Small Business Chapter II- Starting a Small Business

Which of these refers to a company's ethical obligations to the community?

A company's ethical obligation to the community refers to social responsibility.

SWOT analysis

An assessment that provides a concise overview of a firm's strategic situation

Social entrepreneurship is best defined as:

Applying already established principles of good business to social problems

Cost-based Strategy or Differentiation-based Strategy? A small manufacturer's production costs are about the same as those of his competition. This is because the shipping costs of his raw materials are very high. But he has discovered a local source for these materials, and his shipping expenses would be significantly reduced by using that source as his main supplier. This would lower his production costs below those of his competitors.

Cost-based Strategy

Cost-based Strategy or Differentiation-based Strategy? A custom dressmaker realizes that she can add a new feature to her products that will appeal to an upscale market niche, which includes buyers who would be willing to pay a premium price for fashion items that have the new feature.

Differentiation-based Strategy

The most accurate statement concerning socially responsible actions and firm profitability is:

Evidence concerning the link between social responsibility and profit is mixed.

Which of these represent the second step in the ethical decision making process?

Identification of alternative solutions

____ refers to a general sense of honesty and reliability that is expressed in a strong commitment to doing the right thing, regardless of the circumstances.

Integrity

Which of the following best describes the difference between integrity and ethics?

Integrity is based on internal principles that guide behavior; ethics is based on external guides to behavior.

Of all the possible stakeholders, which of the following are the three primary ones?

Investors, creditors, and employees

A baker looking for new retail space has returned from a seminar on environmentalism and wishes to act responsibly in this area. Which action will best accomplish this purpose?

Looking into leasing a LEED-certified space

Although important, company values rarely contribute to the financial viability of businesses.

Organizations usually stand to benefit when company values and the values held by entrepreneurs or founders align with the values of society as a whole. See Section 2-2b: Social Responsibility and Small Business.

Focus strategies

POA that isolates and enterprise from competitors and other market forces by targeting a restricted market segment

Which of the following is foundational to a company's ability to satisfy its stakeholders?

Profitable. If a business fails to be profitable, it cannot remain in existence, thus becoming incapable of satisfying any stakeholders

Ethical companies feel that they have an obligation to their _____, the people who could be most affected by the company's actions.

Stakeholders are individuals or groups that either can affect or are affected by the performance of the company.

Which of the following is an example of an employee acting unethically toward his or her employer?

Taking unjustified sick leave

Resources

The basic inputs that an entrepreneur can use to start and/or operate a business

Paradox of Attraction

The self-contradictory idea that an attractive market opportunity is likely to draw multiple competitors, thereby diminishing its attractiveness

When ABC International engages in the unethical practice of concealing business income, it is called skimming.

True

An individual's beliefs affect what that person does on the job and how she acts towards customers.

True. An individual's beliefs affect what that person does on the job and how she or he acts toward customers and others

The Internet has made it easier for users to copy intellectual property.

True. The Internet has made it easy for millions of users to copy intellectual property free of charge.

True or False? Aligning with societal values like sustainability or environmental sensitivity can lead businesses to realize both increased profits and societal benefits, as customers are more willing to shop at places that share the same values.

True. The majority of consumers say they would be willing to pay more to buy products that are sustainable.

True or False? Unique past experiences and passions allowed Zoi to create Bambino's, using her own values to create a brand that is both financially successful and socially beneficial.

True. Zoi's experiences in her family's restaurant and working in a geriatric clinic both contributed to her novel insight regarding the delivery of fresh, healthy, and sustainable food for bab

serendipity

a facility for making desirable discoveries by accident

market

a group of buyers and sellers of a particular good or service

strategy

a plan of action that coordinates the resources and commitments of an organization to achieve superior performance

Feasibility Analysis

a preliminary assessment of a business idea that gauges whether the venture envisioned is likely to succeed

What is the purpose of the Foreign Corrupt Practices Act?

c. Prohibiting U.S. firms from paying bribes in foreign countries, including countries where such bribes may be legal.T he Foreign Corrupt Practices Act makes it illegal for U.S. businesses to use bribery in their dealings anywhere in the world, regardless of local practice

The business practices that a firm's leaders and employees view as right or wrong reflect their

code of ethics

industry

compete with one another offering identical or similar products or services for sale to the same general group of buyers

A digital ID tag that collects data on consumers' buying habits related to a particular Internet address is known as a

cookie

Strength of business idea

create value for end users, offer products or services that customers favor and find easy to use

When a company delivers an excellent product with first-rate service, _____ and _____ are likely to follow.

customer satisfaction; profits

Mullins suggest that three dimensions

fit of the venture leader's mission, aspirations and level of comfort with the risk involved 2) critical to the success of the enterprise and her or his ability to excecute 3) connections to suppliers, customer, investors, and others in the industry who will be essential to making the venture work

A poll by an online media company found that more than 80 percent of Web users worry about

how well their personal information is being protected.

Refusing to pay a bribe even though it is a common practice in the country one is doing business in is an example of

integrity

Integrity

is acting in ways that are congruent with the values you espouse.

Clark, the owner of DEF LLC, bragged about hiding company income from the IRS but was surprised when he learned his sales manager was accepting kickbacks from customers. Clark should have remembered

lapses in integrity are passed down from superiors to subordinates

Research suggests that entrepreneurs who head small, growth-oriented companies may be _____ than CEOs of large corporations.

less narrowly focused on profits

Legitimacy

lies are those that are specifically designed to make a new business look bigger and busier than it really is.

startups

new business ventures created "from scratch"

Tangible Resources

organizational resources that invisible and difficult to assess

Start up idea

products or services that exist but are not present in all markets.

PRO factors

products, representatives, and the organization.

ethical _____ holds the philosophy "When in Rome, do as the Romans do."

relativism

cost based strategy

requires a firm to hold down its costs so that it can compete by charging lower prices and still make a profit

Four strategies

restricting the target market to a single subset of customer b) emphasizing a single product or service c) limiting the market to a single geo.. region d) the superiority of the product or service

Milton Friedman argued that businesses

should be required to use their resources to meet their social responsibilities.

One unethical practice involves the concealing of business income. This practice is called

skimming.

new market ideas

startup ideas centered around providing customers with an existing product or service not available in their market

pivot

to refocus or recreate a startup if the initial concept turns out to be flawed

The notion of integrity and ethics are closely tied

true

Strategy or Differentiation-based Strategy? A board game manufacturer discovered that he could use a heat-transfer process to add attractive designs to the backs of his game pieces because of the basic material he uses in production of those pieces. His competitors could not duplicate the process because their basic material would not accept such transfers. He realized that this decorative step would add value, thereby allowing him to sell his product at a higher price.

Differentiation-based Strategy

You, as a resident and citizen of USA, are conducting business abroad and make decisions based on local interpretations depending on the country you are in. You are using the philosophy of

Ethical relativism is the belief that ethical standards are subject to local interpretation.

An example of a business adversely affected by environmental protection laws would be a

fast lube and oil change center.

competitive advantage

A benefit that exists when a firm has a product or service that is seen by its target market as better than those of competitors

fatal flaw

A circumstance or development that alone could render a new business unsuccessful

Capabilities

A company's routines and processes that can coordinate the combined use of its productive assets in order to achieve desired outcomes

Integrity is best defined as:

A general sense of honesty and reliability that is expressed in a strong commitment to doing the right thing, regardless of the circumstances.

True or False? While financial performance is important, many small business founders view their values and contributions to society as critical to overall success.

A) True. Many small business owners think of their businesses with both long-term viability and social benefits in mind. Se

Be a good corporate citizen, and give back" represents which type of responsibility?

Discretionary

Which stakeholder group(s) benefit(s) the most from Shake Shack's commitment to high wages and salaries?

Employees, customers, and the owners. While high wages and salaries directly benefit employees, owners benefit from lower turnover rates and highly motivated workers, while customers benefit from a higher level of customer service and attention to detail

Small businesses are thought to have four types of responsibilities that are either required, expected, or desired. Which of these responsibilities does Shake Shack meet by empowering and valuing their employees?

Empowering and valuing employees is a discretionary responsibility.

The internet has made it easier for people to steal the creations and ideas of others, including literary works, artistic products, and music which are collectively known as trademarks.

False. . A trademark is any word, name, symbol, or design used to identify a specific product.

If businesses don't explicitly incorporate social values into their businesses, then they don't provide any societal benefit

False. By providing employment, and in Shake Shack's case, allowing families to live above the poverty line, businesses can provide extremely important benefit to society simply by staying in business.

Given the size, the ethical influence of a leader is more pronounced in a large corporation than it is in a small firm.

False. In a small organization, the influence of a leader is more pronounced than it is in a large corporation where leadership can become diffused.

"Three big" stakeholders for organizations are employees, customers, and competitors.

False. Three big" stakeholders for companies are owners, customers, and employees.

oppurtunity recognition

Identification of potential new products or services that may lead to promising businesses

Cost-based Strategy or Differentiation-based Strategy? An accidental discovery led to a technological breakthrough that makes it possible for an entrepreneur to produce her product more efficiently, allowing her to sell her product at a lower price than the competition and still make a sufficient profit.

a. Cost-based Strategy

Capital requirements and venture performance

little capital to launch- low levels of liability and other risks are ideal

Because a firm has considerable discretion when revealing performance results, financial reports can sometimes be _____ without technically being illegal.

misleading

new benefit ideas

startup ideas centered around providing customers with new or improved products or services

new technology idea

startup ideas involving new or relatively new technology, centered around providing customers with a new product or service

A profitable company that responds to customers' needs while showing reasonable concern for the environment is called a(n)

sustainable small business.

differentiation based strategy

POA designed to provide a product or service with unique attributes that are valued by consumers

Entrepreneurs run into surprise challenges and problems, and these always blunt the social impact of the firm, as well as its financial performance.

False. While surprise challenges can be difficult to address, many entrepreneurs seek to solve these issues and use creativity to bring novel solutions to these problems.

competitive environment

The environment that focuses on the strength, position, and likely moves and countermoves of competitors in an industry

Which of the following is NOT one of the "Big Three" stakeholders?

a. Government regulators (correct) b. Customers c. Owners d. Employees

Which of the following is generally NOT an outcome when a business practices social responsibility?

a. increased financial performance b. increased scrutiny from regulatory (correct) agencies c. greater access to capital d. reduced employee turnover. . Increased scrutiny from regulatory agencies is not an outcome when a business practices social responsibility.

Some experts estimate that one-third of all new businesses fail because of

employee theft.

Which of the following is the most frequently observed form of workplace misconduct?

Abusive behavior

Long-term benefits of adopting ethical and responsible business practices include all of the following EXCEPT:

Adopting ethical and responsible business practices results in reduced employee turnover. a. improved financial performance. b. improved productivity and quality. c. higher employee turnover. *(correct) d. higher sales and customer loyalty.

According to Blanchard and Peale, an organization's ethical policy should be based on all of these EXCEPT:

a. pride. b. persistence. c. perspective. d. pattern. *correct

A U.S. manager is upset with the company's overseas representative for paying a small "access fee" to a local customs official to ensure the expedited release of a customer order. The manager's belief such payments are wrong reflects a sense of

ethical imperialism.

targeted market and customers

identify growing rapidly -customers with high levels of purchasing power

Giving the impression a business is something it is not is

illegal

capability of founders

industry related experience skills, and networks, as well as a great passion for and a good fit with the new business