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Chapter 8: Entrepreneurial Strategy

Small businesses and entrepreneurial firms create the majority of new jobs in the US economy
Most small businesses in the US are in retail trade and construction industries.
Opportunity recognition is the process of identifying, selecting, and developing entrepreneurial opportunities
Opportunity recognition involves two phases of activity: discovery and evaluation
The evaluation phase of opportunity recognition includes the “Aha!” experience that often leads to new venture development
The majority of entrepreneurial start-ups are financed with personal savings and the contributions of family and friends
The majority of entrepreneurial firms are started with financing from venture capitalists and banks
Angel investors are private individuals who provide equity investments for seed capital during the early stages of a new venture
As investors, venture capitalists rarely provide any help or services to entrepreneurial firms other than financing
Venture capital funding for entrepreneurial ventures is usually available only after the start-up has become a going concern and established track record
Venture capital is a form of public equity financing used to help young firms grow rapidly
To obtain venture capital financing, business founders often have to give up some ownership and control of their business
Venture capitalists and angel investors regard the management team as the most important asset of an entrepreneurial venture
Because of the Small Business Administration and government regulations, small businesses are rarely allowed to bid on government contracts
An entry wedge is a type of entrepreneurial strategy firms can use to enter into business
Founders using a pioneering new entry strategy look for opportunities to capitalize on proven market successes
Adaptive new entry involves offering a radical new product or highly innovative service
Rather than fighting over existing customers, firms pursing a “blue ocean” strategy seek opportunities in uncontested markets
“Blue ocean” strategies rarely provide sustainable advantages because they are easily imitated
Because new ventures are typically small, they usually don’t have high economies of scale relative to competitors
Entrepreneurial firms are often in a strong position to use combination strategies because they have the flexibility to approach situations uniquely
Entrepreneurial competitive dynamics refers to a cycle of actions and responses between firms competing for the same customers
Entrepreneurial new entry is often perceived as a competitive threat because most market needs are being met, either directly or indirectly, by an existing firm
Market commonality is the extent to which rivals draw from the same types of resources
When attacked, older and larger firms tend to respond more quickly but their responses are often more predictable
Cutting prices or increasing marketing efforts are examples of tactical competitive actions
In the context of competitive dynamics, tactical actions involve major commitment of distinctive and specific resources to strategic initiatives
Refinements or extensions of existing strategies are often referred to as tactical actions
Forbearance is a particularly aggressive type of competitive attack
Co-opetition, where competitors work together behind the scenes, is a form of illegal tacit collusion
For an entrepreneurial start-up to be successful, three ingredients are critical. What are they?
1. Viable opportunity
2. Available resources
3. Qualified and motivated founding team
Which of the following is a common source of new business opportunities?
(A. Current or past work experiences
B. Suggestions by family or friends
C. Chance event)
The process of identifying, selecting, and developing new venture opportunities is known as
opportunity recognition
Generally speaking, the opportunity recognition process consists of two phases of activity. They are
discovery and evaluation
Which of the following is NOT one of the characteristics of an entrepreneurial opportunity?
When an opportunity is attractive long enough for it to be successfully developed and deployed, it is said to be
Which of the following terms is used to refer to opportunities that are practical and physically possible?
Financing for entrepreneurial start-ups includes which of the following?
All of these
Which of the following sources of entrepreneurial financing are available to ventures that have already started to conduct business and generate sales?
All of these
The majority of entrepreneurial start-ups are financed with
personal savings and the contributions of family and friends
Private individuals who provide seed capital to young ventures are known as
All of the following statements about venture capital are true EXCEPT
venture capital is a form of public equity financing
Based on statistics reported in the text, which of the following statements is FALSE?
Ninety percent of the companies financed with venture capital funds fail
According to the text, new ventures launched by entrepreneurial teams are more likely to be successful than ventures launched by
“lone wolf” entrepreneurs
Which of the following types of resources contribute to the success of entrepreneurial firms?
All of these
__________ provide(s) a key avenue for growth for many young and small firms through partnering to obtain resources and/or expand into new markets
Strategic alliances
The US Small Business Administration supports small business through all of the following EXCEPT
investing venture capital
Which of the following is NOT one of the three characteristics of entrepreneurial leadership mentions by the text?
Clarifying job responsibilities
Why is vision such an important element of entrepreneurial leadership?
Because the entrepreneur has to envision realities that do not yet exist
Which of the following is NOT a common new entry strategy according to the text?
proactive new entry
Seeking products or services that have been successful in one market and introducing the same basic product or service in another segment of the market is referred to as
imitative new entry
Which of the following is NOT a key element of blue ocean strategy?
Highlight incremental improvements to capture market share

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