bisnis Innovation

1. BUSINESS
INOVATION

2. CREATING A NEW BUSINESS
Small businesses are created by entrepreneurs who have a business idea and are willing to invest their own
money to back the idea. Many new businesses are created with a very small amount of money, which limits the
amount of funds that the entrepreneur might lose. Here is a brief summary of how three successful small business
were created:
 Domino’s Pizza (of Ann Arbor, Michigan) is a classic example of a business that started with little funding. It was
established when Tom Monaghan (a college dropout) and his brother bought a bankrupt pizza parlor in 1960.
Tom had to borrow the $500 that he needed to invest in the firm. Later, he bought his brother’s interest in the
business. Domino’s Pizza now generates sales of about $1 billion per year.
 Jeremy’s MicroBatch Ice Cream (of Philadelphia, Pennsylvania) applied the microbrewery concept to ice cream.
It makes ice cream in small quantities and sells it in limited editions. The owner, Jerry Kraus, created the
business idea for a class project when he was a student at the University of Pennsylvania.
 Glow Dog, Inc. (of Concord, Massachusetts), sells light-reflective clothing for pets. The owner, Beth Marcus,
thought of this business idea when she was walking her dog at night and realized that the dog was not visible
to passing motorists. After just two years in business, her firm averaged annual sales of more than $1 million.

3. BEING AN ENTREPREUNEUR
Advantage of Being an Entrepreneur
 People are not born entrepreneurs. They choose to be
entrepreneurs,rather than working as employees for a
business. Some of the more important advantages of being an
entrepreneur are:
 As an entrepreneur, you may possibly earn large profits on
your business, and therefore earn a much higher income than
if you worked for another business.
 You can be your own boss and run the business the way that
you want.
 Because you are in control, you do not need to fear being
mistreated by a boss or being fired.
 You have the satisfaction of working in a business that you
created, and
 you will likely be more willing to work because you are directly
directly rewarded for your work in the force
Being an entrepreneur also has some disadvantages that
should be considered: You may possibly incur large losses and
could even lose your entire investment in the business. Some of
the more useful websites on starting a small business are:
 Yahoo!’s Small Business site (http://smallbusiness
.yahoo.com)
 American Express (http://americanexpress
.com/smallbusiness)
 Small Business Administration (http://www
.sbaonline.sba.gov)
 Quicken Small Business (http://www.quicken
.com/small_business)
Though you may be in control of the business, you have to
ensure that the business functions properly. Being in control
does not necessarily mean that you can skip work whenever
you desire; the income you earn is tied to how well the business
is managed on a daily basis. Though, as the owner of a
business, you will not be fired, you could still lose your source
of income if the business fails

4. ENTREPREUNEUR PROFILE
 Risk Tolerance Entrepreneurs must be willing to accept the risk of losing their business investment.
 Creativity Entrepreneurs recognize ways to increase customer satisfaction. They may detect a need
by customers for a product or service that does not exist, and then attempt to satisfy that need. Or
they may reccognize that an existing product or service has deficiencies and attempt to improve on
it.
 Initiative Entrepreneurs must be willing to take the initiative to make their ideas happen. They are
able to recognize challenges and deal with them directly. To take the initiative, entrepreneurs need to
have ambition and be persistent.
All of these characteristics are needed. Risk tolerance is necessary to invest in a new business. Creativity
is needed not just to create a business idea,

5. DECIDING WHETHER TO CREATE A NEW BUSINESS :
1 Demand
 Every product has its own market, where there are consumers who
purchase the product and businesses that sell the produc
2. Competition
 Each business has a market share, which represents its sales
volume as a percentage of the total sales in a specific market. If
the total sales in the market for a particular product are $10
million this year, a firm that experienced sales of $2 million has a
market share of 20 percent (computed as $2 million divided by
$10 million). That is, the firm has 20 percent of the market
 Each market has segments, or subsets that reflect a specific type
of business and the perceived quality. Thus, a market can be
narrowly defined by type of business and quality. Segmenting the
market in this way allows a firm to identify its main competitors so
that they can be assessed
 Before creating a new business
for a particular market, the
following conditions in that
market should be considered:
 Demand
 Competition
 labor conditions
 Regulatory condition

6. LABOR AND REGULATORY CONDITIONS
3. Labor
 Conditions Some markets have specific
labor characteristics. The cost of labor
is much higher in industries such as
health care that require specialized
skills. Unions may also affect the cost of
labor.
 Some manufacturing industries,
particularly those in the northern states,
have labor unions, and labor costs in
these industries are relatively high
 4. Regulatory Conditions
 The federal government may enforce environmental rules or may prevent a firm
from operating in particular locations or from engaging in particular types of
business. For example, Blockbuster is affected by state and federal regulations
regarding advertising, consumer protection, provision of credit, franchising,
zoning, land use, health and safety, and working conditions. Although all
industries are subject to some form of government regulation, some industries
face especially restrictive regulations. Automobile and oil firms have been subject
to increased environmental regulations.
 Firms in the banking, insurance, and utility industries have been subject to
regulations on the types of services they can provide. Companies such as
Amazon.com that rely heavily on the Internet for their business are exposed to
some additional regulations governing the Internet and e-commerce. For
example, they could be affected by laws regarding the protection of consumer
data. If more regulations are implemented to ensure greater protection, the costs
to Amazon.com of running its business could increase. Entrepreneurs who wish to
enter any industry must recognize all the regulations that are imposed on that
industry

7. DEVELOPING A COMPETITIVE ADVANTAGE
 Key Advantages : While businesses use numerous strategies to develop a competitive
advantage, most strategies are intended to produce products more efficiently or to produce a
higher quality
 Produce Products Efficiently
 If a new business can produce a product of similar quality at a lower cost, it can price the
product lower than its competitors. This should enable the new firm to take away some of its
competitors’ market share. The low production cost may result from efficient management of
the firm’s employees (human resources) and its production process.

8.  Produce Higher-Quality Products
If a new business can produce a product of higher quality without incurring
excessive costs, it has a competitive advantage over other competitors in the
same price range. Various characteristics may cause a product to be of better
quality
 Using the Internet to Create a Competitive Advantage
Many firms rely on the Internet to create a competitive advantage. They
establish a website, where they advertise their products. Web-based
businesses can accept credit card payments online for their products and then
ship the products to customers.

9. ASSESSMENT OF THE BUSINESS ENVIRONMENT
 The business environment surrounding the
business includes the economic
environment, the industry environment,
and the global environment.
1. Economic Environment
 The economic environment is assessed to
determine how demand for the product
may change in response to future
economic conditions. The demand for a
product can be highly sensitive to
thestrength of the economy. Therefore, the
feasibility of a new business may be
influenced by the economic environment.
2. Industry Environment
 The industry environment is assessed to determine
the degree of competition
3. Global Environment
 The global environment is assessed to determine
how the demand for the product may change in
response to future global conditions. The global
demand for a product can be highly sensitive to
changes in foreign economies, the number of
foreign competitors, exchange rates, and
international trade regulations.

10. MARKETING PLAN
 Target Market
 A new business may be unknown to its target market
and will need to gain the trust of customers. If its
owners believe their product is better than other
products, they will need to prove that their product is
better. Customers are not necessarily going to switch
to a new product, especially if they are satisfied with
existing products with which they are familiar. New
businesses rely on various marketing strategies to
attract customers, such as advertising their product,
offering a special discount, or even providing free
samples to the customers
 Product Characteristics
 The business plan should describe the
characteristicsoftheproduct,withanemphasisonwhatma
kestheproductmoredesirable than similar products
offered by competitors. A product may be desirable
because it is easier to use, is more effective, or lasts
longer. Any competitive advantage of this product
over similar products should be identified.
 Pricing
 The proposed price of the product should be included. Prices of
similar products sold by competitors should also be mentioned. The
price will influence the demand for the product.
 Distribution
 The business plan should describe the means by which the product
will be distributed to the customers. Some products are sold to
customers directly, while others are distributed through retail
outlets.
 Promotion
 The business plan should also describe the means by which the
product will be promoted. The promotion strategy should be
consistent with the customer profile. For example, products that
appeal to college students may be advertised in student
newspapers.

11. SUMMARY OF A BUSINESS PLAN
 I. DESCRIPTION AND OWNERSHIP OF PROPOSED
BUSINESS
 Describe the product (or service) provided by the
proposed business.
 II. ASSESSMENT OF THE BUSINESS ENVIRONMENT
 Economic Environment: Describe the prevailing
economic conditions and the exposure of the firm to
those conditions.
 Industry Environment: Describe the competition in
the industry and the general demand for the
product in the industry.
 Global Environment: Describe the prevailing global
conditions that relate to the business, such as
foreign markets where the business may sell
products in the future or obtain supplies.
 III. MANAGEMENT PLAN
 Organizational Structure: Describe the organizational
structure and show the relationships among the employee
positions. This structure should also identify the
responsibilities of each position in overseeing other
positions and describe the specific tasks and salaries of
managers and other employees.
 Production Process: Describe the production process,
including the site, design,and layout of the facilities
needed to produce a product. Also, describe the planned
amount of production per month or year.
 IV. MANAGING EMPLOYEES
 Describe the work environment used to motivate
employees and the plans for training, evaluating, and
compensating employees.

12.  V. MARKETING PLAN
 Target Market: Describe the profile (such as the typical age and income
level) of
 the customers who will purchase the product and therefore make up the
target
 market. (Who will buy the product?)
 Product Characteristics: Explain desirable features of the product. (Why will
customers buy the product?)
 Pricing: Describe how the product will be priced relative to competitors’
products. (How much will customers pay for the product?)
 Distribution: Describe how the product will be distributed to customers.
(How
 will customers have access to the product?)
 Promotion: Describe how the product will be promoted to potential
customers.
 (How will customers be informed about the product?)
 VI. FINANCIAL PLAN
 Funds Needed: Estimate the amount of funds
needed to establish the business and to support
operations over a five-year period. Feasibility:
Estimate the revenue, expenses, and earnings of the
proposed business over the next five years. Consider
how the estimates of revenue, expenses, and
earnings of the proposed business may change
under various possible economic or industry
conditions.

13. REFERENCES
 INTRODUCTION TO BUSINESS 4th Edition, Jeff Madura, Thomson south western, 2007