Deck 3: Starting a Small Business

Question 1

Carol enjoyed yarn crafts but there were no yarn shops in her small town.She reasoned that there were many others nearby who might appreciate being able to purchase yarns and supplies without a long drive.Within a year her shop was profitable and expanding into larger space.Which of these statements best describes this situation?

A)Carol grew a business out of her personal experience.
B)Carol turned her hobby into a thriving business.
C)Carol accidentally stumbled upon a gold mine.
D)Carol used her work experience as a source of start-up ideas.

Answer 1

B

Question 2

Israel Kirzner believes entrepreneurs have a unique capability, which he calls _________ ________, to spot existing opportunities for businesses.

A)innovative thinking
B)market awareness
C)entrepreneurial alertness
D)opportunity recognition

Answer 2

C

Question 3

Vernon worked in a cabinet shop until he became frustrated that his ideas for improving efficiency were falling on deaf ears.So he left and started his own cabinet shop where he could implement those ideas.From which source did his ideas for his start-up come?

A)From hobbies
B)From personal interests
C)From accidental discovery
D)From work experience

Answer 3

D

Question 4

Richard could see the demand for towable recreational vehicles declining so beginning in the early 1970s he used his equipment, employee, and professional network to design and build utility trucks, a more recession-resistant industry.This is an example of:

A)serendipity.
B)diversification.
C)innovative thinking
D)market ideas.

Question 5

Wilma needed wine glasses but all she had were candlestick holders and 250-millilitre canning jars.Gluing the two together, she created what she called "mountain crystal" which became a big hit.The local crafters' association asked her to make enough for them to sell and her business took off.This is an example of building a business from:

A)work experience.
B)hobbies.
C)personal interest.
D)accidental discovery.

Question 6

Kathy has founded three different businesses in the past eight years, all of which have become so successful she has sold them at large profits.We can say Kathy is good at:

A)innovative ideas.
B)entrepreneurial alertness.
C)new market ideas.
D)opportunity recognition.

Question 7

Jane wants to open a restaurant.She is not interested in a franchise; she wants to build her business literally from the ground up.When she does, her business will be classified as a:

A)entrepreneurial opportunity.
B)start-up.
C)new market idea.
D)serendipity.

Question 8

The quote "Good artists borrow; great artists steal" is the principle that launched which company?

A)Aimie's Dinner and Movie
B)Apple
C)C and D Landscape Company
D)Xerox

Question 9

Laura discovered to her amazement that the skin oil she sold seemed to repel mosquitos.She relabelled the product and began selling it as an alternative to brands such as Peaceful Sleep and Tabard!.Laura's start-up is which kind?

A)New market idea
B)New technology idea
C)New benefit idea
D)New product idea

Question 10

_____ refers to the way entrepreneurs identify new products or services that may lead to promising businesses.

A)Focus-based decisions
B)Elasticity
C)Opportunity recognition
D)Cost-benefit analysis

Question 11

Julie, owner of a bed and breakfast inn, had been asked repeatedly to cater for events.Once she realised her kitchen was not being used during the latter part of the day, she started the catering company.This change is an example of:

A)recognising a hot trend and riding the wave.
B)combining two businesses into one to create a market opening.
C)beginning with a problem in mind.
D)considering ways to adapt a product or service to meet customer needs in a different way.

Question 12

Jeff Bezos' original business plan involved taking orders for books and having the items shipped directly from the publisher to the customer.He modified the plan to include other products such as toys and decided to buy the toys from the producers and ship them from his own warehouse.This modification of the original plan is called:

A)a change of plan
B)a pivot.
C)a serendipity.
D)a competitive move.

Question 13

Lisa listens whenever someone says "Someone ought to make a ...".She expects one of these ideas to develop into a profitable business.Lisa possesses:

A)market awareness.
B)entrepreneurial alertness.
C)opportunity recognition.
D)innovative thinking.

Question 14

Ling Song noticed significant growth in the Asian population in Johannesburg.The local supermarkets carried mostly traditional South African products.She knew her neighbours would want familiar foods so she decided to open a food market catering to their preferences.Which kind of start-up will her store be?

A)New market idea
B)New technology idea
C)New benefit idea
D)New product idea

Question 15

A computer technician recognising a need for more aesthetically pleasing computers would be said to have entrepreneurial _____.

A)technology
B)alertness
C)strategy
D)rivalry

Question 16

An example of an idea for a new start-up from a hobby is:

A)a coin collector, who bought and sold coins for years to build a personal collection, deciding to become a coin dealer.
B)a furniture salesperson seeing the possibility of opening a new furniture store in a different area of the city.
C)a sharpshooter, who shot holes in a pair of her boyfriend's jeans during an argument, hearing him get complimented on the way they look.
D)all of the above are examples.

Question 17

According to a study by the National Federation of Independent Business, the most common source of new product ideas for small business start-ups is:

A)prior work experience.
B)personal interests and hobbies.
C)a chance happening.
D)existing records of a business.

Question 18

When Jeff Bezos launched Amazon.com, his idea of selling items he did not own from a website was unique.Which type of start-up is this?

A)New market idea
B)New technology idea
C)New benefit idea
D)New product idea

Question 19

An example of an idea for a new start-up from an accidental discovery is

A)a coin collector, who bought and sold coins for years to build a personal collection, deciding to become a coin dealer.
B)a furniture salesperson seeing the possibility of opening a new furniture store in a different area of the city.
C)a sharpshooter, who shot holes in a pair of her boyfriend's jeans during an argument, hearing him get complimented on the way they look.
D)all of the above are examples.

Question 20

Drs James and Janet Baker saw that many people experienced difficulty and frustration when typing, some because of physical disabilities.So they invented voice recognition software to allow users to talk to the computer.Their ideas have become Dragon Naturally Speaking, a popular talk-to-type software application.Which of these statements describes their start-up?

A)Borrow heavily from existing products or services.
B)Combine two businesses to create a market opening.
C)Begin with a problem in mind or a pain you can relieve.
D)Recognise a hot trend and ride the wave.

Question 21

Which factor determines the nature and degree of competition in an industry, as identified by Michael Porter in his book Competitive Advantage?

A)The interest of small businesses.
B)Bargaining power of competitors.
C)Threat of substitute products or services.
D)The macro-economic level of the industry.

Question 22

An evaluation of the general environment:

A)is done before the feasibility analysis.
B)helps identify a trend that could be used for a possible start-up idea.
C)will clarify the unique value of the start-up idea.
D)will be the primary determinant for a possible start-up idea.

Question 23

When conducting an outside-in analysis, one should consider the _____ environment followed by the _____ environment.

A)general; industry
B)general; natural
C)industry; natural
D)industry; political

Question 24

For the past several years the borrowing interest rates has hovered around 10% in South Africa.This is an example of a(n) ______________ trend.

A)economic
B)sociocultural
C)political/legal
D)demographic

Question 25

TV commercials promote security systems and vehicle tracking.Other ads promote medications for high blood pressure, immune system disorders and high cholesterol.Which type of trend do these represent?

A)Sociocultural
B)Global
C)Technological
D)Demographic

Question 26

Which statement is an example of a technological trend?

A)The South African Reserve Bank announces that it will decrease the interest rate it charges banks.
B)Government passes legislation that increases the tax rates on companies.
C)A new computer chip is announced which will allow for miniaturisation of many electronic devices.
D)The EU announces an increase in tariffs on all agricultural goods.

Question 27

Which statement is an example of an economic trend?

A)The South African Reserve Bank announces that it will decrease the interest rate charged to banks.
B)Government passes legislation that increases the tax rate on companies.
C)A new computer chip is announced which will allow for miniaturisation of many electronic devices.
D)The EU declares an increase in tariffs on all agricultural goods.

Question 28

The trend toward more customised consumer goods is what kind of trend?

A)Economic
B)Sociocultural
C)Technological
D)Demographic

Question 29

Alyson and Andrea, country artists, realised that their love of classic rock was also popular with their fans.Their change to their show to incorporate more rock songs with a country flavour is an example of:

A)recognising a hot trend and riding the wave.
B)combining two businesses into one to create a market opening.
C)beginning with a problem in mind.
D)finding a way to adapt a product or service to meet customer needs in a different way.

Question 30

Today's smartphones bear little resemblance to the original analogue cell phones of the early 1990s.Their capabilities exceed those of the early desktop computers.It seems nearly every adult carries at least one cell phone.Which of the trends does this represent?

A)Sociocultural
B)Demographic
C)Technological
D)Global

Question 31

Substitute products:

A)reduce the attractiveness and profitability of an industry.
B)represent those items manufactured by direct rivals within an industry.
C)are usually cheaper than the products they can replace.
D)are always a serious threat to rivals in an industry.

Question 32

Angela noticed an interest among her friends and colleagues in wearing high-end watches and other jewellery for special occasions, so she started a company where customers could rent high-end jewellery.Angela is:

A)considering ways to adapt a product or service to meet customer needs in a different way.
B)offering products through a subscription service.
C)cashing in on the sharing economy.
D)imagining how a market for a product could be creatively expanded.

Question 33

When Sally realised her vintage clothing pieces were being bought by the local college students and not just their parents, she started adding more vintage pieces to her inventory.Sally is:

A)recognising a hot trend and riding the wave.
B)combining two businesses into one to create a market opening.
C)beginning with a problem in mind.
D)considering ways to adapt a product or service to meet customer needs in a different way.

Question 34

Which statement is an example of a global trend?

A)The South African Reserve Bank announces that it will decrease the interest rate it charges banks.
B)Government passes legislation that increases the tax rates on companies.
C)A new computer chip is announced that will allow for miniaturisation of many electronic devices.
D)The EU declares an increase in tariffs on all agricultural goods.

Question 35

Which segment is part of the general environment?

A)The industry segment
B)The global segment
C)The information segment
D)The human resources segment

Question 36

As China's production of exportable goods increases, Chinese workers have more money to spend on consumer items.Other developing countries are experiencing the same growth.Which type of trend does this represent?

A)Economic
B)Sociocultural
C)Global
D)Demographic

Question 37

The increased trade between South Africa and Namibia since the enactment of the Southern African Development Community Free Trade Agreement is related to the ____ element of the general environment.

A)technological
B)global
C)ecological
D)sociocultural

Question 38

A "rain tax" is based on the amount of non-water-absorbing surfaces on real estate.Which type of trend does this represent?

A)Economic
B)Sociocultural
C)Political/legal
D)Technological

Question 39

Which statement is an example of a political/legal trend?

A)The South African Reserve Bank announces that it will decrease the interest rate it charges banks.
B)Government passes legislation that increases the tax rates on companies.
C)A new computer chip is announced which will allow for miniaturisation of many electronic devices.
D)The EU declares an increase in tariffs on all agricultural goods.

Question 40

Many commuters grab a cup of coffee and drink it during their ride to work.So someone invented specially shaped cups that don't tip and lids with sip openings that close and don't spill.Which of these innovative ways of thinking best fits this situation?

A)Combine two businesses to create a market opening.
B)Study a product or service to see if you can make it "green".
C)Recognise a hot trend and ride the wave.
D)Study an existing product and explore ways to improve its function.

Question 41

Rumpelstiltskin, an imp in a Grimm Brothers fairy tale, could spin straw into gold.We would call this a(n):

A)useful skill.
B)tangible resource.
C)intangible resource
D)capability.

Question 42

Based on William A.Sahlman's suggestions, which question about competitors should be answered by the business plan?

A)Are there ways to co-opt potential or actual competitors by forming alliances?
B)How easily can new competitors enter the industry?
C)Do small businesses have special advantages when competing in the industry?
D)What is the average size of competitors?

Question 43

The diamond market is monopolised by the De Beers organisation, from mining to cutting and polishing to wholesaling.Jewellers can do little to negotiate prices.This situation typifies:

A)low barriers to entry.
B)availability of substitutes.
C)intense rivalry.
D)strong suppliers.

Question 44

Careful analysis of the competitive environment can result in:

A)failure of a new business.
B)unexpected response from a rival.
C)loss of the start-up's supplier base.
D)greater financial success of the start-up.

Question 45

Resources are best described as:

A)those basic inputs that a business uses to conduct its business.
B)only those features that are visible and easy to quantify.
C)the business's lending capacity.
D)capabilities that can be exploited.

Question 46

A SWOT analysis can be described best as:

A)a means of assessing the business's industry situation.
B)an assessment of the internal strengths and weaknesses of the business.
C)a dynamic analysis of the business's current situation.
D)a concise overview of the business's strategic situation.

Question 47

Miles' start-up company began well but within a couple months he found he was unable to pay invoices from suppliers.He didn't understand how he could have this problem.He hired experts; his business idea was sound; and he had many new customers.What went wrong?

A)Miles lacked critical technologies.
B)Miles lacked patents or copyrights.
C)Miles lacked raw materials.
D)Miles lacked cash resources.

Question 48

Considering Michael Porter's five factors, the chicken meat processing industry is characterised by:

A)low barriers to entry.
B)intense rivalry among competitors.
C)availability of many substitutes.
D)strong buyers.

Question 49

Observations about the external environment and organisational potentials can be brought together by means of

A)an alignment strategy.
B)the in-and-out assessment.
C)a SWOT analysis.
D)common sense critique.

Question 50

A(n) _____ exists when multiple resources are integrated and then deployed to the business's advantage.

A)networked resource
B)common intangible
C)capability
D)industry edge

Question 51

Intangible resources include:

A)a good location, cash and capable business partners.
B)a good reputation, a respected brand name and an extensive personal network.
C)intellectual property rights, equipment and technology.
D)capable business partners, intellectual property rights and equipment.

Question 52

Morris built a thriving business by selling tailor-made clothing at off-the-rack prices.All other custom-clothing stores charge much higher prices.We can say that Morris has a(n):

A)core competency.
B)competitive advantage.
C)serendipity.
D)opportunity alertness.

Question 53

An increase in the bargaining power of suppliers:

A)increases both the attractiveness and the profitability of the target market.
B)decreases both the attractiveness and the profitability of the target market.
C)decreases the attractiveness and increases the profitability of the target market.
D)increases the attractiveness and decreases the profitability of the target market.

Question 54

Considering Michael Porter's five factors, the automotive industry in South Africa is characterised by:

A)weak rivalry.
B)high barriers to entry.
C)many substitute products.
D)weak suppliers.

Question 55

Considering Michael Porter's five factors, we can say that the fast food hamburger industry is characterised by:

A)intense rivalry.
B)strong suppliers.
C)strong buyers.
D)ease of entry into the industry.

Question 56

Which of the following could be considered a core competency?

A)Woolworth's return policy.
B)NutriSystem's claim that users lose weight by eating.
C)McDonald's ability to fry hamburgers quickly.
D)South African Airways's 'flights to South Africa and beyond'.

Question 57

Tangible resources include:

A)cash, technology and raw materials.
B)cash, management expertise and a good reputation
C)management expertise, a good reputation and technology.
D)intellectual property rights, equipment and a skilled workforce.

Question 58

One of the drawbacks of SWOT analysis is:

A)it is very time consuming.
B)a professional consultant must perform it.
C)its focus on present conditions.
D)it requires information about competitors not readily available to outsiders.

Question 59

Farmers wishing to sell grain cannot negotiate a price; they either accept the price offered or decline to sell their crop.This is an example of:

A)low barriers to entry.
B)availability of substitutes.
C)intense rivalry.
D)strong buyers.

Question 60

An inside-out analysis is one that:

A)considers the general environment and industry setting.
B)catalogues the start-up's sources of potential strengths.
C)considers the strengths of buyers and suppliers.
D)catalogues the possible responses of rivals in the industry.

Question 61

Milton's Auto Service is a small auto maintenance and repair shop located in a small town in a garage behind Milton's house.Milton doesn't charge as much as auto dealerships so he has a steady stream of local customers.Which of the following best describes Milton's strategy?

A)innovation
B)strategic alliances
C)cost-based
D)differentiation

Question 62

Kitty-Kat Korner fabric shop caters to the quilters in the region.Other fabric shops carry fabrics for all types of clothing along with floral, yarn and other craft supplies.Kitty-Kat carries only items related to quilting.Which of the following best describes Kitty-Kat's strategy?

A)focus
B)cost-based
C)quality
D)innovation

Question 63

A focus strategy is best described as

A)an attempt to compete directly with industry giants.
B)a domestic marketing strategy.
C)a strategy that isolates the business from market forces.
D)targeting the high end of a market.

Question 64

According to Michael Porter, a focus strategy can erode when:

A)the strategy is protected.
B)the target segment's differences from other segments narrow.
C)new businesses reconstruct the industry.
D)demand for the product grows and thus attracts new competitors.

Question 65

Containers Etc.manufactures household containers.In contrast to traditional market designs, all of the products are microwaveable, child-proof and come in an assortment of 35 colours.Accordingly, Containers Etc.is pursuing a _____ strategy.

A)product-based
B)differentiation-based
C)concept-based
D)efficiency-based

Question 66

Which action is a cause for erosion of a small business's focus strategy?

A)Consumer demand grows.
B)New businesses reconstruct the industry.
C)Differences between segments grow larger.
D)The focus strategy is imitated.

Question 67

Marketplace Farms is a regional cooperative of apple and peach growers.In order to compete against larger regional growers, the company relies on inexpensive packaging processes and lower-cost labour instead of machines.Marketplace Farms is relying on what type of strategy?

A)price-based
B)marketing-based
C)efficiency-based
D)cost-based

Question 68

Many direct sales organisations suggest that the new "member" begin selling the product part-time while continuing to work at his/her regular job.Which explanation best fits this recommendation?

A)The business meets a definite market need.
B)The target market is sizable.
C)There are few competitors.
D)The business can be tested cheaply and expanded incrementally.

Question 69

Mark is the owner of Delectable Delights, a specialty store offering chocolates, candies, and fruit baskets.After a recent analysis of the competitive environment, Mark concluded that three distinct consumer segments exist for his products - A, B and C consumers.In an effort to maximise the effectiveness of its strategy, Mark has decided to limit his efforts to fulfilling the needs of A consumers.He is employing a _____ strategy.

A)multi-segmentation
B)selective
C)focus
D)concentration

Question 70

A differentiation-based strategy requires that a business:

A)be the lowest-cost provider in an industry.
B)emphasise the uniqueness of its product or services.
C)achieve the highest resource efficiency in an industry.
D)be the lowest-priced competitor in an industry.

Question 71

Generally speaking, a strategy is:

A)an action plan that guides resource investments.
B)a formal statement of what the business intends to do.
C)an expanded description of the business's mission statement.
D)most effective when it is designed to reflect the tactics that are common within an industry.

Question 72

O-MY-U once had a winning team in every college sport.But athletes graduate and fortunes change.Attendance at the games dropped when the team had a losing season.Bob and Shirley found it difficult to attract enough guests to their bed-and-breakfast to cover their costs.How would Michael Porter explain this?

A)The focus strategy was imitated.
B)Demand disappeared.
C)The target segment lost its uniqueness.
D)New businesses sub-segmented the industry.

Question 73

The very feature of a market that makes it attractive to one small company (the lack of competition) will make it attractive to others; this fact is called the __________ ___ ___________.​

Question 74

Miriam opened a yarn craft store in her small town based on her personal interests and hobbies.There were no competitors locally; the merchandise was readily available; and she had the initial capital to open the store.Yet her business failed.Too few customers visited her store.What was Miriam's fatal flaw?

A)The merchandise was patent-protected.
B)Miriam could not raise enough capital.
C)Miriam lacked industry knowledge.
D)Miriam ignored the market limitations.

Question 75

Kitty-Kat Korner fabric shop caters to the quilters in the region.Nowhere else can a quilter find everything she needs: fabrics, notions, pattern books, even quilting machines and quilting classes.This is not your typical fabric store by any means.Which of the following best describes Kitty-Kat's strategy?

A)innovation
B)differentiation
C)cost-based
D)strategic alliances

Question 76

As the success of the athletic teams at O-MY-U skyrocketed, so did attendance at the games.Out-of-town visitors found all the hotels fully booked.So Bob and Shirley opened their home to guests on weekends, operating as a bed-and-breakfast.Soon many of their neighbours did the same and Bob and Shirley found they could no longer fill all their rooms every game weekend.How would Michael Porter explain this?

A)The focus strategy was imitated.
B)Demand disappeared.
C)The target segment lost its uniqueness.
D)The industry became further segmented.

Question 77

Arlene runs Aquabuddies, a company that makes figurines for aquariums.What type of strategy would be expected?

A)A focus strategy.
B)An unsegmented strategy.
C)A multi-segmentation strategy.
D)A marketing mix strategy.

Question 78

The two broad strategies for building a competitive advantage are the _____ strategies.

A)cost-based and differentiation-based
B)price-advantage and cost-advantage
C)marketing-advantage and price-advantage
D)focus-advantage and marketing-advantage

Question 79

Nora has identified an underserved market for her product.Competitors are not likely to notice her efforts to attract her target market, and her product fills a need for these customers.Nora has found:

A)an opportunity sweet spot.
B)a core competency.
C)a competitive advantage.
D)a capability.

Question 80

A company that is the lowest-cost producer within the market will have what type of strategy?

A)price-based
B)marketing-based
C)efficiency-based
D)cost-based