978-1259912191 Chapter 3 Solutions Manual Part 1

Chapter Three: Business Idea Generation and Initial

Evaluation

Key Terms

Brainstorming: A creative process whereby a group of individuals are brought together

Gap Analysis: A relatively simple process of systematically examining the difference, or

gap, between what is expected and what occurs. One type of gap analysis, called

opportunity analysis, examines opportunities in the marketplace side-by-side with the

individual’s ability to address those gaps. (LO 3-2)

Synergy The connection between the entrepreneur’s skills, understanding of an

industry, and the ability to create a competitive advantage such that the sum of the parts

of the new business is greater than the individual parts alone. (LO 3-1)

Threats to Operational Financing: The threat of not obtaining sufficient financing to

operate a firm. (LO 3-3)

Threats to Profit Margin: The threat of not being able to achieve a profit margin

sufficient to allow the business to attain substantial returns. (LO 3-3)

Threats to Sales Generation Schemes: The threat of not being able to generate

sufficient sales required to make the firm profitable. (LO 3-3)

Suggested Text Responses

Opening Vignette- “Uber Changes the Business” – p. 41

Student responses will vary.

Exercise 1 – p. 43

Student responses will vary.

Exercise 2 – p. 49

Student responses will vary.

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Chapter Three: Business Idea Generation and Initial

Evaluation

Ethical Challenge – p. 55

Student responses will vary.

Review Questions – p. 58

1. Based on your education, what are the skills you have that could be the basis

2. Based on your work experience, what are the skills you have that could be the

3. Based on your hobbies, what are the skills you have that could be the basis for

4. What are your top three personal skills? Student responses will vary.

5. What things do you like doing best? Student responses will vary.

6. What magazines and books do you read? Student responses will vary but suggest

7. What are your three greatest accomplishments in life? What skills were

involved in these accomplishments? Student responses will vary but have students

8. Do you enjoy working with people? Student responses will vary but point out that

9. In what general industry (retail/wholesale/manufacturing/service) would you

prefer to work? Student responses will vary

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Chapter Three: Business Idea Generation and Initial

Evaluation

Business Plan Development Questions: p.58

Student responses will vary.

Individual Exercises: p.58

Student responses will vary.

Class Activities and Sample Assignments

1. Ask students to write a five-page essay in MLA or APA writing style and conduct

research about the business risk associated with a new small business owner

(entrepreneur). Ask students to include at least four scholarly research reference

sources. This project could be a term project or an assignment to be completed by a

specified time. (LO 3-1, 3-.2, 3-3)

2. Ask students to write a three or four page essay in MLA or APA writing style that

summarizes their skill sets, analyzes the market for gaps or business needs, and

compares and contrasts their skills and abilities with a particular business need.

Students should include at least four scholarly research reference resources.

(LO 3-1)

3. As a class activity, ask students to list their personal skill sets. Next, ask students to

list their education (formal and informal). Finally, ask students to list the skills they

acquired as a result of past employment. Discuss how they can use a trait that they

revealed from any of their lists or a compilation of skills or traits that they revealed

from their lists, and apply them to generate an innovative business idea or new

business venture opportunities. The key to this assignment is to have students

explore their inner talents and generate a business idea. (LO 3-1)

4. As a group, discuss and define gap analysis. For a period of one week, ask students

to explore businesses in their communities for potential business needs that are not

met. Next, ask students to decide whether or not they can find a new business need.

Students can also conduct research on the internet, their local paper, career web

sites or they can speak to recruiters or career counselors to complete their analysis.

Have each student present his or her findings; or you could assign this particular

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Chapter Three: Business Idea Generation and Initial

Evaluation

assignment as a group assignment. You can also assign this project as a

three-to-five page essay in MLA or APA writing style. Students could be required to

have at least three research reference sources. (LO 3-2)

5. Divide students into groups of two or three and ask each group to create a list of

innovative business opportunities and to brainstorm about one innovative business

opportunity. Write their responses on a board or flip chart. Discuss the possible

outcomes of each innovative idea as a class. (LO 3-2)

6. Ask the class to discuss business risk and summarize the three threats that impede

business success. In groups, assign students to different business types and ask

them to list the business risks for each business type. Discuss the three threats that

impede each particular business type. For example, group one is assigned a

restaurant, group two is assigned a manufacturing company, group three is assigned

a wholesale company, and group four is assigned a career recruiting company.

Assign other business types as needed. (LO 3-3)

7. Discuss the important consideration about how a new small business owner will

finance the new small business operation. Ask students to consider the amount of

money that they have available to finance their new small business. Next, ask

students to estimate the amount of money they anticipate they will require to open

their new small business. List their responses and discuss how much money they

will need to establish their new small business. (LO 3-4)

Discussion Questions for Online/Hybrid classes

1. What is brainstorming? Why is it important to the new entrepreneurial owner?

(LO 3-2)

2. Define gap analysis. Discuss how innovative individuals utilize it with their individual

skills and abilities to reveal new entrepreneurial opportunities. (LO 3-2, 3.3)

3. Summarize the six ways that potential entrepreneurs identify business opportunities

in the marketplace.

(LOL 3-2)

4. Discuss if you think social networking (such as Facebook, Twitter, or LinkedIn) assist

innovative individuals to network and find a potential partner for their new

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Chapter Three: Business Idea Generation and Initial

Evaluation

entrepreneurial idea. What other ways can new small business owners find partners

for their business ideas? (LO 3-1, 3-2, 3-3)

5. Summarize the five important headings that potential entrepreneurial owners should

consider when complete their gap analysis. Can you think of additional items to

consider? (LO 3-3)

6. What is business risk? What are the three threats that impede entrepreneurial

venture success? Discuss why potential entrepreneurs should be concerned about

business risk. (LO 3-3)

7. How can new small business owners finance their new small businesses? What do

they do if they do not have enough money to initiate their business operations? List

at least three ways individuals can acquire the money they require to start a new

entrepreneurial venture. (LO 3-3)

8. What is a deficit analysis? Why do new entrepreneurs evaluate it?

(LO 3-1, 3-2, 3-3)

9. What is due diligence? Why is it important? (LO 3-3)

10.List at least five ways you can identify a new entrepreneurial need.

(LO 3-1, 3-2, 3-3)

Discussion Questions for Online/Hybrid classes-Responses

1. What is brainstorming? Why is it important to the new entrepreneurial

owner? (LO 3-2) Brainstorming is a creative process whereby a group of

2. Define gap analysis. Discuss how innovative individuals utilize it with their

individual skills and abilities to reveal new entrepreneurial opportunities.

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Chapter Three: Business Idea Generation and Initial

Evaluation

3. Summarize the six ways that new potential entrepreneurs identify business

opportunities in the marketplace. (LO 3-1, 3-2, 3-3) The six ways include

4. Discuss if you think social networking (such as Facebook, Twitter, or

LinkedIn) assist innovative individuals to network and find a potential

partner for their new entrepreneurial idea. What other ways can new small

business owners find partners for their business ideas? (LO 3-1, 3-2, 3-3)

5. Summarize the five important headings that a potential entrepreneurial

owner should consider when completing a gap analysis. Can you think of

additional items to consider? (LO 3-3) The new entrepreneur should consider

6. What is business risk? What are the three threats that impede

entrepreneurial venture success? Discuss why potential entrepreneurs

should be concerned about business risk. (LO 3-3) Business risk includes

7. How can new small business owners finance their new entrepreneurial

businesses? What do they do if they do not have enough money to initiate

their business operations? List at least three ways individuals can acquire

the money they require to start a new entrepreneurial venture. (LO 3-3)

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Chapter Three: Business Idea Generation and Initial

Evaluation

8. What is a deficit analysis? Why do entrepreneurs evaluate it? (LO 3-2, 3-3)

9. What is due diligence? Why is it important? (LO 3-3) A new business will

10. List at least five ways you can identify a new entrepreneurial need.

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