Question 1

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

Accepted Answer

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

Question 2

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?

Accepted Answer

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

Question 3

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

Accepted Answer

A)  recognizing 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 4

Janis 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:

Accepted Answer

A)  entrepreneurial opportunity. 
B)  startup. 
C)  new market idea. 
D)  serendipity.

Question 5

Resources are best described as

Accepted Answer

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

Question 6

The State of Maryland has recently imposed a "rain tax" based on the amount of non-water-absorbing surfaces on real estate.  Which type of trend does this represent?

Accepted Answer

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

Question 7

Verlin 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 startup come?

Accepted Answer

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

Question 8

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

Accepted Answer

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

Question 9

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?

Accepted Answer

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

Question 10

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

Accepted Answer

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

Question 11

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

Accepted Answer

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 12

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

Accepted Answer

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

Question 13

Select one of the ways of innovative thinking, explain it, and give an example of a business idea this type of thinking might generate.

Accepted Answer

The answer of Select one of the ways of innovative...

Question 14

Wilma needed wine glasses but all she had were candlestick holders and 8-ounce 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:

Accepted Answer

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

Question 15

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

Accepted Answer

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

Question 16

Considering Michael Porter's five factors, the automotive industry in the United States is characterized by:

Accepted Answer

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

Question 17

A SWOT analysis can be described best as

Accepted Answer

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

Question 18

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

Accepted Answer

A)  The Federal Reserve announces that it will decrease the interest rate it charges banks. 
B)  Congress passes legislation that increases the tax rates on corporations. 
C)  A new computer chip is announced which will allow for miniaturization of many electronic devices. 
D)  The E.U. declares an increase in tariffs on all agricultural goods.

Question 19

Mike and Jane opened a franchise sporting goods store.  Neither was athletic; neither had ever managed a retail store; and the business failed within one year. Which statement best explains these results?

Accepted Answer

A)  The venture did not fit with their mission or aspirations. 
B)  They had no connections with suppliers, customers, or investors. 
C)  They lacked factors critical to the success of the enterprise. 
D)  They failed to complete a feasibility study.

Question 20

One of the drawbacks of SWOT analysis is:

Accepted Answer

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.

Exam 3: Starting a Small Business

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

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?

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

Janis 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:

Resources are best described as

The State of Maryland has recently imposed a "rain tax" based on the amount of non-water-absorbing surfaces on real estate. Which type of trend does this represent?

Verlin 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 startup come?

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

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?