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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.
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.
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.
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.
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.
What are the relative advantages and disadvantages of ‘going into business’
via purchasing a franchise, as compared
to setting up your own business
- 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).