mgmt 3000 guhde exam 2

entrepreneurship

- process of initiating a business venture, organizing the necessary resources, assuming the associated risks, and enjoying the rewards

- 31 million entrepreneurs in the US (about 16% of the adult workforce)

- 55% of adults have started a business at some point in their lives

entrepreneur

- someone who engages in entrepreneurship

small businesses

- classified by size of business relative to its industry

- most small businesses only run and operated by the owner

- 99.9% of all US businesses are small businesses

- nearly 50% of all US employees are employed by a small business

- small businesses are the lifeblood of the US economy

- create 2/3 of net new jobs

- drive US innovation and competitiveness

- account for 44% of US economy activity

- easier for small businesses to be innovative due to less rules and regulations than large businesses

types of small business owners

- idealists: rewarded by chance to work on something new and creative (photographers, artists)

- optimizers: get personal satisfaction from being business owners (claim to fame)

- hard workers: thrive on the challenge of building a larger, more profitable business (live to work)

- jugglers: high-energy people who enjoy handling every detail of their own business (i can do it best so i'll do it myself)

- sustainers: enjoy chance to balance work and personal life (control of work-life balance)

minority-owned businesses

- small business owner race distribution is reflected in the US population

- as minority population of US grows, number of minority-owned business grows too

- more than 11 million minority-owned businesses

- employ more than 6.3 million people and generate nearly $2 trillion in revenue annually

immigrant-owned businesses

- immigrants are 2x as likely as native-born Americans to start a new business

- types of businesses launched by immigrant entrepreneurs are increasingly sophisticated

- shift from retail and restaurants towards firms in financial services, software, insurance, and online businesses

- immigrant entrepreneurs are not reflective of the immigrant US population

women-owned businesses

- more than 12 million firms were majority women-owned in 2018

- 58% increase from 2007

- women are more cautious than men about borrowing money which limits growth opportunities (particularly in high tech fields)

- as cost of launching tech businesses falls, more women are taking a gamble in this competitive market

- businesses owned by women of color have experienced huge growth since 2002

small business failure

- 20% of small businesses fail within first year

- by the end of 10 years, only 30% of small businesses will remain (70% failure rate)

- notable risks of small businesses lead to high failure rate

- top reasons why small businesses fail are no market need, ran out of cash, or not the right team

traits of entrepreneurs

1) need for autonomy - motivated by opportunity to work alone

2) entrepreneurial sacrifice - ability to persevere after struggles or defeat

3) high energy - willingness to put in the time to get work done

4) need to achieve - internally motivated, especially in competitive situations

5) self-confidence - total confidence that business idea will work, apparent to others

6) internal locus of control - control over what happens to a person is internal, working hard leads to success

7) awareness of passing time - success dependent on time management

8) tolerance of ambiguity - ability to be okay with uncertainty of entrepreneurship

- managers in large businesses share traits of high energy, need for achievement, and self-confidence

social entrepreneurship

- focuses primarily on creating social value by providing solutions to social problems, with a secondary purpose of generating profit and returns

- combines traditional entrepreneurship with a mission to change the world for the better

benefit corporation (B Corp)

- apply to a nonprofit business, called B Lab, for right to use phrase in marketing materials

- to obtain certification, business must pass an impact assessment, which scores organization on environmental sustainability, community impact, and transparency

process of launching a start-up

1) start with an idea (mostly created from in-depth understanding of industry/profession, spotting a market niche)

2) write a business plan

3) choose a legal structure

4) arrange financing

business plan

- document specifying business details prepared by an entrepreneur prior to opening a new business

- planning forces entrepreneurs to carefully think through issues and problems of starting and developing a business

- useful if seeking outside funding

characteristics of a business plan

- clear, compelling vision

- clear, realistic financial projections

- profile of potential customers and target market

- details about the industry and competitors

- evidence of an effective management team

- critical risks

- sources and uses of start-up funds and operating funds

sole proprietorship

- unincorporated business owned by an individual for profit

- majority of US businesses

- few legal requirements

- total ownership and control

- unlimited liability

partnership

- unincorporated business owned by 2 or more people

- use formal partnership agreement (not required, but good idea) which specifies how partners share responsibilities and resources and contribute expertise

- unlimited liability

corporation

- artificial entity created by the state and existing apart from its owners

- more complex paperwork

- separate legal entity liable for its actions (limited liability for owners)

- must pay taxes on its income (double taxation)

- provides continuity of business

- can raise funds through sale of stock to investors

debt financing

- borrowing money that must be repaid at a later date

- normally includes interest

- could be family and friends, personal credit cards, bank loans, or small business administration (SBA)

equity financing

- funds that are invested in exchange for ownership in the company

- angel financing, venture capital firms, or crowdfunding

angel financing

- wealthy individual who believes in a start-up provides personal funds and advice to help the business get started

venture capital firms

- group that invests money in new or expanding businesses for ownership and potential profits

crowdfunding

- raising capital from small amounts from many investors, usually through social media and the Internet

business incubator

- typically provides shared office space, management support services, and management and legal advice to entrepreneurs

- ex. Atlanta Tech Village created by David Cumming to cater to entrepreneurs tech needs and tech-related startups

co-working facility

- open office environment shared by multiple freelance entrepreneurs as well as corporate telecommuting employees or others who don't have a regular office

franchising

- franchise owner sells right to offer product/services and their process under brand name in exchange for selling fee and ongoing sales and fees

- disadvantages: lack of control, franchisor dictates prices and franchisee must purchase equipment, building, and new product offerings

- advantages: franchisor gives management help and expertise, known brand name, and reliable financial projections

- ex. McDonalds: 38,000 restaurants in more than 100,000 countries, 93% franchise operations, franchise applicants must have minimum of $500,000 in available liquid assets and pay $45,000 franchise fee

peter drucker's thoughts on objectives/goals

- all employees must pull in the same directions and their contributions must fit together to produce a whole without gaps, friction, or unnecessary duplication of effort

goal

- desired future circumstance or condition that the organization attempts to realize

plan

- blueprint for goal achievement specifying necessary resource allocations, schedules, tasks, and other actions

planning

- determining organizational goals and defining the means for achieving them

- goal + plan = planning

organizational mission

- reason for an organization's existence (produce a product/provide a service)

mission statement

- reason the organization exists, how they differ from competitors, and statement of their values

- everything flows from the mission statement

- operational goals support tactical goals which support strategic goals all in an effort to achieve the mission

strategic goals

- official goals, broad statements describing where the organization wants to be in the future, long term

strategic plans

- define action steps by which the company intends to attain strategic goals (increase revenue through expansion into a foreign market)

tactical goals

- results that major divisions and departments within the organization intend to achieve in support of the strategic goals (applies to middle management)

tactical plans

- define what major departments and organizational subunits will do to reach tactical goals (develop marketing plan for the foreign market)

operational goals

- results expected from departments, work groups, and individuals in support of tactical goals

- used to direct employees and resources

operational plans

- specify action plans toward achieving operational goals (hire new employees for foreign market)

- schedules are important component

- each employee contributes to organization's mission

characteristics of effective goals

- specific and measurable

- have defined time period

- cover key result areas

- challenging but realistic

- linked to rewards

performance management planning approaches

- management by objectives

- single-use plans

- standing plans

key performance indicators (KPIs)

- tools used to assess what is important to an organization and how well the organization is progressing toward achieving its strategic goal

management by objectives (MBO)

- created by peter drucker

- system whereby managers and employees define goals and use the goals to assess performance

- focuses manager and employee efforts on activities that will lead to goal attainment

- can improve performance at all company levels

- improves employee motivation

- aligns individual and departmental goals with company goals

- however, does not pay attention to the means by which the goals are accomplished

management by means (MBM)

- new systematic approach that focuses attention on the methods and processes used to achieve goals

single-use plans

- plans developed to achieve objectives that are not likely to be repeated in the future

- ex. expansion of Hull Parking Deck

standing plans

- ongoing plans that provide guidance for tasks or situations that occur repeatedly within the organization

- ex. May Commencement

benefits of planning

- provide a source of motivation and commitment

- guide resource allocation

- guide to action (behavior)

- set a standard of performance

limitations of planning

- can create too much pressure

- can create false sense of certainty

- may cause rigidity in a turbulent environment

contingency planning

- define company responses to be taken in the case of emergencies, setbacks, or unexpected conditions

scenario building

- forecasting technique that looks at current trends and discontinuities and visualizes future possibilities

stretch goals

- reasonable yet highly ambitious and compelling goals, characterized by both extreme difficulty and extreme novelty, that energize people and inspire excellence

crisis planning

- preparing organization, managers, and employees to cope with catastrophic events that could destroy the firm

strategic management

- set of decisions and actions used to formulate and execute strategies that will provide a competitively superior fit between the organization and its environment so as to achieve organizational goals

strategy

- plan of action that describes resource allocation and activities for dealing with the environment, achieving a competitive advantage, and attaining the organization's goals

competitive advantage

- what sets the organization apart from others and provides it with a distinctive edge for meeting customer needs

- elements are exploiting core competence, targeting customers, achieving synergy, and creating value

core competence

- something the organization does especially well in comparison to its competitors

corporate level strategy

- pertains to the organization as a whole and the combination of the business units and product lines that make up the corporate entity

business level strategy

- pertains to each business unit or product line and how each one competes within its industry

functional level strategy

- pertains to the major functional departments within the business unit

- functional areas of business include accounting, marketing, HRM, R&D, manufacturing, and others depending on the line of business

SWOT analysis

- strength and weaknesses (internal): intellectual property, labor force, location, brand, toxic culture, weak management

- opportunities and threats (external): general environment and task environment

strategy formulation

- includes the planning and decision making that lead to the establishment of the firms goals and the development of a strategic plan

strategy execution

- the use of managerial and organizational tools to direct resources toward implementing the strategy and achieving goals

strategic business units (SBUs)

- business divisions of the organization that have unique business missions, product lines, competitors, and markets

portfolio strategy

- pertains to the mix of multiple SBUs/product lines to provide synergy and competitive advantage

- ex. PepsiCo selling snack food in addition to soda

BCG matrix

- organizes business units by business growth rate and market share

- the combination of high/low market share and high/low business growth rate provide four categories for corporate portfolio:

1) star (high market share/high growth rate)

2) bright prospects (low market share/high growth rate)

3) cash cow (high market share/low growth rate)

4) dog (low market share/low growth rate)

diversification

- strategy of moving into new lines of business

- done through merger or joint venture

merger

- when 2 or more organizations combine to become one

joint venture

- involves strategic alliance or program by 2 or more organizations

related diversification

- expansion into new business related to existing business activities

- ex. Google moves into AI

unrelated diversification

- expansion into new lines of business that are not related

- ex. Harley Davidson sells bottled water or Starbucks sells furniture

vertical integration

- expansion into businesses that supply to the business or are distributors

- can be forward (apple moving into retailing) or backward (netflix producing its own content)

michael porter's five forces

- negative effects on industries

- ex. airline industry not very profitable

1) potential new entrants (lots of airlines)

2) bargaining power of buyers (can find cheapest flight online)

3) bargaining power of suppliers (airplanes and fuel are expensive)

4) threat of substitute products (zoom and teams replaced air travel during covid)

5) rivalry among competitors (airlines copy each other's deals)

differentiation strategy

- distinguish products/services from competitors

- ex. better, stronger, faster

cost leadership strategy

- aggressively seek efficient facilities, cost reductions, and cost controls

focus strategy

-concentration on a specific region or buyer, then follows differentiation or cost leadership strategy

globalization strategy

- use of standardized product design and advertising strategies throughout the world

- based on assumption that a single global market exists for many consumer and industrial products

multidomestic strategy

- handling of competition in each country remains independent of industry competition in other countries

- adapts product/advertising to local tastes and needs

glocalization strategy

- combines global coordination to attain efficiency with local flexibility to meet needs in different countries

organizing

- the deployment of organizational resources to achieve strategic goals

- strategy defines how to achieve goals and organizing defines how it will be done in terms of resources

organization structure includes:

- formal tasks assigned to individuals and departments

- formal reporting relationships among employees

- the design of systems to ensure effective coordination of employees across a department

organization chart

- visual representation of an organization's structure

division of labor

- the degree to which organizational tasks are subdivided into separate jobs

- also called worker specialization

chain of command

- an unbroken line of authority that links all employees in an organization and shows who reports to whom

authority

- formal and legitimate right of a manager to make decisions, issue orders, and allocate resources to achieve outcomes/goals

- vested in organizational positions, not people

- flows down the vertical hierarchy

- accepted by subordinates

insubordination

- not recognizing the authority of one's supervisor

- grounds for dismissal

responsibility

- the duty to perform the task or activity as assigned

accountability

- willingness or obligation to accept responsibility

delegation

- process that managers use to transfer authority and responsibility down the hierarchy

line authority

- managers have formal authority to direct and control immediate subordinates (via a line in the org chart)

line departments

- perform tasks that reflect the organization's mission (generate revenue)

staff authority

- authority that includes the right to advise, recommend, and counsel in the staff specialist's area of expertise

staff departments

- support line departments (cost center)

span of management

- number of employees reporting directly to a supervisor

- optimal number is around 8

tall structure

- span of management is narrow and therefore has many hierarchical levels, many layers of management

- more desirable from an employee perspective as there are more promotion opportunities

flat structure

- span of management is wide and therefore has few hierarchical levels, fewer layers of management

centralization

- decision authority located near the top of the organization

- slow, has to flow all the way up and back down again

- allows for consistency across decisions

- required in times of crisis

decentralization

- decision authority is pushed downward (delegated) to lower organization levels

- more likely to be used by theory y managers

departmentalization

- basis for grouping positions into departments and departments into the total organization

- five approaches: functional, divisional, matrix, team, and virtual network

functional structure

- the grouping of activities by common function

- positions grouped into departments based on similar skills, expertise, work activities, and resource use

divisional structure

- departments grouped together based on similar organizational outputs such as product/service or based on geographic location

matrix approach

- combines functional and divisional approaches simultaneously in the same part of the organization

- improves coordination and information

- does not work because it violates unity of command principle

- 2 managers with line authority over employees makes it impossible for employees to obey both fully, making insubordination a daily occurrence

team approach

- cross-functional teams consist of employees from various functional departments who are responsible to meet as a team and resolve mutual problems