1. Lecture 4 Section 4 OPPORTUNITY IDENTIFICATION: The Assessment Process Assessment and Evaluation of New Venture Ideas New Venture Idea Checklist Business Location and Layout OHT 1

2. Opportunity Identification: The Assessment Process 1. Assessment and Evaluation of New Venture Ideas What is a business opportunity? How can you generate ideas for business opportunities? Sources for new venture ideas How can you decide which ideas are worth pursuing? OHT 2

3. 1. What is a business opportunity? A business opportunity is defined as a needed product or service selling in enough volume and produced cheaply enough to make a profit. Note the important words in the definition: needed enough volume cheaply enough OHT 3

4. 2. How can you generate ideas for business opportunities? The best ideas come from you Your own ideas are the best to work with, not only because you have a sense of ownership but because they are more likely to be about things you feel some sense of commitment to. To help bring out your ideas, do an inventory of yourself OHT 4

5. To begin with, ask yourself what special knowledge, skills, or experience you have in the following areas: Products - what products do you know about? - what can you make or mend? - do you have an hobby which you can develop into a business? Consumer buying patterns - what do you know about how and what people buy? OHT 5

6. Contacts with industries - do you have an “inside edge”, a contact who can help you to get ahead of the game? - do you have a contact who can help you introduce a product or service into Vietnam? Hobbies - many businesses started as hobbies - what do you do in your spare time? - how could your hobbies become business opportunities? OHT 6

7. Groups of people - What groups of people do you associate with? - what do you know about these groups? - do they have a need that you could supply? Kinds of businesses - What kind of businesses have you been involved in? - what problems did they have? - what opportunities do you see to do it better yourself? OHT 7

8. Job Skills - what special job skills do you have? - what can you do that might be needed by other people? Trends - have you seen any current trends you could turn into business opportunities? - can you spot a trend and go with it? - are people starting to eat less junk food and more nutritious snacks? - are people getting more involved with sports and fitness classes? OHT 8

9. Lifestyles - what do you know about lifestyles in your town or city? - what do people do on weekends? - what kind of lifestyles do families have? - is there an opportunity to serve these lifestyle needs? OHT 9

10. 3. Sources for New Venture Ideas Many opportunities exist for identifying and providing newer and better goods and services. The entrepreneur will read or hear about something that in turn sparks the idea. Quite often they are are a result of developments in the external environment. OHT 10

11. Some of the sources for these ideas are: Newspapers, trade journals, and professional publications Specialty magazines - in food, sports, fashion, hobbies, and so Trade shows, fairs, and exhibitions Consumer groups - that generate new product or service ideas Employees in a firm - the work environment can generate innovative, commercially feasible ideas OHT 11

12. 4. How can you decide which ideas are worth pursuing? ASK YOURSELF 3 QUESTIONS Is the product or service I am thinking of for my business something people really need or want? Do enough people need or want this product or service to make it a good business prospect? Can I provide this product or service cheaply enough to make a profit? OHT 12

13. These questions will make you ask many other questions, such as: Why you believe people want or need what you intend to offer? What kind of people and how many will buy it? What it will cost you to produce or provide the goods or services you have in mind? What people will be prepared to pay? OHT 13

14. Note: May be able to compete successfully on the basis of: better product design greater durability better service lower price Warning: Ideas are cheap, but profits take planning OHT 14

15. 2. New Venture Idea Checklist  There are many critical factors that are important in new- venture assessment.  One way of identifying and evaluating them is through the use of a checklist.  The assessment must be tailor-made for the specific venture. OHT 15

16.  There are three specific phases that a new venture goes through: pre-start-up start-up post-start-up Pre-start-up: This phase begins with an idea for the venture and ends when the doors are opened for business. OHT 16

17. Start-up: This phase commences with the initiation of sales activity and delivery of products and/or services and ends when the business is firmly established and beyond short-term threats to survival. Post-start-up: This phase lasts until the venture is terminated or the surviving organisational entity is no longer controlled by an entrepreneur. OHT 17

18. CONTENTS OF A NEW VENTURE IDEA CHECKLIST Basic Feasibility of the Venture - Can the product or service work? Competitive Advantages of the Venture - What specific competitive advantages will the product or service offer? Buyer Decisions in the Venture - Who are the customers likely to be? - Where are these customers located and how will they be served? OHT 18

19. Marketing of the Goods and Services - What share of the market will the company capture? By when? - What are sales targets? By when should they be met? Production of the Goods and Services - Will the company make or buy what it sells? Or will it be a combination of these two? Staffing Decisions in the Venture - Who will be hired? By when? How will they be found and recruited? OHT 19

20. Control of the venture - What records will be needed? When? Financing - How much will be needed for development of the product or service? - How much will be needed for setting up operations? - How much will be needed for working capital? - Where will the money come from? What if more is needed? OHT20

21. A NEW VENTURE IDEA CHECKLIST Refer to T 1 OHT21

22. 3. Business Location and Layout Often the location is chosen because a building or piece of land is vacant or because the site is located close to the home of the owner. These are poor reasons for picking a business location. Economics, population, and competition are important factors to consider. OHT 22

23. Selecting a Business Location 1. General factors to be considered when selecting a business location: a) Economic factors - A major concern in locating an area for a small business is the economic base of the area. - A study should be made of the industries in the area. -The study should answer the following questions: OHT 23

24. Do 80 percent of the people work in one industry or business? Or does the community have a variety of jobs Is industry in the area healthy? Are businesses moving in or locating elsewhere What is the average income? What are the income level (low, medium, or high) in the area? What are the employment/unemployment trends? OHT 24

25. b) Population Is the population growing or declining? What is the area’s total population? What are the age groups, ethnic groups, and ratio of sexes in the area? Ratio of family to two or three or four-person household. OHT 25

26. c) Competition How many are there? Where are they located? How well are they doing? How many similar businesses have opened or closed in the past two years? What are their strengths (competitive advantage) and weaknesses? OHT 26

27. 2. Three areas to consider in making your location decision: the trading area as a whole the town or city the actual site OHT 27

28. In choosing your location, consider the following: Refer to T 2 OHT 28

29. 3. What about the future Most of the information on economics, population, and competition deals with past or present conditions. Search for information about future plans for the area An important factor in locating a business is future potential of the site - maybe a highway is going bypass the area - the area is going to be developed for more houses to come up OHT 29

30. 4. To Buy or Lease Premises If you are considering leased premises, you should at least know the answers to the following questions: How is rent determined? Are there extras? What are the lease renewal provisions? Who owns improvements that the tenant makes? Does the tenant have the right to sublet? OHT 30

31. Are there any options for expansion? Are there any restrictions on use of the property? Will the tenant be reimbursed in case of fire? How much insurance does the landlord hold and does he require the tenant to have a certain kind? OHT 31

32. 5. Types of Business Locations Firms tend to cluster in one of the following locations: Central Business Districts (CBD) - generally located in the center of city or town - traffic - cars, motorcycles, and people is heavy - problems with this kind of area usually include poor parking and high rents OHT 32

33. Neighbourhood Shoppping Areas - areas of the city or town where many people live - many different types of stores will locate together - rent is moderate compared to the central business district Shopping Centers - the mix of stores in the shopping center is planned - they are generally located near main streets and highways - have ample parking space OHT 33

34. - usually it is about 30 to 40 minutes drive away - a supermarket often is the largest store in the center Industrial Parks and Estates - they are for manufacturers and wholesalers - they are planned clusters - easy access to transportation and utilities OHT 34

35. 6. Selecting the Correct Site must be related to: type of business to be established customers to be served types of goods and services to be sold Note: your business location must be selected as a result of careful study, not on a hunch. this study does not need to be fancy, but it must be done carefully. OHT 35

36. End of Lecture 4 OHT 36