Exam #3
12-5: What is a business method patent? Provide an example of a business method patent. How can having such a patent provide a firm a competitive advantage in the marketplace?
-A business method patent is a patent that protects an invention that is, or facilities, a method of doing business. -Since 1998 the most notable business method patents awarded have been Amazon.com's one-click ordering system, Priceline.com's "name-your-price" business model, and Netflix's method for allowing customers to set up our rental list of movies they want mailed to them (a delivery method that Netflix customers use infrequently today) or that they wish to download for streaming purposes. -Activities associated with the business method patent can be an important source of competitive advantage for a firm.
14-18:What is a joint venture?
-An entity created when two or more firms pool a portion of their resources to create a separate, jointly owned organization. -An example given in the text is Beverage Partners Worldwide which is a joint venture between Coca Cola and Nestlé. They formed in 1991 where they focused on ready-to-drink chilled teas based in green and black tea reaching over 50 countries worldwide.
14-17:What is the difference between technological alliances and marketing alliances? Provide examples of both types of alliances and how they can increase a firm's sales.
-Technological alliances feature cooperation in research and development, engineering, and manufacturing. Research and development alliances often bring together entrepreneurial firms with specific technical skills and larger, and more mature firms with experience in development and marketing. By pooling their complementary assets, these firms can typically produce a product and bring it to market faster and cheaper than either firm could alone. -Ex: Pfizer's blockbuster drug Celebrex, was created via a technological alliance. Celebrex is a prescription arthritis medicine. Marketing alliance is typically match a company that has a distribution system with a company that has a product to sell in order to increase sales of a product or service. Ex: American food company may initiate an alliance with Nestlé a swiss food company to gain access to Nestlé's distribution channels in Europe. Both technological and marketing alliances allow firms to focus on their specific area of expertise and partner with others to feel their expertise gaps. This approach is particularly attractive to entrepreneur firms, which often lack the financial resources or time to develop all the competencies they need to bring final products to market quickly.
13-11: What are the five stages in the organizational life cycle?
-The five stages in the organizational cycle are introduction, early growth, continuous growth, maturity, and decline. -The introduction stage is the start of the phase where a business determines what its strength and core capabilities are and start selling its initial product or service. It's a very "hands-on" phase for the founder or founders who are normally involved in every aspect of the day-to-day life of the business. -The early growth stage is generally characterized by increasing sales in heightened complexity. The business is normally still focused on its initial product or service but is trying to increase its market share and might have related products in the works. -The continuous growth stage is characterized as the need for structure in more formal relationships increases as a business moves beyond its early growth stage in its pace of growth accelerates. The resource requirements of the business are usually a major concern, along with the ability of the owner and manager to take the firm to the next level. -A business answers the maturity stage when its growth slows. At this point, the firm typically focuses more intently on efficiently managing the products and services it has rather than expanding in new areas. -It is not inevitable that a business enters the decline stage and either deteriorate or die. Many American businesses have long histories and have thrived by adapting to environmental change and by selling products that remain important to customers. Eventually, all business's products or services will be threatened by more relevant and innovative products.
13-5: Is it possible for a firm to grow too fast? If so, what are the potential downsides?
A business can grow too fast. Many businesses start fast and never let up, which stresses of business financially and can leave its owners emotionally drained. Sometimes businesses grow at a measured pace and then experience a sudden upswing in orders and have difficulty keeping up. This scenario can transform a business with satisfied customers and employees into a chaotic workplace with people scrambling to push the business products out the door as quickly as possible. The way to prevent this from happening is to recognize when to put the brakes on and have the courage to do it.
12-12: What is a copyright?
A copyright is a form of intellectual property protection that grants to the owner of a work or authorship the legal right to determine how the work is used and to obtain the economic benefits from the work.
11-5: What is meant by a firm's positioning strategy?
A firm's positioning strategy refers to the strategy of the firm on how it wants itself to be positioned in the mind of customers and how it can compete in the market. It is a way through which the firm wants its products and services to be seen differently in the market and highlight features which will set them apart and make them unique and most favorable brand when customers decide to purchase that product or service.
14-4:What is a market penetration strategy? Provide an example of a market penetration strategy and describe how using it effectively might increase a firm's sales.
A market penetration strategy involves actions taken to increase the sales of a product or service through greater marketing efforts or through increased production capacity and efficiency. An increase in a product's market share is typically accomplished by increasing advertising expenditures, offering sales promotions, lowering the price, increasing the size of the salesforce, or increasing a companies social media efforts. Example: Consider Proactiv, the skincare company. Since its inception in 1994, Proactiv has relied on celebrity endorsers to demonstrate and promote its product. Actress Judith light and actress/singer Vanessa Williams were the firm's first celebrity endorsers. Over the years the company has added additional celebrity endorsers to appeal to a broader and more diverse clientele. Dr. Katie Rodman, A cofounder of Proactiv, points to the celebrity endorsers program as one of the savviest actions the company has taken to build market share.
14-10: What is the difference between a merger and an acquisition? How can acquisitions help firms fill their needs?
A merger is the pooling of interest to combine two or more firms into one. And acquisition is the outright purchase of one from buy another. In an acquisition, The surviving firm is called the acquirer, and the firm that is acquired is called the target. Acquiring another business can fulfill several of a company's needs, such as expanding its product line, gaining access to distribution channels, achieving economies of scale, gaining access to technology that will enhance its current offerings, or gaining access to talented employees.
11-4: What is a niche market?
A niche market is a plan within a market segment that represents a narrow group of customers with similar interests.
12-17: 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, or other information that provides the owner of the information with a competitive advantage in the marketplace. Information is confidential and needs to be kept secret to help a firm maintain its competitive advantage. An example is a company's customer list. A company may have been extremely diligent over time tracking the preferences in buying habits of its customers, helping it fine-tune its marketing message and target past customers for future business. If this list fell into the hands of one or more of the companies competitors, its value would be largely lost, and it would no longer provide the firm in a competitive advantage over its competitors.
10-5): A) What is bootstrapping? Provide several examples of how entrepreneurs bootstrap to raise money or cut costs.
Bootstrapping is finding ways to avoid the need for external financing or funding through creativity, ingenuity thriftiness, cost cutting, or any means necessary. Bootstrapping methods Buy used equipment Coordinate purchases with other businesses Lease equipment Obtain payments in advance from customers Minimize personal expenses Avoid unnecessary expenses Hire interns Share office space or employees with other businesses Buy items cheaply, but prudently through discount outlets or online auctions such as eBay.
13-3: What are the potential downsides to firm growth?
Business success doesn't always scale. The very thing that makes a business successful might suffer as a result of growth. This is what business experts often mean when they say growth is a "two-edged sword." Businesses that are based on providing high levels of individualized service often do not grow or scale well. For example, and investment brokerage Service that initially provided high levels of personalized attention can quickly evolve into providing standard or even substandard service as it adds customers and starts automating its services. It's initial customers might find it harder to get individualized service than it once was and start viewing the company as just another ordinary business.
10-7) B) What is the difference between equity funding and debt financing? (debt financing)
Debt Financing -Involves getting a loan -The two most common types of loans are the single purpose loan and a line of credit. -Single-purpose loan: borrowing a specific amount of money, that must be repaid in a fixed amount of time with interest. -Line of credit: A borrowing "cap" is established and borrowers can use the credit at the discretion. Lines of credit require periodic interest payments. 2 Major Advantages -None of the ownership of the business is given -Interest Payments are tax-deductible 2 Major Disadvantages -Loans or Credit must be repaid -Lenders often impose strict conditions on loans & insist on collateral to protect their investment. The 3 most common sources of debt financing are Commercial banks, SBA Guaranteed Loans, and other sources of Debt financing.
10-7) A) What is the difference between equity funding and debt financing? (equity funding)
Equity Funding -Exchanging partial ownership of the firm in return for funding. The 3 Most common forms of equity funding are Business Angels, Venture Capital, and Initial Public Offering (IPO). Business Angels: individuals that invest their personal capital directly to startup businesses. These investors typically has high income is well educated and invests in companies in the region. They invest between $10,000 - $500,000 in a single company. Approximately 61,900 businesses receive investments from angel investors per year. Venture Capital: Money that is invested by venture capital firms in startups and small businesses with growth potential.They are limited partnerships of money managers who raise money to invest in startups. The majority of their money follows businesses originally funded by angel investors, government programs, or other means. IPO: the first sale of stock to the public. (selling a piece of your business to the public). It raises a firm's equity capital to fund projects and raises a businesses public profile making it easier to attract high quality customers, alliance partners, and employees. *The difference between angel investors and venture capitalists is that angel investors invest early in the company and venture capitalists invest later. Advantages: - Access to capital - Investors offer help through their expertise and assistance. -Money received by an equity investor doesn't have to be paid back. Disadvantage: the business owners must give up a piece of their business and may lose control.
13-16: How do rapid growth firms deal with potential cash flow shortfalls?
Growth usually increases rather than decreases the challenges involved with cash flow management because an increase in sales means that more cash will be flowing into and out of the firm. Growth is also expensive, and that it often involves investing more money in operations, marketing, administrative processes (to better track accounts payable and receivable), and personnel. Some firms raise the cash needed to find a growth via investors or a line of credit at a bank. Other firms deliberately restrict the pace of their growth to avoid cash flow challenges.
10-5) B): In your judgment, how important is the art of bootstrapping for an entrepreneurial venture?
In my opinion bootstrapping is important because it prevents the business from spending too much money, helps a business figure out their goals, helps a business figure out how to achieve their goals, keep the company focused on their goals, and allows the business concepts to mature into a product or service.
12-1: What distinguishes intellectual property from other types of property, such as land, buildings, and inventory?
Intellectual property is any product of human intellect that is intangible but has value in the marketplace. It is called intellectual property because it is the product of human imagination, creativity and inventiveness. Traditionally, businesses have thought of their physical assets such as land, buildings, and equipment as their most important assets. Increasingly, however, a company's intellectual assets have become the most valuable.
11-2: Explain the importance of market segmentation. What are several ways markets can be segmented?
Market segmentation is important because a new firm typically has only enough resources to target one market segment, at least initially. Markets can be segmented in many ways such as by geography (city, state, country) demographic variables (age, gender, family size, income), psychographic variables (personality, lifestyle, values), behavioral variables (benefits sought, product usage rates, brand loyalty), and product type (varies by product).
12-8: What are the six steps in applying for a patent?
Step 1 Make sure the invention is practical. Step 2 Determine the type of application to file. Step 3 Hire a patent attorney. Step 4 Conduct a patent search. Step 5 File a patent application. Step 6 Obtain decision from U.S Patent and Trademark Office.
11-1: What is a target market? Why is it important for a firm to choose its target market early in the process of launching its venture?
The identification of the target market in which the firm will compete is extremely important. A target market is a segment within a larger market that represents a narrower A group of customers with similar interests. The target market a firm selects affects everything it does from the key assets it requires to the financing or funding it will need to the partnerships it forms. The target market can be based on any relevant variable, as long as it identifies for a firm the group of like-minded customers to whom it will try to appeal. This type of awareness of a firm's intended market, and the people who are the most likely to respond positively to a firm's product or service, is helpful in fleshing out all the elements of the firm's business model.
10-1: What are the three most common reasons most entrepreneurial ventures need to raise money in their early life?
The three most common reasons most entrepreneurial ventures need to raise money in their early life is because of cash flow challenges, capital investments, and lengthy product development cycles. Cash flow challenges: money needed to start a new business and expenses including training, marketing, utilities, legal expenses and more. Capital Investments: Buying property such as real estate, building facilities, and purchasing equipment exceeds a firm's ability to provide funds for these needs. Lengthy product development cycles: some products are under development for years before they generate earnings. The upfront costs often exceed a firm's ability to fund these activities on its own.
13-12: What is the managerial capacity problem?
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 managerial capacity problem.
