Deck 11: Sources of Capital

Question 1

As discussed in the Opening Profile to Chapter 11, the story of the PowerBar is a good example of an entrepreneur pursuing an opportunity based on market knowledge gained through experience.

Answer 1

True

Question 2

The central strategy of any entrepreneurial venture is growth, otherwise, the company will lose ground while standing still.

Answer 2

False

Question 3

Successful growth in a small and medium-sized business takes commitment, resources, and a strategy.

Answer 3

True

Question 4

To be successful, the growth strategy selected should capitalize on some aspect of the entrepreneur's and firm's knowledge base.

Question 5

Evan Douglas is a professor of entrepreneurship at the Brisbane Graduate School of Business in Australia. His dream is to create and manage a business that involves an office (preferably a shack) on the beach somewhere on the Great Barrier Reef and renting a small number of yachts to tourists. His dream business is an example of a lifestyle business. Growth can be perceived by such lifestyle entrepreneurs as______.

A) Highly positive
B) threatening the very reason for becoming an entrepreneur in the first place.
C) Slightly positive
D) usually life-style firms
E) None of the answers apply.

Question 6

Taxes. The entrepreneur will be required to withhold taxes for his or her employees. Each month or quarter (depending on the size of the payroll), deposits or payments will need to be made to the appropriate agency for funds withheld from wages. Discuss the requirements re: taxes and employees salaries.

Question 7

A firm lowering its prices to encourage greater consumption of its products by its current customers would be an example of a penetration growth strategy.

Question 8

Describe the six basic principles of time management.

Question 9

Exporting is a good example of a penetration growth strategy because it increases the firm's market share in new markets.

Question 10

Finding new groups of customers to sell to is an example of a market development growth strategy.

Question 11

Finding new uses for an existing product such as baking soda, is a good example of a product development growth strategy.

Question 12

Discuss how an entrepreneur might attempt to overcome the pressures placed on the management of employees by growth.

Question 13

Product development growth strategies take advantage of the firm's relationships with existing customers.

Question 14

Diversification growth strategies may include backward integration but not forward or horizontal integration, as those are considered market development strategies.

Question 15

Backward integration is taking a step back on the value chain toward the raw materials.

Question 16

Discuss the benefits of growth to a firm.

Question 17

As defined in the text, horizontal integration occurs at the same level of the value-added chain but simply involves a different, but complementary, value-added chain.

Question 18

Define and discuss how a firm might use a diversification growth strategy, using an example to illustrate your understanding.

Question 19

For most small businesses, growth causes more problems than benefits.

Question 20

Growth is good for employee morale because it provides the means for increasing productivity without adding additional resources.

Question 21

As discussed in the Opening Profile to Chapter 11, the story of the PowerBar is a good example of__________.

A) early growth fueled by diversification
B) entrepreneurs pursuing an opportunity based on market knowledge gained through experience
C) achieving long-term success by focusing all efforts on just one product
D) the creative use of venture capital funding
E) None of the answers apply.

Question 22

As discussed in the Opening Profile to Chapter 11, the strategic mistake made by the creators of PowerBar was __________.

A) not considering the effects of competition
B) following a broad-scope market strategy
C) failing to look beyond their original product to continue their growth
D) not fully protecting their intellectual property
E) None of the answers apply.

Question 23

As discussed in the Opening Profile to Chapter 11, their vision of finding a solution to a serious runner's energy source wasn't the only factor in forming this new venture. Both Brian and Jennifer were determined to __________________________.

A) create a work environment where employees would feel important
B) follow a broad-scope market strategy
C) look beyond their original product to continue their growth
D) fully protect their intellectual property
E) None of the answers apply.

Question 24

Negative implications arising from an organization's newness is referred to (in the text) as__________.

A) penetration strategy
B) product development strategy
C) market development strategy
D) assets of newness
E) liabilities of newness

Question 25

Advantages that a new organization has over a mature one is referred to (in the text) as __________.

A) penetration strategy
B) product development strategy
C) market development strategy
D) assets of newness
E) liabilities of newness

Question 26

Define and discuss how a firm might use a product development growth strategy, using an example to illustrate your understanding.

Question 27

Define and discuss how a firm might use a market development growth strategy, using an example to illustrate your understanding.

Question 28

Lowering prices, increasing inventory levels, advertising and sales promotion in existing markets, and adding more highly trained sales staff for existing locations would all be tactics of a __________ growth strategy.

A) penetration
B) product development
C) market development
D) diversification
E) None of the answers apply.

Question 29

The growth strategy that attempts to better exploit its original entry is known as a __________ growth strategy.

A) penetration
B) product development
C) market development
D) diversification
E) None of the answers apply.

Question 30

Define and discuss how a firm might use a penetration growth strategy, using an example to illustrate your understanding.

Question 31

Describe the factors that must be considered by entrepreneur when choosing to grow their business, and what issues they will need to address once the decision has been made.

Question 32

Selling in new geographical markets, to new groups of customers, and finding new uses of the product would all be tactics of a __________ growth strategy.

A) penetration
B) market development
C) product development
D) diversification
E) None of the answers apply.

Question 33

A(n) __________ is a system for storing and using customer information.

A) market grid
B) database
C) inventory
D) spreadsheet
E) None of the answers apply.

Question 34

An entrepreneur seeking to follow a market development growth strategy may need to take into account which of the following factors?

A) possible regional differences in customer preferences
B) differences in language requirements for packaging and communications
C) differences in legal requirements for selling in foreign markets
D) All of the answers are correct.
E) None of the answers apply.

Question 35

Targeting a new market segment for a firm's existing products would be considered a tactic of which of the following growth strategies?

A) penetration
B) market development
C) product development
D) diversification
E) None of the answers apply.

Question 36

The makers of baking soda continually develop and promote new uses for their staple product to increase sales in new markets, which is a tactic of which of the following growth strategies?

A) penetration
B) market development
C) product development
D) diversification
E) None of the answers apply.

Question 37

The entrepreneur has which of the following responsibilities regarding taxes?

A) withhold and remit federal and provincial income taxes for employees
B) pay employer's portions of Employment Insurance (EI) and Canada Pension Plan (CPP) premiums
C) file end-of-year tax returns
D) withhold and remit employee's portions of Employment Insurance (EI) and Canada Pension Plan (CPP) premiums
E) All of the answers are correct.

Question 38

The __________ growth strategy uses the firm's experience with a particular customer group as a source of knowledge on the problems they may have with existing technology and ways in which they can be better served.

A) penetration
B) market development
C) product development
D) diversification
E) None of the answers apply.

Question 39

When Home Depot actively pursues the contractor market by offering them one-stop shopping for all of their building needs including special order services, this would be an example of which of the following growth strategies?

A) penetration
B) market development
C) product development
D) diversification
E) None of the answers apply.

Question 40

A product development growth strategy is consistent with a focus on customer relationship management for which of the following reasons?

A) Developing new products for new markets increases sales which keeps everyone happy.
B) Developing and selling more to your existing customers increases your sales and profits while also increasing their satisfaction.
C) Customer retention programs require new markets to leverage corporate learning.
D) Customers prefer to do business with high market share companies, as it increases their level of confidence and satisfaction.
E) None of the answers apply.

Question 41

Porsche developing a sport utility vehicle (SUV) so that their sports car owner group will have something to drive during the winter would be an example of which of the following growth strategies?

A) penetration
B) market development
C) product development
D) diversification
E) None of the answers apply.

Question 42

When managing costs and profits for a growing venture, the difference between the financial statements used by the entrepreneur and those prepared for shareholders, bankers, and other investors is__________.

A) the amount of detail given for revenues and expenses between the different product lines
B) the degree of optimism shown
C) the accuracy of the numbers
D) the time period covered
E) None of the answers apply.

Question 43

With regards to managing fixed assets, a growing venture may derive which of the following benefits from leasing?

A) improved cash flow
B) tax deductibility for lease payments
C) longer term commitment
D) improved cash flow and tax deductibility for lease payments
E) All of the answers are correct.

Question 44

The FIFO system of inventory valuation is recommended because __________.

A) it reflects truer inventory costs
B) it gives a more accurate cost of goods sold value
C) it makes net income lower than LIFO, which means less cash paid for taxes
D) it reflects truer inventory costs and it gives a more accurate cost of goods sold value
E) All of the answers are correct.

Question 45

McDonald's owns the meat processing plants that produce the hamburger patties for their restaurants, which is an example of __________.

A) backwards integration
B) forward integration
C) horizontal integration
D) divergent diversification
E) None of the answers apply.

Question 46

As an inventory management philosophy, LIFO may be more sensible to use in times when__________.

A) prices of goods are declining
B) the business still uses a manual system for inventory control
C) the business is in a rapid growth stage
D) the venture has at least $100,000 in sales
E) None of the answers apply.

Question 47

A computer manufacturing company such as Dell decides to set up a network of retail stores to sell their products, which is an example of __________.

A) backward integration
B) horizontal integration
C) forward integration
D) conglomerate integration
E) None of the answers apply.

Question 48

From a general perspective, the objective of inventory control is to __________.

A) not run out of inventory
B) eliminate the need to carry safety stock inventory
C) balance the cost of carrying inventory with the cost of lost sales
D) smooth out production schedules for maximum efficiency
E) respond to pressure from competitors when necessary

Question 49

Prominent golf club manufacturer Callaway Limited entering the golf ball manufacturing business was an example of __________.

A) backward integration
B) forward integration
C) horizontal integration
D) concentric diversification
E) None of the answers apply.

Question 50

When analyzing cash flows for a growing venture, an increase in supplier prices may require__________.

A) a search for alternative sources
B) raising the price of products/services
C) higher cash disbursements than those budgeted
D) All of the answers are correct.
E) None of the answers apply.

Question 51

Introducing a new product into a new market that is unrelated to the existing business is not recommended for an entrepreneur for which of the following reasons?

A) This type of product development strategy rarely works for small businesses.
B) Diversification into unrelated markets takes time, attention, and resources from an entrepreneur already short of these things.
C) Unrelated markets allow for utilization of existing corporate knowledge but not experience.
D) This type of market development strategy is often successful which creates more time and resource pressure on the entrepreneur.
E) All of the answers are correct.

Question 52

The advantage of size to an entrepreneur is (are) which of the following?

A) size enhances the legitimacy of the firm
B) larger firms are more attractive to suppliers which increases its bargaining power
C) higher volume increases production efficiency
D) All of the answers are correct.
E) None of the answers apply.

Question 53

Growth of the venture causes __________.

A) pressures on existing financial resources
B) pressures on human resources
C) pressures on the entrepreneur's time
D) pressures on the management of employees
E) All of the answers are correct.

Question 54

Growth of the venture may cause which of the following human resources problems?

A) decline in employee morale
B) increase in employee burnout
C) increase in employee turnover
D) difficulty in maintaining the desired corporate culture
E) All of the answers are correct.

Question 55

As discussed in the text, in the coming years, Canada will face which of the following human resources problems?

A) high unemployment due to an abundance of labour
B) an over-educated work force unwilling to do less skilled labour
C) difficulty in finding good people due to a shortage of labour
D) a backlash against participative management styles
E) All of the answers are correct.

Question 56

When managing cash flow, an entrepreneur will compare their cash flow numbers for the most recent accounting period to __________.

A) the cash flow numbers for the previous accounting period
B) budgeted cash flow projections
C) industry standards
D) All of the answers are correct.
E) None of the answers apply.

Question 57

As discussed in the text, an entrepreneur seeking to overcome pressures on existing human resources should consider which of the following?

A) subcontracting some or all of the recruiting, selection, and management tasks for human resources to a professional who specializes in this area
B) hiring more family to help run the business
C) throwing out all existing job descriptions and make all employees"success-driven" using flexible responsibilities
D) merging with another firm who is stronger in these areas
E) None of the answers apply.

Question 58

Part-time workers in an organization __________.

A) are cheaper to employ than full-time workers as there are less fixed costs involved
B) have higher turnover and personal instability
C) have less commitment to the company
D) All of the answers are correct.
E) None of the answers apply.

Question 59

The process of firing incompetent employees is made easier for the entrepreneur if __________.

A) the organization employs more full-time workers than part-time
B) area unemployment is low
C) the firm has a generous compensation plan
D) a fair employee evaluation process is in place and being used
E) All of the answers are correct.

Question 60

To protect the organization from disputes when firing employees, the entrepreneur should ensure that__________.

A) a fair employee evaluation process is in place and being used
B) employees are provided with regular feedback on their performance
C) any problems with employee performance are identified and solutions to correct the problems are agreed to
D) all communication with employees regarding performance issues is documented
E) All of the answers are correct.

Question 61

The key element for maintaining the desired corporate culture in a growing venture is __________.

A) hiring only older workers who have experience working in a similar environment
B) the entrepreneur taking responsibility for it and leading by example
C) hiring younger workers with no experience and then indoctrinating them to learn "the way"
D) following the government standards for employee rights and responsibilities
E) None of the answers apply.

Question 62

As discussed in the text, many entrepreneurs find that as the venture grows, they need to change__________.

A) their legal representation
B) their attitude towards customer satisfaction
C) their management style
D) their sense of intuition
E) None of the answers apply.

Question 63

With regards to the management of employees, as the venture grows, one of the most difficult things for an entrepreneur is to __________.

A) step back and let the managers do their jobs
B) make changes to the way the business communicates with interested stakeholders
C) assume more responsibility for decision-making
D) take responsibility for maintaining corporate culture and leading by example
E) None of the answers apply.

Question 64

To reduce the need for acquiring new resources in a growing venture, an entrepreneur should focus on__________.

A) financial control
B) managing inventory
C) maintaining good records
D) All of the answers are correct.
E) None of the answers apply.

Question 65

A participative style of management may provide which of the following benefits to a growing venture?

A) more satisfied employees
B) new ways to solve problems are identified
C) employees have a greater commitment to the decisions made
D) the information processing demands on the entrepreneur are reduced
E) All of the answers are correct.

Question 66

For an entrepreneur with a growing venture, creating a positive organizational culture involves__________.

A) communicating all matters to key employees
B) being willing to delegate responsibility
C) establishing a "we" spirit, not a "me" spirit in meetings and memorandum
D) providing for continuous training for employees
E) All of the answers are correct.

Question 67

An entrepreneur seeking to establish a team spirit in their growing venture should __________.

A) establish a performance incentive plan for each individual employee
B) provide opportunities for employees and managers to work together as equals
C) challenge their competitor to a sporting event such as softball
D) provide company uniforms for all employees
E) None of the answers apply.

Question 68

In a growing venture, an entrepreneur's __________ is their most precious resource; totally perishable and irreplaceable.

A) cash
B) attitude
C) time
D) relationship with others
E) None of the answers apply.

Question 69

The process of improving an individual's productivity through more efficient use of time is known as__________.

A) resource allocation
B) time management
C) task prioritization
D) productivity analysis
E) None of the answers apply.

Question 70

Which of the following is not necessarily a benefit of time management?

A) improved interpersonal relationships
B) increased productivity
C) higher quality of decision making
D) reduced time anxiety and tension
E) increased job satisfaction

Question 71

A recognition of the need to change personal attitudes and habits regarding the allocation of time belongs to which of the following principles of time management?

A) principle of desire
B) principle of effectiveness
C) principle of analysis
D) principle of teamwork
E) principle of prioritized planning

Question 72

A focus on the most important issues belongs to which of the following principles of time management?

A) principle of desire
B) principle of effectiveness
C) principle of analysis
D) principle of teamwork
E) principle of prioritized planning

Question 73

Understanding how time is currently being allocated, and where it is being inefficiently invested belongs to which of the following principles of time management?

A) principle of desire
B) principle of effectiveness
C) principle of analysis
D) principle of teamwork
E) principle of prioritized planning

Question 74

The need or the magnitude of the new resources required by a growing venture can be reduced through_________.

A) recycling of used resources
B) better management of existing resources
C) increased sales and profitability
D) deferral of capital expenditures
E) None of the answers apply.

Question 75

Categorization of tasks by their degree of importance and then the allocation of time to tasks based on this categorization belongs to which of the following principles of time management?

A) principle of effectiveness
B) principle of desire
C) principle of analysis
D) principle of prioritized planning
E) principle of reanalysis

Question 76

A periodic review of one's time management process belongs to which of the following principles of time management?

A) principle of effectiveness
B) principle of desire
C) principle of prioritized planning
D) principle of reanalysis
E) principle of teamwork

Question 77

The basic principle that it is "more important to do the right things than to do things right"implies that the key to effective time management is in __________.

A) setting priorities
B) getting up early
C) sacrificing leisure activities
D) maintaining high moral standards
E) None of the answers apply.