Sources of Opportunities. (These Can Be Both Internal and External.)

UNIT 5.1

IDENTIFYING OPPORTUNITIES.

CHAPTER 14

Sources of opportunities. (These can be both internal and external.)

Internal:

·  Research and Development department or inventions for individuals.

·  Customer Feedback.

·  Intrapreneurship/staff suggestions.

·  Rewards.

·  Idea generation techniques such as Brainstorming (explain).

·  Product Churning.

External:

·  Market Research.

·  Copying.

·  Education (mini-company)

·  Monitor fashions and tastes abroad.

·  Variations of other products.

·  Producing under license.

·  Import substitution.

It is important that a prospective entrepreneur assess his or her own skills and characteristics. Some factors to be taken into account are:

·  Personality.

·  Expertise/Skills.

·  Hobbies and interests.

·  Age/Experience

Market Research.

Definition: The collection and analysis of all data about the market for a product or service.

MR is important because:

·  Reduces development costs. (removes trial and error)

·  Helps to identify the target market.

·  Helps to identify strengths and weaknesses of competing products.

·  Measures customer reaction.

·  Predict sales.

·  Identifies needs and wants.

Steps in carrying out MR.

1.  Decide what information is required.

2.  Decide whether or not to use an agency.

3.  Decide on the method of collection (field/desk).

4.  Collect.

5.  Analyse.

6.  Take decisions.

Types of MR.

1.  Desk Research (Secondary).

·  From within the business (accounts, reports, sales records, customer feedback etc.)

·  State Agencies (CSO,ESRI etc.)

·  Specialist Agencies (MRBI).

·  Trade Association magazines.

·  Commercial databases.

·  Internet.

Advantages of desk research.

·  Fast.

·  Cheap.

·  Plentiful.

Disadvantages of desk research.

·  May be inaccurate.

·  May lack detail.

·  Does not reveal customers’ motivation.

2.  Field Research.

·  Talking to competitors.

·  Talking to retailers.

·  Simple observation of peoples’ behaviour.

·  Consumer surveys (interviews, questionnaires and samples).

·  Focus groups

For advantages and disadvantages, simply reverse those of desk research.

A good questionnaire should be:

·  Carefully worded.

·  Accurate.

·  Clear.

·  Use simple language.

·  Avoid leading questions.

Types of answers sought can include:

·  Closed response (direct, yes or no).

·  Multiple choice.

·  A range of answers (more than one box can be ticked).

·  Open ended (interviewee writes response).

Sampling.

1. Random (equal chance). 2. Quota (characteristics). 3. Cluster (geography)

New Product and Service Development Process.

Stages:

The first stage is Idea Generation. We have dealt with this.

1.  Product Screening. This is done by using MR, assessing your own talents, SWOT etc.

2.  Concept Development. Concept is a precise statement of the need the product will fill and the form it will take. USP.

3.  Feasibility Study. Is it viable and sound? Feasibility of production and finance (breakeven analysis) What will its contribution be to sales, costs and profits (break-even analysis)?

4.  Prototype Development. A lengthy and expensive process which ascertains the attributes of the product, the production difficulties and costs.

5.  Test Marketing. Determines the reaction of potential buyers.

6.  Production and launch.

There is nothing in the syllabus about where an entrepreneur can get help. Chapters 21will cover this area.

Breakeven Analysis

Breakeven Point is the point at which Total Costs = Total Revenue.

Important terms:

·  Output

·  Target output

·  Revenue

·  Fixed costs

·  Variable costs

Breakeven Point = Fixed Costs

Sales Price-Variable Costs (contribution per unit)

Margin of Safety = Target Output- Breakeven Output

Stages in drawing the BE chart

1.  Draw Axes. Sales vertical, output horizontal

2.  Fixed costs (parallel to horizontal)

3.  Total Costs (add fixed to variable and start at start of fixed costs)

4.  Total Revenue (must start at origin)

5.  Draw in Margin of Safety