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Chapter 1-6 ENT 3315
Terms in this set (46)
small business diversity
size, growth potential, organizational structure, and culture
High potential ventures (aka gazelles)
businesses that have phenomenal prospects for growth potential
differ from other business owners in the degree of their independence. Because of the guidance and constraints provided by contractual arrangements with franchising organizations, franchisees function as limited entrepreneurs.
small business definition
is arbitrary and typically adopted to serve a particular purpose. sometimes use number of employees, sales volume, and value of assets. NO ACCEPTED OR UNIVERSALLY AGREED ON DEFINITION
US Small Business Administrations defines small business as
having fewer than 500 employees
define reluctant entrepreneurs
those who start or acquire a small business as a result of financial hardship or other severely negative conditions such as being laid off
define corporate refugees
individuals who flee the bureaucratic environment of a corporation that is stifling or oppressive to them. 42% of 721 people have considered quitting their jobs over bureaucratic hassles
what are a significant number of entrepreneurs highly motivated by?
a significant number of entrepreneurs are, no doubt, highly motivated by the prospect of making money
define entrepreneurial legacy
includes both tangible items and intangible qualities passed on not only to heirs but also to the broader society
though definitions vary, stakeholders are typically described as those individuals or groups who either can affect the performance of the company or are affected by it.
who are "The Big Three" stakeholders
owners, customers, employees
Milton friedman said
"There is only one social responsibility of business - to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud"
Friedman argues that
businesses should be expected simply to earn profits honestly; any other use of the firm's resources is justified only if it enhances the firm's value.
fraudulent reporting of income
one glaring example of unethical behavior by small firm management is fraudulent reporting of income and expenses for income tax purposes. This conduct includes SKIMMING (concealing some income), as well as improperly claiming personal expenses to be business-related.
when entrepreneurs encounter fraud abroad
Frequently, they simply apply US standards to the situation. But this approach is sometimes criticized for resulting in ETHICAL IMPERIALISM
define ethical imperialism
an arrogant attempt to impose American values on other societies.
define ethical relativism
another viewpoint that is troublesome because it implies that anything goes if the local culture accepts it.
True or False: The personal integrity of the founder or owner is the key to a firm's ethical performance.
What is a BBB
privately owned companies in many cities that have joined together to form Better Business Bureaus. The purpose of such organizations is to promote ethical conduct on the part of all businesses in a region
Downfall of BBBs
Though BBBs report relevant information to law enforcement agencies, they are not government entities, and they cannot collect money or impose penalties on companies that engage in unethical business practices.
Who has been hit especially hard by expanding environmental regulations
fast lube/oil change services, medical waste disposal operations, self-service carwashes, and asbestos removal services
define opportunity recognition
identifying imaginative new products or services that may lead to promising business ventures is so central to the entrepreneurial process that it has its own name - opportunity recognition
True or False: Several studies have identified sources of ideas for small business startups. One such study by the National Federation of Independent Businesses (NFIB) has found that prior work experience accounted for 45% of new ideas.
True or false: hobbies grow beyond being leisure activities to become businesses and they can add surprising energy to the startup process.
A facility for making desirable discoveries by accident. It is another source of new startup ideas - aka accidental discovery. Awareness obviously plays a role here, but anyone may stumble across a useful idea in the course of day-to-day living
define general environment
made up of very broad factors that influence most businesses in a society
define industry environment
more narrow definition as the context for factors that directly impact a given firm and all of its competitors
define competitive environment
most specific. focuses on strength, position, and likely moves and countermoves of competitors in an industry.
what do global trends do?
reflect international developments that create new opportunities to expand markets, outsource, invest abroad, and so on.
the industry environment factors
New competitors, substitute products/services, rivalry, suppliers, buyers
True or false: the search for a startup opportunity can actually begin with an inside-out analysis, one that catalogs the statup's sources of potential strengths (including those that can reasonably be obtained or created) and the unique competencies that can be formed from them
The two emphasises that companies can build their strategies around
low cost or differentiation
define differentiation-based strategy
the second general option for building a competitive advantage which is an approach that emphasizes the uniqueness of a firm's product or service (in terms of some feature other than cost).
Pros of buying a franchise
the greatest advantage is the probability of success. you basically buy a business model witha proven track record.
True or false: The Small Business Administration (SBA) maintains a Franchise Registry (www.franchiseregistry.com) which speeds up loan processing for small business franchisees
Costs of being a franchisee
initial franchise fee, investment costs, royalty payments, advertising costs
define Franchise Disclosure Document (FDD)
a detailed statement of such information as the franchisor's finances, experience, size, and involvement in litigation. The document must inform potential franchisees of any restrictions, costs, and provisions for renewal or cancellation of the franchise.
define due diligence
careful evaluation of a business opportunity. basically a preliminary step that the buyer needs to acquire background information about the business, some of which can be obtained through personal observation or discussion with the seller.
valuing a company
1) asset-based valuation
2) market-based valuation
3) cash flow-based valuation
define nondisclosure agreement
something the prospective buy may expect to sign that restricts the buyer from revealing confidential information or violating the trust that the seller has offered in providing the information. Buyers are allowed to share info with potential lenders or legal advisors on need-to-know basis.
the predator/parasite conflict
a sibling dilemma.
Family members working in the firm are sometimes seen by relatives who work outside the company as predators - extracting money from the business that the outsiders believe is rightfully theirs.
From the inside, family members external to the firm are seen, in turn, to be parasites. That is, they have ownership rights, receive dividends, or make other claims on the business without contributing to its success.
honest and candid discussion can be difficult, so it is standard for family leaders to invite an outside expert or facilitator to coordinate early sessions. The facilitator can help develop an agenda and set ground rules for discussion.
transfer of ownership
A step taken by some parents involves changing the ownerhsip structure of the firm. those children active in the firm's management , for example, might be given common (voting) stock and others given preferred (nonvoting) stock.
True or False: a business plan is always needed
two types of business plans
short plan or comprehensive plan
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