Ch5

Question 1

Entrepreneur

Answer 1

Innovators who start companies to pursue their ideas for a new product or service. People which vision, drive, and creativity, who are willing to take the risk of starting and managing a business to make a profit.

Question 2

Classic entrepreneurs

Answer 2

Risk takers who start their own companies based on innovative ideas. They often start the business for personal satisfaction and the lifestyle.

Question 3

Multipreneurs

Answer 3

Entrepreneurs who start a series of companies. They thrive on the challenge of building a business and watching it grow

Question 4

Intrapreneurs

Answer 4

Entrepreneurs who don’t own their own companies but apply their creativity, vision, and risk taking within a large corporation. They enjoy the freedom to nurture their ideas and develop new products, while their employees provide regular salaries and financial backing.

Question 5

Why become an entrepreneur

Answer 5

Entrepreneurs are found in all industries and have different motives for starting companies.

Question 6

Characteristics of successful entrepreneurs

Answer 6

Ambitious: they are competitive and have a high need for achievement
Independent: individuals and self starters who prefer to lead rather than follow
Self confident: understand the challenges of starting and operating a business and are decisive and confident in their ability to solve problems
Risk takers: risk can be better than playing it safe
Visionary: ability to spot trends and act on them
Creative: bold marketing strategies, and innovative solutions to managerial problems
Energetic: takes long hours to start a new business
Passionate: love their work
Committed: willing to make personal sacrifices to achieve their goals

Question 7

Getting started

Answer 7

Self assessment to determine whether you have the personal traits you need to succeed and if so, what business would be best for you.

Question 8

Finding the idea

Answer 8

Starting a firm in a field where you have experience improves your chances of success. Or personal experience as a consumer.

Question 9

Business model canvas

Answer 9

Helps refine and review the business model before moving towards a formal business plan

Question 10

Elements of a business plan

Answer 10

• executive summary
• vision and mission statement
• company overview
• product and/or service plan
• marketing plan
• management plan
• operating plan
• financial plan
• appendix

Question 11

Key features of a business plan

Answer 11

General description of the company, the qualifications of the owner(s), a description of the products of services, an analysis of the market (demand, supply, competition), sales and distribution channels, and a financial plan

Question 12

Bootstrapping

Answer 12

Funding the operation with your own resources

Question 13

Angel investors

Answer 13

Individual investors or groups of experienced investors who provide financing for start up businesses by investing their own money, often referred to as “seed capital.” Gives investors more flexibility.

Question 14

Several questions one must ask when buying a small business

Answer 14

Why is the owner selling?
Does he or she want to retire or move on to a new
challenge, or are there problems with the business? Is the business operating at a profit?
If not, can this be corrected?
On what basis has the owner valued the company, and is it a fair price?
What are the owner’s plans after
selling the company?
Will he or she be available to provide assistance through the change of ownership of the business?

Question 15

Common causes of business closure

Answer 15

Economic factors
Financial causes
Lack of experience
Personal reasons

Question 16

Competitive advantage

Answer 16

Also called differential advantage is a set of unique features of a company and its products are perceived by the target market as significant and superior to those of the competition

Question 17

Cost competitive advantage

Answer 17

Firm can produce a product or service at a lower cost than all its competitor while maintaining satisfactory profit margins.

Question 18

Differential competitive advantage

Answer 18

More successful for long term viability of a company.

Question 19

Niche competitive advantage

Answer 19

Targets and effectively serves a single segment of the market. Good for small companies

Question 20

How can you grow a business

Answer 20

Market penetration
Geographic expansion
Product development
Diversification

Question 21

Market penetration

Answer 21

Increases sales in current markets. Eg adding more locations

Question 22

Geographic expansion

Answer 22

Expand into new locations, either foreign or domestic

Question 23

Product development

Answer 23

Develop improved products. Eg. New models of the iPhone

Question 24

Diversification

Answer 24

Enter a new business line or expand your product line into other areas.

Question 25

Related diversification

Answer 25

A piano company introducing a line of electric pianos

Question 26

Conglomerate diversification

Answer 26

Situation where a company has unrelated products lines such as motorbikes, boat engines, and audio equipment.

Question 27

Merger

Answer 27

Occurs when two or more firms combine to form one new company.

Question 28

Types of mergers and what they are

Answer 28

• horizontal merger: companies at the same stand in the same industry merge to reduce costs, expand profit offerings, or reduce competition.
• vertical merger: company buys a firm in its same industry, often involved in an earlier or later stage of the production or sales process.
• conglomerate merger: brings together companies in unrelated businesses to reduce risk.

Question 29

Leveraged buyout (LBO)

Answer 29

Financially motivated type of merger. Corporate takeovers financed by large amounts of borrowed money.

Question 30

Bankruptcy

Answer 30

Occurs when the business is no longer to pay its debts. The total debt is work more than the company’s assets or the company runs out of cash. If a company cannot pay its variable costs there is no way it can pay its fixed costs and therefore they go bankrupt and shut down the business.

Question 31

Options to consider when taking money out of the company

Answer 31

• continuing to operate the business as is and collect dividends
• selling all or part of the business to someone else
• taking the company public

Question 32

1. Public companies

2. Private companies

Answer 32

1. Traded on stock exchange

2. Owned by a limited number of shareholders

Question 33

Dividends

Answer 33

Payments from the organization to the shareholders who own shares of the company’s stocks

Question 34

Initial public offering (IPO)

Answer 34

Initial listings to sell shares of the company on the stock market

Question 35

Divest

Answer 35

Sell a specific part of their company.

Question 36

Securities markets

Answer 36

Streamline the purchase and sales activities of investors by allowing transactions to be made quickly and at a fair price

Question 37

Primary market

Answer 37

New securities are sold to the public usually with the help of investment bankers

Question 38

Secondary market

Answer 38

Where old (already issued) securities are bought, sold, or traded, among investors

Question 39

Stock markets

Answer 39

New York stock exchange (NYSE)
Toronto stock exchange (TSE)
NASDAQ
Hong Kong exchange (HKEX)
Shanghai stock exchange (SSE)

Question 40

Insider trading

Answer 40

Buy/selling of shares based on info that is not public, it is illegal.