Markets & Value
What is the term for the voluntary exchange space where sellers and buyers interact and a market price is established?
Market
What does "competitive advantage" mean?
Ability to outperform rivals in same market, increasing market share/profits.
What does the acronym PESTEL stand for?
Political, Economic, Social, Technological, Environmental, Legal.
What is an entrepreneur?
Individual who develops a new business and assumes risks/rewards
Name the four major types of business organization described in Unit 1.
Sole proprietorship, partnership, LLC, corporation
Define "value creation" and give one example of how a business creates value for customers.
Value creation: providing a product that responds to customers’ problems/needs/wants. Example: a mattress company improving sleep quality.
Name two ways a business can differentiate its product to achieve competitive advantage.
Higher quality, unique features, better service, lower price, stronger marketing.
Give one example of a political factor and one example of a technological factor that can affect businesses.
Political: subsidies/tariffs. Technological: internet access or automation
What is a minimum viable product (MVP) and what is its main purpose during validation?
MVP = simplest version with core features to get feedback and validate demand/problem-solution fit.
Explain one advantage and one disadvantage of organizing a business as a corporation.
Advantage: limited liability and access to capital; Disadvantage: loss of owner control, more regulation.
Distinguish between a customer and a consumer, and explain why a business must choose which customers to serve.
Customer = purchaser; consumer = user; businesses segment customers to focus resources and achieve problem-solution fit
Explain what a barrier to entry is and give two examples of barriers businesses might create.
Obstacles to new entrants: patents, high startup costs, exclusive supplier contracts, regulations.
Describe how environmental factors and social factors might interact to change consumer demand for a product, with a concrete example.
Example: environmental concern for sustainability (env) + social trend favoring eco-friendly goods (social) → higher demand for sustainable products.
List three strategies entrepreneurs use to generate new product ideas.
Observing customers, interviewing, surveying, market/technical research, experimentation.
How do specialized departments (e.g., HR, accounting, operations) improve a growing firm's ability to meet customer needs? Give two concrete reasons
Departments build expertise, increase efficiency, enable scale, and allow focused strategy (e.g., marketing builds brand; operations ensure quality).
A company can charge a higher price than its production cost. What is this process called, and why is it important for long-term viability?
Value capture (charging price > cost); essential for profit and reinvestment.
Compare how a company competing on low price vs. one competing on differentiation would structure its operations and supply chain choices.
Low-price: mass production, cost minimization, efficient supply chains. Differentiation: higher-quality inputs, artisan or quality-focused processes, marketing and customer service.
Choose a local market scenario (e.g., limited internet access, high transport costs, preference for local goods). Identify three relevant PESTEL factors and explain briefly how each would influence the types of businesses likely to succeed.
Example answer: limited internet access (technological) limits e-commerce; high transport costs (economic/environmental) favor local producers; preference for local goods (social) favors farm-to-table or local artisans.
Describe the steps of the entrepreneurial design-thinking process for validating a market opportunity, including what validation means in this context.
Steps: identify problem via observation/interviews/surveys → validate problem exists for multiple customers → develop solution (sketch/prototype/MVP) → test MVP and gather feedback → iterate. Validation = evidence problem exists and is shared.
Contrast artisan production and mass-production processes, and explain which customer priorities each process best serves.
Artisan: skilled labor, customization, quality — serves customers valuing uniqueness. Mass production: assembly/automation — serves customers prioritizing low price and volume
Explain how sellers’ and buyers’ opposing price incentives interact to form a prevailing market price; include an example (use course terminology).
Sellers want higher prices, buyers want lower — equilibrium emerges as prevailing market price through voluntary exchanges (example: local coffee market).
A firm uses exclusive supplier agreements and large-scale production. Explain how these choices can function together to sustain a competitive advantage and create barriers to entry.
Exclusive agreements limit rivals’ access to inputs; scale lowers unit costs — together create cost and access barriers preventing entry.
Explain how changes in legal and economic PESTEL factors together could alter career opportunities in a market; use specific terms from Unit 1.
Legal changes (regulation, IP laws) can restrict or enable industries while economic shifts (recession/boom) change demand → together affect which firms operate and which jobs are available.
An entrepreneur interviews 50 people and finds that most experience the identified problem and would buy a solution. Explain what stage this represents, what it validates, and one next step the entrepreneur should take to reduce risk before a full launch.
This is problem validation stage: shows problem exists and many would buy. Next step: test MVP with users for feedback and iterate; run small pilot to gather purchase intent or pre-orders.
Describe three risks businesses consider when selecting suppliers for a global supply chain and explain one mitigation strategy for each risk.
Risks: natural disasters/political instability (supply disruption) — mitigate via supplier diversification; quality/reputation risk — certify suppliers and audit; resource shortages/cost volatility — use contracts/hedging and inventory buffers.