Creating a Business Model

3
Conducting a
Feasibility Analysis &
Designing a Business
Model
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Creating a Business Model

1. Conducting an idea assessment

2. Elements of a feasibility analysis

3. The 6 forces in the macro environment

of an industry PESTEL

4. Porter’s Five Forces Model

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Creating a Business Model

5. Primary & secondary market research

5. The nine elements of a business model

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The New Era of Business
 Business Eras
Production (industrial) Era

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 Business Eras
Sales Era (1920-1950)

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Business Eras
Marketing Era

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 Appraising Readiness to Become an
Entrepreneur contd.
Marketing considerations:
The successful owner is the one who:

1- Knows how to evaluate the marketplace in terms of identifying the

needs of the different groups of potential customers

2- Can identify the major competitors and their strengths and

weaknesses

3- Understands what motivates buyers to purchase

4- Appreciates how to exhibit non-prescription merchandise attractively

5- Knows how to conduct simple marketing research to better define

possible markets and needs for products and services.
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Creating a Business Model

Idea Assessment: is the process of:

▪examining a particular need in the market

▪developing a solution for that need, &

▪determining the entrepreneur’s ability to turn

the idea into a business.

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Creating a Business Model

New Business Planning Model

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Creating a Business Model

Idea Assessment
Use an idea sketch pad to ask key questions
addressing:

1.Customers
2.Offering
3.Value proposition
4.Core competencies
5.People

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Creating a Business Model

Idea Sketch Pad

Creating a Business Model

Feasibility Analysis: Viability

▪ Is a particular idea a viable foundation for
creating a successful business?

▪ Feasibility study addresses the question:

“Should we proceed with this business idea?”

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Creating a Business Model

Elements of Feasibility Analysis

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Creating a Business Model

Industry & Market Feasibility Analysis

Evaluating industry attractiveness using the
Six macro forces: EPSTEL
1. Sociocultural
2. Technological
3. Demographic
4. Economic
5. Political and legal
6. Global

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 Analyzing The Market
Environment

The marketing environment is made up of two environments;

▪ The microenvironment is the immediate environment that

effects the companies ability to serve customers.

▪ The macroenvironment consists of larger social forces that

affect all players in the microenvironment.

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Creating a Business Model

Industry & Market Feasibility Analysis

Ask:
▪How large is the industry?
▪How fast is it growing?
▪Is the industry as a whole profitable?
▪Is industry characterized by high profit margins or
thin margins?
▪How essential are its products to customers?

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Creating a Business Model

Industry & Market Feasibility Analysis

Ask:
▪What trends are shaping the industry’s future?
▪What threats does the industry face?
▪What opportunities does the industry face?
▪How crowded is the industry?
▪How intense is the level of competition?
▪Is the industry young, mature, or in between?

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Creating a Business Model

Porter’s Five Forces Model

1. Competition
2. Suppliers
3. Buyers
4. New entrants
5. Substitute products / services

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Creating a Business Model

Porter’s Five Forces Model

1. Industry competitors

1. Suppliers Bargaining

1. Buyers Bargaining

1. Threat of new entrants

1. Threat of substitutes
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Strongest of the five forces
Industry is more attractive when:
▪ Number of competitors is large, or, at the other extreme, quite
small

▪ Competitors are not similar in size or capacity

▪ Industry is growing fast

▪ Opportunity to sell a differentiated product or service exists

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The greater the leverage of suppliers, the less
attractive the industry
Industry is more attractive when:
▪ Many suppliers sell a commodity product
▪ Substitutes are available
▪ Switching costs are low
▪ Items account for a small portion of the cost of
finished products

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Buyers’ influence is high when number of
customers is small & cost of switching to a
competitor’s product is low.
Industry is more attractive when:
▪ Customers’ switching costs are high
▪ Number of buyers is large
▪ Customers want differentiated products
▪ Customers find it difficult to collect information for
comparing suppliers
▪ Items account for a small portion of customers’ finished
products

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The larger the pool of potential new entrants, the
less attractive an industry is.
Industry is more attractive to new entrants when:
▪ Advantages of economies of scale are absent
▪ Capital requirements to enter are low
▪ Cost advantages are not related to company size
▪ Buyers are not loyal to existing brands
▪ Government does not restrict the entrance of new
companies

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Substitute products or services can turn an
industry on its head
Industry is more attractive to new entrants
when:
▪ Quality substitutes are not readily available
▪ Prices of substitute products are not
significantly lower than those of the industry’s
products
▪ Buyers’ switching costs are high

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Module 3: Creating a Business Model

Elements of Feasibility Analysis

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Creating a Business Model Part II

Elements of Feasibility Analysis

Creating a Business Model Part II

Product / Service Feasibility Analysis

Two questions:

1.Are customers willing to purchase our product

or service?

2.Can we provide the product or service to

customers at a profit?

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Creating a Business Model Part II

Product / Service Feasibility Analysis

Primary research:
Collect data firsthand and analyze it

Secondary research:
Gather data that already has been
compiled and analyze it

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Creating a Business Model Part II

Product / Service Feasibility Analysis

Primary research:
Collect data firsthand and analyze it
▪ Customer surveys and questionnaires
▪ Focus groups
▪ In-home trials
▪ Trade associations and business directories

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Creating a Business Model Part II

Product / Service Feasibility Analysis

Primary research:
Collect data firsthand and analyze it
▪ Industry databases
▪ Demographic data
▪ Forecasts
▪ Articles
▪ Local data
▪ Internet

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Creating a Business Model Part II

Product / Service Feasibility Analysis

Secondary research:
Gather data that already has been compiled
and analyze it.

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What are Consumers’
Needs, Wants, and
Demands?

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 What are Consumers’ Needs,
Wants, and Demands?

• Needs are basic human needs include food,

clothing and safety

• Wants must be met when appropriate for the sake

of your happiness

• Demands are simply the wants of a consumer

when backed by the ability to pay for that want.

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Demand =
Wants Buying Power

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What are the differences
between Goods,
Services, & Ideas…?

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 What are the differences between Goods,
Services, & Ideas…?

Marketing deals with goods, services, and ideas.

• A good is something someone can touch.

• A service is providing an intangible benefit to customers.

• An idea can include concepts or images.

For this course, we will use the word product to refer to goods,
services, and ideas.

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Segmenting Consumers: Demographics
Demographics:
• Age

• Gender

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Segmenting Consumers: Demographics
Demographics:
• Social class/income

•Geography

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Maslow’s Hierarchy of Needs

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Do you have any bond, attachment or
relationship with specific brands?

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Consumer-Brand Relationships
1. Self-concept attachment: the product
helps to establish the user’s identity.
“This brand says something about me”

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Consumer-Brand Relationships (Cont’d)
2. Nostalgic attachment: the product serves
as a link to the consumer’s past.

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Consumer-Brand Relationships (Cont’d)
3.Interdependence: the product is a part of
the user’s daily routine.

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Consumer-Brand Relationships (Cont’d)
• 4. Love: the product elicits emotional
bonds of warmth, passion, or other strong
emotion

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Positioning

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Creating a Business Model Part II

Elements of Feasibility Analysis

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Creating a Business Model Part II

Financial Feasibility Analysis

Capital requirements:
an estimate of how much start-up capital is
required to launch the business.

Estimated earnings:
forecasted income statements.

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Creating a Business Model Part II

Financial Feasibility Analysis

Time out of cash:
The total cash it will take to sustain the business
until the business achieves break-even cash flow.

Return on investment:
Combining the previous two estimates to determine
how much investors can expect their investments to
return.

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Creating a Business Model Part II

Elements of Feasibility Analysis

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Creating a Business Model Part II

Entrepreneur Feasibility Assessment

Question: Is this idea right for me?

▪Assess entrepreneurial readiness: knowledge,

experience, and skills (KSAs) necessary to start.

▪Assess whether the business will be able to

generate enough profit to support everyone’s
income needs

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Creating a Business Model Part II

The Business Model Process

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Creating a Business Model Part II

The Business Model Canvas

Product Description

▪ Features: descriptive facts about a product /

service.

▪ Benefits: what the customer gains from the

product or service feature.
 Marketing Strategy: 1-SDP

Address:
▪ Segmentation Product
▪ Targeting Price
▪ Consumer Attributes Promotion
▪ Differentiation Place
▪ Positioning
▪ Value Proposition (V=Q:S:P)
Marketing Strategy: 2- Mix

Address:
▪ Segmentation Product
▪ Targeting Price
▪ Consumer Attributes Promotion
▪ Differentiation Place
▪ Positioning
▪ Value Proposition (V=Q:S:P)
Module 4: Creating a Business Model Part II

The Business Model Process

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Module 4: Creating a Business Model Part II

Test Value Proposition

Ask:
▪Do we really understand the customer problem?

▪Do these customers care enough about this problem?

▪Do these customers care enough about our product?

Creating a Business Model Part II

The Business Model Process

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Creating a Business Model Part II

Business Prototyping
▪ Entrepreneurs test their business models on a
small scale before committing serious
resources to launch a business that might not
work.

▪ Recognizes that a business idea is a

hypothesis that needs to be tested before
taking it full scale.

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Creating a Business Model Part II

Business Prototyping: Lean Start-Up

Lean Start-Up:
A process of rapidly developing simple prototypes to
test key assumptions by engaging real customers
Minimal Viable Product:
the simplest version of a product or service with
which an entrepreneur can create a sustainable
business

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Creating a Business Model Part II

The Business Model Process

Creating a Business Model Part II

Pivots:
The process of making changes / adjustments
in the business model on the basis of the
feedback a company receives from customers.
1. Product pivot
2. Customer pivot
3. Revenue model pivot

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Creating a Business Model Part II

Conclusion
▪ The best business ideas start with a common
problem or need.

▪ Ideas assessment process helps an entrepreneur

to identify the solution with the most potential.

▪ Feasibility analysis helps the entrepreneur

determine whether an idea can be transformed into
a viable business.

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Creating a Business Model Part II

Conclusion
▪ Developing a business model helps entrepreneur
better understand all that will be required to launch
and build a business.

▪ Once the entrepreneur completes the idea

assessment, feasibility study, and business model,
he or she is ready to develop the business plan.

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Marketing Strategy: Ask & Write
▪ Who are the company’s key competitors?

▪ What are there strengths and weaknesses?

▪ What are their strategies?

▪ How successful are they?

A good elevator pitch provides:
▪ Context
▪ Benefit
▪ Target customers
▪ Point of differentiation
▪ Clincher
‫‪What Lenders look for‬‬

‫‪The “5 Cs” of Credit‬‬

‫‪1. Capital‬‬ ‫رأس المال‬
‫‪2. Capacity‬‬ ‫القدرة‬
‫‪3. Collateral‬‬ ‫الضمانات‬
‫‪4. Character‬‬ ‫تقييم شخصية رائد األعمال‬
‫‪5. Conditions‬‬
‫قا للسوق – المنافسين – التضخم ‪ -‬سعر الفائدة إلخ‬
Business Plan: Pitching / Presenting
Pitching MUST be less than 20 minutes
Business Plan: Immutable Pitching Tips

▪ Prepare & Practice delivery.

▪ Demonstrate enthusiasm & not emotions.
▪ Focus on the financial opportunity of the idea
▪ Hook investors fast with:
a. explanation of the new venture
b. its opportunities
c. anticipated benefits to them.
Module 4: Business & Strategic Planning

Business Plan: Immutable Pitching Tips

▪ Use visual aids.
▪ Follow the 10/20/30 rule for presentations.
▪ How company’s products solve critical problems.
▪ Factors that make your company unique.
▪ Offer proof.
▪ Keep the presentation “crisp.”
▪ Never use technical terms above the audience.
 Amr Sukkar PhD, M Phil, MBA
You tube channel: Amr Sukkar
Email Address: amressamsukkar@gmail.com
Facebook pag: Amr Sukkar

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