Strategies for Firm Growth Part 1

Entrepreneurship: Successfully Launching New Ventures Chapter 14 Strategies for Firm Growth 1) Shake Smart, the company profiled in the opening feature of Chapter 14, sells nutritious smoothie-like shakes. The first place the shakes were sold was ________. A) at a pop-up store in the Memorial Union on the Iowa State University campus B) at a kiosk just outside the Aztec Center on the San Diego State University campus C) at concession stands in Spartan Stadium on the Michigan State University campus D) on central campus at the University of Nebraska campus E) in the Lory Student Center on the Colorado State University campus Answer: B 2) Shelby Collins owns a firm that designs and sells women's clothing. She is currently trying to grow her firm by developing new product lines. Shelby is pursuing a(n) ________ growth strategy. A) in-house B) center C) domestic D) external E) internal Answer: E 3) New product development, other product-related strategies, and international expansion are examples of ________ growth strategies. A) external B) domestic C) primary D) internal E) in-house Answer: D 4) Internally generated growth is often called organic growth because it does not rely on ________. A) outside intervention B) its own skills and capabilities C) external funding D) internal leadership E) internal design expertise Answer: A 5) Which of the following is an example of an external growth strategy? A) Geographic expansion B) Improving an existing product or service C) Increasing the market penetration of an existing product or service D) Extending product lines E) Strategic alliances Answer: E 6) Modcloth, Zappos and Sir Kensington's are examples of firms that are growing via ________ growth strategies. A) in-house B) external C) internal D) central E) derivative Answer: C 7) Which mechanism for firm growth involves the creation and sale of new products or services? A) Strategic alliances B) New product development C) Licensing D) Franchising E) Joint ventures Answer: B 8) Which of the following is an advantage of internal growth strategies? A) Need to develop new resources B) Get quality and pricing right C) Investment in a failed internal effort can be difficult to recoup D) Provides maximum control E) Adds to industry capacity Answer: D 9) Which of the following statements is not true regarding new product development? A) New product development involves designing, producing, and selling new products as a means of increasing firm revenues and profits. B) When new product development is properly executed, there is tremendous upside potential. C) The key to successful new product development strategy is to develop products that aren't simply "me-too" products. D) In general, developing new products is a low-risk strategy. E) In many fast-paced industries, new product development is a competitive necessity. Answer: D 10) The Savvy Entrepreneurial Firm feature in Chapter 14 focuses on SwitchFlops, a company that produces sandals with interchangeable straps. The primary takeaway from the feature is that savvy growth-minded startups ________. A) utilize both internal and external growth strategies B) emphasize internal rather than external growth strategies C) emphasize international growth strategies from their inception D) configure their products and services in ways that have built-in growth potential E) compete on the basis of quality rather than price Answer: D 11) Which of the following was not identified in the textbook as a key to effective new product development? A) Develop products that add value. B) Get quality and pricing right. C) Find a need and fill it. D) Conduct ongoing feasibility analysis. E) Focus on broad target markets. Answer: E 12) Which of the following was not identified in Chapter 14 as one of the top five reasons new products fail? A) The potential market was overestimated. B) Customers saw the product as too expensive. C) Lack of passion for the product D) The product was no different than the competition's. E) The costs of developing the product line were too high. Answer: C 13) External growth strategies involve efforts taken within the firm itself, such as new product development, other product-related strategies, and international expansion. Answer: FALSE 14) Internally generated growth is often called organic growth because it does not rely on outside intervention. Answer: TRUE 15) In many fast-paced industries, new product development is a competitive necessity. Answer: TRUE 16) An advantage of internal growth is that it is a rapid form of growth. Answer: FALSE 17) New product development is a low-risk growth strategy. Answer: FALSE 18) Explain the difference between internal and external growth strategies. Provide examples of each. Answer: Internal growth strategies rely on efforts generated within the firm itself, such as new product development, other product-related strategies, and international expansion. External growth strategies rely on establishing relationships with third parties, such as mergers, acquisitions, strategic alliances, joint ventures, licensing, and franchising. 19) Describe the internal growth strategy of new product development. Why is it a competitive necessity in some industries that entrepreneurial firms focus on this form of growth? Answer: New product development involves the creation and sale of new products (or services) as a means of increasing firm revenues. In many fast-paced industries, new product development is a competitive necessity. For example, the average product life cycle in the computer software industry can be measured in months. Because of this, to remain competitive, software companies must always have new products in their pipelines. 20) If a business enhances the quality of a product, makes it more convenient to use, improves its durability, or makes it more up-to-date, any one of those initiatives fall under the category of ________. A) increasing the market penetration of an existing product or service B) extending product lines C) geographic expansion D) licensing E) improving an existing product or service Answer: E 21) A ________ strategy seeks to increase the sales of a product or service through greater marketing efforts or through increased production capacity and efficiency. A) product line extension B) product line sharpening C) product line widening D) market penetration E) market expansion Answer: D 22) Pam Ryan owns a store that sells running shoes and related products. Pam is currently trying to increase sales through endorsements by famous runners and former Olympic athletes. Pam is pursuing a(n) ________ strategy. A) strategic alliance B) licensing C) market penetration D) geographic expansion E) improving an existing product or service Answer: C 23) Work that is done for a company by people other than the company's full-time employees is referred to as ________. A) insourcing B) farming-out C) personnel extension D) outsourcing E) capacity enhancement Answer: D 24) A(n) ________ strategy involves making additional versions of a product so that it will appeal to different clientele. A) market penetration B) geographic expansion C) improving an existing product or service D) strategic alliance E) product line extension Answer: E 25) Chris Smith owns a store that sells all-terrain vehicles (ATVs). In the past, Chris just sold one version of each of the ATVs he sold in his showroom, but to increase sales, Chris now sells a low-end, a medium-priced, and a high-end version of each of the ATVs he sells. Chris's new strategy is called a(n) ________ strategy. A) improving an existing product or service B) market penetration C) product line extension D) geographic expansion E) joint venture Answer: C 26) Entrepreneurial businesses that grow by expanding from their original location to additional geographic sites are pursuing a ________ strategy. A) common expansion B) market penetration C) universal networking D) geographic expansion E) product line extension Answer: D 27) Shelly Watters owns a chain of fashion boutiques that started in Washington, DC and has expanded into Maryland, Virginia, and West Virginia. Shelly is growing her company via a strategy of ________. A) geographic expansion B) market penetration C) product line extension D) outsourcing E) licensing Answer: A 28) A market penetration strategy involves actions taken to increase the sales of a product or service through greater marketing efforts or through increased product capacity and efficiency. Answer: TRUE 29) A product line extension strategy involves making additional versions of a product so that it will appeal to a different clientele or making related products to sell to the same clientele. Answer: TRUE 30) Geographic expansion is most common in manufacturing settings. Answer: FALSE 31) Describe what a product line extension strategy is. What are the advantages of this strategy? Describe a company you are familiar with that utilizes a product line extension growth strategy. Answer: A product line extension strategy involves making additional versions of a product so that it will appeal to different clientele or making related products to sell to the same clientele. For example, a company may take a low-end product, make another version of it that is a little better, and then make another version of it that represents the top of the line. The advantage of a product extension strategy is that it allows a firm to take one product and extend it into several products without incurring significant additional development expense. In regard to making related products to sell to the same clientele, many firms start by offering one product or service and then expand into related areas. Many companies utilize product extension strategies. Starbucks, for example, now sells bottled Frappuccino Coffee, which is an extension of its more traditional hot coffees and related drinks sold in its restaurants. 32) According to a survey of rapid growth firms conducted by the Small Business & Entrepreneurship Council and the Financial Services Roundtable, ________ percent of the firms in the survey said that expanding into overseas markets factored into their business plans over the next five years. A) 9 B) 21 C) 40 D) 53 E) 66 Answer: B 33) International new ventures are ________. A) businesses that have employees located in two or more countries B) businesses that sell products in two or more countries C) businesses that, from inception, seek to derive significant competitive advantage by using their resources to sell products or services in multiple countries D) businesses that are headquartered in a foreign country and export their products to the United States E) new ventures that export at least one-third of their products to foreign countries Answer: C 34) The What Went Wrong feature in Chapter 14 focuses on the failure of Crumbs Bake Shop, a specialty-restaurant chain that sold gourmet cupcakes. According to the feature, Crumbs failed due to ________. A) lack of funding to facilitate expansion, high real estate costs, management turnover, poor operating margins B) no pivot or change in strategy, lack of international expansion, trademark dispute with a competitor, failure to franchise C) increasingly crowded market, consumers started losing interest in cupcakes, high real estate costs, and no pivot or change in strategy D) lack of funding to facilitate expansion, management turnover, increasingly crowded market, and high fixed costs E) high operating costs, trademark dispute with a competitor, consumers started losing interest in cupcakes, and failure to franchise Answer: C 35) Which of the following is the primary advantage of exporting as a foreign market entry strategy? A) Provides a firm total control over its foreign operations B) Ability to generate revenue C) Exporting is a relatively inexpensive way for a firm to become involved in foreign markets. D) The exporting company's customers put up most of the capital needed to establish the export operation. E) Exporting involves very little effort on the part of a firm. Answer: C 36) Which of the following is the primary disadvantage of licensing as a foreign market entry strategy? A) A firm in effect "teaches" a foreign company how to produce its proprietary products. B) High transportation costs C) It is usually a one-time activity. D) A firm loses partial control of its business operations. E) Quality control Answer: A