AA

Chapter 7: Foundations of Business

Senior Skip Day

  • Informal engagement: Discussion of senior skip day as a relatable experience to build rapport with students.

Class Overview

  • Time noted: 12:20 PM, class is starting.

  • Focus: Wrapping up Chapter 6 and transitioning to Chapter 7.

  • Timeline: Anticipation of covering main aspects of Chapter 7, possibly finishing.

Upcoming Assignments and Exercises

  • Friday: Asynchronous work assigned.

    • Task: Complete the emotional intelligence module.

    • Materials: Podcast and articles provided.

    • Note: Emotional intelligence will be revisited in Chapter 12 and in a planned case study.

  • Monday: Entrepreneurship exercise.

    • Class available for team ideation and collaboration.

    • Flexibility to meet in classroom or any other chosen environment.

    • Assignment: Video presentation required; focus on problem-solving.

    • Duration: Video should emphasize the problem (80%-90%) rather than the solution (20%-30%).

    • Inspiration: Consider local issues and market needs.

Chapter 6 Recap: Mergers and Acquisitions (M&A)

  • Terminology: Mergers vs. Acquisitions

    • Merger: Two similar companies combine to form a new corporation.

    • Acquisition: A company absorbs another into its operations.

    • Key Examples: Mentioned instances of hostile takeovers by Pfizer, Warner Lambert, and American Home Products.

  • Motivations for M&A:

    • Cost reduction.

    • New market penetration.

    • Revenue increase.

    • Essential for corporate growth.

  • Current Events:

    • Article discussed from Morning Brew about Redfin and Zillow.

    • Strategic Alliance: Competitors collaborate to enhance market visibility.

    • FTC's concern over a $100 billion payment from Zillow to Redfin, focusing on competition stifling.

  • Notable Mergers/Acquisitions Post-2020:

    • Capital One acquiring Discover for $35 billion.

    • Musk's acquisition of Twitter in 2022.

    • Mars and Kelanova merger.

    • Note: Mars is a Virginia-based, family-owned company undergoing a significant acquisition, expected completion by early 2025.

Stock Market Discussion

  • Student engagement through sharing stock investments:

    • Caleb: Sandisk, bought at $69.49 now at $122.

    • Max: Technology investments, bought at $1.55.

    • Lauren: CEG bought at $300, now at $3.45.

    • Pfizer's recent production shifts due to impending tariffs impacting pharmaceuticals.

  • Corporate Social Responsibility (CSR):

    • Newell Brands' philanthropic efforts providing $176,000 in grants to local communities, including animal shelters.

    • Company undergoing a restructuring plan to save $300 million.

Types of Business Structures

  • Limited Liability Company (LLC):

    • Offers tax treatment similar to partnerships, liability protection like corporations.

    • Increased structure with more formal requirements.

  • Cooperatives:

    • Owned collectively by members within a community; example provided about neighborhood grocery store revitalization.

  • Overall Business Structure Recap:

    • Sole Proprietorships: Largest segment of businesses.

    • Corporations: Highest revenue-generating.

    • Franchises discussed in previous chapters for entrepreneurial pathways.

Chapter 7 Introduction: Entrepreneurship

  • Discussion on the Importance of Entrepreneurship:

    • Emphasis on collegiate investment in entrepreneurship initiatives at Virginia Tech.

    • Shift in grant structures from 35% to 15% equity for faculty innovations to encourage commercialization.

  • Defining Entrepreneurs:

    • Entrepreneurs identify problems, perform customer discovery, and validate market needs before proposing solutions.

    • Not for everyone due to inherent risks and uncertainty.

Characteristics of Entrepreneurial Activity

  • Three Core Characteristics:

    • Innovation: Broadly applicable beyond product development; can include process improvements.

    • Operational Management: Running a business is complex and challenging.

    • Risk-Taking: Understanding and mitigating risks where necessary, embracing uncertainty.

Bicycling Analogy

  • Discussion on safety versus convenience, related to the Park and Diamond company story that emphasized innovative helmet design.

  • Lessons learned in entrepreneurial journey include validation of customer needs and finding reliable manufacturers.

Reasons for Business Failure

  • Common Points Identified:

    • Lack of loyal customer base.

    • Inadequate marketing strategies.

    • Insufficient funding.

    • Rushing into markets without proper research.

Pathways to Funding for Entrepreneurs

  • Funding Sources Discussed:

    • Crowdfunding: Non-equity based; involves individual donations through platforms like Kickstarter.

    • Angel Investors: Offer funds ranging from $5,000 to $75,000, often along with expertise.

    • Venture Capital: Larger fundraising from groups, typically exceeding $100,000; demands for higher returns.

  • Notable distinctions:* Angel investors operate earlier in the venture lifecycle compared to venture capitalists who focus on validated business models.

Small Business Versus Entrepreneurship

  • Understanding the Difference:

    • Small businesses often focus on sustainability and lifestyle rather than aggressive growth strategies.

  • Defining Characteristics of Small Business Owners:

    • Stability, lifestyle focus, personal investment in their community.

  • Concept of a Lifestyle Business:

    • Example of local restaurant scenarios where owners prefer maintaining a singular successful establishment rather than pursuing aggressive expansion.

Innovation in Business Lifecycle

  • Emphasis on continuous innovation throughout the business lifecycle from startup to growth to maturity.

  • Common Industry Divide: 80% of small businesses are service-oriented, emphasizing problem-solving rather than just selling products.