Exam 2

Question 1

what is the first thing that should be done when evaluating your business idea

Answer 1

determanin who your target customers are and what is their pain and what solutions do you offer.

Question 2

should you hastily move into an industry to have a first mover advantage

Answer 2

No bc if you are not well prepared enough later entrants who are will over take your business

Question 3

what are the 3 ways to define a market segment?

Answer 3

who the customers are, where the customers are, and how the customers behave

Question 4

why are macro level market trends important

Answer 4

macro level market trends are critical for determining the long-term growth potential of your business

Question 5

3 questions about Macro level market trands that you should ask yourself

Answer 5

is the market large enoguh to allow many competitors the opportunity to serve different segments without getting in each others way?
what are the prediticions for yours markets short term growth rate?
what are the predictions for the long term growth rate?

Question 6

How should you measure market trends

Answer 6

in as many ways as possible. get a detailed evaluation of your market and consider how these different trends work together to tell a story of what the future of the market means for your business

Question 7

what did thinking machines discover

Answer 7

MPP computer was a super computer. unlike reg computers that only have one processer working at a time the MPP has thousands working at the same time

Question 8

why did thinking machine fail?

Answer 8

They built a machine without having a market. Do not fall in love with your business idea!!! The history of Thinking Machines is a vivid
example of what can go wrong when blindly building a business around a cool product or
service, without fully considering whether there is truly a market demand.

Question 9

What do you have to do before conducting an industry analysis? You must define your industry.

Answer 9

especially for
startups, it is important to have focus and not be too broad. However, it is also important not to
be so narrow that you do not recognize other substitutes for your products or services. No easy method but what is important is that your industry, as well as other substitute industries, consists of other sellers – not customers, not products – of goods or services that meet the kinds of customer needs that you hope to satisfy

Question 10

Threat of entry questions to ask

Answer 10

is it difficult or easy for companies to enter this industry?

Question 11

what is micheal porters five forces frame work used for?

Answer 11

Used to find industry attractiveness

Question 12

Supplier power questions to ask

Answer 12

do suppliers have the power to set terms and conditions

Question 13

buyer power questions to ask

Answer 13

do buyers have the power to set terms and conditions?

Question 14

threat of subsititutes questions to ask?

Answer 14

is it easy or difficult for substitue products to steal my market?

Question 15

competitive rivavlry questions to ask

Answer 15

is competitive rivalrly intense or genteel?

Question 16

what are the 5 forces

Answer 16

1. threat of entry
2. supplier power
3. buyer power
4. threat of subsititues
5. competive rivalrly

Question 17

how do firms develope a sustainable competitive advantage?

Answer 17

1. proprietary elements such as patents and trade secrets
2. superier organizational processes, capabilities or resource that are difficult for others to duplicate or imitate
3. an economically viable buisness model, in that the company wil not run out of cash quickly

Question 18

how to determine if a company is economically viable?

Answer 18

a) will revenue be adequate in relation to capital investment required?
b) how much will it cost to attract and maintain customers?
c) are gross margins sufficient to cover the necessary cost structure?
d) are operating cash cycles favorable?

Question 19

are patents always useful?

Answer 19

No a patent is not very useful if a competitor can develop a differnet product or service that is cheaper and or more effective alternative to yours

Question 20

There are three key elements that drive an entrepreneur’s dream:

Answer 20

a) a mission that determines what kind of business to build or what kinds of markets to
serve
b) a set of personal aspirations that guides the level of achievement to be sought
c) some level of risk propensity that indicates what sort of risks are to be taken and what
kind of sacrifices are to be made in pursuit of the dream

Question 21

in regard to defining personal aspirations, there are three things that founders need to
consider:

Answer 21

a) how big they want the business to become in terms of sales, profits, number of
employees, number of locations, and so forth
b) what role that they want in the organization, in terms of wanting to be a leader or
manager
c) how long they want to remain involved in the organization

Question 22

With respect to determine what level of risk that you are willing to bear. Some important
questions to consider are:

Answer 22

a) will you risk a secure salary and the things that go along with your current
employment, and if so – for how long?
b) will you risk losing control of your business?
c) will you put your own money at risk? and if so, how much?
d) will you risk your home or time with your family and loved ones?
e) do those you love accept the risk you plan to take?

Question 23

Is it true that once you accept venture capital your buisness is no longer yours?

Answer 23

yes once you accept venture capital your buisness is no longer yours, but venture capitalist likely wont even take the risk of investing in your buisness unless they see that you are willing to bear a certain level of personal risk

Question 24

To help to identify your industries critical success factors, it may be helpful to ask the
following two questions:

Answer 24

a) Which few activities are the ones that, if gone wrong, will almost always have severely
negative effects on company performance?
b) Which decisions or activities, done right, will almost always deliver disproportionately
positive effects on performance?

Question 25

What lesson did we learn from Palm?

Answer 25

They began their buisness with an eleborate plan to create a portable PC computer. However the technology was not there to create this appliance it would be too costly and no one would buy. instead they focused on creating a digital agenda tooal. The case of Palm is a good example of not trying to do too much. Instead it often pays off to
keep things simple, offer a product or service that fills a specific need, and focus on developing
processes that ensure quality.

Question 26

Mullins points out two domains that can be deal-breaker

Answer 26

Micro-market: Target segment benefits and attractiveness. If your opportunity does not
provide a differentiated solution to a customer’s pain – better, faster, or cheaper – forget
it and move on to something else.
b) Team domain: Ability to execute on CSFs. The ability of you and your team to execute
on critical success factors. If you cannot deliver results here, then this opportunity is not
for you.

Question 27

The large market fallacy

Answer 27

Large markets that are growing fast are likely to attract
lots of other competitors, often large companies with lots of resources. Further, such
markets often have low barriers to entry, making it difficult to compete. It may instead
be better to pursue a large part of a smaller market than to go after a small part of a large
market.

Question 28

the better moustrap falacy

Answer 28

the better mouse trap is when you are providing an advanced solution for a problem that people are not willing to pay for. this happened with the tech company. even though their product was faster and more advanced (better) ppl didnt buy it. Especially in technologically driven industries,
entrepreneurs often try to capitalize on technology for its own sake. Doing so rather than asking what the technology can do that benefits some target segment of customers is a trap. Better technology – a better mousetrap – does not necessarily equal a better solution
for the customer.

Question 29

The better mouse trap fallacy example

Answer 29

Viatra’s ATM was the better mouse trap. they used a lot of their capital to invest in the atm and it was an extremely advanced and fast product. despite this the customers were not willing to buy it over their ethernet. if they would not have switched directiosn then they would have failed as a company. `` this shows that the better product does not always sell.

Question 30

The me-to trap

Answer 30

when there is a fast growing- large market entrepeneaurs tend to think they will not have competition. but no matter how large a market there is always competition thus differenciating your target market segment to find a niche market is crucial. you should find an industry where you cna fly below the radar and serve a smaller market.
The combination of high threat of entry (macro-level industry factor) and lack of sustainable advantage for new entrants (a micro-level industry factor) can cause a large number of competitors to pursue the same opportunity. Thus, the combination of low barriers to entry and lack of sustainable competitive advantage
should be a red flag.

Question 31

The hubris trap

Answer 31

This relates to the overconfidence of entrepreneurs who have
experienced past success. For example, what Louis Borders learned through his success creating Borders Books did not translate to his starting Webvan (the online grocery delivery service). In fact, his past experience actually may have gotten in the way—by trying to apply principles from one industry toward another industry, which did not operate by the same set of rules.

Question 32

Hubris trap example

Answer 32

Knowledge gained from experience and success in one industry can sometimes blind entrepreneurs to important differences within other industries. For example, the experience of Louis Borders in the book retail industry led him to believe that firms who build the largest and most sophisticated physical infrastructure will develop a competitive advantage within the dot.com or e-commerce marketplace. Instead, eBay demonstrated that those who could develop viable businesses with minimal physical infrastructure and maintain high gross margins would be the most successful.

Question 33

Explain the digital equiptment corporation example. (DEC)

Answer 33

“s we have seen, DEC failed to adapt to trend after trend in the computing industry: 16-bit computing, the rise of PCs and UNIX. The problem for DEC was not that they had no connections or that no one in DEC saw these things happening”
By collecting information about trends from sources external to your firm, you will be able to better evaluate whether making large scale changes related to your products/services is
appropriate. However, this doesn’t mean simply collecting the information and then ignoring it as in the example of Digital Equipment Corporation. You must fully integrate the information as
being important and useful.
“ DEC’s blind faith in its own products and solutions – arrogantly and naïvely, some would say – rather than on the basis of the marketplace evidence that was there to be seen and understood.”

Question 34

Why is it important to havve connections up the value chain?

Answer 34

alue chain to SUPPLIERS who deal with the leaders
in your industry and with firms in other industries that might offer products/services that are
substitutes for the offerings that you provide.

Question 35

why is it important to have connections down the value chain?

Answer 35

“Cotton and Cooper, however, were of the mind that Ethernet was going to win the battles and the war for networks, and that ATM – Virata’s better mousetrap – would lose. Licensing looked to them like the better bet: ‘We were straddling a chasm that was starting to widen. Sooner or later we had to jump to one side, otherwise we risked falling into the chasm never to recover.’7 His first move was to dismiss Virata’s entire networking product sales staff. The house would be bet on DSL.”

““the value chain to POTENTIAL CUSTOMERS – including distributors, consumers, and users – in target markets that you might serve one day in addition to the markets you plan to target at the outset.”

Question 36

why is it important to have connections across your industry with competitors and with firms from other industries that offer subsitutes?

Answer 36

your industry with COMPETITORS – and with firms from other industries that offer substitutes – so that you can gain some perspective to gauge accurately changes in market conditions. When your sales increase, it’s good to know whether they are doing so because you are gaining market share or whether you are simply benefiting from a rising tide that floats all boats. The same is true when your sales are soft.”

Question 37

what is the tide that floats all boats?

Answer 37

When your sales increase, it’s good to know if they are doing so because you are gaining market share or if you are simply benefiting from a tide that floats all boats. The same is true when sales are soft. Having good contacts across your industry can help you to evaluate the
nature of your current sales position.

this is why it is important to have connections in the industry

Question 38

why is it important to have a wide array of contacts within your industry?

Answer 38

to help you recognize trends or changes in the amrketplace that your company can take advantage of.

Question 39

What lessons was learned from Viatra?

Answer 39

They switched directions from the ATM to lisencing and were able to get out of the better mouse trap (ATM). Mainly that connections matter. Tom coopers and the board’s connections up, down and accross the value chain allowed them to take a risky bet with confidence. they said that the thing that made them most sucessful was their teams connections and the quality of the team.

Question 40

what to do before writing a buisness plan?

Answer 40

a) Come up with an idea that you think might fly, one that solves genuine customer problems or needs.
b) Assess and shape your idea using the seven domains framework.
c) Write a customer-driven feasibility study – a memo to yourself – that lays out the conclusions you’ve reached from your data and analysis.

Question 41

Good entrepreneurial ideas tend to come from the following:

Answer 41

a) Opportunities created by macro-trends (e.g., Whole Foods Market).
b) Opportunities found by living and experiencing the customer’s problems (e.g., Nike).
c) Opportunities created through scientific research (e.g., SmithKline Beecham’s Zantac).
d) Opportunities proven elsewhere that you can transform and adapt for the local context of where you hope to do business (e.g., Starbucks).