Lecture 4

Section 4 OPPORTUNITY IDENTIFICATION: The Assessment Process

Assessment and Evaluation of New Venture Ideas New Venture Idea Checklist Business Location and Layout

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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?

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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

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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

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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?

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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?

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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?

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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?

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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?

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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.

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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

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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?

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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?

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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

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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.

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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.

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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.

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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?

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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?

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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?

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A NEW VENTURE IDEA CHECKLIST

Refer to T 1

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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.

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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:

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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?

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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.

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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?

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2. Three areas to consider in making your location decision:

the trading area as a whole the town or city the actual site

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In choosing your location, consider the following:

Refer to T 2

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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

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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?

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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?

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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

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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

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- 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

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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.

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End of Lecture 4

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