SUBJECT: Entrepreneurship and E-business (3161924)

BE SEMESTER: 6
Chapter: 2 Starting the venture
1. What are the sources of information for business ideas?
Ans.
There are mainly 5 Ways for Sources of New Ideas:
1. Consumers
2. Existing Companies
3. Distribution Channels
4. Government
5. Research & Development.

1. Consumers– the potential consumer should be the final focal point of ideas for the
entrepreneurs. The attention to inputs from potential consumers can take the form of
informally monitoring potential ideas or needs or formally arranging for consumers to
have an opportunity to express their concerns. Care needs to be taken to ensure that
the new idea or the needs represents a large enough market to support a new venture.

2. Existing Companies– with the help of an established formal methods potential

entrepreneurs and intrapreneurs can evaluate competitive products & services on the
market which may result in new and more market appealing products and services.

3. Distribution channels– members of the distribution channels are familiar with the
needs of the market and hence can prove to be excellent sources of new ideas. Not
only do the channel members help in finding out unmet or partially met demands
leading to new products and services, they also help in marketing the offerings so
developed.
4. Government– it can be a source of new product ideas in two ways firstly, the patent
office files contain numerous product possibilities that can assist entrepreneurs in
obtaining specific product information, and secondly, response to government
regulations can come in the form of new product ideas.

5. Research & development– Entrepreneur’s own R&D is the largest source of new
idea. A formal and well-equipped research and development department enables the
entrepreneur to conceive and develop successful new product ideas.

2. What do you understand by business models? What are key

components of a business model?
Ans.
The term business model refers to a company's plan for making a profit. It identifies the
products or services the business plans to sell, its identified target market, and any
anticipated expenses. Business models are important for both new and established businesses.
They help new developing companies attract investment, recruit talent, and motivate

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management and staff. Established businesses should regularly update their business plans or
they'll fail to anticipate trends and challenges ahead. Business plans help investors evaluate
companies that interest them.

The key components of any business model are:

 A compelling value proposition: How do you want your people to think about your
brand?
 A unique brand positioning: What do you offer to your people that make them want
more?
 A 10x goal setting: Can you offer a 10X better product or service? (compared to existing
solutions)
 Customer segments: Who is your customer? (to notice here we’re not talking anymore
about people but customers, those willing to pay for your product or service)
 Distribution channels: How do you get your product or service to your customer?
 Profit formula: Is the business financially sustainable?

3. What do you mean by ‘creative problem solving’?

Ans.
Creative Problem Solving is a way of thinking and behaving. CREATIVE PROBLEM
SOLVING or CPS is a process, method, or system for approaching a problem in an
imaginative way and resulting in effective action.

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The Creative Problem Solving process presented in this workbook is known as the Osborn-
Parnes problem-solving model. This particular model uses the following steps:

Although CPS can be applied individually, problems are often most effectively solved in a
team, where brainstorming allows for more ideas to be generated. Thinking of many ideas is
critical to effective problem solving using the Osborn-Parnes model.

4. Discuss key inputs to a draft business plan. Discuss various types of

business plans.
Ans.
The plan must define the objectives, strategies, customer scenario, market segments, products
and services to be offered, sales forecast and steps required to attain the objectives. The plan
should describe distribution systems, promotional activities and pricing decisions.

There are 5 Business plan to implement

1. Marketing Planning
2. Finance Planning
3. People Planning
4. Product Planning
5. Supply Planning
Marketing Planning:
From the analysis carried out, you will no doubt have set some objectives about marketing.
'Marketing' is a very broad area of the business - indeed there are likely to be marketing
implications associated with almost all your objectives.
Your marketing plan will include detail about:
 Your products and /or services
 the place in which you sell them and the way that you distribute them
 the price you charge for them
 the promotion you undertake

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The plan will show your intention of how you will undertake the full range of marketing
activities. It will be based on the data you collected about your competitors, your market
places and other areas discussed earlier. It will also reflect the potential you have identified
through analysis for:
• adding or amending products and/or services to your range
• finding new customers or better satisfying the needs of existing customers.
• finding new markets
• taking advantage of changes in business environment, especially changes in
existing market places
• combating threats posed by competitors and taking advantage of their weaknesses

Finance Planning:
A financial plan is often seen as the basis for many other parts of the business plan. This
particular plan, designed to meet the financial objectives you have set, is important in that it
pulls together the one common denominator of all other plans - and that is cash. The financial
plan for the business will have at its heart standard features:
 profit forecast
 cash flow forecast
 projected balance sheet
The financial plan you set should be tailored to meet your individual business needs. To do
so, it will refer to your particular business circumstances and may also include one or all of a
range of other financial tools, such as:
 business funding structure
 working capital analysis
 sales forecast
 returns achieved on sales
 break-even analysis
 contribution from production
 stock analysis
Looking into these different forms of analysis will quickly show you that they individually
serve differing business requirements. You will need to decide which are most relevant to
your business situation and from which you will gain most advantage.

People Planning:
Having the right people with the right skills is vital to every business. A successful business
will recognize that, to be competitive in the 21st Century, it must be proactive in training and
developing its employees and it must have in place a strategy for achieving this. The plan
needs to concentrate on the objectives which arise from the business vision. It could cover a
wide range of business issues including the identification and satisfaction of training and
development needs to meet business and individual requirements. People planning can be
crucial in achieving longer term objectives by equipping employees with the right skills - and
it is on those skills that the business will be competitive in its market places. The plan will
also cover broad statements on recruitment, employment, induction, training and a range of
other related business functions.

The Employment Department's 'Investors in People' initiative centres on the proven fact that
concentration on 'people' issues can bring significant business benefits. Your local Training

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and Enterprise Council in England or Wales, or your Local Enterprise Company in Scotland,
will be able to offer help and guidance on this matter.

Product Planning:
Throughout this guide, 'product' is taken to mean your product or - if you are a service
provider - your service. Whichever your areas of activity, today's changing business
environment and trends in customer buying patterns have to be closely monitored. The
business needs to be able to react quickly and effectively when changes occur. In addition,
you will want to influence future trends throughout your own marketing effort - but you need
to carefully plan future product and service developments to coincide with likely changes.
The life cycle of a product or of a service can be estimated and the various stages it goes
through will determine its contribution to the business. The effect of this is that your plans for
improving or extending products and/or services are closely linked to your marketing and
financial plans.

Quality of your products and services is an important area within your plan. Closely linked to
your pricing strategy, the question of product development affects the whole of the business –
and everyone in it.

You set your quality standards to satisfy the needs and desires of your customers. Many
industries have acknowledged quality levels and the concept of 'benchmarking' is an
innovative way to create partnerships from which all parties benefit through exchange of
information.

Supply Planning:
The relationships you develop with your suppliers and your customers are also important
influencing factors to be addressed when looking at your product plan. Associated with the
issue of quality, these relationships are crucial to future business success.

5. Explain industry analysis.

Ans.
Industry analysis is defined as an assessment tool designed to offer business entity a
comprehensive idea about the complex nature of a specific industry. It includes reviewing the
market, political, and economic factors that have a direct impact on the development of an
industry.

Industry analysis is conducted by the business entity or specifically an entrepreneur to

identify the factors which are influencing the sector that they have already or thinking about
investing in.

The potential new entrants, condition of the competitors, and both the buyer and suppliers
have a direct influence on the working of an industry. It is the industry analysis concept that
gives the business entity the necessary information so that they can make plans to tackle them
effectively.

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The necessity of industry analysis:
1. Retaining valuable, existing customers –
2. Attracting new customers –
3. Sustainability of business –
4. Integrating strategy in culture-
5. Star performers-
6. Star performers-
10 Benefits of industry analysis:
1. The industry analysis report is beneficial as it helps to assess the profitability of a
particular industry
2. It is generally able to forecast the potential behaviour of the competitors
3. Helps to recognize and identify strategies that will prove its worth
4. Industry analysis is a tool to develop a competitive strategy that will act as the
best defence against competitive forces
5. Helps to highlight the strength and weakness of an organization with its analysis
6. Industry analysis pinpoints the area where strategic changes will yield best payoffs
7. It emphasizes on the area where the industry trend shows threats or even opportunities.
8. Industry analysis helps the entrepreneur to know about the position of his company
relative to the competitors in the industry.
9. Can easily forecast demand and supply and consequently about the financial gains
10. Industry analysis helps to discover untapped opportunities in the industry.

Limitations of industry analysis:

The limitations of an industry analysis are as follows-

1. Seasonal factors play a key role in an industry and can have a direct impact on the
purchase and sale patterns. If analysts do not consider this factor it can prove a serious
limitation in the industry analysis report
2. If an industry is hit by inflation severely, it has a direct impact on the balance
sheets and can thus prove a severe limitation for the industry analysis report
3. Industry analysis is a subjective method and is not a guarantee of success.
4. Sometimes the incorrect interpretation of data can result in choosing the wrong path
and making wrong decisions.

6. Explain the structure of a business plan.

Ans.
A business plan is a written document prepared by the entrepreneur that describes all the
relevant external and internal elements involved in starting a new venture. It addresses both
short- and long-term decision making. The business plan is like a road map for the business’
development. In developing the business plan the entrepreneur can determine how much
money will be needed from new and existing sources.
Proposed Business Plan
1. General Introduction
a) Name and address of business
b) Name and address of entrepreneur

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c) Stakeholder of business
d) Nature of business and customers
2. Business Venture
a) Product (s) to be offered
b) Service (s) to be offered
c) Scale of business operation
d) Type of technology used
e) Type of skilled personnel required
3. Organized Plan
a) Form of ownership, sole proprietorship, partnership or joint stock company
b) Identification of business, associated partners/members etc.
c) Administrative structure
d) Identification of management team
4. Production Plan
a) Details of manufacturing process
b) Physical infrastructure required
c) Types of plant and machinery
d) Raw materials to be used
e) Requirement of power, water etc.
5. Human Resource Plan
a) Categories of human resources or staff required
b) Human resource already identified
c) Human resource required to be procured
d) Time frame for procurement of human resource
6. Marketing Plan
a) Products and services offered
b) Pricing policies
c) Promotional strategies
d) Logistics for distribution
e) Channels of distribution
7. Financial Plan
a) Breakeven analysis
b) Fixed capital requirements
c) Working capital requirement
d) Sources of capital
e) Schedule of procurement of capital
f) Schedule of procurement of asset
g) Cash flow projection
8. Miscellaneous/Appendix
a) Market research report
b) Contract with venders
c) Contract with financial institutions
d) Type of business risk
e) Contingency plan

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7. State the characteristics of entrepreneurial marketing.

Ans. 6 Characteristics of Entrepreneurial Marketing are :

1. Proactive Orientation:
Entrepreneurial firms are continually searching for new ways to achieve competitive
advantage through changes in established methods in marketing or production (Morris
and Sexton 1996, Zahra and Garvis 2000).
2. Innovativeness:
Innovative firms have the ability to maintain a flow of new ideas that can translate
into new products or services (Covin and Slevin 1994).
3. Focus on the Customer:
An entrepreneurial firm is focused on the need for creative approaches to acquire,
retain, and develop customers (Slater and Narver 1995, Deshpande, Farley, and
Webster 1993). Paying attention to the consumer equips the entrepreneurial firm with
a knowledge base of customer’s requirements.
4. Utilizing an Opportunity:
The recognition and pursuit of opportunity is a core dimension of entrepreneurial
marketing. Entrepreneurship has been termed as the process of discovery, evaluation,
and exploitation of opportunities (Shane and Venkatraman 2000). Entrepreneurial
opportunities are situations in which new goods, services, raw materials, and
organizing methods can be introduced through the formation of new means, ends, or
means-ends relationships (Casson 2003).
5. Risk Management:
Entrepreneurship is associated with calculated risk taking. This implies an effort to
identify the risk factors and subsequent attempt to control or mitigate those risk
factors. Entrepreneurial marketing has an important role in managing risk in the
entrepreneurial firm (Srivastav, Shervani, and Fahey 1999).
6. Value Creation:
Innovative value creation is an important facet of entrepreneurial marketing, as value
creation is a prerequisite for transactions and relationships (Morris et al. 2002).

8. What do you mean by market feasibility?

Ans.

Market feasibility determines the depth and condition of a particular real estate market and its
ability to support a particular development.

In simple words it determines whether a product or service can sustain in a specific market or
not as well as whether it is capable of generating financial surplus for the firm or not.

Most market feasibility studies include:-

 Description of the industry

 Current Market Analysis

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  Competition or presence of competing products.
 Anticipated future market potential.
 Potential buyers and sources of revenues.
 Sales projections.
Market feasibility tests can be carried out not only on products but on ideas, campaigns,
processes and entire businesses too.

A feasible product is the one which not only caters to the needs of present prospective buyers
but also maintains a stable demand in the future. A feasible product enhances the financial
surplus of a firm.

9. Discuss marketing research for new venture.

Ans.
It’s the simplest way for entrepreneurs to keep up with market trends and maintain a
competitive edge by sizing up your business opportunity.
Market research can be carried out at various stages of a business life cycle, from pre-launch
and beyond. Having a greater understanding of your marketplace from the very start will
enable you to create a sound business strategy to establish and grow your brand into one
that’s better than the competition.

Primary market research covers the following:

Monitoring the effectiveness of sales
 Ascertaining the quality of services provided by competitors
 Understanding the channels of communication used by competitors
 Assess the active competition within the market
Secondary market research covers the following:
 Published company reports data
 Existing surveys and studies
 Newspaper reports
 Government data

Primary market research is a kind of market research that can be carried out individually or as
a business, with the aim of collecting unique data that can be used to improve products,
services and overall functionality.

Secondary market research is a different type of market research as it relies on information

that’s already available from a variety of sources.

The key steps of successful market research

There are four important steps to any successful market research study:
 Investigate whether similar research has previously been carried out.
 If so, analyze the existing relevant data that meets your objectives – providing it
meets your budget.
 How will the existing data be used and by whom?
 Do you need to conduct your own primary market research too? If so, with whom?

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10. Write a short note on Contingency planning.

Ans. All businesses are vulnerable to some amount of risk. Contingency planning can be
effective in mitigating these risks.

Contingency planning is defined as a course of action designed to help an organization

respond to an event that may or may not happen. Contingency plans can also be referred to as
‘Plan B’ because it can work as an alternative action if things don’t go as planned.

There are seven steps outlined for a contingency plan which are as follows:

Develop a Contingency Planning Policy Statement: This will provide the authority and
guidance necessary to develop the plan.

Conduct the BIA (Business Impact Analysis): The BIA will help to identify and prioritize
information systems and components that are critical in supporting the organization’s
mission/business functions.

Identify Preventive Controls: Preventive controls are measures taken to reduce the effects
of system disruptions. They will increase system availability and reduce contingency life-
cycle costs.

Create Contingency Strategies: These are thorough recovery strategies that ensure the
system will be recovered quickly in case of a disruption.

Create an Information System Contingency Plan: This should contain detailed guidance
and procedures for restoring a system after emergencies occur. These procedures will be
unique to the system’s security impact level and recovery requirements. Each third-party
vendor must be prepared for working within the bank’s contingency plan during and after
emergencies.

Provide Plan Testing, Training and Exercises: Testing your plan will ensure that recovery
will be successful while training prepares personnel so that they know how to act in case of
emergency and with regards to putting the plan into effect.

Ensure Plan Maintenance: The plan should be updated regularly to remain current with any
changes made within the organization.

When you run a business, risk comes with the territory and can occur in the form of
accidents, natural disasters, financial risks, IT attacks and more. Be sure you are prepared by
providing comprehensive contingency planning in your workplace.

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