Preview Extract
Chapter 3 Feasibility Analysis
1) Morphology, the company profiled in the opening feature for Chapter 3, was started to
produce a board game. The feature describes how Morphology sought to validate its business
idea. According to the feature:
A) Morphology was unable to validate its business idea and the idea was dropped
B) Morphology's feasibility analysis was incomplete, and the company has struggled ever since
it was launched
C) Morphology's feasibility analysis was flawed, and the company failed
D) Morphology did an exemplary job validating its business idea, and its board game is now
being sold in more than 40 stores across the United States, with some distribution in Canada
E) Morphology's feasibility analysis was well done, and the company was acquired by Mattel
before it could launch its board game as an independent company
Answer: D
Rationale:
The correct answer is D because the feature states that Morphology did an exemplary job
validating its business idea, and its board game is now being sold in more than 40 stores across
the United States, with some distribution in Canada. This indicates that the business idea was
successfully validated and the company's product is now successfully in the market.
2) According to the textbook, which is the proper sequence of events in developing successful
business ideas?
A) opportunity recognition, feasibility analysis, development of a business plan
B) feasibility analysis, opportunity recognition, development of a business plan
C) development of a business plan, opportunity recognition, feasibility analysis
D) feasibility analysis, development of a business plan, opportunity recognition
E) development of a business plan, feasibility analysis, opportunity recognition
Answer: A
Rationale:
The correct sequence, according to the textbook, is opportunity recognition, feasibility analysis,
and then development of a business plan. This is because first, you identify a viable opportunity,
then you analyze its feasibility to ensure it's practical, and finally, you develop a detailed plan to
execute the idea.
3) ________ is the process of determining whether a business idea is viable.
A) Feasibility analysis
B) Opportunity recognition
C) Viability analysis
D) Achievability analysis
E) Scenario analysis
Answer: A
Rationale:
Feasibility analysis is the process of determining whether a business idea is viable. It involves
assessing various aspects such as market demand, competition, and financial feasibility to
determine the potential success of the idea.
4) Cameron Smith recently surveyed 200 of his classmates to get a sense of the demand for a
new software product he is working on. Collecting data via a survey you administer yourself is
referred to as:
A) direct research
B) derivative research
C) primary research
D) secondary research
E) initial research
Answer: C
Rationale:
The correct answer is C because collecting data directly from the source, in this case, the
classmates, is considered primary research. It involves gathering new data specifically for the
purpose of the research.
5) Talking to industry experts, obtaining feedback from prospective customers, and
administering surveys are examples of:
A) primary research
B) secondary research
C) derivative research
D) principal research
E) fundamental research
Answer: A
Rationale:
The correct answer is A because these activities involve gathering new data directly from
relevant sources, which is the definition of primary research.
6) Trade journals, industry-related publications, government statistics, and competitors' Web
sites are examples of:
A) secondary research
B) action research
C) principal research
D) legacy research
E) vertical research
Answer: A
Rationale:
The correct answer is A because these sources provide existing data that has already been
collected and published, which is the definition of secondary research.
7) Jennifer Burroughs is thinking about starting a firm in the upscale women's fashion industry.
To get a full appreciation of the competitive nature of the industry, and how she might position
her products, Jennifer has spent considerable time looking at industry-related publications,
Hoover's Online, and ABI-Inform, which is a database that provides access to articles covering a
wide-variety of business and industry related issues. Jennifer is conducting:
A) primary research
B) secondary research
C) action research
D) temporary research
E) purposeful research
Answer: B
Rationale:
The correct answer is B because Jennifer is using existing sources of information, such as
industry-related publications and databases, to gather insights into the industry, which is the
definition of secondary research.
8) The What Went Wrong feature in Chapter 3 is titled "eBay Drop-Off Stores: How Feasible
Were They?" What was it about the potential feasibility of eBay Drop-Off stores that worried
skeptics from the beginning?
A) that the stores would not have enough "quality" merchandise to sell on eBay and that the
variety of items the stores would be asked to sell would be too broad
B) that consumers were losing interest in eBay and that the stores would not have enough
"quality" merchandise to sell on eBay
C) that eBay was attracting too many competitors and that consumers were becoming
increasingly Internet savvy, making it easier for them to sell items at online auctions themselves
rather than relying on an intermediary like an eBay Drop Off store
D) that the variety of items the stores would be asked to sell would be too broad and that
consumers were losing interest in online auctions
E) that consumers were losing interest in online auctions and that eBay was declining in terms of
its popularity
Answer: A
Rationale:
The correct answer is A because skeptics were concerned that the stores would struggle to find
enough high-quality merchandise to sell on eBay and that the range of items they would be
required to sell would be too broad, potentially limiting their effectiveness.
9) Which of the following is not one of the four areas of feasibility analysis discussed in the
textbook?
A) product/service feasibility
B) financial feasibility
C) societal feasibility
D) organizational feasibility
E) industry/market feasibility
Answer: C
Rationale:
The correct answer is C because societal feasibility is not one of the areas of feasibility analysis
discussed in the textbook. The four areas are product/service feasibility, financial feasibility,
organizational feasibility, and industry/market feasibility.
10) ________ feasibility is an assessment of the overall appeal of the product or service being
proposed.
A) Consumer
B) Industry/market segment
C) Industry/market
D) Product/service
E) Purchaser/end-user
Answer: D
Rationale:
The correct answer is D because product/service feasibility involves assessing the overall appeal
and potential success of the product or service being proposed. This includes factors such as
consumer demand, uniqueness, and competitive advantage.
11) Does it make sense? Is it reasonable? Is it something consumers will get excited about? Does
it take advantage of an environmental trend, solve a problem, or fill a gap in the marketplace?
These are the types of questions asked during the ________ component of a complete feasibility
analysis.
A) financial feasibility
B) industry/target market feasibility
C) organizational feasibility
D) concept feasibility
E) product/service feasibility
Answer: E
Rationale:
The correct answer is E because these questions pertain to the product/service feasibility
component of a complete feasibility analysis. This component assesses the viability and appeal
of the product or service being proposed.
12) Which of the following is not a part of assessing the product/service feasibility of a business
idea?
A) buying intentions survey
B) gumshoe research
C) library research
D) analyzing industry attractiveness
E) concept test
Answer: D
Rationale:
The correct answer is D because analyzing industry attractiveness is typically part of
industry/target market feasibility analysis, not product/service feasibility analysis.
13) The two components of product/service feasibility analysis are:
A) product/service value and product/service affordability
B) product/service demand and product/service timeliness
C) product/service timeliness and product/service value
D) product/service durability and product/service value
E) product/service desirability and product/service demand
Answer: E
Rationale:
The correct answer is E because the two components of product/service feasibility analysis are
product/service desirability (demand) and product/service demand (value). These aspects assess
whether there is a market need and desire for the proposed product or service.
14) The two components of product/service feasibility analysis are product/service demand and:
A) product/service desirability
B) management prowess
C) target market attractiveness
D) resource sufficiency
E) financial performance of similar businesses
Answer: A
Rationale:
The correct answer is A because the two components of product/service feasibility analysis are
product/service demand and product/service desirability. These aspects together assess the
potential market for the product or service.
15) A(n) ________ involves showing a preliminary description of a product or service idea to
prospective customers to gauge customer interest, desirability, and purchase intent.
A) concept test
B) product/service statement
C) impression test
D) idea prospectus
E) idea test
Answer: A
Rationale:
The correct answer is A because a concept test involves presenting a preliminary description of a
product or service idea to potential customers to gather feedback and assess their interest,
desirability, and likelihood of purchase.
16) Which of the following items is typically not included in a concept statement?
A) a brief description of the company's management team
B) a description of how the product or service will be sold and distributed
C) a description of how much money the new venture needs
D) the benefits of the product or service
E) the intended target market
Answer: C
Rationale:
The correct answer is C because a description of how much money the new venture needs is
typically part of the business plan, not the concept statement.
17) Al Jenkins is in the process of developing an exciting new product in the smartphone
industry. He'd like to show a preliminary description of the product to industry experts and
prospective customers to solicit their feedback. Al should complete and distribute a(n):
A) perception statement
B) usability statement
C) early adopter statement
D) concept statement
E) adoption risk-reward statement
Answer: D
Rationale:
The correct answer is D because a concept statement is used to present a preliminary description
of a product or service idea to gather feedback from industry experts and potential customers.
18) Which of the following is an incorrect approach to administering a concept test?
A) The concept statement shouldn't exceed one page.
B) After the concept statement is developed, it should be shown to at least 10 people.
C) The best candidates to distribute a concept statement to are family and friends.
D) If time permits, a concept statement should be used in an iterative manner and distributed to
several groups of people.
E) A short survey should be attached to the concept statement to solicit feedback.
Answer: C
Rationale:
The correct answer is C because relying solely on family and friends for feedback may introduce
bias. It's important to get feedback from a diverse group of people who represent potential
customers.
19) A ________ survey is an instrument that is used to gauge customer interest in a product or
service.
A) shopper intent
B) purchase intent
C) product demand
D) consumer interest
E) buying intentions
Answer: E
Rationale:
The correct answer is E because a buying intentions survey is used to gauge customer interest in
a product or service, typically by asking about their likelihood to purchase.
20) Sam Willis is distributing an instrument, which includes a concept statement with a short
survey attached, to try to gauge customer interest in a product he is developing. Sam is
distributing a:
A) shopper intent survey
B) consumer interest survey
C) product demand survey
D) buying intentions survey
E) purchase intent survey
Answer: D
Rationale:
The correct answer is D because a buying intentions survey is used to gauge customer interest in
a product or service, typically by asking about their likelihood to purchase.
21) A buying intentions survey is typically administered as part of ________ feasibility analysis.
A) financial
B) organizational
C) industry/target market
D) legal/regulatory
E) product/service
Answer: E
Rationale:
The correct answer is E because a buying intentions survey is used to assess the potential
demand and feasibility of a product or service, which falls under the product/service feasibility
analysis.
22) Katlin Smith is investigating the feasibility of developing an iPhone app to help high school
students with math. To get a good handle on the potential demand for her service, Katlin is
scrounging around for information wherever she can find it. She even spent two weeks
volunteering as a math tutor at a local high school to see how students responded to her methods.
Katlin is conducting ________ research.
A) parallel
B) derivative
C) gumshoe
D) secondary
E) on-the-ground
Answer: C
Rationale:
The correct answer is C because Katlin is engaging in hands-on, investigative research by
volunteering as a math tutor to gather firsthand insights and information about potential demand
for her app.
23) Corry Pierce is investigating the feasibility of a new type of electronic game targeting middle
school and high school-age boys. Which of the following is an example of "gumshoe research"
that Corry could conduct to get a sense of the likely demand for his game?
A) Download electronic games industry reports from the Internet.
B) Administer a buying intentions survey.
C) Administer a concept test.
D) Look at the Web sites of a number of companies that sell electronic games.
E) Spend several days in electronic games arcades and stores to observe the types of games that
attract the interest of middle school age and high school age boys.
Answer: E
Rationale:
The correct answer is E because spending time in electronic games arcades and stores to observe
the types of games that attract the interest of the target market is an example of gumshoe
research, which involves hands-on investigation and observation.
24) The Savvy Entrepreneurial Firm feature in Chapter 3 focuses on Bill Gross, and how a
company he was leading, Knowledge Adventure, made a 180-degree turn on the positioning of a
product. According to the feature, Gross and his team made the change as a result of:
A) observing how customers acted when buying their product
B) studying industry trends
C) conducting Internet research
D) administering a concept test and a buying intention's survey
E) hiring consultants to provide them advice
Answer: A
Rationale:
The correct answer is A because the feature highlights how Gross and his team observed
customer behavior to understand the need for a product repositioning, indicating the importance
of firsthand observation and customer feedback.
25) A(n) ________ is a group of firms producing a similar product or service. A firm's ________
is the limited portion of the industry that it goes after or to which it wants to appeal.
A) target market, industry
B) trade group, industry
C) industry, trade group
D) competitive group, target market
E) industry, target market
Answer: E
Rationale:
The correct answer is E because an industry is a group of firms producing similar products or
services, while a firm's target market is the specific segment of the industry it aims to serve.
26) The two components of industry/target market feasibility analysis are:
A) industry status and target market status
B) industry attractiveness and target market attractiveness
C) industry sufficiency and target market demand
D) industry attractiveness and product/service demand
E) industry evolution and target market attractiveness
Answer: B
Rationale:
The correct answer is B because the two components of industry/target market feasibility
analysis are assessing the attractiveness of the industry and the target market, which involves
evaluating factors such as market size, growth potential, and competition.
27) ________ feasibility analysis is an assessment of the overall appeal of the industry and
market for the product or service being proposed.
A) Institutional
B) Financial
C) Organizational
D) Product/service
E) Industry/target market
Answer: E
Rationale:
The correct answer is E because industry/target market feasibility analysis evaluates the overall
appeal and potential success of the industry and market for the proposed product or service.
28) A(n) ________ is a group of firms producing a similar product or service, such as electronic
games, smartphones, or computers.
A) trade group
B) industry
C) business group
D) commerce group
E) conglomerate
Answer: B
Rationale:
The correct answer is B because an industry is a group of firms that produce similar products or
services.
29) Which of the following issues should be considered in industry/target market feasibility
analysis?
A) gaps in the marketplace
B) financial performance of similar businesses
C) resource sufficiency
D) industry attractiveness
E) management prowess
Answer: D
Rationale:
The correct answer is D because industry/target market feasibility analysis should consider
factors such as market size, growth potential, competition, and overall attractiveness of the
industry and market.
30) Mintel, IBISWorld, and BizMiner are databases most likely to be used during the ________
feasibility stage of the feasibility analysis process.
A) organizational
B) economic
C) political/legal
D) industry/target market
E) product/service
Answer: D
Rationale:
The correct answer is D because Mintel, IBISWorld, and BizMiner are databases that provide
industry and market research, which are most relevant to the industry/target market feasibility
stage of the feasibility analysis process.
31) Which of the following is not an attribute of an attractive industry?
A) is young rather than old
B) is not crowded
C) is late rather than early in its life cycle
D) is important to the customer
E) is fragmented rather than concentrated
Answer: C
Rationale:
The correct answer is C because industries that are late in their life cycle are often considered
less attractive as they may have already experienced significant growth and saturation, making it
challenging for new entrants to compete.
32) A ________ market is a place within a larger market segment that represents a narrower
group of customers with similar needs.
A) secondary
B) primary
C) target
D) parallel
E) minor
Answer: C
Rationale:
The correct answer is C because a target market refers to a specific segment within a larger
market that a business focuses on serving due to its distinct needs and characteristics.
33) Which of the following statements about target markets is incorrect?
A) There is a distinct difference between a firm's industry and its target market.
B) The challenge in identifying an attractive target market is to find a market that's large enough
for the proposed business but is yet small enough to avoid attracting larger competitors.
C) By focusing on a target market, a firm can usually avoid head-to-head competition with
industry leaders and can focus on serving a specialized market very well.
D) A target market is a place within a larger market segment that represents a narrower group of
customers with similar needs.
E) It's generally easier to find good information about a target market than an industry as a
whole.
Answer: E
Rationale:
The correct answer is E because it is generally more challenging to find detailed and accurate
information about a target market compared to an industry as a whole, due to the specific and
often niche nature of target markets.
34) ________ is conducted to determine whether a proposed business has sufficient management
expertise, organizational competence, and resources to successfully launch its business.
A) Industry/market feasibility analysis
B) Institutional feasibility analysis
C) Financial feasibility analysis
D) Organizational feasibility analysis
E) Product/service feasibility analysis
Answer: D
Rationale:
The correct answer is D because organizational feasibility analysis assesses the readiness of a
proposed business in terms of its management expertise, organizational competence, and
resource sufficiency.
35) The two primary issues to consider in organizational feasibility analysis are:
A) target market attractiveness and financial rate of return
B) management prowess and resource sufficiency
C) capital requirements and industry attractiveness
D) concept testing and financial rate of return
E) industry attractiveness and overall attractiveness of the investment
Answer: B
Rationale:
The correct answer is B because organizational feasibility analysis focuses on evaluating the
management prowess of the team and the sufficiency of resources to launch the business
successfully.
36) The two primary issues to consider in organizational feasibility analysis are management
prowess and:
A) market timeliness
B) concept testing
C) resource sufficiency
D) target market attractiveness
E) total startup cash needed
Answer: C
Rationale:
The correct answer is C because organizational feasibility analysis also involves assessing
whether the firm has sufficient resources to execute its business plan effectively.
37) A(n) ________ is the group of founders, key employees, and advisers that either manage or
help manage a new business in its startup years.
A) opening team
B) entrepreneurial team
C) scout team
D) launch team
E) new venture team
Answer: E
Rationale:
The correct answer is E because a new venture team consists of the key individuals who are
responsible for managing or assisting in managing a new business during its startup phase.
38) Which of the following is an example of a resource that normally would not be evaluated as
part of the "resource sufficiency" stage of organizational feasibility analysis?
A) ability to form favorable business partnerships
B) financial resources
C) affordable office space
D) key equipment needed to operate the business
E) key support personnel
Answer: B
Rationale:
The correct answer is B because financial resources are typically evaluated as part of financial
feasibility analysis, not resource sufficiency in organizational feasibility analysis.
39) According to the textbook, two of the most important factors to consider regarding
"management prowess" are:
A) the passion the sole entrepreneur or the management team has for the business idea and the
extent to which the management team or sole entrepreneur understands the markets in which the
firm will participate
B) whether the members of the management team have worked successfully together before and
the passion the sole entrepreneur or the management team has for the business idea
C) whether the members of the management team are good "networkers" and the extent to which
the management team or sole entrepreneur understands the markets in which the firm will
participate
D) the educational and functional backgrounds of the management team or sole entrepreneur
E) whether the members of the management team are good "networkers" and the passion the sole
entrepreneur or the management team has for the business idea
Answer: A
Rationale:
The correct answer is A because management prowess includes factors such as the team's
passion for the business idea and their understanding of the target markets, which are crucial for
the success of the venture.
40) To test resource sufficiency, a firm should list the ________ most critical non-financial
resources that it will need to move its business idea forward and determine if those resources are
available.
A) 1 to 2
B) 3 to 5
C) 6 to 12
D) 10 to 16
E) 15 to 25
Answer: C
Rationale:
The correct answer is C because listing the 6 to 12 most critical non-financial resources helps the
firm assess whether it has the necessary resources to execute its business plan effectively.
41) The focus in organizational feasibility analysis is on:
A) financial resources for manufacturing firms and nonfinancial resources for service firms
B) financial resources for service firms and nonfinancial resources for manufacturing firms
C) nonfinancial and financial resources equally
D) nonfinancial resources
E) financial resources
Answer: D
Rationale:
Organizational feasibility analysis focuses on determining whether the necessary nonfinancial resources
are available to launch the business successfully. This includes factors like the availability of skilled
personnel, organizational structure, and management expertise. Financial feasibility, on the other hand,
specifically examines the financial resources required for the venture.
42) The Partnering for Success feature in Chapter 3 focuses on the task of finding the right business
partner. According to the feature, which of the following is an incorrect rule-of-thumb in finding a
business partner?
A) Know the skills and experiences you need in a partner.
B) Make sure you and your partner's work habits are compatible.
C) Make sure you and your partner have common goals and aspirations.
D) Pick a partner that is similar rather than different from you in terms of skills, abilities, and functional
background.
E) Hire a lawyer to negotiate the partnership agreement.
Answer: D
Rationale:
The correct approach in finding a business partner is not necessarily to pick someone similar to you, but
rather to find someone whose skills and abilities complement your own. This can create a balanced and
effective partnership where each partner brings unique strengths to the table.
43) ________ is a quick financial assessment of the viability of a business idea.
A) Organizational feasibility analysis
B) Institutional feasibility analysis
C) Product/service feasibility analysis
D) Financial feasibility analysis
E) Industry/market feasibility analysis
Answer: D
Rationale:
Financial feasibility analysis focuses on assessing whether a business idea is financially viable. It involves
evaluating factors such as startup costs, revenue projections, and profitability to determine if the idea is
financially feasible.
44) The most important issues to consider in financial feasibility analysis are:
A) resource sufficiency, industry attractiveness, and total startup cash needed
B) total startup cash needed, financial performance of similar businesses, and the overall financial
attractiveness of the proposed venture
C) target market attractiveness, resource sufficiency, and product/service demand
D) total startup cash needed, management prowess, and product/service demand
E) concept testing, total startup cash needed, and financial performance of similar businesses
Answer: B
Rationale:
The most important issues in financial feasibility analysis are the total startup cash needed, the financial
performance of similar businesses, and the overall financial attractiveness of the proposed venture.
These factors help determine if the business idea is financially viable and sustainable.
45) The most important issues to consider in financial feasibility analysis are: financial performance of
similar businesses, total cash needed, and:
A) the projected internal rate of return of the proposed venture
B) the projected years to an IPO or an acquisition for the proposed venture
C) management prowess
D) overall attractiveness of the proposed venture
E) the projected borrowing power of the proposed business
Answer: D
Rationale:
In addition to the financial performance of similar businesses and the total cash needed, the overall
attractiveness of the proposed venture is also a crucial factor in financial feasibility analysis. This
includes factors such as market demand, competitive landscape, and growth potential.
46) Which of the following is incorrect regarding the "total startup cash needed" component of financial
feasibility analysis?
A) It's not necessary to complete an actual budget of startup expenses.
B) When explaining where the startup funds will come from, avoid cursory explanations such as "I plan
to bring investors on board" or "I'll borrow the money."
C) There are worksheets posted online that help entrepreneurs determine the startup costs to launch
their venture.
D) An explanation of where the startup funds will come from should be included.
E) If the money will come from friends and family or is raised through other means, a reasonable plan
should be stipulated to repay the money.
Answer: A
Rationale:
It is necessary to complete an actual budget of startup expenses to accurately determine the total
startup cash needed. This budget helps identify all necessary expenses and ensures that the
entrepreneur has a clear understanding of the financial requirements of the venture.
47) Which of the following factors is a negative as it pertains to the financial feasibility of a business
venture?
A) steady and rapid growth in sales during the first five to seven years in a clearly defined market niche
B) high percentage of recurring revenue—meaning that once a firm wins a client, the client will provide
recurring sources of revenue
C) inability to forecast income and expenses with a reasonable degree of accuracy
D) internally generated funds to finance and sustain growth
E) availability of an exit opportunity for investors to convert equity into cash
Answer: C
Rationale:
Inability to forecast income and expenses with a reasonable degree of accuracy is a negative factor in
the financial feasibility of a business venture. Uncertainty in financial projections can lead to inaccurate
planning and potential financial challenges.
48) Which of the following factors is a positive as it pertains to the financial feasibility of a business
venture?
A) inconsistent and slow growth in sales during the first five to seven years in a clearly defined market
niche
B) high percentage of recurring revenue
C) inability to forecast income and expenses with a reasonable degree of accuracy
D) reliance on externally generated funds to finance and sustain growth
E) absence of an existing opportunity for investors to convert equity into cash
Answer: B
Rationale:
High percentage of recurring revenue is a positive factor in the financial feasibility of a business venture.
It indicates a stable revenue stream and reduces the risk of revenue fluctuations, making the business
more financially viable.
49) The template for completing a feasibility analysis included in Appendix 3.1 of the book is called the
________ analysis.
A) First Evaluation
B) Initial Screen
C) First Pass
D) First Screen
E) Flash Screen
Answer: D
Rationale:
The template for completing a feasibility analysis included in Appendix 3.1 of the book is called the "First
Screen" analysis. This template helps entrepreneurs assess the feasibility of their business ideas by
evaluating various factors such as market potential, competitive landscape, and financial viability.
50) The First Screen feasibility analysis template included in Chapter 3 is called "First Screen" because:
A) it is the first feasibility analysis template created
B) it is the first and most important step in the opportunity recognition process
C) it is the first step in a sequence of several steps that must be completed before a business idea is
deemed to be feasible
D) feasibility analysis is an entrepreneur's initial or first pass at determining the feasibility of a business
idea
E) it is the first of several "screens" that a business idea must pass through before it is considered to be
feasible
Answer: D
Rationale:
The First Screen feasibility analysis template is called "First Screen" because it represents an
entrepreneur's initial or first pass at determining the feasibility of a business idea. It is designed to
quickly assess the viability of a business idea and identify key areas that require further investigation or
refinement.
51) Feasibility analysis is the process of determining if a business idea is viable.
Answer: True
Rationale:
Feasibility analysis is indeed the process of evaluating the viability of a business idea. It involves
assessing various factors such as market demand, competition, and financial requirements to
determine if the idea has the potential to succeed.
52) The proper sequence for developing successful business ideas is to first conduct a feasibility
analysis, then progress through the opportunity recognition stage, and finish with the completion
of a business plan.
Answer: False
Rationale:
The proper sequence for developing successful business ideas is to first recognize the
opportunity, then conduct a feasibility analysis to assess the viability of the idea, and finally
develop a business plan to detail how the idea will be executed.
53) The four forms of feasibility analysis include: product/service feasibility, industry/target
market feasibility, organizational feasibility, and financial feasibility.
Answer: True
Rationale:
These four forms of feasibility analysis cover different aspects of a business idea.
Product/service feasibility assesses the appeal of the proposed product or service, industry/target
market feasibility evaluates the potential market and industry conditions, organizational
feasibility examines the resources and capabilities of the organization, and financial feasibility
looks at the financial aspects of the idea.
54) Primary research is research that is collected by the person or persons completing the
analysis.
Answer: True
Rationale:
Primary research involves collecting data directly from the source. This can include surveys,
interviews, and observations conducted by the person or persons completing the analysis.
55) Census Bureau data, analyst forecasts, and other pertinent information gleaned through
library and Internet research are examples of primary research.
Answer: False
Rationale:
Census Bureau data, analyst forecasts, and information gathered from library and Internet
research are examples of secondary research, not primary research. Primary research involves
collecting data directly from the source through methods such as surveys, interviews, and
experiments.
56) Product/service feasibility analysis is an assessment of the overall appeal of the product or
service being proposed.
Answer: True
Rationale:
Product/service feasibility analysis evaluates the potential appeal of the product or service being
proposed. It considers factors such as uniqueness, benefits to customers, and potential demand in
the market.
57) There are two components to product/service feasibility analysis: product/service desirability
and total startup funds needed.
Answer: False
Rationale:
Product/service feasibility analysis typically includes more than two components. While
product/service desirability is one component, other factors such as market size, competition, and
pricing strategy are also considered. Total startup funds needed are part of financial feasibility
analysis.
58) A concept statement should be two-three pages long.
Answer: False
Rationale:
A concept statement should be brief and concise, typically no more than one page long. It should
clearly and succinctly describe the business idea, its value proposition, target market, and
competitive advantage.
59) The temptation to show a concept statement to friends and family members should be
avoided because they are predisposed to give positive feedback.
Answer: True
Rationale:
Friends and family members may be biased and inclined to give positive feedback, which can be
misleading. It's important to seek feedback from a diverse group of individuals, including
potential customers and industry experts, to get a more objective assessment of the concept.
60) A buying intentions survey is used to gauge customer interest in a product or service.
Answer: True
Rationale:
A buying intentions survey is a tool used to assess customer interest in a product or service. It
typically asks respondents about their likelihood of purchasing the product or service, which can
help gauge market demand and potential sales.
61) Industry/target market feasibility is an assessment of the overall appeal of the industry and
the target market for the product or service being proposed.
Answer: True
Rationale:
Industry/target market feasibility analysis helps determine whether the industry is attractive and
whether the target market is sizable and reachable. It involves assessing factors such as market
size, growth trends, competition, and customer needs and preferences.
62) Organizational feasibility analysis is conducted to determine whether a proposed business
venture has sufficient management expertise, organizational competence, and resources to
successfully launch its business.
Answer: True
Rationale:
Organizational feasibility analysis evaluates the ability of the management team to execute the
business plan and the adequacy of the resources and organizational structure to support the
venture's success.
63) The focus in organizational feasibility analysis is on financial resources.
Answer: False
Rationale:
The focus in organizational feasibility analysis is on nonfinancial resources, such as management
expertise, organizational competence, and human resources. Financial feasibility analysis
specifically evaluates the financial resources needed for the venture.
64) There are two primary areas to consider in organizational feasibility analysis: management
prowess and resource sufficiency.
Answer: True
Rationale:
Organizational feasibility analysis focuses on assessing the management team's abilities and the
availability of resources needed to launch the venture. These two areas are crucial for
determining the venture's organizational feasibility.
65) A new venture team is the group of founders, key employees, and advisers that either
manage or help manage a new business in its startup years.
Answer: True
Rationale:
The new venture team includes the founders, key employees, and advisers who play a role in
managing the new business during its startup phase. This team is essential for guiding the
venture through its initial stages and ensuring its success.
66) In regard to management prowess, two of the most important factors in this area are the
passion that the solo entrepreneur or the management team has for the business idea and the
extent to which the management team or solo entrepreneur understands the markets in which the
firm will participate.
Answer: True
Rationale:
Passion for the business idea and a deep understanding of the target markets are key factors in
determining the management prowess of a new venture. These factors influence the effectiveness
of the management team in executing the business plan.
67) For financial feasibility analysis, a very detailed and comprehensive financial analysis is
required.
Answer: False
Rationale:
While financial feasibility analysis does require a thorough examination of the financial aspects
of the business idea, it does not necessarily require a highly detailed or comprehensive financial
analysis. The goal is to assess the financial viability of the venture, focusing on key financial
indicators and assumptions.
68) The most important issues to consider in financial feasibility analysis are: total startup cash
needed, financial performance of similar businesses, and overall financial attractiveness of the
proposed venture.
Answer: True
Rationale:
These factors are crucial for determining the financial feasibility of a business venture. The total
startup cash needed, financial performance of similar businesses, and overall financial
attractiveness of the proposed venture provide insights into the venture's financial viability and
potential for success.
69) The mechanics for filling out a First Screen worksheet are complicated.
Answer: False
Rationale:
The First Screen worksheet is designed to be user-friendly and straightforward. It provides a
structured framework for entrepreneurs to assess the feasibility of their business ideas without
requiring complex or technical knowledge.
70) First Screen is a template for completing industry analysis
Answer: False
Rationale:
First Screen is not a template for completing industry analysis. It is a tool for conducting a
preliminary evaluation of a business idea's feasibility, focusing on key aspects such as market
potential, competitive advantage, and financial viability.
71) Describe the purpose of feasibility analysis. When should a feasibility analysis be conducted
relative to opportunity recognition and the development of a business plan?
Answer: Feasibility analysis is the process of determining if a business idea is viable. As a
preliminary evaluation of a business idea, a feasibility analysis is completed to determine if an
idea is worth pursuing and to screen ideas before spending resources on them.
Feasibility analysis follows the opportunity recognition stage but comes before the development
of a business plan.
72) Describe what a concept statement is, and what it should include.
Answer: A concept statement is a preliminary description of a business. It should include:
∙ A description of the product or service being offered.
∙ The intended target market.
∙ The benefits of the product or service.
∙ A description of how the product will be positioned relative to similar ones in the market.
∙ A description of how the product or service will be sold and distributed.
The concept statement is administered as part of product/market feasibility analysis and should
be used to get initial feedback and input regarding a business idea.
73) What is gumshoe research and why is it important?
Answer: Gumshoe research is simply doing what it takes to collect sufficient information to
assess the target market feasibility of a product idea. A gumshoe is a detective or an investigator
that scrounges around for information or clues wherever they can be found. This type of research
can take creative forms. For example, if your idea is to sell educational toys, you might spend a
week volunteering at a day care center and watch how children interact with toys. Similarly, you
might spend some time browsing through a toy store and observing the types of toys that get the
most attention. Gumshoe research is simply being inventive in regard to the activities that can be
undertaken to better understand your industry and target market's attractiveness.
74) Describe the purpose of industry/target market feasibility analysis, and identify the two
primary issues that should be considered. What is the difference between a firm's industry and its
target market?
Answer: Industry/market feasibility analysis is an assessment of the overall appeal of the
industry and the target market for the product or service being promoted. For industry/target
market feasibility analysis, there are two primary issues that a proposed business should
consider: industry attractiveness and target market attractiveness. There is a distinct difference
between a firm's industry and its target market. An industry is a group of firms producing a
similar product or service, such as computers, cars, or electronic games. A firm's target market is
the limited portion of the industry that it goes after or to which it wants to appeal. Most firms do
not try to service their entire industry. Instead, they select or carve out a specific target market
and try to service that market very well.
75) Briefly describe the purpose of the First Screen and how it's used.
Answer: The First Screen is a template for completing a feasibility analysis. It is called First
Screen because a feasibility analysis is an entrepreneur's initial pass at determining the feasibility
of a business idea. The mechanics for filling out the First Screen worksheet are straightforward.
It maps the four areas of feasibility analysis accentuating the most important points in each area.
The final section of the worksheet, "Overall Potential," includes a section that allows for
suggested revisions of a business idea to improve its potential for feasibility. The value of the
First Screen is that it (1) provides an entrepreneur an overall sense of the feasibility of a business
idea and (2) draws attention to issues that suggest the idea has low potential. The fact that an
issue, such as total startup cash needed, is low potential does not necessarily mean that the
business idea is not feasible. By drawing attention to this issue, an entrepreneur may think
through less expensive ways to launch the venture.
Test Bank for Entrepreneurship: Successfully Launching New Ventures
Bruce R. Barringer, R. Duane Ireland
9780132555524, 9780131393905, 9780134729534, 9780133797190
