Entrepreneurism. Chapters 10

Front 1

Characteristics of an industry that make it difficult to start new ventures

Back 1

Barriers to entry

Front 2

A road map for starting and running a business; also used as a sales document to convince bankers, venture capitalists, family, friends, and even oneself to invest in the business.

Back 2

Business Plan

Front 3

An entrepreneur writes the executive summary to the business plan first.(T or F)

Back 3

False

Front 4

The business plan describes an investment opportunity.
(T or F)

Back 4

True

Front 5

Entrepreneurs should avoid discussing potential barriers for the new venture in their business plan. (T or F)

Back 5

False

Front 6

A target market is a group of other companies in the same industry. (T or F)

Back 6

False

Front 7

Examples of demographics are "growth" and "maturity."
(T or F)

Back 7

False

Front 8

Sociographics are the tendencies for people to identify with a particular cause or group (T or F)

Back 8

True

Front 9

Entering an emerging industry that does not have an established market typically requires less capital.
(T or F)

Back 9

False

Front 10

When entering a mature-phase industry, execution is more important than innovation.
(T or F)

Back 10

True

Front 11

The balance sheet shows the status of the business at a particular point in time.
(T or F)

Back 11

True

Front 12

Variable expenses such as cost of goods sold are listed on the balance sheet.
(T or F)

Back 12

False

Front 13

The basic outline for a business plan includes all of the following except

Back 13

A personal credit check

Front 14

The people most likely to become customers of a business are its

Back 14

Target market

Front 15

An emerging industry is often characterized by ________ growth

Back 15

Fast

Front 16

During which industry phase will the entrepreneur have the most trouble obtaining a significant market share?

Back 16

Growth phase

Front 17

In which of the following marketing strategies does a company build market share by moving from one niche to another?

Back 17

Guerilla

Front 18

Seven good reasons that entrepreneurs should write a business plan:

Back 18

1)To sell oneself on the business
2)To obtain bank financing
3)To obtain investment funds
4)To arrange strategic alliances
5)To obtain large contracts
6)To attract key employees
7)To motivate and focus the management team.

Front 19

A business plan should include the following...

Back 19

- Executive summary
- Company information
- Product or service description
- Competitive analysis
- Market analysis
- Industry analysis
- Management team
- Marketing plan
- Financial projections

Front 20

The _________ is probably the most important section of any business plan

Back 20

Executive summary

Front 21

Here are some tips for writing an effective executive summary:

Back 21

1) Write everything else first
2) Write in plain language
3) Describe the business
4) Describe the market size
5) Identify the target market share
6) Identify competitive advantages
7) Describe the investment opportunity

Front 22

The company's information section includes...

Back 22

- Basic details about the company
- The company’s legal form and state or country in which the business is incorporated
- The ownership structure of a business
- The company’s mission statement
- A brief overview of the company’s operating history
A brief statement about how the venture was conceived can be useful

Front 23

The product or service section describes the new venture's product or service in details...

Back 23

- Sufficient to enable investors a working understanding of what the company sells
- May include photographs, schematic drawings, and descriptive scenarios about how the product or service is used by customers
- If patents, copyrights, or other forms of intellectual property protection have been put in place, this section highlights the status of those measures
- Entrepreneurs writing this section focus on the benefits of each feature of their product or service

Front 24

Writing in the section of products and services focus on the benefits on each of their product or service.

Features refers to what the product is, and benefits refer to what the product...

Back 24

Does

Front 25

The new venture will likely encounter various...
as it attempts to distribute its products or services in markets already served by existing competitors

Back 25

Barriers to entry

Front 26

The competive analysis section examines...

Back 26

- The markets that the competitors serve and the strategies they employ in those markets
- The various barriers to entry encountered as it attempts to distribute its products or services in markets.
- The expected response from competitors when the new venture enters the existing markets.
- Reasonable judgments that might occur and counterstrategies to combat them.
- A features and benefits matrix that highlights the new venture’s product or service

Front 27

The market analysis section of the business plan is designed...

Back 27

- To provide insights into the target market for the products or services offered by the venture
- There are several common ways for entrepreneurs to delineate the market for their new venture, including:
* Demographics
* Psychographics
* Geography
* Sociographics

Front 28

There are several common ways for entrepreneurs to delineate the market for their new venture, including:

Back 28

- Demographics
- Psychographics
- Geography
- Sociography

Front 29

Demographics refers to readily identifiable characteristics of an individual or a group snf include...

Back 29

- Age
- Income
- Sex
- Race
- Ethnic background
- Marital status
- Home ownership
- Educational background

Front 30

_______ refers to group or individual characteristics that are less readily observable. These variables, with terms such as attitude, taste, or values, describe psychological states or tendencies associated with individuals or groups

Back 30

Psychographics

Front 31

Markets that are confined to a particular location can be described using terms from ________

Back 31

Geography

Front 32

_______ refers to the tendency for people to identify with a particular cause or social group

Back 32

Sociographics

Front 33

The industry analysis section of a business plan focuses on...

Back 33

Identifying the current health, maturity, and future prospects of the industry
* Industry health: Whether the industry is marked by innovation, growth, and dynamism, or whether it is in decline.
* Maturity: A reflection of its health.

Growth stage: Achieved critical mass in terms of market size and now has enough active customers to sustain a growing number of competitors.
* The challenge is whether the company can scale itself quickly enough to capture a significant market position

Despite the growth in the industry, many new ventures fail during this phase of the industry life cycle.

Mature stage: Characterized by steady or slowly growing industry-wide revenues.
- A few well-established brands dominate the industry and control much of the market share.
- Despite the lack of growth, the mature stage can be attractive to a new venture due of the industry’s stability.
- Innovation is less important than outright execution.
- Customers have well-established buying patterns and preferences.

Decline stage: Characterized by falling industry-wide revenues, consolidation of competitors, and falling prices and profit margins.
- Tend to eliminate competitors who are least efficient in their delivery of products and services

Another industry variable that a business plan addresses is the future prospects of the industry.

There can be several ways of forecasting industry trends.
- Direct means: to plot industry size over the past five to ten years on a graph and then extrapolate the graph forward.
- To examine what industry analysts are saying about an industry’s growth potential is yet another way.

Front 34

An ______ industry is often characterized by rapid growth and frequent and dramatic changes. An _____ industry often has a long period during which it struggles to establish itself in the minds of its primary customers.

Back 34

Emerging

Front 35

A _____ industry is one that has achieved critical mass in terms of market size and now has enough active customers to sustain a growing number of competitors

During the _______ stage, the challenge is whether the company can scale itself quickly enough to capture a significant market position.

Back 35

Growth

Front 36

The _______ stage of an industry is characterized by steady or slowly growing industry-wide revenues

Back 36

Mature

Front 37

An industry that is in _______ is characterized by falling industry-wide revenues, consolidation of competitors, and falling prices and profit margins.

_______ industries tend to eliminate competitors who are least efficient in their delivery of products and services.

Back 37

Decline

Front 38

The part of the business plan that discusses the __________ emphasizes the relevant expertise that each team member brings to the enterprise. The section should not include each person's résumé but, rather, a brief (one or two paragraphs) biographical description of each management team member's experience, education, and duties. It's important to highlight the strengths that each team member brings to the venture

Back 38

Management Team

Front 39

The marketing plan describes...

Back 39

- How the new venture intends to enter its chosen markets
- How it intends to acquire customers
* Market entry strategy describes the approach the firm takes to introduce its products.
* Firms can use a wide range of market entry strategies, including the onslaught strategy, guerrilla marketing, and the feint strategy.
* Marketing techniques range from advertising to public relations and promotions.
- The marketing plan budget specifies the likely costs of the early-stage advertising and promotions campaigns.

Front 40

________ describes the approach the firm takes to introduce its products. Firms can use a wide range of market entry strategies, including the onslaught strategy, guerrilla marketing, and the feint strategy

Back 40

Market entry strategy

Front 41

With the _______ the venture enters the market visibly and directly, attempting to compete head-to-head with the existing firms in the market. The ______ is risky, requiring that the venture specify in detail how it intends to deal with the potential backlash from the existing competitors.

Back 41

Onslought strategy

Front 42

________ is used when the venture wants to avoid competing head-to-head with the established firms in the market

Back 42

Guerilla Marketing

Front 43

The _____ strategy is also useful when a new venture is entering an industry with established and dominant competitors. This tactic calls for the venture to make a highly visible entry into a particular market niche. At the same time, the venture quietly enters another market niche that is the true target of its intentions.

Back 43

The feint strategy

Front 44

_______ in a business plan usually include a sales forecast, income statement (also known as a profit and loss statement), cash flow statement, and balance sheet

Back 44

Financial Projections

Front 45

The _______ is a straightforward document that lists the various products or services that the company intends to sell, the price they will sell at, and the number of units of each item that will be sold each month.

Back 45

Sales forecast

Front 46

The ____ records the venture's gross revenues per month and subtracts all monthly expenses, both variable and fixed

Back 46

Income statement

Front 47

The _______________ tracks the movement of cash into and out of the venture. This important statement helps the business owner track the venture's liquidity

Back 47

Cash Flow statement

Front 48

The balance sheet equation is:

Back 48

Assets = Liablities+Owner's Equity

Front 49

A snapshot of how the venture is using money it earns through operations
How money that has been invested or loaned

Enables a quick review of the company’s debt-to-equity position and other so-called key ratios

Back 49

Balance Sheet