Verified Test Bank Chapter 3 Designing Business Models

Chapter 3: Designing Business Models

True/False

1. A business model provides a framework in which entrepreneurs can examine their business plans and explore alternative ways for their companies to function and grow profitably while building barriers to ward off competitors.
2. The Five Component Model has nine key topics to consider when exploring different business models.
3. Capturing data on customer requirements and using it to create unique services or products can be a powerful way of adding value and keeping out competitors.
4. A business model based on information sharing can provide low barriers against competitors because the costs involved in integrating incompatible data and computer systems can be prohibitive.
5. Unfortunately, licensing and franchising are not valuable components of a business model.
6. Interestingly, some companies base their business models entirely on licensing and have no intention of producing or selling any product.
7. An entrepreneur should not seek to be a franchisee or build a business as a franchisor without seeking competent legal advice.
8. The key advantage of outsourcing is that it enables you to invest your resources in more profitable activities.
9. Large companies are nearly always stretched for resources, however, use of outsourcing should not be part of their business models.
10. Outsourcing functions range from use of individual specialist consultants and focused service providers to full manufacturing facilities and large software program developers.
11. Short Answer / Fill in the Blank
12. A(n) ________ provides a framework in which entrepreneurs can examine their business plans and explore alternative ways for their companies to function and grow profitably while building barriers to ward off competitors.
13. _____________ is the value created for the user of the product or service.
14. Suppliers, customers, and other stakeholders operate more and more in ______________.
15. If you can enter the market and build your customer base before anyone else, you achieve ____________ in which it becomes harder and harder for competitors to get into the market and convince your customers to switch.
16. Licensing ________ and refer to types of contracts between an issuing entity and a receiving entity.
17. A(n) _________ license provides just one licensee the rights stated in the agreement.
18. ____________ are paid as a percentage of net sales of products or services.
19. ___________ may prevent a licensee from just sitting on the rights and not trying to generate sales.
20. A(n) ____________ is a legal and commercial relationship between the owner of a trademark, service mark, trade name, or advertising symbol and an individual or group wishing to use that identification in a business.
21. The _________ allows a franchisee to participate in building a business together with other franchisees, under the rules stipulated by the franchisor and under certain conditions spelled out in the agreement.

Multiple Choice

1. Which of the following factors are not important when designing a business model?
   1. Understanding customers’ values
   2. Having Venture Capital Investment
   3. Analyzing current and potential customers
   4. Clearly identifying the markets that you will enter.
2. Which of the following is the term for users to whom the product or service is useful and for what purpose?
   1. Cost structure
   2. Market segment
   3. Profit potential
   4. Value proposition
3. Formulating which of these allows the innovating firm to gain and hold advantage over rivals?
   1. Competitive strategy
   2. Value networks
   3. Market segment
   4. Value discounts
4. It is recommended that the Business Model Canvas be used in _________ sessions.
   1. Individual
   2. Team
   3. Small
   4. Large
5. Data lock-ins inhibiting a move to a competitor can be found in which of the following?
   1. E-mail services
   2. Banking
   3. Health care services
   4. All of these.
6. The authors recommend that a small company restrict the number of licenses it issues to how many competitors?
   1. Three or four
   2. Five or six
   3. Two or three
   4. One or two
7. Which of the following is the term used to describe the fee that may be paid to initiate the contract?
   1. Running royalties
   2. Minimums
   3. Up-front
   4. Advances
8. _________ may prevent a license from just sitting on the rights and not trying to generate sales.
   1. Running royalties
   2. Minimums
   3. Up-front fees
   4. Marketing
9. Which of the following is the term for a legal and commercial relationship between the owner of a trademark, service mark, trade name, or advertising symbol and an individual or group wishing to use that identification in a business?
   1. License agreement
   2. Franchise
   3. Exclusive license
   4. Running royalty
10. Which is the best-known franchise organization?
    1. Wendy’s
    2. Arby’s
    3. Chick-Fil-A
    4. McDonald’s
11. The federal government has issued regulations that require franchisors to prepare what type of document?
    1. UFCO
    2. UFCC
    3. UFOC
    4. UFDC
12. A franchise agreement need not have the following conditions stated:
    1. Payments that must be made to the franchisor.
    2. The location where the franchisee may operate.
    3. Guidelines on using the franchisor’s brand.
    4. The expiration date of the patent that is being franchised.
13. For a franchise agreement, the typical length of agreement for initial period is around:
    1. 8 years
    2. 9 years
    3. 7 years
    4. 10 years
14. Limitations of franchise agreements include all of the following except:
    1. treatment of confidentiality
    2. general legal requirements
    3. non-compete stipulation
    4. legal advice
15. Every company is now contemplating ______ for some or even most of its functions.
    1. insourcing
    2. outsourcing
    3. running royalties
    4. upfront fees
16. What is the key advantage of outsourcing?
    1. It enables one to invest resources in more profitable activities.
    2. It is impossible to do it alone.
    3. It builds a virtual company.
    4. Resources are more valuable.
17. Outsourcing is attractive because:
    1. It allows a customer to learn about your internal processes.
    2. You should only retain routine processes within the company.
    3. Fixed costs can be reduced.
    4. It avoids having to train your employees in special skills.
18. Outsourcing implies loss of direct control and _______.
    1. supervision
    2. standards
    3. performance
    4. communication
19. Social networks are:
    1. Club members.
    2. Not-for-profit organizations.
    3. Missionaries.
    4. Online communities sharing common interests.
20. We live in a global economy where changes occur ____________.
    1. slowly
    2. primarily within borders of economy
    3. rapidly
    4. with governmental intervention only
21. A large corporation can license rights to a small company’s _____________.
    1. intellectual property
    2. running royalties
    3. business profits
    4. networks