Ch. 13

Employee turnover for part-time workers is lower than that for full-time workers. T/F?

False

_____ focus on selling a firm's existing products to new groups of customers. T/F?

Market development strategies

Effective time management can increase an entrepreneur's job satisfaction. T/F?

True

An example of market development strategies for new demographic market is...

Weave One, a clothing retailer, that had clothes exclusively for women launches its range of clothing line for men. A chain of luxury hotels launches a new series of budget hotels that are affordable.

Entrepreneurs who have the necessary abilities for the transition to more professional management practices and the aspiration to grow their business: have little potential for firm growth. usually form lifestyle firms. are the most likely to achieve growth. will achieve growth only if the entrepreneur replaces himself or herself with a professional manager.

are the most likely to achieve growth.

A computer company buys a hard-drive manufacturer. This is an example of:

backward integration

When a retail tire store buys a tire wholesaler this is an example of horizontal integration. T/F?

False

What is an example of horizontal integration as a type of diversification strategy used by companies?

A company that manufactures personal computers develops operating systems.

What is an example of backward integration as a type of diversification strategy used by companies?

A company that sells dairy products buys a dairy farm.

Identify an example of backward integration as a diversification strategy.

A laptop manufacturer establishing a retail unit that sells microprocessors and other parts of a laptop

What is an example of forward integration as a type of diversification strategy used by companies?

A manufacturer of men's clothing starts a retail store that sells its clothing line.

An example of market development strategies for new geographical market is...

Burger Z, a chain of fast-food joints, opens its range of restaurants in ten different cities in the United States. A consumer goods company launches its products, popular in the United States, in India.

Identify the strategies that an entrepreneur uses for overcoming pressures of managing employees. (Check all that apply.) Avoiding delegating responsibility to others Conducting open and frequent communication with employees Establishing a "me" spirit in meetings and memoranda to employees as well as to other stakeholders Providing frequent feedback to employees

Conducting open and frequent communication with employees Providing frequent feedback to employees

Which of the following is an example of horizontal integration as a diversification strategy for a firm that manufactures laptops? Setting up an automobile manufacturing unit Selling individual components of laptops Establishing retail stores that sell consumer goods Developing operating systems

Developing operating systems

The computerized system developed by the grocery and pharmaceutical industry to link chain members is:

Efficient Computer Response (ECR)

Which of the following is an example of a car manufacturer in the United States adopting the product development strategy for growth? Selling cars in South American countries Entering the market of car accessories by manufacturing and selling them Increasing its marketing budget for promoting a new car that it plans to sell Establishing a software development center in the United States

Entering the market of car accessories by manufacturing and selling them

Matthias is an entrepreneur who runs a home stay for tourists visiting the Hawaiian Islands. His dream is to grow his business only to an extent that it does not become one of a professional manager. His business is an example of a lifestyle business. In the given context, which of the following steps is Matthias expected to take? He is likely to develop his business using horizontal integration strategies. He is likely to consider leasing new assets as an alternative to fixed assets. He is likely to conduct sensitivity analysis for maintaining cash flow. He is likely to control his business from growing beyond a certain point.

He is likely to control his business from growing beyond a certain point.

Identify the benefits of time management for entrepreneurs of rapidly growing ventures. (Check all that apply.) Increased productivity Improved interpersonal relationships Lesser need for providing feedback to employees Increased responsibility

Increased productivity Improved interpersonal relationships

Which of the following should be practiced by an entrepreneur to deal with incompetent employees? A firing decision need not be well documented. Problems should be identified with a proposed solution agreeable to both the employee and the entrepreneur. Only competent employees should be given feedback on a regular basis. A firing decision should be based on the discretion of the entrepreneur rather than employee evaluation.

Problems should be identified with a proposed solution agreeable to both the employee and the entrepreneur.

_____ for growth involve developing and selling new products to customers who are already purchasing a firm's existing products.

Product development strategies

Which of the following are true about entrepreneurs of firms with constrained growth? (Check all that apply.) They are usually in the business to satisfy their personal lifestyle choice rather than to maximize personal wealth. They are the most likely to achieve rapid and continuous growth. They are in the most danger of failure. They are the most likely to be frustrated by the firm's lack of growth.

They are in the most danger of failure. They are the most likely to be frustrated by the firm's lack of growth.

Identify a characteristic of entrepreneurs of firms with constrained growth. They possess the necessary abilities for effective and professional management but do not aspire to do so. They aspire to grow their businesses but do not possess sufficient abilities to successfully satisfy this aspiration. They possess neither the ability to make the transition to a more professional management approach nor the aspiration to grow their businesses. They possess the necessary professional management abilities and the aspiration to grow their businesses.

They aspire to grow their businesses but do not possess sufficient abilities to successfully satisfy this aspiration.

________ is the process of improving an individual's productivity through more efficient use of time.

Time management

The grocery and pharmaceutical industries have developed a computerized system to link chain members together and manage demand, distribution, and marketing. T/F?

True

Time management is the process of improving an individual's productivity through more efficient use of time. T/F?

True

To implement participative management the entrepreneur should have open communication with employees. T/F?

True

Which of the following should an entrepreneur running a firm that manufactures consumer electronic products do to effectively manage inventory? Maintain a high inventory, typically double the amount of expected sales Use a computerized inventory-control system and anticipate customer demand Use the fastest mode of transport for transportation of manufactured goods irrespective of customer demand Maintain low inventory and start production of new goods after customers place orders

Use a computerized inventory-control system and anticipate customer demand

A sports car manufacturer enters into the business of selling car accessories. In the context of different growth strategies, this is an example of _____.

a diversification strategy

Entrepreneurs who possess the ability to make the transition to a more professional management approach and the aspiration to grow their businesses are the most likely to _____.

achieve firm growth

An advantage of using the product development strategy for growth is the chance to _____.

capitalize on existing distribution systems and on the corporate reputation a firm has with its customers

Growth of the venture: lessens legitimacy of the firm. lessens time spent on management decision making. causes pressures on human resources. lessens pressures on existing financial resources.

causes pressures on human resources.

To support the effort toward financial control by record keeping, it is helpful to _____.

consider using a software package to enhance the flow of useful financial information

According to the penetration strategy, an entrepreneur tries to penetrate his or her firm's product or market further by _____.

encouraging existing customers to buy more of the firm's current products

An advantage of expansion and growth for a new firm is that an increase in size _____.

enhances the legitimacy of the firm

According to the principle of reanalysis, entrepreneurs can usually improve their time management by _____.

evaluating more systemic issues and revisiting potential opportunities for delegation

A firm that manufactures washing machines starts to manufacture detergent. This illustrates _______ integration.

horizontal

A relatively large proportion of all _____ are represented by entrepreneurs who possess the necessary abilities for transition but do not aspire to do so.

lifestyle firms

An amusement park in the United States caters to the kids and youths segment. It plans to enter the market in countries such as India and China. It also plans to have new rides that will allow senior citizens to enjoy their visit to the park. This growth strategy of the park is an example of the _____.

market development strategy

In the context of growth strategies, the _____ focuses on a company's existing product in its existing market.

penetration strategy

The _____ provides information to an entrepreneur about how time is currently being allocated, which will also highlight inefficient or inappropriate investments of time.

principle of analysis

Entrepreneurs in the ________ quadrant of firm growth possess the abilities to grow but do not aspire to grow their businesses.

unused potential for growth

Hassan is an entrepreneur who has started a software firm that creates mobile applications. Hassan thinks that he should resign from the role of CEO and hire someone who has the ability to satisfy his aspiration for growth. He plans to focus on developing the R&D and creating new apps. Based on the ability of the entrepreneur to make a transition to professional management practices and the entrepreneur's aspirations, identify the type of the firm growth outcome.

A firm with constrained growth

Jemina is an entrepreneur who runs a fashion boutique for a range of clothes for girls aged 12 to 17 years. Her dream is to grow her business only to an extent that her task does not become that of a professional manager's. She has been a successful entrepreneur and has effectively managed many firms. Her current venture is an example of a lifestyle business. Based on the ability of the entrepreneur to make a transition to professional management practices and the entrepreneur's aspirations, identify the type of the firm growth outcome.

A firm with unused potential for growth

Discuss the three types of market development strategies and give examples of each.

A. New geographical market—This simply refers to selling the existing product in new locations. For example, a firm selling its products in Singapore could start selling its products in Malaysia, Thailand, and Indonesia. This has the potential of increasing sales by offering products to customers who have not previously had the chance to purchase them. The entrepreneur must be aware of possible regional differences in customer preferences, language, and legal requirements that may necessitate a slight change in the product (or packaging). B. New demographic market—Demographics are used to characterize (potential) customers based upon their income; where they live; their education, age, and sex; and so on. For an entrepreneur that is currently selling the firm's existing product to a specific demographic group, the business could grow by offering the same product to a different demographic group. For example, a studio currently produces and sells computer games (specializing in games on baseball and soccer) to males between the ages of 13 and 17. However, there is an opportunity for this company to expand its sales by also targeting males between the ages of 24 and 32 who are university educated, have high disposable incomes, and would likely enjoy the escapism of these computer game products. C. New product use—An entrepreneurial firm might find out that people use its product in a way that was not intended or expected. This new knowledge of product use provides insight into how the product may be valuable to new groups of buyers. For example, when I moved from Australia to Chicago, I bought a baseball bat. I did not use the bat to play baseball; rather I kept it beside my bed for security against anyone who might break into my apartment. Another example is four-wheel-drive vehicles. The original producers of this product thought that it would be used primarily for off-road recreational driving but found that the vehicle was also popular among housewives because it was big enough to take the children to school and carry all their bags and sporting equipment. Knowledge of this new use allowed the producers to modify their product slightly to better satisfy customers who use the product in this way. An advantage from using a market development strategy is that it capitalizes on existing knowledge and expertise in a particular technology and production process.

An inexpensive way for entrepreneurs to overcome pressures on existing financial resources is by acquiring new resources. T/F?

False

Comparison of the actual and budgeted expenses in the income statement can be helpful for new ventures where there are multiple products or services. T/F?

False

Diversification strategies are completely unrelated to an entrepreneur's and a firm's knowledge. T/F?

False

Even when cash flow problems are discovered, the pro forma budgeted amounts should never be changed. T/F?

False

Financial reporting to shareholders, bankers, and other investors give the marketing cost for each product and highlight the performance of managers in controlling costs. T/F?

False

Firms headed by entrepreneurs who neither have the ability to make the transition to a more professional management approach nor the aspiration to grow their businesses usually perform better if they grow to a bigger scale. T/F?

False

Which of the following are the advantages of the participative style of management of employees? (Check all that apply.) Involving others in the decision-making process reduces the information-processing demands on the entrepreneur. Highly qualified managers and employees always follow the entrepreneur's ways to tackle problems. Employees are better prepared and inspired to implement the decided course of action in a decision-making process. Employees can be relieved of the added responsibility of making decisions and taking initiative.

Involving others in the decision-making process reduces the information-processing demands on the entrepreneur. Employees are better prepared and inspired to implement the decided course of action in a decision-making process.

Identify the implications of growth for a firm. (Check all that apply.) It can reduce the firm's bargaining power. It can cause problems of employee morale and employee burnout. It can make the firm less attractive to suppliers. It can lead to a stretching of the existing financial resources.

It can cause problems of employee morale and employee burnout. It can lead to a stretching of the existing financial resources.

Fit State Inc. is a company that manufactures gym equipment and sells it to different gyms and fitness centers in the United States. The company decides to use product development strategies for growth. Which of the following should the company do to follow the product development strategy? It should begin its own chain of gyms in the United States. It should enhance its promotional strategies. It should manufacture and sell sports equipment. It should sell its products in Latin American countries.

It should manufacture and sell sports equipment.

AQO2, a company that sells fruit-based beverages in the United States, has a popular product named Ozo. Ozo is marketed as a sports drink for teenagers and young adults. The company plans to use the penetration strategy for growth. Which of the following should the company do to follow the penetration strategy? It should focus on increasing its range of beverages by offering caffeine-based drinks. It should enter markets in Asia and Latin America with its popular product, Ozo. It should revise the marketing strategy for Ozo to promote it as a supplemental drink that can be consumed every day. It should look to diversify its business by entering into the manufacture of sports goods.

It should revise the marketing strategy for Ozo to promote it as a supplemental drink that can be consumed every day.

Which of the following is true about leasing as an alternative for buying equipment or fixed assets? Leases are valuable for equipment that do not become obsolete in a short time period. Leasing may be a good alternative depending on the type of asset to be leased and the usage demand on the asset. Leasing usually contains a small down payment and negligible usage fees. Leases are never more expensive than a purchase.

Leasing may be a good alternative depending on the type of asset to be leased and the usage demand on the asset.

_____ focus on selling a firm's existing products to new groups of customers.

Market development strategies

A recognition of the need to change personal attitudes and habits regarding the allocation of time is known as the principle of desire. T/F?

True

Effective time management depends on an entrepreneur's willpower and self-discipline. T/F?

True

Even though some entrepreneurs may way to grow their business, they lack the ability to do so. T/F?

True

The principle of ________ provides information to the entrepreneur about how time is currently being allocated, which will also highlight inefficient or inappropriate investments of time.

analysis

Inventory control: eliminates the need to carry inventory. balances the cost of carrying inventory with the cost of lost sales. requires a computerized inventory system. is not necessary for small firms.

balances the cost of carrying inventory with the cost of lost sales.

The strategy for growth in which the entrepreneur encourages existing customers to buy more of the firm's current product is a:

penetration strategy

The _____ requires an entrepreneur to categorize his or her tasks by their degree of importance and then allocate time to tasks based on this categorization.

principle of prioritized planning

The penetration growth strategy: aims to take new products into new markets. relies on taking market share from competitors. expands the firm's product offering with complementary products. focuses on developing new products for the existing market.

relies on taking market share from competitors.

An example of market development strategies for new product use is...

Alt World Tech relaunches its lightweight range of bikes popular among city riders by marketing them as mountain range bikes that have an advantage of being lightweight. An online gaming company relaunches its popular virtual reality games marketing them as educational games that can be used to develop the cognitive abilities of young adults.

Identify a true statement about the sensitivity analysis conducted when projecting cash flow in the early stages of a venture. Sensitivity analysis should not be computed for disbursements. Sensitivity analysis fails to ascertain the maximum cash needed by an entrepreneur. An entrepreneur lowers the number of items sold and reduce market share to conduct sensitivity analysis. An entrepreneur can use 1 plus and minus 5 for an optimistic and pessimistic cash estimate for monthly expected cash flow.

An entrepreneur can use 1 plus and minus 5 for an optimistic and pessimistic cash estimate for monthly expected cash flow.

Which of the following is true according to the principle of effectiveness in time management? Excessive time should be spent on making a small improvement in only a specific area. Perfectionism is more important than quality. An entrepreneur should try to finish each task in a single session. An entrepreneur should focus on tasks based on a random order.

An entrepreneur should try to finish each task in a single session.

Forward integration occurs when the firm acquires one of its suppliers. T/F?

False

If the existing product is being sold to teenagers in one country and new entry involves selling the existing product to teenagers in a new country then this represents a new product use. T/F?

False

Most new ventures need a human resource department from the first day of operations. T/F?

False

CT Koffee, a chain of coffeehouses in the United States, wants to pursue the penetration strategy to increase its growth and revenue. Which of the following steps should the company take to achieve growth using the penetration strategy? Increase its marketing budget for promotion campaigns that encourage existing customers to visit its cafes more often Establish a new chain of pizza delivery centers in the United States Start the manufacture of coffee mugs and wooden kitchenware Establish cafe chains in South Asian markets such as India, Sri Lanka, and Pakistan

Increase its marketing budget for promotion campaigns that encourage existing customers to visit its cafes more often

Identify a true statement about horizontal integration as a diversification strategy. It refers to introducing a new product into a new market that is not related to the existing business. It involves the firm becoming its own supplier. It deals with entering a different, but complementary, value-added chain. It involves the firm becoming its own buyer.

It deals with entering a different, but complementary, value-added chain.

Which of the following is true about forward integration as a diversification strategy for a firm? It refers to introducing a new product into a new market that is not related to the existing business. It occurs at the same level of the value-added chain. It provides the entrepreneur with an attractive opportunity to grow his or her business. It provides the opportunity to increase the sales of the existing product.

It provides the entrepreneur with an attractive opportunity to grow his or her business.

Surfwin manufactures surfboards that are popular among surfers across the United States. The company plans to adopt a diversification strategy to enhance growth. Which of the following should the company do as part of adopting a diversification strategy? It should set up shops on beaches that would sell and provide surfboards on rent to surfers. It should develop a new marketing strategy that specifically targets professional surfers. It should buy a substantial stake in one of its competitors. It should enter into new markets in Asian countries.

It should set up shops on beaches that would sell and provide surfboards on rent to surfers.

VWX Pharma Inc. is a pharmaceutical company based in the United States. It plans to adopt forward integration as a diversification strategy. Identify the step that the company should take to follow this strategy. It should start a chain of drug stores to sell its pharmaceutical products. It should increase the funding on its marketing budget. It should sell chemical compounds that it uses to manufacture drugs. It should start a chain of fast-food restaurants.

It should start a chain of drug stores to sell its pharmaceutical products.

Which of the following is true about backward integration as a diversification strategy for a firm? The firm becomes its own supplier. The growth opportunity occurs at the same level of the value-added chain. The firm becomes its own buyer. The growth opportunity occurs in the next level of the value-added chain.

The firm becomes its own supplier.

The _____ acknowledges the increasing importance of delegation for an entrepreneur of a growing firm; that is, the entrepreneur must require others to take responsibility for the completion of tasks previously undertaken by the entrepreneur.

principle of teamwork