Developing an Effective Business Model Part 1

Developing an Effective Business Model 1) Her Campus Media, the focus of the opening feature of Chapter 4, features a vibrant online magazine, with feature articles targeted toward all aspects of college life and survival. According to the feature, Her Campus's business model focuses on connecting companies with college females. The key to making this work is ________. A) the strength of Her Campus Media's management team B) the strength of Her Campus Media's brand C) the quality of the online content that Her Campus Media produces D) the functionality and vibrancy of the company's Web site E) Her Campus's unparalleled access to college females Answer: E 2) A ________ is a firm's plan or recipe for how it creates, delivers, and captures value for its stakeholders. A) commercialization plan B) business model C) business plan D) launch plan E) tactical model Answer: B 3) The Savvy Entrepreneurial Firm feature in Chapter 4 focuses on the ways in which Quirky creates, delivers and captures value for its stakeholders. According to the feature, Quirky would be a business that would be difficult to copy. According to the feature, it would be difficult to copy because ________. A) it has raised over $91 million and has over 550,000 people in its network B) it has a highly-functional Web site and has a talented management team C) it has a savvy marketing plan and has over 550,000 people in its network D) it has raised over $91 million and has a talented management team E) it has an excellent Internet domain name and has a first-mover advantage Answer: A 4) Which of the following is the proper sequence for when a firm should develop a business model? A) Preparation of the business model, initial validation of the business idea, opportunity recognition B) Initial validation of the business idea, establishing a growth plan, preparation of the business model C) Initial validation of the business idea, preparation of the business model, fleshing out the operational details of the firm D) Opportunity recognition, fleshing out the operational details of the firm, preparation of the business model E) Opportunity recognition, preparation of the business model, establishing a growth plan for the firm Answer: C 5) In regard to business models, which of the following statements is incorrect? A) There is a standard business model that most firms follow. B) A firm's business model is inherently dependent on the collection of resources it controls and the capabilities it possesses. C) It is dangerous for a company to assume that it can be successful by simply copying the business model of another firm. D) A firm's business model is its plan or diagram for how it competes. E) It is often difficult to determine what another firm's business model is. Answer: A 6) The Partnering for Success feature in Chapter 4 focused on Web-based platforms, including Odesk, Elance, and Guru, that make it easy to identify and hire experienced ________. A) part time employees B) freelancers C) interns D) virtual assistants E) full-time employees Answer: B 7) A business model is a firm's plan or recipe for how it creates, delivers, and captures value for its stakeholders. Answer: TRUE 8) What is a business model? Why is it important? Provide an example to illustrate your answer. Answer: A business model is a firm's plan or recipe for how it creates, delivers, and captures value for its stakeholders. Business models are fundamental to a firm's ability to succeed both in the short and long term. Dropbox, for example, has what's referred to as a freemium business model. It offers customers a free account with a set amount of storage space, and makes money by selling premium accounts with more capacity. Dropbox could charge all of its users a monthly fee based on the amount of storage that they use, but that's not its business model. Its business model is based on the belief that by introducing users to its service through a free account, it will ultimately sign up more paid users. A firm's business model also describes how the core aspects of what it does fit together and complement one another. 9) The two general categories of business models are ________ and ________. A) normal; unique B) standard; disruptive C) ordinary; revolutionary D) customary; unique E) ordinary; disruptive Answer: B 10) ________ business models depict existing plans or recipes firms can use to determine how they will create, deliver, and capture value for their stakeholders. A) Revolutionary B) Normal C) Customary D) Disruptive E) Standard Answer: E 11) Brandon Jones has crafted a business model for his firm that is based on an existing plan or template for how firms in his industry create, deliver and capture value for their shareholders. Brandon has crafted a ________ business model. A) standard B) disruptive C) customary D) normal E) temporary Answer: A 12) Which of the following statements about business models is incorrect? A) There are two general types of business models. B) There is no perfect business model. C) Most of the standard business models have been in place for some time. D) A firm's business model is confined to its own boundaries. E) Firms should guard themselves against thinking that one particular business model is a "home run" regardless of circumstances. Answer: D 13) ________ refers to the number of subscribers that a subscription-based business loses each month. A) Agitate B) Churn C) Erosion D) Attrition E) Stir Answer: B 14) Tyler Smith founded a firm that has a subscription-based business model. Although Tyler has averaged 600 new subscribers per month, she also loses 450 subscribers per month. The number of subscribers that Tyler loses each month is referred to as ________. A) erosion B) churn C) destruction D) attrition E) agitation Answer: B 15) Which of the following firms has a peer-to-peer business model? A) Dell B) Dropbox C) Airbnb D) Salesforce.com E) Google Answer: C 16) ________ business models are ones that do not fit the profile of standard business models, and are impactful enough that they disrupt or change the way business is conducted in an industry or an important niche within an industry. A) Disruptive B) Normal C) Unique D) Incomparable E) Exceptional Answer: A 17) Google and its AdWords program is an example of a ________ disruptive business model. A) low-end B) new-market C) high-quality D) low-price E) new-channel Answer: B 18) Southwest Airlines is an example of a ________ disruptive business model. A) low-end B) new-market C) high-quality D) new-product E) new-channel Answer: A 19) There are two types of disruptive business models — ________ and ________. A) low-end; high-end B) new-product; new-market C) new-market; low-end D) new-channel; high-quality E) standard; unique Answer: C 20) Which of the following firms introduced a disruptive business model? A) Salesforce.com B) eBay C) Panera Bread D) Barnes & Nobel E) J. Crew Answer: A 21) Standard business models depict existing plans or recipes firms can use to determine how they will create, deliver, and capture value for their stakeholders. Answer: TRUE 22) It is important to understand that there are several perfect business models. Answer: FALSE 23) Disruptive business models are impactful enough that they disrupt or change the way business is conducted in an industry or an important niche within an industry. Answer: TRUE 24) According to the textbook, Southwest Airlines introduced a new market disruption type of disruptive business model. Answer: FALSE 25) The Barringer/Ireland Business Model Template has five major categories and 14 individual parts. Answer: FALSE 26) What is the difference between standard business models and disruptive business models? Include examples of both in your answer. Answer: Standard business models depict existing plans or recipes firms can use to determine how they will create, deliver, and capture value for their stakeholders. Examples include the advertising business model, the auction business model, the low-cost business model, and the manufacture/retailer business model. Disruptive business models, which are rare, are ones that do not fit the profile of a standard business model, and are impactful enough that they disrupt or change the way business is conducted in an industry or an important niche within an industry. Examples include Dell (which introduced the direct-to-consumer computer sales model), Google (which introduced the online advertising model), and Salesforce.com (which introduced the notion of software as a service, or SaaS). 27) The Barringer/Ireland Business Model Canvas consists of ________ major category(ies) and ________ parts. A) 1; 12 B) 3; 9 C) 6; 18 D) 4; 12 E) 2; 6 Answer: D 28) The four major categories in the Barringer/Ireland Business Model Template are ________. A) core strategy, resources, financials, and operations B) core strategy, value proposition, customers and channels C) value proposition, resources, customers and partners D) activities, partners, customers, and competitors E) value proposition, cost structure, financials, and operations Answer: A 29) Which of the following is not one of the four major categories in the Barringer/Ireland Business Model Template? A) Operations B) Resources C) Channels D) Core strategy E) Financials Answer: C 30) In the Barringer/Ireland Business Model Template, ________ describes how the firm plans to compete relative to its competitors. A) strategic plan B) grand strategy C) tactical strategy D) value proposition E) core strategy Answer: E 31) Jamie Finch is crafting the business model for her fashion design firm. She just completed the section that describes how her firm plans to compete relative to her rivals. Jamie just completed the ________ portion of her business model template. A) operations B) core strategy C) resources D) strategic plan E) tactical strategy Answer: B 32) Which of the following is not one of the four elements of the core strategy section of the Barringer/Ireland Business Model Template? A) Business mission B) Key assets C) Basis of differentiation D) Target market E) Product/market scope Answer: B 33) A business's ________ describes why it exists and what its business model is supposed to accomplish. A) values statement B) importance statement C) differentiation statement D) mission statement E) significance statement Answer: D 34) Nathan Green is starting a firm in the organic produce industry. Nathan has developed a statement—"Helping Make Your Life Better, Healthier, and Fuller"—that describes the reason his company exists and what his business model is supposed to accomplish. In the terminology used in the Barringer/Ireland Business Model Template, Nathan's statement is referred to as his ________ statement. A) values B) uniqueness C) differentiation D) mission E) task Answer: D