Chap008.doc

Chapter 08 - Entrepreneurial Strategy and Competitive Dynamics

Chapter 08 Entrepreneurial Strategy and Competitive Dynamics True / False Questions

1. Small businesses and entrepreneurial firms create the majority of ne jobs in the !. S. economy. "rue #alse

$. %ost small businesses in the !.S. are in retail trade and construction industries. "rue #alse

&. 'pportunity recognition is the process of identifying( selecting( an d developing entrepreneurial opportunities. "rue #alse

). 'pportunity recognition involves to phases of activity* discovery and evaluation. "rue #alse

+. "he evaluation phase of opportunity recognition includes the ,ha, e/perience that often leads to ne venture development. "rue #alse

. "he majority of entrepreneurial start-ups are financed ith personal savings and the contributions of family and friends. "rue #alse

. "he majority of entrepreneurial firms are started ith financing from venture capitalists and ban2s. "rue #alse

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8. ngel investors are private individuals ho provide e3uity investments for seed capital during the early stages of a ne venture. "rue #alse

4. 4 s investors( venture capitalists rarely provide any help or services to entrepreneurial firms other than financing. "rue #alse

10. 5enture 5enture capital funding for entrepreneurial ventures is usually available only after the start-up has become a going concern and established a trac2 record. "rue #alse

11. "he term ,angel investors, refers to private individuals ho provide seed capital to young ventures. "rue #alse

1$. 5enture 5enture capital is a form of public e3uity financing used to help young you ng firms gro rapidly. "rue #alse

1&. "o obtain venture capital financing( business founders often have to give up some onership and control of their business. "rue #alse

1). ccording to the te/t( venture capitalists and angel investors regard the management team as the most important asset of an entrepreneurial venture. "rue #alse

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8. ngel investors are private individuals ho provide e3uity investments for seed capital during the early stages of a ne venture. "rue #alse

4. 4 s investors( venture capitalists rarely provide any help or services to entrepreneurial firms other than financing. "rue #alse

10. 5enture 5enture capital funding for entrepreneurial ventures is usually available only after the start-up has become a going concern and established a trac2 record. "rue #alse

11. "he term ,angel investors, refers to private individuals ho provide seed capital to young ventures. "rue #alse

1$. 5enture 5enture capital is a form of public e3uity financing used to help young you ng firms gro rapidly. "rue #alse

1&. "o obtain venture capital financing( business founders often have to give up some onership and control of their business. "rue #alse

1). ccording to the te/t( venture capitalists and angel investors regard the management team as the most important asset of an entrepreneurial venture. "rue #alse

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1+. 6ecause of the Small S mall 6usiness dministration and government regulations( small businesses are rarely alloed to bid on government contracts. "rue #alse

1. n entry edge( according to the te/t( is a type of entrepreneurial strategy firms can use to enter into business. "rue #alse

1. #ounders using a pioneering ne entry strategy loo2 for opportunities to capitali7e on proven mar2et successes. "rue #alse

18. daptive ne entry involves offering a radical ne product or highly innovative service. "rue #alse

14. ather than fighting over e/isting customers( firms pursuing a ,blue ocean, strategy see2 opportunities in uncontested mar2ets. "rue #alse

$0. ,6lue ocean, strategies rarely provide sustainable advantages because they are easily imitated. "rue #alse

$1. 6ecause ne ventures are typically small( they usually don9t have high economies of scale relative to competitors. "rue #alse

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$$. Entrepreneurial firms are often in a strong position to use combination strategies because they have the fle/ibility to approach situations uni3uely. uni3uely. "rue #alse

$&. Entrepreneurial competitive dynamics refers to a cycle of actions and responses beteen firms competing for the same customers. "rue #alse

$). Entrepreneurial ne entry is often perceived as a competitive threat because most mar2et needs are being met( either directly or indirectly( indirectly( by an e/isting firm. "rue #alse

$+. $+ %ar2et commonality is the e/tent to hich rivals dra from the same types of resources. "rue #alse

$. %ar2et commonality refers to the e/tent to hich competitors are vying for the same customers in the same mar2ets. "rue #alse

$. :hen attac2ed( older and a nd larger firms tend to respond more 3uic2ly( but their responses are often more predictable. "rue #alse

$8. Cutting prices or increasing mar2eting efforts are e/amples of tactical competitive actions. "rue #alse

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$4. ;n the conte/t of competitive dynamics( tactical actions involve major commitments of distinctive and specific resources to strategic initiatives. "rue #alse

&0. efinements or e/tensions of e/isting strategies are often referred to as tactical actions. "rue #alse

&1. #orbearance is a particularly p articularly aggressive type of competitive attac2. "rue #alse

&$. Co-opetition( here competitors or2 together behind the scenes( is a form of illegal tacit collusion. "rue #alse

Multiple Choice Questions

&&. ;n the opening case( iSold ;t( a firm that helped others sell products on e6ay( e6ay( ent from one of the fastest groing franchise businesses to a firm that sa a number of its franchises close and declining sales in a matter of months. :hat as a major challenge iSold ;t faced that led to these problems< . ;t did not have the financial resources to maintain the rapidly groing firm. 6. "he company lac2ed 2noledgeable e/ecutives in 2ey positions. C. ;ts concept as rapidly imitated by others. D. ;t had ea2 operational systems and could not maintain control of the groing netor2 of stores.

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&). ccording to the te/t( for an entrepreneurial start-up to be successful( three ingredients are critical. :hat are they< . good ideas( a team of investors( and a business plan 6. a viable opportunity( available resources( and a 3ualified and motivated founding team C. an opportunity( a mar2eting plan( and office space D. management( mar2eting( and money

&+. :hich of the folloing is a common source of ne business opportunities< . current or past or2 e/periences 6. suggestions by family or friends C. chance event D. all of these

&. & "he process of identifying( selecting( and developing ne venture opportunities is 2non as . innovativeness. 6. bootstrapping. C. opportunity recognition. D. brainstorming.

&. =enerally spea2ing( the opportunity recognition process consists of to phases of activity. "hey are . =lobal Search and ecycling >rofits. 6. 5alue Creation and ffordability. C. Discovery and Evaluation. D. none of these.

&8. :hich of the folloing is ?'" one of the characteristics of an entrepreneurial opportunity< . attractive 6. affordable C. achievable D. value creating

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&4. :hen an opportunity is attractive long enough for it to be successfully developed and deployed( it is said to be . value creating. 6. affordable. C. achievable. D. durable.

)0. :hich of the folloing terms is used to refer to opportunities that are practical and physically possible< . durable 6. valuable C. achievable D. sustainable

)1. #inancing for entrepreneurial start-ups includes hich of the folloing< . investments by family and friends 6. personal savings C. private investors D. all of these

)$. :hich of the folloing sources of entrepreneurial financing are available to ventures that have already started to conduct business and generate sales< . ban2 financing 6. venture capital C. public financing D. all of these

)&. "he majority of entrepreneurial start-ups are financed ith . ban2 financing. 6. public financing @e.g.( S6 loansA. C. venture-capital financing. D. personal savings and the contributions of family and friends.

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)). >rivate individuals ho provide seed capital to young ventures are 2non as . angels. 6. ga7elles. C. cash cos. D. rising stars.

)+. ll of the folloing statements about venture capital are true EBCE>" . entrepreneurs raise venture capital by selling shares of onership in their business. 6. venture capital is a form of public e3uity financing. C. venture capital is used to finance rapid groth or large capital e/penditures. D. venture capital groups can often provide helpful management advice.

). 6ased on statistics reported in the te/t( hich of the folloing statements is #SE< . #irms that obtain venture-capital funding receive an average of over 1 million each. 6. "otal investment in start-up firms averages about 80(000 in the firm9s first year. C. mong the 100 fastest-groing ne businesses identified by Entrepreneur maga7ine( 1 percent obtained start-up funding from personal savings. D. ?inety percent of the companies financed ith venture capital funds fail.

). ccording to the te/t( ne ventures launched by entrepreneurial teams are more li2ely to be successful than ventures launched by . established corporations. 6. bootstrappers. C. ,lone olf, entrepreneurs. D. all of these.

)8. :hich of the folloing types of resources contribute to the success of entrepreneurial firms< . social capital 6. financial resources C. human resources D. ll of these contribute to the success of entrepreneurial firms.

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)4.  provide@sA a 2ey avenue for groth for many young and small firms through partnering to obtain resources andFor e/pand into ne mar2ets. . Strategic alliances 6. 6ootstrappers C. ,one olf, entrepreneurs D. esearch G development

+0. "he !.S. Small 6usiness dministration supports small business through all of the folloing EBCE>" . government contracting. 6. underriting loans. C. investing venture capital. D. training and counseling.

+1. :hich of the folloing is ?'" one of the three characteristics of entrepreneurial leadership mentioned by the te/t< . vision 6. dedication and drive C. commitment to e/cellence D. clarifying job responsibilities

+$. :hy is vision such an important element of entrepreneurial leadership< . 6ecause the entrepreneur has to envision realities that do not yet e/ist. 6. 6ecause a vision statement must be part of the documentation used to obtain venture financing. C. 6ecause organi7ations cannot function ithout a detailed and operational vision. D. ll of these

+&. :hich of the folloing is ?'" a common ne entry strategy according to the te/t< . imitative ne entry 6. adaptive ne entry C. proactive ne entry D. pioneering ne entry

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+). See2ing products or services that have been successful in one mar2et and introducing the same basic product or service in another segment of the mar2et is referred to as . imitative ne entry. 6. adaptive ne entry. C. proactive ne entry. D. pioneering ne entry.

++. :hich of the folloing is ?'" a 2ey element of a blue ocean strategy< . >ursue lo cost and differentiation advantages simultaneously. 6. %a2e the competition irrelevant. C. Highlight incremental improvements to capture mar2et share. D. Create ne demand in uncharted territory.

+. Cir3ue du Soleil is an e/ample of a firm that successfully enacted a ,blue ocean, strategy. :hich of the folloing is a feature of the strategy it enacted< . ;t developed its on musical scores for its circus performances. 6. ;t discontinued traditional parts of the circus( such as animal acts. C. ;t researched customers to learn hat circus features are more in demand. D. ll of these.

+. ,Doing more ith less,( by holding don costs or ma2ing more efficient use of resources is one of the ays entrepreneurs achieve success. "his is an e/ample of ho entrepreneurs use . an imitative strategy. 6. a lo-cost leader strategy. C. a differentiation strategy. D. a combination strategy.

+8. Entrepreneurial firms that pursue a lo-cost leadership strategy use hich of the folloing to achieve loer costs< . cost-saving technology such as the ;nternet 6. simple organi7ational structures C. rapid decision ma2ing D. all of these

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+4. :hen an industry is mature( a  strategy is considered to be one of the most effective approaches for a ne entrant. . focus 6. differentiation C. overall lo-cost D. small business

0. ccording to the te/t( all of the folloing might ma2e it difficult for entrepreneurial firms to effectively pursue a strategy of differentiation EBCE>" . incumbent firms are constantly see2ing opportunities to speciali7e in mar2et niches. 6. differentiation strategies are often e/pensive to enact. C. it may be difficult for a young firm to establish a strong brand identity. D. implementing superior ne technologies may be challenging for entrepreneurial firms.

1. ;ntense rivalry involving actions and responses among similar competitors vying for the same customers in a mar2etplace is 2non as . competitive dynamics. 6. resource similarity. C. threat of substitutes. D. pioneering ne entry.

$. :hich of the folloing is ?'" one of the reasons a company might launch ne competitive actions< . to obtain first mover advantages 6. to improve mar2et position C. to capitali7e on groing demand D. to find ne sources of ra materials

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&. ?etfli/ CE' eed Hastings made this important observation about dealing ith rivals* . ,;n a highly competitive mar2etplace( firms must be paranoid about the multitude of potential rivals., 6. ,Iou can afford to ignore rivals in small mar2ets( but you can never ignore rivals in large mar2ets( such as online video companies li2e Iou"ube., C. ,"here are tens and maybe hundreds of start-ups ho thin2 that they are going to eat ?etfli/9s lunch. "he challenge for a management team is to figure out hich are real threats and hich aren9t., D. ,?etfli/9s position is so strong that ; don9t orry about ne entrants.,

). ircraft ma2ers 6oeing and irbus have a high degree of  because they ma2e very similar products and have many buyers in common. . dynamic capabilities 6. mar2et commonality C. first mover advantages D. e3uity funding

+. "he :all Street Journal and the ?e Ior2 "imes have seen the intensity of their rivalry increase. 'ne factor driving this is that the :all Street Journal has moved from financial nes reporting to general national and global nes reporting and finally( to adding local ?e Ior2 nes. "he rivalry of these to nes providers has increased due to . increased dynamic capabilities. 6. increased mar2et commonality. C. erosion of first mover advantages. D. the choice of tactical over strategic actions.

. :hich of the folloing 3uestions should a firm as2 itself before responding to a competitive attac2< . Ho serious is the impact of the attac2< 6. :hat is our competitive intentKdo e ant to blunt the attac2 or enhance our competitive position ith our response< C. :hat resources do e have available for a response< D. ll of these.

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. :hich of the belo best describes the competitive tendencies of small firms< . 6ecause they lac2 legitimacy in the mar2etplace( small firms tend to signal their competitive actions long before they launch those actions. 6. Small firms typically have more resources available as they underta2e competitive attac2s than do large firms. C. Small firms are more nimble and can respond 3uic2ly to competitive attac2s. D. ll of these.

8. Cirrus ircraft( a leading manufacturer of small airplanes( sees a mar2et opportunity and has decided to double its plant capacity over the ne/t to years. :hat type of competitive action does this represent< .  tactical action because the move is an attempt to fill a gap in service. 6.  strategic action because such a large plant e/pansion ill re3uire a major commitment o f resources. C.  strategic action because the firm can easily reverse the action at any time( thus giving Cirrus more strategic fle/ibility. D.  guerilla offensive because it is fast and ill surprise its rivals.

4. ll of the folloing are e/amples of strategic actions a firm might ta2e EBCE>" . ac3uire ith competitors to reduce competition. 6. e/pand into neglected mar2ets. C. change product pac2aging. D. tie up ra materials sources.

0. "he best e/ample of a tactical action that a company might use in response to a competitive attac2 is to . ac3uire the competitor. 6. target the rival9s mar2ets. C. e/pand into ne geographical areas. D. offer price discounts and rebates.

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1. ll of the belo are factors that affect ho a competitor ill respond to a competitive attac2 EBCE>" . ho dependent the competitor is on that industry or particular mar2et segment. 6. the degree of mar2et poer and reputation of the company that initiated the attac2. C. the resources hich are available for a firm to respond. D. the stoc2 mar2et reaction to the initial competitive attac2.

$. :hich of the folloing refers to a situation here a company has a high concentration of its business in a particular industry9s mar2et< . competitor9s resources 6. mar2et dependence C. resource similarity D. actor9s reputation

&.  firm is considering a large price cut on its leading product as a ay to gain mar2et share. 'ne e/ecutive strongly disagrees ith the price cut and states( ,:e are in the same mar2etplace as our rivals( and e do not have any competitive advantages in our cost structure. ;f e cut prices( our competitors ill li2ely do the same. "he end result is that e ill all ma2e less money., "hese arguments are an e/ample of . a strategy of forbearance. 6. a strategy of co-opetition. C. a hardball strategy hereby competitive actions are not underta2en ithout a clear advantage. D. a ea2ness strategy that leads a company into constant decline.

Essay Questions

). :hat is the role of opportunity recognition in the ne venture development process<

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+. Discuss the four characteristics of an entrepreneurial opportunity. E/plain hy each is important for the opportunity to be viable.

. Discuss the role of informal investments versus venture-capital financing as it is used by entrepreneurial ventures. :hat are the advantages and disadvantages of each type<

. :hat are the advantages and disadvantages of using venture capital to finance ne ventures<

8. 8 ;n hat ays are human capital and social capital valuable to an entrepreneurial startup< >rovide e/amples of each.

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4. Compare and contrast the three most common ne venture entry strategies* pioneering( imitative( and adaptive.

80. Define the term ,competitive dynamics., "hen( describe the cycle of actions and responses that are characteristic of a competitive dynamics process.

81. Compare and contrast mar2et commonality and resource similarity.

8$. ccording to competitive dynamics( competitors are more li2ely to respond hen attac2ed in a mar2et here the competitor relies on that mar2et for a large portion of its sales. :hy is this so< "hat is( hat ,dynamic, is at or2 in this situation that ould cause that response<

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8&. :hat are the differences beteen strategic actions and tactical actions< :hat are the implications of each approach to the competitive dynamics process<

8). ;n the conte/t of competitive dynamics( hat factors determine the li2elihood of a competitive response<

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Chapter 08 Entrepreneurial Strategy and Competitive Dynamics nser Ley

True / False Questions

1. (p. 281) Small businesses and entrepreneurial firms create the majority of ne jobs in the !. S. economy. TRE Ioung and small firms are responsible for more innovations and more ne job creation than any other type of business.

AACSB: Analytic Blooms: Understand Learning Obecti!e: "8#"1 $%e role o& ne' !entres and small bsinesses in t%e U.S. economy. Le!el o& i&&iclty: 2 *edim $opic: +ec ogni,ing -ntreprenerial Opportnities

$. (p. 282) %ost small businesses in the !.S. are in retail trade and construction industries. F!"SE "hough construction and retail trade are among the largest segments in small business( they still ma2e up only about $+M of all !S small companies.


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&. (p. 281 28/) 'pportunity recognition is the process of identifying( selecting( and developing entrepreneurial opportunities. TRE "o determine hich ideas are strong enough to become ne ventures( entrepreneurs must go through a process of identifying( selecting( and developing potential opportunities. "his is the process of opportunity recognition.

AACSB: Analytic Blooms: +emember Learning Obecti!e: "8#"2 $%e role o& opportnities0 resorces0 and entrepreners in sccess&lly prsing ne' !entres. Le!el o& i&&iclty: 1 -asy $opic: +ec ogni,ing -ntreprenerial Opportnities

). (p. 28/) 'pportunity recognition involves to phases of activity* discovery and evaluation. TRE 'pportunity recognition refers to more than just the ,Eure2a, feeling that people sometimes e/perience at the moment they identify a ne idea. lthough such insights are often very important( the opportunity recognition process involves to phases of activity( discovery and evaluation( that lead to viable ne venture opportunities.


+. (p. 28/) "he evaluation phase of opportunity recognition includes the ,ha, e/perience that often leads to ne venture development. F!"SE "he discovery phase refers to the process of becoming aare of a ne business concept. %any entrepreneurs report that their idea for a ne venture occurred to them in an instant( as a sort of ,ha, e/perienceKthat is( they had some insight or epiphany( often based on their prior 2noledge( that gave them an idea for a ne business.

AACSB: Analytic Blooms: Understand Learning Obecti!e: "8#"2 $%e role o& opportnities0 resorces0 and entrepreners in sccess&lly prsing ne' !entres. Le!el o& i&&iclty: 2 *edim $opic: +ec ogni,ing -ntreprenerial Opportnities

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. (p. 28) "he majority of entrepreneurial start-ups are financed ith p ersonal savings and the contributions of family and friends. TRE "he funding available to young and small firms tends to be 3uite limited. ;n fact( the majority of ne firms are lo-budget start-ups launched ith personal savings and the contributions of family and friends.


. (p. 28) "he majority of entrepreneurial firms are started ith financing from venture capitalists and ban2s. F!"SE "he funding available to young and small firms tends to be 3uite limited. ;n fact( the majority of ne firms are lo-budget start-ups launched ith personal savings and the contributions of family and friends.


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8. (p. 28) ngel investors are private individuals ho provide e3uity investments for seed capital during the early stages of a ne venture. TRE lthough ban2 financing( public financing( and venture capital are important sources of small business finance( these types of financial support are typically available only after a company has started to conduct business and generate sales. Even ,angel, investors( private individuals ho provide e3uity investments for seed capital during the early stages of a ne venture( favor companies that already have a inning business model and dominance in a mar2et niche.


4. (p. 283) 4 s investors( venture capitalists rarely provide any help or services to entrepreneurial firms other than financing. F!"SE 5enture capitalists nearly alays have high performance e/pectations from the companies they invest in( but they also provide important managerial advice and lin2s to 2ey contacts in an industry.


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10. (p. 288#283) 5enture capital funding for entrepreneurial ventures is usually available only after the start-up has become a going concern and established a trac2 record. TRE 'nce a venture has established itself as a going concern( other sources of financing become readily available. 6an2s( for e/ample( are more li2ely to provide later-stage financing to companies ith a trac2 record of sales or other cash-generating activity. Start-ups that involve large capital investments or e/tensive development costs or those on the brin2 of rapid groth often see2 venture capital.


11. (p. 283) "he term ,angel investors, refers to private individuals ho p rovide seed capital to young ventures. TRE ;n contrast to angel investors( ho invest their on money( venture capital companies are organi7ed to place the funds of private investors into lucrative business opportunities.


1$. (p. 283) 5enture capital is a form of public e3uity financing used to help young firms gro rapidly. F!"SE 5enture capital is a form of private e3uity financing through hich entrepreneurs raise money by selling shares in the ne venture.


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1&. (p. 283) "o obtain venture capital financing( business founders often have to give up some onership and control of their business. TRE 5enture capital is a form of private e3uity financing through hich entrepreneurs raise money by selling shares in the ne venture.


1). (p. 283) ccording to the te/t( venture capitalists and angel investors regard the management team as the most important asset of an entrepreneurial venture. TRE 6an2ers( venture capitalists( and angel investors agree that the most important asset an entrepreneurial firm can have is strong and s2illed management.


1+. (p. 23") 6ecause of the Small 6usiness dministration and government regulations( small businesses are rarely alloed to bid on government contracts. F!"SE  2ey area of support for small business is in government contracting. >rograms sponsored by the S6 and other government agencies ensure that small businesses have the opportunity to bid on contracts to provide goods and services to the government.


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1. (p. 234) n entry edge( according to the te/t( is a type of entrepreneurial strategy firms can use to enter into business. TRE 'ne of the most challenging aspects of launching a ne venture is finding a ay to begin doing business that 3uic2ly generates cash flo( builds credibility( attracts good employees( and overcomes the liability of neness. "he idea of an entry strategy or ,entry edge, describes several approaches that firms may ta2e to get a foothold in a mar2et.

AACSB: Analytic Blooms: +emember Learning Obecti!e: "8#"4 $%ree types o& entry strategies#pioneering0 imitati!e0 and adapti!e#commonly sed to lanc% a ne' !entre. Le!el o& i&&iclty: 1 -asy $opic: -ntreprenerial Strategy

1. (p. 234) #ounders using a pioneering ne entry strategy loo2 for opportunities to capitali7e on proven mar2et successes. F!"SE n imitative ne entry strategy is used by entrepreneurs hen they loo2 for opportunities to capitali7e on proven mar2et successes. ?e entrants ith a radical ne product or highly innovative service may change the ay business is conducted in an industry. "his 2ind of brea2through( creating ne ays to solve old problems or meeting customers9 needs in a uni3ue ne ay( is referred to as a pioneering ne entry.


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18. (p. 234) daptive ne entry involves offering a radical ne product or highly innovative service. F!"SE ?e entrants ith a radical ne product or highly innovative service may change the ay business is conducted in an industry. "his 2ind of brea2through( creating ne ays to solve old problems or meeting customers9 needs in a uni3ue ne ay( is referred to as a pioneering ne entry.


14. (p. 23) ather than fighting over e/isting customers( firms pursuing a ,blue ocean, strategy see2 opportunities in uncontested mar2ets. TRE ;n their ne boo2 6lue 'cean Strategy( :.Chan Lim and enee %auborgne conclude that companies that are illing to venture into mar2et spaces here there is little or no competition( labeled ,blue oceans,( ill outperform those firms that limit groth to incremental improvements in competitively croded industries( labeled ,red oceans.,


8-$+


$0. (p. 23) ,6lue ocean, strategies rarely provide sustainable advantages because they are easily imitated. F!"SE 'nce created( a blue ocean strategy is difficult to imitate. ;f customers floc2 to blue ocean creators( firms rapidly achieve economies of scale( learning ad vantages( and synergies across their organi7ational systems.

AACSB: Analytic Blooms: Understand Learning Obecti!e: "8#"4 $%ree types o& entry strategies#pioneering0 imitati!e0 and adapti!e#commonly sed to lanc% a ne' !entre. Le!el o& i&&iclty: 2 *edim $opic: -ntreprenerial Strategy

$1. (p. 23) 6ecause ne ventures are typically small( they usually don9t have high economies of scale relative to competitors. TRE 6ecause ne ventures are typically small( they usually don9t have high economies of scale relative to competitors. "his means that ne firms must see2 a different approach if they ish to pursue a cost-leadership strategy.

AACSB: Analytic Blooms: Understand Learning Obecti!e: "8#"/ 5o' t%e generic strategies o& o!erall cost leaders%ip0 di&&erentiation0 and &ocs are sed by ne' !entres and small bsinesses. Le!el o& i&&iclty: 2 *edim $opic: -ntreprenerial Strategy

8-$


$$. (p. 233) Entrepreneurial firms are often in a strong position to use combination strategies because they have the fle/ibility to approach situations uni3uely. TRE Entrepreneurial firms are often in a strong position to offer a combination strategy because they have the fle/ibility to approach situations uni3uely. #or e/ample( holding don e/penses can be difficult for big firms because each layer of bureaucracy adds to the cost of doing business across the boundaries of a large organi7ation.


$&. (p. 4"") Entrepreneurial competitive dynamics refers to a cycle of actions and responses beteen firms competing for the same customers. TRE Competitive dynamics is intense rivalry( involving actions and responses( among similar competitors vying for the same customers in a mar2etplace.

AACSB: Analytic Blooms: +emember Learning Obecti!e: "8#"6 5o' competiti!e actions0 sc% as t%e entry o& ne' competitors into a mar7etplace0 may lanc% a cycle o& actions and reactions among close competitors. Le!el o& i&&iclty: 1 -asy $opic: Competiti!e ynamics

8-$


$). (p. 233#4"") Entrepreneurial ne entry is often perceived as a competitive threat because most mar2et needs are being met( either directly or indirectly( by an e/isting firm. TRE ?e entry into mar2ets( hether by start-ups or by incumbent firms( nearly alays threatens e/isting competitors. "his is true in part because nearly every mar2et need is already being met( either directly or indirectly( by e/isting firms. s a result( the competitive actions of a ne entrant are very li2ely to provo2e a competitive response from companies that feel threatened. "his( in turn( is li2ely to evo2e a reaction to the response.

AACSB: Analytic Blooms: Understand Learning Obecti!e: "8#"6 5o' competiti!e actions0 sc% as t%e entry o& ne' competitors into a mar7etplace0 may lanc% a cycle o& actions and reactions among close competitors. Le!el o& i&&iclty: 2 *edim $opic: Competiti!e ynamics

$+. (p. 4"2) $+ %ar2et commonality is the e/tent to hich rivals dra from the same types of resources. F!"SE %ar2et commonality is hether or not competitors are vying for the same customers and ho many mar2ets they share in common. esource similarity is the degree to hich rivals dra on the same types of resources to compete.

AACSB: Analytic Blooms: +emember Learning Obecti!e: "8#" $%e components o& competiti!e dynamics analysis#ne' competiti!e action0 t%reat analysis0 moti!ation and capability to respond0 types o& competiti!e act ions0 and li7eli%ood o& competiti!e reaction. Le!el o& i&&iclty: 1 -asy $opic: Competiti!e ynamics

8-$8


$. (p. 4"2) %ar2et commonality refers to the e/tent to hich competitors are vying for the same customers in the same mar2ets. TRE %ar2et commonality is hether or not competitors are vying for the same customers and ho many mar2ets they share in common. #or e/ample( aircraft manufacturers 6oeing and irbus have a high degree of mar2et commonality because they ma2e very similar products and have many buyers in common.


$. (p. 4"/) :hen attac2ed( older and larger firms tend to respond more 3uic2ly( but their responses are often more predictable. F!"SE 'lder and larger firms may have more resources and a repertoire of competitive techni3ues they can use in a counterattac2. arge firms( hoever( tend to be sloer to respond. 'lder firms tend to be predictable in their responses because they often lose touch ith the competitive environment and rely on strategies and actions that have or2ed in the past.

AACSB: Analytic Blooms: Understand Learning Obecti!e: "8#" $%e components o& competiti!e dynamics analysis#ne' competiti!e action0 t%reat analysis0 moti!ation and capability to respond0 types o& competiti!e act ions0 and li7eli%ood o& competiti!e reaction. Le!el o& i&&iclty: 2 *edim $opic: Competiti!e ynamics

8-$4


$8. (p. 4") Cutting prices or increasing mar2eting efforts are e/amples of tactical competitive actions. TRE "o broadly defined types of competitive action include strategic actions and tactical actions. "actical actions include refinements or e/tensions of strategies. E/amples of tactical actions include cutting prices( improving gaps in service( or strengthening mar2eting efforts. Such actions typically dra on general resources and can be implemented 3uic2ly.


$4. (p. 4") ;n the conte/t of competitive dynamics( tactical actions involve major commitments of distinctive and specific resources to strategic initiatives. F!"SE "o broadly defined types of competitive action include strategic actions and tactical actions. Strategic actions represent major commitments of distinctive and specific resources. Such actions re3uire significant planning and resources and( once initiated( are difficult to reverse.


8-&0


&0. (p. 4") efinements or e/tensions of e/isting strategies are often referred to as tactical actions. TRE "o broadly defined types of competitive action include strategic actions and tactical actions. "actical actions include refinements or e/tensions of strategies. E/amples of tactical actions include cutting prices( improving gaps in service( or strengthening mar2eting efforts. Such actions typically dra on general resources and can be implemented 3uic2ly.


&1. (p. 4"3) #orbearance is a particularly aggressive type of competitive attac2. F!"SE "here may be many circumstances in hich the best reaction is no reaction at all. "his is 2non as forbearance( refraining from reacting at all as ell as holding bac2 from initiating an attac2.


8-&1


&$. (p. 4"3) Co-opetition( here competitors or2 together behind the scenes( is a form of illegal tacit collusion. F!"SE Co-opetition is a term that as coined by netor2 softare company ?ovell9s founder and former CE' aymond ?oorda to suggest that companies often benefit most from a combination of competing and cooperating. Close competitors that differentiate themselves in the eyes of consumers may or2 together behind the scenes to achieve industryide efficiencies.


Multiple Choice Questions

&&. (p. 28") ;n the opening case( iSold ;t( a firm that helped others sell products on e6ay( ent from one of the fastest groing franchise businesses to a firm that sa a number of its franchises close and declining sales in a matter of months. :hat as a major challenge iSold ;t faced that led to these problems< . ;t did not have the financial resources to maintain the rapidly groing firm. 6. "he company lac2ed 2noledgeable e/ecutives in 2ey positions. C# ;ts concept as rapidly imitated by others. D. ;t had ea2 operational systems and could not maintain control of the groing netor2 of stores. iSold ;t overestimated customer illingness to pay an intermediary $0-&0 percent of the sales price for the convenience of listing their products and collecting the money. nd ith lo barriers to entry in this industry( many copycat firms 3uic2ly entered the mar2et. ;n early $00( iSold ;t stopped selling ne franchises and is 3uic2ly losing the ones they sold.


8-&$


&). (p. 281) ccording to the te/t( for an entrepreneurial start-up to be successful( three ingredients are critical. :hat are they< . good ideas( a team of investors( and a business plan $# a viable opportunity( available resources( and a 3ualified and motivated founding team C. an opportunity( a mar2eting plan( and office space D. management( mar2eting( and money 6eyond merely identifying a venture concept( the opportunity recognition process also involves organi7ing the 2ey people and resources that are needed to go forard. E/hibit 8.& depicts the three factors that are needed to successfully proceedKopportunity( resources( and entrepreneur@sA.


&+. (p. 281) :hich of the folloing is a common source of ne business opportunities< . current or past or2 e/periences 6. suggestions by family or friends C. chance event D# all of these #or ne business start-ups( opportunities come from many sourcesKcurrent or past or2 e/periences( hobbies that gro into businesses or lead to inventions( suggestions by friends or family( or a chance event that ma2es an entrepreneur aare of an unmet need.


8-&&


&. (p. 281 28/) & "he process of identifying( selecting( and developing ne venture opportunities is 2non as . innovativeness. 6. bootstrapping. C# opportunity recognition. D. brainstorming. "o determine hich ideas are strong enough to become ne ventures( entrepreneurs must go through a process of identifying( selecting( and developing potential opportunities. "his is the process of opportunity recognition.


&. (p. 28/) =enerally spea2ing( the opportunity recognition process consists of to phases of activity. "hey are . =lobal Search and ecycling >rofits. 6. 5alue Creation and ffordability. C# Discovery and Evaluation. D. none of these. 'pportunity recognition refers to more than just the ,Eure2a, feeling that people sometimes e/perience at the moment they identify a ne idea. lthough such insights are often very important( the opportunity recognition process involves to phases of activity( discovery and evaluation( that lead to viable ne venture opportunities.


8-&)


&8. (p. 28) :hich of the folloing is ?'" one of the characteristics of an entrepreneurial opportunity< . attractive $# affordable C. achievable D. value creating #or an opportunity to be viable( it needs to have four 3ualities* attractive( achievable( durable( and value creating.


&4. (p. 28) :hen an opportunity is attractive long enough for it to be successfully developed and deployed( it is said to be . value creating. 6. affordable. C. achievable. D# durable. #or an opportunity to be viable( it needs to have four 3ualities( one of hich is durable. "his means the opportunity must be attractive long enough for the development and deployment to be successfulN that is( the indo of opportunity must be open long enough for it to be orthhile.


8-&+


)0. (p. 28) :hich of the folloing terms is used to refer to opportunities that are practical and physically possible< . durable 6. valuable C# achievable D. sustainable #or an opportunity to be viable( it needs to have four 3ualities( one of hich is achievable. "his means the opportunity must be practical and physically possible.


)1. (p. 28#28) #inancing for entrepreneurial start-ups includes hich of the folloing< . investments by family and friends 6. personal savings C. private investors D# all of these "he majority of ne firms are lo-budget start-ups launched ith personal savings and the contributions of family and friends. ,ngel, investors( private individuals ho provide e3 uity investments for seed capital during the early stages of a ne venture( favor companies that already have a inning business model and dominance in a mar2et niche.


8-&


)$. (p. 28) :hich of the folloing sources of entrepreneurial financing are available to ventures that have already started to conduct business and generate sales< . ban2 financing 6. venture capital C. public financing D# all of these lthough ban2 financing( public financing( and venture capital are important sources of small business finance( these types of financial support are typically available only after a company has started to conduct business and generate sales.


)&. (p. 28) "he majority of entrepreneurial start-ups are financed ith . ban2 financing. 6. public financing @e.g.( S6 loansA. C. venture-capital financing. D# personal savings and the contributions of family and friends. "he majority of ne firms are lo-budget start-ups launched ith personal savings and the contributions of family and friends.


8-&


)). (p. 28) >rivate individuals ho provide seed capital to young ventures are 2non as !# angels. 6. ga7elles. C. cash cos. D. rising stars. ,ngel, investors( private individuals ho provide e3uity investments for seed capital during the early stages of a ne venture( favor companies that already have a inning business model and dominance in a mar2et niche.


)+. (p. 288#283) ll of the folloing statements about venture capital are true EBCE>" . entrepreneurs raise venture capital by selling shares of onership in their business. $# venture capital is a form of public e3uity financing. C. venture capital is used to finance rapid groth or large capital e/penditures. D. venture capital groups can often provide helpful management advice. Start-ups that involve large capital investments or e/tensive development costs may see2 venture capital( a form of private e3uity financing through hich entrepreneurs raise money by selling shares in the ne venture. 5enture capitalists nearly alays have high performance e/pectations from the companies they invest in( but they also provide important managerial advice and lin2s to 2ey contacts in an industry.


8-&8


). (p. 28#283) 6ased on statistics reported in the te/t( hich of the folloing statements is #SE< . #irms that obtain venture-capital funding receive an average of over 1 million each. 6. "otal investment in start-up firms averages about 80(000 in the firm9s first year. C. mong the 100 fastest-groing ne businesses identified by Entrepreneur maga7ine( 1 percent obtained start-up funding from personal savings. D# ?inety percent of the companies financed ith venture capital funds fail. mong firms included in the Entrepreneur list of the 100 fastest-groing ne businesses in a recent year( 1 percent reported that their start-up funds came from personal savings. :hen firms receive venture-capital investments( they receive a substantial level of investment( over 1 million on average in the Laufmann #oundation survey. ccording to E/hibit 8.)( the total average capital invested in a start-up firm is about 80(000.


). (p. 283) ccording to the te/t( ne ventures launched by entrepreneurial teams are more li2ely to be successful than ventures launched by . established corporations. 6. bootstrappers. C# ,lone olf, entrepreneurs. D. all of these. %anagers need to have a strong base of e/perience( e/tensive domain 2noledge( and an ability to ma2e rapid decisions and change direction as needed. ;n the case of start-ups( more is better. ?e ventures that are started by teams of three( four( or five entrepreneurs are more li2ely to succeed in the long run than are ventures launched by ,lone olf, entrepreneurs.


8-&4


)8. (p. 28) :hich of the folloing types of resources contribute to the success of entrepreneurial firms< . social capital 6. financial resources C. human resources D# ll of these contribute to the success of entrepreneurial firms. esources are an essential component of a successful entrepreneurial launch. #or start-ups( the most important resource is usually money because a ne firm typically has to e/pend substantial sums just to start the business. Hoever( financial resources are not the only 2ind of resource a ne venture needs. Human capital and social capital are also important.


)4. (p. 231)  provide@sA a 2ey avenue for groth for many young and small firms through partnering to obtain resources andFor e/pand into ne mar2ets. !# Strategic alliances 6. 6ootstrappers C. ,one olf, entrepreneurs D. esearch G development Strategic alliances provide a 2ey avenue for groth by entrepreneurial firms. 6y partnering ith other companies( young or small firms can e/pand or give the appearance of entering numerous mar2ets andFor handling a range of operations.


8-)0


+0. (p. 23") "he !.S. Small 6usiness dministration supports small business through all of the folloing EBCE>" . government contracting. 6. underriting loans. C# investing venture capital. D. training and counseling. ;n the !.S.( the federal government provides support for entrepreneurial firms in to 2ey arenas( financing and government contracting. "he Small 6usiness dministration @S6A has several loan guarantee programs designed to support the groth and development of entrepreneurial firms. "he government itself does not typically lend money bu t underrites loans made by ban2s to small businesses. "he S6 also offers training( counseling( and support services through its local offices and Small 6usiness Development Centers.


+1. (p. 23") :hich of the folloing is ?'" one of the three characteristics of entrepreneurial leadership mentioned by the te/t< . vision 6. dedication and drive C. commitment to e/cellence D# clarifying job responsibilities Entrepreneurs put themselves to the test and get their satisfaction from acting independently( overcoming obstacles( and thriving financially. "o do so( they must embody three characteristics of leadership* vision( dedication and drive( and commitment to e/cellence.


8-)1


+$. (p. 23") :hy is vision such an important element of entrepreneurial leadership< !# 6ecause the entrepreneur has to envision realities that do not yet e/ist. 6. 6ecause a vision statement must be part of the documentation used to obtain venture financing. C. 6ecause organi7ations cannot function ithout a detailed and operational vision. D. ll of these 5ision may be an entrepreneur9s most important asset. Entrepreneurs envision realities that do not yet e/ist. :ithout a vision( most entrepreneurs ould never even get their venture off the ground.


+&. (p. 234) :hich of the folloing is ?'" a common ne entry strategy according to the te/t< . imitative ne entry 6. adaptive ne entry C# proactive ne entry D. pioneering ne entry #or a ne venture( the entry strategy ill vary depending on ho ris2y and innovative the ne business concept is. ?e-entry strategies typically fall into one of three categories* pioneering ne entry( imitative ne entry( or adaptive ne entry.


8-)$


+). (p. 234) See2ing products or services that have been successful in one mar2et and introducing the same basic product or service in another segment of the mar2et is referred to as !# imitative ne entry. 6. adaptive ne entry. C. proactive ne entry. D. pioneering ne entry. ;mitators loo2 for opportunities to capitali7e on proven mar2et successes. n imitative ne entry strategy is used by entrepreneurs ho see products or business concepts that have been successful in one mar2et niche or physical locale and introduce the same basic product or service in another segment of the mar2et.


++. (p. 23) :hich of the folloing is ?'" a 2ey element of a blue ocean strategy< . >ursue lo cost and differentiation advantages simultaneously. 6. %a2e the competition irrelevant. C# Highlight incremental improvements to capture mar2et share. D. Create ne demand in uncharted territory. Companies that identify and pursue blue ocean strategies follo somehat different rules than those that are ,bloodied, by the competitive practices in red oceans. "hese include* creating uncontested mar2et space( ma2ing the competition irrelevant( creating and capturing ne demand( brea2ing the valueFcost trade-off( and pursuing differentiation and lo cost simultaneously.


8-)&


+. (p. 23) Cir3ue du Soleil is an e/ample of a firm that successfully enacted a ,blue ocean, strategy. :hich of the folloing is a feature of the strategy it enacted< . ;t developed its on musical scores for its circus performances. 6. ;t discontinued traditional parts of the circus( such as animal acts. C. ;t researched customers to learn hat circus features are more in demand. D# ll of these. Cir3ue 3uestioned the traditional circus formula and researched ha t audiences really anted. ;t found that interest in animal acts as declining( in part because of public concerns over the treatment of circus animals. 6ecause managing animals as costly( Cir3ue eliminated them. Cir3ue offers multiple productions ith theatrical story lines( giving audiences a reason to go to the circus more often. Each production has a different theme and its on original musical score.


+. (p. 23) ,Doing more ith less,( by holding don costs or ma2ing more efficient use of resources is one of the ays entrepreneurs achieve success. "his is an e/ample of ho entrepreneurs use . an imitative strategy. $# a lo-cost leader strategy. C. a differentiation strategy. D. a combination strategy. 'ne of the ays entrepreneurial firms achieve success is by doing more ith less. 6y holding don costs or ma2ing more efficient use of resources than larger competitors( ne ventures are often able to offer loer prices and still be profitable. "hus( under the right circumstances( a lo-cost leader strategy is a viable alternative for some ne ventures.


8-))


+8. (p. 23) Entrepreneurial firms that pursue a lo-cost leadership strategy use hich of the folloing to achieve loer costs< . cost-saving technology such as the ;nternet 6. simple organi7ational structures C. rapid decision ma2ing D# all of these Compared to large firms( ne ventures often have simple organi7ational structures that ma2e decision ma2ing both easier and faster. "he smaller si7e also helps young firms change more 3uic2ly hen upgrades in technology or feedbac2 from the mar2etplace indicate that improvements are needed.


+4. (p. 238#233) :hen an industry is mature( a  strategy is considered to be one of the most effective approaches for a ne entrant. !# focus 6. differentiation C. overall lo-cost D. small business %ost start-ups enter industries that are mature( here groth in demand tends to be slo and there are often many competitors. ;f a start-up ants to get a piece of the action( it often has to ta2e business aay from an e/isting competitor. ;f a start-up enters a mar2et ith a broad or aggressive strategy( it is li2ely to evo2e retaliation from a more poerful competitor. Ioung firms can often succeed best by finding a mar2et niche here they can get a foothold.


8-)+


0. (p. 238) ccording to the te/t( all of the folloing might ma2e it difficult for entrepreneurial firms to effectively pursue a strategy of differentiation EBCE>" !# incumbent firms are constantly see2ing opportunities to speciali7e in mar2et niches. 6. differentiation strategies are often e/pensive to enact. C. it may be difficult for a young firm to establish a strong brand identity. D. implementing superior ne technologies may be challenging for entrepreneurial firms. "here are several factors that ma2e it more difficult for ne ventures to be successful as differentiators. #or one thing( the strategy is generally thought to be e/pensive to enact. Differentiation is often associated ith strong brand identity( and establishing a brand is usually considered to be e/pensive because of the cost of advertising and promotion( paid endorsements( e/ceptional customer service( etc. Differentiation successes are sometimes built on superior innovation or use of technology.


1. (p. 4"") ;ntense rivalry involving actions and responses among similar competitors vying for the same customers in a mar2etplace is 2non as !# competitive dynamics. 6. resource similarity. C. threat of substitutes. D. pioneering ne entry. Competitive dynamics is the term for an intense rivalry( involving actions and responses( among similar competitors vying for the same customers in a mar2etplace.

AACSB: Analytic Blooms: +emember Learning Obecti!e: "8#"6 5o' competiti!e actions0 sc% as t%e entry o& ne' competitors into a mar7etplace0 may lanc% a cycle o& actions and reactions among close competitors. Le!el o& i&&iclty: 1 -asy $opic: Competiti!e ynamics

8-)


$. (p. 4"1) :hich of the folloing is ?'" one of the reasons a company might launch ne competitive actions< . to obtain first mover advantages 6. to improve mar2et position C. to capitali7e on groing demand D# to find ne sources of ra materials "here are several reasons hy companies launch ne competitive actions( including to improve mar2et position( capitali7e on groing demand( e/pand production capacity( provide an innovative ne solution( or obtain first mover advantages.


&. (p. 4"2) ?etfli/ CE' eed Hastings made this important observation about dealing ith rivals* . ,;n a highly competitive mar2etplace( firms must be paranoid about the multitude of potential rivals., 6. ,Iou can afford to ignore rivals in small mar2ets( but you can never ignore rivals in large mar2ets( such as online video companies li2e Iou"ube., C# ,"here are tens and maybe hundreds of start-ups ho thin2 that they are going to eat ?etfli/9s lunch. "he challenge for a management team is to figure out hich are real threats and hich aren9t., D. ,?etfli/9s position is so strong that ; don9t orry about ne entrants., ?etfli/ founder and CE' eed Hastings has faced numerous competitive threats since launching the online movie rental company in 144. ccording to Hastings( hoever( not all potential threats need to be ta2en seriously* ,:e have to recogni7e that no there are tens and maybe hundreds of start-ups ho thin2 that they are going to eat ?etfli/9s lunch. "he challenge for a management team is to figure out hich are real threats and hich aren9t. . . . ;t9s conventional to say( ,only the paranoid survive, but that9s not true. "he paranoid die because the paranoid ta2e all threats as serious and get very distracted.,


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). (p. 4"2) ircraft ma2ers 6oeing and irbus have a high degree of  because they ma2e very similar products and have many buyers in common. . dynamic capabilities $# mar2et commonality C. first mover advantages D. e3uity funding %ar2et commonality is hether or not competitors are vying for the same customers and ho many mar2ets they share in common. #or e/ample( aircraft manufacturers 6oeing and irbus have a high degree of mar2et commonality because they ma2e very similar products and have many buyers in common.


+. (p. 4"2#4"6) "he :all Street Journal and the ?e Ior2 "imes have seen the intensity of their rivalry increase. 'ne factor driving this is that the :all Street Journal has moved from financial nes reporting to general national and global nes reporting and finally( to adding local ?e Ior2 nes. "he rivalry of these to nes providers has increased due to . increased dynamic capabilities. $# increased mar2et commonality. C. erosion of first mover advantages. D. the choice of tactical over strategic actions. %ar2et commonality is hether or not competitors are vying for the same customers and ho many mar2ets they share in common. Here( the changes to the :all Street Journal9s reporting means the to nespapers are no competing for the same customers.


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. (p. 4"2 4") :hich of the folloing 3uestions should a firm as2 itself before responding to a competitive attac2< . Ho serious is the impact of the attac2< 6. :hat is our competitive intentKdo e ant to blunt the attac2 or enhance our competitive position ith our response< C. :hat resources do e have available for a response< D# ll of these. %ar2et commonality is hether or not competitors are vying for the same customers and ho many mar2ets they share in common. #or e/ample( chipma2ers ;ntel and dvanced %icro Devices @%DA have fought an intense competitive battle for over to decades. "heir battle points out ho highly competitive firms can ta2e their competitive attac2s to multiple battlefields.


. (p. 4"/) :hich of the belo best describes the competitive tendencies of small firms< . 6ecause they lac2 legitimacy in the mar2etplace( small firms tend to signal their competitive actions long before they launch those actions. 6. Small firms typically have more resources available as they underta2e competitive attac2s than do large firms. C# Small firms are more nimble and can respond 3uic2ly to competitive attac2s. D. ll of these. Consider the role of firm age and si7e in calculating a company9s ability to respond. %ost entrepreneurial ne ventures start out small. "he smaller si7e ma2es them more nimble compared to large firms so they can respond 3uic2ly to competitive attac2s.


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8. (p. 4") Cirrus ircraft( a leading manufacturer of small airplanes( sees a mar2et opportunity and has decided to double its plant capacity over the ne/t to years. :hat type of competitive action does this represent< .  tactical action because the move is an attempt to fill a gap in service. $#  strategic action because such a large plant e/pansion ill re3uire a major commitment o f resources. C.  strategic action because the firm can easily reverse the action at any time( thus giving Cirrus more strategic fle/ibility. D.  guerilla offensive because it is fast and ill surprise its rivals. "his is a strategic action because it represents a major co mmitments of distinctive and specific resources. Such actions re3uire significant planning and resources and( once initiated( are difficult to reverse.

AACSB: Analytic Blooms: Apply Learning Obecti!e: "8#" $%e components o& competiti!e dynamics analysis#ne' competiti!e action0 t%reat analysis0 moti!ation and capability to respond0 types o& competiti!e act ions0 and li7eli%ood o& competiti!e reaction. Le!el o& i&&iclty: 4 5ard $opic: Competiti!e ynamics

4. (p. 4"#4") ll of the folloing are e/amples of strategic actions a firm might ta2e EBCE>" . ac3uire ith competitors to reduce competition. 6. e/pand into neglected mar2ets. C# change product pac2aging. D. tie up ra materials sources. Strategic actions represent major commitments of distinctive and specific resources. E/amples include launching a brea2through innovation( building a ne production facility( or merging ith another company. Such actions re3uire significant planning and resources and( once initiated( are difficult to reverse. efer to E/hibit 8.4


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0. (p. 4"#4") "he best e/ample of a tactical action that a company might use in response to a competitive attac2 is to . ac3uire the competitor. 6. target the rival9s mar2ets. C. e/pand into ne geographical areas. D# offer price discounts and rebates. "actical actions include refinements or e/tensions of strategies. E/amples of tactical actions include cutting prices( improving gaps in service( or strengthening mar2eting efforts. Such actions typically dra on general resources and can be implemented 3uic2ly. efer to E/hibit 8.4


1. (p. 4"8) ll of the belo are factors that affect ho a competitor ill respond to a competitive attac2 EBCE>" . ho dependent the competitor is on that industry or particular mar2et segment. 6. the degree of mar2et poer and reputation of the company that initiated the attac2. C. the resources hich are available for a firm to respond. D# the stoc2 mar2et reaction to the initial competitive attac2. Ho a competitor is li2ely to respond ill depend on three factors* mar2et dependence( competitor9s resources( and the reputation of the firm that initiates the action @actor9s reputationA.


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$. (p. 4"8) :hich of the folloing refers to a situation here a company has a high concentration of its business in a particular industry9s mar2et< . competitor9s resources $# mar2et dependence C. resource similarity D. actor9s reputation ;f a company has a high concentration of its business in a particular industry( it has more at sta2e because it must depend on that industry9s mar2et for its sales( hich is 2non as mar2et dependence. Single-industry businesses or those here one industry dominates are more li2ely to mount a competitive response.


&. (p. 4"3)  firm is considering a large price cut on its leading product as a ay to gain mar2et share. 'ne e/ecutive strongly disagrees ith the price cut and states( ,:e are in the same mar2etplace as our rivals( and e do not have any competitive advantages in our cost structure. ;f e cut prices( our competitors ill li2ely do the same. "he end result is that e ill all ma2e less money., "hese arguments are an e/ample of !# a strategy of forbearance. 6. a strategy of co-opetition. C. a hardball strategy hereby competitive actions are not underta2en ithout a clear advantage. D. a ea2ness strategy that leads a company into constant decline. "here may be many circumstances @such as this potential price arA in hich the best reaction is no reaction at all. "his is 2non as forbearance( refraining from reacting at all as ell as holding bac2 from initiating an attac2.

AACSB: Analytic Blooms: Apply Learning Obecti!e: "8#" $%e components o& competiti!e dynamics analysis#ne' competiti!e action0 t%reat analysis0 moti!ation and capability to respond0 types o& competiti!e act ions0 and li7eli%ood o& competiti!e reaction. Le!el o& i&&iclty: 4 5ard $opic: Competiti!e ynamics

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Chapter 08 - Entrepreneurial Strategy and Competitive Dynamics Essay Questions

). (p. 281#28) :hat is the role of opportunity recognition in the ne venture development process< nsers ill vary.


+. (p. 28) Discuss the four characteristics of an entrepreneurial opportunity. E/plain hy each is important for the opportunity to be viable. nsers ill vary.


. (p. 28#283) Discuss the role of informal investments versus venture-capital financing as it is used by entrepreneurial ventures. :hat are the advantages and disadvantages of each type< nsers ill vary.


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. (p. 28#283) :hat are the advantages and disadvantages of using venture capital to finance ne ventures< nsers ill vary.


8. (p. 283#23") 8 ;n hat ays are human capital and social capital valuable to an entrepreneurial start-up< >rovide e/amples of each. nsers ill vary.

AACSB: Analytic Blooms: Apply Learning Obecti!e: "8#"2 $%e role o& opportnities0 resorces0 and entrepreners in sccess&lly prsing ne' !entres. Le!el o& i&&iclty: 4 5ard $opic: +ec ogni,ing -ntreprenerial Opportnities

4. (p. 234#236) Compare and contrast the three most common ne venture entry strategies* pioneering( imitative( and adaptive. nsers ill vary.


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80. (p. 233#4"3) Define the term ,competitive dynamics., "hen( describe the cycle of actions and responses that are characteristic of a competitive dynamics process. nsers ill vary.

AACSB: Analytic Blooms: Understand Learning Obecti!e: "8#"6 5o' competiti!e actions0 sc% as t%e entry o& ne' competitors into a mar7etplace0 may lanc% a cycle o& actions and reactions among close competitors. Learning Obecti!e: "8#" $%e components o& competiti!e dynamics analysis#ne' competiti!e action0 t%reat analysis0 moti!ation and capability to respond0 types o& competiti!e act ions0 and li7eli%ood o& competiti!e reaction. Le!el o& i&&iclty: 2 *edim $opic: Competiti!e ynamics

81. (p. 4"2#4"/) Compare and contrast mar2et commonality and resource similarity. nsers ill vary.


8$. (p. 4"8#4"3) ccording to competitive dynamics( competitors are more li2ely to respond hen attac2ed in a mar2et here the competitor relies on that mar2et for a large portion of its sales. :hy is this so< "hat is( hat ,dynamic, is at or2 in this situation that ould cause that response< nsers ill vary.


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Chap008.doc

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