Creating Business from Opportunity(2) Flashcards
Recognize the features that make some business ideas into business opportunities.
Opportunity is an idea that is based on what conumers need or want and are willing and able to buy sufficiently often at a high enough price to sustain a business
Attractive to customers; durable; timely; anchored in a product or service which adds value for the buyer or end user
Recognize the five roots of business opportunities.
Problems that your business can solve
Changes such as the green movement and societs new concern with recycling
Inventions of totall new products, such as the cell phone, NOT new versions of existing products.
Competition
Technological advances such as development of the technology for social networking
What is a competitive advantage and why is it important?
Strategy for beating the competition
Whatever the business can do to attract customers better than the competition
For a business to be successful the competitive advantage must be sustainable
Competitive strategy: a strategy for beating the competition, combines your business definition with your competitive advantage.
Recognize the six factors that can lead to a competitive advantage
Higher quality(unique product)
Lower price (sustainable with lower cost)
More convenient location
Wider selection
Better Service
Quicker delivery
Recognize the three questions that need to answered in analyzing your competitive advantage.
Competitive offers: How do you compare with competitors on a feature-by-feature basis?
Cost structure: Are you at a cost advantage or disadvantage?
What is your unique selling proposition (the distinctive features and benefits that sets you apart from your competition): What do you have that competitors cannot or will not match?
Recognize the three elements of a solid business definition
The Offer: What the business will sell to customers.
Target Market: (Who) Which of the potential customers are you aiming to serve? A target market should not be too broad and unfocused.
Production and delivery capability: How will you provide the offer to your targeted customers?
Define core values, mission statement, vision statement, culture statement
Core values: beliefs that guide the business operations and decisions. fundamental ethical and moral philosophy and beliefs that form the foundation of the organiztion and provide broad guidance for all decision making.
Mission Statement: a concise communication of your strategy including your business definition and your competitive advantage. Clarifies what the business is trying to do in the present, but can provide direction and motivation for future action through a clear and compelling message.
Vision statement: What you want your organization to beecome in the future. Broader and more comprehensive, built on core values.
Culture statement: core values of an organization in action. Build culture by making beliefs, values, and behavioral norms explicit and intentional.
What is the purpose of a feasibility analysis?
A study to assist in making the “go/no go” decision.
Used to test a business concept in three areas:
product and/or service feasability, market and industry feasibility, financial feasibility.
What are the three parts of a feasibility analysis
product and/or service feasability, market and industry feasibility, financial feasibility.
Recognize the questions that should be answered for each part of the feasibility study
Product/serve feasibility:
Can the product or service be produced and delivered at a profit, in an ongoing manner?
Is there sufficient customer demand for the product or service
Analyzing Market and Idustry Feasibility:
How attractive is the ooporunity in the proposed industry?
Do any strategic, defensible niches exist in the proposed market?
Recognize Porter’s Five Forces
Competitive rivalry Barriers to entry Threats of substitution Supplier power Buyer power
Within Porter’s Five Forces analysis, recognize what would make a particular factor more attractive.
Competive rivalry:
want larger or fewer than five firms, varied size of firms, rapidly growing industry, differentiation matters
Barriers to entry:
want low capital requirements, cost advantage not based on firm size, minimal or absent economies of scale, low cost to change suppliers, customer resistance to change is low, established distribution channels but open, public policies do not impede entry and may facilitate entry.
Threa of Substitutes:
want substitutes that are not readily available, prices not significantly lower, supply of substitutes is uneven or limited, high cost to change suppliers, public policies make substituting difficult or illegal.
Supplier Power:
want brand reputation to not be critical, easy substitution for supplies, switching costs to be relatively low, impact of individual supplier on costs to be small portion of overall costs of finished products.
Buyer Power:
Buyer size to be varibable, a large number of buyers, product importance is small part of cost of goods, delivery demands to be restricted to geographic area, switching costs to be relatively high, product differentiation to be more differentiation/fewer commoditites, information availability makes it hard for customers to compare features and prices.
What is gross profit and why is it important?
Average gross profit per customer = average sale per customer - average cost of sale per customer
Total gross profit = total revenue - total cost of goods sold
If the gross profit is not positive, the business will fail.
