Entrepreneurship 9th Edition by Hisrich – Test Bank

 

 

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Sample Test

Chapter 03 Entrepreneurial Strategy: Generating and Exploiting New Entries Answer Key

True / False Questions

1.    A new entry can be either offering a new product to a new market or creating a new organization.
TRUE

 

Difficulty: Medium

p.58

2.    Newness of a new entry is always an advantage.
FALSE

 

Difficulty: Medium

p.58

3.    The long-run performance of a firm is dependent upon the ability to generate and exploit numerous new entries.
TRUE

 

Difficulty: Medium

p.59

4.    In order to be the basis for a firm’s superior performance, a bundle of resources must be valuable, rare, and imitable.
FALSE

 

Difficulty: Medium

p.60

 

5.    A franchise is the instrument used to protect the owner of the technology from people imitating the technology.
FALSE

 

Difficulty: Hard

p.60

6.    Knowledge is the basis of the entrepreneurial resource.
TRUE

 

Difficulty: Medium

p.60

7.    Experience is idiosyncratic—unique to the life of the individual.
TRUE

 

Difficulty: Easy

p.61

8.The knowledge needed to generate innovation cannot be easily learned from a textbook.
TRUE

 

Difficulty: Medium

p.61

9.    The entrepreneur’s market knowledge is deeper than the knowledge that could be gained through market research.
TRUE

 

Difficulty: Medium

p.61

 

10.  Technological knowledge refers to the entrepreneur’s possession of information, technology, know-how, and skills that provide insight into a market and its customers.
FALSE

 

Difficulty: Medium

p.61

11.  Market research, such as surveys, has limited effectiveness because it is often difficult for customers to articulate the underlying problems they have with a product or service.
TRUE

 

Difficulty: Hard

p.61

12.  The period of time when the environment is favorable for entrepreneurs to exploit a particular new entry is called the window of opportunity.
TRUE

 

Difficulty: Easy

p.63

13.  The longer the entrepreneur takes to research a new entry, the less accurate customer demand estimates are.
FALSE

 

Difficulty: Medium

p.63

14.  When the window of opportunity is open, the environment is unfavorable for entrepreneurs to exploit a new product or enter a new market with an existing product.
FALSE

 

Difficulty: Medium

p.63-64

 

15.  An error of omission occurs from the decision not to act of a new entry opportunity when in hindsight they should have.
TRUE

 

Difficulty: Medium

p.64

16.  An error of commission occurs from the decision not to act on a new entry opportunity.
FALSE

 

Difficulty: Hard

p.64

17.The assessment of a new entry attractiveness is less about whether this opportunity “really” exists or not and more about whether the entrepreneur believes he or she can make it work.
TRUE

 

Difficulty: Medium

p.65

18.  First movers suffer a cost disadvantage as they are not able to move down the experience curve.
FALSE

 

Difficulty: Medium

p.65

19.  First movers can monitor changes in the market that might be difficult or impossible to detect for those firms not participating in the market.
TRUE

 

Difficulty: Easy

p.65

 

20.  If there is a poor fit between its resources and the external environment, then the firm will not enjoy superior performance.
TRUE

 

Difficulty: Medium

p.66

21.  Key success factors are the requirements that any firm must meet to successfully compete in a particular industry.
TRUE

 

Difficulty: Medium

p.66

22.  Emerging industries are industries that have been around for years but are just starting to experience explosive growth.
FALSE

 

Difficulty: Medium

p.67

23.  Environmental changes are highly unlikely in emerging industries.
FALSE

 

Difficulty: Easy

p.67

24.  By overestimating demand, the entrepreneur will suffer the costs of under capacity.
FALSE

 

Difficulty: Hard

p.67

 

25.  Entrepreneurs that delay entry have the advantage of more information about market demand.
TRUE

 

Difficulty: Medium

p.67

26.  Technological uncertainty is eliminated by a superior technology.
FALSE

 

Difficulty: Medium

p.68

27.  Adaptations necessary to meet changes in market demand are difficult because an organization resists change.
TRUE

 

Difficulty: Medium

p.68

28.  Customers always embrace change in products and services.
FALSE

 

Difficulty: Easy

p.69

29.  To overcome customer uncertainty, the venture should educate customer through demonstration and documentation on how to use the product.
TRUE

 

Difficulty: Medium

p.69

 

30.  The late mover is able to operate in the industry for a grace period under conditions of limited competition.
FALSE

 

Difficulty: Medium

p.70

31.  Building customers’ switching costs decreases barriers to entry for other firms.
FALSE

 

Difficulty: Easy

p.71

32.  Competition within an industry always has a negative effect on industry growth.
FALSE

 

Difficulty: Medium

p.71

33.  A narrow scope strategy offers a small product range to a small number of customer groups.
TRUE

 

Difficulty: Medium

p.73

34.  Using a broad scope strategy helps to reduce the risk of market uncertainty.
TRUE

 

Difficulty: Medium

p.74

35.  If a company has a superior product, customers will always be willing to pay a higher price for higher value.
FALSE

 

Difficulty: Medium

p.73

36.  A narrow scope strategy reduces the risks associated with competition.
TRUE

 

Difficulty: Medium

p.73

37.  Imitation of other products increases the downside loss associated with new entry.
FALSE

 

Difficulty: Medium

p.74

38.  Franchising is an example of a new entry strategy that increases the risk of downside loss for the franchises.
FALSE

 

Difficulty: Medium

p.75

39.  A “me-too” strategy consists of copying products that already exist and attempting to build an advantage through minor variations.
TRUE

 

Difficulty: Easy

p.75

40.  The three major risk reduction strategies discussed in the text are narrow scope, broad scope and imitation.
FALSE

 

Difficulty: Medium

1.    73-75

2.    Lack of informal communication systems is one of the assets of newness.
FALSE

 

Difficulty: Medium

p.76

 

Multiple Choice Questions

42.  A new entry includes all of the following except:
A.Offering a new product to a new market
B. Offering an established product to an new market
C. Creating a new product development process for your company
D. Creating a new organization

 

Difficulty: Easy

p.58

43.  The set of decisions, actions, and reactions that first generate, and then exploit over time, a new entry is:
A.entrepreneurial financing.
B. entrepreneurial strategy.
C. bootstrapping.
D. informal organization.

 

Difficulty: Medium

p.59

44.  Which among the following is not a key stage of the entrepreneurial strategy?
A.Market research to identify a new entry opportunity.
B. Generation of a new entry opportunity.
C. Exploitation of a new entry opportunity.
D. A feedback loop from the culmination of a new entry generation and exploitation back to generation of a new opportunity.

 

Difficulty: Medium

p.59

45.  Which item is not part of the new entry generation stage in the entrepreneurial strategy process?
A.Technical knowledge
B. Risk reduction strategies
C. Rare resources
D. Market Knowledge

 

Difficulty: Easy

p.59

46.  The basic building blocks to a firm, or the inputs into the production process, are:
A.competition.
B. strategy.
C. liabilities.
D. resources.

 

Difficulty: Medium

p.60

47.  To be the basis of a firm’s superior performance over competitors for an extended period of time, resources need to be:
A.valuable.
B. fully utilized.
C. patented.
D. shared.

 

Difficulty: Medium

p.60

48.  _________ are used to protect the owner of the technology from people imitating the technology.
A. Franchises
B. Switching costs
C. Patents
D. Distributors

Difficulty: Medium

p.60

 

 

 

49.  Which of the following statements is(are) true?
A.Knowledge is a valuable entrepreneurial resource that is gained through formal education.
B. Knowledge can be gained through highly experienced managers and/or firms.
C. Knowledge based on experience is unlikely to be learned in a classroom.
D. Research, more than knowledge, leads to the generation of new entries in markets and technologies.

 

Difficulty: Medium

p.61

50.  ______________ knowledge refers to the entrepreneur’s possession of information, technology, know-how, and skills that provide insight into the industry and customers.
A. Technological
B. Resource
C. Opportunity
D. Market

 

Difficulty: Medium

p.61

51.  Which is the best way to gain knowledge about a potential new entry?
A.Marketing research
B. Internet research
C. Entrepreneur’s market experience and knowledge.
D. Surveys

 

Difficulty: Hard

p.61

52.  Technological knowledge:
A.is gained through market research.
B. can lead to a technology that is the basis for a new entry.
C. does not help unless the market applicability is obvious.
D. does not help if the market is limited.

 

Difficulty: Hard

p.62

 

53.  When conducting research on a new entry:
A.the more information the entrepreneur has, the more difficult it is to focus on the consumer.
B. the entrepreneur must rely upon surveys more that market knowledge.
C. extensive research is expensive in terms of time and money.
D. lesser prior knowledge is advantageous since it minimizes the risk of entrepreneurial bias.

 

Difficulty: Medium

p.63

54.  The window of opportunity is part of:
A.assessing the attractiveness of a new entry opportunity.
B. creating a resource bundle.
C. choosing an entry strategy.
D. choosing a risk reduction strategy.

 

Difficulty: Medium

p.63-64

55.  The period of time when the environment is favorable for entrepreneurs to exploit a particular new entry is the:
A.market research phase.
B. window of opportunity.
C. technology window.
D. narrow-scope strategy.

 

Difficulty: Medium

p.63-64

56.  When an entrepreneur pursues a new entry opportunity only to find out later that he or she had overestimated his or her ability to create customer demand it is a(n):
A.technological error.
B. window of opportunity.
C. error of omission.
D. error of commission.

 

Difficulty: Medium

p.64

 

57.  An error of omission occurs when an entrepreneur:
A.enters a market but overestimates the customer demand.
B. develops a product for a market that is too narrow.
C. decides not to enter a market that is, in fact, desirable.
D. fails to understand the limitations of a market.

 

Difficulty: Hard

p.64

58.  Regarding entry into a new market, which of the following is(are) true?
A.First movers gain expertise through participation.
B. First movers are not able to detect changes in the market.
C. First movers suffer a cost disadvantage.
D. First movers face more competitive rivalry.

 

Difficulty: Easy

p.65

59.  First movers:
A.are not able to gain from moving down the experience curve.
B. are better positioned to satisfy customers.
C. face more competition than late movers.
D. fail to secure important channels.

 

Difficulty: Medium

p.65

60.  Which of the following is not a reason that first movers are better positioned to satisfy their customers?
A.They have a chance to select and secure the most attractive segments of the market
B. They have the chance to position themselves at the center of the market
C. They have a chance to face less competitive rivalry
D. They have a chance to establish their product as the industry standard

 

Difficulty: Hard

p.65

 

61.  A disadvantage of being a first mover is:
A.environmental instability.
B. cost disadvantages.
C. long lead time to gain knowledge.
D. a limited market.

 

Difficulty: Hard

p.66

62.  If there is a good fit between the venture’s bundle of resources and the external environment:
A.the firm will be rewarded with superior performance.
B. the entrepreneur will be unable to compete in the market segment.
C. environmental variables will be irrelevant.
D. demand uncertainty will be irrelevant.

 

Difficulty: Medium

p.66

63.  In emerging industries:
A.environmental factors do not affect customer demand.
B. entrepreneurs confront demand certainty.
C. environmental changes are highly likely.
D. it is easier to respond effectively to sudden changes.

 

Difficulty: Medium

p.67

64.  First movers face:
A.market rigidities.
B. high entry barriers.
C. cost disadvantages.
D. demand uncertainty.

 

Difficulty: Easy

p.67

 

65.  By delaying entry, late movers:
A.can learn from the actions of first movers without incurring the same costs.
B. have less information about market demand.
C. secure the window of opportunity.
D. can avoid high entry barriers.

 

Difficulty: Medium

p.67

66.Technological uncertainty:
A. is a result of uncertainty about customer demand.
B. occurs because an alternative technology could be introduced by competitors.
C. only occurs in emerging markets.
D. can be avoided by early entrants with superior technology.

 

Difficulty: Hard

p.68

67.  Changes needed to adapt to environmental changes:
A. are easier in established organizations because of inertia.
B. can be avoided by late entry.
C. are more difficult because of the entrepreneur’s tendency to escalate commitment.
D. don’t affect smaller organizations.

 

Difficulty: Medium

p.68

68.  The entrepreneurial attributes of persistence and determination, which are so beneficial when the new venture is on the “right course,”:
A. can make the entrepreneur more suitable to work in volatile markets.
B. can hasten the process of adapting to sudden changes.
C. can aid the entrepreneur in recognizing, and implementing changes.
D. can inhibit the ability of the entrepreneur to detect, and implement, change.

 

Difficulty: Medium

p.68

 

69.  By entering a market later,
A.customer uncertainties have already been substantially reduced.
B. the venture can build a reputation as a “founder.”
C. the company can erect barriers to entry and imitation.
D. the player gets to operate only for a grace period.

 

Difficulty: Medium

p.69

70.  Customer uncertainty can take all of the following forms except:
A.not understanding how to use the product
B. not knowing whether the product will perform as expected
C. not knowing where to buy the product
D. being uncertainty adverse in general and resistant to change

 

Difficulty: Medium

p.69

71.  By being first to market a product, the venture:
A.can tends to lose customer loyalties to late entrants.
B. loses out to switching costs.
C. secures access to important sources of supply.
D. can sell its products and services at a higher price.

 

Difficulty: Easy

p.71

72.  The costs that must be borne by customers if they are to stop purchasing from the current supplier and begin purchasing from another is (are):
A.customer switching costs.
B. lead time.
C. resource costs.
D. resource bundle errors.

 

Difficulty: Medium

p.71

 

73.  Lead time is:
A.the time from production to market delivery
B. the time in which the first mover operates in the market under conditions of limited competition
C. the time it takes for an entrepreneur to go from the concept stage to the delivery stage
D. the time between product introduction and customer acceptance

 

Difficulty: Medium

p.70-71

74.  Barriers to entry include all of the following except:
A.patents
B. switching costs
C. environmental instability
D. building customer loyalties

 

Difficulty: Hard

p.71

75.  Frequent flier miles would be an example of which barrier to entry?
A.Building customer loyalties
B. Securing access to supply of key resources
C. Creating product uniqueness
D. Building in switching costs

 

Difficulty: Hard

p.71

76.  _____ refers to the probability, and magnitude, of downside loss.
A. Reward
B. Risk
C. Liability of newness
D. Technology error

 

Difficulty: Easy

p.73

 

77.  Offering a small product range to a small number of customer groups is:
A. a narrow-scope strategy.
B. an imitation strategy.
C. a broad-scope strategy.
D. a way of reducing market uncertainties.

 

Difficulty: Medium

p.73

78.  A narrow-scope market strategy:
A.does not provide the entrepreneur an opportunity to build up specialized knowledge and expertise.
B. provides substantial protection against competitors.
C. is like putting all your eggs in one basket.
D. can be thought of as taking a “portfolio” approach to dealing with uncertainties.

 

Difficulty: Medium

p.73

79.  A broad-scope market strategy:
A.focuses on producing customized products.
B. provides substantial protection against competitors.
C. is used to reduce market uncertainty.
D. is based primarily on product quality.

 

Difficulty: Medium

p.74

80.  A broad-scope strategy:
A.is vulnerable to the risk that market demand does not materialize as expected and/or changes over time.
B. opens the firm up to many different “fronts” of competition.
C. focuses the firm on producing customized products, localized business operations, and high levels of craftsmanship.
D. offers a way of reducing some competition-related risks.

 

Difficulty: Medium

p.74

 

81.  Imitation strategies:
A.require expensive and extensive research.
B. are rare and inimitable.
C. does not provide organizational legitimacy.
D. can enhance a firm’s performance.

 

Difficulty: Medium

p.74

82.  A ______ strategy that copies products that already exist and attempts to build an advantage through minor variations.
A.technological
B. narrow scope
C. me-too
D. broad scope

 

Difficulty: Easy

p.75

83.  Which of the following is a liability of newness?
A.Costs associated with learning new tasks are high.
B. Lack of established routines and processes give the venture a new slate.
C. Communication in informal systems is increased.
D. Market for potential consumers is limited.

 

Difficulty: Hard

p.76

84.  Franchising:
A.is the only imitation strategy discussed in the text.
B. reduces risk of downside loss.
C. is the same as the me-too strategy.
D. reduces the amount of competition an entrepreneur will face.

 

Difficulty: Medium

p.75