Business Management Unit 4

Contribution of New Firm Creation

It contributes to economic growth, employment creation, and the renewal of the economy .

Business Idea vs. Opportunity

Not all ideas are business opportunities; an opportunity requires "business potential," whereas a bad idea or lack of potential results in rejection or lost opportunity .

Self-employment vs. Entrepreneurship

Self-employment is based on a specific skill or service for existing customers; Entrepreneurship requires a team, an innovative concept (Eureka!), and a scalable, predictable business model .

Customer-Value Canvas (Right Side)

Based on observations of the customer: Gains, Pains, and Customer Jobs-to-be-done .

Customer-Value Canvas (Left Side)

Based on design: Products & Services, Gain Creators, and Pain Relievers .

Business Plan Components

1. Viability analysis, 2. Marketing Plan, 3. Production Plan, 4. HR Plan, 5. Financial Plan .

Success Factors (Personal)

Motivation (Independence, Self-efficacy) and Personality Features (Proactiveness, Risk-taking, Creativity) .

Business Model (Definition)

A description of the rationale of how an organization creates, delivers, and captures value.

Value Proposition (BMC Component)

The value delivered to the customer by solving their problems or satisfying their needs.

Customer Segments (Target)

The specific people or organizations for whom the company creates value.

Customer Relationships

The kind of relationship established with customers (e.g., personal attention, loyalty, frequency) .

Channels

The distribution channels used to reach the customer (physical, online, retail, etc.).

Key Resources & Activities

The necessary assets and actions required to make the value proposition work .

Key Partners

Relationships with suppliers, distributors, or collaborators to optimize the business model.

Revenue Streams

How the company gets income (e.g., asset sale, rent, pay-per-use, subscription) .

Firm Lifecycle Stages

1. Birth (Introduction), 2. Development (Growth), 3. Maturity (Instability), 4. Decline .

Introduction/Birth Phase

Characterized by reduced sales and negative profits (losses).

Development/Growth Phase

Characterized by rapidly increasing sales and the transition to positive profits.

Maturity Phase

Sales reach their maximum, and profits stabilize at their peak.

Economies of Scale (Growth Motive)

Increasing productive capacity to reduce unit costs and raise profit margins .

Market Power Motive

Growing to increase market dominance and gain increased pricing power .

Growth Challenge: Delegating

The transition from being an "owner" to a "leader" by learning to delegate tasks to others .

Growth Challenge: Cash-flow

The risk of losing sight of daily cash management while focusing on the joy of growth .

Specialization vs. Diversification

Specialization stays within existing industries; Diversification enters new industries where the firm didn't compete before .

Market Penetration

Growing in the same market with the same product by increasing market share (e.g., via advertising or discounts) .

Product Development

Offering new products or services to existing markets.

Market Development

Offering existing products to new geographical areas or new market segments .

Related Diversification

Adding new activities that have commercial or technical synergies with existing ones.
+1

Backward Vertical Integration

A form of related diversification where the firm moves closer to raw materials (former level of the value system).
+2

Forward Vertical Integration

A form of related diversification where the firm moves closer to the final consumer (later stage of the value system).
+1

Horizontal Diversification

Entering other businesses that substitute or complement the company’s current products/services .

Unrelated (Conglomerate) Diversification

Entry into businesses with no technical or commercial relationship to current activities (financial risk diversification) .

Internal vs. External Growth

Internal growth uses the firm's own resources to create new capacity; External growth acquires existing capacity by buying other firms .

Hybrid Growth

Growth through cooperation, alliances, or franchises (e.g., Joint Ventures, Licensing) .

External Growth (Pros and Cons)

Advantage: Very quick and increases position without adding capacity. Disadvantage: Complex management, culture clashes, and "buying the bad with the good".

Exit Options (Crisis Phase)

Harvest (slow exit), Disinvestment (selling part/all of the company), or Liquidation (selling all assets)