potential to do very well.In the context of the critical steps involved in conducting an external analysis, Gerald is ________.

A)starting to develop an understanding of his competitive advantage
B)drawing a set of competitive maps
C)defining the industry in which he is competing
D)examining and developing insights about substitutes

Question 58

The first part of an external analysis is to

A)research potential substitutes.
B)develop a competitive edge.
C)identify potential customers.
D)determine in which industry the new business will compete.

Question 59

Mary has established a reasonable geographic radius for her flower shop.As a result, she should be able to

A)examine potential customers.
B)predict her price point.
C)define normal or ordinary competitive factors.
D)predict sale price.

Question 60

The ability to exit a business relatively easily tends to increase the threat posed by a new entry.

Question 61

________ keeps an entrepreneur from leaving the business.

A)Exit barrier
B)Exit strategy
C)Exit restrictions
D)None of these

Question 62

A tool to better understand competitors and their capabilities is

A)competitive map.
B)deficit analysis.
C)benchmarking.
D)resource-based analysis.

Question 63

A(n)________ is an analytical tool to organize information about direct competitors on all points of competition.

A)analysis gap
B)competitive map
C)completion map
D)deficient map

Question 64

In the context of conducting an external analysis, which of the following steps should an entrepreneur take next after identifying and researching competitors within an industry?

A)Develop an understanding of one's own competitive edge.
B)Examine and develop insights about benchmarking.
C)Examine and develop insights about elasticity of demand.
D)Draw a set of competitive maps.

Question 65

A(n)________ exists if the service or product performs a similar function.

A)trade-in
B)substitute
C)elasticity of demand
D)product/service flexibility

Question 66

A(n)________ is an analytical tool to organize information about direct competitors on all points of competition.

A)It is less expensive.
B)It helps in developing insights regarding pricing.
C)It provides knowledge about each competitor and allows the entrepreneur to better position the new business.
D)All of these.

Question 67

A substitute can assist in forming a(n)________ on the price that can be charged for product or service.

A)elastic demand
B)schedule
C)competitive map
D)ceiling

Question 68

Mark is setting up his new business.He has defined the industry in which he is competing and has also defined his customers.In the context of conducting an external analysis, which of the following should be Mark's next step?

A)Mark should examine and develop insights about substitutes.
B)Mark should draw a set of competitive maps.
C)Mark should research the industry.
D)Mark should develop an understanding of his competitive advantage.

Question 69

An entrepreneur cannot leave his or her business because of the amount of money that was invested.This is called a(n)________.

A)harvest plan
B)exit strategy
C)benchmarking
D)exit barrier

Question 70

When completing a conceptual map, an entrepreneur needs to visit ________ of the potential competitors.

A)50 percent
B)60 percent
C)75 percent
D)100 percent

Question 71

In developing a competitive map, an owner should review

A)population of the area.
B)household income.
C)average number of customers per hour.
D)all of these.

Question 72

When small businesses compete with large firms, a main disadvantage is

A)analyzing unusual or unique competitive factors.
B)operating at a cost level.
C)lacking flexibility.
D)reaching break-even point quicker.

Question 73

The ability to exit a business relatively easily

A)tends to limit the intensity of competition in the industry.
B)increases the threat posed by a new entry.
C)makes it difficult for an entrepreneur to recoup the initial investment.
D)encourages entrepreneurs to use predatory pricing in order to survive.

Question 74

Larry has set up a new burger joint in his hometown.He has obtained information about who will most likely be customers at his joint.Because his joint is located near a college, he knows that a majority of his customers are going to be students.In the context of the critical steps involved in conducting an external analysis, which of the following should be Larry's next step?

A)Larry should start developing an understanding of his competitive advantage.
B)Larry should gain thorough information about the elasticity of demand for his product.
C)Larry should develop insights about benchmarking.
D)Larry should conduct research to know his exact competitors.

Question 75

Fragmented markets have

A)few potential competitors.
B)many potential customers.
C)no clear dominant competitors.
D)clear dominant competitors.

Question 76

Which of the following is likely to occur if entrepreneurs fail to define a radius from which they believe their business will draw a majority of its customers?

A)It will distort the entrepreneur's advertising efforts.
B)It will dramatically reduce the entrepreneur's costs.
C)It will be easier for the entrepreneur to identify direct and indirect competition.
D)It will force the entrepreneur to forego business unnecessarily.

Question 77

Competitors will often ________ their knowledge if your business is not a potential direct competitor.

A)share
B)not share
C)hide
D)distort

Question 78

Which of the following is an example of the list of items that an entrepreneur should include while visiting and making comparisons to his-her potential competitors?

A)Access from road
B)Size of the facility
C)Nearby attraction for customers
D)All of these

Question 79

_____ is working with and learning from a company outside of your industry that has a skill that is critical to the firm's operation.

A)Fragmenting
B)Substitute-based
C)Benchmarking
D)Tag lines

Question 80

According to the book, which of the following is an example of an economic issue that a new business should consider?

A)Industry trends
B)Case of entry/exit
C)Elasticity of demand
D)All of these