Entrepreneurship Chapter 3 Creating Business from Opportunity.

Entrepreneurship

Chapter 3 Creating Business from Opportunity

Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE

© 2010 Pearson Education, Upper Saddle River, NJ 07458.

All Rights Reserved.2

The Business Definition The offer—what will the business

offer the customers? Target market—who will it serve? Production and delivery capability

—how will it provide the products & services it sells?




Types of Business Manufacturing—makes tangible

products & sells them through distributors or directly.

Wholesale—buys in bulk from manufacturers & sells smaller quantities to retailers.

Retail—sells individual items to consumers.

Service—sells time/expertise to consumers.




Defining an Organization Core Values Mission Vision Culture




Organizational Core Beliefs Beliefs entrepreneurs use to guide

organizations.Example: My restaurant will support local organic farmers.

Core beliefs affect: materials used in production prices charged how customers are treated




Mission Statement A concise statement of

Target customers Products & services Markets served Use of technology Importance of public issues &

employees Focus on survival, profitability, &

growth




Vision Overall view of desired company

future state Built upon core values & beliefs Compelling across the organization Employees need to be empowered

to fulfill it




Culture Largely shaped by leadership Core values in action Includes

Risk tolerance & innovation Orientation with respect to people,

teams, & outcomes Attention to detail Communication norms




Routes to Finding Opportunities

Self- or group-developed business ideas

Research on “hot” business ideas or growth areas

Product or service idea first & search for a market or business second




Factors of Competitive Advantage

1. Quality2. Price3. Location4. Selection5. Service6. Speed/turnaround




What Is Your USP? Unique Selling Proposition—what

attracts customers away from the competition and toward a business?

1. Compare what your business offers to what competitors offer.

2. Are you at a cost advantage or disadvantage?




Competitive AnalysisYour Company

Competitor #1

Competitor #2

Competitor #3

Quality

Price

Convenience

Selection

Service

TOTAL




Define the Unit of Sale Manufacturing—one order Wholesale—a dozen Retail—one item Service—one hour of time or one

completed task Combination—average sale per

customer




Average Sale Per Customer

Average sale per customer – Average cost of sale per customer Average gross profit per customer




Unit of Sale as a Combination

of Different Items




Cost of Goods Sold (COGS)

COGS = cost of labor and materials required to make one additional unit

COSS (cost of services sold) = cost of

labor and materials required to provide one additional unit of service




Economics of One Unit (EOU) Method for seeing if a business can

be profitable

If one unit of sale is profitable, the whole business is likely to be profitable.

Selling price per unit – COGS per unit = Gross profit per unit




Economics of One Unit (EOU) —Manufacturing




Economics of One Unit (EOU) —Wholesale




Economics of One Unit (EOU) —Retail Business




Economics of One Unit (EOU) —Service Business




Economics of One Unit (EOU) —Example




The Entrepreneur’s Strategy: Start a business with a profitable EOU Hire others to create the units Increase volume of units being sold Start new businesses or expand

opportunities

Result: The entrepreneur creates jobs and wealth.

Entrepreneurship Chapter 3 Creating Business from Opportunity.

Documents

pearson education

upper saddle river

business ideasresearch

hot business ideas

opportunity entrepreneurship

core values beliefscompelling

leadershipcore values

growth areasproduct