Lesson Proper

Principles, Tools and Techniques in Creating a Business

Principles in Creating a Business

According to the New Oxford American Dictionary, a principle is “A fundamental truth or proposition
that serves as the foundation of a system of belief or behavior or for a chain of reasoning.”

The principles of a business are the driving forces that make it successful. They are the backbone for
the organization.

There are ten such principles that underlie the creation of the most successful small business in the
world.

1. Scalability – a business must be scalable for it to be successful. A small business built rightly can grow
10, times its current size. Scalability is the capability of a system, network, or process to handle a
growing amount of work, or its potential to be enlarged in order to accommodate that growth. In an
economic context, where scalability of a company implies that the underlying business model offers the
potential for economic growth within the company.

2. Big Ideas – a small business is no more effective than the idea upon which it is built. The entrepreneur’s
vision is more important to the life of the business than anything else.

3. Systems – you must recognize that a small business is a System in which all parts contribute to the
success of failure of the whole. In the system, everything must work together: from employee to the
president; from equipment to resources.

4. Sustainability – a business must dynamic, able to thrive through all economic conditions, in all markets,
providing meaningful, highly differentiated results to all its customers. Such differentiation is the key to
survive.

5. Growth – all business need internal growth. A small business is a school in which its employees are
students, with the intention, will, and determination to grow.

6. Vision – a small business must manifest the higher purpose upon which it was seeded, the vision it was
meant to exemplify, the mission it was intended to fulfill.

7. Purpose – a small business is the fruit of a higher aim in the mind of the person who conceived it.

8. Autonomy – a business is not part of the owner’s life, but is, in fact, its own entity. A small business
possesses a life of its own, in the service of God, in whom it finds reason.

9. Profitability – a small business is an economic entity, driving an economic reality, creating an

economic certainty for the communities in which it thrives.

10. Standards – a small business creates a standard against which all small business are measured as either
successful, or not. All small businesses should aim to thrive beyond the standards that formerly existed.
 Each business needs a shape and structure, and these principles will give your company an outline,
which is necessary for it to thrive.

Seven Steps in Effective Decision-making

There are seven basic steps in effective decision-making:

1. Identify the decision to be made – After realizing that a decision must be made, you then go
through an internal process of trying to clearly define the nature of the decision you must make.
2. Gather relevant information – Most decisions require collecting pertinent information. Some
information must be sought from within yourself through a process of self-assessment, while other
information must be sought from outside books, people and a variety of other sources.
3. Identify alternatives – Through the process of collecting information you will probably identify
several possible paths of action, or alternatives. In this step of the decision-making process you will
list all possible and desirable alternatives.
4. Weigh evidence – In this step, you draw on your information and emotions to imagine what it would
be like if you carried out each of the alternatives to the end. You must evaluate whether the need
identified in Step 1 would be helped or solved through the use of each alternative.
5. Choose among alternatives – Once you have weighed all the evidence, you are ready to select the
choice that seems to be best suited to you.
6. Take action – You now take some positive action, which begins to implement the alternative you
chose.
7. Review decision and consequences - In the last step you experience the results of your decision and
evaluate whether or not it has "solved the need you identified in Step 1. If it has, you may stay with
this decision for some period of time. If the decision has not resolved the identified need, you may
repeat certain steps of the process in order to make a new decision.

Decision-making tools

While the basic principles might be the same, there are dozens of different techniques and tools that can
be used when trying to make a decision.

Among some of the more population options, which often use graphs, models or charts, are:
1. Decision Matrix – A decision matrix is used to evaluate all the options of a decision. When using
the matrix, create a table with all of the options in the first column and all of the factors that affect
the decision in the first row. Users the score each option and weigh which factors are of more
importance. A final score is then tallied to reveal which option is the best.
2. T–Chart – This chart is used when weighing the plusses and minuses of the options. It ensures that
all the positives and negatives are taken into consideration when making a decision.
3. Decision Tree – This is a graph or model that involves contemplating each option and the outcomes
of each. Statistical analysis is also conducted with this technique.
4. Multivoting – This is used when multiple people are involved in making a decision. It helps whittle
down a large list options to a smaller one to the eventual final decision.
5. Pareto Analysis – This is a technique used when a large number of decisions need to be made. This
helps in prioritizing which ones should be made first by determining which decisions will have the
greatest overall impact.
6. Cost–Benefit – This technique is used when weighing the financial ramifications of each possible
alternative as a way to come to a final decision that makes the most sense from an economic
perspective.
 7. Conjoint Analysis – This is a method used by business leaders to determine consumer preferences
when making decisions.

Tools and Techniques in Making an Efficient Business

It is the Holy Grail for small business owners finding ways to make efficiency savings in all aspects of
their operations. The good news is there are plenty of tools, tips and techniques available to help them make
cost savings and boost productivity.

Here are ten of them.

1. Use technology to speed up workflow.

Small businesses should be looking to innovations in technology to solve day-to-day

inconveniences. For example, a huge amount of time is often spent on admin and sending
information back and forth between various parties. A lot of it could be saved through document
sharing

This can simplify and speed up workflow. With so many free platforms and applications out
there, such as Dropbox and Google Docs, you can increase productivity with no extra business costs.
In fact, anything from communication, data sourcing and payments can all is managed from mobile
devices, so you can grow your business on the go.

2. Shorter meetings fuel efficiency.

Hold a brief meeting standing up, every morning, where each person explains what they are
going to work on that day. This will ensure everyone is on the right track and not wasting time on
non-urgent tasks. By doing this standing up, you can make sure the meeting is energized and to the
point.

3. Smart office space pays.

Office space can involve a big outlay for SMEs, but it is also an area where some smarter
thinking can make a real difference. Sharing meeting rooms and other communal space, for example
kitchen facilities, with other companies and individuals reduces costs. For sole traders, this could
mean working in an office environment alongside other businesses, as opposed to working from
home or the local coffee shop.

The added benefit of co-working spaces is that to foster collaboration and creativity between the
various businesses and people using the space. Steve Jobs was a famous proponent of this concept
and the Pixar offices were designed with a huge central atrium to encourage random, spontaneous
encounters between colleagues who didn't usually work together.

4. Small changes, big savings.

One way of improving efficiency is for business owners to make small changes to the way they
handle their company's expenses.
 Invest in automated booking and expense programs to minimize the time and cost involved with
reconciling expenses manually. This will also provide an overview of expenditure, which allows
businesses to establish clear expense policies, identify key suppliers and negotiate better supplier
rates. Have regular meetings with suppliers to ensure they continue to meet your needs and to check
you are effectively utilizing the services they offer.

5. Manage staff expenses.

Implement a corporate card program, which can help oversee and manage employee expenses
and provide high quality management information.

6. Keep a firm grip on cash flow.

"Turnover is vanity, profit is sanity, and cash flow is reality", is an old saying that business
owners would do well to heed. Identify the payment process and key names at your top customers
that make up 80% of the business. Five working days after sending out the invoice, make sure you
courteously call to check all is in order on the invoice. And know your forward order book only
include confirmed when work is confirmed, probable when it is probable and be skeptical about
anything that is possible.

7. Stay connected on the move.

The growing trend towards mobile and flexible working means that employees are permanently
connected and are increasingly working on the go. The new generation of portable print and scan
technology offers huge support for business efficiency moves.

Portable printers and scanners enable employees to work as productively on the go as they do
when they are sitting at their desk For example, they allow employees to print final amends to
presentations in the car before heading into a meeting or scan important documents when out of the
office into a workflow.

8. Use time more efficiently.

Being more efficient is more about being than doing. It is probably 90% mindset, The shorter the
amount of time you allow yourself, the more you will get done, so make sure the first 90 minutes of
your day is focused on growing your business. Turn off your email and phones and concentrate only
on that. Then divide your working day into 45- or 30-minute chunks-use a timer-and think of doing
only that task.

Create daily folders marked with the days of the week and putting into those folders the things
that must be done on that day. Anything that isn't completed gets put into the next day's folder. This
creates a good routine.

9. Get the best deal on insurance.

Trawling insurance companies, either online or by telephone, to find the best deal on business
insurance can be extremely costly in time. Business owners can save time by getting multiple
insurance quotes from one place, either using a broker or a quote comparison tool. "But check the
policy details to make sure that you are comparing like for like."
 10. Do not be lax with the legal.

In the hectic process of starting up a business, the founders often put off sorting out the legal
matters until later, or not at all. However the advice from legal services firm is to lay the right legal
foundations at the start to avoid costly disruptive problems in the future.

If you have started a business and decided to partner with someone, a friend or a family member,
it's important to have a partnership agreement in place from the word go. You may think this sounds
overly official, but without this type of agreement, all sorts of disputes can arise, even between the
closest of friends. This can be costly and damaging for the business.

Competition

It shows that weak competition is one of the fundamental factors that explain limited growth,
productivity, and employment in the economy. Philippine experience has shown that reforms such as trade
liberalization, deregulation, and privatization, while necessary, are not sufficient to foster effective
competition. The success of these reforms depends on the creation of a competitive domestic market
environment; which is in turn determined by the interplay of behavioral, regulatory and structural constraints
along with the broader aspects of competitive infrastructure. With the removal of many regulatory barriers, the
economy is already substantially open. However, competition in many industries has remained limited due to
structural factors such as large capital and economies of scale requirements, lack of middle and medium
enterprises leading to a hollow industrial structure, and weak linkages of SMEs with large enterprises. In
agriculture, regulatory barriers still exist while in infrastructure, the capacity and independence of our
regulators are still evolving and need to be strengthened. Maintaining a competitive environment requires
coordinated policies to implement continued liberalization and deregulation in tandem with the necessary
support measures that will address the structural obstacles to the entry and growth of domestic enterprises.
These efforts should be pursued jointly with well-functioning competition and regulatory agencies.

Technical Marketing Techniques

There are four marketing techniques that you can use to approach your market with your products and
services. Use these to market your products better than your competition. The better you market to your
customers, the greater your success in business and sales. Use these tricks to get ahead of your competitors.

1. Create Utility and Usefulness with Your Product

The first marketing technique you can use to beat your and competition is to create utility, usefulness,
and satisfy with the needs of your customers to achieve a specific result. This requires that you offer them
something they need and can use to accomplish their other goals.

Look at your market today. What will your customers and potential customers want, need, and are
willing to pay for in the months and years ahead? What are the trends in customer demands in your market? If
you can answer this accurately, you can often leapfrog over your competition and dominate a new market even
before it emerges.

2. Change Your Pricing

 A second approach to sales and marketing is by changing your pricing. By bringing your goods and
services into the price range of your customers, you can open up entirely new markets that do not today exist.
How could you price your products or services so that more customers could afford to buy them?

Many companies have been able to achieve market leadership by focusing on bringing their prices into
the affordability range of more customers. What we have found is that the greater your market share, and the
lower your cost of production, the lower is the price that you can charge.

3. Emphasize Your Product’s Key Benefit to The Customer

The third strategy in sales and marketing is adapting to the customer's reality, both social and
economic. The ultimate aim of your marketing plan is to make selling unnecessary. But this is seldom
achieved.
The product almost always needs to be sold to the end customer. As it turns out, each product offers a "key
benefit” that is the primary reason why the customer would buy.

Each product or service also triggers a key fear, which is what holds the customer back from buying the
product or service in the first place. Customers are terrified of risk. They are afraid of paying too much, getting
the wrong product, losing their money, and getting stuck with something that is inappropriate for their
purposes. 1his is the main reason that qualified prospects hold back from buying any product or service, at any
price

When you can emphasize the key benefit, the unique added value that a customer will receive by
buying your product or service, and at the same time take away his or her major tear, you can open up an
enormous market for what you sell. What is the key benefit that motivates your customer to buy? If you have
different types of customers, what is the key benefit that triggers the buying decision in each of these different
kinds of customers?

What is the key fear that holds potential customers back from buying your product or service? What
could you do to emphasize the benefit and make it more attractive, while at the same time, minimize or
eliminate the fear that causes a customer to hesitate?

4. Deliver True Value of Your Product to Your Customer

The fourth approach to marketing plan is for you to deliver what represents "true value" to the
customer. True value is something that can only be identified by working closely with your customers.

What represents true value to your customers? How could you structure your product or service
offerings in such a way that people would be more comfortable purchasing them from you rather than from
your competitors?

There will always be competition for products and services. It is your job to make sure that you stay
ahead of the game and ahead of your competition.

Methods of Competitive Advantages

Businesses are constantly seeking competitive advantages in the market-place. There are many
different ways in which this can be done, but many will focus on a few tried and true methods of gaining a leg
up on the competition. These methods can generally be classified into about four different primary categories.
Both Stanford University and the University of Cambridge cite Michael Porter's broad and narrow categories
of competitive strategies as the basis for understanding how businesses try to compete.

1. Cost Leadership

Cost leadership is the first competitive advantage businesses often attempt to gain. Cost leadership as
an advantage occurs when a business is able to offer the same quality product as its competitors, but at a lower
price. Cost leadership can occur when a company finds ways to produce goods at a lower cost through the
perfection of production methods or by the utilization of resources in a more efficient manner than
competitors. Other factors, Such as proprietary technology, can also factor into this type of advantage. Cost
leadership may be classified as an offensive strategy, whereby businesses attempt to drive competitors out of
the market by consistently using price strategies designed to win over consumers.

2. Differentiation

Differentiation is a second strategy that businesses often use to set themselves apart from competitors.
In a differentiation strategy, low cost is only one of many possible factors that may set aside a business from
others. Business that differentiate themselves typically look for one or more marketable attributes

That they have that can set them apart from their competitors. They then find the segment of the market that
finds those attributes important and market to them. The process can also work in the other direction with
businesses conducting research to determine which things consumers find most important and then developing
a niche market for those products or characteristics.

3. Defensive Strategies

Another way for a business to gain a competitive advantage is to utilize a defensive strategy. The
advantage gained by this type of strategy is that it allows business to further distance itself from its competition
by, in some sense, maintaining a competitive advantage it has gained. Therefore, this strategy is closely related
to differentiation and cost leadership because it is a method used by businesses to keep those advantages in
place once they have been attained. Whereas the other two strategies are more offensive in nature, this strategy
becomes an actual advantage as it becomes increasingly difficult for so-called competitors to offer any real
opposition to the business.

4. Alliances

Competitive advantages can also be gained by businesses that seek strategic alliances with other
businesses in related industries or within the same industry. Businesses have to be careful not to cross the line
between alliances and collusion though. Collusion occurs when businesses within the same industry work
together to artificially control prices. Strategic alliances, on the other hand, are more along the lines of joint
ventures that businesses use to pool resources and gain themselves exposure at the expense of other
competitors not in the alliance.

Types of Business Competition

The goal in business is to make a profit by selling a product or service. In most situations several
companies will be competing for sales and the market share.
 This competition can range from performance competition, where each company does its best to win
the hearts and minds of the customers, to a head-to-head competition, where a company will not only seek to
do better than its opponents but will also try to prevent the competition from performing well.

1. Performance Competition

Many companies are aware of their competition but are mainly concerned in their immediate business,
getting customers and satisfying those customers.

By providing good products and services, these companies hope to be successful and even lead the
pack. Marketing and making the customers aware of their products and company is also done to improve their
business performance. By using Total Quality Management (TQM) or Six-Sigma methods and conforming to
the ISO 9000 Standards, a company can enhance their ability to make quality products and have a well-run
company.

Many companies are aware of their competition and their position in the marketplace, so they simply
try to do their best to meet their customers this case, "the cream rises to the top.

2. Head-to-Head Competition

In some cases, companies will compete directly with their top competitors. They will not only try to
perform well, but they will also try to make it all for their opponents to do well. Since the opponents may be
also using such tactics they will need to use good defensive measures to deflect the attacks.

3. Controlling Supplies

One way in which a company can deter their opponents from doing well is to try to control the supplies.
By outbidding in vital supplies or controlling suppliers can be done to hinder the opponents. However, make it
sure that suppliers will benefit from your business if you want to control them.

4. Advertising

Marketing and advertising sometimes employ negative ads about the competitors. The best ads indicate
lack of quality of the competition through the use of implication.

For a long while Miller Lite and Bud Lite beers had their own advertising campaigns, each touting the
advantage of their individual brand. But then in 2004, Miller went head-to-head against Budweiser in their
marketing. Miller commercials showed Bud Lite being replaced by Miller Lite. This brought about a battle
with each attacking the other's brand.

5. Distribution

Controlling the distribution of products is another method of deterring the competition. Beer and
beverage companies will gain contracts to be the sole distributor at ballparks.

6. Predatory Competition
 Large companies have been known to buy out smaller competitors. Or they may simply make it
difficult for the company to stay in business. Microsoft was known to squeeze out small competitors by forcing
computer stores not to carry those products.

Lawsuit is another way a large company can stifle smaller competition real or imaginary. Some small
companies have been put out of business simply because there was an inkling of competition.

Other business companies have been known squeezing out small stores in the area, as well as for
bullying suppliers into cooperation with their needs. Although the public frowns on such tactics, they still flock
to these business establishments because of their low prices.

Often several companies will be competing for sales and the market share common type is performance
competition, where each company does its best to win customers. Head-to-head competition is where a
company will not only seek to do better than its opponents but will also try to prevent the competition from
Performing well. Large companies may use predatory competition to assure their top position.

7. Supplier

Suppliers are party that supplies goods or services. A Supplier may be distinguished from a contractor
or subcontractor, who commonly adds specialized input to deliverables. Also called vendor

Supplier is a supply chain management term that means anyone who Provides goods or services to a
company or individuals. A Vendor often manufactures inventorial items, and sells those items to a customer.

Suppliers are individuals or businesses that provide goods or services to vendors in return for the
agreed upon compensation. As such, Suppliers do not generally interact with consumers directly, leaving that
task to vendors or shop owners. It is not unusual for a supplier to provide volume discounts to vendors when
they agree to sign long-term contracts or place orders for large quantities.

There are suppliers found in just about any type of profession that can be imagined. Wholesale
suppliers are very common in the retail industry, where they are likely to manufacture and deliver large
quantities of products to their client. Supply companies also work in niche markets as well, such as importing
and exporting packaged foods, ethnic or cultural goods, or any other range of products that have a small but
reliable demand. In general, exporters of this type will handle all the details for shipment and delivery to the
vendor, and include the associated costs in the final charges issued to the client.

One of the main strategies of suppliers is the creation of volume discounts for vendors who place orders
tor large quantities of a specific good or service. In many cases, the discounts are structured as tiered pricing.
That is, the supplier will charge a fixed price per unit it the order is for up to a thousand units, but offer a
specific discount if the order is for between 1001 and 2000 units. A higher tier discount is applied if the order
is between 2001 and 3000 units, followed by an even higher discount if the order is in the 3001 to 4000 unit
range, and so on.

Some suppliers choose to make the discount a little simpler by applying a fixed discount that applies to
any order quantity over a certain number of units. Other suppliers prefer to go with discounts issued to
customers who are willing to enter into contracts that feature duration of two to five years and commit the
vendor to order a minimum number of units between the beginning date and ending date specified on the
contract. Should the vendor fail to purchase that minimum number of units during the life of the contract, the
supplier has the option of going back and charging penalties of some type.
 Suppliers rarely rely simply on competitive pricing in order to secure steady clients. Along with price,
they also tend to strive for quality, an attractive range of goods and services, quick response to customer
queries, and timely delivery of the products once the order is placed.

Impact of Suppliers to Business

Hereunder are some of the impacts of suppliers to one's business:

1. Quality - supplier components can positively or negatively affect the quality of your product. Higher
quality increases customer satisfaction and decreases returns, which adds cash to your bottom line.

2. Timeliness - Their timely deliveries are crucial to how customers view your reliability. A quick
turnaround can become the key to minimizing your inventory, which in turn translates for less risk of
inventory obsolescence and lower cash needs.

3. Competitiveness - They can give you the one-up on your competition based on their pricing, quality,
reliability, technological breakthroughs and knowledge of industry trends.

4. Innovation - Suppliers can make major contributions to your new product development. Remember,
they live their product more than you do; they’re working to be on the cutting edge of innovation for
their product. The good ones will understand your company, its industry and needs, and can help you
tweak your new idea.

5. Finance - If you've proven to be a considerate, loyal and paying customer, you may be able to tap into
your suppliers for additional financing once you hit growth mode or if you run into a cash crunch. That
financing may take the form of postponed debt, extended terms on new purchases, a loan, or an
investment in your company.

All of these improve your cash position.