Business Ideas and Market Strategies

Introduction

• Starting a new business prioritizes establishing a presence in the target market
• Existing businesses focus on expansion or maintaining competitiveness
• Business ideas can involve improving existing products/services or innovating customer service

Product/Service Improvement

• Performance
• Acquisition Cost
• Maintenance Cost
• Salvage Value
• Use

Sound Business Idea

• A sound business idea is an economic opportunity, essentially a plan or concept potentially successful and profitable.
• It addresses a market need or problem
• It has a clear target audience
• It can be executed effectively within resource constraints

Sound Business Idea Examples

• Parcel delivery services like DHL, FedEx, and LBC adapted business ideas to address the poor service of postal services thus addressing a need in the market.

Importance of Sound Business Ideas

• A sound business idea is crucial for new ventures to gain market entry success
• Established businesses use sound business ideas to remain competitive

Different Forms of Business Ideas

• Professionalization: Streamlining and organizing operations (e.g., McDonald's)
• Customization: Offering various colors, designs, and features for products (e.g., clothing, sporting goods)
• Technological Adaptation: Utilizing new technology to enhance existing products/services (e.g., bakery using machines)
• Local Product Replacement: Replacing imported products with local production (e.g., agricultural goods)
• Internationalization: Expanding business operations internationally (e.g., Jollibee)

Procedure in Determining the Best Business Idea

• Preparation of the list of business ideas
• Screening of the listed ideas
• Final selection

Method of Searching for Ideas

• Unanticipated means (e.g., work, hobbies, acquaintances, chance events)
• Deliberate search (e.g., using questions, idea prompting)

Unanticipated Means

• The person's work
• The person's hobbies
• The person's acquaintances
• A chance event encountered by the person

The Person's Work

• Employees directly interacting with customers may identify unmet needs or demands.
• Unmet needs can be an opportunity for business development (e.g., tutor academy)

The Person's Hobbies

• A hobby can serve as a platform for business development
• A hobby can create the necessary skills and experience needed to excel in a new venture (e.g., guitar enterprise)

Acquaintances

• Another person can spark an awareness of a business opportunity (e.g., book store)

A Chance Event

• An encountered event can act as a catalyst for a business venture (e.g., trading tomatoes based on class mate's feedback).

Deliberate Search for Ideas

• Using search questions to define the needed answers
• Idea prompting based on an encounter with another person's idea, customer request, or an event can lead to new ideas.

Screening Generated Ideas

• Market feasibility
• Technical feasibility
• Financing feasibility
• Financial feasibility

Market Feasibility

• Stable and sufficient demand
• Potential competitive strength of the firm

Market Feasibility - Demand

• Business ideas must have sufficient demand
• The failure to meet demand would lead to a business' demise.

Market Feasibility - Strength

• The business idea must be able to compete with existing or potential competitors.

Stages to screen a strong idea.

• Search for business ideas
• Screening
• Adoption of the selected business idea
• Preparation of formal plans

Sources of Market Information

• Prior market studies from other companies, government agencies, and entrepreneurs
• Actual polls of typical customers using various methods (questionnaire, advertisements, phone interviews, and personal interviews).
• Negotiation with prospective customers to determine their purchasing intentions

Technical Feasibility

• The real execution of converting ideas to products or services may experience challenges in quality, quantity, sufficient resources, material procurement, and manpower.

Financing Feasibility

• Sufficient funds to finance operations
• Sources include the entrepreneur's savings, relatives/friends, and financial institutions.

Financial Feasibility

• Profit is the result of business idea financial feasibility, determined through an analysis done in steps:
  • Prepare projected financial statements (income statement, balance sheet, and cash flow statement)
  • Analyze financial ratios derived from projected statements.

Projected Financial Statements

• Forecasts of future financial performance of a firm

Determining Financial Feasibility

• The process of evaluating the financial performance of an idea using projected financial statements and ratio analysis to determine financial feasibility.
• The resulting determination can lead to approval or rejection of the idea.

Projected Income Statement

• Summarizes planned revenues, expenses, and profits over a given time period.

Projected Balance Sheet

• Showcases projected financial position of a firm on a particular date.

Projected Cash Flow Statement

• Shows projected cash sales and/or purchases.

Final Selection

• Process of screening the best business ideas and eliminating the rest.
• Potential outcomes of screening: status quo, shorter list, zero listing.

Evaluation of Shortlisted Business Ideas

• Proposal evaluation based on expected value
• Expected value criteria can be used to evaluate shortlisted business ideas.

Organizational Culture and Creativity

• Encouragement of creativity and risk-taking
• Rewards for creativity
• Open communication
• Allowance for errors
• Climate of participation
• Training in the creative process
• Flexibility

Encouragement of Creativity and Risk-Taking

• Creativity involves proactively finding solutions to obstacles affecting a firm's objectives.
• Testing a business concept necessarily requires a calculated risk; risks can be good or bad

Rewards for Creativity

• Rewarding creative activity encourages its continuity in the organization

Open Communication

• Free-flowing exchange of ideas among firm members.
• Communication flows vertically and horizontally through organizational structure.
• Open communication allows easy identification of problem-solving potential.

Allowance for Errors

• Acknowledging and correcting errors is crucial for creative endeavors; errors should not hinder the creative process.
• Creative individuals won't be discouraged by errors. The company benefits from open error corrections

A Climate of Participation

• Organizational participation encourages contribution to creative efforts in the organization.
• Employee participation leads to generating more creative ideas.

Structural Mechanisms that Aid Creativity

• Structural support for creative endeavors within an organization.
• A designated unit for creative logistical support helps manage creative activities effectively

Training in the Creative Process

• Training can enhance creative abilities, even for individuals with natural talent.

Flexibility

• Flexibility in scheduling and working environment allows individuals to create ideas in the most comfortable way.

Strategic Planning for Small Businesses

• Determining primary objectives
• Adopting a course of action
• Allocating resources

Determination of Primary Objectives

• Defining the overarching goal provides clarity, alignment, direction for informed decisions, prioritizing activities, and rallying the team for long-term success in a competitive marketplace.

Vision and Mission Statements

• Vision statement: Defines firm goals, objectives, and direction
• Mission statement: Defines the company's work, customer base, and mode of operation.

Strategic Objectives

• Specific targets that entrepreneurs hope to achieve for their organization.
• Define in specific terms, how the firm's mission will be realized.
• Examples include expanding capacity, increasing sales, and market share.

Adoption of Course of Action

• Strategy as the carefully designed plan to accomplish firm objectives.
• Strategies outline how to reach goals with available resources such as SWOT analysis and forecasting future sales.

SWOT Analysis

• SWOT analysis (strengths, weaknesses, opportunities, threats) is an organized approach to evaluate a firm's internal aspects and external environment.
• Evaluates internal organizational strength and weaknesses and external environment challenges.

Forecasts of Future Sales Performance

• Estimation of future sales or income of a firm,
• Performed for short-term, medium-term and long-term estimations.
• A combination of statistical and intuitive forecasts tempered by the experience of the entrepreneur.

Implementing Strategic Plans

• Implementation of strategies needs suitable methodology
• Identify suitable methods, and resources required.

Identifying Specific Methods

• Establishing the optimal methods for utilizing resources
• Strategies should involve relevant tactics for effective resource utilization.

Deploying Resources

• Identifying available human and non-human resources necessary to achieve objectives.

Fundamental Strategies for Small Businesses

• Flexibility Strategy
• Strategy of Effectiveness as a Higher Priority Approach
• Start Simple Approach or a Gradual Approach

Strategy Concerns of Small Business

• Two fundamental situations:
• Organizing a new business
• Running an existing business

Situation for New Business

• Acquiring an existing business
• Organizing a new business
• Buying a franchise

Situation for Existing Business

• Compete with small business
• Compete with large business

New Business - Acquiring an Existing Business

• Advantages: Immediate access to revenue streams, established brand, existing processes
• Disadvantages: Higher upfront costs, possible debt and liabilities, limited flexibility.

New Business - Organizing a New Business

• Advantages: Full control over the concept, flexibility to adapt, unique brand/culture, potentially lower initial investment
• Disadvantages: Higher risk and uncertainty, longer time frame to establish brand and revenue, effort and resources needed to develop operational processes and systems, challenges with attracting initial customers

New Business - Buying a Franchise

• Advantages: Proven business model, training & support, established brand, potential for faster growth and expansion independently
• Disadvantages: Initial franchise fees, limited autonomy, restrictions on business operations and branding, potential for conflict.

Strategies for a Going Concern

• Segment market
• Efficient use of research and development
• Think small

Why Small Business Operators Ignore Strategic Planning

• Inability to start
• Lack of expertise
• Failure to realize the importance of strategic planning
• Focus on daily operations
• Resource poverty
• Uncontrollable and intangible variables

Summary

• Businesses need strategic planning to be successful
• Strategy selection depends on whether it's a new or existing business
• Challenges such as lack of expertise, daily operations focus, and resource constraints frequently prevent entrepreneurs from performing strategic planning.

This quiz explores the essentials of starting a new business, focusing on developing sound business ideas that meet market needs. It includes strategies for improving products and services and examples of successful businesses that adapted to market demands. Understand the elements that contribute to a business's competitive edge.