Testbank of fundamental of management 7e by robin ch 04e

Fundamentals of Management, 7e (Robbins/DeCenzo/Coulter) Entrepreneurship Module 1) Entrepreneurship is process of starting a new business to respond to an opportunity in the market Answer: TRUE Explanation: Entrepreneurship is an innovative attempt to take advantage of some need in the market Entrepreneurial organizations are always innovative and looking to grow Diff: Page Ref: 111 2) An entrepreneurial venture is the same as a small business Answer: FALSE Explanation: An entrepreneurial venture and a small business can look similar from the outside However an entrepreneurial venture focuses much more on being innovative, seeking opportunities, and growth than a small business Diff: Page Ref: 111 3) An entrepreneurial venture is much more likely to change an industry than a small business Answer: TRUE Explanation: Being much more innovative than a small business, an entrepreneurial venture looks to invent new products and methods of production that change an entire industry An example is the Viking Range, which helped create an entire new type of super-premium kitchen appliance Diff: Page Ref: 111 4) Most entrepreneurial ventures are successful Answer: FALSE Explanation: Data shows that only 44 percent of ventures survive four years of business After seven years, only 31 percent of ventures remain Diff: Page Ref: 112 5) One of the first things an entrepreneur does is look for potential opportunities in the marketplace Answer: TRUE Explanation: Identifying opportunity is the first thing any entrepreneur does Without finding an opportunity there is no reason to start an organization Diff: Page Ref: 112 6) Legal issues for an entrepreneurial organization are typically addressed after the organization is up and running Answer: FALSE Explanation: Legal issues that involve taxes, liability, and such things as patents need to be taken care of before the organization is up and running How the organization is set up and structured in a large part will determine how the legal issues are addressed Diff: Page Ref: 112 Copyright © 2011 Pearson Education, Inc 7) Once the entrepreneurial organization is up and running, the entrepreneur becomes a manager Answer: TRUE Explanation: After all planning and launching activities are over, the entrepreneur must assume the role of manager and start helping to produce the goods or services she plans to provide Diff: Page Ref: 112 8) An executive summary is the most complete kind of business plan Answer: FALSE Explanation: An executive summary is the most brief form of a business plan, typically running no longer than two pages in length Diff: Page Ref: 112 9) A context analysis sizes up the target market and evaluates possible competitors to the company Answer: FALSE Explanation: An opportunity analysis sizes up the target market and evaluates possible competitors to the company, not a context analysis A context analysis gives a broad view of the trends in the entire industry and its place in the economy Diff: Page Ref: 113 10) An entrepreneurial venture's advertising strategy would be included in the description of the business section of a full business plan Answer: TRUE Explanation: The description of the business would include, among many other things, the advertising strategy that the organization plans to employ when it is operational Diff: Page Ref: 113 11) Since it is impossible to predict the future, projected income estimates are not part of a good business plan Answer: FALSE Explanation: Though often difficult to make, income forecasts are in fact an important part of a business plan Even if the estimates turn out to be wrong they still give planners a baseline to which they can make comparisons Diff: Page Ref: 114 12) The two primary factors that affect the legal structure of an entrepreneurial organization are taxes and legal liability Answer: TRUE Explanation: The way the organization is structured has a critical effect on how it will be taxed and what liability it will have Organizations with a lot of assets, and therefore a lot to lose, for example, must be structured differently than those with little to lose Diff: Page Ref: 114 13) If the legal structure of an entrepreneurial venture does not turn out to be ideal, it can always be changed easily once the organization is up and running Answer: FALSE Explanation: Changing the legal structure of the organization is difficult and time-consuming, so it is best for the entrepreneur to choose the right structure at the outset Diff: Page Ref: 114 Copyright © 2011 Pearson Education, Inc 14) When they first start out, most small entrepreneurial ventures have a very informal organizational structure Answer: TRUE Explanation: In many cases, there is no real structure other than the entrepreneur making all decisions and delegating work only as he or she sees fit Diff: Page Ref: 115 15) An entrepreneurial venture that sees its competitive advantage in cost efficiency would tend to adopt an organic style organizational structure Answer: FALSE Explanation: A venture that focused on costs and efficiency would tend to need a more mechanistic, rather than an organic approach Diff: Page Ref: 115 16) Since they are often overwhelmed by the pressure of decisions, one chore that most entrepreneurs never hesitate to delegate is decision making Answer: FALSE Explanation: In fact, most entrepreneurs have great difficulty letting go and allowing someone else to make decisions Letting others make decisions causes the entrepreneur to lose some control over the organization so the aversion to sharing decision-making power is not unfounded Diff: Page Ref: 115 17) When hiring, entrepreneurs are typically much less concerned with matching a candidate's values to the organization's organizational culture than traditional HRM managers Answer: FALSE Explanation: The opposite is true Entrepreneurs are much more concerned about getting a good match between a candidate and the organizational culture than traditional HRM managers Diff: Page Ref: 115 18) The classic "entrepreneurial personality" is a person who is high in self-confidence, motivation, and energy Answer: TRUE Explanation: Other well-known traits of entrepreneurs include risk-taking, resourcefulness, persistence, and autonomy Diff: Page Ref: 116 19) People with proactive personalities tend to react to their environment more than trying to change their environment Answer: FALSE Explanation: The reverse is true Proactive people tend to take action rather than waiting to react to what happens to them Diff: Page Ref: 116 20) You would expect an entrepreneur who has a grand vision for the future to be more of a risktaker than an entrepreneur who is using his or her venture simply as a source of income Answer: TRUE Explanation: Entrepreneurs who are seeking ambitious growth tend to be risk takers Entrepreneurs who are simply looking to put money in their pockets tend to take fewer risks Diff: Page Ref: 116 Copyright © 2011 Pearson Education, Inc 21) The more proactive you are, the more likely you are to be an entrepreneur Answer: TRUE Explanation: People who rate high on proactivity tests are more likely to be entrepreneurs Proactivity is largely a measure of how strongly a person feels about taking action to solve problems Diff: Page Ref: 117 22) Identifying opportunity is not a trait of a person with a proactive personality Answer: FALSE Explanation: In proactivity tests such as the one on page 117, the ability to identify opportunity is listed as a characteristic of a proactive person Diff: Page Ref: 117 23) Employee empowerment increases productivity but decreases employee motivation Answer: FALSE Explanation: Empowerment increases both productivity and motivation In fact, productivity typically rises because motivation has risen Diff: Page Ref: 118 24) A good way to ease into employee empowerment is to let employees share in decision making Answer: TRUE Explanation: Participative decision making allows both bosses and employees to get used to the idea of employees making decisions After trust has been established, the employees can then be empowered to make decisions on their own Diff: Page Ref: 118 25) Employee empowerment has little effect on an organization's profits or productivity Answer: FALSE Explanation: Empowerment, when properly done, has been shown to result in gains in productivity, profits, quality, and employee satisfaction Diff: Page Ref: 118 26) The leader of an entrepreneurial organization is like a jazz band leader because she controls every note that her "musicians" play Answer: FALSE Explanation: A jazz leader does not control individual notes of musicians An entrepreneurial leader, in the same way, should not try to control the individual actions of her employees Instead, she should let employees work on their own, seeking only to get the best out of them for the good of the group Diff: Page Ref: 118 27) Nonvisionary entrepreneurial leaders usually outperform visionary entrepreneurial leaders Answer: FALSE Explanation: The opposite is true A study shows that visionary companies outperformed nonvisionary companies by a wide margin in both standard financial measurements and stock market performance Diff: Page Ref: 119 Copyright © 2011 Pearson Education, Inc 28) A command-and-control leadership style works best with an entrepreneurial organization that is organized in teams Answer: FALSE Explanation: Teams respond much better to a coach-and-collaboration leadership style than a command-and-control leadership style Diff: Page Ref: 119 29) One of the keys that distinguishes an entrepreneurial organization from a conventional organization is the concerted emphasis on growth Answer: TRUE Explanation: Focus on growth is a distinguishing characteristic for an entrepreneurial venture If an organization doesn't vigorously pursue growth, it isn't truly entrepreneurial Diff: Page Ref: 119 30) The first step in managing a downturn in an entrepreneurial business is to recognize that things are not going well Answer: TRUE Explanation: Many entrepreneurs will willfully ignore signs of trouble, preferring to redouble their efforts in a positive direction rather than try to remedy problems that are occurring So the most important step in managing a downturn is recognizing the downturn in the first place Diff: Page Ref: 119 31) Selling an entrepreneurial venture is always a sign of failure Answer: FALSE Explanation: Exiting a venture and harvesting the profits of the sale can be very lucrative, and not at all a sign of failure Diff: Page Ref: 120 32) Because entrepreneurship is so time-consuming and energy-consuming, many entrepreneurs have trouble in their personal lives Answer: TRUE Explanation: Running an entrepreneurial venture is often a never-ending enterprise, leaving entrepreneurs with little or no time for family or friends For this reason, entrepreneurs need to become expert time managers, always being able to find the time for true priorities Diff: Page Ref: 120 33) Saving money by avoiding the expense of professional legal and accounting advice is often a mistake for entrepreneurs Answer: TRUE Explanation: Entrepreneurs should avoid being penny-wise and pound foolish When they need help, they should spend the money for professional service Good professional advice is often critical to the survival of an entrepreneurial venture Diff: Page Ref: 120 Copyright © 2011 Pearson Education, Inc 34) It is a good idea for an entrepreneur to develop a network of trusted friends and advisors to help with problems and decisions Answer: TRUE Explanation: What many entrepreneurs find especially helpful are peers who can say "no" to them Inside the organization an entrepreneur often has no one with the power to second-guess his or her judgment A disinterested peer can be critical without risking his or her job Diff: Page Ref: 120 35) An entrepreneurial venture and a small business A) are superficially similar B) are identical C) have nothing in common D) are impossible to tell apart Answer: A Explanation: A) Entrepreneurial ventures and small businesses are clearly not identical, ruling out "identical and impossible to tell apart" as correct responses, but they have a number of characteristics in common, ruling out "having nothing in common" as a correct response The two are similar on the surface in that they are both small in size (at least initially) and often informally run, making "being superficially similar" the correct response for this question An entrepreneurial venture focuses much more on being innovative, seeking opportunities, and growth than a small business Diff: Page Ref: 111 36) One key difference between an entrepreneurial venture and a small business is that the entrepreneurial venture focuses on A) productivity B) efficiency C) quality D) innovation Answer: D Explanation: D) Where small businesses typically concentrate on such things as productivity, efficiency, and quality to find their niche in a market, entrepreneurial ventures look to focus on innovation, creating new products or services that don't exist in a market, and in some cases creating a new market This makes innovation the correct response for this question Diff: Page Ref: 111 Copyright © 2011 Pearson Education, Inc 37) When it was first starting out, the Viking Range company qualified as an entrepreneurial organization because its products were A) high in quality B) expensive C) innovative and different D) loved by serious cooks Answer: C Explanation: C) The thing that distinguishes an entrepreneurial venture from other ventures is that the entrepreneurial venture is innovative in some way Producing products that were costly, high in quality, or beloved did not make Viking an entrepreneurial company Making innovative products did qualify Viking as entrepreneurial, so innovative is the correct response for this question Diff: Page Ref: 111 38) Besides being innovative in some way, a second defining characteristic of an entrepreneurial venture is that it is A) small in size B) focused on growth C) dedicated to quality D) original and creative Answer: B Explanation: B) Size and quality have nothing to with defining an entrepreneurial company Being original and creative is another way of saying that a company is innovative, so original is an incorrect response Focus on growth is a defining characteristic of an entrepreneurial venture, so focused on growth is the correct response for this question Diff: Page Ref: 111 39) An "accidental entrepreneur" is someone who became an entrepreneur because she A) always had a dream to start a company B) lost her job C) identified a great opportunity D) quit her job Answer: B Explanation: B) Though accidental entrepreneurs may have always had a dream to start a company and may be good at identifying opportunities, those are not primary reasons why they became entrepreneurs Instead, they became entrepreneurs because they had lost, rather than quit their jobs, typically in a corporation This makes losing one's job the correct response for this question Diff: Page Ref: 111 Copyright © 2011 Pearson Education, Inc 40) In the wake of the recent economic downturn, statistics show that entrepreneurship is A) dramatically rising B) modestly rising C) falling D) neither rising nor falling Answer: B Explanation: B) The lack of jobs in today's economy is probably the cause of the recent increase in entrepreneurship, but this increase is modest rather than dramatic, making modestly rising the correct response and ruling out dramatically rising Note that this modest increase also rules out the other two choices as correct responses because both include "falling" in their answer Diff: Page Ref: 111 41) After four years, business A) 56 percent of entrepreneurial ventures are out of B) 56 percent of entrepreneurial ventures are still in C) 31 percent of entrepreneurial ventures are out of D) two-thirds of entrepreneurial ventures are out of Answer: A Explanation: A) After four years, only 44 percent of entrepreneurial ventures remain in business, making "56 percent are out" the correct response for this question and ruling out "56 percent are still in." After two years, two-thirds of the ventures are still in business, not out of business After seven years, 31 percent of the ventures are still in business, not out of business Diff: Page Ref: 111 42) Survival rates of entrepreneurial ventures that started in a recession are those that started in an expansion A) somewhat greater than B) less than C) the same as D) much greater than Answer: C Explanation: C) Surprisingly, it makes no difference when entrepreneurial ventures start Their survival rates are the same whether they originated during a recession or an expansion, making the same the correct response for this question and ruling out all other choices Diff: Page Ref: 112 Copyright © 2011 Pearson Education, Inc 43) In most cases, the first step in the initial pre-planning phase of the entrepreneurial process is this A) pinpointing potential competitive advantages B) identifying potential opportunities C) exploring finance options D) researching the venture's feasibility Answer: B Explanation: B) Without a promising opportunity there is no reason to embark on a venture in the first place So the first step in the pre-planning phase of the entrepreneurial process is to identify a promising potential opportunity in the marketplace, making identifying opportunities the correct response for this question The second step is to pinpoint competitive advantages that your approach to developing the opportunity might offer If you seem to have a real competitive edge, the third step is to see how feasible the venture is by estimating costs and assessing competitors The final step of the process, if other things check out, is to explore options for funding Diff: Page Ref: 112 44) This is typically the second step in the initial pre-planning phase of the entrepreneurial process A) researching the venture's feasibility B) identifying potential opportunities C) exploring finance options D) pinpointing potential competitive advantages Answer: D Explanation: D) After a promising potential opportunity in the marketplace has been identified as step one of the process, the second step is to pinpoint competitive advantages that you might have in developing this opportunity, making pinpointing advantages the correct response for this question If you seem to have a genuine competitive edge, the third step is to see how feasible the venture is by estimating costs and assessing competitors The final step of the process, if other things check out, is to explore options for funding Diff: Page Ref: 112 45) The third step in the initial pre-planning phase of the entrepreneurial process is A) exploring finance options B) pinpointing potential competitive advantages C) researching the venture's feasibility D) identifying potential opportunities Answer: C Explanation: C) After identifying both a promising potential opportunity in the marketplace and competitive advantages you might have in developing this opportunity, the third step in the preplanning phase of the entrepreneurial process involves gauging the feasibility of the project This may involve estimating costs, assessing competitors, and generally evaluating whether or not the idea is actually realistic, making researching feasibility the correct response for this question The final step of the process, if other things check out, is to explore options for funding Diff: Page Ref: 112 Copyright © 2011 Pearson Education, Inc 46) The fourth step in the initial pre-planning phase of the entrepreneurial process is A) exploring finance options B) researching the venture's feasibility C) pinpointing potential competitive advantages D) identifying potential opportunities Answer: A Explanation: A) After identifying both a promising opportunity in the marketplace and competitive advantages you might have in developing this opportunity, the third step in of the process involves gauging the feasibility of the project Once all of these other steps have passed muster, the final step of the process is to see whether your ideas are fundable This may involve having discussions with banks and other sources of capital and explaining your plans and qualifications to them Diff: Page Ref: 112 47) During the first step of the planning and organizing phase of an entrepreneurial venture, this is accomplished A) selecting a legal business organization form B) stating a mission C) selecting an organizational design D) creating a business plan Answer: B Explanation: B) Once the pre-planning phase of developing an entrepreneurial venture is complete, the planning and organizing phase of the project begins The first step of this process involves identifying a mission for the organization, making stating a mission the correct response for this question The second step involves creating a business plan for the organization The third step requires the entrepreneur to select an official legal form for the organization to manage tax and liability issues The final step in the process involves creating an organizational design for the venture that outlines how work will be carried out Diff: Page Ref: 112 48) During the second step of the planning and organizing phase of an entrepreneurial venture, an entrepreneur A) states a mission B) selects a legal business organization form C) creates a business plan D) selects an organizational design Answer: C Explanation: C) The first step of the planning and organizing phase of the entrepreneurial process involves identifying a mission for the organization The second step involves creating a carefully thought out business plan that details how the organization will operate and who will be involved in its operation, making creating a business plan the correct response for this question The third step requires the entrepreneur to select an official legal form for the organization to manage tax and liability issues The final step in the process involves creating an organizational design for the venture that outlines how work will be carried out Diff: Page Ref: 112 10 Copyright © 2011 Pearson Education, Inc 61) The form of legal ownership that an entrepreneur chooses for a venture primarily affects these concerns A) profit and productivity B) taxes and liability C) liability and planning D) taxes and revenue Answer: B Explanation: B) The form of legal ownership determines liability issues—who will be held responsible in the event that the organization gets involved in lawsuits or other legal issues—and tax issues—how the organization will be considered by the IRS This makes taxes and liability the correct response and eliminates all other responses Diff: Page Ref: 114 62) Entrepreneurs should take great care when choosing a form of legal ownership because once one form is chosen it is to change it to another form A) impossible B) very difficult C) easy D) rather embarrassing Answer: B Explanation: B) The reason entrepreneurs want to get their legal ownership form right the first time is not because it is embarrassing or impossible to change to another form but that it is difficult and can be costly, making very difficult the correct response for this question Note that easy is wrong because being easy to change forms would not be a barrier to making a change Diff: Page Ref: 114 63) Which of the following is NOT a way to organize an entrepreneurial venture? A) partnership B) corporation C) cooperative association D) sole proprietorship Answer: C Explanation: C) Partnerships, corporations, and sole proprietorships are all recognized legal forms for an entrepreneurial venture A cooperative association may be an informal term for a venture, but it is not a recognized legal term so this choice is the correct response for this question Diff: Page Ref: 114 15 Copyright © 2011 Pearson Education, Inc 64) Many small entrepreneurial firms don't have a deliberately planned organizational structure because A) they are inefficient B) small firms never need structure C) the IRS prevents them from having a structure D) one person does "everything" Answer: D Explanation: D) In most cases, small firms are not inefficient and they require some kind of structure, though it may be a highly informal structure The reason small firms tend not to have a deliberate structure is that one person (or a few people) tend to take care of all issues for the organization—making such structural categories as departmentalization unnecessary This makes one person doing "everything" the correct response for this question Note that the IRS preventing them from having a structure is ruled out because the IRS has little or no influence on organizational structure Diff: Page Ref: 115 65) In general, an entrepreneurial venture that sees as its competitive advantage would tend to be in structure A) efficiency; organic B) efficiency; mechanistic C) innovation; mechanistic D) innovation: formal Answer: B Explanation: B) The more efficiency-oriented an organization is, the less organic and the more formal and mechanistic it is likely to be, making "efficiency; mechanistic" the correct response for this question An innovative organization would tend to be organic, not mechanistic, and informal, not formal Diff: Page Ref: 115 66) In general, an entrepreneurial venture that sees as its competitive advantage would tend to be in structure A) efficiency; organic B) efficiency; informal C) innovation; mechanistic D) innovation: informal Answer: D Explanation: D) The more innovation-oriented an organization is, the less mechanistic and the more informal and organic it is likely to be, making "innovation; informal" the correct response for this question An efficiency-oriented organization would tend to be mechanistic, not organic, and formal, not informal Diff: Page Ref: 115 16 Copyright © 2011 Pearson Education, Inc 67) An entrepreneurial venture that manufactured low-cost generic pills would be likely to be A) very organic in structure B) very innovative C) fairly mechanistic in structure D) very informal in structure Answer: C Explanation: C) The venture described sees opportunity in efficiency and cost-control, not innovation This emphasis on costs would tend to make the organization more mechanistic than organic or informal, making fairly mechanistic the correct response for this question Organizations that rely on innovation tend to be organic while those that make standardized products and rely on efficiency tend to be more mechanistic Diff: Page Ref: 115 68) An entrepreneurial venture whose goal is to create humorous video games would be likely to be A) very organic in structure B) highly centralized C) fairly mechanistic in structure D) very mechanist in structure Answer: A Explanation: A) Organizations that rely on innovation tend to be organic while those that make standardized products and rely on efficiency tend to be more mechanistic This organization clearly strives to be creative and innovative, so it would tend to have an organic structure, which would rule out being centralized or mechanistic The correct response for this question is therefore very organic in structure Diff: Page Ref: 115 69) When hiring, entrepreneurs are more likely to make sure that these two elements are a good match than traditional HRM managers A) job skills and organizational needs B) job qualifications and organizational requirements C) formal job training and organizational requirements D) values and organizational culture Answer: D Explanation: D) Though a good match between job skills, job qualifications, or job training and organizational needs are certainly all important to an entrepreneurial organization, they are no more important to an entrepreneur when hiring than a traditional HRM manager What entrepreneurs typically find more important is a match between the organization's culture and the attitudes and values of the person being hired, making values and organizational culture the correct response for this question Diff: Page Ref: 115 17 Copyright © 2011 Pearson Education, Inc 70) At an entrepreneurial organization, job candidates are more likely to hear about than they will at conventional organizations A) benefits B) monetary compensation C) advancement through the ranks D) learning opportunities Answer: D Explanation: D) Conventional organizations are likely to mention conventional job features at a job interview, such as benefits, advancement, and compensation In an entrepreneurial organization one is much more likely to hear about the intangible, psychological benefits of working for the firm that include such things as learning opportunities, making learning opportunities the correct response for this question Diff: Page Ref: 116 AACSB: Analytic Skills 71) Which of the following is the best one-word definition of a successful entrepreneur? A) aggressive B) stubborn C) ambitious D) unpredictable Answer: C Explanation: C) Though many entrepreneurs can be aggressive in the way they attack a problem, stubborn in the way they persist in the face of difficulty, and unpredictable in the way they recognize value and opportunity where no one else sees it, none of these terms encompasses the essence of an entrepreneur like the word ambitious, making ambitious the correct response The ambition that entrepreneurs have is usually what drives them to be bold and aggressive in the way they approach the world, so that is why this is the best choice here Diff: Page Ref: 116 72) Which of the following terms does not fit the classic profile of the successful entrepreneur? A) high energy B) reflective C) persistent D) resourceful Answer: B Explanation: B) Successful entrepreneurs tend to be high energy individuals who tenaciously persist in finding the solution to a difficult problem and are skilled in finding ways to get things done when they seem impossible One trait that entrepreneurs not tend to have in abundance is a reflective, contemplative nature—they tend to be do-ers not individuals who dither and mull things over This makes reflective the correct response for this question Diff: Page Ref: 116 18 Copyright © 2011 Pearson Education, Inc 73) In general, entrepreneurs tend to more than the average person A) cut corners B) take risks C) avoid risks D) avoid cutting corners Answer: B Explanation: B) Cutting corners or avoiding the cutting of corners in most cases has little to with how entrepreneurial a person is If anything, entrepreneurs are probably less likely to cut corners than others, because they realize that cutting corners could in some instances jeopardize their ambitions What does correlate with the entrepreneurial personality is risk-taking Entrepreneurs tend to be risk takers, making taking risks the correct response and ruling out avoiding risks as a correct response Diff: Page Ref: 116 74) A person with a proactive personality is someone who A) takes action B) avoids taking action C) is entrepreneurial D) is not entrepreneurial Answer: A Explanation: A) A proactive person is someone who tends to take action to influence his environment, making taking action the correct response and ruling out avoiding taking action Though entrepreneurs tend to be proactive people, a proactive person is not necessarily entrepreneurial, so both of the remaining choices can be ruled out Diff: Page Ref: 116 75) People who become entrepreneurs often have A) family money B) no family money C) family members who are entrepreneurs D) no family members who are entrepreneurs Answer: C Explanation: C) Though a source of money can be helpful to an entrepreneur, family money is not recognized as an indicator for entrepreneurship, so both choices regarding family money can be eliminated as correct responses Entrepreneurs often come from families that have other entrepreneurs in them, especially parents, making "family members who are entrepreneurs" the correct response for this question and ruling out "no family members who are entrepreneurs." Diff: Page Ref: 116 19 Copyright © 2011 Pearson Education, Inc 76) Perhaps the best predictor of whether or not a person will become an entrepreneur is how she is A) proactive B) talented C) likeable D) desperate Answer: A Explanation: A) Though recent job losses have caused many somewhat desperate individuals to become entrepreneurs, that cause is still overshadowed in importance by how proactive a person is, making proactive the correct response for this question Being likeable and talented also can be helpful to entrepreneurs, but those traits are not as important as how proactive a person is Diff: Page Ref: 116 77) The key to the proactive personality is that a proactive person feels that he or she can any environment A) adapt to B) change C) be successful in D) be well liked in Answer: B Explanation: B) The defining characteristic of a proactive person is not how successful or wellliked he or she is What defines proactivity is not being satisfied with the status quo Rather than adapt to unsatisfactory conditions, proactive people instead will try to initiate some kind of change to make the environment suit their needs All of these factors combined indicate that change is the correct response for this question A proactive person is a person who will not hesitate to change his or her environment Diff: Page Ref: 116 AACSB: Analytic Skills 78) A proactive person would be most likely to say this about his or her life A) I feel trapped B) If I don't like something, I fix it C) If I don't like something, I learn to live with it D) I like to leave well enough alone Answer: B Explanation: B) Proactive people rarely feel trapped for long or learn to live within conditions they don't like Instead of leaving well enough alone, proactive people the opposite; they upset the apple cart and change things if the situation isn't to their liking This means that wanting to fix things best describes a proactive person, making fixing things one doesn't like the correct response for this question Diff: Page Ref: 117 AACSB: Analytic Skills 20 Copyright © 2011 Pearson Education, Inc 79) A proactive person is best described as someone who has skill in identifying A) a problem B) trouble C) a good idea D) a good opportunity Answer: D Explanation: D) Though a proactive person would not be bad at recognizing problems, trouble, or good ideas, a truly defining characteristic of a proactive person is the ability to recognize a good opportunity, making good opportunity the correct response for this question Recognizing opportunities is what typically compels proactive people to act, and action is their most defining characteristic Diff: Page Ref: 117 80) This is the simplest and easiest way to find out how entrepreneurial you are A) The only way to find out is to initiate an entrepreneurial venture B) There is no way to find out C) You can take a test to see how proactive you are D) You can take a general intelligence test Answer: C Explanation: C) Though initiating an entrepreneurial venture could determine how entrepreneurial you are, it is clearly not a simple or easy way to answer the question, so initiating a venture is an incorrect response A much simpler measure of entrepreneurial proclivity is to take a proactivity test like the one on page 117, making taking a test the correct response and ruling out the other two choices Since proactivity correlates strongly with the inclination to be entrepreneurial, a high score on a proactivity test indicates a high likelihood of being entrepreneurial Diff: Page Ref: 117 81) In general, employee empowerment motivation in employees A) increases B) slightly decreases C) strongly decreases D) has no effect on Answer: A Explanation: A) Empowerment gives employees a greater sense of "ownership" in what they do, so it tends to increase such things as motivation, effort, and job satisfaction This makes increases the correct response for this question and eliminates all other choices Diff: Page Ref: 118 21 Copyright © 2011 Pearson Education, Inc 82) The typical reason for why an entrepreneur considers implementing employee empowerment in an organization is to make sure that the organization A) stays nimble and flexible B) is profitable C) stays small and informal D) is efficient Answer: A Explanation: A) Though employee empowerment can help an organization be efficient and profitable, those are not the primary reasons for delegating authority Entrepreneurs delegate authority to keep their organizations nimble and flexible, making staying nimble and flexible the correct response for this question Note that staying small and informal is incorrect because no amount of delegation can keep an organization small if it is in the process of expanding Diff: Page Ref: 118 83) Entrepreneurs who have trouble delegating authority should go through the process of empowering employees in this manner A) gradually B) all at once C) using a rigid timetable D) hastily Answer: A Explanation: A) When entrepreneurs are hesitant with respect to empowering employees they should go about the process slowly and gradually rather than all at once or hastily Timetables may help, but they could also damage the process if employees get impatient or the employer feels that the process is going too fast, so using a rigid timetable is an incorrect response Diff: Page Ref: 118 84) The best way for a hesitant entrepreneur to begin the process of employee empowerment is to A) give employees complete decision-making power immediately B) use participative decision making C) let the employees decide how much decision-making power they will have D) order employees to start making decisions Answer: B Explanation: B) The best response by far here is to use participative decision making Opening up the decision-making process allows both the entrepreneur and the employees to see how each other thinks and solves problems More importantly, participative decision making is gradual and builds trust Once both the entrepreneur and the employees feel that the employees are ready to make decisions on their own, more decision-making power can be delegated Note that all other choices in this question are either arbitrary and/or too abrupt so they are designated as incorrect responses Diff: Page Ref: 118 22 Copyright © 2011 Pearson Education, Inc 85) A leader of an entrepreneurial organization is like a jazz band leader because she A) controls every "note" that the performers "play" B) wants a happy and harmonious workplace C) has no influence over what the performers "play" D) works to draw the "best" out of every performer Answer: D Explanation: D) In a jazz band, the leader can't control every note that the performers play, but she does have considerable influence over their performance Ultimately, the job of jazz-leadertype entrepreneur is to guide her performers, give them problems to solve, and create a situation in which they can perform at their very best This makes working to draw the "best" out of every performer the correct response for this question Wanting a happy workplace is ruled out because a happy and harmonious workplace is usually not a primary goal for an entrepreneurial manager Diff: Page Ref: 118 86) An entrepreneur's ability to be visionary is important because visionary companies tend to A) have employees who are satisfied with their jobs B) be larger than nonvisionary companies C) be more successful than nonvisionary companies D) be more organic than nonvisionary companies Answer: C Explanation: C) The primary reason why an attractive vision is important for an entrepreneurial company is that visionary companies outperform nonvisionary companies by a wide margin, making "being more successful" the correct response for this question The size or structure of an organization does not necessarily affect its success, ruling out being larger and more organic as correct responses Though it may be true that employees in visionary companies are likely to be satisfied with their jobs, there is no evidence to support this assertion Diff: Page Ref: 119 87) This type of work team has the most autonomy A) cross-functional B) problem solving C) self-directed D) empowered Answer: C Explanation: C) A self-directed team is the most empowered team and has the most autonomy of any of the team structures that are common in entrepreneurial ventures, making self-directed the correct response for this question A cross-functional team has individuals who have various special skills who work together A problem solving team is a team selected out of a single department that is put together exclusively to work on a specific problem An empowered team has the authority to identify improvements that should be made in a work activity and implement those improvements if it decides they are necessary Diff: Page Ref: 119 23 Copyright © 2011 Pearson Education, Inc 88) This type of work team has authority to implement the changes it recommends A) empowered B) cross-functional C) problem solving D) self-directed Answer: A Explanation: A) An empowered team has the authority to identify improvements that should be made in a work activity and implement those improvements if it decides they are necessary, making empowered the correct response for this question A cross-functional team has individuals who have various special skills who work together A problem solving team is a team selected out of a single department that is put together to work exclusively on a specific problem A self-directed team is the most empowered team and has the most autonomy of any of the team structures that are common in entrepreneurial ventures Diff: Page Ref: 119 89) This type of work team is composed of specialists A) empowered B) problem solving C) self-directed D) cross-functional Answer: D Explanation: D) A cross-functional team has individuals who have various special skills who work together, making cross-functional the correct response for this question A problem solving team is a team selected out of a single department that is put together to work exclusively on a specific problem An empowered team has the authority to identify improvements that should be made in a work activity and implement those improvements if it decides they are necessary A self-directed team has the most autonomy of any of the team structures that are common in entrepreneurial ventures Diff: Page Ref: 119 90) An entrepreneur should a plan for dealing with an economic downturn any downturn occurs A) create; when B) have; in place before C) write out; after D) think out; while Answer: B Explanation: B) When it comes to downturns, it is best for the entrepreneur to have a plan in place before the downturn occurs, not to try to deal with the crisis while it is occurring, or after it has occurred This makes "have; in place before" the correct response for this question Planning for downturns is much like planning exit routes for a building in case of a fire Once the downturn occurs, it is too late to try to think about it in an unemotional, analytic way Diff: Page Ref: 119 24 Copyright © 2011 Pearson Education, Inc 91) Harvesting an entrepreneurial venture occurs when the venture A) has a hit product B) is successful C) is sold for a large sum D) becomes profitable Answer: C Explanation: C) Having success, being profitable, and having a hit product can all make a venture attractive to buyers However, an entrepreneur is able to harvest the venture only when it can be sold to a buyer for a high price, making being sold for a large sum the correct response for this question Diff: Page Ref: 120 92) To avoid problems in their personal lives, entrepreneurs need to become excellent time managers and deal with conflicts they arise A) shortly before B) as C) well after D) long before Answer: B Explanation: B) The key to handling conflicts is not to put them off When a conflict, such as a personal or family problem, arises an entrepreneur should not bury herself in her work and try to ignore it Instead, she should deal with it directly as it arises, making "as" the correct response for this question Dealing with a conflict before it arises is somewhat impossible in most cases, so both shortly before and long before can be ruled out Dealing with a conflict after it arises is usually too late Diff: Page Ref: 120 93) This is one of the best ways for entrepreneurs to deal with especially difficult work-related or personal problems A) read self-help books B) consult trusted employees C) develop a network of trusted peers D) consult relatives and family members Answer: C Explanation: C) Though reading self-help books and consulting with family members might be helpful, both options are flawed Books provide no live feedback and family member consultations can get emotionally overheated Consulting employees is a downright bad idea because it may compromise information that you don't want to be revealed to the organization The best option for this question is to develop a network of friends and peers who can look at problems objectively and give advice freely, making developing a network of trusted peers the correct response Diff: Page Ref: 121 25 Copyright © 2011 Pearson Education, Inc 94) In a short essay, explain what an entrepreneurial venture is and how it differs from a small business Answer: An entrepreneurial venture is a business that focuses on innovation and growth Entrepreneurial ventures typically originate because an entrepreneur sees an opportunity in the market and has a vision for how that opportunity can be exploited In an entrepreneurial venture, this exploitation of the opportunity is accomplished in some innovative way—with an innovative product or service, method of providing that product or service, or both A small business, on the other hand is an organization that seeks to make a profit but is not particularly innovative or looking for growth Growth is the final characteristic of an entrepreneurial venture Though it may start small, the venture is always looking for its innovative edge to create a "home run" product, causing it to experience dramatic growth Diff: Page Ref: 111 AACSB: Analytic Skills 95) In a short essay, explain why Viking Range qualifies as an entrepreneurial venture Answer: Viking Range has all the earmarks of an entrepreneurial venture—vision, opportunity, innovation, and growth Viking Range began with the vision of a single man, Fred Carl Jr Carl was taking advantage of an opportunity in the market that he saw for sales of super high quality appliances Carl's products were highly innovative Finally, Carl's company experienced dramatic growth It has grown from a tiny company to an organization that now has annual sales of about $300 million Diff: Page Ref: 111 AACSB: Analytic Skills 96) In a short essay, describe the (pre-planning) steps an entrepreneur typically takes in deciding whether or not to begin entrepreneurial venture Answer: First, the entrepreneur needs to identify a promising opportunity in the marketplace Second, the entrepreneur needs to imagine how she will exploit that opportunity, identifying competitive advantages that her approach would provide Next, the entrepreneur would spend time gauging the feasibility of the project—estimating costs, looking at competitors, seeing if the idea would really work in the real world Finally, the entrepreneur would look into funding the project If that looked good, the entrepreneur would enter into planning and organizing the actual venture Diff: Page Ref: 112 AACSB: Analytic Skills 97) In a short essay, describe the steps an entrepreneur typically takes in planning and organizing an entrepreneurial venture Answer: In planning an entrepreneurial venture an entrepreneur would first develop an organizational mission Next, he would spend time creating a detailed business plan for the venture This would include details of how the organization would actually run After the business plan was complete, the entrepreneur would focus on two types of organization First, the entrepreneur would determine what kind of legal form the organization would have This would help the organization deal with tax and liability issues Finally, the entrepreneur would work on organizing the actual organizational structure of his new company Diff: Page Ref: 112 AACSB: Analytic Skills 26 Copyright © 2011 Pearson Education, Inc 98) In a short essay, describe the contents of the executive summary part of a full business plan Answer: An executive summary is sort of a mini-version of a full business plan An executive summary contains an abbreviated version of the organization's mission statement, the goals of the venture, and a brief description of the products or services that the organization would provide An executive summary should describe the competitive advantages that the entrepreneur envisions for the organization as well as identifying its niche in the current marketplace The summary might also have profiles of competitors and some brief information on the finances of the venture Diff: Page Ref: 112 AACSB: Analytic Skills 99) In a short essay, describe the contents of the business description part of a full business plan Answer: A business description describes how an entrepreneurial venture will be organized, launched, and managed A business description contains a complete mission statement and whole host of details about how the organization's work will proceed This includes information about: costs, pricing, scheduling, risks, marketing, advertising, operational work plans, facilities, equipment, staffing, and benefits and costs for those employees Diff: Page Ref: 113 AACSB: Analytic Skills 100) In a short essay, describe the factors that determine whether an entrepreneurial venture will be mechanistic or organic in structure Answer: The more efficiency- and cost-oriented an organization is, the more likely it will have a mechanistic structure Mechanistic structures work well when the organization is producing a fairly simple, standardized product and not focusing on custom products or innovation An organic structure works better when the organization is focused on being creative and making unique, innovative products An innovative organization needs the freedom that a less centralized, less formal, more organic structure provides Diff: Page Ref: 115 AACSB: Analytic Skills 101) In a short essay, describe the classic entrepreneurial personality Answer: The typical successful entrepreneur is a confident, motivated, high energy individual She likes to solve problems and won't give up on them until she finds the solution This person is resourceful, self-directed, and likes to take risks Finally, the typical entrepreneur has a proactive personality That is, rather than adapt to an unsatisfactory status quo she will take action and try to change things for the better Diff: Page Ref: 116 AACSB: Analytic Skills 27 Copyright © 2011 Pearson Education, Inc 102) In a short essay, explain what a proactive personality is and what its connection is to entrepreneurship Answer: A person with a proactive personality will see a problem and act on it Rather than be a victim of circumstances, a proactive person likes to take action to change those circumstances Proactivity is a lot like being dynamic Dynamic however, refers primarily to an individual who likes to be in motion A proactive person, on the other hand, is not only in motion, the goal of his motion is to change something in the environment Proactivity is important in entrepreneurship because it is an excellent predictor of who will be an entrepreneur People with high proactivity scores tend to make good entrepreneurs Diff: Page Ref: 116-117 AACSB: Analytic Skills 103) In a short essay, explain how entrepreneurial you think you are Answer: Sample response: I think I am a fairly entrepreneurial person On the proactivity quiz on page 117 I scored a 96, which puts me above the level of 85 that identifies highly proactive people My main entrepreneurial strength, as I see it, is my ability to spot marketplace opportunities I am always noticing some product or service that "needs" to be invented For example, I currently see lots of opportunity in the soft drink market as people turn away from sugary (or artificially sweetened) drinks and move toward things like seltzer Diff: Page Ref: 117 AACSB: Reflective Thinking 104) In a short essay, describe a good way for an entrepreneur to motivate her employees Answer: Though entrepreneurs typically find it difficult to give up control and decision-making power, the best thing they can is to empower employees When given decision-making power, employees typically perform at a higher level, are more motivated, and more satisfied with their jobs Diff: Page Ref: 118 AACSB: Analytic Skills 105) In a short essay, describe how an entrepreneur who is reluctant to empower employees might go about the process Answer: If the entrepreneur has trouble delegating authority, it is a good idea to use participative decision making as a stepping stone to empowerment By making decisions together, the entrepreneur and the employees can build trust in one another Once both the entrepreneur and the employees feel that the employees are ready to make decisions on their own, more decisionmaking power can be delegated Diff: Page Ref: 118 AACSB: Analytic Skills 28 Copyright © 2011 Pearson Education, Inc 106) In a short essay, describe how an entrepreneur is like a jazz band leader Answer: In a jazz band, the leader doesn't attempt to control every note that the performers play Instead, the leader tries to get the best performers possible and put them in the best situation possible to perform A similar thing occurs with an entrepreneur who is looking to have employees who are creative and innovative The entrepreneur can't try to orchestrate every move they make Instead, the entrepreneur should simply put them in the best working situation possible, give them good problems to solve, and let them use their talents and skills to solve those problems Like a jazz band leader, the ultimate goal of an entrepreneur is to get employees to perform at the highest possible level If she can get them to this, then she has been successful Diff: Page Ref: 118 AACSB: Analytic Skills 29 Copyright © 2011 Pearson Education, Inc ... would tend to need a more mechanistic, rather than an organic approach Diff: Page Ref: 115 16) Since they are often overwhelmed by the pressure of decisions, one chore that most entrepreneurs... aggressive in the way they approach the world, so that is why this is the best choice here Diff: Page Ref: 116 72) Which of the following terms does not fit the classic profile of the successful entrepreneur?... statement of an entrepreneurial venture would be included in this section of a full business plan A) analysis of opportunity B) description of the business C) executive summary D) analysis of the