NVPM-1

UNIT-1BUSINESS CONCEPTS

2

What you will know?

Statement of concept of business Who is a potential customer Marketing approach Where is the money- trend identification Micro/ Macro level factors

– Social, political, environmental, demographic, international factors Tap customer’s hidden requirements New products- improvement over existing products Barriers to new ideas Competitor effect Effect of patent rights Brand name protection Is business right for you? Are you an entrepreneur? Entrepreneurial firm How and when to zero in on a project

3

What is Business?

Definitions of Business

Business has four dimensions of meaning– A commerce– An occupation – An organization– A System

4

Definitions of Business

(General Defn.) A business is a legally recognized organization designed to provide goods and/or services to consumers

Business as a commerce is the process that people produce, exchange and trade goods and services

Business as an occupation is the acquired set of specialized skills and abilities that allows people to create valuable goods and services

Business as an organization is the system of task and authority relationship that coordinates and controls the interactions between people so that they work toward a common goal

Business as a system is a combination of business commerce, occupations, and organizations that produces and distributes the goods and services that create value for people in a society

5

The Concept of Business

The exchange of goods/services with money for mutual benefit/profit

An organization that provides goods and/or services to earn profits

All profit-seeking activities that are organized and directed to convert factors of production into goods and services or combination between goods and services for customers in the markets to achieve the business objectives

6

Business Objectives

Business Profit = Total Revenue –Total Cost

Economic Profit – business profit that considered opportunity cost as a part of expenses

Survival

Growth

Social Responsibility

7

Who is a potential customer ?

Customer: A person, company, or other entity which buys goods and services produced by another person, company, or other entity.

Potential customer : A person, company, or other entity which may buy a particular thing or avail a service.

There is a high possibility of this person, company or entity buying that thing or service.

(Or) ' A person, company, or other entity which might

be willing and be able to engage in exchange to satisfy that need or want'

8

Marketing Approach

Marketing approach begins with getting to know markets and target clients – understand their true needs and desires.

The company thus develops products as solutions adapted to those clients.

It then looks for pertinent ways in which to commercialize – Communicates its existence and its solutions.

Once this is accomplished, it is then in a better position – to manage, – sell and – deliver value to clients – persuades them to repeat their purchases.

9

Contd… {For you to read}

In other words, the more one understands the needs of target markets and clients, the greater the odds of one’s creating and developing products and services adapted to those needs.

One will then be in a better position to promote such business solutions, using appropriate means of communication, thus driving sales.

The last stage of the process is the delivery of the product or service with an eye toward creating a satisfying buying experience for the client, building client loyalty as much as possible.

If the company delivers the goods properly and gets to know the client better in doing so, it can in turn develop more suitable products (the cycle begins anew; the wheel comes around).

10

Where is the money?- Trend identification

Trend identification: The analysis of past data and identification through past changes in a variable's value to determine if a trend exists and, if so, what the trend indicates.

A firm's marketing department is likely to be interested in sales trends for each of the firm's products.

11

Importance of Trends

Trends are one of the most valuable elements to identify if we hope to comprehend, in general, the type of future we will face.

They are also extremely important for marketers and those in business, as many of us catering to niches, or even general markets, must understand where real trends are guiding things, as the survival or profitability of our businesses will depend on it.

12

Spotting and Profiting from Business Trends

No matter what business you’re in, watch for trends in the – fashion, – property and – electronics industries

Often how society reacts to these trends will shape how and what they buy. 

You should also look at your target audience and notice their buying habits as well.  Ask yourself the following questions:– How much do they earn?  – Are they willing to pay more for better service or quality

or are they hunting for the cheapest bargains?  – How likely are they to tell their friends about their

experience with you?

13

– What gender are they and what is their education level?

– Are they single? Married? Do they have children? All of these questions can impact how well a trend is received and how far it expands.

– How do they view the Internet?

– Are they technologically savvy?

– Do they use shopping comparison and research tools or are they likely to buy the first thing that comes up to their mind or the first thing that pops up when they search on the net?

When checking out current business trends, it’s a good idea to “look beneath the surface” of the trend and ask yourself – what makes it popular? 

14

Micro and Macro level factors

In any economy all corporations are affected by micro and macro economic, social, political, environmental, demographic and international.

The Micro-environment:

This environment influences the organization directly. It includes suppliers that deal directly or indirectly, consumers and customers, and other local stakeholders. Micro tends to suggest small, but this can be misleading. In this context, micro describes the relationship between firms and the driving forces that control this relationship. It is a more local relationship, and the firm may exercise a degree of influence.

15

The macro-environment

This includes all factors that can influence an organization, but that are out of their direct control.

A company does not generally influence any laws (although it is accepted that they could lobby or be part of a trade organization).

It is continuously changing, and the company needs to be flexible to adapt. There may be aggressive competition and rivalry in a market. Globalization means that there is always the threat of substitute products and new entrants.

The wider environment is also ever changing, and the marketer needs to compensate for changes in culture, politics, economics and technology

16

The micro-environment, i.e. our external customers, agents and distributors, suppliers, our competitors, etc.

The macro-environment, i.e. Political (and legal) forces,

Economic forces, social factors, Technological forces Socio-cultural forces, and. These are known as PEST factors.

Economic Factors Economic factors those affect the growth of entrepreneurship are:

Infrastructural Facilities Availability of Capital Market Risks Availability of Skilled Labour Interest rates The level of inflation Employment level per capita Long-term prospects for the economy Gross Domestic Product

(GDP) per capita, and so on

17

Social factors

Is Society the rational thinking type?

What are the customs, traditions of the society?

Are education, research, training etc. given adequate importance & attention?

Are appointments to responsible positions made on the basis of competence but not by narrow religious/ caste considerations?

Does process of hiring skilled & even non-skilled labour also have skewed considerations of caste, region, affiliation to political parties?

Is the competence, aptitude, skill etc. taken into consideration?

18

Socio-cultural Factors

1.What is the dominant religion? 2.What are attitudes to foreign products and

services? 3.Does language impact upon the diffusion of

products onto markets? 4.How much time do consumers have for leisure? 5.What are the roles of men and women within

society? 6.How long are the population living? Are the

older generations wealthy? 7.Do the population have a strong/weak opinion

on green issues?

19

Technological Factors

Does technology allow for products and services to be made more cheaply and to a better standard of quality?

Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc?

How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc?

Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc?

20

Political factors

The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses.

You must consider issues such as:

1.How stable is the political environment? 2.Will government policy influence laws that regulate or tax your business? 3.What is the governments position on marketing ethics? 4. What is the governments policy on the economy? 5. Does the government have a view on culture and

religion? 6. Is the government involved in trading agreements ?

21

Tap Customer’s hidden requirements

We have an increasing need to design a competitive advantage into our services and products. One of the greatest struggles is identifying the features and positioning the product which will provide an advantage and communicate this value to potential customers.

We can use modified six sigma techniques to identify CTQs to translate the VOC into specific features. These features when mapped against customers’ unspoken and hidden needs can be positioned to provide a distinctive competitive advantage

22

Lets take a look at this specific methodology to uncover the hidden needs of customers. We will follow the following steps to organize the process

Define VOC requirements Obtain the VOC Conduct a customer needs assessment Design the product/service features

23

Define the requirements: To start the process it is important to identify where your

fundamental customer needs can be identified. Customer needs can be identified through customer interviews, sales team feedback, customer surveys, market research etc.. If you are targeting a new market segment, identify sources with your target market characteristics.

Come up with a list of contacts and sources that will contribute to your overall assessment. From there decide on the types of information you require from these contacts. Customer needs can be technical requirements, financial parameters, turnaround times etc..

For example if you are offering technology installation services, you will want to build a list of companies and people that will be representative of your target market

24

Obtaining VOC Begin to craft questions and contact methods to

accurately obtain feedback from these individuals. We are uncovering needs here and not validating

what we already think. The best way is to conduct one-to-one interviews

to be able to pick up potential hidden needs and inquire about them in more depth.

Once we gather the feedback its time to analyze, group and prioritize responses. It is helpful to survey customers and it can help you prioritize the needs uncovered .

25

Conducting a Customer Needs Assessment Once we gather the VOC, its time to create A

customer needs assessment This is where a CTQ flow down method is helpful

to organize VOC requirements. To use this method place the customer need on

the LHS and try to dig a bit deeper to describe the needs in more specific terms.

The idea is to break down needs into more specific areas so that you can design features that are sure to meet their needs

26

Designing service features This is the final step Some features may meets multiple needs, which

is all the better for creating a efficient product/ service.

Start by looking at very specific needs identified in your customer needs assessment.

Your features need to meet these needs in the most efficient and cost effective means possible

The main point here is to create innovative features that meet your customer’s hidden requirements

27

CTQ Flow diagram

Product design

Need

Need

Specific need

Specific need

Specific need

Specific need

Features

Features

Features

Features

Features

28

Barriers to new ideas

Need for change If the existing product is satisfying the needs of the consumer there

is no need for a new product. Ex: Windows 7 and Windows XP

Receptiveness The human mind resists change. A innovative product may not be

immediately accepted in the market if it is threatening the existence of its well established competitor.Ex: BING and Google

29

Compatibility with the previous versions A new technology may not be compatible with the existing products which run

on the product or on which the product runs on. Ex: Several software are not reverse compatible

Limitations by patents Not much of research may be done on patented technology. Only the company

holding the patents might be working to improve the technology

Decision taking body The board of director of a company should be able to identify the potential of a

new ideaEx: The mouse was neither an Microsoft/ Apple invention. It was XEROX’s invention.

30

Funding for research Adequate funding and advanced facilities may not be available for

testing new ideas

Lack of parallel technology A good idea has to be backed with parallel contemporary

technologies. The absence of parallel technology to develop a idea and bring it into production is a major hindrance.

Ex: Concept cars, Electric Cars, Microsoft’s Project Natal, Sixth Sense

31

Competitor effect

Effect: on the organization on the customer

On the organization:– Loss of sales– Loss of customers– Loss of employees– Loss of profits– Difficulty in surviving– Price race– Unlawful practices– Rivalry– Trademark/copyright infringement– Desire to make better quality products/services– Creativity and innovation– More efficient production– Better employee remuneration

32

On the customer:Better prices/ better serviceBetter qualityBetter customer satisfactionMore product variationBetter and more efficient economyBetter value for money

33

Patents

What Are Patents, Trademarks, and Copyrights?

Some people confuse patents, copyrights, and trademarks. Although there may be some similarities among these kinds of intellectual property protection, they are different and serve different purposes

34

What Is a Patent?

A patent for an invention is the grant of a property right to the inventor, issued by the Patent and Trademark Office of the country

“the right to exclude others from making, using, offering for sale, or selling” the invention

or “importing” the invention into the country. What is granted is not the right to make, use, offer for sale, sell or import, but the right to exclude others from making, using, offering for sale, selling or importing the invention

35

There are three types of patents:

1) Utility patents may be granted to anyone who invents or discovers any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof;

2) Design patents may be granted to anyone who invents a new, original, and ornamental design for an article of manufacture; and

3) Plant patents may be granted to anyone who invents or discovers and asexually reproduces any distinct and new variety of plant.

36

What Is a Trademark or Servicemark?

A trademark is a word, name, symbol, or device that is used in trade with goods to indicate the source of the goods and to distinguish them from the goods of others.

A servicemark is the same as a trademark except that it identifies and distinguishes the source of a service rather than a product. The terms “trademark” and “mark” are commonly used to refer to both trademarks and servicemarks.

Trademark rights may be used to prevent others from using a confusingly similar mark, but not to prevent others from making the same goods or from selling the same goods or services under a clearly different mark.

37

What Is a Copyright?

Copyright is a form of protection provided to the authors of “original works of authorship” including literary, dramatic, musical, artistic, and certain other intellectual works, both published and unpublished.

Copyright Act generally gives the owner of copyright the exclusive right to reproduce the copyrighted work, to prepare derivative works, to distribute copies or phonorecords of the copyrighted work, to perform the copyrighted work publicly, or to display the copyrighted work publicly.

The copyright protects the form of expression rather than the subject matter of the writing. For example, a description of a machine could be copyrighted, but this would only prevent others from copying the description; it would not prevent others from writing a description of their own or from making and using the machine. Copyrights are registered by the Copyright Office

38

Patent Laws

The patent law specifies the subject matter for which a patent may be obtained and the conditions for patentability. The law establishes the Patent and Trademark Office to administer the law relating to the granting of patents and contains various other provisions relating to patents.

39

What Can Be Patented

The patent law specifies the general field of subject matter that can be patented and the conditions under which a patent may be obtained.

Any person who “invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent,” subject to the conditions and requirements of the law. These classes of subject matter taken together include practically everything that is made by man and the processes for making the products

40

The patent law specifies that the subject matter must be “useful.” The term “useful” in this connection refers to the condition that the subject matter has a useful purpose and also includes operativeness, that is, a machine which will not operate to perform the intended purpose would not be called useful, and therefore would not be granted a patent. A patent cannot be obtained upon a mere idea or suggestion.

The patent is granted upon the new machine, manufacture, etc., as has been said, and not upon the idea or suggestion of the new machine. A complete description of the actual machine or other subject matter for which a patent is sought is required.

41

Novelty And Non-Obviousness, Conditions For Obtaining A Patent

In order for an invention to be patentable it must be new as defined in the patent law, which provides that an invention cannot be patented if: “(a) the invention was known or used by others in this country, or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patent,” or “(b) the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country more than one year prior to the application for patent

42

If the invention has been described in a printed publication anywhere in the world, or if it was known or used by others in this country before the date that the applicant made his/her invention, a patent cannot be obtained. If the invention has been described in a printed publication anywhere, or has been in public use or on sale in this country more than one year before the date on which an application for patent is filed in this country, a patent cannot be obtained. In this connection it is immaterial when the invention was made, or whether the printed publication or public use was by the inventor himself/herself or by someone else. If the inventor describes the invention in a printed publication or uses the invention publicly, or places it on sale, he/she must apply for a patent before one year has gone by, otherwise any right to a patent will be lost. The inventor must file on the date of public use or disclosure, however, in order to preserve patent rights in many foreign countries.

43

Even if the subject matter sought to be patented is not exactly shown by the prior art, and involves one or more differences over the most nearly similar thing already known, a patent may still be refused if the differences would be obvious. The subject matter sought to be patented must be sufficiently different from what has been used or described before that it may be said to be nonobvious to a person having ordinary skill in the area of technology related to the invention. For example, the substitution of one color for another, or changes in size, are ordinarily not patentable.

44

Brand Name Protection

Brand names are protected through “TRADE MARK “

All businesses should have a registered trade mark. As a minimum, the business or main brand name should be registered

This is the only way to stop others from copying names, logos, slogans or other things.

Business name registration alone does not work.

45

Contd…

Many people think that registering a business name means that it is protected and it stops other people from using the same business name. It doesn't!

Registering a business name is almost useless for protection purposes.

Registering "Ultrashine Carwash" in Chennai does not stop someone else from setting up their own "Ultrashine Carwash" in Mumbai.

Secondly, it does not stop someone from registering a very similar name - even in the same state. Examples are "Ultrashine Car Cleaning" or "Ultrashiny Carwash".

46

Contd…

The only real function business name registration has is to notify the government of the owner of the business.

The same applies with company (ie. Pvt. Ltd.) names.

What happens if clients do not register a trade mark?

If Ultrashine Carwash is not registered as a trade mark, it is very expensive and difficult to stop someone else from calling their business exactly the same name.

47

What happens if you register a trade mark?

When a business registers "Ultrashine Carwash" as a trade mark, it will have the automatic legal right to stop anyone from using the name. It will have the right to sue the other company for "Trade mark infringement" law.

All it will need to show the judge is that it has registered the name and that the other company is using the same or a similar name. The court is likely to order them to change their name and to pay compensation money.

48

Contd…

Most importantly, when businesses have a registered trade mark, they can use the symbol ®. Just by using this symbol, most copycats are scared off so they may not even have a problem to begin with.

It is very important for businesses to register everything that they do not want others to copy.

This can include: • Name

• Packaging • Logo • Colours • Slogan • Sounds • Shapes • Smells

Because trade marks are powerful tools, businesses need to register their trade marks.

49

Are you an entrepreneur?Is this business right for you?

Entrepreneurial firm

– Its taken from a French word “entrprendre” which means to “undertake”

Who is an Entrepreneur ?– An urge to build– Want to make the “future state” the “present

state”– Take an idea off the ground and keeping it

afloat– A true entrepreneur is a doer not a dreamer

50

Qualities of an entrepreneur

Passionate A strong urge to create Leader Often unconventional Has a GOAL and not a WISH Ability to take Risk – Leave the comfort zone Focus Commitment Perseverance Sees the Big Picture Roll up the sleeve / Get your hands dirty attitude Delegation Always thinking about the idea and validating it

51

Opportunity – – Most of the things worth doing in the world had been

declared impossible before they were done – Louis D. Brandeis

Staying Power –– Success seems to be a matter of hanging on after

others have let go Planning

– Fail to Plan and you Plan to Fail– “For everything you must have a plan” – Napoleon

Handling Adversity– There is no education like adversity – Benjamin Disraeli

52

Hustler– Everything comes to him who hustles

while he waits – Thomas Edison Aggressive

– Impatient, Restless, Need it now Not worried about details Compromise quality of life Handle social pressures Relationship – People person

53

Attributes in an entrepreneur that you can learn in College

Leadership Resourceful Passion “Make it Happen” attitude Identify and build a team Unconventional Commitment Focus “Can be done” – Don’t worry about details Seizing an “Opportunity” Learn from your instructors, friends, environment

54

Essential Ingredients

Idea Vision Passion Money – friends and family before taking

professional money, Incubation Address a customer need Your partners Market Execution Plan (not all the details) How will you make money?

55

Idea– Validate from advisors, seniors, market– Barrier to entry– Impact on the customer base

New Idea – Product or Service Existing – Cheaper, Faster, Better

Passion- All success stories have a common factor – PASSION- High achievers – passionate people

- Self driven and motivated - Goal oriented not technique oriented - Passionate people innovate

56

Zero in on a project

The moment you see an opportunity to make some money

Analyse - the product and the market Talk to entrepreneurs in the same field Conduct market survey Find and compare suppliers of

Raw materials Machinery Equipments Service providers etc.

Calculate the economics Fixed costs Variable costs Maintenance costs Operational costs Contingencies etc.

Prepare a business plan

57

End of unit