MGT 3111 Midterm reveiw

MGT 3111 Midterm reveiw - MGT Midterm Review Ch. 7 More...

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MGT Midterm Review Ch. 7 More than ½ of new businesses fall in the first few years due to lack of a well thought out business plan and insufficient capital funding An industry analysis is vital to success- if entering the industry in maturity or decline phase of life cycle you will very rarely be successful. A competitive advantage differentiates your business from the competition- on benefits the customer desires (not price) If you don’t have a C.A. you will not stay in business. In addition, the C.A. you have today will not be relevant after a period of time. Categories of Failure Product-Market - poor timing - design problems - poor distribution - no definition of what business is - over reliance on one certain customer Financial - most businesses start out under capitalized or in too much debt - Fast growth—get venture capitalist who takes over so you lost profit Management - poor management can ruin a business idea - nepotism—hiring family members - Human relations problems External Problems—effect of competition on business—make sure you know as much as you can about the competition Return on Investment (ROI) - Net Income/ Average Owner’s Equity - Measures- Return on owner’s capital; when compared with return on assets, it measures the extent financial leverage is being used for or against the owner - It tells you how well a company is doing as an investment - Net Profit Before Tax/ Net Worth - Measures efficiency of net worth in generating net profit: the number of dollars in net profit produced for every $1 invested in net worth You need to look for ways to move your C.A. to the left of the Product Life Cycle. Product Life Cycle-concept that provides a way to trace the stages of a product’s acceptance, from its introduction to its decline Introductory - prices high to recover development costs Growth
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- prices begin to fall toward end of growth stage as result of competitive pressure Maturity - prices continue to fall Decline - prices stabilize at relatively low level; small price rises are possible if competition is negligible Ch. 8 Building a sustainable competitive advantage- one that is hard to copy and can endure over time- is the focus and reason an entrepreneur takes the time to complete a thorough assessment of the environment An entrepreneur adds value to a product or service by providing a benefit that the customers want and aren’t getting from their current provider. This is how we differentiate out product/service from the competition and establish a C.A. The environment in which we compete has a great impact on our ability to develop and sustain a C.A. Porter’s “Five Forces” is one of the most important scanning models to use when assessing the industrial or “macro” environment The “micro” or “community” analysis, which determines the target market for your particular product or service, considers a group of critically important variables related to the success or failure of the venture. Getting the target market
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MGT 3111 Midterm reveiw - MGT Midterm Review Ch. 7 More...

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