CHAPTER 6 ENTREPRENEURSHIP AND

BUSINESS PLANNING
i. Creating New Business
ii. Assessing Market Situation
iii. Developing a Comparative
Advantage
iv. Developing a Business Plan
v. Risk Management

Entrepreneurship
The Boss
The Business
Owner
The Risk Taker
One who starts a
small business

Thecapacityandwillingnesstodevelop,
organizeandmanageabusiness
venturealongwithanyof
itsrisksinordertomakeaprofit.Themost
obviousexampleofentrepreneurshipisthe
startingofnewbusinesses

Focus on your core product

Keep your pitch simple
Know what you do best and stay
true
Map your capabilities
Utilize marketing tools
Implement action plan
Excercise the action plan

Creating a
New
Business

Market Situation
Snapshot view of marketing arena
The size and growth trends of your
market, what to face in terms of
competition, and what critical issues
will affect the ability to sell products

Key Market Situations

Business Plan
Customer
Description
Market
Segmentation
Market size &
Growth Trends

Assesing
Competition
Direct/Indirect
Competitors
Opportunities &
Threats
Solution

Forecasting
Business Climate
External
Environment
(Economic
condition.
Social trends,
emerging
technologies)

Your customer description:

Geographic terms (where they live),
Demographic terms (facts such as age,
gender, race, education level, marital status,
income level, and household size)
Psychographic terms (lifestyle characteristics,
including attitudes, beliefs, and behaviors that
affect customer-purchasing patterns).

How customers divide into

market segments:
Marketsegments are comprised of
unique groups of consumers that share
similar characteristics.
EG: Women may buy from your company
very differently than men do, and buyers
from one geographic area may have
different product interests than customers
from another.

The size of your market and the

growth trends you see:
Indicate size and growth information for
your overall market and for the various
market segments your company serves.
EG: if teenagers represent a sizeable
segment of your clientele, include facts
about the size and growth trends of the
teenage population in your market area.

Situational Analysis
A collection of methods that managers use
to analyze an organization's internal and
external environment to understand the
organization's capabilities, customers, and
business environment.

SWOT
Porters Five Forces

Comparative Advantages
The ability of a firm to produce goods
/services at a lower opportunity cost than
other firms or individuals. A comparative
advantage gives a company the ability to
sell goods and services at a lower price
than its competitors and realize stronger
sales margins.

 Comparative
advantage stipulates
that countries should
specialize in a
certain class of
products for export,
but import the rest even if the country
holds an absolute
advantage in all
products.

Developing Comparative
Advantages in Organization
1. A favorable environment to produce
certain products
2. Knowledge leads to cost-efficient
technique
3. Economies of Scale
4. Government Regulation (Tariff, tax)
5. Quality of products and sales support

Risk Management
Risks are events, situations or
circumstances which lead to negative
consequences for businesses.
A good risk management plan with
appropriate risk management strategies
can minimize costly and stressful
problems, and reduce insurance claims
and premiums.

Types of Risk
i.
ii.
iii.
iv.
v.

Strategic Risk : Business environment,

transaction & Investors relations
Financial Risk: Financial Structure and
transaction
Operational Risk: Operational &
Administrative Procedures
Legal Risk : Rules and Regulation
Nature Risk : Natural Disaster