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?