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Principles Of Management > Chapter 7 > Flashcards

Chapter 7 Flashcards

1
Q

INTRODUCTION

small business

A
  • a business having fewer than 100 employees, independently owned and operated, not dominant in its field, and not characterized by many innovative practices
  • tend to not manage particularly aggressively and they expect normal, moderate sales, profits, and growth
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2
Q

INTRODUCTION

entrepreneurship

A
  • the pursuit of lucrative opportunities by enterprising individuals.
  • process involves discovering, evaluating, and capitalizing on opportunities to create new and future goods and services.
  • creating value is the objective
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4
Q

INTRODUCTION

entrepreneurial venture

A
  • a new business having growth and high profitability as primary objectives
  • manage aggressively and develop innovative strategies, practices, and products.
  • they and their financial backers usually seek rapid growth, immediate and high profits, and sometimes a quick sellout with large capital gains
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5
Q

INTRODUCTION

entrepreneur

A
  • individual who establishes a new organization without the benefit of corporate sponsorship
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6
Q

INTRODUCTION

intrapreneur

A
  • new venture creators working inside big companies
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7
Q

ENTREPRENEURSHIP

Events and trends that can lead to entrepreneurial opportunity

A
  • Technological discoveries : startups in biotechnology, microcomputers, and nanotechnology followed technological advances.
  • Demographic changes : all kinds of health care organizations have sprung up to serve an aging population, from exercise studies to assisted-living facilities.
  • Lifestyle and taste changes : startups have capitalized on new clothing and music trends, desire for fast food, and growing interest in sports; in recent years, more consumers want to help take care of the environment, and more businesses are concerned about showing consumers that they care too
  • Economic dislocations : such as books or failures; rising oil prices spurred a variety of developments related to alternative energy or energy efficiently
  • Calamities : such as wars and natural disasters; the terrorist attacks of September 2001 spurred concern about security, and entrepreneurs today are still pursuing ideas to help government age ices prevent future attacks; hurricanes on Gulf Coast raised awareness of the importance of preparing for emergencies
  • Government initiatives and rule changes : deregulation spawned new airlines and trucking companies; whenever the government tightens energy efficient requirements, opportunities become available for entrepreneurs developing ideas for cutting energy use
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8
Q

ENTREPRENEURSHIP

franchising

A
  • an entrepreneurial alliance between a franchise (an innovator who has created at least one successful store and wants to grow) and a franchisee (a partner who manages a new store of the same type in a new location)
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8
Q

ENTREPRENEURSHIP

transaction fee model

A
  • charging fees for goods and services

- examples : Amazon.com and online travel agents

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9
Q

ENTREPRENEURSHIP

advertising support model

A
  • charging fees to advertise on a site

- advertisers pay the site operator to gain access to the demographic group that visits the operator’s site.

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11
Q

ENTREPRENEURSHIP

intermediary model

A
  • charging fees to bring buyers and sellers together

- example : eBay, bringing buyers and sellers together and charging commission for each sale.

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12
Q

ENTREPRENEURSHIP

subscription model

A
  • charging fees for site visits
  • charge a monthly or annual fee for site visits or access to site content
  • newspapers and magazines are good examples
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13
Q

ENTREPRENEURSHIP

affiliate model

A
  • charging fees to direct site visitors to other companies’ sites
  • sites pay commission to other sites to drive business to their own sites
  • examples : Zazzle.com Spreadshirt.com CafePress.com
  • designers are the affiliates , they choose basic, undecorated products (such as a shirt) and add their own designs, creating customized products offered to consumers
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14
Q

ENTREPRENEURSHIP

social enterprise

A
  • organization that applies business models and leverages resources in ways that address social problems
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14
Q

ENTREPRENEURSHIP

social entrepreneurship

A
  • leveraging resources to address social problems
  • fully incorporates social as well as economic value into mainstream thinking and decision making
  • it provides dual, shared value : creating economic value plus social or societal benefit simultaneously
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16
Q

ENTREPRENEURSHIP

business incubators

A
  • protected environments for new, small businesses
  • offer benefits such as low rents and shared costs
  • often located in industrial parks or abandoned factories
  • shared staff costs, such as for receptionists and secretaries, avoid the expense of a full-time employee but still provide convenient access to services
  • staff manager is usually an experienced businessperson or consultant who advises the new business owners
  • hatch new businesses
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16
Q

ENTREPRENEURSHIP

Successful entrepreneur characteristics

A
  1. Commitment and determination :
    - Successful entrepreneurs are decisive, tenacious, disciplined, willing to sacrifice, and able to immerse themselves in their enterprises.
  2. Leadership :
    - They are self-starters, team builders, superior learners, and teachers. Communicating a vision for the future of the company has a direct impact on venture growth.
  3. Opportunity obsession :
    - They have an intimate knowledge of customers’ needs, are market driven, and are obsessed with value creation and enhancement.
  4. Tolerance of risk, ambiguity, and uncertainty :
    - They are calculated risk takers and risk managers, tolerant of stress, and are able to resolve problems.
  5. Creativity, self-reliance, and ability to adapt :
    - They are open-minded, restless with the status quo, able to learn quickly, highly adaptable, creative, skilled at conceptualizing, and attentive to details.
  6. Motivation to excel :
    - They have a clear results orientation, set high but realistic goals, have a strong desire to achieve, know their own weaknesses and strengths, and focus on what can be dine rather than on the reasons things can’t get done.
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17
Q

ENTREPRENEURSHIP

business accelerator

A
  • organization that provides support and advice to help Young businesses grow
  • these still-young firms are more mature but still in their formative years and now they face the challenges of sustaining growth and achieving their full market potential
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18
Q

ENTREPRENEURSHIP

initial public offerings (IPO)

A
  • sale to the public, for the first time, of federally registered and underwritten shares of stock in the company
  • reasons include raising more capital, reducing debt or improving the balance sheet and enhancing net worth, pursuing otherwise unaffordable opportunities, and improving credibility with customers and other stakeholders
  • disadvantages include the expense, time, and effort involved; the tendency to become more interested in the stock price and capital gains than in running the company properly; and the creation of a long-term relationship with an investment banking firm that won’t necessarily always be a good one
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19
Q

ENTREPRENEURSHIP

opportunity analysis

A
  • a description of the good or service, an assessment of the opportunity, an assessment of the entrepreneur, specification of activities and resources needed to translate your idea into a viable business, and your source(s) of capital
  • focuses on the opportunity, not the entire venture
  • it provides the basis for making a decision on whether to act
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21
Q

ENTREPRENEURSHIP

business plan

A
  • a formal planning step that focuses on the entire venture and describes all the elements involved in starting it
  • describes the venture and its market, strategies, and future directions and often has functional plans for marketing, finance, manufacturing, and human resources.
    1. Helps determine the viability of your enterprise
    2. Guides you as you plan and organize
    3. Helps you obtain financing
  • it is read by potential investors, suppliers, customers, and others
  • five key factors : the people, the opportunity, the competition, the context, and risk and reward
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21
Q

ENTREPRENEURSHIP

legitimacy

A
  • people’s judgement of a company’s acceptance, appropriateness, and desirability, generally stemming from company goals and methods that are consistent with societal values
  • helps overcome the liability of newness that creates a high percentage of new venture failure
  • helps a firm acquire other resources such as top managers, good employees, financial resources, and government support
  • you can generate legitimacy by visibly conforming to rules and expectations created by governments, credentialing associations, and professional organizations; by visibly endorsing widely held values; and by visibly practicing widely held beliefs.
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22
Q

ENTREPRENEURSHIP

social capital

A
  • goodwill stemming from your social relationships; a competitive advantage in the form of relationships with other people and the image other people have of you
  • helps entrepreneurs gain access to useful information, gain trust and cooperation from others, recruit employees, form successful business alliances, receive funding from venture capitalists, and become more successul
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23
Q

CORPORATE ENTREPRENEURSHIP

skunkworks

A
  • a project team designated to produce a new, innovative product
  • a team is forms with a specific goal within a specified time frame
  • a respected person is chosen to be manager of the skunkworks
  • in this approach to corporate innovation, risk takers are not punished for taking risks and failing - their former jobs are held for them
  • risk takers have opportunity to earn large rewards.
24
Q

CORPORATE ENTREPRENEURSHIP

entrepreneurial orientation

A
  • the tendency of an organization to identify and capitalize successfully on opportunities to launch new ventures by entering new or established markets with new or existing goods or services
  • determined by five tendencies
    1. Allow independent action
    • grant individuals and teams the freedom to exercise their creativity, champion promising ideas, and carry them through to completion
      2. Innovate
    • requires the firm to support new ideas, experimentation, and creative processes that can lead to new products or processes; it requires a willingness to depart from existing practices and venture beyond the status quo
      3. Take risks
    • comes from a willingness to commit significant resources, and perhaps borrow heavily, to venture into the unknown; the tend you to take risks can be assessed by considering whether people are bold or cautious, whether they require high levels of certainty before taking or allowing action, and whether they tend to follow tried-and true paths
      4. Be proactive
    • is to act in anticipation of future problems and opportunities; are forward thinking and fast to act and are leaders rather than followers
      5. Be competitively aggressive
    • tendency of a firm to challenge competitors directly and intensely to Achieve entry or improve its position.
25
Q

CORPORATE ENTREPRENEURSHIP

bootlegging

A
  • informal work on projects, other than this officially assigned, of employees’ own choosing and initiative
  • informal can mean secretive, such as when a bootlegger believes the company or the boss will frown on those activities
  • some companies encourage it
  • to a limited extent, they allow people freedom to pursue pet projects without asking what they are or monitoring progress, figuring bootlegging will lead to some lost time but also to learning and to some profitable innovations
26
Q

REVIEW

Describe why people become entrepreneurs and what it takes, personally.

A
  • People become entrepreneurs because of the profit potential, the challenge, and the satisfaction they anticipate (and often receive) from participating in the process, and sometimes because they are blocked from more traditional avenues of career advancement.
  • Successful entrepreneurs are innovators, and they have good knowledge and skills in management, business, and networking.
  • Although there is no single entrepreneurial personality, certain characteristics are helpful : commitment and determination; leadership skills; opportunity obsession; tolerance of risk; ambiguity and uncertainty; creativity; self-reliance; the ability to adapt; and motivation to excel
27
Q

REVIEW

Summarize how to assess opportunities to start new businesses.

A
  • You should always be on the look out for new ideas, monitoring the current business environment and other indications of opportunity.
  • Franchising offers an interesting opportunity, and the potential of the Internet is being tapped (after entrepreneurs learned some tough lessons from the dot-bomb era).
  • Trial and error and preparation play important roles.
  • Assessing the business concept on the basis of how innovative and risky it is, combined with your personal interests and tendencies, will also help you make good choices.
  • Ideas should be carefully assessed via opportunity analysis and a thorough business plan.
28
Q

REVIEW

Identify common causes of success and failure.

A
  • New ventures are inherently risky.
  • The economic environment plays an important role in the success of failure of the business, and the entrepreneur should anticipate and be prepared to adapt in the face of changing economic conditions.
  • How you handle a variety of common management challenges also can mean the difference between success and failure, as can the effectiveness of your planning and your ability to mobilize nonfinancial resources, including other people who can help.
29
Q

REVIEW

Discuss common management challenges.

A
  • When new businesses fail, the causes often can be traced to some common challenges that entrepreneurs face and must manage well.
  • You might not enjoy the entrepreneurial process.
  • Survival - including getting started and fending off competitors - is difficult.
  • Growth creates new challenges, including reluctance to delegate work to others.
  • Funds may be put to improper use, and financial controls may be inadequate.
  • Many entrepreneurs fail to plan well for succession.
  • When needing to wanting new funds, initial public offerings provide an option, but they represent an important and difficult decision that must be considered carefully.
30
Q

REVIEW

Explain how to increase your chances of success, including good business planning.

A
  • The business plan helps you think through your idea thoroughly and determine its viability.
  • It also convinces (or fails to convince) others to participate.
  • The plan describes the venture and its future, provides financial projections, and includes plans for marketing, manufacturing, and other business functions.
  • The plan should describe the people involved in the venture, a full assessment of the opportunity (including customers and competition), the environmental context (including regulatory and economic issues), and the risk (including future risks and how you intend to deal with them).
  • Successful entrepreneurs also understand how to develop social capital, which enhances legitimacy and helps develop a network of others including customers, talented people, partners, and boards.
31
Q

REVIEW

Describe how managers of large companies can foster entrepreneurship.

A
  • Intrapreneurs work within established companies to develop new goods or services that allow the corporation to reap the benefits of the innovation.
  • To facilitate intrapreneurship, organization’s use skunkworks - special project teams designated to develop a new product - and allow bootlegging - informal efforts beyond formal job assignments in which employees pursue their own pet projects.
  • Organizations should select projects carefully, have an ongoing portfolio of projects, and fund them appropriately.
  • Ultimately, a true entrepreneurial orientation in a company comes from encouraging independent action, innovativeness, risk taking, proactive behavior, and competitive aggressiveness.
32
Q

QUESTIONS

How does an organization cultivate intrapreneurship?

A
  • bootlegging

- skunkworks

33
Q

QUESTIONS

What role does entrepreneurship play within an organization?

A
  • Entrepreneurship occurs when an enterprising individual pursues a lucrative opportunity
  • To be an entrepreneur is to initiate and build an organization, rather than being only a part of one
  • It involves creating new systems, resources, or processes to produce new goods or services and/or serve new markets
34
Q

QUESTIONS

Should organizations encourage an entrepreneurial spirit within their organization?

A
  • Even established companies try to find and pursue new and profitable ideas - and they need in house entrepreneurs (sometimes called Intrapreneurs) to do so.
35
Q

QUESTIONS

What is the relationship between innovation and entrepreneurship?

A
  • Entrepreneurship is inherently about innovation - creating a new venture where one didn’t exist before
36
Q

QUESTIONS

What are common characteristics of an entrepreneur?

A
  • Successful entrepreneurs are innovators and also have food knowledge and skills in management, business, and networking
  • In contrast, inventors may be highly creative but often lack the skills to turn their ideas into a successful business
  • Manager-administrators may be great at ensuring efficient operations but aren’t necessarily innovators
  • Promoters have a different set of marketing and selling skills - use for entrepreneurs, but those skills can be hired, whereas innovativeness and business management skills remain the essential combination for successful entrepreneurs.
37
Q

QUESTIONS

Do the financing issues that new businesses face differ from those faces by a well-established business?

A
  • Acquiring venture capital is not essential to the success of most start-up businesses; in fact it is rare.
  • Recent numbers from the Census Bureau say that more than three fourths of start-up companies with employees were financed by entrepreneurs’ own assets or assets of their families.
  • Approximately 1 out of 10 businesses were financed with the owners’ credit cards.
38
Q 
QUIZ 
Which of the following is a formal planning step that focuses on an entire venture and describes all the elements involved in starting it?
(A) A contingency plan
(B) A venture capital agreement
(C) An opportunity analysis
(D) An organizational assessment
(E) A business plan
A

ANSWER :

(E) A business plan

39
Q 
QUIZ 
Which if the following refers to the tendency to engage in activities designed to identify and capitalize successfully on opportunities to launch new ventures by entering new or established markets with new or existing goods?
(A) Horse trading
(B) Entrepreneurial orientation
(C) Vertical integration 
(D) Bootlegging
(E) Strategic concentration
A

ANSWER :

(B) Entrepreneurial orientation

39
Q 
QUIZ 
An entrepreneurial between an innovator who has created at least one successful store and wants to grow and a partner who manages a new store of the same type in a new location is called :
(A) an intrapreneurial venture
(B) conglomerate diversification
(C) franchising
(D) bootlegging
(E) outsourcing
A

ANSWER :

(C) franchising

40
Q 
QUIZ 
A competitive advantage in the form of relationships an entrepreneur has with other people and the image other people have of the entrepreneur is known as : 
(A) legitimacy 
(B) groupthink
(C) social capital
(D) emotional intelligence
(E) corporate advantage
A

ANSWER :

(C) social capital

41
Q

QUIZ
Which of the following is a key difference between an entrepreneur and an intrapreneur?
(A) An entrepreneur makes use of corporate resources, whereas an intrapreneur does not.
(B) An entrepreneur has less knowledge of business, whereas an intrapreneur is more knowledgable.
(C) An entrepreneur receives no corporate support, whereas an intrapreneur has the benefit of corporate support.
(D) An entrepreneur has more knowledge of business, whereas an intrapreneur lacks business knowledge.
(E) An entrepreneur works longer and harder, whereas an intrapreneur is laid back and easy going.

A

ANSWER :

(C) An entrepreneur has no corporate support, whereas an intrapreneur has the benefit of corporate support.

42
Q

QUIZ
The role of a business incubator is :
(A) protect consumers from fraud
(B) provide new, small businesses access to competition
(C) provide large business employees enhanced wellness benefits
(D) provide a protected environment for new, small business
(E) provide opportunities for exponential growth without competition

A

ANSWER :

(D) provide a protected environment for new, small business

43
Q

QUIZ
Which of the following is the fundamental reason for creating an opportunity analysis?
(A) to excite potential customers
(B) to obtain financing
(C) to negotiate agreements with suppliers
(D) to analyze whether or not to proceed
(E) to work out the details of marketing, finance, and manufacturing

A

ANSWER :

(D) to analyze whether or not to proceed

44
Q 
QUIZ 
Which of the following models brings buyers and sellers together and charges a commission for each sale?
(A) transaction fee model
(B) affiliate model
(C) intermediary model
(D) subscription model
(E) conglomerate model
A

ANSWER :

(C) intermediary model

45
Q 
QUIZ 
Which of the following provides a way to raise capital through federally registered and underwritten sales of shares in the company?
(A) commodity sale
(B) future stock sale
(C) first bond option
(D) initial public offering
(E) stock option
A

ANSWER :

(D) initial public offering

46
Q

QUIZ
Legitimacy increases the profitability of success of a new business by :
(A) eliminating risk from the business plan
(B) reducing the number if resources necessary to start the firm, such as office space, loans, and supplies
(C) weakening the competition and its ability to operate in the future
(D) helping a firm acquire resources such as top managers and good employees
(E) helping to revise rules and expectations of society

A

ANSWER :

(D) helping the firm acquire resources such as top managers and good employees

47
Q 
QUIZ 
Intrapreneurs are otherwise known as : 
(A) corporate entrepreneurs 
(B) horse traders
(C) social entrepreneurs 
(D) knowledge workers
(E) bootleggers
A

ANSWER :

(A) corporate entrepreneurs

48
Q

QUIZ
Which of the following is true of the role of the economic environment in the success of entrepreneurial ventures?
(A) Entrepreneurial success is not affected by the economic environment as a good idea will prevail in all external conditions.
(B) Entrepreneurial success is affected only by the talent and behavior of individuals, not by the economic environment.
(C) Downturns in the economic environment offer no opportunity for entrepreneurial success.
(D) A robust economy and the resulting conditions in credit and demand increase the rate Of new business formation, but a troubled economy has no effect on new ventures.
(E) The economic environment affects the success of entrepreneurial ventures by affecting the supply of capital and prospective opportunities.

A

ANSWER :
(E) The economic environment affects the success of entrepreneurial ventures by affecting the supply of capital and prospective opportunities.

49
Q 
QUIZ 
A(n) \_\_\_\_\_\_ is a formal planning step that focuses in an entire venture and describes all the elements involved in starting it.
(A) opportunity analysis 
(B) strategic plan
(C) business plan
(D) trend analysis
(E) operational plan
A

ANSWER :

(C) business plan

50
Q 
QUIZ 
Which of the following refers to project teams designated to produce a new product?
(A) knowledge workers
(B) skunkworks
(C) horse traders
(D) social entrepreneurs 
(E) bootleggers
A

ANSWER :

(B) skunkworks

51
Q 
QUIZ 
A(n) \_\_\_\_\_\_ differs from an entrepreneurial venture in that it is not managed aggressively, and it's owners expect normal, moderate levels of sales, profits, and growth.
(A) small business
(B) internet start-up
(C) intrapreneurial team
(D) global venture
(E) speculative venture
A

ANSWER :

(A) small business

52
Q 
QUIZ 
One of the five key factors that entrepreneurs are required to have thought through is \_\_\_\_\_\_.
(A) people
(B) place
(C) packaging
(D) policy
(E) promotion
A

ANSWER :

(A) people

53
Q 
QUIZ 
Which of the following key planning elements should provide a competitive advantage that can be defended?
(A) competition
(B) risk and reward
(C) opportunity
(D) people 
(E) context
A

ANSWER :

(C) opportunity

54
Q 
QUIZ 
Which of the following entrepreneurial businesses is an example of high innovation and high risk?
(A) A new restaurant 
(B) A online retail shop
(C) A new drug
(D) A new dog walking service
(E) A new hardware store
A

ANSWER :

(C) A new drug

55
Q 
QUIZ 
When an enterprising individual pursues a lucrative opportunity, it is known as : 
(A) speculation
(B) franchising 
(C) entrepreneurship
(D) bootlegging
(E) horse trading
A

ANSWER :

(C) entrepreneurship

56
Q

QUIZ
The primary objective of entrepreneurial venture is to :
(A) acquire growth and high profitability
(B) provide non-profit services
(C) increase the social capital
(D) create a long term relationship with an investment banking firm
(E) reduce the amount of dividends paid

A

ANSWER :

(A) acquire growth and high profitability

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