Course Objective for 310 test 2
Do all firms have the potential to be aggressive growth firms? Why or why not?
- Not all firms can have aggressive growth because the firms that grow the fastest are the ones that solve a problem and have an impact on customers, and there's only room for a few firms to have this impact
What are the potential downsides to firm growth?
some businesses grow too fast, thus causing stress on the company financially, its owners, and the workers. This makes the company possibly lose growth and go backwards.
What is the purpose of a franchise agreement
spells out the price , the services to be provided by the franchisor to the franchisee, and the items a franchisee should expect
How does a firm's growth rate affect its ability to attract and retain talented employees?
talented employees want to work for a firm that can offer promotions, higher salaries, and increased levels of responsibilities and larger firms can offer more of these benefits
What are the benefits of planning for growth?
making a plan for growth is good because it sets goals and helps them guide their growth even if it doesn't go as planned.
How does franchising differ from other forms of business ownership
franchising you are able to establish a product and business model initially and easily. You get support during franchise formation and management. Also, economies of scale if franchisor performs certain functions for all franchisees (advertising, trends, r&d)
What is a copyright?
grants the owner/author of a work the legal rights to determine how the work is used - books, operating manual, magazines, music, etc
What is trade dress?
refers to characteristics of the visual appearance of a product, its packaging, or even the design of a building it is a form of intellectual property
What is the difference between a scale joint venture and a link joint venture? Provide examples of both types of joint ventures and how their effective use can increase a firms sales
scale joint venture- partners collaborate at a single point in the value chain to gain economies of scale in production or distribution. It's good for developing new products link joint ventures- position of the parties is not symmetrical and objective of partners may diverge and give an opportunity to add to product line
What is an example of a business that wouldn't be suitable for franchising?
**maybe** a place like Walmart or home depot because they would be too expensive to start up and run without the capital from a franchisor
What is a trademark? How can trademarks help a firm establish a competitive advantage in the marketplace?
- A trademark is any word, name, or symbol used to identify a firm - It provides a competitive advantage because it allows people to recognize your firm and makes it easy for people to find you
Is it possible for a firm to grow too fast? If so, what are the potential downsides?
- Businesses can grow too fast and cannot keep up with orders, can be financially draining, and can overwork employees
What are some of the issues an entrepreneur should consider when answering the question "is franchising a good choice for me"
- Have I looked closely at all aspects before deciding to franchise? Franchising often involves managerial demanding tasks of training, supporting, supervising and nurturing franchisees
What is the purpose of an assignment of invention agreement? is it a good idea for firms to ask their employees to sign assignment of invention agreements?
- It's a part of the employment agreement that assigns the employer the right to to apply for the patent of an invention made by an employee during the course of their employment - Yes it is a good idea because they gain the right to get a patent on a product their employees invent.
What is a business method patent? Provide an example. How can having such a patent provide a firms a competitive advantage in marketplace?
- It's a patent that protects an invention that facilitates a method of doing business - An example is Amazon's "1-Click shopping". Amazon patented a system that allows consumers to purchase items by clicking an order button on a website - For this example it provides a competitive advantage because it makes shopping easier for customers
Give an example of a design patent. How can having a design patent provide a firm a competitive advantage in the marketplace?
- New design of a computer mouse, changes the way it looks and should be protected - The product design is a major competitive advantage
What is sustained growth? Why is it important
- Sustained growth is the growth in revenues and profits over a sustained period of time -It's the level of growth a startup needs to maintain to ensure maximum performance without seeking outside help and it's important for the long term growth
What is the difference between a licensor and a licensee
- a licensor owns the intellectual property, wheres as a licensee purchases the right to use
What is the difference between a merger and an acquisition? How can acquisitions help firms fill their needs?
- a merger is a pooling of interests to combine 2 or more firms into one - an acquisition is a purchase of one firm by another An acquisition can fill a firms needs by - expanding product line - gaining access to new technology - access to talented employees
What is a trade secret? Provide an example of a trade secret. How might the trade secret you identified help a firm establish a competitive advantage in the marketplace?
- a trade secret is any formula, pattern, physical device, idea, process, etc that provides the owner the information of a competitive advantage -Here are a few examples (marketing plans, product formulas, financial forecasts) - I think of spongebob's krabby patty secret recipe - it establishes a competitive advantage because it is private information that only you know and other firms cannot have access to it
What rules of thumb should an entrepreneurial venture follow to successfully sell its products overseas
- answer request promptly and clearly - a file should be set up to retain copies of all foreign inquiries - keep promises - documents should be personally signed - let individuals know who they are meeting with
what are the rules of thumb for determining whether franchising is a good choice for a particular business
- are you willing to take orders? - are you willing to be a part of a franchise system, instead of owning your own and making own rules? - How would you react if franchisor rejects your idea? - How willing are you to put your money at risk?
Why is cash flow management such an important issue for a firm entering a period of rapid growth?
- as a firm grows, there is an increasing rise in the costs of the firm. - you have to carefully manage the cash to make sure you can meet all payments
Why is it difficult for some firms to grow or scale their operations?
- businesses can suffer from growth because a higher growth rate means there is less personalized attention to customers - high end products are exclusive and if they have a lot of growth they aren't exclusive anymore
For US citizens, what are the main issues that should be considered before buying a franchise in a foreign country
- consider the value of the franchisor's name in the foreign country - work with a knowledgeable lawyer - determine whether the product/ service is saleable in a foreign country - uncover whether the franchisor has experience in international markets - find out how much training and support you will receive from franchisor - evaluate currency restrictions
What is meant by the phrase copyright infringement? would you characterize copyright infringement as a minor or as a major problem in the US and other countries? Explain.
- copyright infringement occurs when one work derives from another, is an exact copy, or similar to the original work. - Copyright infringement is a major problem in the US and other countries, costing owners 25 billion per year
what are two primary rules for determining whether intellectual property protection should be pursued for a particular intellectual assets?
- determine if the intellectual property in question is directly related to its competitive advantage - determine whether an item has value in the marketplace. If a market of a product doesn't exist, don't need to patent it
What characteristics are associated with a promising acquisition candidate?
- firms openness to being acquired - strength of management team and industry - compatibility of the company and the company being acquired - successful past financials - understands business and industry of firm
What information does not qualify for trade secret protection?
- information that is known to the public - information that competitors can discover through legal means
define the term intellectual property and describe its importance
- intellectual property is any product of human intellect that is intangible - it is important because intellectual are the most valuable assets and can give a company a competitive advantage
What are the two primary purposes of conducting an intellectual property audit? What risks does a company have if it doesn't periodically conduct an intellectual property audit?
- it is essential for a company to periodically determine whether its intellectual property is being properly protected - is to remain prepared to justify its value in the event of a merger or acquisition If the company does not conduct an intellectual property audit periodically they risk the chance of overlooking intellectual property that can be protected and if it is not protected someone else could take it
What types of physical measures do firms take to protect their trade secrets?
- restricting access (only tell employees if they need to know) - labeling documents (confidential or restricted so employees know to keep what documents to themselves) - password protecting confidential computer files - maintaining logbooks for visitors - maintaining adequate security measures
What is a copyright bug? Where would one expect to find the bug, and how is it used?
- the letter C inside a circle with the first year of publication and the author copyright owner -it's found at the bottom of a document - it's used to prevent someone from copying work without permission and claiming that they did not know that the work was copyrighted
What are some of the common reasons new products fail?
- the potential market was overestimated - customers saw the product was too expensive - the product was poorly designed - the product was no different than the competitors products - cost of developing the product was too high
The common causes of trade secret disputes
- when an employee leaves a firm and is accused of taking confidential information with them
What are the major differences between utility patents and design patents?
-Utility patents protects the way a product is used and works Design patents protect the way an article looks
What are the keys to a firms effort to achieve success through new product and service development
-find a need and fill it -get quality and pricing right -focus on a specific target market -conduct ongoing feasibility analysis
Why is price stability such an important issue for a firm entering a period of rapid growth?
-it's important to sell differentiated products to a clearly defined target market to have price stability Otherwise firms selling the same products can offer a lower price which attracts other customers away from your business
Can most firms be classified as rapid growth firms? Explain your answer.
-no, the main companies that have rapid growth are the ones that solve significant problems or have a major impact on their customers. ONLY healthcare, technology, and other rapid industries can be classified as this.
What are the six steps in applying for a patent?
1) Make sure the invention is practical 2) Determine what type of application to file 3) Hire a patent attorney 4) Conduct a patent search 5) File a patent application 6) Obtain a decision from the USPTO
What are the five stages in the organizational life cycle?
1) introduction level- get off to a good start and gain momentum in marketplace 2) early growth- increase market share, increasing sales, and related products in the works 3) continuous growth- developing new products, expanding into new markets, need for structure and formal relationships, and determine lines of delegation 4) Maturity- growth slows, efficiently managing the products it has instead of expanding into new areas, innovation slows, and opportunities for acquisition begin to take place 5) decline stage- avoiding the decline depends on the strength of its leadership and ability to respond
What are the three steps involved in selecting and registering a trademark?
1) select an appropriate mark- a name, logo, design 2) Perform a trademark search- see if trademark is available 3) Create rights in the trademark- when consumers start to identify a trademark with a specific product *Example is chapstick instead of lip balm
What is adverse selection and how might it affect entrepreneurial firms?
Adverse selection means that as the number of employees a firm needs increases, it it more difficult to find the best employee. - the faster a firm grows, the less time you have to evaluate candidates, and if you pick a bad employee it raises your cost
Why is it important for a prospective franchisee to retain his or her own franchise attorney?
Because the attorney will represent your interests and reviews all the documents before committing to a franchise. They will help make the best choice that's in your best interest
What are the differences between entrepreneurial services and managerial services?
Entrepreneurial services are services the generate new market, product, and service ideas Managerial services are routine functions of the firm that facilitate the profitable execution of new opportunities
What is franchising
form of business organization where a firm that already has a successful product, service licenses its trademark and method of doing business to other businesses in exchange for a franchise fee
What are the six foreign market entry strategies and what are the key characteristics of each one
Exporting -producing a product at home and shipping it to a foreign market. It's inexpensive, but has high transportation costs Licensing - firm with rights to a product gives permission for someone else to manufacture that product. A licensee puts up most of the capital to establish overseas operation, but it teaches the foreign firm how to produce the product and the firm could produce one similar Joint Ventures - firm owned by 2 or more independent firms. You can gain access to knowledge of foreign partners, but you lose partial control of business Franchising - franchisee is willing to pay franchisor a royalty fee in exchange for a product or service. The franchisee puts up most of the capital needed to operate, but loses quality control Turnkey Projects - build a business in foreign country, trains employees to operate business, and turns over the keys when ready to operate. This generate revenue, but is a one time activity Wholly Owned Subsidiary - opening a firm in a foreign country. The owner has total control, but the cost of setting up and maintaining are high
What are some aspects of franchising that make it subject to ethical abuses?
Get rich quick mentality- people see franchising as getting money quickly and become more interested in selling franchises than using them to make money in the long run The false assumption that buying a franchise is a guarantee of business success- there is always going to be risk when buying a business conflicts of interest between franchisors and franchisees
What is the managerial capacity problem?
If a firm has insufficient managerial services to implement its entrepreneurial ideas, it can't quickly hire new managers to fix problems. - expensive to hire new employees, and it takes time for the new mangers to be socialize into a firms culture and relationships
How does a joint venture differ from a strategic alliance
In a joint venture the companies start and invest in a new company that's jointly owned by both of the parent companies. A strategic alliance is a legal agreement between two or more companies to share access to their technology, trademarks or other assets. A strategic alliance does not create a new company.
In what state or stages of the organizational life cycle are capital constraints most prevalent?
In the early growth stage and continuous growth stage - when a firm grows they need money to hire more employees, etc and if a firm can't raise capital to hire employees they will not be able to grow
What distinguishes intellectual property from other types of property, such as land, buildings, and inventory?
Intellectual property is intangible and is a product of human intellect, whereas land, buildings, and inventory is tangible
What is the difference between an internal and external growth strategy?
Internal growth strategy is the efforts taken within the firm itself such as new product development, product related strategies, etc for the purpose of increasing sales External growth strategy rely on establishing relationships with third parties and it has a faster growth rate than internal strategy
Over the past several years, why have strategic alliances and joint ventures become increasingly prevalent growth strategies for entrepreneurial firms?
Joint ventures allow firms to gain knowledge of foreign markets and local customs
If an entrepreneur has an idea for a themed restaurant based on television game shows, is the idea itself eligible for copyright protection? Why or why not?
No it is not eligible for copyright protection because copyright laws cannot protect the idea itself. However, if it was the specific expression of an idea it could be covered
One of the most difficult challenges involved with rapid growth is quality control. Why is this so?
When a firm grows it handles more service requests because of the larger number of customers. If the firm cannot handle the extra amount of requests there is a loss in the quality of the product because it is made faster and with not enough employees.
If an individual Planet Smoothie franchise is losing money, does it still have to pay a monthly royalty? Explain your answer
Yes, they would still have to pay the royalty fee even if they were losing money. This is because a royalty fee is around 5% of gross income and if the company has any income, the 5% still needs to be paid
What is an international expansion strategy? What are the keys to implementing this strategy successfully in an entrepreneurial firm?
a way to access foreign markets (exporting, licensing, joint ventures, franchising, turnkey projects, wholly owned subsidiary) some keys are making sure your business is financially and organized enough to go international -read on page 483 for in depth information.
What are the principal advantages and disadvantages of buying a franchise?
advantages of buying a franchise - a proven product with an established market - established trademark or business system - franchisor's training expertise - franchisors ongoing support - availability of financing Disadvantages of buying a franchise - cost of franchise - restrictions on creativity - duration of commitment - risk fraud, misunderstanding, or lack of commitment
What are the advantages and the disadvantages of establishing a franchise system?
advantages of establishing a franchise system - helps venture grow quickly b/c franchisees provide most of the capital - agency theory (firm run by franchisee instead of managers b/c they are more committed) disadvantages of establishing a franchise system - organizations allows other to profit from its trademark and business model
What is a joint venture
created when 2 or more firms pool a portion if their resourced to create a separate organization
What are the economies of scale and economies of scope and why are these important to entrepreneurial firms?
economies of scale is generated when increasing production lowers the average cost of each units produced - buying in bulk, a company can spread its costs over a greater # of units. economies of scope is an increase in the variety of products that are produced, which lowers the average total cost. - it's an advantage a firm accrues that comes from the scope of a firm's operations
what are the differences among an individual franchise agreement, and area franchise agreement, and a master franchise agreement?
individual franchise agreement involves the sale a single franchise for a specific location area franchise agreement allows a franchise to own and operate a specific number of outlets in a geographic area master franchise agreement having the right to open and operate at a specific number of locations in an area and also has the right to offer and sell the franchise to other people in area
What are the costs involved in purchasing a business format franchise? Are these costs similar across franchise systems, or do they vary widely? Which costs are one time costs and which costs continue indefinitely?
initial franchise fee -brick and mortar franchise charge less and home based services charge more. This is a more than one time charge, such as training and recruiting capital requirements -cost of buying real estate, constructing a building, purchasing inventory, obtaining a license, etc. This is a one time charge continuing royalty fee - a percent of weekly or monthly gross income. Thins is an ongoing cost advertising fee- this is an ongoing cost these costs vary across franchise systems
What is an international new venture? Why might it be to the benefit of an entrepreneurial start up position itself as an international new venture from the outset?
international expansion strategy is when businesses seek to derive competitive advantage by using their resources to sell products in services in multiple countries - don't know the last part
What is a product line extension strategy? Provide an example of a product line extension strategy and describe how it's effective use might increase a firms sales
involves making additional versions of a product so that it will appeal to different clientele or making related products to sell to same clientele - an example is making a better version of a product. It allows firms to make a better product without starting from scratch and spending more money on developing a new one.
What is the purpose of the franchise disclosure document? Are there any regulations regarding when the FDD must be provided to a prospective franchisee? If so, what are they?
it gives a prospective franchisee a broad base of information about the background and financial health of the franchisor. The franchise disclosure document must be given 14 business days before the document can be signed
"Franchising is a safe investment"
it is no safer than any other business ownership
What is the purpose of a licensing agreement? In a licensing agreement, which party is the licensor, and which is the licensee?
it's a contract between the licensee and licensor with terms of the license spelled out. This is important so neither party breaks the contract
What is the meaning of the term licensing? How can licensing be used to increase a firms revenues?
licensing is granting permission by one company to another to use a specific form of its intellectual property under defined conditions you increase revenues by.........
How do rapid growth firms deal with potential cash flow shortfalls?
many firms will fund growth via investors or a line of credit at a bank. Other firms restrict the pace of growth to avoid cash flow challenges
What is the market penetration strategy? Provide an example of a market penetration strategy and describe how using it effectively might increase a firms sales
market penetration strategy are the actions taken to increase sales through greater marketing efforts or through production capacity and efficiency - examples of this are (increasing advertising, offer sale promotions, lowering price, etc) - offering lower prices or sales promotions gives people incentives to buy your products
What is moral hazard and how might it affect entrepreneurial firms?
moral hazard is when a firm hires a new manager and that manager does not have the same ownership incentives as the original founders and new hires may not be as motivated - to fix this firms hire monitors to supervise employees
explain what a patent is and describe different types of patents
patents grant the right to exclude others from making, selling, or using an invention for the term of the patent types of patents - utility patents protects the way a product is used and how it works - design patents protect the way it looks - plant patents protects a variety of plants that can be reproduced asexually
What are the differences between a product and trademark franchise and a business format franchise? Provide at least two examples of both types of franchise arrangements
product and trademark franchise is an arrangement where franchisor grants the right to the franchisee the right to buy products and use the trade name. - an example is GM dealerships Business format franchise is a franchisor provides a formula for doing business to the franchise along with training, advertising, etc - an example is McDonalds
What is the difference between technological alliances and how they can increase a firms sales
technological alliances- feature cooperation in research and development, engineering, and manufacturing - pooling assets firms can bring a product to market faster and cheaper marketing alliances- match a company that has a distribution system with a company that has a product to sell to increase sales - gain access to distribution channels
What is the difference between technology licensing and merchandise licensing? Provide examples of both types of licensing and how they can increase a firms sale's
technology licensing- licensing of technology that the licensor controls by virtue of a utility patent merchandise licensing- licensing of a recognized trademark or brand the licensor controls through a trademark or copyright
Why is it important for a franchisor to develop detailed and thorough operating manuals?
the operating manual teaches the franchisee everything they need to know about the company. An example of the importance is in the McDonald's example from class. You need to know how long to cook fries, so the fries all taste the same at every McDonald's location
Why might firms work hard to achieve a market leadership position?
to realize economies of scale, economies of scope, and be recognized as a brand leader
In the context of copyright law, what is meant by term derivative work?
works that are new renditions of something that is already copyrighted
