b. Majority interest c. Horizontal merger d. Diversified activity merge 2. The development of a new venture based on an inventor's work often requires ________. a. Expertise of an entrepreneur b. Heavy investment from financers c. Skilled human resources d. Highly educated staff 3. A business where an individual is both the owner and conductor of the business affairs is called__________________. a. Sole Proprietorship b. Partnership c. Corporation d. Joint Ventures 4. The idea and actions that explain how a firm will make its profits refers to Escorted tour a. Mission b. Goal c. Strategy d. Objective 5. Entrepreneurs are best as ________________ a. Managers b. Venture capitalists c. Planners. d. Doer Answers 51 1-b, 2-a, 3-a, 4-c, 5-d 2.9 REFERENCES References book CU IDOL SELF LEARNING MATERIAL (SLM)
Aulet, B. and Ursache, M. (2017) Disciplined entrepreneurship workbook. Edited by C. Snyder. Hoboken, New Jersey: John Wiley & Sons, Inc. Available at: https://ebookcentral.proquest.com/lib/gla/detail.action?docID=4826750. Baron, R. A. and Shane, S. A. (2008) Entrepreneurship: a process perspective. 2nd ed. Mason, OH: South-Western. Barringer, B. R. and Ireland, R. D. (2012) Entrepreneurship: successfully launching new ventures. 4th global ed. Harlow: Pearson Education Limited. Blundel, R. (2017) Exploring entrepreneurship. 2nd edition. London: SAGE Publications. Available at: https://app.talis.com/glasgow/player#/modules/5f55ffaa3f2b343bc876562b/resources/ 5f5611273f2b343bc876566a. Bolton, B., Thompson, J. and Science Direct (Online service) (2004) Entrepreneurs: talent, temperament, technique. 2nd ed. Boston: Elsevier Butterworth-Heinemann. Available at: https://ezproxy.lib.gla.ac.uk/login?url=https://www.sciencedirect.com/science/book/9 780750661287. Textbook references Angels, Dragons and Vultures (2011) by Simon Acland Venture capital advice for entrepreneurs. The $100 Startup (2012) by Chris Guillebeau Innovation and Entrepreneurship (1985) by Peter F. Drucker H.J. Bernardin, Human Resource Management, Tata McGraw Hill, New Delhi, 2004. Website http://eagri.org/eagri50/ARM402/index.html http://pioneerinstitute.net/activities/6188-entrepreneurship-development-cell.htm https://www.srecwarangal.ac.in/centre-for-enterprenurship.php https://fredericodeigah.wordpress.com/2012/10/12/introduction-to-entrepreneurship- development/ http://ncert.nic.in/ncerts/l/lebs213.pdf 52 CU IDOL SELF LEARNING MATERIAL (SLM)
UNIT – 3 : IDEA GENERATION STRUCTURE 3.0 Learning Objectives 3.1 Introduction 3.2 Definition Idea Generation 3.2.1 Tools and techniques for generating ideas 3.3 SWOT Analysis 3.4 New and existing Product and services, 3.5 Franchising and its Benefits 3.6 Summary 3.7 Keywords 3.8 Learning Activity 3.9 Unit End Questions 3.10 References 3.0 LEARNING OBJECTIVES After studying this unit, you will be able to: Describe nature of Idea Generation Identify scope of SWOT Analysis State New and existing Product & services. List the functions of Franchising and its benefits 3.1 INTRODUCTION Entrepreneurship is being able to create and run a business. In entrepreneurship, idea generation is one of the main factors that lead to its success. The idea thought of here should be able to solve a problem. And along with being unique, the idea should also be easy to execute. For example, let’s suppose you feel a lot of people have a problem understanding legal jargon and legal proceedings. So, in this case, your entrepreneurial idea could be setting up a platform that caters to all the legal needs of people and helps them understand it easily. 53 CU IDOL SELF LEARNING MATERIAL (SLM)
Idea Generation in Product Development Idea generation is the first step for any product development. This requires you to look for feasible product options that can be executed. It is a very important step for organizations to solve their problems. It requires you to do market research and SWOT analysis. You should aim to come up with an idea that is unique from your competitors and can be used profitably. For example, self-sanitizing door handles can be a product that you look at. It is unique and would be in high demand because of the current shift towards a healthy lifestyle. 3.2 DEFINITION OF IDEA GENERATION Idea generation is described as the process of creating, developing and communicating abstract, concrete or visual ideas. It’s the front end part of the idea management funnel and it focuses on coming up with possible solutions to perceived or actual problems and opportunities Ideas are the first step towards making improvement. Us making progress as individual human beings depend on new ideas. From the perspective of an individual, new ideas can help you to move forward if you feel stuck with a task or are unable to solve a certain problem. 3.2.1 Tools and techniques for generating ideas: 1. Idea Challenge Idea challenge is a focused form of innovation where you raise a problem or opportunity with the hopes of coming up with creative solutions. The point of idea challenge is to participate in ideation and generate ideas around a pre- defined theme for a limited period of time. It allows forming a specific question and directing that question at a specific audience to receive new ideas and unique insights. Before setting up an idea challenge, it’s important to define what you want to accomplish with it. There are two types of idea challenges, problem centric and solution centric approaches, the individual should first clarify whether one is looking to identify challenges or develop potential solutions for them. 54 CU IDOL SELF LEARNING MATERIAL (SLM)
Idea challenge is the best technique when you need to generate lots of new ideas. It may not be the most effective way to generate ideas if you only involve a few experts in your ideation process as it’s proven to be more useful for engaging large audiences. Although idea challenge enables the individual to gather lots of ideas fast, careful planning takes time and might not be worth the effort if there are no resources to execute it properly. Also, right timing is necessary for it to succeed. 2. SCAMPER Technique The SCAMPER technique is created by Bob Eberle, and is a method used for problem- solving and creative thinking. It’s a holistic way of applying critical thinking to modify ideas, concepts or processes that already exist. The purpose of the SCAMPER is to make adjustments to some parts of the existing idea or process to reach the best solution. It consists of seven actions that can be used to replace parts in the process a. Substitute – Substitution technique refers to replacing a part of your product, concept or process with another to achieve even better outcome. b. Combine – The combine technique explores the possibility to combine two ideas into a single, more effective solution. c. Adapt – Adaptation analyses the possibilities to make the process more flexible and focuses on other similar incremental improvements to the idea, process, or concept. d. Modify – Modifying the idea looks at the problem or opportunity from a bigger perspective and aims for improving the overall results, not just the idea. e. Put to another use – This approach focuses on finding ways to use the idea or existing solution for another purpose and analyses the possible benefits if applied to other parts of the business. f. Eliminate – The elimination technique is quite straightforward: it examines the possible outcomes if one or more parts of the concept were eliminated. g. Reverse – This action focuses on reversing the order of interchangeable elements of an idea. 3. Opposite Thinking 55 CU IDOL SELF LEARNING MATERIAL (SLM)
Opposite/reverse thinking is a technique that can help an individual to question long-held assumptions related to your business. It’s a useful tool to consider if you feel your team is stuck with the conventional mind-set and coming up with those “out-of-the-box ideas” seems to be difficult. Often, finding the best solutions isn’t found through a linear thought process. Although our brains are wired that way, opposite thinking can help us question the norm. 4. Brainstorm Cards Brainstorm cards are a useful tool created by the Board of Innovation for coming up with dozens of new ideas related to whatever challenge or problem an individual is currently working with. Brainstorm cards help to consider external factors such as: societal trends, new technologies, and regulation in the context of your business. Success factors for generating innovative business ideas In order for idea generation to be successful, one must consider several factors: 1. The problem you’re solving Before you can reach a solution, you need to first understand the challenge or obstacle ahead of you. That includes researching the market, competitors, trends and so forth. Equipping your team with this knowledge can lead to insights that inspire creative solutions and imagination. 2. Target audience needs It’s important to remember that creativity can come from anywhere and anyone. Effective creative is driven by an understanding of the target—what they need or care about and how we can help them. Great creative work adds a layer of imagination and insight to make the messaging, strategy or approach unique and powerful. 3. Workplace culture The company culture should provide an environment in which creative expression and active discussions are encouraged. Great ideation can be difficult if employees do not feel safe expressing their thoughts and/or opinions. Where do one start to build a culture emphasized on creative expression? From the top with transparent and encouraging leadership. 4. Stakeholders & team members 56 CU IDOL SELF LEARNING MATERIAL (SLM)
Prior to the ideation process, determine who the key stakeholders or team members are and whether they should be included in the idea generation exercises. Examples of key members might include department heads, CEOs, project managers, account folks or creative. From an approval standpoint, having these people in the same room at the start can ensure on-strategy solutions and early alignment. 5. Guardrails or constraints While its fun to imagine any project has endless possibilities, it’s simply never the case. Before brainstorming ideas, set basic limitations to keep everyone’s ideas from veering too far off track. These constraints might include timing, budget or priority. While you never want to stifle creativity and imagination in the ideation process, these constraints can help avoid drifting off into “dream land.” The principles of idea generation In organisation everyone on the team plays an important role in generating ideas for our clients. It doesn’t always happen naturally, however. One must set aside time to develop these ideas. To better equip and train our team, I am reviewing several resources. One of them is a short book called A Technique for Production Ideas by James Webb Young. Principle one: a new idea is nothing more than a new combination of old elements Principle two: capacity to bring old elements into new combinations depends largely on the ability to see relationships Consciously or unconsciously, every idea produced follows a certain technique that includes these principles. They can cultivate a conscious idea-generating technique. According to Young, this technique follows a five-step process from which all ideas flow. It’s important to follow each step in sequence. Five Steps of the idea generation process Step 1 – Gather raw materials In the advertising world, it is the agency’s job to know the client, its products and, most importantly, its customers. Yet most agency people stop too soon in the process of gathering 57 CU IDOL SELF LEARNING MATERIAL (SLM)
information. If enough research exists, differences between products and consumers appear, leading to relationship individualities that may lead to an idea. In advertising, an idea results from a new combination of specific knowledge about products and people with a general knowledge about life and events. A practical step is to write information down and save it in a systematic way on your computer. Classify and organize information as you gather it. This helps prepare your mind for the idea-producing process. Step 2 – Blend your information together The second step, after thorough raw material gathering, is to blend the information together— bringing facts together to see how they fit. Bits of ideas may begin to appear; this can be mentally exhausting but press on and think of it as putting a puzzle together. Step 3 – Drop and forget it Drop the idea completely and turn it over to your unconscious mind: In other words, let it develop while you sleep. Also, do things that you enjoy that stimulate your mind and emotions. Listen to music; go to the movie or theater; read poetry; or get outside your normal routine. Step 4 – Have your eureka moment If you’ve really done your work during the first three steps, then the fourth happens naturally. Perhaps you’ve experienced this: a “Eureka” or “I’ve got it” moment. You wake up with a great idea or you are taking a shower or driving to work and the idea appears with clarity. Write it down or commit it to memory. Step 5 – Share your idea This is when reality hits. Your bright, shiny idea may lose some of its luster once others are made aware of it. However, the refining and tuning process that happens when you share your ideas with the team can offer enlightening perspective—and generate something better. 58 CU IDOL SELF LEARNING MATERIAL (SLM)
It’s important not to hold your idea too tightly: allow it to go through a critical-thinking process. If it’s a good idea, you will see that it has self-expanding qualities, and with this, possibilities you did not think of may come to light. This five-step process, as simple as it seems, will allow you to continue down the path of producing relevant and dramatic ideas for your business. However, Young’s method of idea generation is not the only approach. Other popular methods and techniques for generating ideas 1. Brainstorming Probably the most well know idea generation exercises are brainstorming and mind mapping. Brainstorming is a process which involves coming up with as many solutions for a specific problem as possible. This activity can either be done individually or in a group or sometimes a combination of both. Companies should brainstorm individually and then meet as a group to review, build upon and prioritize our ideas prior to sharing with the client. This not only helps us solve our clients’ problems but ensures key members are involved and aligned. More often than not, we find ourselves combining multiple ideas into one killer idea. 2. Mind Mapping Mind mapping is a visual framework representing tasks, concepts or items linked to a central concept. The main benefit of this technique is to help organize and categorize ideas faster so you can more quickly identify relationships between concepts. In fact, mind mapping can be useful for inspiring or uncovering connections you wouldn’t normally think of or see. For example, if you’re looking for ways to increase product sales, a mind map may illuminate new ways to think about how you message the product offerings or approach marketing overall. A mind map must have three characteristics The central tropic should be at the center of the map Main themes of the central topic should branch out from the center Second level topics form the structure of mind map Differed colors should be used to denote relationships, doodling to highlight areas and having fun when mind mapping. Let the mind and the team wanders free to create those new, 59 CU IDOL SELF LEARNING MATERIAL (SLM)
unexpected relationships. When the mind mapping process is complete, then you can go back and refine ideas that come out of it. 3. Opposite thinking Also known as reverse thinking, instead of going with the rational route to solve the problem; you consider the exact opposite of the idea. For example, if you’re generating ideas for how to increase email subscribers, you’d instead ask yourself: How do I stop getting new email subscribers? This approach allows you to expand your thought process and pinpoint certain areas or solutions that wouldn’t normally cross your mind. 3.3 SWOT ANALYSIS SWOT stands for Strengths, Weaknesses, Opportunities, and Threats, and so a SWOT Analysis is a technique for assessing these four aspects of your business. One can use SWOT Analysis to make the most of what one has got, to the organization's best advantage. And one can reduce the chances of failure, by understanding what the business is lacking, and eliminating hazards that would otherwise catch the business unaware. A SWOT analysis was systematically applied at a national level when preparing the afore- mentioned long-term strategy. However, it is clear that only the quality performance of a SWOT analysis will form a suitable strategic structure. Therefore, the organization environment will much influence organization performance now and in the future. The detail of SWOT analysis is explained in following sections. Internal Environment Internal environment are an internal factors within an organization in many areas such as management, staff, finance, research and development, operational efficiency and capacity, technical frameworks, culture, and organizational structure. Internal environment consists of strengths and weaknesses in organization, those viewed as a result of factors and variables that can be controlled within organizations. Strengths Strengths are represents the organization’s internal power and strong points of view that an organization possess to compete against its competitors. It also can be view as organizational capabilities and internal positive attitudes that enable organizations possess strategic power to 60 CU IDOL SELF LEARNING MATERIAL (SLM)
achieve organizational goals. It also can define as skills and abilities that enable organizations set out and implement their strategies in order to do better than their competitors. Weaknesses Weaknesses are represents the organization’s negative impact of product and service value with regards to customers or competitive environment. It also can define as shortages in internal capabilities that make organizations unable to achieve their goals or lose their competitive advantage. This may allow their competitors to do better than the organization performance. Thus, it should be determine and acknowledge earlier in order bitter reality without procrastination. External Environment External environment is contains all changes that take places outsides the organization’s boundary such as customers, suppliers, economic, political, cultural, and technological changes. External environment consists of opportunities and threats of an organization. Opportunities Opportunities are defined as a set of conditions suitable for achieving goals at the right time. It is stated that opportunities can be divided into three types those are added, supplementary, and explosive. Added opportunity is using the available resources to expand their benefits, so the revenues in this category are limited. Then, supplementary opportunity is where the organizations have to acquire new knowledge. Where explosive opportunity requires organizations to invest capital in R&D to make large changes in organization standards and attributes. Threats Threats can define as a challenge caused by a negative attitude inconsistent with the organization common norms. Besides, it also can be viewed as any improper event of force in the external environment that causes harm to the organization’s strategy. In addition, threats are a set of conditions, resources and capabilities that organizations need to pressured, but cannot influence or control over it, means which is out of our control. Why Use SWOT Analysis? SWOT analysis is use to develop a plan or find a solution for an organization’s problem. This is because that takes consideration in many different internal and external factors which is 61 CU IDOL SELF LEARNING MATERIAL (SLM)
maximizes the potential of the strengths and opportunities while minimizing the impact of the weaknesses and threats of an organization. When to Use SWOT Analysis? SWOT Analysis is uses when needs to developing a strategic plan or finding a solution to a problem. These tasks are performed by managers, designers or by the entire project team. Teamwork is particularly effective in providing structure, objectivity, clarity and tends to focus further discussions about strategy that might otherwise tend to wander. SWOT Analysis Usage SWOT analysis has been used by countless practitioners, marketing researchers, and is a familiar and popular tool for business marketing and strategy areas. This tool is used to assess alternatives and complex decision situations. It can be constructed quickly and can benefit from multiple viewpoints as a brainstorming exercise. There are three steps to use the SWOT analysis which is firstly analyses the internal factors and then analyses the external factors, and finally create a worksheet. First and foremost, internal analysis is examining the capabilities of an organization’s strengths and weaknesses. The planner might list down ideas from projects that both successful and unsuccessful completely in the top row of the SWOT grid. Second step is external analysis known as environmental analysis here has to analyses the opportunities and threats or obstacles to organization’s performance that place at the bottom row of the SWOT grid. This has to carefully examine the market in which you intend to launch the product and analyze what the status of the competition. The Coca Cola Company SWOT analysis examples. Strengths Variety of products – one of the biggest strengths that The Coca Cola Company has is their incredible variety of products across different categories. In fact, there are over 500 brands across 200 companies owned by Coca Cola. This not only gives them a higher control on the market, but also more diversified expertise, and less overall competition. 62 CU IDOL SELF LEARNING MATERIAL (SLM)
Market share – with a market share of 43% in the soft drink industry, they have a very solid positioning compared to many other competitors. Which also means that it would be extremely difficult to compete with Coca Cola and its almost unlimited resources? Brand recognition – Coca Cola is one of the most recognized brands in the world, which gives them a huge advantage in front of their competitors. It also means that any new product or brand they invest in will gain visibility almost immediately. Secret recipes – and last but not least, the company prides itself in having a secret recipe for its flagship product – the Coca Cola. This means that this product will be difficult to replicate by competitors Weaknesses Health trends – one of the biggest weaknesses that the company has is its unability to adapt to current health trends. As people are becoming more and more conscious about the unhealthy food and the amount of sugar they are consuming, soft and sugary drinks are slowly getting substituted by healthier options. Sugar substitute – another health-related weakness for the company involves the difficulty of improving their quality of their product without affecting its famous taste. Coca Cola has been actively looking for healthy sugar substitutes for years with no success. Current positioning – the current positioning of Coca Cola and its soft drinks is both a blessing and a curse. A blessing, because everyone knows the brand and the product it offers. This kind of brand recognition is something that every company dreams of. However, this weakness comes with the fact that Coca Cola already has a certain reputation established for it that is difficult to change. And, considering its sugary drinks with mysterious and secret ingredients, it is certainly not the most positive one. Opportunities Health trends – if The Coca Cola Company closely monitors and responds adequately to current health trends, they have a huge opportunity to increase their market share. And get an even bigger chunk of the soft drink industry. Especially if they manage to find a healthy substitute for sugar. 63 CU IDOL SELF LEARNING MATERIAL (SLM)
Few major competitors – considering the dominance of the brand and only a few major competitors for these particular types of products, Coca Cola can quickly introduce new products with the right marketing strategy. Threats Healthier alternatives – although the company is quite dominant when it comes to soft drinks, a lot of other healthier alternatives are arising on the market. Flavoured waters, smoothies, organic drinks, green juices, and so on, are just some of the alternatives that people are starting to prefer as they get more conscious with their health. Negative press and media coverage – although The Coca Cola Company is known for its brilliant Marketing strategies and its incredible brand recognition, it also gets a lot of negative coverage for being unhealthy. In-depth research, YouTube videos, and even articles from reputable sources such as the telegraph might cause serious harm in the long run. Airbus Airbus, the world’s largest airliner manufacturer, and the one who took the most orders in 2019. So, let’s see what are the strengths, weaknesses, opportunities and threats for Airbus: Strengths Market share – with an estimated market share of almost 63%, Airbus is the largest aircraft manufacturer in the world, which gives the company a very strong and powerful position in the industry. Global network & international presence – with business operations located in Europe, the Americas, Africa & the Middle East, and Asia, Airbus has an incredible international network and presence. Innovation & technology – additionally, Airbus is putting a huge focus on investing in technology, innovation, and next generation manufacturing, more than any other competitor in the industry. Eco-efficiency – and last but not least, another strength that Airbus counts with is eco-efficiency. The company has been recognized is a leader in proposing and developing solutions for sustainable aviation. 64 CU IDOL SELF LEARNING MATERIAL (SLM)
Weaknesses Delay in delivery – in 2019, Airbus took more orders for aircraft delivery than any other competitor, including its biggest rival Boeing. However, this caused a delay in the delivery of the orders, causing the company to accumulate a lot of backlogs. Operational inefficiencies – compared to rivals such as Boeing, Airbus has gained a reputation of being somewhat inconsistent when it comes to executing operations. The company is often delaying launches of its new models – for example, the launch of Airbus A380 was delayed by more than one year. This weakness is definitely something that Airbus could work on. High production costs – another key weakness of the company is the fact that it has higher production costs than its main rival Boeing, which leaves them with lower profit margins. Opportunities Boom in Travelling – as the travelling industry is booming due to the growing percentage of the middle class, and the lower costs for airplane tickets compared to a decade ago, aircraft manufacturers are receiving more orders than ever. In fact, even in the next few years, the air traffic is anticipated to grow by 4.3% annually. According to Airbus, this alone will require “39,200 new passenger and dedicated freighter aircraft over the next 20 years.” Technological advances – over the last few years, the industry has gone through a lot of innovation processes and technological improvements. This has allowed Airbus to improve its weaknesses and offer better and faster performance. Also, the fact that aircrafts are becoming more and more secure with the new technologies make people want to travel even more. Threats Competition – the competition in the aerospace industry is practically considered a duopoly. The reason why is because Boeing and Airbus have a combined share of 91% for the whole commercial aircraft market globally. This means that they will not have to fight off small competitors, but also that the competition between both companies is extremely fierce. That can be a significant threat for Airbus. 65 CU IDOL SELF LEARNING MATERIAL (SLM)
Global pandemic – in 2020, the whole world suffered from the COVID-19 pandemic. This alone had a severe impact on the growth of the commercial aircraft market, as people suddenly had to stop travelling. And although this was a temporary decrease that is slowly starting to recover, aircraft manufacturers like Airbus will be affected at least for the next one year. Potential competitors in key markets – of course, the fact that Airbus and Boeing are currently dominating the global market does not mean that this will last forever. Currently, important markets like China and Russia are also planning to develop their own commercial aircraft. If that happens, it will most probably shrink the market share for Airbus. Zara Strengths Efficient manufacturing & delivery – Zara is one of the most efficient clothing companies in the world when it comes to all operational processes – manufacturing, delivery, supply chain and logistics. Reportedly, the company needs just 1 week to develop a new product and get it to all 2,259 stores it has worldwide, compared to an industry average of 6 months. This gives Zara a huge advantage when it comes to delivering new designs in record time. Competitive pricing – additionally, the company also offers a very competitive pricing for the variety and amount of products it offers. Its clothing is targeted to a middle class audience; although it´s also true that the pricing is adapted to the characteristics of each market. For example, the prices for Zara in South Korea are 96% higher than the prices in Spain, taking into account the exchange rate of the study Strong global presence – As we already mentioned, Zara has over 2,200 stores across 96 countries, positioning itself as a strong international brand with a solid support (Inditex, with over 7000 stores). Fast reaction to new trends – the company is known for imitating high-fashion trends, and it is extremely fast when it comes to spotting and replicating them for its own products. Weaknesses 66 CU IDOL SELF LEARNING MATERIAL (SLM)
Zero policy advertising – the company is famous for its zero policy advertising. This means that, instead of investing in Marketing and Communication actions, they use the money for opening new stores. Although this policy has some awesome benefits, I think that it´s also a very big weakness. The heavy digital advertising done by competitors can completely overshadow Zara in the long run. Limited product stock – because Zara delivers fashion pieces in record time, they don´t produce as much stock as other companies would. Which is not great news for customers who often love a piece, and it is already out of stock – or simply not in the size they need. Controversies – additionally, the company is also involved in multiple controversies revolving child labour and paying under minimum wage. As people are getting more and more conscious about these topics, these controversies is doing a lot of harm to the company´s reputation. High fashion imitation – as we already mentioned, Zara is known to imitate fashion trends. Which means that they are not a trend setter, and they do not offer a lot of unique and creative pieces designed exclusively by them? Opportunities Growing demand for high fashion – currently, there is a growing demand for clothing that looks high fashion, but don´t cost thousands of dollars for a single piece. This is a great opportunity for Zara, which does precisely what people want – selling high fashion style for affordable prices. Fast fashion – as customer behavior is changing, people get bored with everything faster than ever. And this is true for fashion as well – clothes that people would wear for months and years now get substituted with new pieces much more often. Which is another excellent opportunity for Zara as the so-called “fast fashion is on the rise”. Market growth – the growth of the apparel market is steadily increasing by 5-6% every year, which is great news for clothing companies like Zara. Threats Growing competition – the increasing demand for fashion and apparel also means that competition is growing as well. With huge online providers taking over the Internet such as ASOS, Fashion Nova, Shein and others, Zara´s popularity is 67 CU IDOL SELF LEARNING MATERIAL (SLM)
becoming threatened by other companies. Especially considering the fact that these providers actually offer products from multiple brands at the same place. Increasing costs – another tendency that could impose a significant threat for Zara are the increasing costs for production and raw material. Which, as a consequence, will probably reduce its revenue and profit margins? Especially considering the fact the prices are already relatively low! For now, Zara has managed to develop a well integrated and efficient supply chain that keeps the cost of raw materials low. But this might not last forever, especially if the prices keep rising. Regulatory threats – the business industry is gradually getting more and more regulated. On a global scale, governments and legal agencies are regulating all kind of sectors and businesses, and the fashion market is not an exception. This includes labour, quality, customer services, and many other aspects of the industry. All of these regulations might eventually have a negative impact on Zara. 3.4 NEW AND EXISTING PRODUCT AND SERVICES: There are two key business opportunities in Product Development. First, you can improve an existing product. Or second, you can create a totally new product. Which is better for your business? It requires less resource-intense to improve an existing product. The company already has a customer base, a brand position and the market is familiar with the company and their offerings. On the other hand, the company by introducing a new product tries to get more business growth. Bringing new customers into the fold may pay dividends down the line in cross-selling your products and services. So the correct answer is, probably both. But what is the ideal split between the two? What percent of my revenue should come from completely new products and what percent from product improvement? There is no hard and fast rule about this, although the company can probably find many different answers with a quick Internet search. Rather than focusing on these guidelines, it is more important to look at your individual situation. Some of the question you should consider is: Are there opportunities to improve existing products? 68 CU IDOL SELF LEARNING MATERIAL (SLM)
If the products have significant weaknesses, those are opportunities that are sitting right in front of you. Are the customers complaining or asking for changes in the product? Is company losing sales to the competitors? This might be your first line of attack for product development. Where is the life cycle of the company’s existing products? If the company is close to retiring a product, they may not want to invest heavily in developing improvements because there would be no payback. If the company just introduced the product, it may be too soon will introduce changes as it is still struggling with introduction challenges. On the other hand, if your product is in the sweet middle spot in its life, introducing improvements can boost sales and revenue, and may actually extend the product’s life expectancy. Will the new product leverage the existing brand and operations? If the company is going to sell the new product to existing customers, you have a leg up. They are already familiar with you, your brand, and what you stand for. You may have existing sales relationships. Assuming that customers like using the same brand can be a huge cost-saving. Can the company leverage the customer service infrastructure? What about online resources? Marketing costs for introducing a new product are significant, and leveraging the existing market position can create synergies and cost savings. Will the company be entering a completely new market with new product introduction? New market entry is difficult and costly. Starting from scratch with consumer awareness, educating the market about your offering and how it is different and better than anything else available can take a lot of time and resources. Product trial may be difficult to achieve. Product adoption may not come as quickly as expected. Depending on the sales cycle, it may be years before you can tell whether the launch was successful. If you’re not willing to make that investment, this might not be the way to go. Above information gives an idea as to whether introducing new products or improving existing products – or both – are the better strategy for the company. 69 CU IDOL SELF LEARNING MATERIAL (SLM)
Information can come from internal sources, such as financials, sales, prospects, adoption rates, complaint information. Third party sources of information such as government data and product reviews can help you identify opportunities. Syndicated industry and market data can be especially helpful (especially if the company is entering a new-to-you market) to help the company to evaluate potential demand. Finally, marketing research to evaluate customer interest in, appeal and likelihood to purchase are important in projecting potential demand for the product. Product development – Whether completely new or simply improved – is an important investment for the company’s future. Don’t count on averages or industry guidelines to tell how the company should invest in Product Development resources. The information can be used to build a custom strategy specific to adjust as per company requirement. With inclusion of an investment in Product Development process, the company can create competitive advantage that will improve sales, increase customer loyalty, and drive long-term business success. 3.5 FRANCHISING AND ITS BENEFITS Advantages of franchising for the franchisee The franchisee is the third-party buyer who purchases the brand rights from the franchisor (the owner of the brand). The franchisee pays an initial franchise fee to the franchisor for the rights to use their brand in addition to ongoing franchise fees for marketing, royalties, and more. There are several advantages of franchising for the franchisee, including: 1. Business assistance One of the benefits of franchising for the franchisee is the business assistance they receive from the franchisor. Depending on the terms of the franchise agreement and the structure of the business, the franchisee might receive essentially a turnkey business operation. They may be provided with the brand, the equipment, supplies, and the advertising plan—essentially everything they need to operate the business. 70 CU IDOL SELF LEARNING MATERIAL (SLM)
All franchises provide the knowledge and wisdom of the franchisor. Whether that knowledge is stored in a searchable, digital knowledge base or is a phone number to reach the franchisor directly, the franchisee has access to a deep reservoir of business assistance to guide them through the process of owning and operating a business. This knowledge can be essential to running a successful business and makes it much easier than starting a business from scratch. 2. Brand recognition A big benefit that franchisees receive when opening a franchise is brand recognition. If you start a business from scratch, you would have to build your brand and customer base from the ground up, which would take time. Franchises, on the other hand, are already well-known businesses with established customer bases built in. So when you open a franchise with this recognizable branding, people will automatically know what your business is, what you provide, and what they can expect. 3. Lower failure rate In general, franchises have a lower failure rate than solo businesses. When a franchisee buys into a franchise, they’re joining a successful brand, as well as a network that will offer them support and advice, making it less likely they’ll go out of business. As well, franchises have already proven their business concept, so you have reassurance that the products or services you’ll be offering are in demand. 4. Buying power Another benefit of franchising is the sheer size of the network. If you’re operating a standalone business and need to order products or supplies to make your products, you’re paying more money per item because your order is relatively small. However, a network of franchises has the opportunity to purchase goods at a deep discount by buying in bulk. The parent company can use the size of the network to negotiate deals that every franchisee benefits from. A lower cost of goods lowers the overall operation costs of the franchise. 5. Profits Franchises see higher profits than independently established businesses. Most franchises have recognizable brands that bring customers in droves. This popularity results in higher profits. 71 CU IDOL SELF LEARNING MATERIAL (SLM)
Even franchises that require a high initial investment for the franchise fee see high return on investment. 6. Lower risk Starting a business is risky. This is true whether a business owner is opening an independent business or purchasing a franchise. That being said, the risk is lower when opening a franchise. One of the reasons franchise owners face lower risk than independent business owners is the franchise network. Most franchises are owned by established corporations that have tested and proven the business model of the franchise in multiple markets. This lower risk may also make it easier to access loans, including the best SBA franchise loans, to help you launch your business. 7. Built-in customer base One of the biggest struggles of any new business is finding customers. Franchises, on the other hand, come with instant brand recognition and a loyal customer base. Even if you’re opening the first branch of a franchise in a small town, the likelihood is that potential customers are already familiar with the brand from exposure to TV commercials or travel to other cities. 8. Be your own boss One of the biggest benefits of owning a business is being your own boss. When starting a franchise business, you get to be your own boss with the added benefit of receiving support from the franchise’s knowledge base. Owning a business is hard work, but when you’re your own boss, you get to create your own schedule, have autonomy over your career, and potentially work from home. A franchise gives you the benefit of being your own boss without the risk of starting your own independent business. Disadvantages of franchising for the franchisee While there are many advantages of franchising, it would be remiss to think there aren’t also disadvantages. Let us explain further. 1. Restricting regulations 72 CU IDOL SELF LEARNING MATERIAL (SLM)
While a franchise allows the franchisee to be their own boss, they’re not entirely in control of their business, nor can they make decisions without taking into account the opinion of the franchisor. For most franchisees, the most frustrating disadvantage that they face is that they must follow the restrictions laid out in the franchise agreement. The franchisor can exert a degree of control over the majority of the franchise business and decisions made by the franchisee. Depending on the franchise agreement, the franchisor can control any of these aspects of the business: Business location Hours of operation Holidays Pricing Signage Layout Decor Products Advertising and marketing Resale conditions These restrictions are put into place to maintain uniformity between the different franchises and the overall brand, but they can also be frustrating and feel limiting for the franchisee. 2. Initial cost While the initial investment of the franchise fee buys a lot of benefits for the franchisee, it can also be costly—especially if you’re joining a very well-known and profitable franchise. While this often translates to larger profits, coming up with this initial money can put a strain on any small business owner. 3. Ongoing investment In addition to the initial investment the franchisee will have to provide, additional, ongoing costs that are unique to franchises. Within the franchise agreement, the ongoing costs of the franchise should be enumerated. These costs might include royalty fees, advertising costs, and a charge for training services. 4. Potential for conflict 73 CU IDOL SELF LEARNING MATERIAL (SLM)
While one of the benefits of owning a franchise is the network of support you receive, it also has the potential for conflict. Any close business relationship, especially when there’s an imbalance of power, comes with a risk that the parties won’t get along. While a franchise agreement states the expectations of both the franchisee and franchisor, the franchisee has minimal power to enforce the franchise agreement without a costly legal battle. Whether it’s lack of support or simply a clash of personalities, the closeness of the business relationship between franchisor and franchisee is rife for conflict. A franchisor should screen all potential franchisees before entering into business with them, and as the franchisor, he should also use this opportunity to get a feel for the franchisor’s personality and management style. 5. Lack of financial privacy Another disadvantage of franchising is a lack of privacy. The franchise agreement will likely stipulate that the franchisor can oversee the entire financial ecosystem of the franchise. This lack of financial privacy can be seen by franchisee as a disadvantage of owning a franchise; however, it may be less of an issue if you welcome financial guidance. Advantages of franchising for the franchisor The advantages and disadvantages of franchising don’t solely apply to the franchisee, of course. The franchisor should also weigh the pros and cons before deciding to enter into this business model. First, let’s explore the benefits of franchising that the franchisor can enjoy. 1. Access to capital One of the biggest barriers to expansion for small business is the money it costs to expand. And while there are several business loan options, they don’t always pan out. Franchising your business will take some time and money on your end, but it also has the potential to make you a lot of money in the form of franchise fees. Expanding the business as a franchise allows the franchisor to expand with little debt. The business expands as capital becomes available from franchisees instead of taking on debt through loans. The franchisor also shares minimal risk with the franchisee because the franchisee puts their name on the deed for the physical location of the business and lowers the franchises overall liability. 2. Efficient growth 74 CU IDOL SELF LEARNING MATERIAL (SLM)
Opening the first unit of a business is costly and time consuming. Opening a second unit can be almost as difficult. When that burden is shared with another business owner, it makes the process more efficient and takes the onus off the initial business owner. When trying to grow the business in small business, starting a franchise can make opening multiple locations a much simpler process. 3. Minimal employee supervision One of the big stresses as a business owner is hiring and managing employees. As a franchisor, the only support that he has to provide to the franchisee is training and business knowledge. In general, the franchisor has no hand in the management, hiring, and firing of employees. This minimal employee supervision allows the franchisor to focus on the growth of the business instead of day-to-day operations. Instead of worrying about whether an employee shows up for their shift or not, the franchisor is focused on the big picture for business success. 4. Increased brand awareness One of the many benefits of franchising is increased brand awareness. The more locations the brand has the more people who are aware of the brand. And the more these customers come to know and love the brand, the more profitable and successful the brand can be. This increased brand awareness of a multi-location franchise can be highly beneficial to the franchisor and their franchisees—a win-win. 5. Reduced risk One of the biggest benefits to the franchisor in a franchise agreement is the ability to expand without an increase in risk. Because the franchisee takes on the debt and liability of opening a unit under the name of the franchise, the franchisor gets all the benefit of an additional location without taking on the risk themselves. Additionally, the franchisor is often further insulated because the franchise is incorporated as a new business entity, leaving the original business owned by the franchisor as a separate entity from the franchise. A franchise lawyer can help to set up the terms for this type of protection within the franchise agreement. Disadvantages of franchising for the franchisor 75 CU IDOL SELF LEARNING MATERIAL (SLM)
While franchisors receive a lot of benefits from starting a franchise, there are also some disadvantages to consider. 1. Loss of complete brand control When a business owner opens an independent business, they maintain complete control over their brand and every decision that happens within the business. When a franchisor allows a franchisee to open a business under their brand, they’re giving away (actually, selling) some of the control over their small business branding. While the franchise agreement should contain strong stipulations and rules to guide the decisions made by the franchisee, your franchisees won’t be clones of you. They will think and act differently, and your brand could wind up suffering because of it. 2. Increased potential for legal disputes Any time you enter into a close business agreement with other people, you open yourself to the risk of legal disputes. While a well-crafted and lawyer-approved franchise agreement should limit a lot of the possibilities for legal disputes between the franchisor and franchisees, these disputes are still possible. Any legal disputes that must be resolved in mediation or through the court system can be costly in both time and money, which takes away from the success of the franchise. 3. Initial investment While much conversation is devoted to the initial investment that a franchisee must make in the franchise, that ignores the initial cost that is taken on by the franchisor. When a franchisor starts a franchise, there’s a startup cost to get the business in operation. A franchisor must make sure that the franchise agreement is written clearly and reviewed by a lawyer experienced in franchise law. You may also hire a franchise consultant for expertise during this process. Starting a franchise requires an initial investment of both time and money on the part of the franchisor. 4. Federal and state regulation While not entirely a drawback, dealing with the federal regulations set down by the Federal Trade Commission for franchises can be a nuisance for franchisors. These regulations ensure that franchises are operated fairly, but it also requires time and effort from the franchisors to meet all of these regulations. 76 CU IDOL SELF LEARNING MATERIAL (SLM)
And while you don’t have to file your agreement with the federal government, you do have to file with some states—and you will have to make sure you’re compliant with different state’s laws. This can be a time-consuming process, but can be made easier with professional guidance. India: The Next Big Hot Spot for Global Franchisors? In India, whether in a metro city or smaller town, a quick look around the bustling markets will give a sense of the presence of numerous brands all around. From heading to the nearest Domino's or KFC for a bite or for a shopping spree with brands like Levi's or the Gap, the Indian masses have helped franchising to rise substantially in recent years. According to a recent KPMG and Franchise Association of India (FAI) report, the Indian franchise industry is estimated at US$50.4 billion, a fourfold growth since 2013. A majority of this growth can be attributed to professionals, especially those from an IT background, who chose the franchising route to entrepreneurship in the past 4 to 5 years. Brand India With a population of more than 1.3 billion, India is poised to become the third-largest consumer market, behind only the U.S. and China; and consumer spending in India is expected to grow from US$1.5 trillion at present to nearly US$6 trillion by 2030. This makes India a huge potential market for international brands, as well as for in-house entrepreneurs. Further, the number of \"ultra\" high-net-worth individuals (HNIs) in India is expected to double to 330,400, with more than US$300 million worth of assets by 2022. This rise in the number of HNIs is creating a level of sustainability in the franchising ecosystem. Moreover, India offers vast opportunities for franchisors, thanks to the surging entrepreneurial instincts of its people. According to estimates, almost 35 percent of all franchise buyers are first-timers in business. While earlier franchising was mainly done by people who were already doing some business, franchise opportunities currently act as a gateway for first-time entrepreneurs. These new entrepreneurs are very receptive to international franchises. In fact, the growing interest toward franchising in India is not uncalled for when compared against industry estimates that 90 percent of Indian startups fail within 5 years from lack of 77 CU IDOL SELF LEARNING MATERIAL (SLM)
mentorship and structure; whereas the success rate in franchising is about 85 percent. More entrepreneurs are associating with brands that assure a relatively higher rate of success. Indeed, franchising is one way India can fight the issue of economic disparity. Besides, franchising is not only a great way to encourage self-employment; it also is a big employment generator. A single franchise store employs between 5 and 30 people. The job creation from franchises in India is estimated to be to the tune of 1.5 million. International franchise hotspot India is already the second-largest franchise market in the world after the U.S., with 4,600 active franchisors (50 percent regional brands, 34 percent national brands, and 16 percent global brands) and nearly 200,000 outlets operated by almost 170,000 franchisees. Over the past 20 years, India has been a major hotspot for international brands. Some of the international brands that operate in India through franchisees include Anytime Fitness, Baskin-Robbins, Burger King, ChemDry, Domino's, Dunkin', Gold's Gym, Johnny Rockets, KFC, Krispy Kreme, McDonald's, Pizza Hut, RE/MAX, Subway, and Toni & Guy. Domino's represents one of the most successful franchise growth stories in India. The company opened its first pizza outlet in New Delhi in 1996 through Jubilant Food Works and has grown to more than 1,250 stores in India. In fact, with its product improvements and strategic changes, Domino's has struck the right chords with customers to become the largest pizza company worldwide and in India. Subway, which holds the title of the world's largest fast-food chain with more than 44,700 franchises, has found success in simplicity, focusing on what it calls its \"core carrier\": fresh bread and the oven it bakes in. Subway began its operations in India in 2001 and currently operates a chain of more than 650 restaurants across more than 70 cities. The company's key unique selling points consist of strong marketing, supply chain management, a value-driven business operation, and complete back-end support for entrepreneurs. RE/MAX India, the largest network of Indian real estate brokers, is setting records with 1,000 brokers having a presence in 46 cities with close to 200 offices in India. The international real estate giant aims to add 1,500 agents in the current fiscal year. Brands from North America, Australia, and the U.K. top the list because of the large Indian diaspora living in these regions. Many non-resident Indians have brought these brands to India through a master franchise arrangement. 78 CU IDOL SELF LEARNING MATERIAL (SLM)
Brands from the Asia/Pacific and China regions, including Singapore, Malaysia, Hong Kong, Japan, and Korea, have been aggressively entering in the Indian market. Mobile phone brands from China to specialty retailers like Miniso, Mumuso, and lifestyle brands like Muji have been vying for the Indian customer with their quality products and competitive prices. There is a hope to see more service-based formats like cleaning services, education, and healthcare move from these countries to India. Following a slew of foreign direct investment (FDI) relaxations on retail and the government's aspirations to make it into the top 50 in the \"Ease of Doing Business\" rankings, international brands are making a beeline to enter the India market. Key sectors Sectors like retail, food service, and health and wellness contribute almost 60 percent to the overall franchising business in India. Retail. The Indian retail industry has emerged as one of the most dynamic and fast-paced industries following the entry of several new players. This trend is further fortified by the government's decision to allow 51 percent FDI in multi-brand retail and 100 percent in a single brand. Further, there has been sharp rise and improvement in the urbanization and consumption pattern of Indians, which is expected to grow the retail market from an estimated US$672 billion in 2017 to US$1,200 billion in 2021. Total consumption expenditure is expected to reach nearly US$3,600 billion by 2020, about double the US$1,824 billion in 2017. Food service. On the other hand, food service businesses have never been busier, thanks to Millennials with high disposable income and little inclination to don their aprons in the kitchen. India is home to the world's largest Millennial population, which has lifted the average frequency of eating-out/ordering-in to 6.6 times per month and average spending of Rs 2,500 (about US$35) per person per month. With food and beverages estimated to account for 42 percent of Indian household expenditures by 2021, the trends are indeed positive for food service franchises. Health and wellness. With increasing awareness, the health and wellness industry is experiencing a \"healthy\" boom that is shaping the ever-growing industry like never before. Leading the pack, the beauty and wellness industry in India is growing twice fast as markets in the U.S. and Europe. According to a KPMG report, India's beauty and wellness market is estimated at Rs 80,370 crore in 2018. {Editor's note: US$11.35 billion if we've done our math 79 CU IDOL SELF LEARNING MATERIAL (SLM)
correctly.} The fitness industry is not far behind. According to the IHRSA Global Report 2018, the health club market in India is worth around Rs 6,343 crore in 2018 {Ed: about US$9 billion} because of rising awareness among people to remain fit, and rising disposable income. Experts opine that the education sector in India is still largely unorganized and unexplored, with a huge scope for franchising in pre-school, coaching institutes, vocational institutes, and after-school brands. India has the world's largest population of about 500 million in the age bracket of 5 to 24 years, which provides a great opportunity in terms of a large addressable education market. In addition, the education sector in India remains a strategic priority of the government, which has allowed 100 percent FDI in the education sector through the automatic route since 2002. The education sector in India, estimated at US$91.7 billion in FY2017-18, is expected to reach US$101.1 billion in FY2018-19. The franchise facilitator India presents numerous exciting opportunities for brands to expand and prosper; there are certain challenges that must be taken into account. The biggest challenge for franchising in India is that the government has not recognized it as a small-business facilitator. Unlike in the U.S., India does not have a comprehensive franchise law to regulate this sector. In fact, to comply with the legal requirements, the Indian franchise venture must follow several state and central government laws. Understanding local culture, tastes, and \"Indianization\" of the products is yet another set of challenges faced by global brands entering the country. Further, expensive retail space in the country's large cities is another challenge restricting fast expansion of brands. Despite these market impediments and constraints, most of the global brands have achieved success with effective market entry and expansion strategies, adapting their products and services to local market preferences. International market entry specialist FranGlobal, part of Asia's largest franchising solutions company Franchise India Holdings, is helping a majority of the international brands enter and expand in the Indian subcontinent and abroad. To date, FranGlobal has successfully partnered with brands like The Coffee Bean & Tea Leaf, Gloria Jean's Coffees, Carl's Jr., Subway, Fatburger, Doner & Gyros, Harrys of London, Chaiiwala UK, Mujosh, and many more in their launch, setup, and expansion in India and other countries. 80 CU IDOL SELF LEARNING MATERIAL (SLM)
Experts believe that despite the boom in franchising, India still has a large untapped potential and is set to grow even faster in the coming years. India Franchising Fast Facts Indian franchise industry is estimated at US$50.4 billion, a fourfold growth since 2013. There are 4,600 franchisors in India (50 percent regional brands, 34 percent national brands, and 16 percent global brands). India has nearly 200,000 franchise outlets operated by almost 170,000 franchisees. Nearly 60 percent of franchise locations are in unit franchise format. Approximately 1.5 million people are employed by franchised businesses in India. Approximately 26 percent of franchise buyers are women. Almost 35 percent of all franchise buyers are first-timers in business. Postgraduates and graduates together make up 84 percent of franchise businesses. The franchising sector contributes nearly 2 percent to the country's GDP and is forecasted to contribute 5 percent to India's Gross National Income by 2025. The success rate in franchising is about 85 percent, compared with 90 percent of Indian startups that fail within 5 years. The number of ultra-HNIs in India is expected to double to 330,400 with more than US$300 million worth of assets by 2022. India is the third-largest consumer of goods and services in the global market. Launching a franchise in India is a tried-and-tested approach of starting one's own venture. Automobiles, beauty, fast food, education, wellness, postal delivery, fashion, and healthcare are some of the most sought-after domains for starting a franchise. Franchise business is one of those models that brands have adopted for expansion in India. There are many low cost franchise opportunities in India one can go for. India is a mega-market for the most profitable franchise businesses. The franchise setup is rapidly expanding in the country. It helps both the franchisee and the franchisor in achieving their individual goals. Many successful entrepreneurs have opted for the franchise model instead of getting along with cringe business ideas. You may ask, \"What is the most profitable franchise to own?\" This post outlines the 10 most profitable franchises in India to give you some idea. Top 10 Profitable franchise business opportunities in India for young entrepreneurs 81 CU IDOL SELF LEARNING MATERIAL (SLM)
S.NO Franchise Business Franchise Brands 1 Courier & delivery 2 Pre-School InXpress 3 Wraps & rolls Wow Kidz and DPS Global Salon Playschool 4 Gifting 5 Ice cream Kathi Junction, RollaCosta, and 6 Electric vehicle Kathi Express 7 Juice & shakes 8 Louis Unisex Salon and Studio99 Language schools 9 Ferns N Petals Pharmacy Giani’s, Gelato Vinto, and Teddy 10 Gayatri Electric Vehicle Lounge London Shakes and Juice Lounge The British Institute and English Pillars Care Pharmacy and Sanjivani Top Profitable Franchise Business Opportunities in India 1. Subway Franchise Business Subway Industry Food and Beverages (Fast Food) Founded in 1965 Investment INR 54-90 Lakhs 82 CU IDOL SELF LEARNING MATERIAL (SLM)
Franchise Business Subway Franchise Units More than 500 Subway is the largest sub-sandwich chain in the world. Subway was started by Fred DeLucea in 1965 to help pay his college tuition fees. Subway's mission is to provide service of the highest quality to its customers at affordable prices, something that every brand abides by nowadays. Today, Subway is one of the few mainstream fast food joints that thrive on the promotion of a range of healthy food options. With salads and endless sandwich combinations on a variety of bread such as whole wheat, multigrain, and gluten-free variants, Subway has created a loyal customer base in the process. 2. Giani’s Franchise Business Giani's Industry Food and Beverages (Desserts and Ice creams) Founded in 1956 Investment INR 10-20 Lakhs Franchise Units Approximately 50+ Giani’s is one of the oldest ice cream parlors in India. It was founded by Giani Gurcharan Singh in 1956. When he launched Giani di Hatti amidst the bazaars of Chandni Chowk, Old Delhi, it only had rabri, faluda and mango shake which won countless hearts at that time. Giani's has become unstoppable since then. Giani’s went on to launch several company-owned and franchise outlets in Northern India and experienced big returns on its investment. 3. Jawed Habib Hair and Beauty Ltd. Franchise Business Jawed Habib Hair and Beauty Ltd. Industry Beauty and Wellness 83 CU IDOL SELF LEARNING MATERIAL (SLM)
Franchise Business Jawed Habib Hair and Beauty Ltd. Founded in 2000 Investment INR 20-30 Lakhs Franchise Units Approximately 875 Jawed Habib Hair & Beauty 'Jawed Habib' is a hair grooming and wellness brand founded by Jawed Habib. Jawed comes from a family of barbers; thus, haircutting was not new to him. His grandfather was the barber of famous dignitaries such as Lord Mountbatten and Pandit Jawaharlal Nehru. Following the legacy, Jawed’s father was appointed as the official hairstylist of Rashtrapati Bhawan. But Jawed Habib had different plans and wanted to establish his brand nationwide. He succeeded in his entrepreneurial endeavors and also played a crucial role in changing the paradigmatic view of a barber. Jawed transformed the image of an ordinary barber into that of a glamorous hairdresser. 3. EuroKids Franchise Business EuroKids Industry Pre-school Education Founded in 2001 Investment INR 10-20 Lakhs Franchise Units 1000+ EuroKids is one of the most prominent pre-school chains in India. It was founded by Prajodh Rajan and Vikas Phadnis in 2001, and it was their ‘child first’ ideology that led to the success of EuroKids. EuroKids has come a long way from being a publishing company to a full- fledged playschool chain that parents nationwide have bestowed their trust in. With over 1000 pre-school centers in more than 350 cities across India, Nepal, and Bangladesh, the brand has created a stellar reputation for itself as a perfect place for nurturing young minds. It 84 CU IDOL SELF LEARNING MATERIAL (SLM)
endeavors to fully utilize this growth by investing INR 500 crores in setting up nearly 2,000 more schools in many more cities. The pre-school sector in India has witnessed steady growth over the years and is expected to grow at a compound rate of approximately 32% in the next 3-4 years. 4. FabIndia Franchise Business FabIndia Industry Retail (Fashion) Founded in 1960 Investment INR 40-50 Lakhs Franchise Units Approximately 175+ FabIndia was founded by John Bissell in 1960 and has become a household name today. It is loved by all age groups alike. FabIndia has crossed the INR 1,000 crore sales mark to become the largest retail apparel brand in India; it is significantly ahead of competitors like Zara and Levi’s India. The brand stays true to its original essence of embracing and propagating Indian culture through apparel and other products. FabIndia has been adding new categories of products consistently CONCLUSION Like most other business decisions, starting or buying into a franchise has its pros and cons. And not all franchises or franchise relationships are created equally. It’s important to do research before choosing the franchise that’s right for you and to understand all the advantages and disadvantages of franchising that you may come across as either the franchisee or franchisor. 3.6 SUMMARY SWOT Analysis which has been used over the last fifty years in the field of strategic management is evaluable technique for planning and decision making. In the 85 CU IDOL SELF LEARNING MATERIAL (SLM)
strategic management process a number of analysis techniques are used to achieve long-term goals of an organization. Over the years SWOT has been a widely used technique in the analysis of internal and external environments to support strategic decision situations. The technique has been employed myriad of areas demanding strategic analysis for an industry, an organization, a product, a person, a project, a city and so on. SWOT involves to determine an objective and to identify the internal and external factors which are favorable and unfavorable to achieve that objective. The strategic management process begins with the evaluation of the organization’s internal analysis. The internal analysis is used to identify the internal sources and capabilities for competitive advantage. The external analysis is used to identify market opportunities and threats by analyzing general environment, competitive industry environment and rivals. 3.7 KEYWORD PEST Analysis - PEST Analysis (Political, Economic, Social and Technological) is an analytical method used by companies to determine what major external factors could affect their business. Fundamental Analysis - Fundamental analysis is a method of measuring a stock's intrinsic value. Analysts who follow this method seek out companies priced below their real worth. Stress Testing - Stress testing is a computer simulation technique used to test the resilience of institutions and investment portfolios against possible future financial situations. Such testing is customarily used by the financial industry to help gauge investment risk and the adequacy of assets and help evaluate internal processes and controls. 3.8 LEARNING ACTIVITY 1. Define Idea Generation ___________________________________________________________________________ ___________________________________________________________________________ 86 CU IDOL SELF LEARNING MATERIAL (SLM)
2. State SWOT Analysis ___________________________________________________________________________ 3.9 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. Explain the features of Idea Generation 2. Identify and discuss the steps in SWOT Analysis 3. Elaborate about new and existing product and services 4. Specify the strategies to follow during introduction of new product or services 5. What is franchisee? Long Questions 1. Importance of Idea Generation 2. How SWOT Analysis helps business to identify the business prospects. 3. Role of franchising in India 4. Specify advantages and disadvantages to franchisee. 5. Specify advantages and disadvantages to franchisor. B. Multiple Choice Questions 1. SWOT analysis stands for a. Strength, Wealthy, Occasional, Treatment b. Strength, Weaknesses, Opportunity, Threat c. Strength, Weaknesses, Opportunity, Treat d. Strength, Weaknesses, Optimistic, Threat 2. The idea generation in new product development does not include 87 a. Crowdsourcing b. Internal stage c. External Stage d. On boarding 3. The Product development consists of _______ stages a. Eight b. Four CU IDOL SELF LEARNING MATERIAL (SLM)
c. Ten d. Two 4. Which of the following is not a creative-thinking technique? Rs. 25 Lakh a. daydreaming b. thinking backward c. being flexible d. being practical 5. Ideation is _________ a. the process of overcoming objections to a business idea b. the way entrepreneurs evaluate business ideas c. the process of forming new business opportunities d. the process of forming new ideas Answers 1-b, 2-d, 3-a. 4-d, 5-d 3.10 REFERENCES References book Poornima M. Charantimathv (2006) “Entrepreneurship Development and Small Business Enterprises,” Dorling Kindersley (India) Pvt. Ltd, New Delhi. Sanjay, Anshuja Tiwari (2007) Entrepreneurship Development in India”, sarup & Sons publications, New Delhi. Ramachandran (2009) Entrepreneurship DevelopmTata McGraw –Hill Education Pvt.Ltd. New Delhi. Pawan Kumar Sharma (1991) “Development banks and entrepreneurship promotion in India”, Mittal publications, New Delhi. C.P. Yadav (2000) ‘Encyclopaedia of Entrepreneurship Development, Anmol Publications, New Delhi. Textbook references “Entrepreneurial Development and Small Business Management” by Dr P T Vijayashree & M “Entrepreneurial Development” by Desai 88 CU IDOL SELF LEARNING MATERIAL (SLM)
Website http://eagri.org/eagri50/ARM402/index.html http://pioneerinstitute.net/activities/6188-entrepreneurship-development-cell.htm https://www.srecwarangal.ac.in/centre-for-enterprenurship.php https://fredericodeigah.wordpress.com/2012/10/12/introduction-to-entrepreneurship- development/ http://ncert.nic.in/ncerts/l/lebs213.pdf 89 CU IDOL SELF LEARNING MATERIAL (SLM)
UNIT – 4 : BUSINESS PLAN DEVELOPMENT STRUCTURE 4.0. Learning Objectives 4.1. Introduction to Business Plan 4.2. Value Proposition 4.3. Customer Segment Channels 4.4. Summary 4.5. Keywords 4.6. Learning Activity 4.7. Unit End Questions 4.8. References 4.0 LEARNING OBJECTIVES After studying this unit, you will be able to: Describe nature of Business plan development Identify scope of Business Plan State the different Customer segments channels List the Challenges 4.1 INTRODUCTION What Is a Business Plan? A business plan is a written document that describes in detail how a business—usually a startup—defines its objectives and how it is to go about achieving its goals. A business plan lays out a written roadmap for the firm from marketing, financial, and operational standpoints. Business plans are important documents used to attract investment before a company has established a proven track record. They are also a good way for companies to keep themselves on target going forward. Although they're especially useful for new businesses, every company should have a business plan. Ideally, the plan is reviewed and updated periodically to see if goals have been met or 90 CU IDOL SELF LEARNING MATERIAL (SLM)
have changed and evolved. Sometimes, a new business plan is created for an established business that has decided to move in a new direction... Understanding Business Plans A business plan is a fundamental document that any startup business needs to have in place prior to beginning operations. Banks and venture capital firms indeed often make writing a viable business plan a prerequisite before considering providing capital to new businesses. Operating without a business plan is not usually a good idea. In fact, very few companies are able to last very long without one. There are definitely more benefits to creating and sticking to a good business plan—including being able to think through ideas without putting too much money into them and, ultimately, losing in the end. A good business plan should outline all the projected costs and possible pitfalls of each decision a company makes. Business plans, even among competitors in the same industry, are rarely identical. But they all tend to have the same basic elements, including an executive summary of the business and a detailed description of the business, its services, and its products. It also states how the business intends to achieve its goals. The plan should include at least an overview of the industry of which the business will be a part, and how it will distinguish itself from its potential competitors. Elements of a Business Plan The length of the business plan varies greatly from business-to-business. All of the information should fit into a 15- to 20-page document. If there are crucial elements of the business plan that take up a lot of space—such as applications for patents—they should be referenced in the main plan and included as appendices. As mentioned above, no two business plans are the same. But they all have the same elements. Below are some of the common and key parts of a business plan. Products and services: Here, the company can outline the products and services it will offer, and may also include pricing, product lifespan, and benefits to the consumer. Other factors that may go into this section include production and manufacturing processes, any patents the company may have, as well as proprietary technology. Any information about research and development (R&D) can also be included here. Market analysis: A firm needs a good handle of the industry as well as its target market. It will outline who the competition is and how it factors in the industry, along with its strengths 91 CU IDOL SELF LEARNING MATERIAL (SLM)
and weaknesses. It will also describe the expected consumer demand for what the businesses is selling and how easy or difficult it may be to grab market share from incumbents. Marketing strategy: This area describes how the company will attract and keep its customer base and how it intends to reach the consumer. This means a clear distribution channel must be outlined. It will also spell out advertising and marketing campaign plans and through what types of media those campaigns will exist on. Financial planning: In order to attract the party reading the business plan, the company should include its financial planning and future projections. Financial statements, balance sheets, and other financial information may be included for already-established businesses. New businesses will instead include targets and estimates for the first few years of the business and any potential investors. Budget: Any good company needs to have a budget in place. This includes costs related to staffing, development, manufacturing, marketing, and any other expenses related to the business. Types of Business Plans Business plans help companies identify their objectives and remain on track. They can help companies start and manage themselves, and to help grow after they're up and running. They also act as a means to get people to work with and invest in the business. Although there are no right or wrong business plans, they can fall into two different categories—traditional or lean startup. According to the Small Business Administration, the traditional business plan is the most common. They are standard, with much more detail in each section. These tend to be much longer and require a lot more work. Lean startup business plans, on the other hand, use an abbreviated structure, highlighting key elements. These business plans aren't as common in the business world as they are short—as short as one page—and have very little detail. If a company uses this kind of plan, they should expect to provide more detail if an investor or lender requests it. Special Considerations Financial Projections A complete business plan must include a set of financial projections for the business. These forward-looking projected financial statements are often called pro-forma financial 92 CU IDOL SELF LEARNING MATERIAL (SLM)
statements or simply the proformas. These statements include the overall budget, current and projected financing needs, a market analysis, and the company's marketing strategy. Other Considerations for a Business Plan The idea behind putting together a business plan is to enable owners to have a more defined picture of potential costs and drawbacks to certain business decisions and to help them modify their structures accordingly before implementing these ideas. It also allows owners to project what type of financing is required to get their businesses up and running. If there are any especially interesting aspects of the business, they should be highlighted and used to attract financing. For example, Tesla Motors' electric car business essentially began only as a business plan. A business plan is not meant to be a static document. As the business grows and evolves, so too should the business plan. An annual review of the plan allows an entrepreneur to update it when taking markets into consideration. It also provides an opportunity to look back and see what has been achieved and what has not. Think of it as a living document that grows and evolves with your business. 4.2 VALUE PROPOSITION A value proposition is a statement that answers the ‘why’ someone should do business with you. It should convince a potential customer why your service or product will be of more value to them than similar offerings from your competition. You know why your company is great, but do your potential customers know what sets your brand apart? A good value proposition can give you an advantage over your competitors and is often what your prospects use to evaluate you. And for many consumers, your value proposition is the first thing they encounter when exploring your brand. So, having a clear, concise value proposition is more important than ever. (Consider this: You’ve got less than a minute to capture a site visitor’s attention.) When creating a value proposition, it’s important to identify all the benefits your product or services offer. Describing what makes these benefits valuable in a quickly digestible way for the reader will help your value proposition make an impression. It’s also critical to identify your customer’s main problem your value proposition helps solve. By connecting this value to your buyer’s challenges your value proposition will become more clear. This is what helps differentiate your brand as the best provider of this product or service. 93 CU IDOL SELF LEARNING MATERIAL (SLM)
Top Characteristics of a Great Value Proposition Be concise and easy to understand Define what you do Make it easy for someone to find you in an online search Explain how your product resolves a pain point for your potential customer Be displayed prominently on your website and/or your consumer touch points Answer the question: “If I am your ideal customer, why should I buy from you instead of any of your competitors?” That seems like a lot to fit into a concise statement, doesn’t it? So it should come as no surprise that creating a good value proposition is a struggle for most marketers. Marketingexperiments.com surveyed marketers and found that many struggle with value propositions because either: Their company hasn’t identified one Their company doesn’t clearly express it Their company isn’t testing or measuring its value proposition Great Value Proposition Examples Explained 1. Shopify Shopify’s value proposition lets you know it can handle all of your ecommerce needs no matter where you sell from. Why it works: Whether you’re an established business or sell crocheted dog sweaters from a pop-up shop during the holidays, Shopify uses simple language to communicate its benefits to a variety of sellers. Further down the page, Shopify reinforces its key benefits by further explaining what it can do. In the following manner GET STRAIGHT TO GROWING YOUR BUSINESS Let us handle the rest When we say it’s never been easier to start a business, we mean it SHOPIFY HANDLES EVERYTHING FROM MARKETING AND PAYMENTS 94 CU IDOL SELF LEARNING MATERIAL (SLM)
Now you can focus on the things that are important 2. TrackMaven When it comes to marketing software offerings, it can be difficult to concisely communicate your value proposition when the majority of your competitors offer the same services. Why it works: TrackMaven concisely speaks to a marketer’s pain point — proving ROI. It clearly communicates that it understands you’re probably overwhelmed trying to prove ROI, and its solution makes it easy for you to do so. 3. Zoom Video and Web Conferencing As soon as you visit video and web conferencing service Zoom’s site, you’re greeted by their value proposition and the reason why you should choose its services — it’s rated the No. 1 video conferencing and web conferencing service by Gartner. 95 CU IDOL SELF LEARNING MATERIAL (SLM)
Why it works: Social proof. Scroll down a little bit more, and the company answers the ‘why’ you should choose them by providing five benefits unique to the company. Not only that, it speaks to some pain points businesses that need video conferencing may experience: inconsistent experiences, difficult platforms and hidden pricing. Most Common Value Proposition Mistakes Good value propositions can be as elusive as a unicorn, but that doesn’t mean they can’t be found (or in this case, created.) But as you read earlier, most marketers struggle with putting a good value proposition together. Here are a few common mistakes that can get in the way of creating good value propositions. 1. Not Having Proof 96 CU IDOL SELF LEARNING MATERIAL (SLM)
The entrepreneur loves his product, he thinks what you’ve got is the best ever, but should you say that? No. If the value proposition declares that the product of the organisation is “the most easy-to-use marketing automation platform” on the market, then the company got to back that up. Take Zoom video conferencing, for example. Its claim that it is the “#1 video conferencing and web conferencing service” is backed up by a Gartner analysis. But you don’t have to have a study by a leading IT research and advisory firm to back up your claims. Case studies and customer testimonials can also give you the proof you need. These customer testimonials from Basecamp help drive home its selling point that it makes businesses more efficient. 2. Not Being Clear It’s easy to see why people should buy your product or services when they’re your product or services, but for everyone else, you need to clearly communicate exactly what sets you apart. If the site or value proposition doesn’t clearly and quickly communicate your selling points and why someone should become a customer, your potential customers are going to find a company that does, and you’ll see that in your site’s bounce rates. 3. Not Testing It is said that, A/B testing can be helpful when crafting a compelling value proposition. See what kinds of terms perform best by A/B testing conversions on your site. One can also find which language resonates with your potential customers by using PPC ads, according to Marketingexperiments.com. In its example, the company uses PPC ads for an ISO test company. Each ad contains a different set of keywords. Then, based on the click through rates of each ad, the company can determine which value proposition resonates best with the potential customers. A good value proposition can be the difference between the next customer and another bounce statistic. Creating a compelling value proposition doesn’t have to be overwhelming. 97 CU IDOL SELF LEARNING MATERIAL (SLM)
Clearly communicating what makes you unique (without being too clever) with proof and testing can help you stand apart from your competition. 4.3 CUSTOMER SEGMENTS CHANNELS Customer segmentation is the process of dividing customers into groups based on common characteristics so companies can market to each group effectively and appropriately. In business-to-business marketing, a company might segment customers according to a wide range of factors, including: Industry Number of employees Products previously purchased from the company Location In business-to-consumer marketing, companies often segment customers according to demographics that include: Age Gender Marital status Location (urban, suburban, rural) Life stage (single, married, divorced, empty-nester, retired, etc.) Why Segment Customers? Segmentation allows marketers to better tailor their marketing efforts to various audience subsets. Those efforts can relate to both communications and product development. Specifically, segmentation helps a company: Create and communicate targeted marketing messages that will resonate with specific groups of customers, but not with others (who will receive messages tailored to their needs and interests, instead). Select the best communication channel for the segment, which might be email, social media posts, radio advertising, or another approach, depending on the segment. Identify ways to improve products or new product or service opportunities. Establish better customer relationships. Test pricing options. Focus on the most profitable customers. 98 CU IDOL SELF LEARNING MATERIAL (SLM)
Improve customer service. Upsell and cross-sell other products and services. How to Segment Customers Customer segmentation requires a company to gather specific information – data – about customers and analyze it to identify patterns that can be used to create segments. Some of that can be gathered from purchasing information – job title, geography, products purchased, for example. Some of it might be gleaned from how the customer entered your system. An online marketer working from an opt-in email list might segment marketing messages according to the opt-in offer that attracted the customer, for example. Other information, however, including consumer demographics such as age and marital status, will need to be acquired in other ways. Typical information-gathering methods include: Face-to-face or telephone interviews Surveys General research using published information about market categories Focus groups Using Customer Segments Common characteristics in customer segments can guide how a company markets to individual segments and what products or services it promotes to them. A small business selling hand-made guitars, For example, the company might decide to promote lower-priced products to younger guitarists and higher-priced premium guitars to older musicians based on segment knowledge that tells them that younger musicians have less disposable income than their older counterparts. Similarly, a meals-by-mail service might emphasize convenience to millennial customers and “tastes-like-mother-used-to-make” benefits to baby boomers. Customer segmentation can be practiced by all businesses regardless of size or industry and whether they sell online or in person. It begins with gathering and analyzing data and ends with acting on the information gathered in a way that is appropriate and effective. Types of customer service channels for online business Gone are the days when you would just pick one contact channel to utilize! The future of customer communication relies on a multi-channel approach. Therefore, we are collating all 99 CU IDOL SELF LEARNING MATERIAL (SLM)
the customer service channels that can help you manage client requests more effectively and greatly improve the customer experience. The top communication channels used by businesses are as follows: 1. Email 2. Live Chat 3. Chatbots 4. Video chat 5. Social media platforms 6. Messaging apps 7. Phone Support 8. Social groups & online Communities 9. Knowledge base 10. Forms The importance of online customer support channels and how they can be used by businesses. 1. Email Email is a powerful, low-cost communication channel of customer support for most companies to provide a better customer experience. 62% of customers say that email support is a preferred way to communicate with brands. For online businesses, email customer service is going to a non-negotiable channel. A stronghold on email support can take your customer engagement strategy a long way. For businesses, email as a customer service channel has many advantages. It is convenient for customers because it allows for asynchronous communication. The customer does not have to wait on hold or queue to get a response. How can email support be used for the business? Email support is perfect for busy customers. It acts as a catalyst for businesses to manage and segment such customers and send them emails instantly. Using email support, customers can describe their concerns by adding all the essential points. It helps to understand customer pain points and provide step-wise solutions. Email support can be easily integrated into other channels like voice or chat support. It shows tangible results and always increases the ROI. 100 CU IDOL SELF LEARNING MATERIAL (SLM)
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