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Small Business Simulation Game: Creation of a small business! Business Plan. For example- small clothes shop in Kyiv that works at the same time like a bar 24/7, where people can do shopping and enjoy cocktails. Or healthy fast food small cafe for vegans, natural products where people can take away and order, etc... I will tell you more about the topic later..  Check please TASK BRIEF! Also, I attached some slides. If you need something please ask me. Thank you. BCO314 SMALL BUSINESS MANAGEMENT Task brief & rubrics Task Small Business Simulation Game: Creation of a small business (part I) • This is an individual task. • You are requested to simulate the first phase of the creation of your small business, and to do so you need to prepare and develop the first part of a Business Plan. These are the contents that you are requested to develop, as well as the expected table of contents: o The idea o Its vision o The definition of the project o The Market o The Business Opportunity o The competitors’ analysis o Its main competitive value o Swot o Strategic Objectives o References • This needs to be submitted as a pdf. It is recommended to work on it in Word format or similar, as you are requested to justify your small business idea and project, supporting it with research and data. Formalities: • Wordcount: 2000 words • Cover, Table of Contents, References and Appendix are excluded of the total wordcount. • Font: Arial 12,5 pts. • Text alignment: Justified. • The in-text References and the Bibliography must be in Harvard’s citation style. Submission: Week 5 – Via Moodle (Turnitin). Day and hour limit: Sunday 31/10/2021 23:59 CEST. Weight: This task is a 40\% of your total grade for this subject. It assesses the following learning outcomes: • Outcome 1: Conduct a small business using the strategic elements. • Outcome 2: Explain key components of the strategic management of growth to small business contexts. • Outcome 3: Distinguish the characteristics, competences and contributions of small businesses, as well as their challenges. Rubrics Exceptional 90-100 Good 80-89 Fair 70-79 Marginal fail 60-69 Application (30\%) Student applies fully relevant knowledge from the topics delivered in class. Student applies mostly relevant knowledge from the topics delivered in class. Student applies some relevant knowledge from the topics delivered in class. Misunderstanding may be evident. Student applies little relevant knowledge from the topics delivered in class. Misunderstands are evident. Evaluation (25\%) Student constructs a coherent argument to present a well-justified business plan using a range of appropriate sources from wider research. Student constructs a mostly coherent argument to present a business plan with some justification from mostly appropriate wider research. Student attempts to construct a coherent argument and present a business plan, although it may lack justification or support from wider research. Student attempts to construct an argument and present a business plan, although it lacks justification or support from wider research. Proposal (25\%) Student makes a highly adequate and comprehensive small business proposal that follows on coherently from the evaluation and is well- justified. Student makes an adequate and comprehensive small business proposal, connected to their evaluation and justified. Student makes a fairly adequate and comprehensive small business proposal that bears some connection to their evaluation and attempts to justify it. Student attempts to make an adequate and comprehensive proposal although it bears little relation to the evaluation and is weak and unsupported. Communication (20\%) Student communicates their ideas extremely clearly and concisely, respecting word count, grammar and spellcheck. Student communicates their ideas clearly and concisely, respecting word count, grammar and spellcheck. Student communicates their ideas with some clarity and concision. It may be slightly over or under the wordcount limit. Some misspelling errors may be evident. Student communicates their ideas in a somewhat unclear and unconcise way. Does not reach or does exceed wordcount excessively and misspelling errors are evident. Welcome to Small Business Management Sandra Oller Barcelona, 27th September 2021 Welcome to Small Business Management! • Virtual “hand shaking” • My e-mail: – [email protected] SANDRAOLLER mailto:[email protected] Introduction • General considerations • Course description • Objectives • Learning outcomes • Course content • Course evaluation SANDRAOLLER General considerations • Moodle • Attendance & punctuality: – >15’ after the starting time → Absence – If missing part of the class >15’ (f.e. leaving earlier) → absence – If there are mitigating circumstances → counselor SANDRAOLLER Course Description • Provide a clear vision of small business as it really is today, focused on the distinctive nature of small businesses that students might actually manage versus high growth firms. • The goal of the companies discussed in the course is personal independence with financial security; not market dominance with extreme wealth. • Traditional beliefs and models in small business are discussed, as well as the latest findings and best practices from academic and consulting arenas. • During the course, the class will discuss the challenges facing entrepreneurs and small business owners, while keeping focused on the small businesses students plan to start. Course Description • One of the key issues in successfully managing and growing a small business, particularly if outside capital is needed, is to create a business plan. The development of a specific business plan for small businesses is covered in the course. • The various organizational structures available are discussed in terms of their applicability as well as important legal issues. • The sources of capital and how to obtain them, starting, managing and growing the venture are areas of focus as well. Course Objectives • Introduce students to the peculiarities of the successful management of small businesses. • Deliver the key elements to develop a strategic plan which will include the environmental analysis, marketing and financing strategies. • Compare the different types of small businesses: own venture, family business and franchised business. • Provide the elements to develop a business plan or formula • Accompany the students to carry out a real small business, where real money flows. Course Outcomes • Distinguish the characteristics, competences and contributions of small businesses, as well as their challenges. • Explain key components of the strategic management of growth to small business contexts. • Critically assess and apply suitable marketing and financing strategies to small businesses. • Conduct a small business using the strategic elements. Course Content • Unit 1: Introduction to small businesses • Unit 2: Strategic Management and Growth of the Small Business • Unit 3: Create, franchise or buy a Small Business • Unit 4: Small business Marketing • Unit 5: Legal Environment of the Small Business • Unit 6: Small business as Family–Owned Businesses • Unit 7: Finance & Accounting in small business Course evaluation • Evaluation assignments: – Midterm simulation 40\% – Small Business Report 60\% Unit 1: Introduction to small business • What is small business? Small size and great significance • Characteristics and competences of small business • Size definitions and types of industries • Why the number of small businesses is growing rapidly? Why the public favors small business? • Unique contributions of small business • Current problems facing small businesses • Current trends challenging small business owners • What leads to success in managing a small business? • Where are the opportunities and threats for small business? What are the fastest growing industries? • Small Business and Entrepreneurial Opportunity: Is There a Difference? Distinguishing between entrepreneurial ventures and small businesses • Small business lifecycle • Factors affecting the future of a small business in an industry Unit 1: Introduction to small business • What do you think about it? What do you think it’s like? Small business & Entrepreneurship https://www.youtube.com/watch?v=f6nxcfbDfZo Video: Entrepreneurship https://www.youtube.com/watch?v=f6nxcfbDfZo Entrepreneurship - definitions We can find different definitions: • Entrepreneurship is the process of starting, organizing, managing, and assuming the responsibility for a business, taking some risks to obtain profits (and/or impact.) • “Entrepreneurship is the pursuit of opportunity beyond the resources you currently control” (Stevenson 1983, 1985, 1990) • Entrepreneurship linked to small business vs start-ups • Impact, innovation SANDRAOLLER Entrepreneurship • Maturity (industry, product, service) • Scalability • Financial Curve • Financing SME Business Start-up * Maastrich University; https://www.maastrichtuniversity.nl/blog/2017/06/5-differences-between-startups-starting-businesses https://www.maastrichtuniversity.nl/blog/2017/06/5-differences-between-startups-starting-businesses The definition of small business varies by country and by industry, in addition to number of employees, some measures that can be used are: annual revenues/sales, assets, net profit. • The number of employees is one of the most widely used measures • Small businesses are privattely owned businesses that have fewer employees and/or less annual revenue than a regular-sized business. It can be a sole proprietorship, partnership, etc. • Small business owners are responsible for managing all aspects of their company. • A single person may manage diverse areas. Small Business - Small businesses offer ideas, innovations, practices, and lifestyle options that larger organizations unsuccessfully attempt to initiate. – create jobs → US they create two-thirds of net new jobs (SBA, US Small Business Administration, 2019) – spark innovation: according to the SBA (US Small Business Administration), small companies develop more patents per employee than do larger companies. – provide opportunities for women and minorities to achieve financial success and independence) Small size… and great significance! - Small businesses make an enormous contribution to our neighborhoods, cities, and nations. → Small business is a fundamental part of the total business scene in any country Small business constitutes a major force in the U.S. economy, There are more than 27 million small businesses and they generate about 50\% of the gross domestic product (GDP) Small size… and great significance! - Small business organizations are able to fully achieve their visionary goals, without adding more locations and employees. - Many enterprise owners still opt to keep their organizations small in size and big in vision and craftsmanship. Small size… and great significance! • Why do you think that small business spark innovation? Which characteristics contribute to this? • Which are the main characteristics and competencies of small business? Small size… and great significance! Which characteristics contribute to innovation? • Passion. Small-business owners are interested in making businesses successful and are more open to new concepts and ideas to achieve that end. • Customer connection. Being small, these firms better know their customers’ needs and therefore are better positioned to meet them. • Agility → firms can adapt more rapidly to changing environment • Willingness to experiment • Resource limitation → doing more with less. • Information sharing & collaboration • European Union classifications of size: – Single Person Enterprise: – Owner serves as the only employee. – Microenterprise: Less than 10 employees. – Small Business: Up to 50 employees. Characteristics and competencies of small business - Size EU Small Business Non-financial business economy: (\% share for each enterprise size class, EU-27, 2018) • Value added: the increase in the value of goods and services as a result of business activity. * Eurostat, Key figures on European business, 2021 Edition. • Small Business range from fewer than 20 employees (Australia), 50 (according to the definition used by the European Union) and fewer than 500 (for many US Small Business Administration programs) • In competitive terms, size will be relatively small or not compared to peers and may vary depending on the sector: – Entry barriers & scale economies → investment – Ex: industrial vs service sector Characteristics and competencies of small business - Size • Efficiency: Small groups can be more efficient without layers of corporate hierarchy. • Creativity: A large organization finds its efficiency and reliability in order, quality control process, and hieratical structure. Small businesses are able to take creative approaches to providing services and product development. Characteristics and competencies of small business – key competencies • Flexibility: Small size and independent ownership more easily translate into a greater willingness to take risks or deviate from the business plan, which is less likely in a publicly owned corporation. Characteristics and competencies of small business - key competencies • Accountability: The visibility and small margin for error in a small business creates a more stringent requirement for personal efficiency and accountability. Characteristics and competencies of small business - key competencies • Specialization: A greater level of quality can be delivered from a small business. Larger organizations or multilocation franchises rely upon standard processes and tolerate fewer deviations in order to meet operating goals. Characteristics and competencies of small business - key competencies • https://www.youtube.com/watch?v=03Koct2jVwQ Video: Small Business Big Results https://www.youtube.com/watch?v=03Koct2jVwQ • Create Jobs: “Small and medium-sized enterprises (SMEs) are the backbone of Europes economy. They represent 99\% of all businesses in the EU. In the past five years, they have created around 85\% of new jobs and provided two-thirds of the total private sector employment in the EU. ” (*) • Create Opportunity: Small enterprises are more likely to employ inexperienced and older workers; offering greater opportunities for women, minorities, and immigrants. Characteristics and competencies of small business - Impact • Foster Economic Diversity: Create a more diverse, resilient economy, allowing a greater variety of products, industries, and participants. • Sustain Communities: Communities with a healthy contingent of small, locally owned enterprises are less vulnerable to a recession or an economic downturn that affects a particular industry. Characteristics and competencies of small business - Impact • Set High Standards for Quality: Many big-vison small Business owners opt for self-employment to have the ability to provide their customers and stakeholders the high quality level they deserve. Characteristics and competencies of small business - Impact • The Power That Small Businesses Wield • https://www.businessnewsdaily.com/15359-importance-of-small- business.html • Why are small businesses important? • Why is the presence of small businesses important for large businesses? • How do small businesses influence big businesses? • What advantages do small businesses have over large businesses? Disadvantages? • How can small businesses successfully work with big businesses? Characteristics and competencies of small business - Article https://www.businessnewsdaily.com/15359-importance-of-small-business.html Relationships with firms or public institutions, such as collaboration with research organizations or customers, methods for integration with suppliers, or outsourcing. Characteristics and competencies of small business – External relations Why is the interest in small businesses growing? Why is the interest in small businesses growing? • Economic & technology context: – Challenges: unemployment, uncertainty, etc. – New opportunities (e.g. knowmads) • Values & lifestyle: – Independence – Impact – Community – Certain ruralisation • Personal profile & interests – Purpose – Passion – Habilities, knowledge, capabilities What do you think is the most important challenge facing you as a small business owner today (12/2020)? What do you think is the most important challenge facing you as a small business owner today (12/2020)? * Statista: https://www.statista.com/statistics/329040/us-small-business-owners-assessment-of-their-biggest-challenge/ Main problems of small businesses - success • Market fit: value for customers? go-to-market? • Inadequate financing – Lower resources – Negotiation power vs banks → More difficulties to get adequate financing; some finish with a wrong finance structure and/or liquidity problems • Inadequate management – Profitability – Growth and resources – Competition with corporations • In some contexts, paperwork and burdensome government regulations What is success? • What’s your definition of success? – Personal – Relies on values – Adaptable and changes over time Define your formula THANK YOU! ➔ Identify trends and challenges that can represent opportunities and threats The diagnosis in the small business Environmental analysis * B2U– Business-to-you POLITICS ECONOMICS SOCIAL TECHNOLOGY ENVIRONMENT LEGAL 18 External Analysis A. Overall environment variables Description & analysis O T ➢Political Variables ➢Economic Variables ➢Social & Cultural Variables ➢Demographic Variables ➢Technological Variables ➢Legal Variables ➢Other variables Checklist for a PESTELanalysis Politicalfuture • Political parties and alignments atlocal, national and European orregional level • Legislation, e.g. on taxation andemployment law • Relations between government and the organisation (possibly influencing the preceding items in a major way and forming a part of future corporatestrategy) • Government ownership of industry and attitude to monopolies andcompetition Socio-culturalfuture • Shifts in values andculture • Change in lifestyle • Attitudes to work andleisure • “Green” environmental issues • Education and health • Demographic changes • Distribution of income Economicfuture • Total GDP and GDP perhead • Inflation • Consumer expenditure and disposable income • Interest rates NOMBRE PROGRAMA / Nombre profesor Legalfuture • Currency fluctuations and exchange rates • Investment, by the state, private enterprise and foreign companies • Cyclicality • Unemployment • Energy costs, transports costs, communications costs, raw materials costs Technological future • Government and EU investment policy • Identified new research initiatives • New patents and products • Speed of change and adoption ofnew technology • Level of expenditure on R&D by organisation’s rivals • Developments in nominally unrelated industries that might be applicable Environmental future • “Green” issues that affect the environment • Level and type of energy consumed-renewable energy? • Rubbish, waste and its disposal • Competition law and government policy • Employment and safety law • Product safety issues www.eoi.es http://www.eoi.es/ 23 External Analysis • Start by brainstorming and going exhaustively through the different elements that you can think of + research on environment trends • Identify and discuss the ones that can be relevant for your business • Explore and get data on them → be factual; figures and concrete references empower your discussion! • See how each of them may be or become an opportunity or a threat for your business, and start thinking what you can do about it. Small Business Management - Session 3 - Sandra Oller Barcelona, 11th October 2021 About today! • The entrepreneurship & small business management process • Strategic planning • Business plan • Business opportunity • Mission • Environmental analysis • Competitive analysis • Strategic alternatives • Goals & strategies • Operational & Financial planning • Follow up and control systems Entrepreneurship & Small business management The process *Timothy S. Hatten, Small Business Management – Entrepreneurship and Beyond Entrepreneurship & Small business management Environmental factors affecting the process *Timothy S. Hatten, Small Business Management – Entrepreneurship and Beyond • It is a long term planning tool used for viewing a business and the environments in which it operates • Mission Statement- What business are really in? • Environmental Analysis- SWOT analysis External Analysis Internal Analysis Competitive Analysis (your competitive advantage) • Strategic Alternatives • Goal Setting and Strategies • Control Systems • Strategic Planning in action Strategic Planning What? Strategic Planning When? *Timothy S. Hatten, Small Business Management – Entrepreneurship and Beyond Strategic Planning The process *Timothy S. Hatten, Small Business Management – Entrepreneurship and Beyond Purposes of the business plan in small businesses To convince that your idea for a business is not just a dream and can be a viable you need to plan, set goals, and above all, know your business plan The purpose: The three primary reasons for writing a business plan are: 1. to help you determine the feasibility of your business idea 2. to provide direction for your business after it is in operation (road map for future operations) 3. to attract capital for starting up the business Have a Comprehensive but Realistic Business Plan • Preparing a good business plan will help you as the founder of a small business to think through important issues and understand potential problems and how to deal with them. • The aspirations reflected in your business plan must be realistic and correspond with your current capabilities. If you bite off more than you can chew your business stands to lose valuable money and time. Therefore, ensure that your business plan is structured to work within your limits. Remember, your business plan should keep evolving as your business gradually experiences growth, it just has to stay realistic. Purposes of the business plan in small businesses The Project in the Management Cycle of the company The company Analysis Planning Execution Control Seguimiento de la actividad (Valoración de los resultados en relación con el Plan Puesta en práctica del Plan (Eficacia y eficiencia) El Proyecto de creación de empresas comprende el Análisis y la Planificación, bases de la Realización y elControl To study the situation, present and future, inside and outside of the company Strategic & Tacticaldecision making. Organising Procedures, means and actions to be taken Creation Project Seguimiento de la actividad (Valoración de los resultados en relación con el Plan Puesta en práctica del Plan (Eficacia y eficiencia) The Project of the company creation comprises the Analysis & the Planning, bases of the Execution & Control Follow-up of the Activity (Evaluation of results compared to thePlan) Implement the Plan - Efficiency & effectiveness The Process of Company creation Mejoras y Follow-up Start-up PreparationReflection & analysis What is a Business Opportunity? What is a Business Opportunity? • Business idea vs Business Opportunity → not all business ideas represent a business opportunity! • Idea as a thought → need to concretize in a specific solution, check if it is feasible, test, develop, etc. • Business opportunity exists if it is linked to a need, to solving a problem. • It has certain qualities: – Attractive – Durable – Timely → Window of opportunity – Creates value for the end user! Ensure you don’t just come up with an idea ➔ find a business opportunity! Business Opportunity • identifiable consumer problem/need • develop the right mindset ➔ – sharpen your senses to identify consumer needs and wants – conduct research to determine whether the idea can become a successful new venture. • Opportunities can arise in different ways: – Sometimes they are found with deliberate research – Others there is a component of serendipity Usually it’s the result of the deliberate attempt to solve a problem 3 ways of finding opportunities • Observing and identifying trends • Solving a problem • Finding gaps in the marketplace – → certain customer segments unserved, overpricing, inefficient ways to serve the market, etc. Examples: business created to fill in a gap in the marketplace * Source: Entrepreneurship Successfully Launching New Ventures, Bruce R. Barringer, R. Duane Ireland, Pearson. • A mission statement provides direction for the company • Your mission statement communicates what you want your business to do and to be by describing: – Purpose – Scope – Direction of your business • A description of the reason why an organization exists. • It is the foundation on which all other goals and strategies are based. https://www.youtube.com/watch?v=LJhG3HZ7b4o Strategic Planning Mission Statement https://www.youtube.com/watch?v=LJhG3HZ7b4o Present Future Market Segments Products or services Geographical Scope Singularities Mission of the Company: Product / Market Pair Mission Statement • When you plan strategically you need to look forward… • Vision: an aspirational description of what an organization would like to achieve or accomplish in the mid-term or long-term future. ➔ clear guide for choosing current and future objectives • Values: Values are enduring, passionate, and distinctive core beliefs, and they’re an essential part of developing your strategy. ➔ beliefs that guide the conduct, activities and goals of your organization ➔ influence the attitudes and behaviors of your organization Strategic Planning Vision and Values • Google Mission Statement – Organize the worlds information and make it universally accessible and useful • Google Vision Statement – To provide access to the world’s information in one click • Google Values – Great isn’t good enough. – Focus on the user, all else will follow. – It’s best to do one thing really well. – Fast is better than slow. – Democracy on the web works. – You can make money without doing evil. – There’s always more information. – The need for information crosses all bor – You can be serious without a suit. – You don’t need to be at your Strategic Planning Mission, Vision and Values To develop strong competitive positioning strategies you need a good understanding of • the environment ➔ identify trends and circumstances that can represent opportunities and threats → environment analysis • the industry ➔ its competitors and their strengths and weaknesses → competitive analysis ➔ Which is our competitive advantage? The diagnosis in the small business Environmental analysis and competitive analysis ➔ Identify trends and challenges that can represent opportunities and threats The diagnosis in the small business Environmental analysis * B2U– Business-to-you POLITICS ECONOMICS SOCIAL TECHNOLOGY ENVIRONMENT LEGAL 18 External Analysis A. Overall environment variables Description & analysis O T ➢Political Variables ➢Economic Variables ➢Social & Cultural Variables ➢Demographic Variables ➢Technological Variables ➢Legal Variables ➢Other variables Checklist for a PESTELanalysis Political future • Political parties and alignments atlocal, national and European orregional level • Legislation, e.g. on taxation andemployment law • Relations between government and the organisation (possibly influencing the preceding items in a major way and forming a part of future corporatestrategy) • Government ownership of industry and attitude to monopolies andcompetition Socio-cultural future • Shifts in values andculture • Change in lifestyle • Attitudes to work andleisure • “Green” environmental issues • Education and health • Demographic changes • Distribution of income Economic future • Total GDP and GDP perhead • Inflation • Consumer expenditure and disposable income • Interest rates NOMBRE PROGRAMA / Nombre profesor Legal future • Currency fluctuations and exchange rates • Investment, by the state, private enterprise and foreign companies • Cyclicality • Unemployment • Energy costs, transports costs, communications costs, raw materials costs Technological future • Government and EU investment policy • Identified new research initiatives • New patents and products • Speed of change and adoption ofnew technology • Level of expenditure on R&D by organisation’s rivals • Developments in nominally unrelated industries that might be applicable Environmental future • “Green” issues that affect the environment • Level and type of energy consumed-renewable energy? • Rubbish, waste and its disposal • Competition law and government policy • Employment and safety law • Product safety issues www.eoi.es http://www.eoi.es/ 23 External Analysis • Start by brainstorming and going exhaustively through the different elements that you can think of + research on environment trends • Identify and discuss the ones that can be relevant for your business • Explore and get data on them → be factual; figures and concrete references empower your discussion! • See how each of them may be or become an opportunity or a threat for your business, and start thinking what you can do about it. Industry Competitiveness The model of the Five Competitive Forces was developed by Michael E. Porter in the 1980s. Since that time it has become an important tool for analysing an organisations industry structure in strategic processes. The diagnosis in the small business Environmental analysis and competitive analysis Competition Analysis • Will require some research about various aspects of your competitors business • Description of key competitors and their market positioning • Size of key competitors in units/dollars • Market shares of key competitors • Sales trends of key competitors • Strengths and weaknesses of key competitors compared to your organisations goods or services • Perceived marketing strategies of key competitors and their probable impact on your organisation The diagnosis in the small business Competitive analysis 20 B. Sector data Description & analysis O T Market (size, trends, segments, characteristics) Customers (purchase and usage habits). “Customer’s Profile”. Competitors (placement, market shares, economic results, success strategies) (*1) Add here the “Competitor Comparative Chart” Distribution channels (existing channels, margins and channel support) Suppliers (main suppliers data, levels of concentration) Other variables to be considered External Analysis 21 C. Competitive analysis Description y analysis O T Barriers to entry and exit Potential new competitors Customers power of negotiation Potential response and strategies from our competitors to the activity of our company Suppliers power of negotiation Substitutes Products or services External Analysis Competitive analysis * https://openstax.org/books/entrepreneurship/pages/11-4-the-business-plan, 10/10/2021 • https://www.entrepreneurnow.com/courses/your- market/lessons/defining-your-competition/ Competition https://www.entrepreneurnow.com/courses/your-market/lessons/defining-your-competition/ THANK YOU! Small Business Management Sandra Oller Barcelona, 4th October 2021 Unit 2: Strategic Management and Growth of the Small Business • Strategic quests for small business: Managing creativity, opportunity & feasibility • Small Business Entry: Paths to part-time entrepreneurship and paths to full-time entrepreneurship • The importance to plan in small business • The quest for value for small business. Defining the customer’s concept of value. Types of values • Bowman’s strategy clock applied to small business • The diagnosis in the small business: environmental analysis and competitive analysis Strategic Management and Growth of the Small Business “Being good in business is the most fascinating kind of art. Making money is art and working is art and Good business is the best art” Andy Warhol (1977) Strategic quests for small business “What do we want to sell?” Your business will probably survive only if its purpose is to satisfy its customers - the ultimate users of its goods or services “What does the customer want to buy? Identify something that customers want or fill an unmet need The business idea To come up with an innovative business idea, you need to be creative Process producing an idea or opportunity that is novel and useful, frequently derived from making connections among distinct ideas or opportunities. Process producing an idea or opportunity that is novel and useful, frequently derived from making connections among distinct ideas or opportunities. Exploitable set of circumstances with uncertain outcome, requiring commitment of resources and involving exposure to risk. Exploitable set of circumstances with uncertain outcome, requiring commitment of resources and involving exposure to risk. The extent to which an idea is viable and realistic and the extent to which you are aware of internal (to your business) and external (industry, market, and regulatory environment) forces that could affect your business. The extent to which an idea is viable and realistic and the extent to which you are aware of internal (to your business) and external (industry, market, and regulatory environment) forces that could affect your business. CREATIVITY OPPORTUNITY FEASIBILITY Strategic quests for small business Managing creativity, opportunity & feasibility Strategic quests for small business The surprising habits of original thinkers • Video: https://www.ted.com/talks/adam_grant_the_surprising_habits_of_ original_thinkers?language=en https://www.ted.com/talks/adam_grant_the_surprising_habits_of_original_thinkers?language=en The business idea can come from various sources…. Strategic quests for small business From Ideas to Opportunities through Creativity The business idea can come from various sources: • Work experience • Similar business • Hobby or personal interest • Chance happening • Serendipity • Family or friends • Education • Expertise Strategic quests for small business From Ideas to Opportunities through Creativity The business idea can come from various sources: • Work experience • Similar business • Hobby or personal interest • Chance happening • Serendipity • Family or friends • Education • Expertise Ways to keep on being creative Get into an innovative frame of mind Make sure that it is an opportunity Make sure an Idea is Feasible by Pilot testing Strategic quests for small business From Ideas to Opportunities through Creativity • Starting a business takes talent, determination, hard work, and persistence. • Requires a lot of research and planning. • Before starting your business, you should appraise your strengths and weaknesses and assess your personal goals to determine whether business ownership is for you. Strategic quests for small business Working on your business idea ▪ What, exactly, is my business idea? Is it feasible? ▪ What industry do I want to enter? ▪ What will be my competitive advantage? ▪ Do I want to start a new business, buy an existing one, or buy a franchise? ▪ What form of business organization do I want? Small business entry The basic questions to ask before you start a business After making these decisions, you’ll be ready to take the most important step in the entire process of starting a business: • Describe your future business → BUSINESS PLAN: identifies the goals of your proposed business and explains how these goals will be achieved • You must also take a second crucial step before you actually start up your business: think if you’ll need to get financing—the money that you’ll need to get your business off the ground. Small business entry First steps to do before you start a business a) Start a new business b) Buy an existing business c) Franchise a business d) Inherit a business e) Be hired to be manager of a business w/ equity stake 1. Evaluate the market 2. Find a location 3. Develop a plan 4. Obtain financing (if needed) 5. Buy equipment (if needed) 6. Find some customers Vet the claims of the seller Small business entry Paths to business ownership Must abilities of a small business owner • Ability to plan. • Ability to calmly deal with unreasonable, irate clients without losing control. • Ability to deal with irresponsible, whining and unreliable employees without losing control. • Ability to deal with inane government bureaucrats and regulations without losing control. This is the life of management. Much like moving from a rental house to one you own, you cant call the landlord to fix a broken pipe. Discover yourself! Small business entry Small business entry Part-time entrepreneurship • Definition of part-time entrepreneurship have been based on: - The type of primary occupation - The weekly hours worked: working for 35 or fewer hours a week - The amount of income generated or the self perception • A large percentage of businesses are run by part-time entrepreneurs • Some of the biggest companies in the world started off on a part-time basis • Part-time entrepreneurship has become an increasingly important part of the society and the economy Part-time entrepreneurship over full-time entrepreneurship Part-time entrepreneurship has some advantages over full-time: • Involves lower risk compared to full-time • Provides an additional source of income + autonomy/self-realisation • Offers many benefits for the individual and society: flexible employment which is compatible with the duties at home. • Economic relevance and impacts society: > Fosters economic developement by increasing the overall number of entrepreneurs in an economy and helps to drive innovation, cates for market niches and increases the human capital in the economy. Small business entry The part-time path potential pitfalls: • Less time to market, strategize and build a clientele. • Limited availability for customers → compatible with product/service? • Holding down a full-time job while running a part-time business can leave you with little, if any, leisure time and your personal life may suffer as a result. • That is not to say a part-time business cant work. Youll need to have excellent time-management skills, strong self-discipline, and support from family and friends Part-time entrepreneurship over full-time entrepreneurship Small business entry Advantages • Flexibility • Autonomy and self-realization • Manageable-lower risk • Additional source of income • Social security through wage job • Synergies with wage job • Learning for full-time entrepreneurship Disadvantages • Strain of aligning multiple occupations • Limited dedication to entrepreneurship • Negative impact on family and job • Limited availability for customers • Low acceptance in society Part-time entrepreneurship over full-time entrepreneurship Small business entry • When to consider part-time entrepreneurship: Paths to part-time (PT) entrepreneurship Small business entry • Working for 35 or fewer hours per week. • Is the way most people start in entrepreneurship. • About ¾ of those starting a business already work full-time for someone else. • Allows entrepreneurs the stability of working a ‘normal’ job while giving them the freedom to explore something new without a lot of risk. • Allows the entrepreneur to test his idea, service, or product. • At some point, as the entrepreneurial business grows, the entrepreneur will have to make a choice between his business and working for someone else. Paths to part-time (PT) entrepreneurship Small business entry • PT is a significant portion of all current entrepreneurial companies. • Remember, this includes lawn mowing, baby sitting, and other seasonal activities. • These PT companies are more likely to be more volatile because their owners are not depending solely on them for income. The full-time job is providing the needed income, or it is part time and just adding a little extra money when needed. • Over 6 million people sell on online sites such as eBay or Yahoo auctions. This is normally done part time as a hobby or a supplement to their normal lifestyle. Paths to part-time (PT) entrepreneurship Small business entry • Determinants of transition from part-time to full time entrepreneurship? Paths to part-time entrepreneurship and paths to full-time entrepreneurship Small business entry • Determinants of transition from part-time to full time entrepreneurship: – Financial reasons? – Social recognition? – Independance – Self-realization – innovation • An entrepreneur needs to make venture development decisions to advance the business and achieve personal goals • The possibly most important Venture development decision concerns the transition from part-time towards full-time Paths to part-time entrepreneurship and paths to full-time entrepreneurship Small business entry • Contains a clear statement of your business mission, vision and the set of values that steer your business. • Gives your small business direction and maps out strategies to achieve your goals by answering who, what, where, when, why and how. • Improves communication: allows you to communicate clearly the vision and small business essentials. • Is insightful to potential investors, lenders, partners, employees, vendors and other stakeholders. • Makes you more organized and prepared for the future. The importance to plan in small business The Business Plan • Helps you making better operational decisions and have fewer unforeseen surprises and problems. • Gives you control over your business: a well-written business plan is a blueprint for a small business owner to stay on track. • Helps you to stay focused on executing action plans to reach set objectives, within defined timelines. • Allows you to set objectives for managers and key personnel. • Help you to secure finance: if you’re seeking finance for your small business, you’ll have to show banks and venture capitalists or angel investors why they should invest in your business; you’ll need a solid business plan. The importance to plan in small business The Business Plan • Tests the viability of your small business idea • Clarifies your small business goals and strategy • Improves communication: a business plan allows you to communicate clearly the vision and small business essentials • It is insightful to potential investors, lenders, partners, employees, vendors and other stakeholders. • Makes you more organized and prepared for the future • Make better operational decisions and have fewer unforeseen surprises and problems. • Gives you control over your business The importance to plan in small business The Business Plan – why is it important? If the market is not attractive for a new business, the business is likely to fail. A Market Attractiveness Study is conducted by looking at several important factors that include the number of accessible customers, competition, and market growth. The importance to plan in small business Market attractiveness Study The importance to plan in small business Market attractiveness Study • Accessible Customers: How large is the market for your product or service and are the customers readily accessible? Customer accessibility determines your cost to deliver the goods or services. • Competition: How many other businesses are providing the same product or service to the same market group? Or solving the same needs/problem with other products/services? • Market Growth: If the new business idea is not an area of growth, sustaining the business in the long-run will be very difficult. Any business involving new technology, computer training and services are examples of growth markets. What Is Value? The quest for value for small business Defining the customer’s concept of value What Is Value? • Value is not just price. Value is a much richer concept. • Costumer value can bee seen as the difference between a costumer’s perceived benefits and the perceived cost. • Customer value is highly dynamic and can change for a variety of reasons: – the business may change elements that are important to the customer value calculation – customers’ preferences and perceptions may change over time – competitors may change what they offer to customers… • One author states that the challenge is to “understand the ever changing customer needs and innovate to gratify those needs.”Sudhakar Balachandran” The quest for value for small business Defining the customer’s concept of value Customer value = Perceived benefits − Perceived cost The quest for value for small business Defining the customer’s concept of value Perceived Cost versus Perceived Benefits * Source: Small Business Management in the 21st Century, https://saylordotorg.github.io/text_small-business- management-in-the-21st-century/index.html FUNCTIONAL SOCIAL EMOTIONAL EPISTEMIC CONDITIONAL Specific outcomes Performance Images Symbolism Affective Passion Novelty Curiosity Physical context Social context The quest for value for small business Types of values * Source: Small Business Management in the 21st Century, https://saylordotorg.github.io/text_small-business- management-in-the-21st-century/index.html The quest for value for small business Components of Customer Value MONETARY • Purchase Price of product or service • Operating cost of product or service • Service cost • Switching cost • Opportunity cost TIME • Finding information about product or service • Travel to acquire product or service • Learning curve PSYCHIC • Effort required to find product or service • Effort required to use product or service • Concern about risk of product or service * Source: Small Business Management in the 21st Century, https://saylordotorg.github.io/text_small-business- management-in-the-21st-century/index.html The quest for value for small business Components of Perceived Benefit ➔ increase! Component Aspects Activites to Deliver Functional • Measurable quality • Performance • Reliability • Support network • Quality assurance in product and services • Superior product and process design • Selection of correct attributes • Ability to improve product and operations • Management of value chain Social • Builds identification with social, ethnic or class group • Emphasize lifestyle • Development of interaction among people • Build bonds within groups • Market research correctly identifies customer base(s) • Ability to build social community among customers Emotional • Assist in making one feel good about themselves • Attachment to product or service • Produces a change in how others see the user • Trustworthiness • Profound customer experience • Aesthetics • Market research understands psychological dimensions of customer base(s) • Marketing content emphasizes desired psychological dimensions • Reliability between marketing message and delivery Epistemic • Novelty • Fun • Evoke interest in product or service • Interest in learning • Produces a willing suspension of disbelief • Creative personnel • Creative product or process development • Commitment to innovation • Willingness to experiment Conditional • Produces meaning in a specific context • Tied to particular events • Tied to holidays • Demonstrates social responsibility • Flexibility (can alter physical facilities or marketing message depending on context) • Management commitment to responsible action * Source: Small Business Management in the 21st Century, https://saylordotorg.github.io/text_small-business-management- in-the-21st-century/index.html The quest for value for small business Components of Perceived Cost ➔ decrease! Component Aspects Activites to Deliver Monetary • Reduce purchase price • Reduce operating costs • Reduce maintenance costs • Reduce opportunity costs • Superior design • Operational efficiency • Cost containment • Quality control and assurance • Easy acquisition Time • Reduce time to search for product or service • Reduce time to purchase • Reduced learning curve • Broad distribution channels • Web-based purchasing option • Web-based information • Superior design Psychic • Simplified use • “Comfortable” feeling with regard to product or service use • Superior design • Ability to write clear instructions * Source: Small Business Management in the 21st Century, https://saylordotorg.github.io/text_small-business-management- in-the-21st-century/index.html The quest for value for small business Creating customer value https://www.youtube.com/watch?v=9I2baWR-rqg https://www.youtube.com/watch?v=9I2baWR-rqg • Customer value proposition is a business’s way of generating value in their product or service when targeting potential customers. • This is often calculated by working out the total sum of benefits that vendors put forward to their consumers. • Real value is created only if benefits are relevant to the customers and outperform costs. Customer value proposition * Source: Strategyzer.com • Customer Knowledge: Bring in people who are in frequent contact with the customers you are targeting and thus have deep customer knowledge • Great value propositions often focus on a limited number of pain relievers and gain creators and then deliver on those exceptionally well. • Focus on one value proposition for a specific customer segment on a single map. Make a new map for a different Value Proposition. ➔ Can you think about an example? * Strategyzer.com Value proposition canvas Case Study: Uber • Customer jobs, Pains & Gains and Value Map: • https://youtu.be/kiWkRiynPAo?t=121 https://youtu.be/kiWkRiynPAo?t=121 • The Bowman Strategy Clock is a marketing model with which a company can analyze its position in relation to what its competitors have to offer. • It was developed by economists Cliff Bowman and David Faulkner. • According to Bowman, competitive advantage is more powerful as a distinctive element than a cost advantage; it concerns strategic positioning and the positioning of a product in the market. Bowman’s strategy clock applied to small business Bowman’s strategy clock applied to small business * Source: Mulder, P. (2018). Bowman Strategy Clock. Retrieved 8/10/2019 from ToolsHero: https://www.toolshero.com/strategy/bowman-strategy-clock/ • Bowman’s Strategy Clock shows how a company can position a product or service based on two dimensions • On the one hand, it’s about price and on the other it’s about perceived value. • Looking at the different combinations of these two dimensions within the Bowman Strategy Clock leads to eight possible strategies, divided over four quadrants. These eight strategies are displayed in a clock, which this model’s name is based on. • A company can choose a position form the Bowman Strategy Clock which offers the most competitive advantage. If a company understands these eight fundamental strategic positions, it will enable them to better analyze and evaluate its current strategy. From this position, it can make changes and improve its competitive position. Bowman’s strategy clock applied to small business Bowman’s strategy clock applied to small business Position 1. Low price and low added value This is not the most competitive position within the Bowman Strategy Clock. The product or service is not differentiated and the customer perceives very little value. The price is still very low. Position 2. Low price Companies in this position often produce large quantities. Their products are valued. Products are sold at a low price which leads to low profit margins on individual products. The high volume of output can still generate high profits. * Source: Mulder, P. (2018). Bowman Strategy Clock. Retrieved 8/10/2019 from ToolsHero: https://www.toolshero.com/strategy/bowman-strategy-clock/ Bowman’s strategy clock applied to small business Position 3. Hybrid This position involves companies which use product differentiation. ➔ Its products are highly valued. The companies focus on a low price. ➔ The customer is convinced there is a good added value which genuinely benefits them. This position of the Bowman Strategy Clock is very effective, particularly if the added value is consistently and well-applied and offered. * Source: Mulder, P. (2018). Bowman Strategy Clock. Retrieved 8/10/2019 from ToolsHero: https://www.toolshero.com/strategy/bowman-strategy-clock/ Bowman’s strategy clock applied to small business Position 4. Differentiation Offer a as high as possible quality at an average price. → to offer their customers the highest level of perceived added value. They not only focus on product quality, but also on so-called branding; → reliable brand on the market that retains customers. Customers remain sensitive to high quality products of a well known brand and therefore select these products. They are even prepared to pay more for these. * Source: Mulder, P. (2018). Bowman Strategy Clock. Retrieved 8/10/2019 from ToolsHero: https://www.toolshero.com/strategy/bowman-strategy-clock/ Bowman’s strategy clock applied to small business Position 5. Focused Differentiation This concerns the positioning strategy on which luxury and exclusive brands focus; a high quality product at a high price. They use targeted segmentation, promotion and distribution, which leads to higher profit margins. Their competitors are in the same segment, they keep prices high. * Source: Mulder, P. (2018). Bowman Strategy Clock. Retrieved 8/10/2019 from ToolsHero: https://www.toolshero.com/strategy/bowman-strategy-clock/ Bowman’s strategy clock applied to small business Position 6. Risky high margins Companies using this strategy charge high prices for products of which the customer’s perceived value is mediocre. In the long-term, this is a significant risk and this position is likely to fail. → the customers will look for a better-quality product in the same price range or a similar product for a lower price. * Source: Mulder, P. (2018). Bowman Strategy Clock. Retrieved 8/10/2019 from ToolsHero: https://www.toolshero.com/strategy/bowman-strategy-clock/ Bowman’s strategy clock applied to small business Position 7. Monopoly Pricing They are the only business offering the product in their segment. Monopolies are regulated in most countries, in order to prevent the companies from increasing the prices unnecessarily or offering faulty goods. Position 8. Loss of market share The company is not able to offer a product or service that the customers value. → the price is too high and as a result customers stay away. * Source: Mulder, P. (2018). Bowman Strategy Clock. Retrieved 8/10/2019 from ToolsHero: https://www.toolshero.com/strategy/bowman-strategy-clock/ To develop strong competitive positioning strategies you need a good understanding of • the environment ➔ identify trends and circumstances that can represent opportunities and threats → environment analysis • the industry ➔ its competitors and their strengths and weaknesses → competitive análisis ➔ Which is our competitive advantage? The diagnosis in the small business Environmental analysis and competitive analysis THANK YOU!