Chapter 19 - Identifying Business Ideas

Question 1

What are internal sources of business ideas for an entrepreneur?

Answer 1

Interests + hobbies
Unexpected events (eureka moment)
Frustration
Skills and knowledge

Question 2

What are internal sources of business ideas for existing firms?

Answer 2

Brainstorming
Intrapreneurship
Research and development

Question 3

What are external sources of business ideas for entrepreneurs?

Answer 3

Family + friends

Networking

Question 4

What are external sources of business ideas for entrepreneurs and existing firms?

Answer 4

Media
Market trends
State agencies
Import substitution

Question 5

How can state agencies help with idea generation?

Answer 5

They provide information on worldwide statistics and growth statistics e.g. enterprise Ireland

Question 6

How can import substitution help with idea generation?

Answer 6

When an Irish business or entrepreneur makes a product that is currently imported

Question 7

What are external sources of business ideas for existing firms?

Answer 7

Competitions

Customer feedback

Question 8

What is market research?

Answer 8

The process of collecting and analyzing information about the target market. Used to identify trends and marketing decisions

Question 9

What are reasons for conducting market research?

Answer 9

To find out the size of the market
To identify competitors
To find out consumer needs and wants
To identify trends

Question 10

What are the 3 stages of market research?

Answer 10

Gather
Analyse
Report

Question 11

What is primary research?

Answer 11

Involves gathering first hand information from the marketplace

Question 12

What are 4 examples of primary research?

Answer 12

Observation
Consumer panels
Surveys
Mystery shoppers

Question 13

What is a mystery shoppers?

Answer 13

An anonymous shopper to evaluate customer service and store operations

Question 14

What are the advantages and disadvantages of observation?

Answer 14

Consumers are unaware that they are being observed so the retailer can gain accurate information
It shows how people behave but it does not show why they behave as they do

Question 15

What are the advantages and disadvantages of consumer panels?

Answer 15

The business can gain detailed insight into the consumers attitudes and opinions
It can be time consuming

Question 16

What are the advantages and disadvantages of surveys?

Answer 16

The firm can obtain detailed information

High non response rate

Question 17

What are the advantages and disadvantages of mystery shoppers?

Answer 17

It encourages employees to provide high quality customer service at all time
Information gathered is subject to the mystery shoppers personal opinion

Question 18

What are the advantages of primary research?

Answer 18

Specific information (information is relevant to the business)
Better analysis (doesn’t rely on other people’s interpretation)
Timing (more recent information)
Confidentiality

Question 19

What are disadvantages of primary research?

Answer 19

Time consuming
Cost
In accurate feedback ( biased or untrue)
Business resources (can take resources away from other important areas e.g. finance)

Question 20

What is secondary research?

Answer 20

Involves gathering information that has already been collected by others

Question 21

What are 5 examples of secondary research?

Answer 21

Business reports 
Government publications (central statistics office)
Internet 
Media
Commercial research agencies

Question 22

What are the advantages and disadvantages of business reports?

Answer 22

Many of these reports are available for free

It can be time consuming to read through it

Question 23

What are the advantages and disadvantages of government publications?

Answer 23

They provide accurate information

It can be difficult to find the reports

Question 24

What are the advantages and disadvantages of the internet?

Answer 24

Most of the information is available for free

There is an enormous amount of information

Question 25

What are the advantages and disadvantages of commercial research agencies?

Answer 25

They provide detailed information | Agencies charge a fee

Question 26

What are the advantages and disadvantages of the media?

Answer 26

A wide range of information | Information may not be available at the time it is needed

Question 27

What are the advantages of secondary research?

Answer 27

Cheaper than primary research Faster than primary research Large volume of information Accurate

Question 28

What are disadvantages of secondary research?

Answer 28

Non specific ( may not be exactly what the business needs) Outdated Copyright (reproducing data without permission can cause conflict) Information overload

Question 29

What are 5 benefits of market research?

Answer 29

Identify the target market Reduce costs (avoid making products consumers don’t want) Evaluate an advertising campaign (did the advertising campaign interest the consumers) Forecast future trends Identify problems

Question 30

What are the 7 steps in the development process of a new product?

Answer 30

1. Idea generation 2. Product screening 3. Concept development 4. Feasibility study 5. Prototype development 6. Test marketing 7. Product launch

Question 31

What is product screening?

Answer 31

Separating possible good ideas from ideas that are not practical

Question 32

What is concept development?

Answer 32

When the idea is turned into an actual product

Question 33

What is USP?

Answer 33

Unique selling point = sets the product apart from others on the market

Question 34

What is a feasibility study?

Answer 34

Study carried out to see if the product is commercially viable

Question 35

What are the 3 feasibility studies that should be carried out?

Answer 35

Production feasibility - can it be made? Is it safe? Financial feasibility - how much does it cost to make? Marketability - is there a demand for it?

Question 36

What is the purpose of prototype development?

Answer 36

It identifies possible faults, see if it meets standards, identifies if adjustments need to be made

Question 37

What is test marketing?

Answer 37

Launching the product into a small market before releasing it into the entire market

Question 38

Which step in the development process of a product is the break even analysis included?

Answer 38

Feasibility study

Question 39

How do you calculate break even point?

Answer 39

Fixed costs __________ Contribution per product

Question 40

How do you calculate contribution per product?

Answer 40

Selling price per unit - variable cost per unit

Question 41

How do you calculate total revenue?

Answer 41

Forecast output x selling price

Question 42

How do you calculate total costs?

Answer 42

Fixed costs + variable costs

Question 43

How do you calculate margin of safety?

Answer 43

Forecast output - break even point

Question 44

How do you calculate variable costs?

Answer 44

Forecast output x variable costs per unit

Question 45

How do you calculate profit?

Answer 45

Total revenue - total costs

Question 46

What 6 things must be included in a break even analysis?

Answer 46

``` Total costs Total revenue Fixed costs Margin of safety Break even point Profit ```

Question 47

What are the limitations to a break even analysis?

Answer 47

It assumes all products made will be sold It assumes selling price remains the same It does not account for faulty products It assumes businesses know all costs and can categories them