SmartBook 2.0 - Ch. 14 - Accessing Resources for Growth from External Sources

is a way by which an entrepreneur may grow his or her firm by having others pay for the use of the firm's name, process, product, service, and so on.

Franchising

_____ refers to exploring possible mutual benefits from a business relationship so that the "size of the pie" can be increased.

Integration task

Which of the following are the disadvantages of acquisition for an entrepreneur? (Check all that apply.)

The actual purchase price may be inflated due to the established image, existing customer base, channel members, or suppliers. Most ventures that are up for acquisition have a marginally successful or even unprofitable track record.

Which of the following should an entrepreneur do when assessing the opportunity of investing in a franchise?

The entrepreneur should assess the profit potential for the franchise.

Identify a true statement about the capital requirements of franchisees.

The franchisor may finance the initial investment to start the franchise operation in some cases.

Identify a true statement about the features of a leveraged buyout.

The interest rates are consistent with the present yields of comparable risk investment.

Identify the factors that should be considered by an entrepreneur when choosing a franchise. (Check all that apply.)

The purchase of a franchise should involve an assessment of the financial stability of the franchisor. It is important for the entrepreneur to assess the market that the franchise will attract.

Identify the factors involved in a joint venture success. (Check all that apply.)

The timing of the venture must be right. The assessment of the parties involved should be accurate to best manage the new entity in light of the ensuing relationships.

Which of the following are true about joint venture arrangements between two or more private-sector companies? (Check all that apply.)

There is a detailed cost-sharing arrangement between the different entities of the partnership. The joint venture can be formed to perform cooperative research.

Identify a true statement about joint venture agreements between two or more private-sector companies.

These types of joint venture agreements are the most common.

Recognizing the relative importance of the issues during a negotiation allows an entrepreneur to _____.

sacrifice equity but obtain control

Which of the following are the most common means of acquisition? (Check all that apply.)

An entrepreneur's direct purchase of a firm's entire stock or assets Bootstrap purchase of a firm's assets

True or false: The bargaining zone approach in a negotiation between an entrepreneur and the growth partner focuses on the integrative stage.

False

True or false: The degree of symmetry in a joint venture is limited to the chemistry between the companies involved.

False

Identify the advantages of franchising to franchisors. (Check all that apply.)

It helps the venture to grow quickly using little capital. It helps them achieve economies of scale by buying supplies in large quantities.

Identify a true statement about a franchise agreement.

It should contain details about the exclusivity of territory coverage.

Identify a true statement about joint ventures.

They have occurred between rival companies.

True or false: A franchise provides an opportunity to establish a new venture with up-front support that could save the entrepreneur significant time and capital.

True

True or false: Regardless of the mode used for the growth of a firm, entrepreneurs need to be good negotiators.

True

The type of franchise where manufacturers use franchises to distribute their product lines is referred to as .

dealerships

In the context of primary tasks for an entrepreneur negotiating with another party for access to an external growth mechanism, the refers to negotiating how the benefits of a business relationship will be allocated between the parties.

distribution task

An advantage of acquisition for an entrepreneur is that the employees of the acquired company _____.

know how to run the business

refers to purchasing an existing venture by any employee group.

leveraged buyout

is the price (the bundle of resources from an agreement) at which an entrepreneur is indifferent about whether to accept the agreement or choose an alternative.

reservation price

In the context of negotiation, if the information about the issues important to each party is known to both parties and they use it, then it is likely that _____.

the outcome will be mutually beneficial

Which of the following is true about franchising?

A franchisee uses the brand name of the franchise that is well established.

Identify a true statement about acquisitions.

Acquisitions can take many forms based on the goals and position of the parties involved in the transaction.

Identify a true statement about brokers in acquisitions.

Brokers represent the seller and will sometimes aggressively find buyers using referrals, advertising, or direct sales.

According to the work of Bazerman and Neale (1992), identify the different strategies that may work best for the negotiation between an entrepreneur and the growth partner. (Check all that apply.)

Building trust and sharing information Using differences to create trade-offs that are a source of mutually beneficial outcomes

True or false: An ideal way to start the process of building trust in a negotiation between an entrepreneur and a growth partner is by sharing one's reservation price with the other party.

False

True or false: An unproven franchise will be a less expensive investment with a low risk.

False

Which of the following are the major problems that have kept industry-university joint ventures from proliferating at a fast pace? (Check all that apply.)

Demands of universities to have a share in the financial returns from patents Demands of industry partners to have all proprietary rights Demands of industry partners to be given total control over the partnership

Which of the following is true about the managerial assistance provided by franchisors?

Each new franchisee is usually required to undergo a training program on all aspects of operating the franchise.

Identify the disadvantages of franchising to a franchisee. (Check all that apply.)

Failure of the franchisor to offer services, advertising, and location Inability of the franchisor to keep promises made in the franchise agreement

_____ is an arrangement whereby the manufacturer or sole distributor of a trademarked product or service gives exclusive rights of local distribution to independent retailers in return for their payment of royalties and conformance to standardized operating procedures.

Franchising

Which of the following is true about mergers?

Mergers can safeguard against market encroachment, product innovation, or an unwarranted takeover.

Identify the advantages of acquisition for an entrepreneur. (Check all that apply.)

New customers of the acquired firm are already familiar with the customer location. The acquired firm has an established image and track record.

Which of the following are the disadvantages of franchising for a franchisor? (Check all that apply.)

The ability of a franchisor to maintain tight controls becomes more difficult as the number of franchises increases. A franchisor may find it very difficult to obtain quality franchisees.

Which of the following is an advantage of franchising to a franchisor?

The ability to spend larger sums of money on advertising

_____ is the last step in establishing a franchise arrangement.

The contract agreement

Identify the disadvantages of acquisition for an entrepreneur. (Check all that apply.)

The entrepreneur may have overconfidence in his or her ability. The key employees of the acquired company may often leave when the business changes hands.

_____ is the primary reason why acquisitions fail to generate the expected synergies and future benefits.

The problem of integrating the new organization's culture with the existing organizational culture

Identify the true statements about industry-university joint ventures. (Check all that apply.)

University researchers want to make the research knowledge available through research papers. Profit corporations want to obtain tangible results, such as a patent, from their research investment and want to acquire all proprietary rights.

An entrepreneur's best alternative to a negotiated agreement helps determine _____.

a reservation price for the negotiation

is the purchase of an entire company, or part of a company.

acquisition

refers to the range of outcomes between an entrepreneur's reservation price and the reservation price of the other party.

bargaining zone

People who sell companies are known as _____.

brokers

is a separate entity that involves a partnership between two or more active participants to form a company.

joint venture

An advantage to a franchisee in franchising is the _____.

managerial support provided by the franchisor

Ideally, an acquisition should _____.

positively influence the bottom line, impacting both long-term gains and future growth

The most common type of franchise is the one that _____.

provides a name, image, and method of conducting business

A franchisee usually enters into a business that has a(n)_____.

well-known name, product, or service