Final Flashcards
- Why is entrepreneurship important for economic growth
- Maintain competitive markets (increases competition)
- New firms means more creation
- Introduces more innovation- increases economic growth
- Increases wages
- Increasing quality of life
- Is it young firms or small firms that generate more new jobs? How was this proven?
this was shown by a Counterfactual test which put both equal groups sided by side and the young firms created more jobs at a faster rate
- What is the definition of entrepreneurship according to this class? Describe each component of this definition.
• The Pursuit of opportunity beyond resources controlled
- Pioneering a truly innovative product
- Devising a new business model
- Creating a better or cheaper version of an existing product
- Targeting an existing product to new sets of customers
- What are the types of risk facing entrepreneurs? Identify and describe each.
Demand risk -Will people actually want your product? Customer’s willingness to adopt the entrepreneur’s solution (driverless car)
Adoption Cost- How much will it cost to get your customers to use the product
Technology risk - Will technology actually work?
Execution risk - Ability to attract employees and partners who can implement the venture’s plans “Is it possible”
- What is the “catch-22” in the financing of entrepreneurial ventures?
At first you will lose money but hopefully, eventually you will make the money back and more
You need to raise money but people want proof u can make money but you can’t prove them yet bc you don’t have money
- What are four strategies entrepreneurs use to deal with access to financing Issues?
Lean experimentation - Use the smallest possible set of activities required to rigorously test a business model hypothesis (minimum viable product) (prototype)
Staged investing - Designed for entrepreneurs to address risks sequentially. Resources allocated per stage.
Partnering - Leverage another organization’s resources, and sharing risk with this organization
“Storytelling” - Painting a picture of the world including the benefits of the product.
Bootstrapping/Self Funding
- What is the main idea of Porter’s 5 forces
Find where industry forces are the weakest and locate them using the 5 forces. That’s how you can try to find ways to be the most profitable.
- What are the 5 forces? Identify each.
- competitive rivalry- competition in the industry already
- Threat of new entrants- A. Barriers to Entry B. Retaliation of Incumbents. Your position can be affected by people’s ability to enter your market. So, think about how easily this could be done.
- Threat of substitutes- A different product that does the same thing
- Buyer Power- the ability for the customer to affect the price.
- Supplier power- This refers to the likelihood of your customers finding a different way of doing what you do. For example, if you supply a unique software product that automates an important process, people may substitute it by doing the process manually or by outsourcing it. A substitution that is easy and cheap to make can weaken your position and threaten your profitability.
5.
- Discuss the relationship between supplier/buyer power and industry Attractiveness
the higher the buyer and supplier power are the higher barriers of entry are and therefore lowers the attractiveness of the industry.
- Discuss what determines the threat of substitutes in an industry.
Attractive price (price-value) Switching cost
- What are the prescriptions of Porter’s 5 forces?
a. Position your company where forces are the weakest
b. Exploit changes in the forces
c. Reshape the forces in your favor
- What are the elements of an environmental analysis
Demographic Trends Socio-cultural influences Technological development Macroeconomic and global trade Political/Legal influences
- What is a concentrated industry
A few companies own most of the market share
- What is blue ocean strategy
creating a new market space- you get hi demand and get cost at a low for a differentiation strategy
- Explain blue ocean strategy visually, by showing differences in willingness to pay and cost of consumer relative to the other generic strategies
Draw 3 bar graphs with cost and willingness to pay, with a dotted line through all 3 indicating market average: one with lower cost and willingness to pay (cost)/ one with higher cost and willingness to pay (differentiation)/ one with lower cost and higher willingness to pay (blue ocean) {all in terms of market ave}
- Discuss the 4 tests of creating and sustaining a competitive advantage. What helps us create? What helps us sustain?
· Valuable ( company pays less than MV of product)
· Rare ( held my fewer players than the total amount in the industry)
· Inimitable ( cannot be copied
· Nonsubstitutable ( cannot be substituted for)
· Creating ADV comes from value and rare while sustaining is inimitable and non-substitutable (offense and defense)
- What determines inimitability
· Replicability (casually ambiguous, social complexity, unique historical conditions, tacit, legality, complimentary, established first-mover adv)
· Transferability (geographical, existing complimentary, require financial outlays)
- What are the parts of a business model? Identify each.
- Customer value proposition
- 2.Technology and operations management
- Go to market plan
- Profit formula
- Describe the main idea of hypothesis-based entrepreneurship and the lean startup model.
- A methodology for startups to test the key features and hypotheses of their product
- Iterative process until you get to product-market match
- Identify assumptions before you base your strategy on them
- We find out we are wrong before we spend serious money
