Small Business An Entrepreneurs Plan 6th Edition By Ron Knowles – Test Bank

Complete Test Bank With Answers

 

 

Sample Questions Posted Below

 

Chapter 5-Learning from the Competition: Your Competitive Intelligence

MULTIPLE CHOICE

1. Which of the following best identifies the stage of the competition life cycle in which pricing is experimental?

a.	decline
b.	mature
c.	embryonic
d.	growth

ANS: C

PTS: 1

REF: p.119

2. Which of the following involves visiting customers and analyzing their perception of the competition? 

a.	competitive segmentation
b.	primary research
c.	secondary research
d.	competitive mapping

ANS: B

PTS: 1

REF: p.103

3. Which of the following best defines the unique features that attract customers and encourage customer loyalty?

a.	core competency
b.	unique selling point
c.	unique selling feature
d.	distinctive competency

ANS: D

PTS: 1

REF: p.109

4. Which of the following best identifies how the cost leadership strategy successfully competes?  

a.	developing and maintaining a unique perception of its product/service
b.	being the low-cost producer or service provider
c.	carving out a specific/narrow segment of the market
d.	providing a niche product/service at the lowest cost possible

ANS: B

PTS: 1

REF: p.113

5. Which of the following describes the competitive intelligence process of gathering together a small number of customers for a “group think” about your potential competitors?

a.	touchpoint analysis
b.	SWOT analysis
c.	competitive test matrix
d.	secondary research

ANS: A

PTS: 1

REF: p.107 

6. Which of the following describes the competitive intelligence process of analyzing customers’ perceptions of the competition in order to find out what benefits and features are important to them?

a.	SWOT analysis
b.	customer analysis
c.	touchpoint analysis
d.	benefit analysis

ANS: C

PTS: 1

REF: p.107

7. Which of the following describes the business arena when it is in the embryonic stage?

a.	saturated
b.	highly competitive
c.	relatively empty
d.	status quo

ANS: C

PTS: 1

REF: p.117

8. Which of the following describes the competitive intelligence process of establishing unique benefits and features that the target customer values relative to the competition?

a.	targeting
b.	differentiation
c.	positioning
d.	SWOT analysis

ANS: C

PTS: 1

REF: p.113

9. Which of the following describes what happens as an industry matures?

a.	Competition becomes fierce, and you are forced to try to attract customers away from your competition in order to survive.
b.	There is little or no competition, and you are forced to try to attract customers away from your competition in order to survive.
c.	You have to increase your prices to increase your profitability.
d.	You have to decrease your prices to increase your profitability.

ANS: A

PTS: 1

REF: p.117

10. Which of the following competitive marketing strategies is exemplified by the establishment of a “dollar store” that offers low retail prices?

a.	differentiation
b.	cost leadership
c.	penetration
d.	focus or niche market focus

ANS: B

PTS: 1

REF: p.114

11. Which of the following best identifies the first step in a competitive touchpoint analysis?

a.	Develop a distinctive competency.
b.	Develop a competitive strategy.
c.	Talk to the customers directly.
d.	Conduct a competition analysis.

ANS: C

PTS: 1

REF: p.114

12. According to the author, which of the following is a common rule of thumb for the time frame for high-tech businesses to go from birth to product penetration?

a!	3 months
b!	6 months
c!	1 year
d!	2 years

ANS: B

PTS: 1

REF: p.118

13. Which of the following is the LEAST effective strategy for dealing with the competition?

a.	improving your customer service
b.	forming strategic alliances
c.	adding new benefits to your product or service
d.	lowering your prices

ANS: D

PTS: 1

REF: p.113–120

14. Which of the following strategies was used by Perri Domm, the owner of Goodbye Graffiti (Chapter 5 opening case study)?

a.	reduced competition and increased sales using a competitive test matrix
b.	reduced prices and implemented a cost leadership competitive strategy
c.	launched an expensive name and product recognition campaign
d.	used a SWOT analysis, which allowed him to evaluate the external weaknesses and internal opportunities of his competitors

ANS: C

PTS: 1

REF: p.104

15. According to the text, which of the following companies is illustrated as a possible invisible competitor?

a.	Zellers
b.	Goodbye Graffiti
c.	MVM
d.	Crazy Roadhouse

ANS: B

PTS: 1

REF: p.106

16. Which of the following describes the process of establishing, in the mind of the customer, a unique product or service image?

a.	customer imaging
b.	customer mapping
c.	positioning
d.	perceptual imaging

ANS: C

PTS: 1

REF: p.113

17. According to the author, which of the following best identifies who should dictate the changes required to stay competitive?

a.	customers
b.	competition
c.	partners
d.	suppliers

ANS: A

PTS: 1

REF: p.120

18. Which of the following strategies best identifies a business that targets one or more narrow market segments?

a.	niche
b.	product penetration
c.	differentiation
d.	market penetration

ANS: A

PTS: 1

REF: p.113

19. In which of the following stages of the competitive life cycle are you most likely to see price wars?

a.	decline
b.	growth
c.	maturity
d.	embryonic

ANS: A

PTS: 1

REF: p.117

20. According to the text, which of the following product life cycle stages does brand loyalty begin?

a.	embryo
b.	growth
c.	maturity
d.	decline

ANS: B

PTS: 1

REF: p.118

21. Which of the following describes competitors that offer the same types of products or services as perceived by target customers?

a.	secondary
b.	direct
c.	indirect
d.	target

ANS: B

PTS: 1

REF: p.105

22. Which of the following best defines a competitive SWOT?

a.	the first step in your touchpoint analysis
b.	a matrix grid, which allows you to evaluate the strengths and weakness of your competitors
c.	successfully used by Perri Domm, the owner of Goodbye Graffiti (Chapter 5 case study) to reduce his competition and increase his market share.
d.	analysis of the internal and external conditions for perceived competitors.

ANS: D

PTS: 1

REF: p.15

23. Which of the following will NOT help you to grow product or service sales?

a.	intelligence
b.	promotions
c.	SWOT analysis
d.	touchpoint analysis

ANS: B

PTS: 1

REF: p.106 – 107 / 113

24. According to the text, which of the following best outlines the competitive pricing review sheet?

a.	contains a SWOT analysis of your three major competitors
b.	contains a touchpoint analysis
c.	assists with setting a price for your product or service that is acceptable to the market
d.	assists with identifying the competitive strategy required

ANS: C

PTS: 1

REF: p.111

25. Which of the following is NOT a common goal of competitive intelligence?

a.	improve your customer service
b.	reduce the number of competitors
c.	improve your advertising and promotions
d.	develop new product/service opportunities

ANS: B

PTS: 1

REF: p.106

26. Which of the following describes a partnership between one or more organizations that is formed to create a competitive advantage?

a.	niche
b.	strategic
c.	general
d.	competitive

ANS: B

PTS: 1

REF: p.120

27. According to the text, in which of the following product life cycle stages would longer production runs happen?

a.	embryo
b.	growth
c.	maturity
d.	decline

ANS: C

PTS: 1

REF: p.118

28. According to the textbook, which of the following is a major goal of competitive intelligence?

a.	develop a touchpoint analysis
b.	identify your direct competitors
c.	create a SWOT analysis
d.	find new customer needs and opportunities

ANS: D

PTS: 1

REF: p.106

29. According to the text, which of the following best identifies what Mina Cohen from “Travel-A-Purpose” did to make her business grow?

a.	franchise
b.	partnership
c.	joint venture
d.	strategic alliance

ANS: D

PTS: 1

REF: p.121

30. According to the author, which of the following best represents Action Step ^#31?

a.	create a competitive touchpoint analysis
b.	create a competitive test matrix
c.	develop a competitive positioning strategy
d.	identify who your direct and indirect customers are

ANS: C

PTS: 1

REF: p.122

TRUE/FALSE

1. According to the textbook, the affluent senior consumer will most likely want to purchase a product or service in the mature stage of the competitive life cycle.

ANS: F

PTS: 1

REF: p.117

2. A competitive touchpoint is an analysis of your competitors’ products and services.

ANS: F

PTS: 1

REF: p.107

3. It was not surprising to learn that the major competitor of Crazy’s Roadhouse (Chapter 5 case study) was another roadhouse down the street.

ANS: F

PTS: 1

REF: p.108

4. According to the textbook , generally, cost leadership is not a recommended competitive strategy for most small businesses.

ANS: T

PTS: 1

REF: p.114

5. According to the textbook, to succeed in a mature market, you must win customers from your competitors.

ANS: T

PTS: 1

REF: p.119

6. According to the textbook, the niche or focus competitive strategy is popular among smaller businesses.

ANS: T

PTS: 1

REF: p.109

7. If you sell chocolates and the benefit to your customer is an afternoon treat, then your invisible competitor would be anyone who sells afternoon treats, such as ice cream vendors.

ANS: F

PTS: 1

REF: p.106

8. A competitive test matrix will help you to develop your competitive pricing strategy.

ANS: T

PTS: 1

REF: p.114

9. According to the text, for most small businesses, there are three broad competitive strategies that provide a framework to hone their particular driving force.

ANS: T

PTS: 1

REF: p.113

10. According to the textbook, competitors in an industry usually behave in the same way.

ANS: F

PTS: 1

REF: p.106

11. According to the textbook, a driving force or distinctive competency is a major consideration for your competitive positioning strategy.

ANS: T

PTS: 1

REF: p.109

12. You can create uniqueness by adding service and product change.

ANS: T

PTS: 1

REF: p.103

13. According to the text, strategic alliances or partnerships between competitors are growing trends.

ANS: T

PTS: 1

REF: p.106 / 123

14. Small-business owners should be on the lookout for the invisible competitor.

ANS: T

PTS: 1

REF: p.106

15. According to the textbook, your direct competitors are those people or organizations that customers perceive to provide the same types of products or services.

ANS: T

PTS: 1

REF: p.105

16. According to the textbook, your major competitive strategy will be to lower your prices.

ANS: F

PTS: 1

REF: p.105 | 109

17. According to the textbook, the major objective of gathering information about and monitoring the activities of your competitor (competitive intelligence) is to expand your market share.

ANS: F

PTS: 1

REF: p.106

18. According to the textbook, strategic alliances can help you to guide your business into growth segments.

ANS: T

PTS: 1

REF: p.121

19. In today’s competitive environment, may entrepreneurs believe that if their business model isn’t broken, then don’t fix it.

ANS: F

PTS: 1

REF: p.121

20. A common goal of competitive intelligence is to improve customer service.

ANS: T

PTS: 1

REF: p.106

21. A competitive SWOT analysis uses a grid that allows you to evaluate the strengths and weakness of your competitors’ products, services, and benefits.

ANS: F

PTS: 1

REF: p.114-115

22. According to the textbook, product penetration refers to a calculated thrust into the market.

ANS: T

PTS: 1

REF: p.118

23. As we learned from the case study on Ron Taylor’s construction business, (Chapter 5), your customers could be major competitors.

ANS: T

PTS: 1

REF: p.103

24. In the growth stage of the business life cycle, competition becomes fierce and you are forced to steal customers to survive.

ANS: F

PTS: 1

REF: p.118

25. Researching the competitive environment includes both primary and secondary research.

ANS: T

PTS: 1

REF: p.103-104

26. A competitive test matrix and a SWOT analysis are two approaches that can help you to develop your unique product or service.

ANS: T

PTS: 1

REF: p.114

27. A competitive touchpoint analysis involves analyzing customers’ perceptions of the competition.

ANS: T

PTS: 1

REF: p.103

28. Positioning involves establishing in the mind of the consumer a unique image or perception of your product or service.

ANS: T

PTS: 1

REF: p.113

29. The SME Benchmarking Tool is provided online.

ANS: T

PTS: 1

REF: p.110

30. A distinctive competency can be developed through a touchpoint analysis.

ANS: T

PTS: 1

REF: p.113

31. Your competitive strategy should focus on creating your own market niche.

ANS: T

PTS: 1

REF: p.113

32. Both direct and indirect competitors provide the same products or services.

ANS: F

PTS: 1

REF: p.105

33. According to the text, there are two types of competitors—direct and invisible.

ANS: F

PTS: 1

REF: p.105

34. The establishment of a real estate company that undercuts the high real estate fees charged by traditional realtors is an example of a differentiation strategy.

ANS: F

PTS: 1

REF: p.104

35. According to the textbook, a major objective of competitive intelligence is to eliminate your competition.

ANS: F

PTS: 1

REF: p.106

COMPLETION

1. 1. As your industry goes into decline, completion becomes ________________.

ANS: desperate

PTS: 1

REF: p.117

2. The second stage of the competitive life cycle is __________.

ANS: growth

PTS: 1

REF: p.117

3. Any business that has the capacity and desire to provide similar products, services, or benefits is called your __________  __________.

ANS: invisible competition

PTS: 1

REF: p.106

4. One method that can help you to evaluate your potential competitors is a competitive test _____________.

ANS: matrix

PTS: 1

REF: p.114

5. You can guide your business into growth segments by constantly adding __________.

ANS: benefits (or changes)

PTS: 1

REF: p.116

6. The process of establishing unique benefits and features that the target customer values relative to the competition is called ______________  _______________.

ANS: competitive positioning

PTS: 1

REF: p.119

7. A partnership between one or more organizations that is formed to create a competitive advantage is called a ______________  _____________.

ANS: strategic alliance

PTS: 1

REF: p.121

8. An analysis of the internal strengths and weaknesses and external threats and opportunities for perceived competitors is commonly called a competitive ___________.

ANS: SWOT

PTS: 1

REF: p.115

SHORT ANSWER

1. Explain the term competitive positioning.

ANS: Competitive positioning is the process of establishing unique benefits and features that the target customer values more than those of the competition.

PTS: 1

REF: p.113

2. Describe a competitive test matrix.

ANS: A competitive test matrix is a table or grid that allows you to develop quantitative measurements of competitors’ strengths and weaknesses. Here, on a numerical scale, you rank the strengths and weaknesses of each competitor in terms of the benefits and features provided to your target customer.

PTS: 1

REF: p.114

3. Describe a mature market.

ANS: A mature market is the third stage of the competition life cycle. It is one in which there is heavy competition for the product/service (e.g., a full-service gas station has heavy competition). There are usually market pressures to cut prices, emphasize product differentiation instead of product improvement, increase advertising, and lengthen production runs.

PTS: 1

REF: p.118

4. Why is it important to understand the product life cycle?

ANS: It is important to understand the product life cycle because different competitive strategies are needed at each stage of the product life cycle. Understanding the product life cycle will also help the business owner formulate the competitive positioning strategy.

PTS: 1

REF: p.117 -118

5. For most small businesses, there are three broad competitive strategies available that provide a framework to hone in on a particular driving force. Explain these three competitive approaches. Which of these three approaches is not normally recommended for small business?

ANS: The three competitive approaches are: 

1. 1. Niche or focus strategy. A company carves out a specific or narrow segment of a market.
2. 2. Differentiation strategy. A differentiation strategy is a “uniqueness” strategy that helps a firm to compete by successfully developing and maintaining a unique perception of its product or service that is valued by the customer. The uniqueness may be physical, technical or psychological.
3. 3. Cost leadership strategy. A company successfully competes on price by being a low-cost producer. Firms pursuing this strategy must be effective in engineering, purchasing, manufacturing, and physical distribution.

Normally, cost leadership is not a recommended strategy for most small businesses. However, there are creative exceptions.

PTS: 1

REF: p.115-116

6. Briefly describe the objective of a competitive touchpoint analysis.

ANS: Competitive touchpoint analysis is the process of analyzing customers’ perceptions of the competition in order to find out what benefits and features are important to them.

PTS: 1

REF: p.107

7. Briefly describe the difference between a direct and an indirect competitor.

ANS: Direct or first-level competitors are those companies or individuals that, as perceived by the target customer, offer the same features or types of products/services. They offer a product or service that is potentially interchangeable with your product or service, as perceived by the consumer. 

Indirect or second-level competitors are companies or individuals that provide similar benefits, as perceived by your target customer. Indirect competitors compete with your business for “same occasion” dollars.

PTS: 1

REF: p.109