MGT 365

Mid-term Review

Concepts/Definitions:
 Three primary rewards for entrepreneurs.
o Freedom
o Profit
o Independence
o Satisfaction
 Artisan vs. Opportunistic
o Artisan = Crafsman, technical, paternalistic, slow to delegate, limited
o Opportunistic = Broad-based, scientific approach, delegates, broad
strategy, longer planning
 Advantages of small entrepreneur firms
o Customer focus
o Quality performance
o Integrity and responsibility
o Innovation
o Special Niche
 Entrepreneurs willingness to assume risk
o Moderate risk
 Type A, Type B, and Type C ideas
o Type A = new market, existing products
o Type B = new technology, new product
o Type C = Improved product, new benefit
 What type of idea accounts for the largest number of startups?
o Good opportunity
 Most common source of new product ideas
o Prior work experience (45%)
o Others: hobbies, accidental, deliberate search, contacts, trade shows,
research institutions, trade publications, journals
 Michael Porter’s factors
o Threat of new competitors
o Threat of substitute products/services
o Intensity of rivalry among existing competitors
o Bargaining power of suppliers
o Bargaining power of buyers
 How is competitive advantage protected?
o Differentiation
o Patents, copyrights
o New products, stay ahead of competition
 SWOT analysis
o Strengths, Weaknesses, Opportunities, and Threats
o Starts with defining a desired end state
 o Opportunities = external chances to make greater sales or profits in the
environment
o Threats = external elements in environment that could cause trouble
 Two broad-based strategies for building competitive advantage
o Cost based
o Differentiation based
 Concepts surrounding business plan terms
 Sections of the business plan
o Executive summary = brief description of each succeeding section
o Company overview = Vision, history, current status, strategy, goals,
mission and objectives
o Products or Services = Key features and benefits, current stage of
development, proprietary position, competitive advantages
o Market and Comp Analysis = (see this section)
o Management team = Backgrounds and roles of key individuals, history
and ability to work as an effective team, personnel needs, organization
structure
o Operating strategies = Marketing, production, r&d, personnel,
administrative, and financial strategies
o Critical Risks = Realistically identifies major internal and external critical
risks that could threaten business and plans for dealing with these
o Cash Flow Statement = realistic assessment of cash requirements
o Income Statement = realistic and attractive income potential
o Balance sheet = Realistic assessment of working capital and fixed asset
requirements
o Funds Required/Used = amount, timing, type, and use of funds
o Offering = proposal/terms to investors, what we are seeking and what we
will give in return
 Benefits of writing a business plan
o Have a clearly articulated statement of goals and strategies for internal use
o Use as a selling document to be shared with outsiders
o Shows professionalism and seriousness of commitment
 Primary outside users of the business plan
o Investors (including bankers)
o Customers
o Suppliers
 What factors do investors find favorable and unfavorable?
o Favorable
 “One minute investor”
 Speak investors language
 Brief (30-40 pages)
 Attractive overall appearance
 Well-organized with a table of contents and numbered pages
 Market oriented in meeting customers needs
  Show evidence of customer acceptance
 Recognize investor’s need for healthy return
 Demonstrate a focus on a limited number of products/services
 Have a proprietary market position
o Unfavorable
 Infatuation with product/service, downplay market
need/acceptance
 Unrealistic financial projections
 Unrealistic growth projections
 Marketing mix
o The combination of product, pricing, promotion, and distribution
 Consumer-oriented v. product-oriented v. sales-oriented v. market-oriented
o Consumer = all efforts begin and end with the consumer
o Product = Product/production efficiencies
o Sales = Sales over production efficiencies and customer preference
 What’s included in the market analysis section of the marketing plan?
o Evaluation process that encompasses market segmentation, marketing
research, and sales forecasting
 What is included in the marketing plan?
o Market analysis
o The competition
o Marketing strategy
 Product/service section
 Distribution section
 Pricing section
 Promotion section
 What’s in the competitor analysis?
o SWOT
o Relative competitive strengths and weaknesses
o Who are they, where, market control, our target share of the market
 Primary vs. Secondary data?
o Primary data = new market information that is gathered by the firm
conducting the research
o Secondary = market information previously compiled by others
 Franchising Terms
o Franchising = a marketing system revolving around a two party
agreement, whereby the franchisee conducts business according to the
terms specified by the franchisor
o Franchise Contract = The legal agreement
o Franchise = the privileges conveyed in the contract
o Franchisee = entrepreneur whose power is limited by agreement
o Franchisor = The party that specifies the methods to be followed
 Meaning of term “franchising”
 o See “Franchising”
 Benefits of franchising
o Higher probability of success
o Training
o Financial assistance
o Operating benefits
 Notes on organizational forms (sole proprietor, Partnership, Corp.)
o Sole
 Advantages: total control, own all off company
 Disadvantages: no one to lean on or take over, all profit is just
regular income
o Partnership
 Ad = someone to help out and lean on
 Dis = Power struggles, very high divorce rate, responsible for
partners
o Corp
 A: much higher potential for growth, lots of people to lean on
 D: much lower individual control, ownership shared with many
 Advantages and disadvantages of each form