Entrepreneurship Exam 1 Study Guide
Entrepreneurship Exam 1 Study Guide MGMT 3850
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This 18 page Study Guide was uploaded by Alora Lornklang on Saturday February 20, 2016. The Study Guide belongs to MGMT 3850 at University of North Texas taught by Brandi Everett in Spring 2016. Since its upload, it has received 293 views. For similar materials see Foundations of Entrepreneurship in Entrepreneurship at University of North Texas.
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MGMT 3850 Foundations of Entrepreneurship Study Guide Exam #1 Chapter 1: The Foundations of Entrepreneurship LO-1: Define the role of the entrepreneur in business in the United States and around the World. Entrepreneurship is thriving in the US, but the current wave of entrepreneurship is not limited to the United States; many nations across the globe are seeing similar growth in their small business sectors. A variety of competitive, economic, and demographic shifts have created a world in which “small is beautiful.” Capitalist societies depend on entrepreneurs to provide the drive and risk taking necessary for the system to supply people with the goods and services they need. LO-2: Describe the entrepreneurial profile. Entrepreneurs have some common characteristics, including a desire for responsibility, a preference for moderate risk, confidence in their ability to succeed, desire for immediate feedback, a high energy level, a future orientation, skill at organizing, and a value of achievement over money. In a phrase, they are tenacious high achievers. LO-3A: Describe the benefits of Entrepreneurship Driven by these personal characteristics, entrepreneurs establish and manage small businesses to gain control over their lives, make a difference in the world, become self fulfilled, reap unlimited profits, and contribute to society, and do what they enjoy doing. LO-3B: Describe the drawbacks of entrepreneurship. Entrepreneurs also face certain disadvantages, including uncertainty of income, the risk of losing their investments (and more), long hours and hard work, a lower quality of life until the business gets established, high stress levels, and complete decisionmaking responsibility. LO-4: Explain the forces that are driving the growth of entrepreneurship. Several factors are driving the boom in entrepreneurship, including the portrayal of entrepreneurs as heroes, better entrepreneurial education, economic and demographic factors, a shift to a service economy, technological advances, more independent lifestyles, and increased international opportunities. LO-5: Explain the cultural diversity of entrepreneurship. Several groups are leading the nation’s drive toward entrepreneurship: young people, women, minorities, immigrants, parttimers, home based business owners, family business owners, copreneurs, corporate castoffs, corporate dropouts, social entrepreneurs, and retired baby boomers. LO-6: Describe the important role that small businesses play in our nation’s economy. The small businesses sector’s contributions are many. They make up 99.7% of all business, employ 49.2 percent of the private sector workforce, have created nearly twothirds of the net new jobs in the economy, produce 46 percent of the country’s private GDP, and account for 47 percent of all business sales. LO-7: Put failure into the proper perspective Entrepreneurs recognize that failure is a natural part of the creative process. Successful entrepreneurs have the attitude that failures are simply steppingstones along the path to success, and they refuse to be paralyzed by a fear of failure. LO-8: Explain how an entrepreneur can avoid becoming another failure statistic. Entrepreneurs can employ several general tactics to avoid these pitfalls. They should know their business in depth, prepare a solid business plan, manage financial resources effectively, understand financial statements, learn to manage people, set their businesses apart from the competition, and maintain a positive attitude. V OCABULARY : Entrepreneur o One who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying significant opportunities and assembling the necessary resources to capitalize on them Opportunity entrepreneurs o Entrepreneurs who start businesses because they spot an opportunity in the marketplace. Necessity entrepreneurs o Entrepreneurs who start businesses because they cannot find work any other way. Serial entrepreneurs o Entrepreneurs who repeatedly start businesses and grow them to a sustainable size before striking out again. Bootstrapping o A strategy that involves conserving money and cutting costs during start up so that entrepreneurs can pour every available dollar into their business. Social entrepreneurs o Entrepreneurs who use their skills not only to create profitable businesses but also to achieve economic, social, and environmental goals for the common good. Cloud computing o Internetbased subscription or payperuse software services that allow business owners to use a variety of business applications, from database management and inventory control to customer relationship management and accounting. Micromultinationals o Small companies that operate globally from their inception. Familyowned business o One that includes two or more members of a family with financial control of the company Copreneurs o Entrepreneurial couples who work together as coowners of their businesses. Small business o One that employs fewer than 100 people Gazelles o Small companies that are growing at 20 percent or more per year with at least $100,000 in annual sales; they create 70 percent of net new jobs in the economy. Chapter 2: Ethics and Social Responsibility: Doing the Right Thing LO-1: Define business ethics and describe the three levels of ethical standards. Business ethics involves the fundamental moral values and behavioral standards that form the foundation for the people of an organization as they make decisions and interact with organizational stakeholders. Small business managers must consider the ethical and social as well as the economic implications of their decisions. The three levels of ethical standards are o The law o The policies and procedures of the company o The moral stance of the individual LO-2: Determine who is responsible for ethical behavior and why ethical lapses occur. Managers set the moral tone of the organization. There are three ethical styles of management: immoral, amoral, and moral. Although moral management has value in itself, companies that operate with this philosophy discover other benefits, including a positive reputation among customers and employees. Ethical lapses occur for a variety of reasons: o Some people are corrupt o The company culture has been poisoned o Competitive pressures push managers to compromise o Managers are tempted by an opportunity to “get ahead.” o Managers in different cultures have different views of what is ethical. LO-3: Explain how to establish and maintain high ethical standards Philosophers throughout history have developed various tests of ethical behavior: the utilitarian principle, Kant’s categorical imperative, the professional ethic, the Golden Rule, the television test, and the family test. A small business manager can maintain high ethical standards in the following ways: o Create a company credo o Develop a code of ethics o Enforce the code fairly and consistently o Hire the right people o Conduct ethical training o Perform periodic ethical audits o Establish high standards of behavior, not just rules. o Set an impeccable ethical example at all times. o Involve employees in establishing ethical standards. LO-4: Explain the difference between social entrepreneurs and traditional entrepreneurs. Traditional entrepreneurs seek opportunities to create market value and profit. Social entrepreneurs use entrepreneurship to pursue opportunities to create social value by creating innovative solutions to society’s most vexing problems. LO-5: Define social responsibility . Social responsibility is the awareness of a company’s managers of the social, environmental, political, human, and financial consequences of their actions. LO-6: Understand the nature of business’s responsibility to the environment. Environmentally responsible business owners focus on the three R’s.: o Reduce the amount of materials used in the company from the factory floor to the copier room o Reuse whatever you can o Recycle the materials you dispose of LO-7: Describe the Business’s Responsibility to Employees Companies have a duty to act responsibly toward one of their most important stakeholders: their employees. Businesses must recognize and manage the cultural diversity that exists in the workplace, establish a responsible strategy for combating substance abuse in the workplace, prevent sexual harassment, and respect employees’ right to privacy. LO-8: Explain the Business’s Responsibility to Customers. Every company’s customers have a right to safe products and services; to honest, accurate information; to be heard, ; to education about products and services; and to choices in the marketplace. LO-9: Discuss business’s responsibility to investors. Companies have the responsibility to provide investors with an attractive return on their investments and to report their financial performances in an accurate and timely fashion to their investors. LO-10: Describe business’s responsibility to the community. Increasingly, companies are seeing a need to go beyond “doing well” to “doing good”—being socially responsible community citizens. In addition to providing jobs and creating wealth, companies contribute to the local community in many different ways. V OCABULARY : Stakeholders: o The various groups and individuals who affect and are affected by a business. Ethics: o A branch of philosophy that studies and creates theories about the basic nature of right and wrong, duty, obligation, and virtue. Social responsibility o How an organization responds to the needs of the many elements in society. Business ethics o The fundamental moral values and behavioral standards that form the foundation for the people of an organization as they make decisions and interact with stakeholders. Triple bottom line (3BL) o Measuring business performance using profitability, its commitment to ethics and social responsibility, and its impact on the environment (“profit, people, and planet”) Company credo o A statement that defines the values underlying the entire company and its ethical responsibilities to its stakeholders. Code of Ethics o A written statement of the standards of behavior and ethical principles a company expects from its employees. Employee Assistance program (EAP) o A companyprovided benefit designed to help reduce workplace problems such as alcoholism, drug addiction, a gambling habit, and other conflicts and to deal with them when they arise. Sexual Harassment o Any unwelcome sexual advance, request for sexual favors, and other verbal or physical sexual conduct made explicitly or implicitly as a condition of employment. Chapter 3: Inside The Entrepreneurial Mind: From Ideas to Reality LO-1: Explain the Differences among creativity, innovation, and entrepreneurship. The entrepreneur’s “secret” for creating value in the marketplace is applying creativity and innovation to solve problems and to exploit opportunities people face every day. Creativity is the ability to develop new ideas and to discover new ways of looking at problems and opportunities. Innovation is the ability to apply creative solutions to those problems and opportunities to enhance or to enrich people’s lives. Entrepreneurship is the result of a disciplined, systematic process of applying creativity and innovation to the needs and opportunities in the marketplace. LO-2: Describe why creativity and innovation are such an integral part of entrepreneurship. Entrepreneurs must always be on guard against paradigms preconceived ideas of what the world is, what it should be like, and how it should operate—because they are logjams to creativity. Successful entrepreneurs often go beyond conventional wisdom as they ask, “Why not?” Success—even survival—in this fiercely competitive, global environment requires entrepreneurs to tap their creativity constantly. LO-3: Understand how the two hemispheres of the human brain function and what role they play in creativity. For years, people assumed that creativity was an inherent trait. Today, however, we know better. Research shows that almost anyone can learn to be creative. The left hemisphere on the brain controls language, logic, and symbols, processing information in a stepbystep fashion. The right hemisphere handles emotional, intuitive, and spatial functions, processing information intuitively. The right side of the brain is the source of creativity and innovation. People can learn to control which side of the brain in dominant in a given situation. LO-4: Explain the 10 “mental locks” that limit individual creativity. The number of potential barriers to creativity is limitless, but entrepreneurs commonly face 10 “mental locks” on creativity: Searching for the one “right” answer, focusing on “being logical,” blindly following the rules, constantly being practical, viewing play as frivolous, becoming overly specialized, avoiding ambiguity, fearing looking foolish, fearing mistakes and failure, and believing that, “I am not creative.” LO-5: Understand how entrepreneurs can enhance the creativity of their employees as well as their own creativity. Entrepreneurs can stimulate creativity in their companies by expecting creativity, expecting and tolerating failure, encouraging curiosity, viewing problems as challenges, providing creativity training, providing support, rewarding creativity, and modeling creativity. Entrepreneurs can enhance their own creativity by using the following techniques: allowing themselves to be creative, giving their minds fresh input every day, keeping a journal handy to record their thoughts and ideas, reading books on stimulating creativity or taking a class on creativity, and taking some time off to relax. LO-6: Describe the steps in the creative process. The creative process consists of 7 steps: o Preparation: involves getting the mind ready for creative thinking o Investigation: requires the individual to develop a solid understanding of the problem or decision o Transformation: involves viewing the similarities and the differences among the information collected; o Incubation: allows the subconscious mind to reflect on the information collected o Illumination: occurs at some point during incubation when a spontaneous breakthrough causes an epiphany o Verification: involves validating the idea as accurate and useful o Implementation: involves transforming the idea into a business reality. LO-7: Discuss techniques for improving the creative process. Five techniques are especially useful for improving the creative process: o Brainstorming is a process in which a small group of people interact with very little structure with the goal of producing a large quantity of novel and imaginative ideas o Mind mapping is a graphical technique that encourages thinking on both sides of the brain, visually displays the various relationships among ideas, and improves the ability to view a problem from many sides. o Forcefield analysis allows entrepreneurs to weigh both the advantages and the disadvantages of a particular decision and work to maximize the variables that support it and minimize those that work against it. o TRIZ is a systematic approach designed to help solve any technical problem, whatever its source. Unlike brainstorming and mind mapping, which are rightbrain activities, TRIZ is a leftbrain, scientific, stepby step process that is based on the study of hundreds of the most innovative patents across the globe. o Rapid prototyping is based on the premise that transforming an idea into an actual model will point out flaws in the original idea and will lead to improvements in its design. LO-8: Describe the protection of intellectual property through patents, trademarks, and copyrights. A patent is a grant from the federal government that gives an inventor exclusive rights to an invention for 20 years. A trademark is any distinctive word, symbol, or trade dress that a company uses to identify its product and to distinguish it from other goods. It serves as a company’s “signature” in the marketplace. A copyright protects original works of authorship. It covers only the form in which an idea is expressed and not the idea itself and lasts for 70 years beyond the creator’s death. V OCABULARY : Creativity o The ability to develop new ideas and to discover new ways of looking at problems and opportunities. Innovation: o The ability to apply creative solutions to problems and opportunities to enhance or to enrich people’s lives. Myopic Thinking: o A type of thinking that destroys creativity because it is narrowly focused and limited by the status quo Intrapreneurs o Entrepreneurs who operate within the framework of an existing business. Convergent thinking o The ability to see similarities and the connections among various data and events. Divergent thinking o The ability to see differences among various data and events. Brainstorming o A process in which a small group of people interact with very little structure with the goal of producing a large quantity of novel and imaginative ideas. Mind mapping o A graphical technique that encourages thinking on both sides of the brain, visually displays the various relationships among ideas, and improves the ability to view a problem from many sides. Rapid prototyping o The process of creating a model of an idea, enabling an entrepreneur to discover flaws in the idea and to make improvements in the design. Patent: o A grant from the federal government’s Patent and Trademark Office to the inventor of a product, giving the exclusive right to make, use, or sell the invention of this country for 20 years form the date of filing the patent application. Trademark o Any distinctive work, phrase, symbol, design, name, logo, slogan, or trade dress that a company uses to identify the origin of a product or to distinguish it from other goods on the market. Service mark o Offers the same protection as a trademark but identifies and distinguishes the source of a service rather than a product. Trade dress o The unique combination of elements that a company uses to create a product’s image and to promote it. Copyright o An exclusive right that protects the creators of original works of authorship, such as literary, dramatic, musical, and artistic works. Chapter 4: Conducting a Feasibility Analysis and Designing a Business Model LO-1: Describe the process of conducting an idea assessment. An idea sketch pad is a tool that helps entrepreneurs assess ideas. The idea sketch pad has 5 parameters: o Customers: start with a group of customers who have a clear need that is not being addressed. o Offering: Describe your ideas for a product or service to offer the customers. o Value proposition. Explain why your product or service will be important to customers. o Core competencies: Determine if your offering has any technologies or unique features that will help differentiate it from competitors? o People: Identify the key people on the team who will launch this business. LO-2: Explain the elements of a feasibility analysis. Determine how attractive an industry is overall as “home” for a new business. Evaluate possible niches a small business can occupy profitably LO-3: Describe the six forces in the macro environment of an industry. Sociocultural trends can lead to dramatic chances, creating hole new industries and fundamentally transforming existing industries. Technological breakthroughs lead to the development of new products and entirely new industries. Changing demographics create opportunities for entrepreneurs. Economic trends, both positive and negative, create opportunities Political and legal change, such as new laws and regulations, create opportunities for entrepreneurs. Global trends that open global markets allow businesses to customers and suppliers from all corners of the world and can help even the smallest business. LO-4: Understand how Porter’s Five Forces Model assesses the competitive environment. Understand how Porter’s Five Forces Model assesses the competitive environment for every business: o The rivalry among competing firms o The bargaining power of suppliers o The bargaining power of buyers o The threat of new entrants o The threat of substitute products or services LO-5: Describe the various methods of conducting primary and secondary market research. Primary research tools include customer surveys focus groups, building prototypes, conduction inhome trials, and “windshield” research (driving around and observing the competition Secondary research gathers existing data from trade associations and business directories, industry compiled by government agencies, market research reports, articles in magazines and journals, local data, and the Internet. LO-6: Understand the four major elements of a financial feasibility analysis. Capital requirements. o Start up companies often need capital to purchase equipment, buildings, technology, and other tangible assets and to hire and train employees, promote their products and services, and establish a presence in the market. Estimated earnings o In addition to product an estimate of the startup company’s capital requirements, an entrepreneur should forecast the earning potential of the proposed business. Time out of cash o To estimate time out of cash, take the negative cash flow from the business each month and divide by how much available cash is left in the business. This gives the number of months the business can survive at its current rate of negative cash flow. Return on investment. o A venture must produce an attractive rate of return relative to the level of risk it requires. This riskreturn tradeoff means that the higher the level of risk a prospective business involves, the higher the rate of return it must provide to the entrepreneur and its investors. LO-7: Describe the process of assessing entrepreneur feasibility. Many new businesses require that an entrepreneur possess a certain set of knowledge, experiences, and skills to have a chance of being successful. Entrepreneurial readiness also involves issues such as temperament and work ethic. LO-8: Describe the nine elements of a business model. Customer segments o A good business model always starts with the customer. The entrepreneur’s first step is to identify a segment of customers who have a clearly defined need. Value proposition o The value proposition is the collection of products and/or services the business will offer to meet customers’ needs. Customer relationships o Not every business provides the same type and same level of customer service Channels o Channels refer to both communication channels (promotion) and distribution channels (product placement). Communication channels define how the customers seek out information about this type of product. The distribution channel defines the most effective way to get products to the customers for this type of business. Key activities o The goal is to build a basic checklist of what needs to be done to open the business and what activities are necessary to ensure its longterm success. Key resources o This will serve as an initial checklist to ensure that all key resources have been identified that will support a successful launch and sustain the business as it grows. Key partners o This segment of the business model includes important suppliers, outsourcing partners, investors, industry partners, advisers, and all other external business or entities that are critical to make the business model work. Revenue streams o How will the value proposition generate revenue? Cost structure o The key activities, key resources, and key partners components of the plan help identify basic types of costs and give some estimate of their scope. V OCABULARY : Idea assessment: o The process of examining a need in the market, developing a solution for that need, and determining the entrepreneur’s ability to successfully turn the idea into a business. Feasibility analysis: o An analysis of the viability of a business idea that includes four interrelated components: an industry and market analysis, the product or service analysis, a financial analysis, and an entrepreneur analysis. Primary research: o The process of collecting data firsthand and analyzing it. Inhome trials o A market research technique that involves sending researchers technique that involves sending researchers into customers’ homes to observe them as they use a company’s product or service. Secondary research: o The process of gathering data that has already been compiled and is available, often at a reasonable cost or sometimes even free. Minimal viable product o The simplest version of a product or service with which an entrepreneur can create a sustainable business Pivots: o The process of making changes and adjustments to a business model on the basis of the feedback a company receives from customers. o Customer pivot Change the customer segment or market o Revenue model pivot Chapter 5: Crafting a Business Plan and Building a Solid Strategic Plan LO-1: Explain the benefits of an effective business plan. A business plan, which builds off of info from the feasibility analysis and business model, serves two essential functions. First and more important, it guides the company’s operations by charting its future course and devising a strategy for following it. The second function of the business is to attract leaders and investors. Applying for loans or attempting to attract investors without a solid business plan rarely attracts needed capital. Rather, the best way to secure the necessary capital is to prepare a sound business plan. An effective business plan should pass three tests o Reality test: the external component of the reality test revolves around proving that a market for the product or service really does exist. The internal component of the reality test focuses on the product or service itself. o Competitive test. The external part of the competitive test evaluates the company’s relative position to its key competitors. The internal competitive test focuses on the management team’s ability to create a company that will gain an edge over existing rivals. o Value test. To convince lenders and investors to put their money into the venture, a business plan must prove to them that it offers a high probability of repayment or an attractive rate of return LO-2: Describe the elements of a business plan. Although a business plan should be unique and tailormade to suit the particular needs of a small company, it should cover three basic elements: executive summary, mission statement, company history, business and industry profile, description of the company's business strategy, profile of its products and services, statement explaining its marketing strategy, competitor analysis, owners’ and officers’ resumes, plan of operation, financial data, and loan or investment proposal. LO-3: Explain the “Five Cs of Credit” and why they are important to potential lenders and investors receiving business plans. Small business owners need to be aware of the criteria bankers use in evaluating the creditworthiness of loan applicants, known as the five Cs of credit: capital, capacity, collateral, character, and conditions Capital o Lenders expect small business to have an equity base of investment by the owner(s) that will help support the venture during times of financial strain. Capacity o A synonym for capacity is cash flow. The bank must be convinced of the firm’s ability to meet its regular financial obligations and to repay the bank loan, and that takes cash. Collateral o Collateral includes any assets the owner pledges to the bank as security for repayment of the loan. Character o Before approving a loan to a small business, the banker must be satisfied with the owner’s character. Conditions o The conditions—interest rates, the health of the nation’s economy, industry growth rates, etc.—surrounding a loan request also affect the owner’s chance of receiving funds. LO-4: Understand the keys to making an effective business plan presentation Entrepreneurs who are informed and prepared when requesting a loan or investment favorably impress lenders and investors. Tips include: Demonstrate enthusiasm about the venture, but don't be overemotional; “hook” investors quickly with an upfront explanation of the new venture, its opportunities, and the anticipated benefits to them; use visual aids; hit the highlights of your venture; don’t get caught up in too much detail in early meetings with lenders and investors; avoid the use of technological terms that will likely be above most of the audience; rehearse your presentation before giving it; close by reinforcing the nature of the opportunity; and b prepared for questions LO-5: Understand the importance of strategic management to a small business Companies without clear strategies may achieve some success in the short run, but as soon as a competitive threat arises, they often fail. LO-6: Explain why and how a small business must create a competitive advantage in the market. The goal of developing a strategic plan is to create for the small company a competitive advantage—the combination of factors that sets the small business apart from its competitors and gives it unique position in the market. Every small firm must establish a plan for creating a unique image in the minds of its potential customers. A company builds a competitive edge on its core competencies, which are a unique set of capabilities that a company develops in key operational areas, such as quality, service, innovation, team building, flexibility, responsiveness, and others, that allow it to vault past competitors. They are what the company does best and are the focal point of the strategy. This step must identify target market segments and determine how to position the firm in those markets. Entrepreneurs must identify some way to differentiate their companies from competitors. LO-7: Develop a strategic plan for a business using the nine steps in the strategic management process. Step 1: Develop a clear vision and translate it into a meaningful mission statement. Highly successful mission statement. Highly successful entrepreneurs communicate their vision to those around them. The firm’s mission statement answers the first question of any venture: What business am I in? The mission statement sets the tone for the entire company. Step 2: Assess the company’s strengths and weaknesses. Strengths are positive internal factors; weaknesses are negative internal factors. Step 3: Scan the environment for significant opportunities and threats facing the business. Opportunities are positive external options; threats are negative external forces. Step 4: Identify the key factors for success in the business. In every business, key factors determine the success of the firms in it, so they must be an integral part of a company’s strategy. KSFs are relationships between a controllable variable and a critical factor influencing the firm’s ability to compete in the market. Step 5: Analyze the competition. Business owners should know their competitors almost as well as they know their own. A competitive profile matrix is a helpful tool for analyzing competitors’ strengths and weaknesses. Step 6: Create company goals and objectives. Goals are the broad, longrange attributes that the firm seeks to accomplish. Objectives are quantifiable and more precise; they should be specific, measurable, assignable, realistic, timely and written down. The process works best when managers and employees are actively involved. Step 7: Formulate strategic options and select the appropriate strategies. A strategy is the game plan the firm plans to use to achieve its objectives and mission. It must center on establishing for the firm the KSFs identified earlier. Step 8: Translate strategic plans into action plans. No strategic plan is complete until the owner puts it into action. Step 9: Establish accurate controls. Actual performance rarely, if ever, matches plans exactly. Operating data from the business assembled into a comprehensive scorecard serves as an important guidepost for determining how effective a company’s strategy is. This information is especially helpful when plotting future strategies. The strategic planning process does not end with these nine steps; rather, it is an ongoing process that an entrepreneur will repeat. V OCABULARY : Business plan: o A written summary of an entrepreneur’s proposed business venture, its operational and financial details, its marketing opportunities and strategy, and its managers’ skills and abilities. Feature: o A descriptive fact about a product or service Benefit: o What a customer gains from the product or service Intellectual capital o One source of a company’s competitive advantage that consists of human, structural, or customer capital Competitive advantage o The value proposition that sets a small business apart from its competitors and gives it a unique position in the market that is superior to its competition. Core competencies o A unique set of capabilities that a company develops in key areas that allow it to vault past competitors. Mission statement o An enduring declaration of a company’s purpose that addresses the first question of any business venture: What business are we in? Strengths o Positive internal factors that a company can use to accomplish its mission, goals, and objectives Weaknesses o Negative internal factors that inhibit the accomplishment of a company’s mission, goals, and objectives. Opportunities o Positive external options that a company can exploit to accomplish its mission, goals, and objectives. Threats o Negative external forces that inhibit a company’s ability to achieve its mission, goals, and objectives. Competitive profile Matrix o A tool that allows business owners to evaluate their companies against major competitors using the key success factors for that market segment. Goals o Broad, longrange attributes that a business seeks to accomplish; they tend to be general and sometimes abstract Objectives o More specific targets of performance, commonly addressing areas such as profitability, productivity, growth, and other key aspects of a business. Cost leadership strategy o A strategy in which a company strives to be the lowcost producer relative to its competitors in the industry. Differentiation Strategy o A strategy in which a company seeks to build customer loyalty by positioning its goods or services in a unique or different fashion. Focus strategy o A strategy in which a company selects one or more market segments; identifies customers’ special needs, wants, and interests; and approaches them with a good or service designed to excel in meeting those needs, wants, and interests. Balanced scorecards: o A set of multidimensional measurements that are unique to a company and that incorporate both financial and operational measures to give managers a quick but comprehensive picture of a company’s performance.
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