Introduction to Business Model Canvas PDF

 1 Introduction to Business Model Canvas 11  Synopsis This chapter introduces the Business Model Canvas as a tool to discuss and generate business strategies on key critical business areas. Introduction to Entrepreneurship Al...

 1 Introduction to Business Model Canvas 11  Synopsis This chapter introduces the Business Model Canvas as a tool to discuss and generate business strategies on key critical business areas. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 3  Objectives The objectives of this chapter are:  To introduce students to the various tools available in the Business Model Canvas to facilitate development of effective business strategies.  To develop skills in using a Business Model Canvas to work on business opportunities which can then be used to develop a viable business model. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 4  Learning Outcomes At the end of this chapter, students should be able to:  Develop generic analytical skills (identifying, analyzing and capturing of opportunities).  Apply the tools (i.e. SWOT and Business Model Canvas) in analyzing and developing new business models and strategies. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 5  List of Topics  Business Model Canvas Components Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 6  Introduction  The Business Model Canvas, introduced by Osterwalder (2008) is a method of analyzing, designing, strategizing and testing a business model based on nine business areas. The strategies are put up on a board so that the entire model can be seen at once. This will allow the entrepreneur to understand each of the strategies and relate it easily to the other strategies on display. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 7  Introduction (cont.)  The Business Model Canvas is a canvas or a chart which includes at least nine areas or elements in a business model. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 8  Introduction (cont.) 1 Customer segments 2 Value propositions 3 Marketing channels 4 Customer relationships 5 Key partners 6 Key activities 7 Key resources 8 Cost structure 9 Revenue streams Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 9  Business Model Canvas Components Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 10  Business Model Canvas Components (cont.)  Customer segments – Customer segments refer to the target people and/or organizations you are offering value proposition. They can be divided into groups of individuals or organizations that have similar demographics, psychographics, behaviour, geographical characteristics or other multidimensional combinations. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 11  Business Model Canvas Components (cont.)  Companies that identify underserved segments can then outperform the competition by developing uniquely appealing products and services. Customer segmentation is most effective when a company’s offerings are tailor-made to segments that are the most profitable and serve them with distinct competitive advantages. This prioritization can help companies develop marketing campaigns and pricing strategies to extract maximum value from both high- and low profit customers. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 12  Firm’s Value Propositions  According to Osterwalder (2008), a company’s value proposition is what distinguishes itself from its competitors. Value is provided through various elements such as newness, performance, customization, reliability in ‘getting the job done’, design, brand, price, cost reduction, risk reduction, accessibility, and convenience. The value propositions may be quantitative, e.g. price and efficiency; or qualitative, e.g. overall customer experience and outcome. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 13  Firm’s Value Propositions (cont.) The following are examples of value proposition concepts and techniques:  Unique Selling Proposition (USP)focuses on what makes a product better than the competition.  Feature–Advantage–Benefit (FAB)a process that helps an entrepreneur figure out what each of the product’s features means to customers, which enables the entrepreneur to address their concerns, desires, wants, and needs. Start by listing the product’s features, then consider the advantages it creates (e.g. a knife that would not corrode). Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 14  Firm’s Value Propositions (cont.)  Finally turn that into the practical benefit (e.g there is no need to buy a new knife every year).  Points of Parity–Points of Difference (POP–POD) POP–POD is a process used to find differentiating factors between businesses. Start by finding points of parity—the factors in common with competitors, then find the points of difference—the business aspects that is different to competitors. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 15  Firm’s Value Propositions (cont.)  Unique Value Proposition (UVP) UVP has a strong focus on uniqueness, which makes it less useful for the general market but it is useful to specific target market due to its unique features.  Some value propositions involve innovative technology. Some simply deliver better service. Others are a mix of better goods and services. Indeed, there are many different types, some of which are quantifiable, e.g. price, speed of service; and some of which remain qualitative, e.g. design, status, customer experience. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 16  Marketing Channels  A company can deliver its value proposition to its targeted customers through different channels. Effective channels will distribute a company’s value proposition in ways that are fast, efficient and cost- effective.  The first decision to be made when trying to sell products or services to the target market is whether to sell directly to that target market, or to use intermediary services. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 17  Marketing Channels (cont.)  The most common methods of direct marketing include direct selling, Internet marketing and catalogues. Although direct marketing involves a simple and straightforward process, it does not always move goods from producers to consumers efficiently, due to the lack of expertise, experience and economies of scale. In order to be more efficient, many companies rely on marketing intermediaries to market their products. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 18  Marketing Channels (cont.) Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 19  Customer Relationships  Customer relationships are the types of relationships a company establishes with specific customer segments. Customer relationships may be driven by one or more of these three motivations: – Customer acquisition – Customer retention – Increased sales (upscaling)  Studies show that it costs four to six times as much to get a new customer as it does to keep a customer loyal, hence, it is imperative for companies to build brand loyalty. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 20  Customer Relationships (cont.) Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 21  Key Partners  Key partners are the network of suppliers and partners that make the business model work. Companies forge partnerships to optimize business models, reduce risk, and acquire resources. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 22  Key Activities  Key activities are activities that a company must do in order to make its business model work.  For example, at a computer software company, the key activities include software development and marketing. A consultancy company will concentrate on problem solving. Key activities are important in any business building block. These activities will depend on the nature of the business. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 23  Key Resources  Key resources are the most important assets needed to make a business model work. Every business model requires them, and it is only through them that companies generate value propositions and revenues. Key resources can be physical, financial, intellectual, or human. A microchip manufacturer needs capital-intensive production facilities, whereas a microchip designer depends more on human resources. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 24  Cost Structure  The entrepreneur should strategize the best and appropriate cost structure to suit the project concept. The opted cost structured model will have to be aligned with the other activities in the business model to match the total products and services concept offered to customers. For example, the Air Asia model is a low-cost model where customers are charged for products and service items that they choose when they purchase their ticket. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 25  Revenue Streams  Revenue streams represent the cash a company generates from each customer/product segment. An entrepreneur will have to strategize and modify his products and services to create attractive values for target customers. An entrepreneur may explore additional revenue streams through export markets or online marketing, or for example, lease idle assets to generate additional revenue. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 26  Revenue Streams (cont.) Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 27  Summary  The Business Model Canvas has been accepted and used widely for developing business strategies, both by start-up businesses as well as established large corporations.  The Business Model Canvas methodology will enable students to learn how to work out an effective business strategy in a systematic, orderly and comprehensive manner. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 11– 28  1 Operations Management for Business Start-ups 7  Synopsis This chapter provides the basic knowledge on how to manage operations of a business start-up and small businesses. It covers managing inputs, processes and outputs that involve planning of product design, process design, location choice and layout design, production capacity planning and management of production schedule and cost, inventory and quality management. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 3  Objectives The objectives of this chapter are: 1. To introduce operations management. 2. To discuss product design, process design, location choice and layout design, production capacity planning and management of production schedule and cost, inventory and quality management Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 4  Learning Outcomes At the end of this chapter, students should be able to:  Discuss basic operations management, especially for small business start-ups.  Discuss and apply knowledge on operations management to their entrepreneurial practicum project. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 5  List of Topics 1. Location Planning 2. Process Design, Sourcing of Equipment and Layout Planning 3. Production Planning and Capacity Management 4. Inventory Management 5. Quality Management 6. Operational Costs and Product Costing Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 6  Introduction  Operations management can be defined as the management of resources (inputs), organizing and designing the transformation process (production processes) to produce products and services (outputs) to achieve objectives of cost, quality, quantity, time and safety. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 7  Components of Production Management Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 8  1. Location Planning  It is crucial for an entrepreneur to choose the right location for his business because a good location can result in – higher sales, – lower operating cost and – higher profit. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 9  1. Location Planning (cont.)  In general, the choice of location will depend on the following factors: – Close proximity to customers. – High number of potential customers and high population growth. – Close proximity to raw materials. – Availability of good infrastructures and facilities. – Availability of manpower. – Good visibility and easier accessibility. – Low crime rate and availability of facilities and services such as hospitals, schools, banks, sport facilities, etc. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 10  2. Process Design, Sourcing of Equipment and Layout Planning  In a small business employing a traditional production process, products are made in a small quantity and they are normally produced to fulfil specific customers’ needs.  Generally, the tools and machines used are designed to perform specific isolated tasks to help operators perform their work. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 11  2. Process Design, Sourcing of Equipment and Layout Planning (cont.)  Entrepreneurs must choose machines that are suitable with his production tasks in terms of quality, price, quantity, after-sales service and maintenance, etc.  The layout planning and the positioning of the machines must be designed to achieve – efficient process flow, – safe operation, – effective and convenient process control. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 12  Example of Process Flow Chart Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 13  3. Production Planning and Capacity Management  An entrepreneur must design adequate production facilities to produce outputs that fulfil sales forecast.  Decisions must be made on the type, quality and number of machines or equipment and manpower required for the plan production.  Depending on the volume of production, he may choose to use a fully automatic, semi-automatic or manual production system. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 14  4. Inventory Management  Entrepreneurs must manage inventory effectively because: (a) Adequate inventory helps entrepreneurs to meet market demand. (b) Inadequate inventory will cause disruption to operations and incur missed sales opportunities. (c) Too much inventory means high inventory costs and reduce business profit.  In short, inventory is entrepreneurs’ valuable capital. – All capital must be managed effectively and efficiently. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 15  4. Inventory Management  In short, inventory is entrepreneurs’ valuable capital. – All capital must be managed effectively and efficiently.  A business that has – too much inventory will increase holding or storage (carrying) costs and occupy more space; – while too little inventory may cause stock shortage and affect customer service. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 16  4. Inventory Management  The objective of inventory management is to determine optimum inventory level that is suitable for the business.  In a retail business, the general rule of thumb: – inventory for fast-moving items should be adequately stocked, – while the inventory for slow-moving items should be few but adequate. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 17  5. Quality Management  Definition of Quality: – a measure of how close a product or service conforms to standards and specifications (Stevenson, 2009). – a product’s fitness for use; its success in offering features that consumers want (Juran, 1998). – ISO definition: "The totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs". Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 18  6. Quality Management Benefits of quality:  Remain competitive  Retain market share  Acquire profitability  Achieve customer satisfaction and customer loyalty  Produce high quality products/services  Reduce operational costs (reduced quality problems, scraps, yield loss, wastages) Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 19  6. Quality Management Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 20  6. Quality Management Cost of Non-quality:  Entrepreneurs must realize that the cost of non- quality is very high.  External costs involve poor reputation, loss of repeat customers, and rejected or returned product costs.  Internal costs involve wasted cost on material and labour, rework costs and low morale among workers. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 21  6. Quality Management  An entrepreneur should initially focus on preventive efforts to eliminate defects and seek the causes of these defects e.g. – defective methods, – materials, – manpower, – equipment, – management procedures and systems, – layout and work place. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 22  6. Quality Management  An entrepreneur has to identify these quality defects and find the causes of these defects, before working out a suitable solution.  The cause-and-effect diagram (next page), also known as Ishikawa diagram, can facilitate an exercise to: – identifying quality problems, – their root causes and – possible remedies or solutions. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 23  6. Quality Management Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 24  Operational Costs and Product Costing  One of the objectives of operations management is to minimize the cost per unit of production, so that the product can be sold at a competitive price.  Operational costs include cost of direct materials, direct labour and overhead. – Direct materials and labour include the money spent on materials and labour directly used for the production of the product. – Overhead costs include other indirect costs such as wages for administrative, marketing and finance staff; rental, utility, transportation, maintenance, depreciation of assets (equipment) and interest. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 25  Operational Costs and Product Costing (cont.) Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 26  Summary  This chapter introduces basic operations management that needs to be addressed by an entrepreneur when starting a new business.  An entrepreneur will have to choose the site location, plan his production system, and estimate the cost per unit of the output.  Ultimately, the operations management must be able to meet operational objectives of quality, quantity, delivery time, cost and safety. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 7– 27  1 Marketing Planning for Business Start-ups 6  Synopsis This chapter covers basic principles of marketing considered necessary for business start-ups. Marketing planning will be explained as a process with serial steps to completion. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 3  Objectives The objectives of this chapter are:  To introduce the basic concepts in marketing.  To demonstrate the elements of marketing mix.  To discuss the relevance of marketing in entrepreneurship. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 4  Learning Outcomes At the end of this chapter, students should be able to:  Describe the basic concepts in marketing.  Explain marketing mix.  Explain the importance of marketing for entrepreneurs. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 5  List of Topics  Important Concepts in Marketing—Needs, Wants, Demand, Values and Satisfaction  Market Segment, Target Customers and Positioning  Customer Relationship Management  Marketing Plan  Marketing Mix  Marketing and Entrepreneurship Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 6  Introduction  Kotler (2014) defines marketing as “the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit.  Marketing identifies unfulfilled needs and desires”.  This chapter focuses on the basic knowledge about principles of marketing and some of the approaches applicable for start-ups and small business companies. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 7  Important Concepts in Marketing—Needs, Wants, Demand, Values and SatisfactIon  An entrepreneur must understand the target customers in terms of needs, wants and demands, so one can develop products or services that are of value to the customers.  He may have to invest in information gathering and analysis which will enable him to understand his customer’s motivation and behaviour.  This will help develop marketing strategies and tactics that are suitable and fit the customers’ characteristics. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 8  Important Concepts in Marketing— Needs, Wants, Demand, Values and Satisfaction (cont.)  “Needs” refer to a person’s feelings of a state of inadequacy.  “Wants” refer to what a customer desires beyond basic needs. “Wants” are often influenced by many factors, i.e. psychographics, demographics, economics and cultural factors.  “Demands” refer to the needs and wants that can be translated into real purchases by customers because they can afford it and are willing to pay for it. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 9  Important Concepts in Marketing— Needs, Wants, Demand, Values and Satisfaction (cont.)  “Value” is the benefit received when buying a product or service. “Price” is what is paid for a product or service. – Customers will be easily persuaded to part with their money to buy something if they perceive it to have greater value than what it cost them to buy.  Therefore, a marketer will try to package his products, price, promotion, distribution channels and selling outlets – to suit and fit the target market customers and to make them consider it to be of higher value than its price. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 10  Important Concepts in Marketing— Needs, Wants, Demand, Values and Satisfaction (cont.)  Customer satisfaction is very important as it will translate into repeated sales.  Satisfied customers contribute to sales growth because they will promote the products (word- of-mouth) to friends and family. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 11  Market Segment, Target Customers and Positioning  In the marketplace, sellers compete with each other to sell to customers. – A marketer needs to identify the target customers. – One may divide potential customers into segments of customers that share common characteristics.  This practice may facilitate the entrepreneur to package suitable marketing strategies that suit customers’ characteristics. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 12  Market Segment, Target Customers and Positioning (cont.)  “Positioning” refers to how customers perceive a brand or a company and its offerings as compared to other company’s offerings.  Customers’ perceptions can also be influenced by how a company communicates and projects its image to the customers.  Some companies use taglines to position, reflect and differentiate their products from competitors’ product. – E.g. Subway restaurants use “Eat Fresh” as their tagline to show them as a restaurant selling fresh products. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 13  Customer Relationship Management (CRM)  Customer relationship management or customer relationship marketing is focused on building relationships with existing customers to turn them into loyal customers.  The objective of relationship marketing is to build a win-win and satisfying relationship with the customers.  Researches have shown that it is less expensive to maintain current customers and develop good relationships with them. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 14  Marketing Plan  Successful marketers usually develop a marketing plan as their road map. – The plan serves as a guideline to specific analysis, marketing strategies, tactics and programmes.  A marketing plan requires data collection and analysis of customers, competitors and marketing environment. – Based on this, realistic and suitable marketing objectives, strategies and marketing budget are outlined for implementation. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 15  Marketing Mix  Marketing mix refers to marketing strategies, commonly known as 4Ps, i.e. strategies of product, price, promotion and place. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 16  Marketing Mix (cont.) Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 17  1. Product  Marketers develop product strategies that can create and provide values to target customers. – Among product strategies that need to be developed include components of a product, branding, packaging, and other elements that add value to the core product.  Components of a product include the core function of a product, plus other elements that can add value to the product, e.g. – innovative design, – extended warranty, – after sales service, etc. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 18  1. Product (cont.) Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 19  2. Price  The marketer needs to plan prices in such a way that customers can afford to pay, are willing to pay, and the price can provide a profit margin.  Price can be fixed based on a number of strategies: i. Cost-based pricing- cost plus targeted profit margin. ii. Value-based pricing - based on customers intrinsic value evaluation and perception. iii. Competitor-based pricing- price is fixed relative to competitor’s price. iv. All of the above. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 20  Cost based vs Value Based Pricing Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 21  3. Promotion  Promotion in general refers to how marketers communicate with customers.  In today’s business environment, it is not only important for marketers to communicate with customers and potential customers, but it is also crucial that marketers communicate with – suppliers, – distributors, – competitors  at the same time, provide avenues for customers to communicate with each other. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 22  3. Promotion (cont.)  Promotional strategies involve the use of: – sales promotion, – advertising, – public relations, – publicity, – direct marketing, – personal selling and – social media marketing. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 23  Promotion (cont.)  Sales promotion is commonly used to entice or persuade customers to buy within a short period of time, e.g – contests, – price reductions, – rebates, and – coupons. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 24  3. Promotion (cont.)  Advertising is communication from the marketer to the target audience through medium such as – printed, – electronic, – outdoor and – online advertising.  The objectives of advertising can be to persuade, to remind or to inform the target audience about products and/or about the firm.  Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 25  3. Promotion (cont.)  However, a marketer’s challenge is always to identify a promotional method that is cost effective, i.e. to achieve maximum impact at the lowest possible price.  With the advancement of telecommunication technologies, promotional strategies today are more innovative and can reach audiences 24/7 all over the world. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 26  3. Promotion (cont.)  Social marketing use the Internet as a platform to communicate with stakeholders and customers.  Popular and commonly used social media instruments for promotional activities include: – Instagram, – Twitter, – Facebook and – interactive websites Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 27  4. Place  Place is the strategy to make products available and accessible to target customers. – A producer has to make the decisions on how to deliver products to customers.  Important functions that need to be performed in any type of channel of distribution includes – selling, – providing information, – logistics, – research, – financing, etc. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 28  4. Place  Direct channel is where producers deliver products to customers directly without a middleman. – One of the fastest-growing direct sales distribution method is online sales (through Internet). Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 29  Marketing and Entrepreneurship  In general, marketing is a business approach that is based on principles of: – understanding customers, – delivering values to satisfy customers, and – doing it at a profit.  The implementation of effective marketing strategies (4Ps) reflects a firm’s understanding of its target customers’ needs and wants. – However, marketing today is becoming more interesting and challenging. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 30  Marketing and Entrepreneurship (cont.)  For example, many young entrepreneurs are involved in online businesses, services and mobile applications.  Thus, entrepreneurs need to be creative and willing to take risks in developing new ways of marketing new products/services to target customers. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 31  Summary  A marketer’s role is to find an opportunity to sell products and/or services to his target customers using the most suitable, cost-effective marketing strategies, in order to create profit to the marketer and to benefit the customers. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 6– 32