Transcript Unit Notes

Unit Four
Planning Your Venture
What is Market Analysis?
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Who are your customers? How are they
identified?
What problems might you encounter entering
the market?
Where will you be located?
What laws and government regulations should
you be aware of?
Unit 4 Vocabulary
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Appointments
Bait-and-Switch Advertising
Barriers to Entry
Brand Loyalty
Business Risk
Capacity
Carrying Capacity
Census Tract
Competitive Advantage
Complexity
Consideration
Contract
Copyright
Customer Needs Analysis
Customer Profile
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Descriptive Research
Economic Base
Economic Risk
Economies of Scale
Equal Employment
Opportunity Commission
Exploratory Research
Extended Coverage
Façade
Fidelity bonds
Focus Group
Geographics
Historical Research
Human Risk
Incentive
Unit 4 Vocabulary
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Incubator
Industrial Markets
Industrial Park
Industry
Insurance Policy
Intellectual Property Law
Layout
License
Market
Market Positioning
Market Research
Market Segmentation
Market Segments
Market Share
Mass Marketing
Patent
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Patent Pending
Permit
Price Discrimination
Psychographics
Public Domain
Risk
Secondary Data
Service Mark
Target Market
Trade Area
Trademark
Uniform Commercial Code
Warranty of Merchantability
Workstation
Wrongful Termination
Unit 4 Essential
Question 1
(MKT-EN-2)
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What are the fundamental concepts of
business ownership?
Essential Question 1A
(MKT-EN-4H)
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What is the market segment for your
proposed business?
Conducting Market Research
Types of Research
• Exploratory Research: Used
when little is known about a
subject.
• Descriptive Research: Used
when you want to determine
the status of something.
• Historical Research: Used
when studying the past.
Conducting Market Research
The Research Process
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Define information needs.
Collect secondary data.
Collect primary data.
Organize the data.
Analyze the data.
– Is there a market for the product?
– How big is the market?
– Will the industry support the business?
Analyzing the Industry
• Industry: A collection of businesses
with a common line of product or
service.
• Factors of an Industry
– Carrying Capacity: The industry’s ability to
support new growth. Is there room for a new
business like yours?
Analyzing the Industry
• Factors of an Industry
– Uncertainty: The degree of stability or
instability in an industry. Industries that are
fast-changing present a high degree of
uncertainty.
– Complexity: The number and diversity of
contacts that a business must deal with. The
more suppliers, customers, and competitors, the
more complex the business environment.
Analyzing the Industry
• Factors of an Industry
– Stage of Life: Where the business is in the
business cycle; birth, growth, maturity, or
decline. The business owner must develop
business strategies that are compatible with the
stage of the business’s life.
Analyzing the Industry
• Are there Barriers to
Entry? Things that
keep new business
from entering the
industry or succeeding
in the industry.
Analyzing the Industry
• Barriers to Entry
– Economies of Scale: Big
businesses can produce
products more quickly
and cheaper than small
businesses.
 Can be overcome by
finding a niche that no one
else serves.
Analyzing the Industry
• Barriers to Entry
– Brand Loyalty: Occurs
when customers buy
products from companies
they know.
 Can be overcome by
increasing your brand
awareness, which requires
money for advertising.
Analyzing the Industry
• Sources of Supply
– Must have access to affordable
sources of inventory, raw
materials, and goods.
 Supplier location
 Trade discounts
 Alternate sources
Analyzing the Industry
• Technology
– Allows companies to improve
their business process.
 Maintains competitiveness
 Must be periodically updated
Analyzing the Industry
• Competition
– Know the market share: the portion of the total
sales generated by all the competing companies
in a given market.
– Is there a niche: a small segment of the market,
usually based on customer needs.
– Identify the market position: a specific market
niche for a product.
Analyzing the Industry
• Competition
– Determine the competitive advantage: a feature
that makes a product more desirable than its
competitor’s products.
– Gather competitive intelligence:
• Visit the competitor’s outlets.
• Buy your competitor’s products.
• Search the internet and your competitors website.
Identifying Your Customers
• Market: A group of all potential customers
(people or businesses) who share common needs
and wants, and who have the ability and
willingness to buy the product.
• Target Market: The segment of the market that
the company will focus its efforts.
• Market Segmentation: Dividing the total market
into smaller groups of people who share specific
needs and characteristics.
Market Segmentation
Geographics
• Segmentation of the
market based on where
people live.
Market Segmentation
Demographics
• Statistics that describe a population in
terms of personal characteristics.
These include age, gender, income,
ethnic background, education, etc.
Market Segmentation
Psychographics
• Involves the study
of customers based
on lifestyle, and the
attitudes and values
that shape it.
Market Segmentation
Product Benefits
• Built in features of products in
response to consumer needs and
wants.
Market Segmentation
• Consumer Market: Customers who
buy products for personal use.
• Industrial Market: Customers who
buy products for business use.
Developing a Customer Profile
• Combining geographic, demographic,
psychographic, and product benefit
data to get a complete picture of your
potential customers.
– Who are my customers?
– What do they generally buy, and
how do they hear about the
products and services they buy?
– How often do they buy?
– How can my business meet their needs?
Essential Question 1B
(MKT-EN-2F)
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What are the types of risks that
businesses encounter ?
Risk Management
 Risk:
The possibility of financial loss.
 Risk can be managed by using the
best available marketing information,
analyzing opportunities, and making
decisions to balance risk with
adequate monetary returns.
Kinds of Risk
 Economic
Risks
 Occur
from changes in overall business
conditions.
Amount or type of competition
 Changing consumer lifestyles
 Population changes
 Product obsolescence
 Government regulation
 Inflation
 Recession
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Kinds of Risk
 Natural
 Result
Risks
from natural causes.
Floods
 Tornados
 Hurricanes
 Fire
 Lightning
 Droughts
 Earthquakes
 Unexpected changes in normal weather conditions
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Kinds of Risk
 Human
Risks
 Caused
by human mistakes and the
unpredictability of employees and customers.
Customer or employee dishonesty
 Employee carelessness
 Employee incompetence
 Customer or employee accidents
 Employee illness
 Customer non-payment of accounts
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Handling Business Risk
 Risk
Prevention and Control
 Screening
and Training Employees
 Providing Safe Conditions and Safety Instruction
 Preventing External Theft
 Controlling Employee Theft
Handling Business Risk
 Risk
Transfer
 Purchasing
Insurance
Property Insurance
 Personal Liability Insurance
 Product Liability Insurance
 Worker’s Compensation Insurance
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Handling Business Risk
 Risk
Transfer
 Guarantees
and Warranties
 Transfer through Ownership
Sole Proprietorship
 Partnership
 Corporation
 C-Corporation
 S-Corporation
 Limited Liability Company (LLC)
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Handling Business Risk
 Risk
Retention
 Businesses
retain certain business risks and
assume the responsibility for them because it
is impossible to prevent or transfer these
risks.
 Risk
Avoidance
 Foresight
and anticipation will allow
businesses to avoid certain risks.
Essential Question 1C
(MKT-EN-2E)
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What are the relevant government
regulations relating to the operation of a
business?
Laws that Affect Employees
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Title VII of the Civil Rights Act: Forbids sexual
harassment: any unwelcome sexual conduct.
Americans With Disabilities Act: Requires employers
to provide reasonable accommodations to the
workplace.
Family Medical Leave Act (FMLA): Employers who
have 50 or more employees must provide up to 12
weeks of unpaid leave to their employees for family
medical related issues.
Laws that Affect Employees
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Equal Pay Act of 1963: Men and women must receive
the same pay for the same work.
Fair Labor Standards Act of 1938:
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Established the minimum wage at $1 per hour.
Established the maximum full time workweek at 40 hours.
Established minimum child full time labor age at 16.
Wrongful Termination: When an employee is
terminated for wrongful reasons.
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Notify employees in writing of rules violations.
Maintain good records to help prevent unwanted lawsuits.
Laws that Affect Fair Trade
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Clayton Act of 1914 and Robinson-Patman
Act of 1936: Prohibit price discrimination:
Business cannot sell the same product to
different people at different prices.
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Warranties and Product Liability:
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Caveat emptor – let the buyer beware.
Warranty of merchantability: This warranty is
implied by law and assures the buyer that he or she is
purchasing a product of at least average quality and
fit for the purpose for which it is intended.
Laws that Affect Fair Trade
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Fair Packaging and Labeling Act:
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Requires manufactures to list all ingredients and raw
materials used in production.
Requires the size, weight, and contents of a product
to be on the label.
Uniform Commercial Code:
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Uniform Commercial Code (UCC): Group of laws
that regulates commercial business transactions.
Laws that Affect Fair Trade
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Truth in Lending: Consumer Credit Protection
Act, also known as the Truth in Lending Act,
requires those who give credit to reveal all the
terms and conditions of their credit agreements.
Truth in Advertising: Federal Trade
Commission sets rules with regard to advertising.
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Misleading Ads: Ads should not claim to do
something it cannot.
Laws that Affect Fair Trade
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Sale Price: You cannot offer a reduced price on your
product unless it has been offered to the public at the
regular price.
Price Comparisons:
Cannot use list price, manufacturer’s suggested retail price
(MSRP), as your comparison-selling price unless the
product is actually sold for that price.
 Must have proof your price is lower than your competitors
if you use this fact in advertising.
 Bait-and-Switch: Uses a bargain priced item to lure
potential customers into a store then a salesperson tries to
sell them higher priced merchandise.
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Unit 4 Essential
Question 2
(MKT-EN-5)
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What are effects of government on
business?
Essential Question 2A
(MKT-EN-5A)
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What governmental agencies affect
business?
Government Agencies that
Affect Business
• Consumer Product Safety Commission
(CPSC): Establishes product safety
standards and recalls products
• Environmental Protection Agency (EPA):
Creates and enforces standards for the
environment, regulating air, water, and noise
pollution as well as toxic waste
• Equal Employment Opportunity
Commission (EEOC): Establishes rules
relating to discrimination in the workplace
Government Agencies that
Affect Business
• Federal Communications Commission
(FCC): Regulates all forms of interstate and
international communication
• Federal Trade Commission (FTC):
Enforces anti-trust, truth-in-lending, and
labeling laws
• Food and Drug Administration (FDA):
Creates standards for foods and drugs and
approves new drugs
Government Agencies that
Affect Business
• Internal Revenue Service (IRS): Enforces
tax statutes and resolves disputes
• Interstate Commerce Commission (ICC):
Determines trade practices, rates, and
routes for interstate railroads, bus
companies, and pipelines
• Justice Department: Enforces laws to
maintain free trade
Government Agencies that
Affect Business
• National Labor Relations Board (NLRB):
Monitors and governs the relationship
between employees and unions
• Occupational Safety and Health
Administration (OSHA): Establishes and
regulates safety and health standards for
employees
• Patent and Trademark Office (PTO):
Issues patents and trademarks for new
products
Essential Question 2B
(MKT-EN-5B)
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What is the importance of copyright,
trademark, patent, logo, license, permit,
etc.?
Protecting Your Ideas
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Patent: A grant given to an inventor
that gives him or her the exclusive
right to produce and sell an invention.
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Lasts for a period of twenty-one years after
application.
Must pass all of the following rules:
Protecting Your Ideas
The invention must not contain prior art. It
shouldn’t be based on anything publicly available
before the date of the invention.
 The invention must fit into one of five classes:
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A machine
A process
Article of manufacture
A composition
A new use of one of the four categories
The invention must be “unobvious.” It should be
new and unexpected.
 The invention must have utility. Must be useful, not
whimsical or silly.
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Protecting Your Ideas
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Copyrights: Protects original works of
authors. Examples: books, movies,
musical compositions, computer
software, etc.
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Lasts for the life of the author plus fifty years.
After the copyright period, the work becomes part
of the public domain: Can be used by anyone free
of charge.
Protecting Your Ideas
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Trademark: Word, symbol, design, or
combination of these that a business uses
to identify itself or something it sells.
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Service mark: Design or symbol that describes a
service business.
Lasts indefinitely unless the trademark becomes a
common part of the everyday language.
Essential Question 2C
(MKT-EN-5C)
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What licenses are needed by small
businesses?
Laws That Affect Startup
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Permits and Licenses
Permit: A legal document giving official
permission to run a business.
 License: A certificate that shows you have
the necessary education and training to do a
job.
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Laws That Affect Startup
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Contracts: A binding legal agreement
between two or more persons or parties.
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To be legal a contract must contain:
Agreement: Where one party promises to do something
and the other party accepts.
 Consideration: What is exchanged for the promise.
 Capacity: The parties are legally able to enter into a
binding agreement.
 Legality: No provisions that are illegal or result in illegal
actions.
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Laws That Affect Startup
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Location
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Zoning and building codes affect where a
business can be located and what type of
business can operate in that location.
Unit 4 Essential
Question 3
(MKT-EN-4)
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What information is needed to compile a
business plan worksheet?
Essential Question 3A
(MKT-EN-4A)
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What are the different types of business
locations?
Types of Business
Locations
 Mall Space
 Kiosks: Small carts or like furniture found in
malls, airports, large sporting events or even
other retail stores that provide temporary, or
inexpensive, locations with high foot traffic.
 Anchor stores: Large chain stores that
generate a high amount of customer traffic.
 Retail shops
Types of Business
Locations
 Shopping Center
 Strip malls and other attached, adjoining retail
locations
 Vary in size from as few as 3 units to as many
as 20 stores
 The types of retailers, and the goods or
services they offerwill also vary
Types of Business
Locations
 Downtown Area
 Communities that are working to revitalize their
downtown areas can greatly benefit retailers
from this effort
 Lack of parking is generally a big issue for
downtown retailers
 Competitors are older, well-established
specialty stores which seem to thrive in the
downtown setting
Types of Business
Locations
 Free Standing Locations
 Is basically any stand-alone building
 Can be tucked away in a neighborhood
location or right off a busy highway
 Suffers from random traffic that other retail
outlets receive in malls or shopping centers
 Has to work at marketing to get the customer
inside
Types of Business
Locations
 Office Building
 Good for a retailers that cater to other
businesses
 Tenants share maintenance costs and the
image of the building is usually upscale and
professional.
Types of Business
Locations
 Home-based
 Many retail businesses are getting a start at
home
 Some eventually move to a commercial store
location
 This type of location is an inexpensive option,
but growth may be limited
 Harder to separate business and personal life
Essential Question 3B
(MKT-EN-4B)
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What steps are involved in conducting a
location analysis?
Location Analysis
 Is the Economic Base Favorable?
 Economic Base: The major industries
that provide jobs
 Industry-oriented or service-oriented
 Growing or shrinking (flow of money into or
out of a community)
Location Analysis
 Are there Financial Incentives?
 Financial Incentive: Reward or
advantage that helps business
 Lower taxes
 Cheaper land prices
 Employee training programs
 Enterprise zones
Location Analysis
 What is the Make Up of the
Population?
 Is the community’s population aging as
young people move away?
 Is the community getting younger as new
families with children move in?
Location Analysis
 Does the Labor Supply Match Your
Needs?
 How many employees are needed?
 Is there a sufficient labor pool to meet
those needs?
 Does the available pool have the
necessary skills to help the business?
Essential Question 3C
(MKT-EN-4C)
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What trends and other criteria need to be
identified in determining a site location?
Site Selection
 Determine trade area: region or
section of the community from which
you expect to draw customers
 Select several potential sites
 Draw a circle around each potential
site showing the trade area
Site Selection
 Within each trade area examine the
following features:
 Number and Size of Competitors:
 Mark all potential competitors both directly and
indirectly
 Look for clusters of stores to determine where
customers shop
 Are there vacant business in the area? Why?
Site Selection
 Nature of the Competition:
 How does your business compare in size and
merchandise to your competitors?
 Do you want to be near your competitors to
encourage comparison shopping and use your
competitors to help draw traffic?
 Do you want to be located away from your
competitors and generate your own drawing power?
Site Selection
 Character of the Area:
 Is it attractive and inviting?
 Does it have the appearance of success?
 Is it a safe, thriving environment?
 Mark out potential problem blocks or areas
 Accessibility and Traffic
 Mark the routes customers will take to reach your
business
 What is the traffic count per hour, per day
(weekday/weekend), per week, and holidays?
 Is there adequate parking?