Unit II

Creating and starting the venture: Sources of new Ideas, Methods of

generating ideas, creative problems solving- Product planning and
development process.
The business plans: Writing Business plan, Evaluating Business plans,
Using and implementing business plans, marketing plan, financial plan
and the organizational plan, launching formalities.
Nature and scope of business plan 11+4 Hours
 Sources of New Ideas for Entrepreneurs
The entrepreneurial idea is a feasible, financially sound, technically possible, and
socially acceptable idea of a project or product that may have utility to
perspective customers.
External Sources Internal sources
• Customers • Internal R & D
• Competitors • Employees
• Distribution channels • Complaints system
• Trade Shows, Fairs and Exhibitions • Customer service, sales force
• Public information, trade magazine
• Outside consultants
• Universities
• Government/law, Regulations
1. Customers:
• Prospective customers know best what they want and the
habits/tastes that will be popular shortly.
• New product or service ideas may come from customers’ reactions to
the present product and the expected product idea.
2. Competitors
The analysis of profitability and break-even level of various industries or
organizations indicate promising investment opportunities which are
profitable and relatively risk-free.
Distribution channels:
• Member of the distribution channels; intermediaries, transient
customer preference, and possible expectations may be a good
business idea.
• Not only do channel members frequently have suggestions for
completely new products, but they can also help in marketing the
entrepreneur’s newly developed products.
Trade Shows, Fairs aid Exhibitions
• These sources display new products and innovations in processes and
services.
• An innovative entrepreneur can get product ideas to adapt or modify
and produce with indigenous materials and technology.
Government:
• First, the files of the Patent Office contain numerous new product
possibilities. They can suggest other more marketable new product ideas.
• Secondly, new product ideas can respond to government regulations,
industrial policy, investment guidelines, annual plan, Five-year plan, etc.
• Thirdly, several government agencies nowadays assist entrepreneurs in
discovering evaluating business ideas.
• Fourthly, government publications on trade and industry can also help set
new venture ideas.
Methods of generating ideas
• Focus groups
• Environmental scanning
• Brain storming
• Problem inventory analysis
• Creativity and problem solving
• Market research
Focus groups:
• A moderator leads a group of people through an open, in-depth
discussion rather than simply asking questions to solicit participant
response; for a new product area, the moderator focuses the group’s
discussion in either a directive or a nondirective manner.
• The group of 8 to 14 participants is stimulated by comments from
other group members to conceptualize and develop a new product
idea to fulfill market needs.
• This is an excellent method for initially screening ideas and concepts
too.
Ex: Twitter for adult group customers, Disney for child group
Environmental scanning:

Environmental scanning is a process that helps organizations gather

information about their environment and use it to generate ideas and
develop strategies

• Identify events, trends, and issues

• Analyze patterns
• Predict impacts
• Develop strategies
• Use SWOT analysis
Brain storming
• This method would be effective if the effort focuses on a specific product
or market area. The following four rules should be followed when using
this method:
• No criticism is allowed by anyone in the group – no negative comments.
• Freewheeling is encouraged- the wilder the idea, the better.
• Quantity of ideas is desired- the greater the number of ideas, the greater
the likelihood of useful ideas emerging.
• Combinations and improvements of ideas are encouraged – ideas of
others can still produce another new idea.
SCAMPER
S- Substitute- What can you substitute for it?
C- Combine- What can be combined with it?
A- Adapt- What else is like this?
M- Modify- Could we change an existing idea or product?
P- Put to other uses- How can I use this new way?
E- Eliminate- What can be omitted or eliminated?
R- Reverse- Could I do the opposite?
Problem inventory analysis: Problem inventory analysis is a technique for generating new ideas
by listing problems in a product category and relating known products to the problems. This can
help you come up with new ideas for products or generate new ideas entirely.

• some other techniques for generating ideas:

Brainwriting
• A technique for generating many ideas for a problem, often used when a group needs to
encourage creativity.
SWOT analysis
• A common method for problem-solving and generating ideas, SWOT analysis measures a
company's strengths, weaknesses, opportunities, and threats.
Rapid ideation
• A technique where a group writes down ideas individually within a time limit, and then shares
their ideas aloud or the group leader collects them.
Random word technique
• A technique where a chosen word is used to spark new ideas. For example, if you're trying to
improve a product, you might randomly select the word "ocean" and think about how
concepts related to the ocean could inspire new ideas.
Creative Problem solving
Creative Problem solving
Creative Problem solving
Creative Problem solving
Creative Problem solving
Creative Problem solving
Creative Problem solving
Summarize Free association:
• Developing a new idea through a chain of word associations. • A
word or phrase is written down – then another and another • Each new
word attempting to add something new to the ongoing thought process
• Thereby creating a chain of ideas ending with a new product idea
emerging.
Summarize Forced Relationships
• Developing a new idea by looking at product combinations. • Isolate
the elements of the problem • Find the relationships between these
elements • Record the relationships in an orderly form • Analyze the
resulting relationships to find ideas or patterns • Develop new ideas
from these patterns.
Creativity and problem solving
1. Mind mapping
It involves putting brainstormed
ideas in a visual map or picture or
a graphical presentation showing
the relationship among these
ideas.
Creativity and problem solving
2.Attribute listing

Step 1: List the attributes(product, design, quality).

Step 2: Draw a table using the attribute as the
column heading.
Step 3: Write down variations of attributes as possible
in value.
Step 4: Select one entry from each column.
Step 5: Improve the mixture of elements and may be
merely a starting point for a new way of thinking
about a task.
• Collective Notebook Method • Developing a new idea by group
members regularly recording ideas. • Use a small notebook that fits
into a pocket: • Record – statement of the problem, blank pages and
any pertinent background data. • Each group member write their own
personal ideas three times each day. • Give to group leader at the end
of the day • Group leader summarizes all material • Final creative
focus group discussion with all participants.

• Attribute Listing Method • Developing a new idea by looking at the

positives and negatives. • List the attributes of an item or problem •
Look at each attribute from a variety of viewpoints • Originally
unrelated objects can be brought together to form a new combination
and possible new uses that better satisfy a need.
Big-Dream Approach • Developing a new idea by thinking without
constraints. • Dream (imagine) about the problem and its solution
(think big) • Every possibility should be recorded and investigated
without regard to the negatives involved or resources required. • Ideas
should be conceptualized without any constraints until an idea is
developed into a workable form.
Parameter Analysis • Developing an idea by focusing on parameter
identification and creative synthesis. • Parameter identification •
Analyze variables in the situation to determine their relative
importance • Important variables are the focus and others set aside •
Creative synthesis • Relationships between parameters that describe
the underlying issues are examined. Through evaluation of the
parameters and relationships, one or more solutions are developed;
this solution development is called creative synthesis.
Product planning and development process
• Once ideas emerge and are analyzed through the opportunity analysis
plan, they will need further development and refinement. This
refining process—the product planning and development process—is
divided into five major stages:
• idea stage, concept stage, product development stage, test marketing
stage, and commercialization.
• These stages result in the start of the product life cycle
Product Concept Development:
• Those product ideas which clear the screening stage must be
developed into a product concept – identifying physical features,
benefits, price etc. of the product. At this stage product idea is
transformed into a product concept i.e. a product which target market
will accept.
Commercial Feasibility:
• At this stage, the purpose is to determine whether the proposed
product idea is commercially feasible, in terms of demand potential
and the costs of production and marketing. Management must also
ensure that product concept is compatible with the resources of the
organization technological, human and financial.
• Product Development:
• Product development encompasses the technical activities of
engineering and design. At this stage, the engineering department
converts the product concept into a concert form of product in view
of the required size, shape, design, weight, colour etc. of the product
concept.
• A model or prototype of the product is manufactured on a limited
scale. Decisions are also made with regard to packaging, brand name,
label etc. of the product.
Test Marketing:
• A sample of the product is tested in a well-chosen and authentic sales
environment; to find out consumers’ reaction. In view of consumers’
reactions, the product may be improved further.
Commercialisation:
• After the management is satisfied with the results of test marketing,
steps are taken to launch a full-fledged programme for the
production, promotion and marketing of the product. It is the stage
where the new product is born; and it enters it life cycle process.
 Business Plan
• The business plan is a written document prepared by the entrepreneur
that describes all the relevant external and internal elements involved in
starting a new venture. It is often an integration of functional plans such
as marketing, finance, manufacturing, and human resources.
• A business plan describes the company's goals, operations, industry
standing, marketing objectives, and financial projections. The
information it contains can be a helpful guide in running the company.
• It can be a valuable tool to attract investors and obtain financing from
financial institutions.
• Importantly, a business plan shouldn't be a static document. As a
business grows and changes, so too should the business plan.
Evaluating business plan
• After you create your Business Plan, in order to succeed, it is essential
that you evaluate it periodically and modify the sections that you feel
are not working for your business.
• There are 5 ways in which we can evaluate your business plan:
1. How Viable is your Plan?
When evaluating your plan, look for the gap between these
assumptions and the reality of your business. Make adjustments and
corrections to ensure that your business plan is more realistic and in
touch with the current and future scenarios of your business.
2. Involve your employees
Your employees are involved in the details of the running of your
business. Share your Business plan with them and ask for their feedback.
• This will allow you to gauge how the plan actually impacts the running
of your business. It is key to ask them questions such as:
• Do they have suggestions to improve ways to provide better customer
service?
• Do they feel the objectives laid out in the business plan align with the
way they currently do their jobs?
• Do they feel that the correct target audience is being reached?
• Is there any possible target group that could also be targeted for your
business?
3. Is your Target Group correct?
• Before starting your business, you may have listed out your ideal
consumer based on age, income, gender and so on.
• After your business has been running for a period of time, you will
need to look at these demographics, check if your assumptions were
right and if you can find a way to widen your TG by enhancing your
products or services.
4. What are Current Industry Trends?
• When evaluating your Business Plan, it is important to look at industry
trends and ensure that you are making the best of current trends that
impact your business.
• It is also essential that you examine the ways in which competitors
have changed their functioning to accommodate the change in
trends.
5. Are your funds allocated properly?
• Every month, spend an hour with your accountant or set up a weekly
meeting in order to get a clear picture of how your resources are
being spent.
• Discover if there are other ways in which your resources can be
optimized, how you can reach more people by concentrating on more
marketing channels or focusing on the ones that will reap you better
benefits for the time and effort spent on them.
 Using and implementing business plans
• The business plan is designed to guide the entrepreneur through the
first year of operations.
• It is important that the implementation of the strategy contain control
points to ascertain progress and to initiate contingency plans if
necessary.
Measuring Plan Progress:
Typically, the business plan projections will be made on a 12-month
schedule.
However, the entrepreneur cannot wait 12 months to see whether
the plan has been successfully achieved. Instead, on a frequent
basis (i.e., the beginning of each month), the entrepreneur should
check the profit and loss statement.
 Inventory Production

Website Control
Quality
control elements

Disbursements Sales
A brief description of each of these control elements is given here:
• Inventory control. By controlling inventory, the firm can ensure maximum
service to the customer. The faster the firm gets back its investment in raw
materials and finished goods, the faster that capital can be reinvested to meet
additional customer needs.
• Production control. Compare the cost figures estimated in the business plan
with day to-day operation costs. This will help control machine time, worker
hours, process time, delay time, and downtime cost.
•
• Quality control. This will depend on the type of production system
but is designed to make sure that the product performs satisfactorily.
• Sales control. Information on units, specific products sold, price of
sales, meeting of delivery dates, and credit terms is useful to get a
good perspective of the sales of the new venture. In addition, an
effective collections system for accounts receivable should be set up
to avoid aging of accounts and bad debts.
• Disbursements. The new venture should also control the amount of
money paid out. All bills should be reviewed to determine how much is
being disbursed and for what purpose.

• Web site control. With more and more sales being supported or
garnered from a company’s Web site, it is very important to continually
evaluate the Web site to ascertain its effectiveness in meeting the goals
and objectives of the plan. There are
many services and software packages available to assist the
entrepreneur in this process.
Marketing Plan
• A good marketing plan ---- backbone for a successful enterprise
Steps in preparing a market plan:
1. Market research
2. Market segmentation
3. Market targeting
4. Market positioning
5. Developing Marketing strategies (4P’s)
6. Budgeting the plan
7. Implementing, Monitoring and reviewing the plan
8. Executive summary
1. Market research
Steps in conducting market research:
• Formulating the objectives
• Select the type of research
• Collect and tabulate the data
• Analyse the data
• Document the facts, figs, conclusions
• Make the decisions
Information need to collect:
• Total size of current market
• Total size of potential market
• Growth rate of the market
• Consumer preference
• Consumer satisfaction
• Consumer buying behavior
• Price and sensitivity analysis
• Distribution level etc..
Case study: Aman Gupta’s boat
marketing strategy turned it into
1500 Cr Company
2. Market segmentation: It is the process of dividing the market into
groups of people with similar behavior or characteristics.

Demographic: age, income, gender, education, occupation

Psycho-graphic : life style, personality
Geographic: East, west, north, south
Behavioral: Occasion, usage rate, benefits, loyalty, user status, buyer
readiness
3. Market targeting: it is the process of evaluating different segments.
And identify the segments a company wants to target.
It consists of 2 steps. (a) Market evaluation (b) target market selection
(a) Market evaluation
• Assessment of size of each market
• Assessment of segment growth
• Competitive strengths and weaknesses
• Potential opportunities and threats from competitors, suppliers,
buyers, govt. subsidies etc..
(b) target market selection
It involves the selection of targeting strategies of company.
• Single segment concentration- business targets only one segment
• Selective specialization – business targets few related segments
• Product specialization- targets specialize in specific product segment
• Market specialization-targets the needs of whole market it specializes in
• Full market leverage-targets the all customers and satisfy all their needs.
4.Market positioning: It is the act of positioning the product or service in
such away that it appears attractive to the customers.
Following variables must be considered before positioning a brand/product.
• What image company wants to project?
• How competitors project themselves?
• The type of product.
• Product life cycle.
• Pricing strategy
5. Developing market mix strategies: It is a task of preparing product,
price, place and promotional strategies for a business.
(i) Product mix: a product may be physical goods, services, events, place
etc.
(ii) Price mix: Competitors product price, cost of product/services, demand
of product, availability of raw material, overall marketing objectives.
(iii) Place mix: it is the process through goods are delivered to final
customers.
(iv) Promotional mix: it is the process of educating customers through
various forms of media bout product quality, utility, price.
6. Budgeting the marketing strategies:
The effective marketing plan must consider all the costs involved in
implementation of feasibility studies and market plan. Various monthly,
yearly, quarterly costs that must be projected are
• Cost of market research
• Cost of new product development
• Cost of sales and promotion
• Cost of distribution
7. Implementing, monitoring and reviewing:
After implementing market strategies, bench mark must be set in order
to evaluate market plan. Monitoring involves
Market share data, sales figures, customer feedback, employers
feedback, feedback from retailers.

8. Executive summary:
Summarize entire market plan.
Financial plan
• Like the marketing, production, and organization plans, the financial
plan is an important part of the business plan. It determines the
potential investment commitment needed for the new venture and
indicates whether the business plan is economically feasible.
• Generally, three financial areas are discussed in this section of the
business plan.
• First, the entrepreneur should summarize the forecasted sales and the
appropriate expenses for at least the first three years, with the first
year’s projections provided monthly. It includes the forecasted sales,
cost of goods sold, and the general and administrative expenses. Net
profit after taxes can then be projected by estimating income taxes.
• The second major area of financial information needed is cash flow
figures for at least three years, although sometimes investors may
want to see five-year projections. The first year of projections,
however, should be on a monthly basis. Since bills have to be paid at
different times of the year, it is important to determine the demands
on cash on a monthly basis, especially in the first year. Remember
that sales may be irregular, and receipts from customers also may be
spread out, thus necessitating the borrowing of short-term capital to
meet fixed expenses such as salaries and utilities.
• The last financial item needed in this section of the business plan is
the projected balance sheet. This shows the financial condition of the
business at a specific time. It summarizes the assets of a business, its
liabilities (what is owed), the investment of the entrepreneur
and any partners, and retained earnings (or cumulative losses).
Organizational plan
• The organizational plan is the part of the business plan that describes
the venture’s form of ownership—that is, proprietorship, partnership,
or corporation. If the venture is a partnership, the terms of the
partnership should be included. If the venture is a corporation, it is
important to detail the shares of stock authorized and share options,
as well as the names, addresses, and resumes of the directors and
officers of the corporation. It is also helpful to provide an organization
chart indicating the line of authority and the responsibilities of the
members of the organization.
• Table, summarizes some of the key questions the entrepreneur needs
to answer in preparing this section of the business plan. This
information provides the potential investor with a clear
understanding of who controls the organization and how other
members will interact in performing their management functions.
Launching formalities
• It is quite difficult for a new entrepreneur to promote a venture as it
involves series of different steps. A potential entrepreneur has to
follow a step-by-step approach to start a new venture.
1. Product selection: The following things will be included in the project
selection and preliminary activities :
• Selecting the product/service,
• Selecting the location,
• Conducting Project feasibility study,
• Preparing the business plan,
• Preparing a project profile.
2) Decide the Constitution :The constitution of the business unit has to be
decided by its promoters before starting any industry, which are mainly of
following types:
• Sole proprietorship.
• Partnership,
• Corporation/Limited Company,
• Cooperative,
 3) Registration :
• Registration of a new venture is very important. Though not
mandatory, but registration is very advantageous for a business unit
as it provides a legal identification and status to the business so that it
can execute all its legal rights. A registered business unit is, provided
with government assistance, incentives and licenses to import raw
materials. Briefly, a business can ensure all its legal rights by
registering itself.
4) Clearances from Specific Departments :
On the basis of nature of the industry and the location of units,
various types of approvals are required from different authorities.

Specific Clearances are usually • Central excise registration,

required depending on the Type of • Bureau of Indian Standards (BIS)
Unit :
certificate,
• Agricultural land conversion,
• Fruit product order (FPO) licence,
• Urban land ceiling clearance,
• Food Adulteration Act licence,
• Building plan approval,
• Power loom registration,
• Factories Act,
• Trade licence, • Electronics industries registration,
• Pollution Control Board clearances, • Drugs and cosmetics licence,
• Sales tax registration, • Approvals of hotels,
5) Location :
• Deciding the location for constructing the business unit is the next step.
The entrepreneur also has to decide whether to buy or rent the
business location. It also important to decide the size of plot, covered
And open areas, etc. This is quite important to have an appropriate
industrial site or a ready industrial shed for any industrial project.
6) Machinery and Equipment :
• Depending upon the selected product, different machines and
equipment's required for production are selected. Also, the different
suppliers and their costs are evaluated and selected. The scheme of
National Small Industries Corporation (NSIC) can be used, in which
different machines and equipment's can be acquired on the basis of
hire-purchase system. It is advisable to have a proper plan for machines
and equipment's in advance, particularly in cases when they are to be
obtained from other city, state or nation.
7) Project Report Preparation :
• Once the nature of ownership, machines, equipment's and location
are decided, the entrepreneur must prepare the feasibility study or
project report. A project report provides a detailed understanding
about the project and reveals its techno-economic feasibility. With
the help of project reports, economic viability and the technical
feasibility of the selected.
8) Project Appraisal :
• In simple terms, evaluation of a project is called project appraisal. This
mainly includes the method of conducting ex-ante analysis of any
project or scheme, It is quite important to evaluate the project from
the viewpoint of economic, financial, technical, market, managerial
and social aspects, while initiating any enterprise so that the
feasibility of the project can be checked.
9) Finance : Finance can be considered as the backbone of an organisation.
Every entrepreneur needs finance to setup a new venture. One can seek capital
assistance and venture capital for starting an enterprise from various financial
agencies.
• Means of Finance :
• Own equity,
• Internal accruals,
• Inter corporate deposits/investment,
• State financial institutions,
• Central financial institutions,
• Banks,
• Borrowings like ECB, CP, FDI, PCNRB,
• State subsidy and seed capital,
• Lease finance.
10) Implement the Project and Obtain Final Clearances :
• After obtaining different clearances, licenses, infrastructure facilities,
etc., from the concerned departments, the entrepreneurs are
required to implement the project.