Discuss the importance of defining a prospective business by writing a clear and concise business concept.

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5.1

• Discuss the importance of defining a prospective
  business by writing a clear and concise business
  concept.
• Describe how a feasibility study can be used to
  test a concept in the marketplace.

Section 5.1 Feasibility Analysis Testing an
Opportunity
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Developing a Business Concept

• Once you have a idea for a new business, define
  it by writing a clear and concise business
  concept.

business concept a clear and concise
description of a business opportunity it
contains four elements the product or service,
the customer, the benefit, and the distribution
Section 5.1 Feasibility Analysis Testing an
Opportunity
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Developing a Business Concept

• In developing a business concept, consider the
  features and benefits your product or service
  offers.

features distinctive aspects, qualities, or
characteristics of a product or service
benefits things that promote or enhance the
value of a product or a service to the customer
Section 5.1 Feasibility Analysis Testing an
Opportunity
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Developing a Business Concept

• When developing a business concept an
  entrepreneur must ask the following questions
• What is the product or service being offered
• Who is the customer?
• What is the benefit that is being provided?
• How will the benefit be delivered to the
• customer?

Section 5.1 Feasibility Analysis Testing an
Opportunity
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Testing the Concept in the Market

• An entrepreneur can use a feasibility analysis in
  order to decide if there is enough demand for a
  product or service.

feasibility analysis the process that tests a
business concept it allows the entrepreneur to
decide whether a new business concept has
potential
Should I proceed with this business?
Section 5.1 Feasibility Analysis Testing an
Opportunity
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Testing the Industry

• The broadest level of feasibility analysis looks
  at the industry in which the business will
  operate.

industry a group of businesses with a common
interest
Section 5.1 Feasibility Analysis Testing an
Opportunity
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Testing Product or Service Requirements

• To consider all the requirements of a product or
  service, you may opt to create a prototype.

prototype a working model used by entrepreneurs
to determine what it takes to develop their
products or services
Section 5.1 Feasibility Analysis Testing an
Opportunity
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• A business can analyze its
  Strengths
  Weaknesses Opportunities
  Threats
  in the marketplace
  using a process called a SWOT analysis.
• This procedure helps because it
• prepares a company for competition or a changing
  marketplace.
• provides guidance and direction for future
  business strategies.

SWOT analysis An assessment of a companys
strengths and weaknesses and the opportunities
and threats that surround it SWOT strengths,
weaknesses, opportunities, threats.
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Internal Strengths and Weaknesses

• Strengths and weaknesses are internal factors
  that affect a business operation. The analysis
  centers around three Cs
• Company
• Customers
• Competition

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Internal Strengths and Weaknesses

• Company

• When evaluating itself, a company must analyze
  these areas
• Company staff
• Financial situation
• Production capabilities

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Talking to Customers

• Customers

target customers people most likely to buy a
businesss products and services

• The most important part of the feasibility
  analysis is testing customers to measure interest
  and identify the target customers.
• Companies study customer buying patterns using
  surveys or conducting interviews with people in
  their target markets.

Section 5.1 Feasibility Analysis Testing an
Opportunity
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Studying the Competition

• Competition

• A company may find that it has certain strengths
  and weaknesses when compared to its competitors.
  Questions that help a business to analyze its
  competitive position are
• What market share does the company have?
• What advantages does the company have over its
  competitors?
• What core competencies does the company possess?

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Studying the Competition

• An easy way to evaluate the competition is to
  create a competitive grid.

competitive grid a tool for organizing
important information about a business ventures
competition
Competitor
Customer
Benefits
Distribution
Strengths
Weakness
Section 5.1 Feasibility Analysis Testing an
Opportunity
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External Opportunities and Threats

• Businesses must always look for opportunities to
  create competitive advantage if they are to
  succeed in the marketplace.

Marketing Essentials Chapter 2, Section 2.1
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Competition

• Companies need to know what their competitors are
  doing at all times. Changes in other companies
  financial situations affect the marketplace, and
  conducting a SWOT analysis helps a business react
  and adjust to these shifts.

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Environmental Scan

• Often, a business will conduct an environmental
  scan to methodically examine four main areas of
  the marketplace. The acronym PEST refers to each
  of the four factors evaluated in the scan
• Political
• Economic
• Socio-cultural
• Technological

environmental scan An analysis of outside
influences that may have an impact on an
organization.
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Political

• Political issues center around government
  involvement in business operations, such as
• Laws
• Regulations
• Global companies need to know the political
  structure and regulations of each foreign country
  in which they conduct business.

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Economic

• Businesses are always interested in the economy
  because if it is healthy, people will be more
  likely to invest in products and markets. If the
  economy is in recession, companies need to be
  more cautious in their decisions.
• The economy is affected by factors such as
• Unemployment rate
• Inflation
• Retail sales figures
• Productivity
• Consumer confidence

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Socio-Cultural

• A socio-cultural analysis is based on customers
  and potential customers. It focuses on their
• Attitudes
• Lifestyles
• Opinions
• And also considers
• Age
• Income
• Occupation
• Education level
• Marital status

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Technological

• Changing technology may be a threat for one
  industry, but an opportunity for others.
  Companies develop completely new products or
  capitalize on new developments by making products
  to support them.

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Looking at Start-Up Resources

• A strong business model is important to investors.

business model a description of how
entrepreneurs plan to make money with their
business concepts
Section 5.1 Feasibility Analysis Testing an
Opportunity
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Lets Practice

• Write a compelling, clear concise
• business concept statement for your
• proposed business. Be sure to refer back to your
  notes on questions to address.
• Here is a sample of one
• Eastside Sports offers sporting equipment and
  apparel to local teams and people who play
  sports. It provides the convenience of one-stop
  shopping at a retail outlet in the customers own
  neighborhood.