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Entrepreneurship ­ MGT602
VU
Lesson 17
CREATIVITY AND THE BUSINESS IDEA
LEARNING OBJECTIVES
1. To discuss the aspects of the product planning and development process
2. To discuss aspects of e-commerce and starting an e-commerce business
PRODUCT PLANNING AND DEVELOPMENT PROCESS
Once idea emerges from idea sources or creative problem solving, they need further development and
refinement in to final product or service to be offered. This refining process- the product planning and
development process ­ is divided in to five major stages. Idea stage, concept stage, product development
stage, test marketing stage and commercializing; it result in the product life cycle.
Establishing evaluation criteria
At each stage of product planning and development process, criteria for evaluation need to be established.
These criteria should be broad, yet quantitative enough to screen the product carefully in the particular
stage of development. Criteria should be developed to evaluate the new product in terms of market
opportunity, competition the marketing system, financial factors and production factors. A market
opportunity and adequate market demand must exist. Current competing producers, prices, and policies
should be evaluated in their impact on market share.
The new product should be compatible with existing management capabilities. The product should be able
to be supported by and contribute to the company's financial structure. The compatibility of new product's
production requirements with existing plant, machinery, and personnel should be determined.
Entrepreneurs should formally evaluate an idea throughout its evolution.
Idea Stage
Promising new product ideas should be identified and impractical ones eliminated in the idea stage allowing
maximum use of company's resources. In the systematic market evaluation checklist method, each new
product idea is expressed in terms of its chief values, merits, and benefits. This technique can be used to
determine which new products should be pursued.
The company should also determine the need for the new product and its value to the company. Need
determination should focus on the type of need, its timing, the users involved, the importance of marketing
variables, and the overall market structure and characteristics. In determining the product's value to the
firm, financial scheduling should be evaluated.
Concept Stage
In the concept stage the refined idea is tested to determine consumer acceptance without manufacturing it.
One method of testing is the conversational interview in which respondents are exposed to statements that
reflect attributes of the product. Features, price, and promotion should be evaluated in comparison to
major competitors to indicate deficiencies or benefits. The relative advantages of the new product versus
competitors should be determined.
Product Development Stage
In this stage, consumer reaction is determined, often through a consumer panel. The panel can be given
samples of the product and competitors' products to determine consumer preference. Participants keep
the record of their use of product and comment on its virtues and deficiencies.
The panel of consumers is also given a sample of product and one or more competitive product
simultaneously. One test product may already be on the market, whereas the other test product is new.
Test Marketing Stage
Although the results of product development stage provide the basis of the final marketing plan, the
market test can be done to increase the certainty of successful commercialization. The last step in the
evaluation process, the test marketing stage, provides actual sales results which indicate the acceptance level
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Entrepreneurship ­ MGT602
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of consumers. Positive test results indicate the degree of probability of a successful product launch and
company formation.
E-COMMERCE AND BUSINESS START-UP AND GROWTH
The Internet
The Internet started in the 1970s with a U.S. Defense Department program named ARPA. In the early
1990s the concept of World Wide Web pages was developed. The Internet is a channel for the creation of
profitable companies. Electronic business (e-business) is any process that a business organization conducts
over a computer-mediated network.
Electronic commerce (e-commerce) is any transaction completed over a computer-mediated network that
involves the transfer of ownership or rights to use goods or services. Factors that facilitate the growth of e-
commerce are:
The widespread use of personal computers.
The adoption of intranets in companies.
The acceptance of the Internet as a business communications platform.
Starting an E-Commerce Company
The Internet is especially important for small and medium-sized companies as it lets them minimize
marketing costs while reaching broader markets. An entrepreneur starting an Internet commerce venture
needs to address many of the same strategic and tactical questions as other companies plus some specific
online issues. One decision is whether to run the Internet operations within the company or outsource
these operations. If handled in-house, expensive equipment and software have to be maintained. There are
numerous possibilities for outsourcing the Internet business. The two major components of Internet
commerce are front-end and back-end operations.
Front-end operations are encompassed in the website's functionality, such as search
capabilities, shopping cart, and secure payment.
Back-end operations involve integrating customer orders with distribution channels and
manufacturing capabilities.
Website
A website is an online connection between the company and its customers and can be developed in-house
or outsourced. There are several important features of every website.
Each website should have search capabilities.
Other functions include shopping cart, secure server connection, credit card payment,
and customer feedback features.
Orders and other sensitive customer information should be transferred only through
secure servers.
An Internet company should also obtain a merchant account, which will allow the
acceptance of major credit cards.
A successful website has three characteristics: speed, speed, and speed. Short download time should be the
primary concern of website developers. A website should be easy to use, customized for specific market
target groups, and compatible with different browsers. If the company is targeting international markets,
then translation and cultural adaptation need to be considered. Probably the most difficult aspect of setting
up an online business is advertising and promoting the web pages. A company can advertise its website
through search engines, banner ads, e-mail, and classifieds. Banner ads can be targeted to the exact
audience of the firm. The entrepreneur should collect e-mail addresses from customers for targeted e-mail
campaigns.
The Internet offers many low-cost or free services for small businesses, including Internet access, unlimited
e-mail accounts, online calendar, instant messaging, and online conference rooms.
Tracking Customer Information
Electronic databases support personal marketing targeted at individual clients. The online company can
capture customers' information in many ways. The U.S. government has generally maintained a policy of
noninvolvement with Internet regulation, but the Federal Trade Commission has also pressed for new laws
to protect minors.
Relationships and Endorsements by Other Companies
The company needs to establish strong connections with other companies in the supply chain to create an
end-to-end value stream. The entrepreneur should protect its innovations and its relationship with other
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Entrepreneurship ­ MGT602
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companies. Another type of relationship is endorsements by prominent Internet companies and
associations. Participation in merchant networks can bring needed credibility.
Doing E-Commerce as an Entrepreneurial Company
The decision to go online should be made on a case-by-case basis. The products should be able to be
delivered economically and conveniently. The product has to be interesting for a large number of people.
Online operations have to bring significant cost reductions compared with brick-and-mortar operations.
The company must have the ability to economically draw customers to its website. Conflict between
traditional and online marketing channels can lead to a hostile, competing position of once partnering
companies.
KEY TERMS
Product development stage
In this stage, the new product is further developed into a prototype and tested
Product life cycle
This cycle is generally divided into four major stages: product introduction, market growth, market
maturity, and sales decline
Product planning and development process
Generally divided into five major stages: idea stage, concept stage, product development stage, test
marketing stage, test marketing stage, and commercialization stage
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Table of Contents:
  1. THE NATURE AND IMPORTANCE OF ENTREPRENEURSHIP:DEFINITION OF ENTREPRENEUR
  2. THE NATURE AND IMPORTANCE OF ENTREPRENEURSHIP:Possibility of New Venture Formation
  3. ENTREPRENEURIAL PROCESS/START UPS:GOVERNMENT AS AN INNOVATOR
  4. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND:ENTREPRENEURIAL PROCESS
  5. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…)
  6. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…):CLIMATE FOR ENTREPRENEURSHIP
  7. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…):PROBLEMS AND SUCCESSFUL EFFORTS
  8. THE INDIVIDUAL ENTREPRENEUR:ENTREPRENEURIAL BACKGROUND AND CHARACTERISTICS
  9. THE INDIVIDUAL ENTREPRENEUR (continued…):Personal Values, Work History, MOTIVATION
  10. THE INDIVIDUAL ENTREPRENEUR (continued…):ROLE MODELS AND SUPPORT SYSTEMS
  11. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES:INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES, Minority interests
  12. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):DIRECT FOREIGN INVESTMENT
  13. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):BARRIERS TO INTERNATIONAL TRADE
  14. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):ENTREPRENEURIAL PARTNERING
  15. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):SOURCES OF NEW IDEAS
  16. CREATIVITY AND THE BUSINESS IDEA:METHODS OF GENERATING NEW IDEAS, CREATIVE PROBLEM SOLVING
  17. CREATIVITY AND THE BUSINESS IDEA:PRODUCT PLANNING AND DEVELOPMENT PROCESS
  18. LEGAL ISSUES FOR THE ENTREPRENEUR:NEED FOR A LAWYER, PATENTS
  19. LEGAL ISSUES FOR THE ENTREPRENEUR:TRADEMARKS, LICENSING
  20. LEGAL ISSUES FOR THE ENTREPRENEURS:PRODUCT SAFETY AND LIABILITY, INSURANCE
  21. CREATING AND STARTING THE VENTURE:WHAT IS THE BUSINESS PLAN, PRESENTING THE PLAN
  22. CREATING AND STARTING THE VENTURE (Continued….):WRITING THE BUSINESS PLAN
  23. CREATING AND STARTING THE VENTURE (Continued….):
  24. CREATING AND STARTING THE VENTURE (Continued….):WHY SOME BUSINESS PLANS FAIL, MARKETING PLAN
  25. THE MARKETING PLAN:MARKET RESEARCH FOR THE NEW VENTURE
  26. THE MARKETING MIX:STEPS IN PREPARING THE MARKETING PLAN
  27. THE ORGANIZATIONAL PLAN:DEVELOPING THE MANAGEMENT TEAM, LEGAL FORMS OF BUSINESS
  28. THE ORGANIZATIONAL PLAN (Continued….)
  29. THE ORGANIZATIONAL PLAN (Continued….):THE LIMITED LIABILITY COMPANY
  30. THE FINANCIAL PLAN:OPERATING AND CAPITAL BUDGETS
  31. THE FINANCIAL PLAN (Continued….):PRO FORMA INCOME STATEMENTS, PRO FORMA CASH FLOW
  32. PRO FORMA SOURCES AND USES OF FUNDS:PERSONAL FUNDS, FAMILY AND FRIENDS
  33. PRO FORMA SOURCES AND USES OF FUNDS:COMMERCIAL BANKS
  34. BANK LENDING DECISIONS:SMALL BUSINESS ADMINISTRATION LOANS
  35. SOURCES OF CAPITAL:GOVERNMENT GRANTS
  36. SOURCES OF CAPITAL:PRIVATE PLACEMENT, BOOTSTRAP FINANCING
  37. CAPITAL SOURCES IN PAKISTAN:PROVINCIAL LEVEL INSTITUTIONS, FINANCIAL INSTITUTIONS
  38. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  39. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  40. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  41. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  42. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  43. NEW VENTURE EXPANSION STRATEGIES AND ISSUES:JOINT VENTURES, ACQUISITIONS
  44. NEW VENTURE EXPANSION STRATEGIES AND ISSUES (Continued….):DETERMINING THE PRICE FOR AN ACQUISITION
  45. ENTREPRENEURSHIP & PAKISTAN:GENDER DEVELOPMENT STATUS WOMAN AS AN ENTREPRENEUR IN PAKISTAN