Entrepreneurship 8th edition Author: Robert D Hisrich, Micheal P. Peters Dean a Shepherd

Chapter 14 Entrepreneur Accessing Resources for Growth from External Sources

Using external parties to help grow a business Franchising Joint ventures Acquisition Mergers

Shah Rukh Roll no: 22

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

Advantages of franchising to the franchisee:- Continue…. Advantages of franchising to the franchisee:- Product Acceptance: Management Expertise Capital Requirements Knowledge of the market Operating the structural controls

Advantages of franchising to the franchiser:- Continue…. Advantages of franchising to the franchiser:- Expansion Risk Cost advantages

Disadvantages of franchising :- Continue…. Disadvantages of franchising :- Inability of franchisor to provide services, advertising etc. The franchise may face a problem when franchisor bought out by another company

Continue…. Types of Franchises :- There are 3 types…. Dealership Offers name, image and methods of doing business Offer services

Investing in a Franchise :- Continue…. Investing in a Franchise :- There are factors that must be assessed by the entrepreneur when he/she want to invest,

Continue…. continue :- Proven vs Unproven Franchise. Financial stability of a franchise. Potential market for the new franchise. Profit potential for a new franchise.

Muhammad Aatif Aneeq Roll no: 15

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.

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

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

Acquisitions Purchasing all or part of a company. Advantages Established business Location Established market structure Cost Existing employees More opportunity to be creative

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

Synergy “The whole is greater than the sum of its parts” Lack = acquisition failure

Muhammad Wasif Laeeq Roll no: 1

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

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

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

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

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

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