Unit-I

Introduction
By
Dilip Johari (Asst. Prof.)
Mechanical Engineering Department
 BUSINESS IDEA
• A business idea is a short and precise description of the basic operation of an
intended business. Before you start a business, you need to have a clear idea of
the sort of business you want to run.
• Your business idea will tell you:
• Which need will your business fulfil for the customers and what kind of
customers will you attract?
• What good or service will your business sell?
• Who will your business sell to?
• How is your business going to sell its goods or services?
• How much will your business depend upon and impact the environment? A
good business idea will be compatible with the sustainable use of natural
resources and will respect the social and natural environment on which it
depends.
 Which need will your business fulfil for the customers?
• Your business idea should always have customers and their needs in mind.
I wish there was a
day care centre near
my workplace so that
I did not have to
spend extra time in
taking my son back
and forth.

It might be a good idea to start a day care centre It might be a good idea to start a waste collection and
in the commercial area as many other parents recycling service in this area. Not only would the owner
may have the same need. of this restaurant need the service, but many other
residents in the area might need it as well.
 What good or service will your business sell?
• Depending on your skills and the needs of the customers, you should decide which good or
service your business will sell. Also, keep in mind that they must be goods or services that
people are willing to pay for and at a price that will allow you to make a profit.
• A good is an item that people pay for and use. It may be something you make yourself or it
may be something you buy to resell. Tools, baked goods, clothes and retail items are all
products .

Making and selling women’s clothes Manufacturing and bottling soya milk for sale Making and selling household furniture
Cont…
• A service is something you do for people that they then pay you for.
For example, delivering goods, banking, babysitting, repairing items,
collecting recyclable waste from apartment buildings, operating
tours, etc. are all services.

Pizza delivery service Phone repair service Car wash service

 Who will your business sell to?
• Any business cannot succeed without customers. Therefore, it is essential that
you know who your customers will be.
• Will you sell to a specific type of customer or to everyone in an area?
• There must be enough people who are able and willing to pay for your goods
and services or the business will not survive.
I know that there is a
demand for good
leather bags as there are
no stores that sell them
in my area.
But should I target
students or working
professionals?
How is your business going to sell its goods or services?
• How are you going to sell your goods or services? If you plan to open a shop,
you know how you will sell your product, but manufacturers or service
operators can sell their products in many different ways.
• A manufacturer, for example, can sell either directly to customers, to retailers or
to wholesalers.
Some businesses sell directly to their customers Some businesses sell to retailers

B&C Furniture makes and sells sofa sets directly to Jasmine Rice Distributor sells its rice to convenience shops
Melody Café. where people go shopping for rice.
How much will your business depend on and impact the
Environment?
• Your business can only be sustainable in the long run if it works in harmony
with the social and natural environment.
• How much does your business depend on the environment?
• Does it rely on the weather, soil or other natural resources?
• Does it need any specific type of labour from the local community?
• Does it need the local community to support it?
• What should you do to make sure that your business nurtures the natural
environment and helps the local community?
• Will your business nurture the natural environment or will it have a
detrimental impact?
• How would you minimize or reverse any negative effect that your business
might have?
 How to Identify your own list of Business Ideas?
• Every business idea should be based on knowledge of the market and its needs.
• The market refers to people who might want to buy a good or service; i.e. the customers.
• The market differs from place to place, depending on who lives in the area, how they live and for what
goods or services they spend their money.
• When you understand the market in your area, you might recognize many business ideas that you may
have previously ignored.
• When generating business ideas, it is best to try to keep your mind open to everything.
• Your first goal is to think of as many ideas as possible and make a list of all the possible business
opportunities.
• With a list, you will have more choices! You then can scan the list and nail down the idea(s) that sound
most feasible to you and that you think will be most profitable.
• There are many ways to come up with business ideas, such as surveying local businesses or asking
existing business owners.
• Below, we will examine a few different approaches to generating business ideas. The information
gained from one approach may supplement another and help you to clearly describe your business
ideas.
 Different Approaches to Generate Business Ideas
1. Learn from Successful Business Owners
2. Draw from Experience
3. Survey your Local Business Area
4. Scanning your Environment
5. Brainstorming
 Learn from Successful Business Owners
• You can learn a lot from people in your area who have already gone
through the process of establishing a business. You should try to get
the following information from them:
➢What kind of idea did these businesses start with?
➢Where did the ideas come from?
➢How did they develop their ideas into successful businesses?
➢How does the business profit and fit into the local environment?
➢Where did they get the money to start their business?
• After you finish talking to the owners, complete a Business Ideas
Analysis Form for each business, listing as many details as possible.
Cont….
• Think about all the factors that have made the business idea a good one and
why it has become a successful business. Find answers to the following
questions and write them on the form under “Notes”:
➢ What lessons can you draw from the experiences of the business owner?
➢ What mistakes do you think the owner made?
➢ How can you avoid the same mistakes?
➢ What do you think has made the business a success?
• When you have completed the activity you will have a better understanding of
how business ideas are created.
• You will also be aware of the problems people have when they try to find a
business idea and turn it into a real business.
 Draw from Experience
• Your own experience
• Look at the list of your interests, your experiences and your networks. Are there any possible
business ideas that you can derive from your own past experience? Think about each type of
experience.
• Start with yourself. What has your experience been as a customer in the market place? Have
you ever searched all day for some items that you could not find in any store in your area?
Think about the goods and services you have wanted at different times and that you have
had difficulty finding.
• Other people’s experiences
• The people around you are potential customers. It is important to understand their
experience trying to find goods and services that are unavailable or not exactly what they
need. Listen carefully to what these people say about their shopping experience.
• Ask your family and friends about the things they would like to find that are not locally
available. Expand your social knowledge by talking to people from different age groups, social
classes, etc. You can also visit community groups, colleges, etc. for a greater understanding of
the market.
 Survey your Local Business Area
• Another way of discovering business ideas is to look around your local community. Find out what type
of businesses are already operating in your area and see if you can identify any gaps in the market.
• If you live in a village or small town, you may be able to identify all the fields of business in the whole
town.
• Otherwise, you may need to focus on the preferred business fields and business types that you
identified. This is an activity that will be much easier to do with a business partner or friend. Visit the
closest industrial area, markets and shopping centres in your area.
 CASE STUDY
• Muthoni is trying to think of business ideas. She collects information about the
businesses operating in the town where she lives so that she can get ideas to start her
own business.
• Muthoni likes cooking. She was working part-time in a bakery when she was in her
college. She is also interested in home decoration and fashion. Muthoni likes meeting
different people.
• Therefore, she prefers to open a service or retail business related to cooking, home
décor or fashion.
What Muthoni does:
• Visits the local shopping mall where there are a lot of high-end restaurants, garment
stores and household goods
• Walks around the local central market, where people often go to shop for furniture,
garments, appliances and household decorations at reasonable rates
• Visits the commercial district where a lot of wholesalers for food and clothing operate.
It is also the hub of hardware products
• Talks to the local business association about the kinds of businesses registered with it
and also checks the yellow pages for additional businesses being advertised
Cont…
• Muthoni is interested in cooking, home décor and fashion. Therefore, she
prepares a list of all businesses related to it that exist in the area she inspected.
Cont…
Muthoni also makes the following general observations about her town:
• Majority of the local people do not have a lot of cash. They mostly shop at small
inexpensive kiosks and there are no luxury or leisure shops.
• Farming is the main economic activity in the area.
• It is a local tourist spot and a lot of people from the neighbouring towns visit it. \
• There are a plenty of small hotels and bars.
• The number of young people seems to be increasing. There are many nursery
schools.
• This is evidently a growing and thriving town as there are a number of building
contractors and construction supply stores.
• The environmental situation is deteriorating. Neither business owners nor the
local residents are concerned about pollution. There is garbage on the streets
and the local factories are polluting the air.
Cont…
• Muthoni then makes the following list of businesses that do not operate in her
town which might be good business opportunities.
• To produce this list, she thinks about the nearby towns that she has visited and
notes the goods and services that are available in those towns, but not available
in her area.
Cont…
By matching each idea against a possible need for the people in her
town, Muthoni is able to focus on a few of these ideas, including:
• Fresh meal shop for babies
• Catering service delivering lunches to offices
• Shop and refreshment stand for teenagers
• Home décor picture gallery with café
• Store selling plastic and paper flowers for home decoration
• Second hand clothing store
• Handmade decorative items made from recycled clothing
 Brainstorming
• Brainstorming means opening up your mind and thinking about many different
ideas. You start with a word or a topic and then write down everything that
comes to mind relating to that subject.
• You continue writing for as long as possible, putting down things that you think
of, even if they seem irrelevant or odd. Good ideas can come from concepts that
initially seem strange.
• Brainstorming works best in a group. Get your family or friends together and ask
them to help by writing down ideas they have when they hear the word or
subject matter.
 THE BEST BUSINESS IDEAS FOR YOU

•Screen your Ideas list

•Field Study
•SWOT Analysis
 SWOT Analysis
• One method people often use to decide the most suitable business idea is a
SWOT analysis. It helps you to focus on the possible problem areas and the
potential advantages of each idea.
 New Product Development
• A way of getting new and keeping old customers
• Effective way of obtaining a competitive advantage
• Source of growth and excitement
 Why New Products?
• New product development is critical to long-term success
• Approximately one-third of the revenue a business generates
is coming from products they did not sell five years ago
• Changing environment creates new demands and needs
 Definition of Product “Newness"
• Depends on who is making the assessment: the buyer or the seller.
• The degree of newness to both the buyer and the seller impacts the
amount of risk taken and influences the way the new product
development process is managed.
 New Product Categories
• Essentially there are six types of new products.
1. New to the world products are products that create entirely new markets.
2. New product lines are products that represent entries into existing markets
that are new to the firm.
3. Product line extensions are new products that allow the firm to' extend its
served market by offering different benefits.
4. Improvements and revisions to existing products are usually designed as
replacements for existing product offerings.
5. Repositionings are modest technical improvements that allow a product to
offer new applications and serve new needs.
6. Cost reductions are versions of existing products that provide comparable
performance at lower cost.
 New-Product Development Process
• Idea generation
• Idea screening
• Concept development and testing
• Marketing strategy development
• Business analysis
• Product development
• Test marketing
• Commercialization
 New-Product Development Process
• Idea generation:
• Internal sources:
• Company employees at all levels.
• External sources:
• Customers
• Competitors
• Distributors
• Suppliers
• Outsourcing (design firms, product consultancies, online collaborative
communities)
 New-Product Development Process
• Idea screening:
• Process used to spot good ideas and drop poor ones.
• Executives provide a description of the product along with
estimates of market size, product price, development time and
costs, manufacturing costs, and rate of return.
• Evaluated against a set of company criteria for new products.
 New-Product Development Process
• Concept development and testing:
• Product idea:
• Idea for a possible product that the company can see itself offering to the
market.
• Product concept:
• Detailed version of the new-product idea stated in meaningful consumer
terms.
• Concept testing:
• Testing new-product concepts with groups of target consumers to find
out if the concepts have strong consumer appeal.
 New-Product Development Process
• Marketing strategy development:
• Part One:
• Describes the target market, planned value proposition, sales, market
share, and profit goals.
• Part Two:
• Outlines the product’s planned price, distribution, and marketing
budget.
• Part Three:
• Describes the planned long-run sales and profit goals, marketing mix
strategy.
 New-Product Development Process
• Business analysis:
• Involves a review of the sales, costs, and profit projections to
assess fit with company objectives.
• If results are positive, project moves to the product development
phase.
 New-Product Development Process
• Product development:
• Develops concept into a physical product.
• Calls for a large jump in investment.
• Prototypes are made.
• Prototypes must have correct physical features and convey
psychological characteristics.
• Prototypes are subjected to physical tests.
 New-Product Development Process
• Testing marketing:
• Product and marketing program are introduced in a more realistic
market setting.
• Not needed for all products.
• Can be expensive and time consuming, but better than making a
major marketing mistake.
 New-Product Development Process
• Commercialization:
• Must decide on timing (i.e., when to introduce the product).
• Must decide on where to introduce the product (e.g., single
location, state, region, nationally, internationally).
• Must develop a market rollout plan.
 Product Life-Cycle
• Begins when the company
PLC Stages develops a new-product idea
• Product • Sales are zero
development • Investment costs are high
• Introduction • Profits are negative
• Growth
• Maturity
• Decline
 Product Life-Cycle
• Low sales
PLC Stages
• High cost per customer
• Product acquired
development • Negative profits
• Introduction • Innovators are targeted
• Growth • Little competition
• Maturity
• Decline
 Marketing Strategies: Introduction Stage

• Product – Offer a basic product

• Price – Use cost-plus basis to set
• Distribution – Build selective distribution
• Advertising – Build awareness among early adopters and
dealers/resellers
• Sales Promotion – Heavy expenditures to create trial
 Product Life-Cycle
• Rapidly rising sales
PLC Stages
• Average cost per customer
• Product • Rising profits
development • Early adopters are targeted
• Introduction • Growing competition
• Growth
• Maturity
• Decline
 Marketing Strategies: Growth Stage

• Product – Offer product extensions, service, warranty

• Price – Penetration pricing
• Distribution – Build intensive distribution
• Advertising – Build awareness and interest in the mass market
• Sales Promotion – Reduce expenditures to take advantage of
consumer demand
 Product Life-Cycle
• Sales peak
PLC Stages
• Low cost per customer
• Product • High profits
development • Middle majority are targeted
• Introduction • Competition begins to decline
• Growth
• Maturity
• Decline
 Marketing Strategies: Maturity Stage

• Product – Diversify brand and models

• Price – Set to match or beat competition
• Distribution – Build more intensive distribution
• Advertising – Stress brand differences and benefits
• Sales Promotion – Increase to encourage brand switching
 Product Life-Cycle
• Declining sales
PLC Stages
• Low cost per customer
• Product • Declining profits
development • Laggards are targeted
• Introduction • Declining competition
• Growth
• Maturity
• Decline
 Marketing Strategies: Decline Stage

• Product – Phase out weak items

• Price – Cut price
• Distribution – Use selective distribution: phase out unprofitable
outlets
• Advertising – Reduce to level needed to retain hard-core loyalists
• Sales Promotion – Reduce to minimal level
 Sales and Profits
Over A Product’s Life
 New-Product Failures
• Why do new products fail?
• Overestimation of market size.
• Product design problems.
• Incorrectly positioned, priced, or advertised.
• Pushed by high level executives despite poor marketing research
findings.
• Excessive development costs.
• Competitive reaction.
 Summary
• New product development drives growth
• Market research is critical to the success of a new product launch
• Market research is a continuous process as customer needs, your business and
the environment changes