Praxis 5101: Entrepreneurship Questions and Answers Graded A

Praxis 5101: Entrepreneurship Questions and Answers Graded A Entrepreneur A person who organizes, manages, and takes on the risks of a business. Entrepreneurship and Economy Entrepreneurs serve as drivers of innovation. They serve a role of job creators. They serve niche markets. Though they can be small in scale they are important contributors to the economy. Creation of Entrepreneurs Entrepreneurs often exist to fill niche consumer needs. They can be created by technological advancements, making it easier for them to fulfill a need. Other production changes and social factors may influence the creation of entrepreneurial endeavors. Established Entrepreneurs This is an entrepreneurial business that has established a consumer base and may be relatively successful Entrepreneurial Ventures These are newer and often small entrepreneurial business that still face many challenges before success. They face high amount of risk, but many entrepreneurs do succeed. Business Competition Thought it is risky for a smaller venture to compete with a larger established firm. It is possible. Smaller business may be able to differentiate and personalize products or services, social media can help them compete for free, personalized offers or discounts. Consumers may really appreciate the niche "boutique" experience. Qualities of Successful Entrepreneurs Leadership, interpersonal skills, motivation and enthusiasm, hard working, organized, planning, flexible, thorough, meticulous, persistent, risk takers and visionaries. Benefits of Entrepreneurship Own boss, working from home, income potential. Negatives of Entrepreneurship Liability, risky, cost of start up, high failure rates, requires extensive support net Benefits of Home Business Easy (thanks internet), comfortable, cost savings (low overhead), tax deductions. Drawbacks of Home Business Difficult to concentrate, may appear unprofessional, storage space, commercial business may not be allowed at residence Sole Proprietorship A business owned and managed by a single individual. Personal liability. Taxes are combined with owners income. Benefits of Proprietorship Control, no corporate tax, no legal costs, less complicated, profit potential Drawbacks of Proprietorship Liability, potential of loss, challenging, harder to gain investors Partnerships Two or more individuals band together to form a business in which they share profits, work, liabilities and other business components. Taxes are under the business name, income returns, excise taxes and employment taxes. Joint Ventures Like a partnership, but temporary Limited Partnership Partnership in which there is limited control but limited liability too. Profits are different and taxation differs. Benefits of Partnership Partners offer different skills and qualities, less burden on one (usually), shared cost and liability, easy to form. Drawbacks of Partnership Partners can disagree, still have liability of the business, one partner can affect the other, sharing profits Corporations It is considered a legal entity, owned by shareholders, liabilities and debts are owned by the corporation. Ability to raise money through sale of stock. Very complex to form. Usually larger business. Benefits of Corporations Shareholder protection, issuing stocks, corporate tax benefits, access to "better" employees. Disadvantages of Corporations Higher start up cost, more paperwork, double taxation potential S Corporation (S Corp) A tax-reporting entity that allows certain corporations with 100 or fewer stockholders to choose to be taxed as partnerships. Its stockholders receive the organizational benefits of a corporation and the tax advantages of a partnership. Limited Liability Company (LLC) A hybrid form of business enterprise that offers the limited liability of the corporation but the tax advantages of a partnership. Franchise A business established or operated under an authorization to sell or distribute a company's goods or services in a particular area Benefit of Franchise Support net, built in consumer base Disadvantage of Franchise Start up cost, profits go to franchise owner (some), Limited control of decisions Variation of Taxation Between Business Ownership Types Sole proprietors, file with business and personal income together. Partnerships, similar to SP but divided between partners. Corporations, taxed as a business and then individual income is taxed, meaning any dividends paid are taxed again. Small Business Start Up Develop a business plan, description of offering, who is involved, target market, pricing, promotions, financial planning and more. Carefully consider location. Generating start up capital. Register name, setting up taxes, acquiring permits. Business Financing Loans acquired for start up. Small Business Administration offers many types. Banks offer loans too. Sometimes attracting a venture capitalist may work. Angel investors, equity investors, convertible debt and family/friends. Venture Capitalists Individuals or companies that invest in new businesses in exchange for partial ownership of those businesses. Angel Investors individuals who invest in start-up companies with high growth potential in exchange for a share of ownership Small Business Administration (SBA) A U.S. government agency that advises and assists small businesses by providing management training and financial advice and loans. Est. 1953, by Congress Business Start Up Obstacles Start up funding, development hiccups, accepting the risk, failure (not entrepreneur's fault, competitive markets Business Plans Plans that interpret an organizational strategy into a market- or community-based opportunity for division or departmental managers. Target Markets Identified segments of the market that a business wants to have as their customers. SWOT analysis strengths, weaknesses, opportunities, threats Porter's Five Forces threat of entry, threat of substitute, supplier power, buyer power, and competitive rivalry Threat of Entry Risk that potential competitors will enter an industry Threat of Substitute Risk that a potential product can substitute for the product / service sold in the market Supplier Power Risk that a supplier will be able to influence competition in an adverse way Buyer Power Risk that supplier will be able to influence competition in an adverse way Rivalry Competition for the same objective or for superiority in the same field. Affected by the other four forces. Blue Ocean Strategy An approach where firms seek to create and compete in uncontested "blue ocean" market spaces, rather than competing in spaces and ways that have attracted many, similar rivals. Value Chain Analysis Views a firm as a series of business processes that each add value to the product or service. Primary and Support Activities. Primary Activities (Value Chain) Inbound logistics, operation, outbound logistics, marketing and sales, service Inbound Logistics The area of logistics that involves bringing raw materials, packaging, other goods and services, and information from suppliers to producers. Operations The activities and processes used in making both tangible and intangible products Outbound Logistics The area of logistics that involves managing the flow of finished products and information to business buyers and ultimate consumers (people like you and me). Marketing and Sales Activities completed to provide the means through which customers can purchase products and to induce them to do so. Service Any activity that fulfills a human want or need and returns money to those who provide it. Support Activities (Value Chain) Firm infrastructure, human resource management, technology development and procurement Firm Infrastructure The accounting, finance, legal, and general administration activities that allow an organization to function Human Resource Management Consists of the activities managers perform to plan for, attract, develop, and retain an effective workforce Technology Development Activities associated with the development of new knowledge that is applied to the firm's operations Procurement Purchases inputs such as raw materials, resources, equipment, and supplies Direct Activities (Value Chain) Create value themselves, like marketing and sales activity Indirect Activities (Value Chain) Support direct activities, like customer records for sales calls Quality Assurance (Value Chain) Activities that ensure both direct and indirect activities meet necessary standards.