15. entr lesson 10

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


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.


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.


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 a franchise

Franchise

Franchisor

Franchisee




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.


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.


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


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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.


Business

3. Decide whether to start a new business,

buy an existing one, or buy 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


- How to Market the Products?

Setting Objectives

Choosing Target Market

Developing an Effective Marketing Mix



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.



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.



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.



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.


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.


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.


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.


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


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.


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.


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.


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)


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


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.


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.


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

15. entr lesson 10

Business

Transcript of 15. entr lesson 10