BA3305 Ch7

_____ is a strategic action. A. Increasing marketing efforts B. Using new distribution channels C. Acquiring a competitor D. Increasing prices

C. Acquiring a competitor

Which of the following types of value benefits is most likely to be offered by a product if it helps the community, a group, the environment, or the world? A. Scope savings B. Personalization C. Altruism D. Scale savings

C. Altruism

Small businesses typically use the strategy of innovativeness rather than imitativeness. True or False

FALSE Strategy in small business is special because most small businesses are more imitative than innovative.

The new NAICS covers more industries than the SIC. True or False

True

Which of the following is a cost benefit? A. Brand B. Altruism C. Personalization D. Organizational practice

D. Organizational practice

Which of the following is the second step of a small business' strategic planning process? A. Reviewing and confirming the goals that define the firm B. Knowing the magic number C. Studying the dynamics and trends of the industry D. Considering the customers and the benefits to offer them

D. Considering the customers and the benefits to offer them

_____ is a value benefit that can come from the products or services that a business owner offers, or from his or her firm's reputation. A. Brand B. Scale savings C. Learning D. Scope savings

A. Brand

Which of the following statements concerning cost strategies is not true? A. Cost strategies are aimed at a small niche market. B. Small businesses in a variety of industries make use of cost strategies. C. In a cost strategy, you try to show how your firm offers a combination of cost benefits that appeal to the customer. D. A cost strategy comes when a small business can pursue a very low cost operation.

A. Cost strategies are aimed at a small niche market.

Which of the following is a generic strategy that targets a portion of the market, called a segment or niche? A. Focus strategy B. Differentiation strategy C. Cost strategy D. Value strategy

A. Focus strategy

_____ is the general name for the line of product or service being sold, or the firms in that line of business. A. Industry B. Market C. Scope D. Niche group

A. Industry

Which of the following statements about industry, industry dynamics, and industry lifecycle is true? A. Industry refers not only to your product or service, but also to all your competitors selling that product or service. B. The fortunes of industries do not move in predictable ways. C. Small firms avoid entering "hot" industries. D. If the industry is not growing there is no way to be successful as a start-up.

A. Industry refers not only to your product or service, but also to all your competitors selling that product or service.

Which of the following is the advantage of knowing the magic number? A. It helps in evaluating if the proposed business can deliver the desired return. B. It helps in retaining customers. C. It seeks out customers who are already being serviced by another firm. D. It helps in making incremental product improvements.

A. It helps in evaluating if the proposed business can deliver the desired return. Knowing the magic number from the start, entrepreneurs are better able to evaluate if their proposed business can deliver on that very basic need that everyone reports needing.

Which of the following statements is true regarding the entry wedge of supply shortage? A. It occurs when a new product is in demand. B. It takes place in a stable market that doesn't change rapidly. C. It takes place in a long-term market. D. It occurs when certain physical resources are unutilized.

A. It occurs when a new product is in demand.

Which of the following is true of a blue ocean strategy? A. It results in a new product or service. B. It is the business equivalent of cloning. C. It involves patterning a business on existing firms. D. It matches the precision of copying as seen in franchising

A. It results in a new product or service.

31. Which of the following are the two major classification systems that code industries? B. SCALE and SCOPE C. SWOT and VRIO D. OLC and SWOT

A. NAICS and SIC There are two major classification systems that code industries: the new NAICS (North American Industry Classification System) and the better-known Standard Industrial Classification system, or SIC.

Which of the following is a tactical action? A. New distribution channels B. Mergers C. New product introductions D. Entering new markets

A. New distribution channels

_____ is a type of life cycle stage following a boom in which there is a rapid decrease in the number of firms in an industry. A. Shake-out B. Growth stage C. Maturity stage D. Retrenchment

A. Shake-out

_____ is the idea and actions that explain how a firm will make its profits. A. Strategy B. Objective C. Mission D. Goal

A. Strategy

Standard industrial classification system (SIC) codes have _____ digits. A. four B. six C. seven D. nine

A. four

Changes in competitors, sales and profits in an industry over time are referred to as: A. industry dynamics. B. retrenchment. C. shake-out. D. transformational competency.

A. industry dynamics.

A(n) _____ is the business term for the population of customers for a business owner's products or services. A. market B. industry C. strategy D. SIC

A. market

A _____ is a narrowly defined segment of the population that is likely to share interests or concerns. A. niche market B. mass market C. primary market D. parallel market

A. niche market

A _____ displays characteristics related to the nature of a product or service itself. A. value benefit B. cost benefit C. scale saving D. cause and effect diagram

A. value benefit

Gross profit is defined as: A. what is left after deducting the cost of goods sold. B. what is left after deducting the operating expenses of the business. C. the amount of money the owner takes out of the firm annually. D. the profit earned by a company when its product is in the maturity stage of the product life cycle.

A. what is left after deducting the cost of goods sold.

Imitation minus one degree of similarity: A. would be the business equivalent of cloning. B. is equivalent to the blue ocean strategy. C. leads to pure innovation. D. helps in the creation of a unique setting.

A. would be the business equivalent of cloning.

_____ is the amount of money left after deducting the operating expenses of the business. A. Gross profit B. Net profit C. Profit after taxes D. Generic profit

B. Net profit

According to Shepherd, Shanley, and Porter, which of the following is a small business suprastrategy? A. Altruism B. Single-mindedness C. Scope savings D. Technology

B. Single-mindedness

Which of the following statements about Michael Porter's Five-Forces Model of Industry Competition is not true? A. Substitutes and alternatives are indirect competition. B. There are five sets of sources of competition. C. Rivals are direct competition. D. New entrants are an industry source of competition.

B. There are five sets of sources of competition.

In the context of entry wedges, _____ occurs because government agencies, government sponsored commercial contracts, and many big businesses have policies that provide for quotas for buying from small businesses. A. second sourcing B. favored purchasing C. market relinquishment D. customer contracting

B. favored purchasing

The first step of the strategic planning process for a small business is: A. performing a SWOT analysis. B. reviewing and confirming the goals that define the firm. C. mapping the prospective customers. D. studying the dynamics and trends of the industry.

B. reviewing and confirming the goals that define the firm. The first step of the strategic planning process involves reviewing and confirming the goals that define the firm and knowing the magic number.

For a small business that is just starting out, all strategy starts with _________. A. the product or service B. the owner C. the competition D. the customers

B. the owner

_______ are characteristics of a product or service that the target customer would consider worthwhile, such as low cost or high quality. A. Cost benefits B. Value benefits C. Benefits D. Value propositions

C. Benefits

An overall strategic approach in which a firm patterns itself on other firms, with the exception of one or two key areas is referred to as _____. A. pure innovation B. niche strategy C. incremental innovation D. blue ocean strategy

C. incremental innovation

_____ are classic strategies for businesses of all types and they include differentiation, cost, and focus. A. Personalization strategies B. Altruistic strategies C. Retrenchment strategies D. Generic strategies

D. Generic strategies

Michael Porter identifies five different threats of competition for any business. Which of the following choices is not one of Michael Porter's five threats? A. Rivals B. Suppliers C. Substitutes D. Investors

D. Investors

Which of the following is a value benefit? A. Scale savings B. Cost savings C. Learning D. Technology

D. Technology

Amy plans to open a laundromat with a gym. She got the idea from the laundromat with a bar and game rooms, which she visits regularly. She wants to test her idea by starting out in a small space with the focus on the laundromat and a small space allocated for gym equipments. Amy's idea is an example of _____. A. a blue ocean strategy B. a pure innovation C. an altruistic approach D. an incremental innovation

D. an incremental innovation

In an imitative strategy, an entrepreneur: A. creates a new product or service which has no competitors. B. considers prospective customers before creating a product or service. C. seeks to do something that is very different from what others are doing. D. does more or less what others are already doing.

D. does more or less what others are already doing.

A niche market is a narrowly defined segment of the population that is likely to share interests or concerns. True or False

True

Cost benefits include scale and scope savings. True or False

True

Eventually, mature industries begin a decline stage. Some industries face death, while others find new life in a process called retrenchment. True or False

True

Second sourcing provides customers with greater certainty of supplies or services. True or False

True

Strategy is the idea and actions that explain how a firm will make its profits. True or False

True

Tactical actions are competitive responses with low resource requirements. True or False

True

The major ways you cope with competitive pressures is by undertaking some combination of strategic actions and tactical actions. True or Fale

True

Imitation plus one degree of similarity results in: A. patterning a business on existing firms. B. creating previously unseen products or services. C. creating products or services that have no competitors. D. characterizing a business based on the returns it offers.

A. patterning a business on existing firms.

_____ is the particular way a firm implements customer benefits that keeps the firm ahead of other firms in the market. A. Industry analysis B. Competitive advantage C. Resource distribution D. Market relinquishment

B. Competitive advantage

In which of the following stages is there an explosion of choices in terms of products and services? A. Introduction stage B. Growth stage C. Maturity stage D. Decline stage

B. Growth stage

Which of the following statements is not true of degree of similarity? A. Most firms use imitation plus or minus one degree of similarity. B. Imitation minus one degree of similarity is called incremental innovation. C. Imitation minus one degree of similarity is the business equivalent of cloning. D. Imitation plus one degree of similarity is called incremental innovation.

B. Imitation minus one degree of similarity is called incremental innovation.

Most small businesses are more _____ than _____. A. cost-directed; profit-directed B. imitative; innovative C. profit-directed; cost-directed D. innovative; imitative

B. imitative; innovative

Which of the following is a strategic action? A. Price cutting B. Product enhancements C. New product introductions D. Increased marketing efforts

C. New product introductions

An imitative business that competes locally with others in the same industry is referred to as _____. A. incremental competition B. niche business C. linear competition D. parallel competition

D. parallel competition

Shake-out is a type of life cycle growth stage marked by a very rapid increase in sales in a relatively short time. True or False

FALSE A shake-out is a type of life cycle stage following a boom in which there is a rapid decrease in the number of firms in an industry.

Generally, benefits do not influence a firm's strategy process. True or False

FALSE Benefits drive a firm's offering to its customers and influence every part of the strategy process.

There are two major classification systems that code industries: NAICS and SIC. True or False

TRUE There are two major classification systems that code industries: the new NAICS (North American Industry Classification System) and the SIC (Standard Industrial Classification system).

Imitation minus one degree of similarity is the business equivalent of an innovative strategy. True or False

FALSE In practice, most firms use imitation plus or minus one degree of similarity. Imitation minus one degree of similarity would be the business equivalent of cloning.

Market scale refers to the geography of the target market. True or False

FALSE Market scale is a characteristic of a market that describes the size of the market—a mass market or a niche market. Market scope refers to the geography of the target market.

Funds left over after deducting the cost of goods sold are referred to as the net profit. True or False

FALSE Net profit is what is left after deducting the operating expenses of the business.

Incremental innovation is also called a blue ocean strategy. True or False

FALSE Pure innovation, not incremental innovation, is also called a blue ocean strategy.

The first step of the strategic planning process for small businesses is considering your customers and the benefits you want to offer them. True or False

FALSE The first step of the strategic planning process for small businesses involves reviewing and confirming the goals that define entrepreneurs' firms and knowing their magic number.

The supra-strategies are designed to work when there are very few small business in an industry, along with many larger firms. True or False

FALSE The supra-strategies are all designed to work where there are many small businesses in an industry, along with a few larger firms.

Your magic number is the number of customers you can comfortably provide with your product or service. True or False

FALSE Your magic number is the post-tax income you personally seek from the business.

A research process that provides the entrepreneur with key information about other firms in the same line of business as his or her, the current situation and trends is known as: A. SWOT analysis. B. VRIO analysis. C. value chain analysis. D. industry analysis.

D. industry analysis.

Which of the following is true of the entry wedge of second sourcing? A. It occurs when business firms leave a market. B. It occurs because many big businesses have policies that provide for set-asides for purchases from small businesses. C. It offers the advantage of being globally based. D. It provides a competitive pressure to ensure that suppliers keep providing the best service and prices.

D. It provides a competitive pressure to ensure that suppliers keep providing the best service and prices.

Which of the following is an advantage of picking customer-desired benefits that a business owner's competitors do not offer? A. They results in lower pricing. B. They help business owners to set realistic goals. C. They help a business owner in identifying the magic number. D. They make the firm stand out from the competition.

D. They make the firm stand out from the competition.

Retrenchment is: A. the third life cycle stage. B. a stage marked by a stabilization of demand. C. a type of life cycle stage following a boom in which there is a rapid decrease in the number of firms. D. an organizational life cycle stage in which established firms must find new approaches to improve the business.

D. an organizational life cycle stage in which established firms must find new approaches to improve the business.

A type of life cycle growth stage marked by a very rapid increase in sales in a relatively short time is called the _____. A. maturity stage B. retrenchment C. shake-out D. boom

D. boom

An opportunity that makes it possible for a new business to gain a foothold in a market is referred to as a(n) _____. A. parallel competition B. incremental innovation C. differentiation strategy D. entry wedge

D. entry wedge

Which of the following statements concerning choosing an industry is not correct? A. Picking the right industry is key to the success of your small business. B. Insurance firms and health-related firms do well in bad times and good historically. C. Industry is vitally important to your core strategy decisions. D. There are industries that are more profitable than others.

B. Insurance firms and health-related firms do well in bad times and good historically.

Which of the following is an advantage of using an imitative strategy? A. It allows entrepreneurs to do something that is very different from what others are doing. B. It allows business owners to buy existing technologies. C. It allows entrepreneurs to fit their businesses to their own ideas and preferences. D. It allows business owners to create unique settings.

B. It allows business owners to buy existing technologies.

Which of the following is true of the introduction stage of a product? A. Sales are almost always high. B. Most customers are unaware of the offerings. C. Firms begin to compete on features and prices. D. Some products turn out to be extremely popular.

B. Most customers are unaware of the offerings.

A perceptual map is: A. a chart that maps changes in competitors, sales and profits in an industry over time. B. a graphic display which positions products according to their scores on important strategic dimensions. C. a chart that indicates the changes in the magic number of a business owner. D. a graphic display which indicates the various stages of the lifecycle of a product. A perceptual map is a graphic display which positions products, services, brands, or companies according to their scores on important strategic dimensions.

B. a graphic display which positions products according to their scores on important strategic dimensions.

In the goal step of the strategic planning process, the key is to: A. focus on the kind of customers the business wants to deal with. B. bring together the decisions that underlie the business plan. C. offer state-of-the-art or leading-edge technology. D. build a brand reputation through the products or services.

B. bring together the decisions that underlie the business plan.

Which of the following types of customers are likely to generate more potential customers than any other type? A. Loyal customers B. Local customers C. Passionate customers D. Corporate customers

C. Passionate customers

As a new entrepreneur, Anthony's magic number for 2013 is $42,000. If the current tax rate for his business is 30 percent, calculate the amount that Anthony's firm would need to sell for him to get his magic number. A. $50,000 B. $50,495 C. $60,000 D. $60,854

C. $60,000 The formula to calculate the pretax income is as follows: Pretax income = (The desired post-tax income)/(1 - Tax percentage rate)

Which of the following is characteristic of the boom stage in the life cycle of a product? A. Most customers are unaware of the offerings. B. Many firms close down. C. Firms begin to compete on features and prices. D. Established firms must find new approaches to improve the business.

C. Firms begin to compete on features and prices.

Which of the following is true of a differentiation strategy? A. It requires a firm to offer a combination of cost benefits that appeals to the customers. B. It is generally pursued by all small businesses. C. It is aimed at mass markets. D. It is used by businesses that pursue a very low cost operation.

C. It is aimed at mass markets.

_____ refers to the size of the market, whereas _____ refers to the geographic range covered by the market. A. Scope; scale B. Mass; niche C. Scale; scope D. Niche; mass

C. Scale; scope

The _____ is marked by a stabilization of demand, with firms in the industry moving to stabilize or improve profits through cost strategies. A. decline stage B. maturity stage C. growth stage D. retrenchment stage

B. maturity stage

Value benefits are important because: A. they lead to scope savings. B. they lead to higher prices. C. they result in scale savings. D. they lead to reduced costs.

B. they lead to higher prices.

Which of the following is true of niche markets? A. They are broad markets. B. They target all the customers in the entire market. C. They are specific and narrow. D. They involve large portions of the population.

C. They are specific and narrow

In an industry life cycle, the shake-out phase ends when: A. the firms introduce new products or services. B. the competition between firms increases. C. the rapid die-off of firms stops. D. the growth phase begins.

C. the rapid die-off of firms stops.

When looking at the typical start-up strategy of a classic innovator, which of the following statements is not true? A. Their market scope is a niche market. B. Industry attractiveness is moderate to high. C. They may use an elite supra-strategy. D. Innovation only happens during the introduction phase of the life cycle.

D. Innovation only happens during the introduction phase of the life cycle.

A customer group that involves large portions of the population is referred to as a _____. A. niche market B. secondary market C. local market D. mass market

D. mass market

The fourth step of a small business' strategic planning process involves: A. considering the customers and the benefits to offer them. B. refining the firm's capabilities in order to maintain a competitive advantage. C. determining the best strategic direction and strategy for the firm. D. studying the dynamics and trends of the industry.

C. determining the best strategic direction and strategy for the firm.

The life cycle stage in which a product or service is being invented is known as the _____. A. growth stage B. boom C. introduction stage D. shake-out

C. introduction stage

As a firm gets more experience, it can often work with fewer mistakes and greater efficiencies, thereby lowering costs. This leads to the cost benefit of _____. A. personalization B. scope savings C. learning D. altruism

C. learning

Industry analysis is defined as the technique used to: A. determine the magic number in a particular industry. B. determine the extent to which a product is similar to another product. C. study the dynamics and trends of an industry. D. study the effects of low cost on an industry.

C. study the dynamics and trends of an industry.

Market scope is important because: A. it helps business owners in determining the size of the target market. B. it helps business owners to decide where to focus their sales and advertising efforts. C. it helps business owners in designing a product. D. it helps business owners in calculating their magic number.

B. it helps business owners to decide where to focus their sales and advertising efforts.

Differentiation strategies target a niche segment of the market. True or False

FALSE Differentiation strategies are aimed at mass markets—situations in which nearly everyone might buy a product or service.