MGMT 3000 Test 2

entrepreneurship

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

entrepreneur

someone who engages in entrepreneurship

five types of small business owners

* idealists
* optimizers
* hard workers
* jugglers
* sustainers

idealists

rewarded by the chance to work on something new and creative

optimizers

get personal satisfaction from being business owners

hard workers

thrive on the challenge of building a larger, more profitable business

sustainers

enjoy chance to balance work and personal life

minority owned businesses

as the majority population of the U.S. has grown, so has the number of _______________

* more than 11 million ______________
* employ more than 6.3 million people and generate nearly 2 trillion in revenue annually

racial and ethnic composition of small-business owners

1. white
2. hispanic
3. black
4. asian
5. other
6. native
7. islander

immigrant owned businesses

_____________ were almost twice as likely as native born Americans to start new businesses

* many immigrants appreciate the economic stability and opportunity

types of businesses launched by ______________ entrepreneurs are increasingly sophisticated

women owned businesses

* more than 12 million firms were majority ___________ in 2018, 57% increase from 2007
* ________ tend to be more cautious than men about borrowing money, which limits growth opportunities

women

* the suggestion that ________ tend to be more cautious about borrowing money, which limits growth opportunities, particularly in high tech fields is questioned
* as the cost of launching technology related businesses falls, more _________ are taking a gamble in this competitive market

traits of entrepreneurs

1.Autonomy

2\.Entrepreneurial sacrifice – ability to persevere after struggles or defeat

3\.High energy

4\.Need to achieve – internally motivated

5\.Self-confidence

6\.Internal Locus of Control

7\.Awareness of passing time

8\.Tolerance for ambiguity

starting an online or mobile app business

\
−Find a market niche

−Create a professional website

−Choose a domain name

−Know when to **pivot** (change strategic directions)

−Use social media

social entrepreneurship

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

* Combines the creativity, business smarts, passion, and work of the traditional entrepreneur with a mission to change the world for the better

benefit corporation

* Apply to a nonprofit business, called B Lab, for the right to use that phrase in marketing materials
* To obtain certification, the business must pass an impact assessment, which scores the organization on environmental sustainability, community impact, and transparency

launching a start-up

* start with an idea
* write a business plan
* choose a legal structure
* arrange financing

reasons for starting a business

* joined a family business
* to control your future
* to be your own boss
* to fulfill a dream
* downsized or laid off

source of new business ideas

* in-depth understanding of industry or profession
* market niche spotted
* brainstorming
* copying someone else
* hobby
* other

business plan

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

writing a business plan

planning forces the entrepreneur to carefully think through the issues and problems associated with starting and developing the business 

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
* summary

choosing a legal structure

* sole proprietorship
* partnership
* corporation

sole proprietorship

unincorporated business owned by an individual for profit

* majority of businesses in the United States
* few legal requirements
* proprietor has total ownership and control
* owner has unlimited liability

partnership

unincorporated business owned by two or more people

* easy to start
* use a formal agreement
* specifies how partners share responsibility and resources
* specifies how partners contribute expertise
* unlimited liability
* often dissolve within 5 years

corporation

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

* separate legal entity for its actions
* limits owners’ liability
* must pay taxes on its income
* provides continuity
* more complex paperwork
* can raise funds through the sale of stock to investors

arranging financing

* debt financing
* equity financing

debt financing

borrowing money that must be repaid at a later date to start a business, could be from

* family/friends
* personal credit cards
* bank loans
* finance companies
* small business administration (SBA)

equity financing

funds that are invested in your business in exchange for ownership in the company

* angel financing
* venture capital firms
* crowdfunding

angel financing

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

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

sources of start-up capital

* personal savings
* credit cards
* family loans
* angel capital
* home equity
* personal bank loans
* business bank loans

business incubator

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

co-working facility

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

disadvantages of franchises

* lack of control
* franchisors dictate the process
* must purchase equipment, building and new product offerings

franchising

* firm collects upfront and ongoing fees in exchange for letting other firms offer products and services under its brand name and using its processes
* franchise owner sells the right to offer products/services and their ongoing process under its brand name in exchange for selling fee and ongoing sales and fees

advantages of franchises

* franchise owner provides management help and expertise
* known brand name
* reliable financial projections

McDonald’s Franchise

* 38,000 restaurants in more than 100 countries
* 93% are franchise operations
* franchisee applications must have a minimum of $500,000 available in liquid assets and pay a $45,000 franchise fee
* many stores are earning well over $2 million in sales annually
* the cost of purchasing an existing franchise can exceed $1 million and a new operation will cost between $1.3 and 2.4 million
* franchisees pay about 82% of store revenue to _________ every year

goal

desired future circumstance or condition that the organization attempts to realize

plan

blueprint for goal achievement specifying the necessary resource allocations, schedules, tasks, and other organizations

planning

determining the organization’s goals and defining the means for achieving them

levels of goals and plans

1. mission statement
2. strategic goals/plans
3. tactical goals/plans
4. operational goals/plans

strategic goals

* official goals


* broad statements describing where the organization wants to be in the future, long term

strategic plans

* define the action steps by which the company intends to attain strategic goals
* blueprint that defines organizational activities and resource allocations

strategic goal

increase revenue through expansion into a foreign market

tactical goals

* the results that major divisions and departments within the organization intend to achieve
* apply to middle management

tactical plans

* define what major departments and organizational subunits will do to implement the organization’s strategic plan

tactical goal

develop marketing plan for the foreign market

operational goals

results expected from departments, work groups, and individuals

operational plans

* developed at the lower levels of the organization to specify action plans toward achieving operational goals and to support tactical plans
* schedules are an important component

operational goal

hire employees for new foreign market

organizational planning process

1. develop the plan
2. translate the plan
3. plan operations
4. performance management
5. monitor and learn

jugglers

high energy people who enjoy handling every detail of their own business

develop the plan

* define mission, vision
* set goals
* manage goal conflict

monitor and learn

* hold planning reviews
* hold operational reviews

performance management

use:

* management by objectives
* single use plans
* standing plans

plan operations

* define operational goals and plans
* select measures and targets
* set stretch goals
* crisis planning

translate the plan

* define tactical plans and objectives
* develop strategy map
* define contingency plans and scenarios

mission

reason for organization’s existence

mission statement

* reason the organization exists
* How they differ from their competitors
* May include statement of their values

\
Provides basis for development of all subsequent goals and plans

approaches to managing goal conflict

•Build a coalition

•Modify goals by time or location

•Address conflicts with debate and dialogue

•Break down barriers and promote cross-silo cooperation

coalition management

building an alliance of people who support managers and influence efforts toward achieving goals

align goals

* Effectively designed organizational goals are aligned within the org


* Aligned goals are consistent and mutually supportive so that the achievement of goals at lower levels permits the attainment of higher-level goals


* strategy map

strategy maps

visual representations of key drivers of an organization’s success

* Show how specific goals and plans in each area are linked

performance management

•Managers use operational goals to direct employees and resources

•Planning approaches

−Management by objectives (MBO)

−single-use plans

−Standing plans

•Key performance indicators (KPIs)

key performance indicators

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

characteristics of effective goals

* are specific and measurable
* have a defined time period
* cover key result areas
* are challenging but realistic
* are linked to rewards

management by objectives

system whereby managers and employees define goals for every department, project, and person and use them to monitor subsequent performance

management by means

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

management by objectives process

step 1: set goals

step 2: develop action plans

step 3: review progress/ take corrective action

step 4: appraise overall performance

benefits of management by objectives

* 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

single use plans

•plans used to achieve objectives that are not likely to be repeated in the future

−Include programs and projects

standing plans

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

−Include organizational policies, rules, and procedures

−Ex. UGA class registration

benefits and planning

•Goals and plans

−Provide a source of motivation and commitment

−Guide resource allocation

−Are a guide to action (behavior)

−Set a standard of performance

limitations of planning

• goals and plans

−Can create too much pressure

−Can create a false sense of certainty

−May cause rigidity in a turbulent environment

−Can get in the way of intuition and creativity

planning for a turbulent environment

* Contingency planning
* Scenario building
* Stretch goals
* Crisis planning

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

importance of strategy

It determines which organizations succeed and which ones struggle

thinking strategically

* Take the long-term view
* See the big picture
* Positively affect performance and financial success

\
* Legal/political
* Inflation? Interest rates? Labor force participation rate?
* Sociocultural
* Aging population? Remote work? Quiet quitting?
* Increasing customer expectation?
* Artificial intelligence

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 or client needs in the marketplace

elements of competitive advantage

* target customers
* achieve synergy
* occurs when organizational parts interact to produce a joint effect that is greater than the sum of its parts acting alone
* create value
* exploit 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 business units (more than one) and product lines that make up the corporate entity

business level strategy

pertains to each business unit or product line

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

strategic management process

* evaluate current:
* mission
* goals
* strategies
* scan external environment
* national
* global
* scan internal environment
* core competence
* synergy
* value creation
* identify strategic factors
* opportunities
* threats
* strengths
* weaknesses
* define new:
* mission
* goals
* grand strategy
* formulate strategy
* corporate
* business functional
* execute strategy via changes in:
* leadership/culture
* structure
* human resources
* communication systems

swot analysis

internal

* strengths and weaknesses

external

* opportunities and threats

strategy formulation

includes the planning and decision making that lead to the establishment of the firm’s goals and the development of a specific strategic plan

strategy execution

the use of managerial and organizational tools to direct resources toward accomplishing strategic results

formulating corporate-level strategy

three approaches

* portfolio
* Boston consulting group
* diversification

strategic business units

business division of the organization that has a unique business mission, product line, competitors, and markets relative to other SBUs in the corporation

portfolio strategy

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

BCG Matrix

organizes business units along two dimensions – **business growth rate** and **market share**

* The combination of high/low market share and high/low business growth rate provide four categories for a corporate portfolio

−**Star**

−**Cash cow**

−**Bright prospect**

−**Dog**

diversification

strategy of moving into new lines of business

unrelated diversification

expansion to new lines of business that are not related (starbucks making furniture)