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BU111 MIDTERMS All Questions to Think About.docx

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Sofy Carayannopoulos

25/09/2013 BU111-Questions To answer a question, you must: -describe what it is -describe the components -describe how it is related to the question -give an example -USE KEY WORDS*** (instead of putting competitive advantage, you must put DISTINCTIVE competitive advantage) Questions to Think About: List the critical success factors, what are they, and how do they connect with each other? -Achieving Financial Performance: is a company’s goal to reach a certain level of profit, growth, competitiveness. -Meeting Customer Needs: giving the consumer what he/she wants whether it would be reliable products to cheap products. Be able to give the customer what they want before they know it. -Building Better Quality Products and Services: building good quality products and services that are reliable, affordable, and consistent. This builds consumer loyalty -Inspiring Innovation and Creativity: constantly making your product better not only to achieve all of the critical success factors, but also to stay with, or ahead of, the competition. -Gaining Employee Commitment: must provide employees with a work environment that will ensure their stay. Happy employees will work harder, longer, and you will attract the best. -Gaining a distinctive Competitive Advantage: must distinguish the product from the rest of the competition, will help you achieve some of the other success factors Describe the Diamond-E model and how it relates to the critical success factors -the Diamond-E model is a way of analyzing how the internal and external components of the organization relate. It’s a key model for doing a strategy analysis. Opportunities and threats come from the external environment. The key idea is that all the components of the organization (the managerial preferences that represent the biases and the preferences of management, the organization which is the culture, capabilities and leadership of the organization, and the resources that the organization has such as the capital, employees, machinery) must align with a company’s strategy in order for it to be successful in the external environment. But the environment is always changing What is an external analysis, what are the components, what are the benefits and what are the challenges? -An external analysis is a tool that is used by companies to determine the possible opportunities and threats -The two components of the external analysis are: 1. the general environment: this is the general conditions in which a company operates such as a country’s economic system. The general environment can be analyzed using the PEST Factors (Political, Economic, Social, and Technological). 2. The Specific Environment: this is the specific industry a company is currently a part of or is thinking about pursuing. This can be analyzed using Porter’s Five Forces (Buyer Power, Supplier Power, Threat of Substitutes, Threat of New Entrants, and the Existing Firms) -the benefits of a company doing an external analysis is that it makes managers proactive, it provides information used in planning, helps an organization get the needed resources, it helps the organization cope with uncertainty, and it improves performance and consistency -the challenges is that the external analysis is time consuming, the environment is constantly changing, and that the forecast are imperfect What are the PEST Factors and what is their effect on a firm’s profitability/strategy? -Political-Legal: some elements include taxes, trade agreements, government control and stability. This affects uncertainty, risks, and constraints -Economic: some elements are standard of living, economic growth, and national debt. This can influence cost, potential sales, and financial uncertainty -Social: customs, value, attitudes, and customer preferences. This can affect how we live, work, consume and produce -Technological: internet affects buying, selling, communication. Able to access information. Changes product design and manufacturing. This can what we produce, how much we produce, and how we sell it. It demands constant learning Explain Porter’s five Forces and how can companies defend against them? -Buyer Power: if there are few or concentrated buyers, low switching costs, standardized products. This reduces the price you can sell. Defend against this by alliances with other firms and strong advertising. -Supplier Power: if there are a small amount of supplier in an industry, the suppliers will have power over the companies because the companies have to compete for the suppliers resources. This effects profitability because the suppliers are able to charge more. Higher switching costs, high probability of forward integration, bargaining power, low attractiveness of substitute suppliers. Defend against this by a strategic alliance or integral supply. -Threat of Potential Entrants: a high threat of potential entrants causes increased competition. Defend against this by creating or using barriers such as capital intensity, technological know- how, regulatory approval, brand loyalty, access to distribution. -Substitutes: many substitutes causes increased competition, puts a ceiling price, pressure increases as switching costs decline. Defend against this by making buyers think you are unique and locking them in -Rivalry among Existing Firms: results in increased costs, is the most powerful of the five forces. Porter’s five forces predicts industry profitability. It allows a firm to determine whether or not it should enter an industry. Questions to Think About: What is the difference between a new venture, small business, and entrepreneurship?Are they mutually exclusive? New Venture: is a newly formed organization that sells goods/services. A new venture consists of entrepreneurship because in order to succeed it must have identified an opportunity in the market and accessed resources to capitalize it, which is part of the entrepreneurial process. This can also be a small business because new ventures tend to be owner operated, consists of less than 100 employees, and is not dominant in the market. Small Business: is a company that is owner operated, consists of less than 100 employees, and is not dominant in the market. A small business can be a new venture because it could be a newly formed organization and it must have once been an entrepreneur, which means it recognized an opportunity and capitalized on it. Entrepreneurship: is identifying an opportunity and accessing the resources to capitalize on it. Entrepreneurship can easily relate to both a small business and a new venture because both must have identified an opportunity and accessed the resources in order to capitalize on it in the past. -however, these three are distinctively different things with different meanings What role does the Pof PEST play in entrepreneurship and why does it choose to do so? ** -The government makes it easy to chase entrepreneurship because that region of the economy employs a large amount of people and it has a great impact on GDP. The government will also encourage entrepreneurship because it promotes innovation. The government may also restrict chasing entrepreneurship because of corporate taxes, trade regulations, and government control. -It chooses to do so because entrepreneurs contribute a large amount to the GDP, which will increase the standard of living. It also employs a large amount of people in a country will reduce unemployment. What is the entrepreneurial process and what influences it and why? How are its elements and principles similar to the Diamond-E? -The process is the entrepreneur, the opportunity, and the resource. The PEST model influences the entrepreneur process, specifically the economy because many elements, such as inflation, national debt, trade agreements, and growth, will make it difficult for the process, specifically accessing resources. This is similar to the Diamond-E because the internal part of the organization is the entrepreneur and their ideas (resources, manager preferences, organization).A key point is that the principle logic, that all the components must be aligned, are shared by both models. In order for a firm to be successful, their managerial preferences, organization, and resources must align with the strategy in order to be successful in the external environment. This is similar to the entrepreneurial process because the entrepreneur must be able to identify the opportunity and access resources in order to be successful. Where does the process begin, why does it begin there, and what determines if the process will be successful? -The process begins with the entrepreneur and his/her ideas. The entrepreneur must recognize an opportunity in the market and come up with an idea that is aligned with the opportunity. It begins here because it must begin with an idea. The process will be successful if the entrepreneur identifies an opportunity and accesses resources to capitalize on it. What are the components of opportunity recognition? Why is this screening important? -The components of opportunity recognition is: 1. Idea Generation (which causes paradigm shifts). 2. Screening process. The purpose of this is to take out any bad ideas and concentrate on the ones that will work. It saves time and money. You do this from: 1. you must determine if the opportunity creates value for the consumer (solves a problem, meets a need). If it does, the customer must be willing to pay for it. 2.An idea that provides a distinct competitive advantage that can be sustained (product must be unique/better than others). 3. The idea is marketable and financially viable. -this screening is important so you are able to weed out the bad ideas. It will allow you to save time and save money, which is extremely important if you are starting up a new company. Questions to Think About: What choices does a firm have for accessing resources? What are the characteristics of each option? -there are 3 choices are: 1. Bootstrapping: doing more with less in terms of finances and other resources like know-how, technology, research. 2. Debt Financing: given financial resources for interest payments and control of the company is kept. 3. Equity Financing: given financial resources for a portion of the company. There is no interest but control is lost. In what ways are traditional and social enterprises similar? -traditional enterprises’goal is to make money while a social enterprises goal is to create social worth. However, once a traditional enterprise achieves financial success, forms of social responsibility comes as a by-product of profit. In turn, successful traditional enterprises make a profit and eventually create social worth. Successful social enterprises create social worth and eventually make a profit as a by-product. They relate in terms of net worth of each company, keeping in min
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