Idea Generation and Evaluation

1. 2. IDEA GENERATION AND EVALUATION
2.1 Sources of Business Idea
2.2 Evaluation of Idea
2.3 Analysis of the Market
2.4 SWOT Analysis

2. Introduction –
Persons interested in becoming entrepreneurs must have the ability to generate a large number
of ideas so that at least one idea has the potential for a business opportunity. These ideas also lead to
varied phases of projects.
A project is an organised unit dedicated to attainment of a goal successfully within a given
period, a budget and in conformance with pre – determined programme specifications. In other words, a
project is a scientifically evolved work plan devised to achieve a specific objective within a specified
period time.
Thus, adoption of ideas will result into profitable business. Well – trained entrepreneurs keep
searching for idea worthy of commitment in terms of time, money and effort. This brings about
industrialisation.

3. 2.1 Sources of Business Idea
The starting point in any product development is the generation of business idea/project
idea. For this purpose, an entrepreneur can refer to potential studies conducted and prepared by
different organizations like the National Council of Applied Economic Research (NCAER),
financial institutions and other promotional organisations such as Confederation of Indian
Industries (CII), etc.
Different sources and methods help entrepreneurs to develop a wide range of ideas. Following
are some sources:
1. Area Studies: It identifies the development of a potential backward area or a district.
2. Sub-Sectoral Studies: This study identifies the opportunities in specified sectors like food
processing.

4. 3. Resource-based Studies: This study identifies the opportunities based on utilisation of
natural or industrial resources such as forest-based industries, marine-based industries,
industries using rubber as the main raw material, etc.
4. Import and Export: The study also identifies the possibilities of import and export.
5. Pattern of Product Consumption: The study by different organizations identified the
pattern of product consumption of the country.
6. Demand Forecasting: Studies also include forecasting of demands made by Industrial
Chambers such as CII, FICC1, ASSOCHAM, etc.
7. Surveys: It also includes study relating to existing industrial establishments
Some other sources could be:

5. 1. Good understanding of economics and the economy – A person is well read and
understands the economy and its functioning and has good knowledge of economics is most
certainly going to find several business ideas.
2. Changing needs of the people in a locality/ society – An observant person will find plenty
of ideas if he keenly observes the changes in the needs of the people living in his/her
locality or city.
3. Extensive travelling and wide range of reading - A person can find many business ideas
during his travel. Similarly, a well-read person is more likely to find business opportunity
and grab it in time.
Although the above are good sources of business ideas, yet a creative person is likely to
derive more advantages than a person who is less creative and continues to think on traditional
ideas. Creativity plays a vital role in setting up a business enterprise.

6. 2.2 Evaluation of Idea
To be successful in business, it's important to take special care with business ideas early
in the process. Not all business ideas will be right for company, but a proper evaluation ensures
that focus is mostly on the ideas that will be lucrative or help a business meet its goals in some
way. While a business idea can be exciting and many stakeholders may want to immediately act
on the idea, sufficient time must be taken to see if the idea is a viable one.
It's important to complete a business idea evaluation because it helps to determine if the
idea will work. Learning more about the market, the competition and customers’ wants, will
help deciding if the idea is worth pursuing. Evaluation will help an entrepreneur to begin with
more confidence. Forming a business plan, explaining the concept to investors or
communicating with potential customers will become easier.

7. Following steps are taken to evaluate the business plan and make sure it's a sustainable idea
that can be successful:
1. Determine a target market
A target market is the group of people to whom selling products or services is selected.. They
are the consumers who would benefit most from the business idea and will become sustained
customers of the business. It's important to learn about this group so idea can be better formed
and later market to them successfully. Understanding the consumers well can help to anticipate
their needs and serve them appropriately. This can make a major difference to the business.
Performing preliminary researching, asking different groups of people targeted
questions about the business idea to gauge their response and observing shoppers is one way to
gather maximum information.

8. 2. Create a buyer persona
Understanding target market, helps in learning about the age, gender, familial situation, level
of education and marital status, among other demographics. With this information, establishing
buyer personas, which are characters that represent the members of the target audience is
possible. These personas are created to guide the business decisions. Personas are important
because an entrepreneur can view each persona as an actual customer and help understand and
empathize with them more.
3. Conduct a market analysis
A market analysis is an assessment of market conditions, which may include economic details,
consumer buying patterns, trends, forecasting and the competition in a market.A market
analysis can help determine the best time and way to launch the business idea to the public.
Focus groups, interviews and surveys can be used for market survey.

9. 4. Analyze the business’s competitor
To a large extent , the success of business idea is because of competitors. Hence, it's important
to know more about competitors , to see what they've done to find success and what can be
given to the target audience that the competitor is not giving.
To analyse competition, the entrepreneur must gather information about the company
and its offerings and write an observational list of strengths and weaknesses. This will help to
identify what is in the entrepreneur’s business ideas that will set him apart. Writing a unique
value proposition that tells customers about offers, how it differs from the competitors and the
way it meets their needs will be very beneficial.

10. 5. Understand own finances
Part of evaluating a business idea is being able to understand the finances associated with the
launch of the idea. Asking following questions helps an entrepreneur to understand his financial
position:
•How will I get the funds I need to start my business?
•How much money do I need to begin?
•What is my projected income and expenses?
•What's my total earning potential in the first month? Three months? One year?

11. •How will I realize sustained profits?
All this will enable the entrepreneur to know what to expect from the business and
accordingly work on securing investments, plan for expansion, marketing and hiring
employees and be prepared for some unexpected expenses.
6. Get feedback
Getting feedback from others who haven't been privy to business idea can make a big
difference. An entrepreneur may consider asking friends, family, employees and company
stakeholders what they think of the business idea. Sharing preliminary research to explain why
the idea was developed can provide the required direction to the entrepreneur.

12. 2.3 Analysis of the Market
A market analysis is a thorough assessment of a market within a specific industry. A
market analysis can help an entrepreneur to identify how to better position of his
business to be competitive and serve customers. A market analysis has many benefits, such
as reducing risk for the business and taking better business decisions.
Understanding customer base is one of the first key steps to success in business. Without
knowing who customers are, what they want, and how they want to get it , an entrepreneur
could struggle to produce an effective marketing strategy. This is where a market analysis
comes in. A market analysis can be a time-intensive process, but it is straightforward and easy
too.

13. There are seven steps in conducting a market analysis:
1. Determine the purpose
There are many reasons for conducting a market analysis, such as to gauge competition or to understand
a new market. Whatever the reason, it’s important to define it right away to keep on track throughout
the process. Start by deciding whether purpose is internal – like improving cash flow or business
operations – or external, like seeking a business loan. The purpose will dictate the type and amount of
research to be done.
2. Research the state of the industry
A detailed outline of the current state of the business’s industry must be mapped. Using metrics such as
size, trends and projected growth will help in knowing where the industry is heading. Use the findings
to come to a conclusion. Comparative market analysis can also be undertaken to help find the business’s
competitive advantage within the specific market.

14. 3. Identify your target customer.
Use a target market analysis to decide who is most likely to want the product and
focus efforts there. Understand the market size, customers and where they come
from, and what might influence their buying decisions. Looking at demographic
factors like Age, Gender, Location, Occupation, Education, Needs, Interests will
help to identify the right customer.
During the research, creating a customer profile or persona that reflects ideal
customer to serve as a model for your marketing efforts can also be undertaken.

15. 4. Understand competition
To be successful, good understanding of competitors is required , including their market
saturation, what they do differently and their strengths, weaknesses and advantages in the
market. Listing down all main competitors, then going through that list and conducting a
SWOT analysis of each competitor is done. What does that business have that our business
doesn’t have ? What would lead a customer to choose that business over yours? Putting oneself
in the customer’s shoes helps in answering these questions.
Then, rank list of competitors from most to least threatening, and decide on a timeline to
conduct regular SWOT analyses on most threatening competitors.

16. 5. Gather additional data.
When conducting marketing analysis, information is a good friend of the
business. How much ever one has it is never sufficient. It is important that the
data used is credible and factual, so being cautious is of utmost importance. These
are some reputable business data resources:
• State and local commerce sites
• Trade journals
• SWOT analysis of own business
• Market surveys or questionnaires

17. 6. Analyze your data
After all the information has been collected, verification must be done to check the accuracy. Analyze
the data to make it sure it is useful. Organize research into sections to make better sense and include
ones for self purpose, target market and competition.
Research should include:
•An overview of the business’s industry’s size and growth rate
•Business’s projected market share percentage
•An industry outlook
•Customer buying trends
•Forecasted growth of own company
•Purchasing power of the customers for the business’s product and/ or service.

18. 7. Put Analysis to work
Once the market analysis is done, it’s time to actually make it work for the
company. Using the research and findings to improve business internally should
be undertaken.
If research has been conducted for external purposes, organize research and data
into an easily readable and digestible document to make it easier to share with
lenders.
Retain all of information and research for next analysis, and consider making a
calendar reminder each year to stay on top of market.

19. 2.4 SWOT Analysis
It is rightly said “winners recognise their limitations but focus on their strengths; losers
recognise their strength but focus on their limitations.” Positive thinking is strength
whereas negative thinking is a weakness.
One of most widely used strategic planning tools is a SWOT analysis. Most
companies use it in one form or another. SWOT analysis is often used as basic guide for
strategic planning.
The term SWOT is the acronym made up of four words viz., Strengths,
Weaknesses, Opportunities and Threats. The first two variables are internal to an
organisation whereas the last two are external.

20. A SWOT analysis is designed to facilitate a realistic, fact-based, data-
driven look at the strengths and weaknesses of an organization, initiatives, or
within its industry. The organization needs to keep the analysis accurate by
avoiding pre-conceived beliefs or grey areas and instead focusing on real-life
contexts. Companies should use it as a guide and not necessarily as a prescription.
A SWOT analysis pulls information from internal sources (strengths of
weaknesses of the specific company) as well as external forces that may have
uncontrollable impacts to decisions (opportunities and threats).

21. SWOT Table: Analysts present a SWOT analysis as a square segmented into four
quadrants, each dedicated to an element of SWOT. This visual arrangement
provides a quick overview of the company’s position. Although all the points
under a particular heading may not be of equal importance, they all should
represent key insights into the balance of opportunities and threats, advantages
and disadvantages, and so forth.
The SWOT table is often laid out with the internal factors on the top row
and the external factors on the bottom row. In addition, the items on the left side
of the table are more positive/favorable aspects, while the items on the right are
more concerning/negative elements.

22. How to Do a SWOT Analysis
A SWOT analysis can be broken into several steps with actionable items before and after
analyzing the four components. In general, a SWOT analysis will involve the following steps.
Step 1: Determine the Objective
A SWOT analysis can be broad, though more value will likely be generated if the analysis is
pointed directly at an objective. For example, the objective of a SWOT analysis may be focused
only on whether or not to perform a new product rollout. With an objective in mind, a company
will have guidance on what they hope to achieve at the end of the process. In this example, the
SWOT analysis should help determine whether the product should be introduced or not.

23. Step 2: Gather Resources
Every SWOT analysis will vary, and a company may need different data sets to support pulling
together different SWOT analysis tables. A company should begin by understanding what
information it has access to, what data limitations it faces, and how reliable its external data
sources are.
In addition to data, a company should understand the right combination of personnel to
have involved in the analysis. Some staff may be more connected with external forces, while
various staff within the manufacturing or sales departments may have a better grasp of what is
going on internally. Having a broad set of perspectives is also more likely to yield diverse,
value-adding contributions.

24. Step 3: Compile Ideas
For each of the four components of the SWOT analysis, the group of people assigned to
performing the analysis should begin listing ideas within each category. Examples of questions
to ask or consider for each group are given below.
Internal Factors: What occurs within the company serves as a great source of information for
the strengths and weaknesses categories of the SWOT analysis. Examples of internal factors
include financial and human resources, tangible and intangible (brand name) assets, and
operational efficiencies.
External Factors: What happens outside of the company is equally as important to the success
of a company as internal factors. External influences, such as monetary policies, market
changes, and access to suppliers, are categories to pull from to create a list of opportunities and

25. Step 4: Refine Findings
With the list of ideas within each category, it is now time to clean-up the ideas. By refining the
thoughts that everyone had, a company can focus on only the best ideas or largest risks to the
company. This stage may require substantial debate among analysis participants, including
bringing in top management to help rank priorities.
Step 5: Develop the Strategy
Armed with the ranked list of strengths, weaknesses, opportunities, and threats, it is time to
convert the SWOT analysis into a strategic plan. Members of the analysis team take the
bulleted list of items within each category and create a synthesized plan that provides guidance
on the original objective.

26. For example, the company debating whether to release a new product may have
identified that it is the market leader for its existing product and there is the opportunity to
expand to new markets. However, increased material costs, strained distribution lines, the need
for additional staff, and unpredictable product demand may outweigh the strengths and
opportunities. The analysis team develops the strategy to revisit the decision in six months in
hopes of costs declining and market demand becoming more transparent.

27. Importance of SWOT Analysis:
SWOT analysis is not only concerned with making only four lists, but it is much more than that.
1. SWOT Analysis brings to light whether the business is healthy or sick.
2. An undertaking comes to know of both internal as well as external factors affecting its success or
failure.
3. It helps in the formation of a strategy to prepare for the possible threats from the competitors.
4. SWOT analysis evaluates the business environment in a detailed manner to take strategic decisions
for the future course of action.
In India, the importance of SWOT analysis has further increased since 1991 i.e., after the adoption of
the policy of LPG (Liberalisation, Privatisation and Globalisation). There is now a two-fold competition
to our own business concerns – due to liberalisation and privatisation.

28. Telecommunication, Insurance, Banks and many other sectors have now
been opened to the private sector. On account of globalisation, many
multinational companies have come to India and are giving stiff competition to
Indian business concerns. At the same time, globalisation is an opportunity as
Indian entrepreneurs can now go to the foreign countries and sell their products. It
is a threat because Indian market may be captured by multinationals if domestic
firms do not produce quality products.
Only a Business Concern which makes its SWOT analysis can survive.

29. Limitations of SWOT Analysis
Although a useful planning tool, SWOT has limitations.
a. It is one of several business planning techniques to consider and should not be used alone.
b. Each point listed within the categories is not prioritized the same.
c. SWOT does not account for the differences in weight. Therefore, a deeper analysis is
needed, using another planning technique.

30. Example #1
Let us conduct a SWOT analysis for Starbucks which is a globally renowned brand for coffee and other
beverages..
Strengths
•It has claimed the position of the global leader in coffee and beverage retailing on the back of stellar
financial performance.
•It has strong brand equity
•The company enjoys great brand recall value among its consumers who perceive its products offerings
to be of excellent quality at a reasonable price.
•It is one of the largest coffeehouses globally and on the back of its commendable size and high sales
volume the company can price its products even for the middle-income group which forms a huge
portion of the consumer segment.

31. Weaknesses
•Its heavy dependence on coffee beans, which is the key input, keeps its
profitability vulnerable to the price volatility of coffee beans.
•In the past, the company has been under the scanner of many environmentalists
and social activists for procuring coffee beans from impoverished third-world
farmers.
•Despite its pricing catering to the middle tier of society, the price is still costly
for many working consumers.

32. Opportunities
•It can expand the supplier network which will help it to improve its braining
power against the whims of its unscrupulous supplier network.
•Although the company has expanded into most emerging markets, it should
penetrate the tier-II cities of the emerging countries in order to further increase its
customer base.
•The company should expand its product portfolio to venture into the full
spectrum food and beverage business which includes the like of Burger King and
McDonald’s

33. Threats
•The company’s profitability is always at the mercy of rising prices of coffee
beans and the whimsical supply network.
•The customer outreach faces strong competition from the local coffeehouses and
specialty stores that offer similar products at a much cheaper price.
•The company’s growth in the past was primarily driven by the developed
markets which are currently saturated.

34. Example #2
Let us conduct a SWOT analysis for Walmart which is a retail chain of discount department
stores, hypermarkets, and grocery stores operated across the world..
Strengths
•It has a strong brand value among its customers.
•The supermarket giant has a wide network of more than _____ stores spread across ___
countries.
•It can attract customers from all classes because of its attractive pricing, which it can achieve
due to economies of scale.
•It offers a wide range of products coupled with an ample number of brands
•Walmart enjoys the position of the market leader in the U.S.

35. Weaknesses
•Its growth is marred by restricted geographical expansion into emerging markets.
•In the past, its reputation has been tarnished due to the sales of various Chinese goods that
have left them burdened with many legal cases.
•Several employees and labor-related issues over the last few years have damaged the integrity
of its workforce.
Opportunities
•Given the widespread coverage of the internet today, they should start focussing more on the
online sales business to add to its revenue.
•Add more brands to its existing product portfolio to attract more customers.

36. Threats
•It remains exposed to the intense competition given by other big retail chains that also offer a
product range that is equally good at a competitive price
•Despite its brand value, it faces a lot of political, social, legal, and communal obstructions in
the new markets. Recently, they faced a lot of opposition in India.