MGMT 427 Final Exam

Zider

1. How VCs choose their investments - VCs look for good industries rather than good people or businesses. They look for industries that are more competitively forgiving than the market as a whole.

Ulukaya

1. Sources of funds to start business - Borrowed money from the bank (SBA) through invested profits and bank loans 2. Reasons for not taking on outside investors - The owner of the company can solely make all the decisions without input from investors.

Hoffman and Blakey

1. VCs want to have their cake and eat it too 2. Ways VCs protect their investment -Have board seats at the firm -Board approval provision by the VC -Requirements for financial statements -Employment contract

Graham

1.. When the founders should trust their instincts - Founders should trust their instincts when it comes to picking who you are working with 2.. Most important thing founders should learn - Listen to partners, It's not important to know about starting a startup, Startups are time consuming

Simulations

1.Measures of sustainable profitable growth: Cumulative Shareholder Return % 2. Takeaways of the simulation: Always pay close attention to your market overview to base your decisions on, occupancy rate 3. Cumulative total shareholder return

C corporation

A C corporation is a legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity.

Patent

A patent is a form of intellectual property that gives its owner the legal right to exclude others from making, using, or selling an invention for a limited period of years in exchange for publishing an enabling public disclosure of the invention

________ means that as the number of employees a firm needs increases, it becomes increasingly difficult for it to find the right employees, place them in appropriate positions, and provide adequate supervision.

Adverse selection

Google's AdWords

Advertising system where advertisers bid on keywords, in which their clickable ads would come up in search results.

________ is the process of comparing the company's products and processes to those of competitors or leading firms in other industries to find ways to improve quality and performance.

Benchmarking

For startup firms, the cost of buying real estate, building facilities, and purchasing equipment often exceeds the firm's ability to provide funds for those needs on its own. Which of the following reasons that motivate firms to seek funding or financing is illustrated in this example?

Capital investments

In startup firms, inventory must be purchased, employees must be trained and paid, and advertising must be paid for before cash is generated from sales. Which of the following reasons that motivate firms to seek funding or financing is illustrated in this example?

Cash flow challenges

________ involves first identifying and assessing competitors and then selecting which competitors to attack or avoid.

Competitor analysis

Cost-based Vs. value-based pricing

Cost based pricing is setting a target percent profit made on top of the cost to produce Value based pricing is setting a price based on the value it brings to customer

Business models: standard vs. disruptive

Disruptive business models are the ones that do not fit the profile of a standard business model. Standard business model is a firm's plan or recipe for how it creates, delivers, and captures value for its stakeholders.

Which of the following statements is incorrect regarding equity funding?

Equity investors fund the majority of the plans they consider.

Quincy Apparel Case

Factors of failure

Wasserman

Founder's dilemma: rich Vs. king; quick growth Vs. control

From the franchisor's point of view, which of the following is incorrect regarding franchising?

Franchising is a relatively simple business endeavor.

Which of the following is not a source of equity funding?

Government grants

Mr. Ulukaya is an unusual founder because:

He is willing to share the company with the employees who have helped building it

Yoffie and Cusumano

How to tackle a superior force: void, first mover, flexible; NO SUMMO matches

Which of the following statements is not true regarding new product development?

In general, developing new products is a low-risk strategy.

Board of directors: inside vs. outside

Inside: Employees, officers, and stakeholders. Outside: Consumers, regulators, suppliers. 1. Responsibilities of board of directors -Appoint the officers of the firm​ -Declare dividends​ -Oversee the affairs of the corporation

Statement of cash flow and its items, e.g. operating, investing

Keep track of financial affairs like end of month bank statement

Myths about entrepreneurs

Majority of them get lucky due to favorable circumstances It's easier when one's born with the skills, harder when one has to learn it. They don't have to work as hard.

How to identify opportunity: observing trends, solving a problem, finding gaps in marketplace

Market Survey Coming up with a problem consumers may not know they have Testing a product/service in the market

________ means that as a firm grows and adds personnel, the new hires typically do not have the same ownership incentives as the original founders, so the new hires may not be as motivated as the founders to put in long hours or may even try to avoid hard work.

Moral hazard

Guest Speaker: serial entrepreneur What are good practices in determining how to set the price of your goods and services?

Price lower than competitors to be aggressive and drive business towards you. *Price it the same as the competitors to eliminate the price difference comparison to rely more on the product or service itself.

Primary Research

Research you conduct yourself through observations, surveys, and interviews

Four financial objectives: stability, efficiency, liquidity, profitability

Stability: The company is resistant to economic shock. The strength and vigor of the firm's overall financial position Efficiency: How productively a firm utilizes its assets relative to its revenue Liquidity: company's ability to meet short term financial obligations Profitability: ability to earn a profit (Net Income / Revenues) x 100

Which of the following is an example of an external growth strategy?

Strategic alliances

According to Strom (2016), Ulukaya reluctantly received a loan from TPG Capital, a private equity firm, because:

The company ran into financial problems after opening a new yogurt processing facility in Idaho

________ are limited partnerships of money managers who raise money in "funds" to invest in startups and growing firms.

Venture capital firms

Rachel Watts owns a chain of office supply stores. Over the past three years, Rachel has significantly increased her sales through the outright purchase of additional office supply stores. Rachel is pursuing a(n) ________ strategy.

acquisition

Feasibility study and its four areas (product/service, financial, organizational, industry/market)

analysis that takes all of a project's relevant factors into account—including economic, technical, legal, and scheduling considerations

The three important things that a business can do to prepare for growth are ________.

appreciate the nature of business growth, stay committed to a core strategy, and plan for growth

Shawn Jones was reading the business plan of New Venture Fitness Drinks, and noticed that prior to its financial forecasts, New Venture Fitness Drinks placed an explanation of the sources of the numbers for the forecast and the assumptions used to generate them. This explanation is called a(n) ________.

assumption sheet

The pro forma ________ provides a firm a sense of how its activities will affect its ability to meet its short-term liabilities and how its finances will evolve over time.

balance sheet

Amy Clark just opened a soup and salad restaurant near Golden Gate Park in San Francisco, CA. Rather than borrow money or raise funds from investors, Amy used her creativity and ingenuity and figured out how to get her business up and running without the need for external funding. Amy is utilizing a technique referred to as ________.

bootstrapping

Networking

building and maintaining relationships with people whose relationships could bring advantages to a firm.

International new ventures are ________.

businesses that, from inception, seek to derive significant competitive advantage by using their resources to sell products or services in multiple countries

The three primary reasons startups need funding are ________.

cash flow challenges, capital investments, and lengthy product development cycles

Terry Wells owns a growing company that makes innovative kitchen appliances. One thing that Terry has to continually work at is to keep enough cash on hand to make sure she has sufficient liquidity to meet her payroll and cover her other short-term obligations. The day-to-day challenge of firm growth this example is referring to is ________.

cash flow management

A brief, carefully constructed statement that outlines the merits of a business opportunity is called a(n) ________ speech.

elevator

Business plan and its components: e.g. executive summary

executive summary business overview operation overview market analysis products and services sales and marketing management team competitive analysis financial plans projections

________ growth strategies rely on establishing relationships with third parties, such as mergers, acquisitions, strategic alliances, joint ventures, licensing, and franchising.

external

________ is a form of business ownership in which a firm that already has a successful product or service licenses its trademark and method of doing business to other business in exchange for an initial franchise fee and an ongoing royalty.

franchising

Steven and Emily Campbell are planning to open a casual dining restaurant in downtown Akron, Ohio, and need $125,000 to get started. They have $50,000 of their own money, which leaves $75,000. After getting turned down by a couple of banks, they decided to turn to their relatives and acquaintances for help. Fortunately, they were able to raise the money through a gift from Steven's grandfather, a loan from Emily's parents, and a small investment by Steven's best friend in college, Doug. The money that an entrepreneur raises in this manner is referred to as ________.

friends and family

Entrepreneurial businesses that grow by expanding from their original location to additional geographic sites are pursuing a ________ strategy.

geographic expansion

Historically, commercial banks ________.

have not been a good source of funds for startup firms

The first sale of stock by a firm to the public is referred to as a(n) ________.

initial public offering

The three most common forms of equity funding are ________.

initial public offerings, business angels, venture capitalists

New product development, other product-related strategies, and international expansion are examples of ________ growth strategies.

internal

Secondary Research

is a research method that involves using already existing data. Secondary research includes research material published in research reports and similar documents. Can be found in libraries, websites, data obtained from already filled in surveys.

Transformational leader

leadership where a leader works with teams to identify needed change, creating a vision to guide the change through inspiration, and executing the change in tandem with committed members of a group

Peter Simmons owns a specialized computer software company. Although Peter's software designers and programmers are very good, it takes 2-3 years to develop a good software product. This example illustrates the need for funding or financing referred to as ________.

lengthy product development cycles

________ is the granting of permission by one company to another company to use a specific form of its intellectual property under clearly defined conditions.

licensing

A firm's pro forma financial statements are similar to its historical financial statements except that they ________.

look forward rather than back

When a firm's managerial resources are insufficient to take advantage of its new product and service opportunities, the subsequent bottleneck is referred to as the ________ problem.

managerial capacity

A ________ strategy seeks to increase the sales of a product or service through greater marketing efforts or through increased production capacity and efficiency.

market penetration

Sears and Holiday Inn encountered difficult times because they did not stand out as the lowest in cost, highest in perceived value, or best in service of their primary target market segment. Both companies are ________.

middle of the roaders

Almost every industry includes firms that specialize in serving target subsegments called market ________.

niches

The two major advantages of getting a loan versus investment capital are ________.

no ownership in the firm is surrendered and interest payments are tax deductible

Dell produces and delivers PCs of competitive quality at lower costs. The company constantly aims to achieve low production and distribution costs to win a large market share. Dell utilizes a(n) ________ strategy very effectively.

overall cost leadership

Megan Johnson owns a kitchen and bathroom cabinet company. Her market research is telling her that she is taking business away from the large home improvement stores in her trade area. One thing that Megan is worried about is that the large stores might fight back by lowering their prices, which hurts everyone except the consumer. The day-to-day challenge of firm growth that this example is referring to is ________.

price stability

A(n) ________ strategy involves making additional versions of a product so that it will appeal to different clientele.

product line extension

Marketing mix

product, pricing, promotion, place/distribution

Kelly Andrews owns a company that makes office furniture. Recently, a favorable article was written about Kelly's company in a business magazine, and as a result, Kelly has seen a spike in his orders. Although Kelly is grateful for the additional orders, he is worried about one thing. An increase in activity means that his firm must handle more service requests and paperwork and contend with more customers, stakeholders, and vendors. Kelly knows that if he doesn't handle this increased activity properly, the workmanship of his products could decline. The day-to-day challenge of firm growth that this example illustrates is ________.

quality control

All of the following are advantages to buying a franchise except ________.

restrictions on creativity

The two types of crowdfunding sites are ________-based and ________-based.

rewards; equity

Outcomes of strong organizational culture

satisfied and engaged customers and employees, could also lead to increased productivity.

Katy Anderson's startup, which is in the organic fruit and vegetables industry, was launched on January 1, 2015. However, prior to its formal launch, Katy spent many hours working on her business, particularly during the feasibility analysis stage. The time and effort that entrepreneurs put into their venture, that can't be easily measured from a financial point of view, is referred to as ________ equity.

sweat

The seed money that gets a company off the ground typically comes from ________.

the founders of the firm

According to Ulukaya (2013), what was the main reason Ulukaya did not want to take on outside investors?

they would eventually force him to sell out

Copyright infringement

unlawful use of works protected by copyright law without permission for a usage where permission is required