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Another facet they exhibit impulsive behaviors and they are prone to take action. The primary motivation for the entrepreneur is the ability to master his/her destiny and to the have to ability to do something they really enjoy. They can also be very impatient with discussions and theories. The following illustrates the typical entrepreneurial profile: Ø Desire for responsibility for their actions. Ø Confidence in their ability to succeed. Ø High level of energy and enthusiasm. Ø Future orientation – searching for possible opportunities. Ø Skilled at organizing and running a successful company. Ø Value of achievement over money - since of control over their lives. STRATEGIC MANAGEMENT AND THE ENTREPRENEUR Strategic ManagementProcess: The process of developing a game plan to guide the company as it strives to accomplish its mission, goals, and objectives, and to keep it on its desired course:1 Develop a clear vision, and translate into a meaningful mission statement2 Define the firm’s core competencies, market segment, and position the business3 Asses the company’s strengths and weakness4 Scan the environment for opportunities and threats facing the business5 Identify the key factors for success in the business Competitive Advantage The aggression of factors that sets a company apart from its competitors and gives it a unique position in the market. Goals The broad, long-range attributes that a business seeks to accomplish, they tend to be general and sometimes even abstract. Objectives More specific targets of performance, commonly addressing such areas as profitability, productivity, growth, and other key aspects of a business. Core Competencies A unique set of capabilities that a company develops in key operational areas that allow it to vault past competitors. Market Segmentation Carving up the mass market into smaller, more homogeneous units and then attacking each segment with a specific marketing strategy designed to appeal to its members Positioning Positioning the company in the market involves influencing customers’ perceptions to create the desired image for the business and its goods and services. Key Success Factors Relationships between a controllable variable and a critical factor influencing a company’s ability to compete in the market. Competitive Profile Matrix A tool that allows a business owner to evaluate his company against major competitors on the key success factors for that market. Strategy A road map of the tactics and actions and entrepreneur draws up to fulfill the firm’s mission, goals, and objectives. Cost Leadership Strategy A strategy in which a company strives to be the lowest-cost producer relative to its competitors in the industry. Differentiation Strategy A strategy in which a company seeks to build customer loyalty by positioning its goods or services in a unique or different fashion. Focus Strategy A strategy in which a company selects one or more segments of a market, identifies their special needs, wants and interests, and offers them a good or service designed to excel in meeting those needs, wants and interests. Strengths Positive external factors that contribute to a company’s ability to accomplish its mission, goals and objectives. Weaknesses Negative internal factors that inhibit a company’s ability to accomplish its mission, goals and objectives. Opportunities Positive external options that a business could exploit to accomplish its mission, goals and objectives. Threats Negative external forces that inhibit a company’s ability to accomplish its mission, goals and objectives. Identifying the strengths and weaknesses of a business helps the owner to understand his/her business (as it will exist or not.) Therefore, the entrepreneur’s attention should be focused on assessing the company’s strengths and weaknesses. Building a successful competitive strategy requires a business to expand its strengths to conquer and balance for the weaknesses. Entrepreneurs must pay close attention to their external environment to identify any opportunities and threats that might have a significant impact on the business. Opportunities and threats are the most crucial for the entrepreneurs to monitor, due to the fact that these factors will affect the behavior of the markets in which the business operates, the behavior of competitors, and most importantly the behavior of customers. Unlimited Personal Liability A situation in which the sole proprietor is personally liable for all of the business’s debts.Creditor can force the proprietor to liquidate his personal assets to cover the debts. Partnership Agreement A document that states in writing all of the terms of operating the partnership for the protection of each partner involved. UPA Codifies the body law dealing with partnerships in the United States. General Partners Partners who share in owning, operating, and managing a business and who have unlimited liability for the partnership’s debts. Limited Partners Partners who do not take an active role in managing the business and whose liability for the partnership’s debt is limited to the amount they have invested. Limited partnership A partnership composed of at least one general partner and at least one limited partner. Master Limited Partnership A partnership whose shares are traded on the stock exchanges, just like corporation’s. Corporation A separate legal entity apart from its owners which receives its right to exist from the state in which it is incorporated Domestic Corporation A corporation doing business in the state in which it is incorporated Foreign Corporation A corporation doing business in a state other than the one in which it is incorporated. Alien Corporation A corporation formed in another country but doing business in the U.S. Treasury Stock The share a corporation owns in itself. Right of First Refusal A provision requiring shareholders who want to sell their stock to offer it first to the corporation. Bylaws The rules and regulations the officers and directors establish for the corporation’s internal management and operation. Double Taxation Corporation profits are taxed twice, at the corporate rate and at the individual rate Article of Organization The document that establishes for an LLC its name, method of management, duration and etc. Operating Agreement “ “ “ “ “ “ the provisions governing the way it will conduct business An S-Corporation retains similar characteristics of a legal corporation but has the advantage of being taxed as a partnership, provided that it meets certain requirements. The advantages of an S-Corporations is that they get to retain the advantages of regular corporations while having the ease of transferability of ownership, the continuity of existence, and the limited personal liability for its owners. Also, S-Corporation owners get the opportunity to make year-end payouts to themselves if profits are high. Lowering their tax bills is another attractive benefit for the S-Corporation owners. The disadvantage they face is the cost of many fringe benefits such as insurance, meals and lodging, paid to shareholders with 2% or more of stock cannot be deducted as business expenses for tax purposes. Shareholders of S-Corporations are constrained to a limited range of retirement benefits. S-Corporation status is usually beneficial to start-up companies, anticipating net losses and to highly profitable firms with substantial dividends to pay out to shareholders. Franchising is a system of distribution in which semi-independent business owners pay fees and royalties to a parent company in return for the right to sell its products or service and often to use its business format and system. Trade name Franchising Franchisee purchases the right to use the franchiser’s trade name without distributing particular products exclusively under the franchiser’s name. Product Distribution Franchising A franchiser licenses a franchisee to sell its products under the franchiser’s brand name and trademark through selective, limited distribution network. Pure Franchising A franchiser sells a franchisee a complete business format and sytem. The benefits of buying a franchise are: Ø Management training and support to ensure franchisees continued success. Ø Brand name appeal, with the advantage of a highly recognized name and identifying trademark. Ø Standardized quality of goods and services. Ø National advertising programs essential to the success of virtually all franchise operations Ø Financial Assistance, franchisers usually assist franchisees in establishing relationships with banks, investors and other funding sources. Ø Proven products and business formats, the franchisers experience, expertise and products. Ø Centralized buying power, cost savings passed on from the franchiser to franchise. Ø Territorial protection, proper location is critical to the success of a business. Ø Franchising fees and profit sharing, imposing fees and demanding a share of the franchisees revenues. Ø Strict conformities to standardized operations. Ø Restrictions on purchasing products and supplies outside of the franchisers approved suppliers. Ø Limited product line, selling only those products approved by the franchiser. Ø Unsatisfactory training programs, undelivered promise of extensive services, advice, and assistance. Ø Market saturation, franchisees are threatened by territorial encroachment. Buying a successful existing business is a great advantage for the buyer, because the business may continue to be successful. An existing business may already have the best location, which will become instrumental in the success of the business. Since an existing business already has experienced employees, equipment, suppliers and inventory in place, there may be fewer problems arising at start up. The new owner will also be able to use the experience of the previous owner in the success of the business. All of these factors plus the fact that the business may be sold at a bargain price in comparison to starting up from scratch will enable the new owner to start a turn key operation in a fraction of the time. On the other hand there are many disadvantages incorporated in buying an existing business, such as, the previous owner may have orchestrated improper business behavior. The business location and/or the employees may have become unsatisfactory. Another factor to take notice of is the insufficiency of the equipment and inventory. Buying an overpriced business is a major disadvantage; due to the fact the new owner may never be able to recover profits and/or investments. Product: An item, idea or service that satisfies the need of a consumer Place: The direct place or method of distribution of the product, any activity involving the movement of the goods Price: A key factor in a consumers decision to buy, price affects both sales volume and profits, with the right price high sales volume may be achievable Promotion: Involves both advertising and personal selling, its goal is to inform and persuade current and potential consumers through some mass medium the benefits of their goods or service Bibliography: Word Count: 1780
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