MGMT 310 Exam 1: Ch 1,2,3,5,6
What are the 4 characteristics of successful entrepreneurs?
1) passion for their business 2) Product/Customer Focus 3) Tenacity Despite Failure 4) Execution Intelligence
What are the 5 steps to generating creative ideas?
1) preparation 2) incubation 3) insight 4) evaluation 5) elaboration
How many women owned businesses in 2002?
6.2 million
What is a buying intentions survey?
Is an instrument that is used to gauge customer interest in a product or service. It consists of a concept statement or a similar description of a product or survey with a short survey attached to gauge customer interest (the emphasis should be on highlighting the uniqueness of the products or its enhanced features). Internet sites like SurveyMonkey make administering a buying intentions survey easy and affordable.
What is innovation?
Is the process of creating something new, which is central to the entrepreneurial process. Several studies have found that small businesses outperform their larger counterparts in terms of obtaining patents.
What is library research?
Libraries are an often underutilized source of information for generating new business ideas. The best approach is to talk to a reference librarian, who can point out useful resources, such as industry-specific magazines, trade journals, and industry reports. It saves inexperienced would-be entrepreneurs a lot of time Simply browsing through several issues of a trade journal or an industry report on a topic can spark new ideas
What does establishing a focal point for ideas mean?
Some firms meet the challenge of encouraging, collecting, and evaluating ideas by designating a specific person to screen and track them—for if it's everybody's job, it may be no one's responsibility. Another approach is to establish an idea bank (or vault), which is a physical or digital repository for storing ideas.
What are the three steps to assessing product/service demand?
Step 1: Administer a Buying Intentions Survey Step 2: Conduct Library, Internet, and Gumshoe research Step 3: taking to people face to face
Why are the 4 steps in the entrepreneurial process?
Step 1: Deciding to become an entrepreneur. Step 2: Developing successful business ideas. Step 3: Moving from an idea to an entrepreneurial firm. Step 4: Managing and growing the entrepreneurial firm.
What are the 3 steps to make sure that ideas do not get lost or stolen?
Step 1: The idea should be put in a tangible form such as entered into a physical idea logbook or saved on a computer disk, and the date the idea was first thought of and author(s) should be entered (very important for future property/author right protection) Step 2: The idea should be secured. This may seem like an obvious step, but is often overlooked. Step 3: Avoid making an inadvertent or voluntary disclosure of an idea, in a manner that forfeits the right to claim exclusive rights to it (should not be discussed in elevators, coffee shops or at the gym).
What are cognitive factors?
Studies have shown that opportunity recognition may be an innate skill or cognitive process. Some people believe that entrepreneurs have a "sixth sense" that allows them to see opportunities that others miss. This "sixth sense" is called entrepreneurial alertness, which is formally defined as the ability to notice things without engaging in deliberate search.
What is an industry?
a group of firms producing a similar product or service.
What is a customer advisory board?
a group that meets regularly to discuss needs, wants and problems that may lead to new ideas
What is a window of opportunity?
a metapor describing the time period in which a firm can realistically enter a new market. Once the new product is established its window of opportunity is open
What is an intranet?
available only to qualified employees that has a file for ideas that are being actively contemplated and a file for inactive ideas
What is a strong tie relationship?
characterized by frequent interaction such as ties between coworkers, friends, and spouses. These relationships, which typically form between like-minded individuals, tend to reinforce insights and ideas that people already have.
What is corporate entrepreneurship?
firms with an orientation toward acting entrepreneurially
What are technological advances?
frequently create business opportunities that help people perform every days tasks in better or more convenient ways
What are economic forces?
help determine areas that are ripe for new start-ups and areas that start-ups should avoid. They are the state of the economy, the level of disposable income, and consumer spending patters
What is a product/customer focus?
keen focus on products and customers typically stems from the fact that most entrepreneurs are, at heart, craftspeople. It also involves the diligence to spot product opportunities and to see them through to completion
What is secondary research?
looks at data that has already been collected
What is a concept statement?
one-page description of a business/product that is distributed to people who are asked to provide feedback on the potential
What is entrepreneurial alertness?
the ability to notice things without engaging in deliberate search
What is insight?
the flash of recognition when the solution to a problem is seen or an idea is born. It is sometime called the eureka experience. So right when they recognize the opportunity
What is a target market?
the limited portion of the industry it plans to go after.
How do people decide to become an entrepreneur?
through a triggering event that sparks an idea
What is incubation?
when a person considers an idea or thinks about a problem which can be conscious or unconscious
What is an opportunity gap?
when an entrepreneur recognizes a problem or a need for something
What are the 4 essential qualities of an opportunity?
(1) attractive (2) durable (3) timely (4) anchored in a product, service or business that creates value for its buyer or end user.
What are the 3 main reasons people become entrepreneurs?
(1) be their own boss, (2) pursue their own ideas (3) realize financial goals.
What does externally stimulated mean?
(decision to start a business→search for and recognition of opportunity→start-up): e.g. Amazon; own example
What does internally stimulated mean?
(entrepreneur recognizes a problem=opportunity gap→creates a business to fill it): AirBnB, iPhone apps
What is a summary business plan?
10-15 pages that works best for new ventures in the early stages of development that want to test the waters to see if investors are interested in their idea
What is the purpose of a product/service feasibility analysis?
Is an assessment of the overall appeal of the product or service being proposed. Before a prospective firm rushes a new product or service into development, it should be sure that the product or service is what prospective customers want
What are entrepreneurial firms impact on larger firms?
Some entrepreneurial firms create the machines that make parts for larger firms. In fact, many entrepreneurial firms have built their entire business models around producing products and services that help larger firms become more efficient and effective
What are the 4 most important trends?
1) Economic forces 2) Social forces 3) Technological advances 4) Political action and regulatory change
Where did the idea that entrepreneurs are gamblers come from?
1) Entrepreneurs typically have jobs that are less structured, and so they face a more uncertain set of possibilities than people in traditional jobs. 2) Many entrepreneurs have a strong need to achieve and set challenging goals, a behavior that is often equated with risk taking
What are the 2 ways that most entrepreneurial ventures are started?
1) Externally stimulated 2) Internally stimulated
What are the 4 personal characteristics that tend to make some people better at recognizing opportunities than others?
1) Prior Experience 2) Cognitive Factors 3) Social Networks 4) Creativity
What are the 3 types of start-up firms?
1) Salary-substitute 2) Lifestyle 3) Entrepreneurial
What are 3 techniques for generating ideas?
1) brainstorming 2) focus groups 3) Research
What are the 2 components of a product/service feasibility analysis?
1) does it have desirability 2) does it have any demand
What is a properly conducted feasibility analysis?
A properly conducted feasibility analysis includes four separate components, and should be conducted prior to writing the business plan as discussed in the following slides.
What is Day-In-The-Life Research?
A type of anthropological research, where the employees of a company spend a day with a customer
What % is there of young entrepreneurs?
According to a Harris Interactive survey, 40% of people eight to 21 years old said they'd like to start their own business someday. A total of 59% of the 8- to 21- year olds said they know someone who has started his/her own business.
What is creativity?
Creativity is the process of generating a novel or useful idea. Opportunity recognition may be, at least in part, a creative process. For an individual, the creative process can be broken down into five stages
What is encouraging creativity at the firm level?
Creativity is the raw material that goes into innovation and should be encouraged at the organizational(from office layout to team building activities) and individual supervisory level (listen carefully, don't be judgmental or critical, encourage learning from mistakes etc.)
What are the 4 questions you should ask yourself to determine appeal of the product or service?
Does it make sense? Is it reasonable? Is it something consumers will get excited about? Does it take advantage of an environmental trend, solve a problem, or take advantage of a gap in the marketplace? Is this a good time to introduce the product or service to the market? Are there any fatal flaws in the product or service's basic design or concept?
What is the second common myth about entrepreneurs?
Entrepreneurs Are Gamblers. Entrepreneurs are actually moderate risk takers.
What is the third myth about entrepreneurs?
Entrepreneurs Are Motivated Primarily by Money. Actually money is rarely the reason entrepreneurs start new firms. In fact, some entrepreneurs warn that the pursuit of money can be distracting.
What is the fourth myth about entrepreneurs?
Entrepreneurs Should Be Young and Energetic. Entrepreneurial activity is fairly easily spread out over age ranges. While it is important to be energetic, investors often cite the strength of the entrepreneur as their most important criteria in making investment decisions
What is the first common myth about entrepreneurs?
Entrepreneurs are born, not made which is based on the mistaken belief that some people are genetically predisposed to be entrepreneurs. The consensus of many studies is that no one is "born" to be an entrepreneur; everyone has the potential to become one. Whether someone does or doesn't become an entrepreneur is a function of their Environment, Life experiences, and Personal choices
What is the fifth myth about entrepreneurs?
Entrepreneurs love the spotlight. The vast majority do not attract public attention (working on proprietary products they avoid it)
What is brainstorming?
Is a technique used to generate a large number of ideas and solutions to problems quickly. A brainstorming "session" typically involves a group of people, and should be targeted to a specific topic
What is industry/target market feasibility?
Is an assessment of the overall appeal of the industry and the target market for the propose business.
What is intent research?
If you are starting from scratch, simply typing "new business ideas" into a search engine will produce links to newspapers and magazine articles about the "hottest" new business ideas. If you have a specific topic in mind, setting up Google or Yahoo! e-mail alerts will provide you with links to a constant stream of newspaper articles, blog posts, and news releases about the topic. Targeted searches are also useful.
What are the rules for a brainstorming session?
No criticism. Freewheeling is encouraged. The session should move quickly. Leap-frogging is encouraged
What is the difference between an idea and an opportunity?
Opportunities are tough to spot (individual; market related factors) Opportunities are more than just ideas (thought, impression, notion, based on individual perceptions) An idea is a thought and does not meet the criteria of an opportunity
What is included in moving from an idea to an entrepreneurial firm?
Preparing the proper ethical and legal foundation, assessing a new ventures financial strength and viability, building a new venture team, and getting financing or funding
What is prior industry experience?
Several studies have shown that prior experience in an industry helps an entrepreneur recognize business opportunities (40% of Inc. 500 firms). By working in an industry, an individual may spot a market niche that is underserved. It is also possible that by working in an industry, an individual builds a network of social contacts who provide insights that lead to recognizing new opportunities.
What is job creation?
Small businesses are the creators of most new jobs in the U.S., and employ half of all private sector employees. According to a Kauffman Foundation survey, 92% of Americans say entrepreneurs are critically important to job creation.
What makes an entrepreneur strong?
What makes an entrepreneur "strong" in the eyes of an investor is experience, maturity, a solid reputation, and a track record of success. These criteria favor older rather than younger entrepreneurs.
What is an opportunity?
a favorable set of circumstances that creates a need for a new product, service, or business.
What must you do to complete a competitive analysis grid?
a firm must first understand the strategies and behaviors of its competitors. While it is not possible to collect information on all competitors at least 5 in each category should be identified and analyzed.
What is an entrepreneurial firm?
a firm that brings new products and services to the market by creating and seizing opportunities regardless of the resources they currently control. Like Facebook. And many times they partner with other firms, often to obtain the boost they need
What is a lifestyle firm?
a firm that provides their owner or owners the opportunity to pursue a particular lifestyle and make a living at it. Like being a personal trainer, or tennis pro
What is an idea bank?
a physical place for storing ideas
What is a landing page?
a single web page that typically provides direct sales copy
What is tenacity despite failure?
ability to persevere through setbacks and failures
What is a direct competitor?
business that offer products that are identical to yours
What are indirect competitors?
businesses offering close substitute products
What are future competitors?
businesses that are not yet direct or indirect competitors but could be at any time
What are weak tie relationships?
characterized by infrequent interaction like ties between causal acquaintances. It is more likely that an entrepreneur will get new business ideas through weak-tie rather than strong-tie relationships. These relationships, which form between casual acquaintances, are not as apt to be between like-minded individuals, so one person may say something to another that sparks a completely new idea.
What is included in managing and growing an entrepreneurial firm?
dealing with unique marketing issues, the importance of intellectual property, preparing and evaluating challenges and growth, strategies for firms growth, and franchising
What are the 3 types of competitors?
1) Direct competitors 2) indirect competitors 3) future competitors
What are the two components to industry/target market feasibility analysis?
1) Industry attractiveness (general) 2) Target market attractiveness (specific)
What are the 3 key questions an entrepreneur must ask before starting a firm?
1) Is the industry accessible—in other words, is it a realistic place for a new venture to enter? 2) Does the industry contain markets that are ripe for innovation or are underserved? 3) Are there positions in the industry that avoid some of the negative attributes of the industry as a whole?
What are the 2 techniques available to assess industry attractiveness?
1) Study Environmental and Business Trends 2) The Five Competitive Forces Model
What are the 3 factors of management prowess?
1) The passion for the business idea. 2) Understanding the markets in which the firm will participate. 3) Additional factors: extensive professional experience, social networks
Who are the 2 primary audiences for a business plan?
1) a firms employees 2) investors and other stakeholders
What are the 4 factors that have an impact on the ability of suppliers to exert pressure on buyers?
1) buyer group connection 2) buyers costs 3) degree of standardization of suppliers products 4) threat of backward integration
What are the 6 barriers to entry?
1) economies of scale 2) product differentiation 3) capital requirements 4) cost advantages independent of size 5) access to distribution channels 6) government and legal barriers
What are the two primary issues to consider with organizational feasibility analysis?
1) management prowess 2) resource sufficiency
What are the 4 factors that determine the intensity of the rivalry among existing firms in an industry?
1) number and balance of competitors 2) degree of difference between products 3) growth rate of an industry 4) level of fixed costs
What are the 3 ways to identify an opportunity?
1) observing trends 2) solving a problem 3) finding gaps in the marketplace
What are the 4 key areas of feasibility analysis?
1) product/service feasibility 2) Industry/target market feasibility 3) organizational feasibility 4) financial feasibility
What are the 3 types of business plans?
1) summary business plan 2) full business plan 3) operational business plan
What are the 4 factors that have an impact on the ability of suppliers to exert pressure on buyers?
1) supplier concentration 2) switching costs 3) attractiveness of substitutes 4) threat of forward integration
What are the 5 forces in the 5 forces model?
1) threat of substitutes 2) threat of new entrants 3) rivalry among existing firms 4) bargaining power of suppliers 5) bargaining power of buyers
What are the 3 things you need to consider during a financial feasibility analysis?
1) total start-up cash needed 2) financial performances of similar businesses 3) Overall Financial Attractiveness of the Proposed Venture
What are the 5 red flags for investors?
1. Founders with none of their own money at risk 2. A poorly cited plan 3. Defining the market size too broadly 4. Overly aggressive financials 5. Sloppiness in any area( grammar, editing, omitted sections)
What are the 12 slides you should have when presenting to investors?
1. Title Slide 2. Problem 3. Solution 4. Opportunity and target market 5. Technology 6. Competition 7. Marketing and sales 8. Management team 9. Financial projections 10. Current status 11. Financing sought 12. Summary
What is a full business plan?
25-35 pages that works best for new ventures that are at the point where they need funding or financing. This serves a s blueprint for the company's operations
What is a operational business plan?
40-100 pages that is meant primarily for an internal audience. This works best as a tool for creating a blueprint for a new ventures operations and providing guidance to operational managers
What is a business plan?
A business plan is a written narrative, typically 25 to 35 pages long, that describes what a new business plans to accomplish.
What are the firms employees looking for in a business plan?
A clearly written business plan helps the employees of a firm operate in sync and move forward in a consistent and purposeful manner.
What are switching costs?
Switching costs are the fixed costs that buyers encounter when switching or changing from one supplier to another. If switching costs are high, a buyer will be less likely to switch suppliers (e.g. exclusive contracts in retail; rewards programs)
What are investors and other stakeholders looking for in a business plan?
A firm's business plan must make the case that the firm is a good use of an investor's funds or the attention of others.
What are focus groups?
A focus group is a gathering of five to ten people, who have been selected based on their common characteristics relative to the issues being discussed. These groups are led by a trained moderator, who uses the internal dynamics of the group environment to gain insight into why people feel the way they do about a particular issue. (e.g. what do you think about our ice-cream?) Although focus groups are used for a variety of purposes, they can be used to help generate new business ideas
What is the third approach of finding a gap in the marketplace?
A gap in the marketplace is often created when a product or service is needed by a specific group of people but doesn't represent a large enough market to be of interest to mainstream retailers or manufacturers. These product gaps in the marketplace represent potentially viable business opportunities.
What is Gumshoe Research?
A gumshoe is a detective or an investigator that scrounges around for information or clues wherever they can be found. Be a gumshoe. Ask people what they think about your product or service idea. If your idea is to sell educational toys, spend a week volunteering at a day care center and watch how children interact with toys.
What is management prowess?
A proposed business should candidly evaluate the prowess, or ability, of its management team to satisfy itself and that management has the requisite passion and expertise to launch the venture.
Whats the overall schedule of a business plan?
A schedule should be prepared that shows the major events required to launch the business. The schedule should be in the format of milestones critical to the business's success. An effectively prepared and presented schedule can be extremely helpful in convincing potential investors that the management team is aware of what needs to take place to launch the venture and has a plan in place to get there.
What is a competitive analysis grid?
A tool for organizing the information a firm collects about its competitors
What is a new venture team?
the group of founders, key employers, and advisers that either manage or help manage a new business in its start up years
What is bargaining power of buyers?
Buyers can suppress the profitability of the industries from which they purchase by demanding price concessions or increases in quality.
What do you need to include in a company description?
Company description Company history Mission statement Products and services Current status Legal status and ownership Key partnerships (if any)
What should you include in the design and developments plan?
Development status and tasks Challenges and risks Projected development costs Proprietary issues (patents, trademarks, copyrights, licenses, brand names)
What is access to distribution channels?
Distribution channels are often hard to crack. This is particularly true in crowded markets, such as the convenience store market.
What are cost advantages independent of size?
Existing firms may have cost advantages not related to size. For example, the existing firms in an industry may have purchased land when it was less expensive than it is today.
What does level of fixed costs mean with respect to rivalry?
Firms that have high fixed costs must sell a higher volume of their product to reach the break-even point than firms with low fixed costs.
How do you figure out the financial performance of similar businesses?
First, there are many reports available, some for free and some that require a fee, offering detailed industry trend analysis and reports on thousands of individual firms. Second, simple observational research may be needed. For example, the owners of New Venture Fitness Drinks could estimate their sales by tracking the number of people who patronize similar restaurants and estimating the average amount each customer spends.
What is a dual use document?
For most new ventures, the business plan is a dual-purpose document used both inside and outside the firm. Yet only 1/3 of entrepreneurs write a business plan Although those who complete a plan are six times more likely to start a business
What should you include in an operations plan?
General approach to operations Business location Facilities and equipment
What is the threat of new entrants?
If the firms in an industry are highly profitable, the industry becomes a magnet to new entrants. Unless something is done to stop this, the competition in the industry will increase, and average industry profitability will decline.Firms in an industry try to keep the number of new entrants low by erecting barriers to entry. A barrier to entry is a condition that creates a disincentive for a new firm to enter an industry.
What does buyer group connection mean?
If there are only a few large buyers, and they buy from a large number of suppliers, they can pressure the suppliers to lower costs and thus affect the profitability of the industries from which they buy (Walmart, Target).
What is the design and development in a business plan?
If you're developing a completely new product or service, you need to include a section in your business plan that focuses on the status of your development efforts. Many seemingly promising start-ups never get off the ground because their product development efforts stall or the actual development of the product or service turns out to be more difficult than thought. As a result, this is a very important section for businesses developing a completely new product or service.
What is rivalry among existing firms?
In most industries, the major determinant of industry profitability is the level of competition among existing firms. Some industries are fiercely competitive, to the point where prices are pushed below the level of costs, and industry-wide losses occur. (e.g. computer industry) In other industries, competition is much less intense and price competition is subdued (e.g. pharmaceuticals industry)
What are firm level factors?
Include a firm's assets, products, culture, teamwork among its employees, reputation, and other resources.
What are environmental trends with respect to industry?
Include economic trends, social trends, technological advances, and political and regulatory changes. For example, industries that sell products to seniors are benefiting by the aging of the population.
What are industry level factors?
Include threat of new entrants, rivalry among existing firms, bargaining power of buyers, and related factors Some industries are tougher than others (e.g. information sector versus education and healthcare)
What should you include in the overall schedule?
Incorporating the venture Completion of prototypes Rental of facilities Obtaining critical financing Starting production Obtaining the first sale
What are emerging industries?
Industries in which standard operating procedures have yet to be developed. Recent changes in demand or technology Opportunity: First-mover advantage (e.g. Apple with iTunes; Windspire in small-scale wind-generated power)
What is product differentiation?
Industries such as the soft drink industry that are characterized by firms with strong brands are difficult to break into without spending heavily on advertising.
What are fragmented industries?
Industries that are characterized by a large number of firms of approximately equal size. Opportunity: Consolidation (become industry leader); Geographic roll-up strategy - acquiring firms in different geographic areas (e.g. Starbucks, 1-800-GOT-JUNK, Zipcar)
What are declining industries?
Industries that are experiencing a reduction in demand. Opportunities: Leadership, establishing a niche market, and/or pursuing a cost reduction strategy (e.g. Cirque de Soleil-leader, Nucor's minimills in the steel industry-price reduction)
What are global industries?
Industries that are experiencing significant international sales (e.g. computers, software, biotech). Opportunities: Multidomestic (country by country, local adaptation) and global strategies (standardized product: Microsoft, P&G, Intel)
What are mature industries?
Industries that are experiencing slow or no increase in demand. Opportunities: Process innovation and after-sale service innovation
What is industry attractiveness?
Industries vary in terms of their overall attractiveness. In general, the most attractive industries have the characteristics of: young, early, fragmented, growing, not crowded, high margins, not highly dependent. Particularly important—the degree to which environmental and business trends are moving in favor rather than against the industry.
What needs to be included in an industry analysis?
Industry size, growth rate, and sales projections Industry structure Nature of participants Key success factors Industry trends Long-term prospects
What is an industry analysis?
Is business research that focuses on the potential of an industry (i.e. trying to determine if entry is really feasible or if already present if the firm's competitive advantage is truly sustainable)
What is an organizational feasibility analysis?
Is conducted to determine whether a proposed business has sufficient management expertise, organizational competence, and resources to successfully launch a business. Focuses on non-financial resources.
What is a financial feasibility analysis?
Is the final component of a comprehensive feasibility analysis. A preliminary financial assessment is sufficient.
What are Nontraditional Barriers to Entry?
It is difficult for start-ups to execute barriers to entry that are expensive, such as economies of scale, because money is usually tight. Start-ups have to rely on nontraditional barriers to entry to discourage new entrants, such as assembling a world-class management team that would be difficult for another company to replicate (e.g. biotech firms recruiting researchers from top universities).
What is entrepreneurship?
the process by which individuals pursue opportunities without regard to resources they currently control for the purpose of exploiting future goods and services
What should you include in the management team and company structure plan?
Management team Board of directors Board of advisers Company structure
What needs to be included in the market analysis?
Market segmentation and target market selection Buyer behavior Competitor analysis
What are observations in a business plan?
Most business plans do not include all the elements introduced in the sample plan; we include them here for the purpose of completeness. Each entrepreneur must decide which elements to include in his or her plan.
Why is the industry analysis important?
Once it is determined that a new venture is feasible in regard to the industry and market in which it will compete, a more in-depth analysis is needed to learn the ins and outs of the industry. The analysis helps a firm determine if the target market it identified during feasibility analysis is favorable for a new firm. Important for understanding the principles on which the industry is built and the competencies needed to succeed in it.
What are business trends with respect to industry?
Other trends that impact an industry. For example, are profit margins in the industry increasing or falling? Is innovation accelerating or waning? Are input costs going up or down?
What is an operations plan in a business plan?
Outlines how your business will be run and how your product or service will be produced. A useful way to illustrate how your business will be run is to describe it in terms of "back stage" (unseen to the customer) and "front stage" (seen by the customer) activities. Your have to strike a careful balance between adequately describing this topic and providing too much detail. As a result, it is best to keep this section short and crisp.
What should you include in the marketing plan?
Overall marketing strategy Product, price, promotions, and distribution Sales process (or Cycle) Sales tactics
What should you include in the economics of business?
Revenue drivers and profit margins Fixed and variable costs Operating leverage and its implications Start-up costs Break-even chart and calculations
What is a feasibility analysis?
the process of determining if a business idea is viable. It is the preliminary evaluation of a business idea, conducted for the purpose of determining whether the idea is worth pursuing.
What are government and legal barriers?
Some industries, such as broadcasting, require the granting of a license by a public authority to compete.
What should you include in the financial projections?
Sources and uses of funds statement Assumptions sheet (cite sources) Pro forma income statements (how much income will be generated in the next 3 to 5 years) Pro forma balance sheets Pro forma cash flows Ratio analysis (return on assets and sales)
What does attractiveness of substitutes mean?
Supplier power is enhanced if there are no attractive substitutes for the product or services the supplier offers (e.g. kerosene for airlines)
What is bargaining power of suppliers?
Suppliers can suppress the profitability of the industries to which they sell by raising prices or reducing the quality of the components they provide. If a supplier reduces the quality of the components it supplies, the quality of the finished product will suffer, and the manufacturer will eventually have to lower its price. If the suppliers are powerful relative to the firms in the industry to which they sell, industry profitability can suffer.
What is an executive summary in a business plan?
The executive summary is a short overview of the entire business plan It provides a busy reader with everything that needs to be known about the new venture's distinctive nature. An executive summary shouldn't exceed two single-spaced pages.In many instances an investor will ask for a copy of a firm's executive summary and will ask for a copy of the entire plan only if the executive summary is sufficiently convincing. The executive summary, then, is arguably the most important section of a business plan.
What is execution excellence?
The ability to fashion a solid business idea into a viable business
What content do business plans need?
The business plan should give clear and concise information on all the important aspects of the proposed venture. (e.g. industry, target market, marketing plan, operations plan, design) It must be long enough to provide sufficient information yet short enough to maintain reader interest. For most plans, 25 to 35 pages is sufficient.
What is target market attractiveness?
The challenge in identifying an attractive target market is to find a market that's large enough for the proposed business but is yet small enough to avoid attracting larger competitors (i.e. a niche: focus on introducing a new product into an existing market or an existing product into a new market). Assessing the attractiveness of a target market is tougher than an entire industry (e.g. less information available) Often, considerable creativity must be employed to find information to assess the attractiveness of a specific target market. The problem is easier to solve if you are already familiar with the target market (i.e. you work in it)
What does the growth rate of the industry mean with respect to rivalry?
The competition among firms in a slow-growth industry is stronger than among those in fast-growth industries.
What does the degree of standardization of suppliers products mean?
The degree to which a supplier's product differs from its competitors affects the buyer's bargaining power (e.g. BMW radios)
What does the degree of differences between products mean?
The degree to which products differ from one product to another affects industry rivalry.
What are social networks?
The extent and depth of an individual's social network affects opportunity recognition. People who build a substantial network of social and professional contacts will be exposed to more opportunities and ideas than people with sparse networks. Research results suggest that between 40% and 50% of people who start a business got their idea via a social contact.
What are the financial projections of a business plan?
The final section of a business plan presents a firm's pro forma (or projected) financial projections. Having completed the earlier sections of the plan, its easy to see why the financial projections come last. They take the plans you've developed and express them in financial terms.
What do you need to do to figure out the total start-up cash needed?
The first issue refers to the total cash needed to prepare the business to make its first sale. An actual budget should be prepared that lists all the anticipated capital purchases and operating expenses needed to generate the first $1 in revenues. The point of this step is to determine if the proposed venture is realistic given the total start-up cash needed. How the money will be raised and repaid.
How should you present your business plan?
The first rule in making an oral presentation is to follow directions. If you're told you have 15 minutes, don't talk for more than the allotted time. The presentation should be smooth and well-rehearsed. The slides should be sharp and not cluttered. The smart entrepreneur has a good idea of the questions that will be asked, and will be prepared for those queries
What is the 5 forces model?
The five competitive forces model is a framework for understanding the structure of an industry. The model is composed of the forces that determine industry profitability. They help determine the average rate of return for the firms in an industry. Each of the five forces impacts the average rate of return for the firms in an industry by applying pressure on industry profitability. Well managed firms try to position their firms in a way that avoids or diminishes these forces—in an attempt to beat the average rate of return of the industry.
What is the first application of the 5 forces model?
The five forces model can be used to assess the attractiveness of an industry by determining the level of threat to industry profitability for each of the forces. If a firm fills out the form shown on the next slide and several of the threats to industry profitability are high, the firm may want to reconsider entering the industry or think carefully about the position it would occupy.
What are buyers costs?
The greater the importance of an item is to a buyer, the more sensitive the buyer will be to the price it pays.
What is competitive intelligence?
The information that is gathered by a firm to learn about its competitors. A new venture should take care that it collects competitive intelligence in a professional and ethical manner.
What is the management team and company structure of a business plan?
The management team of a new venture typically consists of the founder or founders and a handful of key management personnel. This is a critical section of a business plan. Many investors and others who read the business plan look first at the executive summary and then go directly to the management team section to assess the strength of the people starting the firm.
What is a market analysis in a business plan?
The market analysis breaks the industry into segments and zeros in on the specific segment (or target market) to which the firm will try to appeal. Most start-ups do not service their entire industry. Instead, they focus on servicing a specific (target) market within the industry. It's important to include a section in the market analysis that deals with the behavior of the consumers in the market. The more a start-up knows about the consumers in its target market, the more it can tailor its products or services appropriately.
What is the marketing plan of the business plan?
The marketing plan focuses on how the business will market and sell its product or service. The best way to describe a start-up's marketing plan is to start by articulating its marketing strategy, positioning, and points of differentiation, and then talk about how these overall aspects of the plan will be supported by price, promotional mix, and distribution strategy. It's also important to discuss the company sales process.
What does the number and balance of competitors mean?
The more competitors there are, the more likely it is that one or more will try to gain customers by cutting its price.
What is capital requirements?
The need to invest large amounts of money to gain entrance to an industry is another barrier to entry. Like the automotive industry
What is passion for their business?
The number one characteristic shared by successful entrepreneurs and this passion typically stems from the entrepreneur's belief that the business will positively influence people's lives
Why are there more senior entrepreneurs currently?
The percentage of U.S. entrepreneurs who are seniors jumped from 15% to 23% from 1996 to 2010. The increase is attributed to corporate downsizing, a desire among older workers for more fulfillment in their lives, a need for additional income, and similar factors
What is the threat of forward integration?
The power of a supplier is enhanced if there is a credible possibility that the supplier might enter the buyer's industry (e.g. Microsoft and computers).
What is the threat of backward integration?
The power of buyers is enhanced if there is a credible threat that the buyer might enter the supplier's industry (Dell and monitors).
What is the threat of substitutes?
The price that consumers are willing to pay for a product depends in part on the availability of substitute products. In contrast, when close substitutes for a product exist, industry profitability is suppressed, because consumers will opt out if the price gets too high. An industry in which the threat of substitutes is high is not attractive because the prices paid by consumers are probably low. The extent to which substitutes suppress the profitability of an industry depends on the propensity for buyers to substitute between alternatives. This is why firms in an industry often offer their customers amenities to reduce the likelihood that they will switch to a substitute product, even in light of a price increase. (e.g. McDonalds offering salads; airlines offering reward miles; BR and Target offering shopping cards)
When should you conduct a feasibility analysis?
The proper time to conduct a feasibility analysis is early in thinking through the prospects for a new business. The thought is to screen ideas before a lot of resources are spent on them. Primary and secondary research should be conducted
What is the second application of the 5 forces model?
The second way a new firm can apply the five forces model to help determine whether it should enter an industry is by using the model to answer several key questions. The questions are shown in the figure on the next slide, and help a firm project the potential success of a new venture in a particular industry.
How many minority entrepreneurs are there?
There has been a substantial increase in minority entrepreneurs in the U.S. from 1996 to 2010. The biggest jump has come in Latino entrepreneurs, which increased from 11% to 23% from 1996 to 2010
What are social forces?
They alter how people and businesses behave and set their priorities. These trends provide opportunities for new businesses to accommodate the changes.
What is the economics of the business in a business plan?
This section addresses the basic logic of how profits are earned in the business and how many units of a business's profits must be sold for the business to "break even" and then start earning a profit. Two companies in the same industry may make profits in different ways. One may be a high-margin, low-volume business, while the other may be a low-margin, high-volume business. It's important to check to make sure the approach you select is sound. Computing a break-even analysis is an extremely useful exercise for any proposed or existing business
What is the company description in a business plan?
This section begins with a general description of the company. While at first glance this section may seem less important than the others, it is extremely important. It demonstrates to your reader that you know how to translate an idea into a business. It should be specific
What is the industry analysis in a business plan?
This section should begin by describing the industry the business will enter in terms of its size, growth rate, and sales projections.Before a business selects a target market it should have a good grasp of its industry—including where its promising areas are and where its points of vulnerability are (SWOT analysis). The industry that a company participates in largely defines the playing field that a firm will participate in.
What is resource sufficiency?
This topic pertains to an assessment of whether an entrepreneur has sufficient resources to launch the proposed venture.
How do you test resource sufficiency?
To test resource sufficiency, a firm should list the 6 to 12 most critical nonfinancial resources that will be needed to move the business idea forward successfully. If critical resources are not available in certain areas, it may be impractical to proceed with the business idea.
What is observing and anticipating trends?
Trends create opportunities for entrepreneurs to pursue
What is supplier concentration?
When there are only a few suppliers that supply a critical product to a large number of buyers, the supplier has an advantage.
What is a barrier to entry?
a condition that creates a disincentive for a new firm to enter an industry
What is a competitive analysis?
a detailed evaluation of a firms competitors
What is entrepreneurial intensity?
firms fall along a conceptual continuum that ranges from highly conservative to highly entrepreneurial and the position of a firm on this continuum is referred to as its entrepreneurial intensity
What is one of the most effective things an entrepreneur can do to conduct a thorough product/service feasibility analysis?
hit the streets and talk to potential customers.
What is the second approach, solving a problem?
identifying opportunities simply involves noticing a problem and finding a way to solve it. These problems can be pinpointed through observing trends and through more simple means, such as intuition, serendipity, or change.
What can a competitive analysis grid help a company do?
it stacks up against its competitors, provide ideas for markets to pursue, identify its primary sources of competitive advantage.
What are entrepreneurial firms impact on society?
make our lives easier, enhance our productivity at work, improve our health, and entertain us in new ways. Also creates new moral and ethical issues
What are political actions and regulatory changes?
provide the basis for opportunities. Like how laws to protect the environment have created opportunities for entrepreneurs to start firms that help other firms comply with environmental laws and regulations
What is included in a successful business idea?
recognizing opportunities and generating ideas, conducting a feasibility analysis, developing an effective business model, doing an industry and competitor analysis, and writing a business plan
What is primary research?
research that is collected by the person or persons completing the analysis
What is a concept test?
showing a preliminary description of a product or service idea to industry experts and prospective customers to solicit feedback
What is a salary-substitute firm?
small firms that basically provide their owner or owners with a similar level of income to what they would normally be able to earn in a conventional job. Like owning a restaurant or a hair salon
What is preparation?
the background, experience and knowledge that an entrepreneur brings to the opportunity recognition process
What is opportunity recognition?
the process of perceiving the possibility of a profitable new business or a new product or service. meaning an opportunity can't be pursued until it is recognized. A process that rests on entrepreneur's abilities to recognize certain environmental changes. If opportunity gaps are correctly identified and acted upon it leads to the generation of new product , business and service ideas
What is elaboration?
the stage when the creative idea is put into a final form. All the details are worked out and the idea is transformed into something of value
What is a solo entrepreneur?
those who identified their business ideas on their own
What as a network entrepreneur?
those who identified their ideas through social contact
What is creative destruction?
when entrepreneurs develop new products and technologies that over time make current products and technologies obsolete
What is economies of scale?
when mass producing a product results in lower average costs. Industries that are characterized by large economies of scale are difficult for new firms to enter, unless they are willing to accept a cost disadvantage.
What is evaluation?
when the idea is subjected to scrutiny and analyzed for its viability. Some accidentally skip this step
