Final Revision Entrepreneurship

Chapter 1: Review Questions

MCQ

1.Entrepreneurs seem to be characterized by:

A) a desire for money
B) an inability to organize but strong conceptual skills
C) a desire to work alone because of weak management skills and a need for control
D) a high energy level.
2. Juan is able to work well in a constantly changing atmosphere and has little concern for
what tomorrow will bring. Juan demonstrates which of the following characteristics of a

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typical entrepreneur?
A) The willingness to take extreme risks
B) A desire for immediate feedback

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C) A tolerance for ambiguity.

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D) A future orientation
3. Entrepreneurs start businesses for a number of reasons including:

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A) an opportunity to make a difference.
B) having to deal with less government regulation than as an executive of a large company

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C) a much lower risk of career failure due to layoff or acquisition than working for a large
company

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D) the opportunity to get rich much quicker than if they work for a large company
4. Surveys show that owners of small businesses believe that:
A) they work harder on their own than if they worked for someone else.

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B) they earn less than if they worked for someone else
C) they are less satisfied than if they worked for someone else
D) venture capital is relatively easy to raise

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5. A significant benefit of starting your own company is:
A) more leisure time because there is less of a need to punch a time clock.
B) contributing to society and being recognized for your efforts.
C) to be able to choose who you work with or don't work with
D) more job security than working for a large corporation
6. Mary and Ted are discussing starting a new business and are asking themselves a
series of questions like; "What is the worst that could happen if we fail?" "How likely is
that to happen?" They are assessing which potential drawback of small business
ownership?
A) The long hours and hard work involved
B) The risk of losing their entire investment.
C) The lower quality of life they'll experience
D) The uncertainty of their income
7- Potential drawbacks of small business ownership include:
A) a relatively low guaranteed income

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B) a significantly freer personal schedule but less personal income and assets with which
to enjoy the more relaxed schedule
C) a high likelihood of a lower quality of life while starting and establishing the small
business.
D) relatively limited potential for further personal development
8. The growth of entrepreneurship is being fed by:
A) the return to a manufacturing-based economy
B) technological advancements.
C) diminished opportunities in overseas markets for larger corporations
D) the vilifying of large corporations in society

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9. The international market:
A) has proven to be a tremendous opportunity for small business.
B) is being dominated by large corporations based in Europe and Japan

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C) is largely closed to small U.S.-based businesses because of the growth of

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international entrepreneurship
D) provides greater opportunities for women and minority entrepreneurs than U.S.

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domestic markets do

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10. Small businesses thrive in every industry, but the majority of them are in:
A) the general construction industry.
B) retail businesses.

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C) mining and manufacturing.
D) service industries.

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11. More businesses fail because of ________ than for any other reason.
A) incompetent management.
B) theft by employees

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C) insufficient capital
D) poor choice of location
12. Tom was a financial consultant who liked to work with his hands, especially in
making furniture. He quit his rat race financial job to start a small custom furniture
business. After struggling for several years, he closed it and went back to financial
services. Tom discovered that there was a big difference between making furniture
for himself and running a customer furniture manufacturing business. Tom's
business failed because of:
A) uncontrolled growth
B) poor financial control
C) his lack of experience.
D) an inability to access start-up capital
13. Successful entrepreneurs recognize that their most valuable resource is their ________.
A) time.
B) energy
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C) vision
D) Age
14. One key to success with a business startup is to begin with enough ________.
A) capital.
B) sales
C) accounts payable
D) suppliers.
15. A key characteristic of a successful entrepreneur is:_________
A) never having failed
B) expert technical knowledge of the product

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C) learning to fail intelligently.
D) earning at least a 25% return for investors
16. The key to effective financial management in a start-up is:________

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A) excellent controls

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B) the use of ABC accounting processes
C) sufficient start-up capital.
D) an adequate inventory on hand

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17. Which of the following is true about avoiding business failure?

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A) You must understand financial statements.
B) You need to learn how to manage others.

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C) You must differentiate your product from the competition.
D) You must do all of these.
18. Small businesses are those that employ: ___________

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A) more than 100 employees.
B) fewer than 20 employees.
C) fewer than 100 employees.

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D) Number doesn't matter.
19. Which of the following is not a common characteristic of entrepreneurs?
A) Desire for responsibility
B) Business plan expertise.
C) Preference for moderate risk
D) High energy level
20. Primary cause of business failure is:___________
A) improper managerial attitude
B) poor financial controls
C) incompetent management.
D) location
21. To avoid business failure, an entrepreneur should:
A) know the business in depth.
B) develop a solid business plan.
C) take entrepreneurship courses.
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D) Both A and B
22. Management incompetence includes all but: ___________
A) the owner lacks the leadership ability necessary to operate it successfully.
B) lack of capacity to make the business work
C) insufficient capital.
D) inexperience
23. Joanne is thinking about running her own business. What risks does she face?
A) Getting stuck in a job she hates
B) Having to deal with more government regulation than if she were a manager in a
larger company

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C) Having less status in society, as most people do not respect small business owners
D) Losing her entire invested capital.

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24. The following are some common characteristics of entrepreneurs Except: ----------.
a. A high energy level.

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b. A preference for moderate risk.

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c. A desire to work alone because of weak management skills and a need for control.

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d. A desire for responsibility.
True or False
1. Entrepreneurs are people who grow existing businesses by careful management of

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existing resources False
2. Entrepreneurial success requires little more than a good idea for a product or service True

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3. Research has isolated a set of characteristics that can predict who will succeed as an
entrepreneur False

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4. It is common to experience a lower quality of life during a business start-up than after
the business is established. True
5. Entrepreneurs can outsource many of the operations of their companies. True
6. Two characteristics common to entrepreneurs are creativity and an eye for
opportunity. True
7.The international market has proven to be a tremendous opportunity for small
business True
8.Technological advancements are not a fed for the growth of entrepreneurship. False
9.Entrepreneurs can outsource many of the operations of their companies. True
10.The Potential drawbacks of small business ownership include a high likelihood of a
lower quality of life while starting and establishing the small business. True

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 Chapter 2: Review Questions
MCQ
1. ________ is the ability to develop new ideas and to discover new ways of looking at
problems and opportunities.
A) Showboating
B) Commoditizing
C) Innovation
D) Creativity
2. ________ is the ability to apply creative solutions to problems and

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opportunities to enhance or to enrich people's lives.
A) Showboating

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B) Commoditizing

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C) Creativity
D) Innovation

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3. According to Ted Levitt, creativity is ________ new things.

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A) thinking
B) doing

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C) corroborating
D) emulating
4. According to Ted Levitt, innovation is ________ new things.

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A) thinking
B) doing

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C) corroborating
D) emulating
5. For entrepreneurs, simply having a great new idea is not enough;
transforming the idea into a ________ product, service, or business venture
is the next step.
A) plausible
B) legible
C) intangible
D) tangible
6. Some small businesses create innovations ________ in response to customer
feedback or changing market conditions.
A) responsibly
B) compassionately
C) reactively
D) proactively
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7. Innovation is ________ when it creates market-changing, disruptive breakthroughs that
are the result of generating something from nothing.
A) mandatory
B) perfunctory
C) evolutionary
D) revolutionary
8. Some small businesses create innovations ________ by spotting opportunities on which
to capitalize.
A) responsibly

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B) compassionately
C) reactively

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D) proactively

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9. The ________ brain processes information intuitively and takes care of the body's
emotional, intuitive, and spatial functions.

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A) left

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B) right
C) front

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D) back
10. Which brain handles language, logic, and symbols?

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A) Left
B) Right
C) Front

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D) Back
11. Which one of the following is a barrier to creativity?
A) Searching for the one "right" answer
B) Focusing on being "logical"
C) Blindly following the rules
D) All of the above
12. Thanks to ________, the cost of failed attempts at innovation has never been lower.
A) globalization
B) distance
C) technology
D) localization
13. ________ are entrepreneurs who operate within the framework of an existing business.
A) Managers
B) Disruptors
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C) Intrapreneurs
D) Challengers
14. The voice of a ________ can be an important source of creative ideas.
A) customer
B) competitor
C) operator
D) manager
15. ________ is (are) the fuel that drive(s) creativity.
A) Rules

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B) Imagination
C) Conformity

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D) Rigidity
16. Which of the following is NOT a step in the creative process?

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A) Transliteration

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B) Preparation

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C) Investigation
D) Illumination
17. In the creative process, the transformation phase requires two types of

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thinking: ________ and ________.
A) convergent, parallel

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B) divergent, parallel
C) investigative, parallel
D) convergent, divergent

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18. ________ thinking is the ability to see the similarities and the connections
among various and often diverse data and events.
A) Divergent
B) Parallel
C) Investigative
D) Convergent
19. ________ thinking is the ability to see the differences among various data
and events.
A) Divergent
B) Parallel
C) Investigative
D) Convergent

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 True or False
1. Creativity is the ability to develop new ideas and to discover new ways of looking at
problems and opportunities. True

2. Invention is the ability to apply creative solutions to problems and opportunities. False

3. Innovation is always revolutionary. False

4. Entrepreneurs must always be on guard against traditional assumptions and perspectives

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about how things ought to be because they are certain killers of creativity. True

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5. Left-brain thinking is at the heart of the creative process. False

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6. Right-brain people challenge custom, routine, and tradition. True

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7. Right-brain people realize that there may be more than one "right answer." True

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8. Successful entrepreneurship requires both left- and right-brain thinking. True

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9. In the early imaginative phases of the creative process, logical thinking can restrict
creativity. True

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10. Ambiguity can be a powerful creative stimulus. True

11. Intrapreneurs are entrepreneurs who operate within the framework of an existing
business. True

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 Chapter 3: Review Questions
MCQ
1. In franchising, a ________ pays fees and royalties to a ________ in return for the right
to sell its products or services under the franchiser's trade name and often to use its
business format and system.
A. franchiser; franchisee.
B. franchisee; franchiser.
C. franchise; business owner
D. business owner; parent company

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2. The success of franchising is largely due to:
A. the economic growth of the United States and other developed nations, economies
B. more college students choosing to go to work for themselves rather than for

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corporations

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C. the mutual benefits it provides to the franchiser and franchisee.
D. All of these factors

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3. In franchising, the reputation of the franchiser is dependent on:
A. their locations and popularity with the local customer

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B. the brand name recognition and appeal
C. the rate of growth and the number of national outlets

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D. the quality of the goods and services provided.
4. Franchise advertising programs:
A. are organized by the franchiser but controlled locally by the franchisee

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B. are an expense borne by the franchiser
C. require franchisees to spend a minimum amount on local advertising.
D. allow voluntary participation

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5. The primary advantage of buying a franchise over starting your own company is:
A. in the purchase of the franchiser's experience, expertise, and products.
B. the fact it is much less expensive than doing your own business start-up
C. the extensive assistance offered in finding start-up capital
D. the absolute territory protection offered by all franchisers
6. Most franchise experts consider the most important factor in the success of a franchise
to be:
A. the simplicity of the idea
B. location.
C. territorial protection
D. financing
7. Despite all the benefits, there are a number of disadvantages to franchises, such as:
A) the time consumed by the management training and support the franchiser provides
B) the cost of national advertising
C) strict adherence to standardized operations.
D) territory limitations
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8. The most expensive franchises in terms of total investment are:
A) retail franchises
B) business service franchises
C) McDonald's franchises
D) hotel and motel franchises.
9. The biggest challenge facing the growth of new franchises is:
A) the lack of capital
B) competition from independent entrepreneurs
C) market saturation.
D) the recent downturn in the economy

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10. The document that governs the relationship between a franchisor and the franchise is
the:
A) FTC. B) FDD. C) UFOC. D) FOC.

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11. The most litigated subject of the franchisee agreement is:

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A) franchisee fees.
B) advertising expenditures.

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C) termination of contract.
D) resale price maintenance clauses.

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12. The franchiser has the right to cancel a contract if a franchisee:
A) declares a bankruptcy.

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B) fails to make required payments on time.
C) fails to maintain quality standards.
D) All of the above

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True or False
1. In franchising, royalties are paid by the franchisee to the franchisor True

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2. By definition, a franchise is owned by a semi-independent franchisee who pays a fee to a
franchiser in return for the right to sell the franchised goods or services True

3. Pure franchising involves the right to use all the elements of a fully integrated business
operation True

4. When a franchisee buys a franchise, he/she is purchasing the expertise and the business
experience of the franchisor True

5. Most franchisers provide extensive financial help like loans and low-rate financing for
their franchises. False

6. Buying a franchise prevents an entrepreneur from making many mistakes and avoids the
most inefficient type of learning—trial and error True

7. The only fee that franchisers can collect from franchisees is a one-time franchise fee paid
at the outset of the relationship. False (Fee and royalties )
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8. In addition to other fees, franchisees must also pay royalties but only on net profits—no
profits, no royalties. False

9. Franchisors can require franchisees to purchase materials and supplies only from
approved suppliers. True

10. One of the best ways for an entrepreneur to evaluate a potential franchiser is to
interview several franchise owners who have been in business at least one year. True

11. The franchise contract defines the rights and the obligations of both parties and sets the

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guidelines which govern the franchise relationship. True

12. Franchisors are obligated to renew a franchisee's contract unless there has been

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malfeasance on the part of the franchise. False (can)

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 Chapter 4: Review Questions
MCQ
1. For entrepreneurs, a business plan is:-------------
A) a systematic, realistic evaluation of a venture's chances for success in the market.
B) a way to determine the principal risks facing the venture.
C) a game plan for managing the business successfully.
D) All the above.
2. A business plan performs a number of functions including:----------

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A) identifying how many employees will be needed in the business start-up phase.
B) attracting capital for the start-up.
C) providing the entrepreneur with a plan for managing inventory.

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D) providing the basis for purchasing property and casualty insurance for the new

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company.
3. A business plan:---------

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A) is developed through an intuitive process by which the entrepreneur records his/her

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plans for the business in the future.
B) focuses on the internal elements of the business.

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C) forces an entrepreneur to think a business idea through, considering both its positive
and its negative aspects.

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D) is a strategic plan for a business that must be supplemented by operational plans once
financing is secured.
4. A business plan:-----------

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A) reduces the risk and uncertainty involved in starting a new company.
B) is a guarantee of success for the small company.
C) should be done by professional writers in consultation with the owner.
D) should be kept in outline form to avoid over structuring the company.
5. are short-term, specific targets which are attainable, measurable, and controllable.
A) Objectives.
B) Policies.
C) Goals.
D) Standard operating procedures.
6. Investors look for which of the following when reviewing the experience of the
management team of a new venture?
A) Assets that can be used as collateral for the loan/investment.
B) Experience, talent, and integrity.
C) Plans for keeping the management team in place.
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D) A hiring strategy that has the customer clearly in focus.
7. Which of the following statements is true?
A) The useful life of the financed asset must be less than the maturity of the loan.
B) An entrepreneur should try to camouflage any weaknesses in the small business.
C) Projected financial statements should prove the company's ability to repay the loan.
D) Officers' personal assets that can be used as collateral must be included in the financial.
8. The process of testing the business model on a small scale before committing serious
resources to launch a business that might not work is called:
A) benchmarking.

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B) business prototyping.
C) scaling.

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D) lean modeling.

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9. Business plans need to pass three tests:------------
A) the financial test, the market test, and the management test.

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B) the appearance test, the substance test, and the concept test.

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C) the reality test, the competitive test, and the value test.
D) the presentation test, the content test, and the application test.

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10. The C of the five Cs that is a synonym for "cash flow" is: -----
A) capital.
B) character.

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C) collateral.
D) capacity.

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11.A ------------ is what a customer gains from the product or service feature.
A) feature
B) bonus
C) discount
D) benefit
12. An executive summary should:---------
A) explain the basic business model and the problem the business will solve for customers.
B) briefly describe the owners and key employees, target market(s), and financial
highlights.
C) briefly describe the company's competitive advantage.
D) All of the above.
13.A ----------- is a descriptive fact about a product or service.
A) feature.
B) product summary.
C) benefit.
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D) None of the above.
14. What is the competitive test?
A) It evaluates the company's relative position to its key competitors.
B) It identifies the competitors only.
C) It finds their address and phone numbers.
D) None of the above.
True or False
1. Entrepreneurs who apply for loans without having prepared business plans are less
likely to get the money they need. False

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2. The executive summary should summarize all the relevant points of the proposed

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venture and should be concise-no more than two pages. True

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3. A feature is what a customer gains from a product. False ( benefit )

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4. The executive summary should be written first and should be a broad general discussion
of the business plan. True

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5. Defining the target market is one of the hardest and most important things the
entrepreneur can do in the business plan. True

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6. An entrepreneur should not include an exit strategy as a way to "cash out" for investors

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in the initial plan. False

7. Always tell the truth, even if it's bad news, in the business plan. True

8. The internal competitive test focuses on management's ability to create a company that
will gain a competitive edge. True

9. The entrepreneur should begin the presentation with an explanation of the opportunity,
the benefit to the investors, and what the new venture is. True

10.Objectives are short-term, specific performance targets that are attainable,

measurable, and controllable. True

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 Chapter 5: Review Questions
MCQ
1. A business plan for the small business owner:
A) is of relatively little importance due to the dynamic nature of the marketplace.
B) is synonymous with the marketing plan.
C) tends to stress how the entrepreneur will operate rather than detailing what he/she
wants to accomplish.
D) contains both a marketing plan and a financial plan.
2. ________ is the process of creating and delivering desired goods and services to

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customers, and involves all of the activities associated with winning and retaining loyal
customers.
A) Marketing

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B) Personal selling

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C) Promotion
D) Advertising and public relations

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3. The focus of the small company's marketing plan is:
A) its product or service.

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B) the customer.
C) attracting capital.

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D) an evaluation of key competitors.
4. The marketing plan should include certain key objectives, such as:
A) determining product costs through market research.

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B) pinpointing the specific target markets a small business will serve.
C) determining what costing strategies to use.
D) discovering what the company's ETDB index is.

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5. Shifting patterns in the age, income, education, race, and other characteristics of the
population are the subject of ________ and exert a potent force on a company's
marketing plan.
A) psychographics
B) geographic
C) demographics
D) geo-demographics
6. Entrepreneurs who recognize demographic, social, and cultural trends as they emerge
have the opportunity to ________ their companies from the competition in meaningful
ways.
A) integrate B) differentiate C) placate D) mediate
7. Market research answers what important question for the small business owner?
A) How shall I set up my distribution system?
B) What should my goals and objectives be in my marketing plan?
C) Who are my customers and what are they looking for?
D) What form of business ownership would be most effective in this market?

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8. The marketing goal of a small business is to treat each customer as a(n):
A) individual. B) group. C) profit center. D) cost center.
9. Effective one-to-one marketing involves:
A) identifying your best customers.
B) treating each customer as an individual.
C) developing a marketing plan designed specifically to appeal to their customer needs,
tastes and preferences.
D) All of these
10. ________ is a process in which computer software that uses statistical analysis,
database technology, and artificial intelligence finds hidden patterns, trends, and

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connections in data so that business owners can make better marketing decisions and
predictions about customer's behavior.
A) Customer relationship management

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B) Data mining

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C) Data discovery
D) Simulation

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11. The key to marketing success is:
A) economy of scale in promotion by creating broad-based ad campaigns.

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B) understanding customers' unique needs, wants and preferences.
C) the use of direct-marketing and e-commerce.

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D) catering to teenagers.
12. Companies do a number of things to focus on their customers, including:
A) fixing customer complaints quickly.

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B) conducting market research on what superior customer service is.
C) offering quality products at low prices.
D) implementing a TCM management system in their production facility.

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13. The total quality management (TQM) concept:
A) strives to achieve quality not just in the product or service itself, but in every aspect of
the business and its relationship with the customer.
B) relies on quality inspections through an army of quality control inspectors.
C) focuses on reducing the time it takes to fulfill a customer's request for a product.
D) is built on market research.
14. A key to effective innovation by the entrepreneur is:-----------.
A) dedicating at least 20% of pre-tax revenues to R & D.
B) always looking for new product and service ideas.
C) hiring managers with a track record for innovation.
D) None of these.
15. ________ refers to developing, maintaining, and managing long-term relationships
with customers so that they will want to keep coming back.
A) Customer relationship management
B) Customer retention management
C) Customer management software
D) Customer reassurance management
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16. The most common channel of distribution for consumer goods is:
A) manufacturer → consumer.
B) manufacturer → retailer → consumer.
C) manufacturer → wholesaler → retailer → consumer.
D) manufacturer → broker → consumer.
17. ________ is the vehicle for gathering the information that serves as the foundation
for the marketing plan.
A) Target market identification.
B) Market research.
C) Banker identification.

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D) Competitive analysis.
18. Surveys, questionnaires, and focus groups are considered to be:
A) primary research.

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B) secondary research.

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C) data collation.
D) All of the above

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True or False
1. A bootstrap marketing plan should have four objectives: profit, profit, profit, and

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profit. False (awareness, trial, repeat, and referral )

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2. The goals of one-to-one marketing are to attract, retain and increase the purchases by
the target customer. True

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3. A target market is the group of customers at whom the company aims its products and
services. True

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4. The ultimate goal of TQM is to avoid quality problems. True

5. If employees are committed to quality, management's commitment becomes

unimportant. False

6. The ability to innovate is one of the greatest weaknesses of the entrepreneur. False

7. Listening to customers and responding to what you hear from them is a highly
effective way to achieve stellar customer service. True

8. A small company's promotional goals may include creating a brand image, persuading
customers to buy, and/or to develop brand loyalty. True

9. The marketing mix consist of the "4Ps”: Product, Plot, Place, Promotion. False (price)

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 Chapter 6: Review Questions
MCQ
1. ________ is a trend where people test products in retail stores but buy them online.
A) Showboating
B) Commoditizing
C) Onlining.
D) Showrooming
2. One of the Internet's greatest strengths is its ________ nature.
A) efficiency

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B) collectivistic
C) interactive
D) atavistic

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3. Perhaps the most visible impact of the Internet is in the world of ________.

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A) services
B) manufacturing

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C) education
D) retailing

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4. After launching the Web site, the companies must follow-up by:
A) redesigning the Web site and buying more hardware to support the Web site.

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B) automating or expanding the warehouse to meet customer demand.
C) integrating the Web site into the inventory control system.
D) All of the above

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5. Before your Web site can become the foundation for a successful e-business, you must
create it with your ________ in mind.
A) technology

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B) employees
C) target audience
D) vendors
6. The most common reasons for leaving a site without purchasing include:
A) the shopping cart was easy to find.
B) checking out was easy and quick.
C) the site was trustworthy.
D) shipping charges were too high.
7. Sites that ________ may never have the chance to sell because customers will click to
another site.
A) move quickly
B) download slowly
C) don't have e-mail
D) don't have toll-free numbers
8. A niche can be defined in many ways, including: ---------.
A) by geography.
B) by customer profile.
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C) by product.
D) All of the above
9. ________ is a tool that measures a Web site's ability to attract customers, generate
sales, and keep customers coming back, help entrepreneurs know what works—and
what doesn't—on the Web.
A) A counter B) Web analytics C) A Web designer D) A server application
10. Which one of the following is not a basic Web analytic?
A) Time spent on site
B) Sales revenue generated
C) Number of items sold

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D) Which products are selling best (and which are not)
11. ________ is a statement explaining the nature of the information a company collects
online, what it does with that information, and the recourse customers have if they

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believe the company is misusing the information.

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A) employment manual
B) online manual
C) privacy policy

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D) online policy

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12. What software scans computer drives for viruses and nasty programs?
A) Virus detection

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B) Firewall
C) Server application
D) Detention software

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13. Reasons for leaving a Web site without purchasing are:
A) having a phone number when encountering problems.
B) insufficient product information.

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C) having to check back to view items in the shopping cart.
D) for security purposes, multiple steps are necessary to get to the check out page.
14. Which of the following is correct?
A) Make it easy for customers to change the contents of their shopping carts.
B) Give customers the option of calling to resolve problems they encounter during
checkout.
C) Make it easy for customers to pay for their online purchases.
D) All of the above
15. Most common mistakes that entrepreneurs make once they finally decide to go
online are:
A) they believe they have to have a "perfect" site before they can launch it.
B) few businesses get their sites "right" the first time.
C) in fact, the most successful e-commerce sites are constantly changing, removing what
does not work and adding new features to see what does.
D) All of the above
16. Paid listings also are called:
A) pay for placement.
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B) pay per click.
C) pay for performance ads.
D) All of the above
True or False
1. Some of the most common reasons small or mid-sized companies take their business
to the Web are to keep up with the customers and to reach global markets. True

2. Creating a meaningful presence on the Web requires an ongoing investment of

resources—time, money, energy, and talent. True

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3. Measuring the success of its Web-based sales effort is essential to remaining relevant
to customers whose tastes, needs, and preferences are always changing. True

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4. It is not necessary for entrepreneurs with both physical and virtual stores to promote

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their Web sites at every opportunity. False

5. It is not necessary for companies that collect information from their online customers

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to safeguard their customers' privacy. False

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6. When launching an e-commerce, the most important part of any e-commerce effort is
technology. False (before)

7. Research indicates that for online merchants, customer service is not as important on

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the Web as it is in traditional brick-and-mortar stores. False (retail )

8. Web-based entrepreneurs often discover that the greatest challenge their businesses

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face is attracting customers on the Web and not necessarily creating a workable order
fulfillment strategy. False

9. It really is not necessary to put the company's Web address on everything a company
publishes since the company's name is listed on all search engines. False

10. The most common problem with online credit card transaction is chargebacks, online
transactions that customers dispute. True

11. The key to promoting a Web site is networking, building relationships with other
companies, customers, trade associations, on-line directories, and other Web sites your
company's customers visit. True

12. E-Commerce is creating a new economy, one that is connecting producers, sellers,
and customers via technology in ways that have never been possible before. True

20 page
 Essay Question
Chapter 1 What can an entrepreneur do to avoid the
Briefly outline the key characteristics of a failure of his/her company? Discuss at least
typical entrepreneur. six actions they can take.
Answer: Entrepreneurs have some common Answer: There are several general tactics
characteristics, including a desire for small business owners can employ to avoid
responsibility, a preference for moderate risk, failure. Entrepreneurs should know their
confidence in their ability to succeed, desire business in depth, develop a solid business
for immediate feedback, a high energy level, plan, manage financial resources effectively,
a future orientation, skill at organizing, and a understand financial statements, learn to

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value of achievement over money. In a manage people effectively, set the business
phrase, they are high achievers. apart from the competition, and keep in
tune with themselves.

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Identify and explain the advantages and the Chapter 2

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disadvantages of small business ownership.
Answer: Driven by these personal What is the difference between creativity
and innovation?

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characteristics, entrepreneurs establish and
manage small businesses to gain control over Answer: Creativity is the ability to develop

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their lives, become self-fulfilled, reap new ideas and to discover new ways of
unlimited profits, contribute to society, and looking at problems and opportunities.
Innovation is the ability to apply creative

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do what they enjoy doing. Small business
ownership has some potential drawbacks. solutions to those problems and
There are no guarantees that the business opportunities to enhance or to enrich

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will make a profit or even survive. The time people's lives. In short, creativity is thinking
and energy required to manage a new new things and innovation is doing new
business may have dire effects on the owner things.

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and family members. What factors enable small business
innovation?
What are the primary causes of small ∙ Passion
business failure? ∙ Customer connection
Answer: Because they are building businesses ∙ Agility and adaptation
in an environment filled with uncertainty and ∙ Experimentation and improvisation
shaped by rapid change, entrepreneurs ∙ Resource limitations
recognize that failure is likely to be a part of ∙ Information sharing and collaboration
their lives; yet, they are not paralyzed by that What are the steps in the creative process?
fear. Successful entrepreneurs have the ∙ Preparation
attitude that failures are simply stepping ∙ Investigation
stones along the path to success. ∙ Transformation
∙ Incubation
∙Illumination
∙ Verification
∙ Implementation
21 page
 Essay Question
When is innovation revolutionary and when What is the difference between creativity
is it evolutionary? and innovation?
Answer: Sometimes innovation is Answer: Creativity is the ability to develop
revolutionary, creating market-changing, new ideas and to discover new ways of
disruptive breakthroughs that are the result looking at problems and opportunities.
of generating something from nothing. More Innovation is the ability to apply creative
often, innovation is evolutionary, developing solutions to those problems and
market-sustaining ideas that elaborate on opportunities to enhance or to enrich
existing products, processes, and services people's lives. In short, creativity is thinking

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that result from putting old things together new things and innovation is doing new
in new ways or from taking something away things.
to create something simpler or better. Explain the benefits of franchising to the

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What are the barriers to creativity? franchisee.

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∙ Searching for the one "right" answer Answer: The franchisor has the benefits of
∙ Focusing on being "logical" expanding his or her business on limited

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∙ Blindly following the rules capital and growing without developing key
managers internally. The franchisee also

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∙ Constantly being practical
∙ Viewing laughter and play as frivolous receives many key benefits: management
∙ Becoming overly specialized training and counseling; customer appeal of

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∙ Avoiding ambiguity a brand name; standardized quality of goods
∙ Fearing looking foolish and services, national advertising programs,
financial assistance, proven products and

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∙ Fearing mistakes and failure
∙ Believing that "I'm not creative" business formats, centralized buying power,
Chapter 3 territorial protection, and a greater chance
for success.

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Franchising is an important part of the U.S.
Although franchising is the fastest growing
economy. Briefly explain its importance,
segment of small business, it has
define franchising, and identify the three
drawbacks. Name and explain at least five
basic types of franchises.
drawbacks to franchising from the
Answer: Through franchised businesses,
franchisee's perspective.
consumers can buy nearly every good
Answer: Potential franchisees should be
orservice imaginable—from singing telegrams
aware of the disadvantages involved in
and computer training to tax services and
buying a franchise: franchise fees and profit
waste-eating microbes. There are three types
sharing, strict adherence to standardized
of franchising: trade name franchising, where
operations, restrictions on purchasing,
the franchisee purchases only the right to use
limited product lines, possible ineffective
a brand name; product distribution
training programs, and less freedom.
franchising, which involves a license to sell
specific products under a brand name; and
pure franchising, which provides a franchisee
with a complete business system.
22 page
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