Entrepreneurship : CUET Mock Test - 5 - CUET Commerce MCQ

Innovative entrepreneurs have to face high risk on account of novelty of their products/processes. Either of these may fail. These are trading risks.

Intrapreneur bridges the gap between inventors and managers. An intrapreneur is an employee who is tasked with developing an innovative idea or project within a company. The intrapreneur may not face the outsized risks or reap the outsized rewards of an entrepreneur. However, the intrapreneur has access to the resources and capabilities of an established company.

Entrepreneurship Development Institute of India (EDII), an autonomous and not-for-profit institute, set up in 1983, is sponsored by apex financial institutions - IDBI Bank Ltd., IFCI Ltd., ICICI Bank Ltd. and State Bank of India (SBI). It is situated in Ahmedabad, Gujarat.

BPO stands for business process outsourcing. Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of a specific business process to a third-party service provider. BPO is typically categorised into back office outsourcing, which includes internal business functions, such as human resources or finance and accounting and front office outsourcing, which includes customer-related services, such as contact centre services.

Average stock level = Minimum stock level + (1/2) Reorder quantity
9,000 units = 4,000 units + (1/2) Reorder quantity
(1/2) Reorder quantity = 9,000 units – 4,000 units
Reorder level = (5000/0.5) units = 10,000 units

Brick and mortar companies refer to traditional street-side companies that offer products and services to their customers face-to-face in an office or store that they own or rent. The local grocery store and the corner bank are examples of brick and mortar companies. Brick and mortar businesses have found it difficult to compete with mostly web-based businesses like Amazon.com Inc.

The excess payment by the new company to the amalgamating companies for the appraised value of the assets and liabilities taken over is accounted as goodwill. Specifically, goodwill is recorded in a situation in which the purchase price is higher than the sum of the fair value of all identifiable tangible and intangible assets purchased in the acquisition and the liabilities assumed in the process.

The form of external expansion adopted by Fizz & Lime is manufacturing franchise opportunity. This type of franchise provides an organisation with the right to manufacture a product and sell it to the public, using the franchisor's name and trademark (in this case Fizz & Lime). This type of franchise is found most often in the food and beverage industry.

Porter's Five Forces is a model that identifies and analyses five competitive forces that shape every industry and helps determine an industry's weaknesses and strengths.
Rivalry among competing firms is central (most powerful) to the remaining four because it is used to measure competition intensity, attractiveness, and profitability of an industry or market.

Corporate venturing (also known as corporate venture capital) is the practice of directly investing corporate funds into external startup companies. This is usually done by large companies who wish to invest in small but innovative startup firms. They do so through joint venture agreements and acquisition of equity stakes. The investing company may also provide the startup with management and marketing expertise, strategic direction, and/or a line of credit.

Vertical merger happens by means of a combination of two or more firms that are engaged in different stages of operation, production or distribution. For instance, where a company that manufactures laptops combines with a company that markets laptops, it is a case of a vertical merger.

• Venture capital is a form of private equity and a type of financing that emphasises on management capability. Venture capital financing is funding provided to companies and entrepreneurs. It can be provided at different stages of their evolution.
• Private equity is an alternative investment class and emphasises on corporate governance. Private equity is composed of funds and investors that directly invest in private companies, or that engage in buyouts of public companies, resulting in the delisting of public equity.
• Private placement is the issue of securities to a select group of persons not exceeding 49. The regulations for private placement are codified under sections 42 and 62 of Companies Act, 2013.

New product development (NPD) is the process of bringing a new product to the marketplace. A business needs to engage in this process due to changes in consumer preferences, increasing competition and advances in technology or to capitalise on a new opportunity. Therefore, most established companies focus on incremental innovation for new product development. Most established companies enter new markets by tweaking products for new customers.

Benchmarking is the process through which a company measures its products, services and practices against its toughest competitors, or those companies recognised as leaders in its industry. It means identifying and imitating the best in the world at specific tasks and functions.

If the opening stock is X, then closing stock = X + 3,000
So, average closing stock = (X + X + 3,000)/2 = 14,000
So, X = Rs. 12,500
So, closing stock = Rs. 12,500 + Rs. 3,000 = Rs. 15,500

Assertions (I) and (II) both are correct because the Reserve Bank of India has defined a sick unit as one which has incurred a cash loss for one year and is likely to continue incurring losses for the current year as well as in the following year, and the unit has an imbalance in its financial structure such as, current ratio is less than 1 : 1, and there is worsening trend in debt-equity ratio. A sick industry is not healthy in terms of its financial management. The Sick Industrial Companies Act (SICA) was enacted in 1985 to address a chronic problem in the Indian economy which is industrial sickness.

First an opportunity is identified and evaluated. Then a business plan is made to exploit the opportunity. The business plan is then implemented and the required resources secured. Finally, all aspects of the resultant enterprise are managed to obtain sustained results.

Innovation finds a new product or process to meet an existing or dormant need. Innovation obviously obviates the need for the earlier existing product or process.

A competing product is supposed to serve the same purpose. Why will the consumer shift to a new product to serve the same purpose unless it is cheaper?

• An entrepreneur who is dominated more by customs, religions, traditions and past practices and is not ready to take any risk is called fabian entrepreneur.
• Fabian entrepreneurs are very much sceptical in their approach in adopting or innovating new technologies in their enterprise. They are not adaptable to the changing environment.

As the name suggests, first-generation entrepreneurs are the first in the history of their family who dive into the sea of doing business on their own. Hence they get very less advice from their closest and most trustworthy people (family). Dhirubhai Ambani, K. Anji Reddy, Shiv Nadar are some famous entrepreneurs of first generation. G. D Birla was not a first generation entrepreneur because prior to him the Birla family had started the business.

• Sale price to enable the management to realise an estimated profit of 10% in India:
• Let sales price = Rs. 100
• Cost of production = Sales price - Profit - Commission = 100 - 10 - 10 = Rs. 80
• Cost of production = Rs. 5,00,000 in actual
• If the cost of production is Rs. 80, the sales price is Rs. 100,
• If the cost price is Rs. 5,00,000, the sales price = Rs. 5,00,000 × 100/80 = Rs. 6,25,000
• Selling price per unit = Rs. 6,25,000/25,000 = Rs. 25 per unit

• Forward integration is a business strategy that involves a form of vertical integration whereby business activities are expanded to include control of the direct distribution or supply of a company's products. In forward integration, current products serve as inputs. Forward integration can be a way to increase a company's control of its product and profits, there can be a danger of diluting the core competencies and business.
• Backward integration refers to the process in which a company purchases or internally produces segments of its supply chain, i.e. production of raw material.
• A conglomerate is a corporation made up of a number of different, seemingly unrelated businesses. In a conglomerate, one company owns a controlling stake in a number of smaller companies which conduct business separately.
• A merger is an agreement that unites two existing companies into one new company. Mergers and acquisitions are commonly done to expand a company's reach, expand into new segments, or gain market share.

Takeover generally involves the acquisition of certain block of equity capital of a company which enables the acquirer to exercise control over the affairs of the company. In the takeover process, the company making the bid is the acquirer, while the company it wishes to take control of is called the target. Some of the prominent transactions of recent years are the takeover of INDAL by HINDALCO, IPCL by Reliance Industries, VSNL by Tatas, BALCO by Sterlite Industries, and Ranbaxy Laboratories by Daichi Sankyo.

The format of 'business plan' described in the given para is 'Internal operational plan'.
Internal operational plan is a detailed plan describing planning details that are required by management but may not be of interest to external stakeholders.

The Government of India established the Small Industries Development Organisation (SIDO) in the year 1954. The Small Industries Development Organisation (SIDO) is the national SME Development Agency of India. It is a major constituent of the Ministry of Small Scale Industries of the Government of India.

A firm's competitive strategy concerns how to compete in the business areas the firm operates in. In other words, competitive strategy means to define how the firm intends to create and maintain a competitive advantage with respect to competitors. Holding a competitive advantage over competitors means to be more profitable than competitors over the long term. A firm's competitive strategy within a given business area is examined looking at two factors: the creation of the competitive advantage and the protection of the competitive advantage.

Microfinance involves giving small loans to individuals or small businesses that may be outside the formal banking channel so that they can meet their business related requirements.
Funding through microfinance to Small and Micro Enterprises is not successful due to:
1) Outsourcing of method of providing microfinance because agents are not under a framework
2) High rate of interest
3) Rigid policies
4) Discriminate lending

New product development is a journey. It's the road which leads to the actual product and then the actual product to the market. The process of new product development is as follows:

Market segmentation is the process of dividing a market of potential customers into groups, or segments, based on different characteristics, and it is not one of the stages of new product development.

An organisation that is downsizing to reduce cost is implementing the strategy of stability.
Stability strategy is adopted when the organisation attempts to maintain its current position and focuses only on the incremental improvement by merely changing one or more of its business operations in the perspective of customer groups, customer functions and technology alternatives, either individually or collectively.