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