Unit-3

Developing a business plan

Chapter 5
Learning objective of the chapter
Understanding the meaning and merit of business
ADMAS
plan UNIVERSITY MARKETING AND NEW
for business
DEPARTMENT OF
The right time to have a businessVENTURE
plan
ACCOUNTING
Who and how it can develop DEVELOPMENT
The time when plan is required
Deciding on the format and common elements of
business
M S c oplan
Lecturer: Zakeria Eid Ismail
f Economics
Developing a sample business plan
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 Objectives
• At the end of this chapter, student should be able to
– To define market
– To describe customer
– To discuss Marketing research
– To analyze Marketing intelligence
– To define Competitive analysis
– To distinguish Marketing strategies
– To analyze International markets

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 Introduction
What is a market?
• A market is a place where people go to buy or sell
things. When people have products to sell, they set up
a market place. There may be a special building for the
market place, 
• The market for a business is all the people within a
specific geographical area who need a specific product
or service and are willing and able to buy it.
• Marketing is the process of planning and executing the
conception, pricing, promotion and distribution of ideas,
goods and services to create exchange and satisfy
individual and organizational objectives
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 Types of Markets
• Physical Markets - Physical market is a set up where buyers can
physically meet the sellers and purchase the desired merchandise from
them in exchange of money. Shopping malls, department stores, retail
stores are examples of physical markets.
• Non Physical Markets/Virtual markets - In such markets, buyers
purchase goods and services through internet. In such a market the
buyers and sellers do not meet or interact physically. Examples -
Rediff shopping, eBay etc.
• Market for Intermediate Goods - Such markets sell raw materials
(goods) required for the final production of other goods.
• Black Market - A black market is a setup where illegal goods like
drugs and weapons are sold.
• Knowledge Market - Knowledge market is a set up which deals in
the exchange of information and knowledge based products.
• Financial Market - Market dealing with the exchange of liquid assets
(money) is called a financial market. 4
Who is your potential customer?
• Every business sells some type of product or service to
people.
• Potential customers can be described as:
1. People who need or want the product or service.
2. People who are able to buy the product or service.
3. People who are willing to buy the product or service.
What should entrepreneurs know about potential
customers?
• Know the customers
• Know what different customer groups wants
• Know where the customer buys
• Know when the customer buys
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Where can customer information be located?
• Customer information can be obtained from trade
associations (publications), chambers of commerce,
government agencies (including local government),
newspapers and magazines, and individual research by
conducting a market survey in the community.
What is the marketing concept?
• One of the greatest needs of the owners of small
businesses is to understand and develop marketing
programs for their products and services.
• Modern marketing programs are built around the
“marketing concept” and performance
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CONT….
• Modern marketing programs are built around the “marketing
concept” and performance, which directs the owners to focus
their efforts on identifying, satisfying and following up the
customer’s needs, but at a cost that will bring a profit.
• Marketing is based on the fact that:
(a) business policies and activities should be focused on
satisfying customer needs, and
(b) profitable sales volume is a primary goal.
• When applying the marketing concept, a small business should:
a. Determine the needs of their customers (market research);
b. Analyze their competitive advantages (marketing strategy);
c. Select specific markets to serve (target marketing); and
d. Determine how to best satisfy those needs (marketing
mix). 7
 What is market research?
• A small market research program, based on a
questionnaire given to present customers and/or
prospective customers, can disclose problems and areas
of dissatisfaction that can be easily remedied, or new
products or services that could be offered successfully.
• Market research should also identify trends that may
affect sales and profitability levels.
• Population shifts, legal developments and the local
economic situation should be monitored to enable early
identification of problems and opportunities.
• Competitor activity also should be monitored;
competitors may be entering or leaving the market. 8
 What is a marketing strategy?
• Marketing strategy includes identifying customer
groups (target markets) which a small business can
serve better than its large competitors and tailoring
its product offers, prices, distribution, promotional
efforts, and services towards that particular market
segment (managing the marketing mix).
• Ideally, the strategy should address customer
needs that are not currently being met in the
market and which represent adequate potential
size and profitability.
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 What is target marketing?
• Owners of small businesses have limited resources to spend
on marketing activities.
• Concentrating their marketing efforts on one or two key
market segments is the basis for their target marketing. The
major ways for a business to segment its market are:
• Geographical segmentation: serving the needs of
customers in a particular geographical area (for example, a
neighborhood shop may send advertisements only to people
living within one and a half miles of the shop).
• Customer segmentation: identifying groups of people who
are most likely to buy the product.
• Remember, it is easier and less costly to keep current
customers than it is to attract new customers 10
 Marketing mix

Marketing involves four general activities that are

important.
• Product: includes physical objects or services being sold,
together with packaging, image, brand name and
warranty.
• In addition, a product includes physical attributes that
influence consumer’s perceptions, such as colors, shapes,
sizes and materials.

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• Price: is the monetary unit required for a purchase, and from an
entrepreneur’s view point, it is the unit of income.
• Prices communicate information about value, image and
competition, and they influence decisions about distribution,
market segmentation, product characteristics and related
services.
• Promotion: The act of communication that provides consumers
with information about a company’s products, its services or the
venture itself is promotion.
• They include advertising, personal selling, direct marketing,
public relations.
• Distribution: It is concerned with how products or services are
made available to customers.
• Distribution can mean the physical channels or transporting
products from manufacturers to end users, warehousing,
wholesaling and retailing. 12
 How can marketing performance be
evaluated?
• After key marketing program decisions are made,
entrepreneurs need to evaluate their decisions.
• Standards of performance need to be established
so results can be evaluated against them.
• Sound data on industry norms and past
performance provide a basis for comparing present
performance.
• Owners should evaluate their business
performance at least quarterly.

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• The key questions are:
A. Is the business doing all it can to be customer-
oriented?
B. Do employees make sure customers’ needs are
satisfied and leave customers with the feeling
that they would enjoy coming back?
C. Can customers find what they want and at a
competitive price?

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 How can the consumer acceptance of
a product or service be analyzed?
• Consumers buy products or services for their own use, but do
not buy products for the purpose of making a profit from them.
• Consumers buy to satisfy their own or their family’s wants and
needs.
• When they buy any product or service, they do so because of
what they expect the product or service to do for them.
People are motivated to buy for two basic reasons:
• Emotional reasons: pride in personal appearance, social
achievement, ambition, cleanliness, pleasure, increased leisure
time.
• Rational needs: durability, economy in use, economy in
purchase, handiness, efficiency in operation, dependability in
use. 15
 What factors affect the consumer market?
The consumer market is constantly changing. Many of the following
factors have contributed to consumer changes in the last few years.
Population changes, such as shift in age, distribution of income,
including increases in total purchasing power and the amount spent
for “luxuries”.
• Changes in life-style and attitudes.
• A greater percentage of women in the workforce.
• More leisure time.
• More credit purchases.
• An increase in the number of white-collar and skilled workers.
• Higher overall educational level of the population.
• High rate of inflation.
• Changes in technology (mobile phones).
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 Know Your Competitors
Analyzing Competition
• Competition must be expected when initiating a business, but having too
much competition is an unnecessary risk.
Step 1: Identify your competitors
• A. Direct Competitors: list each by name, address and type of business.
• B. Indirect Competitors: list the name, address and type of business of each
firm that provides products and/or services that, while not the same as yours,
can be a substitute for yours.
Step 2: Analyze businesses that have recently been set up and recently
failed
• A. List competitive businesses that have started within the past two years.
• B. List competitive businesses that have gone out of business within the past
two years.
• C. Analyze the possible reasons for the businesses that have failed in the last
two years. What factor or combination of factors explains the optimism of
the new businesses that have succeeded? What factor or combination of
factors was present in the businesses that failed? 17
Step 3: Analyze existing businesses
A. Estimate the sales and turnover of each of your primary competitors.
B. Rate your competitors in terms of price, quality of product or
services, facilities, advertising, promotion and sales.
• What prices do they charge? What is the quality of their merchandise?
How much do they advertise
• What extra services do they offer?
• Are their sales terms liberal?
• Is their location expensive, moderate or cheap?
• Are their production processes and equipment modern? Are their
employees well-trained? Are their employees well paid?
C. Determine if there is a correlation between the firms that have high
sales and their methods of operation.
• That is, do these firms have similar pricing, selling and/or production
methods? A thorough analysis of the methods of operation based on
the firm’s sales should yield valuable information.
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Step 4: Compare your proposed business operations against the
competition
A. Indicate the advantages your products and/or services will have in
terms of price, performance, quality, durability and visibility over
the competition.
B. Be able to explain why your method of operating your business will
be more successful than that of your competitors.
C. If you plan to operate in a manner similar to other businesses, you
should be able to explain why:
1. Either the market is large enough to profitably support you and the
other firms, or
2. The market cannot support all competitors but your business will be
more efficient and/or more effective.

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Conducting a Market Survey/Market Research

• You may have an excellent product or service to offer to

the public.
• One key to success or failure in business is determining
whether there are enough customers willing to buy your
product or service on a regular basis.
• The price of the product or service must give you an
adequate profit margin to allow you to survive, make a
profit and further develop the business.
• Before committing your resources to the business, you
should measure whether there is a sufficiently large
unsatisfied market. 20
• The following questions need to be answered to
determine what your competitors are doing in your
proposed area of business.
• Is the market growing at a rate that allows another
new business to enter?
• In a declining market, how will you capture
business from your competitors?
• How do your products or services differ from those
of your competitors?
• Have you identified a market segment that needs
servicing?
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 Steps in Conducting a Market Survey
The process of conducting a market survey involves the following
steps.
1. Define market survey objectives and specify what information is
required.
2. Work out details of the market survey, such as:
• sources for obtaining information,
• time and cost of conducting the study,
• methodology to be used in gathering information,
• Development of a plan of action.
3. Select samples and decide what contacts and visits should be made.
4. Prepare questionnaires and plan for survey interviews.
5. Collect and analyze data.
6. Prepare a report of findings. 22
 Information Sources
The information sources can be divided into:
1. Primary Data Sources: information which originates as a
result of contacts with those who are directly involved in
the relevant activity.
• For a furniture survey, for example, information obtained
from furniture manufacturers or wholesalers would be
primary data sources.
2. Secondary Data Sources: data which already exists and
may be used in the investigation. This information may not
have been collected for a specific purpose.
• It may be obtained from trade/manufacturer’s associations
or published data.
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 International Marketing
• International Marketing - is concerned with planning
and conducting transactions across international borders
to satisfy the objectives of individuals and
organizations.
Why International Marketing?
A: There is a trend toward a global economy.
• No longer enough to look at domestic market
• Markets across the world being sought after by more
competitors
• Explosion of international trade
• Global linkages become important 25
 Comparing Domestic and
International Marketing
• Similarity:
- Both carry out transactions that meet the needs of
individuals and organizations
• Differences:
- International markets have greater growth potential
- Some tasks associated with international marketing
not included (or less intense) than in domestic
marketing (e.g., cultural research, political factors,
exchange rates, trade laws, long distance distribution.)
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