Fundamentals of Entrepreneurship

Credit Units: 3 Course Code: ENTR301

Module III:: Scanning the Environment
https://study.com/academy/lesson/opportunity-recognition-or-definition-examples.html
Business idea Generation
A business idea is the response of a person(s) or
organization to solving an identified problem or
to meeting perceived needs in the environment
(markets, community, etc)
A business idea is a prerequisite for a successful
business venture. Good business ideas result
from the effort and often the creativity of the
entrepreneur. Finding a good idea is the first
step in transforming the entrepreneur’s desire
and creativity into a business opportunity.
Sources of good Business Ideas: There are
several sources of good ideas. To be successful in
generating or finding one, however, the
entrepreneur needs to keep his/her mind and
eyes open and be alert to opportunities. An idea
however good, is only a tool at the end of the
day.
Opportunities occur when people discover a problem of some
kind that can be solved with the provision of product/services,
or when people decide they have certain needs or want to
satisfy.
Opportunities may also arise from change. Sources of
opportunities could also be an observed demand and supply
gap arising from society’s needs and function, growing and
evolving economies and economic niches, technological
change, social change, demographic change, political changes
such as war, tariff, and embargoes or artificial scarcities.
Other conditions that may create opportunities’ include
shortages, surpluses, price response, and shifts in demand.
Sources of business ideas include:

Hobbies/interests
Personal skills and experience
Franchises’
Mass media (newspapers, magazines, TV, internet etc)
Exhibitions
Surveys
Complaints
Brainstorming
Creativity

https://www.entrepreneurshipsecret.com/the-role-of-swot-analysis-in-identifying-business-opportunities/
https://www.investopedia.com/terms/s/swot.asp
https://www.investopedia.com/terms/s/swot.asp
Strengths
What advantages does your business have?
What do you do better than anyone else?
What unique or lowest-cost resources can you
draw upon, that others can't?
What do the people in your market perceive
as your strengths?
What factors indicate that you "win
business"?
What is your Unique Selling Proposition
(USP)?
Weaknesses
What could you improve?
What should you avoid?
What are the people in your market likely to
perceive as your weaknesses?
What factors cause you to lose business?
Opportunities
What good opportunities can you spot?
What interesting trends are you aware of?
Useful opportunities can come from such things as:
Changes in technology and markets on both, broad and narrow
scales.
Changes in government policies related to your field.
Changes in social patterns, population profiles, lifestyle
changes, and so on.
Local events.
Threats
What obstacles do you face?
What are your competitors doing?
Are quality standards, compliance requirements, or the
specifications for your job, products, or services changing?
Is changing technology threatening your position?
Do you have bad debts or cash-flow problems?
Could any of your weaknesses seriously threaten your
business?
To get a better picture of a SWOT analysis, consider the
example of a fictitious organic smoothie company.

Strengths :good sourcing of ingredients, personalized customer

service, and a strong relationship with suppliers.

Weakness: little product diversification, high turnover rates,

and outdated equipment.

Opportunities :in emerging technology, untapped

demographics, and a culture shift towards healthy living.

Threats: such as a winter freeze damaging crops, a global

pandemic, and kinks in the supply chain.
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Ecological Environment

 Changes in weather and climate

 Waste management practices by companies
 Use of green or eco-friendly products and practices by businesses
such as use of biodegradable material in packaging, jute/paper
bags instead of polythenes etc.

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Legal Environment

 Domestic (both Home and Host countries’ laws) and

International laws – how cos. can operate at certain
places.
Few laws:
 Discrimination laws
 Health and safety laws
 Consumer protection laws
 Copyright and patent laws
 Laws regarding pollution and recycling
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https://www.youtube.com/watch?app=desktop&v=VrmZLaFY3YE

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Class Discussion: Apple Case Study | SWOT and PESTLE Analysis

https://youtu.be/4k2KUtN3E3o?t=342
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Suggested Video: Nike Case Study

https://www.youtube.com/watch?v=C5Fl-1AOqOU

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Idea Selection

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7 Criteria to Select the Best Idea

1. Clarity
2. Usability
3. Stability
4. Scalability
5. Stickiness
6. Integration
7. Profitability

https://www.inc.com/samuel-bacharach/7-criteria-to-select-the-best-idea.html

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IDEA SELECTION

Step 1: Rough selection

Step 2: Fine selection

Step 3: Detailed analysis

In the detailed analysis, ideas are qualitatively analysed
and evaluated on the basis of criteria. For product ideas,
for example, these are:

a)customer benefit
b)differentiation potential and competitive factor
c)technical and economic feasibility.

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Rough Selection-Grouping your ideas

 Classify each idea generated into one of the three categories below:
• Loopy – This idea is not going to work.
• Maybe – Not sure about the potential. Keep for now.
• On to something – Definite potential.
 Once the ideas have been ranked, you can decide which to bring into the next stage,
where the ideas will be fleshed out. Aim to have no more than 10 ideas to take into
the Idea Design activity.
 Don’t completely discard any ideas until the group has made a final decision on which
idea to pursue in the next stage: Focusing. Sometimes sifting back through ideas can
(with some lateral thinking or brainstorming) turn a silly idea into a potential
enterprise.

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Fine selection

 For e.g. If there are less than ten ideas, the "rating" method can also be used.
Each participant gives each idea between 0 and 5 points. The points are also
added up and you get a ranking and a priority.
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Detailed analysis- Idea Design

 Distinguishing customers and beneficiaries
Customers are people or organizations who will buy from you.
Beneficiaries are the group or individual that benefit from the existence of your social
enterprise. It is essential to distinguish your customers from your beneficiaries. Although
your customers and beneficiaries can be the same, in many cases they are different groups
that require different approaches.
 What product or service will you be selling? features and attributes of your
product/service?
 Who will buy your product/service? Why will they buy from you ?
 What is the social need that you are responding to? Can you identify it? Who
will benefit as a result of your social enterprise?
 What resources will you need get this idea off the ground? 24
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Value Effort Grid

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AMITY GLOBAL Capacity Check
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Enterprise Idea: ___________________________________________________________

Requirement What resources do you What resources do you What additional How will you access these
need? have? resources do you need? additional resources?
Organisational / human resources

Does the group have the people and

skills to plan the enterprise?

Does the group have the people and

skills to start up and run the
enterprise?

Does the group have the people and

skills to manage the enterprise?

Physical/infrastructure resources
Does the group have the inf rastructure
(f acilities, building(s), space,
equipment and technology) required
by the enterprise?

Financial resources
Does the group have the money 26
needed to plan the enterprise?
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FEASIBILITY STUDY

 A feasibility study is a study, which is performed by an organization in order to

evaluate whether a specific action makes sense from an economic or operational
standpoint. The objective of the study is to test the feasibility of a specific action
and to determine and define any issues that would argue against this action.
 Since the study aims to discover whether an action is viable, it can help
organizations to avoid costly or operationally exhausting ventures.
 example of the situations where feasibility study can be performed may include:
Change in business location
Purchase of new equipment or software
Acquisition of another company
Hiring of additional employees

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Caselet- Social enterprise feasibility study – would a great recycling idea really work?

A social enterprise, already running successful furniture stores, had an idea for training
the long term unemployed to re-upholster donated furniture and to then sell it. They
wanted to know would it be a success, both making money and providing a social benefit.

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Feasibility Study

It was found out that to upholster different individual items would take a
lot of skill and also be costly because all the materials would have to be
cut to size and bespoke rather than the economies that you can get when
you are producing the same style sofa each time, for example. Also
people in the sector said that producing bespoke items was high risk as
the customer often changed their mind and then you were left with a
product you had invested a lot of time and money in which might not fit
other people's tastes.

The impact
Our feasibility study identified that what seemed like a good idea was, in
fact, extremely high risk and not likely to succeed either in terms of making
money or social impact. The social enterprise didn’t go ahead thus
protecting their future viability.

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Video: feasibility study 30

https://www.youtube.com/watch?v=H_m2HTo3HQI
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CORE ELEMENTS OF A FEASIBILITY STUDY

 #1 Technical feasibility
 #2 Market feasibility
 #3 Commercial feasibility
 #4 Overall risk assessment
 #5 Feasibility of purchasing an existing business- not necessarily relevant to
every business.

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Technical feasibility
It should answer the following questions:
 What is the proposed product or service?
 Is the product or service already on sale? If not, how far is it from an existing
marketplace and what will the introduction cost?
 How can you protect the product or service from the competition?
 What are the strengths of the product or service?
 What are the main benefits to customers or users?
 What resources are required for producing or providing it?
 How capable is the organization to acquire these resources?
 What are the regulatory standards surrounding the product or service and its
use?
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Market feasibility
 Market feasibility should answer the following questions:

 What market segments are you targeting?

 Why would people buy the product or service?
 Who are the potential customers and how many of them are there?
 What are the buying patterns of these potential customers?
 How will you sell the product or service? Where?
 Who are your competitors?
 What are the strengths and weaknesses of your competitors?
 What is your product or service’s competitive edge?

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Feasibility of purchasing an existing business-

not necessarily relevant to every business.

 How long can your business survive without a sale?

 How long before you break even with the product or service?
 How much money is required to start operating?
 Will your organization require external finance?

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Overall risk assessment

The overall risk assessment should answer the following questions:

 What are the major risks associated with the operation?

 What is the survival outlook for each of the above risks?
 How sensitive are the profits?
 What are the best ways to minimize these risks?

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Commercial feasibility
 Commercial feasibility study include:

 What are the strengths and weaknesses of your business?

 What are the potential sales volumes of the product or service?
 What is the pricing structure you’ll use?
 What are the sensitivity points for your business in terms of sales?
 What is the ROI?

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#5 Feasibility of purchasing an existing

business
 Why is the current owner selling the business?
 What is the business’ performance? If it’s poor, what are the reasons behind
it?
 What is the competition like?
 What is the valuation of the assets included in the sale?
 What are the advantages and disadvantages of the current business location?
Is your organization continuing operations in the same premises or not? Why?

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What is a Feasibility
Study: How it is done?

https://www.youtube.com/watch?v=JWB0WbtQE
9Q

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AMITY GLOBAL What is a Feasibility Study: How it is done?
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STEPS TO CONDUCTING A FEASIBILITY STUDY

 1: Conduct preliminary analysis

 2: Outlining the project scope and conducting current analysis
 3: Comparing your proposal with existing products/services
 4: Examining the market conditions
 5: Understanding the financial costs
 6: Reviewing and analyzing data
 7: Make "Go/No Go" Decision

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1-Preliminary assessment should consist of the following steps:

 First, you want to outline the planned idea or action. This means looking at what
you are looking to achieve and why.
 Second, you should examine the market space and the commercial viability of the
action. You want to get an overall feel of what type of customers are you
potentially attracting.
 Third, you should examine the unique characteristics of the idea and whether they
are strength or a weakness. The idea or action might have certain unique
characteristics (i.e. location, price, usability) and these might help your
organization.
 Fourth, you need to determine if there are insurmountable risks to the action. It’s
essential to outline any risks that could possibly reduce the viability of the action
or idea close to zero.

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2: Outlining the project scope and conducting current analysis

 The key to outlining the scope is about understanding the different
participants and end-users of the proposed idea or action. For instance, if you
are moving the business to new premises, you have to understand the impact
it’ll have on the workforce (change in commute can an impact on employee
morale, etc.) and the customer (will all customers follow your business to a
new location, etc.).

 Finally, you also need to analyze the current situation prior to the
implementation of the idea or action. You can do so by describing the
weaknesses and strengths of the business. Once you’ve done this, you can
study the savings and the operational benefits you are hoping to achieve with
the new proposal.

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3: Comparing your proposal with existing products/services

 Part of your feasibility study must then focus on understanding what the
customers are looking for and whether your proposed idea answers these
needs. You should also compare the proposed product with the existing
products or services and focus on the advantages, as well as disadvantages,
you might have.

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4: Examining the market conditions

 You also need to examine the market conditions. There are four specific
points when it comes to the analyzing market in terms of feasibility.

 Defining the target market.

 Studying the buying habits of the target market.
 Understanding the sale and market share outlook of the proposal.
 Outlining the product awareness required for the use of your product or
service.

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5: Understanding the financial costs

 The financial costs associated with your proposed idea or action will naturally
depend on the proposal. But you have to consider the following points in all
instances:

 The resources required to implement the idea or action.

 The source for these resources: internal or external financing.
 The realistic benefits of the idea or action, whether it’s sales figures, boost in
productivity, or a cut in operational costs.
 The break-even schedule for the proposal. This refers to the time it takes to a
point when the profits from the idea or action equal the costs associated with it.
 The financial risks associated with the idea or action. This can refer to risky
market conditions, the probability of requiring more resources and so on.
 The financial cost of failure. You also need to calculate the financial cost of the
worst-case scenario. This can determine whether your business has the means of
embarking on this new venture or not.

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6: Reviewing and analyzing data

Finally, you need to review your feasibility study carefully and examine the
findings with time. A good rule of thumb is to simply take a step back and reflect
on the research before jumping into conclusions.

After your study, look around and consider the following questions:

Are there any risks you weren’t aware of previously?

Have the market conditions changed?
Has the competition changed?
Is your business situation still the same, in terms of operations and economic
situation?

7: Make "Go/No Go" Decision

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What Is a Feasibility Study Example?

As an example, let's say that a major hospital in the city is looking to expand
its campus by adding a building. The project managers and hospital
administrators carry out a feasibility study to determine the project's cost,
including labor and materials for the building's construction.

The study included an analysis of the potential need, the expected number of
patients, projected revenues, and operating costs, such as staff, doctors, and
nurses. The project managers explored how to finance the project through a
combination of financing from local financial institutions and donations from
wealthy investors.

The potential risk to the project was considered along with public opinion and
interest by the community. The return on investment was calculated and was
determined that the forecasted revenue exceeded the expected costs, leading
the hospital administrators to approve the project.

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https://www.youtube.com/watch?v=5ATiyRVclhc