Preview Extract
Chapter 14 Strategies for Firm Growth
1) Phone Halo, the company profiled in the opening feature for Chapter 14, developed a device
that prevents people from losing their mobile phones. Which growth strategy is Phone Halo now
pursuing?
A) joint ventures
B) strategic alliances
C) mergers and acquisitions
D) licensing
E) international expansion
Answer: D
Rationale:
Phone Halo is pursuing a licensing strategy, as they are likely licensing their technology to other
companies or manufacturers to integrate into their products.
2) Abby Covin owns a firm that manufacturers and sells high-end furniture and home
accessories. She is currently trying to grow her firm by developing new products. Abby is
pursuing a(n) ________ growth strategy.
A) outside
B) inward
C) internal
D) external
E) domestic
Answer: C
Rationale:
Abby Covin is pursuing an internal growth strategy by focusing on developing new products
within her existing firm rather than seeking external partnerships or acquisitions.
3) Which of the following is an example of an internal growth strategy?
A) licensing
B) merger
C) new product development
D) strategic alliance
E) acquisition
Answer: C
Rationale:
New product development is an internal growth strategy because it involves creating and
introducing new products to the market using the firm's existing resources and capabilities.
4) New product development, other product-related strategies, and international expansion are
examples of:
A) external growth strategies
B) domestic growth strategies
C) secondary growth strategies
D) internal growth strategies
E) inward growth strategies
Answer: D
Rationale:
These are examples of internal growth strategies because they involve expanding the firm's
operations, product offerings, or market reach using its existing resources and capabilities.
5) Internally generated growth is often called ________ growth because it does not rely on
outside intervention.
A) natural
B) whole
C) expected
D) organic
E) ordinary
Answer: D
Rationale:
Internally generated growth is called organic growth because it arises from the firm's internal
resources and capabilities without relying on external factors.
6) Which of the following is an example of an external growth strategy?
A) licensing
B) improving an existing product or service
C) increasing the market penetration of an existing product or service
D) extending product lines
E) geographic expansion
Answer: A
Rationale:
Licensing is an external growth strategy because it involves partnering with external companies
to use or distribute the firm's products or technology.
7) Which of the following is an advantage of internal growth strategies?
A) encourages internal entrepreneurship
B) adds to industry capacity
C) need to develop new resources
D) investment in a failed internal effort can be difficult to recoup
E) slow form of growth
Answer: A
Rationale:
Internal growth strategies, such as new product development, can encourage internal
entrepreneurship by empowering employees to innovate and develop new products or services.
8) Which mechanism for firm growth involves the creation and sale of new products or services?
A) acquisitions
B) licensing
C) franchising
D) new product development
E) international expansion
Answer: D
Rationale:
New product development involves creating and introducing new products or services to the
market, which can drive firm growth by attracting new customers and increasing revenues.
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
Rationale:
Developing new products is generally considered a high-risk strategy because it requires
significant investment in research, development, and marketing, with no guarantee of success.
10) Which of the following was not identified as one of the keys to effective new product and
service development?
A) focus on a broad rather than specific target markets
B) get quality and pricing right
C) conduct ongoing feasibility analysis
D) develop products that add value
E) find a need and fill it
Answer: C
Rationale:
Conducting ongoing feasibility analysis is a key aspect of effective new product and service
development, ensuring that the products meet market needs and are viable in terms of cost and
production capabilities.
11) 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
Rationale:
The feature highlights that SwitchFlops configured their sandals with interchangeable straps,
which inherently increased customer engagement and repeat purchases, demonstrating a built-in
growth potential in their product design.
12) Which of the following was not identified in Chapter 14 as one of the top 10 reasons new
products fail?
A) lack of passion for the product
B) target market is smaller than originally projected
C) target market is not defined correctly
D) sales and marketing efforts are not focused and aligned
E) product doesn't address important customer needs
Answer: A
Rationale:
While lack of passion for the product can contribute to failure, it was not specifically identified
in Chapter 14 as one of the top 10 reasons new products fail.
13) 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
Rationale:
Improving an existing product or service encompasses all these initiatives, which aim to enhance
the offering to attract more customers or increase customer satisfaction.
14) A(n) ________ 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 strategy
B) strategic alliance strategy
C) geographic expansion strategy
D) market penetration strategy
E) improving an existing product or service strategy
Answer: D
Rationale:
Market penetration strategy focuses on increasing sales of existing products or services in
existing markets through strategies like marketing efforts and improved efficiency.
15) 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 athletics. Pam is
pursuing a(n):
A) strategic alliance strategy
B) licensing strategy
C) market penetration strategy
D) geographic expansion strategy
E) improving an existing product or service strategy
Answer: C
Rationale:
Pam Ryan is pursuing a market penetration strategy by using endorsements to increase sales of
her existing products in the current market.
16) ________ is work that is done for a company by people other than the company's full-time
employees.
A) Ability enhancement
B) Productivity subcontracting
C) Capacity enhancement
D) Outsourcing
E) Insourcing
Answer: D
Rationale:
Outsourcing involves contracting work to external parties rather than hiring full-time employees
to perform the tasks.
17) A(n) ________ strategy involves making additional versions of a product so that it will
appeal to different clientele.
A) product line extension
B) geographic expansion
C) improving an existing product or service
D) strategic alliance
E) market penetration
Answer: A
Rationale:
Product line extension strategy aims to appeal to different customer segments by offering
variations of a product.
18) Ted Donovan owns a store that sells all-terrain vehicles (ATVs). In the past, Ted just sold
one version of each of the ATVs he sold in his showroom, but to increase sales, Ted now sells a
low-end, a medium-priced, and a high-end version of each of the ATVs he sells. Ted's new
strategy is called a(n):
A) improving an existing product or service strategy
B) market penetration strategy
C) product line extension strategy
D) geographic expansion strategy
E) joint venture strategy
Answer: C
Rationale:
Ted Donovan is implementing a product line extension strategy by offering different versions of
his ATVs to attract customers with varying preferences and budgets.
19) Entrepreneurial businesses that grow by expanding from their original location to additional
geographic sites are pursuing a:
A) common expansion strategy
B) market penetration strategy
C) universal networking strategy
D) geographic expansion strategy
E) product line extension strategy
Answer: D
Rationale:
Geographic expansion strategy involves expanding into new geographic locations to reach new
customers and increase market share.
20) Frank Patterson owns a chain of barbershops that started near Atlanta and has expanded into
northern Florida, South Carolina, North Carolina, and West Virginia. Frank is growing his
company via a strategy of:
A) geographic expansion
B) market penetration
C) product line extension
D) outsourcing
E) licensing
Answer: A
Rationale:
Frank Patterson is growing his company through geographic expansion by opening new locations
in different states to reach more customers and increase sales.
21) According to a recent PricewaterhouseCooper's survey (cited in the textbook) of rapidgrowth entrepreneurial firms, ________ of the 350 firms surveyed sell in international markets.
A) 15%
B) 25%
C) 46%
D) 77%
E) 90%
Answer: C
Rationale:
The survey found that 46% of the rapid-growth entrepreneurial firms sell in international
markets, indicating a significant portion of these firms are engaged in international business
activities.
22) According to the textbook, international new ventures are:
A) businesses that have employees located in three or more countries
B) businesses that sell products in five 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
Rationale:
International new ventures are defined as businesses that, from inception, seek to derive
significant competitive advantage by using their resources to sell products or services in multiple
countries.
23) Which of the following is the primary advantage of exporting as a foreign market entry
strategy?
A) No foreign currency risk is involved.
B) Exporting requires little knowledge of foreign markets.
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
Rationale:
Exporting is a relatively inexpensive way for a firm to become involved in foreign markets
because it does not require significant investments in foreign operations or infrastructure.
24) Which of the following is the primary disadvantage of licensing as a foreign market entry
strategy?
A) high transportation costs
B) quality control
C) It is usually a one-time activity.
D) A firm loses partial control of its business operations.
E) A firm in effect "teaches" a foreign company how to produce its proprietary products.
Answer: E
Rationale:
The primary disadvantage of licensing is that a firm in effect "teaches" a foreign company how
to produce its proprietary products, potentially creating future competition or loss of control over
the product.
25) Which of the following is the primary disadvantage of franchising as a foreign market entry
strategy?
A) It is usually a one-time activity.
B) quality control
C) A firm loses partial control of its business finances.
D) high transportation costs
E) The costs of setting up and maintaining a manufacturing facility and permanent presence in a
foreign country can be high.
Answer: B
Rationale:
The primary disadvantage of franchising is maintaining quality control over the franchisee's
operations, as the franchisor's reputation can be affected by the actions of individual franchisees.
26) ________ growth strategies rely on establishing relationships with third parties, such as
mergers, acquisitions, strategic alliances, joint ventures, licensing, and franchising.
A) External
B) Domestic
C) Outside
D) Distant
E) Peripheral
Answer: A
Rationale:
External growth strategies rely on establishing relationships with third parties to expand the
firm's operations, product offerings, or market reach.
27) Kent Williamson owns a firm that manufacturers and sells electrical supplies. He is currently
trying to grow his firm through licensing and strategic alliances. Kent is pursuing a(n):
A) domestic growth strategy
B) external growth strategy
C) subsidiary growth strategy
D) internal growth strategy
E) secondary growth strategy
Answer: B
Rationale:
Kent Williamson is pursuing an external growth strategy by seeking to expand his firm's
operations through licensing and strategic alliances with other companies.
28) Which of the following is an example of an external growth strategy?
A) market penetration
B) product line extension
C) strategic alliance
D) new product development
E) geographic expansion
Answer: C
Rationale:
A strategic alliance is an external growth strategy that involves forming partnerships or alliances
with other companies to expand the firm's operations or market reach.
29) Which of the following is a disadvantage of growth by means of external growth strategies?
A) diversification of business risk
B) economies of scale
C) getting access to proprietary products or services
D) reducing competition
E) increased business complexity
Answer: E
Rationale:
One disadvantage of growth by means of external growth strategies is increased business
complexity, as managing relationships with third parties can be more challenging than internal
growth strategies.
30) Which of the following is an advantage of growth by means of external growth strategies?
A) clash of corporate cultures
B) increased business complexity
C) loss of organizational flexibility
D) antitrust implications
E) economies of scale
Answer: E
Rationale:
An advantage of growth by means of external growth strategies is economies of scale, as forming
partnerships or alliances can help the firm achieve cost efficiencies and expand its market reach.
31) A(n) ________ is the pooling of interests to combine two or more firms into one. A(n)
________ is the outright purchase of one firm by another.
A) acquisition, merger
B) merger, acquisition
C) licensing agreement, acquisition
D) joint venture, strategic alliance
E) strategic alliance, joint venture
Answer: B
Rationale:
A merger is the pooling of interests to combine two or more firms into one entity, while an
acquisition is the outright purchase of one firm by another.
32) Trevor Watts owns a printing company. Over the past three years, Trevor has significantly
increased his sales through the outright purchase of other printing firms. Trevor is pursuing a(n)
________ strategy.
A) acquisition
B) merger
C) strategic alliance
D) joint venture
E) licensing
Answer: A
Rationale:
Trevor Watts is pursuing an acquisition strategy by purchasing other printing firms outright to
increase his sales and expand his business.
33) Two years ago, Jason Jennings and Mary Scott each owned a small chain of bagel restaurants
in Orange County, California. Just recently, they decided to pool their interests and combine
their individual chains of restaurants into one chain. What Jason and Mary did with their firms is
called a(n):
A) licensing agreement
B) strategic alliance
C) acquisition
D) joint venture
E) merger
Answer: E
Rationale:
Jason Jennings and Mary Scott merged their individual chains of bagel restaurants into one
chain, which is called a merger.
34) Which of the following statements is incorrect regarding acquisitions?
A) In an acquisition, the surviving firm is called the acquirer.
B) An acquisition is the outright purchase of one firm by another.
C) In most cases, a firm acquires a competitor or a company that has a product line or distinctive
competency that it needs.
D) If a firm decides to grow through acquisitions, it is extremely important for it to exercise
extreme care in finding acquisition candidates.
E) Many firms have found that the process of assimilating another company into their current
operation was easier than they thought it would be.
Answer: E
Rationale:
The statement that many firms have found the process of assimilating another company into their
current operation was easier than they thought it would be is incorrect. Acquisitions can be
complex and challenging, and firms must exercise care in finding suitable acquisition candidates.
35) In an acquisition, the surviving firm is called the ________, and the firm that is acquired is
called the ________.
A) target, acquirer
B) goal, objective
C) objective, aggressor
D) acquirer, target
E) aggressor, objective
Answer: D
Rationale:
In an acquisition, the surviving firm is called the acquirer, and the firm that is acquired is called
the target.
36) The What Went Wrong? feature in Chapter 15 focuses on StumbleUpon, an Internet startup
which sold itself to eBay for $75 million. Surprisingly, just two years after eBay bought
StumbleUpon:
A) it licensed the technology underlying StumbleUpon's unique method of finding Web sites to
Yahoo
B) it changed StumbleUpon's name to "eBay Surprise"
C) it sold it to Google for $95 million
D) it closed StumbleUpon and retired its name
E) its founder and a group of investors bought it back
Answer: E
Rationale:
Despite being acquired by eBay, StumbleUpon's founder and a group of investors bought it back
from eBay, indicating that they believed in its potential and wanted to continue its development
independently.
37) The granting of permission by one company to another company to use a specific form of its
intellectual property under clearly defined conditions is referred to as:
A) verifying
B) confirming
C) endorsing
D) licensing
E) certifying
Answer: D
Rationale:
Licensing refers to the granting of permission by one company to another company to use a
specific form of its intellectual property, such as patents, trademarks, or copyrights, under clearly
defined conditions.
38) The ________ is the company that owns the intellectual property. The ________ is the
company purchasing the right to use it.
A) endorsee, endorser
B) licensor, licensee
C) licensor, endorsee
D) endorser, endorsee
E) licensee, licensor
Answer: B
Rationale:
In a licensing agreement, the company that owns the intellectual property is the licensor, and the
company purchasing the right to use it is the licensee.
39) ________ licensing is the licensing of proprietary technology that the licensor typically
controls by virtue of a utility patent.
A) Skill
B) Intellectual property
C) Utility
D) Technology
E) Expertise
Answer: D
Rationale:
Technology licensing involves the licensing of proprietary technology that the licensor typically
controls by virtue of a utility patent, allowing the licensee to use the technology for a specific
purpose.
40) Qualcomm, a high-tech company headquartered in San Diego, owns the rights to several of
the key components that permit cell phones to work. Instead of selling cell phones itself,
Qualcomm grants permission to many companies, such as Samsung and LG, to use specific
forms of its intellectual property in exchange for monetary compensation. Qualcomm is
engaging in an external growth strategy referred to as:
A) licensing
B) strategic alliances
C) acquisitions
D) new product development
E) joint ventures
Answer: A
Rationale:
Qualcomm is engaging in licensing by granting permission to other companies to use its
intellectual property in exchange for compensation, allowing it to expand its reach without
directly selling products.
41) ________ is the licensing of a recognized trademark or brand that the licensor typically
controls through a registered trademark or copyright.
A) Goods and character licensing
B) Products and trademark licensing
C) Products and brand licensing
D) Merchandise and character licensing
E) Products and services licensing
Answer: D
Rationale:
Merchandise and character licensing involves the licensing of a recognized trademark or brand
that the licensor typically controls through a registered trademark or copyright, allowing others
to use the trademark or brand for specific purposes.
42) Merchandise and character licensing is the licensing of a recognized trademark or brand that
the licensor typically controls through a registered:
A) trade secret or copyright
B) patent or copyright
C) trademark or patent
D) patent or trade secret
E) trademark or copyright
Answer: E
Rationale:
Merchandise and character licensing typically involves the licensing of a recognized trademark
or brand that the licensor controls through a registered trademark or copyright.
43) Paul Kite owns a chain of ice cream stores in New England. To draw attention to his stores,
he adopted a very colorful and distinctive logo several years ago, which depicts a funny-looking
cow churning ice cream. Recently, a dairy company asked Paul if it could use a characterization
of his funny-looking cow on a line of yogurt it is coming out with, and offered to pay Paul's
company 3 cents for every carton of yogurt it sells that has the cow's image on the carton. If Paul
accepts this proposal, he will need to enter into a(n) ________ agreement with the dairy.
A) licensing
B) joint venture
C) strategic alliance
D) new product development
E) exporting
Answer: A
Rationale:
Paul Kite will need to enter into a licensing agreement with the dairy company, granting them
permission to use his trademarked logo on their yogurt products in exchange for compensation.
44) According to the textbook, the key to effective merchandise and character licensing is:
A) get licensing income monthly rather than yearly
B) resist the temptation to license a trademark too widely
C) licensing a trademark very widely
D) restrict licensing agreements to one year
E) restrict licensing to product categories that have no relevance and appeal to a firm's core
customers
Answer: B
Rationale:
The key to effective merchandise and character licensing is to resist the temptation to license a
trademark too widely, as this can dilute the brand and reduce its exclusivity and value.
45) A ________ is a partnership between two or more firms that is developed to achieve a
specific goal, and has no joint ownership involved.
A) joint alliances
B) joint venture
C) licensing agreement
D) merger
E) strategic alliance
Answer: E
Rationale:
A strategic alliance is a partnership between two or more firms that is developed to achieve a
specific goal, such as entering a new market or developing a new product, without involving
joint ownership.
46) Which of the following was identified in the textbook as an advantage of participating in
strategic alliances and joint ventures?
A) risk and cost sharing
B) loss of organizational flexibility
C) partners' cultures may clash
D) risk becoming dependent on a partner
E) loss of proprietary information
Answer: A
Rationale:
One advantage of participating in strategic alliances and joint ventures is risk and cost sharing, as
partners can share resources and expertise to achieve a common goal, reducing individual risks
and costs.
47) Which of the following was identified in the textbook as a disadvantage of participating in
strategic alliances and joint ventures?
A) risk and cost sharing
B) economies of scale
C) partners' cultures may clash
D) gain access to a foreign market
E) learning
Answer: C
Rationale:
One disadvantage of participating in strategic alliances and joint ventures is that partners'
cultures may clash, leading to conflicts and difficulties in working together effectively.
48) In the context of strategic alliances, ________ feature cooperation in research and
development, engineering, and manufacturing.
A) administrative alliances
B) directorial alliances
C) marketing alliances
D) organizational alliances
E) technological alliances
Answer: E
Rationale:
Technological alliances in the context of strategic alliances feature cooperation in research and
development, engineering, and manufacturing, allowing partners to leverage their expertise and
resources in these areas.
49) In the context of strategic alliances, ________ typically match a company with a distribution
system with a company that has a product to sell to increase sales of a product or service.
A) promotion alliances
B) marketing alliances
C) organizational alliances
D) directional alliances
E) technological alliances
Answer: B
Rationale:
Marketing alliances in the context of strategic alliances typically match a company with a
distribution system with a company that has a product to sell, allowing both companies to
increase sales of the product or service.
50) The Partnering for Success feature in Chapter 14 is titled "Three Steps to Alliance Success."
The three steps to alliance success identified in the feature are:
A) drafting a licensing agreement, setting up a governance structure, and making it work
B) selecting a partner, cutting the deal, and making it work
C) interviewing potential partners, cutting the deal, and supervising the implementation of the
agreement
D) drafting a licensing agreement, cutting the deal, and setting up a governance structure
E) selecting an alliance "manager," setting up a governance structure, and making it work
Answer: B
Rationale:
The three steps to alliance success identified in the Partnering for Success feature are selecting a
partner, cutting the deal, and making it work, highlighting the importance of careful partner
selection and effective implementation of the alliance agreement.
51) Internal growth strategies involve efforts taken within the firm itself, such as new product
development, other product-related strategies, and international expansion.
Answer: True
Rationale:
Internal growth strategies are those strategies that involve efforts and actions taken within the
firm itself to grow and expand, such as developing new products, improving existing products,
and expanding into new markets.
52) Internally generated growth is often called organic growth because it does not rely on outside
intervention.
Answer: True
Rationale:
Internally generated growth, also known as organic growth, refers to growth that comes from
within the organization itself, such as through new product development or expanding into new
markets, without relying on external factors or interventions.
53) New product development involves designing, producing, and selling new products as a
means of increasing firm revenues and profitability.
Answer: True
Rationale:
New product development is a strategy where a company designs, produces, and introduces new
products to the market in order to increase its revenues and profitability.
54) New product development is a low-risk growth strategy.
Answer: False
Rationale:
New product development is often considered a high-risk strategy because it involves investing
resources in creating and launching a new product without a guarantee of its success in the
market.
55) An advantage of internal growth is that it is a rapid form of growth.
Answer: False
Rationale:
Internal growth is often slower compared to external growth strategies like mergers and
acquisitions because it relies on the firm's own resources and capabilities to expand, which can
take time to develop and implement.
56) 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
Rationale:
Market penetration is a growth strategy that focuses on increasing the sales of existing products
or services in existing markets through greater marketing efforts or by improving the efficiency
of production and distribution.
57) Outsourcing is work that is done for a company by people other than the company's full-time
employees.
Answer: True
Rationale:
Outsourcing involves contracting work to outside suppliers or vendors rather than completing it
internally with the company's own employees.
58) Geographic expansion is most common in retail settings.
Answer: True
Rationale:
Geographic expansion, or expanding into new geographic markets, is a common strategy for
retail businesses looking to grow their customer base and reach new markets.
59) The majority of entrepreneurial firms first enter foreign markets via joint ventures.
Answer: False
Rationale:
While joint ventures can be a common entry strategy for foreign markets, entrepreneurial firms
often first enter foreign markets through other means such as exporting or licensing agreements.
60) External growth strategies rely on establishing relationships with third parties, such as
mergers, acquisitions, strategic alliances, joint ventures, licensing, and franchising.
Answer: True
Rationale:
External growth strategies involve partnering or collaborating with other firms or entities to
achieve growth, rather than relying solely on internal resources and capabilities.
61) An acquisition is the pooling of interests to combine two or more firms into one. A merger is
the outright purchase of one firm by another.
Answer: False
Rationale:
In an acquisition, one firm purchases another, and the acquired firm may or may not continue to
exist as a separate legal entity. In a merger, two or more firms combine to form a new entity.
62) In an acquisition, the surviving firm is called the acquirer, and the firm that is acquired is
called the target.
Answer: True
Rationale:
In an acquisition, the acquiring firm is referred to as the acquirer, while the firm being acquired
is called the target.
63) In regard to acquisitions, many firms have found that the process of assimilating another
company into their current operations is not easy and can stretch finances to the brink.
Answer: True
Rationale:
Acquisitions can be complex and challenging processes, requiring careful integration of the
acquired firm's operations, which can strain a company's finances and resources.
64) Licensing is the granting of permission by one company to another company to use a specific
form of its intellectual property under clearly defined conditions.
Answer: True
Rationale:
Licensing involves one company (the licensor) granting permission to another company (the
licensee) to use its intellectual property, such as patents, trademarks, or copyrights, under certain
conditions.
65) Technology licensing is the licensing of a recognized trademark or brand that the licensor
typically controls through a registered trademark or copyright.
Answer: False
Rationale:
Technology licensing involves the licensing of proprietary technology, such as patents or trade
secrets, that the licensor typically controls through legal protections.
66) Management complexities is a disadvantage of participating in strategic alliances and joint
ventures.
Answer: True
Rationale:
Strategic alliances and joint ventures can lead to management complexities, as partners must
coordinate and align their strategies, cultures, and operations, which can be challenging.
67) A strategic alliance is a partnership between two or more firms that is developed to achieve a
specific goal and has no joint ownership involved.
Answer: True
Rationale:
A strategic alliance is a partnership between firms that is formed to achieve a specific objective,
such as entering a new market or developing a new product, without involving joint ownership or
full integration of operations.
68) In a scale joint venture, the partners collaborate at a single point in the value chain to gain
economies of scale in production or distribution.
Answer: True
Rationale:
In a scale joint venture, partners collaborate at a single point in the value chain, such as
production or distribution, to achieve economies of scale.
69) In a link joint venture, the position of the parties is not symmetrical, and the objectives of the
partners may diverge.
Answer: True
Rationale:
In a link joint venture, partners have asymmetrical positions, and their objectives may diverge,
leading to potential conflicts or challenges in the partnership.
70) A spin-in occurs when a large company divests itself of one of its smaller divisions, and the
division becomes an independent company.
Answer: False
Rationale:
A spin-in occurs when a company acquires an external organization and integrates it into its
existing operations, often to gain access to new technologies or markets.
71) 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.
72) 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.
73) 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.
74) Describe what licensing is. What type of intellectual property can be licensed? Identify the
two types of licensing pursued by entrepreneurial firms.
Answer: Licensing is the granting of permission by one company to another company to use a
specific form of its intellectual property under clearly defined conditions. Virtually any
intellectual property a company owns that is protected by a patent, trademark or copyright can be
licensed to a third party. There are two principle types of licensing. Technology licensing is the
licensing of proprietary technology that the licensor typically controls by virtue of a utility
patent. Merchandise and character licensing is the licensing of a recognized trademark or brand
that the licensor typically controls through a registered trademark or copyright.
75) Describe what a joint venture is. Identify the two types of joint ventures.
Answer: A joint venture is an entity created when two or more firms pool a portion of their
resources to create a separate, jointly owned organization. The two types of joint ventures are
scale joint ventures and link joint ventures. In a scale joint venture, the partners collaborate at a
single point in the value chain to gain economies of scale in production and distribution. In a link
joint venture, the position of the parties is not symmetrical, and the objectives of the parties may
diverge. For example, many of the joint ventures between American and Canadian food
companies provide the American partner with access to Canadian markets and distribution
channels and the Canadian partner with the opportunity to add to its product line.
Test Bank for Entrepreneurship: Successfully Launching New Ventures
Bruce R. Barringer, R. Duane Ireland
9780132555524, 9780131393905, 9780134729534, 9780133797190
