Q&A Hero

Q: Shelby Collins owns a firm that designs and sells women's clothing. She is currently trying to grow her firm by developing new product lines. Shelby is pursuing a(n) ________ growth strategy. A) in-house B) center C) domestic D) external E) internal

Q: Shake Smart, the company profiled in the opening feature of Chapter 14, sells nutritious smoothie-like shakes. The first place the shakes were sold was ________. A) at a pop-up store in the Memorial Union on the Iowa State University campus B) at a kiosk just outside the Aztec Center on the San Diego State University campus C) at concession stands in Spartan Stadium on the Michigan State University campus D) on central campus at the University of Nebraska campus E) in the Lory Student Center on the Colorado State University campus

Q: Describe what a joint venture is. Identify the two types of joint ventures.

Q: Describe what licensing is. What type of intellectual property can be licensed? Identify the two types of licensing pursued by entrepreneurial firms.

Q: A spin-out occurs when a large company divests itself of one of its smaller divisions and the division becomes an independent company.

Q: In a scale joint venture, the position of the parties is not symmetrical, and the objectives of the partners may diverge.

Q: In a link joint venture, the partners collaborate at a single point in the value chain to gain economies of scale in production or distribution.

Q: A joint venture is a partnership between two or more firms that is developed to achieve a specific goal and has no joint ownership involved.

Q: Loss of proprietary information is a disadvantage of participating in strategic alliances and joint ventures.

Q: Technology licensing is the licensing of proprietary technology that the licensor typically controls by virtue of a utility patent.

Q: Licensing is the granting of permission by one company to another company to use a specific form of its intellectual property under clearly-defined conditions.

Q: In regard to acquisitions, many firms have found that the process of assimilating another company into their current operations is relatively easy and is not disruptive to the current operations of their firm.

Q: In an acquisition, the surviving firm is called the acquirer, and the firm that is acquired is called the target.

Q: An acquisition is the pooling of interests to combine two or more firms into one. A merger is the outright purchase of one firm by another.

Q: External growth strategies rely on establishing relationships with third parties, such as mergers, acquisitions, strategic alliances, joint ventures, licensing, and franchising.

Q: The Partnering for Success feature in Chapter 14 is titled "Three Steps to Alliance Success." The three steps to alliance success identified in the feature are ________. A) drafting a licensing agreement, setting up a governance structure, and making it work B) selecting a partner, cutting the deal, and making it work C) interviewing potential partners, cutting the deal, and supervising the implementation of the agreement D) drafting a licensing agreement, cutting the deal, and setting up a governance structure E) selecting an alliance "manager," setting up a governance structure, and making it work

Q: In the context of strategic alliances, ________ alliances typically match a company with a distribution system with a company that has a product to sell to increase sales of a product or service. A) promotion B) marketing C) organizational D) directional E) technological

Q: In the context of strategic alliances, ________ alliances feature cooperation in research and development, engineering, and manufacturing. A) administrative B) directorial C) marketing D) organizational E) technological

Q: Which of the following was identified in the textbook as a disadvantage of participating in strategic alliances and joint ventures? A) Risk and cost sharing B) Economies of scale C) Partial loss of decision autonomy D) Gain access to a foreign market E) Neutralizing or blocking competitors

Q: Which of the following was identified in the textbook as an advantage of participating in strategic alliances and joint ventures? A) Management complexities B) Loss of organizational flexibility C) Partners' cultures may clash. D) Risk becoming dependent on a partner E) Learning

Q: A ________ is a partnership between two or more firms that is developed to achieve a specific goal and has no joint ownership involved. A) joint alliance B) joint venture C) licensing agreement D) merger E) strategic alliance

Q: According to the textbook, the key to effective merchandise and character licensing is ________. A) get licensing income monthly rather than yearly B) resist the temptation to license a trademark too widely C) licensing a trademark very widely D) restrict licensing agreements to one year E) restrict licensing to product categories that have no relevance and appeal to a firm's core customers

Q: Samantha Jones owns a chain of ice cream stores in New England. To draw attention to her stores, she adopted a very colorful and distinctive logo several years ago, which depicts a funny-looking cow churning ice cream. Recently, a dairy company asked Samantha if it could use a characterization of her funny-looking cow on a line of yogurt it is coming out with, and offered to pay Samantha's company 3 cents for every carton of yogurt it sells that has the cow's image on the carton. If Samantha accepts this proposal, she will need to enter into a(n) ________ agreement with the dairy. A) licensing B) joint venture C) strategic alliance D) new product development E) exporting

Q: Merchandise and character licensing is the licensing of a recognized trademark or brand that the licensor typically controls through a registered ________. A) trade secret or copyright B) patent or copyright C) trademark or patent D) patent or trade secret E) trademark or copyright

Q: ________ licensing is the licensing of a recognized trademark or brand that the licensor typically controls through a registered trademark or copyright. A) Goods and character B) Products and trademark C) Products and brand D) Merchandise and character E) Products and services

Q: Qualcomm, a high-tech company headquartered in San Diego, owns the rights to several of the key components that permit cell phones to work. Instead of selling cell phones itself, Qualcomm grants permission to many companies to use specific forms of its intellectual property in exchange for monetary compensation. Qualcomm in engaging in an external growth strategy referred to as ________. A) licensing B) strategic alliances C) acquisitions D) new product development E) joint ventures

Q: ________ licensing is the licensing of proprietary technology that the licensor typically controls by virtue of a utility patent. A) Skill B) Intellectual property C) Utility D) Technology E) Expertise

Q: The ________ is the company that owns the intellectual property. The ________ is the company purchasing the right to use it. A) endorsee; endorser B) licensor; licensee C) licensor; endorsee D) endorser; endorsee E) licensee; licensor

Q: What are the primary day-to-day challenges involved with growing a firm? Briefly describe each challenge.

Q: Few businesses need access to capital to fuel their growth.

Q: One of the most difficult challenges that businesses encounter as they grow is maintaining high levels of quality and customer service.

Q: Growth usually increases rather than decreases the challenges involved with cash flow management.

Q: Adverse selection means that as a firm grows and adds personnel, the new hires typically do not have the same ownership incentives as the original founders, so the new hires may not be as motivated as the founders to put in long hours or may even try to avoid hard work.

Q: Moral hazard means that as the number of employees a firm needs increases, it becomes increasingly difficult for it to find the right employees, place them in appropriate positions, and provide adequate supervision.

Q: According to Penrose, entrepreneurial services generate new market, product, and service ideas.

Q: According to Penrose, managerial services generate new market, product, and service ideas, while entrepreneurial services administer the routine functions of the firm and facilitate the proper execution of new opportunities.

Q: Kelly Andrews owns a company that makes office furniture. Recently, a favorable article was written about Kelly's company in a business magazine, and as a result, Kelly has seen a spike in his orders. Although Kelly is grateful for the additional orders, he is worried about one thing. An increase in activity means that his firm must handle more service requests and paperwork and contend with more customers, stakeholders, and vendors. Kelly knows that if he doesn't handle this increased activity properly, the workmanship of his products could decline. The day-to-day challenge of firm growth that this example illustrates is ________. A) quality control B) price stability C) capital constraints D) benchmarking E) cash flow management

Q: Megan Johnson owns a kitchen and bathroom cabinet company. Her market research is telling her that she is taking business away from the large home improvement stores in her trade area. One thing that Megan is worried about is that the large stores might fight back by lowering their prices, which hurts everyone except the consumer. The day-to-day challenge of firm growth that this example is referring to is ________. A) quality control B) price stability C) capital constraints D) cash flow management E) benchmarking

Q: The What Went Wrong feature in Chapter 13 focuses on Wesabe, a Web-based company that was launched in 2006 to help people manage their personal finances. According to Marc Hedlund, one of Wesabe's cofounders, the company failed for two primary reasons. First, it didn't allow a partner to provide it with an essential service that it decided to build on its own. Second, it ________. A) didn't hire an experienced CEO B) didn't achieve a large enough critical mass of users C) didn't implement a revenue model fast enough D) didn't utilize both internal and external growth strategies E) misunderstood its users

Q: Terry Wells owns a growing company that makes innovative kitchen appliances. One thing that Terry has to continually work at is to keep enough cash on hand to make sure she has sufficient liquidity to meet her payroll and cover her other short-term obligations. The day-to-day challenge of firm growth this example is referring to is ________. A) quality control B) capital constraints C) price stability D) cash flow management E) personnel issues

Q: Which of the following statements is not true regarding the day-to-day challenges of growing a firm? A) As a firm grows, it requires a decreasing amount of cash to service its customers. B) If firm growth comes at the expense of a competitor's market share, price competition can set in. C) Most businesses, regardless of their industry, need capital from time to time to invest in growth-enabling projects. D) Although most businesses are started fairly inexpensively, the need for capital is typically the most prevalent in the early growth and continuous stages of the organizational life cycle. E) One of the most difficult challenges that businesses encounter as they grow is maintaining high levels of quality and customer service.

Q: Which of the following was not identified in the textbook as one of the day-to-day challenges involved with growing a firm? A) Cash flow management B) Channel conflict C) Capital constraints D) Quality control E) Price stability

Q: According to the basic model of firm growth articulated in Chapter 13, the ability to increase managerial services to facilitate growth is not friction free but is constrained and limited. Which of the following selections is not one of the factors that constrains or limits a firm's ability to increase its managerial services? A) The time required to socialize new managers B) How motivated entrepreneurs and/or managers are to grow the firm C) Adverse selection D) Moral hazard E) Benchmarking

Q: ________ means that as a firm grows and adds personnel, the new hires typically do not have the same ownership incentives as the original founders, so the new hires may not be as motivated as the founders to put in long hours or may even try to avoid hard work. A) Difficult selection B) Adverse hazard C) Ethical selection D) Productivity hazard E) Moral hazard

Q: ________ means that as the number of employees a firm needs increases, it becomes increasingly difficult for it to find the right employees, place them in appropriate positions, and provide adequate supervision. A) Moral hazard B) Adverse selection C) Adverse hazard D) Complex hazard E) Complex selection

Q: Kendell Adams owns a software development company. When he first launched his firm, he was careful to hire employees who had the experience he was looking for, were good matches for the positions he had available, and could be properly supervised. As Kendell's firm has grown, and his need for employees has increased, he is finding that it is increasingly difficult to find employees who have the qualifications he is looking for, are good matches for the positions he has available, and fit within the supervisory framework he has developed. Kendell is dealing with an issue referred to as ________. A) adverse hazard B) adverse selection C) complicated hazard D) ethical hazard E) moral selection

Q: ________ means that as the number of employees a firm needs increases, it becomes increasingly difficult for it to find the right employees, place them in appropriate positions, and provide adequate supervision. A) Difficult hazard B) Adverse hazard C) Adverse selection D) Moral selection E) Moral hazard

Q: Jack Wills owns a commercial nursery. Jack has more business than he wants, in fact, he is presently turning away exciting new business opportunities because it is expensive to hire new employees, and he knows that if he did hire new employees it would take time for the new employees to be trained and to be socialized into the culture of his firm. Jack's inability to take advantage of the new business opportunities that are coming his way is due largely to the ________ problem. A) business aptitude B) entrepreneurial aptitude C) commercial opportunity D) business capacity E) managerial capacity

Q: When a firm's managerial resources are insufficient to take advantage of its new product and service opportunities, the subsequent bottleneck is referred to as the ________ problem. A) commercial capacity B) entrepreneurial aptitude C) managerial capacity D) business capacity E) business aptitude

Q: According to Penrose, ________ services generate new market, product and service ideas, while ________ services administer the routine functions of the firm and facilitate the profitable execution of new opportunities. A) managerial; entrepreneurial B) administrative; business C) entrepreneurial; managerial D) business; commercial E) commercial; administrative

Q: Trevor Kimble owns a firm that sells products to the publishing industry. Trevor is currently evaluating a set of opportunities that he feels his firm is capable of pursuing. According to the textbook, Trevor is evaluating his firm's ________. A) prolific potential B) dynamic opportunity options C) productive opportunity set D) passionate opportunity set E) creative field of potential

Q: The author of the book titled The Theory of the Growth of the Firm, which is referred to in Chapter 13, is ________. A) Jim Collins B) Joseph Schumpeter C) Edith Penrose D) Michael Gerber E) Seth Godin

Q: What is the organizational life cycle and why is it important?

Q: As a business moves beyond its early growth stage and its pace of growth accelerates, the need for structure and formalization decreases.

Q: A business's early growth stage is generally characterized by increasing sales and heightened complexity.

Q: The main challenges for a business in the introduction stage are to make sure the initial product or service is right and to start laying the groundwork for building a larger organization.

Q: The majority of businesses go through a discernable set of stages referred to as the business/industry life cycle.

Q: The Savvy Entrepreneurial Firm feature in Chapter 13 focuses on Salesforce.com, a company that pioneered the idea of software as a service (SaaS). The main point of the case is that rather than remaining a niche product, Salesforce.com's product, which is an online software platform for salespeople, has ________ and appeals to mainstream customers. A) crossed the divide B) jumped the divide C) leaped the technology curve D) crossed the chasm E) crossed the valley

Q: According to the textbook, it is ________. A) not inevitable that a business enter the decline stage of the organizational life cycle B) inevitable that a business enter the decline stage of the organizational life cycle C) not inevitable that service firms enter the decline stage of the organizational life cycle but is inevitable for manufacturing firms D) not inevitable that manufacturing firms enter the decline stage of the organizational life cycle but is inevitable for service firms E) not inevitable that international firms enter the decline stage of the organizational life cycle but is inevitable for strictly domestic firms

Q: According to the textbook, a well-managed business that finds its products and services are mature often ________. A) replaces its board of directors to breathe new life into the firm B) looks for licensing opportunities C) looks for partnering or acquisition opportunities to breathe new life into the firm D) looks for new managerial talent to breathe new life into the firm E) looks for international business opportunities

Q: According to the textbook, the toughest decisions regarding business growth are made in the ________ stage of the organizational life cycle. A) introduction B) early growth C) continuous growth D) maturity E) decline

Q: For a business to be successful in the early growth stage of the organizational life cycle, the two important things that must happen are ________. A) the founder or owner of the business must start transitioning from his or her role as the hands-on supervisor to a more managerial role, and increased formalization must take place B) a decision must be made whether the owner-manager and the current management team is capable of taking the business further, and the organization must start laying the groundwork for future growth C) increased formalization must take place, and the business must achieve price stability D) a decision must be made whether the owner-manager or the current management team is capable of taking the business further, and business partnerships must be established E) the founder or owner of the business must start transitioning from his or her role as the hands-on supervisor to a more managerial role, and the business must be cash flow positive

Q: The main challenges for a business in the introduction stage of the organizational life cycle is ________. A) beginning the process of transitioning the owner from a hands-on supervisor to a more managerial role and developing business partnerships B) developing business partnerships and making sure the initial product or service is right C) determining whether the owner of the business and the current management team is capable of taking the business further and developing systems and procedures D) developing systems and procedures and beginning the process of transitioning the owner from a hands-on supervisor to a more managerial role E) making sure the initial product or service is right and starting to lay the groundwork for building a larger organization

Q: The ________ stage of the organizational life cycle is the startup phase, where a business determines what its core strengths and capabilities are and starts selling its initial product or service. A) introduction B) launch C) ramp-up D) early growth E) continuous growth

Q: Which of the following is not one of the five stages in the organizational life cycle? A) Introduction B) Early growth C) Scale D) Maturity E) Decline

Q: The majority of businesses go through a discernable set of stages of growth referred to as the ________. A) business rotation cycle B) business existence cycle C) organizational sequence D) business life cycle E) organizational life cycle

Q: Define the term "market leadership." Why do firms work hard to obtain market leadership?

Q: Sometimes firms are compelled to grow to accommodate the growth of a key customer.

Q: Market leadership occurs when a firm holds the number one or number two position in an industry or niche market in terms of sales volume.

Q: Fixed costs are the costs a company incurs as it generates sales.

Q: A firm's pace of growth is the rate at which it is growing compared to its main competitors.

Q: Katlyn Williams owns a company that makes specialized components for the aerospace industry. Her most important customer is a company that is growing at a rate of 33% per year. Katlyn is working hard to grow her firm, because she knows that unless her company continually grows it will not be able to keep pace with the growth of its most important customer. This example illustrates the reason for growth referred to as ________. A) capturing economies of scope B) executing a scalable business model C) market leadership D) influence, power, and survivability E) need to accommodate the growth of a key customer

Q: Some firms feel that they can better appeal to their customers if they can advertise that they are the "Number 1 firm" in their industry. This sentiment is motivated by the reason for growth labeled ________. A) economies of scope B) need to accommodate the growth of key customer C) economies of scale D) market leadership E) influence, power, and survivability

Q: Market leadership occurs when a firm ________. A) is the number one or number two firm in an industry or niche market in terms of net profits B) is one of the top five firms in an industry or market niche in terms of sales volume C) earns twice as much as its closest competitor D) sells twice as much as its closest competitor E) is the number one or the number two firm in an industry or niche market in terms of sales volume

Q: Paul Mason's firm sells medical equipment to heart surgeons. The company fields a direct sales force that travels the country demonstrating its equipment to heart surgeons and hospital administrators. Recently, Paul's company started producing equipment for eye surgeons, partly to maximize the value of his sales force, which can now call on both heart surgeons and eye surgeons when it makes hospital visits. Paul's firm is attempting to capture economies of ________ through this strategy. A) reach B) scope C) capacity D) range E) scale

Q: Karen West owns a barbecue restaurant. One expense that Karen watches closely is the cost of propane, which she uses to heat her ovens. The more barbecue food Karen sells, the more it costs her for propane on a monthly basis. For Karen, the cost of propane is a(n) ________ cost. A) variable B) secondary C) resultant D) fixed E) irregular

Q: Zack Shields leases a manufacturing facility that produces computer monitors. Zack tries to keep production high, because his lease payments are $10,500 a month, regardless of whether he produces one computer monitor a month or 10,000. Zach's lease payment is a ________ cost. A) variable B) secondary C) fixed D) marginal E) tangible

Q: ________ costs are the costs a company incurs as it makes sales. A) Static B) Irregular C) Balanced D) Variable E) Flexible

Q: ________ costs are costs that a company incurs whether it sells something or not. A) Fixed B) Consistent C) Steady D) Variable E) Regular

Q: ________ costs are costs that a company incurs whether it sells something or not. ________ costs are the costs a company incurs as it generates sales. A) Preset; Marginal B) Variable; Fixed C) Set; Marginal D) Fixed; Variable E) Marginal; Set