1) Introduction: Entrepreneurship- thriving in chaos Flashcards
What characterizes the 21st century in terms of change and uncertainty?
The 21st century is marked by continuous, unpredictable, and often turbulent change. The pace of change has accelerated, making it increasingly difficult to predict and manage.
change in usa vs. china
How does this view of change contrast with historical perspectives?
Historically, Western thinking leaned towards creating stability and control in society and the economy, believing that change could be managed through careful planning.
However, ancient Chinese philosophy had a different take. It viewed change as a natural part of life. Instead of trying to control change, it emphasized adapting to it.
What are some notable economic and political shifts in the 21st century?
- The US economy has experienced stagnation, with a decline in start-up activities over the past 40 years indicating a lack of entrepreneurial momentum and economic vibrancy.
- Conversely, China has witnessed unprecedented growth in non-state-owned enterprises, shifting from dependency on foreign innovation to leading innovation itself.
- This shift has resulted in a significant redistribution of economic power from West to East.
What is Economic power?
Economic power refers to the ability of an entity—such as a nation, corporation, or individual—to influence or control economic resources and outcomes. This power can manifest in various ways, including the ability to set prices, control production, dictate market conditions, and influence the distribution of wealth and resources.
Impact of shift in economic power from the US to China
As economic power has shifted, tensions between global superpowers have intensified. Trade disputes, particularly between the US and China, have led to the escalation of trade wars.
What are trade wars?
Trade wars occur when countries impose tariffs or other restrictions on goods from one another in response to trade barriers or perceived unfair practices. This typically involves increasing tariffs (taxes on imports), implementing quotas, or creating regulations that disadvantage foreign companies.
The goal is often to protect domestic industries, reduce trade deficits, or retaliate against another country’s trade policies.
What are the supporting and critical views of trade wars?
- Advocates say trade wars protect national interests and provide advantages to domestic businesses.
- Critics of trade wars claim they ultimately hurt local companies, consumers, and the economy.
What are the advantages of a trade war?
- Protects domestic companies from unfair competition
- Increases demand for domestic goods
- Promotes local job growth
- Improves trade deficits (imports > exports)
- Punishes nation with unethical trade policies
What are the disadvantages of a trade war?
- Increases costs and induces inflation
- Causes marketplace shortages, reduces choice
- Discourages trade
- Slows economic growth
- Hurts diplomatic relations, cultural exchange
What is WTO?
- Created in 1995, the World Trade Organization (WTO) is an international institution that oversees the rules for global trade among nations.
- The World Trade Organization (WTO) oversees global trade rules among nations and mediates disputes.
- The WTO has been a force for globalization, with both positive and negative effects.
What issues have arisen from corporate scandals and the behavior of major internet companies?
Corporate scandals, such as those involving Enron, WorldCom, and Volkswagen, have raised significant ethical concerns. Additionally, major internet companies like Google, Apple, Facebook, and Amazon have been criticized for monopolistic practices, tax evasion, and political influence. The misuse of data by these companies, particularly for targeted advertising and political purposes, has become a major issue.
What are Cookies?
Cookies are text files containing small amounts of data, such as a username, a session identifier, or tracking information. They are created by the web server when you visit a website and stored on your device by your web browser (e.g., Chrome, Firefox).
How Are Cookies Created?
When you visit a website, the web server sends a cookie to your browser. The browser stores the cookie on your device and sends it back to the server each time you make a request to that website. This exchange allows the server to recognize your device and remember information about your session or preferences.
What are the commercial reasons for companies to use customer data?
- Targeted Advertising: Companies use customer data to deliver personalized ads based on user preferences, behavior, and demographics. This increases the effectiveness of marketing campaigns by ensuring that ads are relevant to the audience, thereby improving conversion rates.
- Customer Segmentation: Businesses analyze customer data to segment their audience into different groups based on behavior, interests, or demographic factors. This allows for more customized marketing strategies and product offerings, improving customer satisfaction and loyalty.
- Product Development: User data helps companies understand customer needs and preferences, guiding the development of new products or the improvement of existing ones. By analyzing data trends, companies can innovate and stay ahead of the competition.
- Pricing Strategies: Data on customer purchasing behavior allows businesses to implement dynamic pricing models, adjusting prices based on demand, customer profile, or competition. This maximizes revenue by aligning pricing with what customers are willing to pay.
- Customer Retention: By analyzing data on customer interactions and behaviors, companies can identify at-risk customers and implement strategies to retain them, such as personalized offers or loyalty programs.
What are the political reasons for using customer data/user data?
- Voter Targeting: Political campaigns use data to identify and target specific voter demographics with tailored messages. This helps in persuading undecided voters or reinforcing support among certain groups.
- Opinion Shaping: By analyzing user data, political entities can craft messages that resonate with specific segments of the population, influencing public opinion on key issues or candidates. This can be crucial in swing states or districts.
- Microtargeting: Similar to commercial segmentation, political campaigns use data to microtarget individuals with personalized messages, increasing the likelihood of engagement and voter turnout among specific groups.
- Fundraising: Political campaigns use data to identify potential donors based on past giving history, political affiliation, and online behavior. This enables targeted fundraising efforts, improving campaign finance outcomes.
- Influence on Policy: Governments and political entities may use data to understand public opinion on various issues, guiding policy decisions or legislative priorities. This data-driven approach ensures that policies align with voter preferences, enhancing political support.
What is a monopoly?
A monopoly refers to the exclusive possession or control of the supply or trade of a commodity or service by a single company or group of companies. In a monopoly, the monopolist has significant market power, allowing them to set prices and control the availability of products or services without facing competition.
This often leads to higher prices and reduced choices for consumers since the monopoly can operate without the pressure of competitors.
How has globalization and technological advancement impacted communication and competition?
Globalization and technological advancements have created a highly connected world where instant communication is possible across the globe. This connectivity amplifies small changes, leading to rapid and unforeseen global impacts, such as the 2008 financial crisis. The internet has disrupted traditional industries, creating new competitive pressures and requiring companies to innovate continually.
What structural changes are occurring in the global economy, and how are they affecting large companies?
Many industries face profound structural changes, such as the shift from fossil fuels to renewable energy in the oil and gas sector. Large companies are increasingly focused on short-term profit generation, often resorting to monopolistic behavior rather than innovation. The ability to create new sources of competitive advantage quickly is becoming the only sustainable strategy in this rapidly changing environment.
What challenges do large companies face in responding to market and societal needs?
Large companies struggle to adapt to the rapidly changing needs of the market and society. They often focus on increasing shareholder value, sometimes at the expense of broader societal needs. The rise of the gig economy and increasing automation are exacerbating issues like income inequality and job insecurity.
What is gig economy?
The gig economy refers to a labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs. In the gig economy, individuals work on a project-by-project basis, often with flexible hours, rather than being employed in traditional, long-term employment roles.
How does the entrepreneurial mindset differ from traditional corporate approaches, and why is it important?
The entrepreneurial mindset thrives in uncertainty and is essential for navigating the chaos of the modern world. Entrepreneurs are flexible, innovative, and able to make quick decisions, which are crucial traits in today’s fast-paced business environment. This mindset contrasts with traditional corporate approaches that may focus on stability and long-term planning.
What is an echo chamber?
An echo chamber is a situation where beliefs or opinions are amplified and reinforced by repeated communication within a closed group, with little exposure to differing views.
How do echo chambers reinforce beliefs?
Echo chambers reinforce beliefs by constantly exposing individuals to information that aligns with their existing views, making those views stronger and more entrenched.
What happens to opposing views in an echo chamber?
In an echo chamber, opposing views are often ignored, dismissed, or excluded, leading to a one-sided perspective.
How do echo chambers contribute to polarization?
Echo chambers contribute to polarization by isolating people from diverse perspectives, making them more resistant to considering different viewpoints and more divided from those who disagree.
Polarisation: division of a group into two sharply distinct opposites.
What role do social media and news consumption play in echo chambers?
Social media algorithms and selective news consumption can create echo chambers by only showing content that aligns with users’ interests or beliefs, reinforcing their existing views.
What are the risks of echo chambers?
Echo chambers can lead to increased polarization, the spread of misinformation, and a reduction in critical thinking, as individuals are less likely to encounter and consider different perspectives.
What is oligopoly?
An oligopoly is a market structure in which a small number of large firms dominate the industry. These firms have significant control over pricing and production, and their actions can greatly influence the market. In an oligopoly, competition is limited, and the firms may collaborate or engage in strategic behavior to maintain their market positions.
What is banruptcy?
Bankruptcy is a legal process that occurs when an individual or a business is unable to pay their debts. It allows them to either eliminate or repay some or all of their debts under the protection and oversight of a court. Bankruptcy can involve liquidating assets to pay creditors or reorganizing debts to create a manageable repayment plan.
What do most organisations do when faced with uncertainty?
Uncertainty makes companies risk-averse and can lead to investment paralysis. When companies face an unpredictable and unstable environment—whether due to economic conditions, market volatility, or regulatory changes—they become more cautious about making decisions.
What is investment paralysis?
Investment paralysis occurs when companies delay or halt investment decisions altogether due to fear of making the wrong move in an uncertain environment.
What are the consequences of investment paralysis?
Investment paralysis can lead to missed growth opportunities, reduced innovation, and, on a larger scale, a slowdown in economic growth.
What is competitive advantage?
Competitive advantage refers to the advantage a firm has over its competitors, allowing it to generate higher sales or profit margins and / or retain more customers than its competitors.
How can companies build competitve advantage (3 methods)?
- Cost: Provide offerings at the lowest price
- Differentiation: Provide offerings that are superior in quality, service, or features
- Specialization: Provide offerings narrowly tailored to a focused market
What is product life cycle (PLC)?
- Introduction: The product is launched, and marketing efforts are focused on building awareness and driving adoption. Sales growth is typically slow.
- Growth: The product gains traction, sales increase rapidly, and competition may begin to enter the market.
- Maturity: Sales growth slows as the product reaches peak market penetration. The market becomes saturated, and competition is high.
- Decline: Sales begin to decrease as the product becomes outdated or newer alternatives are introduced. Companies may reduce marketing efforts or discontinue the product.
What is Industry life cycle?
- Introduction: The industry is in its early stages with new technologies or innovations. Market demand is still being established, and the industry is not yet profitable.
- Growth: The industry experiences rapid expansion as demand increases, and new players enter the market. Investment and innovation are high.
- Maturity: Growth slows down as the industry becomes established and market saturation occurs. Companies focus on maintaining market share and improving efficiency.
- Decline: The industry faces challenges such as reduced demand, technological obsolescence, or increased competition. Companies may consolidate, exit the market, or pivot to new areas.
What is a gazelle in the context of business?
A gazelle is a rapidly growing company that experiences high rates of revenue growth, typically at least 20% annually over several years. These companies usually have revenues between $1 million and $100 million and are often seen as important contributors to job creation and economic development.
What are the characteristics of a gazelle?
Gazelles have fast growth in sales or revenues, an established market presence, and are often profitable. They demonstrate significant growth potential but have not necessarily achieved a billion-dollar valuation.
What is a unicorn in the context of business?
A unicorn is a privately-held startup company valued at over $1 billion. The term highlights the rarity of such companies reaching this valuation.
What are the characteristics of a unicorn?
Unicorns have a high market valuation, often achieved through venture capital investment. They are frequently in the tech sector but can be in other industries as well. Unicorns typically have innovative business models or technologies and may still be in the growth phase and not yet profitable.
What is venture capital?
Venture capital is funding provided by investors to startups and small businesses that are believed to have long-term growth potential. In exchange for their investment, venture capitalists typically seek equity (ownership shares) in the company.
What is sublinear scaling?
Sublinear scaling means that as something gets bigger, it doesn’t become as efficient or productive as you might expect. For example, if a company doubles in size, it might not double its output because it becomes harder to manage.
What is super-linear scaling?
Super-linear scaling means that as something gets bigger, it becomes more efficient or productive than expected. For example, when a city gets larger, it might produce even more wealth and innovation than a smaller city because more people and resources are working together.
Why are Scaling laws important for businesses?
For businesses, understanding these scaling effects is important because it helps them know what to expect as they grow. They need to be aware that growing larger could either slow them down (sublinear) or help them do even better (super-linear), depending on how they manage their growth.
What are the different stages of growth that a firm goes through as it increases in size and age? What are the associated crisis’?
- Growth through creativity- Crisis of leadership
- Growth through direction- Crisis of Autonomy
- Growth through delegation- Crisis of control
- Growth through coordination- Crisis of bureaucracy
What drives the early growth of a firm in the first stage?
Growth through creativity
Early growth is driven by creativity, innovation, and the founder’s direct involvement in operations.
What is the crisis of leadership?
Crisis associated with growth through creativity
As the firm grows, the initial creative energy that drove the company’s early success may no longer suffice. A Crisis of Leadership occurs when the firm outgrows the founder’s ability to manage all aspects, requiring more formal leadership and direction.
How does the firm continue to grow in the second stage?
Growth through direction
Growth continues through establishing direction, with a more structured approach to management and clear objectives.
What is the crisis of autonomy?
Crisis associated with growth through direction
A Crisis of Autonomy emerges as the firm expands, and employees need more decision-making power, leading to tension between centralized control and the need for independence.
What is the key to growth in the third stage?
Growth through delegation
The key to growth is delegation, where authority is distributed to middle managers, allowing the firm to scale operations.
What is the crisis of control?
Crisis associated to growth through delegation
A Crisis of Control arises when the founder or top management fears losing control over the organization, necessitating the implementation of systems to maintain oversight while empowering employees.
How does the firm manage growth in the fourth stage?
Growth through coordination
Growth is managed through increased coordination, integrating various functions and departments to ensure efficiency.
What is the crisis of bureaucracy?
Crisis associated with growth of coordination
A Crisis of Bureaucracy occurs when the firm becomes too rigid and bureaucratic, potentially stifling innovation and slowing decision-making.
How does organizational structure impact innovation?
As companies grow, they tend to become more bureaucratic, which can hinder creativity and innovation. However, companies that maintain flexible, adaptive structures can foster innovation even as they expand.
How can companies extend their life cycles?
Companies can extend their life cycles by continuously innovating and adapting to changing market conditions. Failure to innovate can lead to stagnation and decline, while successful innovation can rejuvenate the company.
