Finance & Strategy

Question 1

How could greed impact an entrepreneurial start-up?

Answer 1

• Large risks can result in rapid growth or complete failure

- Large financial risks could result in the total loss of any seed capital the startup has at its disposal

Question 2

What strategies could you implement to avoid reckless financial strategies?

Answer 2

• Require multiple people to make financial decisions to try to mitigate the effects of risk of one person
• Implement mechanisms which can prevent/mitigate the innate greed which cannot be overridden easily

Question 3

What is agency theory?

Answer 3

Agency theory effectively states that directors of a company are likely to make decisions which favour the short term profitability of a company as their own financial interests are also often tied to it

Question 4

How could agency theory impact a business which aims to be as innovative as possible?

Answer 4

The innovation of a company may be reduced if long term investment into innovation is throttled by short term investments elsewhere, for truly innovative companies innovation is a long-term investment which pays off after years
-Eg share buybacks instead of investing in new tech.

Question 5

What are predictability, malleability, and harshness?

Answer 5

• Predictability: easy for stable industries to plan for future, more turbulent industries may not be worth planning for, an evolutionary approach may work better
• Malleability: in new ventures where the environment is shaped by the entrepreneur
• Harshness: when a business is out of step with the market and is fighting for survival

Question 6

In what ways are entrepreneurial businesses advantaged when it comes to strategy?

Answer 6

• Businesses which have just been brought into being are ‘infinitely shapeable’ there is no rigid concrete structure which has been around for years and years yet
• Because entrepreneurs create their environment they get to shape it