Unit 2 Promotion of A New Venture
Unit 2 Promotion of A New Venture
Unit 2 Promotion of A New Venture
Programme: BBA Semester: VI Paper Code: BBA 306 Academic Year: 2016-17
Date of commencement of classes: 23rd July’ 2007
Unit II lectures:-12
Promotion of a Venture: Opportunities analysis; external environmental analysis
economic, social and technological; competitive factors; legal requirements of
establishment of a new unit and rising of funds; Venture capital sources and
documentation required.
OPPORTUNITY ANALYSIS
Every business plan should include market analysis. This is one of the first and
most important reasons to do a business plan.
Example 1: the market of a local movie theater or restaurant includes not just
the people who regularly go there but everybody who lives within driving
distance.
Example 2: The market for a landscaping business includes all the homes and
commercial properties within a logical reach.
Example 3: The market for downloadable e-books over the internet includes
everyone connected to the web. The market for personal computers includes
homes, schools, businesses, and government organizations.
2. SEGMENTATION
Divide your target market into useful slices or segments.
For Example, a computer manufacturing company that targeted such market
segments as homes, small offices, businesses, educational organizations, and
government.
Dividing the market into these segments helped the company address the more
specific market needs, media, pricing patterns and decision criteria in each of
their different market segments.
ENVIRONMENTAL ANALYSIS
EXTERNAL ENVIRONMENT
Alternatively known
Internal Environment External Environment
as
Suppliers are the ones who provide inputs to the business like raw material,
equipment and so on.
Competitors are the rivals, that compete with the firm in the market and
resources as well.
The political factors take the country’s current political situation. It also reads
the global political condition’s effect on the country and business.
When conducting this step, ask questions like “What kind of government
leadership is impacting decisions of the firm?” Some political factors that you
can study are:
Government policies
Taxes laws and tariff
Stability of government
Entry mode regulations
Economic factors involve all the determinants of the economy and its state.
These are factors that can conclude the direction in which the economy might
move. Some economic factors affecting your business are:
Countries vary from each other. Every country has a distinctive mindset. These
attitudes have an impact on the businesses. The social factors might ultimately
affect the sales of products and services. Some of the social factors you should
study are:
New discoveries
Rate of technological obsolescence
Rate of technological advances
Innovative technological platforms
Legislative changes take place from time to time. Many of these changes affect the
business environment. Some legal factors :
Product regulations
Employment regulations
Competitive regulations
Patent infringements
Health and safety regulations
6. Natural/ Physical ( E for Environmental factors)
The location influences business trades. Changes in climatic changes can affect the
trade. The consumer reactions to particular offering can also be an issue. Some
environmental factors are:
Geographical location
The climate and weather
Waste disposal laws
Energy consumption regulation
People’s attitude towards the environment
GREAT IDEAS
1. Kid-Friendly Apps
Kids are your future customers so gaining their loyalty now isn’t a bad idea.
According to Common Sense Media, three-quarters of kids have access to a mobile
device. This spells a big business opportunity for anyone who can create products
or design apps just for kids. And, if they also happen to be educational or promote
good health, you’ll win their parents over, too.
2. Recycling pickup
Most homeowners have pick-up bins for standard recyclables like paper, glass
and plastic, but they often don't make the effort to properly recycle electronics
and batteries, which can be extremely harmful to the environment when left in
landfills. Offer to pick up all the e-waste that's been collecting in their garages
— old televisions, broken laptops, defunct cellphones — and bring them to
your local electronic recycling facility.
3. Software trainer
If you're proficient in a highly specialized software, you can get paid to pass your
knowledge on to amateurs and professionals looking to expand their skill sets.
Schedule small group workshops or private sessions, and charge by the hour for
a full tutorial of the program.
5. Food Truck
Study by Intuit and Emergent Research predicted that revenue from the food truck
industry will reach $2.7 billion by 2017. A truck is a much less expensive
investment than a brick-and-mortar restaurant and, according to Mobi Munch
founder Josh Tang, the failure rate for food trucks is just 10 to 20 percent (as
opposed to 60 to 90 percent for restaurants).
6. Freelancing
Companies are increasingly turning to freelance and contract workers to fill the
skill gaps in their staff. According to Freelancer.com, which lists more than a
million freelance projects on its site, the most in-demand freelance services are:
data entry, academic writing, Excel projects, data processing, Web search and
Facebook-based jobs. Hourly rates start at $30 an hour and stretch into the
hundreds.
7. Mobile consulting
If your company can provide affordable mobile solutions to businesses that need
them you'll find mobile consulting a rich business opportunity. According to
Jamie Turner, founder of a company called "The 60-Second Marketer," there
will be ongoing need for mobile assistance.
"Research from the 60-Second Marketer indicates that there are more people on
the planet who own a mobile device than who own a toothbrush," Your prospects
are in mobile right now."
8. Translator
Cross-cultural communication is creating a growing need for translators, The
hiring of interpreters and translators is projected to grow 46 percent from 2012 to
2022, much faster than the average for all occupations.
This translates into a big business opportunity for entrepreneurs who can bring
foreign-language speakers together with businesses in need.
9. Employee-monitoring services
Employees are increasingly mobile. In fact, it is estimated there will be 1.3
billion mobile workers by 2015. So how are employers supposed to keep track of
what their workers are doing? A company that could provide employee-
monitoring services, as well as some additional outsourced human resources
functions, would be in great demand right now.
1. Create a mission statement about why your business exists. For example:
“Develop Internet-based software that provides easy project management.”
2. Define a vision of what your business wants to become. For example: “To
become a respected software vendor that possesses 60 percent of the market for
project management software.”
3. Define the market that your business will serve. Include the business outlook
for your industry, what customer needs are addressed and a profile of targeted
customers. For example: “Customers are project managers who manage
multiple projects at construction businesses.”
4. Describe products and services, including their pricing. Include what makes
the products and services competitive.
5. Describe the company’s legal and management structures. Explain how
business activities are accomplished. Indicate what permits and licenses your
business maintains. Include biographies of key managers.
6. Define marketing strategy, including pricing and promotion. Include
customer groups whose needs are met by your products and services.
7. Provide a balance sheet, which is a snapshot of the company’s value. For
an existing business, this should cover the past three years.
8. Provide an income statement, which indicates the profit or loss over a
period. For an existing: business, cover the past three years.
9. Provide a cash flow statement, which indicates revenue, expenses and
available cash. These are projected amounts if the plan is for a startup
business. For an existing business, provide amounts for the past 12 months.
Actual and projected amounts are used to project working capital.
10. Provide each principal’s personal financial statement and prior year’s federal
tax return if your business is applying for financing.
11. Append miscellaneous information that helps define your company.
Include marketing materials, contracts and key employee resumes, for
instance.
12. Write an executive summary that defines what your business does and
why. This becomes the first section in the plan.
A mission statement talks about the present A vision statement talks about your
3.
leading to its future. future.
COMPETITIVE ANALYSIS:
Method of understanding the market forces and how they influence products
and services marketed by entrepreneurs.
The Five Forces Model was devised by Professor Michael Porter. The model is
a framework for analysing the nature of competition within an industry.
Every market or industry is different. Take any selection of industries and you
should be able to find differences between them in terms of:
The result of the above differences is that industries vary in terms of how much
profit they make. To take two examples:
By contrast, why are profits so high in the soft drinks market? The answer is
mainly that:
Customers and suppliers have little power – Pepsi has many millions of
individual consumers, and thousands of retail distributors none of whom has
much influence over the business
There is high brand awareness & loyalty = less consumer desire for substitutes
High barriers to entry – how do you enter a market dominated by Coca-Cola
and Pepsi?
He identified that high or low industry profits (e.g. soft drinks v airlines) are
associated with the following characteristics:
If the supplier forces up the price paid for inputs, profits will be reduced. It
follows that the more powerful the customer (buyer), the lower the price
that can be achieved by buying from them.
Suppliers find themselves in a powerful position when:
Just how much power the supplier has is determined by factors such as:
a) Powerful customers are able to exert pressure to drive down prices, or increase
the required quality for the same price, and therefore reduce profits in an
industry.
b) A great example in the UK currently is the dominant grocery supermarkets
which exert great power over supplier firms.
c) Several factors determine the bargaining power of customers, including:
A substitute product can be regarded as something that meets the same need
Substitute products are produced in a different industry –but crucially satisfy
the same customer need. If there are many credible substitutes to a firm's
product, they will limit the price that can be charged and will reduce industry
profits.
The extent of the threat depends upon
The extent to which the price and performance of the substitute can match the
industry's product
The willingness of customers to switch
Customer loyalty and switching costs
If there is a threat from a rival product the firm will have to improve the
performance of their products by reducing costs and therefore prices and by
differentiation.
All these activities are likely to increase costs and lower profits. Several factors
determine the degree of competitive rivalry; the main ones are:
Before
During
After
Identify lessons learnt and how they can be used in the future
Document positives and negatives. Identify best practices
Understand whether the analysis had the required impact
Follow up on implementation plans
Record information from the analysis to be used in future decisions
1. Promotion Stage
2. Incorporation Stage
3. Capital subscription (Capital raising stage)
4. Commencement of business Stage
1. Promotion Stage
According to Gerstenberg, “Promotion means discovery of business
opportunities and the subsequent organization of funds, property and managerial
ability into a business concern (unit) for the purpose of making profits therefrom.
The person who undertakes all these activities is a promotor.
Memorandum of Association
It contains the name of the company, place of Registered office, objects
(objectives) of the company, the liability of members, the amount of its
authorized capital etc.
It is foundation on which the structure of the company is built.
Articles of Associations
It contains the rules and regulations for the internal management of the company.
d) Minimum Subscription
In order to prevent companies from commencing business with inadequate
resources, it has been provided that the company must receive applications for
a certain minimum number of shares before going ahead with the allotment of
shares.
According to the Companies Act, this is called the ‘minimum subscription.’
VENTURE CAPITAL
Morris, defines venture capital as 'providing seed, start-up and first stage
financing' and also 'funding the expansion of companies that have already
demonstrated their business potential but do not yet have access to the public
securities market or to credit oriented institutional funding sources.
1. Equity: All VCFs in India provide equity but generally their contribution does
not exceed 49 percent of the total equity capital. Thus, the effective control and
majority ownership of the firm remains with the entrepreneur. They buy shares of
an enterprise with an intention to ultimately sell them off to make capital gains.
Royalty Financing: The concept of "royalty financing" has been around for a long
time. Basically, the idea is this: Someone lends you money (in this case,
$100,000), but instead of a fixed interest rate, you agree to pay the lender a
percentage of your gross sales (not net profits) each month — 2 percent to 6
percent is customary.
7. Trade Sale
A trade sale is a common way of exit to a trade buyer, refers to the sale of a
company in its early stages. This allows the management to withdraw from the
business and may open up the prospect of collaboration on larger projects. It
normally entails the disposal of a company's shares or assets and even liabilities, in
whole or in part.
8. Promoter buy back: Many a times promoter wishes to buy back shares from
investors at a price greater than the market price. No promoter would like to see
the prices of the share falling and hence, the promoter may buy back, to shore up
the share prices.