Innovation & Entrepreneurship Flashcards
1
Q
What does the term entrepreneurship mean?
A
Process initiated and carried out by individuals, which serves to identify, evaluate and exploit entrepreneurial opportunities
closely linked with the assumption of risk
2
Q
What are entrepreneurs?
A
- identify business opportunities and make technology concepts commercially viable
- often but not always business owners
- creation of economic structures
3
Q
What is a start-up?
A
taking a stake in an existing company, taking over an existing company, joining a franchise company or establishing new enterprise
4
Q
Describe the GEM.
A
Global Entrepreneurship Monitor (GEM)
- collects the number of founders worldwide
- well-founded recommendations for political decision-makers
- Focus on early stage entrepreneurs who are in the starting of their business or have been running their own business for no more than 42 months
- all types of self-emploment are considered to be business start-ups
5
Q
What is TEA?
A
Total entrepreneurial activity (TEA)
indicates the proportion of target group of early stage founders in the population
6
Q
Describe the term nascent entrepreneur
A
Nascent entrepreneur = future founder
- are busy in their foundation but have not yet completely established the business
7
Q
Describe the critique regarding GEM.
A
- “hobby” start-ups with low added value are also included in the statistic
- believe that only innovative ventures should be included
- why 42 months is the start-up cut off date is unknown
8
Q
Describe the typical classification for SMEs.
A
Micro: - persons employed: up to 9 and - turnover up to 2 mil or - balance sheet p.a. € up to 2 mil
Small: - persons employed: up to 49 and - turnover up to 10 mil or - balance sheet p.a. € up to 10 mil
Medium: - persons employed: up to 249 and - turnover up to 50 mil or - balance sheet p.a. € up to 43 mil
9
Q
Differentiate the terms serial entrepreneur and portfolio entrepreneur.
A
Serial Entrepreneur: founds various companies in sequence, sometimes in different industries and often exit one as they move to the next
Portfolio Entrepreneur: manage an entire portfolio of firms; several companies in parallel
10
Q
What are central elements of the study of an entrepreneur?
A
- entrepreneurial opportunities pursued
- resource required
- form of orga chosen
- environment in which the enterprise operates
11
Q
Who is an entrepreneur?
A
Cantillon (1755): individual driven by pursuit of profit; acquires goods at fixes price and sells later to an undetermined price hoping to make profit and characterised by the assumption of risk
Say (1828): production process: land, capital, employment
Knight (1921): entrepreneur as carrier of uncertainty
Schumpeter (1934) characterised by innovative behaviour (creative destruction) to destroy existing structures and create new ones
Kirzner (1973) primarily uses arbitrage opportunities
current authors: Changes in existing products and processes achieved by entrepreneur through combination of leadership, motivation, crisis management and risk-taking.
Lazear (2012) subset of leaders because of vision, value of goods and cost-effective services capable of communicating the vision to others
12
Q
What’s the current definition of characteristics of an entrepreneur?
A
- bearer of risk: make decisions under uncertainty
- arbitrageurs: exploit price differences and market opportunities
- innovators: introduce new technology or products, discover new markets, create new types of institutions
- coordinators of scarce resources who collect various resources
13
Q
What are the most prominent market exits of young companies?
A
1 market exits without insolvency proceedings
- personal reasons (42%)
- economic or financial reasons (32%)
2 Insolvency petition filed
- insolvency proceeding concluded - company closed (22%)
- insolvency proceeding pending - company reorganised (4 %)
14
Q
Describe the discovery approach of an entrepreneurial opportunity.
A
- opportunity already exists and merely needs to be discovered
- entrepreneurs are special people who recognise and take advantage
- detailed data collection and market research are imperative
- important to act quick before someone else takes advantage of the opportunity
- opportunities are created by changes in markets, industries, laws, regulations demographics etc.
15
Q
Describe the steps of the role of the entrepreneur in the discovery approach.
A
1.1 Taking advantage of the business opportunity
1.2 Evaluation of business opportunities
1 ) identification of business opportunities
2 ) defining of goals and formulation of a plan to achieve the goals
(entrepreneur seeks resources to pursue the entrepreneurial opportunities)
3) entrepreneur develops a solution to satisfy the perceived needs
^ adjustments based on feedback from market
(entrepreneur seeks resources to pursue the entrepreneurial opportunities)
4) market entry
16
Q
Describe the creation approach of entrepreneurial opportunities.
A
- opportunity is created and not discovered
- creation is not constructive but takes form of creative destruction
- entrepreneur creates an innovation that allows them to pursue the opportunity - makes existing opportunities redundant
17
Q
Describe the steps of the role of the entrepreneur in the creation approach.
A
Follows a decision logic (effectuation process)
1) Who am I? What do I know? Who do I know? (effective means)
2) What can I do? (effective course of possible action)
3) Exchange with other people
4) Binding commitments from stakeholders
4. 1 Fresh objectives –> What can I do?
4. 2 Fresh funds –> expanding cycle of resources (start again with 1)
18
Q
What are principles guiding the process of opportunity creation?
A
1 Sparrow in hand principle: something new is created only with existing possibilities, no new paths are taken
2 Affordable loss principle: alignment is made according to what one is prepared to lose, instead of calculating possible returns
3 Patchwork principle: negotiations are conducted with all persons who are willing to make a contribution. Goals determined by who will join.
4 making lemonade out of lemons principle: unexpected coincidences and circumstances are acknowledged and actively used
5 Pilot in control principle: human action is primarily driver of new opportunities. Rather than relying on exploitation of technological or socio-economic changes
19
Q
How can opportunities be assessed?
A
Validation of the business idea
- is the idea viable (market feasible)
- is its implementation worthwhile? (economic feasible)
- Is the idea feasible (technical)
1 Technical feasibility
- degree of technical possibility, innovation, patentability, general intellectual protection are examined
- is the idea technically possible
- develop first prototype
2 Market feasibility
- determine whether it is possible to bring the service or product to market
- needs to offer advantage over existing solutions
- research of similar products, services that satisfy same needs
- are customers willing to pay for the product
- are the resources available to pursuit the opportunity
3 Economic feasibility
- calculated expected return, price, market volume, market (estimates)
- anticipated costs for pursuing the opportunity
- if feasible, establish business plan
20
Q
What are motives of entrepreneurs?
A
1 self-realisation: realise goals and dreams, and/or looking for a challenge
2 Material remuneration: would like to be paid according to their efforts; want to pursuit own venture
3 Innovation: want to create something new
4 Striving for independence: want to be independent and their own boss
21
Q
What are possible barriers of establishing a new venture?
A
- lack of resources
- compliance costs (high taxes or other fees)
- uncertain future
- fear of failure
22
Q
What are the three characteristics particularly relevant for an entrepreneurial personality?
A
1 Performance motivation: Weill perform and deal with tasks that are both challenging and feasible
2 High self- efficacy expectation: belief that one is responsible for one’s own fate and the results of one’s action; can actively influence own outcome
3 Attitude towards risk: tendency to voluntarily expose themselves to situations with an uncertain outcome; take calculated risks and are willing to develop the ability to manage such situations appropriately
23
Q
What are important factors in the decision to become an entrepreneur?
A
1 Pursuit of independence: independent of authority and realise own potential
2 Problem orientation: proactive mindset often allows to focus on the possible solution of a problem
3 Resilience: refers to physical stamina and mental ability to perform under pressure
4 Emotional stability: ability to overcome frustration more easily
5 Assertiveness: will pursuit one’s interest often includes willingness to lead others
6 Social adaptability: flexibility to adjust to the changing requirements
24
Q
What are environmental factors relevant for entrepreneurs?
A
- market
- uncertainty due to technological change
- capital requirements
- competitive density
- enforceability of industrial property rights
- technology transfer
- other social-cultural factors
25
What are pros and cons of team foundations?
Pro:
+ greater capacity for problem-solving, broader horizon of experiences and wider range of knowledge
+ ability to hep one another
+ ease of coping if someone leaves
+ less occurrence of feeling alone or lonely
Cons:
- possible difficulties in cooperation due to unclear competences and group thinking
- team only working together effectively after extended period of time
- constructive resolution of any conflicts that arise in the team, requiring conflict competences, respect, listening, participation, and honesty
26
Describe the term business model.
Business model = how added value is created for customers: how a return on investment is secured in the organisation
- basic idea
- captures purpose of the venture
- possible blueprint for pursuing a business idea
27
What are steps in the development of a business model?
1 Customer: Who is the customer? What are their interest, characteristics, needs?
2 Opportunity: Market opportunities? Potential? Trends, technology and market changes?
3 Solution: What exactly does the solution look like? How does it meet customers needs?
4 Team: Who is needed to develop the solution successfully?
5 Advantage: What are the advantages over the others?
6 Results: What results are expected?
28
Describe why a product alone cannot create value.
The value proposition captured by the entire business model creates
Product/Service --> Solution --> Customer task
Value Prop is addressed to customer task
Value Prop is supplied by business model
Satisfied customers create business model
29
What is a value proposition?
| What are four criteria that help to formulate it?
promise of value to be delivered to a customer through the use of a product or service
1 Value prop:
- factors that should inspire the customer
- customer segment is described
- task solved for the customer is described
- benefit must be clearly defined
2 Business Structure:
- way the business is structured
- convey enthusiasm
- how is the promise of value prop convincingly fulfilled?
- Requires: suitable sales channel, production, or service processes, core capabilities and business partners
3 Profit model:
- how is money earned?
- description of costs and revenues
- make or buy decisions
- long term survival assessment
4 Entrepreneurial spirit:
- Who is the member of the team?
- desired professional and social skills
- team should embody values of the value prop (rules, ideals, manners)
- manage customer complaints appropriately
30
Which are core duties a founder/entrepreneur should be able to fulfil?
1 customer understanding
2 business architect
3 basic economist
4 team builder
Not exhaustive. Entrepreneur must play different roles:
- visionary
- discoverer
- information broker
- decision-maker
- salespeople
- networker
- front line worker
- problem sovler
- controller
31
Describe business model canvas.
| What are elements of it?
Useful tool to visualise the business model.
- Key partners
- Key activities
- Key resources
- Value Proposition
- Customer relationship
- Channels
- Customer segments
- Cost structure
- Revenue streams
32
What's a business model innovation?
Unusual business models that are atypical in the industry
Blue ocean products: no competition and untouched markets
Red ocean: very full, hyper competitive market with price competition
33
How can blue oceans within business model innovations be discovered?
1 Rule of the game and industry are analysed (strategy contour)
Graph:
- horizontal = typical factors that determine competition
- vertically = level the factors are met
2 Benefit curve is plotted in graph
- shows how customer obtains benefit through transformation
3 "Four action format" can be used to develop a new benefit curve
1) Which elements were previously taken for granted and can be deleted?
2) Which factors can be reduced far below industry standard?
3) Which factors far exceed the standard?
4) Which new factors should be created for the industry?
34
What are steps in a strategic plan development?
1 Vision:
- desirable corporate image for new 3+ years
2 Mission:
- purpose and nature of the company
3 Strategic corporate goals:
- medium / long-term goals the company pursuits
- product-market combinations
4 Operational targets
- market share, quantity of a product sold, key financial figures, profitability
35
What are possible generic strategies resulting from a SWOT-Analysis?
1 Expand: combination of strengths/opportunities
2 Protect: strengths/threats
3 Catch up: Weaknesses/opportunities
4 Avoid: weaknesses/threats
Expand as most favourable variant:
1 cost leadership: price advantages
2 differentiation: at least one unique advantage
3 concentration on focal points: concentrating on targeted niches or a better cost situation in the segments thereby increase customer loyalty
36
What is important for every strategy?
| What are success factor criteria?
Strategy must be implemented and critically reviewed based on regular basis.
```
Seven Success factors:
1 market positioning
2 innovation
3 uniqueness of offering
4 structure of sales channels
5 management experiences
6 ability to meet demand
7 market environment
```
37
What is the recommended approach for strategy?
1 Quality should generally take priority over cash flow (market share over profit)
2 focus on rapid growth, aggressive marketing used to gain and defend market share
3 high productivity with particular emphasis on experience and leaving curve effects
4 profit for which the prerequisites were created ca finally be gained
38
Describe the concept of innovation.
Brockhoff:
- Innovation as an invention that is carried through entrepreneurial success
- invention of a new product, service, or process
- requires investment in production, preparation and market development
Lyons:
- what defines who wins and loses
- successful commercialisation of innovations is the main focus
Hauschildt:
- novelty "qualitatively novel product or process that differ noticeably from a comparative state
39
What are possible content-related innovation dimensions?
What is new?
1 Process innovations:
- novel factor combination
- good is produced more cheaply, qualitatively, better or more environmentally friendly, safer or faster
- efficiency oriented
2 Product innovation:
- further than process innovation and also includes recycling
- product to fulfil completely different purposes
- serve existing purposes differently
- effectiveness oriented
3 Service innovation:
- product-service systems where product and process innovations coincide
- immaterial, heterogeneity, inseparability and transience
4 Market innovation:
- new sales or procurement markets
aim to open up new customer or supplier potential
5 Structural innovations:
- renewals in corporate structure
- work structure, new work, schedules, workplace models, new personnel development procedures
- increase in employee qualifications and/or motivation
6 Cultural innovations:
- improvement on social sphere
- change in cooperation between employers and trade unions
40
What isnovelty-degree-related innovation?
Novelty-degree = intensity
How new is new?
- inflationary way of word innovation ranges from new designs up until groundbreaking innovations
- concept according to target groups and degree of novelty
41
What is subjective innovation?
New for whom?
- clarified by focusing on different target groups
- new for individual (manager, company, all managers of a company?)
- novelty for industry
- novelty for entire nation
42
What is the actor dimension of innovation?
New by whom?
- large number of different actors are involved in the creation
- implementation across various departments
- external actors such as customers, suppliers, cooperation partners play an increasingly decisive role in innovation (open innovation)
43
What is open innovation?
refers to the opening up of the entrepreneurial innovation process to include the outside world
e.g. actor dimension of innovation
participation of
- partners
- suppliers
- customers, etc.
44
What is the process dimension of innovation?
Where does the innovation begin, and where does it end?
1. innovation through systematic process
2. closer look at product or service area that is not yet known in detail
3. empirical causes and effects and functional connections
4 results in innovation (new product is published)
5 development and creation of designs, test facilities, prototypes, etc.
6 execution (conversion into economic unit on the market)
7 ongoing reprocessing
innovation management ends with transition to daily routine
45
What is the normative dimension of innovation?
New = successful
- approach that only takes the existence of an innovation seriously if it is economically successful
- questionable: no-one would start a project if success had to be guaranteed from the beginning; market development can only be estimated
46
What are possible dimensions of innovation?
```
1 content-related
2 novelty-degree-related
3 subjective
4 actor-related
5 process-related
6 normative
```
47
What is innovation management?
- prerequisite for sustainable corporate success
- targeted creation of innovations require a conscious design
- innovation potential identification
- to generate ideas, willingness of employees to act innovatively must be shown
- promoted by company management to set clear goals and strategies that include room for innovation
Innovation management = dispositive design of innovation processes
- shape innovation processes
> in contrast a system-theoretical view focuses on the design of the innovation system
48
What are possible innovation strategies?
Design of innovation strategy is an important management task
Ansoff and Stewart:
1 First to market
- intention of a company to always be the first innovator in a market
2 Follow the leader
- company waits for another company to build up the market
- company is then simply and quickly followed resultingg in less favourable image
3 me-too
- copy of the competitor is brought to market
- saves costs and thus exploits cost advantages
```
Maidique and Patch:
1 First to market (pioneer)
2 second to market (fast follower)
3 late to market (cost minimisation)
4 market segmentation (specialist)
```
```
Pepels:
1 Pioneer
2 Early follower
3 Modifier
4 Latecomer
5 Persister
```
49
What are innovation strategies according to Pepels?
1 Pioneer
* innovation leader constantly looking for new products, processes, markets
* focus on technological progress with option of competitive advantage
+ chance of rapid increase in volume and cost digression
- high risk as demand is not secure and large investment necessary
```
2 Early follower
* adapt the innovation of pioneers
* bring new products, optimise existing products, achieve benefits for customers
+ fewer risks than the pioneer
+ investments are lower
- pioneers intellectual propert protection
- image of innovation leader
- cost digression cannot be achieved
```
3 Modifiers
* incorporate innovation at later stage
* experience of pioneers and early followers
+ favourable competitive advantage created by the customer-specific orientation
- barriers of entry
4 Latecomers
* copy of innovations of established users to the market
+ development costs are saved and risk avoided
- products do not have USP
- company must be cost leader
- role requires process, structural, or market innovations (latecomer becomes pioneer in this sense)
5 Persisters
* existing range of products with existing processes and structures will remain within this existing range
+ no investment risk
- cannot gain any image or competitive advantage
50
What are characteristics considered to be a prerequisite for innovative employees?
```
1 Willingness to learn, curiosity, and flexibility
2 Sensitivity (recognise opportunities)
3 Confidence
4 Decision making ability
5 sense of purpose and loyalty to goals
6 Enthusiasm
7 Communication skills
```
51
Describe the three-phase model by Thom.
| What is it used for?
Design of Innovation Processes as part of the Innovation management
1 Idea Generation
1. 1 Search field determination
1. 2 Finding ideas
1. 3 Suggesting ideas
2 Acceptance of ideas
2. 1 Examination of ideas
2. 2 Preparation of implementation plans
2. 3 Decision on a plan to be implemented
3 Realisation of ideas
3. 1 Concrete realisation of the idea
3. 2 Distribution of the new idea to addressees
3. 3 Acceptance control
52
Describe the stage-goal approach by Cooper.
Innovation Management approach
- standardised multi-stage procedure with a series of work phases (stages) and decisions (goals)
- aim is to ensure process quality in the development of product innovations
- process-related influencing factors turned out to be decisive for economic success
- each stage contains cross-divisional activities by different functional areas or departments
- milestones with predefined criteria is used to decide whether the next work phase should begin
- if project does not achieve objectives, it is terminated
53
What are the phases of Coopers Stage-gate model?
Discovery: Idea Generation (agile)
Gate 1 - Idea Screening
Stage 1: Idea Scoping (agile)
Gate 2 - 2nd Screening
Stage 2: Build Business Case (Iteration & spiral)
Gate 3 - Go to development
Stage 3: Development (Iteration & spiral)
Gate 4 - Go to test
Stage 4: Testing & Validation (accelerated)
Gate 5 - Go to launch
Stage 5: Launch (accelerated)
Post Launch Review
54
What are advantages of the Stage-Gate Model procedure by Cooper?
1 Risk Reduction: divided into a number of work phases between go and no-go decisions
2 Simplicity: decision phases are linked to clearly defined criteria (gatekeepers from management make decisions on further action and investments)
3 Transparency: everyone can see investment in good ideas with good progress are made on the basis of defined criteria
4 Support: set of methods, tools and templates for each work and decision phase; scoring; NPV, IRR and PI
5 Experience: tested and used for approx. 25 years
55
Which modifications of the stage-gates model are possible?
Depending on scope and risk, three variants:
1 major risk = entire process with 5 work and decision phases are implemented
2 moderate risk = work phase 1 and 2 as well as 3,4,5 are combined and number of decisions is reduced to two
3 low risk / small projects = sufficient to combine work phases 1 and 2 as well es 3,4,5 ant to provide only for one decision
Agile stage-gate approach is also possible.
56
Describe the phases of the hybrid-stage-gate model.
in every phase constantly included:
- several time-boxed iterations in every phase
- customer feedback (voice of customer)
- user feedback
1 Ideation:
- generate ideas: technical, marketing, others
G1 Idea Screen
2 Concept:
- Concept development & scoping: technical, marketing, production
G2 Go to business case
3 Business case
- build business case: technical, marketing, production
G2 Go to development
4 Development
- create the product: technical, production, marketing
G3 go to test
5 Testing
- field trails, customer tests, trial operations: technical, production, marketing/sales
G4 go to launch
6 Launch
- strate production & selling: technical, production, marketing
PLR
57
What is meant by cloud phase and building block phase in Innovation management?
- division of innovation process into cloud phase and building block phase
1 Cloud Phase:
* People management, ideas & knowledge, creative iterative
> search field analysis
- business opportunity
- research & technology
- GAP analysis on strategy
- customer ideas, market trends
> result: Business Idea
- Technical feasibility: lab samples, SW prototypes
- Entrepreneurial feasibility: patents, partners, resources
- Market feasibility: lead user, market segment, competition
> Result: Business Case
2 Building Block phase
* proces mangement, engineering & implementation, structured iterative
- Systems design: realisation, competence development
- Development process: R&D, production, purchasing
- Marketing plan: Partnering, field tests
> Series introduction & market launch
> product care
58
What are core success factors of innovation processes?
1 Consider risk of failure in advance (always a risk)
2 clear procedure with stop-and-go criteria is necessary
3 Dividing the process into cloud and building block phase
4 Phase objectives of the process should be defined for all results
5 Iterations must always be possible
6 Changing target conditions should be prevented
7 Stop-and-go. policy should be avoided (consistency and continuity)
8 Product development runs parallel to production process development but the cloud and building block phase must not be carried out in parallel
9 support of management is always necessary (promoter)
59
What is the purpose of protection strategies?
- chance that products and/or technologies will lead to technological benefit or significant competitive advantage that needs protection from competitors
- achieve long-term freedom of action and block competitors
- limit the danger of imitations quickly and inexpensively
60
Describe factual and legal protection strategies.
| What are their components?
Competitive advantages through temporary monopoly benefits
```
1 Legal protection strategies
> long term, more sustainable
> property rights secure one's own freedom of action and block competitors
* patents
* brands
* utility models
* designs
```
(support and strengthening of faction protection strategies)
```
2 Factual protection strategies
> faster, better, cheaper
> reduction of the risk of imitation
* secret processes and procedures
* strong distribution channels
* binding of suppliers
* volume advantages
* customer loyalty
* strong brand image
```
61
What are the three core dimensions of a patent strategy?
1 Freedom of action (avoid conflicts with third parties):
- preventive, prophylactic measures taken before or during the development of products or technologies
- patent searches and their analysis
- proactive in-licensing: acquisition of rights by third parties on basis of license agreement
- mutual cross-licensing: mutual acquisition of rights between two parties by a license agreement
- destruction of interfering patents
2 Protection against imitations/blocking of competitors (prevent reproduction):
- technological circumvention solutions due to existing patents
- company must be willing to enforce property rights
3 Commercialisation through licensing:
- marketing its intellectual property rights externally
- consideration of profit-loss
62
Describe the steps in the St. Gallen patent management model.
Model is based on technology portfolio and identifies suitable measures along the technology life cycle.
1 Exploration:
- potential are identified to detect any existing earlier inventions (patent scanning)
2 Set-up
- focused patent reached are carried out (patent monitoring)
3 Lock up
- if own resources of strategic importance have built up, risk of conflict with patents from competitors increase
- patent law measures should be taken by means of expert opinion and appeals
4 Optimisation
- if company possesses high level of expertise but its strategic importance is declining, existing patent cluster should be reviewed in terms of cost/benefits
- out-licensing can bring short term returns
5 Dismantling
- if strategic importance has decreased significantly, it should be further reassessed
- surrender patent rights, sell them, donate them (exit strategies)
63
What is the difference between classic and ethnographic market research?
When is which approach viable?
Market Research:
- Users talk about their behaviour/preferences
- Users respond according to what they think is important
- User answer questions based on opinions and experiences
- analysis follows a defined thematic guideline
> appropriate when testing existing tasks
Ethnography:
- real, observable behaviour forms the basis of the analysis
- Users express their emotions, problems, and experiences through body language and spontaneous comments
- Researchers observe real problems at the moment they arise
- observation follows path of user
> Suitable for the detection of future innovation potentials
64
What are methods used in the ethnographic field research?
1 Participation observation:
- closest possible contact with the object of study by immersing themselves in the field of study through their own participation
2 In-Depth interviews:
- insight is gained into the world of the respondents
- everyday lives, dreams, values
- informational discussion style of interview
3 Artifact studies:
- observing how people use objects also leads to information bout the meaning of the objects
4 Video:
- over or covert
- pre and after perspective of events
5 Sorting cards:
- different cards are sorted by respondents in relation to a question
- results are photographed and statements are added
- useful for priorities or clustering of meaning
65
Describe empathic design.
- approach in which design of a new product is user-centred
- twofold: 1) empathy between user and dev; 2) between product and user
- Procedure: 1) users are observed and data is collected 2) observations are analysed 3) solutions are found and prototypes developed using creative techniques
- goal: integration of customers in early product development leads to better decisions
- not biased by devs mindset
- possible to respond to customers needs
66
What are objectives of BMW when using the empathic design approach?
1 User impulses: Testing what makes people want to use the product
2 Interactions with the user context: How the product fits into the user context
3 Unplanned product change by user: might change the product in unplanned ways to optimise its use
4 Intangible product characteristics: immaterial attributes of the product, which have an influence on the overall perception
5 Unarticulated customer needs: any (unconscious) problems while using are circumvented
67
What are selection criteria in order to choose a legal structure?
1 Legal structure that is customary in the trade
2 Liability, risk distribution, creditworthiness
3 Capital investment and asset protection
4 Management, decision making authority (corp governance)
5 Formation costs and current expenses
6 Tax Burden
7 Legal requirements, trade conditions
8 Business volume
68
What are possible legal structures of businesses in Germany?
Sole proprietorship:
- small business
- sole proprietor
- liberal professions
Partnerships:
- GbR
- OHG
- KG
- partner companies
Corporations:
- GmbH
- AG
- UG
- SE
Cross-form or special legal forms:
- GmbH & Co. KG
- dormant partnership
69
Describe the legal form Sole proprietor.
Einzelunternehmer
- in charge of the company and personally liable with all their assets
- not a merchant
- can be merchant - then e.K. (eingetragener Kaufmann)
70
Describe the legal form small business owner.
Kleingewerbetreibender
- assumed that business is easily manageable
- not affected by HGB
- not allowed to run company but must appear with full name (First and last)
- may voluntarily register into commercial register to acquire merchant status
- dependent on nature and scope of business
71
What are obligations for businesses with merchant status according to German Commercial Law (HGB)?
- double entry bookkeeping
- preparation of financial reports (balance sheet)
- take inventory
- annual accruals
72
When exactly is the point when "nature and scope" of a business exceed a small business?
- nature of business and scope
- more than 5 employees
- business assets > 100k€
- loan amount >50k€
- existing branches or sites
- turnover p.a. (depending on industry: production 300k€, retail 250k€, service 175k€)
73
Describe the legal form freelancer.
- trade tax exempt
| - prerequisite = independently exercised scientific, artistic, literary, teacher, consulting, etc. activity
74
Describe the legal form partnership under civil law.
- GbR (BGB-Society)
- commercial activity below the threshold of merchant
- martinets are entitled to all its assets
- established by at least two persons
- agree to all transactions in management
- can determine rules that govern the GbR as well as roles and responsibilities (highly advisable to document them in written form)
- everyone is fully, personally viable for all actions of the GbR
- becomes automatically OHG above the threshold
75
Describe the legal form general partnership.
OHG
- automatically created out of a GbR
- partnership jointly operated as commercial business under joint company name
- HGB applies
- all partners are equally unlimitedly personal and directly liable for all actions or omissions
76
Describe the legal form limited partnership.
KG
- a form of a OHG
- liability is limited for some
- general partners: fully, unlimitedly liable
- limited partners: liable until the capital they brought in
- partnership agreement (contract) is required
- entry in commercial register is required
77
Describe the legal form partnership society.
PartGG
- several members of freelancers join together to exercise their profession together
- does not exercise commercial trade
- assets of members are pooled
- internal relationship by partnership contract is created (Written)
- entry in partnership register
- all partners are liable without limitation, directly and jointly
- liability is limited to professional mistakes to the partner who gave rise to it
- management similar to OHG, however individual partners cannot be excluded
78
Describe the legal form limited liability company.
GmbH
- separate law applies due to its own legal personality
- formation costs of 25k€
- liability is limited to company's assets
- GmbH is the merchant
- assets belong to GmbH as legal entity
- management director and general assembly (might also have a supervisory board)
- general assembly exercising ultimate control
79
Describe the legal form entrepreneurial company.
UG
- limited liability company without any capital requirement (1€ is enough)
- form of GmbH
- subsequent years after formation, annual profit of 25% is contributed to the capital of the UG until at least 25k€ are collected to form GmbH
- auditor must review balance sheets and confirm this
- risky due to liquidity, creditworthiness and insolvency due to low capital
80
Describe the legal form corporation based on joint stock.
AG
- regulated according to Stock Corp. act
- own legal personality
- merchant
- capital requirement of 50k€
- shares can be issues in form of nominal value or no-par value shares
- assets belong exclusively to the corporation
1 management board: manages business and consists of one or more persons
2 supervisory board: appoints or recalls managers, monitors, and decides (dualistic German system)
3 annual general meeting: composed of shareholders that elect the supervisory board members
81
Describe the dualistic model.
- Found within AGs (corporation based on joint stock)
- people in the management board cannot be in the supervisory board at the same time (share of power)
- increased corporate governance
- supervisory members are elected by shareholders (max. 50%) and stakeholders (e.g. employees)
- famously called stakeholder company because of that
82
Describe the legal form Sociatas Europaea.
- analogue to AG
- share capital of 120k€ required
- dualistic or monistic model possible
83
Describe the legal form GmbH & Co. KG, silent partnership.
- created by forming a KG in which only (fully liable) general partner consists of the GmbH
- silent partnership is created when one partner participates in a commercial enterprise only through capital contribution
- participate on profits but do not appear externally
84
Describe the legal form U.S. Corporation.
- comparable to German GmbH or AG but without any minimal capital requirement
- normally no personal liability
- con: corporation is double taxed for profits as a legal entity and the owners
- three bodies: shareholders, board of directions (elected by shareholders) and executive officers (appointed by the board of directors)
85
What's a S-Corporation?
US Corporations are suffering a major disadvantage which is double taxation
- both owners and legal entity is taxed
- S-Corp is the solution for this and eliminates double taxation
- requirement: balance sheet must be calendar year, number of shareholders is limited, only natural persons with American citizenship or permanent residence permits can be shareholders
86
Describe the legal form LLC.
Limited Liability Company
- similar to German GmbH
- combines partnership and corporation
- managed by shareholders or by external managers
- option to tax LLC either as corp or partnership
- one person LLCs can be formed n most states
Requirements:
- articles of organisation: name, corporate purpose, registered agent and office
- operating agreement
87
What are different stages of company development?
1 Seed Stage:
- from idea to market entry
- need for support begins in the foundation phase
- consulting, coaching, access to network, startup capital
2 Start-Up Phase
- first sales to break-even point
- further capital is required for the expansion of business activity
3 Growth Phase
- adapting internal structures and management systems in the event of rapid growth
- extra support for accessing new markets
4 Maturity Stage
- business activity stabilises but need for capital for investment is given
- times of crisis, bridging liquidity issues etc.
88
Which forms of financing are common in which phase of the company?
1 Seed
- contribution mainly by founders, families of founders and friends
- various external assistance offer advice, networking etc.
- support service from public programs
- investment from private persons and companies
2 Start-Up
- importance of founder and the family decreases
- importance of public and private programs increase
- Corporate venture capital is awarded
3 Growth Phase
- dominated by entrepreneurial investments
- public programs are in place
- private investments are subordinate
4 Maturity phase
- bank loans
- equity investments
- rarely venture capital
89
What are Incubators?
| In which phase are they useful?
- set up and support companies on the path to setting up a business
- provide consulting and coaching
- provide rental spaces, infrastructure and services (e.g. for business plans)
- start-ups from incubators have a survival rate 85% higher than the average start-up
> Incubators are geared towards period up to market launch
90
What are Accelerators?
| In which phase are they useful?
- support of plans to help in rapid development of start-ups mainly through coaching
- start-up boot camps: knowledge and resource exchange
- network, strategic support, etc.
> Accelerators range from foundation to the development phase
> later stage accelerators are also possible between start-up and growth phase
91
What's crowdfunding?
| In which phase is it useful?
- large number of people support a project financially and thus make it possible
- Pro: very uncomplicated and fast way to get money
- Con: Investors have to expect a total loss of their investment
> Crowdfunding typically takes place from the start-up phase through the development phase and ends when the company enters the growth phase
92
What are types of crowdfunding?
1 Classic crowdfunding: (pre-sales, reward-based) no financial consideration is paid but a small thank-you (sample, prototype)
2 Donation-based crowdfunding: no consideration in return; social or charitable projects where people only get involved in order to do something good
3 Crowdinvesting: (yield-based; equity-based) individuals invest in equity-like manner to gain returns (fixed or performance based)
4 Crowdlending: (P2P) persons grant a loan and make debt capital available
93
Which phases in a company development are support service geared towards?
1 Incubators are geared towards period up to market launch
2 Accelerators range from foundation to the development phase
3 Crowdfunding typically takes place from the start-up phase through the development phase and ends when the company enters the growth phase
94
What are business angels and what is their goal?
- private individuals who participate with their own capital in the start-up project with people they do not know before
- offer support, assistance and passing on their own professional experience and integrating the start-ups as the provision of infrastructure
- assumption of an advisory or supervisory board function up to the collaboration in the company
- engagement with BA takes place over a fixed period of time and is contractually defined in advance (exit strategy after x years)
- BA expect above average return (motivation is purely financial)
- particularly helpful for innovative ideas
- usually several small investments instead of very large amounts
95
What does a typical procedure with a Business Angel look like?
1 Deal origination: first contact through communities
2 Initial Screening (evaluator pitch): opportunity to present idea
3 Due Diligence: if first impression was successful, presentation of business plan and critically examination in detail
4 Negotiation and Contracting: if examination is positive, negotiations take place and agreements on modalities take place
5 Post-Investment support: promised support its provided through consulting, network integration, infrastructure, cooperation and much more
6 Exit: at the end of the contract, exit of the BA
96
What is private equity?
- purchase and sale of shares in unlisted companies
- private equity company analyses established companies and then enters into an investment
- expected increase in value of shares over the term
- participation in companies affairs (usually in terms of advice not day-to-day)
97
What are possible exit strategies for private equity companies?
1 IPO: withdraw in case of IPO
2 Trade sales: shares are sold to strategic investor
3 Secondary purchase: shares are sold to another financial investor
4 Buy-Back: founders or owners buy back their shares
5 Liquidation: company is dissolved if not successful (total loss for private equity company)
98
Describe Ventrue Capital.
| How do they chose companies?
- form of private equity investment
- directed at entrepreneurial ventures with very high growth potential
- very important source of financing for very young companies (early stage) and established companies (expansion/growth stage)
- high risk + high return (typically above 20%)
- generate returns from later sale of company shares
- participation, control rights, decision making (founders keep majority of shares)
Choice:
- consulting with experts in selection and decision making
- based on business plan
- criteria: location, corporate culture, personnel
99
Describe Corporate Venture Capital (CVC).
| What's the difference to VC?
- usually subsidiaries of corporations provide capital
- investments in innovative start-ups with very good growth potential
- directly or through investment funds: invest internally or externally
- offer support services with management tasks, possibility of expanding market opportunities
- image benefits of CVC donor
Difference:
- strategic objective of CVC donors are different from those of VCs
- act as innovation management of company
- access to start-up provides them with additional expertise in new tech (competitive advantage)
- expansion of business area or product range through complementary products = expansion of market share
99
Describe Corporate Venture Capital (CVC).
| What's the difference to VC?
- usually subsidiaries of corporations provide capital
- investments in innovative start-ups with very good growth potential
- directly or through investment funds: invest internally or externally
- offer support services with management tasks, possibility of expanding market opportunities
- image benefits of CVC donor
Difference:
- strategic objective of CVC donors are different from those of VCs
- act as innovation management of company
- access to start-up provides them with additional expertise in new tech (competitive advantage)
- expansion of business area or product range through complementary products = expansion of market share
100
Describe the difference between VC and CVC.
CVC:
- act as innovation management of company
- access to start-up provides them with additional expertise in new tech (competitive advantage for themselves)
- expansion of business area or product range through complementary products = expansion of market share
- offer support services with management tasks, possibility of expanding market opportunities
- image benefits of CVC donor
- comparable to strategic cooperation of different size companies
VC:
- purely investment based with profit
- try to grow the company
- no direct profit for VC company
101
What are basic possibilities for public support for start-ups?
1 Become part of high-ranking network of investors
2 Receive financial support from the public sector, either directly or via professional investors
3 Public support measures as excellent sources of information
- Investment grants
- loans
- guarantees
- subordinate loans
- equity investments
102
What is required to receive public start-up support in Germany?
What kind of support is provided?
- technical and commercial qualification
- convincing business plan submitted with application
- project must not have started
Support = financial:
- investment in machinery
- equipment
- vehicles
- land
- factories
- intangible investments
103
What are possible public funding programs in Germany?
1 Special investment grant:
- receipt of unemployment benefits in case of start-up from unemployment
- EXIST program scholarship for university founders
2 Start-up loans from public sector:
- run for long periods of time + fixed interest rates
- redemption free years
- Hausbank Prinzip = credit risk secured by development institute
- possible in absence of securities
3 Loans:
- secured by guarantees of federal states
4 Public development bank:
- provide mezzanine capital to improve creditworthiness
5 Public-sector holdings:
- useful if greater need for capital
- public sector holdings in campy can be made
- federal states have to set up own medium-sized holding companies
6 Consultations:
- Founders Coaching
- start-up coaching to reduce failure and information deficits
7 Technology companies:
- technology promotion and innovation consulting
- High Tech Founder Fund (VC)
104
Describe the principal-agent problem between founders and investors.
- Founder has a lot of info about their project (experience, technology, status of development, status of negotiations, etc.)
- founder can realistically assess their personal abilities correctly (hidden characteristics)
- if founder presents abilities incorrectly this could lead to adverse selection
- Investor (principal) can only get partial insights into the situation
- usually not critical since founder and investors have the same goal
- differences in interest could arise however, if the agent does not want to act in a way the principal wants to (e.g. faster growth vs. more sustainable growth)
105
What are important elements of an investment strategy for VC companies?
1 Investment Size: usually operate within preferred sizes of the investment
2 Diversification: To reduce uncertainty inherent in start-ups, diversification is carried out (investments are made in a number of different areas to spread the risk)
3 Industry: specialised industries
4 Stage: focus on early phases due to limited investment size
5 Geography: preferred to invest more locally (close proximity)
106
Describe the elements of a VC investment strategy.
Quantitative portfolio structure:
- Industry
- Geography
- Stage
Qualitative portfolio structure:
- Investment size
- Diversification
107
What are risks that investors try to minimise?
1 bad management decisions
2 lack of commitment of founding team and key people
3 Differences of opinion about the right timing to generate value
4 Expansion to include new shareholders, as this may lead to conflicts
108
Describe the Term sheet.
| What are key elements?
- term sheet = letter of intent LOI
- investors and founders define key points of planned cooperation at an early stage
- leads to final contract later on
- good practise to adhere to it (even when not legally binding)
- the more detailed the better (fewer negotiations for participation document)
LOI contains:
- regulations on the essential financial aspects
- Strategy(regulation)
- Financial or distribution policy
- employment contract of the management
- put and call options
- etc.
Investment documentation:
1 description of the company and the capital development
2 further information on the investment and the conditions
3 special rights of the investor
4 Liquidation preferences
5 rights and obligations of co-sale
6 obligations of the founders (guarantees and vesting)
109
What are elements of the investment documentation?
Element of the Term sheet (LOI)
1 description of the company and the capital development
2 further information on the investment and the conditions
3 special rights of the investor
4 Liquidation preferences
5 rights and obligations of co-sale
6 obligations of the founders (guarantees and vesting)
110
What are three central questions regarding the use of funds within the LOI?
1 What exactly is the source of money?
2 What are the entrepreneurial reasons for issuing the shares?
3 What is the relationship with other stakeholders?
111
What are interests of the founders in terms of risks regarding the potential investor?
1 Investor is not sufficiently committed and does not contribute enough of his network and knowledge
2 New investors enter the company and upset existing balances
3 Investor withdraws at very wrong time and upsets the balance
4 Surprises at the time of exit lead to financial plan not being adhered and the planned increase in value not being achieved
112
Describe typical negotiation situations of company founders.
1 Idea Phase: Negotiation internally whether to realise idea
2 Licensing Negotiation: on intellectual property
3 Co-Founder Negotiation: If partner is involved, corresponding agreement
4 Equity Collection: capital is often drawn from family and friends
5 Pitch: external investors must be convinced + contract negotiation
6 Team members: if employees are recruited
7 Business Angels: negotiation about participation
8 First customer: negotiation carefully regarding quantities and price
9 Term sheet: negotiation details of LOI
113
How can errors in negotiations be avoided?
Preparation of the negotiation:
- important to clarify interest of the business partners as far in advance as possible
> What do they absolutely want? What else would they like?
> What possibilities exist to generated desired values?
> Which info do they lack?
During negotiations:
- important to identify problems and react appropriately
- expect the unexpected
- have different types of descriptions at hand
- flexible as necessary (not as possible)
- reduce tension quickly (apologise if necessary)
After:
- lessons learned
- reflect
114
What are possible ways to evaluate business start-ups?
Discounted Cash Flow Method (DCF):
* estimate cash flow of the future
* present value by discounting by using appropriate cost of capital
+ future cash flows and cost of capital are taking into account
+ based on time value of money
- obtaining the info of future cash flows for start ups is impossible
Net asset value method:
* all companies assets are estimated at their current market value
* all depts are subtracted
+ simple and straightforward
- start-ups do not have a lot of assets
- not very insightful due to intangible assets
- not recommended as standalone evaluation method
Market Value Method:
* does not focus on internal circumstances but prices on markets
* stock companies = market cap
* non-listed companies = benchmarking
+ simplicity, if listed on stock market
+ brand-value is taken into account (major factor)
- comparability risk due to culture, image and age of machinery
Other approaches:
* probability and simulated oriented business validations methods
* based on assumptions and business planning
115
What are factors that influence the enterprise value?
- past values
- quality, experience of management/founding team
- sales forecasts
- risks
- financial market environment with supply and demand
- price levels
- time factor (time to market; break-even; exit)
Advise for founders:
- Focus intensively on products, prices, customers, competitors (very positive effect on credibility)
116
What is the purpose of a business plan?
Basis for investors or supporters to make decision for or against a project
- can be written for established companies (extensive projects) or founders who need support for their planned start-up
- central objective is to receive support
- procurement of equity capital
- capital for external financing
- support for decision making, joint venture partner, sale of company, expansion into new markets, new products, IPOs
- 7 C-Princinples:
clear, crisp, concise, consistent, coherent, convincing, credible
117
What is a useful method to check for a successful design of a business plan?
The 7 C's
```
Business plan must be:
1 clear
2 crisp
3 concise
4 consistent
5 coherent
6 convincing
7 credible
```
If plan passes these, reader will understand the desired positive impression
118
What are expectations of business plan target groups?
Founder:
- sort thoughts, present results of research and consideration in structured way
- identify weak-points and eliminate them in timely manner
- red thread (controllable and manageable)
- founders should be viewed as main target group
Supporters and Investors:
- decisive document to make decision for or against project
- illustrates prospects of success of the business idea
- upper level management for decision-making purposes
119
What are requirements for a business plan?
- written in reader-friendly manner
- appealing layout
- explained technical terms and connections
- objective and without emotions
- content: traceable, consistency, objective foundation and completeness
- short and concise as possible
- structured and systematic (clear objective and explanations geared to reader)
- assumptions must be realistic and justified
- consistency between different parts of the business plan
- sufficient proof of entrepreneurial qualification
120
What could be priorities in a business plan for certain addressees?
Potential Equity Investor:
- detailed information on the expected return on investment
- presentation of opportunities for value enhancement
- investment and financial policy
- management qualities
Potential Lenders:
- focus on securing repayment of and interest on the loans through existing risk hedges
- balance sheet collateral
- comprehensive development of cash flow
- form and extent of founders commitment
Corporate management:
- designed as framework for operation decisions
- periodic budgets
- target/actual comparisons
- forecast calculations
121
Describe the basic structure of a business plan briefly.
1 Executive summary
2 Company presentation (idea, products/service)
3 Markets, Marketing, Sales
4 Management, Team and Organisation
5 Procurement, Suppliers and Production
6 Implementation Plan and Risk Assessment
7 Finances and Financing
122
Describe the content of the executive summary in a business plan.
- written last
- aims to inspire reader with enthusiam for the project and to read all the plan
- easy to understand
- present business plan in short form + key statements
- intent for the business
123
Describe the content of the company presentation in a business plan.
1 presentation of business model
2 customers needs and benefits generated are clearly recognisable
3 uniqueness of the project
4 description of how revenues are to be achieved
5 previous major successes and failures
124
Describe elements of the company presentation - description of the industry part of the business plan.
```
Description of industry:
1 market volume
2 competitors
3 market developments
4 success factors in industry
5 industry developments
6 (targeted) market position
7 advantages of own products compared to competitors
8 demonstrate that customer needs can be met
```
125
Describe elements of the company presentation - products/services part of the business plan.
```
1 strengths/weaknesses
2 marketing
3 manufacturing
4 management
5 financing
```
- understandable way with technical part in appendix
- which customer needs do the products satisfy
- classification on product lifecycle
- quality management process
126
Describe elements of the company presentation - development part of the business plan.
- development of the company to date
- financial key figures of last three years
- in case of startup = founders advance contribution)
- time of foundation
- location
127
Describe elements of the company presentation - R&D part of the business plan.
1 stages of development of products to date
2 milestones, further developments
3 patents and other protective rights
4 integration of market development in R&D
5 integration of customer needs in R&D
6 influence of new technologies
7 report of R&D costs
128
Describe elements of the market and marketing part of the business plan.
```
1 Market potentials
2 Market volume plausible and comprehensible (total market size, segments, which players)
3 Market segments
4 Players (competitors, market leaders)
5 Main success factors
6 special opportunities
7 risks
8 special characteristics of market
9 Which products/services for which target customers via which distribution channel in which market
```
129
Describe elements of the market and marketing - expected market growth part of the business plan.
```
1 expected growth of overall market
2 growth in revenant market segments
3 Explanation on future market development
4 companies reaction
5 Opportunities and risks
6 Influence of suppliers in market
```
130
Describe elements of the market and marketing - customer part of the business plan.
Customers are described here
1 Who are they?
2 What is their geographical distribution?
3 Who has interest in the products?
4 How important are the appearance and image of the product to them?
5 Influence of customers on pricing, quality or additional services
6 Info on purchasing decision maker
7 Opportunities and risks
131
Describe elements of the market and marketing - competitive situation part of the business plan.
Direct competitor = same product/service in comparable quality
Potential = could possible enter market
Indirect = could endanger company's products through substitutes
1 main competitors and key figures
2 Positioning of competitors
3 Threat posed to competitors by identical products
4 Sensitivity of the market price changes, customer loyalty and reaction to price changes
5 Description of competing products: Quality characteristics, sales channels, pricing strategies, discounts, commission and life cycle phases
132
Describe elements of the market and marketing - own positioning part of the business plan.
Explanation of own positioning
1 Which areas is the own product superior to competitor?
2 Which areas inferior and why?
3 Why is the company superior in the competition?
133
Describe elements of the market and marketing - future development part of the business plan.
1 possible mergers
2 cooperations
3 presence of foreign competitors
4 appearance of alternative products
134
Describe elements of the market and marketing - marketing presentation part of the business plan.
Marketing Mix = 4Ps
```
1 product and performance policy (product function and design, packaging, quality, price)
2 pricing policy (demand oriented, cost-oriented or competitive, discounts, etc.)
3 Distribution channels (costs, details, sales policies, sales personnel)
4 Promotion (awareness, communication policy, willingness to buy, media exposure, ads)
```
135
Describe elements of the Management, Team and Organisation part of the business plan.
1 Competences and motivation of founders and management
2 Experiences and knowledge, composition and distribution of skills
3 Industry specific knowledge
4 Customer relationships
5 Motivation for self-employment
6 Description of the orga (structure and process orga: corporate culture, management principles, instruments)
136
Describe elements of the Procurement, Suppliers and Production part of the business plan.
1 Location or Planning of production facilities
2 Available or required Machinery and equipment
3 Production personell
4 Suppliers or materials (supplier relationships)
5 Production capacities
6 Certifications
7 Outsource possibilities
8 Cost and possible cooperation partners
9 Sourcing: One or several suppliers, dependencies, prices, local or global sourcing
137
Describe elements of the Implementation Plan and Risk Assessment part of the business plan.
```
Implementation Plan:
1 timeframe of five years
2 planning of the foundation
3 planning of the expansion
4 Objectives and milestones
```
Risk Assessment:
1 self-criticism and realistic assessment
2 Internal strengths and weaknesses
3 Opportunities and risks
4 Possible problems and scenarios how do teal with them: liquidity bottlenecks, weaknesses in the team, threats to patentability
138
Describe elements of the Finances and Financing part of the business plan.
1 Comprehensive info on financial situation
2 Calculations must be comprehensive and transparent
3 Five year financial planning timeframe: first year monthly; second year quarterly; third to fifth half-year
4 Show Business idea viability and profitability
5 Credibility as well as scenarios (best, worst, realistic)
Profit planning:
- sales, personnel, deprecation, expenses
- operating result with profit and losses
Liquidity planning:
- investments, interest, financial planning
- surplus/deficit
139
What are the three basic steps to create a business plan?
1 Potential recipients and their target information profile must be defined
2 Necessary basic data is determined, which either exists or needs to be procured
3 Business plan can be drawn up, optimally formulated and comprehensibly designed
140
What are the most common mistakes in business plans?
1 Lack of focus on needs and customers
2 Lack of receiver orientation
3 Incompleteness and contradiction
4 Mixture of hope and reality
5 Non-observance of risk
6 Misjudgement of Time and money
7 General phrases ("we have no competition")
141
Describe typical steps in the creation of a business plan.
1 Founders work with preliminary goals (e.g. sales figures)
2 Market analysis based on secondary data
3 Formulated goals are confirmed or revised
4 Section on production and management is written + financial part is prepared
5 First version of Business Plan: critical examination regarding realism, consistency, meaningfulness and comprehensibility
6 Implementation phase of business plan: if unrealistic - revision; if elements unsuitable - update: regular check up-to-date check
142
Describe e-Business.
| Which different stages of e-Business exist?
-initiation, partial or complete support, handling and maintenance of service exchange processes between economic partners by means of IT
1 Static Presentation
- product and company presentation
- static content
- no personalisation
2 Communicative Interaction
- Pre- and after-sales service
- customer inquiries
- dispatch of information
3 Commercial Transaction
- online transaction e.g. conclusion of contracts
- integration to back-office
4 Value and partner integration
- electronic integration of transaction partners in the value added process
- highest level of interactivity
143
What are the three building blocks of e-Business?
| Which central platforms exist out of e-Business?
1 Information
2 Communication
3 Transaction
via digital networks
- e-procurement
- e-shop
- e-marketplace
- e-community
- e-company
144
How is value generated through an E-Business?
new added value is achieved:
1 structuring and creating better overview (structuring value)
2 selection options at time of query = more efficient selection (selection value)
3 efficient and effective matching of supplier and inquirer (matching value)
4 efficient and effective processing of transactions (transaction value)
5 efficient and effective communication of different demanders (communication value)
145
What is a digital business model?
| What are digital technologies, digital goods, digital strategies and digital business models?
Creation of value or benefits in the company is purely digital, on the basis of digital components or through an activity that is based on digital technologies.
Digital technologies = hard or software units for signal exchange (MP3 player)
Digital goods = based on digital tech or completely digitised (smartphone)
Digital strategies = planning of measures to achieve measurable goals (digital products or business models)
Digital business models = design of relationship between a service provider and groups where IP-based networks are used to exchange services and considerations
146
What are six technologies considered as Enablers of digital business models?
1 Cyber Physical Systems
2 Big Data
3 Cloud Computing
4 Artificial Intelligence
5 Digital Platforms
6 Blockchain Technologies
147
What are particular challenges in the transition to digital business models?
1 Essential for managers to build up new skills (ICT) in terms of their trends and potential
2 External service providers or in-house ICT specialists with IT skills are needed
3 Considerable legal uncertainty (both data security and ownership question of data)
4 Digital infrastructure is becoming increasingly important (transmission rates, reliability, security)
148
What are successful business models in the digital age?
| What are options to switch the business model?
1 Product business model: standardised product in large quantity
2 Platform business model: different players jointly provide a service (winner takes it all)
3 Project business model: highly individualised products where a project is carried out
4 Solution business model: individualised services are offered and completely implemented at the customers site (plan build run)
Switch:
- Expand/extent
- Focus
- Personalize
- Stanradize
149
What is the business model transformation board?
| What options to switch business model are offered?
provides orientation framework for companies on how to switch between the four business models
Dimensions:
- Completeness of the transaction (from low/individual to high/comprehensive, integration)
- Individualisation (from low/bulk to highly customised)
- Product
- Project
- Platform
- Solution
1 Expansion: not only one product is offered but comprehensive and integrated offers (bottom to top)
2 Focus: from product range to only individualised products or projects (top to bottom)
3 Personalisation: opening up of new market segment that cannot be reached with standard offering (left to right)
4 Standardisation: moving away from customer-specific offers to standardised offers (right to left)
150
What is crowdsourcing?
- application of swarm intelligence
- outsourcing of task that is usually carried out within an orga
- utilises creativity of the crowd
- crowdsourcing platform can be managed by AI
151
What is AI?
| What's strong and weak AI?
Artificial Intelligence
- computer systems that imitate the human intelligence
1 ability to learn
2 deal with uncertainty and probabilities
3 solve problems in abstract way
Weak AI = cannot do comparable things to humans in context of complexity, ambiguity and contradiction
Strong AI = comparable performance to human brain (does not exist yet)
Turning Test to prove this
152
What is machine learning?
- system is not fed with if-then rules
- able to recognise patters, regularities and make generalisations
- requires large amount of training data
153
What are applications of AI?
```
1 Computer Vision
2 Biometrics
3 Speed recognition
4 Natural Language Processing
5 Natural Language Generation
6 Sentiment detection
7 Robots
```
154
What is Globotics?
- mix of globalisation and robotics
- easier to outsource service jobs
- service sector largely untouched by globalisation is now also exposed to worldwide competition as a result of digitisation
- activities can be carried out remotely and operated from abroad (e.g. cleaning robots, inventory management, etc.)
- lower wage countries will win and jobs will be lost in industrial nations (telemigration)
155
What are cooperations?
| What are reasons for entering into a cooperation?
- long term collaboration with joint use of resources between legally independent companies
1 Transaction Theory: every exchange process between market participant leads to transaction costs that should be minimised
2 Market-oriented explanation: success of companies is based on positioning, build up and maintaining a competitive advantage (this is easier through cooperation)
3 Resource-oriented declarations: partners have different resource endowments, the joint use of resources represents a significant advantage (especially when difficult to substitute or imitate)
156
What are pros/cons of cooperations in detail?
+ market entry or increased market power in existing markets
+ transfer of skills or new activities or access of skills
+ broadening of financial or Human Resources and better use of existing capacities
+ faster access to business (when increasing dev times by products, knowhow or technologies from cooperation partners)
+ much lower commitment to a new business segment required
+ distribution of costs and risks among cooperation partners
- lower level of freedom and dependency
- division of cooperation results represent a field of conflict
- existing differences lead to high level of control and time-consuming coordination (internationally, language-wise, cultural)
157
What are pros/cons of cooperations?
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+ strategic flexibility
+ focus on core competencies
+ efficiency advantage
+ increased customer benefit
+ lower transaction costs
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- risk of loss of autonomy
- lack of securities for employees
- no lasting improvement of efficiency
- instability and complexity
- dependency on competences brought in
158
What are strategic alliances?
- cooperation with legally independent companies to pursue a common strategy to improve the competitive position
- aim to compensate own weaknesses with strengths of other partners
- long-term relationship (less firm than joint venture)
- usually partners of same industry
- based on agreement and contracts
159
What is a joint venture?
- cooperation between companies legally independent company is jointly established or acquired
- both patent companies own half of the shares
- resources are transferred to common venture
- management is carried out jointly
160
What is a cooperative strategy?
- process by which competing organisations work together to achieve a common goal
- focus on mutual benefits how the cooperation can develop
- clearly distinguished from competitive strategy
- coexisting of companies (cooperation and competition)
- focus on own benefit of company (profit, low risk, etc.)
161
Describe the MBA matrix.
Provides assistance in selecting the appropriate strategy approach.
1 Strategic importance
2 Competence compared to best in market
SI high + C low = ally
SI medium + C low = ally
SI low + C low = buy
SI high + C medium = invest and make
SI medium + C medium = ally
SI low + C medium = buy
SI high + C high = make
SI medium + C high = make
SI low + C high = buy
162
What is important to identify the right fit between two companies?
Six criteria for consideration of potential partners:
1 partners must have necessary size, tech, market access and other contributions to give the cooperation a competitive advantage
2 partners should complement each other (size or strength)
3 acceptable to both sides if a partner wants to focus on specific market; interest on internationalisation strategy should be congruent
4 must be only small risk that one of the partners will later become a competitor
5 cooperation was intended to limit the range of competitors strategies
6 compatibility of two orgas (culturally conflicts should be unlikely)
163
What are possible outcomes of two corporate cultures?
Cultural Fit = precondition for cooperation
if there is no sufficient match following outcomes are expected:
1 two cultures coexist
2 over a period of time, common culture will develop
3 stronger culture will prevail
4 constant resistance will lead to permanent impairment of cooperation
164
What are essential elements of the right form for a cooperation?
Direction of cooperation:
- Vertical = suppliers/buyer along the value chain
- Horizontal = small level of value chain (e.g. competitors)
- Conglomerate (lateral) = unrelated industries
Institutionalisation:
- institutionnels (e.g. supply contract, license agreement)
- unilateral or reciprocal equity participation (e.g. joint venture)
165
Describe the classification of companies based on the IfM Research on Family Businesses.
1. Independent
- Identity of ownership and management:
* Owner company
* Family-run business
- Separation of ownership and management:
* Family-controlled companies
* Public companies with numerous shareholders
2. Dependent
- Dependent companies
166
What's a family business acceding to Zellweger?
Dominantly controlled by a family with the vision to potentially sustain family control across generations.
167
What's a family business acceding to European Commission?
1 Majority of decision making rights are in the possession of the person who established the firm or their spouses, parents, child, children's direct heirs
2 Majority of decision making rights are direct or indirect
3 At least one representative of the family or kin is formally involved in the governance.
4 Listed companies meet the definition, if the person who established or acquired the firm (share capital) or their families or descendants possess 25% of the decision-making rights mandated by their share capital.
168
Describe the F-PEC model.
Family influence is represented by three dimensions:
1 Power dimension: extent of ownership, management control, influence in management bodies
2 Experience dimension: number of generations under family control
3 Cultural dimension: cultural overlap between the family and business system (overlapping values).
169
What are the five dimensions of family income?
1 Inclusion of family control in ownership, management, leadership
2 Complexity of family control: increases with number of family members involved
3 Set-up of business activities: number of companies in a family
4 Philosophy and the goals of the family owners: balancing between economic and other family goals such as long-term orientation or reputation
5 Levels of control in the family history: commitment to the company roots, bond between family and company
170
Describe the two-circle model of the Family Business System.
overlap between family and business system at the same Time points out existing fields of tension
Presumed logic of family system:
- Traditional
- Emotional
- Nepotism
- Long-term perspective
- Non-financial oriented
Presumed logic of firm system:
- Renewal
- Rational
- Meritocracy
- Short-term perspective
- Financial oriented
171
Describe different roles and their motives in the three circle model.
Family, Owner, Shareholder
1 Family Member neither shareholder nor business manager: Harmony, mutual support, long-term survival
2 Shareholder who is neither family member nor manager: Return on equity, dividends, value of ownership
3 Employees or managers who are neither family members nor shareholders: Job security, salary, work environment, promotion
4 Family member who hold shares but not management: Return on equity, dividend, information access
5 Nonfamily managers holding shares: Opportunity to benefit from performance, managerial discretion
6 Family members involved in operations without shares: Get to know firm, career path inside firm, eventually become owner
7 Family members holding shares and management: all three systems based on togetherness in family, commercial success and financial success
172
What are strengths and weaknesses of Family businesses?
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+ Lower traditional agency cost
+ Efficient leadership
+ Resource advantage
+ Continuity and long-term orientation
+ Culture of commitment and support
+ Identity and reputation
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- Dependence on family
- Agency cost because of nepotism
- Succession challenges
- Resource constraints
- Declining entrepreneurial orientation
- Role ambiguity
