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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 Ventures Financial Strength and Viability Chapter 9: Building a New Venture Team Chapter 10: Getting Financing or Funding

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

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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.

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Global 3E

Chapter Quiz
This activity contains 22 questions.
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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.

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To be able to retire early.

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.

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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

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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

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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

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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:

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What are the steps of the entrepreneurial process?

1.

Entrepreneurial behavior typically requires all of the following EXCEPT: Your Answer: invention of something new.

2.

_____ is the position of a firm on a continuum ranging from highly conservative to highly entrepreneurial. Your Answer: Risk tolerance Correct Answer: Entrepreneurial intensity p. 31

3.

What is the most common reason given for why people choose to become entrepreneurs? Your Answer: To make a lot of money. Correct Answer: To be their own boss. p. 31

4.

Some entrepreneurs report that the financial rewards associated with entrepreneurship can be bittersweet if they are accompanied by ________. Your Answer: modest upside potential Correct Answer: losing control of the firm p. 33

5.

All of the following are characteristics shared by successful entrepreneurs EXCEPT: Your Answer: passion.

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Correct Answer: risk averse. p. 33

6.

Which of the following is NOT a common myth about entrepreneurs? Your Answer: Everyone has the potential to be an entrepreneur.

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? Your Answer: sole proprietorship Correct Answer: salary-substitute firm p. 41

8.

_____ of the 26 million businesses in the Unites States are owned by women, minorities, seniors, and young people. Your Answer: A growing number

9.

Influence on innovation and job creation best typifies entrepreneurial firms' ________. Your Answer: impact on society Correct Answer: economic impact p. 45

10.

The entrepreneurial process is comprised of each of the following steps EXCEPT: Your Answer: deciding to become an entrepreneur. Correct Answer: inventing a new product or process. p. 47

11.

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

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first four years. Your Answer: True

12.

Entrepreneur and inventor mean essentially the same thing. Your Answer: True Correct Answer: False p. 30

13.

Entrepreneurship only pertains to starting new businesses, not existing firms. Your Answer: True Correct Answer: False p. 31

14.

The average entrepreneur does NOT make more money than someone with a similar amount of responsibility in a traditional job. Your Answer: True

15.

The number one characteristic shared by successful entrepreneurs is creativity. Your Answer: True Correct Answer: False 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. Your Answer: True

17.

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

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Your Answer: True Correct Answer: False p. 39

18.

Only individuals that thrive on taking big risks have the right personality to be an entrepreneur. Your Answer: True Correct Answer: False 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. Your Answer: True

20.

In recent years, the fastest growing areas for women-owned firms have been in cosmetology, fashion merchandising, and hair salons. Your Answer: True Correct Answer: False p. 43

21.

Discus entrepreneurship's importance to the economy and society as a whole: Your Answer: A 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:

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-Provide Components -Efficiency -Partnering

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22.

What are the steps of the entrepreneurial process? Your Answer: A Step Step Step Step 1. 2. 3. 4. Deciding to become an entrepreneur Developing successful business ideas Moving from an idea to an entrepreneurial firm Managing and growing the entrepreneurial firm

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Chapter # 2
Recognizing Opportunities and Generating Ideas
Explain why its 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.

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Chapter Quiz
This activity contains 22 questions.
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_____ 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

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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

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What is the first stage of the creativity process?

Incubation 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

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An underutilized source of information for generating business ideas is ________.


the consulting firm the library the focus group 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

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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 False

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

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Studies show that less than a quarter of start-up ideas emerge from a 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?

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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. Your Answer: A niche Correct Answer: An opportunity See p. 69 for more information.

2.

Each of the following are ways to identify an opportunity EXCEPT: Your Answer: observing trends. Correct Answer: trying out alternative uses of existing products. See p. 70 for more information.

3.

Which environmental force pertains most to a trend such as the continual increase in the use of cell phones? Your Answer: economic forces Correct Answer: social forces See p. 73 for more information.

4.

Entrepreneurs can recognize problems and find ways to solve them through each of the following EXCEPT: Your Answer: recognizing problems in emerging trends. Correct Answer: identifying a currently available product or service and then building a business around a better version.

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See p. 76 for more information.

5.

All of the following are characteristics shared by those who excel at recognizing opportunities EXCEPT: Your Answer: brainstorming.

6.

_____ is the process of generating a novel or useful idea. Your Answer: Serendipity Correct Answer: Creativity See p. 83 for more information.

7.

What is the first stage of the creativity process? Your Answer: Incubation Correct Answer: Preparation See p. 83 for more information.

8.

Which technique for generating ideas depends on freewheeling, the carefree expression of ideas free of rules or restraints? Your Answer: focus groups Correct Answer: Brainstorming See p. 85 for more information.

9.

Focus groups usually work best as a ________. Your Answer: follow up to brainstorming

10.

An underutilized source of information for generating business ideas is ________. Your Answer: the consulting firm Correct Answer: the library

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See p. 87 for more information.

11.

An idea is a favorable set of circumstances that creates a need for a new product, service, or business. Your Answer: True Correct Answer: False See p. 70 for more information.

12.

Window of opportunity relates to the time period in which a firm can realistically enter a new market. Your Answer: True

13.

As an entrepreneur, it is important to be aware of changes in trends. Your Answer: True

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. Your Answer: True Correct Answer: False See p. 79 for more information.

15.

Often, entrepreneurs are able to pursue an opportunity even before it is recognized as an opportunity. Your Answer: True Correct Answer: False See p. 81 for more information.

16.

Entrepreneurial alertness is largely a learned skill. Your Answer: True

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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). Your Answer: True

18.

Studies show that less than a quarter of start-up ideas emerge from a person's prior work experience. Your Answer: True Correct Answer: False See p. 81 for more information.

19.

Brainstorming sessions are structured discussions that stay focused on one idea until an opportunity is identified. Your Answer: True Correct Answer: False See p. 85 for more information.

20.

Much of the effectiveness of a focus group session depends on the careful recruiting of over 20 participants. Your Answer: True Correct Answer: False See p. 86 for more information.

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

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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

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Chapter # 3
Feasibility Analysis
Explain what a feasibility analysis is and why its 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 its 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 issues to consider in this area. Explain the importance of financial feasibility analysis and list the most critical issues to consider in this area.

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Chapter Quiz
This activity contains 22 questions.
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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

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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.

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_____ is conducted to determine whether a proposed business has sufficient management expertise, organizational competence, and resources to successfully launch its business.
A marketing plan 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

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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. 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

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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 False

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

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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 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?

Discuss the four step process effective businesses emerge from.

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The most effective businesses emerge from a process that includes each of the following EXCEPT: Your Answer: recognizing a business idea. Correct Answer: securing angel investment. See p. 105 for more information.

2.

Which of the following is an example of primary research? Your Answer: census data Correct Answer: administering surveys See p. 107 for more information.

3.

_____ is an assessment of the overall appeal of the product or service being proposed. Your Answer: Concept testing Correct Answer: Product/service feasibility analysis See p. 107 for more information.

4.

All of the following are normally included in the concept test EXCEPT: Your Answer: detailed financial statements.

5.

All of the following are suitable questions to ascertain Product/Service Desirability EXCEPT: Your Answer: Does it make sense? Correct Answer: Is the product or service financially feasible? See p. 108 for more information.

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6.

All of the following are characteristics of attractive industries EXCEPT: Your Answer: the industry is young. Correct Answer: the industry is crowded. See p. 113 for more information.

7.

_____ is conducted to determine whether a proposed business has sufficient management expertise, organizational competence, and resources to successfully launch its business. Your Answer: A marketing plan Correct Answer: Organizational feasibility analysis See p. 117 for more information.

8.

The ability to obtain intellectual property protection on key aspects of the business is most likely an issue related to _____. Your Answer: financial performance of similar firms Correct Answer: resource sufficiency See p. 117 for more information.

9.

Which of the following is the final step of a comprehensive feasibility analysis? Your Answer: financial feasibility analysis

10.

The projected financial return to assess whether the venture is financially feasible considers each of the following EXCEPT: Your Answer: availability of equity capital.

11.

The process of determining if a business idea is viable is the development of a business plan. Your Answer: True Correct Answer: False

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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. Your Answer: True

13.

A concept test is the first physical depiction of a new product. Your Answer: True Correct Answer: False See p. 108 for more information.

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. Your Answer: True

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. Your Answer: True

16.

An industry is a group of firms producing a similar product or service. Your Answer: True

17.

A target market is a place within a larger market segment that represents a broader group of customers with different needs. Your Answer: True Correct Answer: False See p. 115 for more information.

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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. Your Answer: True

19.

The adequacy of the labor pool poses a resource sufficiency issue. Your Answer: True

20.

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

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

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