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Entrepreneurial Experience Final
Terms in this set (37)
What is sustained growth?
growth in both revenues and profits over a sustained period of time
what are the potential downsiders to firm growth?
Not all businesses have the potential to be aggressive growth firms, a business can grow too fast, and business success doesn't always scale
is it possible for a firm to grow too fast? If so, what are the potential downsides?
Yes. many businesses start fast and never let up. which stresses a business financially and can leave its owners emotionally drained. Sometimes businesses grow at a measured pace and then experience a sudden upswing in orders and have difficulty keeping up.
Benefits for planning for growth
if business is successful, the owner will normally do very well financially
What are economies of scale
generated when increasing production lowers the average cost of each unit produced
what are economies of scope
the advantage a firm accrues comes through the scope (or range) of a firm's operations rather than from its scale of production
why might firms work hard to achieve a market leadership position
to realize economies of scale, economies of scope, and to be recognized as the brand leader.
how does a firms growth rate affect its ability to attract and retain talented employees?
talented employees will want to work for a firm that can offer opportunities for promotion, higher salaries, and increased levels of responsibility.
What are the 5 stages in the organizational life cycle
Introduction stage, early growth stage, continuous growth stage, maturity stage, decline stage.
What is the managerial capacity problem?
when a firms managerial resources are insufficient to take advantage of its new product and services opportunities, the subsequent bottleneck is referred to as this.
What is adverse selection?
as the number of employees a firm needs increases, t becomes increasingly difficult for it to find the right employees, pace them in appropriate positions, and provide adequate supervision.
What is moral hazard?
as a firm grows and adds personnel, new hires typically do not have the same ownership incentives as the original founders, so the new hires may not be as motivated as the founders to put in long hours or might avoid hard work.
Why is cash flow management such an important issue for a firm entering a period of rapid growth?
to make sure it maintains sufficient liquidity to meet its payroll & cover other short-term obligations.
How do rapid growth firms deal with potential cash flow shortfalls?
In what stage or stages of the organizational life cycle are capital constraints most prevalent?
early growth and continuous growth stages
what are the differences between entrepreneurial services and managerial services?
entrepreneurial services generate new market, product, and service ideas, while managerial services administer the routine functions of the firm and facilitate the profitable execution of new opportunities.
Difference between an internal and an external growth strategy?
internal growth strategy relates to new product development, international expansion, and other product related strategies. while external growth strategies relate to mergers and acquisitions, licensing, strategic alliances and joint ventures, and franchising.
Common reasons new products fail?
potential market was overestimated, customers saw the product as too expensive, product was poorly designed, product was no different than the competition's, and the costs of developing the product line were too high
What is a market penetration strategy?
involves actions taken to increase the sales of a product or service through greater marketing efforts or through increased production capacity and efficiency
What is a product line extension strategy?
involves making additional versions of a product so that it will appeal to different clientele or making related products to sell to the same clientele
What is an international expansion strategy?
implies more than just making investments in nations outside of the company's home; the concept includes maintaining an actual business presence in those countries
What is an international new venture?
businesses that, from inception, week to derive competitive advantage by using their resources to sell products or services in multiple countries
What are the 6 foreign-market entry strategies and what are the key characteristics of each one?
Exporting, licensing, joint ventures, franchising, turnkey projects, and wholly owned subsidiary.
What rules of thumb should an entrepreneurial venture follow to successfully sell its products overseas?
answer requests promptly and clearly, replies to foreign inquires should be done quickly, a file should be set up to retain copies of all foreign inquiries, keep promises, all correspondence should be personally signed, be polite/courteous/friendly/respectful
Difference between a merger and acquisition?
merger is the pooling of interests to combine 2 or more firms into one. while an acquisition is the outright purchase of one firm by another
Difference between a licensor and a licensee
licensor is the company that owns the intellectual property, the licensee is the company purchasing the right to use it.
What is licensing?
granting of permission by one company to another company to use a specific form of its intellectual property under clearly defined conditions
what is the purpose of a licensing agreement
an agreement between a licensor and licensee
in a licensing agreement, which party is the licensor and which is the licensee?
licensor is the cmpany that owns the intellectual property while the licensee is the company purchasing the right to use it
what is technology licensing
licensing of proprietary technology that the licensor typically controls by virtue of a utility patent
what is merchandise and character licensing
licensing of a recognized trademark or brand that the licensor typically controls through a registered trademark or copyright
what is a joint venture
an entity created when 2 or more firms pool a portion of their resources to create a separate, jointly owned organization.
how does a joint venture differ from a strategic alliance
a joint venture is regarding 2 or more firms coming together to create a separate organization that is owned jointly while a strategic alliance is a partnership between two or more firms
why do new ventures aim to grow?
grow the mission of the business
day to day challenges of growing a firm:
cash flow management, price stability, quality controls, capital constraints
what strategies do new ventures use to grow?
internal and external growth strategies
What are some internal growth strategies?
penetration strategies, product development strategies, market development strategies, and diversification strategies
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