Tb05

CHAPTER 5: ENTREPRENEURSHIP
Test Correlation Table Question Types/Level of Difficulty

LEARNING OBJECTIVES Easy Moderate Difficult

1. Explain the role of TF 9, 10, 13 1, 2, 3, 4, 5, 7, 8, 11, 6
entrepreneurs and how external 12
factors impact their ventures.
MC 3, 6, 10 2, 4, 7, 8, 11, 12, 15 1, 5, 9, 13, 14

ES 2 1 —

2. Describe the personal attributes TF 16, 18, 21 14, 17, 20, 22, 23, 15, 19, 24, 25
that contribute to entrepreneurs’ 26
success.
MC 21, 24, 30, 32, 17, 18, 19, 20, 26, 16, 23, 25, 28, 31,
45 27, 29, 34, 35, 38, 33, 36, 37, 39, 42
41, 43, 46

ES 6 — 3, 4, 5, 7

3. Outline the planning essentials TF 30, 33, 37, 43, 29, 31, 34, 38, 41, 27, 28, 32, 35, 36,
for potential entrepreneurs. 46 44, 45, 47, 48, 49 39, 40, 42

MC 51, 55, 56, 58, 47, 49, 50, 53, 54, 48, 52, 68, 72, 73,
61, 64, 65, 70, 57, 59, 60, 62, 63, 78
77 66, 67, 69, 71, 74,
75, 76

ES — 8 9

4. State the role of intrapreneurs TF 52, 53 50, 51, 54, 55, 56 57
and how organizations can foster
intraprenuership.
MC 79, 81, 84, 86, 80, 83, 85 82, 87, 88
89

ES — 10, 11 —

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True/False Questions
Learning Objective 1

1. Despite the number of women in business, the proportion of new business start-ups
involving female entrepreneurs has declined in recent years.

ANSWER: F, Knowledge, Moderate, p. 127

Rates of entrepreneurship ebb and flow with environmental conditions. Rapid
2. technological change tends to stimulate entrepreneurship.

ANSWER: T, Knowledge, Moderate, pp. 127–128

3. Entrepreneurship has been rapidly increasing with the growth of business throughout the
past century.

ANSWER: F, Knowledge, Moderate, pp. 127–128

4. Entrepreneurship may involve modifications on what other people are already doing
rather than introducing something totally new.

ANSWER: T, Knowledge, Moderate, p. 127

5. An incubator organization applies to organizations that inhibit entrepreneurial activity.


6. A small-business owner is anyone who owns a major equity stake in a company with
fewer than 100 employees.

ANSWER: F, Knowledge, Difficult, p. 128

7. Entrepreneurs succeed primarily because they invent new products or services.


8. Entrepreneurs and small-business owners are essentially the same.


9. Businesses with fewer than 500 employees now furnish most of the employment growth
in America.

ANSWER: T, Knowledge, Easy, p. 129

10. American entrepreneurs have the additional burden of dealing with governmental
restrictions applied by the SBA.

ANSWER: F, Knowledge, Easy, p. 128

11. Globalization has caused many entrepreneurs to seek exciting and untapped

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opportunities in socialistic or communistic countries.

ANSWER: F, Application, Moderate, p. 127

12. Entrepreneurial families tend to successfully pass on their businesses to multiple
generations.


13. Successful family businesses have usually failed by the third generation of ownership.



14. When today’s most successful entrepreneurs were asked to explain why they started
their own companies, a majority said that making money was the reason.


15. About 50 percent of the U.S. population is characterized by a predominant need to
achieve.


16. High achievers set moderately difficult goals, take responsibility for achieving those
goals, and want immediate feedback on their performance.


17. Entrepreneurial activity capitalizes on the sacrifices of other people.

ANSWER: F, Knowledge, Moderate, pp. 130–131

18. Entrepreneurs are born and not made.


19. A need for power is consistently strong in successful entrepreneurs.


20. A need for achievement, a desire for independence, and self-confidence are personal
attributes of most successful entrepreneurs.


21. A key personal attribute of successful entrepreneurs is the ability to be self-sacrificing.

ANSWER: T, Knowledge, Easy, pp. 130–131

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22. Njuguna Mwangi has always wanted to start her own company. Her friends and family
are constantly telling her that she would be a great success because of her desire for
excellence and her desire to succeed in competitive situations. Mwangi could be
described as having a high need for achievement.

ANSWER: T, Application, Moderate, p. 129

23. Entrepreneurs are usually very creative thinkers who are not necessarily competent in
their technical skills.


24. Stubbornness as a child predicts entrepreneurial failure due to lack of flexibility.

ANSWER: F, Application, Difficult, p. 135

25. A majority of all successful entrepreneurs act as their own CEOs, needing no help to
manage their operations.


26. It is not possible to predict your likely success as an entrepreneur.



27. “An insufficient business plan is worse than no plan at all,” says Dave Ferkinhoff,
Founder, Eastside Glass Company in Minnesota.


28. Successful entrepreneurs usually spend less time planning than unsuccessful
entrepreneurs due to an ability to think quickly.


29. Entrepreneurs are people who are realistic in their business plans and not to
exaggerate.


30. A business plan deals with the entrepreneur’s basic idea.


31. When buying a business, prospective entrepreneurs should ask, “Will the seller become a
competitor?”


32. Barnes & Noble is America’s largest bookseller, also owning B. Dalton.

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ANSWER: T, Knowledge, Difficult, p. 138

33. Due to technology and the Internet, proximity to suppliers is no longer an essential
component of new venture business planning.


34. According to the text, McDonald’s, Domino’s Pizza, and Jiffy Lube are all franchises.


35. The entrepreneur's natural bias toward quick action tends to increase the probability of
failure.


36. “Paralysis by analysis” is not part of the principle of affordable loss.


37. Funding through venture capital is an excellent way to raise money without the high
returns on investment that bankers expect.


38. A venture capitalist is someone in an existing organization that turns new ideas into
profitable realities.


39. Evelyn Estrada is starting her own business. At present, she is working to calculate a
month-by-month projection of expected expenses for the first three years of the company.
In other words, Estrada is developing a balance sheet.

ANSWER: F, Application, Difficult, p. 139

40. Generally, venture capitalists expect their investments to reap returns of 50 to 60 percent
annually.


41. An “angel” is a private individual who invests directly in firms and receives an equity stake
in return.


42. A business “angel” probably makes more stringent demands than a venture capitalist on
the actions of an entrepreneur. less

ANSWER: F, Knowledge, Difficult, pp. 139–140

43. Now that Leonard Faulkner has received money from financial backers, he should
continue furnishing his business plans to them in the future.

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44. Small businesses create 31% of total American export sales.


45. During the past 10 years, export sales by small business have declined because of
strong name-brand global competitors.


46. All family-owned businesses have a certain level of conflict that arises from their unique
structure.


47. For most family businesses to succeed in the long run, they must first draw up a legal
agreement on disposing of the business.


48. It is not a good idea to make jobs in family businesses too narrowly defined.


49. Entrepreneurs can make better decisions without the burden of answering to a board of
directors, compared to their more structured competitors.



50. An intrapreneur is someone who starts a fast-growth business.


51. CNN and NBC have created environments that have encouraged intrapreneurial activity.


52. Matt Granger enjoys a reputation in his company for being someone who can
successfully turn new ideas into profitable realities. Matt could be described as an
intrapreneur.

ANSWER: T, Application, Easy, p. 143

53. Decision-making authority in an intrapreneurial organization is often moved all the way
down to first-line managers.


54. Intrapreneurship should stop short of inciting an all-out revolution in an organization’s
practices.

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55. Islands of intrapreneurial activity within an organization are often referred to as
skunkworks.


56. “Corporate Entrepreneurship” is a contradiction in terms. Entrepreneurship is seldom if
ever promoted in corporations because of its potential damage to the organizational
structure.


57. Organizations that redirect themselves through innovation are fostering intrapreneurial
activity.


Multiple Choice Questions

Preview
1. According to the Preview reading, what did the owner of Carmin Industries learn about
entrepreneurship from the Marine Corps?
a. Opportunities exist for the few, the proud.
b. Depend upon yourself first.
c. Don’t think twice about doing things that have not been done before.
d. Imitation is the sincerest form of flattery.

ANSWER: C, Knowledge, Difficult, p. 126

2. Which of the following were not important supports to Carolyn Minerich in establishing
Carmin Industries?
a. professional advice from her husband
b. substantial loans from her parents
c. the Jacksonville Small Business Development Center
d. Compass Bank

ANSWER: B, Knowledge, Moderate, p. 126

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Entrepreneurs and External Factors
3. A(n) __________ is someone who manages resources in order to create something new
—a new business, a new product or service, or even a new market.
a. stakeholder
b. financial speculator
c. venture capitalist
d. entrepreneur

ANSWER: D, Knowledge, Easy, p. 126

4. What differentiates highly successful entrepreneurs from less successful entrepreneurs?
a. They offer a higher quality product or service.
b. They make small modifications to what others are already doing.
c. They are both innovator and decision maker.
d. All of the above differentiate the successful entrepreneurs from the unsuccessful
ones.

ANSWER: D, Knowledge, Moderate, p. 127

5. Burton Snowboards is __________ HeadBlade because __________.
a. different from; HeadBlade is a new product
b. different from; Burton Snowboards was launched on the Internet
c. similar to; both are sports related
d. similar to; the entrepreneurs are from California

ANSWER: A, Application, Difficult, pp. 126–127

6. A niche market is __________.
a. a high-tech market
b. an underserved market
c. characterized by high barriers to entry
d. an area of limited opportunity

ANSWER: B, Knowledge, Easy, p. 126

7. Jake Burton succeeded with his snowboards by __________.
a. introducing a completely new product line
b. teaming up with the most talented designers
c. improving upon an existing design
d. observing his own kids

ANSWER: C, Knowledge, Moderate, p. 126

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8. Which of the following groups has not experienced an increase the number of
entrepreneurs in recent years?
a. women
b. minorities
c. entrepreneurs in Europe and Asia
d. All of these groups will realize increases.


9. Which of the following factors has not contributed to the rise of entrepreneurship?
a. local chambers of commerce
b. a soft economy that put many people out of work
c. favorable tax rates for local businesses
d. support services that assist growth

ANSWER: B, Knowledge, Difficult, p. 128

10. Organizations designed to accelerate the growth of entrepreneurial companies through
an array of business support resources are referred to as business _______.
a. clans
b. networks
c. matrices
d. incubators


11. How does a business incubator support the development of new businesses?
a. rents space to people wanting to start businesses
b. serves businesses by offering administrative services
c. provides moral support
d. All of the above support the development of new businesses.


12. Ingrid King is a wealthy businesswoman who wants to give something back to the people.
She decides to form an organization that would renovate an old warehouse and subsidize
the opening of small businesses. When a television news reporter publicized what she
was doing, more than ten hopeful entrepreneurs applied for the subsidization. At present,
more than fifteen successful businesses have received help from King. King’s
organization could be described as a(n) __________.
a. skunkwork
b. organic organization
c. network
d. business incubator

ANSWER: D, Application, Moderate, p. 128

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13. It has been found that _______ of family owned businesses survive to the third
generation.
a. 70%
b. 40%
c. 20%
d. 5%


14. Marquita Sadler’s new business has been offered assistance through a business
incubator. At the end of two or three years, which of the following outcomes is not
expected for Marquita’s venture?
a. business failure
b. possible purchase by the incubator operators
c. expansion within the incubator
d. sufficient growth to move out of the incubator

ANSWER: B, Application, Difficult, p. 128

15. Kohler Company is an example of what type of business?
a. plumbing company that went public after 25 years
b. company that improved on the already-invented bathtub
c. family-owned company that exclusively offers plumbing products
d. family-owned company that has diversified



Attributes of Successful Entrepreneurs

16. Today’s most successful entrepreneurs were recently asked to explain why they started
their own companies. What statement below ranked as the number one reason these
entrepreneurs started their own business?
a. work for themselves and control their own lives
b. to make money
c. being laid off from their old job
d. not feeling rewarded in their old job

ANSWER: A, Knowledge, Difficult, p. 129

17. Which of the following is not cited as a frequent motivator for successful entrepreneurs?
a. personal achievement
b. being laid off
c. balance of work and family
d. dislike of large organizations


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18. The many studies of entrepreneurs that have been conducted over the years indicate that
those who succeed have several characteristics in common. Which of the following is not
one of the key characteristics?
a. substantial financial backing
b. desire to be independent
c. willingness to make sacrifices
d. need for achievement


19. Research has found that successful entrepreneurs possess a strong __________ which
sets them apart from a majority of the population.
a. need for achievement
b. need for affiliation
c. ability to tolerate high risk
d. ability to make fast decisions

ANSWER: A, Knowledge, Moderate, p. 129

20. Personal attributes of successful entrepreneurs include all of the following except a
__________.
a. desire for independence
b. need for achievement
c. need for affiliation
d. willingness to self-sacrifice


21. Key attributes needed to be a successful entrepreneur are __________.
a. easy to learn
b. only possessed by those who are born with them
c. difficult to learn, but worth the effort to develop
d. none of the above

ANSWER: C, Knowledge, Easy, p. 131

22. What personal attribute did radio station entrepreneur Catherine Hughes show when she
sold her rare pocket watch to help her business?
a. desire for independence
b. self-sacrifice
c. self-confidence


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23. Which of the following is not included in describing the entrepreneurial need for
achievement?
a. drive for excellence
b. desire for recognition
c. goal attainment
d. want immediate feedback


24. Personal attributes of the entrepreneur include all of the following except __________.
a. self-sacrifice
b. self-confidence
c. independence
d. creativity


25. Regarding the effects of family interactions on entrepreneurs, research suggests that
entrepreneurs tend to have __________.
a. many children
b. high competition between family members
c. not been the first-born
d. had self-employed parents

ANSWER: D, Knowledge, Difficult, p. 131

26. __________ brought out the entrepreneurial spirit of Adrian Lugo who founded LUGO
Construction.
a. Racism
b. Poverty
c. Criminal background
d. Lack of formal education


27. In the early days of Adrian Lugo’s construction career, he received the benefit of good
__________.
a. mentoring
b. governmental support programs
c. self-confidence levels
d. family support and encouragement


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28. Daniel Driesenga’s strategy was to focus his Michigan-based engineering firm on
__________.
a. new products and services
b. sales and marketing professionalism
c. local needs of customers
d. expanding the geographic scope


29. Mary Lloyd is a young woman who wants to own her own business. Part of the reason
she believes that she would be successful is that she has always had a desire for
excellence and succeeding in competitive situations. Mary has a __________.
a. low self-esteem
b. high need for achievement
c. high need for power
d. low need for success

ANSWER: B, Application, Moderate, p. 129

30. A person’s desire either for excellence or to succeed in competitive situations is often
referred to as a person’s _________.
a. need for achievement
b. superego
c. need for power
d. ego

ANSWER: A, Knowledge, Easy, p. 129

31. Research conducted by David McClelland and others indicates that a low percentage of
the U.S. population is characterized by __________.
a. self-sacrifice
b. desire for independence
c. need for achievement
d. entrepreneurship


32. Entrepreneurs are consistently strong with respect to a need for __________.
a. power
b. self-actualization
c. control
d. achievement


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33. Entrepreneurs with strong technical proficiency are aided by a ________ orientation.
a. future
b. bureaucratic
c. desire to change society
d. short term, tactical

ANSWER: A, Application, Difficult, p. 132

34. Which of the following is false concerning the role of self-confidence in entrepreneurship?
a. It has minimal affect on the entrepreneur.
b. It enables the entrepreneur to be optimistic in representing the firm to employees and
customers alike.
c. Because of the risks involved in running an entrepreneurial organization, having an
“upbeat” attitude is essential.
d. All of the above are true statements.


35. Wayne Higgins has started his business and is putting in 13 hour days. When asked why
he is working so hard, he replies that nothing worth having is free. This response
suggests that Wayne has an attribute of ___________.
a. a desire for independence
b. not wanting to work in large organizations
c. a need for power
d. self-sacrifice


36. Carmen Anaya indicated on her entrepreneurial quotient questionnaire that her parents
were first-generation U.S. citizens and that as a child she preferred to be alone. These
factors would have a(n) __________ effect on her score.
a. increase
b. reduction
c. zero
d. not applicable

ANSWER: C, Application, Difficult, p. 135

37. Fundamental to all managerial competencies is the __________.
a. strategic action competency
b. teamwork competency
c. planning and administration competency
d. self-management competency


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38. As a result of unanticipated hardships in the early phases of Driesenga & Associates
business, the founder says today,
a. “Never underestimate the power of the government to interfere in your business.”
b. ”Most of our revenue comes from services we did not offer in the original business
plan.”
c. ”Always treat your customers the way you would like to be treated.”
d. “It’s not what you know but who you know.”


39. A study of CEOs who were winners of awards in the Ernst & Young LLP Entrepreneur of
the Year Program revealed several leading strategic practices they have used to sustain
rapid growth for their companies. Which of the following is not among those identified?
a. Delivering products and services that are perceived as the highest quality to
expanding market segments.
b. Generating new customers that expand revenue by about 30 percent annually.
c. Formulating the strategic early in the life of the firm.
d. Maintaining financial control of the firm.


40. Which of the following was a strategic action employed by Daniel Driesenga who founded
Driesenga & Associates?
a. undercutting the prices of his competitors
b. focusing on customer service
c. seeking investors through the stock markets
d. investing in state-of-the art computer technology


41. Administering a plan for a new business is extremely difficult. In the start-up phase,
which of the following is not considered a primary concern?
a. developing a five-year strategic plan
b. putting the plan in writing
c. surviving when funds are scarce
d. attracting top-notch employees


42. A study of entrepreneurs who had a history of success in the market revealed that a
majority of the top management was organized in teams, with 67 percent of the teams
ranging in size from three to six managers. However, not all of these successful
entrepreneurs used teamwork. What percent of the entrepreneurs acted alone in their
top management role?
a. less than 5 percent
b. 10 percent
c. 20 percent
d. slightly less than 50 percent


43. Most successful entrepreneurs __________ put their business plans in writing. The time

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horizon is relatively __________. As the time frame grows even longer, the plans tend to
become more __________.
a. do; short; general
b. do; long; specific
c. do not; short; specific
d. do not; long; general


44. What is the relationship of the original business plan to long-term goal achievement?
a. You cannot be successful without a detailed business plan.
b. The business plan is a hindrance to creativity.
c. Modify the plan when flexibility is needed.
d. all of the above


45. Entrepreneurs seem to be __________.
a. unwilling to spend the saving of others
b. easily bored
c. concerned about the opinions of other people
d. all of the above


46. Which of the following questions would typically not be asked in a survey predicting if you
have “the right stuff” to succeed as an entrepreneur?
a. Did you enjoy participating in group activities in school?
b. Were you a stubborn child?
c. Are you willing to take risks?
d. All of the above are typical questions.



Planning Essentials for Entrepreneurs
47. An outline of how an enterprise expects to turn ideas into reality is often referred to as a
__________.
a. strategy
b. tactic
c. business plan
d. disclosure statement


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48. Potential investors for a new automated car wash facility want the owners to generate a
step-by-step outline of how the owners will transform the idea of a car wash into a reality.
In other words, the investors want a __________.
a. statement of cash flows
b. sources and uses of funds statement
c. balance sheet
d. business plan

ANSWER: D, Application, Difficult, p. 136

49. All of the following are found in a business plan except __________.
a. milestone schedule component
b. executive summary
c. financial component
d. article of incorporation


50. A(n) __________ is one of the primary components of a business plan.
a. article of incorporation
b. executive summary
c. down payment


51. Business opportunities are often implemented in all of the following ways except
__________.
a. start-up
b. purchase
c. franchise
d. All of the above are ways of classifying business opportunities.

ANSWER: D, Knowledge, Easy, pp. 136–138

52. Which of the following is not a potential disadvantage to buying an existing business?
a. mismanagement
b. undisclosed problems
c. restrictive agreements
d. high costs


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53. As the sole employee of Career Transition, John Nogalski will need to determine his
expected revenue, initial investment, and anticipated competition. Nogalski is an
entrepreneur who is considering his __________ strategy.
a. financial
b. start-up
c. profit and loss
d. affordable loss


54. According to the text, which of the following is not one of the questions a person should
ask when making a decision whether to start or buy a new business?
a. Can I run the company at first as a home-based business?
b. Can I continue working for someone else and put in time on my own business after
hours?
c. Is there a way that I can begin the enterprise in stages or with a limited investment?
d. To what extent can I keep the creation of the new business a secret from my current
employer?


55. A business owner who has purchased the right to market a product, while also receiving
training and operational assistance is involved in a __________.
a. business incubator
b. pyramid scheme
c. franchise
d. umbrella organization


56. All of the following use franchises to market their products except:
a. McDonald’s.
b. Domino’s Pizza.
c. Jiffy Lube.
d. All of the above use franchises to market their products.


57. When deciding what type of business to own, people should do all of the following
except:
a. examine their competencies.
b. buy a franchise first before starting their own business.
c. determine their initial investment.
d. Anticipate expected revenue.


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58. Johnny Wong has entered into a contract to open a new McDonald’s restaurant in his
town because he feels that there is an opportunity to make a lot of money. Johnny will
own the business, but will have to meet strict guidelines set forth by McDonalds in order
to use their name and sell their products. Wong has opened a(n) ____________.
a. lifestyle venture
b. franchise
c. incubator organization

ANSWER: B, Application, Easy, p. 138

59. Latonya Taylor is interested in starting her own Home Health Care business. All of the
following would be excellent sources of information for her except:
a. the Internet.
b. personal contacts.
c. publication: Venturing.
d. All would be excellent sources.


60. Entrepreneurs often make a conscious determination of the level of resources they are
willing to commit to a venture. This is known as __________.
a. strategic resourcing
b. the principle of affordable loss
c. paralysis by analysis
d. an informal business plan


61. Which of the following is not one of the issues to consider in buying an existing business?
a. competition from the previous owner
b. goodwill
c. initial investment
d. All of the above are issues.


62. According to the text, entrepreneurs have a tendency to __________ their income and
__________ their costs.
a. focus on; ignore
b. hide; inflate
c. overestimate; underestimate
d. ignore; lose control of


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63. A new venture should identify anticipated costs of opening the business, and project,
month by month, the expenses that reasonably can be expected for the first one to three
years. This is usually done in the ___________.
a. partnership agreement
b. new-venture plan
c. profit and loss statement
d. prospectus


64. Entrepreneurs can seek funding from all of the following sources except:
a. venture capitalists.
b. financial institutions.
c. family and friends.
d. All of the following are good sources of funds.


65. A __________ is a private individual who invests directly in firms and receives an equity
stake in return.
a. venture capitalists
b. strategist
c. business angel
d. co-operative


66. Thurston Steinbock is a venture capitalist. When he provides funds to a company, he
can expect to __________.
a. wait a number of years for a return on his investment
b. receive federal loan guarantees
c. sell the business at a profit
d. take an active role in management


67. Jerrod Walker is opening a new business and is currently calculating the expenses that
can be expected for each month during the next two years. Walker is developing the
__________.
a. balance sheet
b. stockholder’s report
c. cash flow statement
d. new-venture plan


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68. Several considerations are involved in choosing between domestic and global start-ups.
Which of the following is not a consideration?
a. Are the best human resources dispersed among various countries?
b. Would foreign financing be more suitable?
c. What would make me the most money in the short run so that I can expand in the
long run?
d. Do target customers require a venture to be international?

ANSWER: C, Knowledge, Difficult, pp. 140–141

69. A popular global start-up strategy that now accounts for 31% of foreign sales by
American companies is __________.
a. e-commerce
b. exporting
c. franchising
d. countertrade


70. Karen Langley worked in a family business that was characterized by back-stabbing and
accusations of stealing that ultimately caused a __________.
a. family feud
b. cross fire
c. resignation
d. all of the above


71. The top recommendation for increasing the likelihood of a successful family business is to
__________.
a. draw up a legal agreement on disposing of the business
b. select a board of directors made up of family members to protect family interests
c. settle conflicts as they come up
d. decide who is responsible for what activity

ANSWER: C, Knowledge, Moderate, pp. 141–142

72. Hiring criteria policies established by a family business for employing other family
members should be most concerned with the __________ of the person.
a. conflict potential
b. competence
c. commitment
d. emotional maturity


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73. The development of a legal agreement to govern a family business should address all of
the following issues except __________.
a. specific job descriptions of family members
b. policies for determining salaries, bonuses, and dividends
c. creating a succession plan
d. contingencies for disposing of the business


74. Decisions in a family business must strike a balance between two categories of criteria.
These two categories are referred to as __________ criteria and __________ criteria.
a. emotional; realistic
b. formulation; implementation
c. planning; equity
d. economic; family obligation


75. A board of directors is particularly useful for the family business in its ability to
__________.
a. help secure outside sources of money
b. furnish unbiased advice
c. force the resignation of “problem” family members
d. audit financial statements in a way that is publicly acceptable


76. As a family business owner, an outside board of directors can help you do all of the
following except __________.
a. evaluate your relationship with your banker
b. select the best possible job applicants
c. strategic planning on a long-term basis
d. make specific recommendations on large investments


77. Dennis Gertmenian, who founded Ready Pac Produce, was so busy with the daily
production of his operations that he neglected __________.
a. other key family members
b. environmental concerns
c. long-term planning
d. the outside world

ANSWER: C, Knowledge, Easy, pp. 142 – 143

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78. Ready Pac’s board of directors was able to advise the business owner that his plan to
build a new processing plant in Soledad, CA should be __________.
a. pursued before interest rates changed
b. thrown into the trash can
c. a buy, rather than build strategy

ANSWER: C, Knowledge, Difficult, p. 142–143


The Role of Intrapreneurs

79. Someone in an organization who turns new ideas into profitable realities is known as a(n)
__________.
a. research and development specialist
b. entrapreneur
c. intrapreneur


80. To be a successful intrapreneur, a person must possess an attribute of __________.
a. financial savvy
b. diplomacy
c. a focus on tactical issues
d. eccentricity


81. All of the following are attributes of successful intrapreneurs except:
a. having a dream.
b. ability to lead teams.
c. well-developed strategic action competency.
d. All of the above are attributes of intrapreneurs.


82. Which of the following is not an example of intrapreneurship?
a. Art Fry’s invention of Post-it Notes at 3M.
b. Janice Bryant Howroyd’s ACT*1 Personnel Services.
c. Lou Dobb’s creation of CNNFN.
d. Philip Estridge’s development of the PC at IBM.

ANSWER: B, Application, Difficult, p. 143

132


83. For intrapreneurs to be successful, they must build a team that supports the new idea.
One of the keys to success in team building is to __________.
a. use grand metaphors
b. encourage competitive conflict
c. rely on monetary incentives
d. avoid win–lose conflicts


84. Sabrina Wright works for Zoom Industries. Wright’s manager likes the work that Wright
does, believes she has vision, an ability to build and lead teams, and persistence. Wright
would probably make a good __________.
a. intrapreneur
b. charismatic leader
c. district manager
d. salesperson

ANSWER: A, Application, Easy, p. 143–144

85. When fostering intrapreneurial activity, there should be a(n) __________.
a. commitment from the firm’s senior management
b. threat of punishment for wasting company resources
c. extensive pool of cash to support operations in case new ideas fail
d. matrix design


86. Top managers in firms fostering intrapreneurship need to __________.
a. provide incentives and rewards for risk taking
b. provide a flexible organizational design
c. show commitment for intrapreneurial activities
d. all of the above


87. Islands of intrapreneurial activity within an organization are often referred to as
__________.
a. skunkworks
b. technodes
c. playzones
d. chopshops


133


88. Managers who are trying to stimulate intrapreneurial activity in organizations must meet
all of the following challenges except __________.
a. allowing intrapreneurial activities to flourish as a part of the organization’s normal
day-to-day operations
b. generating ideas that result in products that the organization can market
c. tying rewards to performance of the actual intrapreneurial units
d. All of the challenges above must be met by managers.


89. Russell Bradley is the executive vice president for a large electronics firm. Over time,
Bradley has come to realize that his firm’s push to create new products has led to the
creation of small islands of intrapreneurial activity. These islands are also known as
__________.
a. brainstorming teams
b. magic shops
c. skunkworks
d. serial entrepreneurs

ANSWER: C, Application, Easy, p. 144

Essay Questions


1. Explain what entrepreneurs do and describe how the environment supports their
activities.

Entrepreneurs are people who create new business activity in the economy. If they do
so by starting a new company, entrepreneurs are also small-business owners. Other
entrepreneurs create new business activity within large organizations. Often the reasons
that entrepreneurs give for starting their own companies are to be their own bosses and
have more control over their lives. When they start their companies, the goal of many
entrepreneurs is the business to grow slowly. When their companies grow rapidly for a
sustained period of time, however, they are considered to be more successful. Rapid
technological change, low interest rates, and high immigration rates all stimulate
entrepreneurial activity. Local conditions that meet the needs of entrepreneurs—such as
a good labor force and easy networking—also can stimulate entrepreneurial activity.

Moderate, pp. 126–129

134



2. Describe the personal characteristics that contribute to entrepreneurs’ success.

Personal characteristics of entrepreneurs include the need for achievement, desire for
independence, self-confidence, and willingness to make personal sacrifices. These
characteristics often are developed early in life and seem to be shaped greatly by the
family environment. Having a parent who was an entrepreneur and being involved in
entrepreneurial activities increase the likelihood that a child will become an entrepreneur.
Entrepreneurs usually are technically proficient in areas related to their businesses.
Managerial competencies are as important for entrepreneurs as they are for other
managers. Strategic action, planning and administration, teamwork, and communication
competencies seem to be especially important for entrepreneurs.

Difficult, pp. 129–131

3. No one can predict whether an entrepreneur will be successful in business, but there are
characteristics that entrepreneurs have in common. Northwestern Mutual Life Insurance
Company’s quiz highlighted in the Self-Management Competency “Your Entrepreneurial
Quotient,” identifies several characteristic of entrepreneurs. What are five of these
characteristics?

1. Significant numbers of entrepreneurs are children of first-generation U.S. citizens
2. Successful entrepreneurs were not, as a rule, top achievers in school
3. Entrepreneurs were not enthusiastic about participating in group activities in school
4. As youngsters, entrepreneurs often preferred to be alone
5. Entrepreneurs started a business enterprise during childhood or ran for elected
office
6. Stubbornness as a child seems to translate into determination to do things one’s
own way
7. Willingness to take risks
8. Entrepreneurs pursue different paths, despite the opinion of others
9. A motivation for starting their own enterprise is changing the daily routine
10. They are willing to work “as long as it takes” with little or no sleep to finish a job
11. They complete a project successfully and immediately start another
12. Willingness to use their savings to start a business
13. Willingness to borrow from others
14. Immediately starting another business, even if the first business failed
15. Discipline to put long-term and short-term goals in writing
16. Ability to handle cash flow
17. Entrepreneurial personalities are easily bored
18. Entrepreneurs are optimistic
19. Entrepreneurs pursue different paths, despite the opinion of others

Difficult, p. 135

135


4. Describe how Adrian Lugo used his self-management competency to become successful
in the construction industry.

Adrian Lugo, a Vietnam veteran, encountered racism while being a college student and
then later in his teaching profession. One of his instructors even implied that as a
Hispanic and Native American, he was genetically unsuited to become a teacher. Lugo
graduated cum laude. He loved teaching but experienced almost constant attacks on
his character in ways that were racially motivated. Summer work in construction paid
better and gave him the idea to become his own boss.

Lugo vowed that he would always treat his own employees with respect, as well as
insisting on good treatment for himself and his customers. The quality of his work was
high and he effectively addressed issues of meeting deadlines in order to build a
successful business that has earned a Navy contract.


5. What are four of the personal attributes of an entrepreneur?

1. A need for achievement
2. Desire for independence
3. Capacity for self-sacrifice
4. Self-confident
5. Technically proficient in areas related to their business

Easy, pp. 129–132

6. Explain how entrepreneurs develop and recognize how managerial competencies
contribute to their success.

Personal attributes that characterize entrepreneurs include the need for achievement,
desire for independence, self-confidence, and willingness to make personal sacrifices.
These attributes often are developed early in life and seem to be shaped greatly by the
family environment. Having a parent who was an entrepreneur and being involved in
entrepreneurial activities increase the likelihood that a child will become an entrepreneur.
Among the attributes that characterize successful entrepreneurs are need for
achievement, a desire for independence, self-confidence, and a capacity for self-
sacrifice. Entrepreneurs usually are technically proficient in areas related to their
businesses.

Managerial competencies are as important for entrepreneurs as they are for other
managers. Strategic action, planning and administration, teamwork, and communication
competencies seem to be especially important for entrepreneurs. Although some
entrepreneurs seem to have been born with these attributes, many develop the
attributes over a period of time. The development of new ways of thinking can spur
motivation to succeed.


136



7. Give three of the steps that families should follow when starting a family business.

a. Settle conflicts as they come up
b. Decide who is responsible for what
c. Decide whether the business will employ other family members and, if so, what hiring
criteria will be used
d. Establish a board of advisers composed of outsiders, if possible
e. Develop a legal agreement to deal with succession, divestiture, and compensation


8. Describe three of the factors that favor a global start-up.

a. Human resources that are dispersed among various countries
b. Foreign sources of financing
c. Customers located in several countries
d. Competitors from other countries directly affecting your markets
e. Necessity of selling worldwide in order to generate sufficient revenue
f. Local products that must be changed significantly in order to go into foreign markets



9. What are the organizational characteristics that encourage intrapreneurship?

Intrapreneurship involves turning ideas into marketable products and services. Fostering
intrapreneurship and successfully marketing new ventures require a commitment by
management, flexible organizational structures, competent and talented intrapreneurs,
incentives and rewards for risk taking, and appropriate control systems. To encourage
innovation and prevent formal rules and procedures from interfering with the
development of new ideas, large organizations often set up skunkworks teams. Their
activities are less formalized, and they usually have unique subcultures.


10. Top management can foster an intrapreneurial culture by eliminating obstacles and
providing incentives for intrapreneurship. Organizations that redirect themselves through
innovation have certain characteristics. Name four of the six characteristics companies
that foster intrapreneurial activity exhibit.

a. Commitment from senior management
b. Flexible organization design
c. Autonomy of the venture team
d. Competent and talented people who exhibit entrepreneurial behaviors and attitudes
e. Incentives and rewards for risk taking
f. An appropriately designed control system

Moderate, p. 144

137

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