Entrepreneur

Accessing Resources for

Growth from External Sources

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 Using external parties to help
grow a business
Franchising

Jointventures
Acquisition

Mergers

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 Franchising
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:
Management Expertise

Capital Requirements

Knowledge of the market

Operating the structural controls

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Advantages of franchising to the franchiser:-

Expansion Risk

Cost advantages

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Disadvantages of franchising :-

Inabilityof franchisor to provide services,

advertising etc.

The franchise may face a problem when

franchisor bought out by another company

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Types of Franchises :-

There are 3 types.

Dealership

Offers name, image and methods of doing

business
Offer 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.

Financial stability of a franchise.

Potential market for the new franchise.

Profit potential for a new franchise.

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 Joint 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 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 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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 Acquisitions
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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 Acquisitions

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

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 Synergy

The whole is greater than the sum of its

parts
Lack = acquisition failure

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 Mergers

Department of Justice
How does it take place?
Requirements
Determining value

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 Leveraged Buyouts
Definition
Why buy?
Financing
Debt-to-equity ratio
Steps before buying
Is asking price reasonable?
Assess firms debt capacity
Develop appropriate financial package

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 Overcoming Constraints by
Negotiating
Two tasks
Distribution task
Divide up the pie
Integration task
Make the pie larger

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 Negotiating

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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 Negotiating

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 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 whats important based on choices
Used to Create Trade-offs that Result in Mutually
Beneficial Outcomes

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