Please refer to the Enterprise Growth Strategy Class 12 Entrepreneurship Exam Questions provided below. These questions and answers for Class 12 Entrepreneurship have been designed based on the past trend of questions and important topics in your class 12 Entrepreneurship books. You should go through all Class 12 Entrepreneurship Important Questions provided by our teachers which will help you to get more marks in upcoming exams.
Class 12 Entrepreneurship Exam Questions Enterprise Growth Strategy
Class 12 Entrepreneurship students should read and understand the important questions and answers provided below for Enterprise Growth Strategy which will help them to understand all important and difficult topics.
VERY SHORT ANSWER TYPE QUESTIONS
Question. Which is the most popular form of franchising?
Answer: Business format franchise opportunity is the most popular form of franchising.
Question. What are the two ways in which an organisation can expand?
Answer: Internal Expansion and External Expansion are the two ways in which an organisation can expand.
SHORT ANSWER TYPE QUESTIONS-
Question. Differentiate between consolidation and merger.
Answer:
Question. Explain the types of acquisition.
Answer: There are four types of acquisitions:
1. Friendly acquisition: Here, both the companies approve of the acquisition under friendly terms. There is no use of force or pressure and every thing gets over cordially.
2. Reverse acquisition: Here, a private company takes over a public company.
3. Rack flip acquisition: Here, the purchasing company becomes a subsidiary of the purchased company.
4. Hostile acquisition: Here, the entire process is based on force. The smaller company is forced to say yes to the acquisition or the bigger company just buys off all its share.
LONG ANSWER TYPE QUESTIONS
Question. Explain the types of franchising.
Answer: Following are the types of franchising:
1. Product Franchise Business Opportunity: Here, the manufacturers use the product franchise to govern how a retailer distributes their products. The manufacturer grants a store owner the authority to distribute goods by the manufacturer and allows the owner to use the name and trademark owned by the manufacturer. The store owner purchases the inventory in return for these rights. Example: Some tire stores.
2. Manufacturing Franchise Opportunity: It provides an organisation with the right to manufacture a product and sell it to the public, using the franchisor’s name and trade mark. This type of franchising is very common. For example, in the food and beverage industry, bottlers of soft drinks, etc.
3. Business Franchise Opportunity Ventures: Here, a business owner purchases and distributes the products for one specific company. The company provides customers or accounts to the business owner. In return, the business owner pays a fee as compensation. Example, vending machine routes and distributorships.
4. Business Format Franchise Opportunity: Here, a company provides a business owner with a proven method for operating a business using the name and trade mark of the company. The company provides a significant assistance to the business owner in starting and managing the company. The business owner pays a fee or royalty in return.
VERY LONG ANSWER TYPE QUESTIONS
Question. Explain the advantages of franchising, both for the franchisor and franchisee.
Answer: Merits of Franchising:
1. Proven idea: Business is based on a proven idea. Success of the product can be checked in the market.
2. Profit from brand recognition:Franchises develop an image in the marketplace. This saves both time and money of advertising, promotion, recognition, etc. Image of the product is a favourable one and is in the minds of consumers.
3. Recognized brand name and trademarks: Entrepreneur gets a recognized brand name and trademarks. Benefit from any advertising or promotion by the parent company automatically benefits the franchise.
4. Support from parent company: The franchisor gives support in the form of training, help setting up the business, a manual telling how to run the business and ongoing advice.
5. Exclusive rights of the territory: The franchisor can’t sell any other franchises in the same territory which leads to the creation of monopoly power in the territory.
6. Easier Financing: Financing the business becomes easier due to the associated brand name. Banks are more likely to lend money to buy a franchise with a good reputation
Question. What do you think are the reasons for failure of merger and acquisition?
Answer: Following are the reasons for failure of merger and acquisition:
1. Unrealistic price paid for target:Merger and acquisition involves valuation of the target company and paying a price. Many a time the price paid to the target company is much more than what should have been paid. Shareholders of the target company are benefited, the shareholders of the acquirer end up on the losing side.
2. Difficulties in cultural integration: Merger involves combining of two or more different companies with different corporate cultures, styles of leadership, differing employee expectations etc. If the merger is not dealing sensitively with the companies people and their different corporate cultures, the merger may be a disaster. For example, the merger of Daimler Benz with Chrysler. While Daimler-Benz’s culture stressed on a more formal and structured management style, Chrysler favoured a more relaxed and freewheeling style.
3. Overstated synergies: Mergers and acquisitions assumed to be for creating synergies through increased revenue, reduced costs and improvement in the investment intensity. Overestimation can lead to failure.
4. Integration difficulties: The combined firm or entity has to adapt to a new set of challenges given by the new circumstances. Plans are thus prepared to integrate the operations of the combining entities. This is done on the present information. If the information available isinadequate, integration becomes difficult. (a) Poor business fit: Mergers and acquisitions also fail when the products of the merging firms do not fit into the acquirer’s overall business plan.
5. Inadequate due diligence: Due diligence helps in detecting financial and business risks that the acquirer inherits from the target company. Inaccurate estimation of the related risk can result in failure of the merger
HIGHER ORDER THINKING SKILLS In
Question. It is between two companies producing different goods or services for one specific finished product.
Answer: It is Vertical merger.
VERY SHORT ANSWER TYPE QUESTIONS
Question. What are the two main forms of external expansion?
Answer: The two main forms of external expansion are: Franchising and Mergers and Acquisitions.
Question. In what sense are small enterprises more vulnerable than large ones?
Answer: Small enterprises are more vulnerable than large ones to small changes in environment, change in taste and preference of consumers, taxation policies, other government policies, cost of raw materials, etc.
Question. What is called the stage of consolidation for an enterprise?
Answer: Stage of consolidation for an enterprise is the stage, which is normally 3 to 5 years after the take-off stage. During this stage the turnover of the enterprise is maintained.
SHORT ANSWER TYPE QUESTIONS
Question. Human resources issues may lead to failure of merger. Describe.
Answer: A merger is involved with job losses, restructuring and the imposition of a new corporate culture and identity. This may create uncertainty, anxiety and resentment among the company’s employees. Companies often pay less attention to the short term legal and financial considerations involved in a merger and neglect crucial HR issues related to corporate identity and communication. This in turn affects the worker’s morale and productivity.
Question. “An entrepreneur has a dual role to play- one, that of a leader and the other of a manager”. Do you agree?
Answer: Yes, I agree as a leader he provides direction and energy and as a manager he processes the input and gives the output.
Question. How can you represent the idea of a synergy mathematically?
Answer: In mathematical terms, a synergy is where 2 + 2 =5.
Question. Explain how a boardroom split is a reason for failure of merger.
Answer: When a merger is planned, evaluation of the composition of the boardroom and compatibility of the directors is crucial. Managers who are suddenly deprived of authority can react in a bitter way. Personality clashes between executives in the two companies are bound to arise. This may slow down or prevent integration of the firms.
Question. What makes concept of Goli Vada Pav so special?
Answer: Following things make the concept of Goli Vada Pav so special:
1. It is a spicy vegetable patty in bun sold through retail outlet.
2. It offers quality and hygienic fast food which is quite affordable.
3. It sells hygienically prepared food items made in fully automated ‘HACCP’ certified hands free plant with an authentic touch.
4. It is known as an established, reputed, and popular Indian fast-food brand offering clean food for those who have less money and time.
Question. What is the relevance of Franchising?
Answer: 1.Franchising is helping thousands of individuals be their own boss operate their own business.
2. Franchisingis allowing entrepreneurs to be in business for themselves
3. There is high chance of success when an individual takes a franchisee.
Question. Atlanta-based global mobile engagement provider mGage acquired Bangalore- based Unicel Technologies. Due to this friendly acquisition, mGage is poised to become one of India’s largest provider of enterprise mobile messaging solutions.
Answer: 1.Merger through Consolidation/ Amalgamation
2. Meaning: A consolidation is a combination of two or more companies into a ‘new company’. In this form of merger, all companies are legally , dissolved and a new entity is created. Here, the acquired company transfers its assets, liabilities and shares to the acquiring company for cash or exchange of shares.
Question. Explain how the regulatory issues leads to the failure of merger.
Answer: Merger requires legal approvals and has to follow a legal procedure. If any of the stakeholders are not in favour of the merger, they might create legal obstacles and slow down the entire process. This results in regulatory delays and increases the risk of deterioration for the business. So care has to be taken to ensure that regulatory hurdles and problems do not crop up, else it may lead to failure.
LONG ANSWER TYPE QUESTIONS
Question. Give examples of failure of franchisee due to inability to provide services.
Answer: Curtis Bean bought a dozen franchises in Checkers of America Inc., a firm that provides auto inspection services. After losing Rs 200,000, Bean and other franchisees filed a lawsuit claiming that the franchisor had misrepresented advertising costs and had made false claims including that no experience was necessary to own a franchise.
Question. Distinguish between Internal and External Expansion.
Answer:
Question. “Big brands make head towards franchising”. Why?
Answer: The big corporate houses have opted for a franchise route because :
1. It considers franchising as an easy mode of expansion.
2. Chances of success are higher due to high commitment level of the franchisor and the franchisees.
3. It is a powerful and ideal way to expand business.
4. It is best suited for a company which does not have any capital, manpower or time to build the network of company-owned outlets.
Question. How franchising helps start-ups?
Answer: Franchising helps the start-ups in following ways:
1. Working: Franchising changed the working of the start-ups because already the product carriers a name in the market already. The start-ups pay royalty to the franchisor. Start-ups save struggling time and money involved in the process.
2. Training: Start-ups take up trainingto understand the product. Franchisors make franchises fully known with the product/services. Start-ups are the sales person. And franchisors charge a fee for this purpose.
3. Fast growth: The start-ups can grow fast without having to increase cost through increasing labour, operating costs, etc. because normally buyers straight away contact them.
4. One plus one eleven: Franchises work for the benefit of franchisors i.e. they turn up one plus one eleven. Both are open to help each other. Franchisors’ efforts to boast their franchises are always real and sincere. No clash of interest arises.
Question 8. What are the main ingredients of a franchise agreement?
Answer: The main ingredients of a franchise agreement:
1. Contract Explanation: This part , of the agreement outlines the type of relationship a franchisee is going to have with the franchisor.
2. Operations Manual: It is the section of the agreement that details the guidelines that the franchisee must legally follow. Amendments may be made from time to time and the franchisee has to adjust operations accordingly. The franchisee has to maintain the confidentiality.
3. Proprietary Statements: This part tells how the franchise name is to be used. What marketing and advertising procedures is required to follow. It also documents how much the franchisee will be required to contribute toward national advertising efforts.
4. Ongoing Site Maintenance: It includes the types and time frames regarding various maintenance items and upgrades that must be made to the franchisee’s location.
Question. How growth is essential for the existence of an enterprise?
Answer: Growth is always essential for the existence of a business concern.
1. For further growth of an enterprise every concern must try some ways.
2. According to the requirement try to expand its activities.
3. An entrepreneur must act as a challenge seeker.
4. Quick and thoughtful decision of various factors like increase in financial, logistical, and market share of a business.
5. The rule of thumb is that one should only expand when there are untapped opportunities that can benefit the business.
6. There may be a comfortable way that an entrepreneur want capture or a location not serviced even by your competitors.
7. Extra managerial ability, its continued efficiency and profitable functioning ensures existence and growth of enterprise.
Question. What are the disadvantages of franchising to the franchisee?
Answer: Following are the disadvantages of franchising to the franchisee:
1. Right and the only way of doing things: Degree of freedom for the franchise gets limited. There is over guidance and over-influenced degree of control over them. This leaves no scope for the innovation.
2. Continuing cost implication: Revenue gets shared with the franchisor. This is in addition to the royalty and the fees. Additional amounts can be charged towards sharing the cost for advertising, training, etc. It may become an expensive business due to tendency of exploitation by the parent firm.
3. Risk of franchisor getting bought: The franchisee faces irreversible changes in form of problems and difficulties when the franchisor either fails or goes for merger.
4. Inability to provide services: When promises made in the agreement are not kept, the franchisee are left without any support in important areas.
VERY LONG ANSWER TYPE QUESTIONS
Question. ‘Jagriti Ltd’ are the manufacturers of Cars for the last 15 years and was earning good profits. Recently, due to the irregular supply of parts by the suppliers the company could not make timely delivery of cars to its customers. The customers cancelled their bookings and there were very few new bookings. As a result the sale of the cars declined and also the profits. The management of the company analysed the problems and decided to take over those two firms because of whom the problems arose. One of them was supplying engines and the other types. The company also launched new discount schemes for its customers. It also decided to employ 200 unemployed young boys and girls to take up the cleaning operations using imported machines inside the factories as well as the surrounding areas.
1. Identify and state the concept of ‘Enterprise Marketing and Growth Strategies’ discussed in the above para.
2. Identify any one value which ‘Jagriti Ltd’ wanted to communicate to the society.
Answer: 1. The concept for enterprise marketing is sales promotion. Sales promotion is one level or type of marketing aimed either at the consumer or at the distribution channel (in the form of sales-incentives). It is used to introduce new product, clear out inventories, attract traffic, and to lift sales temporarily. The concept for growth strategy is acquisition. Acquisition are often made as part of a company’s growth strategy whereby it is more beneficial to take over an existing firm’s operations and niche compared to expanding on its own. Acquisitions are often paid in cash, the acquiring company’s stock or a combination of both.
2. Following are few of the values which ‘ Jagriti Ltd.’ wanted to communicate to the society: • Job opportunity for youth • Equal opportunities for both men and women • Care for environmental cleanliness.
Question. Mention some of the prominent synergies that could arise from the deal between TATA Steel and Corus.
Answer: There were a lot of apparent synergies between Tata Steel which was a low cost steel producer in fast developing region of the world and Corus which was a high value product manufacturer in the region of the world demanding value products. Some of the prominent synergies that could arise from the deal were as follows:
1. Tata was one of the low cost steel producers in the world and had self¬sufficiency in raw material. Corus was fighting to keep its production costs under control and was on the lookout for sources of iron ore:
2. Tata had a strong retail and distribution network in India and SE Asia. This would give the European manufacturer an in-road into the emerging Asian markets. Hence, there would be a powerful combination of high quality development and low cost high growth markets.
3. There would be technology transfer and cross-fertilization of R&D capabilities between the two companies that specialized in different areas of the value chain.
4. There was a strong culture fit between the two organizations, both of which highly emphasized on continuous improvement and ethics. Tata steel’s Continuous Improvement Programme ‘Aspire’ with the core values: trusteeship, integrity, respect for individual, credibility and excellence. Corus’s Continuous Improvement Programme ‘The Corus Way’ with the core values:’code of ethics, integrity, creating value in steel, customer focus, selective growth and respect for our people.
Question. Unicon Ltd. and Nahata Communications provide Cable T.V. network in adjacent areas of Delhi. After some time the market was slowly taken over by big cable companies. Both Unicon Ltd. And Nahata communications understood the competition and decided to come together so as to increase their markets share. This strategy helped them in cost saving through economies of scale as they could cover more areas now. It led to the overall growth of both the companies.
1. Identify the enterprise growth strategy adopted by the two.
2. State the benefits that the companies have after this arrangement.
Answer: 1. A market extension merger takes place between two companies that deal in the same products but in separate markets. The main purpose of the market extension merger is to make sure that the merging companies can get access to a bigger market and that ensures a bigger client base.
2. Following are the benefits that the companies have after this arrangement:
(а) Synergy: Synergy is the most essential component of mergers. In mergers, synergy between the participating firms determines the increase in value of the combined entity. In other words, it refers to the difference between the value of the combined firm and the value of the sum of the participants. Synergy accrues in the form of revenue enhancement and cost savings.
(b) Acquiring new technology: To remain competitive, companies need to constantly upgrade their technology and business applications. To upgrade technology, a company need not always acquire technology.By buying another company with unique technology, the buying company can maintain or develop competitive edge.
(c) Improved profitability: Companies explore the possibilities of a merger when they anticipate that it will improve their profitability.
(d) Acquiring a competency: Companies also opt for Merger and Acquisition to acquire a competency or capability that they do not have and which the other firm does.
(e) Entry into new markets: Mergers are often looked upon as a tool for hassle-free entry into new markets. Under normal conditions, a company can enter a new market, but may have to face stiff competition from the existing companies and may have to battle out for a share in the existing market.
(f) Access to funds: Often a company finds it difficult to access funds from the capital market. This weakness deprives the company of funds to pursue its growth objectives effectively. In such cases, a company may decide to merge with another company that is viewed as fund-rich.
(g) Tax benefits: Mergers are also adopted to reduce tax liabilities. By merging with a loss-making entity, a company with a high tax liability can set off the accumulated losses of the target against its profits gaining tax benefits.
