Arab Academy for Science and Technology

Graduate School of Business

Final Exam
Course Name: Entrepreneurship & Venture Management Lecturer Name: Mohamed Aly

Student name: Hossam Abdelkhalek Exam Duration:3hr

Question-1: choose the right answer (15 Marks)

1) An entrepreneurial "secret" for creating value in the marketplace is:

A) applying creativity and innovation to solve problems.
B) creating new products and services.
C) learning by doing.
D) applying lessons learned from history.

2) The ability to develop new ideas and to discover new ways of looking at problems and opportunities is
called:
A) entrepreneurship.
B) innovation.
C) creativity.
D) creative thinking.

3) Suppose you are a Small Business Development Center counselor and you're looking at the personality
profiles of five potential entrepreneurs. Based on the profiles, which individual has the most desirable
mix of personal characteristics to become a successful entrepreneur?
A) Candidate A: creative, decisive, moderate risk taker
B) Candidate B: seeks recognition, self-starter, strong work ethic
C) Candidate C: visionary, high risk taker, energetic
D) Candidate E: tolerant for ambiguity, seeks recognition, motivated primarily by money

4) An entrepreneur is one who:

A) is willing to attempt to implement a business concept and then give up if it does not meet immediate
expectations.
B) understands the process of developing an idea and does not need to understand what it means to bring
that idea to a viable business concept.
C) knows that the concept they are about to develop will result in a profitable business.
D) creates a new business concept for the purpose of achieving profit and growth by assembling the
necessary resources to capitalize on identified opportunities.

5) The three primary reasons that people become entrepreneurs and start their own firms are to:
A) pursue their own ideas, realize financial rewards, and eliminate risk in their lives
B) do what they were "born" to do, be their own boss, and capture more of the spotlight
C) take big risks, be their own boss, and do what they were "born" to do
D) be their own boss, pursue their own ideas, and realize financial rewards

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6) Investors often cite the ________ as their most important criterion in the decision to fund new
ventures.
A) strength of the industry the new firm is entering
B) strength of the new venture's marketing plan
C) strength of the business idea
D) strength of the entrepreneur

7) Kate Saunders is starting a firm in the fashion industry primarily to pursue financial rewards.
According to Entrepreneurship studies and surveys , starting a business to make a lot of money:
A) often fails to live up to its hype
B) is equally as satisfying as other reasons for starting a business
C) is the number one reason people start their own business
D) is the number two reason that people start their own business, right behind the lack of better career
prospects

8) Entrepreneurs who repeatedly start businesses and grow to a sustainable size before striking out again
are known as ________ entrepreneurs.
A) opportunistic
B) persistent
C) serial
D) classic

9) In a large organization, an individual may be stifled and limited by a wide variety of factors.
However, by owning one's own business, the only limits are one's own creativity, talent, and
determination. In this sense, small business ownership offers the advantage of the:
A) opportunity to reach one's full potential.
B) opportunity to reap unlimited profits.
C) chance to learn from others' mistakes.
D) ability to accumulate certain wealth.

10) The ability to apply creative solutions to problems and opportunities to enhance or to enrich people's
lives is called:
A) entrepreneurship.
B) innovation.
C) creativity.
D) creative thinking.

11) The demographic attributes of successful entrepreneurs are:

A) limited to specific ages, genders, and ethnic backgrounds.
B) uncertain and have not been fully studied or analyzed.
C) are key predictors that determine how long the business will survive.
D) highly diverse relating to age, gender, and ethnicity.

12) All of the following represent barriers to creativity that entrepreneurs impose upon themselves
except:
A) focusing on being too logical.
B) being too practical.
C) blindly following rules.
D) searching for more than one answer.

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13) Which of the following corporate trends have contributed to the growth of entrepreneurship?
A) The acquisition and merging of mega corporations
B) The idea that "small is beautiful" in large companies, resulting in less hierarchy and layers of
management
C) The flood of venture capital being made available to small businesses
D) The downturn in international markets forcing a focus on the domestic market

14) At which stage of the creative process does a spontaneous breakthrough occur, allowing all of the
previous stages to come together to produce the "Eureka factor" or the "light bulb goes on"?
A) Implementation
B) Preparation
C) Illumination
D) Verification

15) The key to effective financial management in a start-up is:

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

Question 2 : TRUE – FALSE ( 5 Marks )

1) Current competitive conditions favor large companies over smaller ones because of their ability to use
their size to achieve efficiency and economies of scale. F

2) Creativity is the ability to apply creative solutions to problems and opportunities to enhance or enrich
people's lives. F

3) 25 years ago , competitive conditions favored small companies , today large companies have the real
competitive advantage . F
4) Innovation is the ability to develop new ideas and to discover new ways of looking at problems and
opportunities. F

5) History is always a reliable predictor of the future of business. F

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Question -3 Case Analysis ( 20 Marks )

In the 1960s, Armancio Ortega was a salesperson in a woman’s clothing store in rural Spain. The thrifty
client base was unwilling to spend on fanciful indulgences. Noticing that an expensive pink bathrobe in the
window of the store created attention and desire but no buyers, Ortega decided to try a novel strategy of
copying coveted fashionable items and selling them at a very low price. He turned his family’s living room
into a workshop and convinced his brother, sister,and fiancée to make inexpensive copies of fashionable
clothes. The strategy worked so well that Ortega founded a manufacturing company in 1963. After twelve
years of patient experimentation and system building, he vertically integrated forward into retailing,
opening his first retail store in the same town as his original employer. Disappointed that his first choice of
name (Zorba, after a character in the film Zorba the Greek) was trademarked, Armancio Ortega
compromised and named his store Zara.

Today, Ortega is the wealthiest person in Spain. He is the majority owner of Inditex, a large and profitable
vertically integrated clothing retailer selling under multiple brand names targeting multiple segments. Zara,
the flagship, accounts for three quarters of the group’s revenue and holds over 600 stores in over 40
countries. The secret of Zara’s success is quick response (QR). Rather than being forecast driven, Zara is
demand led. Zara’s much admired and analyzed supply chain begins in its three design centers (women,
men, and children). These centers turn out new products continuously, not just for each fashion season.
Competitors generate 2,000 to 4,000 new garments a year. Zara generates 11,000, introducing them in a
steady barrage of new styles. Indeed, the time from the designer’s sketch to putting the stock in the stores
is a stunningly short 15 days. In each design center, a staff of stylists (clothes designers) searches for ideas
of what will connect with its clientele based on forecasting not only what customers are buying but also on
what they might want to buy. The ideas can come from anywhere. Teams of trend-spotters travel the world,
seeing what many different types of people are currently wearing and what physical possibilities exist
(fabrics, cuts, accessories, and so forth). Stylists use this input, as well as examining magazines about
fashion, celebrities, entertainment, and lifestyle. They are looking for ideas to copy, such as a dress worn
by singer Victoria Beckham, photographed in a celebrity magazine. Information also comes in from stores
about what is currently selling. Stylists work in teams to use all this information to create prototypes. Each
prototype is reviewed by three teams: stylists, salespeople, and fabric purchasing agents.

All three groups need to agree for a model to launch, beginning the fifteen-day countdown to having the
item in the stores. The objective is to capture the buyer’s imagination in the same way that expensive pink
bathrobe inspired Spanish window shoppers in 1963. But in Zara, the clothes are affordable, sparking
impulse purchase. How? The secret is to avoid the twin costs of holding inventory and marking down
unsold items, which in fashion tend to be critical. Zara, whose stores are largely in Europe, is vertically
integrated backward into production of many clothes and sources the rest largely from makers also located
in Europe. This collocation allows Zara to move much faster than European competitors, who source from
Asian countries to reduce production costs.

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Zara thus incurs higher labor costs, but it controls production costs by the principle of postponement
(converting work-in-process inventory to finished-goods inventory only at the last possible moment). The
key is to order raw fabric early and hold it (because fabric cannot be quickly manufactured) and dye and
finish it closer to the time of sale. Zara and its suppliers operate formidable manufacturing centers that
create the goods and sort them according to their destination city (where Zara will have multiple stores).
While these goods are moving by truck to enormous, modern warehouses, store managers consult personal
digital assistants (PDAs, pocket-sized computers) that display photos of the proposed new merchandise.
Using their sense of their clientele in their part of the city, they quickly reject or accept. Then the
merchandise is rushed by truck or air freight to the accepting store. Why the rush? A major reason is that
Zara stores have virtually no place to store inventory: They must be supplied just in time. Why? The stores
are located in prime, expensive shopping districts, in space that is too valuable to use as a warehouse. In
turn, to keep costs down while selling inexpensive clothes out of prestigious addresses, Zara does no
advertising, counting entirely on word of mouth (WOM). Relying on WOM demands that customers have
an appealing experience every time they visit. To control the shopping experience, a staff of builders
designs and constructs every store based on the store manager’s reactions to ideas proposed by a model
store. In this way, Zara adapts locally while maintaining a consistent look. To complete the cycle, items
that do not sell are swiftly noted, removed, and rushed to another location, where they have a better chance
of succeeding. The quickly changing assortment brings browsers back: in Spain, clients visit the average
clothing store three or four times a year but visit Zara 17 times a year. These visits create WOM, which
restarts the cycle: fresh retail sales, store feedback to stylists, new prototype, manufacturing fast from
postponed work-in-progress fabric inventory, rushing finished product in, selling out or rushing out,
beginning again. This is indeed quick response to the market. Zara is agile—but it is not lean (everywhere).
It spends more than competitors do on transportation (all that rushing and moving inventory around) even
though production is relatively nearby. It also spends more than competitors do on labor (due to European
costs). But these costs are more than offset by savings in inventory (holding, markdowns) and the ability
to support a marketing strategy that rests on the experience created by each shop’s ambiance and prime
location rather than on advertising.

Zara’s success has been much noted, and a certain myth has built around it. The myth is that it is a state-
of-the-art marvel in information technology. While Zara is indeed heavily computerized, it is not a model
of the latest in information technology and spends much less than do most retailers on IT as a percentage
of sales. In particular, Zara does not have :
• An elaborate customer relationship management (CRM) system
• Sophisticated planning software to convert demand information into production requirements
• Logistics software to run the distribution centers
• Extranets across factories and intranets across stores
• Enterprise resource process software to underpin the whole infrastructure
• A large information technology department
• A formal technology budget Zara does not even have personal computers in its stores: Dedicated terminals
collect basic sales and inventory information, which is transmitted to headquarters by store managers (not
by intranet) daily.

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All this does not mean Zara shuns IT. Indeed, it has been early to adopt computerization, thanks to
insistence by Armancio Ortega himself (who today is still heavily involved in design and not interested in
taking retirement). The current CEO is a former IT manager, a testament to Zara’s comfort with
computerization. The key is that Zara adopts IT only as internal managers see fit. For example, Zara was
early to adopt PDAs (personal digital assistants) to replace faxes and relies on them heavily, obliging
managers to use them to place orders and refusing to allow orders to be phoned in. In other ways, however,
Zara prefers not to automate but to leave decision making in the hands of field personnel, particularly the
store managers. These managers play a much greater role than in competing retailers. They have
considerable latitude in some areas (such as ordering merchandise) but zero latitude in other areas (such as
pricing). Zara can take a minimalist approach to IT in part because the products have few components and
do not need to be tracked or maintained after purchase. As analyst Andrew McAfee puts it, Zara works
because of its minimalist attitude toward IT, not in spite of it. IT is used to aid judgment, not to make
judgments. Computerization is standardized, targeted to where managers see a business case for it. All
technology initiatives come from within Zara and complement its processes rather than usurp them. And
IT is not imposed by specialists on reluctant managers: The managers are well versed in computerization,
and the IT personnel are well versed in Zara’s business. In short the logistics of quick response rest on
thoughtful management using IT as a tool rather than as a substitute for human judgments.

Questions:

A- Analyze the case discussing which entrepreneurial characteristics does Armancio Ortega have that
may be important to ZARA's success?

B- As a strategist, If you were an intrapreneur working with Armancio Ortega in ZARA, what thoughts
would you suggest for ZARA in the future taken in consideration The uncertainty governing the
business environment and its challenges and all core competencies needed to maintain a sustainable
growth efficiently ? .

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A- Analyze the case discussing which entrepreneurial characteristics does Armancio Ortega have that
may be important to ZARA's success?

Zara introduced Fast Fashion Business Model (15 days business cycle)
Vale proposition is Fashionable, affordable clothes, Large choice of styles
Segments: young, price-sensitive and fashion-oriented consumers

1- Large choice of styles produces around 11,000 styles per year (compared to other retailers
average of 3,000)
2- Scarcity, reducing the manufactured quantity of each style helps in lowers the risk of having stock
it cannot sell, & increases desirability, which means shoppers need to buy quickly as the item may
not be available next week
3- Prime stores locations, spending less on ads and depends on WOM
4- Vertical Integration, This gives a lot more flexibility and speed however it means higher costs as
the majority of production carried out in owned or closely controlled facilities in Spain
5- Reducing costs by Demand based production means there is very little inventory in Zara’s supply
chain, which results in much lower working capital requirements
6- Just in time manufacturing model, Deliveries typically arrive one to two days after ordering
7- Procurement strategy
8- Distribution management

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B- As a strategist, If you were an entrepreneur working with Armancio Ortega in ZARA, what thoughts
would you suggest for ZARA in the future taken in consideration The uncertainty governing the
business environment and its challenges and all core competencies needed to maintain a sustainable
growth efficiently?

1. Digital strategy and online capabilities

New ways to engage its customers digitally, online communities and social media
e commerce platforms
Develop CRM system
2. marketing strategy, brand communication is crucial in attracting new customers to have a strong
presence
3. Stores network policy to adopt new trend in opening satellite stores in less prime locations to
reach more people

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