comm1800 midterm study guide
Overall rate of startup failure
70% of entrepreneurs will face potential business failure, nearly 66% will face this potential failure within 25 months of launching their company, almost 77% of respondents who faced potential failure said it was due to COVID-19
Organization
A collection of people working together to achieve a common purpose
ABCs of leadership: what makes a successful leader
Attributes/traits: extraversion and conscientiousness Behaviors/styles: the three (relationship, task, change) Context/situation: what behavior/style fits the context
How can the BMC be divided into two distinct parts, and what do each of these parts encompass?
Business facing (efficiency/costs): back stage, key partners, key activities, key resources, cost-structure, value propositions Customer facing (value): front stage, customer relationships, customer segments, channels, revenue stream, value propositions
Differentiation works best when:
Buyer needs and uses are diverse Many ways to differentiate Few rivals doing the same Technological change is fast-past and you can keep up with rapid product change
Divisional
Can divide based off of: Product, Customer, Process, Geographical division
What are the advantages of MacGregor's approach?
Employees are self-sufficient and are trained enough to be managers
Link between personality traits
Extraversion: energetic/likable, strongest personality correlate of emerging as a leader Conscientiousness: objective performance, being dependable, best predictor of job performance Openness, neuroticism, agreeableness are less impactful
What does it take to achieve entrepreneurial success?
Good people What people actually want NEED Spend as little money as possible/financial savvy Good timing
Focused differentiation
Narrow buyer segment (market niche), diverse product/service
need vs want
Need: gap between what is required; want: gap between what is and what is desired Unsatisfied needs/wants create a state of tension that motivates individuals to practice behavior that will result in it being fulfilled
three ways to think about leadership effectiveness
Objective performance Improvement in the skills/abilities of followers Creating a positive work environment (psychological safety)
why does goal setting sometimes fail?
Only what gets measured/rewarded is what gets done, undermines intrinsic motivation, encourages risky/unethical behavior
what is strategic focus?
Plan of action that will develop a business's competitive advantage
Cost leadership works best when:
Price competition is vigorous Products from competitors are identical/readily available from several Buyers incur low costs in switching purchases Majority of industry sales go to a few, large-volume buyers
Public vs. private companies:
Public company: Listed on the public exchange (stock market...), public reporting obligations Private company: not listed, can't buy its stocks
What are the three types of leadership behaviors?
Relational-oriented behaviors: concern for others, enjoyable to be a member of the group Task-oriented behaviors: clearly defines/organizes work of each team member Change-oriented behaviors: developing/communicating compelling vision
explain revenue vs profit
Revenue: funds an enterprise receives in exchange for its goods/services, shows that people will buy the product Profit: what is left after all bills are paid
Difference between small businesses and entrepreneurial startups
Small business: work for yourself, be your own boss, generate steady income Entrepreneurial startups: build a scalable business model Innovation: new product/service, new way of delivering product/service Growth orientation: grow and spread Funding
How do resources and capabilities fit into strategy?
Successful strategies are resource-based, the strategy needs to match the internal situation and set of resources
Matrix
Take functional structures and overlay project groups/other things on top, Add to functional structure without taking away from it
Commerce
The exchange of goods and services
Leadership continuum and directive vs empowering leadership
The leadership continuum goes from boss-centered leadership to subordinate-centered leadership, one side has use of authority by the manager the other has area of freedom for for subordinates
Reward power
ability to bestow positive benefits on employees
goal setting theory
an individual's intention to work toward a goal is a primary source of motivation
Types of revenue streams
asset sale, usage fee, lening/renting, advertising
Legitimate power
authority
D3
capable but cautious contributor High competence, variable commitment
differentiation
differentiate products/services from rivals that makes them appealing to many
Ranking of goals:
difficult specific, easy specific, non specific (paperclip)
pros of functional
efficiency, skill development, specialization
Downsides of being public:
information that must be made available, scrutiny by investors/public
IPO
initial public offering, first sale of a company's shares to public, listing of shares on stock exchange
cost leadership
it can develop/manufacture/distribute products more efficiently/lesser price than competitors
cons of functional
lack customer focus, slower response times, tribes/silos
Cost driven
minimizing costs, low price value propositions
Informational power
needed/wanted information
Instrumentality
performance → outcome, if I perform, will I get rewarded?
Formal power
related to authority and position, not personal
D4
self-relient achiever High competence and commitment
External attributions
situational forces and factors, more effort to fix/address situation in constructive way, get help for employee, clarifying role/procedures
Departmentalization
the basis on which jobs will be grouped
Job specialization
the degree to which tasks/activities are subdivided
Team
two or more individuals with specified roles interacting adaptively, independently, and dynamically toward a common/valued goal
as entrepreneur Top reasons for failure
1. Ran out of money, 2. No financing/investor interest, 3. No business plan/model
What are the 5 steps involved in analyzing a case?
1. Understand the situation (big picture, weight options) 2. Identify the evidence (why information is included, categorize it into financial issues/market context/performance problems/team or organizational behavior) 3. Interpret exhibits (what is important) 4. Apply concepts (start small, consider cause and effect, take it apart) 5. Reach a conclusion (how would you approach the situation)
Business
An organization that seeks to provide goods or services to customers
What is a business?
An organization that seeks to provide goods or services to customers
Why is it "cost" leadership and not "price" leadership?
Cost leadership: expense incurred for making product/service that is sold Price leadership: amount a customer will pay for product/service Its not that the company is selling it for less, its that it costs them less to make it
9 components of business model
Customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, cost structure
What are some different ways the business model canvas can be used?
Design new models, starting point, historical analysis, snapshot/common language, understand competition, a portfolio of business models
Broad differentiation
Differentiation products/services from rivals that makes them appealing to many
what is competitive advantage
Either doing things differently, or do different things
Situational Leadership II model:
Four developmental stages: high competence/high commitment (D4) → low competence/high commitment (D1) Four leadership styles: delegating (S4), supporting, coaching, directing (S1)
best-cost provider
Hybrid of low-cost provider and differentiation → satisfy buyer expectations on key quality/features/performance and beating out price
Who/what are your competitors?
It's never been more competitive, barriers to entry are lower because technology is more accessible Ones that do ur thing but also what can be hired to do it
Functional
Jobs are grouped according to what the work is, concentrated expertise
managing -vs- leading
Managing: supporting/facilitating individuals working to achieve individual/organizational goals, executing the strategy, doing things right Leadership: uniting individuals around a common goal, developing the strategy, doing the right things
Best-cost provider works best when:
Markets where product differentiation is norm and large numbers of value-conscious buyers can be induced to purchase midrange products rather than basic or top of the line
What is needed for MacGregor's approach to be possible and successful?
Motivated employees
How do entrepreneurs get their money?
Own savings are tapped first (1) Cash Flow (from the business) positive: profitable (2) Credit cards → funded on credit card Largest source of money (3) Friends and family (4) Banks → fund very few young companies because of bank lending Young companies have no secured assets that banks want (5) Venture capitalists Less than 20% than fastest growing companies took venture money Because they didn't want/need it They take some of your company away when giving money Important for companies w/good growth potential Give it so you can compete fast enough
ways to address biases/errors
Recognize tendency to be cognitive misers Seek out information and different perspectives Step away from decision before making it
What characteristics do members share
Shared collective identity, Common goals, Interdependence in terms of assigned tasks/outcomes, Distinctive roles within the team
What is strategy, what does strategy require
Strategy defines how companies achieve competitive advantage by either differentiating or finding a new way to do something.
What are the important traits of effective teams
Trust one another, Engage in unfiltered conflict around ideas, Commit decisions and plans of action, Hold one another accountable for delivering against those plans, Focus on achievement of collective results
What is at the heart of the BMC?
Value-proposition
Reciprocal
adjust as the situation changes, highest level of interdependence, its more dynamic and things are always changing (hockey)
Counter-dependence
aversion to leadership
what is strategy not?
being the best (vague), being the first/only (temporary)
Overdependence
belief that a leader is all-knowing
Interdependent relationship
between boss and subordinate, but the boss generally has more power still
Self-serving bias
blame external things, credit internal
5 types of strategy options
broad cost leadership, focused cost leadership, broad differentiation, focused differentiation
Broad cost leadership
broad spectrum of buyers with low cost
Self-fulfilling prophecy
can be positive/negative, behavior is heavily influenced by expectations of those around us
3 types of formal power
coercive, reward, legitimate
Five dimensions of power
coercive, reward, legitimate, expert, referent
Pooled
combining separate party,
what is a business model
configuration of elements through which a company creates/captures value
Jobs to be done theory
consumers "hire" products to do services
Economy of scale
cost advantages that a business enjoys as output expands
Economy of scope
cost advantages that a business enjoys due to larger scope of operations
pros of divisional
customer-oriented, faster response times, coordination w/in divisions
pros of matrix
customer-oriented, flexible
Decentralization
decision making is spread throughout organization
employee empowerment
delegating decision-making authority to employees and trusting them to make the right decision
D2
disillusioned/unmotivated learner low/some competence, but low commitment
Three types of organizational justice
distributive, procedural, interactional
Unity of command
each employee reports to one boss
Three parts of the theory
effort → performance → outcome, expectancy, instrumentality, valence
Expectancy
effort → performance, if I put forth effort, will I succeed?
D1
enthusiastic beginner Low competence, but high commitment
Marketing
everything a company does to identify customer's needs and design products accordingly
3 types of informal power
expert, referent, informational
motivation
forces within a person that affect the direction, intensity, and persistence of voluntary behavior
team development process (4 steps)
forming, storming, norming, performing
Venture capital:
given to companies with high growth potential, high risk, big investment with hope of big return
issues of teams
groupthink and social loafing
Internal attributions
individual characteristics and traits, disciplinary response, may trigger a downward performance spiral and lead to self-fulfilling prophecy
Equity theory
individual's perceptions about how fairly they are treated in comparison
Attributions
judgements we make about other people/our behavior
Stakeholders
legitimate interest in success/failure of the business and its policies
Private equity
majority stakes, a group of investors makes a direct investment (buying a bunch of shares to have a controlling stake - if more than half) in a company
Accounting
measure, summarize, and communicate financial/managerial information on financial matters (two kinds: financial and managerial) Financial accountant: prepare financial statements to help those in/out the organization assess financial strength Managerial accountant: prepare information for internal use only
Span of control
measures number of people reporting to particular manager
Fundamental attribution error
mistake people make when trying to figure out what caused someone to act in a specific way, we underestimate external factors and overestimate internal ones
benefits of teams
more and better ideas, more learning, develop life skills, create personal connections
Informal power
more personal
Centralization
most decision making is concentrated at the top
Focused cost leadership
niche market with low costs
Is becoming a public company always the end goal?:
no, sometimes companies go from public to private, value does go up when stocks are traded, but private companies have total control over the business
Valence
outcomes → needs, do I value the outcome?
Sequential
output becomes an input, parts build off each other (a relay race)
indirect channels
own stores, partner stores, wholesaler
Interactional justice
perceived degree that respect is given
Distributive justice
perceived fairness of an outcome
Procedural justice
perceived fairness of process used to determine outcome
Finance
planning for, obtaining, managing a company's funds
Management
planning, organizing, leading, controlling a company's resources, The pursuit of organizational goals through the use of organizational resources
3 types of interdependence
pooled, sequential, reciprocal
Referent power
power because of relations
Expert power
power because of skills/expertise
Coercive power
power to punish
Expectancy theory
probability of an individual acting in a particular way depends on the strength of that individual's belief that the act will have particular outcomes,
Expectancy theory of motivation
probability of an individual acting in a particular way depends on the strength of that individual's belief that the act will have particular outcomes,
what is leadership
process involving disproportionate influence over others in pursuit of goals
cons of divisional
resource duplication, increased costs, disconnect between divisions
Fixed costs
salaries, rents, goods/services have prices that remain the same
Confirmation bias
search out and prioritize data that fits preconceived notions too much weight given to supportive evidence, too little to unsupportive evidence
cons of matrix
sections grew apart, confusion over resource allocation, complicated
Chain of command
shown by vertical lines, authority relationships among people working at different levels of the organization
Role/importance of revenue as entrepreneur
solves both unknown and known problems, and is one of the best indicators of product-market fit Revenue generation proves that a startup is solving a significant problem in a sustainable way If no one will pay for the solution, more financing won't change
3 levels of coordination
standardization, planning, mutual adjustment
Forming
step 1, members start interacting and try to work out what is expected of them
Storming
step 2, conflict occurs as personal agendas come to light, members assert themselves/question decisions
Norming
step 3, group find ways of resolving conflict and begin to emerge as a cohesive unit, criticisms/feedback are given constructively
Performing
step 4, confidence grows individually and with other members as they work towards a common goal
Types
strategic alliance, coopertition, joint ventures, buyer-supplier
Escalation of commitment
tendency to stick with decision even when there are rational reasons to change one's mind
what does strategy require
tradeoffs! you can not do everything. For example, you may be meeting some needs for many customers or meeting many needs for some customers.
Perspective taking
try to see/understand things from another person's point of view
Perspective getting
trying harder to get another person's perspective instead of trying to take it
three things employees need to do
understand themselves, understand their leader, build the exchange relationship
Value driven
value>cost, high personalized service
Variable costs
vary proportionally with volume of goods/services produced
Misconceptions about entrepreneurship
venture capital is common! Venture capital: given to companies with high growth potential, high risk, big investment with hope of big return Less than 20% than fastest growing companies took venture money Because they didn't want/need it They take some of your company away when giving money Important for companies w/good growth potential
own channels
web sales or stores
direct channels
web sales, sales force, own stores
revenue streams consider this question
what are ways companies can make money
Cost structure
what the business model elements result in
Sunk costs
what we have already invested, should be ignored though in escalation of commitment
External explanations
when behavior is result of external situational factors
Internal explanations
when the behavior is thought to be under the control of the person
partner channels
wholesaler or partner stores
Key partners
why do companies use partners?