Small Business Management Chapter 7

cost strategy

a generic strategy aimed at mass markets in which a firm offers a combination of price benefits that appeals to the customer

industry dynamics

changes in competitors, sales, and profits in an industry over time

scale

characteristic of a market that describes the market's size

mass market

a customer group that involves large portions of the population

distinctive competence map

a graphic display that compares a company's product or service to that of its competitors in order to identify the company's core expertise and those unique to the company and to its competitors.

niche market

a narrowly defined segment of the population that is likely to share interests or concerns

differentiation strategy

a type of generic strategy aimed at clarifying how one product is unlike another in a mass market

business' supply chain

a way to think about the line of distribution of a product from its start as raw materials to the finished goods into the hands of customers

Incremental innovation

an overall strategic approach in which a firm patterns itself on other firms, with the exception of one or two key areas

competitor

any other business in the same industry.

maturity

third stage of the industry life cycle, which is marked by a stabilization of demand, with firms in the industry moving to stabilize or improve profits through cost strategies

Market relinquishment

Occurs when businesses leave the market

cost benefits

include scale and scope savings

the four steps that small businesses follow in the process of getting to the useful strategies

1. Determining the magic number 2. Implementing distinctive competence 3. Conducting industry analysis 4. Establishing the best strategic direction and strategy

Which of the following are true statements in the context of strategy in the small business?

A strategy may be thought of as a blueprint for planning or a standard for comparison of actions. A good strategy results in increased survival chances and more profits for a small business.

Which of the following are true of industries having high industry attractiveness?

Examples of industries having high industry attractiveness are scrap metal, coal mining, and dry cleaning. Industries that are desirable in terms of making profits may not be industries that are considered as attractive places to work.

Identify the reasons for the importance of market scope

It allows firms to identify potential competitors. It helps firms to decide where to focus their sales and advertising efforts.

Which of the following statements about a company's value proposition are correct?

It focuses on delivering unique value to customers. It includes benefits that differentiate a business' offering from those of its competition. It is a business' unique selling points that customer can expect from its goods and services.

Which of the the following statements regarding industry analysis are correct?

It helps an entrepreneur determine the stage of the industry life cycle. It provides key information about the industry, such as potential profitability. It is a research process that provides an entrepreneur with key information about the industry, such as its current situation and trends.

Which of the following statements characterize the growth stage of the industry life cycle?

Sometimes products or services becomes so popular that the firm(s) are unable to keep up with demand and it becomes known as a "hot" product. Sometimes other firms jump in to take advantage of the growth and may be called the boom. It is where customer purchases increase at a dramatic rate.

Which of the following are the major classification systems that code industries?

The Standard Industrial Classification system The North American Industry Classification System: United States, 2012

The North American Industry Classification System: United States, 2012 -> / The Standard Industrial Classification system ->

The codes have six digits. / The codes have four digits.

Which of the following are one of the seven entry wedges that a firm can use to gain a foothold in a market?

Unutilized resources. Supply shortages. Favored purchasing. Government rules. Customer contracting. Second sourcing. Market relinquishment.

Which of the following is an example of an initial goal decision?

What is the product and/or service idea.? What is expected out of the business? Whom the target customer will be?

Which of the following statements regarding profit before taxes are correct?

When a business can support it, owners tend to put salaries in the operating expense category. It represents the amount of money the owners take out of the firm annually and on which they pay taxes. It is the amount of profit earned by a business before calculating the amount of income tax owed.

value benefits; cost benefits

While _____ refer to what customers sense in a product or service, _____ refer to the ways by which firms can keep costs low for customers.

value proposition

a company's unique selling points that customers can expect when they purchase its goods or services

parallel competition

an imitative business that competes locally with others in the same industry

goal

an intended outcome for a business

scope

defines the geographic range covered by the market, from local to global

tactical actions

most often the entrepreneur's first response; competitive responses with low resource requirements

innovative strategy

overall strategic approach in which a firms seeks to do something that is very different from what others in the industry are doing

Which of the following groups of customers do entrepreneurs see as particularly attractive?

passionate customers / corporate customers

magic number

post tax income an entrepreneur personally seeks from a business

market scope

refers to the geography of a firm's target audience

shake-out

stage in the industry life cycle characterized by a decrease in the number of firms in an industry

Blue Ocean strategy

strategy based on creating a new product or service which has no competitors

focus strategy

targets a portion of the market, which is called a segment or niche

marketing

the actions of a business related to promoting and selling products or services

Profit before taxes

the amount of profit earned by a business before calculating the amount of income tax owed

market

the business term for the population of customers for the business' product or service

Degree of similarity

the extent to which a product or service is like another

Gross profit

the money left after deducting cost of goods sold

Net profit

the money left after operating expenses are deducted from a business

strategy

the notions and actions that explain the profit-making means of a firm

entry wedge

the opportunity that makes it possible for a new business to gain a foothold in a market

core competency

the skills that an organization and all its competitors have

Which of the following statements regarding the retrenchment are correct?

Firms may go out of business during this stage. Retrenchment means the process of finding a new life. It is when established firms must find new approaches to improve the business and its chances for survival.

Regarding which of the following should firm owners make decisions when conducting industry analysis?

The major goals that are set for firms The types of customers firm owners seek and the benefits firm owners plan to offer them

Which of the following statements about strategic actions are correct?

They generally cost more and require specialized expertise to implement. Are competitive responses requiring a major commitment of resources.

competitive advantage

the particular way a firm implements customer benefits that keeps the business ahead of others in the industry

Pure innovation

the process of creating new products or services, which result in a previously unseen product or service

Which of the following statements about the generic strategies are correct?

The differentiation and cost strategies are aimed at mass markets. The term "generic" comes from the fact that they are so widely applicable. They are three applicable classic strategies for businesses of all types--differentiation, cost, and focus.

industry

general name for the line of product or service being sold or the firms in that line of business

Customer contracting

It occurs when a buyer is willing to sign a deal with a small business to ensure a product or service.

Which of the following statements describe the shake-out stage of the industry life cycle?

It is the industry life cycle that is characterized by a decrease in the number of firms in an industry. It ends when the rapid die-off of firms comes to an end. It comes after the boom stage.

Favored purchasing

It occurs because government agencies and many big businesses have policies that provide for quotas for buys from small, minority, and disadvantaged businesses.

Second sourcing

It occurs when firms seek out customers who are already being serviced by other firms.