chapter three Flashcards
business ideas
An opportunity in a business environment can be translated into a business activity
Source of business ideas
Customer surveys.
Interests and hobbies.
Brainstorming.
Mass media.
Personal experience and talents.
Trade fairs and exhibitions.
Business life cycle
a) Idea generation: Here, the entrepreneur does a
lot of ground work to access the viability of the venture he is about to get into.
b) Start – up stage: Activities may involve preparation of a formal business plan, registration of
the business, sourcing capital, recruiting and designing the product. During this phase, sales are
low but slowly increasing its sales as the time passes by.
c) Survival stage: Break-even level.
d) Growth stage:
* Increased sales and profit
* Wider market coverage in terms of geographical region
* A growing number of employees
* Variety of products and services
* Increased competition
* Need for additional expenditure
e) Maturity stage: At this stage, business sales and profits stagnate. Their is intensified competition, profit margin starts to go down.
f) Innovation stage:
Among innovative attempts include:
* Change of management
* Repackage the product/service (product diversification)
* Change the technology
* New distribution methods
* Advertise and promote differently
g) Decline stage: This stage is not in normal plan of business. Sales and e) Stabilization/maturity stage: At this stage, business sales and profits stagnate. The business
may also experience intensified competition. Sales may go down due to the presence of
competitors in the market, profit margin starts to go down.
f) Innovation stage: Organizations that fail to innovate at stabilization stage are likely to decline.
To ensure come back to growth, the entrepreneur is required to re-look at the way’s businesses
have been conducted. The cash generation is higher than the profit on the income statement.
Among innovative attempts include:
* Change of management
* Repackage the product/service (product diversification)
* Change the technology
* New distribution methods
* Advertise and promote differently
g) Decline stage: This stage is not in normal plan. Sales and cash flow all decline. Firms loses their
competitive advantages and finally exits the market.
Legal entity
a). Sole Proprietorship
b). Partnerships
c). Corporation
d). Limited liability company
e). Cooperative
Product demand
Product demand is the total amount of goods and services that all consumers in a marketplace are
willing and able to purchase at a specific price
Types of Product Demand:
- Full demand: Refers to a situation in which customer demand matches market supply
and pricing. - Irregular demand: Varies due to external factors like the time of year.
- Latent demand: Represents an unfulfilled consumer desire for a product that doesn’t
exist yet. - Negative demand: This market circumstance occurs when a company overestimates
consumer demand for a product (pricing it too high or overproducing it), leaving them
with an excess of goods that consumers don’t want or can’t afford.
Factors to consider in assessing product demand
- Go over past sale records
- Use marketing projections to help estimate demand
- Use a competitor’s sales data
- Pay attention to the local and global economy
- Estimate sales on recent performance
How to Determine Product Demand
Search engine data and social listening:
Market research, surveys, and case studies
Test runs
Types of business environment
Are factors that affect the function of the organization and how organization works directly or
indirectly
Internal business environment
Finances
Employees
Customers
Resources
Company culture
Marketing
Marketing intermediaries
They assist other firms in the promotion, selling and distribution
of products/services
Examples of Marketing intermediaries
1). Middle men- Assist in the selling process, creating sales, place and time utilities
2). Physical distribution agents: Their role is to assist in the moving and storage of goods. They include rail roads, trucking companies and airlines.
3). Marketing services agencies: They are firms that provide research, promotions and consultancy
services. They are advertising agencies, media firms and marketing consulting firms.
4). Financial intermediaries: They include banks, credit companies, and insurance companies
which all finance or insure marketing activities
types of Middle men
➢ Agent middlemen whose role is to look for consumers and negotiate sale contracts.
➢ Commission agents- The product is consigned to them by the principal and their role is to
sell the goods on behalf of the principal.
➢ Brokers- Their role is to bring the seller and the buyer together and assist in the negotiation.
They do not receive the payment. Their commission is paid by the one who hires them.
➢ Merchant middlemen: They are the wholesalers and retailers- Both of these agents own the
goods and they earn profit through taking risk.
External factors
Competition
Political
Technical
Ecological
Factors to consider when evaluating business environment
- Ability to manage cash
- Passion and persistence
- Market size:Researching the market and figuring out whether there will be market for your
products and how big it is. - Relationships: What is your relationship with the potential investors or customers?
- Management skill sets: What are the skills of those involved in your business?
