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Introduction to Entrepreneurship & Business Lecture NotesLecture 01:
Stages of a Firm’s Lifecycle:
1. Introduction Stage:
a. High asymmetric information
b. Knowledge deficit about potential costs and revenues
c. High investment in projects
d. Need more debt to grow
e. Cash Flow:
i. Operating: Knowledge deficit about potential costs and
revenues
1. Negative Cash Flow
ii. Investing: Managerial optimism drives investment & Firms
make early significant investments to deter entry
1. Negative Cash Flow
iii. Financing: Firms access bank debt rather than equity &
Increase debt
1. Positive Cash Flow
2. Growth Stage:
a. High asymmetric information
b. Less deficit knowledge of potential costs and revenues
c. High investment in projects
d. Need more debt to grow
e. Cash Flow:
i. Operating: Profit margins are maximized
1. Positive Cash Flow
ii. Investing: Early significant investments to deter entry
1. Negative Cash flow
iii. Financing: Firm access bank debt rather than equity
1. Positive Cash flow
3. Mature Stage:
a. Efficiency maximized through increased knowledge of operations
b. Obsolescence increases relative to new investments
c. Shifts from acquiring financing to servicing debts
d. Distribute excess funds to shareholders
e. Cash Flow:
i. Operating: Efficiency maximized
, 1. Positive Cash Flows
ii. Investing: Obsolescence increases
1. Negative Cash Flows
iii. Financing:
1. Negative cash flows
4. Shake-Out Stage
a. Declining growth rates and declining prices
b. Established firms hinder competitive flexibility
c. Requires a change in cost structure
d. Change in managerial structure
e. Cash Flow:
i. Operating: Declining growth rates
1. Positive or negative Cash Flow
ii. Investing: Early significant investments to deter entry
1. Positive or negative Cash Flow
iii. Financing: Firms might access equity instead of debt
1. Positive or negative Cash Flow
5. Decline Stage
a. Declining growth rates and declining prices
b. Liquidation of assets to service debt
c. Focus on debt repayment and renegotiations
d. Cash Flow:
i. Operating: Decline growth rates and declining prices
1. Negative cash flow
ii. Investing: Liquidation of assets to service debts
1. Positive Cash Flows
iii. Financing: Debt repayment and renegotiation of debt
1. Positive or negative Cash Flow
Technology’s Lifecycle:
1. Technological Discontinuity
2. Era of Ferment
a. Design Competition
b. Substitution
3. Era of Incremental Change
a. Elaboration of Dominant Design
4. Technological Discontinuity
2
,The Innovation S-Curve:
Lecture 02:
The business concept: 3 main tracks (dimensions)
1. Customer group (who): segmentation of market
a. Uber: younger or older people
2. Function (what): might have the same to competitors
a. Complementary
b. Uniform
c. Non-related
3. Technology (how):
a. How function is carried out
3
, b. Ex: transport: by ship? Plane?
Types of Business Concepts:
1. Focused business concept:
a. Concentrate on one single essential dimension and a single one of
its attributes
b. Customer group is different from others
2. Differentiated business concept:
a. Broad market appeal and differentiation in a single dimension or
more compared to the competitors
b. Has more functions
3. Undifferentiated business concept:
a. New enterprise defines its new business broadly concerning the
three basic dimensions, and it does not differentiate its way of doing
business compared to its competitors or across customer segments
Which seven strategies for redefining used by new venture:
- Use feedback from users and try to change strategy
- Netflix: changed technology from DVD to streaming to creating its own
shows
- Google: was a search engine and it know has more
4
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