Entrepreneurship Final Exam

List and describe the four simple rules of outsourcing.

-Know yourself. -Keep strategy decisions in-house. -Fully specify tasks that are to be outsourced. -Know with whom you are contracting.

Describe the key factors for determining an optimum price.

1. Demand for the product or service 2. Value delivered to the customer 3. Prices set by competing firms 4. Your business strategy and product placement

arm's-length transaction

A business deal where the parties have a prior relation or affiliation, but where the business is conducted as if they were unrelated. This approach is done to help guard against potential conflicts of interest.

search engine optimization

A general approach to website design intended to result in the site being displayed toward the beginning of a search engine's (e.g., Google, Yahoo!, etc.) listing for that term.

tax abatement

A legal reduction in taxes by a government.

financial leverage

A measure of the amount of debt relative to total investment.

royalty financing

A method of raising capital financing where investors provide money to a business in return for a guaranteed percentage of revenues.

economic order quantity

A statistical technique that determines the quantity of inventory that a business must hold to minimize total inventory cost.

customer vector report

A type of CRM report that segments by customer (or customer group) on purchases or dates of purchase.

Co-marketing

A type of media partnership where two products jointly pay to advertise together. Usually this is when customers use the two products together, like chips and salsa.

community development organization

An organization authorized by the SBA to make insured loans to small businesses that are expected to increase economic activity within a specific geographic area.

cost of owning

Cost incurred in financing, insuring, taxing, or tracking an asset.

cost of disposition

Cost incurred in the activities necessary to get rid of an asset.

inventory valuation

Determination of the amount of assets held by the firm for sale or production.

tax credit

Direct reduction in the amount of taxes that must be paid, dependent on meeting some legal criteria.

promotional mix

How much of each message conveyance you will use to sell your product as well as your objective in using each one.

Describe the pecking order of funding sources for new firms.

Least to Most Availability -External Loans from Commercial-Rate Lenders - External Loans from motivated (high-cost) lenders - Loans or investments from family/friends/fools and trade credit -owner loans/retained earnings/owners' equity investments (when there is cash flow in the business) -owner capital (personal savings, home equity credit line)

equity capital

Money contributed to the businesses in return for part ownership of the business.

accounts receivable

Money owed to your business by customers who purchased your product on credit.

price lining

The practice of setting (usually) three price points: good quality, better quality, best quality.

channels

People and firms who connect producers of goods and services with customers.

small business investment company

Private business that is authorized to make SBA-insured loans to start-ups and small businesses.

premium pricing

Setting a price above that of the competition to indicate a higher quality.

skimming

Setting a price at the highest level the market will bear, usually because there is no competition at the time.

partitioned pricing

Setting the price for a base item and then charging extra for each additional component.

Describe the steps in the "get customers" side of the customer development funnel.

Step 1: Awareness - get your message out Step 2: Interest- customers taking some action Step 3: Consideration- Step 4: Purchase

customer retention

Techniques that focus on efforts to promote satisfaction with and interest in the firm.

optimum stocking level

The amount of inventory that results in the minimum cost, when considering the cost of lost sales resulting from running out of stock, the number of units sold per day, and the number of days required to receive inventory. Also called reorder point.

cost of operating

The direct cost incurred in using an asset for the purpose for which it was intended.

media integration

The overlap of paid and earned media is based on generating leads through three paid types of efforts: advertorials (editorials written by a company as a type of ad), lead generation purchases (e.g., mailing or subscriber lists or contests), and contests or sweepstakes.

just-in-time (JIT) inventory

The practice of purchasing and accepting delivery of inventory only after it has been sold to the final customer.

Lead generation

The promotional technique of obtaining prospective customers through paid and unpaid efforts to obtain contact information from people with the plan to send these prospects advertisements or other messages in hopes of getting them to become customers.

microinventory

The purchase of inventory only after a sale is made; very typical with Internet firms.

marketing funnel

The rule of thumb in marketing that it takes a large number of people to be made aware of your product in order to find a purchaser.