Chapter 19 - Identifying Business Ideas Flashcards
What are internal sources of business ideas for an entrepreneur?
Interests + hobbies
Unexpected events (eureka moment)
Frustration
Skills and knowledge
What are internal sources of business ideas for existing firms?
Brainstorming
Intrapreneurship
Research and development
What are external sources of business ideas for entrepreneurs?
Family + friends
Networking
What are external sources of business ideas for entrepreneurs and existing firms?
Media
Market trends
State agencies
Import substitution
How can state agencies help with idea generation?
They provide information on worldwide statistics and growth statistics e.g. enterprise Ireland
How can import substitution help with idea generation?
When an Irish business or entrepreneur makes a product that is currently imported
What are external sources of business ideas for existing firms?
Competitions
Customer feedback
What is market research?
The process of collecting and analyzing information about the target market. Used to identify trends and marketing decisions
What are reasons for conducting market research?
To find out the size of the market
To identify competitors
To find out consumer needs and wants
To identify trends
What are the 3 stages of market research?
Gather
Analyse
Report
What is primary research?
Involves gathering first hand information from the marketplace
What are 4 examples of primary research?
Observation
Consumer panels
Surveys
Mystery shoppers
What is a mystery shoppers?
An anonymous shopper to evaluate customer service and store operations
What are the advantages and disadvantages of observation?
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
What are the advantages and disadvantages of consumer panels?
The business can gain detailed insight into the consumers attitudes and opinions
It can be time consuming
What are the advantages and disadvantages of surveys?
The firm can obtain detailed information
High non response rate
What are the advantages and disadvantages of mystery shoppers?
It encourages employees to provide high quality customer service at all time
Information gathered is subject to the mystery shoppers personal opinion
What are the advantages of primary research?
Specific information (information is relevant to the business)
Better analysis (doesn’t rely on other people’s interpretation)
Timing (more recent information)
Confidentiality
What are disadvantages of primary research?
Time consuming
Cost
In accurate feedback ( biased or untrue)
Business resources (can take resources away from other important areas e.g. finance)
What is secondary research?
Involves gathering information that has already been collected by others
What are 5 examples of secondary research?
Business reports Government publications (central statistics office) Internet Media Commercial research agencies
What are the advantages and disadvantages of business reports?
Many of these reports are available for free
It can be time consuming to read through it
What are the advantages and disadvantages of government publications?
They provide accurate information
It can be difficult to find the reports
What are the advantages and disadvantages of the internet?
Most of the information is available for free
There is an enormous amount of information
What are the advantages and disadvantages of commercial research agencies?
They provide detailed information
Agencies charge a fee
What are the advantages and disadvantages of the media?
A wide range of information
Information may not be available at the time it is needed
What are the advantages of secondary research?
Cheaper than primary research
Faster than primary research
Large volume of information
Accurate
What are disadvantages of secondary research?
Non specific ( may not be exactly what the business needs)
Outdated
Copyright (reproducing data without permission can cause conflict)
Information overload
What are 5 benefits of market research?
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
What are the 7 steps in the development process of a new product?
- Idea generation
- Product screening
- Concept development
- Feasibility study
- Prototype development
- Test marketing
- Product launch
What is product screening?
Separating possible good ideas from ideas that are not practical
What is concept development?
When the idea is turned into an actual product
What is USP?
Unique selling point = sets the product apart from others on the market
What is a feasibility study?
Study carried out to see if the product is commercially viable
What are the 3 feasibility studies that should be carried out?
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?
What is the purpose of prototype development?
It identifies possible faults, see if it meets standards, identifies if adjustments need to be made
What is test marketing?
Launching the product into a small market before releasing it into the entire market
Which step in the development process of a product is the break even analysis included?
Feasibility study
How do you calculate break even point?
Fixed costs
__________
Contribution per product
How do you calculate contribution per product?
Selling price per unit - variable cost per unit
How do you calculate total revenue?
Forecast output x selling price
How do you calculate total costs?
Fixed costs + variable costs
How do you calculate margin of safety?
Forecast output - break even point
How do you calculate variable costs?
Forecast output x variable costs per unit
How do you calculate profit?
Total revenue - total costs
What 6 things must be included in a break even analysis?
Total costs Total revenue Fixed costs Margin of safety Break even point Profit
What are the limitations to a break even analysis?
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
