BUSINESS 10

Term 2
 OPPORTUNITY
RECOGNITION AND
MARKET ANALYSIS
Types of Business Plans

■ Statement of your business goals, the reasons you think these

goals can be met and how you are going to achieve them
■ It forces you to figure out how to make your business work
■ It shows investors that your have carefully thought through what
you intend to do to make the business profitable.
■ It will guide you every step of the way as you develop your
business.
■ Can be used to track whether the company is meeting its goals
THE THREE C’S OF A
BUSINESS PLAN
■ Concept – what is your product or service; how is it different from
similar products or services?
■ Customer – who will be buying and why?
■ Capital – where will the initial money come from? What will the
costs be? What profits can you expect?
Parts of a Business Plan

1. Business idea
■ Product / service
■ Type of business
■ Business ownership
Parts of a Business Plan

2. Opportunity and Market Analysis

■ Market – size, trends, characteristics, growth
rate
■ Market research – competitors, competitive
advantage
■ Marketing plan – product and pricing strategy,
promotions
Parts of a Business Plan

3. Financial Strategies
■ Historical financial data
■ Projected revenue and expenses (typically
5 years forecst)
■ Required financing
Parts of a Business Plan

4. Organizational Structure
■ Key personnel
■ Training and motivation
Parts of a Business Plan

5. Legal Structure
■ Intellectual property
■ Insurance protection
■ taxes and government regulation
Parts of a Business Plan

6. Business Management
■ Production
■ Distribution
■ Operations
■ Purchasing
■ Inventory
Parts of a Business Plan

7. Plan for Growth

■ How to grow the business
■ Potential challenges

NOTE: Business plan must include a 1 or 2-page

summary of highlights, key selling points of the
investment opportunity
Executive Summary

■ Mission statement
■ Business name and location
■ Date business will begin
■ Owner’s name, function & contact information
■ Opportunity
■ Products or services
■ Economics of one unit
■ Future plans
Recognizing Opportunities

■ Business opportunity is a consumer need or want

that can potentially be met by a new business
■ Not every business idea is a good business
opportunity
Recognizing Opportunities

■ Does the idea fill a need or want that’s not currently being met?
■ Will the idea work in the location or in the way that you plan to
sell it?
■ Do you see a window of opportunity (period of time you have
to act before the opportunity is lost)? Can you put the idea into
action within a reasonable amount of time
■ Do you have the resources and skills to create the business
■ Can you provide the product or service at a price that will
attract customers but still earn a reasonable profit?
Sources of Opportunity

■ Problems
■ Changes
■ New discoveries
■ Existing products and services
■ Unique knowledge
Four Common Ways to Turn
Ideas into Opportunities
1. Start a new business
2. Buying an independent business
3. Buying a franchise
4. Inventing a new product
Evaluating Opportunities

■ SWOT Analysis - is a business evaluation method that draws its

name from the four areas it evaluates (Strengths, Weaknesses,
Opportunities, and Threats):
■ Strengths. What skills do you have that would enable you to do well
with this specific opportunity? What resources do you have available
(time, money, and people who can help you)? Do you have any
unique knowledge or experiences that could give you an edge?
Evaluating Opportunities

■ Weaknesses. In what skill or knowledge areas do you need to

improve? What resources are you lacking? What might potential
customers see as a weakness in your product or service?
■ Opportunities. Does this business idea fill an unmet need
or want? Are there any trends or changes happening in your
community that you could use as an advantage? What could you do
better than other companies already in the same type of business?
Does the proposed business location give you any advantages?
Evaluating Opportunities

■ Threats. What obstacles stand in the way of pursuing this

opportunity? What current trends could potentially harm your
business? How fierce is the competition in this business area? Does
this business idea have a short window of opportunity?
Target Market

Mass Marketing - selling your product or service to

as many customers as possible
Target market - a limited number of customers
who are most likely to buy the product or service.
Types of Customers

One of the goals of market research is to develop a customer profile, a

detailed description of your target market’s characteristics
1. Consumers. A company who sells to individuals is sometimes
referred to as a business-to-consumer (B2C) company.
2. Businesses. A company who sells to other companies is some- times
called a business-to-business (B2B) company.
Market segments

A market segment is a grouping of consumers or businesses within a

particular market that has one or more things in common
■ Demographics are objective social and economic facts about people i.e.,
age, gender, marital status, family size (number of children), ethnic
background, education, occupation, annual income, and whether they
own a home or rent.
■ Geographics. Basing market segments on where consumers live or
where businesses are located is called geographics.
■ Psychographics. Psychological characteristics of consumers,
such as attitudes, opinions, beliefs, interests, personality, lifestyle,
political affiliation, and personal preferences
MARKETING

■ Market is a group of potential customers for a

particular product or service
■ Marketing is a way of presenting your business
to your customers.
■ Purpose of marketing is to clearly communicate
the value of your product or service.
■ Marketing plan is a detailed guide with two
primary parts:
MARKETING

Primary parts of a marketing plan:

■ Marketing goals
■ Strategies for reaching your goals (the
marketing mix)
MARKETING GOALS

■ Know what you want to accomplish.

■ Marketing goals should agree with your
business plan’s over- all objectives.
■ Are usually more specific and action-
oriented.
■ Measurable in practical ways.
■ Require a time frame
MARKETING GOALS

Time Frames for Marketing Goals

■ Short-Range Goals – what you want to
accomplish in a year or may be further broken
down into quarters (3 months)
■ Mid-Range Goals - what you want to achieve
in the next two to five years
■ Long-Range Goals - where you see your
business ten or twenty years from now.
MARKETING GOALS

■ Motive – refers to the reason why you want to

reach your objectives; the rewards and
opportunity costs.
■ Consistency – must not run in conflict with one
another.
■ Cost – refers to to the budget required to
implement your marketing plan. Cost includes not
only money but also personal energy and
emotional investment.
MARKETING GOALS

■ Market share is the percentage of a given market population that is

buying a product or service from a particular business.

To compute for market share:

Total Sales / Total Market Size x 100

MARKETING
STRATEGIES /
MIX
Marketing mix – refers to
how the company uses the
7P’s of Marketing. It is the
recipe for reaching and
keeping customers.
7 P’s of Marketing

■ People – refers to target customers and the key personnel

people (employees) needed to carry out the marketing plan.
■ Product - description of the product(s) or service(s) your
company plans to offer.
■ Place - refers to selling and delivery methods. How and
where will customers be able to buy or receive the product
or service?
■ Price – refers to the price customers are willing to pay for
the product or service. Pricing strategy may vary over time
7 P’s of Marketing

■ Promotion – refers to the process used to make

potential customers aware of the product or service
and to influence them to buy
■ Packaging – refers to the visual element of the
product or service through the critical eye of a
prospect
■ Positioning – how a product is positioned in the
hearts and minds of customers. It is a critical
determinant to the success of a brand
Attracting Customers to your
product
■ Features of a product are what it does and how it appears to the
senses (sight, sound, taste, smell, and touch).
■ The benefits of a product are the reasons customers choose to buy it.
■ Examples of Benefits: saving time, increasing social status,
protecting the family, getting rid of a problem, improving a
relationship, reducing worry, providing entertainment, and saving
money.
Attracting Customers to your
product
■ product mix – refers to the combination of products a business sells
■ Ultimate goal is not only to attract customers but to keep them.
■ Brand is a marketing strategy that can create an emotional
attachment to your product in the mind of the consumer.
■ Positioning is the process of creating a strong brand image.
■ Mind share is the awareness or popularity a certain product has with
consumers.
■ Brand mark is a graphic symbol used to identify your brand
■ Packaging contains and protects the product until the
consumer uses it.
■ Needs to be suited to the method used for the product’s
distribution and sale.
■ Should be cost-effective and also environmentally
responsible.
■ Should be designed for your target market
■ Should be eye-catching.
■ Should promote the image of the brand and be
distinguishable from competitors’ products.
■ Must meet legal requirements (for example, child-proof
medicine bottles).
■ Packaging can sometimes cause your product to be a success
or a failure.
Determining Place Strategies

■ Distribution channels are the various ways that a

product can reach the consumer.
■ How will you get your product into the hands of
your customers? How can you ensure that your
product will be available to customers where and
when they want it?
■ Distribution channels must be efficient, time-
efficient.
Determining Place Strategies

■ A direct channel is a pathway in which a product goes

from the producer straight to the consumer.
■ An indirect channel is a pathway in which the product
goes from the producer to one or more intermediaries
before it reaches the consumer.
■ An intermediary is the bridge between a producer and a
consumer. Intermediaries include agents, brokers,
wholesalers, distributors, and retailers.
Where and When Will you
Sell?
■ Choosing an excellent location for a physical store.
■ Determining the days and hours when customers are most
likely to shop.
■ Providing an easy-to-use Website that customers can
access any time, from any location.
■ Taking orders via a toll-free telephone number, with
operators standing by 24 hours a day.
Where and When Will you
Sell?

Exclusive Distribution gives a specific retailer, or

authorized dealer, the sole right to sell a product in a
particular geographical area. An exclusive
distribution agreement usually requires that the
retailer or dealer cannot sell competing products.
Where and When Will you
Sell?
intensive distribution. – goal is to make a product
available at as many sales outlets as possible. This
means selling the product at a variety of stores,
many of which may compete with each other.
Selective Distribution. Allowing a product to be
sold at a moderate number of sales outlets, but not
everywhere possible, ina particular geographical
area
How will you transport your
products?
■ Transportation is used to move a product from
one point to another along a distribution channel.
■ Ways to transport products include airplanes,
trains, ships, trucks, or a mix.
■ Some electronic products, such as software files,
can be transported from a seller’s computer to a
buyer’s through the Internet.
Determining Price Strategies:
1) Define your objectives
Build or Maintain an Image. Prices can create or
affect the image of a product in consumers’ minds. A
lower-priced product may be perceived as low
quality vs. a similar product with a higher price.
Increase Sales Volume (Quantity). Higher prices
may lower the number of sales, and lower prices
may increase the number of sales. A slightly higher
price can be charged if a product has more features
vs. its competition
Determining Price Strategies
1) Define your objectives
■ Obtain or Expand a Market Share.
Sometimes an initial lower price can help a
new business attract customers from
competitors. Prices can then be slightly
increased to improve profits.
■ Maximize Profits. Charge a high price for
new products to maximize profits, then drop
the price if competitors copy or find ways to
make it less attractive.
Determining Price Strategies
2) Select your pricing strategy
a) Demand-Based Pricing
■ Focuses on consumer demand i.e., how much
customers are willing to pay for a product
■ Most useful when customers perceive the product as
unique or having greater value than similar products.
■ How? Determine a maximum price by surveying
potential target customers. The price would be the most
that an actual customer would be willing to pay.
■ Ex: Price for one-of-a-kind item, such as an antique or
a painting
Determining Price Strategies
2) Select your pricing strategy
b) Competition-Based Pricing
■ Focuses on what the competition charges.
■ Focus of the strategy is to remain competitive
therefore competitors prices must be monitored
regularly to allow for price adjustments.
■ How? After finding out competitors’ prices,
decide to charge the same price, slightly more, or
slightly less.
Determining Price Strategies
2) Select your pricing strategy
c) Cost-Based Pricing
■ Setting prices based on product cost.
■ How? Know the economics of one unit,
then decide how much profit to add.
Determining Price Strategies

Computing for Markup

Wholesale Cost x Markup % / 100 = Markup Amount

Wholesales Cost + Markup Amount = Retail Price
Determining Price Strategies

Retail Price x Markdown Percentage/100 = Markdown

Amount
Retail Price – Markdown Amount = Sale Price (discounted
price)
Determining Price Strategies

Service
• Charge by the hour
• Flat Fee

Bundling – practice of combining the price of

several services (and/or physical products) into
one price