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Entrepreneurship 8th Entrepreneurship 8th editionedition

Author:Robert D Hisrich,Micheal P. PetersDean a Shepherd

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Chapter 14Entrepreneur

Accessing Resources for Growth from External

Sources

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Using external parties to Using external parties to help grow a businesshelp grow a business

FranchisingJoint venturesAcquisitionMergers

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Shah RukhShah RukhRoll no: 22Roll no: 22

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FranchisingFranchising

An arrangement whereby a franchisor gives exclusive rights of local distribution to a franchise in return for payments of royalties and conformance to standardize operating procedures

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Advantages of franchising to the franchisee:-Product Acceptance:Product Acceptance:Management ExpertiseManagement ExpertiseCapital RequirementsCapital RequirementsKnowledge of the marketKnowledge of the marketOperating the structural controlsOperating the structural controls

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Advantages of franchising to the franchiser:-Expansion RiskExpansion Risk

Cost advantagesCost advantages

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Disadvantages of franchising :-

Inability of franchisor to provide Inability of franchisor to provide services, advertising etc.services, advertising etc.

The franchise may face a problem when The franchise may face a problem when franchisor bought out by another franchisor bought out by another companycompany

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Types of Franchises :-

There are 3 types….DealershipOffers name, image and methods of doing businessOffer services

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Investing in a Franchise :-

There are factors that must be assessed by the entrepreneur when he/she want to invest,

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continue :-

Proven vs Unproven Franchise.Proven vs Unproven Franchise.Financial stability of a franchise.Financial stability of a franchise.Potential market for the new franchise.Potential market for the new franchise.Profit potential for a new franchise.Profit potential for a new franchise.

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Muhammad Aatif AneeqMuhammad Aatif AneeqRoll no: 15Roll no: 15

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Joint VenturesJoint Ventures Two or more companies

forming a new company. It is a separate entity that

involves a partnership between two or more active participants.

Strategic alliances Universities, Non profit

organization, businesses and the public. General Motors & Toyota General Electric &

Westinghouse.

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Types of Joint VenturesTypes of Joint Ventures

Private-sector companies Boeing, Mitsubishi, Fuji, Kawasaki.

Cooperative research Triangle Park in North Carolina..

Industry-university agreements Two problems

International joint ventures

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Factors of SuccessFactors of Success

How to best manage entity Ensuing relationships Degree of symmetry b/w partners Expectation of results Timing must be right

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AcquisitionsAcquisitions Purchasing all or part of a

company. Advantages

Established business Location Established market

structure Cost Existing employees More opportunity to be

creative

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AcquisitionsAcquisitions

Disadvantages Marginal success record Overconfidence in ability Key employee loss Over evaluated

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SynergySynergy

“The whole is greater than the sum of its parts”

Lack = acquisition failure

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Muhammad Wasif LaeeqMuhammad Wasif LaeeqRoll no: 1Roll no: 1

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MergersMergers

Department of Justice How does it take place?

Requirements Determining value

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Leveraged BuyoutsLeveraged Buyouts

Definition Why buy? Financing

Debt-to-equity ratio Steps before buying

Is asking price reasonable? Assess firm’s debt capacity Develop appropriate financial package

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Overcoming Constraints by Overcoming Constraints by NegotiatingNegotiating

Two tasks Distribution task

Divide up the pie Integration task

Make the pie larger

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NegotiatingNegotiating

What will you do if no agreement is reached? Reservation Price

What will the other party do if no agreement is reached? Bargaining zone

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NegotiatingNegotiating

What are underlying issues for you? How important is each issue? Trade-offs

What are underlying issues for other party? How important is each issue? Understanding=Increased integration

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Negotiating StrategyNegotiating Strategy

Build Trust and Share Information Best outcome Can it hurt the negotiations?

Ask Lots of Questions Probe for preferences

Make Multiple Offer Simultaneously Show what’s important based on choices

Used to Create Trade-offs that Result in Mutually Beneficial Outcomes