study guide midterm 1
study guide midterm 1 mgt253
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This 10 page Study Guide was uploaded by odette antabi on Monday September 26, 2016. The Study Guide belongs to mgt253 at University of Miami taught by Dr. Vincent Daniels in Fall 2016. Since its upload, it has received 42 views. For similar materials see Intro to Entrepreneurship in Management at University of Miami.
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Date Created: 09/26/16
CHAPTER 1 What is entrepreneurship? Academic definition: is the process by which individuals pursue opportunities without regard to resources they currently control Venture capitalist: is the art of turning an idea into a business What entrepreneurs do? : assemble and then integrate all the resources needed: the money, the people, the business model, the strategy. To transform an invention or an idea into a viable business Corporate entrepreneurship: is the conceptualization of entrepreneurship at the firm level. Entrepreneurial firms: Proactive Innovative Risk taking Conservative: take more “ wait and see posture” Risk averse Less innovatiove Why become an entrepreneur: Be your own boss Peruse own ideas Financial reward Characteristics of a successful entrepreneur: Passion for the business: belief that the business will positively influence their lives Product/ customer focus Execution intelligence: the ability to fashion a solid business idea into viable business Tenancy despite failure: the failure rate is naturally high because they are pursuing something new. They need to have the ability to preserve through setbacks and failures. Myths about entrepreneurs 1. Entrepreneurs are born, not made. No one is born to become an entrepreneur, everyone has the potential to become one. Whether someone becomes an entrepreneur is a function of the environment, lefe experiences and personal choices Common traits: Moderate risk taker Persuasive Resource assembler/ leverage Tolerant to ambiguity Optimistic Achievement motivated Self-confident Promoter Creative Self-starter Tenacious Networker 2. Entrepreneurs are gamblers: most entreprenuers are moderate risk takers. This idea comes from 2 sources: entrepreneurs usually have jobs that are less structured, and face more uncertainty, and they have the strong need to achieve and set challenging goals 3. Motivated primarily by money. Really for something more persona 4. Should be young and energetic. Not only young people. It is not age oriented 5. Love the spotlight. The vast majority of them do not attract public attention Types of start up firms Salary-substitute firm: provide the owner a similar level of income to what they would be earning in a conventional job Lifestyle firm: provide owners the opportunity to peruse a particular lifestyle Entrepreneurial firms: firms that bring new product and services to the market by creating and seizing opportunities regardless of the resources they control Economic impact of entrepreneurial firms: Innovation: process of creating something new which is central to the entire entrepreneurial process Job creation: create substantial number of jobs Impact of society: think all about the new products and services that make our lives easier, enhance our productivity at work, health and entrainment Impact on larger firms Entrepreneurial process 4 steps 1. Deciding to become an entrepreneur 2. Developing successful business ideas 3. Moving from an idea to an entrepreneurial firm 4. Managing and growing the entrepreneurial firm CHAPTER 2 Opportunity: is a favorable circumstance that leads to a creation of a product, service or business qualities of an opportunity: Timely Attractive Durable: its going to last Anchored in a product, service, or business that cerates or adds value for its buyer or end user Ways to identify an opportunity Observing trends Solving a problem Finding gaps in the market place 1. Observing trends: trends create opportunities for entrepreneurs a. Economic forces: what us going on in the economy that could start a company. Ex. When gas was expensive they started an app to see the lowest price b. Social forces: alter how people and business behave and set their priorities. Ex. Aging of the population, growth in cellphone use c. Technological advances in technology frequently create business opportunities. Ex. Internet, Uber, digital photography d. Political actions and regulatory changes: ex. Laws to protect environment 2. Solving problems: a. Identifying opportunities simply involves noticing a problem and finding a way to solve it. problems in you life 3. Gaps in the market place: a. Created when a product or services is needed by a specific group of people but doesn’t represent a large enough market to be of interest Personal characteristics of the entrepreneur: that helps them recognize opportunities Prior experiences: by working in a industry an individual may spot a market niche that is underserved. Also they build a network of social contacts who provide insights that lead to recognizing new opportunities Cognitive factors: way you think. Innate skills, cognitive process. People think that entrepreneurs have a “sixth sense” that helps them see opportunities. This is called entrepreneurial alertness which is defined as the ability to notice things without engaging in deliberate search Social networks: people who build substantial social networks and professional contacts will be more exposed to opportunities. Strong tie (frequent interaction) vs. weak tie (infrequent relations). It is more likely to get a new business from a weak – tie relationship Creativity: is the process of generating novel or useful ideas. steps: preparation, incubation, insight, evaluate, elaboration Technique for generating ideas: Brain storming: technique used to generate a large number of ideas and solutions to problems quickly. Rules: no critics, freewheeling is encouraged, sessions must move quickly, leap- frogging is encouraged. Focus Groups: gathering 5-10 people who have been selected based on their common characteristics relative to the issue being discussed. Led by a trained negotiator who uses internal dynamics of the group environment to gain insight Library research: often underutilized source of info Internet research Advisory board CHAPTER 3 Feasibility analysis: is the process of determining whether a business idea is viable. It is the preliminary evaluation of a business idea, conducted for the purpose of the determining whether the idea is worth pursuing When to conduct a feasibility analysis: The proper time is early in thinking through the prospects for a new business. The thought is to screen ideas before a lot of resources are spent Forms of feasibility analysis Product/ services feasibility: is an assessment of the overall appeal of the product or service being proposed. Before rushing into the development it should be sure that the product or service is what the customers want. o Product/service desirability: 1. Ask the following questions to dertmine the basic appeal does it makes sense? Is it reasonable? Does it take advantage of the market? Is it a good time to introduce it? 2. Administer a concept test: is one page description of a business that is distributed to people who are asked to provide feedback on the idea. This will provide a sense of the viability and suggestions of how it can be strengthened o Product service demand: 1. talking face to face with potential customers: the idea is to gauge customer reactions to the general concept you wan to sell 2. utilizing online tools, such as Google ad words and landing pages, to asses demand. Search engine shows up when a user is searching for a product that is close to their idea. Industry/ target market feasibility : is an assessment of the overall appeal of the industry and the target market for the proposed business. An industry is a group of firms producing similar products or services. A firm’s target market is the limited portion of the industry it plans to go after. o Industry attractiveness: important to see the degree to which environmental and business trends are moving in favor rather than against to the industry. Characteristics of attractive industries: young rather than old, early rather than late in their lifecycle, fragmented rather than concentrated, are growing rather than shrinking, are not crowded, selling products that clients must have. o Target market analysis: find a market that is large enough for the proposed business but is yet small enough to avoid attracting larger competitors Organizational feasibility: is conducted to determine whether the proposed business has sufficient management expertise, organizational competence, and resources to successfully launch a business. o Management prowess: the proposed business should evaluate the prowess, or ability of its management team to satisfy itself that management has the requisite passion and expertise to launch the venture o Resource sufficiency: assessment whether an entrepreneur has the sufficient resources to launch the proposed venture. The firm should list 6 to 12 most critical nonfinancial resources that will be needed to move the business forward successfully. Financial feasibility: is the final component of a comprehensive feasibility analysis, a preliminary financial assessment is sufficient. o Total star-up cash needed: to prepare the fist sale. Actual budget should be prepared that lists all capital purchases and operating expenses needed to generate the first revenue o Financial performance of similar business: comparing to already established businesses. Seeing at financial reports or observational research o Overall financial attractiveness of the proposed venture: the extent to which a business opportunity is positive relative to each factor is based on estimate than rather performance First screen: template for completing a feasibility analysis CHAPTER 4 Business model: is a firms’ plan for how it creates, delivers and captures value for its stake holders. The proper time is following the feasibility analysis stage prior to fleshing out the operational details. Categories: Standard business model depict existing plans or recipes firms can use to determine how they will create, deliver an capture value Disruptive business model: are rare, are the ones that do not fit the profile of standard business model. they are impactful enough to disrupt or change the way business is conducted in an industry or an important niche. Barringer/ Ireland business model template: they have a common set of attributes that can be laid in a visual framework or template so its easy to see the individual parts and their interrelationships. 1. Core strategy: is the first component of the business model. Describes how thr firm plans to compete relative to its competitors. Elements: Business mission: describes why it exists and what business model it is supposed to accomplish Basis of differentiation: clearly articulate the points that differentiate its product or services from its competitors Target market: is a place within a larger market segment that represents a narrow group of costumers with similar interests Product/market scope: define the products and markets on which it will concentrate. Most firms start with a narrow product/ market scope and pursue adjacent product and market as they grow and become more financially secure. Project 3-5 years in the future in terms of anticipated expansion 2. Resources: are the inputs a firm uses to produce, sell, distribute and service product or services. A firms most important resources tangible and intangible must be difficult to imitate and hard to find a substitute for. Core competencies: is an specific factor or capability that supports a firm’s business model and sets it apart form rivals Key assets: are the assets that a firms owns that enables its business model to work. It can be physical, financial, intellectual or human. 3. Financials: describes how it earns money Revenue streams: describe the way in which it makes money. You can have a single ort several. Cost structure: describes the most important costs incurred to support its business model. Is costs money to establish a basis of differentiation, develop core competencies, acquire and develop key assets Financing/funding’s: do not need to determine the exact amount of money needed. An approximation is sufficient. Categories to consider: capital costs, one-time expenses, provisions for ramp- up expenses 4. Operations: are both integral to a firm’s overall business model and represent the day-to-day heartbeat to a firms Product or services production: how they are produced. Channels: how it delivers its product or service to its customers. Business sell direct or through intermediaries or via combination of both Key partners: rely on partners to perform important roles CHAPTER 5 Industry: is a group of firms producing a similar product or service. Industry analysis: is a business research that focuses on the potential of an industry importance It is needed to learn ins and outs of the industry Helps determine if the target market is identified during feasibility analysis for the firms 3 key questions: 1. Is the industry accessible: it is realistic to enter 2. Does the industry contain markets that are ripe for innovation 3. Are there positions in the industry that avoid some of the negative attributes as a whole Firm level factors: include firm’s assets products culture, teamwork, reputation Industry level factors: threat of new entrants, rivalry among existing firms, bargaining power of buyers Assessing industry attractiveness: Study environmental and business trends o Environmental trends: include economic trends, social, technological and political and regulatory changes. o Business trends: other trends that impact the industry The five competitive forces model: framework for understanding the structure of an industry. Forces that determine industry profitability. Thay help determine the average rate of return for the forms in an industry. Well managed forms try to position in a way that avoids or diminishes these forces in attempt to beat average rate of return of the industry o Thereat of substitutes: the price that consumers are willing to pay for a product depends in part of the availability of substitutes products.. when close substitutes for a product exists industry profitability is suppressed because customers will opt out if the price is too high o Threat of new entrants: if the firms of an industry are profitable the industry becomes a magnet to new entrants. Unless something is done to stop the competition. Firms in a industry try to keep the number of new entrants low by erecting barriers to entry o Rivalry among existing firms: some industries are fiercely competitive to the point where prices are pushed below the level of costs o Bargaining power of suppliers: suppliers can suppress the profitability of the industries to which they sell by raising process or reducing the quality of the component they provide o Bargaining power of buyers: buyers can suppress the profitability of the industries from which they purchase by demanding process concessions or increases in quality 1. First application of the five forces model: used to asses the attractiveness of an industry by determining the level of the threat of the industry profitability for each of the forces 2. Second application: to help determine whether it should enter an industry is by using the model to answer several key questions Industry types and the opportunities they offer Emerging industries: in which the standard operating procedure have yet to be developed Fragmented industries: those that are characterized by a large number of firms of approximately equal size Mature industries: those that are experiencing slow or no increase in demand Declining industries: those that are experiencing a reduction in demand Global industries: those that are experiencing significant international sales Competitor analysis: is a detailed analysis of a firms competition. It helps understand the position of its major competitors and the opportunities that are available Types of competitors: Direct competitors: business offering identical or similar products Indirect competitors: businesses offering close substitutes products Future competitors: businesses that are not yet direct or indirect competitors but could be at any time Sources of competitive intelligence Collecting competitive intelligence: must understand the strategies and behaviors of its competitors Ethical ways to obtain info about competitors: o Attend conferences and trade shows o Purchase their producers o Study their web abd sites o Read industry related books Completing a competitive analysis grid: a tool for organizing info a firm collects about its competitors. Can help a forms see how it stack up against its competitors, provide ideas for markets to pursue and identify its primary source of competitive advantages.
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