BUSMHR 2500 Chapter 14

Which of the following is true about franchising? Multiple choice question. A franchisee uses the brand name of the franchise that is well established. A franchise's credibility is more if the franchise is a newly established firm. A franchisee is responsible for all spending related to advertising for the product or service of the franchise. A franchisee spends resources to establish the credibility of the business.

A franchisee uses the brand name of the franchise that is well established.

_____ is an arrangement whereby the manufacturer or sole distributor of a trademarked product or service gives exclusive rights of local distribution to independent retailers in return for their payment of royalties and conformance to standardized operating procedures. Multiple choice question. An acquisition A merger Franchising Leveraging

Franchising

Identify the disadvantages of franchising to a franchisee. (Check all that apply.) Multiple select question. Inability of the franchisor to keep promises made in the franchise agreement Lack of freedom for a franchisee in recruiting employees Restriction on the use of the franchisor's name for the promotion of the franchise Failure of the franchisor to offer services, advertising, and location

Inability of the franchisor to keep promises made in the franchise agreement Failure of the franchisor to offer services, advertising, and location

_____ refers to exploring possible mutual benefits from a business relationship so that the "size of the pie" can be increased. Multiple choice question. Distribution task Integration task Reservation task Segregation task

Integration task

Which of the following is true about mergers? Multiple choice question. Mergers fail to work in cases of some technical obsolescence or if there is a market or raw material loss. Mergers guarantee a fixed return on investment for entrepreneurs. Deterioration of the capital structure in an entrepreneur's venture can deter mergers. Mergers can safeguard against market encroachment, product innovation, or an unwarranted takeover.

Mergers can safeguard against market encroachment, product innovation, or an unwarranted takeover.

True or false: The degree of symmetry in a joint venture is limited to the chemistry between the companies involved.

Reason: This is false. The degree of symmetry between the companies involved in a joint venture goes beyond chemistry to objectives and resource capabilities.

True or false: An unproven franchise will be a less expensive investment with a low risk.

Reason: This is false. Whereas an unproven franchise will be a less expensive investment, the lower investment is offset by more risk.

Which of the following is an advantage of franchising to a franchisor? Multiple choice question. The ability to spend larger sums of money on advertising The ability to have variety in terms of quality of services provided by franchisees The reduction in the need to maintain controls as the number of franchisees increase The lack of need to provide training to franchisees

The ability to spend larger sums of money on advertising

Identify the advantages of acquisition for an entrepreneur. (Check all that apply.) Multiple select question. The acquired firm always has a successful and profitable track record. The acquired firm has an established image and track record. The acquired firm guarantees a fixed return on investment. New customers of the acquired firm are already familiar with the customer location.

The acquired firm has an established image and track record. New customers of the acquired firm are already familiar with the customer location.

_____ is the primary reason why acquisitions fail to generate the expected synergies and future benefits. Multiple choice question. The absence of a properly functioning existing channel and sales structure The familiarity of the brand among customers in a new location The problem of integrating the new organization's culture with the existing organizational culture The lack of an established image and track record

The problem of integrating the new organization's culture with the existing organizational culture

Identify the factors involved in a joint venture success. (Check all that apply.) Multiple select question. The expectations of the results of the venture must be exceptionally high. The companies involved in the venture should belong to different industries. The timing of the venture must be right. The assessment of the parties involved should be accurate to best manage the new entity in light of the ensuing relationships.

The timing of the venture must be right. The assessment of the parties involved should be accurate to best manage the new entity in light of the ensuing relationships.

Identify a true statement about joint venture agreements between two or more private-sector companies. Multiple choice question. These types of joint venture agreements require sharing of research and development functions. These types of joint venture agreements are between companies from different countries. These types of joint venture agreements are the most common. These types of joint venture agreements require approval from the federal government.

These types of joint venture agreements are the most common.

A(n) __ is the purchase of an entire company, or part of a company.

acquisition

In the context of primary tasks for an entrepreneur negotiating with another party for access to an external growth mechanism, the __ __ refers to negotiating how the benefits of a business relationship will be allocated between the parties.

distribution task

A __ __ is a separate entity that involves a partnership between two or more active participants to form a company.

joint venture

The joining of two or more companies into a single company is referred to as a(n) __.

merger

Which of the following are the most common means of acquisition? (Check all that apply.) Multiple select question. An entrepreneur's direct purchase of a firm's entire stock or assets Bootstrap purchase of a firm's assets Horizontal integration of functions of two or more firms An entrepreneur's purchase of publicly listed shares of a firm

An entrepreneur's direct purchase of a firm's entire stock or assets Bootstrap purchase of a firm's assets

Identify the disadvantages of acquisition for an entrepreneur. (Check all that apply.) Multiple select question. The acquired business typically does not have a sales structure. The entrepreneur may have overconfidence in his or her ability. The key employees of the acquired company may often leave when the business changes hands. The actual cost of acquiring the business is more than any other means of expansion.

The entrepreneur may have overconfidence in his or her ability. The key employees of the acquired company may often leave when the business changes hands.

__ __ refers to purchasing an existing venture by any employee group.

leveraged buyout

The type of franchise where manufacturers use franchises to distribute their product lines is referred to as __.

dealership

The most common type of franchise is the one that _____. Multiple choice question. provides a name, image, and method of conducting business stands alone as a brand acts only as a dealership requires a high bank collateral amount

provides a name, image, and method of conducting business

Identify a true statement about acquisitions. Multiple choice question. Acquisitions fail to provide the means of entering new markets. Acquisitions fail to provide the means of expanding a business. Acquisitions are of the same form, regardless of the amount of money involved and the type of companies involved. Acquisitions can take many forms based on the goals and position of the parties involved in the transaction.

Acquisitions can take many forms based on the goals and position of the parties involved in the transaction.

Identify a true statement about brokers in acquisitions. Multiple choice question. Brokers operate in a fashion opposite to that of a real estate broker. Brokers do not receive any commission on the sale and so are more likely to find the most economical deals. Brokers usually have poor working knowledge of the business, which can hinder negotiations. Brokers represent the seller and will sometimes aggressively find buyers using referrals, advertising, or direct sales.

Brokers represent the seller and will sometimes aggressively find buyers using referrals, advertising, or direct sales.

Match the means of acquisition (in the left column) with their descriptions (in the right column). Direct purchase of firm's entire stock or assets Direct purchase of firm's entire stock or Bootstrap purchase of a firm's assets

Direct purchase of firm's entire stock or assets - An entrepreneur often obtains funds for the purchase from an outside lender or the seller of the company being purchased. Bootstrap purchase of a firm's assets - An entrepreneur acquires a small amount of the firm for cash and then purchases the remainder of the company with a long-term note that is paid off over time out of the acquired company's earnings.

True or false: Regardless of the mode used for the growth of a firm, entrepreneurs need to be good negotiators.

Reason: This is true. Regardless of the mode used, entrepreneurs need to be good negotiators. They need to negotiate with external parties to obtain the human and financial resources necessary to fuel business growth.

Ideally, an acquisition should _____. Multiple choice question. function as separate vehicles representing the individual partners of the acquisition limit synergy to business philosophy rather than concept work as the sum of its parts rather than as a whole positively influence the bottom line, impacting both long-term gains and future growth

positively influence the bottom line, impacting both long-term gains and future growth

Which of the following are the disadvantages of acquisition for an entrepreneur? (Check all that apply.) Multiple select question. The actual purchase price may be inflated due to the established image, existing customer base, channel members, or suppliers. Most ventures that are up for acquisition have a marginally successful or even unprofitable track record. The entrepreneur has to spend more time on finding suppliers and creating customer awareness. The business's future potential cannot be assessed due to absence of any track records.

The actual purchase price may be inflated due to the established image, existing customer base, channel members, or suppliers. Most ventures that are up for acquisition have a marginally successful or even unprofitable track record.

Which of the following are true about joint venture arrangements between two or more private-sector companies? (Check all that apply.) Multiple select question. There is a detailed cost-sharing arrangement between the different entities of the partnership. The private-sector companies in these agreements can only function in a regional or national market. The joint venture can be formed to perform cooperative research. These agreements restrict the companies from raising capital and expanding markets.

There is a detailed cost-sharing arrangement between the different entities of the partnership. The joint venture can be formed to perform cooperative research.

Identify a true statement about joint ventures. Multiple choice question. They have recently been used as a means of expansion by entrepreneurial firms. They have occurred between rival companies. They cannot be used to penetrate the international market. They are a newly conceptualized organizational form.

They have occurred between rival companies.

Which of the following are the disadvantages of franchising for a franchisor? (Check all that apply.) Multiple select question. A franchisor may find it very difficult to obtain quality franchisees. A franchisor cannot use the franchise route to expand internationally. A franchisor has to provide funds for the entire advertising budget of the franchisee. The ability of a franchisor to maintain tight controls becomes more difficult as the number of franchises increases.

A franchisor may find it very difficult to obtain quality franchisees. The ability of a franchisor to maintain tight controls becomes more difficult as the number of franchises increases.

Identify the advantages of franchising to franchisors. (Check all that apply.) Multiple select question. It ensures that they need to commit only a smaller sum of money to advertising. It helps the venture to grow quickly using little capital. It helps them achieve economies of scale by buying supplies in large quantities. It allows them to hire more employees than a nonfranchised business.

It helps the venture to grow quickly using little capital. It helps them achieve economies of scale by buying supplies in large quantities.

Match the types of franchises (in the left column) with their characteristics (in the right column). Unproven franchise Proven franchise

Unproven franchise - A franchisor likely to make mistakes as the business expands. Proven franchise - It offers lower risk to the franchisee but requires more financial investment.

People who sell companies are known as _____. Multiple choice question. franchisors brokers entrepreneurs franchisees

brokers

The __ is the person who purchases a franchise and is given the opportunity to enter a new business with a better chance to succeed than if he or she were to start a new business from scratch.

franchisee

__ is a way by which an entrepreneur may grow his or her firm by having others pay for the use of the firm's name, process, product, service, and so on.

franchising

An advantage of acquisition for an entrepreneur is that the employees of the acquired company _____. Multiple choice question. are always ready to adapt to a new work culture know to start the business from scratch are ready to work for a lower pay know how to run the business

know how to run the business

In a leveraged buyout, capital is acquired in the form of _____. Multiple choice question. personal funding long-term debt financing short-term debt financing equity funding

long-term debt financing

A franchisee usually enters into a business that has a(n)_____. Multiple choice question. inexistent supply structure low number of employees well-known name, product, or service unprofitable track record

well-known name, product, or service