CHAPTER 06 ASSESSMENT OF ENTREPRENEURIAL

OPPORTUNITIES

TRUEFALSE

1. It is reported that more than 400,000 new firms have emerged in the United States every year
since 2010.

(A) True

(B) False

Answer : (A)

2. The entrepreneurial motivations of individuals relate to the entrepreneur, the environment, and
the venture.

(A) True

(B) False

Answer : (A)

3. There is a great abundance of reliable data concerning the start-up, performance, and failure of
new ventures.

(A) True

(B) False

Answer : (B)

4. Many entrepreneurs do not understand the marketing life cycle of a new product.

(A) True

(B) False

Answer : (A)

5. Most entrepreneurs are objective when they evaluate their new idea.

(A) True

(B) False

Answer : (B)
6. ​Failure to anticipate the technical difficulties related to developing or producing a product can
sink a new venture.

(A) True

(B) False

Answer : (A)

7. Pricing becomes less of a concern when customers become aware of a product's unique
characteristics that are superior to the competition.

(A) True

(B) False

Answer : (A)

8. Most entrepreneurs hire lawyers to brief them on the legal issues surrounding a new venture.

(A) True

(B) False

Answer : (B)

9. There are five specific phases that a new venture goes through.

(A) True

(B) False

Answer : (B)

10. With a nonroutine venture, the initial innovation will maintain the company's competitive
advantage without new technology.

(A) True

(B) False

Answer : (B)

11. In a lifestyle venture, independence, autonomy, and control are the primary driving forces.

(A) True

(B) False
Answer : (A)

12. Surprisingly, growth of sales is generally not considered a critical factor in assessing new
ventures.

(A) True

(B) False

Answer : (B)

13. The decision of an entrepreneur to ignore the market is a safe one if he or she is sure that the
idea will be a success.

(A) True

(B) False

Answer : (B)

14. The growth pattern of sales is critical for an entrepreneur to make correct forecasts.

(A) True

(B) False

Answer : (A)

15. Only a small percentage of new ventures succeed.

(A) True

(B) False

Answer : (A)

16. Timing has little to do with the success or failure of a new venture.

(A) True

(B) False

Answer : (B)

17. Obtaining external financing is considered one of the major types of problems for a new venture
during its first year.

(A) True
(B) False

Answer : (A)

18. Two important factors classified as managerial that could be a cause for failure include human
resource problems and the concept of the team approach.

(A) True

(B) False

Answer : (A)

19. The comprehensive feasibility analysis approach is closely related to the preparation of a
thorough business plan.

(A) True

(B) False

Answer : (A)

20. "Intensity of competition" changes the dominance of problem areas.

(A) True

(B) False

Answer : (A)

21. Solid analysis and evaluation of the feasibility of the product/service idea are critical tasks in
starting a new business.

(A) True

(B) False

Answer : (A)

22. A product does not have to be patented in order to be introduced into the marketplace.

(A) True

(B) False

Answer : (A)

23. Design is now a hot topic in the business world.

(A) True

(B) False

Answer : (A)

24. There are three types of design-centered entrepreneurship.

(A) True

(B) False

Answer : (B)

25. Mistakes and failures along the way are to be seen as poor planning and actually hinders the
design methodology.

(A) True

(B) False

Answer : (B)

26. Design-centered entrepreneurship is when the entrepreneur applies design methods in six
action stages of developing an opportunity.

(A) True

(B) False

Answer : (B)

27. The maverick entrepreneur who avoids reaching out and finding help is a myth of the past.

(A) True

(B) False

Answer : (A)

28. The ‘learn' stage of the Build-Measure-Learn feedback loop is a process in which one
learns by trying out an initial idea and then measuring it to validate the effect.​

(A) True

(B) False

Answer : (B)
29. The Lean Start-Up methodology is hypothesis-driven.​

(A) True

(B) False

Answer : (A)

30. The Build-Measure-Learn feedback loop begins with identifying which hypotheses to test and
ends with requiring the entrepreneur to take a look at the results and determine whether a pivot is
required.​

(A) True

(B) False

Answer : (A)

MULTICHOICE

31. It is reported that new firms have emerged in the United States every year since 2010.

(A) 400,000

(B) 100,000

(C) 22,000

(D) 230,000

Answer : (A)

32. Which of the following is not an entrepreneurial motivation for starting a venture?

(A) the environment

(B) the entrepreneur

(C) the venture

(D) the organization

Answer : (D)

33. Researchers have described a "fully developed new firm" with a number of characteristics,
including:

(A) full-time commitment

(B) informal financial support

(C) minimal hiring

(D) plans to hire one or more individuals

Answer : (A)

34. Many entrepreneurs lack for their new venture.

(A) innovation

(B) intelligence

(C) objectivity

(D) foresight

Answer : (C)

35. Which of the following is not critical to a product's success?

(A) timing

(B) marketing approach

(C) objectivity

(D) size

Answer : (D)

36. When a customer sees a product that is superior to its competitors, ______ becomes less
important.

(A) size

(B) color

(C) quantity

(D) price

Answer : (D)

37. A new venture should be

(A) cheap.

(B) unique.
(C) easy to copy.

(D) inferior to its competitors.

Answer : (B)

38. A common pitfall in selecting a new venture is

(A) poor financial understanding.

(B) proper objective evaluation.

(C) real insight into the market.

(D) having a good idea.

Answer : (A)

39. Timing is especially critical in which area?

(A) the new venture profitability method

(B) marketing

(C) accounting

(D) the economy

Answer : (B)

40. Many entrepreneurs of new ventures lack

(A) knowledge of their product.

(B) a unique angle for the venture.

(C) drive.

(D) the willingness to put in long hours.

Answer : (B)

41. Name the pitfall described by the statement, "Engineers and technically trained people are
particularly prone to falling in love with an idea for a product or service."

(A) inadequate understanding of technical requirements

(B) lack of venture uniqueness

(C) no real insight into the market

(D) lack of objective evaluation

Answer : (D)

42. Product/market problems involve which of the following?

(A) assuming debt too early

(B) unclear business definition

(C) venture capital relationship problems

(D) initial undercapitalization

Answer : (B)

43. During the prestart-up and start-up phases, ____ factors are critical.

(A) five

(B) two

(C) three

(D) seven

Answer : (A)

44. During the prestart-up and the start-up phases of a new venture, which of the following is not
considered one of the crucial factors for success?

(A) uniqueness of venture and price

(B) expected growth and price

(C) availability of products

(D) price and timing

Answer : (D)

45. Sales growth is a critical factor in the

(A) prestart-up phase.

(B) poststart-up phase.

(C) start-up phase.

(D) evaluations phase.

Answer : (C)

46. Venture classifications include which of the following types of venture?

(A) hobby ventures

(B) smaller copycat ventures

(C) high-growth ventures

(D) survival ventures

Answer : (C)

47. Three specific phases that a new venture goes through are

(A) prestart-up, start-up, poststart-up.

(B) start-up, poststart-up, evaluation.

(C) beginning start-up, start-up, ending start-up.

(D) prestart-up, start-up, evaluation.

Answer : (A)

48. Lack of finished product availability can affect

(A) the company's image.

(B) recalls.

(C) marketing efforts.

(D) costs.

Answer : (C)

49. Financial considerations play a major role in

(A) lifestyle ventures.

(B) smaller profitable ventures.

(C) high-growth ventures.

(D) corporate debentures.

Answer : (B)
50. Customers and customer demand patterns relate to what source of the market feasibility
analysis?

(A) market data

(B) competitive data

(C) general economic trends

(D) pricing data

Answer : (A)

51. Independence, autonomy, and ______ are the major driving forces behind lifestyle ventures.

(A) marketing

(B) capitalists

(C) control

(D) people

Answer : (C)

52. The type of venture that is expected to attract venture capital would most likely be a

(A) corporate venture.

(B) high-growth venture.

(C) lifestyle venture.

(D) smaller venture.

Answer : (B)

53. What is a critical consideration when assessing customer availability?

(A) amount of products sold

(B) length of time needed to determine who the customers are, as well as their buying habits

(C) the exact profitability of the venture

(D) how they will obtain the product

Answer : (B)

54. Which of the following as a factor contributing to new-venture failure?

(A) product/market problems.

(B) family issues.

(C) personality clashes.

(D) good management/poor product.

Answer : (A)

55. One of the external problems new ventures face is

(A) vandalism.

(B) poor labor force.

(C) government regulations.

(D) market knowledge.

Answer : (D)

56. In a growing industry, _____ companies do even better.

(A) start-up

(B) good

(C) marketing

(D) small

Answer : (B)

57. Researchers believe that design methodology provides ________ learning mechanisms important
for converting ideas into form.

(A) specific

(B) organizational

(C) vague

(D) a framework of

Answer : (A)

58. Using the failure prediction model discussed in the chapter, the risk of failure can be reduced
by:

(A) using less debt as initial financing and generating revenue in the initial stages.
(B) using more debt as initial financing and generating less revenue in the initial stages.

(C) using more revenue to enhance more debt in the initial stage.

(D) using more cash as initial financing in the initial stage.

Answer : (A)

59. Which of the following is a tool that enables entrepreneurs to judge a business venture's
potential?

(A) profile analysis

(B) market analysis

(C) feasibility analysis

(D) customer analysis

Answer : (A)

60. Managerial problems include which of the following?

(A) venture capital relationship problems

(B) unclear business definition

(C) concept of a team approach

(D) assuming debt too early

Answer : (C)

61. Hiring and promotions on the basis of nepotism rather than qualification fall under the
managerial problem of

(A) human resource problem.

(B) the concept of a team approach.

(C) unclear business definition.

(D) poor management.

Answer : (B)

62. A common human resource problem is

(A) poor relationships with parent companies and venture capitalists.

(B) incompetent support professionals.

(C) inflated owner ego.

(D) incompetent workforce.

Answer : (C)

63. Rapid technological advances in many industries cause a concern for in new venture
development.

(A) faulty product performance

(B) rapid product obsolescence

(C) inadequate awareness of competitive pressures

(D) undercapitalization

Answer : (B)

64. When premature entry into the marketplace causes the failure of a new venture, it can be
termed

(A) poor timing.

(B) undercapitalization.

(C) a design problem.

(D) a distribution problem.

Answer : (A)

65. A solid analysis is

(A) a critical task in starting a new business.

(B) of no importance.

(C) no way to discover flaws in a new-venture idea.

(D) not a critical task in starting a new business.

Answer : (A)

66. Which of the following is a key question to ask when performing a feasibility criteria approach?

(A) Is it proprietary?

(B) Can it easily make money?

(C) What are its points of discussion?

(D) Do we have any potential customers?

Answer : (A)

67. The results of a profile analysis enable the entrepreneur to judge

(A) himself or herself.

(B) the competition.

(C) the business potential.

(D) venture capital opportunities.

Answer : (C)

68. A checklist approach allows the entrepreneur to identify _______ factors of a new venture.

(A) financial

(B) business

(C) personnel

(D) critical

Answer : (D)

69. Problems associated with the managerial team include

(A) being high-risk takers.

(B) poor relationships with parent companies.

(C) verbal agreements made to venture capitalists.

(D) filing lawsuits.

Answer : (B)

70. In determining the potential market, one should look into the future.

(A) one year

(B) three to five years

(C) ten years

(D) three months

Answer : (B)
71. "There is no replacement for passion," is a statement associated with which of the following?

(A) visualizing your success

(B) getting educated

(C) evaluating your beliefs

(D) doing what your love

Answer : (D)

72. What criteria must be met in the design methodology approach?

(A) concept feasibility

(B) financial feasibility

(C) market viability

(D) design feasibility

Answer : (A)

73. ​The Three A's of Metrics are

(A) actionable, accessible, auditable.

(B) accessible, abundance, audience.

(C) accuracy, accountability, auditable.

(D) activity, actionable, accessible.

Answer : (A)

74. Market feasibility analysis relies on

(A) organizational competence

(B) the entrepreneur's vision

(C) venture capital

(D) general economic trends and competitor data

Answer : (D)

75. General sources for a market feasibility analysis include

(A) reliability studies.

(B) statistical analyses.

(C) pricing data.

(D) supplier data.

Answer : (C)

76. In shaping the ultimate success or failure of a new venture, which of the following statements is
applicable?

(A) A single strategic variable is usually responsible.

(B) A single strategic variable is seldom responsible.

(C) A single strategic variable that frequently changes is responsible.

(D) A single strategic variable that influences the entire outcome is responsible.

Answer : (B)

77. Flexibility, reliability, and safety are all examples of

(A) technical feasibility.

(B) market feasibility.

(C) assessment of the entrepreneurial profile.

(D) a good product.

Answer : (A)

78. Which evaluation method enables an entrepreneur to judge the potential of the business?

(A) the entrepreneurial analysis method

(B) the venture analysis method

(C) the profile analysis

(D) the net out-of-pocket cost method

Answer : (C)

79. An approach developed as a criteria selection list from which entrepreneurs can gain insights
into the viability of their venture is the

(A) feasibility criteria approach.

(B) time-essence of a venture approach.

(C) marketability feasibility approach.

(D) comprehensive feasibility approach.

Answer : (A)

ESSAY

80. Define and describe Lean Start-Up methodology?​

Graders Info :

The Lean Start-Up methodology provides a scientific approach to creating early venture concepts
and delivers a desired product to customers' hands faster. Its philosophy originates from the
Japanese concept of lean manufacturing, which seeks to increase value-creating practices and
eliminate wasteful practices. The Lean Start-Up methodology begins with the premise that every
new venture is a grand experiment that attempts to answer questions such as: "Should this venture
be created?" and "Will it be a sustainable business?" The Lean Start-Up methodology was first
developed in 2011 by Eric Ries, founder of IMVU Inc. as a way to prevent waste in start-ups and
ensure that the business plan remains a living document. The hard truth is that no matter how much
research is conducted, how many surveys are developed, and how accurate your financial
predictions are, your new venture concept will still be based on certain assumptions. It is critical
that these assumptions either be validated or discarded as soon as possible.
​

81. Explain three major reasons why new ventures fail.

Graders Info :

The first reason new ventures often fail is poor timing for the start of a new venture. A new product
might be put on the market before a real need for the item exists or it may be introduced too late,
when there is little demand for the product. The second reason is rapid product obsolescence. The
life of a product needs to be assessed as important discoveries are always being made in updating
the product's usefulness. The third reason is faulty product performance. Tests have not been
conducted appropriately for the product or quality has not been adequately controlled.

82. List and describe three pitfalls in selecting a new venture.

Graders Info :

The first pitfall in selecting a new venture is lack of objective evaluation. Ideas for products or
services lack the careful planning measures to bring them up to their proper potential. The second
pitfall is the lack of real insight into the market; a failure on the part of managerial staff to realize
the full potential and life cycle of the product from the beginning. The third pitfall concerns the lack
of venture uniqueness. There is no specific characteristic to set the business apart from competitors
in the same field.

83. ​What are the two types of design-centered entrepreneurship?

Graders Info :

​Design-centered entrepreneurship includes microiterations (within each action stage to improve the
outcome) and macroiterations (moving from one particular action stage back to a previous stage for
further development). Both microiterations and macroiterations involve taking action, learning, and
refinement, all of which are beneficial to the process.

84. What are the five specific feasibility phases that a new venture will go through?

Graders Info :

The first phase is finding out technical feasibility. The feasibility measured is whether the product or
service will meet all technical criteria and tests for serviceability that are measurable. The second
phase concerns marketability. Different tests are used to assure the success of the product or
service rendered. This product must be salable and marketable to the public with a plan for
promoting, pricing, and distributing the product to consumers or customers. The third phase is
financial feasibility. Required finances are compared to available financial resources. The fourth
phase deals with organizational capabilities as far as the personnel needs and requirements. The
final phase is the competitive analysis of existing, as well as potential, competitors.

85. What sorts of legal issues can be overlooked when assessing an entrepreneurial opportunity?

Graders Info :

Business is subject to many legal requirements: the need to make the workplace safe for employees;
the need to provide reliable and safe products, and the need for patents, trademarks, and copyrights
to protect inventions and products. Overlooking any of these legal issues could result in major
problems.