entrepreneurship midterm review

Explain the difference between mass marketing and market segmentation.

mass marketing: to market your product or service to a large amount of people or a majority. market segmentation: to divide your marketplace into multiple parts because it would be more efficient.

List 4 types of market structures:

perfect competition, monopolistic competition, oligopoly, and monopoly

The two major markets for goods and services are: Explain each.

target market: includes the individuals or companies that are interested in a particular product or service and are willing and able to pay for it. market segments: groups of customers within a large markert who share common characteristics

What resources are available to help you develop your business plan?

the SBA, the SBDC, SCORE, your local chamber of commerce, trade associations, and professional business consultants

What is marketing?

the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large

What is the marketing mix?

the blending of the product, price, distribution, and promotion used to reach the target market

Where can an entrepreneur obtain information about purchasing and operating a franchise?

the federal trade commission (FDC)

What steps should you take when purchasing a business?

1. write specific objectives about the kind of business you want to buy, and identify business for sale that meet your objectives. 2. meet with business sellers or brokers to investigate specific opportunities. 3. visit during business hours to observe the business in action. 4. ask the owner to provide you with a complete financial accounting of operations for at least the part three years. 5. ask for important information in written form. 6. determine how you could finance the business. 7. get expert help to determine a price to offer to the business.

List the different types of economic systems.

Command (common) economy: the government determines what, how, or for whom products and services are produced. Market economy: individuals and businesses decide what, how, and for whom goods and services are produced. Traditional economy: goods and services are produced the way they have always been produced. Mixed economy: when elements of the command and market economy are combined.

How does the type of economy affect the way the basic economic questions are answered?

Economies must choose a way to allocate the goods and services that are available to the people who need or want them. These different allocation processes are what create different economies.

What is the difference between employees and entrepreneurs?

Employees are people who work for somebody else and entrepreneurs are individuals who undertake the creation, organization, and ownership of a business.

What effect does supply and demand on price?

Ex. As the price of car detailing serves rise, suppliers are willing to provide more services. As one rises, the other also rises and vice versa. As the price of something decreases, consumers are willing to purchase more of that product. Demand rises as price falls.

What are the two types of goals that entrepreneurs need to set and give an example of each?

Financial goals- ex. how much money you will earn and how quickly you will pay off debts. Nonfinancial goals- ex. supporting a charity, do something they like, or enjoy the personal independence

How do costs of doing business affect prices?

If a product costs more to make, the prices will be higher. Vice versa.

What is the purpose of each part of the business plan?

Introduction: contains many important details about the proposed business idea. Marketing: describes the products/services and how they differ from others on the market, the market, the industry, and the location of your business. Financial Management: determines financial needs, identifies the risks, financial statements, funding requests and return on investment. Operations: explains how the business will be run on a day-to-day basis, discusses hiring and personnel procedures. Concluding statement: summarize the goals and objectives for the business, emphasizing your commitment to the business.

List the three types of economic resources and give an example of each.

Natural resources: oil, minerals, and nutrients needed to grow crops and timber. Human resources: people who create the goods and services such as manufacturers, retailers, etc. Capital resources: buildings, equipment, supplies.

What is the difference between a need and a want?

Needs are things you must have in order to survive. Wants are things you think you must have in order to be satisfied.

Explain the difference between primary and secondary data?

Primary data is information collected for the very first time to fit a specific purpose. Secondary data is data found in already published sources.

Describe the 4 basic principles of the US economic system.

Private property: you use, own, or dispose of things of value. you are free to own anything you want, and you can decide what to do with it as long as you operate within the law. Freedom of choice: you can make decisions independently and must accept the consequences of those decisions. Choose where to open a business, what to sell, and how to operate the company. Profit: the opportunity to earn profit is at the heart of the free-enterprise system. Competition: competition forces a business to improve products, keep costs low, provide good customer services, and search for new ideas so that consumers will choose its products or services.

What are the four functions of business and why is it important for all four to work together?

Production, marketing, management, and finance. Products can be produced, but if management is not functioning properly if adequate financial records are not maintained, or if marketing is not getting the word out to customers, the products will probably not be sold at a profit.

How can you find out about various business opportunities?

The internet and library, books/magazines for entrepreneurs, trade magazines for certain businesses, and government publications. Also, County Business patterns (annual series of publications providing economic profiles) and the small business administration (SBA) (an organization that exists to help small businesses and their owners).

Name three important characteristics of entrepreneurs

They are independent, self-confident, have determination and perseverance, are goal-oriented, have a need to achieve and to set high standards for themselves, are creative, able to act quickly and keep up to date with technology.

How does the availability of economic resources affect an entrepreneur's decisions?

They compete for access to and ownership of economic resources. They also base their decisions off what is available and accessible.

What are some things entrepreneurs contribute to the US economy?

They contribute supply and demand, capital investment and job creation, and change agents (change the way people live).

List the three basic economic questions:

What goods and services will be produced? How will the goods and services be produced? For whom will the goods and services be produced?

What questions should be asked when identifying your target market?

Who is my potential market? Are my customers individuals or companies?If my customers are individuals, how old are they? How much money do they earn? Where do they live? How do they spend their time and money?If my customers are companies , what industries are they in? Where are those industries located?What needs or wants will my product or service satisfy ?How many potential customers live in the area in which I want to operate?What is the demand for my product or services?Where do these potential customers currently buy the products or services I want to sell them?What price are they willing to pay for my products or services?What can I do for my customers that other companies are not already doing for them?

What is an executive summary and why is an important part of the business plan?

a short restatement of the report. it should capture the interest of the reader.

What is marketing research and how does it help businesses?

a system for collecting, recording, and analyzing information about customers, products, and services. helps a business determine which marketing strategies will be most effective and most profitable

What is a business plan?

a written document that describes all the steps necessary for opening and operating a successful business

What are some advantages and disadvantages of owning a franchise?

advantages- an entrepreneur is provided with an established product or service. franchisors offer management, technical, and other assistance. equipment and supplies can be less expensive. a guarantee of consistency attracts customers. disadvantages- franchise fees can be costly and cut down on profits. owners of franchises have less freedom to make decisions than other entrepreneurs. franchisees are dependent on the performance of other franchisees in the chain. the franchisor can terminate the franchise agreement.

What are some of the compromises that must be made by an entrepreneur who joins the family business?

don't get to make their own decisions and be independent, can cause family problems, bad decisions can be made

What are some advantages and disadvantages of the following: 1 each corporation

advantages- limited liability, money can be raised by selling stock, lenders are more willing to lend money, the main shareholder of the company can change through the selling and buying of stock without disrupting the day-to-day business operations. disadvantages- more complicated to set up, need lawyer which can be costly, much more government regulation, income is taxed twice (double taxation)

What are some advantages and disadvantages of buying an existing business?

advantages- the existing business already has the necessary equipment, suppliers, and procedures in place. the seller of the business may train a new owner. there are prior records of revenues, expenses, and profits. financial arrangements can be easier. disadvantages- many businesses are for sale because they are not making a profit. serious problems may be inherited. capital is required.

What are some advantages and disadvantages of the following: 1 each sole proprietorship

advantages- the government exercises very little control, you get to make all the business decisions and keep all the profits the business earns. disadvantages- it can be difficult to raise money, you are often the only person investing money, bearing the burden of all the risks.

What are some advantages and disadvantages of the following: 1 each partnership

advantages- will not have to come up with all the capital alone, any losses will be shared, partners may offer different areas of expertise, and face very little government regulation. disadvantages- do not want to share responsibilities and profits with other people, fear being held liable for the errors of their partners, can lead to disagreement and end bitterly.

What is the purpose of a marketing plan?

define your market, identify your customers and competitors, outline a strategy for attracting and keeping customers, and identify and anticipate change

The most common way to segment a market is

demographic

A customer profile may include what type of information?

demographics (age, marital status, family size) and psychographics (tastes, opinions), use-based data (how often potential customers use product or service), geographic data (where they live and how far they'll travel)

The 4 common ways to segment a market are:

demographics, psychographics, use-based date, and geographic date

What 3 purposes does a business plan fulfill?

explains the idea behind your business and spells out how your product or service will be produced and sold. sets specific objectives and describes how your business expects to achieve. describes the background and experience of the leadership team of the business

What is the purpose of a business plan?

explains the idea behind your business and spells out how your product or service will be produced and sold. sets specific objectives and describes how your business expects to achieve. describes the background and experience of the leadership team of the business

The oldest way to segment a market is

geographic

What are the costs (3 types) involved in purchasing and operating a franchise? Give an example of each.

initial franchise fee- the amount the local franchise owner pays in return for the right to run the franchise. startup costs- the costs associated with beginning a business. royalty fees- weekly or monthly payments made by the local owner to the franchise company. advertising fee- paid to the franchise company to support tv, magazine, or other advertising of the franchise as a whole.

Who is the business plan written for?

investors, people providing the loan

why is marketing so important to a business

it allows businesses to understand who their potential customers are and what these customers wants and needs are

How can a business plan help you run your business?

it can help in decision making, it helps during the development and start up phases of the business planning process

Why is goal setting important when developing a marketing strategy?

it identifies how these goals will be accomplished

How does distribution add value to goods, services and ideas being sold?

it makes sure the product is delivered safely and effectively while saving time and money

Why should some businesses include additional information in their business plans?

it provides additional information and backs up statements made in the body of the report.

How is it possible to add intermediaries to the distribution channel and at the same time increase profits?

it saves time and lowers cost

Why do you need to research to write a business plan?

it will teach you a great deal about running a business and may provide you with specific ideas for starting a company

What is the main benefit of setting up your business as a corporation?

limited liability

Why do entrepreneurs need to write business plans?

makes you think about all aspects of your business, may help you secure financing for your business

Why is product management important?

makes your product stand out in the market, serves the needs of customers

Describe the important features of each market structure.

perfect competition: a very large number of businesses producing nearly identical products and has many buyers. Monopolistic competition: has a large number of independent businesses that produce the goods and services that are somewhat different. Oligopoly: dominated by a small number of businesses that gain the majority of total sales revenue. Monopoly: there is only one provider of a good or service

Why is it important to determine pricing objectives before pricing goods and services?

pricing objectives help maximize sales, discourage competitors, establish an image, increase profits, and attract customers

List the topics a marketing plan must consist of:

product or service, target market, competition, marketing budget, business location, pricing strategy, promotional strategy, distribution strategy

Give an example the following types of entrepreneurial businesses: retailer, wholesaler, Manufacturing, service, agricultural, and mining and extracting.

retailer: auto and home supply stores, clothing stores, hardware stores, etc. wholesaler: apparel, electrical goods, hardware, plumbing, and heating equipment, etc.. manufacturing: food products, apparel and other textile products, chemicals and related products, etc. service: appliance repair, automotive repair, babysitting, etc. agricultural: generate fresh produce and other farm products; farmer. mining and extracting: take resources like coal out of the ground so that they can be consumed.

How can a small business use the marketing concept to its advantage over a large business?

small businesses can get to know their customers better than large businesses can, they can be more responsive and have more flexibility when trying to satisfy their customers needs.

What is the most common type of business ownership? Why?

sole proprietorship because accurate tax records and certain employment laws must be met, but these are usually the only forms of government regulation.

What are some of the questions you should ask when evaluating a franchise opportunity?

study the disclosure document and proposed contract carefully, interview current owners, investigate the history and profitability, investigate claims about your potential earnings, obtain the number and percentage of owners who have done as well as they claim you will, listen carefully to sales presentations, determine what will happen if you cancel the franchise agreement, ask advice from professionals

Why do owners of sole proprietorships face more risks than owners or partnerships and corporations?

they are the only person investing money into the business, therefore, if it fails and debts remain, the entrepreneurs personal assets may be taken to pay what is owed

Why do many entrepreneurs prefer to start new businesses rather than purchase existing businesses or franchises?

they get to make decisions about everything from where to locate the business to how many employees to hire to what price to charge. they are completely independent and create their own destinies.

Why should an entrepreneur consult with an attorney prior to signing a franchise agreement?

to determine if it is a smart decision to make financially, etc.

Explain why it is important to get the details of buying an existing business in writing.

to see if they match your objectives

What is the purpose of the partnership agreement?

to set down in writing the rights and responsibilities of each of its owners

What kinds of decisions need to be made when starting a new business?

where to locate, pricing, how many employees, etc.