business 2014 exam 8

  1. Explain the concept of “blue ocean strategy”
    • The blue ocean strategy refers to identifying
    • completely new market with significant potential for growth and where there are
    • no existing (direct) competitors. Representing a blue sky opportunity.
  2. How relevant is the notion of blue ocean strategy to would-be entrepreneurs? Explain
    • Relatively irrelevant, given that most entrepreneurs business ideas are based on subtle innovations and thus will need to be
    • concerned about existing competitors and potential new competitors in the market.
  3. What do you understand by the “intangible assets” of a business?
    Intangible assets are the non-physical assets of a business, such as intellectual property, business name, licences owned, brand names owned, rights to a location, good reputation and a skilled work force.
  4. In relation to the process of purchasing an existing business, what do you understand by ‘undertaking due diligence’?
    • Due diligence is the process of detailed scrutiny of a business that is for sale, to obtain necessary information to properly evaluate the business, to determine whether the business is a worthwhile investment and
    • at what price.
  5. Explain the difference between a product franchise and a business system franchise; and give examples.
    A product franchise is an arrangement whereby the owner of a product/service gives another business operator the rights to sell their product or service. For example as a distribution network, tire stores.

    • A business system franchise is where an arrangement exists where the franchisor
    • not only allow another business operator (the franchisee) the sell his/her product but also provides them with a business operating system, which details how the franchise must be operated. For example KFC or McDonalds.
  6. What are the relative advantages and disadvantages of ‘going into business’
    via purchasing a franchise, as compared
    to setting up your own business
    from scratch?
    • Advantages: organising/operating aspects have already been investigated, implemented and proved successful by the franchisor,
    • established brand name (easier to obtain customers, realise higher profit), financial assistance and training/ assistance may be provided, centralized resources (cost effectiveness).

    • Disadvantages: can be expensive to buy into,
    • restricted market and lots of control by franchisor (little scope for entrepreneurial activity), unfulfilled promises by the franchisor, franchise only awarded for a set period of time (5-7 years).
Card Set
business 2014 exam 8
tutorial 8 (topic 5 and 6)