enterprise development revision

what is the predominant model for entrepreneurial personality traits?

the five factor model (tupes and christal)

what does OCEAN stand for?

openness, conscientiousness, extroversion, agreeableness, neuroticism

which traits do entrepreneurs usually express?

openness and conscientiousness, extroversion

what are the five cognitive distortions of entrepreneurs?

personal exceptionalism, dichotomous thinking, correct overgeneralisation, blank canvas thinking, and schumpeterianism

what social and experiential factors of one’s background can determine their suitability for entrepreneurship?

family background and circumstances, parent occupation, education, culture and religion, work and life experiences

what is the management approach to entrepreneurship?

idea that entrepreneurship is a series of learned activities

what are common sources of ideas and inspiration for venture ideas?

prior work experience and background, obtaining franchising rights, analysis of business environments, existing business concepts, licensing/distribution rights and patents

where does one deliberately search for venture ideas?

media, industry and trade contacts, trade shows, analysis of the business environment

what are timmons and spinelli’s four anchors?

1. creates or adds significant value

2. solves a significant problem

3. has a robust market and money-making characteristics

4. good fit with founders and team, acceptable risk/reward balance

what are harte’s assessment criteria for new ventures?

1. head start and competitive advantage

2. market potential

3. profit margin potential

4. operational and financial feasibility

what are timmons and spinelli’s assessment criteria?

1. industry and market

2. economics

3. competitive advantage

4. management team

5. fatal flaw(s)

6. personal criteria

7. strategic differentiation

what is franchising?

form of business where a business owner (franchisor) allows a franchisee to operate/distribute under the company’s name

what are the components of the franchise relationship model?

transactional analysis, financial structure, agency issues, relational dynamics

what does ‘transaction analysis’ refer to?

how to best perform transactions, and whether at the corporate or local level

what transactions do franchisors usually take on?

economies of scale, business format design and perfection, marketing and franchise supports (depends on SDS and circumstances)

what transactions are franchisees usually responsible for?

local market activities, hiring, local promotion, unit management, dealing with local regulations and services

what determines the financial structure of a franchise?

nature of customer demand and costs associated with SDS

what costs are usually associated with an SDS?

initial fees and setup costs, royalties, marketing contributions, revenue and operating costs projections

what is the difference in investment between corporate and small or single franchisees?

corporate: franchisees likely to fund more local activities

small/single: franchisor may provide considerable local backing

what is a franchise’s key strength in finances?

allows for a wide range of funding structures and equity holders

what are some examples of agency issues?

for franchisor: being sure that franchisee is doing the best work possible

for franchisee: being sure that the franchisor is always acting in their best interest

how are key partner responsibilities monitored in franchising?

solid ground rules, system of reviews and performance audits, frequency of partner meetings

what do ‘relational dynamics’ refer to in franchising?

allowance of partnership to change as business develops, as market conditions change

why is the adjustment of relational dynamics necessary?

to maintain competitive advantage

what are some advantages of franchising for the franchisor?

• business growth with min. capital outlay and brand development

• spreads risk

• extra income through royalties, franchise fees, revenue, etc

• economies of scale, reduced operating, distribution, and advertising costs

• uniformity of procedures increases consistency, productivity, and quality

• franchisee has vested interest, motivation to do well

what are some advantages of franchising for the franchisee?

• avoids trial/error period in starting/operating a new business (proven business concept, tried and tested)

• lower financial risk (lower investment costs, higher profit margins)

• supported by power and scale of franchisor (experience and know how, training and employee support, ongoing promotion and upgrade of products)

• recognised trade name/trademark = better marketing results

• unified store design leverages business reputation in concept marketing

• easier purchase, storage, and product display systems

what are some disadvantages of franchising for the franchisor?

• considerable capital requirement to build franchise infrastructure and business format

• tight legal regulation (franchise contract law)

• risk of trade name damage from poor franchisee selection

• pressure from franchisees to change policies and procedures

• needed disclosure of confidential information to franchisee has risk

what are some disadvantages of franchising for the franchisee?

• risk of choosing a bad franchise agreement (e.g. poor support or brand reputation)

• sometimes high franchise fees, royalties, etc (lower profit margins)

• transfer of goodwill built in local market to franchisor upon contract termination or expiration (doesn’t trade in own name)

• necessity to abide by franchisor’s operating systems, standards, policies, etc

what are the key components of franchising?

establishing a service delivery system, training and operations support, field support, marketing, advertising, and promotion, product purchase provision

what is a service delivery system (SDS)?

how resources are marshalled to exploit a market opportunity

what is a franchise’s key to success (competitive advantage)

service delivery system

what are examples of SDS format perfection?

beta sites, flagship stores, real-world testing

what is involved in training and operations support in franchising?

the transfer of the SDS to the franchisee and employees

how is training delivered in a franchise?

manuals, classroom components, online systems

why are excellent training systems important in franchising?

ensured standardised, consistent delivery and safeguards brand equity

what is included in field support in franchising?

site visits, performance reviews and audits, constructive suggestions for improvement, communication of new developments

how does field support benefit the franchisor?

preserves standards of product and brand equity

who creates the main promotional materials and themes in a franchise?

the franchisor

how may a franchisee contribute to marketing and advertisement?

local advertising, local store promotion

why is product purchasing good in franchising?

economies of scale; bulk purchasing and inventory control