Entrepreneurial Small Business Katz 5th Edition- Test Bank
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Sample Test
Chapter 03
Small Business Environment: Managing External Relations
True / False Questions
|
1. |
As a firm establishes a track record
for performance, that performance, along with the goods or services it
creates become key elements of the firm’s and entrepreneur’s identity. True False |
|
2. |
Gathering resources for a business is
easier during economic recessions than during economic boom times. True False |
|
3. |
Being a small business makes managing
organizational culture harder than in larger businesses. True False |
|
4. |
Organizational culture not only is the
set of shared beliefs or basic assumptions but also include accepted ways of
dealing with problems and challenges within a company. True False |
|
5. |
The goal of any small business owner is
to manage external relations in order to minimize social capital. True False |
|
6. |
Small businesses high in social capital
are less trusted when problems occur. True False |
|
7. |
Gaining legitimacy in small businesses
is especially difficult for entrepreneurs seen as “different”—women,
minorities, home-based businesses, or businesses started by young people. True False |
|
8. |
Compared to a corporation, a sole
proprietorship is usually considered more legitimate by customers, suppliers,
and investors. True False |
|
9. |
Social networking helps build
long-lasting relationships into a person’s day-to-day business operations. True False |
|
10. |
Mutuality is the set of relationships
and contacts with individuals and institutions a company establishes. True False |
|
11. |
As the owner of a business, quickly
admitting that the firm is in trouble indicates a lack of accountability. True False |
|
12. |
Sustainable entrepreneurship is an
approach to the operation of the firm, the line of business of the firm, or
both, which identifies or creates and then exploits opportunities to make a
profit in a manner that minimizes the depletion of natural resources,
maximizes the use of recycled material, improves the environment, or any
combination of these outcomes. True False |
|
13. |
LaRue Hosmer’s model for making ethical
decisions is focused more on small business than big ones. True False |
|
14. |
An ethical decision should reflect a
decision-maker’s real or presumed obligations to people and institutions in
his or her firm and in its task environment. True False |
|
15. |
In making moral decisions, it is
possible to find oneself in the legal “right” but still unable to make a
viable business decision by pursuing legal recourse. True False |
|
16. |
Universalism is an ethical model that
suggests people get their ideas of right and wrong from their family,
religion, education, and community. True False |
|
17. |
The billboard principle is an ethical
model that asks whether someone would be comfortable having his or her
decision and name advertised on a billboard for the public to see. True False |
|
18. |
BATNA, or the “Best Alternative To a
Negative Situation” happens when the best outcome is identified by the
parties involved. True False |
|
19. |
Small businesses are often the first to
try something innovative. True False |
|
20. |
In innovation, it is mandatory for a person
to be sure how a new idea is going to turn out. True False |
Multiple Choice Questions
|
21. |
_____ refers to the sum total of forces
outside of an entrepreneur and a firm.
|
|
22. |
Following the BRIE model in starting a
business, an entrepreneur creates a boundary within the environment, setting
his firm apart from the rest of the environment. In doing this, the
entrepreneur gives the firm an _____.
|
|
23. |
Thomas has started a new business
venture for which he has been using highly economical resources, such as the
market research data available in public libraries, low-interest funds
borrowed from national banks, and equipments hired on lease. This technique
used by Thomas to overcome resource constraints in his start-up firm is best
known as _____.
|
|
24. |
_____ are considered as a part of the
internal environment of a firm.
|
|
25. |
_____ refers to a set of shared
beliefs, basic assumptions, or common, accepted ways of dealing with problems
and challenges within a company that demonstrate how things get done.
|
|
26. |
Which of the following is an element of
a firm’s internal environment?
|
|
27. |
Which of the following is an element of
a firm’s external environment?
|
|
28. |
Lisa runs a dog grooming business and
is always looking for new trends, reading articles, keeping notes, and
talking to customers and suppliers about what is needed in the industry. What
important function is Lisa performing?
|
|
29. |
Factors such as the ages, races, and
gender of customers would be an element of the firm’s _____ environment.
|
|
30. |
Small business owners should be
scanning their environment looking for upcoming trends. Beyond
trend-spotting, the other key scanning ability is to find the resources you
need from the environment to build your business. The key to identifying
resources comes from the acronym ________, which stands for the different
types of resources.
|
|
31. |
One emerging way to focus on your
immediate environment is called the _______. These are the elements that make
up the settings most helpful to promoting entrepreneurship.
|
|
32. |
Which of the following statements is
true about the task environment?
|
|
33. |
The _____ of an organization will be a
part of its task environment.
|
|
34. |
_____ target specific industries and
professions.
|
|
35. |
The economic sector in the general
environment is primarily concerned about the:
|
|
36. |
Which of the following is typically a
part of a firm’s general environment?
|
|
37. |
Which of the following statements is
true about the general environment?
|
|
38. |
The general description for the
processes and skills used in the management of a firm’s interactions with
people, organizations, and institutions outside of its boundary is called
_____.
|
|
39. |
_____ is best defined as the
characteristics of a business, like trust, consistency, and networks that
help make business operations smooth and efficient.
|
|
40. |
By efficiently managing external
relations, small businesses typically aim at creating _____.
|
|
41. |
Which of the following statements is
true of social capital?
|
|
42. |
Which of the following statements about
small businesses high in social capital is true?
|
|
43. |
Social capital is the major component
of what accountants call _____, and it can be found on business’s balance
sheet.
|
|
44. |
Another approach to building
organization-based legitimacy is the creation and display of a(n) ________.
|
|
45. |
_____ means that a firm is worthy of consideration
or doing business with because of the impressions or opinions of customers,
suppliers, investors, or competitors.
|
|
46. |
The _____ is the most important element
of social capital to customers and supporters of a business, such as bankers,
lawyers, and suppliers.
|
|
47. |
The owner of Elixir Force Inc. received
the most prestigious corporate award and was also titled as “the most
outstanding new entrepreneur of the year.” In the context of people-based
legitimacy, this is typically an indicator of:
|
|
48. |
Which of the following is not one of
the five skills for managing relations with the environment?
|
|
49. |
Having well-known or well-regarded
owners, employees, supporters, or spokespeople primarily increases a firm’s
_____ legitimacy.
|
|
50. |
The _____ is given by the U.S.
Government to businesses and nonprofit organizations that have been judged
outstanding in quality leadership; strategic planning; customer and market
focus; measurement, analysis, and knowledge management; human resource focus;
process management; and results.
|
|
51. |
Documentation and demonstration offered
for products are product-based legitimacy indicators of _____.
|
|
52. |
A firm will be recognized for its
industry leadership, a product-based legitimacy building characteristic,
typically when:
|
|
53. |
Which of the following
legitimacy-building features does having trademarks, service marks, patents,
or copyrights typically indicate?
|
|
54. |
A firm can best increase its
product-based legitimacy by:
|
|
55. |
Jake is a small business owner of Macho
Doors, a manufacturer and installer of garage doors. His business has earned
the reputation as being reliable, trustworthy, and one that makes high
quality, long-lasting doors. However, with rising gasoline and wood prices,
Jake is finding it hard to maintain the existing quality standards. If he
continues with the existing quality standard, his profit margins will go down
and he will not be able to hike his employees’ salaries; if he inserts panels
of lower quality wood the reputation of his business will be lost. These are
typically _____ legitimacy building features.
|
|
56. |
Erion Inc. is an e-commerce company
that sells its food products under the brand name Heal Meal. Its business
partners have planned to enter into a strategic alliance with a well-reputed
retailer in the Asian market in order to expand its operations to the Asian
continent. Which of the following is a reason for the company having a lack
of organization-based legitimacy in the Asian market?
|
|
57. |
Which of the following will cause the
maximum damage to an organization’s legitimacy?
|
|
58. |
Which of the following legal forms of business
is typically considered the least legitimate?
|
|
59. |
Which of the following is the most
appropriate approach to building organization-based legitimacy?
|
|
60. |
Which of the following statements is
true of legitimacy indicators?
|
|
61. |
Ivan has recently started his new
business venture, and he has been busy visiting trade exhibitions, business
organizations, electronic business forums, and his previous colleagues in order
to build contacts. This will help him use their expertise to the benefit of
his business. Ivan is typically working on building a _____.
|
|
62. |
Sylvia had helped Jonathan, one of her
previous subordinates, in establishing his business by referring him to an
important venture capitalist. As an appreciation of her help, Jonathan has
now agreed to hire and personally mentor her son as a trainee in his company.
Both Sylvia and Jonathan are typically exhibiting _____.
|
|
63. |
Interacting with others in order to
build relationships useful to a business refers to _____.
|
|
64. |
Social networking builds long-lasting
relationships. Most entrepreneurs start with the Big 3 social networks, which
are:
|
|
65. |
Which of the following is best avoided
in handling a business crisis?
|
|
66. |
Roller-Tell Inc., a major supplier of
components to the automobile industry, has recently confronted a crisis as
one of its manufacturing units has been forcefully shut down by the local
union. As a result, the company has been unable to meet the customer demands
appropriately. As the owner of the business, the most appropriate way for the
firm to handle this crisis is to:
|
|
67. |
To help and prepare small businesses to
handle crisis they have been recommended to avoid:
|
|
68. |
_____ is an approach to operating a
firm or a line of business which identifies, creates, and exploits
opportunities to make a profit in a manner that can minimize the depletion of
natural resources, maximize the use of a recycled material, or improve the
environment.
|
|
69. |
_____ is a certification standard from
the U.S. Green Building Council for buildings that are environmentally
friendly.
|
|
70. |
The CEO at River Castle Inc. asked the
employees to prepare a report on ways in which the company could become more
environmental friendly. The reports revealed areas in which the company had
been unnecessarily adding to its carbon footprint and consuming excessive
energy due to faulty machines. As a corrective action, all the faulty and
outdated equipment were replaced with efficient equipment. This is an example
of a(n) _____.
|
|
71. |
A system of values people use to
determine whether actions are right or wrong is referred to as _____.
|
|
72. |
_____ refers to a situation where a
person’s values are in conflict, making it unclear whether a particular
decision is the right thing to do.
|
|
73. |
Justin is a sales executive at a
manufacturing company. One of his clients who purchases products from him at
a higher price than that quoted by competitors is facing financial problems.
Since Justin’s promotion depends on his achieving the sales target, he cannot
decide whether he should inform his client about the lower prices its
competitors are paying. Justin is facing a situation known as _____.
|
|
74. |
Jake is a small business owner of Macho
Doors, a manufacturer and installer of garage doors. His business has earned
the reputation as a reliable, trustworthy business that makes high quality,
long-lasting doors. However, with rising gasoline and wood prices, Jake is
finding it hard to maintain the existing quality standards. If he continues
with the existing quality standard, his profit margins will go down and he
will not be able to hike his employees’ salaries; if he inserts panels of
lower quality wood the reputation of his business will be lost. The situation
that Jakes faces is typically described as a(n) _____.
|
|
75. |
Which of the following includes a
three-step process that has been adopted to help small businesses make better
and more ethical decisions?
|
|
76. |
There are costs to firms for their
illegal and even unethical behaviors. Which of the following is seen as the
most damaging and costly to these businesses?
|
|
77. |
The questions on who will be hurt and
how much, who will benefit and how much, what does the owner or the firm owe
others, and what do others owe the owner and the firm are typically asked
when:
|
|
78. |
Which of the following questions in
LaRue Hosmer’s approach to ethical decision making best reflects a decision
maker’s real or presumed obligations to people and institutions in a firm and
in its task environment?
|
|
79. |
_____ means “let the buyer beware,” and
is a philosophy sometimes used by businesses to put the burden for consumer
protection onto a customer.
|
|
80. |
Which of the following statements is
true about caveatemptor?
|
|
81. |
Which of the following is NOT one of
the three steps in small business adaptation of LaRue Hosmer’s model for
making ethical decisions?
|
|
82. |
Using _____ as a defense puts the entrepreneur
who uses it, and, usually by association, the whole small business community,
in a negative light.
|
|
83. |
After defining a moral problem, you
need to generate a variety of alternatives, evaluate each and choose the best
one. At this stage, compare the alternatives to several standards of your
firm, industry, and community. Which of the following is NOT a standard of
comparison stated in the text?
|
|
84. |
Which ethical model typically advocates
seeking the greatest good for the greatest number of people?
|
|
85. |
An ethical model conceived by the
German philosopher Immanuel Kant which suggests that there is a code of right
and wrong that everyone can see and follow refers to _____.
|
|
86. |
Which of the following ethical
philosophies do questions like, “What if everyone did what I want to do and
what kind of world would that be” best summarize?
|
|
87. |
In a negotiation settlement, _____
refers to the second-best outcome identified by the parties to help clarify
the value of achieving a successful negotiation.
|
|
88. |
Which of the following business costs
of ethical failures causes the least damage?
|
|
89. |
When compared to large businesses,
small business owners start their business typically to take advantage of:
|
|
90. |
A way to minimize the need for
high-pressure ethical decision making situations in business is by:
|
Essay Questions
|
91. |
Following the BRIE model in starting a
business, the entrepreneur creates a boundary within the environment, setting
the firm apart from the rest of the environment. In doing this, the
entrepreneur gives the firm an organizational identity. Define organizational
identity and then elaborate on the components of the BRIE model and how they
apply to a new entrepreneur. |
|
92. |
Define the general environment, then
list and elaborate on five of the seven components that make up the general
environment. |
|
93. |
Discuss some of the feasible ways of monitoring
the environment of small businesses. |
|
94. |
What are the three general forms of
legitimacy that small businesses can develop? |
|
95. |
List five of the ten product-based
legitimacy indicators outlined in the text and provide an example for each. |
|
96. |
What are the four best practices that
can help any online social networking effort become successful? |
|
97. |
Explain in detail the steps that a
small business owner should follow when faced with a crisis. |
|
98. |
How can a business achieve
sustainability? How can a business make profits out of enhancing others’
sustainability efforts? |
|
99. |
Briefly discuss LaRue Hosmer’s model
for making ethical decisions in business. |
|
100. |
Briefly describe the four philosophies
related to ethics a person can use to evaluate alternatives he or she has
generated to solve a problem. |
Chapter 03 Small Business Environment: Managing External
Relations Answer Key
True / False Questions
|
1. |
As a firm establishes a track record
for performance, that performance, along with the goods or services it
creates become key elements of the firm’s and entrepreneur’s identity. TRUE Often the firm and the entrepreneur are one and the same, but
as the firm grows beyond the entrepreneur’s direct personal control, parts of
the identity of the firm can grow beyond the entrepreneur alone. And as the
firm establishes a track record for performance, that performance, along with
the goods or services it creates become key elements of the firm’s and
entrepreneur’s identity. |
|
AACSB: Analytical Thinking |
|
2. |
Gathering resources for a business is
easier during economic recessions than during economic boom times. FALSE In creating a firm using the BRIE model, an entrepreneur
gathers resources from the environment. If the environment is rich with
resources as it is during economic boom times, it can be easy to gather what
is needed. In tougher times, such as during economic recessions, gathering
resources can be harder. |
|
AACSB: Analytical Thinking |
|
3. |
Being a small business makes managing
organizational culture harder than in larger businesses. FALSE Being a small business makes managing organizational culture
easier than in larger businesses because, in a small business, there is a lot
of flexibility in terms of roles and expected behaviors, especially when the
business is first getting started. |
|
AACSB: Analytical Thinking |
|
4. |
Organizational culture not only is the
set of shared beliefs or basic assumptions but also include accepted ways of
dealing with problems and challenges within a company. TRUE Organizational culture is the set of shared beliefs or basic
assumptions that demonstrate how things get done. Organizational culture also
includes common, accepted ways of dealing with problems and challenges within
a company. |
|
AACSB: Analytical Thinking |
|
5. |
The goal of any small business owner is
to manage external relations in order to minimize social capital. FALSE The goal of any small business owner is to manage external
relations in order to create social capital. Social capital includes
characteristics of a business, like trust, consistency, and networks that
help make business operations smooth and efficient. |
|
AACSB: Analytical Thinking |
|
6. |
Small businesses high in social capital
are less trusted when problems occur. FALSE Small businesses high in social capital are more trusted,
checked up on less, treated more fairly by regulators, and given the benefit
of the doubt when problems occur. |
|
AACSB: Analytical Thinking |
|
7. |
Gaining legitimacy in small businesses
is especially difficult for entrepreneurs seen as “different”—women,
minorities, home-based businesses, or businesses started by young people. TRUE Gaining legitimacy is one of the top challenges facing new
small businesses, but it can be especially difficult for entrepreneurs seen as
“different”—women, minorities, home-based businesses, businesses started by
young people, entrepreneurs introducing a new technology, or people new to
the area or industry. |
|
AACSB: Analytical Thinking |
|
8. |
Compared to a corporation, a sole
proprietorship is usually considered more legitimate by customers, suppliers,
and investors. FALSE Businesses that are in the legal form of corporation,
partnership, or LLC are considered more legitimate than businesses in the
form of sole proprietorship. |
|
AACSB: Analytical Thinking |
|
9. |
Social networking helps build
long-lasting relationships into a person’s day-to-day business operations. TRUE Social networking is a way to work trust, reciprocity, and
long-term relationships into one’s day-to-day business operations. It’s a way
to build a company’s expertise by convincing others to share their skills and
knowledge with the firm. The most successful owners are those who recognize
that others have the expertise needed and establish relationships that give
them the benefits of that expertise. |
|
AACSB: Analytical Thinking |
|
10. |
Mutuality is the set of relationships
and contacts with individuals and institutions a company establishes. FALSE This is the definition for a social network. Mutuality is the
action of each person helping another. |
|
AACSB: Analytical Thinking |
|
11. |
As the owner of a business, quickly
admitting that the firm is in trouble indicates a lack of accountability. FALSE Admitting that a company is in trouble—quickly and getting to
the scene as soon as possible reflect the caring attitude and accountability
of the business owner. |
|
AACSB: Analytical Thinking |
|
12. |
Sustainable entrepreneurship is an
approach to the operation of the firm, the line of business of the firm, or
both, which identifies or creates and then exploits opportunities to make a
profit in a manner that minimizes the depletion of natural resources,
maximizes the use of recycled material, improves the environment, or any
combination of these outcomes. TRUE This statement is true. Positive outcomes along these lines
are described as “greener,” so the approach is also sometimes called green
entrepreneurship. |
|
AACSB: Analytical Thinking |
|
13. |
LaRue Hosmer’s model for making ethical
decisions is focused more on small business than big ones. FALSE LaRue Hosmer was initially a professor of entrepreneurship who
came from a family logging business. He later turned his eye toward the
challenge of making ethical decisions in business. He came up with a model
widely used today, but it is focused more on big business than small ones. |
|
AACSB: Analytical Thinking |
|
14. |
An ethical decision should reflect a
decision-maker’s real or presumed obligations to people and institutions in
his or her firm and in its task environment. TRUE When a person makes a decision, it should reflect the person’s
real or presumed obligations to people and institutions in his or her firm
and in its task environment. |
|
AACSB: Analytical Thinking |
|
15. |
In making moral decisions, it is possible
to find oneself in the legal “right” but still unable to make a viable
business decision by pursuing legal recourse. TRUE When thinking through the legal standards, recognize that
having the law on one’s side may feel good, but may not be workable as a
solution. A person can find himself in the legal “right” but still unable to
make a viable business decision by pursuing legal recourse. Still, the simple
advice that one should not break the law knowingly and willfully makes a lot
of sense as a legal standard for making moral decisions. |
|
AACSB: Analytical Thinking |
|
16. |
Universalism is an ethical model that
suggests people get their ideas of right and wrong from their family,
religion, education, and community. TRUE Universalism is an ethical model that suggests that there is a
code of right and wrong that everyone can see and follow. It’s the brainchild
of the German philosopher Immanuel Kant that people may also have heard it
expanded by mothers everywhere. People get their ideas of right and wrong
from their family, religion, education, and community. |
|
AACSB: Analytical Thinking |
|
17. |
The billboard principle is an ethical
model that asks whether someone would be comfortable having his or her
decision and name advertised on a billboard for the public to see. TRUE The billboard principle is an ethical principle that asks
whether one would be comfortable having their decision (with their name, of
course) advertised on a billboard for everyone they know to see. |
|
AACSB: Analytical Thinking |
|
18. |
BATNA, or the “Best Alternative To a Negative
Situation” happens when the best outcome is identified by the parties
involved. FALSE BATNA is an acronym for “Best Alternative To a Negotiated
Settlement” in which the second-best outcome is identified by the parties in
a negotiation to help clarify the value of achieving a successful
negotiation. When compared to the BATNA’s of both parties, finding a solution
together often makes more sense. |
|
AACSB: Analytical Thinking |
|
19. |
Small businesses are often the first to
try something innovative. TRUE Small businesses are often the first to try something
innovative. Innovation is the creation of something new or trying something
for the first time. |
|
AACSB: Analytical Thinking |
|
20. |
In innovation, it is mandatory for a
person to be sure how a new idea is going to turn out. FALSE Innovation is the creation of something new or trying
something for the first time. Innovation also suggests that a person is not
sure how a new idea is going to turn out. |
|
AACSB: Analytical Thinking |
Multiple Choice Questions
|
21. |
_____ refers to the sum total of forces
outside of an entrepreneur and a firm.
Environment refers to the sum total of forces outside of an
entrepreneur and his or her firm. |
|
AACSB: Analytical Thinking |
|
22. |
Following the BRIE model in starting a
business, an entrepreneur creates a boundary within the environment, setting
his firm apart from the rest of the environment. In doing this, the
entrepreneur gives the firm an _____.
Organizational identity is not just the name of a firm, but
its basic description—what it does and where it does this. It can include
formal elements like a registration with the state, or a website or e-mail
account with the firm’s name on it, or a telephone number in the firm’s name. |
|
AACSB: Analytical Thinking |
|
23. |
Thomas has started a new business
venture for which he has been using highly economical resources, such as the
market research data available in public libraries, low-interest funds
borrowed from national banks, and equipments hired on lease. This technique
used by Thomas to overcome resource constraints in his start-up firm is best
known as _____.
As entrepreneurs face resource constraints, they often learn
to get by with less, or substitute a more readily obtained resource, or ask
to borrow, rent, or trade for the resource. These techniques are called
bootstrapping and are part of the culture of most successful start-ups. |
|
AACSB: Analytical Thinking |
|
24. |
_____ are considered as a part of the
internal environment of a firm.
The internal environment of a firm consists of those people
inside the boundary—the owner, any employees, and any other owners or board
members of the firm. |
|
AACSB: Analytical Thinking |
|
25. |
_____ refers to a set of shared
beliefs, basic assumptions, or common, accepted ways of dealing with problems
and challenges within a company that demonstrate how things get done.
As every company matures, it adds to its organizational
culture a set of shared beliefs or basic assumptions that demonstrate how
things get done. Organizational culture also includes common, accepted ways
of dealing with problems and challenges within a company. |
|
AACSB: Analytical Thinking |
|
26. |
Which of the following is an element of
a firm’s internal environment?
The internal environment of a firm consists of those people
inside the boundary—the owner, any employees, and any other owners or board
members of the firm. |
|
AACSB: Analytical Thinking |
|
27. |
Which of the following is an element of
a firm’s external environment?
The external environment consists of everything outside the firm’s
boundary. The external environment includes suppliers to the firm. |
|
AACSB: Analytical Thinking |
|
28. |
Lisa runs a dog grooming business and
is always looking for new trends, reading articles, keeping notes, and
talking to customers and suppliers about what is needed in the industry. What
important function is Lisa performing?
Small businesses can use several low cost ways to scan their
environment. They can look for trends by reading articles from trade and
professional press within their industry, ask customers, suppliers, etc. what
they see on the horizon, subscribe to professional journals in their
industry, and keep notes on what they learn. |
|
AACSB: Analytical Thinking |
|
29. |
Factors such as the ages, races, and
gender of customers would be an element of the firm’s _____ environment.
The general environment represents the major forces on the
lives of people and institutions like businesses, and even nations. It
includes the economic sector, the demographic sector, the technological
sector, etc. The demographic sector includes trends in the mix of ages,
races, and gender in society. |
|
AACSB: Analytical Thinking |
|
30. |
Small business owners should be
scanning their environment looking for upcoming trends. Beyond
trend-spotting, the other key scanning ability is to find the resources you
need from the environment to build your business. The key to identifying
resources comes from the acronym ________, which stands for the different
types of resources.
PROFIT stands for these resources: Property/Physical,
Relational, Organizational, Financial, Intellectual (also known as Human),
and Technological. |
|
AACSB: Analytical Thinking |
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