Mgt 3360 Test 3

Front 1

franchise

Back 1

a legal agreement that allows a business to be operatd using the name of the business procedures of another firm

Front 2

start-up

Back 2

a new business that is started from scratch

Front 3

buyout

Back 3

the purchase of substantially all of an existing business

Front 4

cash flows

Back 4

the actual receipt and spending of cash by a business

Front 5

asset

Back 5

something the business owns that is expected to have economic value in the future

Front 6

revolving credit

Back 6

a credit agreement that allows the borrower to pay all or part of the balance at any time; as the loan balance is paid off, it becomes available to be borrowed again

Front 7

founder

Back 7

people who create or start a new business

Front 8

synergy

Back 8

a combination in which the whole is greater than the sum of its component parts

Front 9

spin-off

Back 9

a business that is created by separating part of an operating busines into a seperate entity

Front 10

home-based business

Back 10

businesses that are operated from the owners home

Front 11

due diligence

Back 11

the process of investigating a business to determine its value

Front 12

caveat emptor

Back 12

latin: let the buyer beware

Front 13

discounted cash flows

Back 13

`cash flows that have been reduced in value because they are to b e received in the future

Front 14

book value

Back 14

the diff b/w the original acquisition cost and the amount of accumulated depreciation

Front 15

net realizable value

Back 15

the amount for which an asse3t will sell, less the costs of selling

Front 16

replacement value

Back 16

the cost to acquire an essentially identical asset

Front 17

earnings multiple

Back 17

the ratio of the value of a firm to its annual earnings

Front 18

heuristic

Back 18

a common sense rule, a rule of thumb

Front 19

point of indifference

Back 19

the price at which a buyer is indifferent about buying or not buying the business

Front 20

buy-in

Back 20

the puchase of substantially less than 100% of a business

Front 21

takeover

Back 21

seizing of control of a business by purchasing its stock to be able to select the board of directors

Front 22

ESOP

Back 22

employee stock option plan: a method for employees to purchase the business for which they work

Front 23

intangible assets

Back 23

things of value that have no physical exitence, for example, patents and trade secrets

Front 24

trade name franchising

Back 24

an agreement that provides to the franchisee only the rights to use the franchisor's trade name and/or trademark

Front 25

product distribution franchising

Back 25

an agreement that provides specific brand name products which are resold by the franchisee in a specified territory

Front 26

conversion franchising

Back 26

an agreement that provides an org thru which independent businesses may combine resources

Front 27

business format franchising

Back 27

an agreement that provides a complete business format, including trade name, operational procedures, marketing, and produts or services to sell

Front 28

industry

Back 28

the general name for the line of product or service being sold, or the firms in that line of business

Front 29

trade association aka professional association

Back 29

a group of people in the same industry who band together to gather and share info and present and prepresent the industry to the public and gov

Front 30

trade magazines

Back 30

the magazines that target specific industries and professions

Front 31

market

Back 31

the business term for the population of customers for your product or service

Front 32

scale

Back 32

a characteristic of a market that describes the size of the market- a mass market or a niche market

Front 33

scope

Back 33

a characteristic of a market that defines the geographic range covered by the market- from local to global

Front 34

mass market-

Back 34

a customer group that involves large portions of the population

Front 35

niche market

Back 35

a narrowly defined segment of the population that is likely to share interests or concerns

specific and narrow, you target only customers in the niche

Front 36

imitative strategy

Back 36

an overall strategic approach in which the entrepreneur does more or less what others are already doing

Front 37

innovative strategy

Back 37

an overall strategic approach in which a firm seeks to do something that is very different from what others in the industry are doing

Front 38

degree of similarity

Back 38

the extent to which a product or service is like another

Front 39

parallel competition

Back 39

an imitative business that competes locally with others in the same industry

Front 40

incremental innovation

Back 40

an overall strategic approach in which a firm patterns itself on other firms, with the exception of one or two key areas

Front 41

pure innovation

Back 41

the process of creating new products or services which result in a previously unseen product or service

Front 42

industry analysis (IA)**

Back 42

a research process that provides the entrepreneur w/ key info about the industry, such as its current situation and trends

Front 43

gross profit

Back 43

funds left over after deducting the cost of goods sold

Front 44

net profit

Back 44

the amount of money left after operating expenses are deducted

Front 45

profit before taxes

Back 45

the amount of profit earned by a business before calculating the amount of inocme tax owed

Front 46

benefits

Back 46

characteristics of a product or service that the target cucstomer would consider worthwild

Front 47

**entry wedge

Back 47

an opportunity that makes it possible for a new business to gain a foothold in a market

Front 48

brainstorming

Back 48

a gorup discussion in which criticism is suspended in order to generate the maximum number of ideas

Front 49

strategic direction

Back 49

the conceptualization of how a business might best move in response to the findings of a SWOT analysis- flanut, fix, fight, of flee.

Front 50

generic strategies

Back 50

three widely applicable classic strategies for businesses of all types- differentiation, cost, and focus.

Front 51

differentiation strategy

Back 51

a type of generic strategy aimed at clarifying how one product is unlike another in a mass market

Front 52

cost strategy

Back 52

a generic strategy aimed at mass markets in which a firm offers a combo of cost benefits that appleals to the customer

Front 53

focus strategy

Back 53

a generic strategy that targets a portion of the market, called a SEGMENT or NICHE

Front 54

highly fragmented industries

Back 54

collections of similar businesses in whcih virtually all firms have small market shares

Front 55

value chain

Back 55

a collection of processes and activities a small business conducts to design, produce, market, deliver, and support its product or service

Front 56

competitive advantage

Back 56

the particular way a firm implements customer benefits that keeps the firm ahead of other firms in the industry or market

Front 57

resource

Back 57

any asset, capability, organizational process, info, or knowledge that contributes to the firm's performance

Front 58

tangible resources

Back 58

assets of a firm that can be easily and concretely identified

Front 59

intangible resources

Back 59

capabilities, organizational processes, info, or knowledge of a firm that are not clearly evident

Front 60

organizational capabilities

Back 60

tha bilities, skills, and competencies used by the firm to make profits from tangivle and intangibvle resources

Front 61

transformational competencies

Back 61

the abilities of a frim to make its product or service in a way that enhances value or efficiency compared to other firms

Front 62

combinational competencies

Back 62

organizational capabilities that come from combining tangible and intangible resources in ways superior to the competition

Front 63

valuable resource

Back 63

an asset, capability, organziational process, info, or knowledge that lets a firm take advantage of opportunities or lock out competitors

Front 64

rare resource

Back 64

an asset, capability, organizational process, info, or knowlege that is not generally available to competitors

Front 65

difficult to imitate

Back 65

a resource characteristic which enhances value thru offering uniqueness to the buyer

Front 66

core competency

Back 66

the main work of a firm in a particular line of business

Front 67

industry life cycle

Back 67

the stages an industry goes thru form its birth to its ending. 5 stages: introduction, growth, maturity, decline, and death

Front 68

introduction stage

Back 68

the life cycle stage in which the product or service is being invented and initially developed

Front 69

pioneers

Back 69

a customer adoption segment characterized by customers most willing to be the first to try or have something new

Front 70

early adopters

Back 70

a customer adoption segment that purchases after pioneers

Front 71

growth stage

Back 71

an industry life cycle stage in which customer purchases increase at a dramatic rate

Front 72

customer segment

Back 72

a group or subgroup of potential purchasers that can be approached in a coherent manner

Front 73

early majority

Back 73

customer adoption segment taht purchases after early adopters, and whose demand creates a mass market

Front 74

maturity stage

Back 74

the 3rd life cycle stage, marked by a stabilization of demand, with firms in the industry moving to stabilize or improve profits thru cost strategies

Front 75

late majority

Back 75

a customer adoption segment describing people who wait until the technology has stabilized and the costs have begun to drop

Front 76

decline stage

Back 76

a life cycle stage in which sales and profits of the firm begin a falling trend

Front 77

laggard

Back 77

a customer adoption segment that holds off buying new products or services until either they are forced to or prices reach rock bottom

Front 78

retrenchment

Back 78

an organizational life cycle stage in which established firms must find new approaches to improve the business and its chances for survival

Front 79

business plan

Back 79

a document designed to detail the MAJOR characteristics fo a firm- its product or service, its industry, its market, its manner of operating (production, marketing, management), and its financial outcomes w/ an emphasis on the firm's present and future

Front 80

external legitimacy

Back 80

the extent to which a small business is taken for granted, accepted, or treated as viable by organizations or people outside the small business or the owner's family

Front 81

internal understanding

Back 81

the extent to which employees, investors, and family members involved in the business know the business's purpose and operations

Front 82

vision statement

Back 82

a very simple 5-10 word sentence or tagline that expresses the fundamental idea or goal of the firm

Front 83

tagline

Back 83

aka slogan

memorable catchphrase that captures the key idea of a business, its service, product, or customer

Front 84

mission statement

Back 84

a paragraphy that describes the firm's goals and competitive advantages

Front 85

elevator pitch*****

Back 85

a 30 second (100 words or less) action-oriented description of a business designed to sell the diea of the business to another & open door to more in-depth dialogue

should be memorable enough so listener can tell others about your business

used in one-on-one business settings when someone asks for more detail after hearing your concept

Front 86

executive summary***

Back 86

a 1-2pg (250-500word) overview of the business, its business model, market, expectations, and immediate goals.

its typically put at the start of a business plan and is the most popular summary form for a business plan & the thing everyone will read first

most widely distributed written description of the business

Front 87

cover letter

Back 87

a 1pg document on business stationary (aka letterhead) that introduces the business plan and the business owner to the recipient and indicates why the recipient is being asked to read the plan

Front 88

proprietary technology

Back 88

a product or service or an aspect of one that is kept as a trade secret or is protected legally using patent, copyright, trademark, or service mark

Front 89

preselling

Back 89

involves introducing your product to potential customers and taking orders for later delivery

Front 90

research and development

Back 90

aka R&D

the part of a business (and a business plan) that is focused on creating new products or services and preparing new technologies, ideas, products, or servies for the frims market

Front 91

pioneering business

Back 91

a firm whose product or service is new to the industry or is itself creating a new industry

Front 92

test marketing

Back 92

selling your product or service in a limited area, for a limited time

Front 93

new entrant business

Back 93

a firm whose product or service is established elsewhere, but is new to this market

Front 94

screening plan

Back 94

aka MINI-PLAN

gives the basic overview of the firm and a detailed look at the financials

Front 95

informational plans

Back 95

give potential customers or suppliers info about the compnay and its produc or service

Front 96

proof-of-concept website

Back 96

an internet based type of business plan providing info or demonstration of a product or service designed to solicit info on customer interest

Front 97

key employee/partner plan

Back 97

provides info on the compnay, product/service, market, and critical risks to prospective business or marketing partners or to prospective key employees

Front 98

invention plan

Back 98

a business plan that provides info to potential licensees.

focus on the detaiols of an invention, including intellectual property rights

Front 99

operational plan

Back 99

business plans designed to be used internally for managment purposes

Front 100

private placement memorandum

Back 100

a specialized legal form of business plan crafted by lawyers for the purpose of soliciting formal investments

Front 101

risks

Back 101

the parts of a business or business plan that expose the firm to any kind of loss- profits, sales, reputation, assets, customers, and so on.

Front 102

tangibility

Back 102

an item's capability of being touched, seen, tasted, or felt

Front 103

inseparability

Back 103

a quality of a service in which the service being done cannot be disconneted from the provider of the service

Front 104

heterogeneity

Back 104

a quality of a service in which each time it is provided it will be slightly different from the previous time

Front 105

perishability

Back 105

a service exhibits perishability in that if it is not used when offered, it cannot be saved for later use.

Front 106

core product

Back 106

the very basic description of what a product is- a bar of soap, a house cleaning service.

Front 107

augmented product

Back 107

core product plus features that tend to differentiate it from the competition

Front 108

total product

Back 108

the entire bundle of products, services, and meanings of your offereing; includes extras like service, warranty, or delivery, as well as what the product means to the customer

Front 109

target market

Back 109

the group of people on which a marketer focuses promotion and sales efforts

Front 110

me-too products

Back 110

products essentially similar to something already on the market

Front 111

inelastic product

Back 111

product for which there are few substitutes and for which a change in price makes very little difference in quantity purchased

Front 112

elastic product

Back 112

product for which there are any number of substitutes and for which a change in price makes a difference in quantity purchased

Front 113

internal reference price

Back 113

a consumer's mental image of what a product's price should be

Front 114

external reference price

Back 114

an e3stimation of what a price should be based on info external to a consumer, such as advice, advertisements, or comparison shopping

Front 115

skimming

Back 115

setting a price at the highest level the market will bear, usually because there is no competition at that time.

Front 116

prestige or premium pricing

Back 116

setting a price above that of the competition so as to indicate a higher quality or that a product is a status symbol

Front 117

odd-even pricing

Back 117

setting a price that ends in the nubmers 5,7,or 9

Front 118

partioned pricing

Back 118

setting the price for a base item and then charging extra for each additional component

Front 119

captive pricing

Back 119

setting the price for an item relatively low and then charging much higher prices for the expendables it uses

Front 120

price lining

Back 120

the practice of setting (usually) three price points: good quality, better, quality, and best quality

Front 121

periodic or random discounting

Back 121

sales conducted at either predictable or non predictable intervals

Front 122

off-peak pricing

Back 122

charging lower prices at certain times to encourage customemrs to come during slack periods

Front 123

bundling

Back 123

combining 2+ products in one unit and pricing it less than if the units were sold seperately

Front 124

multiple or bonus pack

Back 124

combining more than one unit of the same product and pricing it lower than if each unit were sold seperately

Front 125

referral discount

Back 125

a discount gicen to a customer who refers a friend to the business

Front 126

a credit agreement that allows the borrower to pay all or part of the balance at any time, as the loan balance is paid off, it becomes available to be borrowed again is considered asset spending (t/f)

Back 126

FALSE

Front 127

to determine what the business to be in is the first step in creating a start-up business (t/f)

Back 127

TRUE

Front 128

most new products and services fail to gain acceptance (t/f)

Back 128

TRUE

Front 129

synergy is a combination le (t/f)in which the parts are greater than the whole

Back 129

FALSE

Front 130

going into competition with your employer is one way that you can go about obtaining committed customers prior to start up (t/f)

Back 130

TRUE

Front 131

purchasing an existing busines requires mroe cash outlay than does creating a start-up (t/f)

Back 131

FALSE

Front 132

certainty, not educated guesses, is the primary advantage of discounted cash flow methods (t/f)

Back 132

FALSE

Front 133

rulistics are considered common-sense rules, a rule of thumb. (t/f)

Back 133

FALSE

Front 134

___ is NOT a path to fulltime business ownership:
-stand retail
-franchise
-start a new business
-buy an existing business

Back 134

STAND RETAIL

Front 135

___ is an advantage of a start-up

Back 135

clean slate

Front 136

___ is the person who starts a new business

Back 136

founder

Front 137

executive volunteers contribute their time and energy to assiting start-up and struggling small businesses as a plublic service in _____

Back 137

mentoring programs

Front 138

on average an entrepreneur suffered __ startup failures before achieving success according to one study of entrepreneurs who had successfully created a startup business

Back 138

3

Front 139

working with a partner can reduce the reisks of start up in which way?

Back 139

partners may provide capital, equipment, or advice

Front 140

_____ is a disadvantage of purchasing an existing business

Back 140

existing managers and employees may resist change

Front 141

___ is an advantage of purchasing an existing business

Back 141

business processes are already in place

Front 142

___ is NOT a suggested method to find a business for sale:

-networking
-trade journals
-internet
-stock brokers

Back 142

stock brokers

Front 143

the act of conducting interviews with the sellers of the business refers to which of the following?

Back 143

due dilligence

Front 144

3 different forms of franchising:

Back 144

trade name
product distribution
business format

Front 145

the ideas and actions that explain how a firm will make its profit refers to objective (t/f)

Back 145

FALSE

Front 146

NAICS and SIC are the 2 major classification systems that code industries (t/f)

Back 146

TRUE

Front 147

market magazines target specific industries and professionals (t/f)

Back 147

FALSE

Front 148

incremental innovation would be the business equivalent of imitation minus one degree of similarity (t/f)

Back 148

FALSE

Front 149

benefits can focus on value added to the products or services or on the cost of the products or services (t/f)

Back 149

TRUE

Front 150

S in SWOT stands for system (t/f)

Back 150

FALSE

Front 151

brainstorming occurs when ideas lead to conflict (t/f)

Back 151

FALSE

Front 152

2 types of resources:

Back 152

tangible and intangible

Front 153

the idea and actions that explain how a firm will amke its profits refers to....

Back 153

strategy

Front 154

____ with the ___ tool is the second step of the small business sstrategy process

Back 154

benefits
SWOT analysis

Front 155

___ refers to geographic range while __ refers to the size of the market

Back 155

scope
scale

Front 156

benefits can focus on what 2 things?

Back 156

value and cost

Front 157

W in SWOT stands for:

Back 157

weakness

Front 158

___ occurs because government agencies provide for quotas of purchases from small businesses

Back 158

favored purchasing

Front 159

in the VRIO analysis, V stands for...

Back 159

value

Front 160

"when outsiders expect it" is one circumstance under which creating a business plan is absolutely necessary (t/f)

Back 160

TRUE

Front 161

according to research, without a business plan firms are more liekly to close down (t/f)

Back 161

TRUE

Front 162

suitable for investors, bankers, and lawyers to read, executive summaries are written in a formal style (t/f)

Back 162

TRUE

Front 163

a business model is described in the last part of the company's background (t/f)

Back 163

TRUE

Front 164

for an existing business, the financial section should report 5-year projections and not the past years since progress forward is what bankers lend you money for. (t/f)

Back 164

FALSE

Front 165

the marketing plan is the only type of plan that adds material and value to full busines plan (t/f)

Back 165

FALSE

Front 166

___ is NOT a business plan concern of family and friend investors

Back 166

competitive advantage

Front 167

all of these are business plan concerns of bankers EXCEPT:
-asset/collateral base
-monitoring compliance
-cash flow and cash cycle
-long-term prospects

Back 167

MONITORING COMPLIANCE

Front 168

___ is not included in the business planning rpesentation types

Back 168

annual objectives

Front 169

what is the length of an elevator pitch?

Back 169

60-100 words

Front 170

the appropriate size for a business plan, where the type of business is well established is...

Back 170

10 pages

Front 171

___ is NOT an idea that good marketing strategy focuses on

Back 171

harvesting the business plan

Front 172

___ is a statement that is not expected in the business plan

Back 172

SEC filing statement

Front 173

all of these are special purpose plans EXCEPT:
-business plan
-screening plan
-invention plan
-informational plan

Back 173

BUSINESS PLAN

Front 174

out of the total population of people you approach, ___ is the percentagee of people who buy.

Back 174

hit rate

Front 175

perishable products can be saved for a good deal of time (t/f)

Back 175

false

Front 176

a balanced combo of goods and services describes a hybrid product (t/f)

Back 176

true

Front 177

the personality of a business is set by the brand (t/f)

Back 177

true

Front 178

idea evaluation/feasibility study is the first stage of new product development process (t/f)

Back 178

false

Front 179

the first state of the product life cycle is imagination (t/f)

Back 179

false

Front 180

acceptance of the product increases rapidly, and sales and profits grow at higher rates during the maturity stage than at any other part of the product life cycle (t/f)

Back 180

false

Front 181

price is a major factor in determining customer's perceptions of quality (t/f)

Back 181

true

Front 182

the difference between the selling and buying price is called ____ and should be enough to cover all fixed costs

Back 182

mark-up

Front 183

a product can include all of these except ___
-price
-ideas
-people
-goods

Back 183

price

Front 184

___ in the new product development process is the stage that comes after idea generation

Back 184

idea screening

Front 185

about __% of about 100,000 patents last year issued by the US Patent Office are profitable

Back 185

.1

POINTE ONE

Front 186

about what percent of all new product launches are successful?

Back 186

60

Front 187

if they have a coupon, about __% of Americans are willing to switch brands

Back 187

64

Front 188

5 ways to get into small business managment:

Back 188

-start a new business (START-UP)
-buy an existing business.
-franchise a business.
-inherit a business.
-be hired to be the professional manager of a small business.

Front 189

start ups may be ___ or they may ____

Back 189

deliberate, well planned, and financed


just happen

Front 190

earn-outs

Back 190

when the business is bought over a period of time with money earned from the business

a way to BUY AN EXISTING BUSINESS

Front 191

"turnkey"

Back 191

every part of setting up the business is handled by professionals

a type of FRANCHISE

Front 192

its common for hired management to use ____ or ____ to purchase the firms for which they work

Back 192

leveraged buyouts

employee stock option plans

Front 193

___ is the most risky path into business and the path that promises the greatest rewards for success

Back 193

starting a new business

Front 194

__% of new employers survive 2 years or more, __% surbibe at least four years, and __% survive more than six years, and businesses that ____ last much longer.

Back 194

66
50
40
get help

Front 195

__% of start ups that begin in business incubators are still in operation 5 years later

Back 195

87

Front 196

survival rates for students from entrepreneurship programs and entrepreneurs seeking help from Small Business Development Centers are __ that of businesses in general

Back 196

twice

Front 197

many businesses that end do so not b/c they failed, but b/c the owner took advantage of a better oppertunity (t/f)

Back 197

TRUE

Front 198

advantages of start-ups: (4)

Back 198

-clean slate
-provides the owner w/ the opportunity to use the most up-to-date technolagies; no "legacy"
-can provide new, unique prodcts/services that are not available from existing businesses
-can be kept small deliberatel to limit the magnitude of possible losses

Front 199

clean slate-

Back 199

no existing employee problems, debt, lawsuits, contracts, or other legal commitments that must be satisfied

Front 200

existing businesses and franchises exist b/c of their success in providing proven products and services (t/f)

Back 200

true

Front 201

a purchased business or franchise requires immediate and constant cash flows to meet ongoing obligations (t/f)

Back 201

true

Front 202

disadvantages of start ups- (5)

Back 202

-no initial name recognition
-will require significant time to become established and provide positive cash flows
-can be difficult to finance
-usually cannot easily gain revolving credit from suppliers and financial institutions
-may not have experienced managers and workers

Front 203

first step in creating a start up business:

Back 203

determine what the business is to be

Front 204

majority of start up businesses are ___

Back 204

"me-too" enterprises

Front 205

___ provides some protection from business failure

Back 205

starting a copycat business

Front 206

is it necessary to define the business to the market in a me-too/copycat business?

Back 206

no

Front 207

what is often the only competitive advantage to a me-too/copycat start up?

Back 207

the location

Front 208

the specific concept that leads to a start-up business usually comes from ___

Back 208

the experience of the person starting the business

Front 209

__ of all start ups are based on ideas from prior work experience, hobbies, and family businesses. these businesses are ___ likely to succeed than businesses based on ideas from other sources

Back 209

2/3

more

Front 210

one of the best predictors of success in start-ups is...

Back 210

the level of experience of the foudners

Front 211

the probability of creating a successful start up is increased greatly when the founder ___ and when the founder ___.

Back 211

has certain attributes
takes certain actions

Front 212

top 12 indicators of start up success:

Back 212

-start the business in a business incubator
-take part in a mentoring program
-have a detailed start-up budget
-produe a product or service for which there is a proven demand
-secure outside investment
-start w/ more than one founder
-have experience managing small firms
-have industry experience
-have previous experience in creating a start up business
-choose a business that produces high margins
-start the business with established customers
-build trust in your "story"

Front 213

margins-

Back 213

the amount by which sales prices exceed product cost

Front 214

high margins...

Back 214

provide a buffer for lots of mistakes

Front 215

greatest hurdle to a successful start up:

Back 215

obtaining and maintianing sufficient cash to support both operations and growth

Front 216

when margins are low, loss of any one sale or customer...

Back 216

has an immediate effect

Front 217

the problem of replacing the lost margin is much easier if

Back 217

you have to make only 1 or 2 sales or get 1 or 2 new customers to make up for lsot business

Front 218

3 ways to obtain committed customers prior to start up:

Back 218

-start your new business as a SPIN OFF**
-start a business to specifically go into competition with your employer
-start a business to subcontract services to an established business

Front 219

a SPIN OFF is a regular business practice thaqt is done by businesses of all sizes and at all stages of development (t/f)

Back 219

TRUE

Front 220

some spin offs are created to get rid of ___, which ____

Back 220

noncore activities

reduces capital requirements of parent firm and provides tighter focus for mgmt on the remaining business

Front 221

spin-offs can be created when the parent lacks either ___ or ____ to pursue the oppertunity. by being spun off, the start-up can gain access to....

Back 221

the interest or the resources


resources other than those of the parent

Front 222

__% of all businesses are HOME BASED (around ___ firms), a good idea to reduce cash flow requirements for start up.

Back 222

53

12 MILLION

Front 223

if you find a PARTNER, the founder of the start-up may either...

Back 223

-reduce the amount of personal investment in time and money required to make the business succeed,

OR

-leverage the contributions of the partner to provide faster growth and higher returns on the investment made in the start-up

Front 224

a new product or service idea often areises from the work being done in the current employment of a start-up founder (t/f)

Back 224

true

Front 225

FRANCHISING

Back 225

a legal agreement that allows one business to be operated using the name and business procedures of another

Front 226

what is the most ubiquitous franchise worldwide?

Back 226

McDonalds

Front 227

McDonalds ahs ___ restaurants in more than ___ countries

Back 227

30,000
100

Front 228

approx. __% of McDonald's restaurants are owned by independent businesspeople who operate them in a franchise relationship. the remainder are ____.

Back 228

73

company stores

Front 229

most franchisors are ____ businesses, most franchisees are ___

Back 229

large

small

(McDonalds Corporation is a large business, McDonald's franchisees are small businesses.)

Front 230

franchises are agreements b/w two entities:

Back 230

-FRANCHISOR- sets conditions and standards and grants operating permissions

and

-FRANCHISEE- pays a fee for the rights and agrees to abide by the conditions and standards

Front 231

4 elements essential for an agreement to constitute a franchise:

Back 231

-agreement provides the franchisee w/ legal right to engage in the business of offering, selling, or distributing goods or services
-agreement provides that the franchisee may engage in business using a marketing plan or system provided by the franchisor
-agreement grants the franchisee use of a brand name, trademark, ervice mark, logo, etc which designates the franchisee as an affiliate of the franchisor
-agreement requires the franchisee to pay a fee for the right to enter into the business

Front 232

the value of a franchise is determined by ___ and ____.

Back 232

the rights granted

the cash flow potential to the franchisee

Front 233

4 basic forms of franchising:

Back 233

-trade name franchising
-product distribution franchising
-conversion franchising
-business format franchising

Front 234

McDonalds uses ___ franchising

Back 234

business format

Front 235

master franchises-

Back 235

require opening multiple stores within a specified area

master franchisees are required to open a minimum number of stores w/in a specified time period, which they may do by selling SUBFRANCHISES w/in the development area

Front 236

advantages of franchising:(3)

Back 236

-franchisee receives the benefit of a proven successful business model
-franchisees recieve training and management support
-less risky than either starting a new business or acquiring an operating business

Front 237

the fees that franchisors charge are the price you pay to....

Back 237

reduce your risk of failure

Front 238

disadvantages of franchising:(2)

Back 238

-you give up control of marketing and operations, and you will be regularly inspected to make sure your meeting contract standards. if you fail, franchisor has the right to take your business from you.
-your success is determined to a large extent by the success of the franchise itself

Front 239

8 of the top 10 franchises overall are in the ____

Back 239

service industry

Front 240

once you've identified a potential franchise, you should perform ____ just as if you were buying an operating business.

Back 240

due diligence

Front 241

what your most interested in when choosing a franchise:

Back 241

stability, integrity, and financhial performance of the franchisor

Front 242

before buying a franchise...

Back 242

interview current franchisees and talk to competing franchisors and their franchisees

Front 243

2 key documents you should personally study before signing that you will always receive from a franchisor:

Back 243

UFOC uniform franshise offering circular

and the FRANCHISE AGREEMENT

Front 244

UFOC

Back 244

standard document franchises use to explain operations, requirements, and costs to potential franchisees

you can get a guide to help interpret the UFOC at the federal trade commission site.

Front 245

franchise agreement

Back 245

the specific contract signed, often incoprorating the info included in the UFOC

Front 246

what you need to know before signing a franchise: (4)

Back 246

-if and how you can transfer the franchise license to someone else
-how you may terminate the contract
-how the franchisor may terminate the contract
-what disclosures you are required to make

Front 247

an unscrupulous franchisor has an opportunity to take over your successful business at a bargain price if the contract...

Back 247

restricts or prohibits you from transferring the franchise to another or if it requires that you achieve unrealistic results to be able to renew

Front 248

the minimum disclosure standards that a franchisor must meet are specified by...

Back 248

Rule 436 of the Federal Trade Commission

Front 249

strategies for starting a business from scratch:

Back 249

-having a home based business
-partnering
-bringing individuals who have special competencies into the business
-your current employer may provide assistance if he's not a direct competitor

Front 250

STRATEGY-

Back 250

the idea and actions that explain how a firm will make its profit

defines fo you, your customers, and your competition how your business operates

Front 251

not all small businesses have a strategy (t/f)

Back 251

false

Front 252

good strategy leads to ___ and ___

Back 252

greater chances for survival

higher profits

Front 253

what makes a strategy good?

Back 253

its fit to the particulars of your business and the resources you can bring to it

Front 254

most small businesses are more ___ than ____

Back 254

imitative

innovative

Front 255

4 steps in the SMALL BUSINESS STRATEGY PROCESS:

Back 255

1.prestrategy
2.benefits
3.strategy
4.competitive advantage

Front 256

stage 1: prestrategy

Back 256

-decide what product/service you intend to offer (industry, imitation/innovation)

-and the general nature of your intended market (scale, scope)

tool: INDUSTRY ANALYSIS

Front 257

__ of all millionaires are self-employed

Back 257

2/3

Front 258

key to success is selecting an industry that...

Back 258

offers good potential for making a profit and attractive opportunities to work w/ a minmum of risk and competition

Front 259

trade association/professional association

Back 259

group of people in the same industry who band together to gather and share info, as well as present and represent the industry to the public and gov

Front 260

2 market decisions that need to be made in the PRESTRATEGY phase:

Back 260

SCALE- size of the market- a mass market or a niche market?

SCOPE-defines the geograhic range covered by the market- from local to global

Front 261

most industries have both mass and niche markets (t/f)

Back 261

TRUE

Front 262

market SCOPE is related to ____

Back 262

market scale

Front 263

market scopes:

Back 263

LOCAL-hood or city
REGIONAL- metropolitan area or state
NATIONAL
INTERNATIONAL- 2 or a few countries
GLOBAL

Front 264

2 reasons market scope is important:

Back 264

-knowing your market scope helps decide where to focus sales and advertising efforts
-knowing target market gives you a way to determine which potential competition you need to worry about the most, namely those also in your SCOPE.

Front 265

__(immitation or innovation)__ is the classic business approach, and 2/3 of people starting small businesses use it.

Back 265

immitation

Front 266

most firms use imitation plus or minus one degree of similarity. this would be the businesss equivalent of....

Back 266

cloning

Front 267

entrepreneurs use industry analysis to _____.

____ makes the difference b/w success and failure.

Back 267

find out what the profits are in an industry in order to better estimate possible financial returns.

finding out how those profits are generated

Front 268

with info from the IA, you can tell if the industry...

Back 268

-is growing, stable, or in decline, and what the degree of competition is
-meets your needs for income (profits/revs), financial growth (trend of industry), and competitive challenge (# and concentration of competitors)

Front 269

IA can also help you determine...

Back 269

if you have or can get the expertise needed to run a profitable business

Front 270

stage 2: benefits

Back 270

key strategic decision

focus on value added to the product or service or on the cost of the product or service: choose VALUE VS COST BENEFITS

-entry wedges

TOOL: SWOT analysis

Front 271

value benefits-

Back 271

can include quality, style, delivery, service, technology, ease of shopping, personalization, assurance, place, brand, or reputation, belonging, or altruism

can charge a premium to make a higher profit

Front 272

cost benefits-

Back 272

can come from lower costs, savings brought on by scale or scope, or from greater efficiencies resulting from thorough learning or superior organizational practices

can also make higher profit by lowering cost of doing business

Front 273

Karl Vesper-

Back 273

success depends on picking the right ENTRY WEDGE to get into the market

suggested 7 wedges specific to small businesses pursuing an IMITATION STRATEGY:
-supply shortages
-unutilized resources
-customer contracting
-second sourcing
-market relinquishment
-favored purchasing
0government rules

Front 274

SWOT analysis

Back 274

strength
weakness
opportunity
threat

a strategic planning tool that looks critically at these factors

best known strategic planning tool

used to organize and perform an analysis of your company's current and future resoources and situations

provides one of the best ways to organize your thinking about how to pursue the benefits you have identified as important to your customers

Front 275

strenghts-

weaknesses-

Back 275

characteristics that give an advantage over others in the industry

"" disadvantage ""

Front 276

oppertunities-

Back 276

chances to make greater sales or profits in the environment

Front 277

threats-

Back 277

elements in the environment that could cause trouble for the business

Front 278

in a SWOT analysis, you gather info from....

Back 278

yourself and others who know you, your company, the market, and the industry, and also talk to potential customers

Front 279

questions in SWOT analysis are ____ and can be obtained from ______(3).

Back 279

SWOT topics (what do you see as threats in the industry?)

formal interviews
informal interviews
brainstorming

Front 280

rule of brainstorming:

Back 280

no critisizing

only questions that can be asked are to clarify

Front 281

at the end of the SWOT analysis, you make a decision about the ___ of the business, and FINALLY _______. the way to make this work is by ____

Back 281

STRATEGIC DIRECTION(flaunt,fix,flight,or flee)

match it against the benefits sought by your market

having your enefits come up in the opportunities you and others see for the industry and market. strengths should support benefits.

Front 282

step 3: strategy selection

Back 282

-generic strategies (differentiation, cost, focus)
-fragmented industry strategies
-supra-strategies

TOOL: value chain analysis

Front 283

3 classic/generic strategies:

Back 283

differentiation

cost

focus

Front 284

supra-strategies

Back 284

seven classic benefit combonations

Front 285

harvard professor michael PORTER

Back 285

offers strategies for small businesess in industries in which virtually all firms have small market shares (aka in HIGHLY FRAGMENTED INDUSTRIES)

also popularized VALUE CHAIN ANALYSIS

Front 286

Porter's 4 cost-driven strategies for small business:

Back 286

-use FORMULA FACILITIES where you benefit from buying a prepackaged business
-BARE BONES/NO FRILLS PROVIDER- keeping prices super low by cutting back on decor, hors, or employees
-BACKWARD INTEGRATION- cutting out the intermediary
-TIGHTLY MANAGE DECENTRALIZATION- once you know how to efficiently run one type of business, it often becomes easier to open related firms

Front 287

2 outcomes evaluated for each component in the value chain:

Back 287

what each of these elements can add to the profit margin

how each component contributes to the strategy of the firm

Front 288

idea of value chain analysis:

Back 288

think thru the diff parts of the business w/ an eye toward getting the most bang for the buck from each part of the firm when pursuing your supra strategy

Front 289

stage 4: competitive advantage

Back 289

-resources (tangible or intangible)
-organizational capabilities

TOOL: VRIO analysis

Front 290

Porter's 5 threats of competition:

Back 290

-existing firms
-potential entrants
-substitutes
-suppliers
-buyers

Front 291

2 types of competencies in organizational capabilities:

Back 291

transformational
combinational

Front 292

2 ways to discourage competitors:

Back 292

-locking in customers
-inhibiting or retarding imitation

Front 293

5 stages of the industry lifecycle:

Back 293

introduction
growth
maturity
decline
deat

Front 294

introduction stage

Back 294

the time for niche strategies- customer segment is pioneers and early adopters

Front 295

growth stage

Back 295

customer segment is the EARLY MAJORITY- purchase after early adopters, demand creates a mass market. they popularize trends identified by the early adopters

differentiation approach focusing on different freatures

Front 296

maturity stage

Back 296

customer segment is late majority

Front 297

decline stage-

Back 297

customer segment is laggards

Front 298

in between decline stage and death stage, entrrepreneurs may find a way to revitalize an industry, refferred to as ____

Back 298

retrenchment

Front 299

2 circumstances when creating a business plan is absolutely necessary:

Back 299

when outsiders expect it

for internal understanding

Front 300

elevator pitch: structure

Back 300

-hook
-purpose of the good/service
-for NEW: give more details about how it works. for OLD: say what makes it unique/superior to competition
-ends w/ WHERE YOUR BUSINESS IS NOW


sounds like a sales pitch

listeners may be customers or investors

Front 301

executive summary: structure

Back 301

GIVES THE MOST DETAIL

series of 3-4 sentence paragraphs, each w/ a particular topic:
-product
-market
-competitive advantages
-managemnt
-business
-finances


no fixed order, but most important is markets, advantages, and management.

Front 302

tagline-

Back 302

expresses fundamental idea or goal of firm

aka slogans, mantra

good way to present VISION STATEMENTS, b/c its brief and memorable

Front 303

MISSION STATEMENT-

talks in terms of ...

rarely iscusses __ but often mentions ___

Back 303

closely related to vision statement- takes its description of the firms goals and adds competitive advantage info

what will make a difference for the customer or the industry

profits, entry wedge

Front 304

mission statements are oriented toward...

Back 304

thos einside the firm or to formal investors

Front 305

mission statements cover...

Back 305

everything important: competitive advantages, position in industry, attitudes towards customers competitors and environment

Front 306

best mission statements are...

Back 306

simple, short, and direct

Front 307

six risks that are THREATS TO BUSINESS that can cause readers to evaluate a plan negatively:

Back 307

-overstated numbers
-uncertain sales (especially conversion rates)
-overlooked competition
-experience deficits
-inadequate cushion
-inadequate payback

Front 308

conversion rate-

Back 308

% of people who buy out of the total population of people you approach

aka HIT RATE

Front 309

best test of conversion rates/hit rates: (2)

Back 309

TEST MARKETING- selling in a litmited area for a limited time

or PRESELLING- introducing to potential customers and taking orders for later delivery

Front 310

overlooked competition-

Back 310

know your immediate competitors, substitutes, and potential competitors

Front 311

experience defecits-

successful firms possess or develop all 4 types of experience:

Back 311

-in the line of business
-in the industry
-in the locality
-in managing

Front 312

inadequate cushion-

have enough cash to survive ____ to avoid risk

Back 312

most common reason for business closure is lack of financial resources

3 months

Front 313

new product development process can take from __ for me-too products to ___ for new ones

Back 313

hours

years and years

Front 314

t/f: some steps in the new product development process can be skipped for me-too products

Back 314

true

Front 315

5 steps to new product development process:

Back 315

1. idea generation/source of business ideas
2. idea screening for business potential
3. idea evaluation/ feasability study
4. product development
5. commercialization

Front 316

traditional idea generator:

Back 316

something an entrepreneur needs or wants that they either cant find or cant find the way they want it

Front 317

new way to find oppertunities in the idea generation stage:

Back 317

use the SCAMPER approach

Front 318

idea screening-

Back 318

process of selecting the most promising ideas to be further evaluated for feasibility

Front 319

six areas which are important to consider when screening ideas:

(from the ___)

Back 319

-PRODUCT-innovativeness and uniqueness
-MARKET-customer need and market size
-INTELLECTUAL PROPERTY
-PEOPLE BEHIND THE IDEA
-ADDITIONAL RESOURCES NEEDED TO BRING THE IDEA TO THE MARKET
-PROFITABILITY OF THE IDEA

i2p analysis

Front 320

in an i2p analysis, __ are listed across the top of the grid and ___ are listed vertically. then, each idea is given a ____

Back 320

ideas

important factors

numerical score for each factor, and scores are totaled.

Front 321

idea evaluation-

Back 321

exhaustive process of specifying the details of each idea's technological feasibility, its cost, how it can be marketed, and its market potential. also considers how the idea fits with the mission and goals of your business

Front 322

basic tool for idea evaluation: ___

5 components:

Back 322

feasibility analysis

I. Business Description
II. Product/Service Description
III. Industry and Market
IV. Basic Financial Projections
V. Future Action Plan

Front 323

3 typical outcomes of feasibility analysis:

Back 323

1. idea cannot be economicaly made into a product or service
2. resulting product or service workds, but dow not appeal to a large enough market (or is not worth enough to them) to make the effort profitable
3. the product or service works, has a market, and could be profitable, but you need to get additional people, funding, or other resources to make it into a successful business

Front 324

concepts that survive to the ___ stage are ready for formal development. the first versions are called ___ and are used for ____

Back 324

PRODUCT DEVELOPMENT

prototypes

further consumer testing

Front 325

once prototype is developed and tested, product is ready for TEST MARKETING-

Back 325

selling the prototype in either a real or simulated market environment

Front 326

standard test marketing-

Back 326

introduces the product and the marketing strategy in the actual environment

Front 327

small businesses primarily choose ____ markets and conduct ___ tests than large businesses

Back 327

smaller local

fewer

Front 328

test marketing reduces ___ and identifies weaknesses in ___

Back 328

potential for failure

product, advertising, price, or distribution method

Front 329

simulated test markets-

Back 329

re-create the marketing environment

can be computer generated

safe, but don't always reflect actual buying behavior

can be expensive

Front 330

commercialization-

Back 330

the process of making the new product available to consumers

very expensive

Front 331

by commercialization, only __% of all new product launches are successful

Back 331

60

Front 332

limited rollout-

Back 332

how smaller firms introduce their products: city by city or region by region in a gradual fashion til their potential market is covered. mistakes made in earlier markets can be fixed before rolling out to additional markets

allow competitors to anticipate your moves

Front 333

if your great on ideas but don't want to get into details of manufacturing the product, get a ___

Back 333

contract manufacturer

Front 334

price-

Back 334

NOT the cost of the item plus profit

implies value or worth

Front 335

most owners of small bsuinesses dont have a specific pricing strategy, but set prices using ____

Back 335

more or less arbitrary heuristic- guess the best price by using a formula

Front 336

4 main reasons entrepreneurs pay so much attention to the issue of price:

Back 336

1. its a major factor in determining customers perceptions of quality and desirability
2. its directly related to gross revenue AND to volume you can attain
3. its the easiest of all marketing variables for a business owner to change
4. its an essential part of competitive strategy

Front 337

optimum price is a function of 4 things:

Back 337

1. demand for the product or service
2. value delivered to the customer
3. prices set by competing firms
4. your business strategy and product placement

Front 338

___ is the most important factor in setting prices

Back 338

market demand

Front 339

the ____ is second in order of importance to the pricing decision

Back 339

value delivered to consumers

Front 340

the problem with using your csots as the basis for setting price is that

Back 340

your costs are irrelevent to the value of your product or service

Front 341

to determine the impact of price change and to set the change appropriately, you need to know if your product is __ or ___

Back 341

elastic or inelastic

Front 342

how to set prices

Back 342

-decide what is the right price
-examine the existing market prices for similar products and services
-consider your business costs

Front 343

if your operating below capacity, the right price is one that is....

Back 343

low enough to fill your production capacity and keep your key employees working

Front 344

if your trying to make your business grow or if your preparing to exit the business, the right price is...

Back 344

one necessary to capture a desired market share or to meet a specific profit target, given an anticipated level of sales volume

Front 345

if your operating profitably near your business's max capacity, the right price is the one that

Back 345

maxiizes the probability of a sale w/o leaving money on the table

Front 346

___ is the best option for a small firm

Back 346

maximizing profits

Front 347

price escalation-

Back 347

everyone who handls your product expects to make something off it

end price to customer might be 4x what you made

Front 348

its a (bad/good) idea for small firms to compete on price

Back 348

bad

Front 349

periodic discounting-

Back 349

sales that happen on a regular cycle, like once a month

Front 350

random discounting-

Back 350

running a sale without a definate pattern or cycle

Front 351

__% of coupons are deliverd thru newspaper

Back 351

80

Front 352

__% of all consumers spend more money in stores with loyalty programs

Back 352

45

Front 353

__/100 small businesses in financial trouble have set their prices too low

Back 353

99

Front 354

__-__% of consumers decide on a product using rpice as the number one factor

Back 354

15-35

Front 355

__% cannot accurately recall the price on something they bought 2 wks ago

Back 355

80