UNIT 2

Nature and Types of Information Required By Entrepreneurs

(a) Marketing Information

Whenever people engaged in business, they also engage in marketing.

Some aspects of marketing have over the years changed
dramatically. Selling alone was considered to be the actual marketing
activity. With the introduction of globalization, world has become

Any market primary consists of people and entrepreneurs need to

concentrate his/her efforts on one of the segment of the market in
which the products have the greatest potential appeal. Good market
segmentation is a must for any successful marketing approach.

b) Technical Information

a. In developing a business idea there is a need for potential

entrepreneur to adopt a carefully moderated and intelligent technical
approach.

b. Planning is a process that never ends for business. It is extremely

important in the early stages of any venture when the entrepreneur
will need technical information to prepare a preliminary business plan.

c. There are different types of technical information that may be part

of any business operation. This may include-designing of premises,
products others may include nature of products/services you will like
to engage in.

(c) Information and Communication Technology (ICT)

Information and communication technology is very important source of

information for Entrepreneurship development as we know that the
whole world is now a global village where information about a
product/service can be easily sourced. One can source through the
internet and find out the kind of hardware, software for the kind of
business one want to venture into. It may be packages on accounting
and production or databases appropriate for the business
(d) Technology Is Constantly Changing the Demands of Consumers

Businesses use new technologies to produce new products and

services. Entrepreneurs should realize’ that new technological
developments such as the internet and cell phones increase the
exchange of information and may have an effect on the operations of
their business, Entrepreneurs may not be aware of the nature and
effects of all new technologies, yet, they must try to determine
technical developments which are likely to have the greatest impact
on their business operations.

(e) Financial Information

Whether a business is small or large, owners and executives-must have

financial information relating to the type of business they want to
establish. The financial information plays a critical role for decision
making. Because decisions are only as good as the information on
which they are based.

It is only with the help of proper financial information, an

entrepreneur will know the amount of capital required for the kind of
business he is going to start/establish.

Money plays a major role in an enterprise. At the beginning of any

business, money is needed to purchase the necessary
tools/equipment, materials/supplies and other needs.

To be competitive, small business owners must prepare for all future

events and market changes. One of the most important aspects of such
preparation is the cash flow planning.
Failure to properly plan cash flow is one of the leading causes for
small business failure. If we know some basic accounting concepts,
this would help us to better manage our cash flow.

(f) Legal Information

Business is the totality of the economic and commercial life of any
nation. Business could be carried on as a small, medium or large scale
enterprise. It could also be carried on as domestic or international
business but you have to know the legal implication on each one of
them.

This is where the legal information is very important. For example, if

one wants to establish a private company in India, it has to be a
minimum of two (2) persons and maximum of fifty (50) members and
there are other documents required by the Corporate Affairs
Commission (CAC) Registrars of Companies before incorporation of any
company. One also needs to know about the copyright and Trade Mark
Laws and also compliance with legal requirement with regard to
Environmental Impact Analysis (EIA).

TOPIC

Identification and evaluation of the business opportunities (basic

ideas, inspiration) is one of the most important elements of the
decision-making process on a business start.

INTRODUCTION

What is an opportunity?

It has rightly been said that small opportunities are the beginning of
big enterprises. Developing of the opportunities requires initiative,
effort and creativity.
Most business opportunities do not occur suddenly but they are results
of the entrepreneur‘s attention which he/she devotes to these
opportunities.
Often a coincidence can help.
The decision-making on in which area a business shall be carried on
usually requires careful consideration.
Entrepreneurs can pursue the opportunities in any field because the
opportunities are arising from the complex of the changing conditions
of economic, legal, social, demographic and even from the changing
conditions in the area of technology.

Therefore it is important that the entrepreneur knows which factor

creates opportunity because regardless of the source of origin every
opportunity shall be carefully examined and evaluated. Opportunity
must also match the personal qualities and goals of entrepreneur.

Valuation of the opportunities

Business opportunity valuation means that the resources will be spent

on further refinement and development of the opportunity. Most
important criterion for valuation of a new opportunity is a market
demand. Demand valuation shall take into account the attitudes of the
customers, size of potential market expressed financially and also in
the units, market development and market share which new product
could get.

Sources of new ideas and opportunities

Where shall a person look for ideas, inspiration for a business? How
shall a person found a good business idea out? To make a business
opportunity’s identification possible many different resources, that
can be distinguished between formal and informal, can be used.

Formal sources of business ideas and opportunities

These resources are used usually in an already established company.

Inspiration generally comes from monitoring of market environment
and its factors – such as demand for the certain products, export
possibilities. The idea may also come from a new discovery of
important commodity’s sources, the discovery of new products and
technologies. It is also possible to find and use the results of various
studies such as studies of production and consumption in the country,
market studies, analysis of import and its substitution by domestic
products, studies valuating effects of development of technique and
technology on the environment, science and development,
government regulation and policy etc.

Informal sources of business ideas and opportunities

When they are starting a business and establishing of own companies

most of the entrepreneurs start rather from informal intellectual
resources. This means that ideas and inspiration are taken from life
situations and surroundings. During the searching of a business idea
a person can start from a variety of options, such as:

Business based on own skills, hobbies and interests

Inspiration or business opportunity arises sometimes in the context of

hobby or sport. In such a situation, it is essential that the
entrepreneur had considerable experience and passion for the activity
because it involves the risk that the company will be established
rather from the love to the hobby than with the goal to satisfy market
needs.

Business based on improvement of foreign successful idea

It is quite a common mistake to assume that own business must be

based only on an original idea if it has to be successful. In fact it may
be just the opposite. Every new idea is not tested very much and that
is why it is risky. On the other hand it is understandable that not
everything that celebrates success elsewhere will be equally
successful in the given environment. In this respect the market
research, advertising and promotion are crucial.

Business based on separation from the parent company

Numbers of companies are being established by ex-employees who
choose to do alone what had previously done in employment (for
example right on the basis of job dissatisfaction).

Source of ideas/INFORMATION – family members and friends

It is advantageous if the person who decides to start a business has

people who are already carrying on a business in its nearby area.
Research has shown that other entrepreneurs are the second largest
group to which the early entrepreneurs turn to obtain information.

Business based on the discovery of loopholes in the market

Many of today's successful entrepreneurs become successful because

of the discovery and use of space in the market offer. To perceive
a gap however is not always easy and it is not possible to make large
conclusions from the limited information they need to further
investigate. If it is established that there is a gap (niche, window) it is
necessary to identify the common, national and local trends and those
that are interesting to try to transform the business plan that would
meet the needs arising from these trends.

It is possible to learn any business. If they have, however, competitors

an edge in knowledge you will be at disadvantage. In principle, it
should have a business relationship to something you already know.

Processing of a business idea

If it should be possible to implement an initial idea – opportunity, this

initial idea shall be further developed. Therefore, it is necessary to
further define what shall be offered, to whom the product shall be
offered and how the product will be delivered to the market.

The business opportunity shall be transformed into a business plan. At

this stage of the idea implementation the market needs are further
identified as well as the necessary amount of needed resources. The
idea therefore takes more complex form, the form of a business plan.
Further elaboration of a business plan shall include also processing of
financial section. This will be handled by estimating the future created
value and estimate of income, it is also necessary to estimate the
cash-flow. After processing of this section the comprehensive business
plan is at disposal.

TOPIC:
CRITERIA TO SELECT A PRODUCT
INTRODUCTION
Product is anything that creates utility. The utility is the want
satisfying ability of a product. It is often good to identify a number of
criteria upon which product selection is based. Marks/Weights can be
allotted to each criterion to achieve an objective evaluation. We all
know that undertaking a business venture is a big investment requiring
adequate planning. Just as investment opportunities are many and
diverse, products or services options for an entrepreneur are
uncountable. However, the selection of required product or service is
the first step towards success. Indeed, products provide the business
with the most important and visible contact with buyers i.e.
consumers. Products to the consumers represent psychological
symbols of personal attributes, goal and social patterns.
Factors to Consider in Product Selection
In selecting product for your business venture, the following factors
must be taken into consideration:

Supply-gap: The size of the unsatisfied market demand which

constitute a source of business opportunity will dictate, to a great
extent the need to select a particular product. The product with the
highest chances of success as reflected in its demand will be selected.
In essence, there must be existing obvious demand for the selected
product.
Fund: The size of the funds that can be mobilized is another important
factor. Adequate fund is needed to develop, produce, promote, sell
and distribute the product selected.
Availability of and Access to Raw Materials: Different products require
different raw materials. The source quality and quantity of the raw
materials needed are factors to be seriously considered, Are the raw
materials available in sufficient quantities? Where are the sources of
raw materials located? Are they accessible? Could they be sources
locally or imported? Satisfactory answers should be provided to these
and many other relevant questions.
Technical Implications: The production process for the product needs
to be considered. There is need to know the technical implications of
the selected product on the existing production line, available
technology and even the labour force. The choice of a particular
product may require either acquisition of the machineries or
refurbishing of the old ones. The product itself must be technically
satisfactory and acceptable to the user.
Profitability/Marketability: Most often, the product that has the
highest profit potential is often selected. However, a product may be
selected on the basis of its ability to utilize idle capacity or
complement the sale of the existing products. The product must be
marketable.
Availability of Qualified Personnel: Qualified personnel to handle the
production and marketing of the product must he available. The cost
of producing the product must be kept to the minimum by reducing
wastages. This is achievable through competent hands.
Government Policies: This is quite often an uncontrollable factor. The
focuses of government policies can significantly influence the
selection of product. For instance, a package of incentives from
government for a product with 100% local input contents can change
the direction of the business’s R & D and hence the product selected.

Steps Involved in New Product Selection Process

There are three basic stages/steps involved in product/venture
selection. These are idea generation, evaluation and choice.

Idea Generation: Product ideas or investment opportunities come from

different sources such as business/financial newspapers, research
institutes, consulting firms, natural resources, universities,
competitors. etc
The starting point for idea generation could be a simple analysis of the
business’s strengths and weakness. Ideas could also be generated
through brainstorming, desk research and various types of
management consensus procedures.
Evaluation: Screening of the product ideas is the first step ill
evaluation. Such criteria as potential value of the product, time
money and equipment required, fitting of potential product into the
business’s long range sales plan and availability of qualified people to
handle its marketability need be thoroughly considered.
Each identified product/investment opportunity needs to be
adequately evaluated. A pre-feasibility study of the product market,
technical and financial aspect is necessary at this stage to have a clear
picture of the associated cost and benefits. A pre-feasibility is a
preliminary version of a feasibility study. It is similar to a feasibility
study except that it is less detailed. It is usually carried out for large
and complex product/project to determine whether to proceed to the
more elaborate feasibility study.

Choice/SELECTION: A choice is made of product which has been found

to be commercially viable, technically feasible and economically
desirable. At this stage, necessary machineries are set in motion.

Causes of Product Failure

A wrong choice when made, often leads to product failure. Product
failure may be caused as a result of one or combination of the
following:

 Management oversight during the basic planning stages – initial

research may be either inadequately done or bungled in the
interpretation.
 Subtle changes in the market. For instance, competitor may
introduce a competing product into the market unexpectedly.
 Lack of sound market appraisal
 Product problems and defect e.g. the manufacturing of a product
that is too costly or too complicated.
 Inadequate marketing support. For Instance, the company may
have rated the product so high in the market that they cut back on
promotion.
 Lack of consumer education about the product.
Product Modification
Product selection is one thing, the sustainability of the product in the
market is another thing entirely. There need to at least stabilize the
sale of the product. This is where product modification comes in
because of the dynamic nature of the business environment. However,
the technique to use to modify a product is dependent upon the
circumstance of the product in relation to the buyer. There are some
possible alternatives of product modification, namely:

Quality improvement– which aims at strengthening the competitive

position of the product. The improvement may be in the appearance
or end use.
Feature improvement- which is to increase the number of real or
imagined product benefits.
Style improvement – aims at improving the aesthetic appeal of the
product rather than its functional performance.
Service improvement e.g. technical advice, faster supply, breaking
bulk, etc. Often used by smaller companies competing with large ones.
Promotional benefits e.g. giveaways competitions, etc. are used to add
value to the product.