Business Enterprise & Simulation

BASIC NEEDS -essential for humans and their • Will the business be legal, not going against
well-being. Things and services that humans any existing or foreseeable government
cannot do without. regulation?
WANTS -desires, luxury, and extravagance that • Is the business in line with your interest and
signify wealth and an expensive way of living. expertise?
Above all the basic necessities of life.
MARKET SCANNING -the process of continually
GENERATING BUSINESS IDEAS and actively monitoring the external
environment in order to identify customer
1. Examine the existing goods and services. needs, anticipate competitive actions, and,
INNOVATION -improving or enhancing identify technological changes which will
an existing product or service provide new market opportunities or market
disruptions.
2. Examine the present and future needs.
PESTLE factors:
3. Examine how the needs are being satisfied.
• POLITICAL FACTORS -involve things that
MARKET DEMAND -need for the impact your business from a
products and services government or legal standpoint.
MARKET -whoever will use or buy the • ECONOMIC FACTORS -financial
product or service fluctuations that are typically out of
your control.
4. Examine the available resources around you. • SOCIAL FACTORS -cultural norms and
attitudes of your targeted demographic
5. Read magazines, news articles, and other
and that of your employees, partners,
publications on new products and techniques or
competitors, etc.
advances in technology.
• TECHNOLOGICAL FACTORS -falling
SELECTING THE RIGHT BUSINESS IDEA behind on technological trends, using
outdated equipment or software, and
-screen your ideas to narrow them down and
examining the technological barriers
decide which business idea is worth pursuing your business faces to enter a new
FACTORS TO SCREEN BUSINESS IDEAS market all fall within this category.
• LEGAL FACTORS -how the law has a
• How much is the needed capital? direct influence on the company’s
• How big is the demand for the operations.
product/service? Do many people need this • ENVIRONMENTAL FACTORS -anything
product/service and continue to need it for a that can impact your business from an
long time? ecological or environmental
standpoint.
• How is the demand met? Who is processing
the products/services to meet the need ENVIRONMENTAL SCANNING -the process of
(competition or demand)? How much of the gathering, analyzing, and dispensing
need is now being met (supply)? information for tactical or strategic purposes.

• Do you have the background and experience SWOT ANALYSIS -an analytical framework that
needed to run this particular business? can help a company meet its challenges and
identify new markets.
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INTERNAL FACTORS (Strengths and HOW TO DO MARKET RESEARCH?

Weaknesses) -the resources and experiences
1. Start by identifying your target market, ideal
readily available to the business proponent.
customers, and common traits.
• STRENGTHS -the strong attributes or
2. Choose the type of research data and
capabilities of the business that provide
sampling method you will use.
a great advantage in exploiting the
business. RESEARCH DATA
• WEAKNESS -poor attributes or
deficiencies that give disadvantages to • PRIMARY SOURCES -gathered data that
the business. the person who needs the data does
gathering himself or herself
EXTERNAL FACTORS (Opportunities and • SECONDARY SOURCES -data are those
Threats) -affect a company, an organization, an that have already been compiled and
individual, and those outside their control. are available
• OPPORTUNITIES -business situations in SAMPLING METHOD
the form of products or services that
must be exploited because of their RANDOM SAMPLING METHODS -also called
potential in terms of profit or growth. probability sampling. Sample selection is done
• THREATS -possible external events in randomly so the laws of probability can be
the environment that may provide harm applied.
to the business. • Simple Random Sampling -the most
PORTER’S FIVE FORCES OF COMPETITIVE commonly used sampling technique.
ANALYSIS -framework or a guide for assessing Selects individuals from a list of the
and evaluating the competitive strength and population, with every individual having
position of a business organization. an equal chance of being selected.
• Stratified Sampling -is often used when
• NUMBER OF COMPETITORS -number of there is a multitude of unique
competitors and their ability to subgroups that require full, randomized
undercut a company. representation across the sampling
• POTENTIAL NEW ENTRANTS -the force population.
of new entrants into its market. • Systematic Sampling -this method is
• POWER OF SUPPLIERS -how easily based on a system of selecting
suppliers can drive up the cost of participants. E.g. select from a list of
inputs. the population every 20th person.
• POWER OF CUSTOMERS -the ability • Multistage Sampling - the sampling is
that customers have to drive prices carried out in several stages such that
lower or their level of power the sample size gets reduced at each
• THREATS OF SUBSTITUTES PRODUCTS - stage.
substitute goods or services that can be
used in place of a company's products NON-RANDOM SAMPLING METHODS -done on
or services that pose a threat. a basis other than the probability
considerations, such as judgment, convenience,
MARKET RESEARCH -the process of gathering etc.
information about your potential customers
your target market, and understanding the • Judgment Sampling -choice of sample
viability of your business. items depends exclusively on the
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investigator’s knowledge and DRAWING CONCLUSIONS AND FORMULATING

professional judgment. RECOMMENDATIONS -critical in determining
• Convenience Sampling -a proportion of the success or failure of your business venture.
the population is selected on the basis
BUSINESS PLAN -written document describing
of its convenient availability.
the nature of the business, the sales and
• Quota Sampling -the population is
marketing strategy, and the financial
divided into mutually exclusive sub-
background, and containing a projected profit
groups from which the sample items
and loss statement.
are selected on the basis of a given
proportion. THREE PRIMARY PARTS OF A BUSINESS PLAN
• Snowball Sampling -the initial
informants are approached through • BUSINESS CONCEPT -where you discuss
their social network to nominate or the industry, your business structure,
refer the participants that meet the your particular product or service, and
eligibility criteria of the research under how you plan to make your business a
study. Also called the referral sampling success.
method or chain sampling method. • MARKETPLACE SECTION -describe and
analyze potential customers. Also
3. Document your findings. describes the competition and how
you'll position yourself to beat it.
DATA PROCESSING -series of actions or steps
performed on data to verify, organize, • FINANCIAL SECTION -contains your
transform, integrate, and extract data in an income and cash flow statement,
balance sheet, and other financial
appropriate output form for subsequent use.
ratios, such as break-even analyses.
DATA PROCESSING CYCLE -sequential one that
starts with inputs and often ends with the SEVEN KEY COMPONENTS OF A BUSINESS PLAN
interpretation of results 1. Executive summary
1. Input - involves collecting data as well as 2. Business description
entering it and then preparing it for the next 3. Market strategies
4. Competitive analysis
part of the cycle.
5. Design and development plan
2. Processing -data is manipulated according to 6. Operations and management plan
instructions and parameters programmed into 7. Financial factors
the processing application.
IMPORTANCE OF BUSINESS PLAN
3. Output -the form of outputs includes
common variations such as results that are ▪ gives entrepreneurs the ability to lay
out their goals and track their progress
printed or displayed on a computer monitor.
as their business begins to grow.
4. Interpretation – Assessing and analyzing ▪ important for attracting investors so
results: What does the data mean? they can determine if your business is
on the right path and worth putting
5. Feedback – Comparing output with desired money into.
results ▪ can help improve the business’s
6. Storage – Archiving the data (either physically chances of success
or electronically) for future use. 10 REASONS WHY YOU NEED A BUSINESS PLAN
1. To help you with critical decisions.
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2. To iron out the kinks. ▪ Ensures effective use of the

3. To avoid big mistakes. organization’s resources by focusing on
4. To prove the viability of the business. the key priorities.
5. To set better objectives and
benchmarks. COMPANY SUMMARY -merely summarizes
6. To communicate objectives and each of the other sections of your plan.
benchmarks. ❖ Name, location, and mission of your
7. To provide a guide for service providers. company. Description of your company,
8. To secure financing. including management, advisors, and brief
9. To better understand the broader history. Your product or service, where your
landscape. product fits in the market, and how your
10. To reduce risk. product differs from competitors in the
QUESTIONS EVERY BUSINESS PLAN SHOULD industry
ANSWER MAJOR PARTS OF A STANDARD STRATEGIC
• Why are you in business? What drives PLAN
you and the business— beyond revenue • Vision
and profits? • Mission
• What does the market look like? How • Goals
does your business idea fit into the • Core values
market in relation to them? • Objectives
• What will you do? How will the industry • Operational, Tactics and Strategies
change when you enter it? • Standard of measurement
• How will you grow? Whom will you • SWOT
need to hire and what will their
responsibilities entail? ENVIRONMENTAL ANALYSIS -the process by
• What do you need? Where will that which corporate planners monitor the
investment take your business? economic, governmental, supplier
technological, and market settings to determine
STRATEGIC PLANNING -the process of the opportunities for and threats to their
documenting and establishing a direction for enterprise.
your small business by assessing where you are
and where you’re going. It also gives you a MACRO-ENVIRONMENTAL ANALYSIS
place to record your mission, vision, values, (EXTERNAL)
long-term goals, and action plans. • Political factors
BENEFITS OF STRATEGIC PLANNING • Economic factors
• Sociological factors
▪ Clearly defines the organizational • Technological factors
purpose, and establishes realistic
• Legal factors
goals/objectives consistent with the
• Environment (Natural) factors
mission.
▪ Communicates goals/objectives to the MICRO-ENVIRONMENTAL ANALYSIS
organization’s constituents. (INTERNAL)
▪ Develops a sense of ownership of the
plan. • Rival Firms
• Buyers
• Entrants
• Substitutes
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MANAGEMENT SUMMARY SECTION -covers all COMPETITIVE ANALYSIS -establishes what

of the relevant information about personnel, makes your product or service unique and
anticipated growth and how the company is
what attributes you play up in order to attract
organized.
your target market.
PARTS OF THE MANAGEMENT SUMMARY
TARGET MARKET - the people who are most
SECTION
likely to buy your products or services, and they
• BUSINESS STRUCTURE - sole are united by some common characteristics.
proprietorship, LLC, partnership, or
corporation. This determination will PRICING STRATEGY -method companies use to
price their products or services. Also called
form the basis for the rest of the areas
in this section. distribution strategy sketches how and where a
• MANAGEMENT TEAM -who will company will place its products/services in an
oversee the company? An attempt to gain market share and consumer
organizational chart can be a good purchases.
visual to use to illustrate this element. PRICING STRATEGIES
• MANAGEMENT TEAM GAPS -what are
your anticipated personnel needs? How • Cost-oriented
will each role, once filled, contribute to • Target profit
the success of your company? • Competition based
• PERSONNEL GROWTH PLAN -this DISTRIBUTION TYPES TO EXPAND LOCATION-
should provide a bottom-line cost for BASED CLIENT
personnel expenditures.
• Direct
MARKET SEGMENTATION -the process of • Indirect
dividing a target market into smaller, more • Hybrid
defined categories.
PROMOTION -is an attempt by marketers to
4 TYPES OF MARKET SEGMENTATION inform, persuade, or remind consumers and
• Demographic back-to-back users to influence their opinion or
• Behavioral elicit a response.
• Physiographic ELEMENTS OF PROMOTIONAL MIX
• Geographic
• Traditional advertising
MARKET NEEDS -marketing concept that • Personal selling
relates to the functional or emotional needs or • Sales promotion
desires of a target market. • Public relation
TYPES OF MARKET NEEDS • Social media
• E-commerce
• FUNCTIONAL NEEDS -help me get
things done
• SOCIAL NEEDS -make me look good to
others
• EMOTIONAL NEEDS -help me feel good
SERVICE BUSINESS ANALYSIS -used to better
understand the structure and operations of an
organization or business.