The Search For Sound Business Idea PDF

THE SEARCH FOR SOUND BUSINESS IDEA GROUP NO. 2 INTRODUCTION When starting a new business, the priority is to establish a presence in the desired market. For existing businesses, the focus shifts to either expanding or staying competitive. In either scenario, the key is to embrace fresh,...

THE SEARCH FOR SOUND BUSINESS IDEA GROUP NO. 2 INTRODUCTION When starting a new business, the priority is to establish a presence in the desired market. For existing businesses, the focus shifts to either expanding or staying competitive. In either scenario, the key is to embrace fresh, effective business ideas. This might involve improvements of products/services or innovating how customers are served. THE PRODUCT OR SERVICE OFFERING MAY BE IMPROVED IN TERMS OF: Performance Maintenance Cost Acquisition Cost Salvage Value Use  SOUND BUSINESS IDEA A sound business idea is defined as the economic opportunity. It is essentially a plan or concept that has the potential to be successful and profitable. It's an idea that addresses a need or solves a problem in the market, has a clear target audience, and can be executed effectively within the constraints of resources available. In simple terms, it's a smart and practical idea for starting or growing a business. SOUND BUSINESS IDEA Any successful venture we use started with the adaptation of a sound business idea. For instance, before the advent of ecommerce or parcel delivery services, people had to contend with the very poor service rendered by the post office. Complaints about delayed delivery and lost parcels have become common. The situation was ripe for a business solution. Enterprising personalities recognized the economic opportunity and adapted a business idea to serve the people better. The success of DHL, FEDEX and LBC is proof that the business idea they adapted is a sound one.  DIFFER IN FORM OF BUSINESS IDEA AN OLD TYPE OF A STANDARD NEW TECHNOLOGY CAN BE BUSINESS CAN BE PRODUCT CAN BE ADAPTED TO MANUFACTURE PROFESSIONALIZED CUSTOMIZED AN OLD PRODUCT Business may provide a variety Operations can be streamlined A certain bakery started using of colors and designs for many and better organized. An machines to produce various products, such as clothing, example of the professional kinds of bread, production cost sporting goods, shoes, etc. approach that is applied to decreased and more quantities Customers can choose which restaurant service is could be produced quickly. features they want included in McDonald’s. their product.  DIFFER IN FORM OF BUSINESS IDEA IMPORTED PRODUCTS BUSINESS CAN BE REPLACED BY OPERATIONS CAN BE LOCAL PRODUCTS INTERNATIONALIZED Importing products can be too This is a real challenge to the cumbersome and difficult. Local entrepreneur. The entry of production could be a good Jollibee in the foreign market, business idea. For example, for instance, is an indication of agricultural goods such as fruits, the possibility of opportunities vegetables, rice, etc. in the international operations. 1. PREPARATION OF THE LIST OF BUSINESS IDEAS 2. SCREENING OF THE PROCEDURE IN LISTED IDEAS DETERMINING THE BEST BUSINESS IDEA 3. FINAL SELECTION METHOD OF SEARCHING FOR IDEAS THERE ARE TWO GENERAL METHODS OF GENERATING BUSINESS IDEAS. THEY ARE AS FOLLOWS: 1. UNANTICIPATED MEANS AND 2. DELIBERATE SEARCH  UNANTICIPATED MEANS WHEN THE ENTREPRENEUR FINDS A BUSINESS IDEA WITHOUT SERIOUS EFFORT, THE METHOD IS REFERRED TO AS UNANTICIPATED MEANS. INCLUDED IN THIS MEANS ARE THE FOLLOWING: The person’s work The person’s hobbies A chance event encountered The person’s acquaintances by the person The Person's Employees who are in direct contact with Work customers are sometimes confronted with demand for products or services that are not currently provided by the company. To the enterprising employee, this may be interpreted as an opportunity for entrepreneurship. Example of this is Mr. Rolando So who was a teacher and apparently starts his own tutor academy. There are times when a person's hobby turns out to be a business opportunity. A hobby is The Person's a useful means of developing some skill which could be useful later when the hobbyist decides to operate a business. Hobbies Entrepreneurship literature abounds with stories of people with hobbies which were later converted into successful business ventures. The case of Mr. Aquilino Co is an illustration of how a hobby can sometimes lead to entrepreneurship. He has a hobby of playing and acquiring guitars until he makes his own guitars and started a guitar enterprise. Acquaintances There are times when a person fails to notice the existence of a business opportunity. Sometimes, it takes another person to make him aware of the wisdom of starting a new business venture. This other person could be a friend, a neighbor, or just anybody he meets once in a while. The case of Mr. Manuel Ong is an illustration. For five years, Mr. Ong had a job as book salesman. His friend visited him and talked about starting a new business. Mr. Ong considered their discussion and started to build his own bookstore.  A Chance There are times when a person encounters an event that will provide him with a clue to a business venture. The case of Mr. Lorenzo de Event Guzman is an interesting one. Lorenzo paid a visit to his former classmate in Batangas and he was served a tomato by the former classmate’s wife. He noticed that tomatoes from Batangas is not as good as those that are found in his hometown of Aliaga, Nueva Ecija. The information provided by Froilan inspired Lorenzo to make some inquiry on the feasibility of transporting commercial quantities of tomatoes in Batangas. Within a few years, Lorenzo became a successful trader of vegetables.  DELIBERATE SEARCH A disadvantage of unanticipated means in idea generation is the difficulty of ascertaining the exact date when the ideas will come pouring in. To offset this problem, a deliberate search for ideas is made. Using Search Idea Prompting Questions Business ideas are Encounters with someone expected to provide else's idea, or a customer answers to some needs. request, or some other Answers can be obtained if event may provide hints or the right questions are cues leading to business asked. When questions are ideas. used to draw out specific answers  GROUP 2 SCREENING GENERATED Ideas Clark Jetro Viray TUP - MANILA Screening Generated Ideas The quest for good business ideas necessitates the creation of a list so that the best may be chosen. However, before making a selection, the concepts provided must be reviewed.  Screening Generated Ideas Business Ideas may be screened with the use of the following criteria: Market Feasibility Technical Feasibility Financing Feasibility Financial Feasibility Market Feasibility A business idea must pass the test of market feasibility. This means that there must be some positive indication about the following: 1. Stable and sufficient demand; and 2. Potential competitive strength of the firm.  Market Feasibility Stable and Sufficient Competitive Demand Strength A business idea will not The business idea must last if there is insufficient be such that the demand for whatever venture can effectively product or service that is compete with current contemplated. or potential competitors.  The proposed business idea must be strong enough to withstand competition Search for Screening Adoption of the Preparation of Business Ideas Selected Formal Plans Business Idea Sources of Market Information Information required to determine the market fit of the business idea may be derived from the following: 1.Prior studies of the market or related markets by other companies, government agencies, and entrepreneurs. 2.Actual polls of population samples representing typical customers. The means used include the following: Sources of Market Information Information required to determine the market fit of the business idea may be derived from the following: 1.Prior studies of the market or related markets by other companies, government agencies, and entrepreneurs. 2.Actual polls of population samples representing typical customers. The means used include the following: Sources of Market Information a. mail questionnaires; b. advertisements incorporating feedback mechanism such as mail responses; c. phone interviews; and d. personal interviews. Sources of Market Information Information required to determine the market fit of the business idea may be derived from the following: 3. Negotiations with prospective customers to solicit orders and determine whether or not they will actually buy. Technical Feasibility Business ideas oftentimes appear easy to execute, but it is not really so when converting them into real products or services with the required quality or quantity. Anything can go wrong in the attempt to assemble the needed resources. Difficulties may be encouraged in the procurement of materials and manpower. Financing Feasibility One of the factors necessary in determining whether a business idea should be considered or not is financing. This means that there must be sufficient funds to finance operations. Financing Feasibility The proposed owners of the venture must have sufficient capital or if insufficient, must be of good credit standing in the community. In general, the sources of financing include the following: 1. the proposed owner’s savings; 2. relatives and friends; and 3. financing institutions like banks. Financial Feasibility The purpose of entrepreneurship is to provide a source of income to the entrepreneur. This will not be possible if the venture will not be profitable. Any business idea that cannot provide some indication of profitability must be screened out. Financial Feasibility Profit is a result of the financial feasibility of the business idea. Financial feasibility may be determined through an analysis of the financial prospects of the proposed business idea. This may be done in two steps: Financial Feasibility 1.The preparation of projected financial statements, such as a. income statement b. balance sheet statement c. cash flow statement 2. The determination and analysis of financial ratios derived from the projected statements.  Projected Financial Statements The forecast of something which will happen in the future is referred to as a projected financial statement. Determining the Financial Feasibility of a Business Idea  The projected income statement is financial record summarizing a firm’s planned or expected financial performance in terms of revenues, expenses, and profits over a given time period. The projected balance sheet shows the planned or expected financial position of the enterprise on a particular date. The projected cash flow statement is one which shows the planned or expected cash sale and / or purchases  GROUP 2 MARCH 18,2024 FINAL SELECTION PRESENTED BY: JARMAINE VENTURA Final Selection Final selection refers to the process of screening the best generated business ideas that pass the adapted critea and eliminating those aren’t from the list.  After screening, the list may appear to be any of the following: STATUS QUO SHORTER ZERO LISTING LIST An Evaluation of Shortlisted Business Ideas BUSINESS PROJECT NET INCOME PROBABILITY EXPECTED VALUE Proposal A ₱5 Million 60% ₱3 Million Proposal B 4 Million 70% 2.8 Million Proposal C 3 Milion 80% 2.4 Million It showed Proposal A as the best choice because of the expected value criteria. When other criteria, however, are used, the final outcome may be altered. Organizational Culture and Creativity Effective innovation assures the continuous survival and growth of the enterprise, but innovation can only thrive in a creative organization with a culture characterized by the following: Encouragement of Creativity and Risk 1 2 Rewards for Creativity Taking 3 Open Communication 4 Allowance for Errors Structural Mechanisms that aid 5 Climate of Participation 6 creativity 7 Training in the Creative Process 8 Flexibility  Encouragement of Creativity and Risk-taking Creativity refers to activities involved in finding solutions to problems that hinder the achievement of the firm's objectives. It is the proactive way of solving problems.  Encouragement of Creativity and Risk-taking Business idea is the output of activity. However, it will remain an idea until it is tested. Testing an idea, however, will require a certain measure of risk taking. This means that the idea may turn out to be a good one or a bad one. Even then, the risk involved must not prevent the proponent from testing the idea, especially if there are indications that it will be a good one. Rewards for Creativity When an activity is rewarded, there is an assurance that such activity will continue existing. Creativity is no exception.  Open Communication The free-flowing exchange of ideas between the members of an organization is referred to as "open communication." Communication flows through the vertical and horizontal relationships in the organization's structure.  Open Communication An important advantage of open communication is that problems are easily directed to persons with the ability to offer solutions.  Allowance for Errors Innovation thrives in an environment that provides allowance for errors. It is not right to expect any activity to be devoid of imperfections. When an error is detected, a move should be made to correct it. When this is done, the creative individual is not discouraged from pursuing his creative endeavors. In the end, it is the company that benefits. A climate of Participation When somebody feels that the organization espouses participation, that person will not hesitate to make a contribution to the creative efforts of the organization. A climate of Participation The firm will benefit from the good effects of employee participation. This is so because there is a chance that more bright ideas will be generated if employees feel free to participate in the creation of solutions to problems. Moreover, an employee who participates in the creative effort feels committed to the exercise and as a result, he is more inclined to support the idea that is chosen. Structural Mechanisms that Aid Creativity The urge to create solutions to problems would be heeded by the innovative person more easily if there are structural mechanisms within the organization to support the exercise. An example of such mechanism is the unit that is responsible for providing logistical support to activities that are creative in nature. The person in charge of the unit is usually qualified to manage such activities as creativity.  Training in the Creative Process Creative pursuits are a bit complicated and it will help if those expected to form such functions are properly trained. Although some persons have natural talent for generating business ideas, those who are not considered as such would benefit from acquiring the required skills through training..  Flexibility One of the distinct characteristics of the creative organization is flexibility. The creative employee is allowed to engage in creative activities on hours most convenient to him and to the company.  Flexibility Apart from adjustment in the time schedule, flexibility may also be applied to the place of work, like allowing the creative employee to work in the place where he feels he can be more creative STRATEGIC PLANNING FOR SMALL BUSINESS  STRATEGIC PLANNING refers to the process of determining the primary objectives of the entrepreneurship and then adopting courses of action and allocating resources to achieve those objectives STRATEGIC PLANNING DETERMINATION OF 1 PRIMARY OBJECTIVES ADOPTION OF 2 COURSE OF ACTION ALLOCATION OF 3 RESOURCES  DETERMINATION OF PRIMARY OBJECTIVE fundamental to strategic planning for small businesses as it provides clarity, alignment, and direction. By clearly defining the overarching goal, small business owners can make informed decisions, prioritize activities, and rally their team towards achieving long-term success in a competitive marketplace VISION AND MISSION Vision Statement A company’s vision statement defines the goals the company has for the future, what the company wants to become and how it will achieve those goals. Mission Statement A mission statement defines what a company does. A company’s mission statement is important because it answers questions like what does the company do, who does the company serve and how does the company serve them STRATEGIC OBJECTIVE This term refers to the specific performance targets that the entrepreneurship hopes to accomplish. The objectives define, in specific terms, how the firm’s mission will be realized. Examples of strategic objectives are the following: 1. Expand production capacity by 50% within two years; 2. Increased by 50% by the year 2012; 3. Increase market share by 10% every two years; and 4. Increase the number of outlets by three within three years ADOPTION OF COURSE OF ACTION strategy is a carefully designed plan for achieving the firm’s objectives. A strategy indicates how the entrepreneur will attempt to accomplish the goals with the resources available ADOPTION OF COURSE OF ACTION In developing realistic strategies , the entrepreneurs can make use of the most popular tools: 1. Swot Analysis and; 2. Forecast of future sales performance SWOT ANALYSIS Is an organized method of a firm's strength and weaknesses with external environment that confront the firm SWOT ANALYSIS 1 STRENGTH A valuable organizational resources or competitive capability or an achievement that gives the firm a market advantage SWOT ANALYSIS 1 EXAMPLE OF STRENGTH A loyal customer base: Access to key resources: A strong brand: A well- An organisation that has known and trusted brand An organisation with a access to resources such can help an organisation large and loyal as raw materials, differentiate itself from its customer base has a distribution channels, or competitors and build strong foundation for key partners may have a customer loyalty. growth competitive advantage SWOT ANALYSIS 2 WEAKNESS factors that are holding an organisation back and may hinder its ability to achieve its goals. These are the things that your organisation does poorly or lacks altogether  SWOT ANALYSIS 1 EXAMPLE OF WEAKNESS Limited product range: An Poor reputation: A Inefficient processes: organisation with a narrow negative reputation can Inefficiencies in an product range may have hurt an organisation’s organisation’s processes difficulty competing with ability to attract can result in wasted organisations that offer a resources and reduced customers and wider variety of products. productivity. partners. Opportunity It refers to the chance offered by the external environment to improve the firm's situation significantly.  Examples FOR A TAILOR RESIDING IN A PROVINCIAL CITY; THE ABSENCE OF A RELIABLE TAILORING SHOP. FOR A NEWSPAPER DEALER: AN EXCLUSIVE SUPPLY CONTRACT FOR THE ENTIRE PROVINCE OFFERED BY A MAJOR NATIONAL PUBLISHER. FOR A SMALL RESTAURANT: THE WITHDRAWAL FROM BUSINESS OF A MAJOR COMPETITOR. Threat Its refer to a challenge posed by an unfavorable trend or development in the external environment that would lead to, in the absence of purposeful entrepreneurial action, the erosion of the entrepreneurship's position.  Examples 1. TO THE GROCERY STORE: THE PROPOSED OPENING OF A MALL IN THE VICINITY; 2. TO THE RESTAURANT LOCATED ALONG THE HIGHWAY: THE PROPOSED CONSTRUCTION OF A DIVERSION ROAD BYPASSING THE HIGHWAY AND THE RESTAURANT; 3. TO THE LOCAL OPERATOR OF 20 UNITS OF PUBLIC UTILITY TRICYCLES: THE PROPOSED CITY ORDINANCE BANNING TRICYCLES FROM PLYING THE MAJOR STREETS OF THE CITY. 4. TO THE LOCAL DEALER OF SKIN-WHITENING SOAP AND CREAM: THE PROPOSED DISSOLUTION OF THE COMPANY SUPPLYING THE PRODUCT.  The Entrepreneurship S W E T A R K E N N E G S T S E H S Opportunities Threats SWOT analysis Forecasts of future performance Strategy Forecasts of Future Sales Implementing Performance Strategic Plans Forecasts are supplementary tools for SWOT analysis. Strategies are useless unless they are implemented. To put strategies It is an estimate or prediction of the into action, the following activities future sales or income of the firm. are required: Forecasts may be short-term (one year or less), medium-term (one to five 1. identifying the specific methods years), long- term (over five years). to be used; and Sales forecasts are often determined through a combination of statistical and 2. deploying the resources needed intuitive forecasts tempered by the to implement the intended plans. experience of the entrepreneur. Identifying Specific Methods Strategies determine the best way to use resources. There is a need, however, to develop tactics which will be used to implement the strategies. Tactics are more detailed and they are used to determine how the specific task can best be accomplished on time with available resources. Deploying the Resources The specific aim of planning is to be able to deploy the right quality and quantity of resources in the various activities required to achieve the objectives. The resources would be indicated in terms of human and nonhuman elements. Fundamental Strategies for Small Business 1. the flexibility strategy 2. The Strategy of Effectiveness as a 3. Start simple Higher Priority STRATEGY CONCERNS OF SMALL BUSINESS STRATEGY CONCERNS OF SMALL BUSINESS In determining what strategy to adapt, the entrepreneur is confronted with two general situations: Is he Is he organizing a currently new running an business? old business?  SITUATION NEW BUSINESS OLD BUSINESS ACQUIRING AN EXISTING COMEPETE WITH SMALL BUSINESS BUSINESS ORGANIZING A NEW COMEPETE WITH LARGE BUSINESS BUSINESS BUYING A FRANCHISE FIGURE 20. STRATEGY SITUATIONS CONFRONTING THE ENTREPRENEUR  NEW BUSINESS ACQUIRING AN EXISTING BUSINESS ADVANTAGES DISADVANTAGES Immediate access to Higher upfront costs compared to revenue streams and starting a new business. customers. Possible inheritances of existing Established brand name debts or liabilities. and reputation. Limited flexibility in shaping the Existing operational business to align with personal processes and systems. vision or goals. Potential for growth and Potential need for significant expansion of an already restructuring or rebranding. established business.  NEW BUSINESS ORGANIZING A NEW BUSINESS ADVANTAGES DISADVANTAGES Full control over the business Higher level of uncertainty and risk concept, branding, and operations. associated with starting a new venture. Flexibility to adapt the business Longer time frame to establish brand model to changing market recognition and generate revenue. conditions. Requires significant effort and Opportunity to build a unique resources to develop operational brand and culture from the ground processes and systems. up. May face challenges in attracting initial Potential for lower initial customers and establishing market investment compared to acquiring presence. an existing business.  NEW BUSINESS BUYING A FRANCHISE ADVANTAGES DISADVANTAGES Access to a proven business model with Initial franchise fees and ongoing a track record of success. royalty payments to the franchisor. Training and support from the Limited autonomy in decision- franchisor in areas such as marketing, making compared to starting an operations, and management. independent business. Established brand recognition and Restrictions on business operations customer base. and branding imposed by the Potential for faster growth and franchisor. expansion compared to starting a new Potential for conflicts with the business independently. franchisor over operational or contractual issues.  SEGMENT MARKETS STRATEGIES FOR A EFFICIENT USE OF RESEARCH AND DEVELOPMENT GOING CONCERN THINK SMALL  INABILITY TO GET STARTED Why Small LACK OF Business UNCONTROLLABLE, OFTEN INTANGIBLE EXPERTISE VARIABLES Operators REASONS Ignore FAILURE TO REALIZE RESOURCE POVERTY Strategic THE IMPORTANCE OF STRATEGIC PLANNING FOCUS ON Planning? DAILY OPERATIONS SUMMARY SMALL BUSINESS NEEDS TO BE SUCCESSFUL. STRATEGIC PLANNING PROVIDES AN ANSWER. THE STRATEGY ADAPTED WILL DEPEND ON WHETHER A NEW BUSINESS IS BEING CONSIDERED OR AN OLD BUSINESS IS CURRENTLY OPERATED. IMPORTANT AS IT IS, SMALL BUSINESS OPERATORS OFTEN IGNORE STRATEGIC PLANNING FOR VARIOUS REASONS. THANK YOU