BUS-W212 - Condensed Midterm Review (based off of review slides)

*Approaches to Entrepreneurship* A. Schools-of-Thought Approaches to Entrepreneurship (The Macro & Micro Views) B. Process Approaches to Entrepreneurship

*A. Schools-of-Thought Approaches* to Entrepreneurship *1. The Macro View* a. environmental b. financial/capital c. displacement --- *2. The Micro View* a. entrepreneurial traits (people school) b. venture opportunity c. strategic formulation ----- *B. Process Approaches* to Entrepreneurship *1. An integrative approach* a. inputs, outputs, and entrepreneurial intensity *2. Dynamic states approach* *3. A framework of frameworks approach*

Debt vs. Equity

*Debt financing* -requires a payback of funds plus a fee (interest) -popular for short-term borrowing (one year or less) for working capital -popular for long-term borrowing (one to five years or more) for the purchase of property or equipment *Equity financing* -requires sharing ownership and profit with the funding source

Avoiding Folklore: The Myths of Entrepreneurship

https://quizlet.com/274653277/flash-cards/

The Evolution of Entrepreneurship

https://quizlet.com/274653277/flash-cards/

Entrepreneurial Ethics

https://quizlet.com/274653277/flash-cards/ A. Defining Ethics: Ethics provide the basic rules or parameters for conducing any activity in an "acceptable" manner. Because of the changing nature of society and business, ethics is based more on a process than a static code. B. Requirements of law may overlap at times but do not duplicate the moral standards of society. C. Legal requirements tend to be negative, morality tends to be positive. D. Legal requirements usually lag behind the acceptable moral standards of society.

Acquisitions

https://quizlet.com/274653277/flash-cards/ See week 6 slides Advantages of acquiring an ongoing venture a. Less fear about successful future operation b. Time and effort can be reduced c. Buy at a good price --- Evaluation of the Selected Venture: What are the threats? a. the business environment b. profits, sales, and operating rations c. assets of the venture --- Key questions --- 5 assets to assess 1. Inventory (age, quality, scalability, condition) 2. Furniture, equipment, fixtures (value, condition, leased or owned) 3. Accounts receivable (age of outstanding debts, past collection periods, credit standing of customers) 4. Trademarks, patents, copyrights, business name (value, role in the business's success, degree of competitive edge) 5. Goodwill (reputation, established clientele, trusted name) --- Evaluating the financial picture Ability to meet current obligations- Current Ratio = Current Assets/Current Liabilities $ Profit for $ Sales- Net Profit Margin= Net Profit/Net Sales How much profit is made for every $ invested?- Return on Net Worth= Net Profit/Net Worth --- Negotiating the deal: Buyer or Seller advantages? Information: Performance, competition, market, etc. -How do we minimize risks due to asymmetries of information? Time: Deadline for deal to happen? Pressure: Who are the key players? Alternatives: Who has the greatest "restrictions?" --- See textbook pg. 155-161

Creating new ventures

*New-New* New (venture) - New (product/market/process) Most effective way to start a new business --- *New-Old* New (venture) - Old (product/market/process) Next-best way Piggybacking Most small ventures do not start with a totally unique idea. Instead, they often "piggyback" on someone else's idea by either improving a product or offering a service in an area where it is not currently available. See page 151 in textbook --- The most effective way to start a new business is to create a new and unique product or service. The next-best way is to adapt an existing product or service or to extend an offering into an area wherein it is not presently available. The first approach is often referred to as new-new; the second, as new-old. --- Examining the Financial Picture Pg. 153 As we know, prospective entrepreneurs of new ventures must evaluate an enterprise's financial picture. How much will it cost to stay in business for the first year? How much revenue will the firm generate during this time period? If the outflow of cash is greater than the inflow, how long will it take before the business turns the corner? It is time to look at these questions in more detail. Answering these questions requires consideration of two kinds of expenses: start-up and monthly. See Table 7.2 on pg. 154 - At this point, the individual should be concerned with what is called *upside gain and downside loss*. *This term refers to the profits the business can make and the losses it can suffer.* How much money will the enterprise take in if everything goes well? How much will it gross if operations run as expected? How much will it lose if operations do not work out well? Answers to these questions provide a composite picture of the most optimistic, the most likely, and the most pessimistic results.

Corporate Entrepreneurship and Innovation

1. 2. Two major phenomena 3. Two empirical phenomena

Stress and the Entrepreneur

1. What is entrepreneurial stress? - 2. Sources of stress a. Loneliness b. Immersion in Business c. People Problems d. Need to Achieve - 3. Dealing With Stress a. Networking b. Getting Away from It All c. Communicating with Employees d. Finding Satisfaction Outside the Company e. Delegating f. Exercising Rigorously

*Reengineering Organizational Thinking*

???

The Dark Side of Entrepreneurship

A. Risk B. Stress C. Ego --- Reasons for unethical behavior: The dark side of entrepreneurship •Greed •Distinctions between activities at work and activities at home •Survival (bottom-line thinking) •Reliance on other social institutions to convey and reinforce ethics.

*The Entrepreneurial Revolution: A Global Phenomenon*

A. The impact of entrepreneurial ventures in the U.S. *B. The impact of gazelles* pg. 17 in textbook Gazelle Definition from Financial Times Lexicon: A gazelle is an extremely fast-growing company, which maintains consistent expansion of both employment and turnover over a prolonged period. There is no single definition of what constitutes an "exceptional" growth rate, but 20% and more per annum is a common definition. C. The legacy of entrepreneurial firms

Twenty-First-Century Trends in Entrepreneurship Research

A. Venture financing — venture capital, angel investors, and innovative financing techniques B. Corporate entrepreneurship C. Social entrepreneurship D. Entrepreneurial cognition E. Women and minority entrepreneurs F. The global entrepreneurial movement G. Family businesses H. Entrepreneurial education

The Triple Bottom Line

An accounting framework that goes beyond the traditional measures of profit, return on investment, and shareholder value to include environmental and social dimensions. 3 Ps People Planet Profits Measures 3 dimensions of performance: *Economic* ... deal with the bottom line and income flows *Environmental* ... related to natural resources and reflect potential influencers *Social* Social measures refer to social dimensions of a community or region such as education, social resources, health and well-being, and quality of life.

*INNOVATION: THE CREATIVE PURSUIT OF IDEAS*

Good ideas involve... Creative thinking combined with systematic analysis •Addressing a specific need •Turning problems into opportunities -Problems are to solutions what demand is to supply --- Approaches to problem-solving: Causal (Adaptive) and Effectual (Innovative) http://www.effectuation.org/?p=1427

Sources of Innovative Ideas

See week 5 slides - entrepreneurial ideas --- ??? So where do I start? "Knowledge Corridors" - Endogenous view a. Prior experience b. Prior education --- So where do I start? *Sources of Innovative Ideas - Exogenous view* a. TRENDS / DEMOGRAPHIC social trends, technological, economic, government b. UNEXPECTED OCCURRENCES surprises c. INCONGRUITIES exist when there is a gap between expectations and reality ex: FedEx d. PROCESS NEEDS address pain ex: Splenda e. INDUSTRY AND MARKET CHANGES There are continual shifts in the marketplace caused by advances in technology, industry growth, etc. The entrepreneur needs to be able to take advantage of any resulting opportunity. f. DEMOGRAPHIC CHANGES Demographic changes arise from changes in population, age, education, occupation, geographic locations, etc. g. PERCEPTUAL CHANGES Perceptual changes occur in people's interpretation of facts and concepts. ex: Atkins diet h. KNOWLEDGE-BASED CONCEPTS. ex: chemistry

Debt Financing Options

TEXTBOOK Pg. 174-176 --- 1. Commercial Banks --- 2. Peer-to-Peer Lending The average size of social loans is around $17,000, with maximums predicted to increase to a potential of $250,000. Peer-to-peer lending is one of the fastest growing areas of finance with 100 percent increases each year. The interest rates range from 5.6 to 35.8 percent, depending on the loan term and borrower rating. The first P2P lending sites appeared in 2005, bringing scale to the age-old idea of borrowing from friends. They multiplied in the latest economic downturn as traditional pools of credit dried up. Some analysts attribute the success of social lending to the weakening economy. -Commercial lenders have been forced to be more conservative in their lending practices, which has led to a depleted pool of capital for entrepreneurs. While the use of P2P lending provides many immediate advantages for entrepreneurs in start-up mode, potential dangers include: • Funding success rate. Most loans are difficult to complete; so the funding success rate could be questionable. • Business plan disclosure. The entrepreneur's business plan is now released to the public domain. • No ongoing counseling relationship. The entrepreneur does not receive any advice or gain experience from the lender, and there are no future rounds of lending or investment. • Potential tax liability. There are tax implications for the borrower and the lender. • Uncertain regulatory environment. The SEC continues to review these sites for potential regulatory policies. --- 3. Trade credit Credit that is given by suppliers who sell goods on account --- 4. Accounts receivable financing Accounts receivable bank loans are made on a discounted value of the receivables pledged.

Equity Financing Options

TEXTBOOK Pg. 177- Financial equity instruments, which give investors a share of the ownership, may include: • *Loan with warrants provides the investor with the right to buy stock at a fixed price at some future date.* Terms on the warrants are negotiable. The warrant customarily provides for the purchase of additional stock, such as up to 10 percent of the total issue at 130 percent of the original offering price within a five-year period following the offering date. • *Convertible debentures are unsecured loans that can be converted into stock.* The conversion price, the interest rate, and the provisions of the loan agreement are all areas for negotiation. • *Preferred stock* is equity that gives investors a preferred place among the creditors in the event the venture is dissolved. The stock also pays a dividend and can increase in price, thus giving investors an even greater return. Some preferred stock issues are convertible to common stock, a feature that can make them even more attractive. • *Common stock is the most basic form of ownership.* This stock usually carries the right to vote for the board of directors. If a new venture does well, common-stock investors often make a large return on their investment. These stock issues often are sold through public or private offerings.

The Knowledge and Learning Process

Textbook pg. 108 Once sources of ideas are recognized, entrepreneurs must use their existing knowledge base, acquired through work, experience, and education, to hone ideas into actual opportunities. General industry knowledge, prior market knowledge, prior customer understanding, specific interest knowledge, or any previous knowledge helps entrepreneurs to distill unusual sources of innovative ideas into potential opportunities. - In addition to simply having a particular experience in their knowledge base, entrepreneurs must be able to learn from their experiences as well. Researcher Andrew C. Corbett has identified the importance of acquiring and transforming information, knowledge, and experience through the learning process. His research lends credence to theories about the cognitive ability of individuals to transform information into recognizable opportunities. How an individual entrepreneur acquires, processes, and learns from prior knowledge is critical to the opportunity identification process. With that in mind, we next examine the imagination and creativity needed to transform experiences into entrepreneurial insight and know-how.

Entrepreneurial Imagination and Creativity

Textbook pg. 109 See pdf https://quizlet.com/274653277/flash-cards/ ----- A. The Role of Creative Thinking --- B. The Nature of the Creative Process a. Phase 1: Background or knowledge accumulation b. Phase 2: The incubation process allows the individual to subconsciously mull over the information gathered c. Phase 3: The idea experience is the time when the idea or solution the individual is seeking is discovered. d. Phase 4: Evaluation and implementation Successful entrepreneurs must be able to identify workable ideas, which they have the skills to implement. --- C. Developing Your Creativity a. Recognizing relationships. b. Developing a functional perspective. c. Eliminating muddling mind‐sets: Mental habits, which block or impede creativity.

Franchising: The Hybrid Approach

Textbook pg. 161- One form of business that incorporates some of the independence of an entrepreneur with the larger umbrella of a corporation is the franchise. Thus, it is a "hybrid" form of entering business. Today, more than a third of all retail sales and an increasing part of the gross domestic product are generated by private franchises. ------ See week 6 slides Any arrangement in which the owner of a trademark, trade name, or copyright has licensed others to use it in selling goods or services. - What are the advantages and disadvantages? (Back to Ben) Q -- Ben & Jerry's??? - Why are they franchising? - they don't have the capital to expand alone -don't have the people to expand -want to move more rapidly than the present system allows https://www.entrepreneur.com/video/217631 - Evaluating franchising opportunities -finding reliable info -investigating the franchisor -seeking professional help

Entrepreneurial Cognition ***

Textbook pg. 28 *the knowledge structures that people use to make assessments, judgments, or decisions* involving opportunity evaluation, venture creation, and growth. In other words, entrepreneurial cognition is about understanding how entrepreneurs use simplifying mental models to piece together previously unconnected information that helps them to identify and invent new products or services and to assemble the necessary resources to start and grow businesses. Specifically, then, the entrepreneurial cognitions view offers an understanding as to how entrepreneurs think and "why" they do some of the things they do.

*THE ENTREPRENEURIAL MINDSET IN INDIVIDUALS*

Textbook pg. 28 entrepreneurial cognition is about understanding how entrepreneurs use simplifying mental models to piece together previously unconnected information that helps them to identify and invent new products or services and to assemble the necessary resources to start and grow businesses

Dealing with Failure

Textbook pg. 34-35 ... The Grief Recovery Process The traditional process of recovering from grief involves focusing on the particular loss to construct an account that explains why the loss occurred. As a plausible account for the failure is constructed, the individual is able to begin to break the emotional bonds to the project lost. However, empirical research has found that this loss orientation toward *grief recovery* can sometimes exacerbate the negative emotional reaction. By focusing on the failure, the entrepreneur's thoughts can shift from the events leading up to the failure to the emotions surrounding the failure event. That is, by continually focusing on the failure, negative thoughts and memories become more salient and can lead to ruminations that escalate grief. --- A *restoration orientation* is an alternate approach and is based on both distracting oneself from thinking about the failure event and being proactive toward secondary causes of stress. Distraction takes the individual's thoughts away from the source of his or her negative emotions, and addressing secondary causes of stress (brought on by the failure) can diminish the primary stressor—the entrepreneurial failure. However, avoiding negative emotions is unlikely to be successful in the long-run—suppressing emotions leads to physical and psychological problems and these suppressed emotions are likely to re-emerge and do so at an inopportune time. [...] The most effective entrepreneurs are realistic enough to expect difficulties and failures. If they can deal effectively with any grief that emanates from the failure, then they will not become disappointed, discouraged, or depressed by a setback or failure. In adverse and difficult times, they will continue to look for opportunity. In this way, entrepreneurs will believe that they learn more from their early failures to form the foundation of later successes.

The Entrepreneurial Experience (not included in review slides)

Textbook pg. 35 Venture creation is a lived experience that, as it unfolds, forms the entrepreneur. In fact, *the creation of a sustainable enterprise involves three parallel, interactive phenomena:* emergence of the opportunity, the emergence of the venture, and the emergence of the entrepreneur. None are predetermined or fixed—they define and are defined by one another. Thus, this perspective on the entrepreneur has gained new momentum in the entrepreneurship research of the twenty-first century.

The Innovation Process

https://quizlet.com/274653277/flash-cards/ review pdf The innovation process is more than just a good idea. Innovation combines the vision to create a good idea with the perseverance to implement the concept. --- Textbook pg. 118 Most innovations result from a conscious, purposeful search for new opportunities. *This process begins with the analysis of the sources of new opportunities.* Drucker has noted that, because innovation is both conceptual and perceptual, would-be innovators must go out and look, ask, and listen. - Successful innovators use both the right and left sides of their brains. They look at figures. They look at people. They analytically work out what the innovation has to be to satisfy the opportunity. Then they go out and look at potential product users to study their expectations, values, and needs. --- Most successful innovations are simple and focused. They are directed toward a specific, clear, and carefully designed application. In the process, they create new customers and markets. Today's mobile technology (cell phones) is a good example. Although this technology is highly sophisticated, it has become easy to use and it appeals to a specific market niche: people who want their technology all in one and on the go. - Above all, innovation often involves more work than genius. As Thomas Edison once said, "Genius is 1 percent inspiration and 99 percent perspiration." Moreover, innovators rarely work in more than one area. For all his systematic innovative accomplishments, Edison worked only in the electricity field.

*SOCIAL ENTREPRENEURSHIP*

https://www.ted.com/talks/majora_carter_3_stories_of_local_ecoactivism