INTRODUCTION TO ENTREPRENEURSHIP

This exam assesses the process by which individuals pursue opportunities without regard to resources
they currently control. The essence of entrepreneurial behavior is identifying opportunities and putting
useful ideas into practice. The tasks called for by this behavior can be accomplished by either individuals
or a group and typically require creativity, drive, and a willingness to take risks. This exam evaluates
students’ understanding of the entrepreneurial process and the way it typically unfolds. It assesses
students’ knowledge and application of this four-step process that includes: deciding to become an
entrepreneur; developing successful business ideas; moving from an idea to an entrepreneurial firm; and
managing and growing the entrepreneurial firm. (3 credits)

● Test format:
o 45 multiple choice (1 point each)
o 5 short answers (5 points each)
o 3 essays (10 points each)
● Passing score: 65% (65/100 points). Your grade will be reported as CR (credit) or NC (no
credit).
● Time limit: 3 hours

OUTCOMES ASSESSED ON THE TEST

● Define entrepreneurship

● Identify the characteristics of successful entrepreneurs

● Identify the critical components of an effective business plan

● Discuss the competitive forces that determine industry profitability

● Articulate a new venture’s business model

● Explain the business planning process

● Describe how to create strong ethical culture in an entrepreneurial venture

● Explain the advantages and disadvantages of different types of business ownership

● Describe financial planning and cash flow analysis

 ● Identify the financing options for new venture start-ups

● Analyze issues critical to venture success: market segmentation/branding; intellectual property;

franchising

TOPICS ON THE TEST AND THEIR APPROXIMATE DISTRIBUTION

The table below indicates the main topics covered by this exam and the approximate percentage of the exam devoted
to each main topic. Under the main topic heading is a list of related–but more specific–topics. It is important to
review these topics to determine how much prior knowledge you have and/or how much additional study is
necessary. To assist with refreshing and enhancing your knowledge of the ideas, concepts, and theories for this
subject, links to free and openly licensed review materials are included for each topic.

Deciding to become an entrepreneur (10%)

Topic Resource

Boundless Management
Introduction to entrepreneurship ● Chapter 1: Introduction to Management
○ Entrepreneurship

Introduction to Management
● Module: Entrepreneurship
The importance of entrepreneurship
○ Reading: The Importance of Small
Business to the U.S. Economy

BUS305: Small Business Management

The changing demographics of entrepreneurs ● Unit 1: Elements of Entrepreneurship
in the U.S. ○ Chapter 2: What Makes Someone an
Entrepreneur?

Getting Started as an Entrepreneur

The entrepreneurial process
● Entrepreneurship Is...

Introduction to Business
● Module: Entrepreneurship
○ Reading: Advantages and Disadvantages of
Approaches that entrepreneurs use to identify
Business Ownership
opportunities
○ Reading: Is Entrepreneurship for You?
○ Reading: Twenty Questions Before
Starting a Business

Creating Services and Products

Techniques for generating ideas
● Chapter 6: Facilitating Creativity and Innovation
 Opportunity assessment (25%)

Topic Resource

Developing New Products and Services

The importance of a thorough feasibility
● Chapter 12: Developing a Business Plan
analysis prior to launch
○ 12.11: Due Diligence

Marketing Principles
Industry analysis ● Chapter 10: Gathering and Using Information:
Marketing Research and Market Intelligence

Business Fundamentals
Competitor analysis
● Competitive intelligence - Definition

South African Journal of Economic and Management

Sciences
The business model of a start-up ● Potential Entrepreneurs’ Assessment of
Opportunities Through the Rendering of a
Business Plan

Business Fundamentals
● Chapter 8: Securing and Managing External
Strategic resources and partnerships Relationships
○ Section 8.3: Marketing Exchanges and
Partnerships

Business and organizational planning (25%)

Topic Resource

Developing New Products and Services

Writing and presenting the business plan
● Chapter 12: Developing a Business Plan

BUS101: Introduction to Business

● Unit 2: Entrepreneurship and Legal Forms of
Forms of business organization
Business
○ 2.1: Legal Forms of Business

Introduction to Business
Preparing the proper ethical and legal
● Module 6: Business Ethics and Corporate
foundation for the business
Responsibility

International Journal of Business and Social Research

Creating a new venture team ● Entrepreneurial Intention, Culture, Gender and
New Venture Creation: Critical Review

Role of professional advisors Finding a Business Mentor

Financial analysis and financing the new venture (25%)

 Topic Resource

Introduction to Business
Financial management of a start-up ● Module 2: Economic Environment
● Module 4: Financial Markets and System

Boundless Accounting
Preparation of financial statements
● Chapter 3: Overview of Financial Statements

Boundless Finance
Financial statements forecasting
● Chapter 4: Forecasting Financial Statements

Boundless Finance
● Chapter 14: Obtaining Capital: Methods of
Venture financing options
Long-Term Financing
○ Venture Capital

Managing an entrepreneurial firm (15%)

Topic Resource

Boundless Marketing
Selecting a market and establishing a position
● Chapter 4: Consumer Marketing
○ Market Segmentation

Key marketing issues for new ventures Entrepreneurship

Introduction to Business
The importance of intellectual property ● Module 5: Legal Environment
○ Intellectual Property

The Legal Environment and Business Law: Executive

The various forms of intellectual property MBA Edition
● Chapter 10: Intellectual Property

Introduction to Business
Franchising and its issues ● Module 7: Business Ownership
○ Franchises

STUDY MATERIALS

This is a comprehensive list of the materials used in this test description. We encourage you to explore these resources
to make sure that you are familiar with multiple perspectives on the topics above. All of these resources are openly
licensed, which means that they are free to be revised, remixed, reused, redistributed, and retained, so long as their
unique terms are followed. You can learn more about open licensing here.
 Resource Licensing Guide

Title License

(2019). Small Business Management [Saylor course]. Washington, D.C.: Saylor See License
Academy.

C4DLab University of Nairobi. (2016). Introduction to Business and CC BY-SA 3.0

Entrepreneurship.

U.S. Small Business Administration: Starting & Managing Public Domain

Boundless’ Introduction to Business [Boundless course]. Portland, OR: Lumen CC BY-SA 4.0
Learning.

Boundless’ Marketing [Boundless course]. Portland, OR: Lumen Learning. CC BY-SA 4.0

Boundless’ Finance [Boundless course]. Portland, OR: Lumen Learning. CC BY-SA 4.0

Boundless’ Accounting [Boundless course]. Portland, OR: Lumen Learning. CC BY-SA 4.0

Botha, M., & Robertson, C. L. (2014). Potential entrepreneurs' assessment of CC BY-NC 3.0
opportunities through the rendering of a business plan. South African Journal of
Economic and Management Sciences, 17(3), 249-265.

Williams, L., et al. (n.d.). Introduction to Business [Lumen course]. Portland, OR: Various
Lumen Learning.

(2012). Developing New Products and Services (v. 1.0). Washington, D.C.: Saylor CC-BY-NC-SA 3.0
Academy.

Business Fundamentals. OpenStax CNX. CC BY 4.0

(2012). Principles of Marketing (v. 2.0). Washington, D.C.: Saylor Academy. CC BY-NC-SA 3.0

SAMPLE QUESTIONS

The questions below are designed to help you study for your TECEP. Answering these questions does not
guarantee a passing score on your exam.

Please note that the questions below will not appear on your exam.

Multiple choice: Select the best answer. (1 point each)

1. What is the primary opportunity that exists for startups in emerging industries?

a. Consolidating the industry and establish industry leadership as a result of doing so

 b. Winning customers by placing an emphasis on service and process innovation
c. Pursuing a niche strategy that focuses on a narrow segment of the industry
d. Capturing a first-mover advantage

2. Which of the following are the main components of an industry/target market feasibility analysis?

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

3. The majority of Americans work for

a. individual franchises
b. small businesses
c. large corporations
d. sole proprietorships

4. What are the two types of disruptive business models?

a. High-end and low-end

b. New-product and new-market
c. New-market and low-end
d. New-channel and high-quality

5. research consists of data that has been collected by the person completing the analysis.
research uses data that has been collected previously.

a. Secondary, Primary
b. Primary, Secondary
c. Indirect, Direct
d. Direct, Indirect

6. The most essential role of the executive summary in the business plan is to

a. describe the company’s goals in detail

b. explain the business plan’s objectives in detail
c. identify the means by which company performance will be measured
d. attract investors
7. Which form of business organization combines the advantages of a partnership and a C
corporation?

a. Subchapter S corporation
b. Limited partnership
c. General partnership
d. Sole proprietorship

8. The price of prescription medicine is high, partly because when someone is sick there is no real
alternative to buying medicine. Which of Porter's Five Forces explains how this aspect of the
prescription medicine industry helps keep its profitability high?

a. Rivalry among existing firms

b. Threat of new entrants
c. Threat of substitutes
d. Bargaining power of buyers

9. costs remain the same despite the volume of goods or services produced.
costs vary proportionally with the volume of goods or services provided.

a. Expense; Non-standard
b. Standard; Non-Standard
c. Fixed; Variable
d. Non-Standard; Standard

10. Which type of business plan is intended as the blueprint of a company's activities and is directed to an
internal audience?

a. Operational
b. Full
c. Summary
d. Tactical

11. A partnership is a modified form of a general partnership.

a. joint
b. limited
c. partial
d. mutual
12. Which section of the business plan focuses on the specific segment or target market of an industry
to which the firm will try to appeal?

a. Current status
b. Market analysis
c. Company summary
d. Operations plan
13. A(n) director on a board of directors is NOT employed by the firm.

a. outside
b. inside
c. external
d. impartial

14. What are the primary financial objectives of any firm?

a. Efficiency, effectiveness, strength, and flexibility

b. Efficiency, effectiveness, power, and success
c. Liquidity, control, effectiveness, and power
d. Liquidity, profitability, efficiency, and stability

15. Which type of financial statement projects the firm's financial situation in the future based on current
trends and assumptions?

a. Chronological
b. Pro forma
c. Concurrent
d. Historical

16. The statement of cash flows is divided into activities.

a. profitability, stability, and investing

b. stability, earning, and financing
c. pending, earning, and capital
d. operating, investing, and financing

17. The difference between sales revenue and cost of goods sold is known as the

a. net profit
b. debt
c. break-even point
d. gross profit or gross margin

18. The most common way to compute the cost of sales is to use the percent-of-sales method, which expresses
each expense item as a percentage of

a. net sales
b. gross profit
c. net income
d. operating income
19. What are the primary reasons that startups need funding?

a. Cash flow challenges, capital investments, and lengthy product development cycles
b. Business research, cash flow challenges, and costs associated with building a brand
c. Bonuses for members of the new venture team, legal fees, and lengthy product
development cycles
d. Attorney fees, capital investments, and marketing research

20. An entrepreneur who starts a business without external funding is utilizing a technique referred to as

a. networking
b. capitalizing
c. prospecting
d. bootstrapping

21. The 4 P's of a firm's marketing mix consists of

a. product, price, promotion, and place

b. passion, pride, principle, and premium
c. parity, passion, product, and pay
d. place, promotion, passion, and performance

22. Value-based pricing takes a -oriented approach.

a. product
b. company
c. customer
d. cost

23. What are the three types of patents?

a. Manufacturing; process; plant

b. Usefulness; purpose; genetic
c. Explicit; implicit; plant
d. Utility; design; plant

24. A franchise is an arrangement in which the franchisor grants to the franchisee the right to buy
its products and use its trade name.

a. product and trademark

b. product extension
c. business format
d. production plus
 25. Companies often falter because the founders can't adjust quickly enough to their new roles and because
the firm lacks a "track record" with outside buyers and sellers. This is referred to as the

a. innovator's affliction
b. creator's dilemma
c. liability of newness
d. burden of inexperience

Short answer questions: Answer in two to four sentences. (5 points each)

26. What are the two primary guidelines for deciding whether intellectual property protection should be
pursued for a specific intellectual asset?

27. What is a copyright? What type of material does it cover?

28. When is franchising appropriate, from the business owner's point of view? Provide an example.

Essay questions: Answer in two to four paragraphs. (10 points each)

29. Describe the purpose of industry/target market feasibility analysis. Identify the two primary issues that
should be considered. What is the difference between a firm's industry and its target market?

30. What is a business model? Why is it important for a firm to have a business model? Provide and discuss
an example of a specific company's business model to illustrate your answer.
ANSWERS TO SAMPLE QUESTIONS

Multiple-choice questions

1. (d) 10. (a) 19. (a)

2. (c) 11. (b) 20. (d)
3. (b) 12. (b) 21. (a)
4. (c) 13. (a) 22. (c)
5. (b) 14. (d) 23. (d)
6. (d) 15. (b) 24. (a)
7. (b) 16. (d) 25. (c)
8. (c) 17. (d)
9. (c) 18. (a)

Short answer questions

26. First, a firm should determine whether the intellectual property in question is directly related to its
competitive advantage. Second, a firm should determine whether the item has independent value in the
marketplace. If either or both of these conditions exist, intellectual property protection for an asset should
be considered.

Scoring Rubric

Provides the two guidelines for deciding whether to

3 points
pursue intellectual property protection

Provides appropriate discussion for each 2 points

27. A copyright is a form of intellectual property protection that grants to the owner of a work of authorship
the legal right to determine how the work is used and to obtain the economic benefits from the work. The
work must be in tangible form, such as a book, operating manual, or magazine article. If something is not
in a tangible form, such as a speech that has never been recorded or saved as a computer file, copyright
law does not protect it.

Scoring Rubric

Appropriately explains copyright 3 points

Provides appropriate discussion of what materials

2 points
copyright covers
 28. Franchising is appropriate when a firm has a strong or a potentially strong trademark, a
well-designed business method, and a desire to grow. Panera Bread is an example, because it possesses all
three of these qualities.

Scoring Rubric

Explains when franchising is appropriate 3 points

Provides appropriate example 2 points

Essay questions

29. Industry/target 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.

Scoring Rubric

Provides the purpose of feasibility analysis 3 points

Provides two appropriate issues that must be

3 points
considered

Explains the difference between a firm's industry and

4 points
its target market

30. A business model is a firm's plan or recipe for how it creates, delivers, and captures value for its
stakeholders. A firm's business model also describes how the core aspects of what it does fit together and
complement one another.

Business models are fundamental to a firm's ability to succeed both in the short and long term.

Dropbox, for example, has what's referred to as a freemium business model. It offers customers a free
account with a set amount of storage space, and makes money by selling premium accounts with more
capacity. Dropbox could charge all of its users a monthly fee based on the amount of storage that they use,
but that's not its business model. Its business model is based on the belief that by introducing users to its
service through a free account, it will ultimately sign up more paid users.
Scoring Rubric

Provides appropriate explanation of a business model

3 points

Provides appropriate explanation why a firm needs to

3 points
have a business model

Provides appropriate example and discussion of a

4 points
specific business model