Financial Management

Financial Management

•       Financial Management

–      Financial management deals with two things: raising money and managing a company’s finances in a way that achieves the highest rate of return

–      Chapter 10 focuses on raising money.  

Financial Objectives of a Firm

1.      Profitability

·       Is the ability to earn a profit : Many start-ups are not profitable during their first one to three years while they are training employees and building their brands.

2.      Liquidity

·       Is a company’s ability to meet its short-term financial obligations :  Even if a firm is profitable, it is often a challenge to keep enough money in the bank to meet its routine obligations in a timely manner.

3.      Efficiency

·       Is how productively a firm utilizes its assets relative to its revenue and its profits. Southwest Airlines, for example, uses its assets very productively.  Its turnaround time, or the time its airplanes sit on the ground while they are being unloaded and reloaded, is the lowest in the airline industry.

4.      Stability

·       Is the strength and vigor of the firm’s overall financial posture : For a firm to be stable, it must not only earn a profit and remain liquid but also keep its debt in check.

Financial Statements

1.      Historical Financial Statements

·       Reflect past performance and are usually prepared on a quarterly and annual basis.

           2. Pro Forms Financial Statements

·       Are projections for future periods based on forecasts and are typically completed for

Important of Keeping a Good Records

The first step towards prudent financial management is keeping good records.

Industry & Competitors Analysis

Rangkuman Introduction to Entrepreneurship

Industry & Competitors Analysis

•       Industry

–     An industry is a group of firms producing a similar product or service, such as airlines, fitness drinks, furniture, or electronic games.

•       Industry Analysis

–     Is business research that focuses on the potential of an industry.

Techniques Available to Assess Industry

Assesing Industry Attractive

·      Study enviromental and business trends

·      The Five Competitive Forces Model

1.   New entrants

2.   Suppliers

3.   Substitutes

4.   Buyers

5.   Rivalry among existing firm

Threat of substitutes

·      Pricw that consumers are willing to pay of a product depends in part on the availability of subtitute products.

Threat of new entrants

·      If the firms in an industry are highly profitable, the industry becomes a magnet to new entrants

Rivalry among existing firms

·      The major determinant of industry profitability is the level of competition among existing firms

Bargaining powers of suppliers

·      Suppliers can suppress the profitability of the indsutries to which they sell by raising prices or reducing the quality of the components the provide

Bargaining power of buyers

·      Buyer can suppress the profitability ogf the industries from which they purchase by demanding price consessions or increases in quality

First application of the five forces model

·      The five forces model can be used to assess the attractiveness of an idustry by determining the level of threat to industry profitability for each of the forces

Second application of the five forces model

·      A new firm can apply the five forces model to help determine whether it should enter an industry is by using the model to answer several kew questions

Industry types and the opportunities the offer

·      Emerging industries : industries in which standard operating producedures have yet to be developed

·      Fragmented industries : industries that are characterized by a large number of firms of appoximately equal size

Competitor analysis

What is a competitor analysis?

·      A competitor analysis is a detailed analysis of a firm’s competition

Indentifiying competitors

·      Direct competitors

·      Indirect competitors

·      Future competitors

Sources of competitive intelligence

·      Colleting competitive intelligence : to complete a competitive analysis grid, a firm must first understand the strategies and behaviors of its competitors

Completing a competitive analysis grid

·      Competitive analysis grid : a tool for organizing the informatiin a firms collects about its competitors

developing a business model

Rangkuman Introducing to Entrepreneurship

Developing an Effective Business Model

What is a business model?

·      Model

A model is a plan or diagram that’s used to make or describe something

·      Business model

A firm’s business model is its plan or diagram for how it competes, uses its resources, structures its relationships, interfaces with customer, and creates value to sustain itself on the basis of the profits it generates

The Importance of business model

·      Serves as an ongoing extension of feasibility analys. A

·      Focuses attention on how all the elements of a business fit together and constitute a working whole

Diversity of business models

·      There is no standard business model for an industry or for a target market within an industry

Components of a business model

Four components of a business model

·      Core startegy : describes how a firm competes relative to its competitors

·      Strategic resources : its has affects its business model substantially

·      Partnership network : new ventures, in particular, typically do not have the resources to perform key roles

·      Customer interface : the way a firm interacts with its customer hinges on how it chooses to compete

Developing an effective business model

Developing successful Business Ideas

Business Models and Their Importance

It’s a plan or recipe for how it creates, delivers, and captures value for its stakeholders.

Theres three elements that mentions above:

·       Intial validation of the business idea

·       Preparation of the business model

·       Fleshing out the operational details of the company

General Categoris of Business Models

1.    Standar Business Model

Standard Business model depict existing plans or recipes firms can use to determine how they will create, deliver, and capture value for their stake holders

2.    Disruptive Business Model

Disruptive business model, which are rare, are ones that do not fit the profile of a standard business model, and are impactful enough that they disrupt or cahnge the way business is conducted in an industry or an important niche within an industry

The Barriger/Ireland Business Model Template

·      Core Startegy

Describe how the firm plans to compete relative to its competitors

·      Resources

Are the inputs a firm uses to produce, sell, distribute, and service a product or service

·      Financials

This is the only section of a firm’s business model that describes hot it earns moneythus

·      Operation

Are both integral to a firm’s overall business model and represent the day to day heartbeat of a firm