4700 exam 3 on 10/28- Mizzou

What is industry analysis?

Business research focusing on the potential and profitability of an industry and its target market.

What is competitor analysis?

The evaluation of competitors to understand their strengths, weaknesses, and market positioning.

What framework is commonly used for industry analysis?

Michael Porter's Five Forces Framework.

What are Porter’s Five Forces?

1. Threat of substitutes 2. Threat of new entrants 3. Rivalry among existing firms 4. Bargaining power of suppliers 5. Bargaining power of buyers.

What does the Threat of Substitutes mean?

The likelihood that customers will switch to different products serving the same need.

What is the Threat of New Entrants?

The ease or difficulty with which new competitors can enter an industry.

What determines Rivalry Among Existing Firms?

Number and size of competitors, rate of industry growth, and differentiation among products.

What affects the Bargaining Power of Suppliers?

Number of suppliers, uniqueness of input, and supplier switching costs.

What affects the Bargaining Power of Buyers?

Number of buyers, product differentiation, and buyer price sensitivity.

What are the three types of competitors?

Direct, Indirect, and Future competitors.

What are ways to obtain competitive intelligence?

Review websites, news releases, industry reports, and interview customers/suppliers.

What are the three primary reasons startups need funding?

Cash flow challenges, capital investments, and lengthy product development cycles.

Examples of cash flow challenges?

Buying inventory, paying employees, and advertising before generating revenue.

What are examples of capital investments?

Real estate, buildings, and equipment purchases that exceed a firm's current resources.

What is bootstrapping?

Using creative, low-cost methods to fund startup operations (e.g., leasing equipment, pre-selling, sharing space, hiring interns).

What are the four primary funding options for startups?

1. Personal Funds 2. Debt Financing 3. Creative Sources 4. Equity Capital.

Advantages & disadvantages of Personal Funds?

Advantage: Maintain control; Disadvantage: Personal financial risk.

Advantages & disadvantages of Debt Financing?

Advantage: Maintain 100% ownership; Disadvantage: Must make interest payments.

Advantages & disadvantages of Creative Sources?

Advantage: Retain full control; Disadvantage: Limited availability or strict rules.

Advantages & disadvantages of Equity Capital?

Advantage: Gain expertise and networking; Disadvantage: Lose some ownership/control.

What are the most common forms of equity funding?

Angel investors, venture capitalists, and initial public offerings (IPOs).

What is a Business Angel (Angel Investor)?

A wealthy individual who invests their personal funds in startups.

What is a Venture Capitalist?

A firm investing pooled funds from many investors in exchange for equity.

What is Crowdfunding?

Raising small amounts of money from a large number of people, often online (reward-based or equity-based).

What is an Elevator Pitch?

A concise 1-minute pitch including: Introduction, Problem, Solution, Unique Value, and Call to Action.

What are the 3 types of break-even points?

1. Without paying founders a consistent salary 2. With paying minimal salary 3. With paying a consistent, good salary.

What is the Pricing Floor?

The lowest price you can charge without losing money.

What is the Pricing Ceiling?

The highest price the market will bear without losing customers.

What are Direct Costs?

Costs directly tied to production (materials, labor).

What are Indirect Costs?

Overhead costs not directly tied to a specific product (rent, utilities).

What is Gross Revenue?

Total money earned before expenses.

What is Gross Profit?

Revenue minus cost of goods sold (COGS).

What is Net Profit?

Total revenue minus all expenses, taxes, and interest.

What does unbillable time mean for entrepreneurs?

Time spent on business tasks that don't directly generate income (usually 50% of total time).

What are the 4 key factors for economic stability of a business (extra credit)?

COST: Capital, Operations, Sales, and Time.