Entrepreneurship: Successfully Launching New Ventures, 3/e

Entrepreneurship: Successfully Launching New
Ventures, 3/e
Chapter 1: Introduction to Entrepreneurship
Chapter 2: Recognizing Opportunities and Generating Ideas
Chapter 3: Feasibility Analysis
Chapter 4: Writing a Business Plan
Chapter 5: Industry and Competitor Analysis
Chapter 6: Developing an Effective Business Model
Chapter 7: Preparing the Proper Ethical and Legal Foundation
Chapter 8: Assessing a New Venture’s Financial Strength and Viability
Chapter 9: Building a New Venture Team
Chapter 10: Getting Financing or Funding
Page
Chapter 11: Unique Marketing Issues
Chapter 12: The Importance of Intellectual Property
Chapter 13: Preparing for and Evaluating the Challenges of Growth
Chapter 14: Strategies for Firm Growth
Chapter 15: Franchising
Page
Chapter # 1
Introduction to Entrepreneurship
Explain entrepreneurship and discuss its importance.
Describe corporate entrepreneurship and its use in established firms.
Discuss three main reasons people decide to become entrepreneurs.
Identify four main characteristics of successful entrepreneurs.
Explain the five common myths regarding entrepreneurship.
Explain how entrepreneurial firms differ from salary-substitute and lifestyle firms.
Discuss the changing demographics of entrepreneurs in the United States.
Discuss the impact of entrepreneurial firms on economies and societies.
Identify ways in which large firms benefit from the presence of smaller
entrepreneurial firms.
Explain the entrepreneurial process.
Page
Global 3E
Chapter Quiz
This activity contains 22 questions.

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false false
Entrepreneurial behavior typically requires all of the following EXCEPT:

invention of something new.
willingness to take risks.
drive.
creativity.
_____ is the position of a firm on a continuum ranging from highly

conservative to highly entrepreneurial.
Risk tolerance
Entrepreneurial intensity
Inventiveness
Organizational bureaucracy
What is the most common reason given for why people choose to
become entrepreneurs?
To make a lot of money.
To escape the long hours associated with corporate jobs.
To be their own boss.
To be able to retire early.
Page
Some entrepreneurs report that the financial rewards associated with
entrepreneurship can be bittersweet if they are accompanied by
________.
modest upside potential
the thrill of starting a business
motivating factors
losing control of the firm
All of the following are characteristics shared by successful

entrepreneurs EXCEPT:
passion.
risk averse.
product/customer focus.
tenacity despite failure.
Which of the following is NOT a common myth about entrepreneurs?

Everyone has the potential to be an entrepreneur.
Entrepreneurs are born, not made.
Entrepreneurs are gamblers.
Entrepreneurs love the spotlight.
Page
What do you call small firms that yield a level of income for their
owner that is similar to what they would earn when working for an
employer?
sole proprietorship
small business
lifestyle firm
salary-substitute firm
_____ of the 26 million businesses in the Unites States are owned by

women, minorities, seniors, and young people.
A growing number
An insignificant portion
A declining amount
An unknown quantity
Influence on innovation and job creation best typifies entrepreneurial

firms' ________.
impact on society
economic impact
impact on larger firms
impact on the environment
Page
The entrepreneurial process is comprised of each of the following
steps EXCEPT:
deciding to become an entrepreneur.
inventing a new product or process.
managing and growing the entrepreneurial firm.
moving from an idea to an entrepreneurial firm.
In the United States, approximately one-third of new firms fail within

their first four years.
True
False
Entrepreneur and inventor mean essentially the same thing.
True
False
Entrepreneurship only pertains to starting new businesses, not

existing firms.
True
False
Page
The average entrepreneur does NOT make more money than someone
with a similar amount of responsibility in a traditional job.
True
False
The number one characteristic shared by successful entrepreneurs is

creativity.
True
False
Execution intelligence refers to developing a business model, putting

together financial resources, and leading people towards transforming
an idea into a business.
True
False
According to research, most entrepreneurs are born, not made.
True
False
Page
Only individuals that thrive on taking big risks have the right
personality to be an entrepreneur.
True
False
After winning a medal for diving in the Olympics, Cheryl starts a diving
instruction school. This is an example of a lifestyle firm.
True
False
In recent years, the fastest growing areas for women-owned firms

have been in cosmetology, fashion merchandising, and hair salons.
True
False
Discus entrepreneurship's importance to the economy and society as a

whole:
Page
What are the steps of the entrepreneurial process?
1. Entrepreneurial behavior typically requires all of the following EXCEPT:
invention of something new.

Your
Answer:
2. _____ is the position of a firm on a continuum ranging from highly

conservative to highly entrepreneurial.
Risk tolerance
Your Answer:
Correct Entrepreneurial intensity
Answer:
p. 31
3. What is the most common reason given for why people choose to become
entrepreneurs?
To make a lot of money.

Your Answer:
Correct To be their own boss.
Answer:
p. 31
Page
4. Some entrepreneurs report that the financial rewards associated with
entrepreneurship can be bittersweet if they are accompanied by ________.
modest upside potential

Your Answer:
Correct losing control of the firm
Answer:
p. 33
5. All of the following are characteristics shared by successful entrepreneurs

EXCEPT:
passion.
Your Answer:
Correct risk averse.
Answer:
p. 33
6. Which of the following is NOT a common myth about entrepreneurs?
Everyone has the potential to be an entrepreneur.

Your
Answer:
7. What do you call small firms that yield a level of income for their owner
that is similar to what they would earn when working for an employer?
sole proprietorship
Your Answer:
Correct salary-substitute firm
Answer:
p. 41
8. _____ of the 26 million businesses in the Unites States are owned by

women, minorities, seniors, and young people.
Page
A growing number
Your
Answer:
9. Influence on innovation and job creation best typifies entrepreneurial firms'

________.
impact on society
Your Answer:
Correct economic impact
Answer:
p. 45
10 The entrepreneurial process is comprised of each of the following steps

EXCEPT:
.
deciding to become an entrepreneur.
Your Answer:
Correct inventing a new product or process.
Answer:
p. 47
11 In the United States, approximately one-third of new firms fail within their
first four years.
.
True
Your
Answer:
12 Entrepreneur and inventor mean essentially the same thing.

.
True
Your Answer:
Correct False
Answer:
p. 30
Page
13 Entrepreneurship only pertains to starting new businesses, not existing
firms.
.
True
Your Answer:
Correct False
Answer:
p. 31
14 The average entrepreneur does NOT make more money than someone with
a similar amount of responsibility in a traditional job.
.
True
Your
Answer:
15 The number one characteristic shared by successful entrepreneurs is

creativity.
.
True
Your Answer:
Correct False
Answer:
p. 33
16 Execution intelligence refers to developing a business model, putting

together financial resources, and leading people towards transforming an
. idea into a business.
True
Your
Answer:
17 According to research, most entrepreneurs are born, not made.

.
Page
True
Your Answer:
Correct False
Answer:
p. 39
18 Only individuals that thrive on taking big risks have the right personality to
be an entrepreneur.
.
True
Your Answer:
Correct False
Answer:
p. 40
19 After winning a medal for diving in the Olympics, Cheryl starts a diving
instruction school. This is an example of a lifestyle firm.
.
True
Your
Answer:
20 In recent years, the fastest growing areas for women-owned firms have
been in cosmetology, fashion merchandising, and hair salons.
.
True
Your Answer:
Correct False
Answer:
p. 43
21 Discus entrepreneurship's importance to the economy and society as a

whole:
.
Your Answer:
A
Page
ECONOMY:
-Innovation
-Job creation
SOCIETY:
-Improvements in healthcare
-Help people be more productive
-Products and services that make our lives easier
-Products and services that entertain us
ASSIST LARGER FIRMS:

-Provide Components
-Efficiency
-Partnering
Page
22 What are the steps of the entrepreneurial process?
.
Your Answer:
A
Step 1. Deciding to become an entrepreneur

Step 2. Developing successful business ideas
Step 3. Moving from an idea to an entrepreneurial firm
Step 4. Managing and growing the entrepreneurial firm
Page
Chapter # 2
Recognizing Opportunities and
Generating Ideas
Explain why it’s important to start a new firm when its “window of opportunity” is
open.
Explain the difference between an opportunity and an idea.
Describe the three general approaches entrepreneurs use to identify opportunities.
Identify the four environmental trends that are most instrumental in creating
business opportunities.
List the personal characteristics that make some people better at recognizing
business opportunities than others.
Identify the five steps in the creative process.
Describe the purpose of brainstorming and its use as an idea generator.
Describe how to use library and Internet research to generate new business ideas.
Explain the purpose of maintaining an idea bank.
Describe three steps for protecting ideas from being lost or stolen.
Page
Chapter Quiz

false false
_____ is a favorable set of circumstances that creates a need for a

new product, service, or business.
A niche
A venture
A trend
An opportunity
Each of the following are ways to identify an opportunity EXCEPT:

observing trends.
solving a problem.
trying out alternative uses of existing products.
finding gaps in the marketplace.
Which environmental force pertains most to a trend such as the

continual increase in the use of cell phones?
economic forces
social forces
technological advances
political and regulatory changes
Page
Entrepreneurs can recognize problems and find ways to solve them
through each of the following EXCEPT:
recognizing problems in emerging trends.
identifying a currently available product or service and then building a business

around a better version.
framing a problem differently than it's been thought of before, and then
proposing an appropriate solution.
experiencing a problem in one's own life, and then realizing the solution
represents a business opportunity.
All of the following are characteristics shared by those who excel at

recognizing opportunities EXCEPT:
brainstorming.
prior experience.
entrepreneurial alertness.
social contacts and ties with others.
_____ is the process of generating a novel or useful idea.

Serendipity
Intuition
Opportunism
Creativity
What is the first stage of the creativity process?

Incubation
Page
Preparation
Insight
Evaluation
Which technique for generating ideas depends on freewheeling, the

carefree expression of ideas free of rules or restraints?
focus groups
Benchmarking
Brainstorming
Projection
Focus groups usually work best as a ________.

follow up to brainstorming
way to increase creativity
substitute for brainstorming
way to survey large numbers of people
An underutilized source of information for generating business ideas is

________.
the consulting firm
the library
the focus group
Page
Brainstorming
An idea is a favorable set of circumstances that creates a need for a

new product, service, or business.
True
False
Window of opportunity relates to the time period in which a firm can

realistically enter a new market.
True
False
As an entrepreneur, it is important to be aware of changes in trends.
True
False
True
False
Page
Often, entrepreneurs are able to pursue an opportunity even before it
is recognized as an opportunity.
True
False
Entrepreneurial alertness is largely a learned skill.
True
False
It is more likely that an entrepreneur will get a business idea through

a weak-tie relationship (infrequent interaction between casual
acquaintances), than through a strong-tie relationship (frequent
interaction between friends and co-workers).
True
False
Studies show that less than a quarter of start-up ideas emerge from a
Page
person's prior work experience.
True
False
Brainstorming sessions are structured discussions that stay focused on

one idea until an opportunity is identified.
True
False
Much of the effectiveness of a focus group session depends on the

careful recruiting of over 20 participants.
True
False
What are the essential qualities of an opportunity?
Page
Researchers have identified several characteristics that tend to make
some people better at recognizing opportunities than others. Discuss
them.
1. _____ is a favorable set of circumstances that creates a need for a new

product, service, or business.
A niche
Your Answer:
Correct An opportunity
Answer:
See p. 69 for more information.
2. Each of the following are ways to identify an opportunity EXCEPT:
observing trends.
Your Answer:
Correct trying out alternative uses of existing products.
Answer:
3. Which environmental force pertains most to a trend such as the continual

increase in the use of cell phones?
economic forces
Your Answer:
Correct social forces
Answer:
Page
4. Entrepreneurs can recognize problems and find ways to solve them

through each of the following EXCEPT:
recognizing problems in emerging trends.

Your Answer:
Correct identifying a currently available product or service and
Answer: then building a business around a better version.
5. All of the following are characteristics shared by those who excel at

recognizing opportunities EXCEPT:
brainstorming.
Your
Answer:
6. _____ is the process of generating a novel or useful idea.
Serendipity
Your Answer:
Correct Creativity
Answer:
7. What is the first stage of the creativity process?
Incubation
Your Answer:
Correct Preparation
Answer:
Page
8. Which technique for generating ideas depends on freewheeling, the
carefree expression of ideas free of rules or restraints?
focus groups
Your Answer:
Correct Brainstorming
Answer:
9. Focus groups usually work best as a ________.
follow up to brainstorming
Your
Answer:
10 An underutilized source of information for generating business ideas is

________.
.
the consulting firm
Your Answer:
Correct the library
Answer:
11 An idea is a favorable set of circumstances that creates a need for a new

product, service, or business.
.
True
Your Answer:
Correct False
Answer:
12 Window of opportunity relates to the time period in which a firm can

realistically enter a new market.
.
Page
True
Your
Answer:
13 As an entrepreneur, it is important to be aware of changes in trends.

.
True
Your
Answer:
14 Major retailers that serve large groups of customers with similar needs by
competing mainly on price would be an example of finding gaps in the
. marketplace.
True
Your Answer:
Correct False
Answer:
15 Often, entrepreneurs are able to pursue an opportunity even before it is

recognized as an opportunity.
.
True
Your Answer:
Correct False
Answer:
16 Entrepreneurial alertness is largely a learned skill.

.
True
Your
Answer:
Page
17 It is more likely that an entrepreneur will get a business idea through a
weak-tie relationship (infrequent interaction between casual
. acquaintances), than through a strong-tie relationship (frequent interaction
between friends and co-workers).
True
Your
Answer:
18 Studies show that less than a quarter of start-up ideas emerge from a
person's prior work experience.
.
True
Your Answer:
Correct False
Answer:
19 Brainstorming sessions are structured discussions that stay focused on one

idea until an opportunity is identified.
.
True
Your Answer:
Correct False
Answer:
20 Much of the effectiveness of a focus group session depends on the careful

recruiting of over 20 participants.
.
True
Your Answer:
Correct False
Answer:
Page
21 What are the essential qualities of an opportunity?
.
Your Answer:
A
-Attractive
-Durable
-Timely
-Anchored in or relates to a product or service that creates or adds value
for its user
22 Researchers have identified several characteristics that tend

. to make some people better at recognizing opportunities than
others. Discuss them.
Your Answer:
A
-prior experience in an industry helps entrepreneurs

recognize business opportunities
-entrepreneurs may be better than others at sizing up the

marketplace and inferring likely implications
-having extensive social and professional contacts exposes

entrepreneurs to opportunities and ideas
-creativity helps the opportunity recognition process
Page
Page
Chapter # 3
Feasibility Analysis
Explain what a feasibility analysis is and why it’s important.
Discuss the proper time to complete a feasibility analysis when developing an

entrepreneurial venture.
Describe the purpose of a product/service feasibility analysis and the two primary
issues that a proposed business should consider in this area.
Explain a concept statement and its contents.
Describe the purpose of a buying intentions survey and how it’s administered.
Explain the importance of library, Internet, and gumshoe research.
Describe the purpose of industry/market feasibility analysis and the two primary
issues to consider in this area.
Discuss the characteristics of an attractive industry.
Describe the purpose of organizational feasibility analysis and list the two primary
Explain the importance of financial feasibility analysis and list the most critical
Page
Chapter Quiz

false false
The most effective businesses emerge from a process that includes

each of the following EXCEPT:
recognizing a business idea.
testing the feasibility of the idea.
writing a business plan.
securing angel investment.
Which of the following is an example of primary research?

census data
industry studies
administering surveys
analyst forecasts
_____ is an assessment of the overall appeal of the product or service

being proposed.
Concept testing
Product/service feasibility analysis
Test marketing
Usability testing
Page
All of the following are normally included in the concept test EXCEPT:
detailed financial statements.
a description of the product or service.
the intended target market.
the benefits of the product or service.
All of the following are suitable questions to ascertain Product/Service

Desirability EXCEPT:
Does it make sense?
Is the product or service financially feasible?
Is this a good time to introduce the product or service in the market?
Are there any fatal flaws in the product or service's basic design or concept?
All of the following are characteristics of attractive industries EXCEPT:

the industry is young.
the industry is fragmented.
the industry is crowded.
the industry has high operating margins.
_____ is conducted to determine whether a proposed business has

sufficient management expertise, organizational competence, and
resources to successfully launch its business.
A marketing plan
Page
Financial feasibility analysis
Industry/market feasibility analysis
Organizational feasibility analysis
The ability to obtain intellectual property protection on key aspects of

the business is most likely an issue related to _____.
financial performance of similar firms
industry attractiveness
resource sufficiency
second-mover advantage
Which of the following is the final step of a comprehensive feasibility

analysis?
financial feasibility analysis
marketing research
filing articles of incorporation
industry/market feasibility analysis
The projected financial return to assess whether the venture is

financially feasible considers each of the following EXCEPT:
availability of equity capital.
amount of capital invested.
existing alternatives for the money being invested.
Page
risks assumed in launching the business.
The process of determining if a business idea is viable is the

development of a business plan.
True
False
Many entrepreneurs make the mistake of identifying a business idea

and then jumping directly to writing a business plan to describe and
gain support for the idea.
True
False
A concept test is the first physical depiction of a new product.
True
False
True
False
Page
Three important ways to accumulate evidence that there will be
healthy demand for a product or service are with library, Internet and
gumshoe research.
True
False
An industry is a group of firms producing a similar product or service.
True
False
A target market is a place within a larger market segment that

represents a broader group of customers with different needs.
True
False
Two of the most important factors related to management prowess are

passion for the business idea and understanding the markets in which
Page
the firm will participate.
True
False
The adequacy of the labor pool poses a resource sufficiency issue.
True
False
For feasibility analysis, it is not typically required that an entrepreneur

do a rigorous financial assessment.
True
False
What are the major components of a comprehensive feasibility

analysis?
Page
The most effective businesses emerge from a process that includes each of
the following EXCEPT:
recognizing a business idea.

Your Answer:
Correct securing angel investment.
Answer:
2. Which of the following is an example of primary research?
census data
Your Answer:
Correct administering surveys
Answer:
3. _____ is an assessment of the overall appeal of the product or service

being proposed.
Concept testing
Your Answer:
Correct Product/service feasibility analysis
Answer:
4. All of the following are normally included in the concept test EXCEPT:
detailed financial statements.

Your
Answer:
Page
5. All of the following are suitable questions to ascertain Product/Service
Desirability EXCEPT:
Does it make sense?

Your Answer:
Correct Is the product or service financially feasible?
Answer:
6. All of the following are characteristics of attractive industries EXCEPT:
the industry is young.

Your Answer:
Correct the industry is crowded.
Answer:
7. _____ is conducted to determine whether a proposed business has

sufficient management expertise, organizational competence, and
resources to successfully launch its business.
A marketing plan
Your Answer:
Correct Organizational feasibility analysis
Answer:
8. The ability to obtain intellectual property protection on key aspects of the

business is most likely an issue related to _____.
financial performance of similar firms

Your Answer:
Correct resource sufficiency
Answer:
Page
9. Which of the following is the final step of a comprehensive feasibility
analysis?
financial feasibility analysis

Your
Answer:
10 The projected financial return to assess whether the venture is financially

feasible considers each of the following EXCEPT:
.
availability of equity capital.
Your
Answer:
11 The process of determining if a business idea is viable is the development

of a business plan.
.
True
Your Answer:
Correct False
Answer:
See p. 105 for more information
12 Many entrepreneurs make the mistake of identifying a business idea and

then jumping directly to writing a business plan to describe and gain
. support for the idea.
True
Your
Answer:
13 A concept test is the first physical depiction of a new product.

.
True
Your Answer:
Correct False
Answer:
Page
14 Some entrepreneurs conduct their initial product/ service feasibility
analysis by simply talking about their product or service idea with others
. before deciding to move forward.
True
Your
Answer:
15 Three important ways to accumulate evidence that there will be healthy

demand for a product or service are with library, Internet and gumshoe
. research.
True
Your
Answer:
16 An industry is a group of firms producing a similar product or service.

.
True
Your
Answer:
17 A target market is a place within a larger market segment that represents

a broader group of customers with different needs.
.
True
Your Answer:
Correct False
Answer:
18 Two of the most important factors related to management prowess are

passion for the business idea and understanding the markets in which the
. firm will participate.
True
Your
Page
Answer:
19 The adequacy of the labor pool poses a resource sufficiency issue.

.
True
Your
Answer:
20 For feasibility analysis, it is not typically required that an entrepreneur do a

rigorous financial assessment.
.
True
Your
Answer:
21. What are the major components of a comprehensive feasibility

analysis?
Your Answer:
a
-Product/service feasibility analysis

-Industry/market feasibility analysis
-Organizational feasibility analysis
-Financial feasibility analysis
22. Discuss the four step process effective businesses emerge from.
Your Answer:
a
-Recognizing a business idea

-Testing the feasibility of the idea
-Writing a business plan
-Launching the business
Page

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Entrepreneurship: Successfully Launching New

Chapter 1: Introduction to Entrepreneurship

Chapter 2: Recognizing Opportunities and Generating Ideas

Chapter 3: Feasibility Analysis

Chapter 4: Writing a Business Plan

Chapter 5: Industry and Competitor Analysis

Chapter 6: Developing an Effective Business Model

Chapter 7: Preparing the Proper Ethical and Legal Foundation

Chapter 8: Assessing a New Venture’s Financial Strength and Viability

Chapter 9: Building a New Venture Team

Chapter 10: Getting Financing or Funding

Chapter 12: The Importance of Intellectual Property

Chapter 13: Preparing for and Evaluating the Challenges of Growth

Chapter 14: Strategies for Firm Growth

Chapter 15: Franchising

Explain entrepreneurship and discuss its importance.

Describe corporate entrepreneurship and its use in established firms.

Discuss three main reasons people decide to become entrepreneurs.

Identify four main characteristics of successful entrepreneurs.

Explain the five common myths regarding entrepreneurship.

Discuss the changing demographics of entrepreneurs in the United States.

Discuss the impact of entrepreneurial firms on economies and societies.

Explain the entrepreneurial process.

This activity contains 22 questions.

Entrepreneurial behavior typically requires all of the following EXCEPT:

willingness to take risks.

_____ is the position of a firm on a continuum ranging from highly

To escape the long hours associated with corporate jobs.

To be their own boss.

To be able to retire early.

the thrill of starting a business

losing control of the firm

All of the following are characteristics shared by successful

tenacity despite failure.

Which of the following is NOT a common myth about entrepreneurs?

Entrepreneurs are born, not made.

Entrepreneurs are gamblers.

Entrepreneurs love the spotlight.

_____ of the 26 million businesses in the Unites States are owned by

Influence on innovation and job creation best typifies entrepreneurial

impact on larger firms

impact on the environment

inventing a new product or process.

managing and growing the entrepreneurial firm.

moving from an idea to an entrepreneurial firm.

In the United States, approximately one-third of new firms fail within

Entrepreneur and inventor mean essentially the same thing.

Entrepreneurship only pertains to starting new businesses, not

The number one characteristic shared by successful entrepreneurs is

Execution intelligence refers to developing a business model, putting

According to research, most entrepreneurs are born, not made.

In recent years, the fastest growing areas for women-owned firms

Discus entrepreneurship's importance to the economy and society as a

1. Entrepreneurial behavior typically requires all of the following EXCEPT:

invention of something new.

2. _____ is the position of a firm on a continuum ranging from highly

To make a lot of money.

modest upside potential

5. All of the following are characteristics shared by successful entrepreneurs

6. Which of the following is NOT a common myth about entrepreneurs?

Everyone has the potential to be an entrepreneur.

8. _____ of the 26 million businesses in the Unites States are owned by

9. Influence on innovation and job creation best typifies entrepreneurial firms'