1. Entrepreneurial firms usually address economic substitutes rather than competing against large firms directly. Ultimately, to substitute for a product means to do without it. The entrepreneurial firm solves that problem. How might your own business idea do this? (See the strategy slides.)
2. A focused firm is a quasi-monopoly. Customers go there because the alternatives are costly in time, energy, or convenience. In light of this fact, how does the price elasticity of demand for an entrepreneurial firm normally compare to that of large firms? (See the strategy slides.)
3. Entrepreneurial firms often sell items that are hard to find (at least locally). Sales grow slowly when the market has a stubborn learning curve. To help with cash flow, the firm may supplement the core product with standard items on the side. How might this idea apply to your business?
4. When small businesses fail, poor cash flow is usually the culprit. The company needs to keep operating even while waiting for revenues from sales that it has already completed (i.e., accounts receivable). Why does this cash crunch worsen, rather than soften, when sales grow?
5. Inflation reduces the values of a fixed amount money over time. Contrarily, the concept of the time value of money expresses the opposite effect—money increases in value over time. Both of these propositions are true. How do you reconcile them?