Presentation on theme: "5.1 Understand the process and value of conducting a feasibility analysis for your business Key Terms: Industry Target customers Competitive grid Prototype."— Presentation transcript:
1 5.1Understand the process and value of conducting a feasibility analysis for your businessKey Terms:IndustryTarget customersCompetitive gridPrototypeBusiness modelValue chainSection 5.1 Feasibility Analysis: Testing an Opportunity
2 Developing a Business Concept You now have developed your business concept.What next???business concept a clear and concise description of a business opportunity; it contains four elements: the product or service, the customer, the benefit, and the distributionSection 5.1 Feasibility Analysis: Testing an Opportunity
3 Testing the Concept in the Market An entrepreneur can use a feasibility analysis in order to decide if there is enough demand for a product or service.feasibility analysis the process that tests a business concept; it allows the entrepreneur to decide whether a new business concept has potentialA feasibility analysis can help an entrepreneur determine whether business conditions are appropriate to go forward with starting a business.Should I proceed with this business?Section 5.1 Feasibility Analysis: Testing an Opportunity
4 Testing the IndustryThe broadest level of feasibility analysis looks at the industry in which the business will operate.Factors to consider:stability of the industrymarket trendspatterns of changemajor players (competition)industry a group of businesses with a common interestSection 5.1 Feasibility Analysis: Testing an Opportunity
5 Testing Product or Service Requirements To consider all the requirements of a product or service, you may opt to create a prototype.prototype a working model used by entrepreneurs to determine what it takes to develop their products or servicesSection 5.1 Feasibility Analysis: Testing an Opportunity
6 This procedure helps because it: A business can analyze its: Strengths Weaknesses Opportunities Threats in the marketplace using a process called a SWOT analysis.This procedure helps because it:prepares a company for competition or a changing marketplace.provides guidance and direction for future business strategies.SWOT analysisAn assessment of a company’s strengths and weaknesses and the opportunities and threats that surround it; SWOT: strengths, weaknesses, opportunities, threats.
7 Internal Strengths and Weaknesses Strengths and weaknesses are internal factors that affect a business operation. The analysis centers around three Cs:CompanyCustomersCompetition
8 Internal Strengths and Weaknesses CompanyWhen evaluating itself, a company must analyze these areas:Company staffFinancial situationProduction capabilities
9 Talking to Customers Customers target customers people most likely to buy a business’s products and servicesThe most important part of the feasibility analysis is testing customers to measure interest and identify the target customers.Companies study customer buying patterns using surveys or conducting interviews with people in their target markets.Section 5.1 Feasibility Analysis: Testing an Opportunity
10 Competition Studying the Competition A company may find that it has certain strengths and weaknesses when compared to its competitors. Questions that help a business to analyze its competitive position are:What market share does the company have?What advantages does the company have over its competitors?
11 Studying the Competition An easy way to evaluate the competition is to create a competitive grid.competitive grid a tool for organizing important information about a business venture’s competitionCompetitorCustomerBenefitsDistributionStrengthsWeaknessSection 5.1 Feasibility Analysis: Testing an Opportunity
12 CompetitionCompanies need to know what their competitors are doing at all times. Changes in other companies’ financial situations affect the marketplace, and conducting a SWOT analysis helps a business react and adjust to these shifts.
13 External Opportunities and Threats Businesses must always look for opportunities to create competitive advantage if they are to succeed in the marketplace.Marketing Essentials Chapter 2, Section 2.1
14 Environmental Scanenvironmental scanAn analysis of outside influences that may have an impact on an organization.Often, a business will conduct an environmental scan to methodically examine four main areas of the marketplace. The acronym PEST refers to each of the four factors evaluated in the scan:PoliticalEconomicSocio-culturalTechnological
15 PoliticalPolitical issues center around government involvement in business operations, such as:LawsRegulationsGlobal companies need to know the political structure and regulations of each foreign country in which they conduct business.
16 The economy is affected by factors such as: Unemployment rate EconomicBusinesses are always interested in the economy because if it is healthy, people will be more likely to invest in products and markets. If the economy is in recession, companies need to be more cautious in their decisions.The economy is affected by factors such as:Unemployment rateInflationRetail sales figuresProductivityConsumer confidence
17 Socio-CulturalA socio-cultural analysis is based on customers and potential customers. It focuses on their:AttitudesLifestylesOpinionsAnd also considers:AgeIncomeOccupationEducation levelMarital status
18 TechnologicalChanging technology may be a threat for one industry, but an opportunity for others. Companies develop completely new products or capitalize on new developments by making products to support them.
19 Looking at Start-Up Resources A strong business model is important to investors.Factors to consider:Purchase or lease ofequipment, furnishings,and a facilityBuying starting inventoryPaying employeesProduct developmentCarry company expensesuntil you have enoughsales to generate a positivecash flowFeasibility planning helps to determine the potential profitability of a business idea.business model a description of how entrepreneurs plan to make money with their business conceptsSection 5.1 Feasibility Analysis: Testing an Opportunity
20 Analyzing the Value Chain Entrepreneurs can create a competitive advantage by looking for ways to make the value chain more efficient.The goal is to deliver maximum value at the least possible cost.Value chain – the distribution channel through which your product or service flows from the producer to the customerThe value chain can include manufacturers, distributors and retailers.Feasibility planning helps to determine the potential profitability of a business idea.Section 5.1 Feasibility Analysis: Testing an Opportunity