Final Exam Flashcards
Pitfalls in selecting new ventures (6)
Lack of objective evaluation, no real insight into the market, inadequate understanding of technical requirements, poor financial understanding, lack of venture uniqueness, ignorance of legal issues
Pre-start-up phase
Begins with an idea for the venture and ends when the doors are open for business
Start-up phase
Begins with the initiation of sales activity and delivery of products and services and ends when the business is firmly established beyond short-term threats to survival
Post-start-up phase
Lasts until the venture is terminated or the surviving organizational entity is no longer controlled by an entrepreneur
Critical factors for new venture development (5)
Uniqueness of venture, investment size, sales growth expectations, product availability, customer availability
What are the 3 major categories of causes for new venture failure?
Product/market problems, financial difficulties, managerial problems
Name the reasons why new ventures fail in terms of product/market problems. (5)
Poor timing, product design problems, inappropriate distribution strategy, unclear business definition, over-reliance on one customer
Name the reasons why new ventures fail in terms of financial difficulties. (3)
Initial undercapitalization, assuming debt too early, venture capital relationship problems
Name the reasons why new ventures fail in terms of managerial problems. (2)
Concept of a team approach, human resource problems
What are the questions to ask within the Feasibility Criteria Approach to assessing entrepreneurial ventures? (11)
Is it proprietary? Are the initial production costs realistic? Are the initial marketing costs realistic? Does the product have potential for very high margins? Is the time required to get to market and to reach the break-even point realistic? Is the potential market large? Is the product the first of a growing family? Does an initial customer exist? Are the development costs and calendar times realistic? Is this a growing industry? Can the product and the need for it be understood by the community?
Strategic planning
The formulation of long-range plans for the effective management of environmental opportunities and threats in light of a venture’s strengths and weaknesses; includes defining the venture’s mission, specifying achievable objectives, developing strategies, and setting policy guidelines
What are some of the benefits of strategic planning? (8)
Cost savings, more efficient resource allocation, improved competitive position, more timely information, more accurate forecasts, reduced feelings of uncertainty, faster decision making, fewer cash flow problems
Be able to describe the mistakes or fatal visions that entrepreneurs fall prey to in their attempt to implement a strategy. (5)
Misunderstanding industry attractiveness, no real competitive advantage, pursuing an unattainable competitive position, compromising strategy for growth, failure to explicitly communicate venture’s strategy to employees
Strategic positioning
Unique positions that have been available but overlooked by competitors, often not obvious, can help entrepreneurial ventures prosper
What are the four squares of the Entrepreneurial Strategy Matrix model?
I-r (high innovation, low risk); I-R (high innovation, high risk); i-r (low innovation, low risk); i-R (low innovation, high risk)
What is necessary for an I-r to survive? (3)
Move quickly, protect innovation, lock in investment and operating costs via control systems, contracts, and other measures
What is necessary for an I-R to survive? (4)
Reduce risk by lowering investment and operating costs, maintain innovation, outsource high-investment operations, joint venture options
What is necessary for an i-r to survive? (3)
Defend present position, accept limited payback, accept limited growth potential
What is necessary for an i-R to survive? (7)
Increase innovation/develop a competitive advantage, reduce risk, use business plan and object analysis, minimize investment, reduce financing costs, franchise option, abandon venture
What are the four venture life-cycle stages?
Initial expansion and accumulation of resources, rationalization of the use of resources, expansion into new markets to assure the continued use of resources, development of new structures to ensure continuing mobilization of resources
What is the path of a venture’s typical life cycle? (according to graph in slides)
New-venture development, start-up activities, venture growth (or failure), business stabilization, innovation or decline
Activities that take place in new-venture development
Activities associated with the initial formulation of the new venture’s general philosophy, mission, scope, and direction
Activities that take place in start-up activities
Creating a formal business plan, searching for capital, carrying marketing activities, and developing the entrepreneurial team
Activities that take place in growth
Leadership transitions from an entrepreneurial one-person focus to a managerial team-orientation to cope with growth of the venture
Activities that take place during business stabilization
A “swing” stage that precedes the period when the firm either swings toward greater profitability or toward decline and failure
Activities that take place during innovation or decline
The firm either continues its success by acquiring other innovative firms and develops new products/services or it goes into decline
Entrepreneurial leadership
Arises when an entrepreneur attempts to manage the fast-paced, growth-oriented company
How can entrepreneurs build an adaptive firm? (4)
Share the entrepreneur’s vision, increase the perception of opportunity, institutionalize change as the venture’s goal, instill the desire to be innovative
Identify five unique managerial concerns of growing businesses.
Distinctiveness of small size, continuous learning, community pressures, one-person-band syndrome, time management
Components of entrepreneurial leadership (6)
Determining the firm’s purpose or vision, exploiting and maintaining the core competencies, developing human capital, sustaining an effective organizational culture, emphasizing ethical practices, establishing balanced organizational controls
What are the five C’s of credit?
Capacity (making sure you can repay), capital, collateral (what you are going to buy), conditions (what is going on), and character
What are different types of loans? (6)
Working capital, equipment, inventory, real estate, factoring, leasing
