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Bu111 Pre-Midterm Study Notes.docx

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Leanne Hagarty

Bu111 Pre-Midterm SI Office hours in room 1C14 - Wednesday 4-7pm - Thursday 9-10am Key Concepts: - PEST - Diamond-E model - Critical success factors (6) - Porters Five Forces - Entrepreneurship - Social factors Relationship between Firm and its External Factors: 1. List the 6 critical success factors and describe their connections with each other. - Building quality products and services - Achieving financial performance - Gaining employee commitment - Creating a distinctive competitive advantage - Encouraging innovation and creativity - Meeting customer needs *All factors link into each other, and are related. In order to be successful, you need to maintain all of these factors all the time. 2. List the factors within the Diamond-E Framework. - Management preferences - Organization - Resources - Strategy - Environment a) Describe the principal logic and the first task - First task: first link needed to make and connect the business/strategy to the environment - Principal logic: consistency or alignment among variables (assuring all factors of the diamond-e model work well together) b) Provide an example of a specific company and apply the diamond-e framework to it. - Digital market (canon vs. Kodak) - Investing in digital photography and have had a competitive advantage ever since - Proctor & Gamble : many different products and different brands and stretched themselves too thin - Ikea: maintain consistency with their products, stable furniture line, cheaper and good quality External Analysis: 1. Compare and contrast the two different methods of external analysis. - General Environment: affects all businesses, uses PEST model, and identifies general trends and changes - Specific environment: affects industry participants, uses porters 5 forces, look for data, statistics, trends, forecasts, and expert opinions CLICKER: Pest is uncontrollable by the organization because the external analysis is not able to be controlled. 2. List the PEST factors and choose a specific company. How would this company conduct its external analysis with the PEST factors (5) - PEST: o Political-legal: government can create incentives, constraints, support/bail out when needed, and it affects uncertainty, risk and costs faced by firm o Economic: influences costs, potential sales, and financial uncertainty o Social: affects how we live, work, consume, and produce o Technological: affects what we produce/what it can do affects how we produce and how we sell. It demands constant learning and scanning. 3. Identify the most powerful force in Porters Five Forces. Describe the 4 ways this force can be intensified (2). - Porters Five Forces: o Analyzes five important sources of competitive pressure and intensity Potential entrants Buyers Substitutes Suppliers Industry competitors: rivalry among external firms - Most powerful force: Rivalry among inside forces/existing firms o A lot of potential entrants o A lot of substitutes o High buying power o Low switching costs Consumer switching costs: how easily a consumer can switch from one product to another; opportunity costs 4. What are some challenges to conducting external analysis? (3) - Forecasts and trend analysis are imperfect - Rapidly changing environment hard to keep up with - Time consuming 5. What are some benefits to external analysis? (5) - Makes managers proactive - Provides information used in planning - Helps organizations get needed information - Helps organization cope with uncertainty - Improves consistency and performance 6. What are three ways the five forces model is valuable to a firm? (1.5) - Predicts industry profitability - Helps determine whether a firm should enter a particular industry - Helps determine whether and/or how it can carve out an attractive position in that industry Entrepreneurship: 1. What is entrepreneurship, and how does it relate to small businesses and new venture creations? (2) - Entrepreneurship is identifying an opportunity and assessing resources to capitalize on it - Entrepreneurship drives the creation of new venture and small businesses CLICKER: Small businesses have less than 100 employees; contribute more than 26% of annual GDP, owner-managed, 97.8% of all businesses in Canada are small *KNOW ALL STATISTICS 100% 2. Describe competitive advantage and give an example of an existing one. (2) - Unique strategic advantage that caters to a specific market - Creates unique value for product/better than others o Green gym, Dragons Den video we watched in class 3. How do you determine if an idea is marketable and financially viable? Provide explanations to back up your claims. (4) - Are there enough customers who are willing to buy it? - What is the market demand likely to be? - Who are the key competitors? - Is the market growing, shrinking, concentrated, fragmented? o Safety point: low exit cost o Longer to gain profit/great cost up front o Riskier venture if there is more investment up front 4. Define bootstrapping and provide an example of its relevance to entrepreneurship. (2) - doing more with less - Making do with as few resources as possible and using other peoples resources or free stuff where possible to reduce costs - Relevant to entrepreneurship because you dont usually have very many start-up resources 5. Define the two types of financing options. Explain the main differences between the two options. (4) - Debt financing: advantage is control is not given up. Disadvantage is interest accrued. Sources are financial institutions and suppliers. - Equity financing: advantage is no interest but disadvantage is less control. Sources are savings, love money, private investors, and venture capitalists 6. Identify a social entrepreneur from class. Explain how their social entrepreneurship provides a unique value to customers, creates social value, and remains self-sustaining. (5) - Greg Overholt: o Unique value to customers is providing assistance with exam preparation o Social value is funding educational development projects in latin America o It is self-sustaining because student volunteers run the review session and the student fees fund the educational projects - Grameen: o Unique value to customers is that it is provided access to reasonable, small loans o Social value is that women are able to invest in their childrens education, build their own homes etc. o Self-sustaining because loans are repaid and capital is given to other members 7. Compare and contrast between traditional and social entrepreneur (4). - Traditional entrepreneurship: some corporate responsibility initiatives, goal is making money - Social entrepreneurship: main goal is benefiting the greatest population, making money is not a priority though a consideration Ethical Behaviour: 1. Identify and explain the categories of ethical behaviour. (3) - Behaviour toward employees (hiring, firing, wages) - Behaviour towards organization (conflict of interest, honesty) - Behaviour towards other economic agents (customers, competitors, stockholders) 2. Identify the steps to assessing ethical behaviour (1.5) - Gather facts - Analyze situation - Make judgement 3. What are the four approaches to analyzing a situation? (2) - Utilitarian approach: greatest good - Rights approach: rights cannot be taken away - Fairness and justice approach: equitable distribution of rewards - Caring approach: responsibilities to one another Stakeholders:
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