Understanding Business Models and Their Importance

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Questions and Answers

What is a business model primarily used for?

To analyze stock market trends

To outline a firm's strategy for creating and delivering value (correct)

To determine employee salary structures

To establish marketing tactics

Which of the following is a characteristic of standard business models?

They are the only type of business model recognized

They are exclusively used by new startups

They depict existing strategies firms can use (correct)

They guarantee a perfect formula for success

What does the term 'churn' refer to in a subscription business model?

The number of subscribers lost each month (correct)

The average duration of a subscription

The total revenue generated each month

The increase in new subscriptions within a month

What is a distinctive feature of disruptive business models?

They change the way business is conducted in an industry Signup and view all the answers

Why is it important for a firm's business model to consider the participation of others?

To expand the potential market and value delivery Signup and view all the answers

Which statement accurately reflects the nature of disruptive business models?

They are rare and significantly alter existing business practices Signup and view all the answers

What must still be assessed in the development of a business model?

The strength of the opportunity and feasibility of the idea Signup and view all the answers

What defines a standard business model?

It is commonly used and depicts existing strategies Signup and view all the answers

What happens to industry attractiveness when the threat of substitutes is high?

It decreases Signup and view all the answers

Which of the following is NOT a barrier to entry in an industry?

High customer loyalty Signup and view all the answers

In what scenario is rivalry among existing firms likely to decrease?

High growth rate within the industry Signup and view all the answers

How does low bargaining power of suppliers affect an industry?

It increases profitability for firms Signup and view all the answers

Which of the following factors does NOT impact the bargaining power of buyers?

Competitor strength Signup and view all the answers

What is a consequence of high rivalry among existing firms?

Create industry-wide losses Signup and view all the answers

Which factor increases the threat of new entrants into an industry?

Low economies of scale Signup and view all the answers

What effect does high buyer group concentration have on bargaining power?

It increases buyer power Signup and view all the answers

Which of the following best defines trade secrets?

Ideas and processes that provide competitive advantage. Signup and view all the answers

What is a common cause of trade secret disputes?

An employee leaving a firm for a competitor. Signup and view all the answers

What are the two primary reasons for conducting an intellectual property audit?

To identify owned IP and assess potential risks. Signup and view all the answers

What is considered a method to protect trade secrets?

Establishing written agreements. Signup and view all the answers

Which law primarily governs trade secret protection?

The Economic Espionage Act. Signup and view all the answers

What is the primary advantage of having a heterogeneous team?

Increased likelihood of conflict but better decisions result Signup and view all the answers

Which is NOT a responsibility of the board of directors?

Manage daily operations Signup and view all the answers

What role does a board of advisors primarily serve?

Offer counsel and nonbinding advice Signup and view all the answers

Why are well-known board members beneficial for a new firm?

They bring instant credibility to the firm Signup and view all the answers

What should be considered when forming a board of advisors?

Compatibility and complementary expertise among members Signup and view all the answers

How do consultants benefit new ventures?

They offer specialized knowledge and advice Signup and view all the answers

What is a skill profile used for in new ventures?

To illustrate the most needed skills and highlight gaps Signup and view all the answers

What kind of directors are included in a board of directors?

A mix of inside and outside directors Signup and view all the answers

What is a potential downside of team conflict?

Potential for unresolved disputes Signup and view all the answers

Which of the following is true about lenders and investors?

They provide guidance and legitimacy alongside financial oversight Signup and view all the answers

What does the term 'intellectual property' refer to?

Intangible products of human intellect with marketplace value Signup and view all the answers

Which of the following is NOT a type of patent?

Function patent Signup and view all the answers

How long does a utility patent last?

20 years Signup and view all the answers

Which of the following statements about patent infringement is true?

It occurs when unauthorized use of a patented invention happens. Signup and view all the answers

Who is eligible to apply for a patent?

The inventor of a product Signup and view all the answers

What is the primary purpose of intellectual property laws?

To encourage creativity and innovation Signup and view all the answers

Which type of patent protects the ornamental design of a manufactured product?

Design patent Signup and view all the answers

What does 'patent pending' indicate?

The inventor is seeking a patent Signup and view all the answers

Study Notes

Business Model and Importance

A business model is a company's plan for creating, delivering, and capturing value for its stakeholders.
A business model is foundational to a firm's success.
It describes the core aspects of a company's business.

Standard Business Models

Standard business models are commonly used by existing firms and startups.
They depict established plans for creating, delivering, and capturing value.
There are several different types of standard business models with their own advantages and disadvantages.
For example, subscription models offer recurring revenue but face challenges with churn (subscribers leaving).

Disruptive Business Models

Disruptive business models are rare models that significantly alter the way businesses operate within an industry or niche.
Examples include companies like Dell, Google, Salesforce.com, and Uber.

Five Competitive Forces Model

This model identifies the influences that shape industry profitability.
It consists of five forces:
- Threat of substitutes: When substitute products can easily replace a company’s product, the threat of substitutes is high, and the power of the company is weak.
- Threat of new entrants: High barriers to entry, like significant capital requirements, reduce competition and make the industry more attractive.
- Rivalry among existing firms: Intense competition can drive prices below costs, leading to losses for all involved.
- Bargaining power of suppliers: A company has less power when suppliers have more leverage, for example, when suppliers are concentrated or offer unique products.
- Bargaining power of buyers: Buyers have more power when they are concentrated or can easily switch to another company.

Intellectual Property and its Importance

Intellectual Property (IP) refers to intangible creations of human intellect which have market value.
It includes patents, trademarks, copyrights, and trade secrets.
IP laws promote innovation by granting creators exclusive rights to their creations.

Patents

A patent is a government grant allowing the inventor exclusive rights to make, sell, or use their invention for a specified period.
There are different types of patents including utility, design, and plant patents.
A patent infringement occurs when someone uses another's patented invention without permission.

Copyright

Copyright protects original works of authorship, including literary, dramatic, musical, artistic, and certain other intellectual works.
The goal of copyright is to encourage new creations by giving creators economic and moral rights.
Copyright infringement occurs when a person or company uses copyrighted materials without permission or without properly attributing the ownership of the work.
Fair use allows for limited use of copyrighted material for purposes like criticism, commentary, news reporting, teaching, scholarship, and research.

Trade Secrets

Trade secrets are confidential information that gives a company a competitive edge in the marketplace.
Examples include marketing plans, employee rosters, and confidential customer information.
Trade secret protection relies on a patchwork of state laws, including the Economic Espionage Act and the Uniform Trade Secrets Act.

Importance of Intellectual Property Audits

A IP audit helps a company identify and evaluate its intellectual property assets.
It is essential for understanding:
- What intellectual property a company currently owns
- Potential IP gaps that need to be addressed.

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Description

This quiz explores the fundamentals of business models, including standard and disruptive types. Learn how these models impact a company's strategy and value creation. Test your knowledge on competitive forces that shape industries.