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EEE Final

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

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