EEE Final – Flashcards
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What does a business model represent?
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The core aspects of a business and how they fit together.
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Standard Business Model
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Depict existing plans firms can use to determine how they will create, deliver and capture value for their stakeholders.
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Disruptive Business Model
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Business Models that don't fit the profile of a standard business models, and are impactful enough that they disrupt or change the way business is conducted in an industry or an important niche within the industry
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New Market Disruption
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Addresses a market that previously wasn't served
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Low-End Market Disruption
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Disrupts market by providing a simple "low cost" alternative to incumbent businesses
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Core Strategy (1st component of Barringer/Ireland Business Model Template)
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Describes how the firm plans to compete relative to its competitors
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Primary elements of Core Strategy
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- Business mission - Basis of Differentiation - Target Market - Product/Market Scope
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Business Mission
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A business mission or mission statement describes why it exists and what its Business Model is supposed to accomplish.
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Basis of Differentiation
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Why consumers pick one company's products over another's.
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Target Market
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A place within a larger market segment that represents a narrow group of customers with similar interests.
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Product/Market Scope
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Defines the products and markets on which a company will concentrate on. (Most firms start with a narrow scope and become larger).
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Resources (2nd component of Barringer/Ireland Business Model Template)
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The inputs a firm uses to produce, sell, distribute, and service a product or service. A firms most important resources must be difficult to imitate and hard to find a substitute for.
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Core Competencies (resources)
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A specific factor or capability that supports a firm's business model and sets it apart from rivals. (technical know-how, efficient process, trusting relationship with customers, expertise in product design)
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Key Assets
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The assets that a firm owns that enable its Business Model to work. (physical-equipment, financial-investors, intellectual-trademarks, or human-employees)
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Financials (3rd component of Barringer/Ireland Business Model Template)
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Only section of a firm's Business Model that describes how it earns money.
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Revenue Streams
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Describes the ways in which a firm makes money, can be single or have several.
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Cost Structure
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Describes the most important costs incurred to support its Business Model
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Goal of Cost Structure
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Identify: -cost-driven or value-driven -nature of business's costs - business's major cost categories
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Financing/Funding
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Indicate the appropriate amount of funding that will be needed and where the money will come from. Approximation is sufficient in the Business Model stage, don't need an exact amount.
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3 categories of costs to consider
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1. Capital costs 2. One-time expenses 3. Provisions for ramp up expenses
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Operations (4th component of Barringer/Ireland Business Model Template)
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Integral to a firm's overall Business Model and represent the day-to-day heartbeat of a firm.
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Product (or service) Production
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How products/services are produced. Manufactured or in-house produced
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Channels
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How the product/service is delivered to customers
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Key Partners
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Final element of a business model If a start-up firm doesn't have sufficient resources or funding to perform all the tasks to make the Business Model work, they rely on key partners to perform important roles.
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Types of Business Partnerships
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- Joint Venture - Network - Consortia - Strategic alliance
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What is Entrepreneurship?
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"The pursuit of opportunity without regard to the resources currently controlled"
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Entrepreneurial Mindset
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The fixed set of attitudes, dispositions and traits that positively incline a person to think, act and behave in an entrepreneurially manner and predetermines a person's response to and interpretation of various situations
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How firms behave in an Entrepreneurial Mindset
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All firms fall on a conceptual continuum that ranges from highly conservative to highly entrepreneurial- a firms position on the continuum is its "entrepreneurial intensity"
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Entrepreneurial Firms
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Are proactive, innovative, and risk taking
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New venture startup process
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1. Decision to become an entrepreneur 2. Developing successful business ideas 3. Moving from an idea to an entrepreneurial firm 4. Managing and growing the entrepreneurial firm
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What Prevents people from behaving in an entrepreneurial manner?
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Hierarchical structures where failure is frowned upon there is a misconception that there is no need for hard work, and society is becoming less risk taking
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Outcomes of Entrepreneurial Process
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Creativity Opportunity recognition Responsible risk taking Self awareness
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Where do opportunities come from?
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- Changing environmental trends - Solving Problems - Filling gaps in the marketplace
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Changing Environmental Trends
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ex: aging of population, increasing diversity, social network participation increasing, growth in use of mobile devices, more focus on health and wellness
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Solving a Problem
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by observing the challenges that people experience in their daily lives. OR through more simple means, such as intution, or chance
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Finding gaps in the Marketplace
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Products consumers need or want that aren't available in a particular location or aren't available at all
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How are opportunities recognized?
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Exploring, watching people, asking questions, journal problems and possibilities, be open-minded, be confident
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What type of risk taker is a business owner?
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A "moderate" risk taker. Responsible business owners take well informed calculated risks. See their business as a secondary or acceptable risk in their lives.
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Endowment Effect
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People place a higher value on things they own opposed to equivalent or even superior things they don't own. (Very powerful urge among people to protect what they already possess, even though something of greater value may be within their reach)
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Risk Aversion
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Refers to the tendency for people to strongly prefer avoiding losses rather than acquiring gains.
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Factors that help overcoming the fear of risk taking
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-aware of emotional reactions -identify particular challengs -recognize traditional thoughts -educate yourself on facts -calculate each risk -practice taking risks
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Researching the business opportunity
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Taking time to learn the ins and outs of an opportunity is largely what makes business owners moderate rather than high risk-takers
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3 approaches to researching opportunities
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1. get advice from experts and informed people 2. gather information about opportunity 3. conduct a feasibility analysis and write a comprehensive business plan
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How to determine what you want in your life
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-look at life holistically -is what you want only satisfied from starting your own business?
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How to overcome the endowment effect and risk aversion
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-determine what you want in your life -having a good sense of "whats the worst thing that can happen if the business fails" -research and test the business idea
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Joint Venture Business Partnership
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2 or more firms
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Network Business Partnership
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hub-and-wheel configuration with a local firm at the hub
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Consortia Business Partnership
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group of organizations with similar needs
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Strategic alliance Business Partnership
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2 or more firms establish exchange relationship
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3 Phases of the Entrepreneurial Mindset
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1. Recognize opportunities 2. Assess opportunities 3. Execute and realize opportunities
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What are the components of the Barringer/Ireland Business Model Template?
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Core strategy resources sales operations
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Quadrant A of the HBDI Model?
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Analytical and logical
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Quadrant B of the HBDI Model?
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organized and planned
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Quadrant C of the HBDI Model?
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sensing and emotional
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Quadrant D of the HBDI Model?
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experimenting and abstract
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What is a Business Model?
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It's the architecture, the frame, the overall view of your business.
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Cost Driven
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leanest cost structure, low price value proposition, maximum automation, extensive outsourcing.
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Value Driven
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focused on value creation, premium value proposition.
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Opportunity recognition
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Important component of the entrepreneurial process. Entrepreneurs are often characterized by their ability to recognize opportunities. The most basic entrepreneurial actions involve the pursuit of opportunity
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MBTI where you focus your attention
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Extraversion or Intraversion
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MBTI which way you take in information
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Sensing or Intuition
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Sensing
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People who tend to take in information through the five senses and focus on the here and now.
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Intuition
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People who tend to take in information from patterns and the big picture and focus on future possibilities
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Extraversion
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People who tend to focus on the outer world of people and activity.
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Introversion
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People who tend to focus on the inner world of ideas and impressions.
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MBTI which way you make decisions
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Thinking or Feeling
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Thinking
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People who make decisions based primarily on logic and on objective analysis of cause and effect.
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Feeling
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People who tend to make decisions based primarily on values and on subjective evaluation of person-centered concerns.
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MBTI how you deal with the outer world
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Judging or Perceiving
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Judging
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People who tend to like a planned and organized approach to life and want to have things settled.
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Perceiving
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People who tend to like a flexible and spontaneous approach to life and want to keep their options open.
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How to establish a Strong Ethical Culture
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Lead by Example Establish a Code of Conduct Implement an Ethics Training Program
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New Venture Team
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Group of founders, key employees, and advisors that move a new venture from an idea to a fully functioning firm.
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Bootstrapping
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Finding ways to avoid the need for external financing or funding through creativity, ingenuity, thriftiness, cost cutting, or any means necessary. Many entrepreneurs bootstrap out of necessity.
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Venture Capital
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Money that is invested by venture capital firms in start-ups and small businesses with exceptional growth potential
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Vendor Credit
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(AKA trade credit) when a vendor extends credit to a business in order to allow the business to buy its products and/or services up front but defer payment until later.
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Marketing (academic definition)
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An organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.
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Marketing (practical definition)
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Involves motivating (qualified) people to enter your sales funnel, converting prospects to customers, and managing customer and prospect relationships on an ongoing basis
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Marketing Strategy
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A firm's approach to marketing its products and services in broad terms. This approach forms the basis of all its marketing-related activities.
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Positioning Strategy
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After selecting a target market, the next step is for a firm to select a "position" in the market. Position is concerned with how a firm is situated relative to its rivals (or potential rivals). In a sense, a position is the part of a specific target market that a firm is claiming for its own.
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Key elements of Resources
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Core competency Key assets
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Key elements of Financials
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Revenue streams Cost Structure Financing/funding
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Key Elements of Operations
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Product (or service) production Channels Key partnerships
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What are the four key elements of the entrepreneurial mindset?
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Opportunity recognition, creativity, responsible risk taking, self awareness
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What are the three steps to the entrepreneurial process?
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Ability to recognize opportunities, ability to assess opportunities, ability to execute opportunities
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Where do opportunities come from?
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Changing environmental trends, solving problems, filling gaps in the marketplace.
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What is the entrepreneurial mindset?
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The fixed set of attitudes, dispositions and traits that positively incline a person to think, act, and behave in an entrepreunrially manner
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What is the new venture startup process?
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Decision to become an entrepreneur>developing successful business ideas>moving from an idea to an entrepreneurial firm>managing and growing the entrepreneurial firm
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HBDI Blue- quadrants definition
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analytical, rational. Green- planning, organized. Red- sensing, emotional. Yellow- synthesizing, intuitive.
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HBDI Blue- quadrant strengths
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solves or fixes a problem
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HBDI Red- quadrant strengths
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allows group to better improve as a team.
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HBDI Yellow- quadrant strengths
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opens up future possibilities.
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HBDI Green- quadrant strengths
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helps get the task done.
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HBDI quadrant questions
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asks why?
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HBDI Green- quadrant questions
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asks how many or how much?
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HBDI Red- quadrant questions
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asks who and for whom?
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HBDI Yellow- quadrant questions
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asks how and what if?
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Extrovert characteristics
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Outer world, talks
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Introvert characteristics?
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Inner world, quiet
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Sensing characteristics?
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Take in information through the senses and focus on here and now
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Intuition characteristics?
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Information through the big picture and focus on future possibilities
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Thinking characteristics?
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Make decisions based on logic and cause and effect
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Feeling characteristics?
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Make decisions based on values and person-centered concerns
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Judging characteristics?
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Planned and organized approach to life
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Perceiving characteristics?
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Flexible and spontaneous
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What are the factors of establishing a strong ethical culture?
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Lead by example, establish a code of conduct, implement an ethics training program
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What are the common forms of legal entity?
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Sole proprietorship, partnership, corporation, limited liability company
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What is a new venture team?
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A group of founders, key employees, and advisors that move a new venture from an idea to a fully functioning firm
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Advantages of a venture team?
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Teams bring more talent, broader network, and psychological support
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Disadvantages of a venture team?
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Team members may not get along, formal structure may be compromised by "equal" employees
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What is a skills profile?
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A chart that depicts the most important skills that are needed and where skills gaps exist in a new firm
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What are the three formal responsibilities of the board of directors?
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Appoint the officers of the firm, declare dividends, and oversee the affairs of the corporation
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Why do new ventures need financing?
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Cash flow challenges, capital investments, lengthy product development cycles
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Alternatives for raising money for a new venture?
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Personal funds, equity capital, debt financing, creative sources
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What is bootstrapping?
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Finding ways to avoid need for external financing through creativity, cost cutting, thriftiness (buying used equipment)
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Equity funding vs. debt financing
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Equity is exchanging partial ownership in a firm, such as stock, for funding. Debt is getting a loan
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What is an elevator speech?
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Brief, contracted statement that outlines the merits of a business opportunity (2 minute pitch)
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Sources of equity funding?
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Venture capital, business angels, IPOs.
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What are business angels?
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Shark tank
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What are venture capital firms?
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Firms who fund very few start ups who show exceptional growth
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Sources of debt financing?
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Commercial banks, SBA guaranteed loans (guaranteed loan for small businesses who can't get money anywhere else
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What is marketing?
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An organizational function and set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.
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What is marketing (practical definition)?
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Motivating qualified people to enter your sales funnel, converting prospects into customers and managing customer and prospect relationships on an ongoing basis
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What is positioning strategy?
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Concerned with how a firm is situated relative to its competitors and what part of the market it is going to be involved in
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Sections of the BMC?
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Core strategy, resources, financials, operations
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HBDI Green- quadrants definition
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planning, organized.
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HBDI Red- quadrants definition
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sensing, emotional.
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HBDI Yellow- quadrants definition
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synthesizing, intuitive.
