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Entrepreneurship and Small Business: Unit No. 4

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As per PTU Syllabus BBA, Unit No. 4: Entrepreneurial Process: search for best opportunity, Steps of entrepreneurial process: Deciding –
Developing – Moving – Managing – Recognizing.

Feasibility Analysis: Economic, Managerial competency. Marketing, Financial & Technical, Environmental Scanning and SWOT analysis.

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Entrepreneurship and Small Business: Unit No. 4

  1. 1. Unit No. 2   Entrepreneurial Process: search for best opportunity, Steps of entrepreneurial process: Deciding – Developing – Moving – Managing – Recognizing.   Feasibility Analysis: Economic, Managerial competency. Marketing, Financial & Technical, Environmental Scanning and SWOT analysis.
  2. 2. Head start for village India • Company: Hippocampus Learning Centres • Founder: Mr. Mahesh Malhotra • Inception: 2011 • Area of business: Pre-schools of rural kids: tries to bridge the urban- rural gap in kindergarten education • Funding: $21 mn in 5 rounds • Investors: Asian Development Bank, Unitus Seed Fund, Khosla Impact, Acumen and Lok Capital 2
  3. 3. • In rural India, a vast majority of parents are less exposed to education facilities and demand far less than their urban counterparts • While addressing pre-schooling needs, it also generates employment for women who are trained for 15 days. Things taught during six months of Montessori training and two years of experience are condensed into a two- week curriculum. 3
  4. 4. • HLC charges Rs 2,000 per year per child as fees. • It has reached about 11,000 pre-school students and has a little over 600 teachers. • They invested in a business that is highly scalable and profitable, while serving a dire social need • Also, unlike these training centres where the pedagogy is mostly in English, HLC offers bilingual training. 4
  5. 5. Entrepreneurship Process • Deciding • Developing • Moving • Managing • Recognizing 5
  6. 6. Entrepreneurial Process • Generating Business Idea • Opportunity recognition • Environmental Scanning: Internal and External • Feasibility Analysis • Business Plan • Preparing Project Report 6
  7. 7. Develop The stage in which the entrepreneur generates ideas, recognizes opportunities, and studies the market Idea OpportunityInnovation
  8. 8. What is An Idea, Opportunity and Innovation? • An idea is a concept for a product or service that does not exist or is not currently available in a market niche. • In contrast, an opportunity is an idea for a new product or service with a market that is willing to pay for that product or service so that it can form the basis of a profitable business. • Innovation is the process of making changes to something that adds value to customers.
  9. 9. Where do I begin? Idea Generation Fun 95% perspiration and 5% inspiration
  10. 10. ‘Business is not about the idea of power, but the power of ideas’ •IDEA GENERATION is the creative process of generating, developing, and communicating new ideas.
  11. 11. From Where the Good Idea came???????? • Customer needs and wants are the logical place to start the search for ideas.
  12. 12. 17-12
  13. 13. Generating Ideas Employees Competitors Lead Users
  14. 14. 14
  15. 15. 15
  16. 16. What is an Opportunity? 2- 16 An opportunity has four essential qualities
  17. 17. Three Ways to Identify an Opportunity Online Shopping Apps Electric carsRedbus.in
  18. 18. 18
  19. 19. “It is useless to tell a river to stop running; the best thing is to learn how to swim in the direction it is flowing.” -Anonymous
  20. 20. 25
  21. 21. Competitor Analysis 26
  22. 22. • Project Management Feasibility and Viability analysis – Technical – Financial – Network – Appraisal and Evaluation 27
  23. 23. 28
  24. 24. 29
  25. 25. Essentials for Project Report • 1. The project report should be sequentially arranged. • 2. The project report should be covering all the details about the proposed project. • 3. The project report should not be very lengthy a subjective. • 4. The project report should justify the financial needs and financial projection. • 5. The project report should also justify market prospects and demands. • 6. The project report should be attractive to the financial agencies and investors. 31
  26. 26. 32
  27. 27. 33
  28. 28. Feasibility study • Feasibility study is an assessment of the practicality of a proposed project. • Preliminary evaluation of idea to determining if it’s worth pursuing • Provides more secure notion that a business idea is viable 34
  29. 29. • A feasibility study aims to objectively and rationally uncover the strengths and weaknesses of an existing business or proposed venture, opportunities and threats present in the environment, the resources required to carry through, and ultimately the prospects for success • In its simplest terms, the two criteria to judge feasibility are cost required and value to be attained. 35
  30. 30. Why to do feasibility Analysis • Assess Economic Viability of Project • Protects from large capital investment • Outline ideas before implementation • Presents associated risk and return • Gives objective evaluation of project to lenders 36
  31. 31. Types of feasibility • Economic • Financial • Technical • Operational • Managerial • Marketing 37
  32. 32. Economic feasibility • The purpose of the economic feasibility assessment is to determine the positive economic benefits to the organization that the proposed system will provide. • It includes quantification and identification of all the benefits expected. This assessment typically involves a cost/ benefits analysis. 38
  33. 33. METHODS • Economic rate of return (ERR) • Social rate of return 39
  34. 34. Technical feasibility • This assessment is based on an outline design of system requirements, to determine whether the company has the technical expertise to handle completion of the project. • The technical feasibility assessment is focused on gaining an understanding of the present technical resources of the organization and their applicability to the expected needs of the proposed system. It is an evaluation of the hardware and software and how it meets the need of the proposed system 40
  35. 35. • When writing a feasibility report, the following should be taken to consideration: • A brief description of the business to assess more possible factors which could affect the study • The part of the business being examined • The human and economic factor • The possible solutions to the problem 41
  36. 36. Factors • Material Inputs • Manufacturing Process and Technology • Plant Capacity • Location • Machinery and Procurement 42
  37. 37. Financial Feasibility • Capital requirements • Financial rate of return • Overall attractiveness of the investment • Sources of Financing the project 43
  38. 38. 44
  39. 39. Marketing • Demand • Supply • Distribution • Prices
  40. 40. Marketing • Demand: Bobba estimates the in-home health care sector to be growing at 25-30 per cent compounded annually. It will be a $100-billion market in 15-20 years, he says. • Prices: It provides post-surgery care and senior care using high-end technology. Among the healthcare packages is a ~9,999 scheme for individuals, including a visits by doctors and services including blood pressure, sugar checks and email consultations.
  41. 41. • Supply and Distribution: Here, there are no operating beds and there’s no real estate. It is about last-mile delivery. It’s about remote patient care 47
  42. 42. Factors • Marketing Potential • Competitors • Cost of Project • Economic Trends
  43. 43. Factors • Marketing Potential: In-home healthcare is estimated to be a $3-billion opportunity in India. • Competitors: With the number of old people rising, the business can only grow and more players are looking to enter the segment • Cost of Project • Economic Trends:
  44. 44. Operational feasibility • Operational feasibility is a measure of how well a proposed system solves the problems, and takes advantage of the opportunities identified during scope definition and how it satisfies the requirements identified in the requirements analysis phase of system development. • The operational feasibility assessment focuses on the degree to which the proposed development projects fits in with the existing business environment and objectives with regard to development schedule, delivery date, corporate culture, and existing business processes.
  45. 45. Elements • Process • Evaluation • Implementation • Resistance • Strategies • Adapt and Review
  46. 46. Managerial Feasibility • Purpose: determine if business has sufficient skills/resources to bring product/service to market successfully • Non-financial factors important to consider here • 2 primary issues to consider: 1. Management prowess 2. Resource sufficiency
  47. 47. Importance of Feasibility Analysis • Understanding Demand • Assessing resources • Marketing feasibility • Marking a Time line
  48. 48. “It is useless to tell a river to stop running; the best thing is to learn how to swim in the direction it is flowing.” -Anonymous
  49. 49. • Different environmental variables exist internally and externally to the business enterprise. • Environmental variables have a positive or negative influence on the enterprise. • Business environment consists of two sub-environments: • Internal environment External environment – consists of :- • Micro/Operating environment • Macro/General environment • Mutual relationships exist between these environments Environment Scanning
  50. 50. Factors Influencing Business Decision
  51. 51. Types of Environment
  52. 52. PESTEL Analysis (Macro Environmental Analysis)
  53. 53. Economic Environment • Economic stages that exists at a given time in a country • Economic system that is adopted by a country for example. Capitalistic, Socialistic or Mixed Economy • Economic planning, such as five year plans, budgets, etc. • Economic policies for example, monetary, industrial and fiscal policies • Economic Indices such as National Income, Per Capital Income, Disposable Income, Rate of growth of GNP, Distribution of Income, Rate of savings, Balance of Payments etc. • Economic Problems • Functioning of economy
  54. 54. Household savings fell by almost one percentage point from 22.8% of GDP in 2011-12 to 21.9% in 2012-13 Household savings have averaged around 22% of GDP, but there has been a major shift in the composition (from financial savings to physical savings) because of high inflation and lower returns on financial instruments such as bank deposits, stocks and insurance vis-a-vis physical investments like gold and real estate http://archive.financialexpress.com/news/budget-2014-indias-falling-savings-inflation-investm www.livemint.com/Opinion/ZDgCdU87oxU6cPnClpc2yN/Improving-Indias-savings-rate.ht
  55. 55. Non Economic Environment • Regulatory Environment • Socio- Cultural Environment • Demographic Environment • Technological Environment • Political Environment
  56. 56. Non- Economic Environment • Cultural Environment • Social Customs & Rituals and practices • Lifestyle patterns • Family structure • Role & position of men, women, children and aged in family & society
  57. 57. Non- Economic Environment Demographic Environment  Growth of population  Age Composition  Life Expectancy  Sex Ratio  Fertility and Mortality rates  Inter-state migration
  58. 58. Age structure: • India has more than 50% of its population below the age of 25 • More than 65% below the age of 35 • It is expected that, in 2020, the average age of an Indian will be 29 years, compared to 37 for China and 48 for Japan • The age structure of a population affects a nation's key socioeconomic issues. Countries with young populations (high percentage under age 15) need to invest more in schools, while countries with older populations (high percentage ages 65 and over) need to invest more in the health sector.
  59. 59. Macro Environment  Technological Environment  Sources of technology  Technological development  Impact of technology  Political Environment  Political parties in power  Political Philosophy
  60. 60. Macro Environment • Regulatory Environment • Constitutional framework • Policies relating to pricing and foreign investment • Policies related to the public sector, SSIs, development of backward areas and control of environmental pollution
  61. 61. • S- Strengths • W- Weaknesses ------------ INTERNAL ENVT. • O- Opportunity • T- Threats ------------------ EXTERNAL ENVT. Environment Analysis The purpose of Environment Analysis is to identify the, strengths, Weakness, opportunities and threats in the organization’s operating environment.
  62. 62. SWOT Analysis S W O T Technique is credited to Albert Humphrey who led a research project at Stanford University in the 1960s and 1970s
  63. 63. STRENGTHSSTRENGTHS Characteristics of the business or a team that give it an advantage over others in the industry. Positive tangible and intangible attributes, internal to an organization. . Examples - Abundant financial resources, Well-known brand name, Economies of scale, Lower costs [raw materials or processes], Superior management talent, Better marketing skills, Good distribution skills, Committed employees. What is SWOT Analysis?
  64. 64. WEAKNESSESWEAKNESSES Characteristics that place the firm at a disadvantage relative to others. Detract the organization from its ability to attain the core goal and influence its growth. Examples - Limited financial resources, Weak spending on R & D, Very narrow product line, Limited distribution, Higher costs, Out-of-date products / technology, Weak market image, Poor marketing skills, Limited management skills, Under-trained employees. What is SWOT Analysis?
  65. 65. OPPORTUNITIESOPPORTUNITIES What is SWOT Analysis? Chances to make greater profits in the environment - External attractive factors that represent the reason for an organization to exist & develop. Arise when an organization can take benefit of conditions in its environment to plan and execute strategies that enable it to become more profitable. Organization should be careful and recognize the opportunities and grasp them whenever they arise. Opportunities may arise from market, competition, industry/government and technology. Examples - Rapid market growth, Rival firms are complacent, Changing customer needs/tastes, New uses for product discovered, Economic boom, Government deregulation, Sales decline for a substitute product .
  66. 66. SWOT ANALYSIS - THREAT ! THREATSTHREATS What is SWOT Analysis? External elements in the environment that could cause trouble for the business - External factors, beyond an organization’s control, which could place the organization’s mission or operation at risk. Arise when conditions in external environment jeopardize the reliability and profitability of the organization’s business. Compound the vulnerability when they relate to the weaknesses. Threats are uncontrollable. When a threat comes, the stability and survival can be at stake. Examples - Entry of foreign competitors, Introduction of new substitute products, Product life cycle in decline, Changing customer needs/tastes, Rival firms adopt new strategies, Increased government regulation, Economic downturn.
  67. 67. HELPFUL HARMFUL S W TO To help decision makers share and compare ideas. To bring a clearer common purpose and understanding of factors for success. To organize the important factors linked to success and failure in the business world. To analyze issues that have led to failure in the past. Aim of SWOT Analysis? To provide linearity to the decision making process allowing complex ideas to be presented systematically.
  68. 68. Build on your Strengths Evaluate your Opportunities Research your Threats Recognise your Weakness
  69. 69. EXAMPLE Mc Donald’s SWOT Analysis
  70. 70. WEAKNESSES • Failing pizza test market thus limiting the ability to compete with pizza providers. • High training costs due to high turnover. • Minimal concentration on organic foods. • Not much variation in seasonal products . • Quality concerns due to franchised operations. • Focus on burgers / fried foods not on healthier options for their customers. • Ranks very high on the Fortune Magazine's most admired list • Community oriented • Global operations all over the world • Cultural diversity in the foods • Excellent location • Assembly line operations. • Use of top quality products STRENGTHS INTERNAL • Marketing strategies that entice people from small children to adults. • Lawsuits for offering unhealthy foods. • Contamination risks that include the threat of e-coli containments. • The vast amount of fast food restaurants that are open as competition. • Focus on healthier dieting by consumers. • Down turn in economy affecting the ability to eat that much. THREATS • Opening more joint ventures. • Being more responsive to healthier options. • Advertising wifi services in the branches. • Expanding on the advertising on being more socially responsible • Expansions of business into newly developed parts of the world. • Open products up to allergen free options such as peanut free. OPPORTUNITIES EXTERNAL Mc Donald’s SWOT Analysis