CHAPTER 6 –ENTREPRENEURSHIP AND BUSINESS PLANNING

i. Creating New Businessii. Assessing Market Situationiii. Developing a Comparative

Advantageiv. Developing a Business Planv. Risk Management

Entrepreneurship

The Boss The Business

Owner The Risk Taker One who starts a

small business

The capacity and willingness to develop, organize and manage a business

venture along with any of its risks in order to make a profit. The most obvious example of entrepreneurship is the

starting of new businesses

Creating a New

Business

Focus on your core product

Keep your pitch simple

Know what you do best and stay true

Map your capabilities

Utilize marketing tools

Implement action plan

Excercise the action plan

Market Situation

• Snapshot view of marketing arena

• The size and growth trends of your market, what to face in terms of competition, and what critical issues will affect the ability to sell products

Key Market Situations

Business Plan

• Customer Description

• Market Segmentation

• Market size & Growth Trends

Assesing Competition

• Direct/Indirect Competitors

• Opportunities & Threats

• Solution

Forecasting Business Climate

• External Environment (Economic condition. Social trends, emerging technologies)

Your customer description: 

• Geographic terms (where they live),• Demographic terms (facts such as age,

gender, race, education level, marital status, income level, and household size)

• Psychographic terms (lifestyle characteristics, including attitudes, beliefs, and behaviors that affect customer-purchasing patterns).

How customers divide into market segments: Market segments are comprised of unique groups of consumers that share similar characteristics.

EG: Women may buy from your company very differently than men do, and buyers from one geographic area may have different product interests than customers from another.

The size of your market and the growth trends you see: 

Indicate size and growth information for your overall market and for the various market segments your company serves.

EG: if teenagers represent a sizeable segment of your clientele, include facts about the size and growth trends of the teenage population in your market area.

Situational Analysis

A collection of methods that managers use to analyze an organization's internal and external environment to understand the

organization's capabilities, customers, and business environment.

SWOT Porter’s Five Forces

Comparative Advantages

The ability of a firm to produce goods /services at a lower opportunity cost than other firms or individuals. A comparative advantage gives a company the ability to sell goods and services at a lower price than its competitors and realize stronger

sales margins.

• Comparative advantage stipulates that countries should specialize in a certain class of products for export, but import the rest - even if the country holds an absolute advantage in all products.

Developing Comparative Advantages in Organization

1. A favorable environment to produce certain products

2. Knowledge leads to cost-efficient technique

3. Economies of Scale

4. Government Regulation (Tariff, tax)

5. Quality of products and sales support

Risk Management

• Risks are events, situations or circumstances which lead to negative consequences for businesses.

• A good risk management plan with appropriate risk management strategies can minimize costly and stressful problems, and reduce insurance claims and premiums.

Types of Risk

i. Strategic Risk : Business environment, transaction & Investors relations

ii. Financial Risk: Financial Structure and transaction

iii. Operational Risk: Operational & Administrative Procedures

iv. Legal Risk : Rules and Regulation

v. Nature Risk : Natural Disaster