Chapter 3

Strategic Management and The Entrepreneur

Multiple Choice Questions:

1.

Which of the following is NOT one of the three components of intellectual capital? a. b. c. d. human structural competitor customer

c., Medium, Page 68

2.

__________ involves developing a game plan to guide a company as it strives to accomplish its mission, goals, and objectives to keep it on its desired course. a. Competitive advantage b. Mission c. Strategic management d. Market segmentation

c., Easy, Page 69

3.

The aggregation of factors that sets a company apart from its competitors and gives it a unique position in the market superior to its competition is its: a. mission statement. b. competitive advantage.

c. competitive profile. d. strategic plan.

b., Easy, Page 69

4.

A strategic plan: a. serves as a blueprint for helping business owners to match their companies' strengths and weaknesses to the environment's opportunities and threats. b. is a company's game plan, helping it to accomplish its mission, goals, and objectives. c. is crucial to creating a company's competitive advantage that sets it apart from its competition and gives it a unique position in the market. d. All of the above.

d., Medium, Page 69

5.

Which of the following was NOT identified as a way for the typical small business to establish a competitive advantage? a. Lowering prices b. Providing higher quality goods or services c. Improving customer service d. Doing whatever the company does for its customers better than its competitors

a., Medium, Page 69

6.

____________ are a unique set of capabilities that a company develops in key operational areas (e.g., quality, service, innovation, and others) that allow it to vault past its competitors. a. Core competencies b. Opportunities c. Key success factors d. Mission statements

a., Medium, Page 69

7.

The relationship between core competencies and competitive advantage is best described by which statement? a. Strengthening a company's competitive advantage strengthens its core competencies. b. A company's core competencies become the nucleus of its competitive advantage. c. As a company's core competencies become stronger, its competitive advantage becomes weaker. d. There is no relationship between core competencies and competitive advantage.

b., Difficult, Page 69

8.

Which of the following is NOT a characteristic of the strategic management procedure for a small company? a. It should use a relatively short planning horizon—two years or less, typically. b. It should begin with an extensive objective-setting session. c. It should encourage the participation of employees and even outsiders to improve the reliability and creativity of the resulting plan. d. It should allow for flexibility and not be overly structured.

b., Medium, Page 71

9.

A clearly defined vision helps a company in which of the following ways? a. b. c. d. Provides direction Determines decisions Motivates people All of the above.

d., Easy, Page 71

10.

A small company's mission statement: a. establishes its purpose in writing. b. gives the business and everyone in it a sense of direction. c. defines what the company is, why it exists, and its reason for being. d. All of the above.

d., Easy, Page 72

goals. threat. c. . Strengths.. Weaknesses.11. Opportunities. an entrepreneur should remember to: a. Abt launched a company. b. Difficult. and objectives. Page 75 13. strength. Kevin Abt noticed that people were cooking meals in their homes less often but wanted to avoid the hassle of going out to eat. Opportunities a. They wanted to "eat in" without cooking. omit statements about her values because they may turn some stakeholders off. c. goals. Weaknesses b. keep it short and simple. Easy. c. Threats d. b. Takeout Taxi is the result of a(n): a. and objectives. weakness. Threats. opportunity. d. All of the above. a. Strengths c. d. that delivers restaurant-prepared food to his customers' homes and businesses. When developing a company's mission statement. Page 74 12. Takeout Taxi. while __________ are negative internal factors that inhibit the accomplishment of a firm’s mission.. write the statement alone without anyone else's interference. __________ are positive internal factors that contribute toward accomplishing the company's mission.

and objectives. d. strength. c. threat. _______ are positive external factors a firm could exploit to accomplish its objectives. Strengths c. Medium. Threats. Medium.. c. b. goals. weakness. Page 75 14. Page 76 15. a. Weaknesses. Medium. Opportunities.. Page 76 . Maria Sanchez is the owner of the Main Street Cafe. Strengths. Threats d. To Maria. this new restaurant constitutes a(n): a. A new restaurant opens a few blocks away. Opportunities c.c.. opportunity. Weaknesses b. while ______ are negative external forces that inhibit a firm’s ability to achieve its mission.

c. and customers often compare prices. especially sales representatives and purchasing agents. a. b. b. Your ________ competitors offer the same products and services. Page 80 . d. key success factors. d.. distinctive competencies. b. and deals from these competitors as they shop. Which of the following is an effective method of collecting information about competitors? a. b. Talk to employees. Ask customers and suppliers what competitors are doing. about competitors.. Easy. Attend trade shows and collect competitors' sales literature. d. significant direct indirect All of the above. Every business is characterized by a set of controllable variables that determines the relative success (or lack of it) of market participants called: a. All of the above d. c. Easy. competitive edge. Easy. Page 79 18.. b. opportunities and threats. Page 77 17.16. features. c.

d.. benchmarking their products and services against yours. c. markets. It is an expensive process which only large companies can afford. Which of the following is NOT a recommended method of collecting competitive intelligence? a. b. Medium.. It is a process closely regulated by various federal laws which prohibit doing things like purchasing competitive products and analyzing them. and trade secrets. Difficult. d. b. It can be relatively inexpensive and easy for the small business owner to conduct. Page 80 20. Pay competitors' employees to become informants about their companies' strategies. b. Buy competitors' products or services and assess their quality and features. Attend trade shows and collect competitors' sales literature. Page 80 . Watch for employment ads from competitors to determine the types of workers they are hiring. It is a process that requires expert help and is relatively expensive.19. Which of the following is true about the information-gathering process in competitive analysis? a. c. c.

b. The most important of the key success factors is location. d. consider the following competitive profile matrix: Key Success Factors Quality Service Convenience On-Time Delivery Location TOTAL Your Business Weighted Weight Rating Score .80 1 . Medium.20 4 . Purchasing rival companies' products. Easy. and analyzing them is: a.00 3 . Your company's most vulnerable point against these two competitors is in the area of on-time delivery.15 2 .. Page 81 .30 .. benchmarking.60 4 . c.10 2.30 3. Competitor 2 is the strongest of these three companies. c.40 1 . b.60 Competitor 2 Weighted Rating Score 1 . cataloging. c.40 2 .40 4 . Your company's most serious weakness is its poor quality.40 . Page 80 For Questions 22-26.50 22. c.10 1.15 2 . taking them apart.20 Competitor 1 Weighted Rating Score 2 . considered illegal due to federal regulation.35 4 1.21. called industrial espionage. Which of the following statements is TRUE? a.70 2 . Overall.35 2 .20 2 .20 1.40 .80 . d.

. Impossible to tell from the information given a. Medium. Which company has the worst location? a. Medium. Which company has the strongest competitive position? a. Impossible to tell from the information given b. Competitor 2 d. Your company b. Page 81 24. Page 81 .23.. Competitor 2 d. Competitor 1 c. Your company b. Competitor 1 c.

Quality b. c. Impossible to tell from the information given c. Competitor 1 c. Medium.. Convenience d. In terms of quality. Page 81 27.. Competitor 2 d. which company has the weakest competitive position? a. Page 81 26. Service and on-time delivery c. allows the small business owner to evaluate her firm against competitors on the key success factors for the industry. b. Difficult. d. creates a road map of action for the entrepreneur in order to fulfill her company's mission. Your company b. Medium. more manageable segments. goals. and objectives. permits the small business owner to divide a mass market into smaller. Page 81 . c. A competitive profile matrix: a.25. Location a.. Which key success factor does the entrepreneur who built this table believe is most important? a. identifies a firm's core competencies.

Easy. Goals. Goals. Measurable c. goals a. __________ are the more specific targets for performance. Which of the following is NOT a characteristic of a well-written objective? a. objectives b.. Strategies. goals d. long range attributes the small business seeks to accomplish. yet challenging b. General d. Page 83 . Realistic. Timely c.28. ___________ are the broad. Page 83 29. Medium. a. Objectives. strategies c..

The focal point of any company's strategy. and objectives. Page 83 32. d.. goals. competitive edge d. Page 83 31. strategy c. and objectives. mission b. and objectives d. strategy b. its product or service. Page 83 . Strategy.30.. its strengths and weaknesses. Medium. core competency b. goals. strategy c. b. its customers. a. whatever it may be. its competition. c. __________ define(s) the "means" for achieving the ends. _________ spell(s) out the "ends" an organization is to achieve. Strategy. Easy. mission.. a. should be: a. c. vision a. A _____________ is a road map of the tactics and actions an entrepreneur draws up to fulfill the company's mission. goals. Mission. Medium. Key success factors.

be comprehensive and well integrated. The relationship between a company's mission. and objectives. and objectives and its strategy. d.. and objectives as competitive conditions change. goals. There is no real link between a company's mission. b. c. identify how the firm will accomplish its mission. and objectives and its strategy is best described by which of the following statements? a. Page 83 34. and objectives. A strategy should: a. Developing a company's strategy lays the groundwork for creating its mission. Medium. d. Page 85 . b. goals. Although managers must change a company's mission. c. b. Difficult. focus on establishing for the firm the key success factors in the industry. All of the above. The mission. goals.33. d. goals. goals. and the strategy defines the means for reaching them.. they should avoid adjusting the company's strategy to prevent the company from losing its focus and momentum. and objectives spell out the ends the company wants to achieve. goals.

Medium. c. buyers are sensitive to price changes. Small firms pursuing a cost-leadership strategy have an advantage in reaching customers whose primary purchase criterion is: a. Companies pursuing this strategy concentrate on a niche within the overall market. All of the above. Easy.. a company can reap savings from economies of scale. All of the above. d. c. price. A cost-leadership strategy works well when: a. d. c. Page 85 37. b. competing firms sell the same commodity products.. quality. d. c. Medium. Page 85 36.. b. A cost-leadership strategy is built on differences among market segments. A cost-leadership strategy works best when buyers' primary purchase criterion is price. c. constant innovation. Page 85 . Which of the following statements concerning a cost-leadership strategy is true? a. b.35. customer service. d.

cost-leadership b. An overemphasis on costs to the elimination of other strategies. Difficult. Cost-leadership may have which of the following inherent dangers? a.. An overfocus on the physical characteristics of the product. concentration c. b. The identified niche is not large enough to be profitable. differentiation c.. and approach them with a good or service designed to excel in meeting these needs. a. Page 86 . identify customers' special needs. c. What is chosen to distinguish the product does not boost its performance. focus d. Page 86 39. Easy. The principle behind a _______ strategy is to select one or more market segments. d.38. d.

strategic alliance. differentiation strategy. A differentiation strategy must create the perception of value in the customer's eyes. differentiation b. Page 86 42. A small company following a ________ strategy seeks to build customer loyalty by positioning its goods and services in a unique fashion. Easy. a. concentration strategy. Page 86 . b. c. d.40. All of the above d. cost-leadership c.. niche a. b. A differentiation strategy seeks to build customer loyalty by positioning goods or services in a unique fashion. d. b.. cost-leadership strategy. Page 86 41.. A differentiation strategy is built on a company's core competence. Medium. Medium. and fast delivery times is pursuing a: a. extra customer service. Which of the following statements concerning a differentiation strategy is true? a. A company that offers superior product quality. focus d. c.

d. Medium. giving special attention to their needs and preferences. focus d. Misunderstanding the firm’s true cost drivers. Page 88 . prestige. a.43... from security and comfort to activities and events designed to appeal to her target customers. Focusing only on physical characteristics of a product or service and ignoring important psychological factors. cost-leadership b. differentiation c. a. All of the above. c. Which of the following is a danger in choosing a differentiation strategy? a. Choosing a market that is not large enough to be profitable. b. Shere Vincente operates a travel service that specializes in arranging trips for women. and customer service. image. Difficult. such as status. Vincente is pursuing a _____ strategy. Page 87 44. positioning c.

focus d.45. Small companies must develop strategies that exploit all of the competitive advantages of their size by: a. b. c. Medium. concentrate on competitive information. differentiation c. make as few changes and modifications in the operational plans as possible. c.. Page 91 .. In order for the control process to work. d. cost-leadership b. Easy. a. identify and track key performance indicators.. responding quickly to customers’ needs. Page 89 47. Medium. remaining flexible and willing to change. maintain control and delegate as little authority and responsibility as possible. constantly innovating. b. Page 88 46. d. head-to-head c. c. All of the above. the small firm pursuing a _________ strategy specializes in serving a specific target segment. Rather than attempting to serve the total market. the business owner must: a. d.

designs and manufactures much of its own jewelry while its competitors (many of them large department stores) sell standard. a. Page 92 49. opportunity. Competitor perspective Internal business perspective Innovation and learning perspective d. Page 74 . d. weakness. Which of the following is NOT one of the four important perspectives a balanced scorecard should look at a business from? a. Medium.. Financial perspective a. a small jewelry store with three locations. As a result. b. "off-the-shelf" jewelry. c. threat.. Skatell's. b. c. strength.48. Skatell's reputation for selling unique and custom-designed jewelry is a(n): a. Difficult. many customers see Skatell's as the place to go for unique pieces of jewelry.

b. the business environment has become more turbulent and challenging to business owners. c.. Easy. True.50. differentiation. Skatell's business strategy would best be described as: a. and increased competition. generic. Page 68 52. structural. The three components of intellectual capital are human. One of the biggest changes entrepreneurs face is the shift in the economy from a base of financial to intellectual capital. globalization. d. low-cost. and customer. True. Page 68 53. Page 86 True/False Questions: 51. True. Refer to the previous question. focus. Page 68 . b. With the growth of the World Wide Web. Medium. Medium. Medium.

Medium. Small companies' core competencies are often the result of benefits such as agility. smaller customer bases and more limited geographic areas give small companies a natural advantage over large businesses when preparing a strategic plan. and innovative ability—all of which are size advantages that allow them to do things that their larger competitors cannot. superior service. The most effective way for a small business to establish a competitive advantage is by offering lower prices. Narrower product lines. it is not essential to managing a small company successfully because of its limited resources. speed. True. True. Easy. Page 69 57. Medium. Page 68 55. False. Page 69 56. Although developing a strategic plan is important for large companies. Page 70 . closeness to customers. Easy. False.54.

The mission statement addresses the first question of any business venture: "What business am I in? . The most effective way to communicate the values of a company to everyone it touches is to formulate an effective mission statement. Medium. Page 72 63. Page 71 61. The ideal strategic planning procedure for a small company should be formal and highly structured. The ideal strategic planning process for a small company should start with setting objectives. Page 71 62. Easy. Ideally. False. strategic planning is not an outcome but an ongoing process. Page 71 60. True. False. Medium.58. Medium. True. Page 70 59. Medium. Large companies have a natural advantage over small firms when it comes to preparing a strategic plan. False.

True. goals. Conducting a SWOT analysis for her own business and for her key competitors allows an entrepreneur to gain a competitive edge by matching her company's strengths against her competitors' weaknesses. Page 72 65. True. Easy. and objectives. True. Easy. Medium. Page 74 .True. and its reason for being. Page 74 68. Page 74 66. Page 72 64. As business and competitive conditions change. why it exists. Medium. A company's mission statement defines what it stands for. Easy. Easy. True. False. Strengths are positive internal factors that contribute towards accomplishing the company's mission. Page 74 67. A company's mission statement should be lengthy and use fancy jargon to impress outsiders. so should a small company's mission statement.

Threats are negative external forces that inhibit a company's ability to achieve its mission. and objectives. True. A firm's strategy must focus on establishing for the firm the key success factors the entrepreneur has identified for the industry. Medium. Page 75 71. False. To be effective. Easy. goals. Page 76 73. Medium. “Big Box Retailers” present an opportunity for many small business owners. Medium. Page 75 72. True. the small business owner should limit strategic analysis to only the two or three most significant opportunities facing the firm. True. After a company's strengths and weaknesses are assessed. Easy. goals. . and objectives. Page 75 70. Page 76 74. False.69. the strategic planning process should identify opportunities and threats facing the company and should isolate the key factors for success in business. Weaknesses are negative external forces that inhibit the firm's ability to achieve its mission.

Page 80 78. Significant competitors are those that offer the same products and services your company offers. buying their products to assess their quality. Conducting successful competitive intelligence on rivals' strategies and actions may include researching their websites. True. and other industry contacts. Medium. and deals from these competitors as they shop. Page 80 . True. Page 80 76. Easy. Easy. features. A small business owner can collect a great deal of information about competitors through a number of low-cost competitive intelligence methods. True. False. Medium. Experts estimate that 70 to 90 percent of the competitive information a company needs already resides with employees who collect it in their daily dealings with suppliers. Page 77 75. and watching for employment ads to determine the type of employees they are hiring.True. Difficult. Page 80 77. and customers often compare prices. customers.

True. It is unwise for entrepreneurs to monitor competitors' strategies and actions because such activities require them to engage in illegal or unethical behavior. Medium. One of the goals of competitive analysis is to improve a firm's reaction time to competitor's actions. Medium. True. Page 80 82.79. Medium. A competitor analysis should include an analysis of direct competitors as well as significant and indirect competitors. Page 80 83. True. Page 81 84. False. "Improving the company's cash flow" is a good example of an effective objective. Page 80 81. . Page 80 80. Medium. Performing competitive intelligence on rivals' strategies and actions does NOT mean that entrepreneurs must engage in unethical or illegal espionage activities. True. A competitive profile matrix analyzes how well a company and its rivals match the key success factors in the industry. Medium.

Page 83 89. Page 83 86. . True. Page 83 85. Page 83 87. True. Difficult. Page 83 88. Easy. True. Medium. False. Goals and objectives provide targets to aim for and a basis for evaluating a company's performance. helps managers to create and maintain a high motivation level. Objectives should be as general as possible to permit flexibility in the business. The strategic planning process works best when employees are actively involved with managers in setting company goals and objectives. "Increasing our market share from 8 percent to 10 percent by the end of the current fiscal year" is a good example of an effective objective. Easy. Setting seemingly impossible objectives. those outside of the likely reach of employees.False. Medium.

False. long-range attributes that a business seeks to accomplish. Medium. A company pursuing a cost-leadership strategy strives to be the lowest-cost producer relative to its competitors in the industry. True. A strategy is a road map of action for fulfilling a firm's mission. True. and objectives in order to have appropriate targets at which to aim her strategy. Easy. and objectives. Medium. False. Page 83 94. Easy. A company's strategy spells out the ends the business wants to achieve. and its mission. goals. Page 83 91. Before an entrepreneur can build a successful strategy. goals. Page 85 . she must establish a clear mission. Goals are the broad. Page 83 90. objectives are more specific targets of performance. True. goals. Medium. Page 83 92. Easy. True. and objectives define the means for reaching them. Page 83 93.

a differentiation strategy must create the perception of value in the customer's eyes. Page 85 96. Small firms pursuing a cost-leadership strategy have an advantage in reaching customers whose primary purchase criterion is high quality. Page 86 . False. Medium. Easy. To be successful.95. False. The best way to build a cost-leadership competitive advantage is to focus entirely on manufacturing costs. True. Page 85 97. Page 85 98. True. One key to building a successful differentiation strategy is to be better than competitors at some characteristic that customers value. Page 86 99. A danger of cost-leadership is that a company may misunderstand what processes actually drive its true costs. Medium. True. Medium. Easy.

True. True. A small business following a focus strategy attempts to serve its narrow target markets more effectively and efficiently than competitors trying to appeal to the broad market. Easy. Page 86 102. Easy. Medium. . One danger in choosing a differentiation strategy is trying to differentiate on the basis of something that the customer does not perceive as valuable. True. Page 86 103. Page 87 104. The key to a successful differentiation strategy is to build it on a core competency. Page 86 101. A focus strategy recognizes that not all markets are homogenous. something the company is uniquely good at doing in comparison to its competitors. Page 88 105. True. The focal point of the entire strategic plan and the competitive strategy chosen should be the customer. Medium.100. Medium. A differentiation strategy frequently allows the company the opportunity to charge a higher price for its products or services. True.

Medium. Medium. comprehensive picture of the company’s total performance. Page 91 108. innovation and learning. False. Page 88 106.True. some companies are developing balanced score cards. A balanced scorecard should look at a business from four important perspectives: competitor. Page 91 . Focus strategies build on differences among market segments. True. To evaluate the effectiveness of their strategies. True. Page 91 110. When creating a balanced scorecard for his or her company. Page 88 107. Page 91 109. Medium. a set of measurements unique to a company that includes both financial and operational measures and gives managers a quick. The secret to good control is identifying and tracking key performance indicators. Difficult. True. True. Medium. internal. Medium. and financial. an entrepreneur should establish goals for each critical indicator of company performance and create meaningful measures for each one.

Assume that you are a consultant to a small independent hardware store in a town where a retail giant such as Wal-Mart. mission. What advice would you offer the owner concerning the hardware store's strategy? Explain. but at lower prices.Essay Questions: 111. The typical small business has fewer product lines. a better-defined customer base and a specific geographical area. Through the strategic management process. Page 69 112. To compete successfully against a larger competitor. goals and objectives and to keep it from straying off its desired course. Page 69 113. the small business owner must develop a true competitive advantage and utilize those core competencies that set the small business apart from the giant conglomerates like Wal-Mart. K-mart or Target is about to open. What advice would you offer an entrepreneur on how to create a mission statement for his or her company? . The large retailer sells many of the same items the small hardware store sells. What is strategic management? What role does a strategic plan play in a small company? Strategic management involves developing a game plan to guide a company as it strives to accomplish its vision. Valuable information can be obtained through close customer contacts and a more flexible approach to meeting customer needs. a concise plan could be developed. It gives owners a blueprint for matching their companies’ strengths and weaknesses to the opportunities and threats in the environment.

use it to lay ethical foundation for company.Tips for writing a powerful mission statement include: Keep it short Keep it simple Get everyone in the company involved Keep it current Reflect your values and beliefs Reflect concern for future Keep tone positive and upbeat. make sure it’s appropriate for company culture. . Look at other companies’ mission statements. opportunities. goals and objectives (ex) special skills or knowledge positive public image experienced sales force Weaknesses are negative internal factors that inhibit the accomplishment of a company’s mission. goals and objectives. Strengths are positive internal factors that a company can use to accomplish its mission. Use it. Page 72 114. weaknesses. Define each of the following terms and give an example of each: strengths. and threats.

Other shoe stores would be direct competitors. but their . Indirect competitors offer the same or similar products or services only in a small number of areas. features. Discuss the three different types of competition you might face and give examples of each. goals and objectives (ex) new competitors adverse legislation economic recession Page 74 115. (ex) proprietary technology emergence of potentially new target market(s) lower interest rates Threats are negative external forces that inhibit a company’s ability to achieve its mission. Significant competitors offer some of the same products and services. there is competition with them in several key areas. and deals from these competitors as they shop. Although their product or service lines may be somewhat different. goals and objectives. Department stores and athletic stores would be examples of significant competitors. Direct competitors offer the same products and services. Assume you own a small shoe store. and customers often compare prices.(ex) lack of capital shortage of skilled labor inferior location Opportunities are positive external options that a firm can exploit to accomplish its mission.

target customers seldom overlap yours. Assume you own a small print shop. A recent survey identified the greatest small business challenge as competition. Specific techniques you might use include: Reading industry trade publications Asking customers and suppliers Talking to employees Attending trade shows Buying competitors products (benchmarking) Obtaining credit reports Checking library resources Using World Wide Web Visiting competing businesses Watching for employment ads from competitors Conducting patent searches for patents filed by competitors Page 80 . Other studies suggest that keeping tabs on rivals’ movements through competitive intelligence programs is vital to strategic activity and survival. Page 79 116. Discount stores and thrift stores may be examples of indirect competitors. Why is it important for you to monitor your competitors' activities? Describe at least five techniques you might use to monitor competitors' strategies and actions ethically and inexpensively.

Focus: select one or more customer(s)/market(s) to create a niche.117. and focus. its benefits. . Disadvantage is trying to differentiate on the basis of something that does not boost performance or lower cost. What is strategy? Describe the three basic strategies small companies can choose from: costleadership. and the power to set industry’s floor price and economies of scale are available. differentiation. Disadvantage is if cost drivers are unknown or other strategies are overlooked. Best when creating real value for customer by differentiation or low cost in a narrow target segment. Cost leadership: strives to be the lowest cost producer. Disadvantages include not being able to capture enough of a market share to be profitable. Best when primary purchase criterion is price. Best when differentiation is in the form of a “true benefit” to the customer. It is a master plan that covers all of the major organizational parts and ties them together. Explain the conditions under which each works. Strategy is a road map of the actions an entrepreneur draws up to a company’s missions. and its pitfalls. goals and objectives. Differentiation: seeks to build customer loyalty by positioning its product/service in a unique different fashion.

absolute product reliability. Discuss some of the methods you might select to allow you to successfully compete against the many large retailers that are nearby. and interests. this small business owner will probably have a greater chance of success utilizing a focus and/or differentiation strategy. He might use a focus strategy by concentrating on a specific market segment. small business owners will not be able to select a cost leadership strategy to meet the larger competitors who have a size advantage over them. and extensive product knowledge. In most cases.Page 83 118. identifying those consumers’ special needs. wants. complete product lines. and interests. instantaneous parts availability. He might also offer on-site repair of camera equipment. he may offer superior customer service. special product features. He might use a differentiation strategy that would seek to build customer loyalty by positioning his goods and services in a unique or different way than the competition. supreme product quality. Therefore. wants. For example. and approaching them with a mix of product offerings that excel in meeting those needs. Assume you own a small camera shop that sells and repairs cameras and equipment. Page 85 .

what is it? A competitive advantage is an aggregation of factors that sets a company apart from its competitors and gives it a unique position in the market. In an effort to increase sales. What is a competitive advantage? Does Cherry Lane have one? If so.” she provided what she thought was excellent customer service and implemented the idea. No business can be everything to everyone. alongside the freeway in the center of all the other car dealerships. It is located adjacent to the city’s baseball stadium. Developing a strategic plan allows the small business to differentiate itself from other companies -. Ed and Yolanda are working on a new marketing strategy that they believe should be quite different from the “shotgun” approach they had been using over the last few months. Although Cherry Lane has significant foot traffic. and in an effort to provide something for “the cost conscious buyer. Cherry Lane has an advantage over regular car dealerships because they are well suited to concentrate on the collectible car enthusiast niche in their marketplace.a common pitfall for many small firms. . most people never make offers to buy. Questions: 119. The price is further reduced by 10% if a particular car is not sold within the first 30 days. One of the first customers convinced Yolanda that this was the only fair thing to do.Chapter 3 Strategic Management and The Entrepreneur Mini-Case Case 3-1: Finding a Competitive Advantage Copreneurs Ed and Yolanda recently opened a vintage used car lot called Cherry Lane. They sell antique and collectible cars on consignment for the owners at a fee of 30 percent of the selling price. Ed and Yolanda feel Cherry Lane has an ideal location.

it is an ongoing process that an entrepreneur will repeat. what steps should they take? Step 1: Develop a clear vision and translate it into a meaningful mission statement. The strategic planning process does not end with these ten steps.120. rather. Step 6: Create company goals and objectives. Step 5: Analyze the competition. Step 3: Scan the environment for significant opportunities and threats facing the business. Step 7: Formulate strategic options and select the appropriate strategies. As Ed and Yolanda begin the strategic planning process. Step 9: Establish accurate controls.. Step 2: Assess the company's strengths and weaknesses. Step 8: Translate strategic plans into action plans. Step 4: Identify the key factors for success in the business. .

Considering the three basic small business strategies identified in your textbook.121. Lowering prices with this special target market is not as important creating the perception of value in the customers' eyes. Rather than attempting to serve the total market. Some students may identify the appropriate strategy as Differentiation. the other car dealerships are not direct competitors. the focusing firm specializes in serving a specific target segment or niche. nor is their market the same. which one would work best for Cherry Lane? Why? A Cost Leadership strategy would not complement the higher price image that these collectible cars usually have. The Focus strategy could be used to more successfully position Cherry Lane with its ability to meet the needs of a special customer base-collectible car buffs. however. .

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