entrepreneurship chap 14
DESCRIPTION
TRANSCRIPT
![Page 1: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/1.jpg)
Hisrich
Peters
Shepherd
Chapter 14Accessing Resources for
Growth from External Sources
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
![Page 2: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/2.jpg)
14-2
Using External Parties to Help Grow a Business Some of the mechanisms entrepreneurs can
use are: Franchising. Joint ventures. Acquisitions. Mergers.
![Page 3: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/3.jpg)
14-3
Franchising
An arrangement whereby the manufacturer or sole distributor of a trademarked product or service gives exclusive rights of local distribution to independent retailers in return for their payment of royalties and conformance to standardized operating procedures. The person offering the franchise is known as
the franchisor. The franchisee is the person who purchases the
franchise.
![Page 4: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/4.jpg)
14-4
Advantages of Franchising—to the Franchisee Product acceptance - Has an accepted name,
product, or service. Management expertise - Managerial assistance
provided by the franchisor. Capital requirements - Up-front support can save
entrepreneur significant time and capital. Knowledge of the market - Offers experience in
business and market. Operating and structural controls – Helps in
standardization and administrative controls.
Franchising (cont.)
![Page 5: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/5.jpg)
14-5
Advantages of Franchising—to the Franchisor Expansion risk
Allows venture to expand quickly using little capital. Business can be expanded nationally and even
internationally. Requires fewer employees than a non-franchised
business.
Cost advantages Supplies can be purchased in large quantities to
achieve economies of scale. Ability to commit larger sums of money to advertising.
Franchising (cont.)
![Page 6: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/6.jpg)
14-6
Disadvantages of Franchising Inability of the franchisor to provide services,
advertising, and location. Franchisor’s failing or being bought out by
another company. Difficulty in finding quality franchisees. Poor management can cause individual
franchise failures. The ability to maintain tight control over
franchises becomes difficult as their number increases.
Franchising (cont.)
![Page 7: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/7.jpg)
14-7
Types of Franchises Dealership - Acts as a retail store for the
manufacturer. Franchise that offers a name, image, and
method of doing business. Franchise that offers services. Changes that helped evolve franchising
opportunities: Good health. Time saving or convenience. Health care. The second baby boom.
Franchising (cont.)
![Page 8: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/8.jpg)
14-8
Investing in a Franchise
Factors to be assessed before making the final decision: Unproven versus proven franchise. Financial stability of franchise. Potential market for the new franchise. Profit potential for a new franchise.
Franchisors are required to make a full presale disclosure.
The franchise agreement contains the requirements and obligations of the franchisee.
![Page 9: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/9.jpg)
14-9
Table 14.2 - Information Required in Disclosure Statement
![Page 10: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/10.jpg)
14-10
Table 14.2 - Information Required in Disclosure Statement (cont.)
![Page 11: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/11.jpg)
14-11
Joint Ventures
A separate entity that involves a partnership between two or more active participants.
Types of Joint Ventures: Between private-sector companies.
Objectives - Entering new/ foreign markets, raising capital, cooperative research, etc.
Industry–university agreements. Created for the purpose of doing research.
International joint ventures.
![Page 12: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/12.jpg)
14-12
Joint Ventures (cont.)
Factors in Joint Venture Success: The accurate assessment of the parties
involved to best manage the new entity. The degree of symmetry between the partners. The expectations of the results of the joint
venture must be reasonable. The timing must be right.
![Page 13: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/13.jpg)
14-13
Acquisitions
The purchase of an entire company, or part of a company; the company no longer exists independently.
Advantages of an Acquisition Established business. Location. Established marketing structure. Cost. Existing employees. More opportunity to be creative.
![Page 14: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/14.jpg)
14-14
Disadvantages of an Acquisition Marginal success record. Overconfidence in ability. Key employee loss. Overvaluation.
Synergy “The whole is greater than the sum of its
parts.” Synergy should occur in both the business
concept and the financial performance.
Acquisitions (cont.)
![Page 15: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/15.jpg)
14-15
Structuring the Deal Involves the parties, the assets, the payment
form, and the timing of the payment. Two most common means of acquisition:
Entrepreneur’s direct purchase of stock or assets. Bootstrap purchase of assets.
Acquisitions (cont.)
![Page 16: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/16.jpg)
14-16
Locating Acquisition Candidates Brokers, accountants, attorneys, bankers,
business associates, and consultants may know of candidates.
Business opportunities in newspapers or trade magazines.
Acquisitions (cont.)
![Page 17: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/17.jpg)
14-17
Mergers
Key concern - Legality of the purchase. Process:
Determine the merger objectives and resulting gains for both companies.
Carefully evaluate the other company’s management.
Determine the value and appropriateness of the existing resources.
Establishing a climate of mutual trust.
Determine the value of a merger candidate.
![Page 18: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/18.jpg)
14-18
Figure 14.1 - Merger Motivations
![Page 19: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/19.jpg)
14-19
Leveraged Buyout
An entrepreneur (or any employee group) uses borrowed funds to purchase an existing venture for cash. Long-term debt financing is provided by banks,
venture capitalists, and insurance companies. Acquired firm’s assets serve as collateral.
Evaluation procedure: Determine whether asking price is reasonable. Assess the firm’s debt capacity. Develop the appropriate financial package.
![Page 20: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/20.jpg)
14-20
Overcoming Constraints by Negotiating for More Resources Distribution task - Negotiating how the
benefits of the relationship will be allocated between the parties.
Integration task - Exploring possible mutual benefits from the relationship so that the “size of the pie” can be increased.
![Page 21: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/21.jpg)
14-21
Assessment 1: What will you do if an agreement is not reached? Best alternative to a negotiated agreement. Determine a reservation price.
Overcoming Constraints by Negotiating for More Resources (cont.)
![Page 22: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/22.jpg)
14-22
Assessment 2: What will the other party to the negotiation do if an agreement is not reached? Difficult to assess reservation price. Bargaining zone - Range of outcomes between
the entrepreneur’s reservation price and that of the other party.
Overcoming Constraints by Negotiating for More Resources (cont.)
![Page 23: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/23.jpg)
14-23
Assessment 3: What are the underlying issues of this negotiation? How important is each issue to you? Focus on achieving aspects most desirable by
trading off aspects of less importance.
Overcoming Constraints by Negotiating for More Resources (cont.)
![Page 24: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/24.jpg)
14-24
Assessment 4: What are the underlying issues of this negotiation? How important is each issue to the other party? Provides the entrepreneur an opportunity to
sacrifice aspects of less importance to him/ her but of high importance to the other party.
Overcoming Constraints by Negotiating for More Resources (cont.)
![Page 25: Entrepreneurship Chap 14](https://reader033.vdocuments.mx/reader033/viewer/2022051210/54c1de284a795972618b45d8/html5/thumbnails/25.jpg)
14-25
Negotiation strategies: Build trust and share information. Ask lots of questions. Make multiple offers simultaneously. Use differences to create trade-offs that are a
source of mutually beneficial outcomes.
Overcoming Constraints by Negotiating for More Resources (cont.)