FTHE & Answer Booklet

B205A – V2

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Section Number Assessment type Final-THE
Academic Year 2020/2021 Semester Spring
Earned Grade out of 100 marks

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 Take Home Exam for Final Assignment 2020-2021/Spring
V2

B205A: Exploring Innovation and Entrepreneurship

Cut-Off Date : 27 April 2021 Cut- off Time : 9:05 PM

Total Marks : 100 Duration : 24 Hours

Contents:

Warnings and Declaration…………………………………………………………….

…………………………………………………………….... 1
Question1 ...……………………….…………………………………………………………………………………………….
………………………..…. 2
Question 2 …...……………………………………………………………………………………………………………………….
……………….…..…. 3
Question 3 ………….………...
………………………………………………………………………………………………………………………………. 4

Plagiarism Warning:
As per AOU rules and regulations, all students are required to submit their own THE-Final work and avoid
plagiarism. The AOU has implemented sophisticated techniques for plagiarism detection. You will be penalized
for any act of plagiarism as per the AOU's rules and regulations.

Declaration of No Plagiarism by Student (to be signed and submitted by student with THE-Final
work):
I hereby declare that this submitted THE-Final work is a result of my own efforts and I have not
plagiarized any other person's work.

Name of Student : …………………………………………………..

Signature : …………………………………………………..

Date : …………………………………………………
 Arab Open University
Faculty of Business Studies
Exploring Innovation and Entrepreneurship/ B205A
Final Take Home Exam Spring 2020-2021
Part1: Case Study
Jacqui LLC: Should a young entrepreneur accept a potential investor’s terms that
require her to give up control of her business?
Jacqui Rosshandler grew up in Australia but was drawn to New York City, where she worked as
legal counsel for an interior design company. She put in long hours at her job, but her goal was
to one day own a business of her own, just like her father did back in Australia. “If I am going to
work this hard, I want to do it for myself,” she recalls thinking. One New Year’s Day, with her
mouth feeling less than fresh, Rosshandler recalled Odor-Go, a breath mint sold in Australia that
really worked. She had never seen a similar product in the United States and decided to start a
company to produce and market one. She realized that the best way to eliminate bad breath was
to treat the source of the problem, the stomach, rather than its symptoms, which appear in the
mouth, as most breath mints do. Rosshandler decided to launch a company, Jacquii LLC, and
began working with a contract manufacturer to develop a unique breath-freshening product.
“Parsley has been used for generations to freshen breath,” she says, “but freshening the mouth
only, especially after consuming pungent foods, doesn’t get rid of the smell that comes from the
stomach. We found that a combination of concentrated peppermint and parsley oils, when
dissolved in the stomach, provides this fresh feeling from within. Your breath actually smells
good from deep inside, not just superficially from the mouth.”

The result of several months of work was a two-step breath-freshening product that Rosshandler
named Eat whatever to give her product a trendy, fun image. Customers swallow a gel cap filled
with an all-natural concentration of peppermint and parsley oils and then pop one of the
package’s small white mints into their mouths for instantly fresh breath. Rosshandler came up
with a clever tagline, “2 Steps to Kissable Breath,” aimed squarely at her target audience-young
people - and hired a package designer to create a clever package. She began marketing her new
breath freshener herself, walking boldly into the flagship C.O. Bigelow apothecary store in
Manhattan and asking, “Who does the buying here?” She actually met with a buyer and left the
store with her first sale. “I had no idea what I was doing,” she recalls with a laugh. A month
later, a friend who worked in public relations convinced Daily Candy, a popular Web site that
focuses on fashion, food, and fun, to mention Eatwhatever, generating $20,000 in orders on her
Web site in just 12 hours. With a distributor’s help, Rosshandler was able to get Eatwhatever in
retail stores such as Zitomer, Ricky’s, and Joe Coffee in New York City; Collette in Paris; Terry
White Chemists in Sydney; and online at Amazon, Victoria Health, an Shopmasc. Sales volume
for the company’s first three years of operation was small, never exceeding $40,000.

Rossnandler had used her own money to create her product and bring it to market, but getting
widespread distribution and generating significant sales would require a lot more money than she
could invest in her small business. The promising business was about to run out of cash, and
Rosshandler was considering shutting it down and getting another job. Then, through her
network of contacts, Rosshandler met Arthur Shorin, who had recently sold his business, the
Topps Company, which is famous for selling bubble gum packaged with collectible baseball
cards. Shorin had extensive knowledge and experience in a similar industry and had an
impressive network of contacts. Shorin was impressed with Rosshandler and Eatwhatever and
offered to invest a minimum of $250,000 (more if necessary) to propel the company’s growth.
There was a catch, however, and it was a big one. In return for his investment, Shorin would own
75 percent of Jacquii LLC leaving Rosshandler with minority ownership of just 25 percent. He
also offered terms that would allow her to regain 15 percent of the company, bringing her total
ownership to 40 percent, if Eatwhatever met certain financial and performance benchmarks. The
offer also included a job for Rosshandler at Artuitive, Shorin’s business incubator for start-up
companies.

Rosshandler talked to several friends about the deal, and they advised her to reject Shorin’s offer,
citing what one friend called “draconian terms”; even if the company met the performance
benchmarks, she would still own just 40 percent of what was once “her company.” Another
pointed out that by giving up 75 percent of her company for an investment of $250,000; she was
saying that her company was worth just $333,333 ($250,000 + 75%). Rosshandler listened to her
friends’ advice but kept thinking, “Isn’t owning 25 percent of something better than owning 100
percent of nothing?”

Answer the following questions:

1. What other potential sources of financing for Jacquii LLC do you recommend Rosshandler
explore? Explain. (400 words, 25 marks)

2. What are the advantages and disadvantages of using equity capital and debt capital to finance
a small business’s growth? (400 words, 25 marks)

3. Should Jacqui Rosshandler accept the investment offer from Arthur Shorin? Explain
(400 words, 25 marks)
Part 2: Essay question

Question One (500 words, 25 Marks)

Entrepreneurs need to persuade other people to become involved, to create effective work teams,
make new connections, and negotiate the terms of resulting relationships.
Explain the concept of positional negotiation; explain the different types of positional negotiation
and the different flaws and limitations of positional negotiations. Support your answer with
relevant examples.

End of Exam
Good Luck