Dynamics of entrepreneurship)Is a French word, literally translated, means between-taker or go-between

Dynamics of entrepreneurship)Entrepreneurship is the process of-

Dynamics of entrepreneurship) 1)creating something new with value by devoting the necessary time and effort.

2)assuming the accompanying financial, psychic, and social risks.

Dynamics of entrepreneurship)3)and receiving the resulting rewards of monetary and personal satisfaction and independence

4 basic aspects of entrepreneur1)involves creation process-something new of value

2)devotion of necessary time and effort

4 basic aspects of entrepreneur

3)assuming the necessary risk (financial, psychic and social areas)

4)rewards-independence, personal satisfaction

Entrepreneurship in usa@1.1to 1.9 million new companies have been formed each year in recent years in USA

As a Decision processIs a movement from something to something.

A movement from present lifestyle to forming a new enterprise.

Facilitating Culture-e.g.USA

Sub cultural-pockets- silicon valley (California), Los Angeles, Denver, Cleveland, Austin etc.How entrepreneurship develops?

Culture for entrepreneurship Family-parents valuing independence.

Teachers-Stanford in silicon valley-

Peers-area with an entrepreneurial pool and a meeting place.

Developing entrepreneurship Government-infrastructure, tax rates

Background-formal education and previous experience (entrepreneurs are not born; they develop)

What makes it possible to form a new company?Marketing is easy when driving force is market demand than a technology push.

Role models-(if that person could do it, so can I)

Finances-friends, relatives, personal savings, credit, seed capital

Types of start-ups1) Lifestyle firms

2)Foundation companies

3)High potential ventures

Life-style firm (features)Is privately heldAchieves modest growth due to1)nature of the business2)the objectives of entrepreneur3)and limited money to R&D

Life-style firm (features)After several years may grow to 30-40 employeesAnnual revenue of @2 millionPrimarily exists to support the owner (no growth and expansion)

Foundation company Created from R&D and lays the foundation for a new business areaCan grow to 5-10 years from 40-400 employeesYearly revenue-10-20million $Of interest to private investors(not VCs)

High potential ventureReceives the greatest investment interest and publicity.Also called gazellesGrowth after 5-10 years,20-30million$No.of employees-@500

Product evolution process (see sketch)Cornucopia

Traditional symbol of abundance

Product evolution process (see sketch)

Begins with knowledge in base technology and science (thermodynamics, fluid mechanics, electronics)

Product evolution process (see sketch)

Critical point is the intersection of knowledge and a recognized social need (IV-product development phase)

Innovations-types1)Ordinary innovations-a new product with little technological change

Innovations-types2)Technological innovations-a new product with significant technological advancement

3)Breakthrough innovations-a new product with some technological change

Innovation to commercialization -mechanismsThe government

Intrapreneurship

Entrepreneurship

Government as innovatorAlso called technology transfer

Results not encouraging

Government as innovator

Reasons-lacks the business skills (marketing and distribution)

Bureaucracy and red tape

intraprenerushipEntrepreneurship with an existing business structure.

Entrepreneurial career-life-cycle approach-research-9 categories1)Educational environment

2)Individuals personality

3)Childhood family environment

4)Employment history

Entrepreneurial career-life-cycle approach-9 categories-research findings5)Adult development history

6)Adult family/non work history

Entrepreneurial career-life-cycle approach-9 categories-research findings7)Current work situation

8)Individuals current perspective

9)Current family situation

Educational environmentResearch says, female entrepreneurs are more educated than general population.

personalityTraits researched are-Need for achievementLocus of controlRisk takingGender identity

Childhood family environmentMore definite resultsTend to have self-employed fathers (possibly entrepreneurs)

Employment history Higher probability of success if the venture is in the area of work experience.negative experiences

Employment history 1)Dissatisfaction with ones job

2)being fired or demoted

3) transfer to undesired location 4)spouse taking a new position in a new location etc.

Adult development history no definite research More impact on women since they start businesses at a later stage of life than men

Adult family/non work historyLack of data; no research

Current work situationHas sought more research and attentionStrong work values and aspirationsLong working daysDominant management styles

Current perspectiveEntrepreneurs continually supplement their education through books, trade journals, seminars, taking courses in weak areas (skills-creativity, financing, control, opportunity identification, venture evaluation, deal-making)

Course in entrepreneurship-overall objectivesSkill identification and assessmentUnderstanding entrepreneurial decision-making Entrepreneurial processCharacteristics of entrepreneurs and their role in development in domestic and recently on international basis

Course in entrepreneurship-overall objectivesAssessing opportunities (coming up with a new idea for a new venture)Writing and presenting a full-scale business planKnowing how to obtain resourcesManaging and growing the enterprise

new unit-Skills for an entrepreneur1)Technical skills2)Business management skills3)Personal entrepreneurial skills

Technical skillsWritingOral communicationMonitoring environmentTechnical business managementTechnologyInterpersonal

Technical skillsListeningAbility to organizeNetwork buildingManagement styleCoachingBeing a team player

Business management skillsPlanning and goal settingDecision makingHuman relationsMarketingFinance

Business management skillsAccountingManagementControlNegotiationVenture launchManaging growth

Personal entrepreneurial skills Inner control/disciplinedRisk-takerInnovativeChange-orientedPersistentVisionary leaderAbility to manage change

ethicsStemming from the Greek ethos meaning custom and usageMore properly originating from swedhethos in which the concepts of individual morality and behavioral habits are related and identified as an essential quality of existence

American ethics-base1)Judeo Christian heritage2)belief in individualism3)opportunities based upon ability rather than social status

Ethics and social responsibility of entrepreneursDrawing more on their own value system, tend to be sensitive to peer pressure and more general social norms in the community and pressure from competitors

Ethics and social responsibility of entrepreneursUS managers seem to have more individualistic and less communitarian values than German and Austrian managers

Ethics and social responsibilityEthics refers to the study of whatever is right and good for humansBusiness ethics concerns itself with the investigation of business practices in light of human values

10 factors triggering workers to act unethically or illegally (research)Balancing work and familyPoor internal communicationPoor leadershipWork hours, work loadLack of management support

10 factors triggering workers to act unethically or illegally (research)Need to meet sales, budget, or profit goalsLittle or no recognition of achievementCompany policiesPersonal financial worriesInsufficient resources

Top 5 types of unethical behaviors (because of pressure)Cut corners on quality controlCovered up incidentsAbused or lied about sick daysLied to or deceived customersPut inappropriate pressure on others

Want to join a course on entrepreneurship? Know/understand- 1)role of new and smaller firms in the economy

2)relative strengths and weaknesses of different types of enterprises

Want to join a course on entrepreneurship? Know/understand-

3)know the general characteristics of an entrepreneurial process

4)assess the students own entrepreneurial skills

Want to join a course on entrepreneurship? Know/understand- 5)understand the entrepreneurial process and the product planning and development

6)know alternative methods for identifying and evaluating business opportunities and the factors that support and inhibit creativity

Want to join a course on entrepreneurship? Know/understand- 7)develop an ability to form, organize and work in interdisciplinary teams

Want to join a course on entrepreneurship? Know/understand- 8)know the general correlates of success and failure in innovation and new venture creation 9)know the generic entry strategies for new venture creation

Want to join a course on entrepreneurship? Know/understand- 10)understand the aspects of creating and presenting a new venture business plan

11)know how to identify, evaluate, and obtain resources

Want to join a course on entrepreneurship? Know/understand-

12)know the essentials of-a) marketing planningb)financial planningc)operations planningd)venture launch planning

Want to join a course on entrepreneurship? Know/understand-

13)know how to manage and grow a new venture

Want to join a course on entrepreneurship? Know/understand- 14)know the managerial challenges and demands of a new venture launch

15)understand the role of entrepreneurship in existing organizations

Future of entrepreneurship1)no.of courses at UG/PG level in various institutions

Future of entrepreneurship2)government incentives like tax incentives, buildings, roads, communication systems etc.

3)role of VCs increasing (state sponsored funds)

Future of entrepreneurship4)societys support in terms of motivation and public support increased.

Future of entrepreneurship5)favorable media-articles in New York times, Wall street journal, Washington post etc (TV has specific programs)

6)large companies are offering intrapreneurship assignments.

New unit-Entrepreneurial and Intrapreneurial mindEntrepreneurial process-4 phases-(progressively)

1)identify and evaluate the opportunity

Unit-3-Entrepreneurial and Intrapreneurial mind2)develop the business plan

3)determine the resources required

4)manage the resulting enterprise created

Identify and evaluate opportunityCreation of length of opportunity

Real and perceived value of opportunity

Identify and evaluate opportunityRisk and returns of opportunity

Opportunity versus personal skills and goals

Competitive situation

Sources of opportunityConsumers and business associates

Members of the distribution system

Technical people

Cause of opportunityTechnological change

Market shift

Government regulation

competition

Opportunity analysis planIncludes-A description of the product or service

An assessment of the opportunity

Opportunity analysis planAn assessment of the entrepreneur and the team

Opportunity analysis planSpecifications of all the activities and resources needed to translate the opportunity into a viable business venture

Opportunity analysis plan

Sources of capital to finance the initial venture as well as its growth(1st and 2nd stage financing)

Assessment of the opportunity-questionsWhat market need does it fill?

What personal observations have you experienced or recorded with regard to that market need?

Assessment of the opportunity-questions

What social condition underlies this market need?

What market research data can be marshaled to describe this market need?

Assessment of the opportunity-questionsWhat patents might be available to fulfill this need?

What competition exists in this market? how would you describe the behavior of this competition?

Assessment of the opportunity-questionsWhat does the international market look like?

Assessment of the opportunity-questionsWhat does the international competition look like?

Where is the money to be made in this activity?

Developing a business planWhy business plan?

1)developing the opportunity

Developing a business plan2)determining the resources required

3)obtaining those resources

4)successfully managing the resulting venture

Resources requiredProcess of resources acquisition-

1)make an appraisal of the entrepreneurs present resources

2)distinguish helpful and critical resources

Resources required3)do not underestimate the amount and variety of resources needed

4)downside risk of inappropriate and insufficient assets should be assessed

Resources required

Entrepreneurs should maintain as large an ownership position as possible

Resources are to be acquired at the lowest possible cost and least cost control

Manage the enterpriseExamine the operational problems of growing enterprise like management style and structure and determine key variables for success

Identify a control system to monitor problem areas

Managerial vs. entrepreneurial decision making1)strategic orientation

2)commitment to opportunity

3)commitment of resources

4)control of resources

5)management structure

comparisonEntrepreneurial

Driven by perception of opportunity

Revolutionary with short duration

Multistage with minimal exposure at each stage

Episodic use or rent of required resources

Flat with multiple informal networksManagerialDriven by currently controlled resources

Evolutionary of long duration

Single staged with complete commitment upon decisions

Ownership or employment of required resources

Formalized hierarchy

Strategic orientationDepends on entrepreneurs perception of the opportunity

Strategic orientationIs crucial when other opportunities have diminishing returns because of environmentWhen planning system and measuring performance to control current resources is strategic, managerial domain needs to be operant

Commitment to opportunityEntrepreneurs are pressured by the need for action, short decision windows, willingness to assume risk with a short span of opportunity commitment

Managerial domain is slow to act, commitment for a long span with no possibility to re-value the commitment

Commitment of resourcesEntrepreneurs have multistage commitment with track record being monitored

Commitment of resources

Although in stages for managerial assignments, the commitment is for total amount (open to receive personal rewards by effective administration of resources)

Control of resourcesEntrepreneur,under the pressure of limited resources, risk of obsolescence, need for flexibility and the risks involved, strives to rent or achieve periodic use on as-needed basis

Control of resourcesThe pressure of power, status and financial rewards cause the manager to avoid rental or other periodic use of the resources

Management structureEntrepreneur employs a flat organizational structure with informal networks throughout

Management structure

Managerial structure is formalized and hierarchical in nature, reflecting the need for clearly defined line of authority and responsibility

Unit-4-Why interest in intrapreneurship? Social,cultural and business level analysis-

Social level-increased interest in doing your own things

Unit-4-Why interest in intrapreneurship?

Hyper-competition at home and abroad

Employment in fortune 500 companies has decreased

Corporate vs. intrapreneurial cultureCorporate Favors conservative decision making (restrictive environment)Hierarchical, established proceduresMotivated by promotionShort run orientationMuch cautious risk takers

IntrapreneurialFavors creativity, flexibility, independence, risk-takingFlat, with networking, teamwork, sponsors and mentors Independence, ability to createBetween long and short runLearn to conceal risky projects until last possible moment

Corporate vs. intrapreneurial cultureCorporate Short run orientationMuch cautious risk takersIntrapreneurialBetween long and short runLearn to conceal risky projects until last possible moment

How to establish climate for entrepreneurship?1)organisation operates on frontiers of technology

2)New ideas encouraged

How to establish climate for entrepreneurship?3)Trial and error encouraged

4)Failures allowed

How to establish climate for entrepreneurship?

5)No opportunity parameters (domain of other division)

6)resources available and accessible

How to establish climate for entrepreneurship?7)Multidiscipline teamwork approach 8)longtime horizon

How to establish climate for entrepreneurship?9)Volunteer program

10)Appropriate reward system

11)sponsors and champions available

12)support of top management

Implementation of intrapreneurshipTop managements commitment for 1-3 years

Conduct seminars

inform general guidelines

Implementation of intrapreneurshipIdentify, select and train intrapreneurial leaders.

Implementation of intrapreneurshipTraining areas be-obtaining resources within the organization,2) identifying viable opportunities and their markets and3) developing business plan

Implementation of intrapreneurshipOverall program expectations and the target results of each intrapreneurial venture should be established (time frame, volume, profitability etc.)Establish a mentor-sponsor system

Implementation of intrapreneurshipUse technology to be flexible and responsive

Implementation of intrapreneurshipPlatform to train and share experiences (one day per month)

Implementation of intrapreneurship

Develop ways to get closer to its customers (tapping the database, hiring from smaller rivals, helping retailer (Pepsi is spending @20 million dollars to create electronic profiles of @9 million Pizza Hut customers

Implementation of intrapreneurshipDanon is sharing its research with retailers and tailoring much of its marketing effort to the individual chains

Learn to be more productive with fewer resources (lean and mean)

Implementation of intrapreneurshipEstablish a strong support structure

Implementation of intrapreneurshipTying the rewards to the performance of the intrapreneurial unit

Implementation of intrapreneurship

Evaluation system to allow successful intrapreneurial units to expand and unsuccessful ones to be eliminated (commensurate with corporate mission statement)

Problems of IntrapreneurshipIndependent venture-capital based start-ups tend to perform two times faster and profitable than corporate start-ups

Successes of intrapreneurship-3M Allows 15%of their time to independent projects

Successes of intrapreneurship-3M Significant %of sales comes from new products introduced within last 5 years

Post-It Notes(800 million) was developed by Arthur Fry (low-sticking power adhesive by Spencer Silver)

HP-intrapreneurshipLost the opportunity to recognize the potential of Steven Woznaiks proposal for PC (was the basis for Apple Computer Inc)

Charles House of HPIgnored the order from David Packard to stop working on a high-quality video monitor

Charles House of HPThe monitor once developed, was used in NASAs manned moon landings and in heart transplants

Charles House of HP

Although projected to achieve sales of no more than 30 units, more than 17,000 of these large-screen displays(@35 million in sales) have been sold

IBMs intrapreneurshipDeveloped the independent business unit concept where each unit is a separate organization with its mini board of directors and autonomous decision making authority on manufacturing and marketing issues

IBMs intrapreneurshipMore than 11 business units have developed such products as the automatic teller machines for banks, industrial robots and the IBM PC (For PC, blank cheque was given to Philip Estridge to sell through IBMs sales force and the retail market, breaking some of the most binding operational rules of IBM at that time

Unit-5-The Individual entrepreneurEntrepreneurial feelings-1)locus of control

2)feelings about independence and need for achievement

3)risk-taking

Locus of controlMore successful entrepreneurs were more internal, and entrepreneurs overall were more internal than the general populace, but not more than male managers

Feelings @independence and need for achievementMcClellands theory on need for achievement-(n Ach)-3 attributes

1)individual responsibility for solving problems, setting goals and reaching these goals through their own efforts

Feelings @independence and need for achievement2)moderate risk taking as a function of skill, not chance

3)knowledge of results of decisions/task accomplishment

Risk-takingInstrument is Kogan-wallach CDQGenerally yes, but no conclusive causal relationship has been established empirically

Entrepreneur background and characteristics1)childhood family environment2)education 3)Personal values4)Age5)Work-history

Childhood family environment1)birth order2)parents occupation3)social status

Birth orderHenning and Jardim found that female executives tend to be the firstborn.In a national sample of 408 female entrepreneurs,Hisrich and Brush found 50%to be first born.In many studies of male and female entrepreneurs, the first-born effect is not present.

Parents occupation Entrepreneurs tend to have self-employed or entrepreneurial fathersFemale entrepreneurs are as likely to report self-employment or entrepreneurial father as male entrepreneur

Social (overall parental relationship)Female entrepreneurs tend to grow up in middle-to-upper class environments, where families are likely to be relatively child-centered, and to be similar to their fathers in personality

Education Education was important in the upbringing of the entrepreneur

Education 70%of all women entrepreneurs have a college degree in (English,psychology, education and sociology)

Education Educational need is cited in the areas of finance, strategic planning, marketing(particularly distribution)Ability to deal with people and communicate clearly in the written and spoken word is important

Personal valuesAggression, benevolence, conformity, creativity, veracity and resource seeking is important for identifying entrepreneursNature of the enterprise, opportunism, institution and individuality of the entrepreneur

Personal values5 consensus characteristics across consumer and leadership groups-1)Superior quality In products2)quality service to customers3)high-calibre management4)honesty 5)ethics

ageMost entrepreneurs initiate their entrepreneurial careers between the ages of 22 and 45Earlier starts are better than the late ones

ageThere are milestones every 5 yearsGenerally male entrepreneurs tend to start their first significant venture in the early 30s,whil women entrepreneurs tend to do so in their middle 30s

Work historyCan not only be a negative displacement in the decision to launch a new entrepreneurial venture; it also plays a role in the growth and eventual success of the new venture (lack of challenge, promotional opportunities, frustration and boredom often motivate

Work historyPrevious technical and industry experience is important

Work historyExperience in the areas of financing; product or service development, development of distribution channels, preparation of marketing plan etcManagerial experience, entrepreneurial experience becomes increasingly important as the complexity of the venture increases

Motivation Independence is the primary motivation

Motivation Money is the second reason for starting a new venture for men whereas job satisfaction, achievement,opportunity and money are the reasons in rank order for womenThe second-order motivations reflect,in part, the work and family situation as well as the role model of the entrepreneur

Role modelsCan be parents, brothers or sisters other relatives or other entrepreneurSuccessful entrepreneurs are viewed frequently as catalysts by potential entrepreneurs

Support systemIs most crucial during the start-up phaseConnections to these support resources be established early in the new venture

Support systemDensity-(extensiveness of ties between the two individuals)Centrality-(the total distance of the entrepreneur to all other individuals and the total number of individuals in the network

The strength of network (support system) depends on-More frequent, in-depth and mutually beneficial relationship, the stronger and more durable the network between the entrepreneur and the individualMost networks are not formally organized, an informal network for moral and professional support still greatly benefits the entrepreneur

Support networks1)moral-support network2)professional support network

Moral support networkOf family and friendsIn many cases, spouses are biggest supporters

Moral support networkFriends can provide encouragement, understanding and even assistance.Relatives (children, parents, grandparents, aunts and uncles) can be strong sources of moral support, particularly if they are also entrepreneurs

Professional-support networkA mentor,business associates, trade associations or personal affiliationsMentor is a coach, a sounding board, and an advocateAnother source of advice is by establishing a network of business associates (self employed individuals who have experienced starting a business

Professional-support networkClients or buyers or suppliersTrade associationsPersonal affiliations in hobbies, sporting events,clubs,civic involvements, school alumni

Male V/s female entrepreneurs1)motivation2)Departure point3)sources of funds4)occupational background5)personality characteristics6)background7)support groups8)type of business started

motivationMale-achievement ,personal independence, job satisfaction arising from the desire to be in controlFemale-achievement-accomplishment of a goal independent-to do it alone

Departure pointMale-dissatisfaction with present job, sidelined in college, sidelined to present job, outgrowth of present job, discharge or layoff opportunity for acquisitionFemale-Job Frustration. interest in and recognition of opportunity in the area, change in personal circumstances

Sources of fundsMale-personal assets and savings, bank financing,investors,loans from friends and familyFemale-personal assets and savings, personal loans

Occupational backgroundMale-experience in line of work, recognized specialist or one who has gained a high level of achievement in the field competent in a variety of business functions

Occupational backgroundFemale-experience in area of business, middle-management or administrative-level experience in the field, service-related occupational background

Personality characteristicsMale-opinionated and persuasive, goal oriented, innovative and idealistic, high level of self-confidence, enthusiastic and energetic, must be own boss.

Personality characteristicsFemale-flexible and tolerant, goal oriented, creative and realistic, medium level of self confidence, enthusiastic and energetic, ability to deal with the social and economic environment

backgroundMale-age when starting venture-25-35,father was self-employed, college-educated-degree in business or technical area (usually engineering), first-born childFemale-age when starting venture-35-45,father was self-employed, college-educated-degree in liberal arts, first-born child

Support groupsMale-friends ,professional acquaintances (lawyers, accountants) ,business associated, spouseFemale-close friends, spouse, family, womens professional groups, trade associations

Type of business startedMale-manufacturing or constructionFemale-service related-educational services, consulting, or public relations

Entrepreneurs vs. inventorsInventor-creates something for the first time, highly driven, highly creative, well educated with college or post-graduate degree, has family,education,occupational experiences, problem solver, high level of self confidence, is willing to take risk, tolerate ambiguity and un-certainty, measures achievement by the no. of inventions developed,no.of patents granted

Unit-7-Non-entrepreneurial profiles1)shotgun-sam2)simplicity sue3)prima Donna Paul4)ralph the rookie

Non-entrepreneurial profiles5)meticulous mary6)underdog ed7)hidden agenda Harry8)inventor Irving

Shotgun SamAna entrepreneurial type who quickly identifies new promising business opportunities but rarely, if ever, follows through on the opportunity to create a successful new venture

Simplicity sueAn entrepreneurial type who always thinks everything is a lot simpler and feels one can create a successful business through one or two easy solutions. Usually a great salesperson. This entrepreneur can make even the most improbable deal seem possible

Prima Donn PaulAn entrepreneurial type so in love with his own idea that he feels everyone is out to take his ideas and take advantage of him. This paranoia does not allow any trust to be established or help given

Ralph the RookieAn entrepreneurial type who is well grounded in theory but lacks real-world business experience

Meticulous MaryA perfectionist entrepreneurial type who is so used to having things under control that he or she cannot manage during a catastrophe and cannot handle periods of ambiguity and chaos

Underdog edAn entrepreneurial type who is not comfortable with actually transforming the invention into a tangible business success. This entrepreneurial type likes to attend seminars and discuss problems but does not like putting things into action, so needs a strong managerial team

Hidden Agenda HarryAn entrepreneur who does not have the right motives and objectives for developing and expediting a new enterprise

Inventor irvingAn inventor, more than an entrepreneur,who is more concerned with the invention itself rather than creating and expediting a business

Unit-8-creating and starting the venture Sources of new ideas-1)consumers2)existing companies3)distribution channels4)research and development

consumersInformally monitor potential ideas and needsFormally arrange for consumers to have an opportunity to express their opinionsCare should be taken to see that the idea or need represents a large enough market to support a new venture

Existing companiesFormal method for monitoring and evaluating competitive products and servicesThis analysis uncovers ways to improve on these offerings resulting in a new product that has more market appeal

Distribution channelsIs a good source because of their familiarity with the needs of the marketCan give suggestions for completely new products

Distribution channelsHelp in marketing the entrepreneurs newly developed productsBy changing color of hosiery as per the salespersons suggestions, company became leading supplier

Research and developmentEntrepreneur's own R&DInformal lab in basement or garage (one research scientist in a fortune 500 company developed a new plastic resin that became the basis of a new product-a plastic molded modular cup pallet-and a new venture (Arnolite Pallet Product Co.Inc)

Methods for generating ideas1)focus groups2)Brainstorming3)problem inventory analysis

Focus groupsGroup of 8-14 participantsIn use since 1950sCan be used for generating new ideas.

Focus groupsModerator leads the group through directive or nondirective mannerOne company interested in the womens slipper market received its new product concept for a warm and comfortable slipper that fits like an old shoe (group of 12)-later the company became success

BrainstormingBasis-people can be stimulated to greater creativity by meeting with others and participating in organized group experiencesAlthough most of the ideas have no basis for further development, often a good idea emerges

Rules for brainstorming1)No criticism is allowed by anyone in the group-no negative comments2)freewheeling is encouraged-the wilder the idea, the better.

Rules for brainstorming3)quantity of ideas desired-the greater the number of ideas, the greater the likelihood of useful ideas emerging

Rules for brainstorming4)combinations and improvements of ideas are encouraged-ideas of others can be used to produce still another new idea.

Should be fun, with no one dominating or inhibiting the discussion.

Problem inventory analysisConsumers are provided with a list of problems in a general product categoryThey are then asked to identify and discuss products in this category that have the particular problemCan be used to test a new product idea for further evaluation

Problem inventory analysis for food industry 1)psychological2)sensory3)activities4)buying usage5)psychological/social

Psychological

a)weight-fattening,empty caloriesb)hunger-filling,still hungry after eatingc) thirst-does not quench, makes one thirstyd) health-indigestion, bad for teeth, keeps one awake, acidity

sensorya) taste- bitter,bland,saltyb)appearance-color,unappetizing,shapec)consistency/texture-tough,dry,greasy

activitiesa) meal planning-forget, get tired of itb) storage-run out, package would not fix

activitiesc) preparation-too many pots and pans, never turns out,d) cooking-burns, stickse) cleaning-makes a mess in oven, smells in refrigerator

Buying usagea) portability-eat away from home, take lunchb) portions-not enough in package, creates leftovers

Buying usagec) availability-out of season, not in supermarketd) spoilage-gets moldy, goes soure) cost-expensive, takes expensive ingredients

Psychological/sociala) serve to company-would not serve to guestsb) too much last-minute preparation

Psychological/socialc) eating alone-too much effort to cook for oneself, depressing when prepared for just one

d) self-image-made by a lazy cook, not served by a good mother

Creative problem solvingCreativity tends to decline with age, education and lack of useDeclines in stages-first when a person starts school, in teens, at age 30,40,50Latent creative potential can be stifled by perceptual,cultural,emotional and organizational factors

Creativity and problem solving techniques1)Brainstorming2)reverse brainstorming3)synetics4)Gordon method

Creativity and problem solving techniques5)checklist method6)free association7)forced relationships8)collective notebook method9)heuristics

Creativity and problem solving techniques10)scientific method11)kepner-tregoe method12)value analysis13)attribute listing method

Creativity and problem solving techniques14)Morphological analysis15)Matrix charting16)sequence-attribute/modification matrix17)inspired(big-dream)approach18)parameter analysis

Brain-stormingMost well-known and widely usedUnstructured process for generating all possible ideas about a problem within a limited time frame through spontaneous contributions of participants

Process of brain-stormingSession starts with a problem statement that is neither too broad nor too narrow6-12 individuals are selected so that a wide range of knowledge is represented

Process of brain-stormingNo group member be a expert in the field of the problemAll ideas, no matter how illogical must be recordedParticipants not allowed to criticize or evaluate during the brainstorming session

Reverse Brain-stormingCriticism is allowedin how many ways this idea can fail'? care to be taken of group morale)

Reverse Brain-stormingCan be effectively used before other creative techniques to stimulate innovative thinkingIdentification of everything wrong with the idea and ways to overcome these problems

SynecticsTo solve problems through one of 4 analogy mechanisms-1)personal2)direct3)symbolic

Synectics4)fantasyGroup works through 2 stages-1)first step is to make strange familiar2)making familiar strange through 1-4

Stage-i- synectics1)Problem definition2)Problem analysis3)Generalization of elements of the problem to familiar entities4)Search for familiar models

Stage-II-5)Use of analogies6)Speculation7)Force fit8)solutionRecycle between 1-7 if necessary

Gordon MethodBegins with group members not knowing the exact nature of the problem to remove the problem of preconceived ideas and behavioral patternsThe entrepreneur starts by mentioning a general concept associated with the problem

Gordon MethodGroup responds by expressing number of ideas

Gordon MethodThen a concept is developed, followed by related concepts, through guidance by the entrepreneurActual problem is then revealed, enabling the group to make suggestions for implementation or refinement of the final solution.

Checklist methodA new idea is developed through a list of related issues or suggestionsMay take any form and be of any length

General check-listPut to other uses? new ways to use as is? other uses if modified?Adapt? what else is like this? what other ideas does this suggest? does past offer parallel? what could I copy? whom could I emulate?

General check-listModify? New twist? change meaning color, motion ,odor, form shape? other changes?Magnify? what to add? more time? greater frequency?stronger?larger?Thicker?extra value? plus ingredient?duplicate?multiply?exaggerate?

General check-listMinfiy?what substitute? smaller? condensed? miniature? lower? shorter? lighter? omit? streamline? split up? understated?Substitute? who else instead? what else instead? other ingredient? other material? other process? other power? other place? other approach? other tone of voice?

General check-listRearrange? interchange components? other pattern? other layout ?other sequence? transpose cause and effect? change pact? change schedule?

General check-listReverse? transpose positive and negative? how about opposites? turn it backward? turn it up-side down? Reverse roles? change shoes? turn tables? turn other cheek?

General check-listCombine? how about a blend? an alloy, an assortment ,an ensemble? combine units? combine purposes? combine appeals? combine ideas?

Free associationFirst a word or phrase related to the problem is written down, then another and another ,with each new word attempting to add something new to the ongoing thought processes ,thereby creating a chain of ideas ending with a new product idea emerging

Forced relationshipsTries to force relationships among some product combinationsIt is a technique that asks questions about objects or ideas in an effort to develop a new ideaFive steps-1)isolate the elements of the problem

Forced relationships2)find the relationships between these elements 3)record the relationships in an orderly form4)analyze the resulting relationships to find ideas or patterns5)develop new ideas from these patterns

Elements-paper and soapNoun paper soaps-idea pattern-tough paper impregnated with soap and usable for washing surfaces

Collective notebook methodA small note book that easily fits in a pocket containing a statement of the problem,blank pages,and any pertinent background data is distributed

Collective notebook methodParticipants record ideas at least once three times a day. At the end of the month,list of the best ideas is developed and the central co-coordinator summarizing all the material

heuristicsInvolves locating all relevant concepts that could be associated with a given product area and generating a set of all possible combinations of ideasRelies on the entrepreneurs ability to discover through a progression of thoughts, insights and learning

heuristicsThe technique is probably used more than imagined, because entrepreneurs frequently must settle for an estimated outcome of a decision rather than a certaintyHIT is a new technique (Heuristic Ideation technique)

Scientific methodInvolves the entrepreneur defining the problem, analyzing the problem, gathering and analyzing data, developing and testing potential solutions, and choosing the best solution

Scientific methodConsists of principles and processes, conducting observations and experiments and validating the hypothesis

Value analysisIn value analysis procedure, regularly scheduled times are established to develop evaluate, and refine ideas.To maximize value, the entrepreneur asks such questions as, can this part be of lesser quality, since it isnt a critical area for problems?

Attribute listingTo list the attributes of an item or problem and then look at each from a variety of viewpointsOriginally unrelated objects can be brought together to form a new combination and possible new uses that better satisfy a need

Matrix charting Is a systematic method of searching for new opportunities by listing important elements for the product area along two axes of a chart and then asking questions regarding each of these elements

Matrix charting The answers are recorded in the relevant boxes of the matrixE.g. where can it be used? who can use it? when can it be used? how can it be used?

Big-dream approachRequires that the entrepreneur dream about the problem and its solution-thinking big.

Big-dream approachEvery possibility should be recorded and investigated without regard to all the negatives involved or the resources requiredIdea should be conceptualized without any constraints until an idea is developed into a workable form

Parameter analysisInvolves 2 aspects-1)parameter identification 2)creative synthesis

Parameter analysisIdentification involves analyzing variables in the situation to determine their relative importance

Parameter analysisThese variables become the focus of the investigation, with other variables being set asideThrough an evaluation of the parameters and relationships, a solution(s) is developed; this solution development is called creative synthesis

Product planning and development process1)idea stage2)concept stage3)product development stage4)test marketing stage5)commercialization

Establishing evaluation criteriaFor evaluating the new product in terms of-Market opportunityCompetitionThe marketing systemFinancial factorsProduction factors

Market opportunityNew or current need for the product ideaAssessment by-Characteristics and attitudes of consumers or industries that buy the product

Market opportunitySize of the potential market in dollars and unitsThe nature of the market with respect to its stage in the life cycle (growing or declining)Share of the market the product could reasonably capture

competitionImpact of current competing producers, prices and marketing policies on the market share of the proposed product

competitionProduct should have features that will meet or overcome current and anticipated competitionShould have unique differential advantage based on evaluation of all competitive products

Marketing systemCompatible with existing management capabilities and marketing strategiesGE can come with a new kitchen appliance to its line than P&GCheck-

Marketing systemThe degree to which the ability and time of the present sales force can be transferred to the new product

Marketing systemThe ability to sell the product through existing established channels of distributionThe ability to piggy-back the advertising and promotion required to introduce the new product

Financial factorsSupported by and contribute to the companys financial structureCheck-Manufacturing cost per unit

Financial factorsSales and advertising expenses per unitAmount of capital and inventory requiredBreak-even point and the long-term profit outlook for the product need to be determined

Production factorsThe new products production be compatible with the existing plant, machinery and personnel

Production factorsIf not, the idea is less positive since new plant and production cost involvedAll required materials needed in production of the product should be available and accessible in sufficient quantity

3 pretest marketing stagesThe idea stageThe concept stageProduct development stage

Idea stageElimination of impractical ideas allowing maximum use of the companys resources (systematic market evaluation checklist) Product idea is expressed in terms of its chief values, merits and benefits

Idea stageConsumers are presented with cluster of new product values to determine selectionIf there is no need for the suggested product, its development be discontinuedIf the idea does not have any benefit or value to the firm

3 references1)aspects2)competitive capabilities3)new product idea capability

Unit-9-Determining the need for a new product idea 1)type of need2)timing of need3)competing ways to satisfy need4)perceived benefits/risks5)price v/s.performance features6)market size and potential7)availability of customer funds

Type of need

Continuing needDelining needEmerging needFuture need

Timing of needDuration of needFrequency of needDemand cyclePosition in life cycle

Competing ways to satisfy need Doing withoutUsing present wayModifying present way

Perceived benefits/risksUtility to customerAppeal characteristicsCustomer taste and preferencesBuying motivesConsumption habits

Price v/s.performance featuresPrice-quantity relationshipDemand elasticityStability of priceStability of market

Market size and potentialMarket growthMarket trendsMarket development requirementsThreats to market

Availability of customer fundsGeneral economic conditionsEconomic trendsCustomer incomeFinancing opportunities

Determining the value for a new product idea1)cash outflow2)cash inflow3)net cash flow4)profit5)relative term6)compared to other investments

Cash out flowR&D costsMarketing costsCapital equipment costsOther costs

Cash inflowSales of new productEffect on additional sales of existing productsSalvageable value

Net cash flowMaximum exposureTime to maximum exposureDuration of exposureTotal investmentMaximum net cash in a single year

profitProfit from new productProfit affecting additional sales of existing productsFraction of total company profit

Relative returnReturn on shareholders equity (ROE)Return on investment (ROI)Cost of capitalPresent value (PV)Discounted cash flow (DCF)Return on assets employed (ROA)Return on sales

Compared to other investmentsCompared to other product opportunitiesCompared to other investment opportunities

Concept stageInitial reactions to the concept are obtained from potential customers or members of the distribution channel when appropriate in conversational interview, selected respondents are exposed to statements that reflect the physical characteristics and attributes of the product idea

Concept stageIn case of competing products, the primary features of existing products are comparedFavorable features be incorporated into the product Features, price and promotion should be evaluated for both the concept being studied and for any major competing products

Questions to determine relative advantage of new product vs. competitive products1)quality and reliability of the new concept 2)superior or deficient compared to available products3)is this a good market opportunity for the firmSimilar evaluation for price, promotion and distribution

Product development stageConsumer reaction to the physical product is determinedConsumer panel as a tool in which a group of potential consumers is given product samplesParticipants keep a record of their use of the product and comment on its virtues and deficiencies

Product development stageA sample of the product and one or more competitive products be given simultaneously

Product development stageOne test product may already be on the market, where as the other test product is new, or both products can be new with some significant variation between themMultiple brand comparisons, risk analysis, level of repeat purchase, or intensity of preference analysis can be used to determine consumer preference

Test marketing stageLast step in the evaluation processProvides actual sales results, which indicate the acceptance level of consumersPositive test results indicate the degree of probability of a successful product launch and company formation

Unit-10-business plan (game plan, road map) is a written document prepared by the entrepreneur that describes all the relevant external and internal elements involved in starting a new venture

business plan (game plan, road map) Often, it is an integration of functional plans such as marketing, finance, manufacturing and human resources.Addresses both short-term and long-term issues for the first 3 years.

Who should write the plan?The entrepreneurMay consult many other sources like Lawyers, accountants, marketing consultants and engineers. (after skills assessments)

Skills assessments (excellent, good, fair, poor)1)accounts/taxes2)planning3)forecasting4)marketing research

Skills assessments (excellent, good, fair, poor)5)sales6)people management7)product design8)legal issues9)organizing

Scope and value of the business plan-who reads the plan?May be read by employees,investors, bankers,venture capitalists, suppliers, customers, advisers and consultants

Preparing the plan-3 perspectives 1)perspective of the entrepreneur since he understands the creativity and technology better than anyone else2)the marketing perspective3)investor perspective

Why business plan?1)it helps determine the viability of the venture in a designated market2)it provides guidance to the entrepreneur in organizing his or her planning activities3)it serves as an important tool in helping to obtain financing

How do potential lenders and investors evaluate the plan? Typically lenders focus on the four Cs-Character, cash-flow, collateral (tangible assets) and equity contribution

How do potential lenders and investors evaluate the plan? Investors, particularly VCs, look for-Entrepreneurs character (more than lenders) and background checksVCs also make sure that the entrepreneur is/are compliant and willing to accept this involvement

Information needs1)market information2)operations information needs3)financial information needs)

Market information To ascertain size-Define the market-(is the product most likely to be purchased by men or women? people of high income or low income/rural or urban dwellers? highly educated or less educated people?

Market information To ascertain market potential-Consider-trade associations, government reports, published studies

Operations information needs1)location-and accessibility to customers, suppliers and distributors2)manufacturing operations-basic machine and assembly operations identification-subcontracted? by whom? 3)raw materials-needed and suppliers names, addresses and costs

Operations information needs4)equipment-purchased or leased5)labor skills-each unique skill needed, the number of personnel in each skill, pay-rate where and how to obtain these skills 6)space-total space, owned or leased 7)overhead-tools,suppliers,utilities,salaries etc.

Financial information needs1)expected sales and expense figures for at least first 3 yearsbased on the market information. each expense item should be identified and given on a monthly basis for the year

Financial information needs2)cash flow figures for the first 3 years-beginning cash, expected accounts receivable and other receipts, all disbursements on a monthly basis for the entire year 3)current balance sheet figures and pro-forma balance sheets for the first 3 years-

Writing the business planCould take more than 200 hours to prepare depending on the knowledge of the entrepreneur and the intended purpose

Business planIntroductory pageExecutive summaryIndustry analysisDescription of ventureProduction plan

Business planMarketing planOrganizational planAssessment of planFinancial planappendix

Introductory pageA) Name and address of businessB)Name(s)and address(es)of principalsC)Nature of businessD)Statement of financing neededE)Statement of confidentiality of report

Executive summary 3-4 pages summarizing the complete business plan

Industry analysisA) Future outlook and trendsB)Analysis of competitorsC)Market SegmentationD)Industry forecasts

Description of ventureA)Product(s)B)Service(s)C)Size of businessD)Office equipment and personnelE)Background of entrepreneurs

Production planA) Manufacturing process amount subcontractedB)Physical plantC)Machinery and equipmentD)Names of suppliers of raw materials

Marketing planPricingDistributionPromotionProduct forecastsControls

Organizational planForm of ownershipIdentification of partners or principal shareholdersAuthority of principalsManagement-team backgroundRoles and responsibilities of members of organization

Assessment of riskEvaluate weakness of businessNew technologiesContingency Plan

Financial PlanA)Pro forma income statementB)Cash flow projectionsC)Pro forma balance sheetD) Break-even analysisE)Sources and application of funds

AppendixA) LettersB) Market research dataC) Leases or contractsD) Price lists from suppliers

Unit-11-Critical questions for industry analysis 1.What are total industry sales over the past five years?2.what is anticipated growth in this industry?3.How many new firms have entered this industry in the past three years?4.What new products have been recently introduced in this industry?5.Who are the nearest competitors?

Critical questions for industry analysis 6.How will your business operation be better than this?7.Are each of your major competitors sales growing,declining,or steady?

Critical questions for industry analysis 8.What are the strengths and weaknesses of each of your competitors?9.What is the profile of your customers?10.How does your customer profile differ from that of your competition

Description of venture1)What are your product (s) and/or service (s)?2)Describe the product (s) and/or service (s), including patent, copyright, or trademark status3)where will the business be located?

Description of venture4)Is your building new?old?in need of renovations? if needed, state costs)5)is the building leased or owned? state the terms)6)Why is this building and location right for your business?7)what additional skills or personnel will be needed to operate the business?

Description of venture8)what office equipment will be needed?9)will equipment be purchased or leased?10)what is your business background?11)what management experience do you have?

Description of venture12)describe personal data such as education,age,special abilities, and interests13)what are your reasons for going into business?

Description of venture14)why will you be successful in this venture?15)what development work has been completed to date?

Other location issuesHow much space is needed?Should I buy or lease the building?What is the cost per square foot?

Other location issuesIs the site zoned for commercial use?What town restrictions exist for signs,parking,and so forth?Is renovation of the building necessary?Legal issues with the lawyer-no negotiations with town or landlord

Other location issuesIs the facility accessible to traffic?Is there adequate parking?Will the existing facility have room for expansion?

Other location issuesIs there an adequate labor pool available?What are local taxes?Are sewage,electricity,and plumbing adequate?

Production plan1)will you be responsible for all or part of the manufacturing operation/2)If some manufacturing is subcontracted, who will be the subcontractors (Give names and addresses)3)Why were these subcontractors selected?

Production plan4)What are the costs of the subcontracted manufacturing (Include copies of any written contracts)5)What will be the layout of the production process (illustrate steps if possible)6)what equipment will be needed immediately for manufacturing?7)What raw material will be needed for manufacturing?

Production plan8)Who are the suppliers of new materials and appropriate costs?9)What are the costs of manufacturing the product?10)what are the future capital equipments needed of the venture?

Production planIn case of a retail operation or service-1)from whom will merchandise be purchased2)how will the inventory control system operate?3)What are storage needs of the venture and how will they be promoted?

Marketing planIs a critical from the point of view of investors.Will be an annual requirement (with careful monitoring and changes made on a weekly or monthly basis)Is a road-map for short-term decision making

Marketing planHow the products or services will be distributed, priced and promotedSpecific forecasts for product(s)or service (s) are indicated to project profitability of the ventureBudget and appropriate controls needed are also discussed

Organizational plan1)what is the form of ownership of the organization?2)if a partnership, who are the partners and what are the terms of agreement?3)if incorporated, who are the principal shareholders and how much stock do they own?4)What type and how many shares of voting or nonvoting stock have been issued?

Organizational plan5)who are the members of the board of directors? give names,addresses,and resumes)6)Who has check-signing authority or control?

Organizational plan7)Who is each member of the management team and what is his or her background?8)what are the roles and responsibilities of each member of the management team?9)what are the salaries,bonuses,or other forms of payment for each member of the management team?

Assessment of risk Major risk for a new venture could result from-A competitors reactionA weakness in the marketing, production or management teamNew advances in technology (that might render the new product obsolete)Alternative strategies in case of these risks

Financial planDetermines the potential investment commitment needed for the new venture and indicates whether the business plan is economically feasible3 areas of a financial plan-

Financial plan1)summarize the forecasted sales and appropriate expenses for at least first 3 years, with the first years projections provided monthly (forecasted sales, cost of goods sold, and the general and administrative expenses

Financial plan2)cash flow figures 3 years with the first years projections provided monthly

Financial plan3)projected balance sheet (shows the financial condition of the business at a specific time)-summarizes the assets of a business, its liabilities (what is owed) ,the investment of the entrepreneur and any partners ,and retained earnings (or cumulative losses)

appendixAny backup material that is not necessary in the text of the documentReference to any of eh documents in the appendix should be made in the plan itself

appendixLetters from customers, distributors or subcontractors Leases, contracts or any other types of agreements that have been initiated may also be included in the appendixPrice lists from suppliers and competitors may be added

Using and implementing the business plan Planning is an important part of any business operationThe business plan should not end up in a drawer after attaining finance and business launch

Sources of informationSmall business administrationDepartment of commerceFederal information centersBureau of censusState and municipal governments

Sources of informationBanksChambers of commerceTrade associationsTrade journalsLibrariesUniversities and community colleges

Measuring plan progress Typically the projections will be made on a 12 month scheduleHowever, beginning of every month checking of profit and loss statement, cash flow projections and inventory,production,qualitys,sales collection of accounts receivable and disbursement be checked

Unit-12-the marketing planOutline for a marketing plan-Background of ventureMarket opportunities and threatsCompetition analysis

marketing planStrengths and weaknesses of ventureMarketing objectives and goalsMarketing strategy and action programsBudgetscontrols

Market research for the new ventureSteps-1)defining the purpose or objectives2)gathering data from secondary sources3)gathering information from primary sources4)analysing and interpreting the results

Defining the purpose or objectives ask people what they think of the product or service and if they would buy it (get their demographics and attitudes details)How much potential customers would be willing to pay for the product or service

Defining the purpose or objectivesWhere potential customers would prefer to purchase the product or serviceWhere the customer would expect to hear about or learn about such a product or service

Gathering data from secondary sourcesTrade magazines,liabraries,government agencies,universities,internet,Nielsen Indexes, National market indexesCensus reportsChambers of commerce, local banks, department of labor and industry, local media

Gathering data from secondary sourcesDun and Bradstreets million dollar directory, business indexOn-line catalogs scanningArticles written about competitors and the industry exhaust all observation, networking

Gathering information from primary sourcesObservationNetworkingInterviewingfocus groupsexperimentation

Net-workingMore of a in-formal method to gather primary data from experts in the field is a valuable low-cost methodMost successful ventures (based on growth rate) were focused on information about competitors, customers and industry using networking, trade associations and recent publications

interviewingMost common approachMore expensive than observation but more likely to generate more meaningful informationIn person, by telephone, through mail (comparison on the basis of costs, flexibility, response rate, speed, depth)

Focus groupMore informal method for gathering in-depth informationIs a sample of 10-12 potential customers who are invited to participate in a discussion relating to the entrepreneurs research objectives

experimentationInvolves control over specific variables in the research processTypically would require a laboratory setting to control and investigate the effects of defined variablesNot useful while researching new ventures

Analyzing and interpreting the results Results be evaluated and interpreted in response to the research objective that were specified in the first step of research process

Analyzing and interpreting the results Summarizing the answers to questions will give some preliminary insights (comparison the results to questions by different age groups, sex, occupation, location etc).

Understanding the marketing planIs kind of a road-map guide to travelerShould answer 3 basic questions-

Understanding the marketing plan1)where have we been? background of the co. strengths and weakness, background on competition, opportunities and threats

Understanding the marketing plan2)where do we want to go? in the short run)-next 12 months?

Understanding the marketing plan3)how do we get there? specific marketing strategy? when it will occur? who will be responsible for monitoring the activities? based on marketing research carried out before the planning process, budgets to be determined and used in income and cash flow projections

What market planning can do?It will enhance the firms ability to integrate all marketing activities so as to maximize efforts toward achieving the corporate goals and objectivesIt will minimize the effects of surprise from sudden changes in the environment

What market planning can do?It established a benchmark for all levels of the organizationIt can enhance managements ability to manage since guidelines and expectations are clearly designated and agreed to by many members of the marketing organization

What market planning cannot do?It will provide a crystal ball that will enable management to predict the future with extreme precisionIt will not prevent management from making mistakes

What market planning cannot do?It will not provide guidelines for every major decision.Judgement by management at the appropriate time will still be criticalIt will not go through the year without some modifications as the environment changes

Characteristics of a marketing planShould provide a strategy for accomplishing the company mission or goalShould be based on facts and valid assumptions (see facts list next slide)

Characteristics of a marketing planMust provide for the use of existing resources (allocation of all equipment, financial resources and human resources must be described)An appropriate organization must be described to implement the marketing plan

Characteristics of a marketing planShould provide continuity to meet longer-term goals and objectivesBe simple and short with adequate details about how to accomplish a goalFlexible-include what if scenarios? with appropriate responding strategiesShould specify performance criteria that will be monitored and controlled

Facts needed for market planningWho are the users, where are they located, how much do they buy, from whom do they buy, and why?How have promotion and advertising been employed and which approach has been more effective?What are the pricing changes in the market, who has initiated these changes, and why?What are the markets attitudes concerning competitive products?What channels of distribution supply consumers, and how do they function?

Facts needed for market planningWho are the competitors, where are they located, what advantages/disadvantages do they have?What marketing techniques are used by the most successful competitors? by the least successful?

Facts needed for market planningWhat are the overall objectives of the company for the next year and 5 years hence?What are the companys strengths? weaknesses?What are ones production capabilities by product?

Environmental analysisEconomyCultureTechnologyIndustry demandLegal concernsCompetitionRaw materials

economyTrends in GNPUnemployment by geographic areaDisposable income

cultureShift in population by demographicsShift in attitudesTrends in safety, health and nutritionConcern for the environmentTo be found in magazines, newspapers or trade journals

technologyAdvances in technology are difficult to predictPotential technological developments determined from resources committed by major industries or the Government

technologyShort term plans and contingency plan in case of a technology playerTrade associations, trade conferences are the avenues to know this

Industry demand Often available from published sourcesWhether the market is growing or declining?The number of new competitorsPossible changes in consumer needs Additional research for demand for the entrepreneurs product

Legal concernsFuture legislation that may affect the product or service, channel of distribution, price or promotion strategyNew legislation such as deregulation of prices, restrictions on media advertising ban on cigarette ads etc)

Legal concernsSafety regulations affecting the product or packagingFrom industry journals or by trade associations

competitionTo be identified from experience, trade journal articles,advertisements,yellow pages etcGenerally face potential threats from larger corporations

Raw materialsSome assessment of the availability of raw materials may be necessary in situations where the raw materials are limited or access to suppliers is difficultTrends regarding raw materials are often published in trade journals

Internal variablesFinancial resourcesManagement teamSuppliersCompany vision

Financial resourcesAvailability of financial resources as well as the amount of funds needed to meet the goals and objectives

Management teamAssignment of responsibility is extremely important

Management teamAvailability of a certain expertise may be uncontrollable (shortage of certain types of technical managers etc)The entrepreneur must build an effective management team and assign the responsibilities to implement the marketing plan

suppliersAre selected on factors such as price, delivery time,quality,management assistance etc.

Company missionDescribes the nature of the business and what the entrepreneur hopes to accomplish with that business

Steps/stages/flow-chart of a marketing plan1)critically examine present and prospective product/market situation2)take into account company goals and restraints

Steps/stages/flow-chart of a marketing plan3)set marketing objectives that are specific and measurable4)determine marketing strategies and prepare action programs with assigned responsibilities and dates for accomplishment5)re-evaluate programs against objectives

Steps/stages/flow-chart of a marketing plan6)objectives attainable/objective un-attainable7)draft marketing plan, with steps to monitor progress of programs8)match feasibility of programs against available resources or restraints9)feasible/not feasible10)submit marketing plan for approval

Defining the business situation Situation analysisReview analysis

Defining the business situation Industry analysisReview of past performance of the product and the companyNew venture-background will be more personal, describing how the product or service was developed and why it was developed (to satisfy consumer needs)

Industry analysisReview of trade magazines, government publications or published articles to determine the attractiveness

Industry analysisSize of market, growth rate, source and availability of suppliers, threat of innovation or new technology,regulations,new entries and effects of economic conditions before determination of marketing strategy

Competitor analysisIdentify each competitor with its location,size,market share,sales,profits,strengths and weaknesses

Segmentation and targeting process by an entrepreneur1)Decide what general market or industry you wish to pursue2)divide the market into smaller groups based on characteristics of the customer or buying situationsA) characteristics of the customer-

Segmentation and targeting process by an entrepreneur1)geographic(state,country,city,region)2)demographic(age,sex,occupation,education,income and race)3)Psychographic-(personalitya and lifestyles)

Segmentation-Buying situation based-Desired benefits (e. g. product features)Usage (e. g. rate of use)

Segmentation-Buying conditions (e. g. time available and product purpose)Awareness of buying intention (familiarity of product and willingness to buy)

Segmentation-III) select segment or segments to targetIV) Develop a marketing plan integrating product, price, distribution and promotion

Examples-poor strategy and good strategyPoor strategy-we will increase sales for our product by lowering the priceGood strategy-we will increase sales for our product by 6-8% by-

Examples-poor strategy and good strategy1)lowering the price by 10%2)attending an important trade show in New York and 3)conducting a mailing to 5,000 potential customers throughout India

Why some plans fail?1)Lack of a real plan-superficial, lacks detail and substance regarding goals and objectives2)Lack of an adequate situation analysis-where you are and where you have been, before deciding where u want to go (careful analysis leads to a reasonable goal)

Why some plans fail?3)unrealistic goals-because of lack of understanding of the situation4)un-anticipated competitive moves, product deficiencies and acts of god (oil-spill, flood, hurricane, war etc)

Unit-13-organizational planOrganization structurePlanning, measurement and evaluation schemesRewardsSelection criteriatraining

Building the successful organizationJob descriptionsJob specifications

Job description-example Sales Manager: Responsible for hiring, t training, co-coordinating and supervising all sales representatives, internal and external to the firm. Monitor sales by territory in the four-state market area. Call on key accounts in market area once every two weeks to provide sales promotion and merchandising support. Prepare annual sales plan for firm, including sales forecasts and goals by territory

Job specificationsSkills and abilities needed to perform the job must be outlined including prior experience and education requirements3-5 years sales experienceA bachelors degree in business

Job specificationsExperience in sales training, management experience, writing skills and communication skillsHow much travel will be necessaryHow much effort will be devoted to developing new businessReporting responsibilities should be also outlined

The role of a board of directors-functions-1)reviewing operating and capital budgets2)developing longer-term strategic plans for growth and expansion3)supporting day-to-day activities

The role of a board of directors-functions-4)resolving conflicts among owners or shareholders5)ensuring the proper use of assets6)developing a network of information sources for the entrepreneur

The role of a board of directors-functions-Normally appointed after a venture has been launched

The role of a board of directors-functions-In case of before formation, would become important part of the management team and organization plan when funding for the new venture is sought

The role of a board of directors-functions-Boards involvement has been shown to be positively related to financial performanceIdeally, the BOD consists of 7-12 members with limited terms to allow for continuous infusion of new ideas

Selection of BOD On the basis of willingness to serveTheir expertiseTheir commitment to support the entrepreneur

Selection of BOD Performance needs to be regularly evaluated by the entrepreneurs thru chairmanThe chairperson (and/or founders) should have a written description of the responsibilities and expectations of each member

Selection of BOD Compensation for board members can be sharestock,stock options, or dollar payment

Board of advisorsMore loosely tied to the organizationServe the venture only in an advisory capacity for some functions or activities No legal status, hence not subject to the pressures of litigationLikely to meet less frequently or depending on the need

Legal forms of business1)propietorship2)partnership

Legal forms of business3)corporationCan be compared with regard to ownership, liability, start-up costs, continuity, transferability of interest, capital requirement, management control, distribution of profits, attractiveness for raising capital etc.

proprietorshipOwnership-individualLiability of owners-individual liableCosts of starting business-none other than filing fees for trade nameContinuity of business-death dissolves the business

proprietorshipTransferability of interest-complete freedom to sell or transfer any part of businessCapital requirements-capital raised only by loan or increased contribution by proprietor

proprietorshipManagement control-proprietor makes all decisions and can act immediatelyDistribution of profits and losses-proprietor responsible and receives all profits and lossesAttractiveness for raising capital-depends on capability of proprietor and success of business

partnershipOwnership-no limitation on number of partnersLiability of owners-in general, partnership individuals all liable for business liabiilties.In limited partnership, partners are liable for amount of capital contribution

partnershipCosts of starting business-partnership agreement, legal costs and minor filing fees for trade name. Limited partnership requires more comprehensive agreement, hence higher costs.

partnershipContinuity of business- death or withdrawal of one partner terminates partnership unless partnership agreement stipulates otherwise. In limited partnership, death or withdrawal of one of limited partners has no effect on continuity. Limited partner can withdraw capital after six months after notice is provided

partnershipTransferability of interest-general partner can transfer his/her interest only with consent of all other general partners. Limited partner can sell interest without consent of general partnersCapital requirements-loans or new contributions by partners require a change in partnership agreement

partnershipManagement control-all partners have equal control and majority rules. In limited partnership ,only the general partners have control of the business

partnershipDistribution of profits and losses-depends on partnership agreement and investment by partnersAttractiveness for raising capital-depends on capability of partners and success of business

Corporation Ownership-no limitation on number of stockholdersLiability of owners-amount of capital contribution is limit of shareholder liabilityCosts of starting business-created only by statute. Articles of incorporation, filing fees, taxes and fees for states in which corporation registers to do businessContinuity of business-greatest from of continuity. Death or withdrawal of owner(s) will not affect legal existence of business

Corporation Transferability of interest-most flexible, stockholders can sell or buy stock at will. Some stock transfers may be restricted by agreement.Capital requirements-new capital raised by sale of stock or bonds or by borrowing(debt)in name of corporation

Corporation Management control-majority stockholder(s)have most control from legal point of view. day-to-day control in hands of management who may or may not be major stockholders

Corporation Distribution of profits and losses-shareholders can share in profits by receipt of dividendsAttractiveness for raising capital-with limited liability for owners, more attractive as an investment opportunity

Sources of capital1)Debt or Equity financing2)internal or external funds3)personal funds4)family and friends5)commercial banks

Debt or equity financingDebt financing (asset based financing)- is a financing method involving an interest-bearing instrument, usually a loan, the payment of which is only indirectly related to the sales and profits of the ventureTypically requires that some asset (such as car, house, plant, machine or land) be used a collateral

Debt or equity financingIf the financing is short-term (less than one year) ,the money is usually used to provide working capital to finance inventory, accounts receivable, or the operation of the business

Debt or equity financingLong-term debt (lasting more than 1 year) is frequently used to purchase some assets such as a piece of machinery,land,or a building with part of the value of the asset (usually 50-80%of the total value) being used as collateral for the long term loan

Debt or equity financingWhen interest rates are low debt financing allows the entrepreneur to retain larger ownership portion in the venture

Equity financingDoes not require collateral and offers the investor some form of ownership position in the ventureThe investor shares in the profits of the venture, as well as any disposition of its assets on a pro-rata basis

Equity or debt or any other financing? Availability of fundsThe assets of the venture

Equity or debt or any other financing? Prevailing interest ratesUsually entrepreneur meets financing needs by employing a combination of debt and equity financingIn small ventures, the equity may be provided by the owner (ice-cream stand, push-cart in the mall etc)

Internal or external fundsInternally generated funds can come from several sources within the company:profits,sale of assets,reductin in working capital, extended working capital,exetended payment terms and accounts receivable

Internal or external fundsIn every new venture, the start-up years involve putting all the profits back into venture (even outside equity investors do not expect payback in the early years)

Internal or external fundsSometimes, the needed funds can be obtained by selling little-used assets (assets should be on a rental basis (preferably on a lease with an option to buy)

Internal or external fundsShort term internal sources of funds can be obtained by reducing short-term assets:inventory,cash and other working capital items

Internal or external fundsSometimes cash can be generated through extended payment terms from suppliersAnother method is collecting bills more quickly

External financingSources to be evaluated on 3 basis-1)the length of time the funds are available2)the costs involved3)the amount of company control lost

Alternative sources of financing Suppliers and trade creditCommercial banksAsset-based lendersInstitutions and insurance companies

Alternative sources of financing Pension fundsVenture capitalPrivate equity placementsPublic equity offeringsGovernment programs

Personal fundsThese are the least expensive funds in terms of cost and control and they are absolutely essential in attracting outside funding particularly from banks private investors and VCs

Personal fundsIt is not the amount but the fact that all monies available are committed that makes outside investors feel comfortable with the entrepreneurs commitment level

Family and friendsProvide a small amount of equity funding for new venturesKeep the business arrangements strictly business

Family and friendsSettle everything upfront and in writingA formal agreement containing the amount of money involved, the terms of money, the rights and responsibilities of the investor and remedies in case of failure be highlighted

Commercial banksTypes of bank loans-1)accounts receivable loans2)inventory loans3)equipment loans4)real estate loans

Accounts receivable loansSuitable when the customer base is well known and credit worthyBank may finance up to 80%of the value of their accounts receivableIn case of government customers factoring" arrangement may be developed

Accounts receivable loansFactor (bank) actually buys the accounts receivable at a value below the face value of the sale and collects the money directly from the accountCost of factoring is higher than the cost of securing a loan

Accounts receivable loansFactoring costs involve both the interest charge on the amount of money advanced until the time the accounts receivable are collected ,the commission covering the actual collection, and protection against possible uncollectible accounts

Inventory loansUsually the finished goods inventory can be financed up to 50%of its value

Inventory loansTrust receipts are a unique type of inventory loan used to finance floor plans of retailers such as automobile and appliance dealersIn TR,the bank advances a large% of the invoice price of the goods and is paid on a pro rata basis as the inventory is sold

Equipment loansCan be used to secure longer-term financing usually 3-10 years Types-1)financing the purchase of new equipment

Equipment loans2)financing used equipment already owned by the company

Equipment loans3)Sales leaseback financing-the entrepreneur sells' the equipment to a lender and then leases it back for the life of the equipment to ensure its continued use

Equipment loans4)lease financing-the company acquires the use of the equipment through a small down payment and a guarantee payment and a guarantee to make a specified number of payments over a period of time. the total amount paid is the selling price plus the finance charges

real estate loansIs also frequently used in asset-based financingIs usually easily obtained to finance a companys land,plant,or another building usually up to 75%of its value

Cash-flow financing1)installment loans2)straight comm