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Entrepreneurship . Chapter 3 Creating Business from Opportunity. The Business Definition. The offer— what will the business offer the customers? Target market— who will it serve? Production and delivery capability— how will it provide the products & services it sells?. Types of Business.

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Entrepreneurship

Entrepreneurship

Chapter 3

Creating Business from Opportunity


The business definition
The Business Definition

  • The offer—what will the business offer the customers?

  • Target market—who will it serve?

  • Production and delivery capability—how will it provide the products & services it sells?


Types of business
Types of Business

  • Manufacturing—makes tangible products & sells them through distributors or directly.

  • Wholesale—buys in bulk from manufacturers & sells smaller quantities to retailers.

  • Retail—sells individual items to consumers.

  • Service—sells time/expertise to consumers.


Defining an organization
Defining an Organization

  • Core Values

  • Mission

  • Vision

  • Culture


Organizational core beliefs
Organizational Core Beliefs

  • Beliefs entrepreneurs use to guide organizations.

    Example: My restaurant will support local organic farmers.

  • Core beliefs affect:

    • materials used in production

    • prices charged

    • how customers are treated


Mission statement
Mission Statement

  • A concise statement of

    • Target customers

    • Products & services

    • Markets served

    • Use of technology

    • Importance of public issues & employees

    • Focus on survival, profitability, & growth


Vision
Vision

  • Overall view of desired company future state

  • Built upon core values & beliefs

  • Compelling across the organization

  • Employees need to be empowered to fulfill it


Culture
Culture

  • Largely shaped by leadership

  • Core values in action

  • Includes

    • Risk tolerance & innovation

    • Orientation with respect to people, teams, & outcomes

    • Attention to detail

    • Communication norms


Routes to finding opportunities
Routes to Finding Opportunities

  • Self- or group-developed business ideas

  • Research on “hot” business ideas or growth areas

  • Product or service idea first & search for a market or business second


Factors of competitive advantage
Factors of Competitive Advantage

  • Quality

  • Price

  • Location

  • Selection

  • Service

  • Speed/turnaround


What is your usp
What Is Your USP?

  • Unique Selling Proposition—what attracts customers away from the competition and toward a business?

  • Compare what your business offers to what competitors offer.

  • Are you at a cost advantage or disadvantage?



Define the unit of sale
Define the Unit of Sale

  • Manufacturing—one order

  • Wholesale—a dozen

  • Retail—one item

  • Service—one hour of time or one completed task

  • Combination—average sale per customer


Average sale per customer
Average Sale Per Customer

Average sale per customer

– Average cost of sale per customer

Average gross profit per customer



Cost of goods sold cogs
Cost of Goods Sold (COGS)

COGS = cost of labor and materials required to make one additional unit

COSS (cost of services sold) = cost of labor and materials required to provide one additional unit of service


Economics of one unit eou
Economics of One Unit (EOU)

  • Method for seeing if a business can be profitable

  • If one unit of sale is profitable, the whole business is likely to be profitable.

Selling price per unit – COGS per unit = Gross profit per unit







The entrepreneur s strategy
The Entrepreneur’s Strategy:

  • Start a business with a profitable EOU

  • Hire others to create the units

  • Increase volume of units being sold

  • Start new businesses or expand opportunities

Result: The entrepreneur creates jobs and wealth.