Professional Documents
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TRUE/FALSE
1. During the last few years, the number of new start-up ventures is approximately 1500 per day.
2. The entrepreneurial motivations of individuals relate to the entrepreneur, the environment, and the
venture.
3. There is a great abundance of reliable data concerning the start-up, performance, and failure of new
ventures.
4. Many entrepreneurs do not understand the marketing life cycle of a new product.
5. Most entrepreneurs are objective when they evaluate their new idea.
6. Most entrepreneurs are well schooled in the technology associated with their ventures.
7. Pricing becomes less of a concern when customers become aware of a products unique characteristics
that are superior to the competition.
8. Most entrepreneurs hire lawyers to brief them on the legal issues surrounding a new venture.
This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be resold,
copied, or distributed without the prior consent of the publisher.
KEY: pg 263
10. With a non-routine venture, the initial innovation will maintain the companys competitive advantage
without new technology.
11. In the life-style venture, independence, autonomy, and control are the primary driving forces.
12. The decision of an entrepreneur to ignore the market is a safe one if he or she is sure that the idea will
be a success.
13. The growth pattern of sales is critical for an entrepreneur to make correct forecasts.
15. Timing has little to do with the success or failure of a new venture.
16. Obtaining external financing is considered one of the major types of problems for a new venture
during its first year.
17. Two important factors classified by Bruno as managerial that could be a cause for failure include
resource problems and team approach.
18. Proper understanding of the market will help an entrepreneur avoid failure with a new venture.
This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be resold,
copied, or distributed without the prior consent of the publisher.
ANS: T PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 267
20. Solid analysis and evaluation of the feasibility of the product/service idea are critical tasks in starting a
new business.
21. A product does not have to be patented in order to be introduced into the marketplace.
23. Overall market understanding rather than time consuming focus on market niches is sufficient for an
evaluation.
24. A feasibility criteria approach focuses strictly on the financial feasibility of a new venture.
25. Feasibility analyses include the technical, market, financial, organizational, and competitive analyses.
MULTIPLE CHOICE
1. It is reported that new firms have emerged in the United States every year since the early
1990s.
a. 600,000 c. 22,000
b. 100,000 d. 230,000
ANS: A PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 258
2. The entrepreneurial motivations of individuals usually relate to which of the following factors?
a. the environment c. the venture
b. the entrepreneur d. all of the above
ANS: D PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 258
This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be resold,
copied, or distributed without the prior consent of the publisher.
3. Researchers have described a fully developed new firm with a number of characteristics including:
a. requires the full time commitment c. has not hired any individuals
b. has formal financial support d. a and b both apply
ANS: D PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 259
6. When a customer sees a product that is superior to its competitors, ______ becomes less important.
a. size c. quantity
b. color d. price
ANS: D PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 261
This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be resold,
copied, or distributed without the prior consent of the publisher.
ANS: B PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 261
11. Name the pitfall described by the statement, Engineers and technically trained people are particularly
prone to falling in love with an idea for a product or service.
a. inadequate understanding of technical requirements
b. lack of venture uniqueness
c. no real insight into the market
d. lack of objective evaluation
ANS: D PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 259
12. Poor financial understanding for an entrepreneur would be characterized by which of the following?
a. failure to anticipate technical difficulties
b. inadequate understanding of costs and funding requirements
c. failure to realize the life cycle of a product
d. lack of product differentiation
ANS: B PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 259
14. During the pre-start-up phase of a new venture, which of the following are among the crucial five
factors for success?
a. uniqueness of venture. c. a & b.
b. expected growth. d. price.
ANS: C PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 263
17. Three specific phases that a new venture goes through are
a. pre-start-up, start-up, post-start-up.
b. start-up, post-start-up, evaluation.
This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be resold,
copied, or distributed without the prior consent of the publisher.
c. beginning start-up, start-up, ending start-up.
d. pre-start-up, start-up, evaluation.
ANS: A PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 263
22. Independence and autonomy are the major driving forces behind which of the following types of
ventures?
a. small unprofitable ventures c. life-style ventures
b. corporate ventures d. high-growth ventures
ANS: C PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 264
23. The type of venture that is expected to attract venture capital would most likely be a
a. corporate venture. c. life-style venture.
b. high-growth venture. d. smaller venture.
ANS: B PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 264
This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be resold,
copied, or distributed without the prior consent of the publisher.
c. the exact profitability of the venture
d. all of the above
ANS: B PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 265
25. Bruno identifies which of the following as a factor contributing to new venture failure?
a. product/market problems. c. personality clashes.
b. family issues. d. good management/poor product.
ANS: A PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 265
27. In recent studies of new venture problems, the most dominant problems at start-up were:
a. regulatory environment c. production/operations
b. sales/marketing d. none of the above
ANS: B PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 266
28. In recent studies of new venture problems, the most dominant problems during the growth stage were:
a. sales/marketing c. regulatory environment
b. organization design d. none of the above
ANS: A PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 266
29. Using the Failure Prediction Model illustrated in the chapter, the risk of failure can be reduced by:
a. using less debt as initial financing and generating revenue in the initial stages.
b. using more debt as initial financing and generating less revenue in the initial stages.
c. using more revenue to enhance more debt in the initial stage.
d. all of the above.
ANS: A PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 268
30. Which of the following are major reasons for the failure of a new venture?
a. inadequate market knowledge c. opening in the wrong location
b. good product performance d. good product/poor marketing
ANS: A PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 267
This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be resold,
copied, or distributed without the prior consent of the publisher.
ANS: B PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 265
32. Hiring and promotions on the bases of nepotism rather than qualification fall under the managerial
problem of
a. human resource problem. c. unclear business definition.
b. the concept of a team approach. d. poor management.
ANS: B PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 265
34. Rapid technological advances in many industries cause a concern for in new venture
development.
a. faulty product performance
b. rapid product obsolescence
c. inadequate awareness of competitive pressures
d. undercapitalization
ANS: B PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 271
35. When premature entry into the marketplace causes the failure of a new venture, it can be termed
a. poor timing. c. a design problem.
b. good timing. d. a distribution problem.
ANS: A PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 265
37. Which of the following are key questions to ask when screening an idea?
a. Is it proprietary? c. What are its points of discussion?
b. Can it easily make money? d. All of the above are correct.
ANS: A PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 270
This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be resold,
copied, or distributed without the prior consent of the publisher.
a. himself or herself. c. the potential of the business.
b. the competition. d. venture capital opportunities.
ANS: C PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 269
39. A checklist approach allows the entrepreneur to identify major strengths and weaknesses in
factors of a new venture.
a. the financial c. the organizational
b. the marketing d. all of the above
ANS: D PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 270
41. In determining the potential market, one must look into the future.
a. one year c. ten years
b. three to five years d. three months
ANS: B PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 270
42. Which of the following are questions an entrepreneur can ask to gain insight into the viability of a
venture?
a. Is it proprietary? c. Is the potential market large?
b. Are the initial production costs realistic? d. All of the above are correct.
ANS: D PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 270
43. Functional design of the product and attractiveness in appearance are an aspect of
a. technical feasibility. c. marketability.
b. financial feasibility. d. organizational competence.
ANS: A PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 271
This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be resold,
copied, or distributed without the prior consent of the publisher.
b. the entrepreneurs vision
c. venture capital
d. general economic trends and competitor data
ANS: D PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 271
47. In shaping the ultimate success or failure of a new venture, which of the following statements applies
the best?
a. A single strategic variable is usually responsible.
b. A single strategic variable is seldom responsible.
c. A single strategic variable will change.
d. A single strategic variable influences the entire outcome.
ANS: B PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 269
49. Which evaluation method enables an entrepreneur to judge the potential of the business?
a. the entrepreneurial analysis method c. the profile analysis
b. the venture analysis method d. the net out-of-pocket cost method
ANS: C PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 269
50. An approach developed as a criteria selection list from which entrepreneurs can gain insights into the
viability of their venture is the
a. feasibility criteria approach. c. marketability feasibility approach.
b. time-essence of a venture approach. d. comprehensive feasibility approach.
ANS: A PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 270
SHORT ANSWER
ANS:
This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be resold,
copied, or distributed without the prior consent of the publisher.
The first reason new ventures often fail is poor timing for the start of a new venture. A new product
might be put on the market before a real need for the item exists or it may be introduced too late, when
there is little demand for the product. The second reason is rapid product obsolescence. The life of a
product needs to be assessed as important discoveries are always being made in updating the products
usefulness. The third reason is faulty product performance. Tests have not been conducted
appropriately for the product or quality has not been adequately controlled.
ANS:
The first pitfall in selecting a new venture is lack of objective evaluation. Ideas for products or
services lack the careful planning measures to bring them up to their proper potential. The second
pitfall is the lack of real insight into the market; a failure on the part of managerial staff to realize the
full potential and life cycle of the product from the beginning. The third pitfall concerns the lack of
venture uniqueness. There is no specific characteristic to set the business apart from competitors in the
same field.
ANS:
One of the critical factors in a new venture assessment is the basic feasibility of the venture. A venture
has to operate within the realm of reality and it must also be a legitimate business venture. A second
critical factor is the buyer decisions in the venture. Decisions as to customer identification in terms of
location and specific classification of customers will be served by this venture. The third critical factor
is the competitive advantages of the venture. Basically, this is comparing a venture with the
competitors. The venture must have advantages that are not available to the competitions realm of
business.
4. What are the five specific feasibility phases that a new venture will go through?
ANS:
The first phase is finding out technical feasibility. The feasibility measured is whether the product or
service will meet all technical criteria and tests for serviceability that are measurable. The second
phase concerns marketability. Different tests are used to assure the success of the product or service
rendered. This product must be salable and marketable to the public with a plan for promoting,
pricing, and distributing the product to consumers or customers. The third phase is financial
feasibility. Required finances are compared to available financial resources. The fourth phase deals
with organizational capabilities as far as the personnel needs and requirements. The final phase is the
competitive analysis of existing, as well as potential, competitors.
This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be resold,
copied, or distributed without the prior consent of the publisher.