Tadesse Entrepreneurship full PPT final.pptx

Entrepreneur ship

1. ENTREPRENEURSHIP AND SMALL BUSINESS MANAGEMENT PREPARED BY :TADESSE HABTE

2. Course Objectives/OUTCOMES At the end of this course, the students should be able to: Get overview and orientation of the concept of entrepreneurship and its historical development. Discuss and understand the entrepreneurial decisions and processes. Identify, explain and understand the characteristics and qualities of successful entrepreneurs. Identify and discuss the entrepreneurial idea generation and development process. Discuss the process of developing and using the Business Plan. Identify the types of financing available and discuss important issues related to finance the market and effective promotion of the new venture. Identify the legal issues related with entrepreneurship.

3. CHAPTER ONE: ENTREPRENURSHIP FUNDAMENTALS

4. What Does Entrepreneurship Mean? Entrepreneurship: Is a process of creating something new with value by devoting the necessary time and effort, assuming the accompanying financial, psychic and social risks and receiving the resulting rewards. This definition stresses four basic aspects of being an entrepreneur:

5. Cont… nd First it involves the creation process – creating something new of value Second, it requires the devotion of the necessary time and effort Third, it involves the rewards of being an entrepreneur (independence, personal satisfaction and monetary reward for profit entrepreneurs) The final aspect of entrepreneurship is taking risks in a very calculated fashion:

6. What is an entrepreneur? Entrepreneurs – People who risk their time, money, and other resources to start and manage a business.

7. Types of Entrepreneurs Types of Entrepreneurs: There are four types of entrepreneurial personalities: The personal achiever The Super Sales Person The Real Manager The Expert Idea Generator

8. Benefits of Entrepreneurship The opportunity to: Create your own destiny Make a difference Reach your full potential Reap impressive profits Contribute to society and to be recognized for your efforts Do what you enjoy and to have fun at it

9. Why Business? What’s the motivation? 1. Independence • Not wanting to work for anyone else(avoiding un reasonable boss, rigid rules of the bureaucracy, poorly conceived performance mgt. systems) • Desire to be one’s own boss 2. Financial success ( Promise of big return than being salaried)

10. Why Business? What’s the motivation? 3. Job satisfaction, achievement, opportunity to apply ones own potential 4. Being in control- Entrepreneurs resent the idea that some controls them and make decisions for them.

11. Entrepreneurs...Traits Self-confident and optimistic Able to take calculated risk Respond positively to changes Flexible and able to changes Knowledgeable of markets Able to get along well with others Independent minded

12. Entrepreneurs Traits,Cont …. nd Energetic and diligent or attentive, or careful or hardworking Creative, need to achieve Dynamic Leader Responsive to suggestions Take initiatives Resourceful and persevering Perceptive with foresight

13. Entrepreneurs Traits, Cont…. nd Responsive to criticism Who have internal locus of control In general entrepreneurs are risk bearers, coordinators and organizers, gap fillers, leaders, innovators or creative initiators.

14. Skills Required By Entrepreneurs Strategic skills Management Skills Planning Organizing Leading (activating) Control Human Relations Skills Financial Skills Marketing Skills

15. Entrepreneur Vs Manager E- innovator where as M- keeps on an established business rules E- focuses on Opportunity where as M- focuses on handling Problems E- Independent where as M- is under the supervision of his/ her employer E- earns huge profit where as M- earns a fixed salary with fixed time period E-takes calculated risks where as M- is less tolerant of uncertainty

16. Entrepreneurial Process The process has four distinct phases identification and evaluation of the opportunity development of the business plan determination of the required resources management of the resulting enterprise

17. Barriers to entrepreneurship Lack of viable (possible/practical) concept Lack of market knowledge Lack of seed capital Lack of technical skill Lack of business know how Lack of motivation Social stigma Legal constraints Monopoly/protection

18. Role of Entrepreneurship in Economic Development Entrepreneurs initiate and sustain the process of economic development in the following ways: Capital formation Improvement in per capital income Generation of employment Balanced regional development Improvement in living standards

19. Role of Entrepreneurship in Economic Development ( Cont… nd ) 6. Economic independence 7. Backward and forward linkage 8. Agents role ( Agents of change) 9. Role of innovation 10. Imitating role

20. Ethical Principles for Entrepreneurs Honesty Integrity Promise Keeping and Trustworthiness Loyalty Fairness Concern for others Respect for others Law abiding

21. Ethical Principles for Entrepreneurs, Cont… nd Commitment to excellent Leadership Reputation and Morale Accountability

22. CHAPTER TWO SMALL BUSINESS FUNDAMENTALS

23. Concepts and definition of Small Business There are two approaches to define small business. 1. Size criteria 2. Economic/control criteria.

24. 1. Size Criteria Size refers to the scale of operation Some of criteria used to measure size are: number of employees ; (mostly used) volume , and value of sales turnover , asset size… total capital investment , volume/value of production , and a combination of the stated factors.

25. Cont… nd the following general criteria for defining a small business are suggested by Small Business Administration (SBA) Financing of the business is supplied by one individual or a small group. Only in a rare case would the business have more than 15 or 20 owners. Except for its marketing function, the firm’s operations are geographically localized .

26. Cont… nd Compared to the biggest firms in the industry, the business is small. The number of employees in the business is usually fewer than 100 .

27. Cont…. nd Ethiopia Micro enterprise: Investment paid up capital not exceeding US$2300 ( 20,000) Small enterprise (SE):Investment paid up capital US$2300-5747 ( 20,000 -50,000) Australia Manufacturing services : <100 employees Service: < 20 employees

28. Cont… nd Small Enterprises are business enterprises with a paid-up capital of not less than Birr 20,000 but not more than Birr 500,000, but excluding high-tech consultancy firms and other high-tech establishments.

29. 2. Economic/Control Criteria All of these characteristics must be satisfied if the business is to rank as a small business. Market share ( Does not influence national prices) Independence ( the owner has control of the business him self ) Personalized Management ( The owner actively participates in all aspects of management ) Technology ( Small businesses are labor intensive ) Geographical area of operation( The area of operation of small firm is often local )

30. Cont… nd Generally, small business is a business that is: privately owned and operated, small number of employees, and relatively low volume of sales. privately owned companies, partnerships, sole proprietorships, or cooperatives .

31. Economic, social & political contributions of small business enterprise Equitable distribution of wealth and decentralization of economic power  . Income dispersed more widely and its benefit is derived by the large segments of the society (this is due to wide spread ownership and decentralized location of small scale enterprises. )  encourage competitive spirit and generate the impetus to self development  relations between workers and employers are more harmonious

32. Cont… nd More Employment creation capacity small scale enterprises are labor intensive and thus create more employment with a given level of capital. require less capital but generate more employment. Removing Regional Imbalance- by inducing people to set up small firms in rural areas to avoid migration function involves specialization in specific areas and results in greater profitability

33. Cont…n d Export Promotion Small-scale enterprises are opening up fresh avenues in the export market in our world.

34. Ancillary Function - supply parts and accessories to bigger enterprises How Big Companies Can Support Small Businesses

35. Advantages of going into Small Business Independence Financial Opportunities Community Service Job Security Family Employment Learning from Challenge Introducing Innovation Catering for small or niche markets

36. Small Business Failure factors (Why small businesses fail) Poor operations management – The manager lacks the ability to operate a small business . Lack of experience – Many owners start businesses in industries in which they have no experience Poor financial management – Many owners start with too little money and with little or no understanding of financial spreadsheet applications. Illegal loan too!

37. Cont… nd Over-investing in fixed assets – Owners who over-invest in fixed assets may find themselves with no access to funds for working capital . Poor credit practices – Owners often sell on credit to meet (or beat) the competition and find that they lack the additional working capital required or the ability to collect receivables. Failure to plan – The lack of a strategic plan to guide the business in the long run

38. Cont…n d Unplanned and uncontrolled growth – Growth is natural and healthy, but unplanned growth can be fatal to a business. Inappropriate location – Owners who choose a business location without proper analysis, investigation, and planning often fail. Too often, owners seek “cheap” sites and locate themselves straight into failure.

39. Problems in the Ethiopian small business Constraints Facing the Sectors in Ethiopia The main constraints identified were:- Lack of working space for production and marketing. Shortage of credit and finance Regulatory problems (licensing, organizing, illegal Business etc.)   

40. Problems in the Ethiopian small business ( Cont…. nd ) Poor production techniques. In put access constraints Lack of Information Inadequate management and Business skill    Absence of appropriate strategy

41. Importance of Small Business Supporting large and giant industries Distribution function- Supply function- Sources of innovation Stimulating economic competition Creating employment opportunities- Freedom of opportunity

42. Characteristics of small business The same manager/proprietor handles all functions of the enterprise The manager/ proprietor finds it difficult to borrow short term or long term loans The industry meets only the immediate needs of local community The establishment is generally week, poorly equipped The rate of failure is high The level of education of the proprietor is very low

43. Unique Problems of Small Business Lack of management skills and depth Personal and misuse of time Research Financing Personnel

44. Competitive Strength of Small Business Knowledge of customers and market Product specialization Geographic specialization Flexibility in management

45. Why do you want to start a business? Most people set up a business for one reason – to make a profit . But there are a great many other reasons such as: To provide a service to the community To improve the living standard of your family To provide employment for your family For status To be your own boss For a change For contact with people for pleasure

46. steps in setting up a business venture There are four preliminary steps that should be taken before deciding to start or buy a business: 1. Development of sound business ideas, 2. Market research, 3. Financial planning and 4. Deciding whether to have co-owners.

47. CHAPTER THREE IDENTIFYING BUSINESS OPPORTUNITIES and Business Planning

48. Identifying Business Opportunities(Cont… nd ) In identifying business opportunities, we need to establish the following: Population figures Demographic data like Sex of the population etc. Trends in demography Political and regulatory trends Economic trends Classification of goods

49. Sources of Ideas For Business Ventures ( Cont… nd )   Newspapers Business Opportunities Business Services Newspaper Articles Magazines Trade Publications Hobbies

50. Sources of Ideas For Business Ventures ( Cont… nd ) Merchandise Shows Trade Shows Craft and Hobby Shows

51. Business Planning The unprepared mind cannot see the out stretched hand of opportunity ( Alexander Flaming) Then the would be entrepreneurs must decide to develop a business plan whether to: Create a new venture Buy an existing business Buy a franchise

52. Cont… nd In starting a new venture, the pivotal step is to prepare a business plan, which calls for entrepreneurs to anticipate: The potential market for products and services The potential costs of satisfying the market The potential pitfalls in organizing operation The easily signals of progress or setbacks

53. Business Plan What is a business plan Is a written document that details the proposed venture Is the roadmap of an entrepreneur for a successful enterprise, telling the entrepreneurs how best to get from A to Z Is a map and compass for a business Is a plan that works for a business to look ahead, focus on key points, allocate resources and prepare for problems and opportunities

54. Who needs a business plan? Those who are Running a business Applying for a business loan Looking for business investment, new products and etc

55. Cont… nd Feasibility plan Here under the entrepreneur should analyze the viability of the plan based on the following factors: Market Technical Economic and financial Social political

56. Benefits of the business plan 1. Reduces firefighting 2. Justifies your plans and actions 3. Test your ideas on paper 4. Indicates your ability and commitment

57. Developing a business plan Out line of the business plan Executive summary Business description Marketing plan Production plan Management plan Competitive analysis Financial plan

58. Cont… nd Executive summary Brief description of the project Brief profile of the entrepreneur Project’s contribution to the economy Business description Type of business Products and services offered Ownership of the business Profitability consideration

59. Market Analysis This is an examination of the primary target market for your product or service, including geographic location, demographics, your target market's needs and how these needs are being met currently.

60. Market Analysis ( cont…d) The competitive analysis section can be the most difficult section to compile when writing a business plan. Before you can analyze your competitors, you have to investigate them. You need to know:  What markets or market segments your competitors serve; What benefits your competition offers; Why customers buy from them; And as much as possible about their products and/or services, pricing, and promotion.

61. Market Analysis ( cont…d) This is a detailed explanation of your sales strategy, pricing plan, proposed advertising and promotion activities, and product or service's benefits.  The Marketing Plan section explains how you're going to get your customers to buy your products and/or services.

62. Market Analysis ( cont.d ) The marketing plan, then, will include sections detailing your: Products and/or Services and your Unique Selling Proposition Pricing Strategy Sales/Distribution Plan Advertising and Promotions Plan

63. Operating Plan A description of your business' physical location, facilities and equipment, kinds of employees needed, inventory requirements and suppliers, and any other applicable operating details, such as a description of the manufacturing process.

64. Cont… nd You need to do two things for your readers in the operating section of the business plan: show what you've done so far to get your business off the ground (and that you know what else needs to be done) and demonstrate that you understand the manufacturing or delivery process of producing your product or service.

65. Management plan An outline of your business' legal structure and management resources, including your internal management team, external management resources, and human resources needs.

66. Management Plan ( Cont… nd ) The Management Plan section describes your management team and staff and how your business ownership is structured. People reading your business plan will be looking to see not only who's on your management team but also how the skills of your management and staff will contribute to the bottom line

67. Competitive analysis Identification of competitive strength

68. Financial Plan Basically, the financial plan section of the business plan consists of three financial statements: The income statement The cash flow projection and The balance sheet, and a brief explanation/analysis of these three.

69. Financial plan (Cont… nd ) First, you need to gather together some of the financial data you'll need to prepare these financial statements for your business plan by examining your expenses. Think of your business expenses as broken into two categories:  Your start up expenses and Your operating expenses .

70. Financial plan, Cont… nd All the costs of getting your business up and running go into the start up expenses category. These expenses may include: Business registration fees Business licensing and permits Starting inventory Rent deposits Down payments on property Down payments on equipment Utility set up fees.  This is just a sampling of start up expenses; your own list will probably expand as soon as you start writing them down.

71. Financial Plan, Cont… nd Operating expenses are the costs of keeping your business running. Think of these as the things you're going to have to pay each month. Your list of operating expenses may include: Salaries (yours and staff salaries) Rent or mortgage payments Telecommunications utilities Raw materials storage Distribution Promotion Loan payments Office supplies Maintenance.

72. The Executive Summary of the Business Plan The purpose of the executive summary of the business plan is to provide your readers with an overview of the business plan. Think of it as an introduction to your business.

73. The Executive Summary of the Business Plan Therefore, your business plan’s executive summary will include summaries of:  A description of your company, including your products and/or services Your mission statement Your business’s management The market and your customer Marketing and Sales Your competition Your business’s operations Financial projections and plans 

74. The Executive Summary of the Business Plan Tips for Writing the Business Plan’s Executive Summary   Focus on providing a summary. The business plan itself will provide the details and whether bank managers or investors, the readers of your business plan don’t want to have their time wasted. Keep your language strong and positive. Don’t weaken the executive summary of your business plan with weak language. Instead of writing, “… might be in an excellent position to win government contracts”, write “… will be in an excellent position...”

75. TOP TEN DON'TS Don't be optimistic (on the high side) in estimating future sales. Don't be optimistic (on the low side) in estimating future costs. Don't disregard or discount weaknesses in your plan. Spell them out.

76. TOP TEN DON'TS(Cont… nd ) Don't stress long-term projections. Better to focus on projections for your first year. Don't depend entirely on the uniqueness of your business or the success of an invention. Do not project yourself as someone you're not. Be brutally realistic.

77. TOP TEN DON'TS(Cont… nd ) Do not be everything to everybody. Highly focused specialists usually do best. Don't proceed without adequate financial and accounting know-how. Don't base your business plan on a wonderful concept. Test it first. Never, never, never skip the step of preparing a business plan before starting.

78. CHAPTER FOUR PRODUCT AND PRODUCT PROTECTION TECHNIQUES

79. What is product? A product is anything that can be offered to a market to satisfy a want or need of users. Products that are marketed can be classified into physical goods and services . A service is any act or performance that one party can offer to another that is essentially intangible Its production may or may not be tied to a physical product.

80. Nature and Classification of Services There are five categories of product offer: 1. Pure tangible good :-offer consists primarily of a tangible good such as soap, sugar or salt. No service will accompany the product. 2. Major Tangible good with accompanying minor service 3. Hybrid : the offer consists of equal parts of goods and services

81. Nature and Classification of Services ( Cont…. nd ) 4. Major Service with accompanying minor goods . 5. Pure service : the offer consists primarily of a service such as psychotherapy, massages and beauty salon

82. NEW PRODUCT DEVELOPMENT PROCESS 1.Idea Generation. from : customers, the company's R&D department, Competitors and other firms, focus groups, employees, salespeople, Ethnographic discovery methods (searching for user patterns and habits)

83. 1. Idea Generation (Cont… nd ) Formal idea generation techniques:, focus group, brainstorming, and problem analysis Technologies External Consulting companies Suppliers Environmental Pressures

84. 2.Idea Screening To eliminate unsound concepts prior to devoting resources to them. The screeners must ask (consider) the following factors: Will the customer in the target market benefit from the product? Technically feasible? profitable at the target price?

85. 2.Idea Screening ( Cont… nd ) A demonstrated need in the marketplace.  A regulatory need or legal requirement. (e.g. Emission controls, Safety regulations, Environmental regulations) The capabilities of the organization Developing, commercializing and marketing the product do not conflict with other company objectives.

86. 3.Business Analysis Specifying; features of product and the marketing strategy necessary financial projections.

87. 3.Business Analysis, Cont… nd Estimate likely selling price based upon competition and customer feedback Estimate sales volume based upon size of market Estimate profitability and breakeven point Effect of the new product on existing products Possibility of finding copyright or patent on the product

88. 4. Development Turning the idea on paper into a prototype Designing the product Manufacturing and Testing (laboratory and consumer tests)

89. 5. Market Testing Exposing actual products to prospective consumers under realistic purchase situations. Test the product (and its packaging) in typical usage situations Conduct focus group customer interviews or introduce at trade show Make adjustments where necessary Produce an initial run of the product and sell it in a test market area to determine customer acceptance

90. 6. Commercialization positioning and launching a new product in full scale production and sales. This step includes; Launch the product Produce and place advertisements and other promotions Fill the distribution pipeline with product Critical path analysis is most useful at this stage

91. New product development is: A proactive process Ongoing process (continuous development), especially in large industry leaders Usually performed by cross-functional teams Better performed using a flexible approach

92. Unique Features Of Services Four I’s of services : I.) Intangibility-cannot be held, touched or seen before the purchase decision. Suggestion: make them tangible or show the benefits. II.) Inconsistency-quality of services vary depending on the people who provide them, the time and the environment in which they are given etc. Suggestion: standandardization and training

93. Unique Features Of Services(Cont… nd ) III.) Inseparability: Has two dimensions. 1.) Inseparability of production and consumption.,,, 2.) The service provider and the consumer are not ,in most cases, separated.

94. Unique Features Of Services(Cont… nd IV.) Inventory: perish ability of goods and inventory carrying costs create a problem to handle goods. But in services inventory carrying costs are more subjective and are related to idle production capacity. (salary and other benefits) Suggestion to minimize idle production capacity: part-time and commission.

95. Marketing of Services The seven P’s of Services: the 4 P’s of goods: i .) Product (service), ii) Price, iii) Promotion, iv) place (distribution) PLUS v.) People-services depend on people. (employees+ customers) -internal marketing more critical

96. Cont…. nd vi.) Physical evidence-environment in which the service is given. vii.) Process-procedures, mechanisms and flow of activities by which the service is created and delivered. Not only “what” is created but also “how” it is created matters. Solution: Capacity management with out compromising quality. off-peak pricing (changing prices at different times of the day or days of the week) plays important role in capacity management.

97. PRODUCT PROTECTION 1.P atent is a set of exclusive rights granted by a state to an inventor or his assignee for a fixed period of time in exchange for a disclosure of an invention.

98. Cont…. nd But a patent is given for products that must be new, inventive and useful or industrially applicable. The exclusive right granted to a patentee in most countries is the right to prevent or exclude others from making, using, selling, offering to sell or importing the invention

99. 2.Trademark ( ™ and ® ) is type of intellectual property, typically a name, word, phrase, logo, symbol, design, image, or a combination of these elements that distinguishes one co’s products from others’. The owner of a registered trademark may commence legal proceedings for trademark infringement to prevent unauthorized use of that trademark. When a trademark is used in relation to services rather than products, it may sometimes be called a service mark

100. Benefits of Trademark Registration Constructive nationwide notice of the trademark owner’s claim Evidence of ownership of the trademark Jurisdiction of federal courts may be invoked Registration can be used as a basis for obtaining registration in foreign countries

101. 3.Copyright is a legal concept, enacted by governments, giving the creator of an original work of authorship exclusive rights to control its distribution, usually for 50 years after the author's death, after which the work enters the public domain. It is given for poems , theses , plays , other literary works , movies , dances , musical compositions , audio recordings , drawings , sculptures , photographs , software , radio and television and broadcasts

102. CHAPTER FIVE Marketing and New venture development

103. Marketing Research Characteristics Marketing research is the systematic and objective identification, collection, analysis, and dissemination of information for the purpose of assisting management in decision making.

104. Marketing Research Characteristics Marketing research is systematic . The procedures followed at each stage are methodologically sound, well documented, and, as much as possible, planned in advance. Marketing research uses the scientific method in that data are collected and analyzed to test prior thinking or hypotheses. Marketing research is objective . It attempts to provide accurate and impartial information. MR involves the identification , collection, analysis, and dissemination of information .

105. Marketing Research Components Marketing research deals with many aspects of a market such as: Market size : number or value of units sold to a market in a given period. Market Share : a specific co’s share of the market size. Market penetration Brand equity research - how favorably do consumers view the brand? Buyer decision process research - to determine what motivates people to buy and what decision-making process they use . Customer satisfaction research

106. Cont…. nd Distribution process audits - to assess distributors’ and retailers’ attitudes toward a product, brand, or company. Marketing effectiveness and analytics - Building models and measuring results to determine the effectiveness of individual marketing activities.

107. Cont… nd Price elasticity testing - to determine how sensitive customers are to price changes Sales forecasting - to determine the expected level of sales given the level of demand. With respect to other factors like Advertising expenditure, sales promotion etc. Segmentation research - to determine the demographic, psychographic, and behavioral characteristics of potential buyers. Test marketing - a small-scale product launch used to determine the likely acceptance of the product when it is introduced into a wider market

108. Marketing Research Process Consists of the following related phases: 1.) Define the research purpose or objectives The ff questions help to establish objectives: Where potential customers buy the product? Why they purchase there? What is the size of the mkt ? how much of it can your business capture? How does your business compared with competitors? The impact of promotion on customers What type of products are desired by potential customers?

109. Step 2: Research Design Formulation Research design is Blueprint for conducting the marketing research. More formally, formulating the research design involves the following steps Qualitative data collection methods Methods of collecting quantitative data (survey, observation, and experimentation) Questionnaire design Measurement and scaling procedures Sampling process and sample size Plan of data analysis

110. Step 3.Gather Secondary Data Secondary data: Is less expensive Can be acquired with in or outside the venture. But may be outdated and less valid.

111. Step 4.Gather Primary Data Primary data collection techniques can be categorized as; 1. Observational techniques-do not involve contact with respondents 2. Focus groups 3. Experimentation-investigates cause and effect relationships.

112. 4. survey techniques- generate data by asking people questions and recording their responses. Examples of survey techniques: A. Mail surveys B. Telephone surveys C. Personal interview surveys

113. Step 5: Data Preparation and Analysis Data preparation includes the editing, coding, transcription, and verification of data. Data analysis gives meaning to the data that have been collected Research results should be evaluated and interpreted in response to the research objectives.

114. Step 6. Report Preparation and Presentation Report includes the specific research questions identified, describe the approach, the research design, data collection, and data analysis procedures the major findings and suggestions for actions. In addition, an oral presentation should be made to management using tables, figures, and graphs to enhance clarity and impact.

115. 4.2) Marketing Intelligence Market intelligence is the systematic process of gathering, analyzing , supplying and applying information (both qualitative and quantitative) about the external market environment. Used to determine: current and future market needs changes in the business environment that may affect the size and nature of the market in the future.

116. The importance of Market Intelligence provides the following benefits; Market and customer orientation – promote external focus Identification of new opportunities. Smart segmentation Early warning of competitor moves Minimizing investment risks Quicker, more efficient and cost-effective information

117. 4.3) Competitive Analysis Competitive analysis refers to determining the strengths and weaknesses of competitors and designing ways to take opportunities or tackle threats posed by competitors. Uses: • To help management understand their competitive advantages/disadvantages relative to competitors • To generate understanding of competitors’ past, present (and most importantly) future strategies • To provide an informed basis to develop strategies to achieve competitive advantage in the future • To help forecast the returns that may be made from future investments (e.g. how will competitors respond to a new product or pricing strategy?

118. It should answer, among other things, the following questions: Who are your competitors? What customer needs and preferences are you competing to meet? What are the similarities and differences between their products/services and yours? What are the strengths and weaknesses of each of their products and services? How do their prices compare to yours? How are they doing overall? How do you plan to compete? Offer better quality services? Lower prices? More support? Easier access to services? How are you uniquely suited to compete with them?

119. Steps of Competitive Analysis 1.) Identify your competitors: Determine both local and non local competitors. Be sure to define the competitive landscape broadly. Your competition includes anything that could draw customers away from your business.. 2.) Gather information about competitors: You need to know: What markets or market segments your competitors serve; What benefits your competitors offer; And as much as possible about their products and/or services, pricing, and promotion strategies.

120. Steps of Competitive Analysis 3.) Analyzing the Competition Study the information you've gathered about each of your competitors and ask yourself this primary question: How are you going to compete with that company? By identifying market niche (a small segment market). Is there a particular segment of the market that your competition has overlooked? Is there a service that customers or clients want that your competitor does not supply? The goal of your competitive analysis is to identify and expand upon your competitive advantage

121. 4.4) Marketing Strategy Meaning Marketing strategies-pricing, promotion, and distribution

122. What is marketing strategy? A marketing strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage.

123. Mkt strategies-The 4 P’S 1. PRICING STRATEGY Price is the value placed on what is exchanged. Something of value is exchanged for satisfaction and utility, includes tangible (functional) and intangible (prestige) factors. Can be a barter. Importance of Price to the Marketer Often the only element the marketer can change quickly in response to demand shifts. Relates directly to total revenue TR = Price * Qtty Profits = TR - TC

124. Factors Affecting Pricing Decisions A. Organizational and Marketing Objectives: Profit, market share, survival, cash flow etc B. Buyers Perceptions (price elasticity): is based on: Available substitutes urgency of need brand loyalty C. Other marketing Mix variables : All marketing mix variables are interrelated. D. costs

125. Selecting an approximate price level 1.) Demand Oriented Pricing: Determined by the demand for the product. Determine the demand first, calculate the mark up needed for each channel member then determine how much is available (cost ceiling) to produce the product.

126. 1. demand oriented pricing policies: Price Skimming :Charge highest price possible that buyers who most desire the product will pay. Attract market segment more interested in quality, status, uniqueness etc. Consumers’ demand must be inelastic. Penetration Pricing Price reduced compared to competitors to penetrate into markets to increase sales. Appropriate when the demand is elastic. Odd-even pricing , end prices with a certain number, $99.95 sounds cheaper than $100., may tell friends that it is $99. Prestige Pricing , when price is used as a measure of quality.

127. 2. Cost oriented pricing Cost-plus pricing Mark-up pricing . Stated as a % of costs or selling price. 3.) Competitive Oriented Pricing: Considers competitors prices primarily. Especially with products that are homogeneous. The market type matters- perfect competition, oligopoly, monopoly etc

128. 2.PROMOTION STRATEGIES Promotion- Is communication of the company and its products to customers.

129. The promotional mix 1.Advertising: any paid form of non personal communication about an organization, good, service, or idea by an identified sponsor. 2.Personal selling: the two-way flow of communication between a buyer and seller, often in a face to face encounter, designed to influence a person’s or group’s purchase decision 3.Public relations: A form of communication that seeks to change the perceptions of customers, share holders ,suppliers, employees and other publics about a company and its products. 4.Sales promotion: short term inducement of value to offered to arouse interest in buying the good/service.

130. Developing the promotion program Identify the target audience Specify the promotion objectives-awareness? Interest? Evaluation? Set the promotion budget Select the right promotion mix Design the promotion-the actual content. Schedule the promotion-timing and sequence

131. 3.Distribution Strategies Marketing Channels -individuals/organizations involved in the process of making the product available for use or consumption by consumers or individual buyers. Function/use: Improve exchange efficiency-less number of transactions Intermediaries are specialists in the exchange process

132. Direct and Indirect channels: 1.Direct channels-producer and end user directly deal. 2.Indirect channels – intermediaries inserted b/n seller and buyer. Example: Merchant Wholesalers, retailers, brokers and agents, manufacturer’s branches and offices

133. CHAPTER SIX FINANCING THE NEW VENTURE

134. 6 .1 Financial Requirements Permanent Capital- Equity Capital usually comes from the form of equity investment in shares in a limited company , or personal loans to or from partners or sole traders. It is used to finance the start-up costs of an enterprise,or major developments and expansions in its life - cycle. It may be required for a significant innovation , such as a new product development.

135. 2. Working Capital:- Short-Term Finance Working capital represents the liquid reserves for meeting current obligations. Operating working capital can be defined as follows: Cash balances Plus accounts receivable Plus inventory Plus other operating current assets Less accounts payable Less taxes payable Less other operating current liabilities Creditors prefer high levels of working capital since they are concerned about receiving payment. Management prefers low levels of working capital since working capital earns an extremely low rate of return.

136. 3. Asset Finance:- Medium to Long-Term Finance The purchase of tangible assets is usually financed on a longer-term basis, from 3 to 10 years, or more depending on the useful life of the asset. to finance Plant , machinery , equipment , fixtures and fittings , company vehicles and buildings

137. Three forms of initial finance The start-up capital takes one of three main forms: Personal savings – the simplest form, their own cash reserves or assets Debt – borrowing from a lender, paying interest but r etaining control Equity – selling shares for capital, no interest but losing partial control

138. SOURCE OF EQUITY CAPITAL Personal Savings Friends and Relatives Banks Angels Corporations Venture Capitalists (VCs) Going Public (IPOs- initial public offerings)

139. Sources of equity capital(Cont… nd ) Family & Friends Financing Consider the impact of the Investment Keep it strictly for business Settle the details up front Create a written contract Treat the money as “bridge financing”-as before going public, and wait for cash inflow for a month or two months Develop a payment schedule

140. SOURCES OF DEBT CAPITAL Commercial Banks Trade Credit Equipment Suppliers Savings & Loans Insurance Companies Credit Unions

141. What investors are looking for? Product/market info. & size, growth rates strategic/competitive dynamics & barriers management team, leadership capabilities management competence & ability Financial issues, time to break-even & return rate fund portfolio (list of financial assets) & relevance to fund strategy deal structure & stage of investment

142. Legal Environment: Investment Agreement Choice of Securities Control Issues Evaluation Issues & Financial Covenants ( signed agreement) Remedies for Breach of Contract Business Model (describes the rationale of how an organization creates, delivers, and captures value (economic, social, or other forms of value))

143. Small business has to effectively deal with the following points Financial Problems Cash Flow - Debtors and Stocks Costs and Profits

144. Stocks need controlling in three areas: Raw material stock - represent what a manufacturer needs to produce its own products and services Work - in - progress : is stock, which is currently being worked on, but is not yet saleable as finished items. Finished stock : is ready for sale, but either awaiting shipment to a consumer, or unsold