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ENTP 3301.002 and ENTP 3301.

501
Midterm Review
CHAPTER 1
INTRODUCTION TO ENTREPRENEURSHIP
1.

Explain entrepreneurship and discuss its importance. (p. 6)


Entrepreneurship is the process by which individuals pursue opportunities without regard to
resources they currently control.
VC Fred Wilson defines it as turning an idea into a business

2.

Describe corporate entrepreneurship and its use in established firms. (p. 6)


It is the conceptualization of entrepreneurship at the firm level. All firms fall along a conceptual
continuum that ranges from highly conservative to highly entrepreneurial. The position of a firm on
this continuum is referred to as its entrepreneurial intensity.
Entrepreneurial Firms proactive innovators & not averse to taking calculated risks.
Conservative Firms have a more wait & see posture, are less innovative and are risk averse

3.

Discuss three main reasons people decide to become entrepreneurs. (pp. 7-9)
Desire to be your own boss, pursue your own ideas and realize financial rewards.

4.

Identify four main characteristics of successful entrepreneurs. (Figure 1.1, p. 10)


Passion for business; Product/customer focus; Tenacity despite failure and Execution
intelligence.

5.

Explain the five common myths regarding entrepreneurship. (pp. 15-17)


a. Entrepreneurs are born, not made
b. Entrepreneurs are gamblers
c. Entrepreneurs are motivated primarily by money
d. Entrepreneurs should be young & energetic
e. Entrepreneurs love the spotlight
Traits & Characteristics of Entrepreneurs
a. Moderate risk taker / Optimistic disposition
b. Networker / Persuasive
c. Achievement motivated / Promoter
d. Alert to opportunities / Resource assembler/leverage
e. Creative / self-confident
f. Decisive / Self-starter
g. Energetic / Tenacious
h. Strong work ethic / Tolerant of ambiguity
i. Lengthy attention span / Visionary

6.

Explain how entrepreneurial firms differ from salary-substitute and lifestyle firms. (Figure 1.2, p.
18)
Types of Start-Up Firms
1. Salary-substitute firms that basically provide their owner/s a similar level of income to
what they would be able to earn in a conventional job
2. Lifestyle provides their owner/s the opportunity to pursue a particular lifestyle and make
a living at it.
3. Entrepreneurial brings new products and services to the market by creating and seizing
opportunities regardless of the resources they currently control

7.

Discuss the changing demographics of entrepreneurs in the United States. (pp. 18-21)
Changing demographics of entrepreneurs in America women which is a 20% increase / 6.5M,
$940M in sales & 7.1M employees); minorities with biggest jump in Latinos (from 11% to 23%),
Asians (4% t0 6%) / , seniors / 55years+ with an increase from 14% to 23% and young people (age
range: 20 34) with a decrease from 35% to 26%.

8.

Explain the process of creative destruction. (p. 21)


1. The process by which new products and technologies developed by entrepreneurs over
time make current products and technologies obsolete; stimulus of economic activity.
2. Creative destruction occurs when something new kills something older. A great example
of this is personal computers.
3. A term coined by Joseph Schumpeter in his work entitled "Capitalism, Socialism and
Democracy" (1942) to denote a "process of industrial mutation that incessantly
revolutionizes the economic structure from within, incessantly destroying the old one,
incessantly creating a new one."
The Entrepreneurial Process
1. Deciding to become an entrepreneur
2. Developing successful business ideas
3. Moving from an idea to an entrepreneurial firm
4. Managing & growing the entrepreneurial firm
POWERPOINT PRESENTATION
Mend your speech a little, lest it may mar your fortunes

CHAPTER 2
RECOGNIZING OPPORTUNITIES AND GENERATING IDEAS
1.

Explain why its important to start a new firm when its window of opportunity is open. (p. 43)
a. An opportunity is defined as a favorable set of circumstances that creates a need for a new
product, service, or business.
b. Four essential qualities of an opportunity: Timely; attractive; durable and anchored.
Window of Opportunity metaphor describing the time period in which a firm can realistically
enter a new market.

2.

Explain the difference between an opportunity and an idea. (p. 44)


An idea is a thought, impression or notion while an opportunity is a favorable set of circumstances
that creates a need for a new product, service or business

3.

Describe the three general approaches entrepreneurs use to identify opportunities. (Figure 2.2, p.
44)
The 3 general approaches entrepreneurs use to identify opportunities are:
a. Observing trends study how they can create opportunities. Most important trends to
follow are economic, social, technological, political and regulatory
b. Solving a problem recognize the problem and find ways to solve them
c. Finding gaps in the marketplace

4.

Identify the four environmental trends that are most instrumental in creating business opportunities.
(Figure 2.3, p. 45)
1. Economic state of the economy, level of disposable income and consumer spending
pattern
A weak economy favors start-ups that help consume save money. An example is
GasBuddy.com, a company started to help consumers save money on gas
2. Social social & cultural trends, demographic changes and what people think is in
Aging of baby boomers
The increasing diversity of the workplace. Increasing interest in social networks such as
Facebook and Twitter. An increasing focus on health and wellness. Increasing interest in
green products
3. Technological new & emerging technologies and new uses of old technologies
Advances in technology frequently create business opportunities.
Examples of Entire Industries that Have Been Created as the Result of Technological
Advances. Examples = Computer industry; Internet; Biotechnology and Digital
photography
4. Political new changes in political arena, new laws & regulations
Political action and regulatory changes also provide the basis for opportunities. Laws to
protect the environment have created opportunities for entrepreneurs to start firms that
help other firms comply with environmental laws and regulations.

5.

List the personal characteristics that make some people better at recognizing business opportunities
than others. (p. 55-58)
Characteristics that tend to make some people better at recognizing opportunities than others. They
are:
1. Prior experiences Several studies have shown that prior experience in an industry helps
an entrepreneur recognize business opportunities.
2. Cognitive factors Studies have shown that opportunity recognition may be an innate skill
or cognitive process. Some people believe that entrepreneurs have a sixth sense that
allows them to see opportunities that others miss.
This sixth sense is called entrepreneurial alertness, which is formally defined as the
ability to notice things without engaging in deliberate search.

3.
4.

Social networks - The extent and depth of an individuals social network affects
opportunity recognition.
Creativity - Creativity is the process of generating a novel or useful idea. Opportunity
recognition may be, at least in part, a creative process. For an individual, the creative
process can be broken down into five stages

6.

Identify the five steps in the creative process. (Figure 2.4, p. 57)
Five steps to generating creative ideas:
a. Preparation background, experience & knowledge
b. Incubation stage during which a person considers an idea or thinks about a problem
(AKA mulling things over phase)
c. Insight flash of recognition when the solution to a problem is seen or an idea is born
d. Evaluation stage of creative process during which an idea is subjected to scrutiny &
analyzed for its viability
e. Elaboration stage during which the creative idea is put into a final form: The details are
worked out and the idea is transformed into something of value (product, service or
business concept)

7.

Understand the opportunity recognition process. (Figure 2.5, p. 58)


a. The process of perceiving the possibility of a profitable new business or a new product or
service

8.

Describe the purpose of brainstorming and its use as an idea generator. (p. 59-60)
a. This is the process of generating several ideas about a specific topic
Rules for Brainstorming
1. No criticism is allowed
2. Freewheeling, carefree expression of ideas free from rules/restraints
3. Session moves quickly
4. Leapfrogging is encouraged (using 1 idea to jump forward quickly to others)

9.

Describe three steps for protecting ideas from being lost or stolen. (p. 64)
You can protects your ideas through tools such as patents, trademarks, copyrights and trade secrets
1. Idea should be put into a tangible form either entered into a physical idea logbook or
saved on a computer disk & dated.
2. Idea should be secured
3. Avoid making an inadvertent or voluntary disclosure of an idea in a way that forfeits your
claim to its exclusive rights

CHAPTER 3
FEASIBILITY ANALYSIS
1.

Explain what a feasibility analysis is and why its important. (p. 79)
Feasibility analysis is the process of determining whether a business idea is viable. It is the
preliminary evaluation of a business idea, conducted for the purpose of determining whether the
idea is worth pursuing.
Most effective business emerge from a process that includes:
1. Recognizing a business idea
2. Testing the feasibility of the idea
3. Writing a business plan
4. Launching the business
a.

Timing of Feasibility Analysis


The proper time to conduct a feasibility analysis is early in thinking through the prospects
for a new business. The thought is to screen ideas before a lot of resources are spent on
them.

b.

Components of a Properly Conducted Feasibility Analysis


A properly conducted feasibility analysis includes four separate components, as discussed
in the following slides.

2.

Understand the role of feasibility analysis in developing successful business ideas. (Figure 3.1, p.
79)
A feasibility analysis is an assessment of a potential business rather than strictly a product or
service
Methodology for Conducting a Feasibility Analysis Four key areas
1. Product / service
2. Industry / target
3. Organizational
4. Financial

3.

Describe the purpose of a product/service feasibility analysis and the two primary issues that a
proposed business should consider in this area. (pp. 81-86)
a. Purpose: Is an assessment of the overall appeal of the product or service being proposed.
Before a prospective firm rushes a new product or service into development, it should be
sure that the product or service is what prospective customers want.
Product / Service Desirability:
1. Ask questions
2. Administer a concept test - A concept statement is a one-page description of a
business that is distributed to people who are asked to provide feedback on the
potential of the business idea.

4.

Explain a concept statement and its contents. (p. 82)


A concept statement is a brief corporate summary that includes information such as target market,
marketing strategies and explanations of why your company will be profitable. Concept statements
are vital for entrepreneurs in the preparatory stages of their company. They map out the direction of
your enterprise.

5.

Describe the purpose of a buying intentions survey and how its administered. (pp.84-85)
Is an instrument that is used to gauge customer interest in a product or service.
It consists of a concept statement or a similar description of a product or survey
with a short survey attached to gauge customer interest.

The statement & survey should be distributed to 20 to 30 potential customers


(those that complete the concept statement test SHOULD NOT be asked to
complete this survey). Each participant should be asked to read the statement &
complete the survey.
Internet sites like Survey Monkey make administering a buying intentions survey
easy and affordable.

6.

Describe the purpose of industry/target market feasibility analysis and the two primary issues to
consider in this area. (pp. 88-90)
It is an assessment of the overall appeal of the industry and the target market for the
proposed business.

An industry is a group of firms producing a similar product or service.

A firms target market is the limited portion of the industry it plans to go after.
The two components to industry/target market feasibility analysis: industry attractiveness and target
market attractiveness.
Industry Attractiveness:
Industries vary in terms of their overall attractiveness.
In general, the most attractive industries have the characteristics depicted on the
next slide.
Particularly importantthe degree to which environmental and business trends
are moving in favor rather than against the industry.
Target Market Attractiveness:
The challenge in identifying an attractive target market is to find a market thats
large enough for the proposed business but is yet small enough to avoid attracting
larger competitors.
Assessing the attractiveness of a target market is tougher than an entire industry.
Often, considerable ingenuity must be employed to find information to assess the
attractiveness of a specific target market.

7.

Discuss the characteristics of an attractive industry. (pp. 89-90)


Are young rather than old

Are early rather than late in their life cycle

Are fragmented rather than concentrated

Are growing rather than shrinking

Are selling products and services that customers must have rather than
want to have

Are not crowded

Have high rather than low operating margins

Are not highly dependent on the historically low price of key raw materials

8.

Describe the purpose of organizational feasibility analysis and list the two primary issues to
consider in this area. (pp. 91-92)
Is conducted to determine whether a proposed business has sufficient management
expertise, organizational competence, and resources to successfully launch a business.
Focuses on non-financial resources
The two primary issues to consider are management prowess and resource sufficiency

9.

Explain the importance of financial feasibility analysis and list the most critical issues to consider
in this area. (pp. 93-95)
It is the final component of a comprehensive feasibility analysis.
A preliminary financial assessment is sufficient.
The most critical issues to consider in this area are:
1. Total start-up cash needed
2. Financial performances of a similar business
3. Overall financial attractiveness of the proposed venture

CHAPTER 4
WRITING A BUSINESS PLAN
1.

Explain the purpose of a business plan. (p. 113)


A business plan is a written narrative, typically 25 to 35 pages long that describes
what a new business plans to accomplish.

2.

Explain the difference between a summary business plan, a full business plan, and an operational
business plan. (Figure 4.2, p. 118)
1. Summary Business Plan (10-15 pages), it works best for new ventures in the early stages
of development that want to test the waters to see if investors are interested in their idea
2. Full Business Plan (25-35 pages); it works best for new ventures who are at the point
where they need funding or financing; serves as a blueprint for the companys
operations
3. Operational Business Plan (40 -100 pages). It is meant primarily for an internal
audience; works best as a tool for creating a blueprint for a new ventures operations and
providing guidance to operational manager.

3.

Explain why the executive summary may be the most important section of a business plan. (p.
122)
The executive summary is a short overview of the entire business plan
It provides a busy reader with everything that needs to be known about the new
ventures distinctive nature.
An executive summary shouldnt exceed two single-spaced pages.

4.

Describe a milestone and how milestones are used in business plans. (p. 124)
A milestone is a noteworthy or significant event. If you have selected & registered your companys
name, completed a feasibility analysis, written a business plan and established a legal entity, you
have already cleared several important milestones.

5.

Explain why the Management Team and Company Structure section of a business plan is
particularly important. (pp. 129-130)
This is a critical section of a business plan.

Many investors and others who read the business plan look first at the executive summary
and then go directly to the management team section to assess the strength of the people
starting the firm.

6.

Describe the purpose of a sources and uses of funds statement and an assumptions sheet. (p.
131)
1. A sources and uses of funds statement is a document that lays out specifically how much
money a firm needs (if the intention of the business plan is to raise money), where the
money will come from and what the money will be used for.
2. An assumption sheet is an explanation of the most critical assumptions that your financial
statements are based on.

7.

Detail the parts of an oral presentation of a business plan. (Table 4.5, p. 134)
The first rule in making an oral presentation is to follow directions. If youre told
you have 15 minutes, dont talk for more than the allotted time.
The presentation should be smooth and well rehearsed.
The slides should be sharp and not cluttered.
Twelve PowerPoint Slides to Include in an Investor Presentation
1. Title Slide
2. Problem
3. Solution
4. Opportunity and target market
5. Technology
6. Competition
7. Marketing and sales
8. Management team
9. Financial projections
10. Current status
11. Financing sought
12. Summary

CHAPTER 5
INDUSTRY AND COMPETITOR ANALYSIS
1.

Explain the purpose of an industry analysis. (p. 149)


It is business research that focuses on the potential of an industry.
Once it is determined that a new venture is feasible in regard to the industry and market in
which it will compete, a more in-depth analysis is needed to learn the ins and outs of the
industry.

The analysis helps a firm determine if the target market it identified during feasibility
analysis is favorable for a new firm.

2.

Identify and understand the five competitive forces that determine industry profitability. (Figure
5.1, p. 153; pp. 152-158)
The 5 forces model is a framework for understanding the structure of an industry and was
developed by Harvard professor Michael Porter.
1. Threat of substitutes
2. Threat of new entrants - The threat of new entrants is one of the five forces that determine
industry profitability. Firms try to keep other firms from entering their industries by
erecting barriers to entry.
3. Rivalry among existing firms
4. Bargaining power of suppliers
5. Bargaining power of buyers

3.

Explain the role of barriers to entry in creating disincentives for firms to enter an industry. (pp.
153-155)
1. A barrier to entry is a condition that creates a distinctive for a new firm to enter an
industry. Economics of scale, product differentiation, capital requirements, cost
advantages independent of size, access to distribution channels and government and legal
barriers are examples of barrier to entry.

4.

Identify the nontraditional barriers to entry that are especially associated with entrepreneurial firms.
(Table 5.1, p. 156)
The non-traditional barriers to entry that are particularly well suited to entrepreneurial firms include
strength of the management team, first-mover advantage, passion of the management team and
employees, a unique business model, special internet domain name and inventing a new approach
to an industry and executing the approach in an exemplary manner.

5.

Explain the purpose of a competitor analysis. (pp. 163-164)


A competitor analysis is a detailed analysis of a firms competition.
It helps a firm understand the positions of its major competitors and the
opportunities that are available.
A competitive analysis grid is a tool for organizing the information a firm collects
about its competitors.

6.

Identify the three groups of competitors a new firm will face. (pp. 164-165)
1. Direct Competitors businesses offering identical or similar products
2. Indirect Competitors Businesses offering close substitute products
3. Future Competitors Businesses that are not yet direct or indirect competitors but could
be at any time

7.

Describe the reasons for completing a competitive analysis grid. (pp. 167-168)
To complete a competitive analysis grid, a firm must first understand the
strategies and behaviors of its competitors.
The information that is gathered by a firm to learn about its competitors is
referred to as competitive intelligence.
A new venture should take care that it collects competitive intelligence in a
professional and ethical manner.

CHAPTER 6
DEVELOPING AN EFFECTIVE BUSINESS MODEL
1.

Describe a business model. (p. 181)


A firms business model is its plan or diagram for how it competes, uses its
resources, structures its relationships, interfaces with customers, and creates
value to sustain itself on the basis of the profits it generates.
The term business model is used to include all the activities that define how a
firm competes in the marketplace.

2.

Explain business model innovation. (pp. 181-182)


a. Business model innovation refers to initiatives such as those undertaken by Michael Dell
when he established the firm now known as Dell Inc. that revolutionized how products are
sold in an industry

3.

Discuss the importance of having a clearly articulated business model. (p. 184)
Importance of Business Models
Serves as an ongoing extension of feasibility analysis. A business model continually asks
the question, Does this business make sense?

Focuses attention on how all the elements of a business fit together and constitute a
working whole.

Describes why the network of participants needed to make a business idea viable is
willing to work together.

Articulates a companys core logic to all stakeholders, including the firms employees.

4.

Discuss the concept of the value chain. (pp. 186-187, Figure 6.2)
The value chain is the string of activities that moves a product from the raw
material stage, through manufacturing and distribution, and ultimately to the end
user.
By studying a product or services value chain, an organization can identify ways
to create additional value and assess whether it has the means to do so.
Value chain analysis is also helpful in identifying opportunities for new
businesses and in understanding how business models emerge.

5.

Define core competency and describe its importance. (p. 192)


A core competency is a resource or capability that serves as a source of a firms competitive
advantage over its rivals. It is a unique skill or capability that transcends products or markets,
makes a significant contribution to the customers perceived benefit, and is difficult to imitate.
(Examples include Sonys competence in miniaturization and Dells competence in supply chain
management).
OTHER MATTERS

1.
2.
3.

Be generally familiar with cases and boxed companies as they illustrate the above.
Test will be short answer, multiple choice, odd man out, etc.
Think about your companies as you review, and note items to circle back on.