15. entr lesson 10
TRANSCRIPT
HOW SMALL BUSINESS IS
FORMED?
Entrepreneurship – Lesson 10
Topics to be
Discussed…………..
Introduction
Steps in starting a Small Business
Small Business Administrative Functions
Introduction
It is often an integration of the functional plans
such as marketing, finance, manufacturing and
human resources.
It is prepared to attract people and money in
the proposed new venture.
Steps in Starting a Small
Business 1. Search for and identify the business opportunities
2. Study the market feasibility of the products / opportunities.
3. Decide whether to start a new business, buy an existing one, or buy a franchise. Decision to start a new business
Decision to buy an existing business
Decision to buy a franchise Franchise
Franchisor
Franchisee
Reasons for buying a franchise
Reasons for not buying a franchise
Steps in Starting a Small
Business
1. Search for and identify the businessopportunities
The list of possible products/services/ ideas isalmost unlimited.
The best place to start searching is to find yourappropriate market niche.
Niche Marketing
is the process of finding a small- but profitable –demand for something, and then producing acustom-made product for that market.
Steps in Starting a Small
Business
2. Study the market feasibility of the
products / opportunities.
Estimating the size of the market.
Estimating the competition.
Estimating your share of the market.
Steps in Starting a Small
Business
3. Decide whether to start a new business,
buy an existing one, or buy a franchise.
Decision to start a new business
Decision to buy an existing business
Decision to buy a franchise
Franchise
Franchisor
Franchisee
Reasons for buying a franchise
Reasons for not buying a franchise
Steps in Starting a Small
Business
3. Decide whether to start a new business,buy an existing one, or buy a franchise.
Decision to start a new business
Reasons for starting a new business Owner’s freedom to:
Define the nature of the business.
Have a free hand in selecting and developing business and personnel.
Take advantage of the latest technology, materials and tools.
Select a competitive environment.
Steps in Starting a Small
Business
3. Decide whether to start a new business,buy an existing one, or buy a franchise.
Decision to buy an existing business
Reasons for buying an existing business Personnel are already working.
The facilities are already available.
A product is already being produced for an existingmarket.
The location may be desirable.
Relationships have been established with banks andtrade creditors.
Revenue and profits are being generated, andgoodwill exists.
Steps in Starting a Small
Business
3. Decide whether to start a new business, buyan existing one, or buy a franchise.
Decision to buy a franchise
Franchise – a business licensed to sell a company’sproduct exclusively in a particular area or to operate abusiness that carries that company’s name.
Examples: McDonalds, KFC, Pizza Hut, Starbucks
Franchisor – The franchisor refers to the companies thatown trademarks (brand name) and products, which givesthe right to the franchisee to use the trademarks and sellproducts and services in a different location. Thefranchisor gets an agreed-upon fee.
Franchisee - A business owner who gets the right to sellgoods or services of a company, in exchange for somepayment/ fee
Steps in Starting a Small
Business
3. Decide whether to start a new business,buy an existing one, or buy a franchise.
Reasons for buying a franchise
The franchiser and franchisee desires thesuccess of the other.
The franchiser brings proven and successfulmethods of operation and obtains guidance fromexperienced people by obtaining a franchise.
The market niche has been identified, and salesactivities are in place.
Steps in Starting a Small
Business
3. Decide whether to start a new business,
buy an existing one, or buy a franchise.
Reasons for not buying a franchise
The best business being franchise is costly.
Expenses include investments and fees, as well
as royalty payments.
New franchisees face far greater financial risk.
The best franchise is not a guarantee of success.
The franchisee may not have enough
independence.
Small Business Administrative
Functions
1. Developing Marketing Strategies
2. Advertising the Product
3. Promoting the Product
4. Distributing and Selling the Products
5. Purchasing and Inventory
6. Developing an Operating Systems
7. Facilitating the Business Operations
1. Developing Marketing Strategies
- How to Market the Products?
Setting Objectives
Choosing Target Market
Developing an Effective Marketing Mix
1. Developing Marketing Strategies
- How to Market the Products?
Setting Objectives
Marketing objectives should be tied in with your
competitive edge and flow from your mission
statement.
A competitive edge / competitive advantage is a
particular characteristic that makes a firm more
attractive to customers than its rivals.
Your competitive edge is something that
customers want and only you can supply which
gives you an advantage over your competitors.
Some factors that might provide such an
advantage are quality, reliability, integrity, and
service as well as lower prices.
1. Developing Marketing Strategies
- How to Market the Products?
Choosing Target Market
A target market is the part of the total market
toward which promotional efforts are
concentrated. Use market segmentation.
Market segmentation is the division of the
market for a product into
groups of customers with identifiable needs
and characteristics.
1. Developing Marketing Strategies
- How to Market the Products?
Developing an Effective Marketing Mix
A marketing mix is the proper blending of the
basic elements of product, price, promotion
and place into an integrated marketing
program.
1. Developing Marketing Strategies
- How to Market the Products?
Suggested Marketing Strategies for SmallBusiness
Moving quickly to satisfy customers’ needs.
Using pricing to differentiate the product.
Paying attention to packaging.
Building customer’s loyalty.
Offering samples and demonstrations.
Aligning at specialized market segments.
Localizing business.
Providing personal touch.
Providing technical repair services.
2. Advertising the Product
Advertising is a form of commercial masscommunication designed to promote the sale of aproduct or service, or a message on behalf of aninstitution or organization.
Thus, it informs customers of the availability,desirability and uses of a product.
Forms of Advertising
The most popular advertising media used by smallbusinesses are display ads in television, newspapers,radio, store signs, direct mail, circulars, handbills,yellow pages ads, outdoor signs and internet.
3. Promoting the Product
Merchandising
It is for promoting the sale of a product at the
point of purchase.
It is the way the product is presented to
customers, including window displays, store
banners, product label and packaging and
product demonstration.
Sales promotion
It includes marketing activities (other than
advertising and personal selling) that stimulate
consumer purchasing and dealer effectiveness.
3. Promoting the Product
Consumer Promotions use coupons,
discounts, contests, trading stamps, samples,
rebates, etc.
Trade Promotions includes free goods,
buying allowances, merchandise allowances,
cooperative advertising and free items given
as premiums.
3. Promoting the Product
Sales Force Promotions consists of benefits,
such as contests, bonuses, extra
commissions, and sales rallies.
Publicity is information about a business that
is published or broadcasted without charge.
4. Distributing and Selling the
Products
a) Distribution involves the effective physical
movement of a product from the production
line to the final consumer.
It includes protective packaging, materials
handling, inventory control, storing, transportation
(internally and externally), order processing, and
various aspects of customer service. Intermodal
Shipping is the use of combination of truck, rail, or
ship to transport goods.
4. Distributing and Selling the
Products
b) Selling the Product
Selling is the activity or process of exchanging a
product for money. In business, "nothing happens
until someone sells something.
Steps in Sales Process
Prospecting for Customer
Presenting the Product
Handling Objections
Closing the Sale
4. Distributing and Selling the
Products
Sales Strategy Techniques
Direct selling
Indirect selling
Direct Selling
Occurs when you sell products directly to
consumers. Methods include catalogues, home
parties, door-to-door selling, telephone sales and
retail craft shows.
4. Distributing and Selling the
Products
Indirect selling occurs when you sell to anintermediary, as opposed to an end user.
Methods of indirect sales include selling yourproduct to a retail store as well as using awholesaler/distributor or broker/agent.
Indirect sales can include club chains, hotelsand institutions as well as any kind of retailshop.
Intermediaries are units or institutions in thechannel of distribution that either take title to ornegotiate the sale of the product.
4. Distributing and Selling the
Products
The usual intermediaries are: brokers / agents,wholesalers, retailers
A broker/agent doesn’t take title of the products.Instead he or she provides a sales force to sellyour goods for you.
A wholesaler/distributor buys products fromproducers and normally sells the goods to retailstores.
They usually represent complementary productsand takes title of the goods.
In most cases, the producer is responsible foradvertising and for getting listed with retail chains.
However, a distributor may share someresponsibility for promotions, especially forsmaller retailers.
5. Purchasing and Inventory
Purchasing is the process of buying the right
item, at the right price, quality, and quantity,
from the right supplier at the right terms and
right time.
Objectives of Purchasing
(In next slide)
5. Purchasing and Inventory
Objectives of Purchasing
Maintain the quality and value of the firm’sproducts.
Minimize cash tied-up in inventory (themerchandise/stock that a company has on hand).
Types of inventory: finished items on display forsale to customers;
batches of goods, such as materials and partsawaiting processing or delivery; repair partsawaiting use; supplies for use in offices, stores,shops and for use in processing other goods;miscellaneous items
Maintain the flow of inputs to maintain the flow ofoutputs.
Strengthen the firm’s competitive position.
6. Developing an Operating
Systems
Operating Systems consist of the inputs,
processes, and outputs of a business.
Inputs are materials, people, money, machines
and other productive factors.
Processes convert these inputs into products
that customer wants.
Outputs are the products produced and the
satisfaction of employees and the public.
6. Developing an Operating
Systems - Examples
7. Facilitating the Business
Operations
Choosing the right location
Location
a) Locating Retail stores
Downtown Business Districts
Freestanding Stores
Shopping Centers
b) Locating Manufacturing Plants
7. Facilitating the Business
Operations
Choosing the right location:
Location is most important for certain types ofbusiness than others. Location refers to the placeof business.
A business has to consider the following factorswhile choosing the location:
Access to a capable, well-trained, stable work force.
Availability of adequate and affordable supplies andservices
Availability, type, use, and cost of transportation.
Taxes and government regulations.
Availability and cost of electricity, gas, water, sewage,and other utilities.
7. Facilitating the Business
Operations
a) Locating Retail stores:
Downtown Business Districts
Downtown business-oriented activities, such asgovernment, financial businesses, and head offices oflarge firms are usually located in the downtown area.
Freestanding Stores
Freestanding stores found in various locations areusually best for customers who have brand orcompany loyalty.
Shopping Centers
Shopping centers vary in size and are designed todraw traffic according to the planned nature of thestores to be included in them.
7. Facilitating the Business
Operations
b) Locating Manufacturing Plants:
The location of manufacturing plant is usually
selected with the aim of serving customers
properly at the lowest practical cost.
Generally, manufacturing industries are set up
in industrial estates and suburban areas.
Reviewed …………..
Introduction
Steps in starting a Small Business
Small Business Administrative Functions