Effective Small Business Management
Exam Questions and Answers
Entrepreneur - Answer- is one who creates a new business in the face of risk and
uncertainty for the purpose of achieving profit and growth by identifying opportunities
and assembling the necessary resources to capitalize on those opportunities
Characteristics of an Entrepreneur - Answer- 1. Desire and willingness to take
initiative
2. Preference for moderate risk
3. Confidence in their ability to succeed
4. Self-reliance
5. Perseverance
6. Desire for immediate feedback
7. High level of energy
8. Competitiveness
9. Future orientation
10. Sill at organizing
11. Value of achievement over money
12. High degree of commitment
13. Tolerance for ambiguity
14. Flexibility
15. Tenacity
Serial Entrepreneurs - Answer- those who create multiple companies, often
running more than one simultaneously
Creativity - Answer- is the ability to develop new ideas and to discover new ways
of looking at problems and opportunities
Innovation - Answer- is the ability to apply creative solutions to those problems
and opportunities to enhance or to enrich people's lives
How to spot entrepreneurial opportunities - Answer- 1. Monitor trends and exploit
them early on
2. Take a different approach to an existing market
3. Put a new twist on an old idea
4. look for creative ways to use existing resources
5. Realize that others have the same problem you do
6. Notice what is missing
,Benefits to owning a small business - Answer- 1. Opportunity to gain control over
your own destiny
2. Opportunity to make a difference
3. Opportunity to reach your full potential
4. Opportunity to reap impressive profits
5. Opportunity to contribute to society and be recognized for your efforts
6. Opportunity to do what you enjoy doing
Social Entrepreneurs - Answer- Business builders who seek to find innovative
solutions to some of society's most pressing and most challenging problems. Ex.
providing low-cost, sturdy housing for families in developing countries
Drawbacks of Entrepreneurishp - Answer- uncertainty of income
risk of losing your entire invested capital
long hours and hard work
lower quality of life until the business gets established
high levels of stress
complete responsibility
discouragement
Age of most entrepreneurs - Answer- 25-44
Fuel feeding the entrepreneurial fire - Answer- 1. entrepreneurs as heroes
2. entrepreneurial education
3. economic and demographic factors
4. shift to a service economy - service sector accounts for about 80% of the jobs
5. technology advancements
6. independent lifestyles
7. e-commerce and www
8. international opportunities
Women owned firms % - Answer- nearly 50%
Home-based business owners % - Answer- 49%
small business - Answer- is one that employs fewer than 100 people
% of new businesses that fail within first 4 years - Answer- 54%
How to avoid failing - Answer- know your business
prepare a business plan
manage financial resources
understand financial statements
learn to manage people effectively
set your business apart from the competition
,maintain a positive attitude
intellectual capital - Answer- is likely to be the source of its competitive advantage
in the marketplace
comprised of three components
1. human capital
2. structural capital
3. customer capital
Human capital - Answer- the talents, skills, and abilities of a company's workforce
structural capital - Answer- the accumulated knowledge and experience in its
industry and in business in general that a company possesses. It can take many
forms including processes, software, patents, copyrights, and most importantly, the
knowledge and experience of people in company
customer capital - Answer- the established customer base, positive reputation,
ongoing relationships, and goodwill a company builds up over time with its
customers
Competitive advantage - Answer- the aggregation of factors that sets the small
business apart from its competitors and gives it a unique and superior position in the
market
core competencies - Answer- are a unique set of skills, knowledge, or abilities that
a company develops in key areas, such as superior quality, customer service,
innovation, engineering, team building, and others that allow it to perform vital
process to world=class standards and to vault past competitors
Strategic Management Process - Answer- 1 Develop a clear vision and translate it
into meaningful mission statement
2 assess the company's strengths and weaknesses
3 scan the environment for significant opportunities and threats facing the business
4 identify the key factors for success in the business
5 analyze the competition
6 create company goals and objectives
7 formulate srategic options and select the appropriate strategies
8 translate strategic plans into action plans
9 establish accurate controls
1 Develop a clear vision and translate it into meaningful mission statement
Vision and Mission defintion - Answer- Vision - is the organizational sixth sense
that tells us why we make a difference in the world
Mission - addresses the first question of any business venture "what business am I
in?"
, Elements of a Mission Statement - Answer- the purpose of the company
the business we are in
the values
2 assess the company's strengths and weaknesses
Definition of strengths and weaknesses - Answer- Strengths - are positive internal
factors that contribute to the accomplishment of a company's mission, goals, and
objectives
Weaknesses - are negative internal factors that inhibit the accomplishment of its
mission, goals, and objectives
3 scan the environment for significant opportunities and threats facing the business
Opportunities and Threats def - Answer- Opportunities - are positive external
option that a company can exploit to accomplish its objectives
Threats - are negative external factors that hamper a company's ability to achieve its
objectives
4 identify the key factors for success in the business
Key Success Factors - Answer- a variety of different patterns depending on the
industry. They are the factors that determine a company's ability to compete
successfully in an industry
5 analyze the competition - Answer- identify the greatest challenge they face, and
one of the most common response is competition
5 analyze the competition
Types of competitors - Answer- direct competitors
significant competitors
indirect competitors
Direct competitors - Answer- offer the same products and services
Significant competitors - Answer- offer some of the same products and services,
although they may be somewhat different
Indirect competitors - Answer- offer the same or similar products or services only
in a small number of areas, and their target customers seldom overlap yours
Competitive profile market - Answer- allows entrepreneurs to evaluate their firms
against the major competitors on the key success factors for their market segments
6 create company goals and objectives
Goals and objectives def - Answer- Goals - are broad, long-range attributes that a
business seeks to accomplish; they tend to be general and sometimes even abstract
Exam Questions and Answers
Entrepreneur - Answer- is one who creates a new business in the face of risk and
uncertainty for the purpose of achieving profit and growth by identifying opportunities
and assembling the necessary resources to capitalize on those opportunities
Characteristics of an Entrepreneur - Answer- 1. Desire and willingness to take
initiative
2. Preference for moderate risk
3. Confidence in their ability to succeed
4. Self-reliance
5. Perseverance
6. Desire for immediate feedback
7. High level of energy
8. Competitiveness
9. Future orientation
10. Sill at organizing
11. Value of achievement over money
12. High degree of commitment
13. Tolerance for ambiguity
14. Flexibility
15. Tenacity
Serial Entrepreneurs - Answer- those who create multiple companies, often
running more than one simultaneously
Creativity - Answer- is the ability to develop new ideas and to discover new ways
of looking at problems and opportunities
Innovation - Answer- is the ability to apply creative solutions to those problems
and opportunities to enhance or to enrich people's lives
How to spot entrepreneurial opportunities - Answer- 1. Monitor trends and exploit
them early on
2. Take a different approach to an existing market
3. Put a new twist on an old idea
4. look for creative ways to use existing resources
5. Realize that others have the same problem you do
6. Notice what is missing
,Benefits to owning a small business - Answer- 1. Opportunity to gain control over
your own destiny
2. Opportunity to make a difference
3. Opportunity to reach your full potential
4. Opportunity to reap impressive profits
5. Opportunity to contribute to society and be recognized for your efforts
6. Opportunity to do what you enjoy doing
Social Entrepreneurs - Answer- Business builders who seek to find innovative
solutions to some of society's most pressing and most challenging problems. Ex.
providing low-cost, sturdy housing for families in developing countries
Drawbacks of Entrepreneurishp - Answer- uncertainty of income
risk of losing your entire invested capital
long hours and hard work
lower quality of life until the business gets established
high levels of stress
complete responsibility
discouragement
Age of most entrepreneurs - Answer- 25-44
Fuel feeding the entrepreneurial fire - Answer- 1. entrepreneurs as heroes
2. entrepreneurial education
3. economic and demographic factors
4. shift to a service economy - service sector accounts for about 80% of the jobs
5. technology advancements
6. independent lifestyles
7. e-commerce and www
8. international opportunities
Women owned firms % - Answer- nearly 50%
Home-based business owners % - Answer- 49%
small business - Answer- is one that employs fewer than 100 people
% of new businesses that fail within first 4 years - Answer- 54%
How to avoid failing - Answer- know your business
prepare a business plan
manage financial resources
understand financial statements
learn to manage people effectively
set your business apart from the competition
,maintain a positive attitude
intellectual capital - Answer- is likely to be the source of its competitive advantage
in the marketplace
comprised of three components
1. human capital
2. structural capital
3. customer capital
Human capital - Answer- the talents, skills, and abilities of a company's workforce
structural capital - Answer- the accumulated knowledge and experience in its
industry and in business in general that a company possesses. It can take many
forms including processes, software, patents, copyrights, and most importantly, the
knowledge and experience of people in company
customer capital - Answer- the established customer base, positive reputation,
ongoing relationships, and goodwill a company builds up over time with its
customers
Competitive advantage - Answer- the aggregation of factors that sets the small
business apart from its competitors and gives it a unique and superior position in the
market
core competencies - Answer- are a unique set of skills, knowledge, or abilities that
a company develops in key areas, such as superior quality, customer service,
innovation, engineering, team building, and others that allow it to perform vital
process to world=class standards and to vault past competitors
Strategic Management Process - Answer- 1 Develop a clear vision and translate it
into meaningful mission statement
2 assess the company's strengths and weaknesses
3 scan the environment for significant opportunities and threats facing the business
4 identify the key factors for success in the business
5 analyze the competition
6 create company goals and objectives
7 formulate srategic options and select the appropriate strategies
8 translate strategic plans into action plans
9 establish accurate controls
1 Develop a clear vision and translate it into meaningful mission statement
Vision and Mission defintion - Answer- Vision - is the organizational sixth sense
that tells us why we make a difference in the world
Mission - addresses the first question of any business venture "what business am I
in?"
, Elements of a Mission Statement - Answer- the purpose of the company
the business we are in
the values
2 assess the company's strengths and weaknesses
Definition of strengths and weaknesses - Answer- Strengths - are positive internal
factors that contribute to the accomplishment of a company's mission, goals, and
objectives
Weaknesses - are negative internal factors that inhibit the accomplishment of its
mission, goals, and objectives
3 scan the environment for significant opportunities and threats facing the business
Opportunities and Threats def - Answer- Opportunities - are positive external
option that a company can exploit to accomplish its objectives
Threats - are negative external factors that hamper a company's ability to achieve its
objectives
4 identify the key factors for success in the business
Key Success Factors - Answer- a variety of different patterns depending on the
industry. They are the factors that determine a company's ability to compete
successfully in an industry
5 analyze the competition - Answer- identify the greatest challenge they face, and
one of the most common response is competition
5 analyze the competition
Types of competitors - Answer- direct competitors
significant competitors
indirect competitors
Direct competitors - Answer- offer the same products and services
Significant competitors - Answer- offer some of the same products and services,
although they may be somewhat different
Indirect competitors - Answer- offer the same or similar products or services only
in a small number of areas, and their target customers seldom overlap yours
Competitive profile market - Answer- allows entrepreneurs to evaluate their firms
against the major competitors on the key success factors for their market segments
6 create company goals and objectives
Goals and objectives def - Answer- Goals - are broad, long-range attributes that a
business seeks to accomplish; they tend to be general and sometimes even abstract
