18 Questions
What is a major obstacle to firms implementing new product and service ideas?
Insufficient managerial services
Why can't firms quickly increase their managerial services?
It is expensive to hire new employees and takes time for them to be socialized into the culture of a firm.
What happens when a firm's managerial resources are insufficient to take advantage of its new product and service opportunities?
The firm experiences a managerial capacity problem.
What is a challenge that firms face as they grow?
Adverse selection and moral hazard.
What does adverse selection mean in the context of firm growth?
It becomes increasingly difficult to find the right employees.
Why is it important for new employees to be socialized into the culture of a firm?
To establish trusting relationships with other members of the firm.
What is a potential issue that arises as a firm grows and adds personnel?
The new hires may not have the same ownership incentives as the founders
What is a challenge that firms face as they grow?
Difficulty in maintaining quality control
What can occur if a growing firm takes market share from a competitor?
The competitor will start a price war
Why do growing firms often face capital constraints?
Because they have too little capital
What is a potential consequence of firm growth?
Decrease in managerial capacity
What is a challenge of growing a firm in terms of cash flow management?
Managing increasing cash flow
What is the main reason why a business may not be able to grow?
Limited managerial capacity
What is the primary function of entrepreneurial services in a firm's administrative framework?
To generate new market, product, and service ideas
What is the main challenge for firms in the decline stage?
Adapting to a changing market
Why is leadership important for firm growth?
Because it enables the firm to adapt over time
What is the primary purpose of managerial services in a firm's administrative framework?
To administer the routine functions of the firm
What is a key factor in determining whether a firm will enter the decline stage?
The firm's ability to adapt over time
Test your understanding of the managerial capacity problem, where a firm's growth is limited by its ability to implement new product and service ideas due to insufficient managerial services. Learn how to overcome this challenge and take advantage of new opportunities.
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