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Full download Business in Action 8th Edition Bovee Solutions Manual all chapter 2024 pdf
Full download Business in Action 8th Edition Bovee Solutions Manual all chapter 2024 pdf
Solutions Manual
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Bovee/Thill, Business in Action 8/e Instructor’s Manual
Chapter 6
ENTREPRENEURSHIP AND SMALL-
BUSINESS OWNERSHIP
Chapter Overview
This chapter covers the increasingly popular topics of entrepreneurship and small
business management. It defines a small business and identifies main causes of small
business failure. It also discusses common characteristics of successful entrepreneurs
and provides various resources for would-be entrepreneurs, including how to write a
business plan and where to obtain financing.
Chapter Outline
Classroom Activities
Details:
End-of-Chapter
6-2. Should Simeon and TurningRobe consider lowering their ingredient costs
by switching to petroleum-based ingredients or stopping their use of pure
distilled water? Why or why not?
No, they should not consider switching to petroleum-based ingredients because
that would be inconsistent with their authentic, pure, all-natural and high-end
brand image. The switch will hurt its “sustainable” reputation and may potentially
turn off some loyal customers. (LO: 2, AACSB: Reflective thinking)
6-3. Would opening their own retail stores be a risky decision for Sister Sky?
How would this change the company’s business model?
Opening its own retail stores may be a risky decision. It would change the
company’s business model by adding a new distribution channel, which is the
direct retail channel. It may compete with existing channels such as the Native
American hotels and resorts and create channel conflict. (LO: 4, AACSB:
Reflective thinking)
Explore the Sister Sky website at www.sistersky.com and find the company on
Facebook and Twitter. How well does the company’s online presence reflect its
values? Does the information you find encourage you to learn more about the
company’s products? How could all entrepreneurs, regardless of market niche
or company style, learn from Sister Sky’s online presence?
Students’ responses will depend, in large part, on the material currently posted on the website.
(LO: 2, AACSB: Reflective thinking)
6-5. What are the advantages of buying a business rather than starting one
from scratch?
When you buy a business, you generally purchase an established customer base,
functioning business systems, a proven product or service, and a known location.
You don’t have to go through the painful period of building a reputation,
establishing a clientele, finding suppliers, and hiring and training employees.
(LO: 3)
6-7. What are the key reasons for most small-business failures?
Some key reasons are management incompetence, lack of industry experience,
and inadequate financing. (LO: 4)
goods and services and compete with larger firms to keep prices low and
qualities high. (LO: 1, AACSB: Reflective thinking)
6-10. Do you expect the number of entrepreneurs in the United States will
grow in the next 10 years? Why or why not?
Yes, the number of entrepreneurs in the U.S. is expected to grow in the next 10
years because of the following three contributing factors: e-commerce and other
technological advances, the growing diversity (women, minorities, immigrants,
and young people) of entrepreneurship, and corporate downsizing and
outsourcing. (LO: 1)
6-11. Could writing a conventional business plan every cause more harm than
good? Explain your answer?
Be aware that not all start-up veterans and investors believe in the value of a
conventional business plan, at least in a company’s early stages. Reasons for the
skepticism include the amount of time and energy required to research and write
a plan, the reluctance of many target readers to read such lengthy documents, the
uncertainty of whether a new product or company idea will even work, and the
difficulty of correctly anticipating all the circumstances and obstacles that a
young company will encounter. Particularly for companies that are developing
new products or new business models before they can launch, some experts
recommend that entrepreneurs devote most of their energy to get- ting a working
product or service model in front of potential customers as quickly as possible so
they can verify and fine-tune it before proceeding to extensive business planning.
Two popular alternatives to conventional business plans are high-level overviews
known as the Business Model Canvas and the Lean Canvas. They are essentially
one-page business plans that present only the essential ideas that make up an
intended business model. (LO: 3, AACSB: Reflective thinking)
6-12. What factors should you consider before selecting financing alternatives
for a new business?
The process begins by assessing the firm’s financing needs and determining
whether funds are needed for the short or the long term. You must also assess the
cost of obtaining financing, and you must weigh the advantages and
disadvantages of financing through debt or equity, taking into consideration the
firm’s special needs and circumstances. (LO: 5)
6-13. Ethical Considerations. You’re thinking about starting your own chain
of upscale, drive-through espresso stands. You have several ideal sites in
mind, and you’ve analyzed the industry and all the important statistics.
You have financial backing, and you really understand the coffee market.
In fact, you’ve become a regular at a competitor’s operation for over a
month. The owner thinks you’re his best customer. He even wants to name
a sandwich creation after you. But you’re not there because you love the
espresso. No, you’re actually spying. You’re learning everything you can
about the competition so you can outsmart them. Is this behavior ethical?
Explain your answer.
Student’s answers will vary. To lead them back to the chapter objectives, the
instructor might want to ask them what they’ve learned from this and how they
would apply it to their future business careers. (LO: 2, AACSB: Ethical
understanding and reasoning)
6-17. Concept Integration. Pick a local small business or franchise that you
visit frequently and discuss whether that business competes on price, speed,
innovation, convenience, quality, or any combination of those factors. Be
sure to provide some examples.
Students’ answers will vary depending on the small business or franchise they
pick. The question can serve the chapter’s goals in several ways. By examining a
“real-life” small business, the student can start applying some of the concepts
discussed in the chapter, including the issues covered in a business plan, the ways
entrepreneurs can get into small businesses for themselves, and the things they
should know before starting. Recognizing how a small business competes can
emphasize the vital role of small businesses in the economy. (LO: 6, AACSB:
Application of knowledge)
and to take risks. Through work for big companies and other small businesses,
many of these qualities can be developed prior to running a business of one’s
own. (LO: 2, AACSB: Reflective thinking)
6-19. Visit www.sba.gov and read the article “Is Entrepreneurship for You?”
(look under “Starting & Managing a Business” and then under “Thinking
About Starting a Business?”). After considering these aspects of
entrepreneurial readiness, how well prepared are you to be an
entrepreneur?
Students’ answers will vary depending on results of the survey and personal
experience. (LO: 2, AACSB: Reflective thinking)
6-20. On the SBA website, read the article “Finding a Business Mentor” in the
“Finding a Mentor or Counselor” section. With these insights in hand,
think about your personal, professional, and academic networks. Assume
that you want to start a business right now, before you graduate. Is there
anybody you already know who could offer you sound advice? What sort of
guidance would this person be able to offer? If you don’t know anyone,
what steps could you take to meet a mentor or counselor?
Students’ answers will vary depending on personal experience. (LO: 4, AACSB:
Reflective thinking)
In a brief email message to your instructor, describe how you could use social
networking to locate potential candidates to serve on the advisory board of your
small business. (Make up any details you need about your company.)
Students’ emails will vary depending on the site they chose but the main topic should
include networking with potential candidates online using one of the sites listed. (LO:
4, AACSB: Information technology)
Students’ answers should include discussion of these key issues: (a) deciding what
information is most important to convey, (b) convincing the audience that the
information provided is accurate, and (c) determining what the audience already
knows.
a. Because its chief purpose is to obtain financing, the plan’s primary audience will
be investors. Hence, the business plan’s most important task is to address the
audience’s principal concerns: What will be the return on our investment? How
will the business accomplish this?
c. Assumptions about the plan’s audience should be based on the same sort of
careful research that has gone into formulating each of its components. The
business plan writer should learn as much as possible about the audience itself
before assuming anything about what that audience does or does not know. (LO:
3, AACSB: Written and oral communication)
With your team, think about how to investigate the possibility of buying a
Burger King franchise. Go to www.bk.com/franchising/home and explore the
information the company provides about franchising opportunities.
Next, brainstorm a plan to learn more about the potential positives and
negatives of buying a Burger King franchise. Then generate a list of at least 10
questions an interested buyer should ask about this potential business
opportunity.
Choose a spokesperson to present your team’s ideas to the class. After all the
teams have reported, hold a class discussion to analyze the lists of questions
generated by all the teams. Which questions were on most teams’ lists? Why do
you think those questions are so important? Can your class think of any
additional questions that were not on any teams’ lists but seem important?
Students’ answers will vary. (LO: 6, AACSB: Analytical thinking)
Students’ answers will vary depending on the articles chosen. (LO: 2, AACSB:
Reflective thinking)
6-22. What could a potential small-business owner learn about the risks and
rewards of business ownership from reading these articles?
Students’ answers will vary depending on the articles chosen. (LO: 2, AACSB:
Reflective thinking)
6-23. How might these articles affect is someone who is thinking about starting
a small business?
Students’ answers will vary depending on the articles chosen. (LO: 2, AACSB:
Reflective thinking)
Assisted-graded Questions
6-24. Given the risks involved in starting any company, should an aspiring
entrepreneur investigate all possible failure scenarios and develop action
plans to avoid these potential outcomes? Explain your answer.
Students’ answers will depending on personal opinions. Responses will likely
includes the fact that start-up veterans and investors cite the difficulty of
correctly anticipating all the circumstances and obstacles that a young company
will encounter. Particularly for companies that are developing new products or
new business models before they can launch, some experts recommend that
entrepreneurs devote most of their energy to getting a working product or
service model in front of potential customers as quickly as possible so they can
verify and fine-tune it before proceeding to extensive business planning. (LO: 3,
AACSB: Reflective thinking)
6-25. Is “I don’t like having a boss tell me what to do” a good reason to start
your own company? Explain your answer.
Wanting control over one’s destiny and independence in the workplace is a
characteristic of successful entrepreneurs. But this feeling alone is not enough to
be successful. Entrepreneurs who have achieved success also are driven by a
passion to succeed, relate well with different personalities, have a talent for
inspiring others, are willing to work hard for sustained periods of time, and are
willing to make sacrifices in other areas of their lives. (LO: 2, AACSB:
Reflective thinking)
CHECKPOINTS
Critical thinking:
(1) Why do you think many companies grow more risk-averse as they grow larger?
Because larger companies tend to have a lot more to lose in the case that they fail, i.e.
more assets, more investments, and more employees, etc.
(2) If they wanted to, could large businesses take the place of small businesses in the
U.S. economy? For instance, could someone build a nationwide landscaping
company? Why or why not?
There are certain aspects of small businesses that are difficult if not impossible to
replicate for large businesses. For instance, personalized service and customer
intimacy are competitive advantages of small businesses that large businesses are
trying to imitate but seldom succeed.
It’s your business: If you can’t land the right job soon after graduation, would you
consider starting a business? Why or why not?
Students’ responses will vary depending on personal opinions.
LEARNING OBJECTIVE 2: List the most common reasons people start their
own companies, and identify the common traits of successful entrepreneurs.
Critical thinking:
(1) Would someone who excels at independent entrepreneurship automatically excel
at an intrapreneurial effort? Why or why not?
Not necessarily, because an intrapreneur needs to work within a large company and
not all entrepreneurs are comfortable with that. They enjoy the freedom of working in
a small firm and might not excel within a large company either.
(2) Does the inability or unwillingness to work within the constraints of a typical
corporation mean someone is naturally suited to entrepreneurship? Why or why not?
No. Inability or unwillingness to work with the constraints of a typical corporation
does not automatically translate to the ability to take risks and start a successful
business.
Critical thinking:
(1) Why is it important to identify critical risks and problems in a business plan?
Because such critical risks and problems are important for investors to consider when
deciding whether to back a firm or not. It’s the ethical thing to do.
(2) Many experts suggest that you write the business plan yourself, rather than hiring
a consultant to write it for you. Why is this a good idea?
This is a good idea because a business plan is also a good document for strategically
planning and operating the business, and therefore needs to reflect the business
owners’ own vision and ideas.
(2) Optimism and perseverance are two of the most important qualities for
entrepreneurs. On a scale of 1 (lowest) to 10 (highest), how would you rate yourself
on these two qualities? How would your best friend rate you?
Students’ responses will vary depending on personal opinions.
Critical thinking:
(1) Why would a state or local government invest taxpayer dollars in a business
incubator?
Because such investments can bring big payoffs for the state or local municipality,
including the prospects of higher tax revenues, more jobs, and general improvement
in the local economy.
(2) Can you think of any risks of getting advice from other entrepreneurs?
Students’ responses will vary depending on personal opinions but points to consider
include whether other entrepreneurs have expertise in the industry or business you
are in and whether their risk preference is similar to yours.
Critical thinking:
(1) Would a profitable small business with only moderate growth potential be a good
candidate for venture capitalist funding? Why or why not?
No. Venture capital firms are typically only interested in funding firms with high
growth potentials.
(2) Why would angel investors help finance companies privately, rather than buying
shares of publicly traded companies?
It’s your business: (1) Would you be willing to take on credit card debt in order to
start a company? Why or why not?
Students’ responses will vary depending on personal opinions.
Critical thinking:
(1) Why might a business owner with a successful concept decide to sell franchises
rather than expanding the company under his or her own control?
Because a franchise can expand more quickly by using funds from franchisees (those
who buy into the franchisee for a fee). It also combines at least some of the freedom
of working for yourself with many of the advantages of a larger, established
organization.
(2) Why might someone with strong entrepreneurial spirit be dissatisfied with
franchise ownership?
Because franchises tend to be regional or national and are typically large
organizations, which are not usually a good fit with the entrepreneurial spirit.
(2) Think about a small-business idea you’ve had or one of the small businesses you
patronize frequently. Could this business be expanded into a national or international
chain? Why or why not?
Students’ responses will vary depending on personal opinions.