MGMT 350 Exam 2
bricolage
the process of analyzing the resources available and creating a product or services from them
pure innovation
the process of creating new products or services, which results in a previously unseen product or service
Due Diligence
the process of investigating a business to determine its value
RBI screen
"Really Big Idea" and is a fast technique for making initial investments (called screens) of prospective business ideas based on five questions. Comes from Alex Bruton.
caveat emptor
"let the buyer beware", which has been made into a philosophy sometimes used by businesses to put the burden for customer protection onto the customer
minimum viable product
A concept central to lean business practices where you make a minimum product, but one that can be sold. By selling to customers and collecting feedback, an entrepreneur can develop a product at minimum cost.
workout
A form of business termination in which the firm's legal or financial obligations are not fully met at closing.
Employee Stock Ownership Plan (ESOP)
A formalized legal method to transfer some or all of the ownership of a business to its employees
decline stage
A life cycle stage in which sales and profits of the firm begin a falling trend.
effectual reasoning
A logical process in which one analyzes the resources available and restraints on the use of resources to create an attainable goal.
pilot test
A preliminary run of a business, sales effort, program, or Web site with the goal of assessing how well the overall approach works and what problems it might have.
A/B testing
A way to check customer reaction to websites describing your product or service. Two versions (version "A" and version "B") of the site are posted and are served up randomly to prospective customers. The version of the website that gets the most commitments from customers is the one kept and the less attractive site is revised and the two versions tested until one revision gets consistently superior customer reactions.
growth stage
An industry life cycle stage in which customer purchases increase at a dramatic rate.
retrenchment
An organizational life cycle stage in which established firms must find new approaches to improve the business and its chances for survival.
innovative strategy
An overall strategic approach in which a firm seeks to do something that is very different from what others in the industry are doing
Beginner's All-purpose Symbolic Instruction Code
BASIC
walkaway
Business termination in which the entrepreneur ends the business with its obligations met.
People, Offering, Customer, Value Proposition, Distinctive Competencies
Five RBI screen questions
strategic partnerships
Formal or informal relationships with customers, vendors, or mentors to ensure the success of an entrepreneurial venture.
Substitute, Combine, Adapt, Magnify, Put to other uses, Eliminate, Rearrange
SCAMPER
opportunity recognition
Searching and capturing new ideas that lead to business opportunities. This process often involves creative thinking that leads to discovery of new and useful ideas.
value proposition
Small business owners' unique selling points that customers can expect from your goods or services, including benefits that differentiate your offering from those of the competition
net profit
The amount of money left after operating expenses are deducted from the business
affordable loss
The minimum possible expenditure of capital and other resources in order to bring an entrepreneurial idea to market.
leveraging contingencies
The practice of and ability to seize upon novel opportunities that become apparent during the conduct of business.
Casual (predictive) reasoning
The process of setting a goal and then determining the strategy and resources required to attain the goal.
maturity stage
The third life cycle stage, marked by a stabilization of demand, with firms in the industry moving to stabilize or improve profits through cost strategies.
spin-off
a business that is created by separating part of an operating business into a separate entity
scope
a characteristic of a market that defines the geographic range covered by the market- from local to global
scale
a characteristic of a market that describes the size of the market-a mass market of a niche market
synergy
a combination in which the whole is greater than the sum of its component parts
heuristic
a commonsense rule; a rule of thumb
revolving credit
a credit agreement that allows the borrower to pay all or part of the balance at any time; as the loan balance is paid off, it becomes available to be borrowed again
mass market
a customer group that involves large portions of the population
perceptual map
a graphic display that positions products, services, brands, or companies according to their scores on important strategic dimensions
customer segment
a group or subgroup of potential purchasers that can be approached in a coherent manner
start-up
a new business that is started from scratch
pass off
a type of business transfer where the owner gives the business to someone else without a payment. This is most often done to maintain employement for the staff and service for the customers, but the business is not profitable enough to give the original owner any revenue
sell off
a type of business transfer where the seller gets only a fraction of the value of the business. This is most often done to maintain employment for the staff and service for the customers, but he business can generate only a small amount of profit with which the original owner can be paid, or the new owner does not have much money to buy the business
boom
a type of life cycle growth stage marked by a very rapid increase in sales in a relatively short time
shake-out
a type of life cycle stage following a boom in which there is a rapid decrease in the number of firms in an industry
business format franchising
an agreement that provides a complete business format, including trade name, operational procedures, marketing, and products or services to sell
goal
an intended outcome for your business
imitative strategy
an overall strategic approach in which the entrepreneur does more or less what others are already doing
competitor
any other business in the same industry as yours
intangibles
assets, such as patents or trademarks, and liabilities, such as accounts payable, that have no physical existence
gain
can be any sort of outcome customers or potential customers would like to encounter or be able to depend on. It is one of two driving forces of creating new products or services.
pain
can be any sort of problem, annoyance, source of aggravation, shortcoming, or suboptimal situation customers or potential customers face. It is one of two driving forces of creating new products or services.
discounted cash flows
cash flows that have been reduced in value because they are to be received in the future
feasibility study
evaluates the potential of a business opportunity by studying five primary areas of depth: the overall business idea, the product/service, the industry and market, financial projections (profitability), and the pan for future action
gross profit
funds left over after deducting the cost of goods sold
casual model of entrepreneurship
one or two approaches to thinking about entrepreneurship. The casual approach is one in which you want to create a particular product or service that does not exist yet, and the achieve that end, you have to cause the product or service to exist. This can mean you will have to learn new skills, or find others to help you achieve your end.
founders
people who create or start a new business
radical innovation strategy
rejecting existing ideas, and presenting a way to do things differently
takeover
seizing of control of a business by purchasing its stock to be able to select the board of directors
value proposition
small business owners' unique selling points that customers can expect from your goods or services, including benefits that differentiate your offering from those of the competition
asset
something the business owns that is expected to have economic value in the future
incremental strategy
taking an idea and offering a way to do something slightly better than it is done presently
marketing
the actions of a business related to promoting and selling products or services
net realized value
the amount for which an asset will sell, less the costs of selling
profit before taxes
the amount of profit earned by a business before calculating the amount of income tax owed
market
the business term for the population of customers for your product or service
feasibility
the extent to which an idea is viable and realistic and the extent to which you are aware of internal and external forces that could affect your business
industry
the general name for the line of product or service being sold, or the firms in that line of business
introduction stage
the life cycle stage in which the product or service is being invented and initially developed
bootstrapping
using low-cost or free techniques to minimize your cost of doing business
license
a legal agreement granting you rights to use a particular piece of intellectual property
franchise
a legal agreement that allows a business to be operated using the name and business procedures of another firm
target market
a marketing term that refers to the group of customers in the area you plan to serve who would be likely to be interested in your product, or those of competitors. Can refer to individuals or market groups called segments
creativity
a process producing an idea or opportunity that is novel and useful, frequently derived from making connections among distinct ideas or opportunities
industry analysis (IA)
a research process that provides the entrepreneur with key information about the industry, such as its current situation and trends
entrepreneurial alertness
a special set of observational and thinking skills that help entrepreneurs identify good opportunities; the ability to notice things that have been overlooked, without actually launching a formal search for opportunities, and the motivation to look for opportunities
blue ocean strategy
a strategy based on creating a new product of service that has no competitors
conversion franchising
an agreement that provides an organization through which independent businesses may combine resources
transfer
an endgame strategy in which ownership is moved from one person or group to another
termination
an endgame strategy in which the owner closes down a business
bankruptcy
an extreme form of business termination that uses a legal method for closing a business and paying off creditors when debts are substantially greater than assets
parallel competition
an imitative business that competes locally with others in the same industry
incremental innovation
an overall strategic approach in which a firm patterns itself on other firms, with the exception of one or two key areas
competitive advantage
the particular way a firm implements customer benefits that keeps the firm ahead of other firms in the industry
licensee
the person or firm that is obtaining the rights to use a particular piece of intellectual property
licensor
the person or organization that is offering the rights to use a particular piece of intellectual property
magic number
the post-tax income the entrepreneur personally seeks from the business
point of indifference
the price at which a buyer is indifferent about buying or not buying the business
buyout
the purchase of substantially all of an existing business
buy-in
the purchase of substantially less than 100 percent of a business
earnings multiple
the ratio of the value of a firm to its annual earnings
niche market
a narrowly defined segment of the population that is likely to share interests or concerns
royalty
a payment to a licensor based on the number or value of licensed items sold
serial entrepreneur
a person who opens multiple businesses throughout his or her career
replacement value
the cost to acquire an essentially identical asset
lean business practices
an application created by Eric Ries that addresses the specifics of new business creation, particularly Internet-based businesses, where rapid experimentation and constant monitoring of viewers' choices are possible
book value
the difference between the original acquisition cost and the amount of accumulated depreciation
degree of similarity
the extent to which a product or service is like another
conversion rate
the measure of how many visitors to your website are actually willing to make a commitment to the product or service promoted on the site
freemium
an approach to pricing, and a business model, that connects free and premium products or services. Typically a free version is offered and users have the option to pay to move up to premium features.
product distribution franchising
an agreement that provides specific brand name products which are resold by the franchisee in a specified territory
trade name franchising
an agreement that provides to the franchisee only the rights to use the franchisor's trade name and/or trademarks
business models
a way to identify and organize key information on a business and how it achieves its goals. Can be analytic tools or a way to do business
industry dynamics
changes in competitors, sales, and profits in an industry over time